HR 1590 IH

To provide retirement security for all Americans.

April 28, 1999

Mr. GEJDENSON (for himself, Mr. GEPHARDT, Mr. BONIOR, Mr. RANGEL, Mr. CLAY, Mr. ANDREWS, Mr. NEAL of Massachusetts, Mr. POMEROY, Mr. FROST, Mr. MENENDEZ, Ms. DELAURO, Mr. KENNEDY of Rhode Island, Mr. NADLER, Mr. CROWLEY, Mr. BRADY of Pennsylvania, Ms. NORTON, Mrs. CAPPS, Mr. BROWN of Ohio, Mr. GREEN of Texas, Mr. VENTO, Mr. BALDACCI, Mr. FILNER, Mr. MCGOVERN, Ms. PELOSI, Mr. DIXON, Mr. DEFAZIO, Mr. UNDERWOOD, Mr. PALLONE, Mr. SHOWS, Mr. OBERSTAR, Mrs. MINK of Hawaii, Mr. FALEOMAVAEGA, Ms. SCHAKOWSKY, Mr. KILDEE, Mr. OLVER, Mr. STRICKLAND, Ms. LOFGREN, Mr. GEORGE MILLER of California, Mr. KLECZKA, Mr. JEFFERSON, Mr. LAFALCE, Mr. SANDLIN, Mr. FORD, Mr. LEWIS of Georgia, Mr. INSLEE, Mr. HILLIARD, Mr. MCNULTY, Ms. KILPATRICK, Mr. FRANK of Massachusetts, Ms. KAPTUR, Mr. WEINER, Mr. MOORE, Mr. PRICE of North Carolina, Mr. HINCHEY, Mr. DELAHUNT, Ms. BERKLEY, Mrs. MEEK of Florida, Mr. WYNN, Mr. RAHALL, Mr. BOUCHER, Mr. CUMMINGS, Mr. GUTIERREZ, Mr. DOYLE, Mr. KUCINICH, Mr. MOAKLEY, Mr. WISE, Mr. CLYBURN, Mr. ACKERMAN, Ms. BROWN of Florida, Ms. LEE, Mrs. MALONEY of New York, Mr. BERMAN, Ms. STABENOW, Mr. TIERNEY, Mr. MALONEY of Connecticut, Mr. WAXMAN, Ms. MILLENDER-MCDONALD, Ms. EDDIE BERNICE JOHNSON of Texas, Mr. LAMPSON, Mr. MARTINEZ, Mr. GONZALEZ, Mr. WEXLER, Ms. JACKSON-LEE of Texas, Mr. DINGELL, Mrs. LOWEY, Mr. CAPUANO, Mr. ALLEN, Mr. STARK, Ms. WOOLSEY, Mr. EVANS, Mrs. THURMAN, Mr. MARKEY, Mr. SABO, Ms. WATERS, Mr. HASTINGS of Florida, Mr. BLAGOJEVICH, Mr. ENGEL, Ms. ROYBAL-ALLARD, and Mrs. NAPOLITANO) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Education and the Workforce, Government Reform, and Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To provide retirement security for all Americans.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Retirement Security Act of 1999'.

SEC. 2. TABLE OF CONTENTS.

The table of contents for this Act is as follows:

Sec. 1. Short title.

Sec. 2. Table of contents.

TITLE I--PENSION ACCESS AND COVERAGE

Sec. 100. Amendment of 1986 Code.

Subtitle A--Improved Access to Individual Retirement Savings

Sec. 101. Credit for pension plan startup costs of small employers.

Sec. 102. Exclusion for payroll deduction contributions to IRAs.

Sec. 103. Nonrefundable tax credit for contributions to individual retirement plans.

Sec. 104. Distributions from certain plans may be used without penalty during periods of unemployment.

Subtitle B--Secure Money Annuity or Retirement (SMART) Trusts

Sec. 111. Secure money annuity or retirement (SMART) trusts.

Subtitle C--Improved Fairness in Retirement Plan Benefits

Sec. 121. Amendments to SIMPLE retirement accounts.

Sec. 122. Nondiscrimination rules for qualified cash or deferred arrangements and matching contributions.

Sec. 123. Definition of highly compensated employees.

Sec. 124. Treatment of multiemployer plans under section 415.

Sec. 125. Exemption of mirror plans from section 457 limits.

Sec. 126. Immediate participation in the thrift savings plan for Federal employees.

Sec. 127. Full funding limitation for multiemployer plans.

Sec. 128. Elimination of partial termination rules for multiemployer plans.

Sec. 129. Repeal of 150 percent of current liability funding limit.

TITLE II--SECURITY

Sec. 200. Amendment of ERISA.

Subtitle A--General Provisions

Sec. 201. Periodic pension benefits statements.

Sec. 202. Requirement of annual, detailed investment reports applied to certain 401(k) plans.

Sec. 203. Information required to be provided to investment managers of 401(k) plans.

Sec. 204. Study on investments in collectibles.

Sec. 205. Qualified employer plans prohibited from making loans through credit cards and other intermediaries.

Sec. 206. Multiemployer plan benefits guaranteed.

Sec. 207. Prohibited transactions.

Sec. 208. Substantial owner benefits.

Sec. 209. Reversion report.

Subtitle B--ERISA Enforcement

Sec. 211. Civil penalties for breach of fiduciary responsibilities made discretionary, etc.

Sec. 212. Reporting and enforcement requirements for employee benefit plans.

Sec. 213. Additional requirements for qualified public accountants.

Sec. 214. Inspector General study.

Subtitle C--Increase in Excise Tax on Employer Reversions

Sec. 221. Increase in excise tax.

TITLE III--PORTABILITY

Sec. 301. Faster vesting of employer matching contributions.

Sec. 302. Rationalization of the restrictions on distributions from 401(k) plans.

Sec. 303. Treatment of transfers between defined contribution plans.

Sec. 304. Missing participants.

Sec. 305. Allowance of rollovers from and to 403(b) plans.

Sec. 306. Rollover contributions from deferred compensation plans of State and local governments.

Sec. 307. Extension of 60-day rollover period in the case of Presidentially declared disasters and service in combat zone.

Sec. 308. Purchase of service credit in governmental defined benefit plans.

TITLE IV--COMPREHENSIVE WOMEN'S PENSION PROTECTION

Subtitle A--Pension Reform

Sec. 401. Pension right to know proposals.

Sec. 402. Women's pension toll-free phone number.

Sec. 403. Modification of government pension offset.

Sec. 404. Family leave provisions.

Sec. 405. Pension integration rules.

Sec. 406. Division of pension benefits upon divorce.

Sec. 407. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee.

Sec. 408. Effective dates.

Subtitle B--Protection of Rights of Former Spouses to Pension Benefits Under Certain Government and Government-Sponsored Retirement Programs

Sec. 411. Extension of tier II railroad retirement benefits to surviving former spouses pursuant to divorce agreements.

Sec. 412. Survivor annuities for widows, widowers, and former spouses of Federal employees who die before attaining age for deferred annuity under civil service retirement system.

Sec. 413. Payment of lump-sum benefits to former spouses of Federal employees.

Subtitle C--Modifications of Joint and Survivor Annuity Requirements

Sec. 421. Modifications of joint and survivor annuity requirements.

Sec. 422. Spousal consent required for distributions from defined contribution plans.

TITLE V--DATE FOR ADOPTION OF PLAN AMENDMENTS

Sec. 501. Date for adoption of plan amendments.

TITLE I--PENSION ACCESS AND COVERAGE

SEC. 100. AMENDMENT OF 1986 CODE.

Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

Subtitle A--Improved Access to Individual Retirement Savings

SEC. 101. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.

`(a) GENERAL RULE- For purposes of section 38, in the case of an eligible employer, the small employer pension plan startup cost credit determined under this section for any taxable year is an amount equal to 50 percent of the qualified startup costs paid or incurred by the taxpayer during the taxable year.

`(b) DOLLAR LIMITATION- The amount of the credit determined under this section for any taxable year shall not exceed--

`(1) $1,000 for the first credit year,

`(2) $500 for each of the 2 taxable years immediately following the first credit year, and

`(3) zero for any other taxable year.

`(c) ELIGIBLE EMPLOYER- For purposes of this section--

`(1) IN GENERAL- The term `eligible employer' has the meaning given such term by section 408(p)(2)(C)(i).

`(2) EMPLOYERS MAINTAINING QUALIFIED PLANS DURING 1997 NOT ELIGIBLE- Such term shall not include an employer if such employer (or any predecessor employer) maintained a qualified plan (as defined in section 408(p)(2)(D)(ii)) with respect to which contributions were made, or benefits were accrued, for service in 1997. If only individuals other than employees described in subparagraph (A) or (B) of section 410(b)(3) are eligible to participate in the qualified employer plan referred to in subsection (d)(1), then the preceding sentence shall be applied without regard to any qualified plan in which only employees so described are eligible to participate.

`(d) OTHER DEFINITIONS- For purposes of this section--

`(1) QUALIFIED STARTUP COSTS-

`(A) IN GENERAL- The term `qualified startup costs' means any ordinary and necessary expenses of an eligible employer which are paid or incurred in connection with--

`(i) the establishment or administration of an eligible employer plan, or

`(ii) the retirement-related education of employees with respect to such plan.

`(B) PLAN MUST HAVE AT LEAST 2 PARTICIPANTS- Such term shall not include any expense in connection with a plan that does not have at least 2 individuals who are eligible to participate.

`(C) PLAN MUST BE ESTABLISHED BEFORE JANUARY 1, 2002- Such term shall not include any expense in connection with a plan established after December 31, 2001.

`(2) ELIGIBLE EMPLOYER PLAN- The term `eligible employer plan' means a qualified employer plan within the meaning of section 4972(d), or a qualified payroll deduction arrangement within the meaning of section 408(q)(1) (whether or not an election is made under section 408(q)(2)). A qualified payroll deduction arrangement shall be treated as an eligible employer plan only if all employees of the employer who--

`(A) have been employed for 90 days, and

`(B) are not described in subparagraph (A) or (C) of section 410(b)(3),

are eligible to make the election under section 408(q)(1)(A).

`(3) FIRST CREDIT YEAR- The term `first credit year' means--

`(A) the taxable year which includes the date that the eligible employer plan to which such costs relate becomes effective, or

`(B) at the election of the eligible employer, the taxable year preceding the taxable year referred to in subparagraph (A).

