[House Report 107-522]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-522

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 PROVIDING FOR CONSIDERATION OF H.R. 4931, RETIREMENT SAVINGS SECURITY 
                              ACT OF 2002

                                _______
                                

   June 20, 2002.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

    Mr. Linder, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 451]

    The Committee on Rules, having had under consideration 
House Resolution 451, 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 consideration in the House of 
H.R. 4931, to provide that the pension and individual 
retirement arrangement provisions of the Economic Growth and 
Tax Relief Reconciliation Act of 2001 shall be permanent, under 
a modified closed rule. 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 in the 
nature of a substitute, printed in this report, if offered by 
Representative Matsui 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 in the nature of a substitute.
    Finally, the rule provides one motion to recommit with or 
without instructions.

           SUMMARY OF AMENDMENT MADE IN ORDER UNDER THE RULE

    Matsui: Democratic Substitute. Provides that the sunset 
included in last year's tax bill would not apply to the pension 
provisions contained in the bill with the following exceptions. 
The substitute would modify the $200,000 compensation limit to 
provide that this level of compensation is not available to a 
plan which decreases benefits to non-highly-compensated workers 
while providing increased benefits to its highly compensated 
employees. The substitute would modify the top-heavy rules to 
require that employer matching contributions not be taken into 
account in determining whether the minimum benefit that must be 
provided to all non-key employees has been met. In addition, it 
would indefinitely extend the Section 25B credit for pension 
contributions by low and moderate income individuals.
    The substitute also includes a modification of the million 
dollar limit on deductible pay, includes changes to the 
deferred compensation arrangements of corporate insiders, 
requires the recognition of stock option gains for executives 
of corporate expatriates, and extends the current golden 
parachute excise tax to severance payments or other deferred 
compensation payments made to executives leaving failing 
companies.

             TEXT OF AMENDMENT MADE IN ORDER UNDER THE RULE

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Retirement Savings Security 
Act of 2002''.

                    TITLE I--PENSION PLAN PROVISIONS

SEC. 101. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS 
                    MADE PERMANENT.

  (a) In General.--Section 901 of the Economic Growth and Tax 
Relief Reconciliation Act of 2001 is amended by adding at the 
end the following new subsection:
  ``(c) Exception.--Subsections (a) and (b) shall not apply to 
the provisions of, and amendments made by, subtitles (A) 
through (F) of title VI (relating to pension and individual 
retirement arrangement provisions).''.
  (b) Conforming Amendments.--Section 901(b) of such Act is 
amended--
          (1) by striking ``and the Employee Retirement Income 
        Security Act of 1974'' in the text, and
          (2) by striking ``of Certain Laws'' in the heading.

SEC. 102. CREDIT FOR RETIREMENT SAVINGS OF CERTAIN INDIVIDUALS MADE 
                    PERMANENT.

  Section 25B of the Internal Revenue Code of 1986 (relating to 
elective deferrals and IRA contributions of certain 
individuals) is amended by striking subsection (h).

SEC. 103. INCREASED COMPENSATION LIMIT NOT TO RESULT IN REDUCED 
                    BENEFITS FOR THE NONHIGHLY COMPENSATED.

  (a) In General.--Paragraph (17) of section 401(a) of the 
Internal Revenue Code of 1986 is amended by adding at the end 
the following new subparagraph:
                  ``(C) Benefits may not decrease.--
                Subparagraphs (A) and (B) shall be applied by 
                substituting `$150,000' for `$200,000' with 
                respect to a plan for any year if any 
                employee's benefit under the plan would 
                decrease were the $200,000 amount used by the 
                plan instead of the $150,000 amount.''
  (b) Deduction Limitation.--Subsection (l) of section 404 of 
such Code is amended by adding at the end the following new 
sentence: ``The preceding sentences of this subsection shall be 
applied by substituting `$150,000' for `$200,000' with respect 
to a plan for any year if any employee's benefit under the plan 
would decrease were the $200,000 amount used by the plan 
instead of the $150,000 amount.''
  (c) Simplified Employee Pensions.--Subsection (k) of section 
408 of such Code is amended by redesignating paragraph (9) as 
paragraph (10) and by inserting after paragraph (8) the 
following new paragraph:
          ``(9) Lower compensation limitation if benefits 
        decrease.--Paragraphs (3)(C) and (6)(D) shall be 
        applied by substituting `$150,000' for `$200,000' with 
        respect to a plan for any year if any employee's 
        benefit under the plan would decrease were the $200,000 
        amount used by the plan instead of the $150,000 
        amount.''
  (d) Certain Tax-Exempt Organizations.--Paragraph (7) of 
section 505(b) of such Code is amended by adding at the end the 
following new sentence: ``The preceding sentences of this 
subsection shall be applied by substituting `$150,000' for 
`$200,000' with respect to a plan for any year if any 
employee's benefit under the plan would decrease were the 
$200,000 amount used by the plan instead of the $150,000 
amount.''
  (e) Effective Date.--The amendments made by this section 
shall apply to years beginning after the date of the enactment 
of this Act.

