[House Report 106-760]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-760
======================================================================
PROVIDING FOR THE CONSIDERATION OF H.R. 1102, THE COMPREHENSIVE
RETIREMENT SECURITY AND PENSION REFORM ACT OF 2000
_______
July 18, 2000.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Reynolds, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 557]
The Committee on Rules, having had under consideration
House Resolution 557, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for the consideration of H.R. 1102,
the Comprehensive Retirement Security and Pension Reform Act of
2000, under a modified closed rule. The rule provides that, in
lieu of the amendment recommended by the Committee on Education
and the Workforce now printed in the bill, the text of H.R.
4843 as reported by the Committee on Ways and Means shall be
considered as adopted. The rule waives all points of order
against consideration of the bill. The rule provides one hour
of debate equally divided and controlled by the chairman and
ranking minority member of the Committee on Ways and Means.
The rule provides for consideration of the amendment
printed in this report, if offered by Representative Rangel or
his designee, which shall be considered as read and shall be
separately debatable for one hour equally divided and
controlled by the proponent and an opponent. The rule waives
all points of order against the amendment printed in this
report. Finally, the rule provides one motion to recommit with
or without instructions.
SUMMARY OF AMENDMENT MADE IN ORDER UNDER THE RULE
Rangel--Amendment in the nature of a substitute.
Incorporates the text of H.R. 4843, as reported, with the
following additional provisions: (1) Provides a refundable
credit for low- and middle-income workers who save for their
retirement; (2) makes small business employees eligible to
claim a credit or certain expenses incurred as a result of
establishing a qualified pension plan and makes small business
employees eligible to claim an additional credit equal to 50%
of certain employer contributions made to the employer's
pension plan; (3) provides relief from certain section 415
rules and benefit limits; and (4) expresses a Sense of Congress
that issues concerning cash balance plans should be resolved.
TEXT OF AMENDMENT MADE IN ORDER UNDER THE RULE
An Amendment To Be Offered by Representative Rangel of New York, or a
Designee, Debatable for 60 Minutes
Strike all after the enacting clause and insert the text of
H.R. 4843, as reported, and add at the end the following new
title:
TITLE VIII--ADDITIONAL PROVISIONS
SEC. 801. REFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE
DEFERRALS AND IRA CONTRIBUTIONS.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by redesignating section 35 as
section 36 and by inserting after section 34 the following new
section:
``SEC. 35. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN
INDIVIDUALS.
``(a) Allowance of Credit.--In the case of an eligible
individual, there shall be allowed as a credit against the tax
imposed by this subtitle for the taxable year an amount equal
to the applicable percentage of so much of the qualified
retirement savings contributions of the eligible individual for
the taxable year as do not exceed $2,000.
``(b) Applicable Percentage.--For purposes of this section,
the applicable percentage is the percentage determined in
accordance with the following table:
------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------
Joint return Head of a All other cases Applicable
--------------------- household -------------------- percentage
--------------------
Over Not over Over Not over Over Not over
------------------------------------------------------------------------
$0 $25,000 $0 $18,750 $0 $12,500 50
25,000 35,000 18,750 26,250 12,500 17,500 45
35,000 45,000 26,250 33,750 17,500 22,500 35
45,000 55,000 33,750 41,250 22,500 27,500 25
55,000 75,000 41,250 56,250 27,500 37,500 15
75,000 ......... 56,250 ........ 37,500 ........ 0
------------------------------------------------------------------------
``(c) Eligible Individual.--For purposes of this section--
``(1) In general.--The term `eligible individual'
means any individual if--
``(A) such individual has attained the age of
18, but has not attained the age of 61, as of
the close of the taxable year, and
``(B) the compensation (as defined in section
219(f)(1)) includible in the gross income of
the individual (or, in the case of a joint
return, of the taxpayer) for such taxable year
is at least $5,000.
``(2) Dependents and full-time students not
eligible.--The term `eligible individual' shall not
include--
``(A) any individual with respect to whom a
deduction under section 151 is allowable to
another taxpayer for a taxable year beginning
in the calendar year in which such individual's
taxable year begins, and
``(B) any individual who is a student (as
defined in section 151(c)(4)).
``(3) Individuals receiving certain retirement
distributions not eligible.--
``(A) In general.--The term `eligible
individual' shall not include, with respect to
a taxable year, any individual who received
during the testing period--
``(i) any distribution from a
qualified retirement plan (as defined
in section 4974(c)), or from an
eligible deferred compensation plan (as
defined in section 457(b)), which is
includible in gross income, or
``(ii) any distribution from a Roth
IRA which is not a qualified rollover
contribution (as defined in section
408A(e)) to a Roth IRA.
