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TITLE
VI--PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS
Subtitle A--Individual
Retirement Accounts
SEC.
601. MODIFICATION OF IRA CONTRIBUTION LIMITS.
(a) Increase
in Contribution Limit.--
(1) In general.--Paragraph
(1)(A) of section <<NOTE: 26 USC
219.>>
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 beginning in: |
The deductible
amount is: |
| 2002 through
2004 |
$3,000
|
| 2005 through
2007 |
$4,000
|
| 2008 and
thereafter |
$5,000.
|
``(B) Catch-up
contributions for individuals 50 or
older.--
``(i) In general.--In
the case of an
individual
who has attained the age of 50 before
the close of
the taxable year, the deductible
amount for
such taxable year shall be increased by
the applicable
amount.
``(ii) Applicable
amount.--For purposes of
clause (i),
the applicable amount shall be the
amount determined
in accordance with the following
table:
``For taxable
years The applicable
beginning in:
amount is:
2002 through
2005........................... $500
2006 and thereafter.........................
$1,000.
``(C) Cost-of-living
adjustment.--
``(i) In general.--In
the case of any taxable
year beginning
in a calendar year after 2008, 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
2007' 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
[[Page 115 STAT.
95]]
amount shall
be rounded to the next lower multiple
of $500.''.
(b) Conforming
Amendments.--
(1) Section
408(a)(1) <<NOTE: 26 USC 408.>> 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) <<NOTE:
Applicability. 26 USC 219 note.>> Effective Date.--The
amendments made
by this section shall apply to taxable years beginning
after December
31, 2001.
SEC.
602. DEEMED IRAs UNDER EMPLOYER PLANS.
(a) In General.--Section
408 (relating to individual retirement
accounts) is
amended by redesignating subsection (q) as subsection (r)
and by inserting
after subsection (p) the following new subsection:
``(q) Deemed
IRAs Under Qualified Employer Plans.--
``(1) General
rule.--If--
``(A) a qualified
employer plan elects to allow
employees to
make voluntary employee contributions to a
separate account
or annuity established under the plan,
and
``(B) under
the terms of the qualified employer
plan, such
account or annuity meets the applicable
requirements
of this section or section 408A for an
individual
retirement account or annuity,
then such account
or annuity shall be treated for purposes of
this title
in the same manner as an individual retirement plan
and not as
a qualified employer plan (and contributions to such
account or
annuity as contributions to an individual retirement
plan and not
to the qualified employer plan). For purposes of
subparagraph
(B), the requirements of subsection (a)(5) shall
not apply.
``(2) Special
rules for qualified employer plans.--For
purposes of
this title, a qualified employer plan shall not fail
to meet any
requirement of this title solely by reason of
establishing
and maintaining a program described in paragraph
(1).
``(3) Definitions.--For
purposes of this subsection--
``(A) Qualified
employer plan.--The term `qualified
employer plan'
has the meaning given such term by
section 72(p)(4);
except such term shall not include a
government
plan which is not a qualified plan unless the
plan is an
eligible deferred compensation plan (as
defined in
section 457(b)).
``(B) Voluntary
employee contribution.--The term
`voluntary
employee contribution' means any contribution
(other than
a mandatory contribution within the meaning
of section
411(c)(2)(C))--
[[Page 115 STAT.
96]]
``(i) which
is made by an individual as an
employee under
a qualified employer plan which
allows employees
to elect to make contributions
described in
paragraph (1), and
``(ii) with
respect to which the individual
has designated
the contribution as a contribution
to which this
subsection applies.''.
(b) Amendment
of ERISA.--
(1) In general.--Section
4 of the Employee Retirement Income
Security Act
of 1974 (29 U.S.C. 1003) is amended by adding at
the end the
following new subsection:
``(c) If a
pension plan allows an employee to elect to make
voluntary employee
contributions to accounts and annuities as provided
in section 408(q)
of the Internal Revenue Code of 1986, such accounts
and annuities
(and contributions thereto) shall not be treated as part
of such plan
(or as a separate pension plan) for purposes of any
provision of
this title other than section 403(c), 404, or 405 (relating
to exclusive
benefit, and fiduciary and co-fiduciary
responsibilities).''.
(2) Conforming
amendment.--Section 4(a) of such Act (29
U.S.C. 1003(a))
is amended by inserting ``or (c)'' after
``subsection
(b)''.
(c) <<NOTE:
Applicability. 26 USC 408 note.>> Effective Date.--The
amendments made
by this section shall apply to plan years beginning
after December
31, 2002.
Subtitle B--Expanding
Coverage
SEC.
611. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined
Benefit Plans.--
(1) Dollar
limit.--
(A) Subparagraph
(A) of section 415(b)(1) <<NOTE: 26
USC 415.>>
(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
in the headings and the text, by
striking ``$90,000''
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
[[Page 115 STAT.
97]]
(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) <<NOTE: 26 USC 415.>> 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
[[Page 115 STAT.
98]]
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) <<NOTE:
26 USC 402.>> 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
[[Page 115 STAT.
99]]
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)
<<NOTE: 26 USC 408.>> (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 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) Certain
Compensation Limits.--
(1) 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).''.
(2) 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).''.
[[Page 115 STAT.
100]]
(h) Rounding
Rule Relating to Defined Benefit Plans and Defined
Contribution
Plans.--Paragraph (4) of section 415(d) <<NOTE: 26 USC
415.>>
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.''.
(i) Effective
Dates.--
(1) <<NOTE:
Applicability. 26 USC 415 note.>> In general.--
The amendments
made by this section shall apply to years
beginning after
December 31, 2001.
(2) Defined
benefit plans.--The amendments made by
subsection
(a) shall apply to years ending after December 31,
2001.
SEC.
612. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE
PROPRIETORS.
(a) In General.--Subparagraph
(B) of section 4975(f )(6) (relating
to exemptions
not to apply to certain transactions) is amended by adding
at the end the
following new clause:
``(iii) Loan
exception.--For purposes of
subparagraph
(A)(i), the term `owner-employee'
shall only
include a person described in subclause
(II) or (III)
of clause (i).''.
(b) 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) <<NOTE:
Applicability. 26 USC 4975 note.>> Effective Date.--The
amendment made
by this section shall apply to years beginning after
December 31,
2001.
SEC.
613. 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 $130,000,'';
(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), and by
inserting the following: ``in the case of
plan years
beginning after December 31, 2002, the
$130,000 amount
in clause (i) shall be adjusted 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, 2001, and any
increase under
this sentence which is not a multiple of
$5,000 shall
be rounded to the next lower multiple of
$5,000.''.
[[Page 115 STAT.
101]]
(2) Conforming
amendment.--Section
416(i)(1)(B)(iii)
<<NOTE: 26 USC 416.>> 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 (and any
reduction under
this sentence shall not be taken into account in
determining
whether section 401(k)(4)(A) applies).''.
(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).''.
[[Page 115 STAT.
102]]
(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 ) <<NOTE:
Applicability. 26 USC 416 note.>> Effective Date.--The
amendments made
by this section shall apply to years beginning after
December 31,
2001.
SEC.
614. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF
DEDUCTION LIMITS.
(a) In General.--Section
404 <<NOTE: 26 USC 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) <<NOTE:
Applicability. 26 USC 404 note.>> Effective Date.--The
amendment made
by this section shall apply to years beginning after
December 31,
2001.
SEC.
615. 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 611, 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) <<NOTE:
Applicability. 26 USC 457 note.>> Effective Date.--The
amendment made
by subsection (a) shall apply to years beginning after
December 31,
2001.
SEC.
616. DEDUCTION LIMITS.
(a) Modification
of Limits.--
(1) Stock bonus
and profit sharing trusts.--
(A) 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
``25 percent''.
(B) Conforming
amendment.--Subparagraph (C) of
section 404(h)(1)
is amended by striking ``15 percent''
each place
it appears and inserting ``25 percent''.
(2) Defined
contribution plans.--
[[Page 115 STAT.