SEC. 104. MATCHING CONTRIBUTIONS NOT TAKEN INTO ACCOUNT FOR MINIMUM 
                    CONTRIBUTION REQUIREMENTS UNDER TOP-HEAVY PLAN 
                    RULES.

  (a) In General.--Subparagraph (A) of section 416(c)(2) of the 
Internal Revenue Code of 1986 is amended by striking the last 
sentence.
  (b) Effective Date.--The amendment made by this section shall 
apply to years beginning after the date of the enactment of 
this Act.

               TITLE II--RESPONSIBLE CORPORATE GOVERNANCE

SEC. 201. PERFORMANCE-BASED COMPENSATION EXCEPTION TO $1,000,000 
                    LIMITATION ON DEDUCTIBLE COMPENSATION NOT TO APPLY 
                    IN CERTAIN CASES.

  (a) In General.--Paragraph (4) of section 162(m) of the 
Internal Revenue Code of 1986 is amended by adding at the end 
the following new subparagraph:
                  ``(G) Certain factors not permitted to be 
                taken into account in determining whether 
                performance goals are met.--Subparagraph (C) 
                shall not apply if, in determining whether the 
                performance goals are met, any of the following 
                are taken into account:
                          ``(i) Cost savings as a result of 
                        changes to any qualified employer plan 
                        (as defined in section 4972(d)).
                          ``(ii) Excess assets of such a plan 
                        or earnings thereon.
                          ``(iii) Any excess of the amount 
                        assumed to be the return on the assets 
                        of such a plan over the actual return 
                        on such assets.''
  (b) Effective Date.--The amendment made by this section shall 
apply to taxable years beginning after the date of the 
enactment of this Act.

SEC. 202. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED COMPENSATION OF 
                    CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED 
                    CONTRIBUTION PLAN WITH EMPLOYER STOCK.

  (a) In General.--Subpart A of part I of subchapter D of 
chapter 1 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new section:

``SEC. 409A. DENIAL OF DEFERRAL FOR FUNDED DEFERRED COMPENSATION OF 
                    CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED 
                    CONTRIBUTION PLAN WITH EMPLOYER STOCK.