``(B) Testing period.--For purposes of
subparagraph (A), the testing period, with
respect to a taxable year, is the period which
includes--
``(i) such taxable year,
``(ii) the 2 preceding taxable years,
and
``(iii) the period after such taxable
year and before the due date (without
extensions) for filing the return of
tax for such taxable year.
``(C) Excepted distributions.--There shall
not be taken into account under subparagraph
(A)--
``(i) any distribution referred to in
section 72(p), 401(k)(8), 401(m)(6),
402(g)(2), 404(k), or 408(d)(4),
``(ii) any distribution to which
section 408A(d)(3) applies, and
``(iii) any distribution before
January 1, 2002.
``(D) Treatment of distributions received by
spouse of individual.--For purposes of
determining whether an individual is an
eligible individual for any taxable year, any
distribution received by the spouse of such
individual shall be treated as received by such
individual if such individual and spouse file a
joint return for such taxable year and for the
taxable year during which the spouse receives
the distribution.
``(d) Qualified Retirement Savings Contributions.--For
purposes of this section, the term `qualified retirement
savings contributions' means the sum of--
``(1) the amount of the qualified retirement
contributions (as defined in section 219(e)) for the
benefit of the eligible individual,
``(2) the amount of the elective deferrals (as
defined in section 414(u)(2)(C)) of such individual,
and
``(3) the amount of voluntary employee contributions
by such individual to any qualified retirement plan (as
defined in section 4974(c)).
``(e) Adjusted Gross Income.--For purposes of this section,
adjusted gross income shall be determined without regard to
sections 911, 931, and 933.
``(f) Investment in the Contract.--Notwithstanding any other
provision of law, a qualified retirement savings contribution
shall not fail to be included in determining the investment in
the contract for purposes of section 72 by reason of the credit
under this section.
``(g) Transitional Rules.--In the case of taxable years
beginning before January 1, 2008--
``(1) Contribution limit.--Subsection (a) shall be
applied by substituting for `$2,000'--
``(A) $600 in the case of taxable years
beginning in 2002, 2003, or 2004, and
``(B) $1,000 in the case of taxable years
beginning in 2005, 2006, or 2007.
``(2) Applicable percentage.--The applicable
percentage shall be determined under the following
table (in lieu of the table in subsection (b)):
------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------
Joint return Head of a All other cases Applicable
--------------------- household -------------------- percentage
--------------------
Over Not over Over Not over Over Not over
------------------------------------------------------------------------
$0 $20,000 $0 $15,000 $0 $10,000 50
20,000 25,000 15,000 18,750 10,000 12,500 45
25,000 30,000 18,750 22,500 12,500 15,000 35
30,000 35,000 22,500 26,250 15,000 17,500 25
35,000 40,000 26,250 30,000 17,500 20,000 15
40,000 ......... 30,000 ........ 20,000 ........ 0.''
------------------------------------------------------------------------
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31,
United States Code, is amended by inserting before the
period ``, or from section 35 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of such Code is amended by
striking the last item and inserting the following new
items:
``Sec. 35. Elective deferrals and IRA contributions by certain
individuals.
``Sec. 36. Overpayments of tax.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2001.
SEC. 802. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended by
adding at the end the following new section:
``SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.
``(a) General Rule.--For purposes of section 38, in the case
of an eligible employer, the small employer pension plan
startup cost credit determined under this section for any
taxable year is an amount equal to 50 percent of the qualified
startup costs paid or incurred by the taxpayer during the
taxable year.
``(b) Dollar Limitation.--The amount of the credit determined
under this section for any taxable year shall not exceed--
``(1) $1,000 for the first credit year,
``(2) $500 for each of the 2 taxable years
immediately following the first credit year, and
``(3) zero for any other taxable year.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' has
the meaning given such term by section 408(p)(2)(C)(i).
``(2) Employers maintaining qualified plans during
1998 not eligible.--Such term shall not include an
employer if such employer (or any predecessor employer)
maintained a qualified plan (as defined in section
408(p)(2)(D)(ii)) with respect to which contributions
were made, or benefits were accrued, for service in
1998. If only individuals other than employees
described in subparagraph (A) or (B) of section
410(b)(3) are eligible to participate in the qualified
employer plan referred to in subsection (d)(1), then
the preceding sentence shall be applied without regard
to any qualified plan in which only employees so
described are eligible to participate.