`(e) SPECIAL RULES- For purposes of this section--

`(1) AGGREGATION RULES- All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (n) or (o) of section 414, shall be treated as one person. All eligible employer plans shall be treated as 1 eligible employer plan.

`(2) DISALLOWANCE OF DEDUCTION- No deduction shall be allowed for that portion of the qualified startup costs paid or incurred for the taxable year which is equal to the credit determined under subsection (a).

`(3) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.'

(b) CREDIT ALLOWED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b) (defining current year business credit) is amended by striking `plus' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting `, plus', and by adding at the end the following new paragraph:

`(13) in the case of an eligible employer (as defined in section 45D(c)), the small employer pension plan startup cost credit determined under section 45D(a).'

(c) CONFORMING AMENDMENTS-

(1) Section 39(d) is amended by adding at the end the following new paragraph:

`(8) NO CARRYBACK OF SMALL EMPLOYER PENSION PLAN STARTUP COST CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the small employer pension plan startup cost credit determined under section 45D may be carried back

to a taxable year ending on or before the date of the enactment of section 45D.'

(2) Subsection (c) of section 196 is amended by striking `and' at the end of paragraph (7), by striking the period at the end of paragraph (8) and inserting `, and', and by adding at the end the following new paragraph:

`(9) the small employer pension plan startup cost credit determined under section 45D(a).'

(3) The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item:

`Sec. 45D. Small employer pension plan startup costs.'

(d) EFFECTIVE DATE- The amendments made by this section shall apply to costs paid or incurred in taxable years ending after the date of the enactment of this Act.

SEC. 102. EXCLUSION FOR PAYROLL DEDUCTION CONTRIBUTIONS TO IRAS.

(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) QUALIFIED PAYROLL DEDUCTION ARRANGEMENT FOR IRA CONTRIBUTIONS-

`(1) IN GENERAL- For purposes of this title, the term `qualified payroll deduction arrangement' means a written arrangement of an employer under which--

`(A) an employee eligible to participate in the arrangement may elect to have the employer make payments--

`(i) to the employee directly in cash, or

`(ii) as elective employer contributions to an individual retirement plan (as defined in section 7701(a)(37)), other than an individual retirement plan described in section 408(k), 408(p), or 408A(b), on behalf of the employee for the taxable year in which the payments otherwise would have been made to the employee directly in cash,

`(B) the amount which the employee may elect under subparagraph (A) for any year may not exceed a total of $2,000,

`(C) no other contributions may be made other than contributions described in subparagraph (A),

`(D) the employee's rights to any contributions made to an individual retirement plan are nonforfeitable (for this purpose, rules similar to the rules of subsection (k)(4) shall apply), and

`(E) the employer makes the elective employer contributions under subparagraph (A) not later than the close of the 30-day period following the last day of the month with respect to which the contributions are to be made.

`(2) ELECTION NOT TO HAVE SUBSECTION APPLY- An employer that maintains an arrangement otherwise described in paragraph (1) may elect to have contributions treated as though they were not made under such an arrangement. If an employer does not make an election described in the preceding sentence, an employee may elect, before any contributions are made for the calendar year, to have contributions on behalf of the employee treated as though they were not made under an arrangement described in paragraph (1). An employer shall be deemed to have made an election under this paragraph for a year if the employer maintained a qualified plan with respect to which contributions were made or benefits were accrued for such year. For purposes of the preceding sentence, the term `qualified plan' means a plan, contract, pension, or trust described in subparagraph (A) or (B) of section 219(g)(5).'.

(b) TAX TREATMENT OF EMPLOYER CONTRIBUTIONS MADE UNDER A QUALIFIED PAYROLL DEDUCTION ARRANGEMENT-

(1) COORDINATION WITH DEDUCTION UNDER SECTION 219-

(A) Section 219(b) (relating to maximum amount of deduction) is amended by adding at the end the following new paragraph:

`(5) SPECIAL RULE FOR CONTRIBUTIONS UNDER A QUALIFIED PAYROLL DEDUCTION ARRANGEMENT- This section shall not apply with respect to any amount contributed under a qualified payroll deduction arrangement described in section 408(q)(1) (for which an election has not been made under section 408(q)(2)).'.

(B) Section 219(g)(1) (relating to the limitation on deduction for active participants) is amended to read as follows:

`(1) IN GENERAL- If (for any part of any plan year ending with or within a taxable year) an individual is an active participant, each of the dollar limitations contained in subsections (b)(1)(A) and (c)(1)(A) for such taxable year shall be reduced (but not below zero) by the sum of--

`(A) the amount determined under paragraph (2), and

`(B) the amount contributed for the taxable year under a qualified payroll deduction arrangement described in section 408(q)(1) (for which an election has not been made under section 408(q)(2)).'.

(2) DEDUCTIBILITY OF EMPLOYER CONTRIBUTIONS- Section 404 (relating to deductions for contributions of an employer to pension, etc., plans) is amended by adding at the end the following new subsection:

`(n) SPECIAL RULES FOR CONTRIBUTIONS UNDER A QUALIFIED PAYROLL DEDUCTION ARRANGEMENT- Rules similar to the rules of subsection (m) shall apply to employer contributions made under a qualified payroll deduction arrangement described in section 408(q)(1) (for which an election has not been made under section 408(q)(2)).'.

(3) CONTRIBUTIONS AND DISTRIBUTIONS- Section 402 (relating to taxability of beneficiary of employees' trust) is amended by adding at the end the following new subsection:

`(l) TREATMENT OF CONTRIBUTIONS AND DISTRIBUTIONS UNDER A QUALIFIED PAYROLL DEDUCTION ARRANGEMENT- Rules similar to the rules of paragraphs (1) and (3) of subsection (h) shall apply to contributions and distributions made with respect to an individual retirement plan under a qualified payroll deduction arrangement described in section 408(q)(1) (for which an election has not been made under section 408(q)(2)), except that contributions made by an employer on behalf of an employee for a taxable year shall be excluded from income only to the extent such contributions would have been deductible for such taxable year under section 219, if such section applied, without regard to section 219(g)(1)(B). Contributions that are not excluded from income under the preceding sentence shall be treated as designated nondeductible contributions under section 408(o).'.

(c) EXEMPTION FROM WITHHOLDING- Subsection (a) of section 3401 (defining wages) is amended by striking `or' at the end of paragraph (20), by striking the period at the end of paragraph (21) and inserting `; or', and by inserting after paragraph (21) the following new paragraph:

`(22) for any payment made for the benefit of the employee to an individual retirement plan if the amount of such payment was deducted and withheld under section 408(q).'.

(d) EXCLUSION SHOWN ON W-2- Subsection (a) of section 6051 (relating to receipts for employees) is amended by striking `and' at the end of paragraph (10), by striking the period at the end of paragraph (11) and inserting `, and', and by inserting after paragraph (11) the following new paragraph:

`(12) the total amount deducted and withheld pursuant to section 408(q).'.

(e) EFFECTIVE DATE- The amendments made by this section shall apply to remuneration paid after December 31, 1999.

SEC. 103. NONREFUNDABLE TAX CREDIT FOR CONTRIBUTIONS TO INDIVIDUAL RETIREMENT PLANS.

(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. RETIREMENT SAVINGS.

`(a) ALLOWANCE OF CREDIT- There shall be allowed as a credit against the tax imposed by this chapter so much of the qualified retirement contributions of the taxpayer for the taxable year as does not exceed the applicable amount of the adjusted gross income of the taxpayer for such year.

`(b) APPLICABLE AMOUNT- For purposes of subsection (a), the applicable amount is determined in accordance with the following table:

The applicable amount is:

Not over $15,000

$450.

Over $15,000 but not over $20,000

$400.

Over $20,000 but not over $25,000

$350.

Over $25,000 but not over $30,000

$300.

Over $30,000

$0.

`(c) SECTION NOT TO APPLY TO CERTAIN CONTRIBUTIONS- This section shall not apply with respect to--

`(1) an employer contribution to a simplified employee pension,

`(2) any amount contributed to a simple retirement account established under section 408(p),

`(3) any amount contributed to a Roth IRA, and

`(4) any designated nondeductible contribution (as defined in section 408(o)(2)(C)).

`(d) Other Limitations and Restrictions-

`(1) BENEFICIARY MUST BE UNDER AGE 70 1/2 - No credit shall be allowed under this section with respect to any qualified retirement contribution for the benefit of an individual if such individual has attained age 70 1/2 before the close of such individual's taxable year for which the contribution was made.

`(2) RECONTRIBUTED AMOUNTS- No credit shall be allowed under this section with respect to a rollover contribution described in section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3).

`(3) AMOUNTS CONTRIBUTED UNDER ENDOWMENT CONTRACT- In the case of an endowment contract described in section 408(b), no credit shall be allowed under this section for that portion of the amounts paid under the contract for the taxable year which is properly allocable, under regulations prescribed by the Secretary, to the cost of life insurance.

`(4) DENIAL OF CREDIT FOR AMOUNT CONTRIBUTED TO INHERITED ANNUITIES OR ACCOUNTS- No credit shall be allowed under this section with respect to any amount paid to an inherited individual retirement account or individual retirement annuity (within the meaning of section 408(d)(3)(C)(ii)).

`(5) NO DOUBLE BENEFIT- No credit shall be allowed under this section for any taxable year with respect to the amount of any qualified retirement

contribution for the benefit of an individual if such individual takes a deduction with respect to such amount under section 219 for such taxable year.

`(e) QUALIFIED RETIREMENT CONTRIBUTION- For purposes of this section, the term `qualified retirement contribution' means--

`(1) any amount paid in cash for the taxable year by or on behalf of an individual to an individual retirement plan for such individual's benefit, and

`(2) any amount contributed on behalf of any individual to a plan described in section 501(c)(18).

`(f) Other Definitions and Special Rules-

`(1) COMPENSATION- For purposes of this section, the term `compensation' has the meaning given in section 219(f)(1).

`(2) MARRIED COUPLES MUST FILE JOINT RETURN- If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.

`(3) TIME WHEN CONTRIBUTIONS DEEMED MADE- For purposes of this section, a taxpayer shall be deemed to have made a contribution to an individual retirement plan on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).