  ``(a) In General.--If an employer maintains a defined 
contribution plan to which employer contributions are made in 
the form of employer stock and such employer maintains a funded 
deferred compensation plan--
          ``(1) compensation of any corporate insider which is 
        deferred under such funded deferred compensation plan 
        shall be included in the gross income of the insider or 
        beneficiary for the 1st taxable year in which there is 
        no substantial risk of forfeiture of the rights to such 
        compensation, and
          ``(2) the tax treatment of any amount made available 
        under the plan to a corporate insider or beneficiary 
        shall be determined under section 72 (relating to 
        annuities, etc.).
  ``(b) Funded Deferred Compensation Plan.--For purposes of 
this section--
          ``(1) In general.--The term `funded deferred 
        compensation plan' means any plan providing for the 
        deferral of compensation unless--
                  ``(A) the employee's rights to the 
                compensation deferred under the plan are no 
                greater than the rights of a general creditor 
                of the employer, and
                  ``(B) all amounts set aside (directly or 
                indirectly) for purposes of paying the deferred 
                compensation, and all income attributable to 
                such amounts, remain (until made available to 
                the participant or other beneficiary) solely 
                the property of the employer (without being 
                restricted to the provision of benefits under 
                the plan), and
                  ``(C) the amounts referred to in subparagraph 
                (B) are available to satisfy the claims of the 
                employer's general creditors at all times (not 
                merely after bankruptcy or insolvency).
        Such term shall not include a qualified employer plan.
          ``(2) Special rules.--
                  ``(A) Employee's rights.--A plan shall be 
                treated as failing to meet the requirements of 
                paragraph (1)(A) unless--
                          ``(i) the compensation deferred under 
                        the plan is paid only upon separation 
                        from service, death, or at a specified 
                        time (or pursuant to a fixed schedule), 
                        and
                          ``(ii) the plan does not permit the 
                        acceleration of the time such deferred 
                        compensation is paid by reason of any 
                        event.
                If the employer and employee agree to a 
                modification of the plan that accelerates the 
                time for payment of any deferred compensation, 
                then all compensation previously deferred under 
                the plan shall be includible in gross income 
                for the taxable year during which such 
                modification takes effect and the taxpayer 
                shall pay interest at the underpayment rate on 
                the underpayments that would have occurred had 
                the deferred compensation been includible in 
                gross income when deferred.
                  ``(B) Creditor's rights.--A plan shall be 
                treated as failing to meet the requirements of 
                paragraph (1)(B) with respect to amounts set 
                aside in a trust unless--
                          ``(i) the employee has no beneficial 
                        interest in the trust,
                          ``(ii) assets in the trust are 
                        available to satisfy claims of general 
                        creditors at all times (not merely 
                        after bankruptcy or insolvency), and
                          ``(iii) there is no factor (such as 
                        the location of the trust outside the 
                        United States) that would make it more 
                        difficult for general creditors to 
                        reach the assets in the trust than it 
                        would be if the trust assets were held 
                        directly by the employer in the United 
                        States.
  ``(c) Corporate Insider.--For purposes of this section, the 
term `corporate insider' means, with respect to a corporation, 
any individual who is subject to the requirements of section 
16(a) of the Securities Exchange Act of 1934 with respect to 
such corporation.
  ``(d) Other definitions.--For purposes of this section--
          ``(1) Plan includes arrangements, etc.--The term 
        `plan' includes any agreement or arrangement.
          ``(2) Substantial risk of forfeiture.--The rights of 
        a person to compensation are subject to a substantial 
        risk of forfeiture if such person's rights to such 
        compensation are conditioned upon the future 
        performance of substantial services by any 
        individual.''
  (b) Clerical Amendment.--The table of sections for such 
subpart A is amended by adding at the end the following new 
item:

        ``Sec. 409A. Denial of deferral for funded deferred compensation 
                  of corporate insiders if corporation funds defined 
                  contribution plan with employer stock.''
  (b) Effective Date.--The amendments made by this section 
shall apply to amounts deferred after the date of the enactment 
of this Act.

SEC. 203. INCLUSION IN INCOME OF CERTAIN DEFERRED AMOUNTS OF INSIDERS 
                    OF CORPORATIONS WHICH EXPATRIATE TO AVOID UNITED 
                    STATES INCOME TAX.

  (a) In General.--Part II of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically 
included in gross income) is amended by adding at the end the 
following new section:

``SEC. 91. UNREALIZED GAIN ON STOCK OPTIONS OF INSIDERS OF CORPORATIONS 
                    WHICH EXPATRIATE TO AVOID UNITED STATES INCOME TAX.

