[House Report 107-53]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     107-53

======================================================================



 
 PROVIDING FOR CONSIDERATION OF H.R. 10, THE COMPREHENSIVE RETIREMENT 
                SECURITY AND PENSION REFORM ACT OF 2001

                                _______
                                

 May 1, 2001.--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. 127]

    The Committee on Rules, having had under consideration 
House Resolution 127, 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 in the House 
of H.R. 10, the Comprehensive Retirement Security and Pension 
Reform Act of 2001, under a modified closed rule. The rule 
provides ninety minutes of debate, with sixty minutes equally 
divided and controlled by the chairman and ranking minority 
member of the Committee on Ways and Means and thirty minutes 
equally divided and controlled by the chairman and ranking 
minority member of the Committee on Education and the 
Workforce.
    The rule provides that, in lieu of the amendments 
recommended by the Committee on Ways and Means and the 
Committee on Education and the Workforce now printed in the 
bill, the amendment in the nature of a substitute printed in 
the Congressional Record and numbered one shall be considered 
as adopted. The rule waives all points of order against 
consideration of the bill as amended.
    The rule provides for consideration of the amendment in the 
nature of a substitute 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 rules waives all points of order against the 
amendment. Finally, the rule provides one motion to recommit 
with or without instructions.
    The waiver of all points of order includes a waiver of 
clause 4(a) of rule XIII (requiring a three-day layover of the 
committee report), a waiver of clause 3(h) of rule XIII 
(requiring the inclusion in the report of a tax complexity 
analysis for a bill reported by the Committee on Ways and 
Means) and section 303 of the Congressional Budget Act of 1974 
(prohibiting consideration of legislation, as reported, 
providing new budget authority, changes in revenues, or changes 
in the public debt for a fiscal year until the budget 
resolution for that year has been agreed to).
    The waiver of clause 4(a) of rule XIII is needed because 
the reports were not filed until Tuesday, May 1, and the bill 
may be considered by the House as early as Wednesday, May 2. 
The waiver of clause 3(h) of rule XIII is needed because the 
report failed to include a sufficient tax complexity statement. 
The waiver of section 303 is necessary because Congress has not 
yet completed consideration of a budget resolution for FY 2002 
and, according to the Joint Committee on Taxation, the bill 
would decrease revenues and increase direct spending in FY 
2002.
    The waiver of all points of order against consideration of 
the minority substitute is necessary for the same general 
reasons as are necessary for the bill.

                            COMMITTEE VOTES

    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

Rules Committee Record Vote No. 9

    Date: May 1, 2001.
    Measure: H.R. 10, the Comprehensive Retirement Security and 
Pension Reform Act of 2001.
    Motion By: Mr. Frost.
    Summary of Motion: Make in order the Morella amendment to 
provide the same Internal Revenue Code treatment to the Thrift 
Savings Plan for federal employees regarding ``catch-up'' 
contributions that would be provided to all other qualified 
public and private sector plans.
    Results: Defeated 2 to 7.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; 
Hastings--Nay; Myrick--Nay; Sessions--Nay; Frost--Yea; Hall--
Yea; Dreier--Nay.

                  Summary of Amendments Made In Order

Amendment printed in the Congressional Record and to be considered as 
        adopted

    Thomas/Boehner: Amendment in the nature of a substitute. 
Combines the provisions of the bill as reported from both the 
Committees on Ways and Means and the Committee on Education and 
the Workforce.

Amendment to be made in order

    Rangel: Amendment in the nature of a substitute. Includes 
the text of the bill as reported and provides a refundable tax 
credit to low- and middle-income workers of up to 50% of annual 
contributions made to a traditional IRA or an employer-
sponsored pension plan such as a section 401(k), section 
403(b), or 457 plan, with eligible annual contributions limited 
to $2,000 and a maximum credit of $1,000; makes small employers 
(no more than 100 employers) eligible to claim a 3-year tax 
credit for an amount equal to 50% of the costs incurred as a 
result of establishing a new qualifying plan; and make small 
employers eligible for a tax credit equal to 50% of certain 
qualifying employer contributions made to a qualifying 
retirement plan on behalf of non-highly compensated employees.

                    TEXT OF AMENDMENT MADE IN ORDER

 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 
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.

         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 
                  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:
                          ``(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
                  ``(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
          ``(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.
  ``(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 
                        equivalentthereof 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--
                  ``(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 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:
          ``(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
                                  ``(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
                                  (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 plan year              The applicable
                beginning in--                           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              The applicable
                beginning in--                           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), 
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.''.
          (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:
  ``(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.

          ``(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.
                          ``(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.
          (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''.

                   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--
                  (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.
        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.

                                
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