`(4) EMPLOYER PAYMENTS- For purposes of this title, any amount paid by an employer to an individual retirement plan shall be treated as payment of compensation to the employee (other than a self-employed individual who is an employee within the meaning of section 401(c)(1)) includible in his gross income in the taxable year for which the amount was contributed, whether or not a credit for such payment is allowable under this section to the employee.'

(b) Conforming Amendments-

(1) Section 86(f) is amended by redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5), respectively, and by inserting after paragraph (1) the following new paragraph:

`(2) section 25B(f)(1) (defining compensation),'.

(2) Clause (i) of section 501(c)(18)(D) is amended by inserting `which may be taken into account in computing the credit allowable under section 25B or' before `with respect'.

(3) Section 6047(c) is amended by inserting `section 25B or' before `section 219'.

(4) Section 6652(g) is amended by inserting `CREDITABLE' before `DEDUCTIBLE' in the heading thereof.

(5) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25A the following new item:

`Sec. 25B. Retirement savings.'

(c) EFFECTIVE DATE- The amendments made by this section apply to taxable years beginning after December 31, 1999.

SEC. 104. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED WITHOUT PENALTY DURING PERIODS OF UNEMPLOYMENT.

(a) IN GENERAL- Paragraph (2) of section 72(t) (relating to exceptions to 10-percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end the following new subparagraph:

`(G) ADDITIONAL DISTRIBUTIONS TO UNEMPLOYED INDIVIDUALS-

`(i) IN GENERAL- Distributions from an individual retirement plan, or from amounts attributable to employer contributions made pursuant to elective deferrals described in subparagraph (A) or (C) of section 402(g)(3) or section 501(c)(18)(D)(iii), to an individual after separation from employment if--

`(I) such individual has received unemployment compensation for 12 consecutive weeks under any Federal or State unemployment compensation law by reason of such separation, and

`(II) such distributions are made during the 1-year period beginning on the date of such separation.

`(ii) DISTRIBUTIONS AFTER REEMPLOYMENT- Clause (i) shall not apply to any distribution made after the individual has been employed for at least 60 days

after the separation from employment to which clause (i) applies.

`(iii) COORDINATION WITH SUBPARAGRAPH (D)- Distributions during the 1-year period described in clause (i)(II) shall not be taken into account in applying the limitation under subparagraph (D)(i)(III).'

(b) CONFORMING AMENDMENTS-

(1) Section 401(k)(2)(B)(i) is amended by striking `or' at the end of subclause (III), by striking `and' at the end of subclause (IV) and inserting `or', and by inserting after subclause (IV) the following new subclause:

`(V) the date on which a period referred to in section 72(t)(2)(G) begins, and'.

(2) Section 403(b)(11) is amended by striking `or' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting `, or', and by inserting after subparagraph (B) the following new subparagraph:

`(C) for distributions to which section 72(t)(2)(G) applies.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after the date of the enactment of this Act.

Subtitle B--Secure Money Annuity or Retirement (SMART) Trusts

SEC. 111. SECURE MONEY ANNUITY OR RETIREMENT (SMART) TRUSTS.

(a) IN GENERAL- Subpart A of part I of subchapter D of chapter 1 is amended by inserting after section 408A the following new section:

`SEC. 408B. SMART PLANS.

`(a) EMPLOYER ELIGIBILITY-

`(1) IN GENERAL- An employer may establish and maintain a SMART annuity or a SMART trust for any year only if--

`(A) the employer is an eligible employer (as defined in section 408(p)(2)(C)), and

`(B) the employer does not maintain (and no predecessor of the employer maintains) a qualified plan (other than a permissible plan) with respect to which contributions were made, or benefits were accrued, for service in any year in the period beginning with the year such annuity or trust became effective and ending with the year for which the determination is being made.

The period described in subparagraph (B) shall include the period of 5 years before the year such trust or annuity became effective with respect to qualified plans which are defined benefit plans or money purchase pension plans.

`(2) DEFINITIONS- For purposes of paragraph (1)--

`(A) QUALIFIED PLAN- The term `qualified plan' has the meaning given such term by section 408(p)(2)(D)(ii).

`(B) PERMISSIBLE PLAN- The term `permissible plan' means--

`(i) a SIMPLE plan described in section 408(p),

`(ii) a SIMPLE 401(k) plan described in section 401(k)(11),

`(iii) an eligible deferred compensation plan described in section 457(b),

`(iv) a collectively bargained plan but only if the employees eligible to participate in such plan are not also entitled to a benefit described in subsection (b)(5) or (c)(5), or

`(v) a plan under which there may be made only--

`(I) elective deferrals described in section 402(g)(3), and

`(II) employer matching contributions not in excess of the amounts described in subclauses (I) and (II) of section 401(k)(12)(B)(i).

`(b) SMART ANNUITY-

`(1) IN GENERAL- For purposes of this title, the term `SMART annuity' means an individual retirement annuity (as defined in section 408(b) without regard to paragraph (2) thereof and without regard to the limitation on aggregate annual premiums contained in the flush language of section 408(b)) if--

`(A) such annuity meets the requirements of paragraphs (2) through (7), and

`(B) the only contributions to such annuity are employer contributions.

Nothing in this section shall be construed as preventing an employer from using a group annuity contract which is divisible into individual retirement annuities for purposes of providing SMART annuities.

`(2) PARTICIPATION REQUIREMENTS-

`(A) IN GENERAL- The requirements of this paragraph are met for any year only if all employees of the employer who--

`(i) received at least $5,000 in compensation from the employer during any 2 consecutive preceding years, and

`(ii) received at least $5,000 in compensation during the year,

are entitled to the benefit described in paragraph (5) for such year.

`(B) EXCLUDABLE EMPLOYEES- An employer may elect to exclude from the requirements under subparagraph (A) employees described in subparagraph (A) or (C) of section 410(b)(3).

`(3) VESTING- The requirements of this paragraph are met if the employee's rights to any benefits under the annuity are nonforfeitable.

`(4) BENEFIT FORM- The requirements of this paragraph are met if the only form of benefit is--

`(A) a benefit payable annually in the form of a single life annuity with monthly payments (with no ancillary benefits) beginning at age 65, or

`(B) any other form of benefit which is the actuarial equivalent (based on the assumptions specified in the SMART annuity) of the benefit described in subparagraph (A).

`(5) AMOUNT OF ANNUAL ACCRUED BENEFIT-

`(A) IN GENERAL- The requirements of this paragraph are met for any plan year if the accrued benefit of each participant derived from employer contributions for such year, when expressed as a benefit described in paragraph (4)(A), equals the applicable percentage of the participant's compensation for such year.

`(B) APPLICABLE PERCENTAGE- For purposes of this paragraph--

`(i) IN GENERAL- The term `applicable percentage' means 2 percent.

`(ii) ELECTION OF HIGHER PERCENTAGE- An employer may elect to apply an applicable percentage of 1 percent for any year for all employees eligible to participate in the plan for such year, if the employer notifies the employees of such percentage within a reasonable period before the beginning of such year. An employer may also elect to apply an applicable percentage of 3 percent for any of the first 5 years that the plan is effective for all employees eligible to participate in the plan for such year, if the employer so notifies the employees.

`(C) COMPENSATION LIMIT-

`(i) IN GENERAL- The compensation taken into account under this paragraph for any year shall not exceed $100,000.

`(ii) COST-OF-LIVING ADJUSTMENT- The Secretary shall adjust annually the $100,000 amount in clause (i) 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 shall be the calendar quarter beginning October 1, 1999, and any increase which is not a multiple of $5,000 shall be rounded to the next lowest multiple of $5,000.

`(6) FUNDING-

`(A) IN GENERAL- The requirements of this paragraph are met only if the employer is required to contribute to the annuity for each plan year the amount necessary to purchase a SMART annuity in the amount of the benefit accrued for such year for each participant entitled to such benefit. Such contribution must be made no later than 8 1/2 months after the end of the plan year.

`(B) PENALTY FOR FAILURE TO MAKE REQUIRED CONTRIBUTION- The taxes imposed by section 4971 shall apply to a failure to make the contribution required by this paragraph in the same manner as if the amount of the failure were an accumulated funding deficiency to which such section applies.

`(7) LIMITATION ON DISTRIBUTIONS-

`(A) IN GENERAL- The requirements of this paragraph are met only if distributions may be paid only when the employee attains age 65, separates from service, dies, or becomes disabled (within the meaning of section 72(m)(7)).

`(B) Limitation on distributions on separation from service of employees

WHO HAVE NOT ATTAINED AGE 65- Subparagraph (A) shall apply to a distribution on separation of service of an employee who has not attained age 65 only if--

`(i) the aggregate cash value of an employee's SMART annuity does not exceed the dollar limit in effect under section 411(a)(11)(A), or

`(ii) the distribution is a direct trustee-to-trustee transfer of the entire balance to the credit of the employee to a SMART trust described in subsection (c), a SMART rollover plan, or a SMART annuity for the benefit of such employee.

`(8) JOINT AND SURVIVOR ANNUITY RULES APPLICABLE- The requirements of this paragraph are met only if the annuity satisfies section 401(a)(11).

`(9) DEFINITIONS AND SPECIAL RULE-

`(A) DEFINITIONS- The definitions in section 408(p)(6) shall apply for purposes of this subsection.

`(B) USE OF DESIGNATED FINANCIAL INSTITUTIONS- A rule similar to the rule of section 408(p)(7) (without regard to the last sentence thereof) shall apply for purposes of this subsection.

`(C) SMART ROLLOVER PLAN- For purposes of this section, the term `SMART rollover plan' means an individual retirement plan for the benefit of the employee to which a rollover was made from a SMART Annuity, SMART trust, or another SMART Rollover plan.

`(c) SMART TRUST-

`(1) IN GENERAL- For purposes of this title, the term `SMART trust' means a trust forming part of a defined benefit plan if--

`(A) such trust meets the requirements of section 401(a) as modified by subsection (d),

`(B) such plan meets the requirements of paragraphs (2) through (8), and

`(C) the only contributions to such trust are employer contributions.

`(2) PARTICIPATION REQUIREMENTS- A plan meets the requirements of this paragraph for any year only if the requirements of subsection (b)(2) are met for such year.

