[Congressional Record Volume 147, Number 58 (Wednesday, May 2, 2001)]
[House]
[Pages H1748-H1827]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
COMPREHENSIVE RETIREMENT SECURITY AND PENSION REFORM ACT OF 2001
Mr. THOMAS. Mr. Speaker, pursuant to House Resolution 127, I call up
the bill (H.R. 10) 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 (Mr. Bass). Pursuant to House Resolution 127,
the bill is considered read for amendment.
The text of H.R. 10 is as follows:
H.R. 10
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
2001''.
(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.
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.
[[Page H1749]]
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
Sec. 501. Repeal of 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. Protection of investment of employee contributions to 401(k)
plans.
Sec. 507. Periodic pension benefits statements.
Sec. 508. 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.
Sec. 612. Annual report dissemination.
Sec. 613. Technical corrections to SAVER Act.
TITLE VII--OTHER ERISA PROVISIONS
Sec. 701. Missing participants.
Sec. 702. Reduced PBGC premium for new plans of small employers.
Sec. 703. Reduction of additional PBGC premium for new and small plans.
Sec. 704. Authorization for PBGC to pay interest on premium overpayment
refunds.
Sec. 705. Substantial owner benefits in terminated plans.
Sec. 706. Civil penalties for breach of fiduciary responsibility.
Sec. 707. Benefit suspension notice.
TITLE VIII--PLAN AMENDMENTS
Sec. 801. 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'' and by
striking the second sentence.
(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 amendments.--
(A) Section 415(b)(2) is amended by striking subparagraph
(F).
(B) Section 415(b)(9) is amended to read as follows:
``(9) Special rule for commercial airline pilots.--
``(A) In general.--Except as provided in subparagraph (B),
in the case of any participant who is a commercial airline
pilot, if, as of the time of the participant's retirement,
regulations prescribed by the Federal Aviation Administration
require an individual to separate from service as a
commercial airline pilot after attaining any age occurring on
or after age 60 and before age 62, paragraph (2)(C) shall be
applied by substituting such age for age 62.
``(B) Individuals who separate from service before age
60.--If a participant described in subparagraph (A) separates
from service before age 60, the rules of paragraph (2)(C)
shall apply.''.
(C) Section 415(b)(10)(C)(i) is amended by striking
``applied without regard to paragraph (2)(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.''.
[[Page H1750]]
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
``(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 under 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) Subclause (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) Amendment of Internal Revenue Code.--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) Amendment of ERISA.--Section 408(d)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2))
is amended by adding at the end the following new
subparagraph:
``(C) For purposes of paragraph (1)(A), the term `owner-
employee' shall only include a person described in clause
(ii) or (iii) of subparagraph (A).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
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 key
employee or former key 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
[[Page H1751]]
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, 2001.
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, 2001.
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, 2001.
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 10511 of the Revenue Act of 1987 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 later of--
(A) the fifth plan year the pension benefit plan is in
existence; or
(B) the end of any remedial amendment period with respect
to the plan beginning within the first 5 plan years; 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) Determination of Average Fees Charged.--For purposes of
any determination of average fees charged, any request to
which subsection (a) applies shall not be taken into account.
(e) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 2001.
SEC. 207. DEDUCTION LIMITS.
(a) Stock Bonus and Profit Sharing Trusts.--
(1) In general.--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) Conforming amendment.--Subparagraph (C) of section
404(h)(1) is amended by striking ``15 percent'' each place it
appears and inserting ``20 percent''.
(b) Compensation.--
(1) In general.--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).''.
(2) Conforming amendments.--
(A) Subparagraph (B) of section 404(a)(3) is amended by
striking the last sentence thereof.
(B) 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, 2001.
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).
[[Page H1752]]
``(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.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
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) Application of nondiscrimination rules.--
``(A) In general.--An applicable employer plan shall not be
treated as failing to meet the nondiscrimination requirements
under section 401(a)(4) with respect to benefits, rights, and
features if the plan allows all eligible participants to make
the same election with respect to the additional elective
deferrals under this subsection.
``(B) Aggregation.--For purposes of subparagraph (A), all
plans maintained by employers who are treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 shall be treated as 1 plan.
``(5) 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.
``(6) 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.--In the case of a year
beginning after December 31, 2005, the Secretary shall adjust
annually the $5,000 amount in paragraph (2)(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 taken into account shall be the calendar quarter
beginning July 1, 2004, and any increase under this
subparagraph which is not a multiple of $500 shall be rounded
to the next lower 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
2001)''.
(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 201) 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 2001)''.
(H) Section 664(g) is amended--
(i) in paragraph (3)(E) by striking ``limitations under
section 415(c)'' and inserting ``applicable limitation under
paragraph (7)'', and
(ii) by adding at the end the following new paragraph:
``(7) Applicable limitation.--
``(A) In general.--For purposes of paragraph (3)(E), the
applicable limitation under this paragraph with respect to a
participant is an amount equal to the lesser of--
``(i) $30,000, or
[[Page H1753]]
``(ii) 25 percent of the participant's compensation (as
defined in section 415(c)(3)).
``(B) Cost-of-living adjustment.--The Secretary shall
adjust annually the $30,000 amount under subparagraph (A)(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 beginning October 1, 1993, and any increase under
this subparagraph which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.''.
(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) Amendment of Internal Revenue 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:
2............................................................20
3............................................................40
4............................................................60
5............................................................80
6.........................................................100.''.
(b) Amendment of 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:
2............................................................20
3............................................................40
4............................................................60
5............................................................80
6.........................................................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, 2001.
(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, 2002; or
(B) January 1, 2006.
(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. 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) Date for regulations.--Not later than December 31,
2002, the Secretary shall issue final regulations described
in paragraph (1) and such regulations shall apply 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.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to years
beginning after December 31, 2001.
(B) Distributions to surviving spouse.--
(i) In general.--In the case of an employee described in
clause (ii), distributions to the surviving spouse of the
employee shall not be required to commence prior to the date
on which such distributions would have been required to begin
under section 401(a)(9)(B) of the Internal Revenue Code of
1986 (as in effect on the day before the date of the
enactment of this Act).
(ii) Certain employees.--An employee is described in this
clause if such employee dies before--
(I) the date of the enactment of this Act, and
(II) the required beginning date (within the meaning of
section 401(a)(9)(C) of the Internal Revenue Code of 1986) of
the employee.
(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, 2001.
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)''
[[Page H1754]]
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, 2001.
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, 2001.
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) and which is maintained by an
eligible employer described in section 457(e)(1)(A).''.
(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) which is maintained by an eligible 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 eligible 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 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 the date of the enactment
of this Act.
(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)
[[Page H1755]]
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 the date of the enactment
of this Act.
(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 the date of the
enactment of this Act.
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 the date of the enactment
of this Act.
SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) Amendment of internal revenue code.--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 received a notice
describing the consequences of making the election, and
``(V) 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) Amendment of erisa.--Section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is
amended by adding at the end the following:
``(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 subparagraph referred to
as the `transferor plan') to the extent that--
``(i) the forms of distribution previously available under
the transferor plan applied to the account of a participant
or beneficiary under the transferor plan that was transferred
from the transferor plan to the transferee plan pursuant to a
direct transfer rather than pursuant to a distribution from
the transferor plan;
``(ii) the terms of both the transferor plan and the
transferee plan authorize the transfer described in clause
(i);
``(iii) the transfer described in clause (i) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan;
[[Page H1756]]
``(iv) the election described in clause (iii) was made
after the participant or beneficiary received a notice
describing the consequences of making the election; and
``(v) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution to which the participant or beneficiary is
entitled under the 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
promulgated by the Secretary of the Treasury, a defined
contribution plan shall not be treated as failing to meet the
requirements of this subsection 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.''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2001.
(b) Regulations.--
(1) Amendment of internal revenue code.--Paragraph (6)(B)
of section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended by inserting after the
second sentence the following new sentence: ``The Secretary
shall by regulations provide that this subparagraph shall not
apply to any plan amendment which reduces or eliminates
benefits or subsidies which create significant burdens or
complexities for the plan and plan participants and does not
adversely affect the rights of any participant in a more than
de minimis manner.''.
(2) Amendment of erisa.--Section 204(g)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)(2))
is amended by inserting before the last sentence the
following new sentence: ``The Secretary of the Treasury shall
by regulations provide that this paragraph shall not apply to
any plan amendment which reduces or eliminates benefits or
subsidies which create significant burdens or complexities
for the plan and plan participants and does not adversely
affect the rights of any participant in a more than de
minimis manner.''.
(3) Secretary directed.--Not later than December 31, 2003,
the Secretary of the Treasury is directed to issue
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986 and section 204(g) of the Employee Retirement
Income Security Act of 1974, including the regulations
required by the amendment made by this subsection. Such
regulations shall apply to plan years beginning after
December 31, 2003, 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 the date of the enactment
of this Act.
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 the date of
the enactment of this Act.
SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF
CASH-OUT AMOUNTS.
(a) Qualified Plans.--
(1) Amendment of internal revenue code.--Section 411(a)(11)
(relating to restrictions on certain mandatory distributions)
is amended by adding at the end the following:
``(D) Special rule for rollover contributions.--A plan
shall not fail to meet the requirements of this paragraph if,
under the terms of the plan, the present value of the
nonforfeitable accrued benefit is determined without regard
to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term `rollover
contributions' means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16).''.
(2) Amendment of erisa.--Section 203(e) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) 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 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) of the Internal Revenue Code
of 1986.''.
(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, 2001.
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).''.
[[Page H1757]]
(c) Effective Date.--The amendments made by this section
shall apply to distributions after the date of the enactment
of this Act.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY FUNDING
LIMIT.
(a) Amendment of Internal Revenue Code.--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--
2002........................................................165
2003......................................................170.''.
(b) Amendment of ERISA.--Section 302(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7))
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--
2002........................................................165
2003......................................................170.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2001.
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 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 maintained 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, 2001.
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, 2001.
SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED
BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE
BENEFIT ACCRUALS.
(a) Amendment of Internal Revenue Code.--
(1) 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. The Secretary
may provide a simplified form of notice for, or exempt from
any notice requirement, a plan--
``(A) which has fewer than 100 participants who have
accrued a benefit under the plan, or
``(B) which offers participants the option to choose
between the new benefit formula and the old benefit formula.
``(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) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) each participant in the plan, and
[[Page H1758]]
``(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)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced 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.
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.
``(3) Early retirement.--A plan amendment which eliminates
or significantly reduces any early retirement benefit or
retirement-type subsidy (within the meaning of section
411(d)(6)(B)(i)) shall be treated as having the effect of
significantly reducing the rate of future benefit accrual.
``(g) New Technologies.--The Secretary may by regulations
allow any notice under subsection (e) to be provided by using
new technologies.''.
(2) 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.''.
(b) Amendment of ERISA.--Section 204(h) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is
amended by adding at the end the following new paragraphs:
``(3)(A) An applicable pension plan to which paragraph (1)
applies shall not be treated as meeting the requirements of
such paragraph unless, in addition to any notice required to
be provided to an individual or organization under such
paragraph, the plan administrator provides the notice
described in subparagraph (B) to each applicable individual
(and to each employee organization representing applicable
individuals).
``(B) The notice required by subparagraph (A) 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 of the Treasury) to allow
applicable individuals to understand the effect of the plan
amendment. The Secretary of the Treasury may provide a
simplified form of notice for, or exempt from any notice
requirement, a plan--
``(i) which has fewer than 100 participants who have
accrued a benefit under the plan, or
``(ii) which offers participants the option to choose
between the new benefit formula and the old benefit formula.
``(C) Except as provided in regulations prescribed by the
Secretary of the Treasury, the notice required by
subparagraph (A) shall be provided within a reasonable time
before the effective date of the plan amendment.
``(D) Any notice under subparagraph (A) may be provided to
a person designated, in writing, by the person to which it
would otherwise be provided.
``(E) A plan shall not be treated as failing to meet the
requirements of subparagraph (A) 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) The Secretary of the Treasury may by regulations
allow any notice under this paragraph to be provided by using
new technologies.
``(4) For purposes of paragraph (3)--
``(A) The term `applicable individual' means, with respect
to any plan amendment--
``(i) each participant in the plan; and
``(ii) any 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)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced by such
plan amendment.
``(B) The term `applicable pension plan' means--
``(i) any defined benefit plan; or
``(ii) an individual account plan which is subject to the
funding standards of section 412 of the Internal Revenue Code
of 1986.
``(C) A plan amendment which eliminates or significantly
reduces any early retirement benefit or retirement-type
subsidy (within the meaning of subsection (g)(2)(A)) shall be
treated as having the effect of significantly reducing the
rate of future benefit accrual.''.
(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, and section
204(h)(3) of the Employee Retirement Income Security Act of
1974, 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 notice 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
and the Committee on Education and the Workforce of the House
of Representatives and the Committee on Finance and the
Committee on Health, Education, Labor, and Pensions of the
Senate.
SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--
(1) In general.--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.''.
(2) Conforming amendment.--Section 415(b)(7) (relating to
benefits under certain collectively bargained plans) is
amended by inserting ``(other than a multiemployer plan)''
after ``defined benefit plan'' in the matter preceding
subparagraph (A).
(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''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 506. 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 which is invested in assets consisting of
qualifying employer securities, qualifying employer real
property, or both, if such assets were acquired before
January 1, 1999.''.
(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. 507. 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
to read as follows:
``(a)(1) Except as provided in paragraph (2)--
``(A) the administrator of an individual account plan shall
furnish a pension benefit statement--
``(i) to a plan participant at least once annually, and
``(ii) to a plan beneficiary upon written request, and
``(B) the administrator of a defined benefit plan shall
furnish a pension benefit statement--
``(i) at least once every 3 years to each participant with
a nonforfeitable accrued benefit who is employed by the
employer maintaining the plan at the time the statement is
furnished to participants, and
``(ii) to a plan participant or plan beneficiary of the
plan upon written request.
``(2) Notwithstanding paragraph (1), the administrator of a
plan to which more than 1 unaffiliated employer is required
to contribute shall only be required to furnish a pension
benefit statement under paragraph (1) upon the written
request of a participant or beneficiary of the plan.
``(3) A pension benefit statement under paragraph (1)--
``(A) shall indicate, on the basis of the latest available
information--
``(i) the total benefits accrued, and
``(ii) the nonforfeitable pension benefits, if any, which
have accrued, or the earliest date on which benefits will
become nonforfeitable,
[[Page H1759]]
``(B) shall be written in a manner calculated to be
understood by the average plan participant, and
``(C) may be provided in written, electronic, telephonic,
or other appropriate form.
``(4)(A) In the case of a defined benefit plan, the
requirements of paragraph (1)(B)(i) shall be treated as met
with respect to a participant if the administrator provides
the participant at least once each year with notice of the
availability of the pension benefit statement and the ways in
which the participant may obtain such statement. Such notice
shall be provided in written, electronic, telephonic, or
other appropriate form, and may be included with other
communications to the participant if done in a manner
reasonably designed to attract the attention of the
participant.
``(B) The Secretary may provide that years in which no
employee or former employee benefits (within the meaning of
section 410(b) of the Internal Revenue Code of 1986) under
the plan need not be taken into account in determining the 3-
year period under paragraph (1)(B)(i).''.
(b) Conforming Amendments.--
(1) Section 105 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1025) is amended by striking
subsection (d).
(2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is
amended to read as follows:
``(b) In no case shall a participant or beneficiary of a
plan be entitled to more than one statement described in
subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is
applicable, in any 12-month period.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2002.
SEC. 508. 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.
[[Page H1760]]
``(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, 2004.
(2) Exception for certain plans.--In the case of any--
(A) employee stock ownership plan established after March
14, 2001, 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 March 14, 2001.
TITLE VI--REDUCING REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) Amendment of Internal Revenue Code.--Paragraph (9) of
section 412(c)(9) (relating to annual valuation) is amended
to read as follows:
``(9) Annual valuation.--
``(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) Amendment of 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) 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) 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) Information under clause (ii) shall, in accordance
with regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) An election under clause (ii), 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 after December 31, 2001.
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, 2001.
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 advice or information 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, 2001.
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
[[Page H1761]]
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, 2002.
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, 2001.
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, 2003.
(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, 2003.
(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, 2003, 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, 2001.
SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) Amendment of internal revenue code.--
(A) In general.--Subparagraph (A) of section 417(a)(6) is
amended by striking ``90-day'' and inserting ``180-day''.
(B) 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).
(2) Amendment of erisa.--Section 205(c)(7)(A) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1055(c)(7)(A)) is amended by striking ``90-day'' and
inserting ``180-day''.
(3) Effective date.--The amendments made by paragraph
(1)(A) and (2) and the modifications required by paragraph
(1)(B) shall apply to years beginning after December 31,
2001.
(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, 2001.
SEC. 612. ANNUAL REPORT DISSEMINATION.
(a) Report Available Through Electronic Means.--Section
104(b)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1024(b)(3)) is amended by adding at the end
the following new sentence: ``The requirement to furnish
information under the previous sentence shall be satisfied if
the administrator makes such information reasonably available
through electronic means or other new technology.''.
(b) Effective Date.--The amendment made by this section
shall apply to reports for years beginning after December 31,
2000.
SEC. 623. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1147) is amended--
(1) in subsection (a), by striking ``2001 and 2005 on or
after September 1 of each year involved'' and inserting
``2001, 2005, and 2009 in the month of September of each year
involved'';
(2) in subsection (b), by adding at the end the following
new sentence: ``To effectuate the purposes of this paragraph,
the Secretary may enter into a cooperative agreement,
pursuant to the Federal Grant and Cooperative Agreement Act
of 1977 (31 U.S.C. 6301 et seq.), with the American Savings
Education Council.'';
(3) in subsection (e)(2)--
(A) by striking ``Committee on Labor and Human Resources''
in subparagraph (D) and inserting ``Committee on Health,
Education, Labor, and Pensions'';
(B) by striking subparagraph (F) and inserting the
following:
``(F) the Chairman and Ranking Member of the Subcommittee
on Labor, Health and Human Services, and Education of the
Committee on Appropriations of the House of Representatives
and the Chairman and Ranking Member of the Subcommittee on
Labor, Health and Human Services, and Education of the
Committee on Appropriations of the Senate;'';
(C) by redesignating subparagraph (G) as subparagraph (J);
and
(D) by inserting after subparagraph (F) the following new
subparagraphs:
``(G) the Chairman and Ranking Member of the Committee on
Finance of the Senate;
``(H) the Chairman and Ranking Member of the Committee on
Ways and Means of the House of Representatives;
``(I) the Chairman and Ranking Member of the Subcommittee
on Employer-Employee Relations of the Committee on Education
and the Workforce of the House of Representatives; and'';
(4) in subsection (e)(3)(A)--
(A) by striking ``There shall be no more than 200
additional participants.'' and inserting ``The participants
in the National Summit shall also include additional
participants appointed under this subparagraph.'';
[[Page H1762]]
(B) by striking ``one-half shall be appointed by the
President,'' in clause (i) and inserting ``not more than 100
participants shall be appointed under this clause by the
President,'', and by striking ``and'' at the end of clause
(i);
(C) by striking ``one-half shall be appointed by the
elected leaders of Congress'' in clause (ii) and inserting
``not more than 100 participants shall be appointed under
this clause by the elected leaders of Congress'', and by
striking the period at the end of clause (ii) and inserting
``; and'';
(D) by adding at the end the following new clause:
``(iii) The President, in consultation with the elected
leaders of Congress referred to in subsection (a), may
appoint under this clause additional participants to the
National Summit. The number of such additional participants
appointed under this clause may not exceed the lesser of 3
percent of the total number of all additional participants
appointed under this paragraph, or 10. Such additional
participants shall be appointed from persons nominated by the
organization referred to in subsection (b)(2) which is made
up of private sector businesses and associations partnered
with Government entities to promote long term financial
security in retirement through savings and with which the
Secretary is required thereunder to consult and cooperate and
shall not be Federal, State, or local government
employees.'';
(5) in subsection (e)(3)(B), by striking ``January 31,
1998'' in subparagraph (B) and inserting ``May 1, 2001, May
1, 2005, and May 1, 2009, for each of the subsequent summits,
respectively'';
(6) in subsection (f)(1)(C), by inserting ``, no later than
90 days prior to the date of the commencement of the National
Summit,'' after ``comment'' in paragraph (1)(C);
(7) in subsection (g), by inserting ``, in consultation
with the congressional leaders specified in subsection
(e)(2),'' after ``report'';
(8) in subsection (i)--
(A) by striking ``beginning on or after October 1, 1997''
in paragraph (1) and inserting ``2001, 2005, and 2009''; and
(B) by adding at the end the following new paragraph:
``(3) Reception and representation authority.--The
Secretary is hereby granted reception and representation
authority limited specifically to the events at the National
Summit. The Secretary shall use any private contributions
accepted in connection with the National Summit prior to
using funds appropriated for purposes of the National Summit
pursuant to this paragraph.''; and
(9) in subsection (k)--
(A) by striking ``shall enter into a contract on a sole-
source basis'' and inserting ``may enter into a contract on a
sole-source basis''; and
(B) by striking ``fiscal year 1998'' and inserting ``fiscal
years 2001, 2005, and 2009''.
TITLE VII--OTHER ERISA PROVISIONS
SEC. 701. 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 new subsections:
``(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) Effective Date.--The amendment 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. 702. 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) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)) maintained by
a small employer (as so defined),'' after ``single-employer
plan,'',
(2) in clause (iii), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new clause:
``(iv) in the case of a new single-employer plan (as
defined in subparagraph (F)) maintained by a small employer
(as so defined) for the plan year, $5 for each individual who
is a participant in such plan during the plan year.''.
(b) Definition of New Single-Employer Plan.--Section
4006(a)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end
the following new subparagraph:
``(F)(i) For purposes of this paragraph, a single-employer
plan maintained by a contributing sponsor shall be treated as
a new single-employer plan for each of its first 5 plan years
if, during the 36-month period ending on the date of the
adoption of such plan, the sponsor or any member of such
sponsor's controlled group (or any predecessor of either)
did not establish or maintain a plan to which this title
applies with respect to which benefits were accrued for
substantially the same employees as are in the new single-
employer plan.
``(ii)(I) For purposes of this paragraph, the term `small
employer' means an employer which on the first day of any
plan year has, in aggregation with all members of the
controlled group of such employer, 100 or fewer employees.
``(II) 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 controlled groups of such sponsors shall be aggregated
for purposes of determining whether any contributing sponsor
is a small employer.''.
(c) Effective Date.--The amendments made by this section
shall apply to plans established after December 31, 2001.
SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND
SMALL PLANS.
(a) New Plans.--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 by adding at the end the
following new clause:
``(v) In the case of a new defined benefit plan, the amount
determined under clause (ii) for any plan year shall be an
amount equal to the product of the amount determined under
clause (ii) and the applicable percentage. For purposes of
this clause, 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.
``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as
defined in section 3(35)) maintained by a contributing
sponsor shall be treated as a new defined benefit plan for
each of its first 5 plan years if, during the 36-month period
ending on the date of the adoption of the plan, the sponsor
and each member of any controlled group including the sponsor
(or any predecessor of either) did not establish or maintain
a plan to which this title applies with respect to which
benefits were accrued for substantially the same employees as
are in the new plan.''.
(b) Small Plans.--Paragraph (3) of section 4006(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)), as amended by section 702(b), is amended--
(1) by striking ``The'' in subparagraph (E)(i) and
inserting ``Except as provided in subparagraph (G), the'',
and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G)(i) In the case of an employer who has 25 or fewer
employees on the first day of the plan year, the additional
premium determined under subparagraph (E) for each
participant shall not exceed $5 multiplied by the number of
participants in the plan as of the close of the preceding
plan year.
``(ii) For purposes of clause (i), whether an employer has
25 or fewer employees on the first day of the plan year is
determined taking into consideration all of the employees of
all members of the contributing sponsor's controlled group.
In the case of a plan maintained by two or more contributing
sponsors, the employees of all contributing sponsors and
their controlled groups shall be aggregated for purposes of
determining whether the 25-or-fewer-employees limitation has
been satisfied.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to plans established after December 31, 2001.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2001.
[[Page H1763]]
SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM
OVERPAYMENT REFUNDS.
(a) In General.--Section 4007(b) of the Employment
Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is
amended--
(1) by striking ``(b)'' and inserting ``(b)(1)'', and
(2) by inserting at the end the following new paragraph:
``(2) The corporation is authorized to pay, subject to
regulations prescribed by the corporation, interest on the
amount of any overpayment of premium refunded to a
designated payor. Interest under this paragraph shall be
calculated at the same rate and in the same manner as
interest is calculated for underpayments under paragraph
(1).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to interest accruing for periods beginning not
earlier than the date of the enactment of this Act.
SEC. 705. 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 new paragraph:
``(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--
(A) in subsection (b)(9), by striking ``as defined in
section 4022(b)(6)'', and
(B) by adding at the end the following new subsection:
``(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)) after
December 31, 2001, and
(B) under section 4042 of such Act (29 U.S.C. 1342) with
respect to which proceedings are instituted by the
corporation after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on January 1, 2002.
SEC. 706. 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 new paragraph:
``(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is 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. 707. 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) in the case of an employee who returns to work for a
former employer after commencement of payment of benefits
under the plan shall--
(A) be made during the first calendar month or payroll
period in which the plan withholds payments, and
(B) if a reduced rate of future benefit accruals will apply
to the returning employee (as of the first date of
participation in the plan by the employee after returning to
work), include a statement that the rate of future benefit
accruals will be reduced, and
(2) in the case of any employee who is not described in
paragraph (1)--
(A) 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
(B) need not include a copy of the relevant plan
provisions.
(b) Effective Date.--The modification made under this
section shall apply to plan years beginning after December
31, 2001.
TITLE VIII--PLAN AMENDMENTS
SEC. 801. 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) except as provided by the Secretary of the Treasury,
such plan shall not fail to meet the requirements of section
411(d)(6) of the Internal Revenue Code of 1986 or section
204(g) of the Employee Retirement Income Security Act of 1974
by reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this Act, or pursuant
to any regulation issued under this Act; and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2004.
[[Page H1764]]
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 ``2006'' for ``2004''.
(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 (Mr. Thornberry). In lieu of the amendment
recommended by the Committee on Ways and Means and the amendment
recommended by the Committee on Education and the Workforce printed in
the bill, the amendment in the nature of a substitute printed in the
Congressional Record and numbered 1 is adopted.
The text of H.R. 10, as amended pursuant to House Resolution 127 is
as follows:
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
2001''.
(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.
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.
Sec. 209. Availability of qualified plans to self-employed individuals
who are exempt from the self-employment tax by reason of
their religious beliefs.
Sec. 210. Certain nonresident aliens excluded in applying minimum
coverage requirements.
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. Modifications to minimum distribution rules.
Sec. 305. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 306. Provisions relating to hardship distributions.
Sec. 307. Waiver of tax on nondeductible contributions for domestic or
similar workers.
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 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. Protection of investment of employee contributions to 401(k)
plans.
Sec. 507. Periodic pension benefits statements.
Sec. 508. 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.
Sec. 612. Annual report dissemination.
Sec. 613. Technical corrections to SAVER Act.
TITLE VII--OTHER ERISA PROVISIONS
Sec. 701. Missing participants.
Sec. 702. Reduced PBGC premium for new plans of small employers.
Sec. 703. Reduction of additional PBGC premium for new and small plans.
Sec. 704. Authorization for PBGC to pay interest on premium overpayment
refunds.
Sec. 705. Substantial owner benefits in terminated plans.
Sec. 706. Civil penalties for breach of fiduciary responsibility.
Sec. 707. Benefit suspension notice.
Sec. 708. Studies.
TITLE VIII--PLAN AMENDMENTS
Sec. 801. 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:
2002..................................................$3,000 .
2003..................................................$4,000 .
2004 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 2002 or 2003 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 2004, 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 2003'
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,
2001.
[[Page H1765]]
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'' and by
striking the second sentence.
(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, 2001''.
(5) Conforming amendments.--
(A) Section 415(b)(2) is amended by striking subparagraph
(F).
(B) Section 415(b)(9) is amended to read as follows:
``(9) Special rule for commercial airline pilots.--
``(A) In general.--Except as provided in subparagraph (B),
in the case of any participant who is a commercial airline
pilot, if, as of the time of the participant's retirement,
regulations prescribed by the Federal Aviation Administration
require an individual to separate from service as a
commercial airline pilot after attaining any age occurring on
or after age 60 and before age 62, paragraph (2)(C) shall be
applied by substituting such age for age 62.
``(B) Individuals who separate from service before age
60.--If a participant described in subparagraph (A) separates
from service before age 60, the rules of paragraph (2)(C)
shall apply.''.
(C) Section 415(b)(10)(C)(i) is amended by striking
``applied without regard to paragraph (2)(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, 2001''.
(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,
2001''; 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:
2002.....................................................$11,000
2003.....................................................$12,000
2004.....................................................$13,000
2005.....................................................$14,000
2006 or thereafter....................................$15,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of taxable
years beginning after December 31, 2006, 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, 2005, 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:
2002.....................................................$11,000
2003.....................................................$12,000
2004.....................................................$13,000
2005.....................................................$14,000
2006 or thereafter.......................................$15,000.
``(B) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2006, the Secretary shall
adjust the $15,000 amount under 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, 2005, 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:
2002....................................................$7,000
2003....................................................$8,000
2004....................................................$9,000
2005 or thereafter.....................................$10,000.
``(ii) Cost-of-living adjustment.--In the case of a year
beginning after December 31, 2005, 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, 2004, 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) Subclause (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, 2001.
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND
SOLE PROPRIETORS.
(a) Amendment of Internal Revenue Code.--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).''.
[[Page H1766]]
(b) Amendment of ERISA.--Section 408(d)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2))
is amended by adding at the end the following new
subparagraph:
``(C) For purposes of paragraph (1)(A), the term `owner-
employee' shall only include a person described in clause
(ii) or (iii) of subparagraph (A).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
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 key
employee or former key 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, 2001.
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, 2001.
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, 2001.
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 10511 of the Revenue Act of 1987 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 later of--
(A) the fifth plan year the pension benefit plan is in
existence; or
(B) the end of any remedial amendment period with respect
to the plan beginning within the first 5 plan years; 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) Determination of Average Fees Charged.--For purposes of
any determination of average fees charged, any request to
which subsection (a) applies shall not be taken into account.
(e) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 2001.
SEC. 207. DEDUCTION LIMITS.
(a) Stock Bonus and Profit Sharing Trusts.--
(1) In general.--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) Conforming amendment.--Subparagraph (C) of section
404(h)(1) is amended by striking ``15 percent'' each place it
appears and inserting ``20 percent''.
(b) Compensation.--
(1) In general.--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).''.
(2) Conforming amendments.--
(A) Subparagraph (B) of section 404(a)(3) is amended by
striking the last sentence.
(B) 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, 2001.
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:
[[Page H1767]]
``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 contributions
and earnings thereon.--The term `qualified distribution'
shall not include any distribution of an excess deferral
under section 402(g)(2) or any excess contribution under
section 401(k)(8), and any income on the excess deferral or
contribution.
``(3) Treatment of distributions of certain excess
deferrals.--Notwithstanding section 72, if any excess
deferral under section 402(g)(2) attributable to a designated
plus contribution is not distributed on or before the 1st
April 15 following the close of the taxable year in which
such excess deferral is made, the amount of such excess
deferral shall--
``(A) not be treated as investment in the contract, and
``(B) be included in gross income for the taxable year in
which such excess is distributed.
``(4) 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)(A) (as added by
section 201(d)(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.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 209. AVAILABILITY OF QUALIFIED PLANS TO SELF-EMPLOYED
INDIVIDUALS WHO ARE EXEMPT FROM THE SELF-
EMPLOYMENT TAX BY REASON OF THEIR RELIGIOUS
BELIEFS.
(a) In General.--Subparagraph (A) of section 401(c)(2)
(defining earned income) is amended by adding at the end
thereof the following new sentence: ``For purposes of this
part only (other than sections 419 and 419A), this
subparagraph shall be applied as if the term `trade or
business' for purposes of section 1402 included service
described in section 1402(c)(6).''.
(b) Simple Retirement Accounts.--Clause (ii) of section
408(p)(6)(A) (defining self-employed) is amended by adding at
the end the following new sentence: ``The preceding sentence
shall be applied as if the term `trade or business' for
purposes of section 1402 included service described in
section 1402(c)(6).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 210. CERTAIN NONRESIDENT ALIENS EXCLUDED IN APPLYING
MINIMUM COVERAGE REQUIREMENTS.
(a) In General.--Subparagraph (C) of section 410(b)(3)
(relating to exclusion of certain employees) is amended by
inserting ``, determined without regard to the reference to
subchapter D in the last sentence thereof'' after ``section
861(a)(3)''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to plan years beginning after December 31, 2001.
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--
[[Page H1768]]
``(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) Application of nondiscrimination rules.--
``(A) In general.--An applicable employer plan shall not be
treated as failing to meet the nondiscrimination requirements
under section 401(a)(4) with respect to benefits, rights, and
features if the plan allows all eligible participants to make
the same election with respect to the additional elective
deferrals under this subsection.
``(B) Aggregation.--For purposes of subparagraph (A), all
plans maintained by employers who are treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 shall be treated as 1 plan.
``(5) 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.
``(6) 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.--In the case of a year
beginning after December 31, 2006, the Secretary shall adjust
annually the $5,000 amount in paragraph (2)(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 taken into account shall be the calendar quarter
beginning July 1, 2005, and any increase under this
subparagraph which is not a multiple of $500 shall be rounded
to the next lower multiple of $500.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2001.
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
2001)''.
(B) Section 404(a)(10)(B) is amended by striking ``, the
exclusion allowance under section 403(b)(2),''.
(C) Section 404(j) is amended by adding at the end the
following new paragraph:
``(3) Special rule for money purchase plans.--For purposes
of paragraph (1)(B), in the case of a defined contribution
plan which is subject to the funding standards of section
412, section 415(c)(1)(B) shall be applied by substituting
`25 percent' for `100 percent'.''.
(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 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).''.
(H) Subparagraph (B) of section 402(g)(7) (as redesignated
by section 201) 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 2001)''.
(I) Section 664(g) is amended--
(i) in paragraph (3)(E) by striking ``limitations under
section 415(c)'' and inserting ``applicable limitation under
paragraph (7)'', and
(ii) by adding at the end the following new paragraph:
``(7) Applicable limitation.--
``(A) In general.--For purposes of paragraph (3)(E), the
applicable limitation under this paragraph with respect to a
participant is an amount equal to the lesser of--
``(i) $30,000, or
``(ii) 25 percent of the participant's compensation (as
defined in section 415(c)(3)).
``(B) Cost-of-living adjustment.--The Secretary shall
adjust annually the $30,000 amount under subparagraph (A)(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 beginning October 1, 1993, and any increase under
this subparagraph which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.''.
(4) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2001.
(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, 2001.
SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCHING
CONTRIBUTIONS.
(a) Amendment of Internal Revenue Code.--Section 411(a)
(relating to minimum vesting standards) is amended--
[[Page H1769]]
(1) in paragraph (2) in the matter preceding subparagraph
(A), 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) Amendment of 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), in the matter preceding subparagraph
(A), 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:
2............................................................20
3............................................................40
4............................................................60
5............................................................80
6.........................................................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, 2001.
(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, 2002; or
(B) January 1, 2006.
(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. 304. MODIFICATIONS TO MINIMUM DISTRIBUTION RULES.
(a) Life Expectancy Tables.--The Secretary of the Treasury
shall modify the life expectancy tables under 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 to reflect current life expectancy.
(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.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to years
beginning after December 31, 2001.
(B) Distributions to surviving spouse.--
(i) In general.--In the case of an employee described in
clause (ii), distributions to the surviving spouse of the
employee shall not be required to commence prior to the date
on which such distributions would have been required to begin
under section 401(a)(9)(B) of the Internal Revenue Code of
1986 (as in effect on the day before the date of the
enactment of this Act).
(ii) Certain employees.--An employee is described in this
clause if such employee dies before--
(I) the date of the enactment of this Act, and
(II) the required beginning date (within the meaning of
section 401(a)(9)(C) of the Internal Revenue Code of 1986) of
the employee.
(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, 2001.
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, 2001.
SEC. 306. PROVISIONS RELATING TO HARDSHIP DISTRIBUTIONS.
(a) Safe Harbor Relief.--
(1) 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.
(2) Effective date.--The revised regulations under this
subsection shall apply to years beginning after December 31,
2001.
(b) Hardship Distributions Not Treated as Eligible Rollover
Distributions.--
(1) Modification of definition of eligible rollover.--
Subparagraph (C) of section 402(c)(4) (relating to eligible
rollover distribution) is amended to read as follows:
``(C) any distribution which is made upon hardship of the
employee.''.