103]]
(A) In general.--Clause
(v) of section <<NOTE: 26
USC 404.>>
404(a)(3)(A) (relating to stock bonus and
profit sharing
trusts) is amended to read as follows:
``(v) Defined
contribution plans subject to
the funding
standards.--Except as provided by the
Secretary,
a defined contribution plan which is
subject to
the funding standards of section 412
shall be treated
in the same manner as a stock
bonus or profit-sharing
plan for purposes of this
subparagraph.''.
(B) Conforming
amendments.--
(i) Section
404(a)(1)(A) is amended by
inserting ``(other
than a trust to which paragraph
(3) applies)''
after ``pension trust''.
(ii) Section
404(h)(2) is amended by striking
``stock bonus
or profit-sharing trust'' and
inserting ``trust
subject to subsection
(a)(3)(A)''.
(iii) The heading
of section 404(h)(2) is
amended by
striking ``stock bonus and profit-
sharing trust''
and inserting ``certain trusts''.
(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' shall
include amounts
treated as `participant's compensation' under
subparagraph
(C) or (D) of section 415(c)(3).''.
(2) Conforming
amendments.--
(A) Subparagraph
(B) of section 404(a)(3) is amended
by striking
the last sentence thereof.
(B) Clause
(i) of section 4972(c)(6)(B) is amended
by striking
``(within the meaning of section 404(a))''
and inserting
``(within the meaning of section 404(a)
and as adjusted
under section 404(a)(12))''.
(c) <<NOTE:
Applicability. 26 USC 404 note.>> Effective Date.--The
amendments made
by this section shall apply to years beginning after
December 31,
2001.
SEC.
617. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX ROTH
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 ROTH
CONTRIBUTIONS.
``(a) General
Rule.--If an applicable retirement plan includes a
qualified Roth
contribution program--
``(1) any designated
Roth 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
Roth Contribution Program.--For purposes of this
section--
``(1) In general.--The
term `qualified Roth contribution
program' means
a program under which an employee may elect to
make designated
Roth contributions in lieu of all or
[[Page 115 STAT.
104]]
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 Roth contribution program unless the
applicable
retirement plan--
``(A) establishes
separate accounts (`designated
Roth accounts')
for the designated Roth 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 Roth
Contributions.--For
purposes of this section--
``(1) Designated
roth contribution.--The term `designated
Roth 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 Roth account
which is otherwise
allowable under this chapter may be
made only if
the contribution is to--
``(i) another
designated Roth 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 Roth 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
Roth 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 Roth 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 Roth contribution to
any designated
[[Page 115 STAT.
105]]
Roth account
established for such individual under
the same applicable
retirement plan, or
``(ii) if a
rollover contribution was made to
such designated
Roth account from a designated
Roth account
previously established for such
individual
under another applicable retirement
plan, the first
taxable year for which the
individual
made a designated Roth 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 any
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 Roth
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
Roth 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) <<NOTE: 26 USC 402.>>
(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(c)(1))
the following new sentence: ``The preceding
sentence shall
not apply the portion of such excess as does not
exceed the
designated Roth 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
Roth account (as defined in section 402A), an
eligible retirement
plan with respect to such portion
shall include
only another designated Roth account and a
Roth IRA.''.
(d) Reporting
Requirements.--
[[Page 115 STAT.
106]]
(1) W-2 information.--Section
6051(a)(8) <<NOTE: 26 USC
6051.>>
is amended by inserting ``, including the amount of
designated
Roth 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
Roth 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 Roth
contributions
(as defined in section 402A) 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
Roth contributions.''.
(f ) <<NOTE:
Applicability. 26 USC 402 note.>> Effective Date.--The
amendments made
by this section shall apply to taxable years beginning
after December
31, 2005.
SEC.
618. NONREFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE
DEFERRALS AND
IRA CONTRIBUTIONS.
(a) In General.--Subpart
A of part IV of subchapter A of chapter 1
(relating to
nonrefundable personal credits) is amended by inserting
after section
25A the following new section:
``SEC. 25B.
ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN
INDIVIDUALS.
``(a) Allowance
of Credit.--In the case of an eligible individual,
there shall
be allowed as a credit against the tax imposed by this
subtitle for
the taxable year an amount equal to the applicable
percentage of
so much of the qualified retirement savings contributions
of the eligible
individual for the taxable year as do not exceed $2,000.
``(b) Applicable
Percentage.--For purposes of this section, the
applicable percentage
is the percentage determined in accordance with
the following
table:
------------------------------------------------------------------------
Adjusted Gross
Income
-------------------------------------------------------------
Joint return
Head of a All other cases Applicable
---------------------
household -------------------- percentage
--------------------
Over Not over
Over Not over Over Not over
------------------------------------------------------------------------
$30,000 ........
$22,500 ........ $15,000 50
30,000 32,500
22,500 24,375 15,000 16,250 20
32,500 50,000
24,375 37,500 16,250 25,000 10
50,000 .........
37,500 ........ 25,000 ........ 0
------------------------------------------------------------------------
``(c) Eligible
Individual.--For purposes of this section--
``(1) In general.--The
term `eligible individual' means any
individual
if such individual has attained the age of 18 as of
the close of
the taxable year.
[[Page 115 STAT.
107]]
``(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 allowed 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)).
``(d) Qualified
Retirement Savings Contributions.--For purposes of
this section--
``(1) In general.--The
term `qualified retirement savings
contributions'
means, with respect to any taxable year, the sum
of--
``(A) the amount
of the qualified retirement
contributions
(as defined in section 219(e)) made by the
eligible individual,
``(B) the amount
of--
``(i) any elective
deferrals (as defined in
section 402(g)(3))
of such individual, and
``(ii) 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
``(C) the amount
of voluntary employee contributions
by such individual
to any qualified retirement plan (as
defined in
section 4974(c)).
``(2) Reduction
for certain distributions.--
``(A) In general.--The
qualified retirement savings
contributions
determined under paragraph (1) shall be
reduced (but
not below zero) by the sum of--
``(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)), received by the
individual
during the testing period which is
includible
in gross income, and
``(ii) any
distribution from a Roth IRA or a
Roth account
received by the individual during the
testing period
which is not a qualified rollover
contribution
(as defined in section 408A(e)) to a
Roth IRA or
a rollover under section 402(c)(8)(B)
to a Roth account.
``(B) Testing
period.--For purposes of subparagraph
(A), the testing
period, with respect to a taxable year,
is the period
which includes--
``(i) such
taxable year,
``(ii) the
2 preceding taxable years, and
``(iii) the
period after such taxable year and
before the
due date (including 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),
and
``(ii) any
distribution to which section
408A(d)(3)
applies.
``(D) Treatment
of distributions received by spouse
of individual.--For
purposes of determining
distributions
received by an individual under
subparagraph
[[Page 115 STAT.
108]]
(A) 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.
``(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) Termination.--This
section shall not apply to taxable years
beginning after
December 31, 2006.''.
(b) Credit
Allowed Against Regular Tax and Alternative Minimum
Tax.--
(1) In general.--Section
25B, <<NOTE: 26 USC 25B.>> as
added by subsection
(a), is amended by inserting after
subsection
(f ) the following new subsection:
``(g) Limitation
Based on Amount of Tax.--The credit allowed under
subsection (a)
for the taxable year shall not exceed the excess of--
``(1) the sum
of the regular tax liability (as defined in
section 26(b))
plus the tax imposed by section 55, over
``(2) the sum
of the credits allowable under this subpart
(other than
this section and section 23) and section 27 for the
taxable year.''.
(2) Conforming
amendments.--
(A) Section
24(b)(3)(B), as amended by sections
201(b) and
203(d), is amended by striking ``section 23''
and inserting
``sections 23 and 25B''.
(B) Section
25(e)(1)(C), as amended by section
201(b), is
amended by inserting ``25B,'' after ``24,''.
(C) Section
26(a)(1), as amended by sections 201(b)
and 203, is
amended by striking ``and 24'' and inserting
``, 24, and
25B''.