`(3) VESTING- A plan meets the requirements of this paragraph for any year only if the requirements of subsection (b)(3) are met for such year.

`(4) BENEFIT FORM-

`(A) IN GENERAL- Except as provided in subparagraph (B), a plan meets the requirements of this paragraph only if the trustee distributes a SMART annuity that satisfies subsection (b)(4) where the annual benefit described in subsection (b)(4)(A) is no less than the accrued benefit determined under paragraph (5).

`(B) DIRECT TRANSFERS TO INDIVIDUAL RETIREMENT PLAN OR SMART ANNUITY- A plan shall not fail to meet the requirements of this paragraph by reason of permitting, as an optional form of benefit, the distribution of the entire balance to the credit of the employee. If the employee is under age 65, such distribution must be in the form of a direct trustee-to-trustee transfer to a SMART annuity, another SMART trust, or a SMART rollover plan (or, in the case of a distribution that does not exceed the dollar limit in effect under section 411(a)(11)(A), any other individual retirement plan).

`(5) AMOUNT OF ANNUAL ACCRUED BENEFIT- A plan meets the requirements of this paragraph for any year only if the requirements of subsection (b)(5) are met for such year.

`(6) FUNDING-

`(A) IN GENERAL- A plan meets the requirements of this paragraph for any year only if--

`(i) the requirements of subparagraph (A) of subsection (b)(6) are met for such year,

`(ii) in the case of a plan which has an unfunded annuity amount with respect to the account of any participant, the plan requires that the employer make an additional contribution to such plan (at the time the annuity contract to which such amount relates is purchased) equal to the unfunded annuity amount, and

`(iii) in the case of a plan which has an unfunded prior year liability with respect to the account of any participant as of the close of such plan year, the plan requires that the employer make an additional contribution to such plan for such year equal to the amount of such unfunded prior year liability no later than 8 1/2 months following the end of the plan year.

`(B) UNFUNDED ANNUITY AMOUNT- For purposes of this paragraph, the term `unfunded annuity amount' means, with respect to the account of any participant for whom an annuity is being purchased, the excess (if any) of--

`(i) the amount necessary to purchase an annuity contract which meets the requirements of subsection (b)(4) in the amount of the participant's accrued benefit determined under paragraph (5), over

`(ii) the balance in such account at the time such contract is purchased.

`(C) UNFUNDED PRIOR YEAR LIABILITY- For purposes of this paragraph, the term `unfunded prior year liability' means, with respect to any plan year, the excess (if any) of--

`(i) the aggregate present value of the participants' accrued benefits under the plan as of the close of the prior plan year, over

`(ii) the value of the plan's assets determined under section 412(c)(2) as of the close of the plan year (determined without

regard to any contributions for such plan year).

Such present value shall be determined using the assumptions specified in subparagraph (D).

`(D) ACTUARIAL ASSUMPTIONS- In determining the amount required to be contributed under subparagraph (A)--

`(i) the assumed interest rate shall be 5 percent per year,

`(ii) the assumed mortality shall be determined under the applicable mortality table (as defined in section 417(e)(3), as modified by the Secretary so that it does not include any assumption for preretirement mortality), and

`(iii) the assumed retirement age shall be 65.

`(E) CHANGES IN MORTALITY TABLE- If the applicable mortality table under section 417(e)(3) for any plan year is not the same as such table for the prior plan year, the Secretary shall prescribe regulations which phase in the effect of the changes over a reasonable period of plan years determined by the Secretary.

`(F) PENALTY FOR FAILURE TO MAKE REQUIRED CONTRIBUTION- The taxes imposed by section 4971 shall apply to a failure to make the contribution required by this paragraph in the same manner as if the amount of the failure were an accumulated funding deficiency to which such section applies.

`(7) SEPARATE ACCOUNTS FOR PARTICIPANTS- A plan meets the requirements of this paragraph for any year only if the plan provides--

`(A) for an individual account for each participant, and

`(B) for benefits based solely on--

`(i) the amount contributed to the participant's account,

`(ii) any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant's account, and

`(iii) the amount of any unfunded annuity amount with respect to the participant.

`(8) TRUST MAY NOT HOLD SECURITIES WHICH ARE NOT READILY TRADABLE- A plan meets the requirements of this paragraph only if the plan prohibits the trust from holding directly or indirectly securities which are not readily tradable on an established securities market. Nothing in this paragraph shall prohibit the trust from holding insurance company products regulated by State law.

`(9) DEFINITIONS- The definitions applicable under subsection (b)(8) shall apply for purposes of this subsection.

`(d) SPECIAL RULES FOR SMART ANNUITIES AND TRUSTS- For purposes of section 401(a), a SMART annuity and a SMART trust shall be treated as meeting the requirements of the following provisions:

`(1) Section 401(a)(4) (relating to nondiscrimination rules).

`(2) Section 401(a)(26) (relating to minimum participation).

`(3) Section 410 (relating to minimum participation and coverage requirements).

`(4) Section 411(b) (relating to accrued benefit requirements).

`(5) Section 416 (relating to special rules for top-heavy plans).'

(b) DEDUCTION RULES-

(1) IN GENERAL- Section 404 is further amended by adding at the end the following new subsection:

`(o) SPECIAL RULES FOR SMART ANNUITIES AND TRUSTS-

`(1) IN GENERAL- Employer contributions to a SMART annuity shall be treated as if they are made to a plan described in paragraph (1) of subsection (a).

`(2) DEDUCTIBLE LIMIT- For purposes of section 404(a)(1)(A)(i), the amount necessary to satisfy the minimum funding requirement of section 408B(b)(6) or (c)(6) shall be treated as the amount necessary to satisfy the minimum funding requirement of section 412.'

(2) COORDINATION WITH DEDUCTION UNDER SECTION 219-

(A) Section 219(b) is amended by adding at the end the following new paragraph:

`(5) SPECIAL RULE FOR SMART ANNUITIES- This section shall not apply with respect to any amount contributed to a SMART annuity established under section 408B(b).'

(B) Section 219(g)(5)(A) (defining active participant) is amended by striking `or' at the end of clause (v) and by adding at the end the following new clause:

`(vii) any SMART annuity (within the meaning of section 408B), or'.

(c) CONTRIBUTIONS AND DISTRIBUTIONS-

(1) Section 402 is further amended by adding at the end the following new subsection:

`(m) TREATMENT OF SMART ANNUITIES- Rules similar to the rules of paragraphs (1) and (3) of subsection (h) shall apply to contributions and distributions with respect to SMART annuities under section 408B.'

(2) Section 408(d)(3) is amended by adding at the end the following new subparagraph:

`(H) SMART ANNUITIES- This paragraph shall not apply to any amount paid or distributed out of a SMART annuity (as defined in section 408B) unless it is paid in a trustee-to-trustee transfer into a SMART rollover plan.'

(3)(A) Section 412(h) 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 inserting after paragraph (6) the following new paragraph:

`(7) any plan providing for the purchase of any SMART annuity or any SMART plan.'

(B) Section 301(a) of Employee Retirement Income Security Act of 1974 (29 U.S.C. 1081) is amended by striking `or' at the end of paragraph (9), by striking the period at the end of paragraph (10) and inserting `; or', and by adding at the end the following new paragraph:

`(11) any plan providing for the purchase of any SMART annuity or any SMART plan (as such terms are defined in section 408B of such Code).'

(4) Section 415(b) is amended by adding at the end the following new paragraph:

`(12) TREATMENT OF SMART ANNUITIES AND TRUSTS- A SMART annuity and a SMART trust shall be treated as meeting the requirements of this section, but distributions from such an annuity or trust shall be taken into account in determining whether any other plan satisfies the requirements of this section.'

(d) INCREASED PENALTY ON EARLY WITHDRAWALS- Section 72(t) (relating to additional tax on early distributions) is amended by adding at the end the following new paragraph:

`(9) SPECIAL RULES FOR SMART ANNUITIES AND TRUSTS- In the case of any amount received from a SMART annuity, a SMART trust, or a SMART rollover plan (within the meaning of section 408B), paragraph (1) shall be applied by substituting `20 percent' for `10 percent' and paragraph (2) shall be applied by substituting `age 65' for `age 59 1/2 '.'

(e) SIMPLIFIED EMPLOYER REPORTS-

(1) SMART ANNUITIES- Section 408(l) (relating to simplified employer reports) is amended by adding at the end the following new paragraph:

`(3) SMART ANNUITIES-

`(A) SIMPLIFIED REPORT- The employer maintaining any SMART annuity (within the meaning of section 408B) shall file a simplified annual return with the Secretary containing only the information described in subparagraph (B).

`(B) CONTENTS- The return required by subparagraph (A) shall set forth--

`(i) the name and address of the employer,

`(ii) the date the plan was adopted,

`(iii) the number of employees of the employer,

`(iv) the number of such employees who are eligible to participate in the plan,

`(v) the total amount contributed by the employer to each such annuity for such year and the minimum amount required under section 408B to be so contributed,

`(vi) the percentage elected under section 408B(b)(5)(B),

`(vii) the name of the issuer,

`(viii) the employer identification number,

`(ix) the name of the plan, and

`(x) the date of the contribution.

`(C) REPORTING BY ISSUER OF SMART ANNUITY-

`(i) IN GENERAL- The issuer of each SMART annuity shall provide to the owner of the annuity for each year a statement setting forth as of the close of such year--

`(I) the benefits guaranteed at age 65 under the annuity, and

`(II) the cash surrender value of the annuity.

`(ii) SUMMARY DESCRIPTION- The issuer of any SMART annuity shall provide to the employer maintaining the annuity for each year a description containing the following information:

`(I) The name and address of the employer and the issuer.

`(II) The requirements for eligibility for participation.

`(III) The benefits provided with respect to the annuity.

`(IV) The procedures for, and effects of, withdrawals (including rollovers) from the annuity.

`(D) TIME AND MANNER OF REPORTING- Any return, report, or statement required under this paragraph shall be made in such form and at such time as the Secretary shall prescribe.'

(2) SMART TRUSTS- Section 6059 (relating to actuarial reports) is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) the following new subsection:

`(c) SMART TRUSTS- In the case of a SMART trust (within the meaning of section 408B), the Secretary shall require a simplified actuarial report which contains--

`(1) information similar to the information required in section 408(l)(3)(B),

`(2) the fair market value of the assets of the trust,

`(3) the amounts distributed directly to participants,

`(4) the amounts transferred to SMART rollover plans, and

`(5) the present value of the annual accrued benefits under the plan to which the trust relates.'