(2) Effective date.--The amendment made by this subsection
shall apply to distributions made after December 31, 2001.
SEC. 307. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR
DOMESTIC OR SIMILAR WORKERS.
(a) In General.--Section 4972(c)(6) (relating to exceptions
to nondeductible contributions), as amended by section 502,
is amended by striking ``or'' at the end of subparagraph (A),
by striking the period and inserting ``, and'' at the end of
subparagraph (B), and by inserting after subparagraph (B) the
following new subparagraph:
``(C) so much of the contributions to a simple retirement
account (within the meaning of section 408(p)) or a simple
plan (within the meaning of section 401(k)(11)) which are not
deductible when contributed solely because such contributions
are not made in connection with a trade or business of the
employer.''
(b) Exclusion of Certain Contributions.--Section 4972(c)(6)
is amended by adding at the end the following new sentence:
``Subparagraph (C) shall not apply to contributions made on
behalf of the employer or a member of the employer's family
(as defined in section 447(e)(1)).''.
(c) No Inference.--Nothing in the amendments made by this
section shall be construed to infer the proper treatment of
nondeductible contributions under the laws in effect before
such amendments.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
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),
[[Page H1770]]
``(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) and which is maintained by an
eligible employer described in section 457(e)(1)(A).''.
(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) which is maintained by an eligible 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:
``(10) 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 eligible employer described in section 457(e)(1)(A) shall
be treated as a distribution from a qualified retirement plan
described in section 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 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, 2001.
(2) Reasonable notice.--No penalty shall be imposed on a
plan for the failure to provide the information required by
the amendment made by subsection (c) with respect to any
distribution made before the date that is 90 days after the
date on which the Secretary of the Treasury issues a safe
harbor rollover notice after the date of the enactment of
this Act, if the administrator of such plan makes a
reasonable attempt to comply with such requirement.
(3) 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, 2001.
(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
[[Page H1771]]
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 after December 31, 2001.
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, 2001.
SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) Amendment of internal revenue code.--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 received a notice
describing the consequences of making the election, and
``(V) 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) Amendment of erisa.--Section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is
amended by adding at the end the following:
``(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 subparagraph referred to
as the `transferor plan') to the extent that--
``(i) the forms of distribution previously available under
the transferor plan applied to the account of a participant
or beneficiary under the transferor plan that was transferred
from the transferor plan to the transferee plan pursuant to a
direct transfer rather than pursuant to a distribution from
the transferor plan;
``(ii) the terms of both the transferor plan and the
transferee plan authorize the transfer described in clause
(i);
``(iii) the transfer described in clause (i) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan;
``(iv) the election described in clause (iii) was made
after the participant or beneficiary received a notice
describing the consequences of making the election; and
``(v) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution to which the participant or beneficiary is
entitled under the 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
promulgated by the Secretary of the Treasury, a defined
contribution plan shall not be treated as failing to meet the
requirements of this subsection 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.''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2001.
(b) Regulations.--
(1) Amendment of internal revenue code.--Paragraph (6)(B)
of section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended by inserting after the
second sentence the following new sentence: ``The Secretary
shall by regulations provide that this subparagraph shall not
apply to any plan amendment which reduces or eliminates
benefits or subsidies which create significant burdens or
complexities for the plan and plan participants and does not
adversely affect the rights of any
[[Page H1772]]
participant in a more than de minimis manner.''.
(2) Amendment of erisa.--Section 204(g)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)(2))
is amended by inserting before the last sentence the
following new sentence: ``The Secretary of the Treasury shall
by regulations provide that this paragraph shall not apply to
any plan amendment which reduces or eliminates benefits or
subsidies which create significant burdens or complexities
for the plan and plan participants and does not adversely
affect the rights of any participant in a more than de
minimis manner.''.
(3) Secretary directed.--Not later than December 31, 2003,
the Secretary of the Treasury is directed to issue
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986 and section 204(g) of the Employee Retirement
Income Security Act of 1974, including the regulations
required by the amendment made by this subsection. Such
regulations shall apply to plan years beginning after
December 31, 2003, 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, 2001.
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, 2001.
SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF
CASH-OUT AMOUNTS.
(a) Qualified Plans.--
(1) Amendment of internal revenue code.--Section 411(a)(11)
(relating to restrictions on certain mandatory distributions)
is amended by adding at the end the following:
``(D) Special rule for rollover contributions.--A plan
shall not fail to meet the requirements of this paragraph if,
under the terms of the plan, the present value of the
nonforfeitable accrued benefit is determined without regard
to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term `rollover
contributions' means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16).''.
(2) Amendment of erisa.--Section 203(e) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) 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 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) of the Internal Revenue Code
of 1986.''.
(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, 2001.
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, 2001.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY FUNDING
LIMIT.
(a) Amendment of Internal Revenue Code.--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 The applicable
plan year beginning percentage is--
in--
2002........................................................165
2003......................................................170.''.
(b) Amendment of ERISA.--Section 302(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7))
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 The applicable
plan year beginning percentage is--
in--
2002........................................................165
2003......................................................170.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2001.
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:
[[Page H1773]]
``(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 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 maintained 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), as amended by section 207, 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, 2001.
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, 2001.
SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED
BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE
BENEFIT ACCRUALS.
(a) Amendment of Internal Revenue Code.--
(1) 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 notice to which the failure
relates is provided or the failure is otherwise corrected.
``(c) Limitations on Amount of Tax.--
``(1) Tax not to apply where failure not discovered and
reasonable diligence exercised.--No tax shall be imposed by
subsection (a) on any failure during any period for which it
is established to the satisfaction of the Secretary that any
person subject to liability for the tax under subsection (d)
did not know that the failure existed and exercised
reasonable diligence to meet the requirements of subsection
(e).
``(2) Tax not to apply to failures corrected within 30
days.--No tax shall be imposed by subsection (a) on any
failure if--
``(A) any person subject to liability for the tax under
subsection (d) exercised reasonable diligence to meet the
requirements of subsection (e), and
``(B) such person provides the notice described in
subsection (e) during the 30-day period beginning on the
first date such person knew, or exercising reasonable
diligence would have known, that such failure existed.
``(3) Overall limitation for unintentional failures.--
``(A) In general.--If the person subject to liability for
tax under subsection (d) exercised reasonable diligence to
meet the requirements of subsection (e), 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 1 plan.
``(B) Taxable years in the case of certain controlled
groups.--For purposes of this paragraph, if all persons who
are treated as a single employer for purposes of this section
do not have the same taxable year, the taxable years taken
into account shall be determined under principles similar to
the principles of section 1561.
``(4) 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 or otherwise inequitable 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. The Secretary
may provide a simplified form of notice for, or exempt from
any notice requirement, a plan--
``(A) which has fewer than 100 participants who have
accrued a benefit under the plan, or
``(B) which offers participants the option to choose
between the new benefit formula and the old benefit formula.
``(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) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) each 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)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced 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.
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.
``(3) Early retirement.--A plan amendment which eliminates
or significantly reduces any early retirement benefit or
retirement-type subsidy (within the meaning of section
411(d)(6)(B)(i)) shall be treated as having the effect of
significantly reducing the rate of future benefit accrual.
``(g) New Technologies.--The Secretary may by regulations
allow any notice under subsection (e) to be provided by using
new technologies.''.
[[Page H1774]]
(2) 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.''.
(b) Amendment of ERISA.--Section 204(h) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is
amended by adding at the end the following new paragraphs:
``(3)(A) An applicable pension plan to which paragraph (1)
applies shall not be treated as meeting the requirements of
such paragraph unless, in addition to any notice required to
be provided to an individual or organization under such
paragraph, the plan administrator provides the notice
described in subparagraph (B) to each applicable individual
(and to each employee organization representing applicable
individuals).
``(B) The notice required by subparagraph (A) 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 of the Treasury) to allow
applicable individuals to understand the effect of the plan
amendment. The Secretary of the Treasury may provide a
simplified form of notice for, or exempt from any notice
requirement, a plan--
``(i) which has fewer than 100 participants who have
accrued a benefit under the plan, or
``(ii) which offers participants the option to choose
between the new benefit formula and the old benefit formula.
``(C) Except as provided in regulations prescribed by the
Secretary of the Treasury, the notice required by
subparagraph (A) shall be provided within a reasonable time
before the effective date of the plan amendment.
``(D) Any notice under subparagraph (A) may be provided to
a person designated, in writing, by the person to which it
would otherwise be provided.
``(E) A plan shall not be treated as failing to meet the
requirements of subparagraph (A) 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) The Secretary of the Treasury may by regulations
allow any notice under this paragraph to be provided by using
new technologies.
``(4) For purposes of paragraph (3)--
``(A) The term `applicable individual' means, with respect
to any plan amendment--
``(i) each participant in the plan; and
``(ii) any 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)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced by such
plan amendment.
``(B) The term `applicable pension plan' means--
``(i) any defined benefit plan; or
``(ii) an individual account plan which is subject to the
funding standards of section 412 of the Internal Revenue Code
of 1986.
``(C) A plan amendment which eliminates or significantly
reduces any early retirement benefit or retirement-type
subsidy (within the meaning of subsection (g)(2)(A)) shall be
treated as having the effect of significantly reducing the
rate of future benefit accrual.''.
(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, and section
204(h)(3) of the Employee Retirement Income Security Act of
1974, 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 notice rule.--
(A) In general.--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.
(B) Reasonable notice.--The amendments made by this section
shall not apply to any plan amendment taking effect on or
after the date of the enactment of this Act if, before April
25, 2001, notice was provided to participants and
beneficiaries adversely affected by the plan amendment (or
their representatives) which was reasonably expected to
notify them of the nature and effective date of the plan
amendment.
(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
and the Committee on Education and the Workforce of the House
of Representatives and the Committee on Finance and the
Committee on Health, Education, Labor, and Pensions of the
Senate.
SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--
(1) In general.--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.''.
(2) Conforming amendment.--Section 415(b)(7) (relating to
benefits under certain collectively bargained plans) is
amended by inserting ``(other than a multiemployer plan)''
after ``defined benefit plan'' in the matter preceding
subparagraph (A).
(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--
``(A) with any other plan which is not a multiemployer plan
for purposes of applying subsection (b)(1)(B) to such other
plan, or
``(B) with any other multiemployer plan 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''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 506. 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 which is invested in assets consisting of
qualifying employer securities, qualifying employer real
property, or both, if such assets were acquired before
January 1, 1999.''.
(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. 507. 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
to read as follows:
``Sec. 105. (a)(1)(A) The administrator of an individual
account plan shall furnish a pension benefit statement--
``(i) to a plan participant at least once annually, and
``(ii) to a plan beneficiary upon written request.
``(B) The administrator of a defined benefit plan shall
furnish a pension benefit statement--
``(i) at least once every 3 years to each participant with
a nonforfeitable accrued benefit who is employed by the
employer maintaining the plan at the time the statement is
furnished to participants, and
``(ii) to a plan participant or plan beneficiary of the
plan upon written request.
``(2) A pension benefit statement under paragraph (1)--
``(A) shall indicate, on the basis of the latest available
information--
``(i) the total benefits accrued, and
``(ii) the nonforfeitable pension benefits, if any, which
have accrued, or the earliest date on which benefits will
become nonforfeitable,
``(B) shall be written in a manner calculated to be
understood by the average plan participant, and
``(C) may be provided in written, electronic, or other
appropriate form.
``(3)(A) In the case of a defined benefit plan, the
requirements of paragraph (1)(B)(i) shall be treated as met
with respect to a participant if the administrator provides
the participant at least once each year with notice of the
availability of the pension benefit statement and the ways in
which the participant may obtain such statement. Such notice
shall be provided in written, electronic, or other
appropriate form, and may be included with other
communications to the participant if done in a manner
reasonably designed to attract the attention of the
participant.
``(B) The Secretary may provide that years in which no
employee or former employee benefits (within the meaning of
section 410(b) of the Internal Revenue Code of 1986) under
the plan need not be taken into account in determining the 3-
year period under paragraph (1)(B)(i).''.
(b) Conforming Amendments.--
(1) Section 105 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1025) is amended by striking
subsection (d).
[[Page H1775]]
(2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is
amended to read as follows:
``(b) In no case shall a participant or beneficiary of a
plan be entitled to more than one statement described in
subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is
applicable, in any 12-month period.''.
(c) Model Statements.--The Secretary of Labor shall develop
a model benefit statement, written in a manner calculated to
be understood by the average plan participant, that may be
used by plan administrators in complying with the
requirements of section 105 of the Employee Retirement Income
Security Act of 1974.
(d) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2002.
SEC. 508. 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
[[Page H1776]]
(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, 2004.
(2) Exception for certain plans.--In the case of any--
(A) employee stock ownership plan established after March
14, 2001, 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 March 14, 2001.
TITLE VI--REDUCING REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) Amendment of Internal Revenue Code.--Paragraph (9) of
section 412(c) (relating to annual valuation) is amended to
read as follows:
``(9) Annual valuation.--
``(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) Amendment of 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) 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) 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) Information under clause (ii) shall, in accordance
with regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) An election under clause (ii), 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 after December 31, 2001.
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) Standards for Disallowance.--Section 404(k)(5)(A)
(relating to disallowance of deduction) is amended by
inserting ``avoidance or'' before ``evasion''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
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, 2001.
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 advice or information 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, 2001.
SEC. 606. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and
Their Spouses.--
(1) In general.--The Secretary of the Treasury and the
Secretary of Labor 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 plan years beginning
after December 31, 2002, the Secretary of the Treasury and
the Secretary of Labor shall provide for the filing of a
simplified annual return for any retirement plan which covers
less than 25 employees on the first day of a plan year and
which meets the requirements described in subparagraphs (B),
(D), and (E) of subsection (a)(2).
(c) Effective Date.--The provisions of this section shall
take effect on January 1, 2002.
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;
[[Page H1777]]
(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 Self-Correction Program for significant compliance
failures;
(4) expanding the availability to correct insignificant
compliance failures under the Self-Correction Program 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, 2001.
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, 2003.
(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, 2003.
(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, 2003, 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) of the Internal
Revenue Code of 1986 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, 2001.
SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) Amendment of internal revenue code.--
(A) In general.--Subparagraph (A) of section 417(a)(6) is
amended by striking ``90-day'' and inserting ``180-day''.
(B) 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).
(2) Amendment of erisa.--
(A) In general.--Section 205(c)(7)(A) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1055(c)(7)(A)) is amended by striking ``90-day'' and
inserting ``180-day''.
(B) Modification of regulations.--The Secretary of the
Treasury shall modify the regulations under part 2 of
subtitle B of title I of the Employee Retirement Income
Security Act of 1974 to the extent that they relate to
sections 203(e) and 205 of such Act to substitute ``180
days'' for ``90 days'' each place it appears.
(3) Effective date.--The amendments made by paragraph
(1)(A) and (2)(A) and the modifications required by paragraph
(1)(B) shall apply to years beginning after December 31,
2001.
(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 and under section 205 of the Employee
Retirement Income Security Act of 1974 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, 2001.
SEC. 612. ANNUAL REPORT DISSEMINATION.
(a) Report Available Through Electronic Means.--Section
104(b)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1024(b)(3)) is amended by adding at the end
the following new sentence: ``The requirement to furnish
information under the previous sentence shall be satisfied if
the administrator makes such information reasonably available
through electronic means or other new technology.''.
(b) Effective Date.--The amendment made by this section
shall apply to reports for years beginning after December 31,
2000.
SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1147) is amended--
(1) in subsection (a), by striking ``2001 and 2005 on or
after September 1 of each year involved'' and inserting
``2001, 2005, and 2009 in the month of September of each year
involved'';
(2) in subsection (b), by adding at the end the following
new sentence: ``To effectuate the purposes of this paragraph,
the Secretary may enter into a cooperative agreement,
pursuant to the Federal Grant and Cooperative Agreement Act
of 1977 (31 U.S.C. 6301 et seq.), with the American Savings
Education Council or any other appropriate, qualified
entity.'';
(3) in subsection (e)(2)--
(A) by striking ``Committee on Labor and Human Resources''
in subparagraph (D) and inserting ``Committee on Health,
Education, Labor, and Pensions'';
(B) by striking subparagraph (F) and inserting the
following:
``(F) the Chairman and Ranking Member of the Subcommittee
on Labor, Health and Human Services, and Education of the
Committee on Appropriations of the House of Representatives
and the Chairman and Ranking Member of the Subcommittee on
Labor, Health and Human Services, and Education of the
Committee on Appropriations of the Senate;'';
(C) by redesignating subparagraph (G) as subparagraph (J);
and
(D) by inserting after subparagraph (F) the following new
subparagraphs:
``(G) the Chairman and Ranking Member of the Committee on
Finance of the Senate;
``(H) the Chairman and Ranking Member of the Committee on
Ways and Means of the House of Representatives;
``(I) the Chairman and Ranking Member of the Subcommittee
on Employer-Employee Relations of the Committee on Education
and the Workforce of the House of Representatives; and'';
(4) in subsection (e)(3)--
(A) by striking ``There shall be not more than 200
additional participants.'' in subparagraph (A) and inserting
``The participants in the National Summit shall also include
additional participants appointed under this subparagraph.'';
(B) by striking ``one-half shall be appointed by the
President,'' in subparagraph (A)(i) and inserting ``not more
than 100 participants shall be appointed under this clause by
the President,'';
(C) by striking ``one-half shall be appointed by the
elected leaders of Congress'' in subparagraph (A)(ii) and
inserting ``not more than 100 participants shall be appointed
under this clause by the elected leaders of Congress'';
[[Page H1778]]
(D) by redesignating subparagraph (B) as subparagraph (C);
and
(E) by inserting after subparagraph (A) the following new
subparagraph:
``(B) Presidential authority for additional appointments.--
The President, in consultation with the elected leaders of
Congress referred to in subsection (a), may appoint under
this subparagraph additional participants to the National
Summit. The number of such additional participants appointed
under this subparagraph may not exceed the lesser of 3
percent of the total number of all additional participants
appointed under this paragraph, or 10. Such additional
participants shall be appointed from persons nominated by the
organization referred to in subsection (b)(2) which is made
up of private sector businesses and associations partnered
with Government entities to promote long term financial
security in retirement through savings and with which the
Secretary is required thereunder to consult and cooperate and
shall not be Federal, State, or local government
employees.'';
(5) in subsection (e)(3)(C) (as redesignated), by striking
``January 31, 1998'' and inserting ``May 1, 2001, May 1,
2005, and May 1, 2009, for each of the subsequent summits,
respectively'';
(6) in subsection (f)(1)(C), by inserting ``, no later than
90 days prior to the date of the commencement of the National
Summit,'' after ``comment'';
(7) in subsection (g), by inserting ``, in consultation
with the congressional leaders specified in subsection
(e)(2),'' after ``report'' the first place it appears;
(8) in subsection (i)--
(A) by striking ``beginning on or after October 1, 1997''
in paragraph (1) and inserting ``2001, 2005, and 2009''; and
(B) by adding at the end the following new paragraph:
``(3) Reception and representation authority.--The
Secretary is hereby granted reception and representation
authority limited specifically to the events at the National
Summit. The Secretary shall use any private contributions
accepted in connection with the National Summit prior to
using funds appropriated for purposes of the National Summit
pursuant to this paragraph.''; and
(9) in subsection (k)--
(A) by striking ``shall enter into a contract on a sole-
source basis'' and inserting ``may enter into a contract on a
sole-source basis''; and
(B) by striking ``fiscal year 1998'' and inserting ``fiscal
years 2001, 2005, and 2009''.
TITLE VII--OTHER ERISA PROVISIONS
SEC. 701. 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 new subsections:
``(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.--Section 206(f) of such Act (29
U.S.C. 1056(f)) is amended--
(1) by striking ``title IV'' and inserting ``section
4050''; and
(2) by striking ``the plan shall provide that,''.
(c) Effective Date.--The amendment 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. 702. 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) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)) maintained by
a small employer (as so defined),'' after ``single-employer
plan,'',
(2) in clause (iii), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new clause:
``(iv) in the case of a new single-employer plan (as
defined in subparagraph (F)) maintained by a small employer
(as so defined) for the plan year, $5 for each individual who
is a participant in such plan during the plan year.''.
(b) Definition of New Single-Employer Plan.--Section
4006(a)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end
the following new subparagraph:
``(F)(i) For purposes of this paragraph, a single-employer
plan maintained by a contributing sponsor shall be treated as
a new single-employer plan for each of its first 5 plan years
if, during the 36-month period ending on the date of the
adoption of such plan, the sponsor or any member of such
sponsor's controlled group (or any predecessor of either) did
not establish or maintain a plan to which this title applies
with respect to which benefits were accrued for substantially
the same employees as are in the new single-employer plan.
``(ii)(I) For purposes of this paragraph, the term `small
employer' means an employer which on the first day of any
plan year has, in aggregation with all members of the
controlled group of such employer, 100 or fewer employees.
``(II) 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 controlled groups of such sponsors shall be aggregated
for purposes of determining whether any contributing sponsor
is a small employer.''.
(c) Effective Date.--The amendments made by this section
shall apply to plans established after December 31, 2001.
SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND
SMALL PLANS.
(a) New Plans.--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 by adding at the end the
following new clause:
``(v) In the case of a new defined benefit plan, the amount
determined under clause (ii) for any plan year shall be an
amount equal to the product of the amount determined under
clause (ii) and the applicable percentage. For purposes of
this clause, 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.
``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as
defined in section 3(35)) maintained by a contributing
sponsor shall be treated as a new defined benefit plan for
each of its first 5 plan years if, during the 36-month period
ending on the date of the adoption of the plan, the sponsor
and each member of any controlled group including the sponsor
(or any predecessor of either) did not establish or maintain
a plan to which this title applies with respect to which
benefits were accrued for substantially the same employees as
are in the new plan.''.
(b) Small Plans.--Paragraph (3) of section 4006(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)), as amended by section 702(b), is amended--
(1) by striking ``The'' in subparagraph (E)(i) and
inserting ``Except as provided in subparagraph (G), the'',
and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G)(i) In the case of an employer who has 25 or fewer
employees on the first day of the plan year, the additional
premium determined under subparagraph (E) for each
participant shall not exceed $5 multiplied by the number of
participants in the plan as of the close of the preceding
plan year.
``(ii) For purposes of clause (i), whether an employer has
25 or fewer employees on the first day of the plan year is
determined taking into consideration all of the employees of
all members of the contributing sponsor's controlled group.
In the case of a plan maintained by two or more contributing
sponsors, the employees of all contributing sponsors and
their controlled groups shall be aggregated for purposes of
determining whether the 25-or-fewer-employees limitation has
been satisfied.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to plans established after December 31, 2001.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2001.
SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM
OVERPAYMENT REFUNDS.
(a) In General.--Section 4007(b) of the Employment
Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is
amended--
[[Page H1779]]
(1) by striking ``(b)'' and inserting ``(b)(1)'', and
(2) by inserting at the end the following new paragraph:
``(2) The corporation is authorized to pay, subject to
regulations prescribed by the corporation, interest on the
amount of any overpayment of premium refunded to a designated
payor. Interest under this paragraph shall be calculated at
the same rate and in the same manner as interest is
calculated for underpayments under paragraph (1).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to interest accruing for periods beginning not
earlier than the date of the enactment of this Act.
SEC. 705. 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 new paragraph:
``(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--
(A) in subsection (b)(9), by striking ``as defined in
section 4022(b)(6)'', and
(B) by adding at the end the following new subsection:
``(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)) after
December 31, 2001, and
(B) under section 4042 of such Act (29 U.S.C. 1342) with
respect to which proceedings are instituted by the
corporation after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on January 1, 2002.
SEC. 706. 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 by inserting after
``fiduciary or other person'' the following: ``(or from any
other person on behalf of any such fiduciary or other
person)''.
(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 new paragraphs:
``(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is 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 Date.--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 the enactment of this Act.
SEC. 707. BENEFIT SUSPENSION NOTICE.
(a) Modification of Regulation.--The Secretary of Labor
shall modify the regulation under subparagraph (B) of section
203(a)(3) 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 in connection with
any suspension of benefits described in such subparagraph--
(1) in the case of an employee who returns to service under
the plan after commencement of payment of benefits under the
plan--
(A) shall be made during the first calendar month or
payroll period in which the plan withholds payments, and
(B) if a reduced rate of future benefit accrual will apply
to the returning employee (as of the first date of
participation in the plan by the employee after returning to
work), shall include a statement that the rate of future
benefit accrual will be reduced, and
(2) in the case of any employee who is not described in
paragraph (1)--
(A) 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
(B) need not include a copy of the relevant plan
provisions.
(b) Effective Date.--The modification made under this
section shall apply to plan years beginning after December
31, 2001.
SEC. 708. STUDIES.
(a) Model Small Employer Group Plans Study.--As soon as
practicable after the date of the enactment of this Act, the
Secretary of Labor, in consultation with the Secretary of the
Treasury, shall conduct a study to determine--
(1) the most appropriate form or forms of--
(A) employee pension benefit plans which would--
(i) be simple in form and easily maintained by multiple
small employers, and
(ii) provide for ready portability of benefits for all
participants and beneficiaries,
(B) alternative arrangements providing comparable benefits
which may be established by employee or employer
associations, and
(C) alternative arrangements providing comparable benefits
to which employees may contribute in a manner independent of
employer sponsorship, and
(2) appropriate methods and strategies for making pension
plan coverage described in paragraph (1) more widely
available to American workers.
(b) Matters to Be Considered.--In conducting the study
under subsection (a), the Secretary of Labor shall consider
the adequacy and availability of existing employee pension
benefit plans and the extent to which existing models may be
modified to be more accessible to both employees and
employers.
(c) Report.--Not later than 18 months after the date of the
enactment of this Act, the Secretary of Labor shall report
the results of the study under subsection (a), together with
the Secretary's recommendations, to the Committee on
Education and the Workforce and the Committee on Ways and
Means of the House of Representatives and the Committee on
Health, Education, Labor, and Pensions and the Committee on
Finance of the Senate. Such recommendations shall include one
or more model plans described in subsection (a)(1)(A) and
model alternative arrangements described in subsections
(a)(1)(B) and (a)(1)(C) which may serve as the basis for
appropriate administrative or legislative action.
(d) Study on Effect of Legislation.--Not later than 5 years
after the date of the enactment of this Act, the Secretary of
Labor shall submit to the Committee on Education
[[Page H1780]]
and the Workforce of the House of Representatives and the
Committee on Health, Education, Labor, and Pensions of the
Senate a report on the effect of the provisions of this Act
on pension plan coverage, including any change in--
(1) the extent of pension plan coverage for low and middle-
income workers,
(2) the levels of pension plan benefits generally,
(3) the quality of pension plan coverage generally,
(4) workers' access to and participation in pension plans,
and
(5) retirement security.
TITLE VIII--PLAN AMENDMENTS
SEC. 801. 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) except as provided by the Secretary of the Treasury,
such plan shall not fail to meet the requirements of section
411(d)(6) of the Internal Revenue Code of 1986 or section
204(g) of the Employee Retirement Income Security Act of 1974
by reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this Act, or pursuant
to any regulation issued under this Act; and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2004.
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 ``2006'' for ``2004''.
(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 90 minutes of debate on the bill as
amended, it shall be in order to consider the further amendment printed
in House Report 107-53, which may be offered only by a Member
designated in the report, shall be considered read and shall be
debatable for 1 hour, equally divided and controlled by the proponent
and an opponent.
The gentleman from California (Mr. Thomas) and the gentleman from New
York (Mr. Rangel) each will control 30 minutes of debate on the bill,
and the gentleman from Ohio (Mr. Boehner) and the gentleman from New
Jersey (Mr. Andrews) each will control 15 minutes of debate on the
bill.
The Chair understands that the representatives of the Committee on
Education and the Workforce will manage their time at the outset of the
debate.
The Chair recognizes the gentleman from Ohio (Mr. Boehner).
Mr. BOEHNER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise today in strong support of H.R. 10. Improving
retirement security is a top priority of this Congress as we work to
secure America's future.
Mr. Speaker, improving retirement security is not just about fixing
Social Security. It is also about expanding access to private pension
plans and making innovations that will maximize every American's
opportunity for a safe and secure retirement. We are committed to
strengthening the retirement security of workers and their families by
expanding pension coverage and protecting their pensions and their
retirement savings.
Today, we take up a bill that will directly improve the retirement
security of American workers. The Comprehensive Retirement Security and
Pension Reform Act of 2001 makes retirement security more available to
millions of workers by, one, expanding small business retirement plans,
which cover 75 percent of the workforce; two, allowing workers to save
more; three, addressing the needs of an increasingly mobile workforce
through greater portability; four, making pensions more secure; and
five, cutting the red tape that has hamstrung employers who want to
establish pension plans for their employees.
This legislation, introduced by my two colleagues, the gentleman from
Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin), is
truly bipartisan. They have done a great job for this House on this
issue over 3 years now, and our committee, the Committee on Education
and the Workforce, reported H.R. 10 by a bipartisan voice vote. In July
2000, the House passed a virtually identical bill, H.R. 1102, by a vote
of 401 to 25.
The committee has made every effort to maintain this bipartisan
approach. Both this Congress and last, we have kept our Democrat
counterparts and the administration fully informed as to procedural and
substantive issues related to the bill. We have solicited their input
and sought to accommodate their concerns. In addition, we have worked
closely with our colleagues on the Committee on Ways and Means, and I
want to thank the gentleman from California (Chairman Thomas) and his
staff for their help and leadership in moving this bill to the floor.
Rarely has such an ambitious piece of legislation earned such broad
support. Today, about 175 Republicans and 130 Democrats are cosponsors
of the bill. More than 100 groups have endorsed the bill, both
businesses and unions, from AFSCME, the Teamsters, the Laborers
International, and the NEA to the U.S. Chamber, the National Federation
of Independent Business, the National Association of Manufacturers, the
American Benefits Council, and the American Council of Life Insurers.
The bill contains 22 amendments to the Employee Retirement Income
Security Act of 1974. The important changes within our committee's
jurisdiction include granting relief from excessive PBGC premiums for
new small business plans; accelerating the vesting of workers'
accounts; repealing and modifying a wide range of unnecessary and
outdated rules and regulations; providing more frequent benefit
statements to workers; requiring enhanced disclosure and other
protections when future pension benefits are reduced, as in the case of
conversion to cash balance accounts; and repealing the so-called full
funding limit that arbitrarily limits defined benefit plan funding to a
less than actuarially sound level.
Pension reform is a critical issue for our Nation's increasingly
mobile workforce, and it spans the generation gap. It concerns both
younger workers, whose retirement security is most in doubt today, and
older workers, the 76 million baby boomers who are now approaching
retirement age.
Whether you are an older worker, a member of Generation X or someone
who falls in between, we all have a stake in this issue. Through
passage of this bill, we can all take credit for making a real
difference in the lives of our constituents.
Mr. Speaker, I reserve the balance of my time.
Mr. ANDREWS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of the legislation. I congratulate our
friends, the gentleman from Ohio (Mr. Portman), the gentleman from
Maryland (Mr. Cardin), and on behalf of our ranking member, the
gentleman from California (Mr. George Miller), we extend our
appreciation to the gentleman from Ohio (Chairman Boehner), and the
subcommittee chairman, the gentleman from Texas (Mr. Sam Johnson), for
their courtesy and cooperation in this bipartisan effort.
I concur with the remarks the chairman just made that this bill will
make a positive difference in a lot of people's lives. It will make a
difference when people are determining how much they can afford to put
into their 401(k) or IRA. It will positively affect that decision,
because they will be able to put more in.
It will positively affect people's lives when a small business person
sits down at the end of the year and decides what to do with the excess
earnings that he or she has generated during the year. Because of so-
called overfunding provisions in the present law, we actually have a
law that makes it illegal for small business owners to put substantial
amounts of money into a pension fund. We agree that the opposite ought
to be the case, that we should encourage people to put as much as
possible for as many people as possible into their funds, and that is
an achievement of this legislation.
[[Page H1781]]
{time} 1200
It will make a difference when many Americans who have left the
workforce for a while want to catch up for the years that they have
missed. Whether it was for raising children or for pursuing an
education, for various reasons, people leave the workforce. Their
income either declines or disappears altogether. They are unable to put
money away during those years. When they return to the workforce and
wish to catch up for those lost years, there are artificial limitations
on what Americans can save.
This legislation removes those artificial limitations and will help
many people, especially women, catch up for those missed years in the
workforce.
We are particularly pleased that this legislation corrects an unfair
and anomalous situation referred to as the section 415 problem. There
are many Americans across the country who for years have driven a truck
or worked on construction sites or worked for a public employer who
have earned substantial pensions, but when they go to collect those
pensions when they retire, they find that they cannot collect all that
they are entitled to because of an anomaly that exists under section
415 of the Internal Revenue Code.
This bill corrects that problem. It says to those individuals that
they will be able to draw down the income that their plan promised them
and that they thought they had earned during those years. This is by no
means an attribute or asset for people at the very top of the income
scale, it is for people that have driven trucks and built buildings and
worked in public hospitals and for governments and schools.
It is one of the reasons why this legislation enjoys the support of
AFCSME, the National Education Association, and many, many other labor
organizations across the country.
We understand, and later there will be an amendment offered that
speaks to this point, that there are many Americans left out of the
private pension system altogether, about 70 million of them. We believe
that our amendment, offered by the gentleman from Massachusetts (Mr.
Neal), cosponsored by myself and others, will help address that
problem. But it is clear that the underlying bill achieves a number of
positive things for people across the spectrum.
For this reason, I am pleased to join both Republican and Democratic
colleagues in support.
Mr. Speaker, I reserve the balance of my time.
Mr. BOEHNER. Mr. Speaker, I yield 3 minutes to the gentleman from
Texas (Mr. Sam Johnson), the chairman of the Subcommittee on Employer-
Employee Relations.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I thank the gentleman for
yielding time to me.
Mr. Speaker, I thank our Democratic colleagues for supporting us on
this. It is with great pleasure that I rise today, because I think this
is the most significant overhaul of retirement law in 25 years.
Twenty-five years ago, it was common for someone to work an entire
lifetime in one job and retire with a pension. A generation later,
America has a mobile workforce, and it is not uncommon for employees to
spend just a few years at one job and then move to another. As a
result, it is harder and harder for people to add to their nest egg
with employer support.
It is not that employers do not want to help out. It is just that
rules and regulations make it difficult. To these Americans, both
employers and employees who want to sock away something for retirement,
help is on the way. This Comprehensive Retirement Security and Pension
Reform Act of 2001 is going to do just that.
As chair of the Subcommittee on Employer-Employee Relations as well
as a member of the Committee on Ways and Means, one of my objectives
has been to find ways to expand retirement coverage, and I have had a
lot of help from my Democrat colleagues and by small businesses, as
well as to search for ways to make retirement plans more friendly.
It is no secret that the cooling economy has bothered people, and
people have watched their retirement accounts, their balances, fall. Of
course, this makes them uneasy. They are saving for their golden years,
retirement; and their nest egg is getting smaller and smaller.
It is time to act now. This Congress is going to do that. To better
prepare for the day when they no longer show up for work every morning,
the best way to give these people peace of mind is to enact H.R. 10. If
we want to secure America's future, people have to feel confident about
their retirement; and by passing this bill, we have taken a long step
toward making them feel that way.
I think this step down the road to strengthening our private
employer-based pension system for all Americans, especially for all of
the 70 million baby boomers who are nearing retirement age, is very
important. We have to continue down this bipartisan path to ensure that
our American workers can enjoy their golden years comfortably and
securely. Let us pass this bill to protect our seniors.
Mr. ANDREWS. Mr. Speaker, I am pleased to yield 3 minutes to our
friend, the gentleman from Massachusetts (Mr. Tierney), a strong
supporter of retiree rights, particularly those in the
telecommunications industry, and the author of important legislation in
that area.
Mr. TIERNEY. Mr. Speaker, I thank the gentleman not only for the
time, but for the tremendous effort he has made in trying to make this
decent bill even better.
Mr. Speaker, I am what we might term a conditional supporter of H.R.
10. While I believe that this legislation is in fact a step in the
right direction toward ensuring retirement security for Americans, I do
not think that this legislation really goes far enough in achieving
this goal for everyone.
As it stands, this bill is certainly not as comprehensive as it could
be, and is not as comprehensive as it should be, a fact that I think is
clearly recognized by those of us who join the gentleman from
Massachusetts (Mr. Neal) in support of his amendment that will be
offered in a little while.
Today, despite the best intentions of others, the underlying
legislation does not quite live up to its billing. Even more important,
it does not quite live up enough to the ideal of this representative
body attending to the needs of all the Nation's people.
The Portman-Cardin bill does not have something for everyone, but it
certainly has a lot for a few. In fact, the Center on Budget and Policy
Priorities has most recently published a paper on this bill based on a
rather extensive study.