(D) Section
904(h), as amended by sections 201(b)
and 203, is
amended by striking ``and 24'' and inserting
``, 24, and
25B''.
(E) Section
1400C(d), as amended by sections 201(b)
and 203, is
amended by striking ``and 24'' and inserting
``, 24, and
25B''.
(c) Conforming
Amendment.--The table of sections for subpart A of
part IV of subchapter
A of chapter 1, as amended by section 432, is
amended by inserting
after the item relating to section 25A the
following new
item:
``Sec. 25B.
Elective deferrals and IRA contributions by
certain individuals.''.
(d) <<NOTE:
Applicability. 26 USC 24 note.>> Effective Date.--The
amendments made
by this section shall apply to taxable years beginning
after December
31, 2001.
SEC.
619. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.
(a) In General.--Subpart
D of part IV of subchapter A of chapter 1
(relating to
business related credits) is amended by adding at the end
the following
new section:
[[Page 115 STAT.
109]]
``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) $500
for the first credit year and each of the 2
taxable years
immediately following the first credit year, and
``(2) 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) Requirement
for new qualified employer plans.--Such
term shall
not include an employer if, during the 3-taxable year
period immediately
preceding the 1st taxable year for which the
credit under
this section is otherwise allowable for a qualified
employer plan
of the employer, the employer or any member of any
controlled
group including the employer (or any predecessor of
either) established
or maintained a qualified employer plan with
respect to
which contributions were made, or benefits were
accrued, for
substantially the same employees as are in the
qualified employer
plan.
``(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 1 participant.--Such
term shall
not include any expense in connection with a
plan that does
not have at least 1 employee eligible to
participate
who is not a highly compensated employee.
``(2) Eligible
employer plan.--The term `eligible employer
plan' means
a qualified employer plan within the meaning of
section 4972(d).
``(3) First
credit year.--The term `first credit year'
means--
``(A) the taxable
year which includes the date that
the eligible
employer plan to which such costs relate
becomes effective,
or
``(B) at the
election of the eligible employer, the
taxable year
preceding the taxable year referred to in
subparagraph
(A).
``(e) Special
Rules.--For purposes of this section--
``(1) Aggregation
rules.--All persons treated as a single
employer under
subsection (a) or (b) of section 52, or
subsection
(n) or (o) of section 414, shall be treated as one
person. All
eligible employer plans shall be treated as 1
eligible employer
plan.
``(2) Disallowance
of deduction.--No deduction shall be
allowed for
that portion of the qualified startup costs paid
[[Page 115 STAT.
110]]
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) <<NOTE:
26 USC 38.>> (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) 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 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 is amended by adding at the end the
following new
item:
``Sec. 45E.
Small employer pension plan startup
costs.''.
(d) <<NOTE:
Applicability. 26 USC 38 note.>> Effective Date.--The
amendments made
by this section shall apply to costs paid or incurred in
taxable years
beginning after December 31, 2001, with respect to
qualified employer
plans established after such date.
SEC.
620. <<NOTE: 26 USC 7801 note.>> 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.
[[Page 115 STAT.
111]]
(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''
means an eligible employer (as defined in section
408(p)(2)(C)(i)(I)
of the Internal Revenue Code of 1986) which has at
least one employee
who is not a highly compensated employee (as defined
in section 414(q))
and is participating in the plan. 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) <<NOTE:
Applicability.>> Effective Date.--The provisions of
this section
shall apply with respect to requests made after December
31, 2001.
SEC.
621. TREATMENT OF NONRESIDENT ALIENS ENGAGED IN INTERNATIONAL
TRANSPORTATION
SERVICES.
(a) Exclusion
From Income Sourcing Rules.--The second sentence of
section 861(a)(3)
<<NOTE: 26 USC 861.>> (relating to gross income from
sources within
the United States) is amended by striking ``except for
purposes of
sections 79 and 105 and subchapter D,''.
(b) <<NOTE:
Applicability. 26 USC 861 note.>> Effective Date.--The
amendment made
by subsection (a) shall apply to remuneration for
services performed
in plan years beginning after December 31, 2001.
Subtitle C--Enhancing
Fairness for Women
SEC.
631. 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) In general.--A
plan shall not permit
additional
elective deferrals under paragraph (1) for
any year in
an amount greater than the lesser of--
``(i) the applicable
dollar amount, or
``(ii) the
excess (if any) of--
``(I) the participant's
compensation
(as defined
in section 415(c)(3)) for
the year, over
``(II) any
other elective deferrals
of the participant
for such year which
are made without
regard to this
subsection.
``(B) Applicable
dollar amount.--For purposes of
this paragraph--
``(i) In the
case of an applicable employer
plan other
than a plan described in section
401(k)(11)
or
[[Page 115 STAT.
112]]
408(p), the
applicable dollar amount shall be
determined
in accordance with the following table:
``For taxable
years The applicable............................
beginning in:
dollar amount is:.........................
2002 $1,000
2003 $2,000
2004 $3,000
2005 $4,000
2006 and thereafter
$5,000.
``(ii) In the
case of an applicable employer
plan described
in section 401(k)(11) or 408(p),
the applicable
dollar amount shall be determined
in accordance
with the following table:
``For taxable
years The applicable............................
beginning in:
dollar amount is:.........................
2002 $500
2003 $1,000
2004 $1,500
2005 $2,000
2006 and thereafter
$2,500.
``(C) 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 subparagraph
(B)(i) and
the $2,500 amount in subparagraph (B)(ii) 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.''.
``(3) Treatment
of contributions.--In the case of any
contribution
to a plan under paragraph (1)--
``(A) such
contribution shall not, with respect to
the year in
which the contribution is made--
``(i) be subject
to any otherwise applicable
limitation
contained in section 402(g), 402(h),
403(b), 404(a),
404(h), 408(k), 408(p), 415, or
457, or
``(ii) be taken
into account in applying such
limitations
to other contributions or benefits
under such
plan or any other such plan, and
``(B) except
as provided in paragraph (4), such plan
shall not be
treated as failing to meet the requirements
of section
401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11),
401(k)(12),
403(b)(12), 408(k), 408(p), 408B, 410(b), or
416 by reason
of the making of (or the right to make)
such contribution.
``(4) Application
of nondiscrimination rules.--
``(A) In general.--An
applicable employer plan shall
be treated
as failing to meet the nondiscrimination
requirements
under section 401(a)(4) with respect to
benefits, rights,
and features unless the plan allows
all eligible
participants to make the same election with
respect to
the additional elective deferrals under this
subsection.
[[Page 115 STAT.
113]]
``(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 or
restriction
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
described 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.''.
(b) <<NOTE:
Effective date. 26 USC 414 note.>> Effective Date.--The
amendment made
by this section shall apply to contributions in taxable
years beginning
after December 31, 2001.
SEC.
632. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED
CONTRIBUTION
PLANS.
(a) Equitable
Treatment.--
(1) In general.--Subparagraph
(B) of section <<NOTE: 26 USC
415.>>
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.--
[[Page 115 STAT.
114]]
(A) Subsection
(f ) of section 72 <<NOTE: 26 USC
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 Economic
Growth and Tax Relief Reconciliation Act of
2001''.
(B) Section
404(a)(10)(B) is amended by striking ``,
the exclusion
allowance under section 403(b)(2),''.
(C) Section
415(a)(2) is amended by striking ``, and
the amount
of the contribution for such portion shall
reduce the
exclusion allowance as provided in section
403(b)(2)''.
(D) Section
415(c)(3) is amended by adding at the
end the following
new subparagraph:
``(E) Annuity
contracts.--In the case of an annuity
contract described
in section 403(b), the term
`participant's
compensation' means the participant's
includible
compensation determined under section
403(b)(3).''.
(E) Section
415(c) is amended by striking paragraph
(4).