(f) CONFORMING AMENDMENTS-

(1) Subparagraph (A) of section 219(g)(5) is amended by striking `or' at the end of clause (v) and by inserting after clause (vi) the following new clause:

`(vii) any SMART trust or SMART annuity (within the meaning of section 408B), or'.

(2) Section 280G(b)(6) is amended by striking `or' at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting

`, or' and by adding after subparagraph (D) the following new subparagraph:

`(E) a SMART annuity described in section 408B.'

(3) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of section 414 are each amended by inserting `408B,' after `408(p),'.

(4) Section 4972(d)(1)(A) 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 adding after clause (iv) the following new clause:

`(v) any SMART annuity (within the meaning of section 408B).'

(g) REPORTING REQUIREMENTS UNDER ERISA- Section 101 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021) is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection:

`(h) SMART ANNUITIES-

`(1) NO EMPLOYER REPORTS- Except as provided in this subsection, no report shall be required under this section by an employer maintaining a SMART annuity under section 408B(b) of the Internal Revenue Code of 1986.

`(2) SUMMARY DESCRIPTION- The issuer of any SMART annuity shall provide to the employer maintaining the annuity for each year a description containing the following information:

`(A) The name and address of the employer and the issuer.

`(B) The requirements for eligibility for participation.

`(C) The benefits provided with respect to the annuity.

`(D) The procedures for, and effects of, withdrawals (including rollovers) from the annuity.

`(3) EMPLOYEE NOTIFICATION- The employer shall provide each employee eligible to participate in the SMART annuity with the description described in paragraph (2) at the same time as the notification required under section 408B(b)(5)(B) of the Internal Revenue Code of 1986.'

(h) $5 PER PARTICIPANT PBGC PREMIUM- Subparagraph (A) of section 4006(a)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1306) is amended--

(1) by inserting `not described in clause (iv)' after `in the case of a single-employer plan' in clause (i),

(2) by striking the period at the end of clause (iii) and inserting `; and', and

(3) by inserting after clause (iii) the following new clause:

`(iv) in the case of a single-employer plan described in section 408B(c) of the Internal Revenue Code of 1986, an amount equal to $5 for each participant.'.

(i) CLERICAL AMENDMENT- 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 408A the following new item:

`Sec. 408B. SMART plans.'

(j) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after December 31, 1999.

Subtitle C--Improved Fairness in Retirement Plan Benefits

SEC. 121. AMENDMENTS TO SIMPLE RETIREMENT ACCOUNTS.

(a) MINIMUM CONTRIBUTION REQUIREMENT-

(1) IN GENERAL- Paragraph (2) of section 408(p) (defining qualified salary reduction arrangement) is amended--

(A) by striking clauses (iii) and (iv) of subparagraph (A) and inserting the following new clauses:

`(iii) the employer is required to make a matching contribution to the simple retirement account for any year in an amount equal to--

`(I) so much of the amount the employee elects under clause (i)(I) as does not exceed 3 percent of compensation for the year, and

`(II) a uniform percentage (which is at least 50 percent but not more than 100 percent) of the amount the employee elects under clause (i)(I) to the extent that such amount exceeds 3 percent but does not exceed 5 percent of the employee's compensation,

`(iv) the employer is required to make nonelective contributions of 1 percent of compensation for each employee eligible to participate in the arrangement who has at least $5,000 of compensation from the employer for the year, and

`(v) no contributions may be made other than contributions described in clause (i), (iii), or (iv).', and

(B) by striking subparagraph (B) and inserting the following new subparagraph:

`(B) CONTRIBUTION RULES-

`(i) EMPLOYER MAY ELECT 3-PERCENT NONELECTIVE CONTRIBUTION- An employer shall be treated as meeting the requirements of clauses (iii) and (iv) of subparagraph (A) for any year if, in lieu of the contributions described in such clauses, the employer elects to make nonelective contributions of 3 percent of compensation for each employee who is eligible to participate in the arrangement and who has at least $5,000 of compensation from the employer for the year. If an employer makes an election under this clause for any year, the employer shall notify employees of such election within a reasonable period of time

before the 60-day period for such year under paragraph (5)(C).

`(ii) DISCRETIONARY CONTRIBUTIONS- A plan shall not be treated as failing to meet the requirements of subparagraph (A)(v) merely because, pursuant to the terms of the plan, an employer makes nonelective contributions under subparagraph (A)(iv) or clause (i) of this subparagraph in excess of 1 percent or 3 percent of compensation, respectively, but only if all such contributions bear a uniform relationship to the compensation of each eligible employee and do not exceed 5 percent of compensation for any eligible employee.

`(iii) COMPENSATION LIMITATION- The compensation taken into account under this paragraph for any year shall not exceed the limitation in effect for such year under section 401(a)(17).'

(2) MATCHING CONTRIBUTIONS- Subparagraph (B) of section 401(k)(11) (relating to adoption of simple plan to meet nondiscrimination tests) is amended--

(A) by striking subclauses (II) and (III) of clause (i) and inserting the following new subclauses:

`(II) the employer is required to make a matching contribution to the trust for any year in an amount equal to--

`(aa) so much of the amount the employee elects under subclause (I) as does not exceed 3 percent of compensation for the year, and

`(bb) a uniform percentage (which is at least 50 percent but

not more than 100 percent) of the amount the employee elects under subclause (I) to the extent that such amount exceeds 3 percent but does not exceed 5 percent of the employee's compensation,

`(III) the employer is required to make nonelective contributions of 1 percent of compensation for each employee eligible to participate in the arrangement who has at least $5,000 of compensation from the employer for the year, and

`(IV) no other contributions may be made other than contributions described in subclause (I), (II), or (III).', and

(B) by striking clause (ii) and inserting the following new clause:

`(ii) CONTRIBUTION RULES-

`(I) EMPLOYER MAY ELECT 3-PERCENT NONELECTIVE CONTRIBUTION- An employer shall be treated as meeting the requirements of subclauses (II) and (III) of clause (i) for any year if, in lieu of the contributions described in such subclauses, the employer elects to make nonelective contributions of 3 percent of compensation for each employee who is eligible to participate in the arrangement and who has at least $5,000 of compensation from the employer for the year. If an employer makes an election under this subclause for any year, the employer shall notify employees of such election within a reasonable period of time before the 60th day before the beginning of such year.

`(II) DISCRETIONARY CONTRIBUTIONS- A plan shall not be treated as failing to meet the requirements of clause (i)(IV) merely because, pursuant to the terms of the plan, an employer makes nonelective contributions under clause (i)(III) or subclause (I) of this clause in excess of 1 percent or 3 percent of compensation, respectively, but only if all such contributions bear a uniform relationship to the compensation of each eligible employee and do not exceed 5 percent of compensation for any eligible employee.'

(b) OPTION TO SUSPEND CONTRIBUTIONS- Section 408(p) (relating to simple retirement accounts) is amended by adding at the end the following new paragraph:

`(10) SUSPENSION OF PLAN- Except as provided by the Secretary, a plan shall not be treated as failing to meet the requirements of this subsection if, under the plan, the employer may suspend all elective, matching, and nonelective contributions under the plan after notifying employees eligible to participate in the arrangement of such suspension in writing at least 30 days in advance. Such suspension shall apply to contributions with respect to compensation earned after the effective date of the suspension. Only 1 suspension under this paragraph may take effect during any year.'

(c) CONFORMING AMENDMENTS- Section 408(p)(2)(C) is amended--

(1) by striking clause (ii),

(2) by striking `DEFINITIONS' in the heading and inserting `ELIGIBLE EMPLOYER',

(3) by striking `(i) ELIGIBLE EMPLOYER- ', and

(4) by redesignating subclauses (I) and (II) as clauses (i) and (ii), respectively.

(d) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 1999.

(2) DELAYED EFFECTIVE DATE FOR PLANS ESTABLISHED IN 1998 OR 1999- In the case of plans

established in 1998 or 1999 under section 408(p) of the Internal Revenue Code of 1986, the amendments made by this section shall apply to taxable years beginning after December 31, 2003.

SEC. 122. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED ARRANGEMENTS AND MATCHING CONTRIBUTIONS.

(a) ALTERNATIVE METHODS OF SATISFYING SECTION 401(k) NONDISCRIMINATION TESTS- Subparagraph (B) of section 401(k)(12) (relating to alternative methods of meeting nondiscrimination requirements) is amended to read as follows:

`(B) Nonelective and matching contributions-

`(i) IN GENERAL- The requirements of this subparagraph are met if the requirements of clauses (ii) and (iii) are met.

`(ii) NONELECTIVE CONTRIBUTIONS- The requirements of this clause are met if, under the arrangement, the employer is required, without regard to whether the employee makes an elective contribution or employee contribution, to make a contribution to a defined contribution plan on behalf of each employee who is not a highly compensated employee and who is eligible to participate in the arrangement in an amount equal to at least 1 percent of the employee's compensation.

`(iii) MATCHING CONTRIBUTIONS- The requirements of this clause are met if, under the arrangement, the employer makes matching contributions on behalf of each employee who is not a highly compensated employee in an amount equal to--

`(I) 100 percent of the elective contributions of the employee to the extent such elective contributions do not exceed 3 percent of the employee's compensation, and

`(II) 50 percent of the elective contributions of the employee to the extent that such elective contributions exceed 3 percent but do not exceed 5 percent of the employee's compensation.

`(iv) RATE FOR HIGHLY COMPENSATED EMPLOYEES- The requirements of clause (iii) are not met if, under the arrangement, the rate of matching contribution with respect to any rate of elective contribution of a highly compensated employee is greater than that with respect to an employee who is not a highly compensated employee. For purposes of this clause, to the extent provided in regulations, the last sentences of paragraph (3)(A) and subsection (m)(2)(B) shall not apply.

`(v) ALTERNATIVE PLAN DESIGNS- If the rate of matching contribution with respect to any rate of elective contribution is not equal to the percentage required under clause (iii), an arrangement shall not be treated as failing to meet the requirements of clause (iii) if--

`(I) the rate of an employer's matching contribution does not increase as an employee's rate of elective contribution increase, and

`(II) the aggregate amount of matching contributions at such rate of elective contribution is at least equal to the aggregate amount of matching contributions which would be made if matching contributions were made on the basis of the percentages described in clause (iii).'