It finds that while the pension provisions will increase savings for
some, it does little or nothing to increase savings for the people who
are most in need of our help, low- and middle-income workers that
comprise the majority of our workforce.
Specifically, the Institute for Taxation and Economic Policy has
found that 76.9 percent of the pension and IRA tax reductions that will
result in this bill would go to people making $67,000 or more. So if
you earn less than $66,000, you will not be able to expect as much as
you should if the bill becomes law in its current form.
That same institute has also found that less than 1 percent of the
pension and IRA tax provisions of this bill would go to persons making
25 percent or less. That is 40 percent of our Nation's working
population. I want to repeat that for those who might not have heard
what I just said. Forty percent of the members of our workforce will
receive only 1 percent of the benefits yielded as a result of this
bill.
Fortunately, we have a way to make this bill actually work better for
all people. We can do that. The way to do it is to adopt a substitute
that will be offered a little while later.
As we have heard and we will hear again, that substitute would leave
intact the base bill and add a few provisions that, by their addition,
actually make this a bill that we can be proud of and a bill that would
truly make a difference.
As we know, the version of this legislation being considered in the
Senate includes measures that would address the needs of those low- and
moderate-income savers who contribute to retirement plans. This
amendment seeks to bring H.R. 10 more in line with that version.
Specifically, what this amendment would do is simply expand the
existing pension coverage for those who currently contribute to pension
plans, but
[[Page H1782]]
also extend it to those who, for whatever reason, do not and cannot.
The fact is that when weighed against paying medical bills, planning
for a child's college education, and making mortgage payments,
retirement planning remains a low priority for many families and
working people.
Mr. Speaker, this is a legitimate concern that I do not believe H.R.
10 alone takes any significant steps to address.
One final point, Mr. Speaker. If the argument is ever raised that the
provisions of this bill are too expensive, let us remember that it is
only a fraction of the cost of the base bill, and we have started in
this body to have the majority try to give away billions of dollars to
the wealthiest 2 percent through estate tax provisions.
We can do better. We should do better with this bill.
The SPEAKER pro tempore (Mr. Thornberry). Without objection, the
gentleman from Texas (Mr. Sam Johnson) will control the time of the
gentleman from Ohio (Mr. Boehner).
There was no objection.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I would just like to comment that this bill has helped
small businesses, those with less than 50 employees, right on down to
one. So in order to help those guys who have not in the past been able
to fund retirement plans, they now can, if this bill passes.
Mr. Speaker, I yield 1 minute to the gentlewoman from New Jersey
(Mrs. Roukema).
(Mrs. ROUKEMA asked and was given permission to revise and extend her
remarks.)
Mrs. ROUKEMA. Mr. Speaker, I thank the gentleman for yielding time to
me.
Mr. Speaker, as an original cosponsor of this bill, I rise in strong
support of it. I want to associate my comments and observations about
the merits of the bill with what the gentleman from Ohio (Chairman
Boehner) and our colleague, the gentleman from Texas (Mr. Johnson),
have said.
I also want to say that the legislation is overdue, as has already
been pointed out, but that it is particularly appropriate at this time
because it has strong support from both employers and employees and is
the kind of tax reform that will help Americans save and invest in the
future. It complements the tax bill that we are soon to have enacted
into law.
I guess I just want to say that I am very confident that President
Bush will be signing this legislation in the near future. When it was
passed last year it had overwhelming support, bipartisan support; and I
fully expect that this will be a supplement to tax reform this year.
This legislation has vast bipartisan support including over 300
cosponsors. Last year, the same legislation passed by a vote of 401 to
25.
Mr. Speaker, this legislation is vitally needed. Only half of all
private sector workers have any kind of pension and only 20 percent of
small businesses offer retirement plans.
H.R. 10 allows workers to save more money in their IRAs and 401(k)
plans. Congress has not raised the contribution limits on IRAs and
pensions since the early 1980s. This legislation is timely because it
addresses a very real and growing concern for millions of Americans
trying to figure out how best to save for their retirement. With this
bill, we can change the retirement outlook for millions of Americans.
The provisions in this bill are the most significant expansion of
pension law in recent history. Both employers and employees are
encouraged to create and participate in pension plans.
Specifically, the current $2,000 IRA contribution limit for both
traditional and Roth IRAs are increased to $5,000 by 2003 and indexed
for inflation thereafter.
Second, the bill provides increased contribution limits on pre-tax
salary contribution to pension plans. For example, the limit on salary
reduction contributions to 401(k)-type plans will be raised to $15,000
by 2005.
Third, the legislation includes additional ``catch-up'' provisions
that allow workers aged 50 and older to save even more for their
retirement needs.
Fourth, the bill includes a portability provision which allows
workers to ``roll over'' their pension savings between plans when they
change jobs.
Finally, the vesting requirements for employer matching contributions
would be reduced to three years from five.
I believe that this bill is a significant step forward in encouraging
American workers to save and invest in America. This is an important
element of tax reform that this House will overwhelmingly endorse. I am
confident that there will be significant pension and IRA reform in the
final tax bill that President Bush will sign into law.
I strongly urge my colleagues to support the important legislation.
Mr. ANDREWS. Mr. Speaker, I am pleased to yield 2 minutes to the
gentleman from Wisconsin (Mr. Kind), who has spoken very strongly for
small business throughout his tenure.
(Mr. KIND asked and was given permission to revise and extend his
remarks.)
Mr. KIND. Mr. Speaker, I thank my friend, the gentleman from New
Jersey, for yielding me this time, and I commend his leadership and the
leadership on the committee for putting together a bipartisan package
that is going to be very important to American workers throughout the
country and to their retirement security.
According to the Social Security Administration, many retirees
receive 19 percent of their income from employer-provided pensions.
However, half of private sector workers have no pension coverage at
all. In addition, only 29 percent of small businesses with 25 or fewer
employees offer pension plans to their employees.
H.R. 10 expands pension coverage and will help to provide retirement
plans for those workers who are currently without such a plan. It
increases the amount an individual can contribute to retirement
accounts, and it allows individuals 50 years and older to make catch-up
contributions to their 401(k) plans beginning in 2002, and in 2005 it
will be indexed for inflation.
This measure will also require faster vesting of pensions, increase
pension portability, and reduce fees for smaller business pension
plans.
In the next 15 years, Mr. Speaker, 76 million baby boomers will
retire. It is time that we pass legislation that helps encourage
retirement and pension savings for all workers.
With the Social Security trust fund currently expected to be
exhausted by 2037, we must act now to ensure the financial security of
future generations. I believe H.R. 10 is a step in that direction.
I also want to commend my friend, the gentleman from Massachusetts
(Mr. Tierney), for working hard to include language in this bill that
would require the Department of Labor to conduct a study on the impact
of H.R. 10 on low- and moderate-income workers. I believe we need to be
fair in providing incentives to these low- and moderate-income workers,
as well as for those in the upper income brackets, to participate in
their retirement plans.
Mr. Speaker, I urge my colleagues today to support this bipartisan
bill. Retirement benefits are critical to ensuring that our aging
population has the income to live out their golden years.
Again, I commend the leadership, the chairman, and the ranking member
on the committee for the fine work they have done with this
legislation.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield 2 minutes to the
gentleman from California (Mr. McKeon), a subcommittee chairman.
Mr. McKEON. Mr. Speaker, I thank the gentleman for yielding time to
me.
Mr. Speaker, I rise today as a proud cosponsor of this legislation.
First, I would like to thank the committee chairman, the gentleman
from Ohio (Mr. Boehner), of the Committee on Education and the
Workforce, and the subcommittee chairman, the gentleman from Texas (Mr.
Johnson), for their work in bringing this bill to the floor.
I would also like to thank the gentleman from Ohio (Mr. Portman) and
the gentleman from Maryland (Mr. Cardin) for their tireless efforts in
seeking pension reform.
Mr. Speaker, this bill provides $52 billion in tax relief to help
hard-working Americans save for their retirement and their own
security. Furthermore, H.R. 10 encourages small businesses to propose
pension plans for its workers.
As a former small businessman, I recognize the need to encourage
small businesses to offer pension plans. H.R. 10 does just that. This
bill streamlines pension laws and repeals and modifies a wide range of
unnecessary and outdated rules and regulations.
[[Page H1783]]
Specifically, it treats business owners like other pension plan
participants by allowing them to take out loans from their retirement
plans. This will go a long way in encouraging small businesses to
establish benefit plans. For those companies that offer plans already,
it will allow them to include a loan feature which will help persuade
lower-income individuals to contribute to the plan.
Additionally, several studies show that one of the many reasons small
business employers do not establish pension plans is the administrative
costs associated with maintaining the plans. H.R. 10 would modify this
problem by lowering the Pension Benefit Guaranty Corporation premiums
for the new small business defined benefit plans.
Mr. Speaker, the small business education communities believe this
reform is vital to encourage greater income security for all Americans.
Therefore, I urge all my colleagues to support H.R. 10.
{time} 1215
Mr. ANDREWS. Mr. Speaker, I yield 2 minutes to the gentlewoman from
New York (Mrs. McCarthy), one of the strongest voices for fixing the
415 problem that I spoke to earlier.
Mrs. McCARTHY of New York. Mr. Speaker, I rise in support of H.R. 10
and its impact on American workers across this country. The United
States savings rate is at a level that has not been seen since the
Great Depression. This is unfortunate because it forces more people to
work later in life to supplement their retirement.
Retirees can no longer live solely on Social Security. Furthermore,
not everyone employed is offered a pension or some form of retirement
plan. That is why individual retirement accounts initially gained so
much support when created in the 1970s. However, the contribution limit
was never adjusted for inflation. The current cap of $2,000 does not
provide much of an incentive to save as it used to. People are making
more money and should be able to save more.
As we have witnessed in the last few months, the stock market is
bound to constrict, and those who solely rely upon their stocks as a
pension plan will feel the strain the most. That is why it is important
to increase the IRA contribution limit to $5,000 and increase the
amount contributed to 401(k) plans. H.R. 10 does this and more. It also
takes into consideration those on the verge of retirement with catch-up
contributions, which will help those people we refer to as the baby
boomers, myself included.
We need to provide hard working Americans the option of saving more
and relying less on Social Security when they retire. The Portman-
Cardin bill allows this to occur.
The SPEAKER pro tempore (Mr. Thornberry). The Chair would announce
the gentleman from Texas (Mr. Sam Johnson) has 4\1/2\ minutes remaining
and the gentleman from New Jersey (Mr. Andrews) has 4\1/2\ minutes
remaining.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield 2\1/2\ minutes to the
gentleman from Virginia (Mr. Goodlatte).
Mr. GOODLATTE. Mr. Speaker, I thank the gentleman from Texas for
yielding me the time to speak on this important legislation that will
modernize pension laws and provide regulatory relief to encourage more
small businesses to offer retirement plans.
Mr. Speaker, while Social Security has been one of our greatest
success stories, longer life expectancies, accompanied by a wave of
baby boomers that will soon begin to reach retirement age, pose new and
difficult challenges to our Social Security system. However, Social
Security was never intended to be the sole source of income for
retirees. Unfortunately, it has become the primary source of income
rather than a safety net for many elderly individuals.
In order to alleviate this problem, I urge my colleagues to support
H.R. 10, the Comprehensive Retirement Security and Pension Reform Act.
This bill is important because it will encourage individual savings,
such as IRAs as well as 401(k) plans and other employer-supported
retirement plans. By knocking down barriers to savings, by raising
limits and allowing workers to set more aside tax free for their
retirement, retirees will have the option of saving more for their
later years.
I am proud to support this bill because it contains a provision that
permits older workers who are returning to the workforce to put even
more aside for their pension. Under this bill, workers over 50 can
contribute up to $5,000 in catch-up contributions for 401(k)-type
plans.
H.R. 10 also responds to the needs of the increasingly mobile
workforce we have in this country by allowing people to vest faster in
their pension plans and by allowing portability so Americans can move
their pension plans from job to job. Workers should be comfortable to
change jobs without the worry of managing separate pension plans.
This bill will also modernize and streamline pension laws to
encourage small business to offer pension plans. As we all know,
employers are not required to offer these plans and many do not do so
due to fiscal constraints. However, H.R. 10 repeals and modifies a wide
range of unnecessary and outdated rules and regulations. Specifically,
H.R. 10 provides incentives to small businesses to offer pension plans
to their workers by lowering Pension Benefit Guaranty Corporation
premiums for new small business defined benefit plans and eliminates
the business user fee for new retirement plans established by small
businesses.
I would like to thank the sponsors of this legislation, the gentleman
from Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin);
along with the chairman of the subcommittee, the gentleman from Ohio
(Mr. Boehner); and the gentleman from California (Mr. Thomas), chairman
of the Ways and Means Committee, for their efforts in supporting this
bill.
I urge my colleagues to support this legislation.
Mr. ANDREWS. Mr. Speaker, I yield 2 minutes to the gentlewoman from
New York (Mrs. Maloney), one of the Members who represents the heart of
the financial center of the world.
(Mrs. MALONEY of New York asked and was given permission to revise
and extend her remarks.)
Mrs. MALONEY of New York. Mr. Speaker, I thank the gentleman for
yielding me this time and for his leadership on this issue and in so
many other areas.
Despite the current question about the direction of our economy,
there is no doubt that our Nation has been transformed in recent years
by the technology sector and the incredible American entrepreneurial
spirit that has led small start-up companies to become the most
successful businesses in history. I strongly endorse the Portman-Cardin
legislation, in part because I believe it helps bring retirement
savings programs up to speed with the new economy.
While much of our manufacturing sector has struggled over the last
decade, the U.S. has created millions of good-paying new technology
jobs, many in my district. This change in our workforce and the
transformation of the American workplace has had a major impact on
government, on financial services, and on savings. One of the major
changes in worker attitudes is that technology workers expect to change
jobs several times over their careers. Given the constant change in the
technology sector, workers demand pension portability and retirement
plans that will travel with them from job to job.
By passing this legislation, we are taking a critical step in
allowing an important government saving stimulus to catch up with the
reality of today's employment market. Importantly, this legislation
also encourages saving by including substantial increases in the IRA
limit to $5,000, and 401(k), 403(b) and 457 plan limits to $15,000.
While this legislation benefits younger workers over the long haul,
it also provides important catch-up contributions for workers who are
50 or older, so that people who have been out of the workforce for a
number of years can build their own nest eggs. Often these older
workers are women who, without this provision, would be punished for
having taken off time to raise their families. I strongly support this
bill.
Mr. ANDREWS. Mr. Speaker, I yield myself the balance of my time and
will simply close out for our side reiterating again my appreciation of
the gentleman from Ohio (Mr. Portman)
[[Page H1784]]
and the gentleman from Maryland (Mr. Cardin) for their outstanding work
on this legislation. I think we can see from the breadth of speakers
that there is strong support across the spectrum for this bill.
One of the blessings of this life is that we can reasonably
anticipate our children, perhaps some of us, will live to be 100 years
old. One of the problems is that we have an income retirement system
set up for 75 years' worth of life. I believe that the very wise steps
that we are about to take today, and I hope through conference and
final passage, will help alleviate that problem. We are very pleased to
support this legislation.
Mr. Speaker, I yield back the balance of my time.
Mr. BOEHNER. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, let me salute the authors of this bill, the gentleman
from Maryland (Mr. Cardin) and the gentleman from Ohio (Mr. Portman),
who really have spent a great deal of time over the last 3 years
building support and fine-tuning this legislation. They really have
done very good work.
I also want to thank my colleagues on my committee, both the
gentleman from Texas (Mr. Sam Johnson), the chairman of the
Subcommittee on Employer-Employee Relations; and most notably the
gentleman from California (Mr. George Miller) and the gentleman from
New Jersey (Mr. Andrews), who we have worked closely together with over
the last 3 years as well.
As the gentleman from New Jersey (Mr. Andrews) just pointed out, this
is a very good bill that will help American workers. We do believe it
will help employers who do not currently offer pensions; give them the
ability and the flexibility and encouragement to offer pensions to
their employees. Our goal ought to be to see that all American workers
have access to high-quality pension and profit sharing plans. This bill
is a major step in that direction.
Let me also add to something the gentleman from New Jersey pointed
out, and that is that the baby boomers are beginning to retire. Most do
not have the kind of resources they need to get them through their
retirement years. I think that the bill we are about to pass will, in
fact, help baby boomers and younger workers begin to set aside more of
their income so that when they get into their golden years, they will
actually be able to have a happy and successful and productive
retirement with the kind of financial security that they need in order
to enjoy their retirement years.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. All time for the Committee on Education and
the Workforce has expired.
The gentleman from California (Mr. Thomas) and the gentleman from New
York (Mr. Rangel) are now each recognized for 30 minutes.
The Chair recognizes the gentleman from California (Mr. Thomas).
Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
I also would thank the Committee on Education and the Workforce for
the cooperative effort on the product that we have in front of us, H.R.
10, but also just as importantly on the inter-committee relationship
where committees share jurisdiction on a particular piece of
legislation. The quality of the product will be seen, as was said
earlier, on the basis of the number of speakers on both sides of the
aisle supporting the document that is in front of us; but it would not
have been possible without the willingness of the committees to work
together in a bipartisan way.
In turning to the Committee on Ways and Means, I clearly want to give
enormous credit to the co-sponsors of this bill, the gentleman from
Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin). It is
extraordinarily easy to take an issue like this and produce a really
good looking $200 billion bill. It is also relatively easy to produce
an okay $100 billion bill. It took extraordinary effort to focus on
what needed to be changed, overdue adjustments on amounts contributed,
and produce this evenhanded excellent piece of work for $51.5 billion
over 10 years.
Why do I say that? Because it is exceedingly easy to double the cost
of this bill because we want to do as much as we can for as many people
as we can. Of course, that is a positive motivating effort; but what I
would hope most Members do is focus on the particulars in this bill.
Frankly, some of the adjustments are overdue. If it were based upon an
indexing on inflation from the time that these numbers were first
created, at the time we were talking about creating super IRAs as the
Bentsen-Roth-Pickle-Thomas bill did, $2,000 seemed like a major
achievement. Today, in this bill, moving it to $5,000 is a significant
advancement, but all of us would like to say we would like to do more.
I find it interesting that those who might oppose this bill want to
increase the amount that we are going to spend and provide support for
people slightly different than the fundamental underlying intention of
this bill. The fundamental underlying intention of this bill is to
assist people, without punishing them, in putting their own money away
to assist in retirement. In that aspect, the Tax Code should reward
people who do this; should create incentives and support for people who
do that.
The question of assisting people who do not have the wherewithal to
do it themselves is a question worthy of consideration, but not at the
time that we are considering this particular bill; shaped the way it
has been shaped, to make it easier for employers to offer, to allow
those who want these various programs to put more of their own money
away under the fundamental structure, adjusted to make it timely today.
So I just want to underscore to my colleagues that there are a number
of issues that we could debate; but they ought to be debated at a
different time, under a different forum, if in fact we want to do
something fundamentally different than what we are doing in this bill.
This bill is excellent as it has been crafted. The evidence of that
is the list, which I am sure is growing, of the more than 100
supporters of H.R. 10, ranging alphabetically from the Airline Pilots
Association, the American Bankers Association, all the way down to the
United Brotherhood of Carpenters, the U.S. Chamber of Commerce, and
virtually every labor and business and corporate group in between.
This bill is frankly overdue. It is time to move it. It is modest and
appropriate. And from the chairman of the committee's point of view, it
was a real pleasure to work on a measure that passes the committee 35
to six and will be discussed on the floor in the way we would prefer,
all of us would prefer, more bills being discussed, and that is, we
would like to do more. But this is an excellent work product, the
authors are to be complimented, and we ought to support it.
Mr. Speaker, I reserve the balance of my time.
And, Mr. Speaker, I yield the balance of my time to the gentleman
from Ohio (Mr. Portman) and ask unanimous consent that he be allowed to
control the balance of the time.
{time} 1230
The SPEAKER pro tempore (Mr. Thornberry). Is there objection to the
request of the gentleman from California?
There was no objection.
Mr. CARDIN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank the gentleman from California (Mr. Thomas) for
his kind comments; but I really want to thank the gentleman for the
manner in which he has led our committee in consideration of the
pension legislation. The gentleman from California has allowed us to
work in a constructive environment so we could reach the point of
having a bill that enjoys broad support on both sides of the aisle.
That is indicative of the gentleman's leadership.
Mr. Speaker, I thank the gentleman from Ohio (Mr. Portman) for his
extraordinary work. The gentleman from Ohio has worked in a bipartisan
way so we could reach this point of having a major, comprehensive
pension reform bill that enjoys strong bipartisan support, and support
not only in this body, but in the other body. We are going to pass this
legislation with a strong vote, and we hope that it will pass the other
body and be enacted into law this year.
Mr. Speaker, this bill provides individual tax relief. It will
provide billions of dollars of tax relief to individual taxpayers by
allowing them to
[[Page H1785]]
defer their tax liability by putting more of their own resources and
their company's resources into retirement plans. That is very important
for our country. It is very important for individuals. It is the
building block, and we will hear a lot today about other problems that
we have in our society. We need to reform the Social Security system.
We agree on that. We need to get lower-wage workers to put more money
away; and the government should maybe offer some incentives to do that.
Congress needs to fix Social Security and offer retirement accounts for
individuals.
Fixing our current retirement system is the first building block in
accomplishing those results. I think that my colleagues agree that the
legislation before us should pass, and should pass quickly. I am not
going to go into great deal of detail. We have heard why this bill is
important. It allows small businesses the opportunity to provide
pension plans for their employees. That will help workers today who do
not have an employer-sponsored plan. Lower-wage workers need their
company to offer incentives so they can participate in a pension plan.
It raises all of the limits on defined contribution and defined benefit
plans.
Mr. Speaker, in raising the limits, we are trying to make up for what
inflation has done in reducing the limits by allowing people to make up
and be as secure as they used to be in putting money away for their own
retirements.
The portability issue, many people change jobs regularly. This bill
allows for the combination of those different plans to manage your own
retirement. We also shorten the vesting rules which is a very important
point.
The bottom line is in the last decade when we started talking about
changing our pension laws, we knew that the savings ratios in the
United States was too low. Yes, we have had some very impressive
economic growth over the last decade. But in one staring example, we
are not doing well, and that is the amount of money that we put away as
a Nation in savings. Eight years ago, that was about 9 percent of our
earnings. Today it is negative. We have actually spent more as a Nation
than we earn. We need to do something about increasing savings. This
legislation will move us in that direction. I am proud to be associated
with this legislation. I know that it will enjoy broad support in this
body.
Mr. Speaker, I reserve the balance of my time.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this afternoon we are here on the floor of the House to
talk about a very serious problem which faces our country, which is a
retirement savings problem. It affects millions of Americans; but
importantly, we are also talking about a bipartisan and very
constructive solution which addresses the problem directly.
I want to thank Members on both sides of the aisle, many of whom have
already spoken, for their hard work on this issue. The gentleman from
Maryland (Mr. Cardin) has been my partner on this effort for the last 3
or 4 or 5 years. We have been to the floor of the House on this very
bill, and he has been instrumental in making this a better bill.
I thank the gentleman from California (Mr. Thomas), the chairman of
the Committee on Ways and Means, who is responsible for getting this
bill to the floor. He has been a leader on this issue over the year. We
all know about the Roth IRA. Here on the House side, we call it the
Thomas IRA because he was the House author of that new IRA provision,
and for years the gentleman from California has taken a leadership role
on expanding retirement security through IRA contributions.
I thank the gentleman from Ohio (Mr. Boehner), the chairman of the
Committee on Education and the Workforce who spoke earlier. His
committee looked at the ERISA provisions and improved them through the
process. They are an important component of expanding retirement
savings. The gentleman went into that in some detail.
The gentleman from Texas (Mr. Sam Johnson), the subcommittee chairman
who is also on the Committee on Ways and Means, and has taken a
leadership role this year; and I thank the gentleman from New Jersey
(Mr. Andrews), the ranking member, who has taken a courageous stand on
some tough issues on the ERISA side, and taken the correct stand
because he has focused on the goal here which is expanding the ability
for everybody to save more for their retirement.
Mr. Speaker, this legislation does a number of things, but it can be
probably summarized three ways. One, it lets everybody save more for
retirement. We move IRA contributions from $2,000 to $5,000 a year. It
is just adjusting it for inflation.
We also allow people in 401(k)s to go from $10,500 a year to $15,000
a year, really just restoring these limits to where they were in the
1980s. On 401(k)s, after adjusting for inflation, a taxpayer could save
more in the 1980s than they can under our bill. We were constrained by
some fiscal concerns that the gentleman from California (Mr. Thomas)
talked about. This is a dramatic increase in what our constituents,
millions of Americans, will be able to save for their own retirement.
Second, we help to address the concerns that people have about an
increasingly mobile workforce. We increase the vesting time from 5
years down to 3 years so people who are moving from job to job can get
into a pension sooner.
We also allow portability between defined contribution plans. The
gentleman from North Dakota (Mr. Pomeroy) will talk about this, but his
legislation is incorporated as part of this legislation to let people
as they move from job to job keep their pension in one account. That is
very important as more and more people are moving from job to job more
and more quickly.
Very importantly, we want to make sure that companies that want to
offer pensions can do so without a lot of red tape. This is very
important. I would underscore what someone already talked about, it is
really a small business problem. An American who works for a large
business probably has a pension, and it is probably a pretty decent
one. An American who works for a small business probably does not.
There is a 1 in 4 chance. Twenty-five or fewer employees, there is only
a 19 percent chance that there is a pension at all, even a simple plan.
This Congress passed the Portman-Cardin legislation a few years ago,
a SEP plan, for the most basic 401(k). This is where the problem is.
This is where most of the low- and moderate-income workers work. This
is the focus of this legislation, to give those employers more
encouragement and more incentive to offer plans to cover more people so
everybody has more retirement security.
The gentleman from California (Mr. Thomas) and others have talked
about what Congress has done over the years. Over the last 20 or 30
years, Congress has done the wrong things in terms of pension coverage.
That is why pension coverage is totally flat. That is why 70 million
Americas, half the workforce, have nothing at all today. No pension at
all. Social Security is not enough. It is hard to live on $900 a month.
People need to have increased private savings; and that is what we need
to do as a Congress, start making it easier, not more difficult.
Mr. Speaker, we have lowered limits. We have added to the rules and
regulations. From 1982 to 1994, the number of traditional defined
benefit plans, the good plans, decreased from 114,000 to 45,000. The
gentleman from North Dakota (Mr. Pomeroy) talked earlier today about
how 40 percent fewer people are in these defined benefit plans today.
The data is unbelievable.
We need to do more to ensure that low- and moderate-income workers
have access to pension plans, and that is why this legislation is so
important.
Mr. Speaker, it is a comprehensive approach. It is the most sweeping
change in our pension laws since the 1970s. It is something that is
going to help everybody, and it is something that every American worker
has the ability to benefit from. Seventy-seven percent of the people
who are involved in pensions today make less than $50,000 a year. You
are going to hear some discussion today how we should target this more
towards low- and moderate-income folks. These are the people that are
going to get help under this legislation.
Finally, I thank all Members of Congress who have supported this
effort over the year. We have over 300 cosponsors of the legislation as
of today. We
[[Page H1786]]
have, on the outside, over 100 groups who have supported this, from the
National Federation of Independent Businesses and other groups
supporting small businesses, and the Chamber of Commerce, to the
Building and Trades Construction Department of the AFL-CIO. It is a
broad cross-section. It is a bipartisan product. It is the product of
several years of working carefully together to ensure that we have the
best possible way in order to help people save for their own
retirement.
Mr. Speaker, the bill is good for our future, our families. It is
good for small businesses. It is great for workers, and I hope that we
can pass it with a resounding vote in the House of Representatives to
give it the momentum that it needs to get through the Senate and end up
on the President's desk to be signed into law, and help Americans have
more peace of mind and security in their retirement years.
Mr. Speaker, I reserve the balance of my time.
Mr. CARDIN. Mr. Speaker, I yield 5 minutes to the gentlewoman from
Florida (Mrs. Thurman).
Mrs. THURMAN. Mr. Speaker, let me give accolades to the gentleman
from Maryland (Mr. Cardin) and the gentleman from Ohio (Mr. Portman),
because I do not believe that this bill would have come to the floor
with such bipartisanship if they had not allowed Members to add in and
talk about issues which were important.
I think this is a very good bill. I think we could do better with the
Democratic substitute, which we will talk about later. But what I would
like to discuss is how this bill will help working women.
Mr. Speaker, we talk about families, but women in this bill are going
to be helped because the bill contains several provisions to help
women, especially those who return to the workforce after their
children are grown. Let me give you some ideas.
The catch-up provision would allow women who have taken time out to
raise a family to make additional contributions of up to $5,000 per
year. In addition, the provision that accelerates vesting of employer-
matching contributions will disproportionately help women.
In IRA language, H.R. 10 accelerates the deductible contribution to
$5,000 in 2002, and increases the contribution by $5,000 beginning in
2005 for people over the age of 50. This bill includes comparable
language for 401(k) and other deferred compensation plans.
Mr. Speaker, in 1997, a GAO study found that women have significantly
different work patterns than men. Women are much more likely to leave
the workforce and three times as likely to work part-time to
accommodate care-giving responsibilities. Women spend roughly 11\1/2\
years out of the workforce, caring for children and their families.
They also are three times as likely to accommodate care-giving
responsibilities, this often during their most lucrative earning years
when they could be building their retirement portfolio.
This bill addresses another problem associated with women moving in
and out of the workforce: vesting. Women over 25 tend to stay in jobs
an average of 4.7 years, often not long enough to obtain the right to
the employee's share of the contribution. H.R. 10 makes it easier for
workers to keep the employee's share of pension contributions. The
result, working women will have a larger retirement nest egg.
When they are working, women's savings priorities are often focused
on their children's education and not retirement. Once the children are
grown, women need this extra assistance to take care of their own
needs.
In addition, women continue to earn less, an average of 26 percent
less, than men. Based on this alone, it stands to reason that women
would have much less to invest for their retirement.
{time} 1245
When they do return to the workforce, they deserve a chance to save
more for retirement.
We all know that Social Security is particularly important to women.
For most elderly unmarried women, 51 percent of their income is from
Social Security. For 25 percent of unmarried women, Social Security is
their only source of income. Anything that Congress can do to encourage
women to save more for retirement reduces their dependency on Social
Security.
Finally, women tend to move to other jobs more frequently than men.
The portability provisions of H.R. 10 will let them concentrate their
separate retirement accounts for a better rate of return.
As I said, we are going to see a Democratic substitute. I just want
to mention a few things in there that I think are critically important
to women:
The retirement security account tax credit would be up to a 50
percent refundable credit for low- and middle-income workers who
contribute up to $2,000 annually to an employer-sponsored plan or a
deductible individual retirement account, better known as an IRA.
The tax credit for small employers' pension plan start-up costs.
Small employers, less than 100 employees, would be eligible for a tax
credit in an amount equal to 50 percent for the costs that would be
incurred as a result of establishing these new qualified pension plans.
Last would be the small employers would be eligible for a tax credit
equal to 50 percent of certain employer contributions made to a pension
plan on behalf of its non-highly compensated employees.
Mr. Speaker, all these provisions in H.R. 10 and if we include the
Democratic substitute I think are a historic opportunity for this
House.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Minnesota (Mr. Ramstad), my colleague on the Committee on Ways and
Means, who has been the leader on including very important provisions
in this bill that help ESOP companies.
Mr. RAMSTAD. Mr. Speaker, I thank my colleague for yielding me this
time. I rise in strong support of this landmark bipartisan package of
pension reforms that will vastly improve the retirement security of
American workers. I want to thank the gentleman from Ohio (Mr. Portman)
and the gentleman from Maryland (Mr. Cardin), two colleagues and
friends on the Committee on Ways and Means, because without their
tireless efforts and their leadership on this important pension reform
package, we would not be here today.
The need, Mr. Speaker, is clear. Americans are living longer but
often they lack the savings needed for a secure retirement. The typical
45-year-old has only 40 percent of the savings needed to avoid a
decline in standard of living during retirement. Half of all private
sector workers, in fact, still have no pension coverage at all. Worse
yet, only 20 percent of job-creating small businesses even offer a
pension plan because of the expense and the difficulty of administering
such plans.
This legislation, H.R. 10, will help reverse this dire situation. I
want to highlight, Mr. Speaker, one of the over 50 provisions in this
package which will give American workers a meaningful opportunity to
save for their retirement. The provision I am referring to would
preserve employee stock ownership plans, or as they are called, ESOPs,
for the workers of S corporations, many of which are small businesses.
ESOPs give workers an opportunity to own a piece of their business, a
piece of the rock, which boosts productivity, morale and retirement
savings. This proposal is based on a bill that I introduced last year
which was cosponsored by 30 members of the Committee on Ways and Means.
It would remove a cloud that was left by the previous administration by
preserving this highly effective retirement savings program for broad-
based S corporation ESOPs.
Mr. Speaker, H.R. 10 is a win-win for America. That is why it is
supported by such a diverse group of small and large businesses, labor
organizations and members of both parties. Most importantly, it is
strongly supported by the working people of America. I urge my
colleagues to pass this important legislation for a secure future for
America's workers.
Mr. CARDIN. Mr. Speaker, I am pleased to yield 4 minutes to the
gentleman from North Dakota (Mr. Pomeroy), my colleague on the
Committee on Ways and Means, part of whose bill is included in ours
dealing with the portability and vesting.
Mr. POMEROY. Mr. Speaker, I thank the gentleman for yielding me this
time and specifically commend the gentleman from Maryland (Mr. Cardin)
[[Page H1787]]
and the gentleman from Ohio (Mr. Portman). Their work has been
exemplary bipartisanship in advancing a substantive response on one of
the most troubling issues facing the country and, that is, the
insufficiency of retirement savings. As in every instance when there is
exemplary congressional performance, there are some outstanding staff
performances backing it up. I want to cite particularly David
Koshgarian backing up the gentleman from Maryland (Mr. Cardin) and
Barbara Pate backing up the gentleman from Ohio (Mr. Portman). Their
work has contributed immeasurably to this legislation.
I think there are three things about this bill we should cite in
particular. First of all, it makes a direct effort at revitalizing
defined benefit pensions in the marketplace today. As the gentleman
from Ohio (Mr. Portman) noted, the number of workers covered by the
reliable, traditional pension program has fallen 40 percent during the
20-year period between 1975 and 1995; and I believe it has fallen, no
doubt, significantly further even today. By raising the limits, you
bring the employers, you bring the decisionmakers within a company back
into the qualified plan and, I believe, enhance the prospects that the
worker on the line, on the shop floor keeps the pension in its
traditional form.
Secondly, the bill advances portability by incorporating the
retirement account portability legislation I have introduced in the
last three Congresses. We have a hodgepodge in the Tax Code of
retirement savings provisions, different ones for for-profit, different
ones for nonprofit, different ones for State and local government.
You can have, for example, a worker through their career, let us say
they come out of college and go into nursing for a nonprofit hospital.
They would have a 403(b) defined contribution plan. Let us say after
that they go to State government and work in the health department.
They would have a 457 plan. Ultimately they end up in a private for-
profit clinic where they would have a 401(k) plan. Each of these is
incompatible with the other under existing law and you could not
combine your accounts. The result is people have their accounts
distributed. We know that in over half the cases where they take the
lump sum distribution, they do not reinvest them in retirement savings.
This is a case where the Tax Code, rather than trying to incent
Americans to save, actually discourages savings. It is 100 percent the
wrong way to go. That is why the portability feature is so important.
Finally, vesting. We know that on average workers are staying with an
employer in the workforce about 4\1/2\ years. It takes 5 years before
the employer's share is vested in a retirement savings account where
the employer has that provision. Under Federal law, they are allowed to
have vesting be a 5-year period. This brings that down to 3 years,
recognizing that there is very substantial mobility in the workforce
today and that after 3 years in the workforce for one employer, the
employer's share should accrue at that point to the employee. They will
be vested. They will have that to take with them as they move on in the
workforce.
All in all, the bill will enhance retirement savings efforts of
American workers. It is extremely important. Again I commend the
sponsors and ask for broad bipartisan support on the House floor today.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentleman from
Arizona (Mr. Hayworth), my friend and colleague on the Committee on
Ways and Means, who has been one of the leaders on this, focusing on
the importance of this bill to savings and to our economy.
Mr. HAYWORTH. Mr. Speaker, I thank my colleague from Ohio and my
colleague from Maryland for once again bringing to the floor of this
House landmark legislation. We have been involved and engaged in
cheerful persistence, for this marks the sixth time we have brought
this legislation to the floor. And each time, Mr. Speaker, we reaffirm
the essential common sense of the measure we prepare to pass yet again.