``(d) Other Definitions.--For purposes of this section--
``(1) Qualified startup costs.--
``(A) In general.--The term `qualified
startup costs' means any ordinary and necessary
expenses of an eligible employer which are paid
or incurred in connection with--
``(i) the establishment or
administration of an eligible employer
plan, or
``(ii) the retirement-related
education of employees with respect to
such plan.
``(B) Plan must have at least 2
participants.--Such term shall not include any
expense in connection with a plan that does not
have at least 2 individuals who are eligible to
participate.
``(C) Plan must be established before january
1, 2010.--Such term shall not include any
expense in connection with a plan established
after December 31, 2009.
``(2) Eligible employer plan.--The term `eligible
employer plan' means a qualified employer plan within
the meaning of section 4972(d), or a qualified payroll
deduction arrangement within the meaning of section
408(q)(1) (whether or not an election is made under
section 408(q)(2)). A qualified payroll deduction
arrangement shall be treated as an eligible employer
plan only if all employees of the employer who--
``(A) have been employed for 90 days, and
``(B) are not described in subparagraph (A)
or (C) of section 410(b)(3),
are eligible to make the election under section
408(q)(1)(A).
``(3) First credit year.--The term `first credit
year' means--
``(A) the taxable year which includes the
date that the eligible employer plan to which
such costs relate becomes effective, or
``(B) at the election of the eligible
employer, the taxable year preceding the
taxable year referred to in subparagraph (A).
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons treated as a
single employer under subsection (a) or (b) of section
52, or subsection (n) or (o) of section 414, shall be
treated as one person. All eligible employer plans
shall be treated as 1 eligible employer plan.
``(2) Disallowance of deduction.--No deduction shall
be allowed for that portion of the qualified startup
costs paid or incurred for the taxable year which is
equal to the credit determined under subsection (a).
``(3) Election not to claim credit.--This section
shall not apply to a taxpayer for any taxable year if
such taxpayer elects to have this section not apply for
such taxable year.''
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) (defining current year business credit) is
amended by striking ``plus'' at the end of paragraph (11), by
striking the period at the end of paragraph (12) and inserting
``, plus'', and by adding at the end the following new
paragraph:
``(13) in the case of an eligible employer (as
defined in section 45D(c)), the small employer pension
plan startup cost credit determined under section
45D(a).''
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following new paragraph:
``(8) No carryback of small employer pension plan
startup cost credit before effective date.--No portion
of the unused business credit for any taxable year
which is attributable to the small employer pension
plan startup cost credit determined under section 45D
may be carried back to a taxable year ending on or
before the date of the enactment of section 45D.''
(2) Subsection (c) of section 196 is amended by
striking ``and'' at the end of paragraph (7), by
striking the period at the end of paragraph (8) and
inserting ``, and'', and by adding at the end the
following new paragraph:
``(9) the small employer pension plan startup cost
credit determined under section 45D(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the
end the following new item:
``Sec. 45D. Small employer pension plan startup costs.''
(d) Effective Date.--The amendments made by this section
shall apply to costs paid or incurred in taxable years ending
after the date of the enactment of this Act.
SEC. 803. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF SMALL
EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended by
adding at the end the following new section:
``SEC. 45E. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.
``(a) General Rule.--For purposes of section 38, in the case
of an eligible employer, the small employer pension plan
contribution credit determined under this section for any
taxable year is an amount equal to 50 percent of the amount
which would (but for subsection (f)(1)) be allowed as a
deduction under section 404 for such taxable year for qualified
employer contributions made to any qualified retirement plan on
behalf of any nonhighly compensated employee.
``(b) Credit Limited to 3 Years.--The credit allowable by
this section shall be allowed only with respect to the period
of 3 taxable years beginning with the taxable year in which the
qualified retirement plan becomes effective.
``(c) Qualified Employer Contribution.--For purposes of this
section--
``(1) Defined contribution plans.--In the case of a
defined contribution plan, the term `qualified employer
contribution' means the amount of nonelective and
matching contributions to the plan made by the employer
on behalf of any nonhighly compensated employee to the
extent such amount does not exceed 3 percent of such
employee's compensation from the employer for the year.
``(2) Defined benefit plans.--In the case of a
defined benefit plan, the term `qualified employer
contribution' means the amount of employer
contributions to the plan made on behalf of any
nonhighly compensated employee to the extent that the
accrued benefit of such employee derived from such
contributions for the year do not exceed the equivalent
(as determined under regulations prescribed by the
Secretary and without regard to contributions and
benefits under the Social Security Act) of 3 percent of
such employee's compensation from the employer for the
year.