(b) CONTRIBUTIONS PART OF QUALIFIED CASH OR DEFERRED ARRANGEMENT- Subparagraph (E)(ii) of section 401(k)(12) is amended to read as follows:

`(ii) SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS NOT TAKEN INTO ACCOUNT- Except as provided in regulations, an arrangement shall not be treated as meeting the requirements of subparagraph (B) or (C) unless such requirements are met without regard to subsection (l), and, for purposes of subsection (l), and determining whether contributions provided under a plan satisfy subsection (a)(4) on the basis of equivalent benefits, employer contributions under subparagraph (B) or (C) shall not be taken into account.'

(c) ALTERNATIVE METHODS OF SATISFYING SECTION 401(m) NONDISCRIMINATION TESTS- Section 401(m)(11) (relating to alternative method of satisfying tests) is amended--

(1) by striking `subparagraph (B)' in subparagraph (A)(iii) and inserting `subparagraphs (B) and (C)',

(2) by adding at the end of subparagraph (B) the following new flush sentence:

`To the extent provided in regulations, the last sentences of paragraph (2)(B) and subsection (k)(3)(A) shall not apply for purposes of clause (iii).', and

(3) by adding at the end the following new subparagraph:

`(C) TEST MUST BE MET SEPARATELY- If this paragraph applies to any matching contributions, such contributions shall not be taken into account in determining whether employee contributions satisfy the requirements of this subsection.'

(d) SPECIAL RULE FOR DETERMINING AVERAGE DEFERRAL PERCENTAGE FOR FIRST PLAN YEAR, ETC- Subparagraph (E) of section 401(k)(3) is amended to read as follows:

`(E) For purposes of this paragraph, in the case of the first plan year of any plan, the amount taken into account as the actual deferral percentage of nonhighly compensated employees for the preceding plan year shall be--

`(i) 3 percent, or

`(ii) the actual deferral percentage of nonhighly compensated employees determined for such first plan year in the case of--

`(I) an employer who elects to have this clause apply, or

`(II) except to the extent provided by the Secretary, a successor plan.'

(e) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after December 31, 1999.

SEC. 123. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES.

(a) IN GENERAL- Subparagraph (B) of section 414(q)(1) (defining highly compensated employee) is amended to read as follows:

`(B) for the preceding year had compensation from the employer in excess of $80,000.'

(b) CONFORMING AMENDMENTS-

(1)(A) Subsection (q) of section 414 is amended by striking paragraphs (3), (5), and (7) and by redesignating paragraphs (4), (6), (8), and (9) as paragraphs (3) through (6), respectively.

(B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C), and 416(i)(1)(D) are each amended by striking `section 414(q)(4)' and inserting `section 414(q)(3)'.

(C) Section 416(i)(1)(A) is amended by striking `section 414(q)(5)' and inserting `section 414(r)(9)'.

(2)(A) Section 414(r) is amended by adding at the end the following new paragraph:

`(9) EXCLUDED EMPLOYEES- For purposes of paragraph (2)(A), the following employees shall be excluded:

`(A) Employees who have not completed 6 months of service.

`(B) Employees who normally work less than 17 1/2 hours per week.

`(C) Employees who normally work during not more than 6 months during any year.

`(D) Employees who have not attained the age of 21.

`(E) Except to the extent provided in regulations, employees who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the employer.'

(B) Subparagraph (A) of section 414(r)(2) is amended by striking `subsection (q)(5)' and inserting `paragraph (9)'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after December 31, 1999.

SEC. 124. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

(a) COMPENSATION LIMIT- Paragraph (11) of section 415(b) (relating to limitation for defined benefit plans) is amended to read as follows:

`(11) SPECIAL LIMITATION RULE FOR GOVERNMENTAL AND MULTIEMPLOYER PLANS- In the case of a governmental plan (as defined in section 414(d)) or a multiemployer plan (as defined in section 414(f)), subparagraph (B) of paragraph (1) shall not apply.'

(b) EXEMPTION FOR SURVIVOR AND DISABILITY BENEFITS- Subparagraph (I) of section 415(b)(2) (relating to limitation for defined benefit plans) is amended--

(1) by inserting `or a multiemployer plan (as defined in section 414(f))' after `section 414(d))' in clause (i),

(2) by inserting `or multiemployer plan' after `governmental plan' in clause (ii), and

(3) by inserting `AND MULTIEMPLOYER' after `GOVERNMENTAL' in the heading.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after December 31, 1999.

SEC. 125. EXEMPTION OF MIRROR PLANS FROM SECTION 457 LIMITS.

(a) IN GENERAL- Subsection (e) of section 457 (relating to deferred compensation plans of State and local governments and tax-exempt organizations) is amended by adding at the end the following new paragraph:

`(16) EXEMPTION FOR MIRROR PLANS-

`(A) IN GENERAL- Amounts of compensation deferred under a mirror plan shall not be taken into account in applying this section to amounts of compensation deferred under any other deferred compensation plan.

`(B) MIRROR PLAN- The term `mirror plan' means a plan, program, or arrangement maintained solely for the purpose of providing

retirement benefits for employees in excess of the limitations imposed by section 401(a)(17) or section 415, or both.'

(b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 126. IMMEDIATE PARTICIPATION IN THE THRIFT SAVINGS PLAN FOR FEDERAL EMPLOYEES.

(a) ELIMINATION OF CERTAIN WAITING PERIODS FOR PURPOSES OF EMPLOYEE CONTRIBUTIONS- Paragraph (4) of section 8432(b) of title 5, United States Code, is amended to read as follows:

`(4) The Executive Director shall prescribe such regulations as may be necessary to carry out the following:

`(A) Notwithstanding subparagraph (A) of paragraph (2), an employee or Member described in such subparagraph shall be afforded a reasonable

opportunity to first make an election under this subsection beginning on the date of commencing service or, if that is not administratively feasible, beginning on the earliest date thereafter that such an election becomes administratively feasible, as determined by the Executive Director.

`(B) An employee or Member described in subparagraph (B) of paragraph (2) shall be afforded a reasonable opportunity to first make an election under this subsection (based on the appointment or election described in such subparagraph) beginning on the date of commencing service pursuant to such appointment or election or, if that is not administratively feasible, beginning on the earliest date thereafter that such an election becomes administratively feasible, as determined by the Executive Director.

`(C) Notwithstanding the preceding provisions of this paragraph, contributions under paragraphs (1) and (2) of subsection (c) shall not be payable with respect to any pay period before the earliest pay period for which such contributions would otherwise be allowable under this subsection if this paragraph had not been enacted.

`(D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2), 8440c(a)(2), and 8440d(a)(2) shall be applied in a manner consistent with the purposes of subparagraphs (A) and (B), to the extent those subparagraphs can be applied with respect thereto.

`(E) Nothing in this paragraph shall affect paragraph (3).'

(b) TECHNICAL AND CONFORMING AMENDMENTS-

(1) Section 8432(a) of title 5, United States Code, is amended--

(A) in the first sentence by striking `(b)(1)' and inserting `(b)'; and

(B) by amending the second sentence to read as follows: `Contributions under this subsection pursuant to such an election shall, with respect to each pay period for which such election remains in effect, be made in accordance with a program of regular contributions provided in regulations prescribed by the Executive Director.'

(2) Section 8432(b)(1)(B) of such title is amended by inserting `(or any election allowable by virtue of paragraph (4))' after `subparagraph (A)'.

(3) Section 8432(b)(3) of such title is amended by striking `Notwithstanding paragraph (2)(A), an' and inserting `An'.

(4) Section 8432(i)(1)(B)(ii) of such title is amended by striking `either elected to terminate individual contributions to the Thrift Savings Fund within 2 months before commencing military service or'.

(5) Section 8439(a)(1) of such title is amended by inserting `who makes contributions or' after `for each individual' and by striking `section 8432(c)(1)' and inserting `section 8432'.

(6) Section 8439(c)(2) of such title is amended by adding at the end the following: `Nothing in this paragraph shall be considered to limit the dissemination of information only to the times required under the preceding sentence.'

(7) Sections 8440a(a)(2) and 8440d(a)(2) of such title are amended by striking all after `subject to' and inserting `subject to this chapter.'

(c) EFFECTIVE DATE- This section shall take effect 6 months after the date of the enactment of this Act or such earlier date as the Executive Director may by regulation prescribe.

SEC. 127. FULL FUNDING LIMITATION FOR MULTIEMPLOYER PLANS.

(a) AMENDMENTS TO CODE-

(1) FULL FUNDING LIMITATION- Section 412(c)(7)(C) (relating to full funding limitation) is amended--

(A) by inserting `or in the case of a multiemployer plan,' after `paragraph (6)(B),', and

(B) by inserting `AND MULTIEMPLOYER PLANS' after `PARAGRAPH (6)(B)' in the heading thereof.

(2) VALUATION- Section 412(c)(9) (relating to annual valuation) is amended--

(A) by inserting `(3 years in the case of a multiemployer plan)' after `year', and

(B) by striking `ANNUAL VALUATION' in the heading and inserting `VALUATION'.

(b) AMENDMENTS TO ERISA-

(1) FULL FUNDING LIMITATION- Section 302(c)(7)(C) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)(C)) is amended--

(A) by inserting `or in the case of a multiemployer plan,' after `paragraph (6)(B),', and

(B) by inserting `AND MULTIEMPLOYER PLANS' after `PARAGRAPH (6)(B)' in the heading thereof.

(2) VALUATION- Section 302(c)(9) of such Act (29 U.S.C. 1082(c)(9)) is amended--

(A) by inserting `(3 years in the case of a multiemployer plan)' after `year', and

(B) by striking `ANNUAL VALUATION' in the heading and inserting `VALUATION'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to plan years beginning after December 31, 1999.

SEC. 128. ELIMINATION OF PARTIAL TERMINATION RULES FOR MULTIEMPLOYER PLANS.

(a) PARTIAL TERMINATION RULES FOR MULTIEMPLOYER PLANS- Section 411(d)(3) (relating to termination or partial termination; discontinuance of contributions) is amended by adding at the end the following new sentence: `This paragraph shall not apply in the case of a partial termination of a multiemployer plan.'