Mr. Speaker, I would ask you to think back to your own experience in
terms of saving or preparing for your retirement. Not once on a
financial form in planning for my family's future, for my retirement,
have I ever been asked to list a political registration. The banks,
financial institutions, employers, do not ask whether you are
Republican, Democrat, Libertarian, vegetarian, they simply ask you to
think about your future.
Now, to return to the political parlance for a second, because I
think since this is the people's House and we stand at the bar of
public opinion every 2 years, we know in political parlance that we
regard a landslide election as procuring 60 percent of the popular
vote. Mr. Speaker, I regret to inform this House that the American
people are currently on the wrong side of a landslide. Only 40 percent
of Americans as baby boomers are taking advantage of retirement savings
to avoid a decline in their standard of living once they decide to
retire. In other words, 60 percent of the people are not taking
advantage of these provisions. With this legislation today, we are
asking Americans to choose to save. That is what we do with this
legislation.
Mr. Speaker, what we are doing is saying to the American people, here
is an enhanced choice for you. We ask you to choose to save.
Portability of the accounts; raising the limits, especially for those
who will encounter retirement decisions first, for those age 50 and
above, no phase-in, immediately raising that limit to $5,000; phasing
that in for traditional and Roth IRAs, increasing that through the
years; and indexing this for inflation, so that the inflation monster
cannot touch retirement savings, taking those realities into account.
And as mentioned by my colleague from North Dakota, the notion of
portability. As we have many different freedoms, many different
options, as we see people make changes in jobs and in our mobile
society and in our fast-changing economy, to have the ability to move
this money from job to job and keep it in the same account, portability
is key, too.
Choose to save. Vote yes on this legislation.
Mr. CARDIN. Mr. Speaker, I am pleased to yield 6 minutes to the
gentleman from Massachusetts (Mr. Neal), my colleague on the Committee
on Ways and Means who has been very active on the pension issues.
Mr. NEAL of Massachusetts. Mr. Speaker, I cannot agree more with the
authors of this legislation that our common goal here today is to
provide meaningful retirement benefits for all working men and women of
this country. Expanded pension coverage and an increased rate of
participation in employment-based plans are more important now than
ever, given our current savings rate and the imminent retirement of the
baby boom generation.
Our current system is built upon the assumption that the minimal
level of income provided under Social Security would indeed in the end
be supplemented by other sources of income such as an employer-based
pension plan as well as personal savings. Thus, it is very important to
make sure that the pension reform legislation today includes incentives
for all Americans to increase retirement savings.
There are many provisions in this bill that are desirable by
increasing benefits and contribution limits for those currently saving
the maximum in their current pension plans or for those currently
saving in individual retirement accounts. I would remind both sides
here today that, with the gentleman from California (Mr. Thomas), we
were responsible for the Roth IRA here in the House of Representatives.
But my primary concern with this legislation today is that it does not
provide the same opportunity for all Americans to save who are not
currently in a retirement system. It could be fixed through the
amendment process.
H.R. 10 contains many provisions designed to enhance and expand the
portability of pension benefits. The current level of mobility among
workers requires a modified approach to our retirement system. The lack
of portability can result in workers being shortchanged in pension
benefits merely because they change jobs. This bill responds to the
need by giving workers greater flexibility to transfer their pension
benefits between employer plans or to an IRA. These provisions have
been in many bills over the last two sessions of the Congress. They
[[Page H1788]]
were strongly backed by myself and members of the Clinton
administration.
There are also provisions in this legislation that would enhance
benefits for women and we acknowledge that. However, while this bill
contains many provisions such as those I have mentioned that are
designed to achieve worthy goals, on the whole, the bill is not
balanced. Under the bill, high-income workers would receive very
generous benefits with no corresponding meaningful direct incentives to
expand and increase retirement savings for low- and moderate-income
workers.
{time} 1300
One analysis of this bill showed that workers earning less than
$41,000, the bottom 60 percent of the American workforce, would
receive, listen to this, 4.3 percent of the benefits; and the top 5
percent of American workers with incomes of more than $134,000 would
receive, and listen to this number, 42.4 percent of the benefits.
I do not oppose increasing retirement savings for workers at the top
of the income scale, but I am concerned that the workers who are most
in need of our assistance today in saving for retirement are being
excluded from our efforts here.
In its current form, the legislation would fail to provide a secure
and adequate retirement for all Americans. The retirement savings
account proposal that will be offered later today as an addition to
this bill would provide the balance that is necessary for a successful
accomplishment of our shared goal, which is a secure retirement for all
workers.
The RSA proposal builds on our current system by providing an
incentive for low- and middle-income workers to participate in an
employment-based retirement system. Under the proposal, the worker
would receive an annual credit of up to $1,000 for contributions made
to an individual retirement account or an employer-based pension plan.
In addition, this bill must do more to provide direct incentives for
small businesses to establish and administer pension plans.
In a recent Small Employer Retirement survey conducted by the
Employee Benefit Research Institute, 65 percent of small employers
stated that tax credits for starting a pension plan would be a major
contributing factor for them to establish a pension plan for their
employees. This factor was second only to an increase in business
profits.
With this compelling evidence, I would like to encourage my
colleagues here today to seriously consider another amendment that will
be offered later on as well that would include two tax credits as an
incentive for small employers to offer pension plans to their employees
and to make contributions to those plans on behalf of their employees.
The gentleman from Ohio (Mr. Portman) has been more than kind and
more than receptive to that notion. Why we cannot do it today, I do not
understand it. This bill could pass this House today 435 to 0 if those
incentives were simply offered, which I have been assured they are
going to be offered when the Senate brings back its version. I hope at
that time we will have an opportunity for this bill to pass almost or
nearly unanimously.
I would be remiss if I did not mention the additional controversies
with provisions underlying this bill. Last year, the Department of
Treasury and outside groups argued strongly that some of the provisions
of this bill could actually lead to a shrinking of pension coverage for
low- and moderate-income workers. They cited most often changes in top
heavy rules and nondiscrimination rules which are designed to protect
non-key employees by making sure that they get a minimum amount of the
benefit from an employer's pension plan.
Now I know the authors of this bill believe the opposite; but a blend
of my tax credit proposal, along with the efforts that they have made
here today, could secure truly one of the great feats of this Congress;
and I expect when it comes back from the Senate that provision will be
included and we will have an opportunity, as I indicated earlier, to
nearly unanimously pass this very important legislation with some
technical corrections.
Mr. PORTMAN. Mr. Speaker, I yield myself 30 seconds just for a quick
response to my friend and colleague, the gentleman from Massachusetts
(Mr. Neal). He, in a good faith effort, is trying to expand the
opportunities for low- and middle-income workers, and I commend him for
that. I also appreciate the kind words he says about the underlying
bill, but I cannot let one thing stand and I am disappointed that he
has raised it and I just want to get this out because we are going to
hear a lot more about it in the Democrat substitute, it sounds like. He
uses an outside group that opposes not only this bill but all tax
relief that we have tried to do, that people that are making $41,000 or
less are only going to get 4.3 percent of the benefits. There is no
way, no way, that he could know that; and I am just disappointed that
we are getting into that because this is going to help all Americans,
including those making less than $41,000.
Mr. Speaker, I yield 3 minutes to my colleague, the gentleman from
Pennsylvania (Mr. English); and I appreciate his help on this
legislation, particularly on some provisions that help with regard to
labor union members.
Mr. ENGLISH. Mr. Speaker, I thank the gentleman from Ohio (Mr.
Portman) for yielding me this time.
Mr. Speaker, in the last 40 years, Americans have gone from saving
6.2 percent of their disposable personal income to saving less than .1
percent. In fact, Americans lag behind Canada, Germany, and Japan by as
much as 4 percent when it comes to our national savings rate.
The rate of decline in national savings is greater in the United
States than in most of the industrialized world. Today, as a result, we
import capital into our country to finance our improving standard of
living. In my view, addressing this problem is as important to our
national economic future as addressing our reliance on foreign oil. We
need to end our dependence on imported capital, and this landmark
legislation will address that problem by allowing families to increase
their retirement savings.
H.R. 10 will increase the national savings rate, increase our
national prosperity, and provide for a stable retirement for millions
of working families through better access to pension plans and expanded
IRAs. The Comprehensive Retirement Security and Pension Reform Act
provides individuals with a variety of retirement savings incentives,
such as lifting limits to IRA and 401(k) plans. These limits are
currently stuck at 1980 levels. Baby boomers who are discovering that
their retirement is severely underfunded because they stopped working
to raise a family can catch up under this plan through higher
contribution limits.
In addition, I am particularly pleased to see that this bill
addresses the unintended consequences of section 415. Currently,
section 415 seriously hampers the ability of America's workers, not the
wealthy but rank and file workers, to collect their full pension
amounts which they have earned. Reducing the pensions of workers who
retire before normal Social Security retirement age has caused enormous
financial hardship for many workers in places like western
Pennsylvania. Thousands of retiring workers have carefully saved and
planned for their retirement, and they are relying on their private
pension funds. This legislation will allow them to have the full
benefit of the pension that they themselves worked so hard to build.
I urge my colleagues to support this landmark legislation.
Mr. CARDIN. Mr. Speaker, I yield myself 30 seconds to clarify a point
on the Democratic substitute. I am pleased that it adds to the
underlying bill. It accepts the fact that the underlying bill is very
important and tries to improve upon it. I just want to make it clear
that nothing in the Democratic substitute would distract or take away
from the underlying Portman-Cardin legislation.
Mr. Speaker, I yield 3 minutes to the gentleman from Wisconsin (Mr.
Kleczka), a distinguished member of the Committee on Ways and Means and
one of those individuals who has also been involved in helping us
formulate the underlying legislation.
Mr. KLECZKA. Mr. Speaker, over the next 40 years, the percentage of
the U.S. population over 65 will almost double. Unfortunately, at a
time when more and more people should be putting money away for their
retirement, personal savings are at historically
[[Page H1789]]
low levels. Twenty years ago, Americans saved at a rate of about 10
percent, but by last year that rate had plummeted to one-tenth of 1
percent. Americans must become more proactive in saving and planning
for their retirement, and the bill before us today provides the
incentives to do so.
Retirement security has often been described as being like a three-
legged stool because people depend on three means of savings for their
retirement: one is Social Security; one is personal savings; and
another one, a very important one, is employer-provided pensions.
H.R. 10 makes great strides in strengthening the footing for the last
two of those legs.
One of the most important adjustments this bill makes will be to
increase the current limit on annual individual retirement account
contributions from $2,000 to $5,000 per year. IRAs are one of the
principal instruments used for savings, and this increase will make
them a much more valuable tool in retirement planning.
It has been almost 20 years since the retirement cap was raised, so
an adjustment today is long overdue. To make sure that the benefits of
IRAs continue to keep pace with the times, this bill will adjust the
cap annually to reflect the effects of inflation.
Regarding employer-provided pensions, the bill allows for faster
investing so that workers will become eligible for employer-matching
contributions to their pension plans in 3 years rather than the current
5. It also breaks down the barriers between private sector 401(k)
plans, nonprofit employer 403(b) plans, and local government 457 plans,
allowing workers to roll over funds in their pension plans when they
move from one job to another.
The bill includes catch-up provisions that allow workers 50 years of
age and older to save even more for their retirement needs by allowing
them to increase by $5,000 the limits on all employee pension
contributions. H.R. 10 also streamlines rules and regulations to make
it easier for businesses, particularly small businesses, to offer
pension plans by eliminating the user fees imposed by the IRS on
businesses when they set up a pension plan.
It would also ensure that these higher contributions to the pension
plans may be deducted by employers.
Mr. Speaker, this legislation will help provide the peace of mind
that Americans deserve in their retirement years. I urge my colleagues
to support this measure.
In closing, let me applaud the efforts of the gentleman from Maryland
(Mr. Cardin) and also the gentleman from Ohio (Mr. Portman) and thank
them for including the changes in section 415, which increases the
pension benefits for working men and women. Again, I urge my colleagues
to support this bill.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Wisconsin (Mr. Ryan), my friend on the Committee on Ways and Means, who
has been a leader on the 415 provisions in this bill and also in
focusing on the savings incentives in the legislation.
Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentleman from Ohio
(Mr. Portman) for yielding me this time.
Mr. Speaker, I would like to right now just thank the gentleman from
Maryland (Mr. Cardin) and the gentleman from Ohio (Mr. Portman) for
putting this excellent piece of legislation together. Specifically, I
want to thank them for including that section 415 provision. This
affects thousands of building trades workers in southern Wisconsin who
because of this law are going to have a better pension system that they
deserve, that they paid into. So I want to thank them for including
this very valuable provision.
There is another important part of this, and that is times have
changed. When our pension laws were written a generation ago, it was a
different kind of an economy. People had the same job for 30 or 40
years of their working lives. They did not move from jobs, but that is
not the case today. People change jobs all of the time, but the problem
is our economy and our pension laws have not caught up with those
times.
This important piece of legislation catches up with the times and
allows pensions to become portable so as people change jobs they can
bring their pensions with them without an adverse consequence on the
Tax Code; and most importantly, this thing does great things in two
great ways for our society. It allows people to save for their
retirement, improve the savings rate, so they can maintain the kind of
standard of living they enjoyed during their working years in their
retirement years. Again, by saving, by putting more money aside, we are
putting more money into the economy. We are improving the liquidity of
capital for small businesses, for job creation, for entrepreneurial
activity.
So when we increase our savings rate, not only do we help the actual
person who is saving in their retirement, we are helping the ability to
create jobs in this country. We are sparking economic growth in job
creation. So this bill not only fixes many problems that are facing
building tradesmen, people who are just nearing retirement, women in
the labor force, it is updating our pension laws so they respond to the
types of jobs we have in today's economy. It is improving people's
standard of living, and it is helping grow the economy and produce jobs
in the economy.
This bill is clearly a win/win for America. That is why it received
such bipartisan support. I urge my colleagues to vote yes on this bill.
Mr. CARDIN. Mr. Speaker, I yield 2 minutes to the gentleman from New
York (Mr. Crowley).
Mr. CROWLEY. Mr. Speaker, I rise in strong support of H.R. 10, the
Comprehensive Retirement Security and Pension Reform Act, introduced by
the gentleman from Ohio (Mr. Portman) and the gentleman from Maryland
(Mr. Cardin). I want to thank both gentlemen for all their hard work in
getting this bill to the floor today.
This legislation provides portability between the employer-sponsored
plans, a key component of any provision security reform, as we are in
an era where Americans are no longer expected to work for one company
until retirement but, rather, many employers and many corporations over
a period of a lifetime.
{time} 1315
This bill also provides incentives to retirement savings by
increasing the IRA contribution limit from the present $2,000 to
$5,000, and expanding eligibility for deductible IRAs.
Most importantly in this ever-changing workforce, this bill contains
vital catch-up provisions to encourage both older workers and women
workers to increase their retirement savings to make up for missed
contribution opportunities. This is key for women, as many of them have
previously left the workforce for the time being, quite often to raise
a family, and now will no longer be blocked from providing for herself
or her family's retirement security.
This is solid legislation that will help all Americans who plan ahead
for their retirement, and I urge all of my colleagues to support this
critical, critical piece of legislation.
Once again, I wanted to thank both gentlemen for getting this bill to
the floor today.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Washington (Ms. Dunn) a member of the Committee on Ways and Committee,
who has taken a leadership role in assuring there is a catch-up
contribution, both on the pension side and on the IRA contributions.
Ms. DUNN. Mr. Speaker, I rise today in support of H.R. 10. I think
this is a fabulous bill, and I commend the gentleman from Maryland (Mr.
Cardin) and the gentleman from Ohio (Mr. Portman) for the great work
they did in bringing us together and consulting with us and allowing us
to make our opinions heard.
I think it does some very, very fine things, but I am particularly
enthusiastic about the very explicit focus that this bill has taken on
the sometimes unique needs of the American working woman.
This bill will enable women to devote more money to retirement
savings, accumulate assets more quickly, and it will enable them to
keep their benefits in one retirement plan when they change jobs. So it
is going to let women have a much better sense of peace of mind as they
move toward retirement, and I think it will make them feel also that
they are more fully participating in planning for that time, to make it
a very happy time and a secure time.
[[Page H1790]]
As we have heard from many previous speakers, women choose to leave
the workforce for many reasons, including to raise a family or to take
care of their loved ones. I left the workforce for 8 years to raise my
little children. I was a lucky person. When I came back in, I would
have appreciated the opportunity that this bill provides to catch up
with the losses sustained during those years to my IRA.
Women are often unable to take full advantage, for that reason, of
employer-sponsored pension plans as well. H.R. 10 helps women make
catch-up contributions to their pension plans.
Right now, for example, you are able to contribute $2,000 each year
to an IRA. This bill says that if you are over 50 years old, a man or a
woman, but specifically interesting more, I think, to women, you can
begin to contribute up to $5,000. That is $3,000 additional dollars
each year you can put away in your IRA. Also when it comes to the
employee pension plan, a 401(k) or a thrift savings plan, women like me
can begin, as soon as this bill is signed, to contribute $5,000 more
every single year into their pension plan.
Current law also makes it very difficult to consolidate retirement
funds from different plans into one plan. Removing these restrictions
is very important, considering the fluid employment situation in
America today. This is especially true for working women who change
jobs more frequently than men do. The portability provisions in H.R. 10
will ensure that retirement benefits follow the employee as the
employee changes jobs.
H.R. 10, Mr. Speaker, is a very well-crafted bill. It has strong
bipartisan support, and I am among the many who urge my colleagues to
support this bill.
Mr. CARDIN. Mr. Speaker, I am pleased to yield 2 minutes to the
gentlewoman from California (Ms. Eshoo).
Ms. ESHOO. Mr. Speaker, thanks and congratulations, first, to the two
major sponsors of this bill, the gentleman from Maryland (Mr. Cardin)
and the gentleman from Ohio (Mr. Portman). I think the quality of this
bill and the amount of support that it enjoys today really speaks to
the eloquence of their work.
We come to the floor every day to cast votes. Sometimes we hold our
noses over what we have to vote for; other times we say, if I had
designed this, it would be so much better.
This is a very, very good bill, it is a sound bill, and I cannot help
but think of FDR's quote that ``True individual freedom cannot exist
without economic security and independence.'' I think that those are
the two things that this bill provides for millions of workers in our
country by making retirement security more available to them.
Our savings rate in our country is at an historically low level, and
this is a critically important piece of legislation to advance people's
being able to save and encouraging them to.
It also addresses the needs of an increasingly mobile workforce. The
average worker today will hold nine jobs by the age of 32, and workers
typically do not stay in any job for more than 5 years until they are
40 years old. So portability and being able to accumulate benefits and
then move it from job to job, I think is essential.
So, Mr. Speaker, I am proud to support this legislation. I think it
is not only good for my constituents, I think it is good for all of the
people of this country; and I think the Congress will take a very
important step by establishing better pension funds for employees,
helping employers to do that, and by the IRA contribution being raised.
So I ask my colleagues to join me and many others in the House on a
bipartisan basis to support this bill, pass it, and help it become law.
It is going to make our country better and stronger.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Illinois (Mr. Weller), a member of the Committee on Ways and Means, who
has played a leadership role on the catch-up contributions and the 415
provisions.
(Mr. WELLER asked and was given permission to revise and extend his
remarks.)
Mr. WELLER. Mr. Speaker, this is a great day. We are doing something,
and the question to ask as we work on this legislation is, is it not
about time?
If you think about it, I think this is the third or the fourth time
we have passed this legislation out of the House, and we finally have a
President now that will sign it into law. It has been a bipartisan
effort over the last several years. My friends, the gentleman from Ohio
(Mr. Portman) and the gentleman from Maryland (Mr. Cardin) have done a
great job working with the committee and showing leadership in
assembling a great package that will help millions of middle-class
Americans and families save for their retirement.
I think it is a tremendous achievement, recognizing that when
individual retirement accounts were created way back in the early
1980s, that the limit was set at $2,000. If you factor in inflation, it
should be well over $5,000 today. We accomplish that goal by phasing in
an increase in the contribution level for IRAs to $5,000.
There are two other provisions that I want to highlight, and I really
want to commend the leadership on our committee for including these two
provisions in this package. Those are provisions that deal with catch-
up provisions, which will help working moms and empty-nesters, as well
as the 415 provisions, which will help 10 million building tradesmen
and women across America.
Let me point out, the catch-up provisions, why are they important? I
always use my sister Pat as an example. She is now teaching school, but
when her children, when she and Rich decided to have kids, she took
some time out of the workforce to be home with the children; and then
once the kids were in school, she went back into the workforce. During
that period of time, my sister Pat and my brother-in-law Rich, they
were not able to make contributions to their IRAs because their income
was essentially cut in half and their expenses were up because they had
children.
Under this legislation, once they turn 50 they can make an extra
contribution, which they are, they can make an extra contribution to
their 401(k) of $5,000, and we immediately allow, once this legislation
is signed into law, someone age 50 or older to contribute up to $5,000,
recognizing the $5,000 increase is phased in over 3 years. So if you
are age 50, you benefit immediately, allowing you the opportunity to
make up.
The 415 provision, people like Larry Correl, a laborer from La Salle
County, will now see his full pension as a result of this legislation.
Mr. CARDIN. Mr. Speaker, I am now pleased to yield 1\1/2\ minutes to
the gentleman from Texas (Mr. Bentsen), the sponsor of many of the
provisions in the bill that deal with small business.
Mr. BENTSEN. Mr. Speaker, I thank the gentleman for yielding me time.
I rise in strong support of the bill, H.R. 10. I want to commend the
gentleman from Ohio and the gentleman from Maryland for bringing up
this bill.
This bill may not be the most politically salable of all the tax
bills we are considering this year, but it is, in my opinion, probably
the most economically correct bill, because it deals more with savings
than consumption. I think this bill arguably will have the broadest
long-term impact on our general economy by increasing the savings
rates, as well as putting more money into investment in the economy.
A lot has been said about the underlying bill. I want to thank both
the gentlemen for including provisions from H.R. 738, which the
gentleman from Missouri (Mr. Blunt) and I introduced, that would ease
the restrictions on small employers, employers of 100 or fewer
employees, who, statistics show, are the least likely to have a pension
program or retirement program. This bill would go a long way toward
making that better.
I also want to commend my colleagues for the amendment that will be
offered by the gentleman from Massachusetts (Mr. Neal) and others that
would provide a tax credit for small employers who want to set up a
pension program for their employees. I would encourage the House to
adopt that, and to adopt the idea of providing credits to low-income
individuals so that they can save as well.
We should not leave out any sector in society that we want to save.
As the gentleman from Illinois who just spoke said, we do have
situations where working families do not have the disposable income to
set aside in these
[[Page H1791]]
programs. If we pass the Neal amendment, we can make this good bill an
even better bill.
Mr. CARDIN. Mr. Speaker, I am pleased to yield 1\1/2\ minutes to the
gentleman from Texas (Mr. Green).
Mr. GREEN of Texas. Mr. Speaker, I am glad to follow my colleague
from Texas. With a Texan in the chair, I hope we are not overdoing it
today on this bill.
Mr. Speaker, I rise in support of H.R. 10, the Comprehensive
Retirement Security and Pension Reform Act, and congratulate our
sponsors for their persistence in this effort, not only this year, but
last year.
Mr. Speaker, the private pension plans are crucial to the retirement
security of millions of Americans, and yet only half of our private
sector employees have any kind of pension, and only 20 percent of the
small businesses offer their employees retirement benefits.
Currently, Americans save only 4 percent of our income, the smallest
amount among industrial nations. If this trend continues, young
Americans will be ill-prepared for their retirement years. That is why
it is important that our current system not only does not reward enough
to encourage savings; it is in dire need of reform.
The legislation we are considering today makes a number of important
changes and encourages individuals to save for their retirement. We all
know that saving $2,000 a year for your IRA is not enough. It raises it
to $5,000. It raises the 401(k) limit to $15,000.
It also addresses the needs of older workers, allowing people 50
years or older to make that annual catch-up, $5,000, for years that
they could not do it. It helps, particularly the provision for women
who have left the workforce and then come back, to be able to catch up
on their retirement effort. There are a number of important components.
Of course, the bill is not perfect and there are things we could do,
particularly for lower-wage workers, and I know there is an amendment,
the Rangel-Neal substitute, that will add that. I encourage folks not
only to vote for that substitute, but ultimately, the bill, Mr.
Speaker.
Mr. PORTMAN. Mr. Speaker, I yield 1 minute to the gentlewoman from
Maryland (Mrs. Morella), for the purpose of entering into a colloquy.
Mrs. MORELLA. Mr. Speaker, I thank the gentleman for yielding. I am
proud to be a cosponsor of this bill.
I just wanted to make sure that the revenue estimate of this bill
assumes that the Federal Employees Thrift Savings Plan will permit
catch-up contributions. By that that I mean, any revenue loss
associated with such contributions would be accounted for and is in the
cost of this bill.
Mr. PORTMAN. Mr. Speaker, will the gentlewoman yield?
Mrs. MORELLA. I yield to the gentleman from Ohio.
Mr. PORTMAN. Mr. Speaker, first I want to thank the gentlewoman from
Maryland (Mrs. Morella) for her help in putting this bill together and
being sure that Federal employees are covered.
Yes, the answer is, the catch-up contributions in this bill lists
types of plans to which the provision applies. Included on that list is
a trust described in the code under section 401(a). Under an existing
section of that code, section 7701(j), the Thrift Savings Plan fund is
created as a trust described in that code section 401(a). Therefore,
the catch-up contributions do apply to the Thrift Savings Plan in the
same manner as it would apply to a 401(k) plan.
Mrs. MORELLA. Mr. Speaker, reclaiming my time, I thank the gentleman
from Ohio for the assurance that he has just given us.
I also want to congratulate him and his coauthor, the gentleman from
Maryland (Mr. Cardin), for putting this great bill together.
{time} 1330
Mr. PORTMAN. Mr. Speaker, I yield 45 seconds to the gentlewoman from
New York (Mrs. Kelly).
Mrs. KELLY. Mr. Speaker, I rise for the purpose of entering into a
colloquy with my friend, the gentleman from Ohio.
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 the retirement security for working Americans.
Unfortunately, I have been contacted by my constituents who are
concerned about potential interpretations of sections 405, 501, and 801
of H.R. 10. They fear they could negatively affect pension benefits.
I would like to get assurances that these sections I have mentioned
are not intended to harm participants. It is my understanding that
these sections are not intended to reduce pension benefits, eliminate
early retirement benefits, retirement-type subsidies, or optional forms
of benefits, or discourage companies from increasing pension benefits.
Mr. PORTMAN. Mr. Speaker, will the gentlewoman yield?
Mrs. KELLY. I yield to the gentleman from Ohio.
Mr. PORTMAN. I would say to my friend, the gentlewoman from New York,
Mr. Speaker, she is absolutely right. Her understanding is correct.
In fact, just the opposite of the concerns she expressed are
intended. We have, in fact, made several adjustments in the language to
ensure that these provisions will achieve their intended effect, which
is, of course, to expand pension coverage and protections for American
workers.
I thank the gentlewoman for her help on this bill and for helping us
to refine it.
Mr. CARDIN. Mr. Speaker, I yield myself the balance of our time.
The SPEAKER pro tempore (Mr. Thornberry). The gentleman from Maryland
(Mr. Cardin) is recognized for 1\1/2\ minutes.
Mr. CARDIN. Mr. Speaker, as the general debate has indicated, there
is strong support for this legislation. I thank my colleagues who have
come to the floor to express their views on this legislation. It is
clear that it will help American workers, it will help people save for
their own retirement.
Let me just point out the Congressional Research Service on November
6 pointed out that if employers offer plans, workers at all income
levels participate and benefit. Eighty-five percent of the workers
earning less than $40,000 will participate in the plans, and 68 percent
of the workers earning less than $20,000.
This bill will make it easier for companies to provide pension plans,
and more workers at all levels will participate.
I again want to thank the gentleman from Ohio (Mr. Portman) for his
work. On my side of the aisle, I want to thank the gentleman from New
Jersey (Mr. Andrews), the gentleman from North Dakota (Mr. Pomeroy),
and the gentleman from Texas (Mr. Bentsen) for their contributions to
the legislation that is before us.
Lastly, let me thank my staff person, David Koshgarian, for all the
work that he put in.
Mr. Speaker, I yield back the balance of my time.
Mr. PORTMAN. Mr. Speaker, I yield the balance of my time to the
gentleman from Illinois (Mr. Crane), senior Republican on the
committee, who was very helpful in putting on this legislation.
The SPEAKER pro tempore. The gentleman from Illinois (Mr. Crane) is
recognized for 1\3/4\ minutes.
Mr. CRANE. Mr. Speaker, I thank my friend for yielding time to me,
and I rise in support of the Comprehensive Retirement Security and
Pension Reform Act of 2001.
In a voluntary, employer-sponsored pension system, businesses must be
given incentives to start, maintain, and expand their plans. H.R. 10
dramatically increases contribution and benefit levels available under
these private plans. However, to take advantage of these increased
levels, key decision-makers will have to establish a qualified
retirement plan or make benefit improvements in their existing plan.
Likewise, we should not create disincentives that might bar an
employer from establishing a pension plan. Toward this end, the
Committee on Ways and Means in this legislation has called for further
study into the issue of whether our tax laws create disincentives for
pension plan funding by employers who are experiencing economic
hardships.
Specifically, H.R. 10 would require the General Accounting Office to
consider whether pension funding would be enhanced if section 172(f) of
the Internal Revenue Code were modified to list payments to defined
benefit plans as an
[[Page H1792]]
item for which 10-year specified liability loss carrybacks may be
available.
The committee's call for this study arose out of a concern that
restrictions under section 172(f) imposed by Congress in 1998 may have
inadvertently undercut the goal of secure pension funding.
Following the 1998 change, I am concerned that taxpayers experiencing
financial losses are not able to carry back pension contributions under
section 172(f). As a result, such taxpayers are subject to a higher
after-tax cost of maintaining pension funding levels. This could
jeopardize the employer's ability to meet future funding obligations,
and act as a disincentive to making contributions beyond the minimum
requirements.
I look forward to the GAO report. Ultimately, I am hopeful we will
consider enactment of legislation restoring pension contributions as an
item eligible for a 10-year carryback under section 172(f). The GAO's
findings will help us to weigh the merits of such legislation.
I congratulate my colleagues, the gentleman from Ohio (Mr. Portman)
and the gentleman from Maryland (Mr. Cardin), on this outstanding bill
and look forward to seeing it signed into law.
Mr. FRELINGHUYSEN. Mr. Speaker, today I rise in support of H.R. 10,
the Comprehensive Retirement Security and Pension Reform Act of 2001.
This legislation will help millions of working Americans plan for a
secure retirement by giving them the ability and incentive to save
during their working years. It will also allow many small businesses
the opportunity to provide pension coverage for their employees.
A main component of H.R. 10 will raise the contribution limit for
both traditional and Roth Individual Retirement Accounts (IRA's) from
$2,000 to $5,000. This even includes a ``catch-up'' provision allowing
workers age 50 and older to make an immediate contribution of up to
$5,000 to their IRA's. This provision is helpful to Older Americans who
may not have had the opportunity to contribute to a retirement savings
plan in their earlier working years and especially critical to women
who enter the workforce later in life.
Second, this bill provides portability for individuals with 401k-type
plans. As you know, in today's changing economy, statistics show that
an average worker does not stay in one job for more than five years. To
accommodate the needs of a growing mobile workforce, H.R. 10 will allow
workers to change jobs without fear of losing their accumulated
retirement savings. In addition, workers will also be able to become
vested in a pension plan in 3 years instead of the current 5.
Finally, this legislation removes many of the burdensome regulations
and administrative costs, such as an IRS ``user fee,'' which in many
cases prevent small businesses from offering employer pension plans.
This freedom and flexibility will not only allow small businesses to
provide a pension plan, but just as important, gives an incentive for
employees to stay in the workforce and make important contributions to
company growth and productivity.
Mr. Speaker, today's vote is important because it reaffirms our
bipartisan commitment to providing a safe and secure retirement for
generations of Americans. We have already stopped the ``raid'' on
Social Security and locked away the $2.6 trillion Social Security
surplus from other government spending. Now, we are helping American
families and individuals, especially the seventy million Americans who
do not have a retirement savings plan or pension, with incentives to
take that extra step in making critical, short-term investments in
retirement savings. People will now be able to fulfill and enjoy their
long-term hopes and dreams during their retirement years.
Mr. BLUMENAUER. Mr. Speaker, I rise today to support both H.R. 10 and
the substitute amendment. I am gratified to see this bipartisan
legislation improving pension and retirement savings vehicles has been
brought before the House of Representatives for consideration.
I am especially pleased with one provision that I have been working
to change since coming to Congress: Section 415. The current statutes
establish arbitrary and punitive levels on working people by not
allowing those who are covered by pension programs to collect the full
benefits they have accrued. This is wrong and H.R. 10 will fix this
inequity and allow all hard working citizens to collect their full
pension.
Both H.R. 10 and the substitute deal with the 100 percent of
compensation problem, which speaks to the disparity lower-paid
employees face when they do not get the pension they should because
programs are based on years of service, rather than salary amounts.
Those who retire early due to the difficult and often physical nature
of their work currently are not allowed to withdraw the full amount of
their pension. This legislation would address that problem.
These are important issues and the legislation is long overdue.
Mr. GRAVES. Mr. Speaker, I rise today in strong support of the
Comprehensive Retirement Security and Pension Reform Act. Seventy
million Americans do not have a 401(k)-type plan or any kind of
pension--roughly half the workforce. In fact, the problem is worse
among small businesses--less than 20 percent of small businesses with
25 or fewer employees offer any kind of pension coverage today. Mr.
Speaker, it is time we make retirement security a reality for more
Americans.
The Comprehensive Retirement Security and Pension Reform Act
modernizes pension laws, provides regulatory relief to encourage more
small businesses to offer retirement plans and allows Americans to set
more aside in an IRA or 401(k)-type plan. In addition, this plan
expands opportunities for women to place retirement savings in IRAs
when they take time away from the work place, opens the door for women
to make catch-up contributions to IRAs later in life when they are
likely to earn more money, and increases the overall amount they can
contribute to their retirement savings.
I am pleased to vote today to pass this fair, balanced and bipartisan
plan to strengthen the economy, increase savings and investment, and
provide a more secure retirement for all Americans.
Mr. UDALL of Colorado. Mr. Speaker, Mr. Speaker, I rise in support of
H.R. 10, the Comprehensive Retirement Security and Pension Reform Act
of 2001.
H.R. 10 increases the maximum amount that can be contributed annually
to both traditional Individual Retirement Accounts and Roth IRAs from
the current $2,000 to $5,000 over the next three years. In addition,
the bill increases the limits on annual contributions to 401(k) and
other defined contribution plans from the current $10,000 to $15,000
over five years. Workers who are 50 or older the bill would allow
additional annual contributions of up to $5,000 to both IRAs and 401(k)
plans. This provision is particularly important for women who may have
entered and left the workforce during their careers to respond to the
needs of their families.
This bill does more than just raise contribution limits. H.R. 10
accelerates vesting of employer matching contributions to defined
contribution plans from five years to three years, and increases the
portability of account balances in pension plans when workers change
jobs.
While H.R. 10 is a good step forward, it is important to note that
only half of our workforce is covered by any type of pension plan. Of
those workers who are covered by a pension plan, only about one-quarter
of low- and moderate-income workers actually participate in them.
As a member of the House Small Business Committee, I am committed to
helping small businesses provide pension plans that help lower- and
moderate-income workers save for retirement. That is why I support the
Rangel-Neal-Andrews-Tierney amendment to add three small business tax
credits to H.R. 10.
The first provision in the Rangel-Neal-Andrews-Tierney amendment is a
refundable tax credit of up to 50 percent of an employee's contribution
to a traditional IRA or employer-sponsored plan up to a maximum credit
of $1,000 per year. This credit would be available for people earning
at least $5,000 and would phase-out as income increases from $25,000 to
$75,000 for married couples and $12,500 to $37,500 for single people.
The second tax credit is to encourage employers that do not currently
have pension plans to start one. Employers of fewer than 100 people
could receive a tax credit of 50 percent of contributions up to 3
percent of payroll for the first three years they have a plan. The
final tax credit in the Rangel-Neal-Andrews-Tierney amendment will be
available for three years to help small employers with the initial
administrative costs for setting up a plan.
Mr. COYNE. Mr. Speaker, I rise in support of H.R. 10. but, at the
same time, I rise to emphasize that important work still needs to be
done, that this is only the beginning, to improve the retirement
opportunities of those citizens for whom this bill will have limited
benefit at best.
For many years, we have attempted to address the issue of pension
reform. In doing so, we have learned that this is, in reality, not a
simple, single issue, but a set of issues as complex as they are broad.
The challenge for us is to determine what aspects of the pension system
are most in need of legislative remedy, then to direct our energies
toward creating the best solutions. Often we have found that our
efforts can lead to competing, contradictory results.