  ``(a) In General.--In the case of a corporate insider of any 
expatriate corporation, the gross income of such insider (for 
the taxable year during which such corporation becomes an 
expatriate corporation) shall include as ordinary income the 
net unrealized built-in gain on options held by such insider to 
acquire stock in such corporation or in any member of the 
expanded affiliated group which includes such corporation. 
Proper adjustments shall be made in the amount of any gain or 
loss subsequently realized with respect to such options for any 
amount included in gross income under the preceding sentence.
  ``(b) Definitions.--For purposes of this section--
          ``(1) Corporate insider.--The term `corporate 
        insider' means, with respect to a corporation, any 
        individual who is subject to the requirements of 
        section 16(a) of the Securities Exchange Act of 1934 
        with respect to such corporation.
          ``(2) Expatriate corporation.--
                  ``(A) In general.--The term `expatriate 
                corporation' means the acquiring corporation in 
                a corporate expatriation transaction.
                  ``(B) Corporate expatriation transaction.--
                For purposes of this paragraph--
                          ``(i) In general.--The term 
                        `corporate expatriation transaction' 
                        means any transaction if--
                                  ``(I) a nominally foreign 
                                corporation (referred to in 
                                this subparagraph as the 
                                `acquiring corporation') 
                                acquires, as a result of such 
                                transaction, directly or 
                                indirectly substantially all of 
                                the properties held directly or 
                                indirectly by a domestic 
                                corporation, and
                                  ``(II) immediately after the 
                                transaction, more than 80 
                                percent of the stock (by vote 
                                or value) of the acquiring 
                                corporation is held by former 
                                shareholders of the domestic 
                                corporation by reason of 
                                holding stock in the domestic 
                                corporation.
                          ``(ii) Lower stock ownership 
                        requirement in certain cases.--
                        Subclause (II) of clause (i) shall be 
                        applied by substituting `50 percent' 
                        for `80 percent' with respect to any 
                        nominally foreign corporation if--
                                  ``(I) such corporation does 
                                not have substantial business 
                                activities (when compared to 
                                the total business activities 
                                of the expanded affiliated 
                                group) in the foreign country 
                                in which or under the law of 
                                which the corporation is 
                                created or organized, and
                                  ``(II) the stock of the 
                                corporation is publicly traded 
                                and the principal market for 
                                the public trading of such 
                                stock is in the United States.
                          ``(iii) Partnership transactions.--
                        The term `corporate expatriation 
                        transaction' includes any transaction 
                        if--
                                  ``(I) a nominally foreign 
                                corporation (referred to in 
                                this paragraph as the 
                                `acquiring corporation') 
                                acquires, as a result of such 
                                transaction, directly or 
                                indirectly properties 
                                constituting a trade or 
                                business of a domestic 
                                partnership,
                                  ``(II) immediately after the 
                                transaction, more than 80 
                                percent of the stock (by vote 
                                or value) of the acquiring 
                                corporation is held by former 
                                partners of the domestic 
                                partnership or related foreign 
                                partnerships (determined 
                                without regard to stock of the 
                                acquiring corporation which is 
                                sold in a public offering 
                                related to the transaction), 
                                and
                                  ``(III) the acquiring 
                                corporation meets the 
                                requirements of subclauses (I) 
                                and (II) of clause (ii).
                          ``(iv) Special rules.--For purposes 
                        of this subparagraph--
                                  ``(I) a series of related 
                                transactions shall be treated 
                                as 1 transaction, and
                                  ``(II) stock held by members 
                                of the expanded affiliated 
                                group which includes the 
                                acquiring corporation shall not 
                                be taken into account in 
                                determining ownership.
                          ``(v) Nominally foreign 
                        corporation.--The term `nominally 
                        foreign corporation' means any 
                        corporation which would (but for this 
                        subparagraph) be treated as a foreign 
                        corporation.
          ``(3) Net realized built-in gain.--The term `net 
        unrealized built-in gain' means, with respect to 
        options to acquire stock in any corporation, the amount 
        which would be required to be included in gross income 
        were such options exercised.
          ``(4) Expanded affiliated group.--The term `expanded 
        affiliated group' means an affiliated group (as defined 
        in section 1504(a) without regard to section 
        1504(b)).''
  (b) Clerical Amendment.--The table of sections for such part 
II is amended by adding at the end the following new item:

        ``Sec. 91. Certain deferred amounts of insiders of corporations 
                  which expatriate to avoid United States income tax.''
  (c) Effective Date.--The amendments made by this section 
shall apply with respect to corporate expatriation transactions 
completed after September 11, 2001, and to taxable years ending 
after such date.

SEC. 204. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO DEFERRED COMPENSATION 
                    PAID BY CORPORATION AFTER MAJOR DECLINE IN STOCK 
                    VALUE OR CORPORATION DECLARES BANKRUPTCY.

  (a) In General.--Section 4999 of the Internal Revenue Code of 
1986 (relating to golden parachute payments) is amended by 
redesignating subsection (c) as subsection (d) and by inserting 
after subsection (b) the following new subsection:
  ``(c) Tax To Apply to Deferred Compensation Paid After Major 
Stock Value Decline or Bankruptcy.--
          ``(1) In general.--For purposes of this section, the 
        term `excess parachute payment' includes severance pay, 
        and any other payment of deferred compensation, which 
        is received by a corporate insider after the date that 
        the insider ceases to be employed by the corporation 
        if--
                  ``(A) there is at least a 75-percent decline 
                in the value of the stock in such corporation 
                during the 1-year period ending on such date, 
                or
                  ``(B) such corporation becomes a debtor in a 
                title 11 or similar case (as defined in section 
                368(a)(3)(A)) during the 180-day period 
                beginning 90 days before such date.
        Such term shall not include any payment from a 
        qualified employer plan.
          ``(2) Corporate insider.--For purposes of paragraph 
        (1), the term `corporate insider' means, with respect 
        to a corporation, any individual who is subject to the 
        requirements of section 16(a) of the Securities 
        Exchange Act of 1934 with respect to such 
        corporation.''
  (b) Effective Date.--The amendment made by this section shall 
apply with respect to cessations of employment after the date 
of the enactment of this Act.

                                  
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