``(d) Qualified Retirement Plan.--
``(1) In general.--The term `qualified retirement
plan' means any plan described in section 401(a) which
includes a trust exempt from tax under section 501(a)
if the plan meets--
``(A) the contribution requirements of
paragraph (2),
``(B) the vesting requirements of paragraph
(3), and
``(C) the distributions requirements of
paragraph (4).
``(2) Contribution requirements.--
``(A) In general.--The requirements of this
paragraph are met if, under the plan--
``(i) the employer is required to
make nonelective contributions of at
least 1 percent of compensation (or the
equivalent thereof in the case of a
defined benefit plan) for each
nonhighly compensated employee who is
eligible to participate in the plan,
and
``(ii) allocations of nonelective
employer contributions are either in
equal dollar amounts for all employees
covered by the plan or bear a uniform
relationship to the total compensation,
or the basic or regular rate of
compensation, of the employees covered
by the plan.
``(B) Compensation limitation.--The
compensation taken into account under
subparagraph (A) for any year shall not exceed
the limitation in effect for such year under
section 401(a)(17).
``(3) Vesting requirements.--The requirements of this
paragraph are met if the plan satisfies the
requirements of subparagraph (A) or (B).
``(A) 3-year vesting.--A plan satisfies the
requirements of this subparagraph if an
employee who has completed at least 3 years of
service has a nonforfeitable right to 100
percent of the employee's accrued benefit
derived from employer contributions.
``(B) 5-year graded vesting.--A plan
satisfies the requirements of this subparagraph
if an employee has a nonforfeitable right to a
percentage of the employee's accrued benefit
derived from employer contributions determined
under the following table:
The nonforfeitable
``Years of service: percentage is:
1......................................................... 20
2......................................................... 40
3......................................................... 60
4......................................................... 80
5......................................................... 100.
``(4) Distribution requirements.--
``(A) In general.--Except as provided in
subparagraph (B), the requirements of this
paragraph are met if, under the plan--
``(i) in the case of a profit-sharing
or stock bonus plan, amounts are
distributable only as provided in
section 401(k)(2)(B), and
``(ii) in the case of a pension plan,
amounts are distributable subject to
the limitations applicable to other
distributions from the plan.
``(B) Distributions within 5 years after
separation, etc.--In no event shall a plan meet
the requirements of this paragraph unless,
under the plan, amounts distributed--
``(i) after separation from service
or severance from employment, and
``(ii) within 5 years after the date
of the earliest employer contribution
to the plan,
may be distributed only in a direct trustee-to-
trustee transfer to a plan having the same
distribution restrictions as the distributing
plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Eligible employer.--The term `eligible
employer' has the meaning given such term by section
408(p)(2)(C)(i).
``(2) Nonhighly compensated employees.--The term
`highly compensated employee' has the meaning given
such term by section 414(q) (determined without regard
to section 414(q)(1)(B)(ii)).
``(f) Special Rules.--
``(1) Disallowance of deduction.--No deduction shall
be allowed for that portion of the qualified employer
contributions paid or incurred for the taxable year
which is equal to the credit determined under
subsection (a).
``(2) Election not to claim credit.--This section
shall not apply to a taxpayer for any taxable year if
such taxpayer elects to have this section not apply for
such taxable year.
``(g) Recapture of Credit on Forfeited Contributions.--If any
accrued benefit which is forfeitable by reason of subsection
(d)(3) is forfeited, the employer's tax imposed by this chapter
for the taxable year in which the forfeiture occurs shall be
increased by 35 percent of the employer contributions from
which such benefit is derived to the extent such contributions
were taken into account in determining the credit under this
section.
``(h) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes of
this section, including regulations to prevent the abuse of the
purposes of this section through the use of multiple plans.
``(i) Termination.--This section shall not apply to any plan
established after December 31, 2009.''
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) (defining current year business credit) is
amended by striking ``plus'' at the end of paragraph (12), by
striking the period at the end of paragraph (13) and inserting
``, plus'', and by adding at the end the following new
paragraph:
``(14) in the case of an eligible employer (as
defined in section 45E(e)), the small employer pension
plan contribution credit determined under section
45E(a).''
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following new paragraph:
``(9) No carryback of small employer pension plan
contribution credit before january 1, 2002.--No portion
of the unused business credit for any taxable year
which is attributable to the small employer pension
plan contribution credit determined under section 45E
may be carried back to a taxable year beginning before
January 1, 2002.''