(F) Section
415(c)(7) is amended to read as follows:
``(7) Certain
contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding
any other
provision of
this subsection, at the election of a
participant
who is an employee of a church or a
convention
or association of churches, including an
organization
described in section 414(e)(3)(B)(ii),
contributions
and other additions for an annuity
contract or
retirement income account described in
section 403(b)
with respect to such participant, when
expressed as
an annual addition to such participant's
account, shall
be treated as not exceeding the
limitation
of paragraph (1) if such annual addition is
not in excess
of $10,000.
``(B) $40,000
aggregate limitation.--The total
amount of additions
with respect to any participant
which may be
taken into account for purposes of this
subparagraph
for all years may not exceed $40,000.
``(C) Annual
addition.--For purposes of this
paragraph,
the term `annual addition' has the meaning
given such
term by paragraph (2).''.
(G) Subparagraph
(B) of section 402(g)(7) (as
redesignated
by section 611(c)(3)) is amended by
inserting before
the period at the end the following:
``(as in effect
before the enactment of the Economic
Growth and
Tax Relief Reconciliation Act of 2001''.
(H) Section
664(g) is amended--
(i) in paragraph
(3)(E) by striking
``limitations
under section 415(c)'' and inserting
``applicable
limitation under paragraph (7)'', and
(ii) by adding
at the end the following new
paragraph:
``(7) Applicable
limitation.--
``(A) In general.--For
purposes of paragraph (3)(E),
the applicable
limitation under this paragraph with
respect to
a participant is an amount equal to the
lesser of--
``(i) $30,000,
or
``(ii) 25 percent
of the participant's
compensation
(as defined in section 415(c)(3)).
[[Page 115 STAT.
115]]
``(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) <<NOTE:
Applicability. 26 USC 72 note.>> 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 <<NOTE: 26
USC 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) <<NOTE:
26 USC 415 note.>> Effective date.--
(A) <<NOTE:
Applicability.>> 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) <<NOTE:
26 USC 403 note.>> Election to modify section
403(b) exclusion
allowance to conform to section 415
modification.--In
the case of taxable years beginning after
December 31,
1999, and before January 1, 2002, a plan may
disregard the
requirement in the regulations regarding the
exclusion allowance
under section 403(b)(2) of the Internal
Revenue Code
of 1986 that contributions to a defined benefit
pension plan
be treated as previously excluded amounts for
purposes of
the exclusion allowance.
(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) <<NOTE:
Applicability. 26 USC 457 note.>> Effective
date.--The
amendment made by this subsection shall apply to
years beginning
after December 31, 2001.
SEC.
633. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.
(a) In General.--Section
411(a) (relating to minimum vesting
standards) is
amended--
[[Page 115 STAT.
116]]
(1) in paragraph
(2), by striking ``A plan'' and inserting
``Except as
provided in paragraph (12), a plan''; and
(2) by adding
at the end the following:
``(12) Faster
vesting for matching contributions.--In the
case of matching
contributions (as defined in section
401(m)(4)(A)),
paragraph (2) shall be applied--
``(A) by substituting
`3 years' for `5 years' in
subparagraph
(A), and
``(B) by substituting
the following table for the
table contained
in subparagraph (B):
The nonforfeitable
``Years of
service: percentage is:
2...........................................
20
3...........................................
40
4...........................................
60
5...........................................
80
6...........................................
100.''.
(b) Amendment
of ERISA.--Section 203(a) of the Employee Retirement
Income Security
Act of 1974 (29 U.S.C. 1053(a)) is amended--
(1) in paragraph
(2), by striking ``A plan'' and inserting
``Except as
provided in paragraph (4), a plan'', and
(2) by adding
at the end the following:
``(4) In the
case of matching contributions (as defined in
section 401(m)(4)(A)
of the Internal Revenue Code of 1986),
paragraph (2)
shall be applied--
``(A) by substituting
`3 years' for `5 years' in
subparagraph
(A), and
``(B) by substituting
the following table for the
table contained
in subparagraph (B):
The nonforfeitable
``Years of
service: percentage is:
2...........................................
20
3...........................................
40
4...........................................
60
5...........................................
80
6...........................................
100.''.
(c) <<NOTE:
26 USC 411 note.>> Effective Dates.--
(1) <<NOTE:
Applicability.>> 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
[[Page 115 STAT.
117]]
service under
such plan in any plan year to which the amendments
made by this
section apply.
SEC.
634. MODIFICATION TO MINIMUM DISTRIBUTION RULES.
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.
SEC.
635. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 PLAN
BENEFITS UPON
DIVORCE.
(a) In General.--Section
414(p)(11) <<NOTE: 26 USC 414.>> (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) <<NOTE:
Applicability. 26 USC 414 note.>> Effective Date.--The
amendment made
by this section shall apply to transfers, distributions,
and payments
made after December 31, 2001.
SEC.
636. 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) <<NOTE:
Applicability.>> 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) <<NOTE:
Applicability. 26 USC 402 note.>> Effective
date.--The
amendment made by this subsection shall apply to
distributions
made after December 31, 2001.
[[Page 115 STAT.
118]]
SEC.
637. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR DOMESTIC OR
SIMILAR WORKERS.
(a) In General.--Section
4972(c)(6) <<NOTE: 26 USC 4972.>>
(relating to
exceptions to nondeductible contributions), as amended by
section 616,
is amended by striking ``and'' at the end of subparagraph
(A), by striking
the period and inserting ``, or'' 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), as
amended by subsection
(a), 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) <<NOTE:
26 USC 4972 note.>> 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) <<NOTE:
Applicability. 26 USC 4972 note.>> Effective Date.--The
amendments made
by this section shall apply to taxable years beginning
after December
31, 2001.
Subtitle D--Increasing
Portability for Participants
SEC.
641. 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)),
``(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) and (9) of section 402(c) and
[[Page 115 STAT.
119]]
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) <<NOTE: 26 USC
457.>>
(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) which is maintained by an
eligible 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.''.
[[Page 115 STAT.
120]]
(C) 10 percent
additional tax.--Subsection (t) of
section 72
(relating to 10-percent additional tax on
early distributions
from qualified retirement plans) is
amended by
adding at the end the following new
paragraph:
``(9) Special
rule for rollovers to section 457 plans.--For
purposes of
this subsection, a distribution from an eligible
deferred compensation
plan (as defined in section 457(b)) of an
eligible employer
described in section 457(e)(1)(A) shall be
treated as
a distribution from a qualified retirement plan
described in
4974(c)(1) to the extent that such distribution is
attributable
to an amount transferred to an eligible deferred
compensation
plan from a qualified retirement plan (as defined
in section
4974(c)).''.
(b) Allowance
of Rollovers From and To 403(b) Plans.--
(1) Rollovers
from section 403(b) plans.--Section
403(b)(8)(A)(ii)
<<NOTE: 26 USC 403.>> (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''.
[[Page 115 STAT.
121]]
(6) Subparagraphs
(A) and (B) of section 402(f
)(1) <<NOTE:
26 USC 402.>> 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 ) <<NOTE:
26 USC 402 note.>> Effective Date; Special Rule.--
(1) <<NOTE:
Applicability.>> 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.
642. 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) <<NOTE:
Deadline.>> 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.--
[[Page 115 STAT.
122]]
(1) Paragraph
(1) of section 403(b) <<NOTE: 26 USC 403.>>
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) <<NOTE:
26 USC 408 note.>> Effective Date; Special Rule.--
(1) <<NOTE:
Applicability.>> 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.
643. 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--
[[Page 115 STAT.
123]]
``(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) <<NOTE:
Applicability. 26 USC 401 note.>> Effective Date.--The
amendments made
by this section shall apply to distributions made after
December 31,
2001.
SEC.
644. 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) <<NOTE: 26 USC 408.>>
(relating to
rollover contributions), as amended by section 643, 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) <<NOTE:
26 USC 402 note.>> Effective Date.--The amendments made
by this section
shall apply to distributions after December 31, 2001.
SEC.
645. 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
[[Page 115 STAT.
124]]
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) Special
rule for mergers, etc.--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:
[[Page 115 STAT.
125]]
``(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) <<NOTE:
Applicability. 26 USC 411 note.>> 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:
``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,
unless such amendment adversely affects 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.