[[Page H1793]]
I believe that this bill is a worthwhile beginning to addressing the
many gaps and shortfalls in pension coverage. I especially commend the
section 415 changes, which will alleviate the restrictive rules for our
many citizens who are covered by multiemployer plans.
However, I think that incentives beyond the expansion of contribution
limits are needed to help employees to fund their retirement accounts
and to assist small business owners to start pension plans for
themselves and their employees.
We have an obligation to all Americans to craft legislation that
reaches down to everyone in its support of pension income enhancement.
The two amendments offered by the Democrats do just that.
The first amendment would help those with little or no retirement
savings, who cannot begin to contemplate making contributions in the
amounts addressed in this bill. It would provide a refundable tax
credit on contributions made to traditional savings plans and IRA's. I
support such a program.
The second amendment would assist those small business owners wishing
to offer pension coverage, and their employees who desperately need it.
It would provide a tax credit for pension plan start-up costs and
contributions. Recent data shows only 42 percent of full-time employees
in businesses with fewer than 100 employees participated in an
employer-sponsored pension or retirement savings plans. Small
businesses are a vital part of our economy; they deserve our help.
When the Committee on Ways and Means next takes up the pension issue,
and we need to do so this year, we must address the following important
areas: (1) the expansion of pension coverage to workers without
pensions; (2) the expansion of coverage for low-wage workers; (3) the
expansion of coverage for part-time workers; (4) the improvement of
pension coverage for women; (5) the improvement of vesting and
portability for workers who change jobs; and (6) the improvement of
available information about retirement planning and pension choices.
Research has shown that part-time and lower-income workers are much
less likely than full-time and more highly paid workers to be
participants in pension or retirement savings plans. We must direct our
focus to those workers who toil at the margins of pension coverage.
The lack of pension coverage is a particular problem for women, whose
circumstances are often made worse by years spent out of the workforce
tending to family responsibilities. No pension legislation can be
considered complete without a targeted effort to help women secure the
pension benefits which all manner of their contributions have earned
for them.
And, we must assure that all workers are offered the information
needed to understand their pension and retirement savings plans, and
the choices inherent in those plans.
Mr. Speaker, this bill, which I support today, is a starting point to
improve the pension system that we already have. I now would urge my
colleagues to work together to develop the pension system that we need,
one that will provide a dignified retirement for all workers,
regardless of their income or career paths.
Mr. STARK. Mr. Speaker, half of the American workforce lacks pension
coverage. The majority of those who lack pension coverage are low- to
moderate-income workers and employees in small businesses. Therefore,
pension reform should be aimed at providing coverage for those who
currently lack it. Any pension reform package should be judged
primarily in terms of how much additional coverage for moderate and
low-income workers the legislation provides and at what cost in terms
of lost revenue. The biggest problem with the overall bill is that the
bulk of it is spent to help relatively few workers who already have
pensions and save for retirement. The biggest potential problem with
the bill is that it could actually provide a disincentive for small
business owners to provide any pension coverage at all.
Increasing the IRA contribution limits to $5,000 is likely to hurt
some low and mid-income workers by inducing small businesses not to
offer an employer-sponsored pension plan. Under H.R. 10, the small
business owner will be able to contribute $10,000 to an IRA combined
for himself and his spouse. This additional contribution may be
sufficient enough for the owner's retirement savings that he may not
perceive a need, nor want to incur the cost, to set-up an employer-
sponsored pension plan.
Over three-fourths of the pension and IRA tax benefits in H.R. 10
would accrue to the 20 percent of Americans with the highest incomes.
In addition to increasing IRA contribution limits, this bill helps
executives and those employees who already earn the most lucrative
salaries and already contribute to some type of tax-preferred
retirement plan. The bill increases the $135,000 annual benefit limit
for defined benefit plans to $160,000. Clearly this only helps those
who currently earn the maximum defined benefit plan limit of $135,000.
The rank and file workers don't earn pension benefits in excess of
$135,000 so they don't need an increase on the annual limit on defined
benefit plans. This is exclusively designed for those at the top.
Currently, there is an employee limit of $10,500 on deposits to
401(k)s, and the combined employer-employee contribution may not exceed
the lesser of $30,000 or 25 percent of pay. The bill before us raises
the maximum combined contribution to $40,000 and eliminates the
requirement that it not exceed 25 percent of pay. This is yet another
example of a provision that is purely intended for high-income workers
who already contribute greatly to their pensions.
Under current law, tax-preferred pension plans must not discriminate
in favor of highly compensated employees. For example, employers must
not discriminate between executives and the rank-and-file workers in
the formulas used to calculate employer contributions. This ensures
that tax preferences for pension plans serve the public purpose of
boosting pensions among a wide array of workers. Instead of
strengthening these rules, the pension reform bill loosens the
nondiscrimination rules.
The bill also seeks to relax the ``top heavy'' protections that serve
a similar purpose in ensuring that the pension wealth is not
concentrated amongst the top tier income-earners. These safeguards
apply to plans in which 60 percent or more of the pension contributions
or benefits accrue to company officers and owners (``key'' employees).
The protections require firms to take additional steps to protect the
rank-and-file workers through accelerated vesting and certain minimum
contributions or benefits than would otherwise be required under the
general rules. H.R. 10 relaxes these safeguards to the detriment of
employees working for these firms.
There are a few relatively miniscule provisions that would actually
be good policy changes for a broad range of workers if they were pulled
out from the bill and addressed in separate legislation.
The legislation would allow rollovers across defined contribution
plan types so that, for example, 401(k) assets could be rolled over
into 403(b) accounts. This will allow employees to move from public,
private and non-profit jobs with fewer pension constraints. This
amounts to .004 percent of the bill's total cost. The legislation also
allows for faster vesting under employer-matching contribution plans.
The bill accelerates the schedule for cliff vesting from 5 years to 3
years, and from 7 years to 6 years under graded vesting, reflecting the
shorter commitments employees make to any one employer. This provision
has a negligible revenue effect.
Section 415(b), Multi-Employer Pensions limits are increased allowing
those in the construction industry to earn the pensions negotiated for
in their contracts. Although this provision may only effect a small
group of workers, it accounts for just one percent of the overall bill.
It is unfortunate that a little over 1 percent of today's bill actually
provides for sound policy changes to help those who really need it.
This bill does nothing to induce those who currently don't save for
retirement to do so, and it gives those who do save more ways to shift
funds. The Washington Post Editorial Department recognizes this fact,
and I would like to submit the following Op-Ed for the Record.
I urge my colleagues to vote no on H.R. 10.
[From the Washington Post, Apr. 29, 2001]
A Miserable Pension Bill
The House Ways and Means Committee has approved still
another tax cut bill, the third this year. Unlike the first
two, this one is relatively small, was not proposed by
President Bush and has strong bipartisan support. The House
is expected to pass it overwhelmingly this week. But that's
unfortunate, because the bill would not produce the healthy
result its sponsors suggest.
The bill, whose principal sponsors are Reps. Rob Portman
and Benjamin Cardin, is presented as a way of increasing the
retirement savings of the middle class. But in fact the tax
savings, an estimated $52 billion over 10 years--would go
mainly to people whose incomes already permit them to save a
great deal. The committee rightly observes that too many
workers approach retirement with insufficient savings; half
of all private-sector workers lack pension coverage. But most
of them will continue to lack it if this bill is passed.
Those who already have the most coverage will be eligible for
more; that will be the main effect.
The bill would significantly increase the amounts of money
that can be set aside each year in tax-favored individual
retirement and 401(k) accounts. An estimated three-fourths of
the benefit of the bill would go to taxpayers in the highest
income quintile, and two-fifths would go to the highest
income 5 percent. Democratic efforts to broaden the bill to
benefit lower-income taxpayers failed. This bill also
contains provisions that critics think would induce small
employers to reduce pension coverage rather than expand it,
as the sponsors suggest.
This one won't break the bank, but neither is it likely to
increase savings that much. For the most part, it will confer
in the name
[[Page H1794]]
of savings a tidy tax break on people who were going to save
anyway. It ought not to pass.
Mr. CANTOR. Mr. Speaker, I rise today in support of H.R. 10, the
Comprehensive Retirement Security and Pension Reform Act and commend
Messrs. Portman and Cardin for introducing this important legislation.
Financial security in retirement is the cornerstone of the American
dream and a critical component of ensuring the health and well-being of
our society for generations to come. Long-term financial planning
provides vast benefits to our national economy, and all hard-working
Americans deserve to retire in comfort without worrying about whether
they will become a burden to their families or reliant upon the Federal
Government for health care and daily subsistence.
H.R. 10 would allow Americans to make a greater investment in their
own retirement plans through expanded individual retirement accounts
and 401(k)s. This provision alone would permit Americans to accumulate
more wealth as they work toward retirement and would have an immediate
beneficial impact upon our slowing economy. In addition, this bill
contains a special catch-up contribution for those age 50 and older who
perhaps were unable to save for retirement to the maximum extent
possible early in their careers.
Another important aspect of this measure is that it would greatly
enhance pension portability, so that workers who change jobs can take
their pension benefits with them. This common sense provision is long
overdue and enjoys overwhelming support among working men and women
across the United States. Finally, the bill includes provisions that
would make it easier for our Nation's small businesses to start
retirement plans, helping bring new pension coverage to millions of
small business workers.
Mr. Speaker, the time has come to enact this bipartisan legislation
into law. No longer can we discuss Social Security and Medicare reform,
the rising costs of health care for our senior citizens, and their
inability to meet daily living expenses on a fixed income without
enabling them to adequately plan and save for their retirement.
I join the overwhelming majority of my colleagues in the House in
support of H.R. 10 and urge the immediate adoption of this important
legislation.
Ms. HARMAN. Mr. Speaker, I rise today to support H.R. 10, the
Comprehensive Retirement Security and Pension Reform Act of 2001, which
will improve the ability of all Americans to save for retirement.
Since 1981, the IRA contribution limit has not been adjusted for
inflation. This legislation increases the contribution limit over the
next 3 years to $5,000. Additionally, those who are over 50 are given
the opportunity to ``catch up'' through an increased contribution limit
of $5,000 beginning in 2002. This legislation also addresses the needs
of the increasingly mobile workforce through provisions which provide
quicker vesting for employer matching funds, a simpler pension system
to encourage small businesses to provide pension plans and a faster
vesting of employer matching contributions. These provisions will allow
the younger generation of workers to better plan and adequately prepare
for retirement.
Mr. Speaker, I was not here the last time this legislation was
considered on the House floor, but had I been, this legislation would
have had my full support.
I urge my colleagues to support H.R. 10.
Mr. BEREUTER. Mr. Speaker, this Member rises today to express his
support for H.R. 10, the Comprehensive Retirement Security Pension
Reform Act of 2001, of which this Member is an original cosponsor. In
fact, this Member also cosponsored similar legislation (H.R. 1102) in
the prior 106th Congress. Therefore, this Member would like to thank
both of the main sponsors of H.R. 10--the distinguished gentleman from
Ohio, Rob Portman and the distinguished gentleman from Maryland, Ben
Cardin--and the chairman of the House Ways and Means Committee, the
distinguished gentleman from California, Mr. Bill Thomas, for their
instrumental role in bringing H.R. 10 to the House floor.
The pension reform provisions as provided in H.R. 10 are all too
necessary as half of the people in the American workforce, 70 million
workers, lack access to any sort of pension. Less than 20 percent of
small businesses, businesses with 25 or fewer employees, offer any kind
of pension coverage today. And, there has been almost no growth in
pension coverage over the past 20 years.
Between 1982 and 1994, Congress repeatedly reduced the limits on
traditional defined benefit pension plans, and costly new regulatory
restrictions were added. As a result, the number of these plans dropped
from 114,000 to 45,000 between 1987 and 1997. And, contribution limits
on pensions and individual retirement accounts (IRAs) are stuck at
1980s levels. You could set more aside in a 401(k) plan in 1986 than
you can today. Unfortunately, these cutbacks hurt the workers who need
the most help in saving for retirement--those at lower and middle
income levels. Since 1990, pension coverage has dropped from 40 to 33
percent among workers who make less than $20,000 per year.
To address these concerns H.R. 10 will provide $52 million in tax
relief to help Americans save for retirement by making it easier for
small businesses to offer retirement plans, allowing workers to save
more, addressing the needs of an increasingly mobile workforce through
portability, making pensions more secure, and cutting the bureaucracy
of red tape that has thwarted employers in establishing employee
pension plans. The bill will increase the IRA contribution limit from
$2,000 to $5,000 over 3 years; subsequently, it will be indexed to
inflation in $500 increments. It would increase the maximum annual
contribution employees can make to their employer-sponsored 401(k)
accounts from $10,500 to $15,000 over 5 years; subsequently, the annual
contribution limit will be indexed to inflation in $500 increments.
And, it would allow taxpayers age 50 and over to contribute $5,000
immediately beginning in 2001 as ``catch up'' contributions for those
people who may have left the workforce for a time period--this is
especially important for women as they often have brief or intermittent
work histories.
This is a fair, balanced, bipartisan plan that will help millions of
American workers, including school teachers, union workers, the
financial services industry, State officials, and educational
institutions. It includes provisions that will make it easier for small
businesses to start retirement plans, helping to bring new pension
coverage to millions of small business workers. And, H.R. 10 will
greatly enhance pension portability, so that workers who change jobs
can take their pension benefits with them.
Mr. Speaker, for all of these important reasons for comprehensive
pension reform and coverage, this Member strongly urges his colleagues
to vote for H.R. 10.
Mr. WELDON of Florida. Mr. Speaker, I rise in strong support of H.R.
10. As a proud cosponsor of this bill I am pleased that we are moving
forward with this legislation at the outset of the 107th Congress. Last
year this bill received overwhelming support in the House and Senate.
We now have a President, George W. Bush, who indicated his support of
the bill and his willingness to sign it into law.
It is critical that we do all that we can to help Americans better
prepare for their retirement. H.R. 10 makes it easier for small
businesses to offer retirement plans, allows workers to save more of
their income for retirement. It makes it easier for an increasingly
mobile workforce to carry their retirement benefits from one job to
another, makes pensions more secure, and cuts the red tape that has
hamstrung employers who want to establish pension plans for their
employees.
With regard to individual retirement accounts (IRAs), the bill
increases that annual contribution limit from $2,000 to $3,000 in 2002,
$4,000 in 2003 and $5,000 by 2004. Thereafter, the contribution limit
is indexed for inflation. The current $2,000 limit has not been
increased since 1981. Additionally, taxpayers that are over 50 years of
age are allowed to contribute up to $5,000 a year beginning immediately
in 2002, allowing these older Americans to make ``catch up''
contributions for retirement.
This bill includes over 50 provisions to improve the retirement
security of American workers. I am pleased that this bill enjoys broad
bipartisan support, and I look forward to its passage.
Mr. TOM DAVIS of Virginia. Mr. Speaker, I rise today in strong
support of H.R. 10, the Comprehensive Retirement Security and Pension
Reform Act, a bill I consider to be one of the most important pieces of
legislation we will consider during this Congress.
Americans want to be self-sufficient. That desire is at the core of
the vast majority of legislation we consider here in Congress, be it
tax-related, healthcare-related, pension-related, or education-related.
Americans want the resources available in their old age that will allow
them to live in dignity, without dependency on the government or the
charity of others, and without becoming a burden to their children.
This is a simple request, but in order to make it possible, years of
careful planning and savings are required. How can we as Members of
Congress help in this process, Mr. Speaker? We have social security,
but we all realize this is a program in need of comprehensive reform in
order to remain viable. Many are skeptical that the money they pay into
social security will be there to help them when they retire. Whatever
is done--or not done with respect to social security, we all realize
that depending heavily on social security to provide a secure
retirement is a bad idea. In fact, it was never intended to be more
than one leg, of a three-legged stool, the other legs of which were
personal savings and pension plans. Unfortunately, with the level of
personal savings in this country at its lowest level since 1933, this
three-legged stool is becoming more of a pogo stick.
[[Page H1795]]
Therefore, it is paramount that we in Congress give Americans tools
to save more of their personal income for retirement. IRAs and 401(k)s
have been excellent instruments to accomplish this goal, but allowable
contributions need to be raised to more realistic levels. H.R. 10
raises the limit for IRA contributions to $5000 and the 401(k) limit to
$15,000, then indexes them for inflation. It gives individuals over 50
years old the opportunity to ``catch up'' by making contributions of up
to $5000 immediately. H.R. 10 also makes it easier for workers to move
their pension savings when they change jobs, and eliminates regulatory
barriers that discourage small businesses from setting up pension
programs.
There are other important provisions in H.R. 10, but I would like to
summarize by saying that Messrs. Portman and Cardin have done an
outstanding job crafting a comprehensive bill that will help Americans
prepare for retirement. I commend them on their outstanding work, and I
urge my colleagues to support this bill.
Mr. BRADY of Pennsylvania. Mr. Speaker, I rise in strong support of
pension provisions in H.R. 10 and the Rangel-Neal substitute. This
legislation will make life better for the 10 million hard working
Americans, retirees and their families who depend on multi-employer
plans for retirement, health and other benefits.
I support this legislation for one simple reason. It restores
fairness to the tax code. Many working Americans, especially union
members in the building trades work their whole lives and pay into
pension funds. They expect to get back what they put in.
Instead, Section 415 of the IRS code treats union multi-employer
pension plans the same way it treats wealthy tax dodgers. Section 415
limits were designed to prevent high income individuals from using
pension plans to shelter excessive benefits.
But these limits are being applied to multi-employer plans, whose
beneficiaries are typical working men and women. Multi-employer plan
retirees need relief and they need it now.
H.R. 10 and the substitute allow working people to receive more of
their retirement benefits that they have worked for and earned.
Mr. Speaker, I want to thank my friends Ben Cardin and Rob Portman
for working so hard to bring this much needed relief to working
Americans. I urge my colleagues to support this bill.
Mrs. MINK of Hawaii. Mr. Speaker, I rise in support of H.R. 10, the
Portman-Cardin pension reform bill. I am proud to be an original
cosponsor of this legislation.
According to the Social Security Administration, the average retiree
gets only 40 percent of her income from Social Security. Another 19
percent comes from employer-provided pensions, 18 percent from personal
savings and 20 percent from earnings. Unfortunately, half of all
private sector workers have no pension coverage. In businesses with
less than 25 workers, only 20 percent have pension plans. Workers in
such positions need incentives to save for their retirement.
H.R. 10 is designed to encourage retirement and pension savings.
First, the bill increases the amount an individual can contribute to
an Individual Retirement Account (IRA) and $2,000 per year to $5,000
per year by 2004. Beginning in 2005, the amount would be indexed for
inflation in $500 increments. The contribution limit is increased for
both traditional IRAs (contributions are tax deductible and not taxed
until withdrawn) and Roth IRAs (contributions are not deductible but
withdrawals are not taxed).
Second, the bill increases the amount an individual can contribute to
a 401(k) plan, a tax-sheltered annuity or a salary-reduction Simplified
Employee Pension (SEP) plan is increased from $10,500 to $15,000 by
2006.
Third, the bill increases the amount that may be contributed to a
small business SIMPLE plan from $6,500 to $10,000 by 2006.
Fourth, the amount that an individual employee of a state or local
government or a non-profit organization can contribute to a Section 457
plan is increased from $8,500 to $15,000 by 2006. In addition, the
amount of contributions can be doubled during the last three years
before retirement.
Together, these provisions provide workers with increased
opportunities to save for retirement.
Next, the bill increases the portability of pensions. This is
increasingly important to the modern workforce, with its high degree of
mobility. Under the provision, workers will be able to roll-over
pension savings from one type of plan to another as they move from job
to job.
The bill also contains an extremely important provision relating to
vesting of pension rights. Under current law, a worker can lose their
employer's pension benefits if they do not work for the employer for
five years. The bill changes the vesting rule so that a worker's rights
to pension benefits vests with three years of employment.
I would like to see greater protections for workers whose employers
are converting their pension plans to so-called cash balance plans.
Employers often do not disclose to older workers that a conversion to a
cash balance plan may contain a ``wear-away'' provision under which a
worker may not earn any additional pension benefits for several years.
Employees also do not receive adequate explanation of the effect that a
conversion has on pension benefits because employers are not required
to provide an explanation.
On balance, however, the bill is a step in the right direction of
assisting Americans to increasing their savings toward their retirement
and I urge its passage.
The SPEAKER pro tempore. All time for general debate has expired.
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 a 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
following:
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
2001''.
(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.
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.
Sec. 209. Availability of qualified plans to self-employed individuals
who are exempt from the self-employment tax by reason of
their religious beliefs.
Sec. 210. Certain nonresident aliens excluded in applying minimum
coverage requirements.
Sec. 211. Refundable credit to certain individuals for elective
deferrals and IRA contributions.
Sec. 212. Credit for pension plan startup costs of small employers.
Sec. 213. Credit for qualified pension plan contributions of small
employers.
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. Modifications to minimum distribution rules.
Sec. 305. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 306. Provisions relating to hardship distributions.
Sec. 307. Waiver of tax on nondeductible contributions for domestic or
similar workers.
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.
[[Page H1796]]
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
Sec. 501. Repeal of 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. Protection of investment of employee contributions to 401(k)
plans.
Sec. 507. Periodic pension benefits statements.
Sec. 508. 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.
Sec. 612. Annual report dissemination.
Sec. 613. Technical corrections to SAVER Act.
TITLE VII--OTHER ERISA PROVISIONS
Sec. 701. Missing participants.
Sec. 702. Reduced PBGC premium for new plans of small employers.
Sec. 703. Reduction of additional PBGC premium for new and small plans.
Sec. 704. Authorization for PBGC to pay interest on premium overpayment
refunds.
Sec. 705. Substantial owner benefits in terminated plans.
Sec. 706. Civil penalties for breach of fiduciary responsibility.
Sec. 707. Benefit suspension notice.
Sec. 708. Studies.
TITLE VIII--PLAN AMENDMENTS
Sec. 801. 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:
2002..................................................$3,000 .
2003..................................................$4,000 .
2004 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 2002 or 2003 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 2004, 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 2003'
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,
2001.
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'' and by
striking the second sentence.
(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, 2001''.
(5) Conforming amendments.--
(A) Section 415(b)(2) is amended by striking subparagraph
(F).
(B) Section 415(b)(9) is amended to read as follows:
``(9) Special rule for commercial airline pilots.--
``(A) In general.--Except as provided in subparagraph (B),
in the case of any participant who is a commercial airline
pilot, if, as of the time of the participant's retirement,
regulations prescribed by the Federal Aviation Administration
require an individual to separate from service as a
commercial airline pilot after attaining any age occurring on
or after age 60 and before age 62, paragraph (2)(C) shall be
applied by substituting such age for age 62.
``(B) Individuals who separate from service before age
60.--If a participant described in subparagraph (A) separates
from service before age 60, the rules of paragraph (2)(C)
shall apply.''.
(C) Section 415(b)(10)(C)(i) is amended by striking
``applied without regard to paragraph (2)(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, 2001''.
(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,
2001''; 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:
2002.....................................................$11,000
2003.....................................................$12,000
2004.....................................................$13,000
[[Page H1797]]
2005.....................................................$14,000
2006 or thereafter....................................$15,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of taxable
years beginning after December 31, 2006, 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, 2005, 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:
2002.....................................................$11,000
2003.....................................................$12,000
2004.....................................................$13,000
2005.....................................................$14,000
2006 or thereafter.......................................$15,000.
``(B) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2006, the Secretary shall
adjust the $15,000 amount under 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, 2005, 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:
2002....................................................$7,000
2003....................................................$8,000
2004....................................................$9,000
2005 or thereafter.....................................$10,000.
``(ii) Cost-of-living adjustment.--In the case of a year
beginning after December 31, 2005, 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, 2004, 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) Subclause (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, 2001.
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND
SOLE PROPRIETORS.
(a) Amendment of Internal Revenue Code.--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) Amendment of ERISA.--Section 408(d)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2))
is amended by adding at the end the following new
subparagraph:
``(C) For purposes of paragraph (1)(A), the term `owner-
employee' shall only include a person described in clause
(ii) or (iii) of subparagraph (A).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
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 key
employee or former key 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:
[[Page H1798]]
``(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, 2001.
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, 2001.
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, 2001.
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 10511 of the Revenue Act of 1987 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 later of--
(A) the fifth plan year the pension benefit plan is in
existence; or
(B) the end of any remedial amendment period with respect
to the plan beginning within the first 5 plan years; 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) Determination of Average Fees Charged.--For purposes of
any determination of average fees charged, any request to
which subsection (a) applies shall not be taken into account.
(e) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 2001.
SEC. 207. DEDUCTION LIMITS.
(a) Stock Bonus and Profit Sharing Trusts.--
(1) In general.--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) Conforming amendment.--Subparagraph (C) of section
404(h)(1) is amended by striking ``15 percent'' each place it
appears and inserting ``20 percent''.
(b) Compensation.--
(1) In general.--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).''.
(2) Conforming amendments.--
(A) Subparagraph (B) of section 404(a)(3) is amended by
striking the last sentence.
(B) 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, 2001.
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 contributions
and earnings thereon.--The term `qualified distribution'
shall not include any distribution of an excess deferral
under section 402(g)(2) or any excess contribution under
section 401(k)(8), and any income on the excess deferral or
contribution.
``(3) Treatment of distributions of certain excess
deferrals.--Notwithstanding section 72, if any excess
deferral under section 402(g)(2) attributable to a designated
plus contribution is not distributed on or before the 1st
April 15 following the close of the taxable year in which
such excess deferral is made, the amount of such excess
deferral shall--
``(A) not be treated as investment in the contract, and
[[Page H1799]]
``(B) be included in gross income for the taxable year in
which such excess is distributed.
``(4) 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)(A) (as added by
section 201(d)(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.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 209. AVAILABILITY OF QUALIFIED PLANS TO SELF-EMPLOYED
INDIVIDUALS WHO ARE EXEMPT FROM THE SELF-
EMPLOYMENT TAX BY REASON OF THEIR RELIGIOUS
BELIEFS.
(a) In General.--Subparagraph (A) of section 401(c)(2)
(defining earned income) is amended by adding at the end
thereof the following new sentence: ``For purposes of this
part only (other than sections 419 and 419A), this
subparagraph shall be applied as if the term `trade or
business' for purposes of section 1402 included service
described in section 1402(c)(6).''.
(b) Simple Retirement Accounts.--Clause (ii) of section
408(p)(6)(A) (defining self-employed) is amended by adding at
the end the following new sentence: ``The preceding sentence
shall be applied as if the term `trade or business' for
purposes of section 1402 included service described in
section 1402(c)(6).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 210. CERTAIN NONRESIDENT ALIENS EXCLUDED IN APPLYING
MINIMUM COVERAGE REQUIREMENTS.
(a) In General.--Subparagraph (C) of section 410(b)(3)
(relating to exclusion of certain employees) is amended by
inserting ``, determined without regard to the reference to
subchapter D in the last sentence thereof'' after ``section
861(a)(3)''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to plan years beginning after December 31, 2001.
SEC. 211. 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 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)), 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 preceding taxable year, 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)) made by the eligible
individual,
``(2) the amount of--
``(A) any elective deferrals (as defined in section
402(g)(3)) of such individual, and
``(B) any elective deferral of compensation by such
individual under an eligible deferred compensation plan (as
defined in section 457(b)) of an eligible employer described
in section 457(e)(1)(A), and
[[Page H1800]]
``(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. 212. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL
EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
business related credits) is amended by adding at the end the
following new section:
``SEC. 45E. 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) of such Code (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(c)), the small employer pension plan startup cost
credit determined under section 45E(a).''
(c) Conforming Amendments.--
(1) Section 39(d) of such Code is amended by adding at the
end the following new paragraph:
``(10) No carryback of small employer pension plan startup
cost 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 startup cost credit
determined under section 45E may be carried back to a taxable
year beginning before January 1, 2002.''
(2) Subsection (c) of section 196 of such Code 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 startup cost credit
determined under section 45E(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 45E. 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
beginning after December 31, 2001.
SEC. 213. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF
SMALL EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
business related credits) is amended by adding at the end the
following new section:
``SEC. 45F. 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.
[[Page H1801]]
``(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) except in the case of a defined benefit plan,
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) of such Code (defining current year business
credit) is amended by striking ``plus'' at the end of
paragraph (13), by striking the period at the end of
paragraph (14) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(15) in the case of an eligible employer (as defined in
section 45F(e)), the small employer pension plan contribution
credit determined under section 45F(a).''
(c) Conforming Amendments.--
(1) Section 39(d) of such Code is amended by adding at the
end the following new paragraph:
``(11) 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 45F may be carried back to a
taxable year beginning before January 1, 2002.''
(2) Subsection (c) of section 196 of such Code is amended
by striking ``and'' at the end of paragraph (9), by striking
the period at the end of paragraph (10) and inserting ``,
and'', and by adding at the end the following new paragraph:
``(11) the small employer pension plan contribution credit
determined under section 45F(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 45F. 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.
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) Application of nondiscrimination rules.--
``(A) In general.--An applicable employer plan shall not be
treated as failing to meet the nondiscrimination requirements
under section 401(a)(4) with respect to benefits, rights, and
features if the plan allows all eligible participants to make
the same election with respect to the additional elective
deferrals under this subsection.
``(B) Aggregation.--For purposes of subparagraph (A), all
plans maintained by employers who are treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 shall be treated as 1 plan.
``(5) 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.
``(6) Other definitions and rules.--For purposes of this
subsection--
[[Page H1802]]
``(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.--In the case of a year
beginning after December 31, 2006, the Secretary shall adjust
annually the $5,000 amount in paragraph (2)(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 taken into account shall be the calendar quarter
beginning July 1, 2005, and any increase under this
subparagraph which is not a multiple of $500 shall be rounded
to the next lower multiple of $500.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2001.
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
2001)''.
(B) Section 404(a)(10)(B) is amended by striking ``, the
exclusion allowance under section 403(b)(2),''.
(C) Section 404(j) is amended by adding at the end the
following new paragraph:
``(3) Special rule for money purchase plans.--For purposes
of paragraph (1)(B), in the case of a defined contribution
plan which is subject to the funding standards of section
412, section 415(c)(1)(B) shall be applied by substituting
`25 percent' for `100 percent'.''.
(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 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).''.
(H) Subparagraph (B) of section 402(g)(7) (as redesignated
by section 201) 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 2001)''.
(I) Section 664(g) is amended--
(i) in paragraph (3)(E) by striking ``limitations under
section 415(c)'' and inserting ``applicable limitation under
paragraph (7)'', and
(ii) by adding at the end the following new paragraph:
``(7) Applicable limitation.--
``(A) In general.--For purposes of paragraph (3)(E), the
applicable limitation under this paragraph with respect to a
participant is an amount equal to the lesser of--
``(i) $30,000, or
``(ii) 25 percent of the participant's compensation (as
defined in section 415(c)(3)).
``(B) Cost-of-living adjustment.--The Secretary shall
adjust annually the $30,000 amount under subparagraph (A)(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 beginning October 1, 1993, and any increase under
this subparagraph which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.''.
(4) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2001.
(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, 2001.
SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCHING
CONTRIBUTIONS.
(a) Amendment of Internal Revenue Code.--Section 411(a)
(relating to minimum vesting standards) is amended--
(1) in paragraph (2) in the matter preceding subparagraph
(A), 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) Amendment of 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:
2............................................................20
3............................................................40
4............................................................60
5............................................................80
6.........................................................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, 2001.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to
[[Page H1803]]
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, 2002; or
(B) January 1, 2006.
(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. 304. MODIFICATIONS TO MINIMUM DISTRIBUTION RULES.
(a) Life Expectancy Tables.--The Secretary of the Treasury
shall modify the life expectancy tables under 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 to reflect current life expectancy.
(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.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to years
beginning after December 31, 2001.
(B) Distributions to surviving spouse.--
(i) In general.--In the case of an employee described in
clause (ii), distributions to the surviving spouse of the
employee shall not be required to commence prior to the date
on which such distributions would have been required to begin
under section 401(a)(9)(B) of the Internal Revenue Code of
1986 (as in effect on the day before the date of the
enactment of this Act).
(ii) Certain employees.--An employee is described in this
clause if such employee dies before--
(I) the date of the enactment of this Act, and
(II) the required beginning date (within the meaning of
section 401(a)(9)(C) of the Internal Revenue Code of 1986) of
the employee.
(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, 2001.
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, 2001.
SEC. 306. PROVISIONS RELATING TO HARDSHIP DISTRIBUTIONS.
(a) Safe Harbor Relief.--
(1) 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.
(2) Effective date.--The revised regulations under this
subsection shall apply to years beginning after December 31,
2001.
(b) Hardship Distributions Not Treated as Eligible Rollover
Distributions.--
(1) Modification of definition of eligible rollover.--
Subparagraph (C) of section 402(c)(4) (relating to eligible
rollover distribution) is amended to read as follows:
``(C) any distribution which is made upon hardship of the
employee.''.
(2) Effective date.--The amendment made by this subsection
shall apply to distributions made after December 31, 2001.
SEC. 307. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR
DOMESTIC OR SIMILAR WORKERS.
(a) In General.--Section 4972(c)(6) (relating to exceptions
to nondeductible contributions), as amended by section 502,
is amended by striking ``and'' at the end of subparagraph
(A), by striking the period and inserting ``, and'' at the
end of subparagraph (B), and by inserting after subparagraph
(B) the following new subparagraph:
``(C) so much of the contributions to a simple retirement
account (within the meaning of section 408(p)) or a simple
plan (within the meaning of section 401(k)(11)) which are not
deductible when contributed solely because such contributions
are not made in connection with a trade or business of the
employer.''
(b) Exclusion of Certain Contributions.--Section 4972(c)(6)
is amended by adding at the end the following new sentence:
``Subparagraph (C) shall not apply to contributions made on
behalf of the employer or a member of the employer's family
(as defined in section 447(e)(1)).''.
(c) No Inference.--Nothing in the amendments made by this
section shall be construed to infer the proper treatment of
nondeductible contributions under the laws in effect before
such amendments.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
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:
[[Page H1804]]
``(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) and which is maintained by an
eligible employer described in section 457(e)(1)(A).''.
(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) which is maintained by an eligible 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:
``(10) 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 eligible employer described in section 457(e)(1)(A) shall
be treated as a distribution from a qualified retirement plan
described in section 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 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, 2001.
(2) Reasonable notice.--No penalty shall be imposed on a
plan for the failure to provide the information required by
the amendment made by subsection (c) with respect to any
distribution made before the date that is 90 days after the
date on which the Secretary of the Treasury issues a safe
harbor rollover notice after the date of the enactment of
this Act, if the administrator of such plan makes a
reasonable attempt to comply with such requirement.
(3) 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, 2001.
(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
[[Page H1805]]
``(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 after December 31, 2001.
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, 2001.
SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) Amendment of internal revenue code.--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 received a notice
describing the consequences of making the election, and
``(V) 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) Amendment of erisa.--Section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is
amended by adding at the end the following:
``(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 subparagraph referred to
as the `transferor plan') to the extent that--
``(i) the forms of distribution previously available under
the transferor plan applied to the account of a participant
or beneficiary under the transferor plan that was transferred
from the transferor plan to the transferee plan pursuant to a
direct transfer rather than pursuant to a distribution from
the transferor plan;
``(ii) the terms of both the transferor plan and the
transferee plan authorize the transfer described in clause
(i);
``(iii) the transfer described in clause (i) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan;
``(iv) the election described in clause (iii) was made
after the participant or beneficiary received a notice
describing the consequences of making the election; and
``(v) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution to which the participant or beneficiary is
entitled under the 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
promulgated by the Secretary of the Treasury, a defined
contribution plan shall not be treated as failing to meet the
requirements of this subsection 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.''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2001.
(b) Regulations.--
(1) Amendment of internal revenue code.--Paragraph (6)(B)
of section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended by inserting after the
second sentence the following new sentence: ``The Secretary
shall by regulations provide that this subparagraph shall not
apply to any plan amendment which reduces or eliminates
benefits or subsidies which create significant burdens or
complexities for the plan and plan participants and does not
adversely affect the rights of any participant in a more than
de minimis manner.''.
(2) Amendment of erisa.--Section 204(g)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)(2))
is amended by inserting before the last sentence the
following new sentence: ``The Secretary of the Treasury shall
by regulations provide that this paragraph shall not apply to
any plan amendment which reduces or eliminates benefits or
subsidies which create significant burdens or complexities
for the plan and plan participants and does not adversely
affect the rights of any participant in a more than de
minimis manner.''.
(3) Secretary directed.--Not later than December 31, 2003,
the Secretary of the Treasury is directed to issue
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986 and section 204(g) of the Employee Retirement
Income Security Act of 1974, including the regulations
required by the amendment made by this subsection. Such
regulations shall apply to plan years beginning after
December 31, 2003, 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
[[Page H1806]]
(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, 2001.