(2) Subsection (c) of section 196 is amended by
striking ``and'' at the end of paragraph (8), by
striking the period at the end of paragraph (9) and
inserting ``, and'', and by adding at the end the
following new paragraph:
``(10) the small employer pension plan contribution
credit determined under section 45E(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the
end the following new item:
``Sec. 45E. Small employer pension plan contributions.''
(d) Effective Date.--The amendments made by this section
shall apply to contributions paid or incurred in taxable years
beginning after December 31, 2001.
SEC. 804. LIMITATION ON CATCH-UP CONTRIBUTIONS.
(a) In General.--Section 414(v), as added by section 301, is
amended by adding at the end the following new paragraph:
``(6) Limitation.--This subsection shall apply with
respect to a participant for a year only if the
participant is not a highly compensated employee and
certifies to the plan administrator that the
participant has been out of the workforce for at least
2 of the preceding 7 years. A plan shall not be treated
as failing to meet the requirements of this subsection
by reason of reliance on an incorrect certification
under this paragraph unless the plan administrator
knew, or reasonably should have known, that the
certification was incorrect.''
(b) Effective Date.--The amendment made by this section shall
apply to contributions in taxable years beginning after Decem-
ber 31, 2000.
SEC. 805. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Early Retirement Limits for Certain Plans.--Subparagraph
(F) of section 415(b)(2) is amended to read as follows:
``(F) Multiemployer plans and plans
maintained by governments and tax exempt
organizations.--In the case of a governmental
plan (within the meaning of section 414(d)), a
plan maintained by an organization (other than
a governmental unit) exempt from tax under this
subtitle, a multiemployer plan (as defined in
section 414(f)), or a qualified merchant marine
plan--
``(i) subparagraph (C) shall be
applied--
``(I) by substituting `age
62' for `social security
retirement age' each place it
appears, and
``(II) as if the last
sentence thereof read as
follows: `The reduction under
this subparagraph shall not
reduce the limitation of
paragraph (1)(A) below (i) 80
percent of such limitation as
in effect for the year, or (ii)
if the benefit begins before
age 55, the equivalent of such
80 percent amount for age 55.',
and
``(ii) subparagraph (D) shall be
applied by substituting `age 65' for
`social security retirement age' each
place it appears.
For purposes of this subparagraph, the term
`qualified merchant marine plan' means a plan
in existence on January 1, 1986, the
participants in which are merchant marine
officers holding licenses issued by the
Secretary of Transportation under title 46,
United States Code.''.
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 806. SENSE OF THE HOUSE OF REPRESENTATIVES REGARDING CASH BALANCE
PENSION PLAN CONVERSIONS.
(a) Findings.--The House of Representatives finds the
following:
(1) Defined benefit pension plans are guaranteed by
the Pension Benefit Guaranty Corporation and provide a
lifetime benefit for a beneficiary and spouse.
(2) Defined benefit pension plans provide meaningful
retirement benefits to rank and file workers, since
such plans are generally funded by employer
contributions.
(3) Employers should be encouraged to establish and
maintain defined benefit pension plans.
(4) An increasing number of major employers have been
converting their traditional defined benefit plans to
``cash balance'' or other hybrid defined benefit plans.
(5) Under current law, employers are not required to
provide plan participants with meaningful disclosure of
the impact of converting a traditional defined benefit
plan to a ``cash balance'' or other hybrid formula.
(6) For a number of years after a conversion, the
cash balance or other hybrid benefit formula may result
in a period of ``wear away'' during which older and
longer service participants earn no additional
benefits.
(7) Federal law prohibits pension plan participants
from being discriminated against on the basis of age in
the provision of pension benefits.
(b) Sense of the House.--It is the sense of the House of
Representatives that pension plan participants whose plans are
changed to cause older or longer service workers to earn less
retirement income, including conversions to ``cash balance
plans'', should receive additional protection under the
Internal Revenue Code of 1986 than what is currently provided,
and Congress should act this year to address this important
issue. In particular, the tax laws, at a minimum, should
provide that--
(1) all pension plan participants receive adequate,
accurate, and timely notice of any change to a plan
that will cause participants to earn less retirement
income in the future; and
(2) pension plans that are changed to a cash balance
or other hybrid formula not be permitted to ``wear
away'' participants' benefits in such a manner that
older and longer service participants earn no
additional pension benefits for a period of time after
the change.