[[Page 115 STAT.
126]]
1054(g)(2))
is amended by inserting after the second sentence
the following:
``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,
unless such amendment adversely affects
the rights
of any participant in a more than de minimis
manner.''.
(3) Secretary
directed.--Not <<NOTE: Deadline. 26 USC 411
note.>>
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.
<<NOTE: Effective date. Applicability.>> 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.
646. 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) <<NOTE:
26 USC 401 note.>> Effective Date.--The amendments made
by this section
shall apply to distributions after December 31, 2001.
[[Page 115 STAT.
127]]
SEC.
647. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT
PLANS.
(a) Section
403(b) Plans.--Subsection (b) of section 403 <<NOTE: 26
USC 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) Section
457 Plans.--Subsection (e) of section 457, as amended by
section 641,
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) <<NOTE:
Applicability. 26 USC 403 note.>> Effective Date.--The
amendments made
by this section shall apply to trustee-to-trustee
transfers after
December 31, 2001.
SEC.
648. 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.''.
[[Page 115 STAT.
128]]
(b) Eligible
Deferred Compensation Plans.--Clause (i) of section
457(e)(9)(A)
<<NOTE: 26 USC 457.>> 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) <<NOTE:
Applicability. 26 USC 411 note.>> Effective Date.--The
amendments made
by this section shall apply to distributions after
December 31,
2001.
SEC.
649. 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) <<NOTE:
Applicability. 26 USC 457 note.>> Effective Date.--The
amendments made
by subsections (a) and (b) shall apply to distributions
after December
31, 2001.
[[Page 115 STAT.
129]]
Subtitle E--Strengthening
Pension Security and Enforcement
PART I--GENERAL
PROVISIONS
SEC.
651. REPEAL OF 160 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.
(a) Amendments
to Internal Revenue Code.--Section
412(c)(7) <<NOTE:
26 USC 412.>> (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
calendar year-- percentage is--
2002........................................
165
2003........................................
170.''.
(c) <<NOTE:
Applicability. 26 USC 412 note.>> Effective Date.--The
amendments made
by this section shall apply to plan years beginning
after December
31, 2001.
SEC.
652. 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
current liability determined
under section
412(l).
``(ii) Plans
with 100 or less participants.--
For purposes
of this subparagraph, in the case of
a plan which
has 100 or less participants for the
plan year,
unfunded current 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
[[Page 115 STAT.
130]]
becomes effective,
whichever is later, within the
last 2 years.
``(iii) Rule
for determining number of
participants.--For
purposes of determining the
number of plan
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.--In
the case of a plan which,
subject to
section 4041 of the Employee Retirement
Income Security
Act of 1974, terminates during the
plan year,
clause (i) shall be applied by
substituting
for unfunded current liability the
amount required
to make the plan sufficient for
benefit liabilities
(within the meaning of section
4041(d) of
such Act).''.
(b) Conforming
Amendment.--Paragraph (6) of section
4972(c), <<NOTE:
26 USC 4972.>> as amended by sections 616 and 637, is
amended--
(1) by striking
subparagraph (A) and redesignating
subparagraphs
(B) and (C) as subparagraphs (A) and (B),
respectively,
(2) by striking
the first sentence following subparagraph
(B) (as so
redesignated),
(3) by striking
``subparagraph (B)'' in the next to last
sentence and
inserting ``subparagraph (A)'', and
(4) by striking
``Subparagraph (C)'' in the last sentence
and inserting
``Subparagraph (B)''.
(c) <<NOTE:
Applicability. 26 USC 404 note.>> Effective Date.--The
amendments made
by this section shall apply to plan years beginning
after December
31, 2001.
SEC.
653. 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) <<NOTE:
Applicability. 26 USC 4972 note.>> Effective Date.--The
amendment made
by this section shall apply to years beginning after
December 31,
2001.
SEC.
654. 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:
[[Page 115 STAT.
131]]
``(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) <<NOTE: 26 USC
415.>>
(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) <<NOTE:
Applicability. 26 USC 415 note.>> Effective Date.--The
amendments made
by this section shall apply to years beginning after
December 31,
2001.
SEC.
655. 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: <<NOTE: 29 USC 1107 note.>>
``(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) <<NOTE:
29 USC 1107 note.>> 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.
656. 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.--
[[Page 115 STAT.
132]]
``(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) <<NOTE:
Applicability.>> 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),
an 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
[[Page 115 STAT.
133]]
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).
[[Page 115 STAT.
134]]
``(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
and guidance.--
``(A) In general.--The
Secretary shall prescribe
such regulations
as may be necessary to carry out the
purposes of
this subsection.
``(B) Avoidance
or evasion.--The Secretary may, by
regulation
or other guidance of general applicability,
provide that
a nonallocation year occurs in any case in
which the principal
purpose of the ownership structure
of an S corporation
constitutes an avoidance or evasion
of this subsection.''.
(b) Coordination
With Section 4975(e)(7).--The last sentence of
section 4975(e)(7)
<<NOTE: 26 USC 4975.>> (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--
[[Page 115 STAT.
135]]
``(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) <<NOTE:
Applicability. 26 USC 409 note.>> 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.
SEC.
657. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY DISTRIBUTIONS.
(a) Direct
Transfers of Mandatory Distributions.--
(1) In general.--Section
401(a)(31) <<NOTE: 26 USC 401.>>
(relating to
optional direct transfer of eligible rollover
distributions),
as amended by section 643, is amended by
redesignating
subparagraphs (B), (C), and (D) as subparagraphs
(C), (D), and
(E), respectively, and by inserting after
subparagraph
(A) the following new subparagraph:
``(B) Certain
mandatory distributions.--
``(i) In general.--In
case of a trust which is
part of an
eligible plan, such trust shall not
constitute
a qualified trust under this section
unless the
plan of which such trust is a part
provides that
if--
[[Page 115 STAT.
136]]
``(I) a distribution
described in
clause (ii)
in excess of $1,000 is made,
and
``(II) the
distributee does not make
an election
under subparagraph (A) and
does not elect
to receive the
distribution
directly,
the plan administrator
shall make such transfer to
an individual
retirement plan of a designated
trustee or
issuer and shall notify the distributee
in writing
(either separately or as part of the
notice under
section 402(f )) that the
distribution
may be transferred to another
individual
retirement plan.
``(ii) Eligible
plan.--For purposes of clause
(i), the term
`eligible plan' means a plan which
provides that
any nonforfeitable accrued benefit
for which the
present value (as determined under
section 411(a)(11))
does not exceed $5,000 shall
be immediately
distributed to the participant.''.
(2) Conforming
amendments.--
(A) The heading
of section 401(a)(31) is amended by
striking ``Optional
direct'' and inserting ``Direct''.
(B) Section
401(a)(31)(C), as redesignated by
paragraph (1),
is amended by striking ``Subparagraph
(A)'' and inserting
``Subparagraphs (A) and (B)''.
(b) Notice
Requirement.--Subparagraph (A) of section 402(f )(1) is
amended by inserting
before the comma at the end the following: ``and
that the automatic
distribution by direct transfer applies to certain
distributions
in accordance with section 401(a)(31)(B)''.
(c) Fiduciary
Rules.--
(1) In general.--Section
404(c) of the Employee Retirement
Income Security
Act of 1974 (29 U.S.C. 1104(c)) is amended by
adding at the
end the following new paragraph:
``(3) In the
case of a pension plan which makes a transfer
to an individual
retirement account or annuity of a designated
trustee or
issuer under section 401(a)(31)(B) of the Internal
Revenue Code
of 1986, the participant or beneficiary shall, for
purposes of
paragraph (1), be treated as exercising control over
the assets
in the account or annuity upon--
``(A) the earlier
of the earlier of--
``(i) a rollover
of all or a portion of the
amount to another
individual retirement account or
annuity; or
``(ii) one
year after the transfer is made; or
``(B) if the
transfer is made in a manner consistent
with guidance
provided by the Secretary.''.