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, 2001.
SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF
CASH-OUT AMOUNTS.
(a) Qualified Plans.--
(1) Amendment of internal revenue code.--Section 411(a)(11)
(relating to restrictions on certain mandatory distributions)
is amended by adding at the end the following:
``(D) Special rule for rollover contributions.--A plan
shall not fail to meet the requirements of this paragraph if,
under the terms of the plan, the present value of the
nonforfeitable accrued benefit is determined without regard
to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term `rollover
contributions' means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16).''.
(2) Amendment of erisa.--Section 203(e) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) 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 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) of the Internal Revenue Code
of 1986.''.
(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, 2001.
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, 2001.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY FUNDING
LIMIT.
(a) Amendment of Internal Revenue Code.--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 The applicable
plan year beginning percentage is--
in--
2002........................................................165
2003......................................................170.''.
(b) Amendment of ERISA.--Section 302(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7))
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 The applicable
plan year beginning percentage is--
in--
2002........................................................165
2003......................................................170.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2001.
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 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 maintained 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), as amended by section 207, 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
[[Page H1807]]
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, 2001.
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, 2001.
SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED
BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE
BENEFIT ACCRUALS.
(a) Amendment of Internal Revenue Code.--
(1) 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 notice to which the failure
relates is provided or the failure is otherwise corrected.
``(c) Limitations on Amount of Tax.--
``(1) Tax not to apply where failure not discovered and
reasonable diligence exercised.--No tax shall be imposed by
subsection (a) on any failure during any period for which it
is established to the satisfaction of the Secretary that any
person subject to liability for the tax under subsection (d)
did not know that the failure existed and exercised
reasonable diligence to meet the requirements of subsection
(e).
``(2) Tax not to apply to failures corrected within 30
days.--No tax shall be imposed by subsection (a) on any
failure if--
``(A) any person subject to liability for the tax under
subsection (d) exercised reasonable diligence to meet the
requirements of subsection (e), and
``(B) such person provides the notice described in
subsection (e) during the 30-day period beginning on the
first date such person knew, or exercising reasonable
diligence would have known, that such failure existed.
``(3) Overall limitation for unintentional failures.--
``(A) In general.--If the person subject to liability for
tax under subsection (d) exercised reasonable diligence to
meet the requirements of subsection (e), 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 1 plan.
``(B) Taxable years in the case of certain controlled
groups.--For purposes of this paragraph, if all persons who
are treated as a single employer for purposes of this section
do not have the same taxable year, the taxable years taken
into account shall be determined under principles similar to
the principles of section 1561.
``(4) 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 or otherwise inequitable 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. The Secretary
may provide a simplified form of notice for, or exempt from
any notice requirement, a plan--
``(A) which has fewer than 100 participants who have
accrued a benefit under the plan, or
``(B) which offers participants the option to choose
between the new benefit formula and the old benefit formula.
``(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) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) each 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)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced 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.
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.
``(3) Early retirement.--A plan amendment which eliminates
or significantly reduces any early retirement benefit or
retirement-type subsidy (within the meaning of section
411(d)(6)(B)(i)) shall be treated as having the effect of
significantly reducing the rate of future benefit accrual.
``(g) New Technologies.--The Secretary may by regulations
allow any notice under subsection (e) to be provided by using
new technologies.''.
(2) 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.''.
(b) Amendment of ERISA.--Section 204(h) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is
amended by adding at the end the following new paragraphs:
``(3)(A) An applicable pension plan to which paragraph (1)
applies shall not be treated as meeting the requirements of
such paragraph unless, in addition to any notice required to
be provided to an individual or organization under such
paragraph, the plan administrator provides the notice
described in subparagraph (B) to each applicable individual
(and to each employee organization representing applicable
individuals).
``(B) The notice required by subparagraph (A) 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 of the Treasury) to allow
applicable individuals to understand the effect of the plan
amendment. The Secretary of the Treasury may provide a
simplified form of notice for, or exempt from any notice
requirement, a plan--
``(i) which has fewer than 100 participants who have
accrued a benefit under the plan, or
``(ii) which offers participants the option to choose
between the new benefit formula and the old benefit formula.
``(C) Except as provided in regulations prescribed by the
Secretary of the Treasury, the notice required by
subparagraph (A) shall be provided within a reasonable time
before the effective date of the plan amendment.
``(D) Any notice under subparagraph (A) may be provided to
a person designated, in writing, by the person to which it
would otherwise be provided.
``(E) A plan shall not be treated as failing to meet the
requirements of subparagraph
[[Page H1808]]
(A) 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) The Secretary of the Treasury may by regulations
allow any notice under this paragraph to be provided by using
new technologies.
``(4) For purposes of paragraph (3)--
``(A) The term `applicable individual' means, with respect
to any plan amendment--
``(i) each participant in the plan; and
``(ii) any 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)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced by such
plan amendment.
``(B) The term `applicable pension plan' means--
``(i) any defined benefit plan; or
``(ii) an individual account plan which is subject to the
funding standards of section 412 of the Internal Revenue Code
of 1986.
``(C) A plan amendment which eliminates or significantly
reduces any early retirement benefit or retirement-type
subsidy (within the meaning of subsection (g)(2)(A)) shall be
treated as having the effect of significantly reducing the
rate of future benefit accrual.''.
(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, and section
204(h)(3) of the Employee Retirement Income Security Act of
1974, 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 notice rule.--
(A) In general.--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.
(B) Reasonable notice.--The amendments made by this section
shall not apply to any plan amendment taking effect on or
after the date of the enactment of this Act if, before April
25, 2001, notice was provided to participants and
beneficiaries adversely affected by the plan amendment (or
their representatives) which was reasonably expected to
notify them of the nature and effective date of the plan
amendment.
(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
and the Committee on Education and the Workforce of the House
of Representatives and the Committee on Finance and the
Committee on Health, Education, Labor, and Pensions of the
Senate.
SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--
(1) In general.--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.''.
(2) Conforming amendment.--Section 415(b)(7) (relating to
benefits under certain collectively bargained plans) is
amended by inserting ``(other than a multiemployer plan)''
after ``defined benefit plan'' in the matter preceding
subparagraph (A).
(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--
``(A) with any other plan which is not a multiemployer plan
for purposes of applying subsection (b)(1)(B) to such other
plan, or
``(B) with any other multiemployer plan 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''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 506. 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 which is invested in assets consisting of
qualifying employer securities, qualifying employer real
property, or both, if such assets were acquired before
January 1, 1999.''.
(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. 507. 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
to read as follows:
``(a)(1) Except as provided in paragraph (2)--
``(A) the administrator of an individual account plan shall
furnish a pension benefit statement--
``(i) to a plan participant at least once annually, and
``(ii) to a plan beneficiary upon written request, and
``(B) the administrator of a defined benefit plan shall
furnish a pension benefit statement--
``(i) at least once every 3 years to each participant with
a nonforfeitable accrued benefit who is employed by the
employer maintaining the plan at the time the statement is
furnished to participants, and
``(ii) to a plan participant or plan beneficiary of the
plan upon written request.
``(2) Notwithstanding paragraph (1), the administrator of a
plan to which more than 1 unaffiliated employer is required
to contribute shall only be required to furnish a pension
benefit statement under paragraph (1) upon the written
request of a participant or beneficiary of the plan.
``(3) A pension benefit statement under paragraph (1)--
``(A) shall indicate, on the basis of the latest available
information--
``(i) the total benefits accrued, and
``(ii) the nonforfeitable pension benefits, if any, which
have accrued, or the earliest date on which benefits will
become nonforfeitable,
``(B) shall be written in a manner calculated to be
understood by the average plan participant, and
``(C) may be provided in written, electronic, telephonic,
or other appropriate form.
``(4)(A) In the case of a defined benefit plan, the
requirements of paragraph (1)(B)(i) shall be treated as met
with respect to a participant if the administrator provides
the participant at least once each year with notice of the
availability of the pension benefit statement and the ways in
which the participant may obtain such statement. Such notice
shall be provided in written, electronic, telephonic, or
other appropriate form, and may be included with other
communications to the participant if done in a manner
reasonably designed to attract the attention of the
participant.
``(B) The Secretary may provide that years in which no
employee or former employee benefits (within the meaning of
section 410(b) of the Internal Revenue Code of 1986) under
the plan need not be taken into account in determining the 3-
year period under paragraph (1)(B)(i).''.
(b) Conforming Amendments.--
(1) Section 105 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1025) is amended by striking
subsection (d).
(2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is
amended to read as follows:
``(b) In no case shall a participant or beneficiary of a
plan be entitled to more than one statement described in
subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is
applicable, in any 12-month period.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2002.
SEC. 508. 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.
[[Page H1809]]
``(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, 2004.
(2) Exception for certain plans.--In the case of any--
(A) employee stock ownership plan established after March
14, 2001, 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 March 14, 2001.
TITLE VI--REDUCING REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) Amendment of Internal Revenue Code.--Paragraph (9) of
section 412(c) (relating to annual valuation) is amended to
read as follows:
``(9) Annual valuation.--
``(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.
[[Page H1810]]
``(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) Amendment of 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) 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) 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) Information under clause (ii) shall, in accordance
with regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) An election under clause (ii), 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 after December 31, 2001.
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) Standards for Disallowance.--Section 404(k)(5)(A)
(relating to disallowance of deduction) is amended by
inserting ``avoidance or'' before ``evasion''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
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, 2001.
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 advice or information 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, 2001.
SEC. 606. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and
Their Spouses.--
(1) In general.--The Secretary of the Treasury and the
Secretary of Labor 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 plan years beginning
after December 31, 2002, the Secretary of the Treasury and
the Secretary of Labor shall provide for the filing of a
simplified annual return for any retirement plan which covers
less than 25 employees on the first day of a plan year and
which meets the requirements described in subparagraphs (B),
(D), and (E) of subsection (a)(2).
(c) Effective Date.--The provisions of this section shall
take effect on January 1, 2002.
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, 2001.
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.
[[Page H1811]]
(2) Effective dates.--
(A) Regulations.--The regulation required by paragraph (1)
shall apply to years beginning after December 31, 2003.
(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, 2003.
(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, 2003, 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) of the Internal
Revenue Code of 1986 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, 2001.
SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) Amendment of internal revenue code.--
(A) In general.--Subparagraph (A) of section 417(a)(6) is
amended by striking ``90-day'' and inserting ``180-day''.
(B) 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).
(2) Amendment of erisa.--Section 205(c)(7)(A) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1055(c)(7)(A)) is amended by striking ``90-day'' and
inserting ``180-day''.
(3) Effective date.--The amendments made by paragraph
(1)(A) and (2) and the modifications required by paragraph
(1)(B) shall apply to years beginning after December 31,
2001.
(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, 2001.
SEC. 612. ANNUAL REPORT DISSEMINATION.
(a) Report Available Through Electronic Means.--Section
104(b)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1024(b)(3)) is amended by adding at the end
the following new sentence: ``The requirement to furnish
information under the previous sentence shall be satisfied if
the administrator makes such information reasonably available
through electronic means or other new technology.''.
(b) Effective Date.--The amendment made by this section
shall apply to reports for years beginning after December 31,
2000.
SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1147) is amended--
(1) in subsection (a), by striking ``2001 and 2005 on or
after September 1 of each year involved'' and inserting
``2001, 2005, and 2009 in the month of September of each year
involved'';
(2) in subsection (b), by adding at the end the following
new sentence: ``To effectuate the purposes of this paragraph,
the Secretary may enter into a cooperative agreement,
pursuant to the Federal Grant and Cooperative Agreement Act
of 1977 (31 U.S.C. 6301 et seq.), with the American Savings
Education Council.'';
(3) in subsection (e)(2)--
(A) by striking ``Committee on Labor and Human Resources''
in subparagraph (D) and inserting ``Committee on Health,
Education, Labor, and Pensions'';
(B) by striking subparagraph (F) and inserting the
following:
``(F) the Chairman and Ranking Member of the Subcommittee
on Labor, Health and Human Services, and Education of the
Committee on Appropriations of the House of Representatives
and the Chairman and Ranking Member of the Subcommittee on
Labor, Health and Human Services, and Education of the
Committee on Appropriations of the Senate;'';
(C) by redesignating subparagraph (G) as subparagraph (J);
and
(D) by inserting after subparagraph (F) the following new
subparagraphs:
``(G) the Chairman and Ranking Member of the Committee on
Finance of the Senate;
``(H) the Chairman and Ranking Member of the Committee on
Ways and Means of the House of Representatives;
``(I) the Chairman and Ranking Member of the Subcommittee
on Employer-Employee Relations of the Committee on Education
and the Workforce of the House of Representatives; and'';
(4) in subsection (e)(3)(A)--
(A) by striking ``There shall be no more than 200
additional participants.'' and inserting ``The participants
in the National Summit shall also include additional
participants appointed under this subparagraph.'';
(B) by striking ``one-half shall be appointed by the
President,'' in clause (i) and inserting ``not more than 100
participants shall be appointed under this clause by the
President,'', and by striking ``and'' at the end of clause
(i);
(C) by striking ``one-half shall be appointed by the
elected leaders of Congress'' in clause (ii) and inserting
``not more than 100 participants shall be appointed under
this clause by the elected leaders of Congress'', and by
striking the period at the end of clause (ii) and inserting
``; and'';
(D) by adding at the end the following new clause:
``(iii) The President, in consultation with the elected
leaders of Congress referred to in subsection (a), may
appoint under this clause additional participants to the
National Summit. The number of such additional participants
appointed under this clause may not exceed the lesser of 3
percent of the total number of all additional participants
appointed under this paragraph, or 10. Such additional
participants shall be appointed from persons nominated by the
organization referred to in subsection (b)(2) which is made
up of private sector businesses and associations partnered
with Government entities to promote long term financial
security in retirement through savings and with which the
Secretary is required thereunder to consult and cooperate and
shall not be Federal, State, or local government
employees.'';
(5) in subsection (e)(3)(B), by striking ``January 31,
1998'' in subparagraph (B) and inserting ``May 1, 2001, May
1, 2005, and May 1, 2009, for each of the subsequent summits,
respectively'';
(6) in subsection (f)(1)(C), by inserting ``, no later than
90 days prior to the date of the commencement of the National
Summit,'' after ``comment'' in paragraph (1)(C);
(7) in subsection (g), by inserting ``, in consultation
with the congressional leaders specified in subsection
(e)(2),'' after ``report'';
(8) in subsection (i)--
(A) by striking ``beginning on or after October 1, 1997''
in paragraph (1) and inserting ``2001, 2005, and 2009''; and
(B) by adding at the end the following new paragraph:
``(3) Reception and representation authority.--The
Secretary is hereby granted reception and representation
authority limited specifically to the events at the National
Summit. The Secretary shall use any private contributions
accepted in connection with the National Summit prior to
using funds appropriated for purposes of the National Summit
pursuant to this paragraph.''; and
(9) in subsection (k)--
(A) by striking ``shall enter into a contract on a sole-
source basis'' and inserting ``may enter into a contract on a
sole-source basis''; and
(B) by striking ``fiscal year 1998'' and inserting ``fiscal
years 2001, 2005, and 2009''.
[[Page H1812]]
TITLE VII--OTHER ERISA PROVISIONS
SEC. 701. 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 new subsections:
``(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) Effective Date.--The amendment 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. 702. 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) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)) maintained by
a small employer (as so defined),'' after ``single-employer
plan,'',
(2) in clause (iii), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new clause:
``(iv) in the case of a new single-employer plan (as
defined in subparagraph (F)) maintained by a small employer
(as so defined) for the plan year, $5 for each individual who
is a participant in such plan during the plan year.''.
(b) Definition of New Single-Employer Plan.--Section
4006(a)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end
the following new subparagraph:
``(F)(i) For purposes of this paragraph, a single-employer
plan maintained by a contributing sponsor shall be treated as
a new single-employer plan for each of its first 5 plan years
if, during the 36-month period ending on the date of the
adoption of such plan, the sponsor or any member of such
sponsor's controlled group (or any predecessor of either) did
not establish or maintain a plan to which this title applies
with respect to which benefits were accrued for substantially
the same employees as are in the new single-employer plan.
``(ii)(I) For purposes of this paragraph, the term `small
employer' means an employer which on the first day of any
plan year has, in aggregation with all members of the
controlled group of such employer, 100 or fewer employees.
``(II) 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 controlled groups of such sponsors shall be aggregated
for purposes of determining whether any contributing sponsor
is a small employer.''.
(c) Effective Date.--The amendments made by this section
shall apply to plans established after December 31, 2001.
SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND
SMALL PLANS.
(a) New Plans.--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 by adding at the end the
following new clause:
``(v) In the case of a new defined benefit plan, the amount
determined under clause (ii) for any plan year shall be an
amount equal to the product of the amount determined under
clause (ii) and the applicable percentage. For purposes of
this clause, 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.
``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as
defined in section 3(35)) maintained by a contributing
sponsor shall be treated as a new defined benefit plan for
each of its first 5 plan years if, during the 36-month period
ending on the date of the adoption of the plan, the sponsor
and each member of any controlled group including the sponsor
(or any predecessor of either) did not establish or maintain
a plan to which this title applies with respect to which
benefits were accrued for substantially the same employees as
are in the new plan.''.
(b) Small Plans.--Paragraph (3) of section 4006(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)), as amended by section 702(b), is amended--
(1) by striking ``The'' in subparagraph (E)(i) and
inserting ``Except as provided in subparagraph (G), the'',
and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G)(i) In the case of an employer who has 25 or fewer
employees on the first day of the plan year, the additional
premium determined under subparagraph (E) for each
participant shall not exceed $5 multiplied by the number of
participants in the plan as of the close of the preceding
plan year.
``(ii) For purposes of clause (i), whether an employer has
25 or fewer employees on the first day of the plan year is
determined taking into consideration all of the employees of
all members of the contributing sponsor's controlled group.
In the case of a plan maintained by two or more contributing
sponsors, the employees of all contributing sponsors and
their controlled groups shall be aggregated for purposes of
determining whether the 25-or-fewer-employees limitation has
been satisfied.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to plans established after December 31, 2001.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2001.
SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM
OVERPAYMENT REFUNDS.
(a) In General.--Section 4007(b) of the Employment
Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is
amended--
(1) by striking ``(b)'' and inserting ``(b)(1)'', and
(2) by inserting at the end the following new paragraph:
``(2) The corporation is authorized to pay, subject to
regulations prescribed by the corporation, interest on the
amount of any overpayment of premium refunded to a designated
payor. Interest under this paragraph shall be calculated at
the same rate and in the same manner as interest is
calculated for underpayments under paragraph (1).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to interest accruing for periods beginning not
earlier than the date of the enactment of this Act.
SEC. 705. 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--
[[Page H1813]]
(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 new paragraph:
``(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--
(A) in subsection (b)(9), by striking ``as defined in
section 4022(b)(6)'', and
(B) by adding at the end the following new subsection:
``(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)) after
December 31, 2001, and
(B) under section 4042 of such Act (29 U.S.C. 1342) with
respect to which proceedings are instituted by the
corporation after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on January 1, 2002.
SEC. 706. 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 new paragraph:
``(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is 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. 707. 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) in the case of an employee who returns to work for a
former employer after commencement of payment of benefits
under the plan shall--
(A) be made during the first calendar month or payroll
period in which the plan withholds payments, and
(B) if a reduced rate of future benefit accruals will apply
to the returning employee (as of the first date of
participation in the plan by the employee after returning to
work), include a statement that the rate of future benefit
accruals will be reduced, and
(2) in the case of any employee who is not described in
paragraph (1)--
(A) 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
(B) need not include a copy of the relevant plan
provisions.
(b) Effective Date.--The modification made under this
section shall apply to plan years beginning after December
31, 2001.
SEC. 708. STUDIES.
(a) Model Small Employer Group Plans Study.--As soon as
practicable after the date of the enactment of this Act, the
Secretary of Labor, in consultation with the Secretary of the
Treasury, shall conduct a study to determine--
(1) the most appropriate form or forms of--
(A) employee pension benefit plans which would--
(i) be simple in form and easily maintained by multiple
small employers, and
(ii) provide for ready portability of benefits for all
participants and beneficiaries,
(B) alternative arrangements providing comparable benefits
which may be established by employee or employer
associations, and
(C) alternative arrangements providing comparable benefits
to which employees may contribute in a manner independent of
employer sponsorship, and
(2) appropriate methods and strategies for making pension
plan coverage described in paragraph (1) more widely
available to American workers.
(b) Matters to Be Considered.--In conducting the study
under subsection (a), the Secretary of Labor shall consider
the adequacy and availability of existing employee pension
benefit plans and the extent to which existing models may be
modified to be more accessible to both employees and
employers.
(c) Report.--Not later than 18 months after the date of the
enactment of this Act, the Secretary of Labor shall report
the results of the study under subsection (a), together with
the Secretary's recommendations, to the Committee on
Education and the Workforce and the Committee on Ways and
Means of the House of Representatives and the Committee on
Health, Education, Labor, and Pensions and the Committee on
Finance of the Senate. Such recommendations shall include one
or more model plans described in subsection (a)(1)(A) and
model alternative arrangements described in subsections
(a)(1)(B) and (a)(1)(C) which may serve as the basis for
appropriate administrative or legislative action.
(d) Study on Effect of Legislation.--Not later than 5 years
after the date of the enactment of this Act, the Secretary of
Labor shall submit to the Committee on Education and the
Workforce of the House of Representatives and the Committee
on Health, Education, Labor, and Pensions of the Senate a
report on the effect of the provisions of this Act on pension
plan coverage, including any change in--
(1) the extent of pension plan coverage for low and middle-
income workers,
(2) the levels of pension plan benefits generally,
(3) the quality of pension plan coverage generally,
(4) workers' access to and participation in pension plans,
and
(5) retirement security.
TITLE VIII--PLAN AMENDMENTS
SEC. 801. 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) except as provided by the Secretary of the Treasury,
such plan shall not fail to meet the requirements of section
411(d)(6) of the Internal Revenue Code of 1986 or section
204(g) of the Employee Retirement Income Security Act of 1974
by reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this Act, or pursuant
to any regulation issued under this Act; and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2004.
[[Page H1814]]
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 ``2006'' for ``2004''.
(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. Pursuant to House Resolution 127, the
gentleman from Massachusetts (Mr. Neal) and a Member opposed each will
control 30 minutes.
Does the gentleman from Ohio (Mr. Portman) seek to control the time
in opposition to the amendment?
Mr. PORTMAN. I do, Mr. Speaker.
The SPEAKER pro tempore. The gentleman from Ohio (Mr. Portman) will
be recognized.
The Chair recognizes the gentleman from Massachusetts (Mr. Neal) for
30 minutes.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I would like to begin by pointing out that this
amendment is being offered by myself, the gentleman from New York (Mr.
Rangel), the gentleman from New Jersey (Mr. Andrews), and the gentleman
from Massachusetts (Mr. Tierney).
The amendment is comprised of three parts, and is the same as the
amendment I offered in the Committee on Ways and Means last week.
In the last hour, we have really gone through a very helpful debate.
I think it demonstrates that we are not as far apart on this
legislation as some might think.
Even though our differences may not be that large, they remain
substantial for low- and moderate-income workers. As I said earlier, if
we do not deal with the issue of providing direct incentives for small
businesses to offer pension plans and direct incentives for workers to
participate, then we are going to be right back here again in the near
future arguing over these same issues.
While 70.8 percent of workers with adjusted gross incomes between
$75,000 and $100,000 participate in an employer pension plan, only 17.9
percent of those workers whose gross adjusted income is between $10,000
and $15,000 participate.
The current system clearly fails these workers with little or no
disposable income. I do not believe that H.R. 10 in its current form
will achieve much success with these workers, as well. This amendment
deals with these issues by establishing a refundable retirement savings
credit for low- and moderate-income workers. The purpose is to
encourage those who have little if any disposable income to make the
effort to save, or if they can, to save even more. The credit would be
up to 50 percent of annual contributions to a traditional individual
retirement account or to a qualified pension plan like a 401(k),
403(b), or a 457 plan.
It is important to understand that this amendment does not establish
a new savings vehicle. It only establishes an incentive to use current
pension vehicles. The eligible contribution would not exceed $2,000,
thus resulting in a maximum credit of $1,000 when the proposal is fully
phased in. The credit amount phases down as income increases, phasing
out at $75,000 for a married couple.
The two other credits that would be added to the bill would reward
small businesses for establishing new pension plans. Many small
employers would like to establish qualified pension plans for their
employees but they need some help in getting there.
We are all aware of how small employers struggle to attract and
retain quality employees, particularly today. They can be successful in
this effort only if they can compete with large businesses and the
benefits they offer to their employees. Moreover, the 38 million
employees who work in small businesses deserve the same secured
retirement as employees in large businesses. Yet, pension coverage of
this group of workers continues to lag behind the coverage available
for employees of large companies.
In a recent survey conducted by the Employee Benefit Research
Institute, 65 percent of small employers stated that the availability
of tax credits was a significant factor in their decision on whether to
offer a pension plan to their employees, second only to an increase in
business profits.
Sixty-five percent is a most substantial number. Clearly the two
small business credits in the amendment would go a long way to
increasing the number of small business pension plans. The gentleman
from Ohio (Mr. Portman) acknowledged this in the committee debate.
The first small business credit would provide a tax credit for
expenses incurred by small businesses, employers with 100 or fewer
employees, for costs associated with starting up new pension plans.
Under this credit, small employers would be eligible to claim a 3-year
tax credit for an amount equal to 50 percent of administrative and
retirement education expenses incurred as a result of offering a new
qualified pension plan.
Eligible expenses for the credit would be capped at $2,000 for the
first year and $1,000 for the second and third years.
The second small business credit would allow these same employers to
be eligible for a tax credit for employer contributions to a pension
plan. This credit would be equal to 50 percent of the employer
contributions to a qualified retirement plan made on behalf of their
non-highly-compensated employees. Qualifying contributions would be
both non-elected employer contributions and employer matching
contributions, up to a total of 3 percent of compensation for non-
highly-compensated employees.
This is important to hear, Mr. Speaker. The additional cost of this
amendment is $46 billion over 10 years. When coupled with the cost of
H.R. 10, the total cost remains under $100 billion. We have managed to
fit that into our $900 billion tax cut proposal on the Democratic side.
Surely the other side would not be asking too much if they could put
that into the $1.6 trillion tax cut that they have offered. It is
simply today a matter of political will.
I would predict when the legislation comes back from the Senate, it
will involve at least one and perhaps two of these amendments.
In conclusion, let me say what I have said repeatedly, I think the
gentleman from Ohio (Mr. Portman) and the gentleman from Maryland (Mr.
Cardin) did a good job with this legislation. I have supported
expanding IRA limits since the day I arrived in the House 13 years ago,
and along with the gentleman from California (Mr. Thomas), carried the
Roth IRA in the House.
There are many good provisions in this bill. But at the same time, we
have a remarkable opportunity today. With just a couple of small
changes on the edges, which the gentleman from Ohio (Mr. Portman) has
at least grudgingly acknowledged in committee were worthwhile, we could
pass this bill today almost unanimously here.
If we do not accept this challenge today, we are going to be back
here next year and the year after and the year after.
I do not know what is so difficult today about addressing a couple of
small issues that would allow low- and moderate-income Americans who go
to work every day to participate in a good and predictable retirement
savings plan. I know in his heart that the gentleman from Ohio (Mr.
Portman) would really like to do that today. He has that opportunity
with simply a nod to move on his side, and I hope that as this debate
proceeds for the next few minutes we will have a chance to say, look,
there are many portions of this bill that are indeed desirable, but
there are also two small portions of this bill on which we could
improve upon today.
Mr. Speaker, I reserve the balance of my time.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I applaud my friend, the gentleman from Massachusetts,
for his concern about expanding pension coverage to low- and moderate-
income Americans. That is, as he knows, precisely what we are trying to
do in this underlying legislation.
The small changes around the edges that he was just talking about
happen to just about double the cost of the
[[Page H1815]]
bill. The underlying bill is about $52 billion over 10 years, which we
hope to be able to fit into the reduced tax bill number. The amendments
the gentleman is offering through the substitute add another $45
billion, taking it up to $97 billion over 10 years, so it is doubling
the cost. These are not small changes.
In terms of the changes, I do like the start-up credit, which is $177
million over the 10-year period. The other two, the employer credit,
which is $5.4 billion, and the individual credit, $35.5 billion, I have
problems with.
The gentleman mentioned that the Senate is likely to add these. I
think the Senate is likely to do something in terms of the small
business start-up, which is, again, a relatively small part. It is
tinkering around the edges, I believe, in terms of the costs and impact
it will have, but it is important for small business.
But I do not think they are going to do the employer credit or the
individual credit. I say that because legislation that was introduced
on a bipartisan basis in the Senate by the Chair and ranking members of
the Finance Committee did not include a refundable tax credit. It was a
nonrefundable credit at a much lower cost, as a result.
Second, on the merits of this, having a refundable tax credit does
create a new entitlement program. At a time when we are struggling to
try to make the earned income tax credit work in terms of the
compliance costs, and the Treasury Department under the Clinton
administration told us there was a mispayment of about 25 percent under
that program, I think it would be ill advised for us to start a new
entitlement program until we have at least tried some of these other
things that we are talking about under this proposal.
What we are talking about in this proposal is primarily expanding
pension coverage to small- and mid-sized businesses where there is very
little coverage today.
Again, I commend the gentleman for focusing on that, but that is what
we do in our underlying legislation. This is where most of the low- and
moderate-income workers are working today, where the folks are working
who do not have pension coverage. We are trying to do this through the
increased limits in this legislation, through the complexity
provisions, which are very important to get at the costs and burdens.
We know from the surveys that have been done they will help to expand
coverage.
Also, though in terms of the portability provisions, there will be
faster vesting. All of this is going to help precisely the people that
the gentleman's refundable tax credit is aimed at, and without all of
the complexity and all of the compliance problems that are inherent in
that kind of a problem.
Finally, on the business tax credit, which is the third piece of the
gentleman's proposal today, I have some concerns about how that would
work. It does not cover the plans that many small businesses use, the
SIMPLE plan, the SEP plan, in any way. It also does not cover some of
the other plans, the 403(b)s, 457s, and so on. It also would be very
difficult for businesses to administer the way in which this credit is
put together.
The Clinton administration Treasury Department had some of these
changes they wanted to see to our underlying legislation. We thought
they were ill-advised because they went the wrong way, adding more
complexity, more regulation and regulations.
{time} 1345
So I do not think this is the way to do it.
Instead, let us stick to the underlying bill, of which I appreciate
the gentleman's support. It is focused exactly on these workers,
focused on trying to expand the coverage to the small companies.
Remember, only 19 percent of companies with 25 or fewer employees offer
any kind of pension today. Those are the people we are trying to help.
Those are the people we are trying to encourage and incentivize to
offer a plan.
So I hope we can stick to that today, rather than doubling the cost
of the bill with something that is not tested, something that is going
to create a lot more complexity.
Mr. Speaker, I reserve the balance of my time.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself 30 seconds.
That is precisely the point. We can fit $100 billion into a $900
billion tax cut proposal on the Democratic side, and the gentleman from
Ohio (Mr. Portman) has acknowledged they find difficulty in including
it in a $1.6 trillion tax cut, even though, as he has pointed out, and
again I think in a very sincere form, that there is at least part of
this he believes at the end of the day is desirable.
Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr.
Levin).
(Mr. LEVIN asked and was given permission to revise and extend his
remarks.)
Mr. LEVIN. Mr. Speaker, I wanted to join the debate because it is an
important debate. Pension reform and expansion are clearly necessary.
There are some very strong provisions in this bill, and I think we all
appreciate the work of the chief sponsors of this.
I do, though, want to very much rise in support of the amendment of
the gentleman from Massachusetts (Mr. Neal) and address the underlying
reasons for it and to respond to some of the criticisms.
We all agree the savings rate needs to be increased, and I hope we
all agree that we want more and more people into this effort. Two-
thirds of the cost of this bill are the IRA expansion. Two-thirds. I
asked the Joint Tax Committee to put together an analysis of the impact
of this, and they did not have it before; but they have now provided
it. Essentially what they show is that two-thirds, two-thirds, of the
benefit would go to families making $75,000 or more.
So, essentially, we have a bill two-thirds of it IRAs and two-thirds
of the benefit going to families with incomes of $75,000 and more.
Almost half would go to families with incomes of $100,000 or more. And
those are not all rich people. Many of these families, $75,000 or
$100,000, they are hard working. In most cases both husband and wife
are working, and they are earning their income. They are not just
clipping coupons.
But, look, that is the fact; that most of the benefit of most of the
cost of this would go to families making $75,000 and more. And,
essentially, I think this undercuts the notion that this is a bill
aimed at mainly low- and middle-income families. Surely not low-income
families and surely not most middle-income families.
What the gentleman from Massachusetts (Mr. Neal) is suggesting is
that we expand this bill so that we try to bring everybody into the
system, and that is a very good idea. And to suggest that a tax credit
is a bad idea because of the error rate, we have argued this endlessly
within Ways and Means. The EITC error rate has been going down. It is
not clear it is much higher than a lot of other error rates.
And there is the argument that tax credits are suspect. The majority
leader here has proposed a refundable health insurance tax credit. If
it is good enough for health insurance, I would think it is good enough
for a pension program.
So I would hope we would take this seriously and that we would pass
it. At the least, if the majority here is not going to vote for it, is
going to march in lockstep against it, I hope there will be adequate
numbers of people voting for this so we send a message to the Senate
that they should try to do better. We can do better than this.
The strong provisions in this bill can be enhanced by spreading the
net of pension reform and pension participation to millions of other
workers and millions of other families in the United States of America.
That is good public policy. So I would hope we would pass this
amendment as part of this bill which will certainly pass the House.
Mr. PORTER. Mr. Speaker, I yield 3\1/2\ minutes to the gentleman from
Florida (Mr. Shaw), a member of the Committee on Ways and Means,
chairman of the Subcommittee on Social Security.
Mr. SHAW. Mr. Speaker, I thank the gentleman for yielding me this
time.
I think it is important to point out that there is great bipartisan
support for the underlying bill in this Chamber. And although it does
have broad bipartisan support, we have heard a few of our colleagues
say that the proposed reforms in this bill are a giveaway to
[[Page H1816]]
those who are already wealthy; that this bill will make it less likely
rather than more likely that companies will sponsor plans.
For the last 20 years, we have heard that cutbacks in benefits and
contribution limits and so-called top-heavy and other provisions were
necessary to increase plan coverage and benefits for the most
vulnerable employees. So what has happened? Approximately 50 million
Americans now lack private pension coverage, while senior executives
have made increasing use of nonqualified plans.
Since 1985, the number of defined benefit pension plans has dropped
from 114,000 to 45,000. In 1993, the year after Congress reduced the
compensation limit for calculating pension benefits from $235,425 to
$150,000, the number of companies in nonqualified plans tripled from 20
to 67 percent.
Only 20 percent of small businesses with 25 or fewer workers now
offer a retirement plan. Our savings rate is one-half of 1 percent,
which is the lowest level since the Great Depression. Seventy-six
million baby boomers will retire within the next 10 years. But studies
show older baby boomers have less than 40 percent of the savings needed
to avoid a decline in their standard of living after they retire.
Social Security was never designed to be the sole source of
retirement income. It was intended to be one leg of a three-legged
stool that included employer-sponsored retirement plans and individual
savings. This bill will restore the incentive for qualified plans and
increase savings, which will benefit all American workers.
The bill restores the contribution and benefit amounts to what they
would have been had they not been repeatedly cut back. In order for
highly paid employees to take advantage of the higher limits and still
pass the nondiscrimination test, companies will have to provide greater
benefits to all other workers. The bill's simplifications of the top-
heavy and nondiscriminatory rules do not weaken the protection afforded
to our workers.
My colleagues also give little attention to the large number of
measures in the bill that are specifically designed to promote the
retirement security of rank-and-file workers. The bill reduces the
vesting period for employer-matching contributions from 5 to 3 years,
ensuring that amounts are not forfeited when workers change jobs or
leave the workforce for care of their children.
Workers 50 years and older can make additional catch-up contributions
to their retirement plan. The security of the private employer-
sponsored retirement system will be strengthened when all workers,
regardless of income level, share a significant stake in their same
retirement plan. This bill provides positive incentives for employers
to do exactly that.
And I would hope that the gentleman from Massachusetts would review
his speech and review this particular bill when we bring out individual
retirement accounts for American workers as part of Social Security. It
is the key to saving Social Security, and I think the refundable tax
credit going into individual retirement accounts is something I look
forward to the gentleman supporting.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself 30 seconds.