(b) EFFECTIVE DATE- The amendment made by this section shall apply to partial terminations beginning after December 31, 1999.

SEC. 129. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.

(a) IN GENERAL- Section 412(c)(7) (relating to full-funding limitation) is amended--

(1) by striking `150 percent' in subparagraph (A)(i)(I) and inserting `the applicable percentage', and

(2) by adding at the end the following new subparagraph:

`(F) APPLICABLE PERCENTAGE- For purposes of subparagraph (A)(i)(I), the applicable percentage is determined according to the following table:

The applicable percentage is--

155

160

165

170

0.'

(b) SPECIAL AMORTIZATION RULE-

(1) IN GENERAL- Section 412(c)(7), as amended by subsection (a), is amended by adding at the end the following new subparagraph:

`(G) SPECIAL AMORTIZATION RULE- Contributions that would be required to be made under the plan but for the provisions of subparagraph (A)(i)(I) shall be amortized over a 20-year period.'

(2) CONFORMING AMENDMENT- Section 412(c)(7)(D) is amended by adding `and' at the end of clause (i), by striking `, and' at the end of clause (ii) and inserting a period, and by striking clause (iii).

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to any unamortized bases with respect to plan years beginning before, on, or after December 31, 1999.

TITLE II--SECURITY

SEC. 200. AMENDMENT OF ERISA.

Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Employee Retirement Income Security Act of 1974.

Subtitle A--General Provisions

SEC. 201. PERIODIC PENSION BENEFITS STATEMENTS.

(a) IN GENERAL- Subsection (a) of section 105 (29 U.S.C. 1025) is amended--

(1) by striking `shall furnish to any plan participant or beneficiary who so requests in writing,' and inserting `shall furnish at least once every 3 years, in the case of a participant in a defined benefit plan who has attained age 35, and annually, in the case of a defined contribution plan, to each plan participant, and shall furnish to any plan participant or beneficiary who so requests,', and

(2) by adding at the end the following flush sentence:

`Information furnished under the preceding sentence to a participant in a defined benefit plan (other than at the request of the participant) may be based on reasonable estimates determined under regulations prescribed by the Secretary.'

(b) RULE FOR MULTIEMPLOYER PLANS- Subsection (d) of section 105 (29 U.S.C. 1025) is amended to read as follows:

`(d) Each administrator of a plan to which more than 1 unaffiliated employer is required to contribute shall furnish to any plan participant or beneficiary who so requests in writing, a statement described in subsection (a).'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to plan years beginning after the later of--

(1) the date of issuance by the Secretary of Labor of regulations providing guidance for simplifying defined benefit plan calculations with respect to the information required under section 105 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1025), or

(2) December 31, 1999.

SEC. 202. REQUIREMENT OF ANNUAL, DETAILED INVESTMENT REPORTS APPLIED TO CERTAIN 401(k) PLANS.

(a) IN GENERAL- Section 104(b)(3) (29 U.S.C. 1024(b)(3)) is amended--

(1) by inserting `(A)' after `(3)'; and

(2) by adding at the end the following new subparagraph:

`(B)(i) If, for any plan year, a plan includes a qualified cash or deferred arrangement (as defined in section 401(k)(2) of the Internal Revenue Code of 1986) and such plan covers less than 100 participants, the administrator shall furnish (within 60 days after the end of such plan year) to each participant and to each beneficiary receiving benefits under the plan an annual investment report detailing such information as the Secretary by regulation shall require.

`(ii) Clause (i) shall not apply with respect to any participant described in section 404(c).'

(b) REGULATIONS-

(1) IN GENERAL- The Secretary of Labor, in prescribing regulations required under section 104(b)(3)(B)(i) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023(b)(3)(B)(i)), as added by subsection (a), shall consider including in the information required in an annual investment report the following:

(A) Total plan assets and liabilities as of the beginning and ending of the plan year.

(B) Plan income and expenses and contributions made and benefits paid for the plan year.

(C) Any transaction between the plan and the employer, any fiduciary, or any 10-percent owner during the plan year, including the acquisition of any employer security or employer real property.

(D) Any noncash contributions made to or purchases of nonpublicly traded securities made by the plan during the plan year without an appraisal by an independent third party.

(2) ELECTRONIC TRANSFER- The Secretary of Labor in prescribing such regulations shall also make provision for the electronic transfer of the required annual investment report by a plan administrator to plan participants and beneficiaries.

(c) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to plan years beginning after the date of the enactment of this Act.

SEC. 203. INFORMATION REQUIRED TO BE PROVIDED TO INVESTMENT MANAGERS OF 401(k) PLANS.

(a) IN GENERAL- Section 105 (29 U.S.C. 1025) is amended by adding at the end the following new subsection:

`(e) If--

`(1) the administrator of an individual account plan described in section 401(k) of the Internal Revenue Code of 1986 provides for investment of the plan assets by means of a contractual arrangement with another party, and

`(2) such other party is not required under such arrangement to separately account for benefits accrued with respect to each participant and beneficiary under this plan,

such administrator shall be treated as failing to meet the requirements of subsection (a) unless, under such contractual arrangement, such administrator provides to such other party such information as is necessary to enable such party to separately account at any time for benefits accrued with respect to each participant and beneficiary.'

(b) CIVIL PENALTY FOR VIOLATIONS- Paragraph (1) of section 502(c) (29 U.S.C. 1132(c)(1)) is amended by striking `or section 101(e)(1)' and inserting `, section 101(e)(1), or section 105(e)'.

SEC. 204. STUDY ON INVESTMENTS IN COLLECTIBLES.

(a) STUDY- The Secretary of Labor, in consultation with the Secretary of the Treasury, shall study the extent to which pension plans invest in collectibles and whether such investments present a risk to the pension security of the participants and beneficiaries of such plans.

(b) REPORT- Not later than 12 months after the date of the enactment of this Act, the Secretary of Labor shall submit a report to the Congress containing the findings of the study described in subsection (a) and any recommendations for legislative action.

SEC. 205. QUALIFIED EMPLOYER PLANS PROHIBITED FROM MAKING LOANS THROUGH CREDIT CARDS AND OTHER INTERMEDIARIES.

(a) IN GENERAL- Subsection (a) of section 401 of the Internal Revenue Code of 1986 is amended by adding after paragraph (34) the following new paragraph:

`(35) PROHIBITION OF LOANS THROUGH CREDIT CARDS AND OTHER INTERMEDIARIES- A trust shall not constitute a qualified trust under this section if the plan makes any loan to any beneficiary under the plan through the use of any credit card or any other intermediary.'

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to plan years beginning after the date of the enactment of this Act.

SEC. 206. MULTIEMPLOYER PLAN BENEFITS GUARANTEED.

(a) IN GENERAL- Section 4022A(c) (29 U.S.C. 1322a(c)) is amended--

(1) by striking `$5' each place it appears in paragraph (1) and inserting `$11',

(2) by striking `$15' in paragraph (1) and inserting `$33', and

(3) by striking paragraphs (2), (5), and (6) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(b) EFFECTIVE DATE- The amendments made by this section shall apply to any multiemployer plan that has not received financial assistance (within the meaning of section 4261 of the Employee Retirement Income Security Act of 1974) within the 1-year period ending on the date of the enactment of this Act.

SEC. 207. PROHIBITED TRANSACTIONS.

(a) IN GENERAL- Section 502(i) (29 U.S.C. 1132(i)) is amended by striking `5 percent' and inserting `15 percent'.

(b) EFFECTIVE DATE- The amendments made by this section shall apply to prohibited transactions occurring after the date of the enactment of this Act.

SEC. 208. SUBSTANTIAL OWNER BENEFITS.

(a) MODIFICATION OF PHASE-IN OF GUARANTEE- Subparagraphs (B) and (C) of section 4022(b)(5) (29 U.S.C. 1322(b)(5)) are amended to read as follows:

`(B) For purposes of this title, the term `majority owner' has the same meaning as substantial owner under subparagraph (A), except that subparagraph (A) shall be applied by substituting `50 percent or more' for `more than 10 percent' each place it appears.

`(C) In the case of a participant who is a majority owner, the amount of benefits guaranteed under this section shall not exceed the product of--

`(i) a fraction (not to exceed 1) the numerator of which is the number of years from the later of the effective date or the adoption date of the plan to the termination date, and the denominator of which is 30, and

`(ii) the amount of the majority owner's monthly benefits guaranteed under subsection (a) (as limited by paragraph (3) of this subsection).'

(b) MODIFICATION OF ALLOCATION OF ASSETS-

(1) Section 4044(a)(4)(B) (29 U.S.C. 1344(a)(4)(B)) is amended by striking `section 4022(b)(5)' and inserting `section 4022(b)(5)(C)'.

(2) Section 4044(b) (29 U.S.C. 1344(b)) is amended--

(A) by striking `(5)' in paragraph (2) and inserting `(4), (5),', and

(B) by redesignating paragraphs (3) through (6) as paragraphs (4) through (7), respectively, and by inserting after paragraph (2) the following new paragraph:

`(3) If assets available for allocation under paragraph (4) of subsection (a) are insufficient to

satisfy in full the benefits of all individuals who are described in that paragraph, the assets shall be allocated first to benefits described in subparagraph (A) of that paragraph. Any remaining assets shall then be allocated to subparagraph (B). If assets allocated to subparagraph (B) are insufficient to satisfy in full the benefits in that subparagraph, the assets shall be allocated pro rata among individuals on the basis of the present value (as of the termination date) of their respective benefits described in that subparagraph.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to plan terminations--

(1) under section 4041(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)) with respect to which notices of intent to terminate are provided under section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) on or after the date of the enactment of this Act, or

(2) under section 4042 of such Act (29 U.S.C. 1342) with respect to which proceedings are instituted by the corporation on or after such date.

SEC. 209. REVERSION REPORT.

(a) IN GENERAL- Section 4008 (29 U.S.C. 1308) is amended by adding at the end the following new subsection:

`(b) REVERSION REPORT- As soon as practicable after the close of each fiscal year, the Secretary of Labor (acting in the Secretary's capacity as chairman of the corporation's board) shall transmit to the President and the Congress a report providing information on plans from which residual assets were distributed to employers pursuant to section 4044(d).'