(2) <<NOTE:
26 USC 401 note.>> Regulations.--
(A) Automatic
<<NOTE: Deadline.>> rollover safe
harbor.--Not
later than 3 years after the date of
enactment of
this Act, the Secretary of Labor shall
prescribe regulations
providing for safe harbors under
which the designation
of an institution and investment
of funds in
accordance with section 401(a)(31)(B) of the
Internal Revenue
Code of 1986 is deemed to satisfy the
fiduciary requirements
of section 404(a) of the Employee
Retirement
Income Security Act of 1974 (29 U.S.C.
1104(a)).
(B) Use of
low-cost individual retirement plans.--
The Secretary
of the Treasury and the Secretary of Labor
[[Page 115 STAT.
137]]
may provide,
and shall give consideration to providing,
special relief
with respect to the use of low-cost
individual
retirement plans for purposes of transfers
under section
401(a)(31)(B) of the Internal Revenue Code
of 1986 and
for other uses that promote the preservation
of assets for
retirement income purposes.
(d) <<NOTE:
Applicability. 26 USC 401 note.>> Effective Date.--The
amendments made
by this section shall apply to distributions made after
final regulations
implementing subsection (c)(2)(A) are prescribed.
SEC.
<<NOTE: 26 USC 404 note.>> 658. CLARIFICATION OF TREATMENT
OF
CONTRIBUTIONS
TO MULTIEMPLOYER PLAN.
(a) Not Considered
Method of Accounting.--For purposes of section
446 of the Internal
Revenue Code of 1986, a determination under section
404(a)(6) of
such Code regarding the taxable year with respect to which
a contribution
to a multiemployer pension plan is deemed made shall not
be treated as
a method of accounting of the taxpayer. No deduction shall
be allowed for
any taxable year for any contribution to a multiemployer
pension plan
with respect to which a deduction was previously allowed.
(b) Regulations.--The
Secretary of the Treasury shall promulgate
such regulations
as necessary to clarify that a taxpayer shall not be
allowed an aggregate
amount of deductions for contributions to a
multiemployer
pension plan which exceeds the amount of such
contributions
made or deemed made under section 404(a)(6) of the
Internal Revenue
Code of 1986 to such plan.
(c) Effective
Date.--Subsection (a), and any regulations promulgated
under subsection
(b), shall be effective for years ending after the date
of the enactment
of this Act.
PART II--TREATMENT
OF PLAN AMENDMENTS REDUCING FUTURE BENEFIT ACCRUALS
SEC.
659. 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.--
[[Page 115 STAT.
138]]
``(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
[[Page 115 STAT.
139]]
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.--Subsection (h) of section 204 of the
Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1054) is
amended to read
as follows:
[[Page 115 STAT.
140]]
``(h)(1) An
applicable pension plan may not be amended so as to
provide for
a significant reduction in the rate of future benefit
accrual unless
the plan administrator provides the notice described in
paragraph (2)
to each applicable individual (and to each employee
organization
representing applicable individuals).
``(2) 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 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--
``(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) Except
as provided in regulations prescribed by the Secretary
of the Treasury,
the notice required by paragraph (1) shall be provided
within a reasonable
time before the effective date of the plan
amendment.
``(4) 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) 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.
``(6)(A) In
the case of any egregious failure to meet any
requirement
of this subsection with respect to any plan amendment, the
provisions of
the applicable pension plan shall be applied as if such
plan amendment
entitled all applicable individuals to the greater of--
``(i) the benefits
to which they would have been entitled
without regard
to such amendment, or
``(ii) the
benefits under the plan with regard to such
amendment.
``(B) For purposes
of subparagraph (A), there is an egregious
failure to meet
the requirements of this subsection if such failure is
within the control
of the plan sponsor and is--
``(i) an intentional
failure (including any failure to
promptly provide
the required notice or information after the
plan administrator
discovers an unintentional failure to meet
the requirements
of this subsection),
``(ii) a failure
to provide most of the individuals with
most of the
information they are entitled to receive under this
subsection,
or
``(iii) a failure
which is determined to be egregious under
regulations
prescribed by the Secretary of the Treasury.
``(7) The Secretary
of the Treasury may by regulations allow any
notice under
this subsection to be provided by using new technologies.
``(8) For purposes
of this subsection--
``(A) The term
`applicable individual' means, with respect
to any plan
amendment--
``(i) each
participant in the plan; and
[[Page 115 STAT.
141]]
``(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.
``(9) For purposes
of this subsection, 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) <<NOTE:
26 USC 4980F note. Applicability.>> 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) 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.
Subtitle F--Reducing
Regulatory Burdens
SEC.
661. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) In General.--Paragraph
(9) of section 412(c) <<NOTE: 26 USC
412.>>
(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.--
[[Page 115 STAT.
142]]
``(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) Use
of 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, 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.''.
(b) Amendment
of ERISA.--Paragraph (9) of section 302(c) of the
Employee Retirement
Income Security Act of 1974 <<NOTE: 29 USC 1082.>>
(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, 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.''.
(c) <<NOTE:
Applicability. 26 USC 412 note.>> Effective Date.--The
amendments made
by this section shall apply to plan years beginning
after December
31, 2001.
SEC.
662. 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) <<NOTE:
Applicability. 26 USC 404 note.>> Effective Date.--The
amendments made
by this section shall apply to taxable years beginning
after December
31, 2001.
SEC.
663. 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 <<NOTE:
26 USC 414 note.>> 1986 is hereby repealed.
[[Page 115 STAT.
143]]
(b) <<NOTE:
Applicability. 26 USC 414 note.>> Effective Date.--The
repeal made
by subsection (a) shall apply to plan years beginning after
December 31,
2001.
SEC.
664. 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.
665. 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) <<NOTE:
Applicability. 26 USC 132 note.>> Effective Date.--The
amendments made
by this section shall apply to years beginning after
December 31,
2001.
SEC.
666. 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
[[Page 115 STAT.
144]]
of this subsection
and subsection (k), including regulations
permitting
appropriate aggregation of plans and
contributions.''.
(b) <<NOTE:
Applicability. 26 USC 401 note.>> Effective Date.--The
amendment made
by this section shall apply to years beginning after
December 31,
2001.
Subtitle G--Miscellaneous
Provisions
SEC.
671. TAX TREATMENT AND INFORMATION REQUIREMENTS OF ALASKA NATIVE
SETTLEMENT
TRUSTS.
(a) Treatment
of Alaska Native Settlement Trusts.--Subpart A of part
I of subchapter
J of chapter 1 (relating to general rules for taxation
of trusts and
estates) is amended by adding at the end the following new
section:
``SEC. 646.
TAX TREATMENT OF ELECTING ALASKA NATIVE SETTLEMENT TRUSTS.
``(a) In General.--If
an election under this section is in effect
with respect
to any Settlement Trust, the provisions of this section
shall apply
in determining the income tax treatment of the Settlement
Trust and its
beneficiaries with respect to the Settlement Trust.
``(b) Taxation
of Income of Trust.--Except as provided in subsection
(f )(1)(B)(ii)--
``(1) In general.--There
is hereby imposed on the taxable
income of an
electing Settlement Trust, other than its net
capital gain,
a tax at the lowest rate specified in section
1(c).
``(2) Capital
gain.--In the case of an electing Settlement
Trust with
a net capital gain for the taxable year, a tax is
hereby imposed
on such gain at the rate of tax which would apply
to such gain
if the taxpayer were subject to a tax on its other
taxable income
at only the lowest rate specified in section
1(c).
Any such tax
shall be in lieu of the income tax otherwise imposed by
this chapter
on such income or gain.
``(c) One-Time
Election.--
``(1) In general.--A
Settlement Trust may elect to have the
provisions
of this section apply to the trust and its
beneficiaries.
``(2) Time
and method of election.--An election under
paragraph (1)
shall be made by the trustee of such trust--
``(A) on or
before the due date (including
extensions)
for filing the Settlement Trust's return of
tax for the
first taxable year of such trust ending
after the date
of the enactment of this section, and
``(B) by attaching
to such return of tax a statement
specifically
providing for such election.