There was no one on this side who said that this was a giveaway to
the rich in the 2 hours of debate that we have been pursuing here. I
think, instead, we suggested it was not a balanced proposal, in the
sense that the very people that the gentleman from Florida (Mr. Shaw)
has referenced here, people that make under $30,000 a year, they are
the ones that depend upon Social Security.
We are never going to have a healthy discussion about Social Security
and its future in this country as long as we leave those people out of
defined pension benefit plans.
Mr. Speaker, I yield 3 minutes to the gentleman from North Dakota
(Mr. Pomeroy), one of the experts in the House on retirement savings
plans, a friend and a member of the Committee on Ways and Means, and a
very competent individual.
Mr. POMEROY. Mr. Speaker, I thank the gentleman for yielding me this
time and for his kind remarks. I believe he has made a significant
contribution to the debate today by offering the substitute, which I
intend to support.
As I said when we considered this last Congress, the problem with
Portman-Cardin is not what is in the bill, the problem is what is left
out. And what is left out is a more meaningful incentive to those who
are having the most difficult time saving, moderate-earning households,
that simply do not have adequate discretionary income. For that reason
we have structured the substitute as an additive proposal. It takes all
of Portman-Cardin and adds this to it.
After all, the last two Congresses have passed a variety of new
incentives for saving for retirement, but have done virtually nothing
for the $50,000 and below household who already had the tax deductible
IRA. I think we ought to look at what is actually happening out there.
In a recent study commissioned by the Consumer Federation of America,
and conducted by Ohio State economist Catherine Montalto, indicates
exactly the problem. Only 44 percent of households in this country are
saving at a rate that will provide them an adequate retirement income.
Not surprisingly, that is differentiated exactly along earnings lines.
Twenty-three percent of those earning between $10,000 and $25,000 have
adequate savings; one out of four, one out of four of those earning
below $25,000. Fifty-four percent of those $50,000 to a $100,000
households have adequate savings; 69 percent of those over $100,000.
Now that tells us that right across the board we have a lot of work
to do, but nowhere do we have more work to do in this than in the
plight of moderate- to middle-earning households. For me, the situation
for this Congress is to basically pay now or pay later. Either we
enhance the ability of these families to accumulate some of their own
assets in retirement savings, help them accumulate assets to pay for
their own retirement income security, or we are going to have to
provide government programs in the future for destitute elderly that
were unable to acquire savings.
Ten percent of those presently eligible are saving in IRAs. Ten
percent. So for us to say, well, now you can save $5,000 as opposed to
$2,000 really may fall short of what they need. If they cannot save
$2,000, let me tell my colleagues, they are not going to save $5,000.
We need to help them save. I believe conceptually the simplest way to
do it on a universal basis is by taking that tax deduction and making a
tax credit.
I would frankly structure it slightly differently than the substitute
puts this provision forward, but I think the substitute offers a way
for us to examine the legitimacy of strengthening savings incentives
for modest-earning households. It is basically market principles. They
need more incentive to save. Let us help them save, as the substitute
does.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Connecticut (Mrs. Johnson), who, as chair of the Subcommittee on
Oversight, was one of the people who helped draft this legislation, and
continues to be very important to focusing this legislation on defined
benefit plans and on small businesses.
{time} 1400
Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the gentleman for
yielding me this time.
Mr. Speaker, I rise in strong support of the underlying bill and in
equally strong opposition to the amendment before us. First of all, the
amendment does not take into account the remarkable effect this bill is
going to have on the availability of pensions to employees across
America. It particularly does not seem to notice that by making pension
plans far simpler to offer to your employees, stripping out a lot of
the regulation, stripping out the cost, many, many employers are going
to be able to offer their employees a defined benefit pension plan.
We have seen a sharp decline in the number of defined benefit pension
plans offered by employers in America in recent years because of the
heavy regulation. They often require no contribution by the employee,
and they guarantee you a benefit when you retire, as opposed to the
defined contribution plans which only guarantee you what benefit your
contribution was able to create.
[[Page H1817]]
Why are we helping low-income people by offering them a defined
contribution plan when by expanding the number of defined benefit
plans, which often do not require any contribution, we are going to
create a far better option for them?
Furthermore, many defined benefit plans also do allow you to
contribute. The very people that they are concerned about, the
amendment is concerned about, the low-income worker who works for a
small business, the person earning $10,000 to $15,000, they are the
people who get the biggest bang from the tax cut. That is why our tax
bill that gives those low-income workers the biggest tax break between
the drop to a 10 percent bracket, the marriage penalty relief, the
child relief, and the bracket drops, these are the very people who are
going to get more dollars and can put those dollars into savings
vehicles.
But if they put them into savings vehicles like a defined benefit
plan, they will get the expander effect of the employer contribution.
So this bill is dynamite for low-income workers and small businesses.
In a country where past pension policy has forced employers to drop
their pensions because the regulations have been so heavy and so
complicated, and the court costs so great, for a country that now has
50 percent of its working people working for employers who do not
provide any pension plan at all for their employees, this bill is an
imperative to pass now in the full form of its underlying legislation.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 2 minutes to the
gentleman from New Jersey (Mr. Andrews), who is the ranking member on
the Subcommittee on Employer-Employee Relations.
(Mr. ANDREWS asked and was given permission to revise and extend his
remarks.)
Mr. ANDREWS. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, I rise in support of this amendment of which I am
pleased to be a cosponsor. I am a strong supporter of the underlying
bill, but I believe this amendment complements the underlying bill in a
very positive way. Seventy-nine percent of working Americans who work
for an employer with 25 or fewer employees do not have a pension.
I think that some of those Americans will be helped by the underlying
bill, but I think those who work in narrow-margin industries, that is,
companies with small profit margins and particularly those people who
work at the entry level, will not be largely helped by the underlying
bill. They will be helped by the substitute by the gentleman from
Massachusetts (Mr. Neal).
This amendment is about the people who wait on tables and work in the
child care centers and work in the retail stores. They are at the
bottom of the pay grade. They are in industries where margins are very
thin, and I believe we can put any amount of tax incentives for an
employer in the bill, and those employees cannot because they cannot
afford to reach pension coverage. A plan that says the government will
match part of the contributions for these employees is one that will
work.
I agree with the gentleman from North Dakota (Mr. Pomeroy). We are
either going to pay now or pay later. People are going to live longer,
their resources are going to be stretched further. If they do not have
private pension coverage, the Treasury will be called upon to meet
those needs in future years. This is a wise amendment that complements
the underlying bill. I urge its adoption.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Brady), a member of the Committee on Ways and Means, who has
taken an active role on this legislation.
Mr. BRADY of Texas. Mr. Speaker, I join others in congratulating the
bipartisan authors of this bill, the gentleman from Ohio (Mr. Portman)
and the gentleman from Maryland (Mr. Cardin), because we make saving so
difficult in this country. Every one of us knows that to have a good,
safe retirement, we have to have a three-legged stool: Social Security
that you can count on, personal savings in the bank, and a retirement
plan at work.
President Bush has signaled today that he is dead serious about
preserving Social Security once and for all. The timing of this bill
could not be better because we are trying to address the other two legs
of that stool: personal savings and retirement plans at work.
Some people call this tax relief. I disagree. I do not know why we
tax people at all for savings. I think we ought to encourage them to
save for their retirement, for education, for college, for health care.
This is merely Washington getting out of the way and allowing people to
put money aside.
I think the original bill is much stronger for small businesses and
for low- and moderate-income savers because of a simple approach. Under
the amendment that is proposed right now, we basically say to small
businesses, if you are eligible under plan A and institute plans B, C
and D, and file under E and F, you may be eligible for a partial tax
credit. In other words, we will pay you to file more paperwork to
endure all of this paperwork.
The Portman plan does the opposite. It says regulation complicates
and frustrates savings.
We are going to remove the regulation. We are going to encourage
small businesses to set up plans for their employees. We know it works
because in 1984 when we started regulating these plans, the number of
savings plans went from 114,000 to 45,000. We drove proven savers out
of the market, and it is time to put those saving plans back into
place. Low- and moderate-income people normally do not have the ability
to save on their own. They save at work.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 3 minutes to the
gentlewoman from Ohio (Mrs. Jones).
Mrs. JONES of Ohio. Mr. Speaker, I thank the gentleman for yielding
me this time.
Mr. Speaker, I want to commend the gentleman from Maryland (Mr.
Cardin) and the gentleman from Ohio (Mr. Portman) for the underlying
bill. I am on record supporting the underlying bill, but I rise in
support of the Democratic substitute because I think it addresses an
area that is not addressed by the underlying bill.
Since I came to Congress, a lot of people say, what are you going to
be remembered for when you leave Congress. One of the things that I
want to be remembered for is helping my constituents and people across
the country develop economic wealth, because I believe economic
empowerment is the tool that is the equalizer for all people in this
country.
If we can give them economic sufficiency, then they can live in
wonderful homes where they can raise their families. If we can give
them economic sufficiency, they can afford to pay the taxes to support
their school systems and feel good about themselves and make a decent
wage and take a vacation once in awhile.
One of the keys to economic wealth development is the ability to
purchase a home. The home becomes the wealth that one generation passes
to the next in a low- or moderate-income family. Another way is a
savings account, and one of the ways that we begin to look at or deal
with low-income families who have attempted to begin the process of
saving is through IDAs, where we match the income, that match the
dollars that they save through saving programs. In Ohio right now, we
have a wonderful program called Cleveland Saves that is being funded by
the Ford Foundation to encourage low- and moderate-income families to
save.
The third way is a retirement plan. It is my belief that the
retirement plan under H.R. 10 does not focus in on the low- and
moderate-income worker, and that the tax cut that is being proposed or
is on the table does not truly benefit the low- and moderate-income
worker. The only way we can assist them in creating their own
retirement plan is through the adoption of the substitute bill that is
being offered by my colleague, the gentleman from Massachusetts (Mr.
Neal).
It is very, very important that we start now to benefit families in
low- and moderate-income areas to build retirement plans so they
understand, as time goes along, they will have something in addition to
Social Security to support their families.
Mr. Speaker, again I say to my colleagues, the gentleman from Ohio
(Mr. Portman) and the gentleman from
[[Page H1818]]
Maryland (Mr. Cardin), thank you for offering this legislation, but
step a little bit to the left or a little bit to the right, whichever
way you choose to express it, and adopt the Democratic substitute on
top of this underlying bill, and then all Americans in this country
will be able to benefit from your proposal.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Minnesota (Mr. Gutknecht).
Mr. GUTKNECHT. Mr. Speaker, I thank the gentleman for yielding me
this time; and it is especially unusual for the gentleman from Ohio
(Mr. Portman) to yield to me because I rise in the uncomfortable
position of opposing both the bill and the substitute, and I would like
to explain why.
I am not an expert on pension policy, but I did serve on the pension
commission in the State of Minnesota, and I think I know a little bit
about pension policy.
Mr. Speaker, virtually everything in this bill is a good provision.
Frankly, I think what the gentleman from Massachusetts (Mr. Neal) is
talking about is something that deserves serious consideration as we
talk about the future of Social Security. The fatal flaw of this bill
is, it fails to deal with one of the most important issues, and that is
a definition of the term ``vested.''
A few minutes ago, the gentlewoman from Connecticut (Mrs. Johnson)
said that she hoped this would mean more companies would be offering
defined benefit programs. I hope that is true. The problem is, even if
they offer those programs, the companies will have the chance to change
those after the plan has started. This has happened to literally
thousands of employees here in the United States.
It happened to many of the people in my district who worked for a
great company, IBM. After they had been vested, IBM changed their
pension plan from a defined benefit plan to a new, convoluted program
that they call a cash balance plan. None of those employees were given
a choice to stay with the plan that they were vested in.
The dictionary defines ``vested'' very clearly. It is law. It is
settled. It is fixed. It is absolute, being without contingency, a
vested right. If we asked every Member of Congress and every American
if that is how they define ``vested,'' that is how we would define it.
But that is not how the law defines it.
That is a fundamental flaw of this legislation. It is a glaring
mistake that this Congress has failed to address. And my colleagues, I
promise, as sure as this is spring back in Minnesota, this is going to
come raining down on this Congress or future Congresses. If we do not
deal with this issue, sooner or later, America is going to have
hundreds of thousands of employees who thought their programs were
vested, and they are going to find out that they were not.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 2 minutes to the
gentleman from Vermont (Mr. Sanders) whose pitched battle with IBM is
on the cutting edge of what the gentleman from Minnesota (Mr.
Gutknecht) just pointed out.
Mr. SANDERS. Mr. Speaker, I thank the gentleman for yielding me this
time, and I want to echo the remarks of the gentleman from Mr.
Minnesota (Mr. Gutknecht).
Mr. Speaker, I think there is a lot to be said for the underlying
bill. I think the Democratic amendment makes the bill stronger, but I
am going to vote against the Republican bill and the Democratic
alternative because in my State and throughout this country, there are
huge numbers of workers who were promised benefits when they signed up
for the job, and then those benefits were taken away from them in the
dead of night when the defined benefits that they had signed on for
were converted into cash balance payments.
I personally regard it as an immoral outrage that IBM, among many
other companies, which has a CEO that has received $175 million in
compensation in a 2-year period, has $500 million in unexercised stock
options, felt it necessary when they had a pension surplus to cut back
on the pension promises made to tens of thousands of their workers, not
to mention the health care promises made to their retirees.
Mr. Speaker, it is my intention to offer a motion to recommit, which
is cosponsored by the gentleman from Minnesota (Mr. Gutknecht), among
others, which basically says that when a company makes an agreement
with a worker and promises defined benefit, that they cannot simply in
the middle of the night change their minds and convert that to a cash
balance payment which could cost those workers up to 50 percent of the
benefits that they were promised.
All over this country there is what I call pension anxiety, and that
is workers who are 50-55 years of age who are wondering whether or not
they will receive the benefits, the retirement benefits, they were
promised. I think they should, and I think it is unfortunate that the
underlying bill and the amendment do not address this important issue.
{time} 1415
Mr. PORTMAN. Mr. Speaker, I yield myself 1 minute just to respond
briefly to the gentleman from Minnesota (Mr. Gutknecht) and the
gentleman from Vermont (Mr. Sanders). I think we will have this on a
motion to recommit as well, but the point ought to be made and made
very clearly that the underlying legislation actually addresses this
issue. It actually moves the ball forward. It provides disclosure. It
provides notification in the case of cash balance conversions. It also,
as compared to last year, actually deals with the issue of early
retirement, so it not only is an improvement from current law, it is an
improvement from last year's bill, partly because of the comments that
were made to me by the gentleman from Minnesota (Mr. Gutknecht), the
gentleman from Vermont (Mr. Sanders), and others. So we do address the
issue, and we do it in a responsible way.
Mr. Speaker, I yield 2 minutes to the gentleman from California (Mr.
Royce).
Mr. ROYCE. Mr. Speaker, I want to begin by thanking the gentleman
from Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin)
for their effective effort to get this bill to the House floor. Let me
just say that it was only a few generations ago that pensions were
almost exclusive to a privileged few in this country. For too many, the
golden years were marked by financial insecurity. Today, the majority
of American workers and their families have the opportunity to spend
their retirement years in relative comfort.
Our private pension system has played a crucial role to accomplish
this turnaround. Clearly, Social Security alone is not enough. The
private pension system is an indispensable part of the retirement
security of American workers. I believe this bill encourages American
workers to start saving for tomorrow today. I think the pension reforms
we are considering will help individuals prepare for a better future. I
also believe that the potential for fraud and abuse with regard to the
substitute proposal is significant. I think it would certainly be very
difficult to administer.
I support the underlying pension reform bill. And I think with that
bill, we are raising the limit on IRA contributions, we have increased
pension portability to allow workers to roll over their pension savings
between plans when they change jobs, we have basically streamlined
rules and regulations to make it easier for small businesses to offer
pensions; and the underlying bill increases protection for workers by
increasing notification and disclosure in the area of cash balance
conversion compared to existing law. I think if all these changes are
enacted, they will provide millions of American workers with much
better tools to prepare for retirement.
Let us help Americans with their retirement security. I am pleased to
be a cosponsor of this legislation. I urge my colleagues to pass H.R.
10 and oppose the substitute.
Mr. PORTMAN. Mr. Speaker, I yield 3 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 thank the gentleman from Ohio for
yielding me this time.
I think, as has been said many times today, this bill is long overdue
and it is a tremendous benefit for the American people. Essentially
what it does and if you ask any American, I know if you ask anybody
back home in Staten Island or Brooklyn, if they are given the
[[Page H1819]]
opportunity to set a little more money aside for their retirement, will
they take advantage of it? This bill does that. This bill for the first
time in years says to that hardworking individual or two, you can take
a little more money and save it for your golden years. Is that not what
we should be trying to do? Should we not be empowering Americans to say
that they should have the freedom to spend a little more money for
their own retirement as they see fit?
We all know that different families have different needs, young, old.
But we also should have a fundamental agreement that when Americans,
when individuals are given the freedom to invest and to save on their
own, we are doing not only them a service but we are doing the entire
Nation a service. On Staten Island, for example, we have a lot of
police officers, firefighters, sanitation workers, a lot of civil
servants, city workers. Right now, if they decide to change careers,
which is their right, they cannot roll over their contributions into
another retirement plan, a 401(k) or an IRA. This bill solves that
problem, giving them more freedom and more flexibility. For the
carpenter, the tradesman, right now he is limited upon retirement with
his benefits. This bill allows him more money. It raises that cap. Is
that not what we should be trying to do?
In short, I credit the gentleman from Ohio and all Members of this
body who support this legislation, because at its core it says to the
American people, we trust you. We want to give you more incentives,
more opportunities and more freedom to set aside your hard-earned money
as you see fit for your retirement. Then you can go off and buy that
second home, invest in your grandchildren's education, buy that second
car but it is up to you.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 30 seconds to the
gentleman from Vermont (Mr. Sanders).
Mr. SANDERS. I thank the gentleman for yielding time.
Mr. Speaker, a moment ago the gentleman from Ohio (Mr. Portman)
indicated that his legislation deals with the fact that millions of
workers have seen reductions in the pensions promised to them by
companies converting from defined benefits to cash balance payments. I
wonder if the gentleman from Ohio can be specific and tell those
millions of workers who were double-crossed by large companies like IBM
how his legislation is going to improve their situation.
Mr. PORTMAN. Mr. Speaker, I yield myself 30 seconds to respond to the
question from the gentleman since he asked for a question on our time.
What I said is accurate which is that this bill does address the
question of cash balance conversions. It does so in three very
important ways: number one, it addresses the issue of disclosure. It
says the disclosure has to be in plain English which is also in their
motion to recommit, I understand. It also addresses the issue of
notification. It makes sure that not only do we have disclosure but it
is notification in advance of what current law requires. It also says,
as compared to last year's legislation, that changes to early
retirement benefits would also have to be disclosed, which is not
current legislation, not even the last year's law. My only point is
that in a responsible way we have tried to address this issue, and we
have done it in a bipartisan manner.
Mr. Speaker, I yield 2 minutes to the gentleman from Illinois (Mr.
Kirk), a new Member of the Congress who has spent a lot of time looking
at these retirement issues.
Mr. KIRK. Mr. Speaker, I rise in support of the majority bill here.
H.R. 10 has a particular provision in it which I strongly support, and,
that is, the catch-up provision for individuals age 50 and above. This
is particularly important for working women. The provision allows women
entering the workforce, presumably after raising children, to make an
additional contribution of up to $5,000 to their IRA or their 401(k)
plan.
Within the next 15 years, more than 76 million baby boomers will
retire. Studies have shown that older baby boomers have less than 40
percent of the savings they will need to maintain their standard of
living in retirement.
For women who have chosen to raise children at home and work
intermittently, their situation is even more dire. The Department of
Labor estimates that less than one in every three women are covered by
a retirement pension plan. These plans are proven to pay out greater
benefits than Social Security, yet they are not readily available to
most women and employees of small businesses. H.R. 10 will allow women
approaching retirement age to save the extra money they need, or to
catch up on their retirement savings lost because of time off from
work. H.R. 10 truly enhances retirement pension fairness for women, an
important fact that is often overlooked in discussions about this
legislation.
H.R. 10 will improve the quality of life for millions of Americans
during their retirement. I urge my colleagues to support these
important modernizations and to oppose the substitute.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 3 minutes to the
gentleman from California (Mr. Becerra), a valued member of the
Committee on Ways and Means.
Mr. BECERRA. Mr. Speaker, I thank the gentleman for yielding time.
Let me begin by complimenting the principal authors of this
legislation. I know that the gentleman from Ohio (Mr. Portman) and the
gentleman from Maryland (Mr. Cardin) have been working for many years
to get us to this point. I want to applaud their efforts to try to
improve the retirement system we have which will allow pensions to be a
more fruitful vehicle for people in this country who work to have a
chance to really live out their retirement in comfort.
I believe that we have reached a new age, though. This is an age
where chances are a teenager has secured a credit card before he or she
has secured a driver's license. With that being said, it seems to me
that we have to do everything we can to make it possible for all
Americans to save and not just to save but to save for their
retirement.
It is time for us to make it possible for all workers in this country
to engage in pension investments. Unfortunately, we are not there yet.
While H.R. 10, I believe, does a tremendous job of improving those
opportunities for workers who currently have access to pensions, I
believe we have to go that extra mile now and talk about a lot of
America's workers, principally low- and moderate-income working
Americans who have not yet had the opportunity to invest in pensions.
It is time for us to do that, because if we do not, we will pay the
price once they retire.
Let us remember that H.R. 10 gives incentives principally through
increases in opportunities to invest, to put more money in, whether it
is your IRA or your 401(k). But if you do not have the money left over
at the end of the year to invest, you cannot take advantage of those
vehicles. It is time for us to give the incentives for lower-income
workers to do exactly that, to say, I am going to save, I am going to
pinch a little bit more because if I do, I am going to get a tax credit
for having done so.
For that small businessman or woman who would love to be able to
offer his or her workers those pension opportunities, if we give them a
credit, the incentive, it is going to cost you a little bit of money
but we are going to give you some of that back because we are going to
give you a tax credit for having participated, what we in essence have
done is said to all Americans, all workers in this country, we want you
to also participate in these savings.
H.R. 10 does a tremendous job of making retirement savings even more
important to the average American who wants to prepare for retirement.
What we do not do through H.R. 10 is go the extra mile and talk to low-
and moderate-income working Americans and say we want you to
participate as well. We need to bring them into the fold. If we do not,
we will pay the price in the end of the game. I think what the
gentleman from Ohio (Mr. Portman) and the gentleman from Maryland (Mr.
Cardin) have done is a tremendous effort. I think if we pass the Neal
substitute, we make this an even better bill and we do it for all
Americans. I urge everyone to vote for the Neal substitute.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I want to start by thanking the gentleman from
California (Mr. Becerra) for his comments about the underlying bill and
the way in which he and other members of our
[[Page H1820]]
committee on the other side of the aisle have worked with us on this
legislation. As I said at the outset, this has been a 4- or 5-year
process, bipartisan from the start.
We have refined it through that process. We believe that this
legislation, the underlying bill, addresses the problem that confronts
us, which is again that half the American workforce does not have that
critical third leg of the retirement savings stool which is employer-
sponsored plans. We also help with regard to personal savings, the
critical second leg of that stool, by expanding IRAs. Finally, as
someone has said earlier today, the President today has indicated his
strong interest in moving forward on that third important leg, Social
Security.
All three are important. What we can do today is make tremendous
progress focusing on where the most potential for gain is, and that is
among our small business employers.
I have talked a little about the substitute today and some of the
concerns I have with it. First is the cost. It almost doubles the size
of the legislation before us. We are trying to keep this a fiscally
conservative bill so that it can be part of any final tax relief
package that goes to the President's desk. Second on the merits, the
refundable tax credit has a number of problems in terms of its
implementation, administerability and this is something that has
happened over the years with the earned income tax credit.
We know from the Treasury Department in the Clinton years that the
mispayment rate is about 25 percent. We do not believe getting into
that kind of a program is necessary, and we think it has a lot of
hazards to it particularly in the area of trying to administer it with
the small business tax credits. I also have some concerns about the way
in which it is drafted. It does not cover some of the plans that most
small businesses use. And finally it adds some new restrictions to
small businesses that we do not think are important, in fact go the
wrong way in terms of loosening up the requirements and letting small
business offer more of these plans to their workers.
{time} 1430
Finally, I will say that the legislation, the underlying legislation,
targets precisely those people that the gentleman from Massachusetts
(Mr. Neal), in a good faith effort, is attempting to target in this
substitute.
Let me be more specific. Again, in the area of small business, we
only have 19 percent of companies with 25 or fewer employees offering
any kind of pension at all today. Those are the very people who we are
targeting by, yes, lessening the restrictions, the costs, the burdens,
the liabilities in these plans, by directly giving the people who make
the decisions in these plans more incentives to offer the plans by
increased contributions. This is the whole focus of the legislation.
Let me give some very interesting statistics. I have heard here today
how low-income workers are not going to participate and so on. If an
employer offers a plan, people will participate. If they build it, they
will come. Among people who make $20,000 to $39,000 a year, 85 percent
participate when an employer offers a plan, even a SIMPLE plan, a SEP
plan, the most simple of plans. A 401(k), it is even more than that.
Among people who make less than $20,000 a year, 68 percent, Mr.
Speaker, over two-thirds of those people participate when an employer
offers a plan.
These statistics are from the Congressional Research Service, by the
way. This is not from even the Committee on Ways and Means, much less
the Republican side. This is unbiased information that shows that the
great potential here is to get these small business employers in plans.
That is what we do. We do it through a number of different ways that I
have talked about, but we also help with regard to vesting, taking it
from 5 years to 3 years because these very workers tend to move jobs
more quickly, more often. We do it by dramatically improving the idea
that someone ought to offer a defined benefit plan. This is where the
employee makes no contribution. So the low-income employees who are in
companies that are now going to offer defined benefit plans, thanks to
this legislation, are going to benefit directly.
We do it by a very interesting change in the law that says there
should no longer be an arbitrary limit, that 25 percent of your
compensation is all that can be put into a pension. Who does that hurt?
That hurts the low- and moderate-income worker; well-meaning
restriction put in place by this Congress. It does not make any sense
because it actually erodes the ability of the low-income worker and the
moderate-income worker to put what they want to put aside for their
retirement. We eliminate the 25 percent of comp rule altogether.
We also have increased portability, as I said earlier, which will
extremely focus on the folks who are moving around a lot, folks who now
cash out their plan because when they move from job to job, say from a
schoolteacher to a job in the private sector, they end up with two
plans and most of those people actually cash out. We are now saying
those plans can come together in a seamless way.
The point, Mr. Speaker, is this: the underlying legislation addresses
the problem in the substitute. It addresses it in a conservative way in
terms of the fiscal impact. It addresses it in a way that directly
relates to the existing problem, what we know about it, and it has
been, as I said, over the last 4 or 5 years an entirely bipartisan
effort, a comprehensive look at our problems and the best ways to
address them.
I urge my colleagues to vote, therefore, against the substitute and
support the underlying legislation.
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, at this time I would close on our side. I want to thank
the gentleman from Ohio (Mr. Portman) for the quality of the debate
that has taken place here today and also to thank the gentleman from
New York (Mr. Rangel) and the gentleman from California (Mr. Thomas)
because the debate in committee I thought was good as well. I also
appreciate the fact that the gentleman from Ohio (Mr. Portman) said
just a few moments ago that he had honest information that came from
the Congressional Research Bureau, that the information did not come
from the Republican side or it did not come from the Committee on Ways
and Means. So we do appreciate that statement that the gentleman was
able to offer for us.
This has been a good debate, and it has been legitimate. There is a
sincere difference of opinion here on how to proceed. I have
acknowledged time and again that I believe that the underlying support
for this bill is indicative of the fact that it does address many of
the problems that we have spoken to in committee during the last few
years.
The key question that we face today, Mr. Speaker, is essentially
this: How do we get low- and moderate-income workers to be full
participants in the private retirement system of this country? We must
help those who are not covered by a pension plan or who are covered by
a pension plan but do not participate, or those who simply cannot put
enough money away in their retirement plan, although they are trying
very hard to make modest contributions.
I submit that H.R. 10 as currently constructed really does not
address those issues, although it does solve a number of other problems
in our pension system. I believe the issue of low- and moderate-income
workers needs to be faced this year, or surely we are going to be back
here very soon attempting to do something. Why not do it today?
I do not think the cost is very great given the size of the tax bills
both Democrats and Republicans are talking about, and I do not believe
that there will be a great deal of administrative complexity
surrounding the retirement saving account proposals. Workers know how
much they put into their pension plans, and there is a paper trail that
everybody can easily check, just like every other line on our income
tax forms. Pension contributions are a document that on a taxpayer's W-
2 form right now, contributions under my RSA proposal, would receive
the same scrutiny and treatment.
H.R. 10 increases contribution limits on individual retirement
accounts and on qualified pension plans in hopes that business owners
will bring other
[[Page H1821]]
employees along as they take advantage of these new provisions. The
gentleman from California (Mr. Thomas) and I pursued this last year,
the Roth IRA. I do not object to that at all, but the underlying tone
of this debate today is, maybe so but maybe not so as well. Either way,
it simply makes sense to give small business owners a direct incentive
to offer pension plans to their employees.
Tax credits to cover the part of administrative costs of opening up a
new pension plan and tax credits to help employers with the cost of
making contributions on behalf of their employees in the early years
simply makes very good sense.
In fact, it makes so much sense that these issues are going to be in
the conference report one way or another.
I would urge us today to do it right now in the next half hour to 45
minutes. I hope my colleagues will support the substitute. It is
anything but partisan. It speaks to a legitimate interest that we all
have, and that is how do we get low- and moderate-income workers into a
bona fide retirement plan? The proposal before us is a sound one. With
this substitute, we can improve upon the work of the gentleman from
Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin). I
would ask a favorable consideration at the right time.
Mr. Speaker, I yield back the balance of my time.
Mr. PORTMAN. Mr. Speaker, I would like to commend the gentleman from
Massachusetts (Mr. Neal) for a good debate here on the floor, and I
yield the remainder of our time to the distinguished gentleman from
Texas (Mr. Armey), the majority leader. There is no Member of Congress
in leadership or otherwise, Mr. Speaker, who is more committed to
passage of this legislation and has been more helpful to it than the
gentleman from Texas (Mr. Armey).
The SPEAKER pro tempore (Mr. Quinn). The gentleman from Texas (Mr.
Armey), the majority leader, is recognized for 3 minutes.
Mr. ARMEY. Mr. Speaker, I thank the gentleman from Ohio (Mr. Portman)
for yielding me this time, and I thank the gentleman from Massachusetts
(Mr. Neal) for his comments.
Mr. Speaker, I would have and had planned to be here to speak in the
general debate on the underlying bill but was called to the White House
to discuss the overall budget circumstances, the overall tax bill. So
if I may just take a moment to apologize to the gentleman from
Massachusetts (Mr. Neal) for speaking about the underlying bill during
time on his substitute.
At the White House, of course, we are very excited and enthusiastic
about the possibility of completing the budget, which we may expect to
see on the floor tomorrow, and then subsequently to move forward and
talk about the reduction in taxes that we have available for the
American people within that some $1.3 trillion over the next 10 years.
As I approached that discussion, I looked at all the things that we
are trying to accomplish in tax reduction, and the fact of the matter
is we have so much to do and so little room within $1.3 trillion to
accomplish it all. Certainly we want to set some things right, end the
marriage penalty and the death taxes; reduce rates across the board on
all taxpayers who are overtaxed.
I was acutely aware that one of my personal objectives, my second
highest priority for what I would expect to be in that package, is this
exact bill. I wanted to thank the gentleman from Ohio (Mr. Portman) for
bringing this bill forward, as he has remained faithful to it.
Why do I feel so strongly about this? Because like the other things
we try to do, it speaks to the heart and the objectives and the hopes
and the dreams of the American family. The American working man and
woman get a bum rap every now and then from the pundits, the
commentators. All too often I hear that America is a Nation of people
that are poor savers. That is not fair. That is not right. We are a
Nation of people that understand our hopes and dreams for a lifetime,
and we understand that in our younger working years a very big part of
what we may do then and now is to care for what we will be able to have
as resources in our older years and, therefore, saving is important to
us, but we struggle. We struggle in all those younger years when we
have our young children to raise and all the expenses and all the
things we would like to accomplish, in the building of a home,
sometimes the building of a business, for some opportunity to save,
against the fact that all too often we are asked to save after-tax
dollars. What this bill is doing to some extent is saying, let us get
the Government out of the way. Remove the Government from between a
person and their dream by giving them an enhanced opportunity to save
tax-exempt dollars in the current time period and catch up with that
later but now to get that money forward.
So the first reason I like this bill is it enhances our opportunity
for saving, first by expanding the opportunity to take tax-exempt
dollars to our savings accounts. It also enhances our opportunity by
removing government red tape and giving more institutions, more small
businesses in particular, more opportunity to offer savings as an
option at the world of work for these men and women.
Yes, it increases the dollars. It expands the opportunity by dealing
with those spouses in America, most of whom are women, who choose to
make their living for their family at home, where they specialize in
what I like to call the things one does for love and their pay is not
there in the form of a paycheck, who are today, under today's laws,
foreclosed from equal access to savings opportunity with women who
choose to work outside the home.
It should be only fair that we give everybody an equal opportunity of
this chance to save for their retirement years, irrespective of how
they make their living for their family, outside the house doing, of
course, important things, or back home and doing at least what we would
have to recognize as the more heartwarming things, if not indeed the
more important things.
Then the final thing that I like about this, especially in today's
world of work, where we have so much mobility, is the opportunity for
one to feel free to move from this job to a better job, from this
employer to a better employer, to a new opportunity and take their
pension with them. This portability feature is important. So this is a
good bill.
There are a couple of problems I have with the substitute. I will
just mention them: one, as soon as one moves from a tax exemption to a
tax credit, one deals the Government back in. What we are trying to do
is get the Government of the United States out from between the
American citizen and their savings hopes. As soon as the Government is
back in, the Government will reintroduce its red tape; and we will be
back to where we were with a complicated system of government
regulations.
The other is the cost. I am committed, with my highest sense of
priority, to not only passing this bill today but to seeing this bill
included in the reconciliation package that will result in real tax
enacted in law signed by the President in the next few weeks. It is
going to be tough enough for me to say to everybody with all their
other priorities, move over and let Portman-Cardin have their place in
here. It is just, unfortunately, not something we could do if it was
carrying that larger price tag.
So let us recognize we have a good effort here, an effort that is
doable and when it is doable for us to accomplish the right thing to do
for the good and true working men and women of this country, to help
them on their own terms with their own resources fulfill their own
dreams. We ought to do it. So I would ask my colleagues, please, vote
against the substitute. Vote for the bill, and let us get about the
business of making more savings opportunities more richly available for
more working men and women in this country.
Mr. HEFLEY. Mr. Speaker, I am opposed to the Substitute Amendment.
Americans should be allowed to prepare for their own retirement and
should be encouraged to do so. The national savings rate is at an all
time low. We must improve our retirement plans so that Americans may
take full advantage of the opportunities that they provide.
H.R. 10 expands and strengthens our nation's private retirement
savings system, making it easier for Americans to save. The Substitute
only creates a costly new entitlement program. The Substitute Amendment
adds
[[Page H1822]]
three new tax credits to H.R. 10, which only complicate the Tax Code. A
new refundable tax credit for savers, as proposed in the Substitute,
would be difficult to monitor. Also, the Substitute includes new Small
Business Tax Credits. Employers could only claim these credits for
three years, reducing their value as incentives to start and maintain
plans. H.R. 10 already helps small businesses by reducing
administrative burdens.
H.R. 10 simplifies the administrative rules that apply to retirement
plans. The Substitute Amendment only complicates the rules. H.R. 10
encourages individual retirement savings by providing greater pension
simplification and increased savings opportunities. For these reasons
and more, I encourage my colleagues to support H.R. 10 and oppose this
Amendment.
{time} 1445
The SPEAKER pro tempore (Mr. Quinn). Pursuant to House Resolution
127, the previous question is ordered on the bill, as amended, and on
the amendment in the nature of a substitute offered by the gentleman
from Massachusetts (Mr. Neal).
The question is on the amendment in the nature of a substitute
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 207,
nays 223, not voting 1, as follows:
[Roll No. 94]
YEAS--207
Abercrombie
Ackerman
Allen
Andrews
Baca
Baird
Baldacci
Baldwin
Barcia
Barrett
Becerra
Bentsen
Berkley
Berman
Berry
Bishop
Blagojevich
Blumenauer
Bonior
Borski
Boswell
Boucher
Boyd
Brady (PA)
Brown (FL)
Brown (OH)
Capps
Capuano
Cardin
Carson (IN)
Carson (OK)
Clay
Clayton
Clement
Clyburn
Condit
Conyers
Costello
Coyne
Cramer
Crowley
Cummings
Davis (CA)
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Dooley
Doyle
Edwards
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank
Frost
Gephardt
Gonzalez
Gordon
Green (TX)
Gutierrez
Hall (OH)
Hall (TX)
Harman
Hastings (FL)
Hill
Hilliard
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hooley
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind (WI)
Kleczka
Kucinich
LaFalce
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lucas (KY)
Luther
Maloney (CT)
Maloney (NY)
Markey
Mascara
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McIntyre
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller, George
Mink
Mollohan
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Phelps
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rivers
Rodriguez
Roemer
Ross
Rothman
Roybal-Allard
Rush
Sabo
Sanchez
Sandlin
Sawyer
Schakowsky
Schiff
Scott
Serrano
Sherman
Shows
Skelton
Slaughter
Smith (WA)
Snyder
Solis
Spratt
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
Woolsey
Wu
Wynn
NAYS--223
Aderholt
Akin
Armey
Bachus
Baker
Ballenger
Barr
Bartlett
Barton
Bass
Bereuter
Biggert
Bilirakis
Blunt
Boehlert
Boehner
Bonilla
Bono
Brady (TX)
Brown (SC)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Cannon
Cantor
Capito
Castle
Chabot
Chambliss
Coble
Collins
Combest
Cooksey
Cox
Crane
Crenshaw
Cubin
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
Deal
DeLay
DeMint
Diaz-Balart
Doolittle
Dreier
Duncan
Dunn
Ehlers
Ehrlich
Emerson
English
Everett
Ferguson
Flake
Fletcher
Foley
Fossella
Frelinghuysen
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Goss
Graham
Granger
Graves
Green (WI)
Greenwood
Grucci
Gutknecht
Hansen
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hilleary
Hobson
Hoekstra
Horn
Hostettler
Houghton
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Issa
Istook
Jenkins
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kerns
King (NY)
Kingston
Kirk
Knollenberg
Kolbe
LaHood
Largent
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (OK)
Manzullo
McCrery
McHugh
McInnis
McKeon
Mica
Miller (FL)
Miller, Gary
Moran (KS)
Morella
Myrick
Nethercutt
Ney
Northup
Norwood
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Reynolds
Riley
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Roukema
Royce
Ryan (WI)
Ryun (KS)
Sanders
Saxton
Scarborough
Schaffer
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Simmons
Simpson
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Spence
Stearns
Stump
Sununu
Sweeney
Tancredo
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Thune
Tiahrt
Tiberi
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--1
Moakley
{time} 1506
Messrs. FOLEY, FRELINGHUYSEN, KING, TOM DAVIS of Virginia, TIBERI,
GREENWOOD, and SAXTON changed their vote from ``yea'' to ``nay.''
Mr. MOORE and Ms. HARMAN changed their vote from ``nay'' to ``yea''.
So the amendment in the nature of a substitute was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore (Mr. Quinn). 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.
The SPEAKER pro tempore. The question is on the passage of the bill.
Motion to Recommit Offered by Mr. Sanders
Mr. SANDERS. Mr. Speaker, I offer a motion to recommit with
instructions.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. SANDERS. I am opposed to the bill in its present form, Mr.
Speaker.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Mr. Sanders of Vermont moves to recommit the bill (H.R. 10)
to the Committee on Education and the Workforce and the
Committee on Ways and Means with instructions to report the
same back to the House forthwith with the following
amendment:
Strike section 504 and insert the following new section:
SEC. 504. TREATMENT OF PLAN AMENDMENTS SIGNIFICANTLY REDUCING
FUTURE BENEFIT ACCRUALS.
(a) Notice Requirements for Defined Benefit Plans of 100 or
More Participants.--
(1) Plan requirement.--Section 401(a) of the Internal
Revenue Code of 1986 (relating to qualified pension, profit-
sharing, and stock bonus plans) is amended by inserting after
paragraph (34) the following new paragraph:
``(35) Notice requirements for defined benefit plans of 100
or more participants significantly reducing future benefit
accruals.--
``(A) In general.--If a large defined benefit plan adopts
an amendment which has the effect of significantly reducing
the rate of future benefit accrual of 1 or more participants,
a trust which is part of such plan shall not constitute a
qualified trust under this section unless, after adoption of
such amendment and not less than 45 days before its effective
date, the plan administrator provides--
``(i) a written statement of benefit change described in
subparagraph (B) to each applicable individual, and
[[Page H1823]]
``(ii) a written notice setting forth the plan amendment
and its effective date to each employee organization
representing participants in the plan.
Any such notice may be provided to a person designated, in
writing, by the person to which it would otherwise be
provided. The plan administrator shall not be treated as
failing to meet the requirements of this subparagraph merely
because the statement or notice is provided before the
adoption of the plan amendment if no material modification of
the amendment occurs before the amendment is adopted.
``(B) Statement of benefit change.--A statement of benefit
change described in this subparagraph shall--
``(i) be written in a manner calculated to be understood by
the average plan participant, and
``(ii) include the information described in subparagraph
(C).
``(C) Information contained in statement of benefit
change.--The information described in this subparagraph
includes the following:
``(i) Notice setting forth the plan amendment and its
effective date.
``(ii) A comparison of the following amounts under the plan
with respect to an applicable individual, determined both
with and without regard to the plan amendment:
``(I) The accrued benefit and the present value of the
accrued benefit as of the effective date.
``(II) The projected accrued benefit and the projected
present value of the accrued benefit as of the date which is
3 years, 5 years, and 10 years from the effective date and as
of the normal retirement age.
``(iii) A table of all annuity factors used to calculate
benefits under the plan, presented in the form provided in
section 72 and the regulations thereunder.
Benefits described in clause (ii) shall be stated separately
and shall be calculated by using the applicable mortality
table and the applicable interest rate under section
417(e)(3)(A).
``(D) Large defined benefit plan; applicable individual.--
For purposes of this paragraph--
``(i) Large defined benefit plan.--The term `large defined
benefit plan' means any defined benefit plan which had 100 or
more participants who had accrued a benefit 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.
``(ii) Applicable individual.--The term `applicable
individual' means--
``(I) each participant in the plan, and
``(II) each 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)).
``(E) Accrued benefit; projected retirement benefit.--For
purposes of this paragraph--
``(i) Present value of accrued benefit.--The present value
of an accrued benefit of any applicable individual shall be
calculated as if the accrued benefit were in the form of a
single life annuity commencing at the participant's normal
retirement age (and by taking into account any early
retirement subsidy).
``(ii) Projected accrued benefit.--
``(I) In general.--The projected accrued benefit of any
applicable individual shall be calculated as if the benefit
were payable in the form of a single life annuity commencing
at the participant's normal retirement age (and by taking
into account any early retirement subsidy).
``(II) Compensation and other assumptions.--Such benefit
shall be calculated by assuming that compensation and all
other benefit factors would increase for each plan year
beginning after the effective date of the plan amendment at a
rate equal to the median average of the CPI increase
percentage (as defined in section 215(i) of the Social
Security Act) for the 5 calendar years immediately preceding
the calendar year before the calendar year in which such
effective date occurs.
``(III) Benefit factors.--For purposes of subclause (II),
the term `benefit factors' means social security benefits and
all other relevant factors under section 411(b)(1)(A) used to
compute benefits under the plan which had increased from the
2d plan year preceding the plan year in which the effective
date of the plan amendment occurs to the 1st such preceding
plan year.
``(iii) Normal retirement age.--The term `normal retirement
age' means the later of--
``(I) the date determined under section 411(a)(8), or
``(II) the date a plan participant attains age 62.''.
(2) Amendments to ERISA.--
(A) Benefit statement requirement.--Section 204(h) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1054(h)) is amended by adding at the end the following new
paragraphs:
``(3)(A) If paragraph (1) applies to the adoption of a plan
amendment by a large defined benefit plan, the plan
administrator shall, after adoption of such amendment and not
less than 45 days before its effective date, provide with the
notice under paragraph (1) a written statement of benefit
change described in subparagraph (B) to each applicable
individual.
``(B) A statement of benefit change described in this
subparagraph shall--
``(i) be written in a manner calculated to be understood by
the average plan participant, and
``(ii) include the information described in subparagraph
(C).
``(C) The information described in this subparagraph
includes the following:
``(i) A comparison of the following amounts under the plan
with respect to an applicable individual, determined both
with and without regard to the plan amendment:
``(I) The accrued benefit and the present value of the
accrued benefit as of the effective date.
``(II) The projected accrued benefit and the projected
present value of the accrued benefit as of the date which is
3 years, 5 years, and 10 years from the effective date and as
of the normal retirement age.
``(ii) A table of all annuity factors used to calculate
benefits under the plan, presented in the form provided in
section 72 of the Internal Revenue Code of 1986 and the
regulations thereunder.
Benefits described in clause (i) shall be stated separately
and shall be calculated by using the applicable mortality
table and the applicable interest rate under section
417(e)(3)(A) of such Code.
``(D) For purposes of this paragraph--
``(i) The term `large defined benefit plan' means any
defined benefit plan which had 100 or more participants who
had accrued a benefit 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.
``(ii) The term `applicable individual' means an individual
described in subparagraph (A) or (B) of paragraph (1).
``(E) For purposes of this paragraph--
``(i) The present value of an accrued benefit of any
applicable individual shall be calculated as if the accrued
benefit were in the form of a single life annuity commencing
at the participant's normal retirement age (and by taking
into account any early retirement subsidy).
``(ii)(I) The projected accrued benefit of any applicable
individual shall be calculated as if the benefit were payable
in the form of a single life annuity commencing at the
participant's normal retirement age (and by taking into
account any early retirement subsidy).
``(II) Such benefit shall be calculated by assuming that
compensation and all other benefit factors would increase for
each plan year beginning after the effective date of the plan
amendment at a rate equal to the median average of the CPI
increase percentage (as defined in section 215(i) of the
Social Security Act) for the 5 calendar years immediately
preceding the calendar year before the calendar year in which
such effective date occurs.
``(III) For purposes of subclause (II), the term `benefit
factors' means social security benefits and all other
relevant factors under section 204(b)(1)(A) used to compute
benefits under the plan which had increased from the 2d plan
year preceding the plan year in which the effective date of
the plan amendment occurs to the 1st such preceding plan
year.
``(iii) The term `normal retirement age' means the later
of--
``(I) the date determined under section 3(24), or
``(II) the date a plan participant attains age 62.
``(4) A plan administrator shall not be treated as failing
to meet the requirements of this subsection merely because
the notice or statement is provided before the adoption of
the plan amendment if no material modification of the
amendment occurs before the amendment is adopted.''.
(B) Conforming amendment.--Section 204(h)(1) of such Act
(29 U.S.C. 1054(h)(1)) is amended by inserting ``(including
any written statement of benefit change if required by
paragraph (3))'' after ``written notice''.
(3) Effective dates.--
(A) In general.--The amendments made by this subsection
shall apply to plan amendments taking effect in plan years
beginning after December 31, 1998.
(B) Special rule.--The period for providing any notice
required by the amendments made by this subsection shall not
end before the date which is 3 months after the date of the
enactment of this Act.
(b) Age-Based Reductions in the Rate at Which Benefits
Accrue under a Cash Balance Plan Violate Age Discrimination
Rule.--
(1) Directive.--The Secretary of the Treasury shall apply
section 411(b)(1)(H) of the Internal Revenue Code of 1986
without regard to the portion of the preamble to Treasury
Decision 8360 (56 Fed. Reg. 47524-47603, September 19, 1991)
which relates to the allocation of interest adjustments
through normal retirement age under a cash balance plan, as
such preamble is and has been since its adoption without the
force of law.
(2) Safe harbor if notice and election to continue benefit
accruals under former defined benefit plan instead of under
cash balance plan.--
(A) Amendment to internal revenue code.--Paragraph (1) of
section 411(b) of the Internal Revenue Code of 1986 (relating
to defined benefit plans) is amended by adding at the end the
following new subparagraph:
``(I) Election to continue benefit accruals under former
defined benefit plan instead of under cash balance plan.--
[[Page H1824]]
``(i) In general.--A large defined benefit plan that adopts
an amendment which results in such plan becoming a cash
balance plan shall be treated as not meeting the requirements
of this paragraph unless such plan provides each participant
with--
``(I) notice and a written statement of benefit change
which meets the requirements of section 401(a)(35), and
``(II) an election to continue to accrue benefits under
such plan, determined under the terms of such plan as in
effect immediately before the effective date of such plan
amendment.
``(ii) Protected accrued benefit.--For purposes of clause
(i), an accrued benefit shall include any early retirement
benefit or retirement-type subsidy (within the meaning of
subsection (d)(6)(B)(i)), but only with respect to a
participant who satisfies (either before or after the
effective date of the amendment) the conditions for the
benefit or subsidy under the terms of the plan as in effect
immediately before such date.
``(iii) Timing of election.--Except as provided in
regulations, the election required by clause (i)(II) shall be
provided within a reasonable time before the effective date
of the amendment resulting in the plan becoming a cash
balance plan.
``(iv) Cash balance plan.--For purposes of this paragraph,
the term `cash balance plan' means a defined benefit plan
under which the rate of benefit accrual of any 1 participant
for a year of service is reduced as the years of service of
such participant increase.''.
(B) Amendment to erisa.--Section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is
amended by adding at the end the following new paragraph:
``(4)(A) For purposes of paragraph (1), in the case of a
plan amendment adopted by a large defined benefit plan (as
defined in subsection (h)(3)) which results in such plan
becoming a cash balance plan, such defined benefit plan shall
be treated as not satisfying the requirements of this section
unless such plan provides each participant with--
``(i) notice and a written statement of benefit change
which meets the requirements of subsection (h)(3), and
``(ii) an election to continue to accrue benefits under
such plan, determined under the terms of such plan as in
effect immediately before the effective date of such plan
amendment.
``(B) For purposes of subparagraph (A), an accrued benefit
shall include any early retirement benefit or retirement-type
subsidy (within the meaning of paragraph (2)(A)), but only
with respect to a participant who satisfies (either before or
after the effective date of the amendment) the conditions for
the benefit or subsidy under the terms of the plan as in
effect immediately before such date.
``(C) Except as provided in regulations, the election
required by subparagraph (A)(ii) shall be provided within a
reasonable time before the effective date of the amendment
resulting in the plan becoming a cash balance plan.
``(D) For purposes of this paragraph, the term `cash
balance plan' means a defined benefit plan under which the
rate of benefit accrual of any 1 participant for a year of
service is reduced as the years of service of such
participant increase.''.
(3) Excise tax on failure to offer election.--
(A) In general.--Chapter 43 of subtitle D of the Internal
Revenue Code of 1986 (relating to qualified pension, etc.,
plans) is amended by adding at the end the following new
section:
``SEC. 4980F. FAILURE TO OFFER ELECTION TO CONTINUE BENEFIT
ACCRUALS UNDER FORMER DEFINED BENEFIT PLAN IN
EVENT OF SIGNIFICANT REDUCTIONS IN FUTURE
BENEFIT ACCRUALS.
``(a) Imposition of Tax.--There is hereby imposed a tax on
the failure of any applicable pension plan to meet the
requirements of subsection (d).
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) shall be 50 percent of the amount of the
excess pension assets in such plan, determined as of the
effective date of the amendment which has the effect of
significantly reducing the rate of future benefit accrual of
1 or more participants.
``(2) Excess pension assets.--For purposes of paragraph
(1), the term `excess pension assets' has the meaning given
to such term by section 420(e)(2).
``(c) 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.
For purposes of the preceding sentence, all multiemployer
plans of which the same trust forms a part shall be treated
as 1 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.
``(d) Election To Continue Benefit Accruals Under Former
Defined Benefit Plan In Event of Significant Reductions in
Future Benefit Accruals.--In the case that an applicable
pension plan adopts an amendment which has the effect of
significantly reducing the rate of future benefit accrual of
1 or more participants, the requirements of this subsection
are met if the plan administrator provides each participant
who has a nonforfeitable right to 100 percent of his accrued
benefits with--
``(1) notice and a written statement of benefit change
which meets the requirements of section 401(a)(35), and
``(2) an election to continue to accrue benefits under such
plan, determined under the terms of such plan as in effect
immediately before the effective date of such plan amendment.
``(e) Timing of Election.--Except as provided in
regulations, the election required by subsection (d) shall be
provided within a reasonable time before the effective date
of such amendment.
``(f) Protected Accrued Benefit.--For purposes of this
section, an accrued benefit shall include any early
retirement benefit or retirement-type subsidy (within the
meaning of section 411(d)(6)(B)(i)), but only with respect to
a participant who satisfies (either before or after the
effective date of the amendment) the conditions for the
benefit or subsidy under the terms of the plan as in effect
immediately before such date.
``(g) Applicable Pension Plan.--For purposes of this
section, the term `applicable pension plan' means a defined
benefit plan that is subject to the notice requirements of
section 401(a)(35).''.
(B) Clerical amendment.--The table of sections for chapter
43 of subtitle D of such Code is amended by adding at the end
the following new item:
``Sec. 4980F. Failure to offer election to continue benefit accruals
under former defined benefit plan in event of significant
reductions in future benefit accruals.''.
(4) Effective dates.--
(A) In general.--The amendments made by this subsection
shall apply to plans and plan amendments taking effect after
December 31, 1998.
(B) Special rule.--The period for providing any notice
required by the amendments made by this subsection shall not
end before the date which is 3 months after the date of the
enactment of this Act.
(c) Prevention of Wearing Away of Employee's Accrued
Benefit.--
(1) Amendment to internal revenue code.--Section 411(d)(6)
of the Internal Revenue Code of 1986 (relating to accrued
benefit may not be decreased by amendment) is amended by
adding at the end the following new subparagraph:
``(D) Treatment of plan amendments wearing away accrued
benefit.--
``(i) In general.--For purposes of subparagraph (A), a plan
amendment adopted by a large defined benefit plan shall be
treated as reducing accrued benefits of a participant if,
under the terms of the plan after the adoption of the
amendment, the accrued benefit of the participant may at any
time be less than the sum of--
``(I) the participant's accrued benefit for years of
service before the effective date of the amendment,
determined under the terms of the plan as in effect
immediately before the effective date, plus
``(II) the participant's accrued benefit determined under
the formula applicable to benefit accruals under the current
plan as applied to years of service after such effective
date.
``(ii) Large defined benefit plan.--For purposes of this
subparagraph, the term `large defined benefit plan' means any
defined benefit plan which had 100 or more participants who
had accrued a benefit 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.
``(iii) Protected accrued benefit.--For purposes of this
subparagraph, an accrued benefit shall include any early
retirement benefit or retirement-type subsidy (within the
meaning of subparagraph (B)(i)), but only with respect to a
participant who satisfies (either before or after the
effective date of the amendment) the conditions for the
benefit or subsidy under the terms of the plan as in effect
immediately before such date.''.
(2) Amendment of erisa.--Section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is
amended by adding at the end the following new paragraph:
``(5)(A) For purposes of paragraph (1), a plan amendment
adopted by a large defined benefit plan shall be treated as
reducing accrued benefits of a participant if, under the
terms of the plan after the adoption of the amendment, the
accrued benefit of the participant may at any time be less
than the sum of--
``(i) the participant's accrued benefit for years of
service before the effective date of the amendment,
determined under the terms of the plan as in effect
immediately before the effective date, plus
``(ii) the participant's accrued benefit determined under
the formula applicable to benefit accruals under the current
plan as applied to years of service after such effective
date.
``(B) For purposes of this paragraph, the term `large
defined benefit plan' means any defined benefit plan which
had 100 or more participants who had accrued a benefit 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.
[[Page H1825]]
``(C) For purposes of this paragraph, an accrued benefit
shall include any early retirement benefit or retirement-type
subsidy (within the meaning of paragraph (2)(A)), but only
with respect to a participant who satisfies (either before or
after the effective date of the amendment) the conditions for
the benefit or subsidy under the terms of the plan as in
effect immediately before such date.''.
(3) Effective date.--The amendments made by this
su,bsection shall apply to plan amendments taking effect
after December 31, 1998.
Mr. THOMAS (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 California?
There was no objection.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Vermont (Mr. Sanders) is recognized for 5 minutes in support of his
motion to recommit.
Mr. SANDERS. Mr. Speaker, this issue affects the lives and well-being
of millions of American workers, and I hope the Members would pay
attention to this debate.
This motion to recommit is cosponsored by the gentleman from New York
(Mr. Hinchey), the gentleman from Ohio (Mr. Kucinich), and the
gentleman from Minnesota (Mr. Gutknecht), so it has a tripartisan
element.
Mr. Speaker, in the last several years, major corporation after major
corporation has cut back the pension benefits that they promised their
workers. IBM, for example, which has a huge pension surplus, which pays
its CEO $175 million over a 2-year period, said to its workers last
year, yes, we made a promise to you, but we are going to renege on that
promise and, in some cases, cut back the benefits that you expected by
30 or 40 or 50 percent.
That is wrong, and we have to deal with it. Unfortunately, the
underlying legislation here does not in any meaningful way deal with
this issue. The proponents of the bill say, we do deal with it, we do
deal with it. But what we are really talking about is that we deal with
it through disclosure.
I guess it is a good thing to know in advance if you are going to get
the death penalty. It helps. But more importantly, it would help if
this legislation did, as my amendment does, give workers a choice. If a
company is going to convert from defined benefits to cash balance,
workers should have a choice, should not be forced to accept major
cutbacks in pensions that were promised to them.
If Members are concerned about what happened at IBM, what happened at
other major corporations in America, let us stand up for those workers
and say, we support your right to have a choice.
Support the motion to recommit.
Mr. Speaker, I yield to the gentleman from Minnesota (Mr. Gutknecht).
Mr. GUTKNECHT. Mr. Speaker, I know that we all have a lot of other
issues going on and a lot of people are not paying attention, but this
is a very important point, because last year, about a year and a half
ago, an awful lot of employees that worked for a great company that has
been a great employer by the name of IBM, they woke up one morning and
all of a sudden their pension benefits were cut by as much as 50
percent. The gentleman from Vermont (Mr. Sanders) is exactly right.
This is a good bill. The underlying bill, the benefits, everything we
do here is good, with one glaring exception: we do not define what the
term ``vested'' means. I want Members to all think about that, what
does ``vested'' mean? It means it is ours, it cannot be taken away.
That is not what the law in the United States says today. Those pension
benefits can be taken away.
We have an opportunity in this bill to resolve that issue. If we do
not do it today, then shame on us. What happened to the IBMers we may
not be able to change, but remember this, Mr. Speaker, if it could
happen to good people working at IBM a year ago, it can happen to an
awful lot of people working in our districts tomorrow.
{time} 1515
The time is now to make this change. Give those people that choice.
Let us vote for the motion to recommit.
Mr. SANDERS. Mr. Speaker, I yield to the gentleman from New York
State (Mr. Hinchey), who has been active on this issue.
Mr. HINCHEY. Mr. Speaker, I thank my friend, the gentleman from
Vermont, for yielding to me.
Colleagues, this is a very important issue. It is important because
it affects our constituents; it affects their retirement and their
security and that of their families. Across this country some companies
have changed their pension program from a defined benefit plan to a
cash balance plan, thereby robbing their pension systems of enormous
amounts of money, billions of dollars, and reducing the pensions
programs of virtually every employee. It particularly adversely affects
those employees who are getting near retirement age. My colleagues'
constituents are affected by this.
We are not going to deal with this issue outside of this bill. We are
not going to return to the issue of pensions anytime during this
Congress. If we do not do it now, it is not going to get done; and the
problem that exists will continue to exist and people will continue to
get hurt.
Please join us in this simple motion to recommit. Let us just correct
this one single deficiency in this bill, improve it, and make it affect
our constituents in a positive way. Vote for the motion to recommit.
Mr. SANDERS. Mr. Speaker, let me conclude by saying that the
proponents of this bill will tell us that they have dealt with this
issue. They have not dealt with this issue. Disclosure is fine, but
disclosure will not help millions of workers who have already seen
their pensions cut and many more who will see their pensions cut.
Please vote ``yes'' on recommit.
The SPEAKER pro tempore (Mr. Quinn). The gentleman's time has
expired. Is the gentleman from California (Mr. Thomas) opposed to the
motion to recommit?
Mr. THOMAS. I am, Mr. Speaker.
The SPEAKER pro tempore. The gentleman from California is recognized
for 5 minutes.
Mr. THOMAS. Mr. Speaker, the authors of the underlying bill said that
they addressed the issue, not that they had dealt with it. This motion
to recommit is 22 pages of very specific directed information that I
will address in a moment.
We have had an excellent discussion about needful changes in the area
of pensions and IRAs. I would hope it is enough for my colleagues to
know that the gentleman from Ohio (Mr. Portman) and the gentleman from
Maryland (Mr. Cardin) are in opposition to this motion to recommit.
This is not the way to deal with pension legislation.
Twenty-two specific pages. For example, in the materials explaining
the bill it says, ``The fact that cash balance plan conversions violate
current pension age discrimination laws is clear.'' If it is clear, why
on page 12, beginning on line 6, does it say, ``Directive. The
Secretary of the Treasury shall apply section 411 without regard to the
portion of the preamble. Such preamble is and has been since its
adoption without the force of law.'' If it is clear, why do my
colleagues direct the Treasury to a particular conclusion about that
section?
It also involves the ERISA area, which is the jurisdiction of the
committee of the gentleman from Ohio.
Mr. Speaker, I yield to the gentleman from Ohio (Mr. Boehner).
Mr. BOEHNER. Mr. Speaker, the motion to recommit deals with the issue
of cash balance pension plans, which are a form of defined benefit
pension plans that most of my colleagues on the Democrat side want. We
have had this huge decline in defined benefit plans and a move toward
defined contribution plans. And as a way to save defined benefit plans,
they came up with this idea of a cash balance conversion.
These are very, very good for younger workers. And I might also add
that over 500 of these conversions have taken place. In almost every
instance, the employer has in fact made all employees whole in the
process. There were some mistakes early on, but they have been
corrected. The gentleman from New Jersey (Mr. Andrews) and I, during
the last administration, worked with the Secretary of Labor, worked
with the White House, and came to an agreement on this disclosure model
contained in this bill.
[[Page H1826]]
We should be very careful about the specific language in this motion
to recommit that allows for choice, so that in the case of a cash
balance conversion an employee could choose one or the other. This
would require an employer to offer two separate plans. And they will do
this: they will have no plan, or there will be no conversion and then
no defined benefit plan.
It is a very bad and dangerous idea, and we should reject this.
Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 30 seconds to the
gentleman from North Dakota (Mr. Pomeroy) in opposition to the motion
to recommit.
Mr. POMEROY. Mr. Speaker, I thank the gentleman for yielding to me.
Colleagues, the bill contains language on disclosure for cash balance
conversions advanced by the White House in consultation with Congress
last year. The motion should be defeated, because although it talks
about mandating choice between defined benefit and cash balance, it
says nothing about changing the pension plan all together for a defined
contribution plan or, worse, scrapping it all together. Those are much
more serious options than moving from traditional defined balance to
cash balance.
Therefore, although well intended, this motion does not work. It
should be defeated.
Mr. THOMAS. Mr. Speaker, I thank the gentleman.
It is also true that members of the Committee on Ways and Means are
very concerned about this, including the gentleman from Massachusetts
(Mr. Neal), who indicated that it is not the appropriate way to deal
with this issue, through a motion to recommit; but that we would be
pleased to look at it in committee.
As we continue through the 22 pages of this bill in terms of the
specific directives, my colleagues might also be interested to know
that if they vote in favor of the motion to recommit, on page 16 they
would be in favor of the imposition of a tax. The tax is an excise tax.
The amount of the tax imposed, and I am quoting, by subsection A, shall
be 50 percent of the amount of the excess pension assets in such plan.
Now, we are more than willing to talk about reasonable adjustments
where we find fault, but that is a bit Draconian. And I would only ask
my colleagues to look on page 22 of this motion to recommit and look at
the effective date: ``The amendments made by this subsection shall
apply to plan amendments taking effect after December 31, 1998.''
I would ask my colleagues, as this bill was constructed in a
bipartisan way, let us reject this motion to recommit in a bipartisan
way.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. 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. SANDERS. 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 final passage.
The vote was taken by electronic device, and there were--yeas 153,
nays 276, not voting 2, as follows:
[Roll No. 95]
YEAS--153
Abercrombie
Ackerman
Allen
Baca
Baldacci
Baldwin
Barcia
Barrett
Becerra
Bentsen
Berkley
Berman
Blagojevich
Blumenauer
Bonior
Boucher
Brown (FL)
Brown (OH)
Capps
Capuano
Carson (IN)
Carson (OK)
Clay
Clayton
Clyburn
Conyers
Costello
Coyne
Cummings
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Doyle
Edwards
Engel
Eshoo
Evans
Farr
Fattah
Filner
Frank
Frost
Gephardt
Green (TX)
Gutierrez
Gutknecht
Hall (OH)
Hastings (FL)
Hilliard
Hinchey
Holden
Holt
Honda
Hooley
Inslee
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind (WI)
Kleczka
Kucinich
LaFalce
Langevin
Lantos
Larsen (WA)
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Luther
Maloney (CT)
Maloney (NY)
Markey
Mascara
Matsui
McCollum
McDermott
McGovern
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller, George
Mink
Mollohan
Murtha
Nadler
Napolitano
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Phelps
Rahall
Rangel
Reyes
Rivers
Rodriguez
Rothman
Roybal-Allard
Rush
Sabo
Sanders
Sawyer
Schakowsky
Scott
Serrano
Skelton
Slaughter
Solis
Spratt
Stark
Strickland
Stupak
Thompson (CA)
Thompson (MS)
Thurman
Tierney
Towns
Udall (CO)
Udall (NM)
Velazquez
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Wexler
Woolsey
NAYS--276
Aderholt
Akin
Andrews
Armey
Bachus
Baird
Baker
Ballenger
Barr
Bartlett
Barton
Bass
Bereuter
Berry
Biggert
Bilirakis
Bishop
Blunt
Boehlert
Boehner
Bonilla
Bono
Borski
Boswell
Boyd
Brady (PA)
Brady (TX)
Brown (SC)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Cannon
Cantor
Capito
Cardin
Castle
Chabot
Chambliss
Clement
Coble
Collins
Combest
Condit
Cooksey
Cox
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis (CA)
Davis (FL)
Davis, Jo Ann
Davis, Tom
Deal
DeLay
DeMint
Diaz-Balart
Dooley
Doolittle
Dreier
Duncan
Dunn
Ehlers
Ehrlich
Emerson
English
Etheridge
Everett
Ferguson
Flake
Fletcher
Foley
Ford
Fossella
Frelinghuysen
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Gonzalez
Goode
Goodlatte
Gordon
Goss
Graham
Granger
Graves
Green (WI)
Greenwood
Grucci
Hall (TX)
Hansen
Harman
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill
Hilleary
Hinojosa
Hobson
Hoeffel
Hoekstra
Horn
Hostettler
Houghton
Hoyer
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Israel
Issa
Istook
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kerns
King (NY)
Kingston
Kirk
Knollenberg
Kolbe
LaHood
Lampson
Largent
Larson (CT)
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lucas (KY)
Lucas (OK)
Manzullo
Matheson
McCarthy (MO)
McCarthy (NY)
McCrery
McHugh
McInnis
McIntyre
McKeon
Mica
Miller (FL)
Miller, Gary
Moore
Moran (KS)
Moran (VA)
Morella
Myrick
Neal
Nethercutt
Ney
Northup
Norwood
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pence
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Pomeroy
Portman
Price (NC)
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Reynolds
Riley
Roemer
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Roukema
Ryan (WI)
Ryun (KS)
Sanchez
Sandlin
Saxton
Scarborough
Schaffer
Schiff
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shows
Simmons
Simpson
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Souder
Spence
Stearns
Stenholm
Stump
Sununu
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thornberry
Thune
Tiahrt
Tiberi
Toomey
Traficant
Turner
Upton
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson
Wolf
Wu
Wynn
Young (AK)
Young (FL)
NOT VOTING--2
Moakley
Royce
{time} 1546
Mr. Gilman changed his vote from ``yea'' to ``nay.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore (Mr. Quinn). 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.
Mr. THOMAS. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. This will be a 5-minute vote.
[[Page H1827]]
The vote was taken by electronic device, and there were--yeas 407,
nays 24, not voting 1, as follows:
[Roll No. 96]
YEAS--407
Abercrombie
Ackerman
Aderholt
Akin
Allen
Andrews
Armey
Baca
Bachus
Baird
Baker
Baldacci
Baldwin
Ballenger
Barcia
Barr
Barrett
Bartlett
Barton
Bass
Becerra
Bentsen
Bereuter
Berkley
Berman
Berry
Biggert
Bilirakis
Bishop
Blagojevich
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonior
Bono
Borski
Boswell
Boucher
Boyd
Brady (PA)
Brady (TX)
Brown (FL)
Brown (OH)
Brown (SC)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Carson (IN)
Carson (OK)
Castle
Chabot
Chambliss
Clay
Clayton
Clement
Clyburn
Coble
Collins
Combest
Condit
Cooksey
Costello
Cox
Coyne
Cramer
Crane
Crenshaw
Crowley
Cubin
Culberson
Cummings
Cunningham
Davis (CA)
Davis (FL)
Davis (IL)
Davis, Jo Ann
Davis, Tom
Deal
DeFazio
DeGette
Delahunt
DeLauro
DeLay
DeMint
Deutsch
Diaz-Balart
Dicks
Dingell
Doggett
Dooley
Doolittle
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Ehrlich
Emerson
Engel
English
Eshoo
Etheridge
Evans
Everett
Farr
Fattah
Ferguson
Flake
Fletcher
Foley
Ford
Fossella
Frelinghuysen
Frost
Gallegly
Ganske
Gekas
Gephardt
Gibbons
Gilchrest
Gillmor
Gilman
Gonzalez
Goode
Goodlatte
Gordon
Goss
Graham
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Grucci
Gutierrez
Hall (OH)
Hall (TX)
Hansen
Harman
Hart
Hastert
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill
Hilleary
Hilliard
Hinojosa
Hobson
Hoeffel
Hoekstra
Holden
Holt
Honda
Hooley
Horn
Hostettler
Houghton
Hoyer
Hulshof
Hunter
Hutchinson
Hyde
Inslee
Isakson
Israel
Issa
Istook
Jackson-Lee (TX)
Jefferson
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kerns
Kildee
Kilpatrick
Kind (WI)
King (NY)
Kingston
Kirk
Kleczka
Knollenberg
Kolbe
LaHood
Lampson
Langevin
Lantos
Largent
Larsen (WA)
Larson (CT)
Latham
LaTourette
Leach
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren
Lowey
Lucas (KY)
Lucas (OK)
Luther
Maloney (CT)
Maloney (NY)
Manzullo
Markey
Mascara
Matheson
McCarthy (MO)
McCarthy (NY)
McCollum
McCrery
McGovern
McHugh
McInnis
McIntyre
McKeon
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Mica
Millender-McDonald
Miller (FL)
Miller, Gary
Miller, George
Mink
Mollohan
Moore
Moran (KS)
Moran (VA)
Morella
Murtha
Myrick
Nadler
Napolitano
Nethercutt
Ney
Northup
Norwood
Nussle
Ortiz
Osborne
Ose
Otter
Oxley
Pallone
Pascrell
Pastor
Paul
Pelosi
Pence
Peterson (MN)
Peterson (PA)
Petri
Phelps
Pickering
Pitts
Platts
Pombo
Pomeroy
Portman
Price (NC)
Pryce (OH)
Putnam
Quinn
Radanovich
Rahall
Ramstad
Regula
Rehberg
Reyes
Reynolds
Riley
Rivers
Rodriguez
Roemer
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Rothman
Roukema
Royce
Ryan (WI)
Ryun (KS)
Sanchez
Sandlin
Sawyer
Saxton
Scarborough
Schaffer
Schakowsky
Schiff
Schrock
Scott
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shows
Simmons
Simpson
Skeen
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Solis
Souder
Spence
Spratt
Stearns
Stenholm
Strickland
Stump
Stupak
Sununu
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Thune
Thurman
Tiahrt
Tiberi
Tierney
Toomey
Towns
Traficant
Turner
Udall (CO)
Udall (NM)
Upton
Velazquez
Visclosky
Vitter
Walden
Walsh
Wamp
Watkins
Watt (NC)
Watts (OK)
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Wexler
Whitfield
Wicker
Wilson
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)
NAYS--24
Conyers
Filner
Frank
Gutknecht
Hinchey
Jackson (IL)
Kucinich
LaFalce
Lee
Matsui
McDermott
Neal
Oberstar
Obey
Olver
Owens
Payne
Rangel
Roybal-Allard
Rush
Sabo
Sanders
Stark
Waters
NOT VOTING--1
Moakley
{time} 1602
Mrs. MEEK of Florida changed her vote from ``yea'' to ``nay.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________