``(3) Period
election in effect.--Except as provided in
subsection
(f ), an election under this subsection--
``(A) shall
apply to the first taxable year
described in
paragraph (2)(A) and all subsequent taxable
years, and
``(B) may not
be revoked once it is made.
``(d) Contributions
to Trust.--
``(1) Beneficiaries
of electing trust not taxed on
contributions.--In
the case of an electing Settlement Trust, no
amount shall
be includible in the gross income of a beneficiary
of such trust
by reason of a contribution to such trust.
[[Page 115 STAT.
145]]
``(2) Earnings
and profits.--The earnings and profits of the
sponsoring
Native Corporation shall not be reduced on account of
any contribution
to such Settlement Trust.
``(e) Tax Treatment
of Distributions to Beneficiaries.--Amounts
distributed
by an electing Settlement Trust during any taxable year
shall be considered
as having the following characteristics in the hands
of the recipient
beneficiary:
``(1) First,
as amounts excludable from gross income for the
taxable year
to the extent of the taxable income of such trust
for such taxable
year (decreased by any income tax paid by the
trust with
respect to the income) plus any amount excluded from
gross income
of the trust under section 103.
``(2) Second,
as amounts excludable from gross income to the
extent of the
amount described in paragraph (1) for all taxable
years for which
an election is in effect under subsection (c)
with respect
to the trust, and not previously taken into account
under paragraph
(1).
``(3) Third,
as amounts distributed by the sponsoring Native
Corporation
with respect to its stock (within the meaning of
section 301(a))
during such taxable year and taxable to the
recipient beneficiary
as amounts described in section 301(c)(1),
to the extent
of current or accumulated earnings and profits of
the sponsoring
Native Corporation as of the close of such
taxable year
after proper adjustment is made for all
distributions
made by the sponsoring Native Corporation during
such taxable
year.
``(4) Fourth,
as amounts distributed by the trust in excess
of the distributable
net income of such trust for such taxable
year.
Amounts distributed
to which paragraph (3) applies shall not be treated
as a corporate
distribution subject to section 311(b), and for purposes
of determining
the amount of a distribution for purposes of paragraph
(3) and the
basis to the recipients, section 643(e) and not section 301
(b) or (d) shall
apply.
``(f ) Special
Rules Where Transfer Restrictions Modified.--
``(1) Transfer
of beneficial interests.--If, at any time, a
beneficial
interest in an electing Settlement Trust may be
disposed of
to a person in a manner which would not be permitted
by section
7(h) of the Alaska Native Claims Settlement Act (43
U.S.C. 1606(h))
if such interest were Settlement Common Stock--
``(A) no election
may be made under subsection (c)
with respect
to such trust, and
``(B) if such
an election is in effect as of such
time--
``(i) such
election shall cease to apply as of
the first day
of the taxable year in which such
disposition
is first permitted,
``(ii) the
provisions of this section shall
not apply to
such trust for such taxable year and
all taxable
years thereafter, and
``(iii) the
distributable net income of such
trust shall
be increased by the current or
accumulated
earnings and profits of the sponsoring
Native Corporation
as of the close of such taxable
year after
proper adjustment is made for all
distributions
made by the
[[Page 115 STAT.
146]]
sponsoring
Native Corporation during such taxable
year.
In no event
shall the increase under clause (iii) exceed the
fair market
value of the trust's assets as of the date the
beneficial
interest of the trust first becomes so disposable.
The earnings
and profits of the sponsoring Native Corporation
shall be adjusted
as of the last day of such taxable year by the
amount of earnings
and profits so included in the distributable
net income
of the trust.
``(2) Stock
in corporation.--If--
``(A) stock
in the sponsoring Native Corporation may
be disposed
of to a person in a manner which would not
be permitted
by section 7(h) of the Alaska Native Claims
Settlement
Act (43 U.S.C. 1606(h)) if such stock were
Settlement
Common Stock, and
``(B) at any
time after such disposition of stock is
first permitted,
such corporation transfers assets to a
Settlement
Trust,
paragraph (1)(B)
shall be applied to such trust on and after the
date of the
transfer in the same manner as if the trust
permitted dispositions
of beneficial interests in the trust in a
manner not
permitted by such section 7(h).
``(3) Certain
distributions.--For purposes of this section,
the surrender
of an interest in a Native Corporation or an
electing Settlement
Trust in order to accomplish the whole or
partial redemption
of the interest of a shareholder or
beneficiary
in such corporation or trust, or to accomplish the
whole or partial
liquidation of such corporation or trust, shall
be deemed to
be a transfer permitted by section 7(h) of the
Alaska Native
Claims Settlement Act.
``(g) Taxable
Income.--For purposes of this title, the taxable
income of an
electing Settlement Trust shall be determined under section
641(b) without
regard to any deduction under section 651 or 661.
``(h) Definitions.--For
purposes of this section--
``(1) Electing
settlement trust.--The term `electing
Settlement
Trust' means a Settlement Trust which has made the
election, effective
for a taxable year, described in subsection
(c).
``(2) Native
corporation.--The term `Native Corporation' has
the meaning
given such term by section 3(m) of the Alaska Native
Claims Settlement
Act (43 U.S.C. 1602(m)).
``(3) Settlement
common stock.--The term `Settlement Common
Stock' has
the meaning given such term by section 3(p) of the
Alaska Native
Claims Settlement Act (43 U.S.C. 1602(p)).
``(4) Settlement
trust.--The term `Settlement Trust' means a
trust that
constitutes a settlement trust under section 3(t) of
the Alaska
Native Claims Settlement Act (43 U.S.C. 1602(t)).
``(5) Sponsoring
native corporation.--The term `sponsoring
Native Corporation'
means the Native Corporation which transfers
assets to an
electing Settlement Trust.
``(i) Special
Loss Disallowance Rule.--Any loss that would otherwise
be recognized
by a shareholder upon a disposition of a share of stock of
a sponsoring
Native Corporation shall be reduced (but not below zero) by
the per share
loss adjustment factor. The
[[Page 115 STAT.
147]]
per share loss
adjustment factor shall be the aggregate of all
contributions
to all electing Settlement Trusts sponsored by such Native
Corporation
made on or after the first day each trust is treated as an
electing Settlement
Trust expressed on a per share basis and determined
as of the day
of each such contribution.
``( j) Cross
Reference.--
``For information
required with respect to electing
Settlement
Trusts and sponsoring Native Corporations,
see section
6039H.''.
(b) Reporting.--Subpart
A of part III of subchapter A of chapter 61
of subtitle
F (relating to information concerning persons subject to
special provisions)
is amended by inserting after section 6039G the
following new
section:
``SEC. 6039H.
INFORMATION WITH RESPECT TO ALASKA NATIVE SETTLEMENT
TRUSTS AND
SPONSORING NATIVE CORPORATIONS.
``(a) Requirement.--The
fiduciary of an electing Settlement Trust
(as defined
in section 646(h)(1)) shall include with the return of
income of the
trust a statement containing the information required
under subsection
(c).
``(b) Application
With Other Requirements.--The filing of any
statement under
this section shall be in lieu of the reporting
requirements
under section 6034A to furnish any statement to a
beneficiary
regarding amounts distributed to such beneficiary (and such
other reporting
rules as the Secretary deems appropriate).
``(c) Required
Information.--The information required under this
subsection shall
include--
``(1) the amount
of distributions made during the taxable
year to each
beneficiary,
``(2) the treatment
of such distribution under the
applicable
provision of section 646, including the amount that
is excludable
from the recipient beneficiary's gross income
under section
646, and
``(3) the amount
(if any) of any distribution during such
year that is
deemed to have been made by the sponsoring Native
Corporation
(as defined in section 646(h)(5)).
``(d) Sponsoring
Native Corporation.--
``(1) In general.--The
electing Settlement Trust shall, on
or before the
date on which the statement under subsection (a)
is required
to be filed, furnish such statement to the
sponsoring
Native Corporation (as so defined).
``(2) Distributees.--The
sponsoring Native Corporation shall
furnish each
recipient of a distribution described in section
646(e)(3) a
statement containing the amount deemed to have been
distributed
to such recipient by such corporation for the
taxable year.''.
(c) Clerical
Amendment.--
(1) The table
of sections for subpart A of part I of
subchapter
J of chapter 1 of such Code is amended by adding at
the end the
following new item:
``Sec. 646.
Tax treatment of electing Alaska Native
Settlement
Trusts.''.
(2) The table
of sections for subpart A of part III of
subchapter
A of chapter 61 of subtitle F of such Code is amended
[[Page 115 STAT.
148]]
by inserting
after the item relating to section 6039G the
following new
item:
``Sec. 6039H.
Information with respect to Alaska Native
Settlement
Trusts and sponsoring Native
Corporations.''.
(d) <<NOTE:
Applicability. 26 USC 646 note.>> Effective Date.--The
amendments made
by this section shall apply to taxable years ending
after the date
of the enactment of this Act and to contributions made to
electing Settlement
Trusts for such year or any subsequent year.
HTML>
TITLE VI--PENSION
AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS
Subtitle A--Individual
Retirement Accounts
SEC. 601. MODIFICATION
OF IRA CONTRIBUTION LIMITS.
(a) Increase
in Contribution Limit.--
(1) In general.--Paragraph
(1)(A) of section <<NOTE: 26 USC
219.>>
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 through
2004........................... $3,000
2005 through
2007........................... $4,000
2008 and thereafter.........................
$5,000.
``(B) Catch-up
contributions for individuals 50 or
older.--
``(i) In general.--In
the case of an
individual
who has attained the age of 50 before
the close of
the taxable year, the deductible
amount for
such taxable year shall be increased by
the applicable
amount.
``(ii) Applicable
amount.--For purposes of
clause (i),
the applicable amount shall be the
amount determined
in accordance with the following
table:
``For taxable
years The applicable
beginning in:
amount is:
2002 through
2005........................... $500
2006 and thereafter.........................
$1,000.
``(C) Cost-of-living
adjustment.--
``(i) In general.--In
the case of any taxable
year beginning
in a calendar year after 2008, 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
2007' 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
[[Page 115 STAT.
95]]
amount shall
be rounded to the next lower multiple
of $500.''.
(b) Conforming
Amendments.--
(1) Section
408(a)(1) <<NOTE: 26 USC 408.>> 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) <<NOTE:
Applicability. 26 USC 219 note.>> Effective Date.--The
amendments made
by this section shall apply to taxable years beginning
after December
31, 2001.
SEC. 602. DEEMED
IRAs UNDER EMPLOYER PLANS.
(a) In General.--Section
408 (relating to individual retirement
accounts) is
amended by redesignating subsection (q) as subsection (r)
and by inserting
after subsection (p) the following new subsection:
``(q) Deemed
IRAs Under Qualified Employer Plans.--
``(1) General
rule.--If--
``(A) a qualified
employer plan elects to allow
employees to
make voluntary employee contributions to a
separate account
or annuity established under the plan,
and
``(B) under
the terms of the qualified employer
plan, such
account or annuity meets the applicable
requirements
of this section or section 408A for an
individual
retirement account or annuity,
then such account
or annuity shall be treated for purposes of
this title
in the same manner as an individual retirement plan
and not as
a qualified employer plan (and contributions to such
account or
annuity as contributions to an individual retirement
plan and not
to the qualified employer plan). For purposes of
subparagraph
(B), the requirements of subsection (a)(5) shall
not apply.
``(2) Special
rules for qualified employer plans.--For
purposes of
this title, a qualified employer plan shall not fail
to meet any
requirement of this title solely by reason of
establishing
and maintaining a program described in paragraph
(1).
``(3) Definitions.--For
purposes of this subsection--
``(A) Qualified
employer plan.--The term `qualified
employer plan'
has the meaning given such term by
section 72(p)(4);
except such term shall not include a
government
plan which is not a qualified plan unless the
plan is an
eligible deferred compensation plan (as
defined in
section 457(b)).
``(B) Voluntary
employee contribution.--The term
`voluntary
employee contribution' means any contribution
(other than
a mandatory contribution within the meaning
of section
411(c)(2)(C))--
[[Page 115 STAT.
96]]
``(i) which
is made by an individual as an
employee under
a qualified employer plan which
allows employees
to elect to make contributions
described in
paragraph (1), and
``(ii) with
respect to which the individual
has designated
the contribution as a contribution
to which this
subsection applies.''.
(b) Amendment
of ERISA.--
(1) In general.--Section
4 of the Employee Retirement Income
Security Act
of 1974 (29 U.S.C. 1003) is amended by adding at
the end the
following new subsection:
``(c) If a
pension plan allows an employee to elect to make
voluntary employee
contributions to accounts and annuities as provided
in section 408(q)
of the Internal Revenue Code of 1986, such accounts
and annuities
(and contributions thereto) shall not be treated as part
of such plan
(or as a separate pension plan) for purposes of any
provision of
this title other than section 403(c), 404, or 405 (relating
to exclusive
benefit, and fiduciary and co-fiduciary
responsibilities).''.
(2) Conforming
amendment.--Section 4(a) of such Act (29
U.S.C. 1003(a))
is amended by inserting ``or (c)'' after
``subsection
(b)''.
(c) <<NOTE:
Applicability. 26 USC 408 note.>> Effective Date.--The
amendments made
by this section shall apply to plan years beginning
after December
31, 2002.
Subtitle B--Expanding
Coverage
SEC. 611. INCREASE
IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined
Benefit Plans.--
(1) Dollar
limit.--
(A) Subparagraph
(A) of section 415(b)(1) <<NOTE: 26
USC 415.>>
(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
in the headings and the text, by
striking ``$90,000''
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
[[Page 115 STAT.
97]]
(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) <<NOTE: 26 USC 415.>> 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
[[Page 115 STAT.
98]]
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) <<NOTE:
26 USC 402.>> 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
[[Page 115 STAT.
99]]
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)
<<NOTE: 26 USC 408.>> (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 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) Certain
Compensation Limits.--
(1) 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).''.
(2) 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).''.
[[Page 115 STAT.
100]]
(h) Rounding
Rule Relating to Defined Benefit Plans and Defined
Contribution
Plans.--Paragraph (4) of section 415(d) <<NOTE: 26 USC
415.>>
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.''.
(i) Effective
Dates.--
(1) <<NOTE:
Applicability. 26 USC 415 note.>> In general.--
The amendments
made by this section shall apply to years
beginning after
December 31, 2001.
(2) Defined
benefit plans.--The amendments made by
subsection
(a) shall apply to years ending after December 31,
2001.
SEC. 612. PLAN
LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE
PROPRIETORS.
(a) In General.--Subparagraph
(B) of section 4975(f )(6) (relating
to exemptions
not to apply to certain transactions) is amended by adding
at the end the
following new clause:
``(iii) Loan
exception.--For purposes of
subparagraph
(A)(i), the term `owner-employee'
shall only
include a person described in subclause
(II) or (III)
of clause (i).''.
(b) 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) <<NOTE:
Applicability. 26 USC 4975 note.>> Effective Date.--The
amendment made
by this section shall apply to years beginning after
December 31,
2001.
SEC. 613. 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 $130,000,'';
(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), and by
inserting the following: ``in the case of
plan years
beginning after December 31, 2002, the
$130,000 amount
in clause (i) shall be adjusted 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, 2001, and any
increase under
this sentence which is not a multiple of
$5,000 shall
be rounded to the next lower multiple of
$5,000.''.
[[Page 115 STAT.
101]]
(2) Conforming
amendment.--Section
416(i)(1)(B)(iii)
<<NOTE: 26 USC 416.>> 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 (and any
reduction under
this sentence shall not be taken into account in
determining
whether section 401(k)(4)(A) applies).''.
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