(b) CONFORMING AMENDMENT- Section 4008 (29 U.S.C. 1308) is amended by striking `SEC. 4008.' and inserting `SEC. 4008. (a) ANNUAL REPORT- '.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to fiscal years beginning after September 30, 1999.

Subtitle B--ERISA Enforcement

SEC. 211. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RESPONSIBILITIES MADE DISCRETIONARY, ETC.

(a) IMPOSITION AND AMOUNT OF PENALTY MADE DISCRETIONARY- Section 502(l)(1) (29 U.S.C. 1132(l)) is amended--

(1) by striking `shall' and inserting `may', and

(2) by striking `equal to' and inserting `not greater than'.

(b) APPLICABLE RECOVERY AMOUNT- Section 502(l)(2) (29 U.S.C. 1132(l)(2)) is amended to read as follows:

`(2) For purposes of paragraph (1), the term `applicable recovery amount' means any amount which is recovered from (or on behalf of) any fiduciary or other person with respect to a breach or violation described in paragraph (1) on or after the 30th day following receipt by such fiduciary or other person of written notice from the Secretary of the violation, whether paid voluntarily or by order of a court in a judicial proceeding instituted by the

Secretary under paragraph (2) or (5) of subsection (a). The Secretary may, in the Secretary's sole discretion, extend the 30-day period described in the preceding sentence.'.

(c) OTHER RULES- Section 502(l) is amended by adding at the end the following new paragraphs:

`(5) A person shall be jointly and severally liable for the penalty described in paragraph (1) to the same extent that such person is jointly and severally liable for the applicable recovery amount on which the penalty is based.

`(6) No penalty shall be assessed under this subsection unless the person against whom the penalty is assessed is given notice and opportunity for a hearing with respect to the violation and applicable recovery amount.'

(d) EFFECTIVE DATES-

(1) IN GENERAL- The amendments made by this section shall apply to any breach of fiduciary responsibility or other violation of part 4 of title I of the Employee Retirement Income Security Act of 1974 occurring on or after the date of the enactment of this Act.

(2) TRANSITION RULE- In applying the amendment made by subsection (b), a breach or other violation occurring before the date of the enactment of this Act which continues after the 180th day after such date (and which may be discontinued at any time during its existence) shall be treated as having occurred on the day after such date of enactment.

SEC. 212. REPORTING AND ENFORCEMENT REQUIREMENTS FOR EMPLOYEE BENEFIT PLANS.

(a) IN GENERAL- Part 1 of subtitle B of title I (29 U.S.C. 1021 et seq.) is amended--

(1) by redesignating section 111 as section 112, and

(2) inserting after section 110 the following new section:

`DIRECT REPORTING OF CERTAIN EVENTS

`SEC. 111. (a) REQUIRED NOTIFICATIONS-

`(1) NOTIFICATIONS BY PLAN ADMINISTRATOR- Within 5 business days after an administrator of an employee benefit plan determines that there is evidence (or after the administrator is notified under paragraph (2)) that an irregularity may have occurred with respect to the plan, the administrator shall--

`(A) notify the Secretary of the irregularity in writing; and

`(B) furnish a copy of such notification to the accountant who is currently engaged under section 103(a)(3)(A).

`(2) NOTIFICATIONS BY ACCOUNTANT-

`(A) IN GENERAL- Within 5 business days after an accountant engaged by the administrator of an employee benefit plan under section 103(a)(3)(A) determines in connection with such engagement that there is evidence that an irregularity may have occurred with respect to the plan, the accountant shall--

`(i) notify the plan administrator of the irregularity in writing, or

`(ii) if the accountant determines that there is evidence that the irregularity may have involved an individual who is the plan administrator or who is a senior official of the plan administrator, notify the Secretary of the irregularity in writing.

`(B) NOTIFICATION UPON FAILURE OF PLAN ADMINISTRATOR TO NOTIFY- If an accountant who has provided notification to the plan administrator pursuant to subparagraph (A)(i) does not receive a copy of the administrator's notification to the Secretary required in paragraph (1) within the 5-business day period specified therein, the accountant shall furnish to the Secretary a copy of the accountant's notification made to the plan administrator on the next business day following such period.

`(3) IRREGULARITY DEFINED-

`(A) For purposes of this subsection, the term `irregularity' means--

`(i) a theft, embezzlement, or a violation of section 664 of title 18, United States Code (relating to theft or embezzlement from an employee benefit plan);

`(ii) an extortion or a violation of section 1951 of title 18, United States Code (relating to interference with commerce by threats or violence);

`(iii) a bribery, a kickback, or a violation of section 1954 of title 18, United States Code (relating to offer, acceptance, or solicitation to influence operations of an employee benefit plan);

`(iv) a violation of section 1027 of title 18, United States Code (relating to false statements and concealment of facts in relation to employee benefit plan records); or

`(v) a violation of section 411, 501, or 511 of this title (relating to criminal violations).

`(B) The term `irregularity' does not include any act or omission described in this paragraph involving less than $1,000 unless there is reason to believe that the act or omission may bear on the integrity of plan management.

`(b) NOTIFICATION UPON TERMINATION OF ENGAGEMENT OF ACCOUNTANT-

`(1) NOTIFICATION BY PLAN ADMINISTRATOR- Within 5 business days after the termination of an engagement of an accountant under section 103(a)(3)(A) with respect to an employee benefit plan, the administrator of such plan shall--

`(A) notify the Secretary in writing of such termination, giving the reasons for such termination, and

`(B) furnish the accountant whose engagement was terminated with a copy of the notification sent to the Secretary.

`(2) NOTIFICATION BY ACCOUNTANT- If the accountant referred to in paragraph (1)(B) has not received a copy of the administrator's notification to the Secretary as required under paragraph (1)(B), or if the accountant disagrees with the reasons given in the notification of termination of the engagement for auditing services, the accountant shall notify the Secretary in writing of the termination, giving the reasons for the termination, within 10 business days after the termination of the engagement.

`(c) DETERMINATION OF PERIODS REQUIRED FOR NOTIFICATION- In determining whether a notification required under this section with respect to any act or omission has been made within the required number of business days--

`(1) the day on which such act or omission begins shall not be included; and

`(2) Saturdays, Sundays, and legal holidays shall not be included.

For purposes of this subsection, the term `legal holiday' means any Federal legal holiday and any other day appointed as a holiday by the State in which the person responsible for making the notification principally conducts business.

`(d) IMMUNITY FOR GOOD FAITH NOTIFICATION- No accountant or plan administrator shall be liable to any person for any finding, conclusion, or statement made in any notification made pursuant to subsection (a)(2) or (b)(2), or pursuant to any regulations issued under those subsections, if the finding, conclusion, or statement is made in good faith.'

(b) CIVIL PENALTY-

(1) IN GENERAL- Section 502(c) (29 U.S.C. 1132(c)) is amended by inserting after paragraph (6) the following new paragraph:

`(8)(A) The Secretary may assess a civil penalty of up to $50,000 against any administrator who fails to provide the Secretary with any notification as required under section 111.

`(B) The Secretary may assess a civil penalty of up to $50,000 against any accountant who knowingly and willfully fails to provide the Secretary with any notification as required under section 111.'

(2) CONFORMING AMENDMENT- Section 502(a)(6) (29 U.S.C. 1132(a)(6)) is amended by striking `or (6)' and inserting `(6), or (8)'.

(c) CLERICAL AMENDMENTS-

(1) Section 514(d) (29 U.S.C. 114(d)) is amended by striking `111' and inserting `112'.

(2) The table of contents in section 1 is amended by striking the item relating to section 111 and inserting the following new items:

`Sec. 111. Direct reporting of certain events.

`Sec. 112. Repeal and effective date.'

(d) EFFECTIVE DATE- The amendments made by this section shall apply with respect to any irregularity or termination of engagement described in the amendments only if the 5-day period described in the amendments in connection with the irregularity or termination commences at least 90 days after the date of the enactment of this Act.

SEC. 213. ADDITIONAL REQUIREMENTS FOR QUALIFIED PUBLIC ACCOUNTANTS.

(a) IN GENERAL- Section 103(a)(3)(D) (29 U.S.C. 1023(a)(3)(D)) is amended--

(1) by inserting `(i)' after `(D)';

(2) by inserting `, with respect to any engagement of an accountant under subparagraph (A)' after `means';

(3) by redesignating clauses (i), (ii), and (iii) as subclauses (I), (II), and (III), respectively;

(4) by striking the period at the end of subclause (III) (as so redesignated) and inserting a comma;

(5) by adding after and below subclause (III) (as so redesignated), the following: `but only if such person meets the requirements of clauses (ii) and (iii), with respect to such engagement.'; and

(6) by adding at the end the following new clauses:

`(ii) A person meets the requirements of this clause with respect to an engagement of the person as an accountant under subparagraph (A) if the person--

`(I) has in operation an appropriate internal quality control system;

`(II) has undergone a qualified external quality control review of the person's accounting and auditing practices, including such practices relevant to employee benefit plans (if any), during the 3-year period immediately preceding such engagement; and

`(III) has completed, within the 2 calendar years immediately preceding such engagement, such continuing education or training as the Secretary in regulations determines is necessary to maintain professional proficiency in connection with employee benefit plans.

`(iii) A person meets the requirements of this clause with respect to an engagement of the person as an accountant under subparagraph (A) if the person meets such additional requirements and qualifications of regulations which the Secretary deems necessary to ensure the quality of plan audits.

`(iv) For purposes of clause (ii)(II), an external quality control review shall be treated as qualified with respect to a person referred to in clause (ii) if--

`(I) such review is performed in accordance with the requirements of external quality control review programs of recognized auditing standard setting bodies, as determined in regulations of the Secretary, and

`(II) in the case of any such person who has, during the peer review period, conducted 1 or more previous audits of employee benefit plans, such review includes the review of an appropriate number (determined as provided in such regulations, but in no case less than 1) of plan audits in relation to the scale of the person's auditing practice.'

(b) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section apply with respect to plan years beginning on or after the date which is 3 years after the date of the enactment of this Act.

(2) RESTRICTIONS ON CONDUCTING EXAMINATIONS- Clause (iii) of section 103(a)(1)(D) of the Employee Retirement Income Security Act of 1974 (as added by subsection (a)(6)) takes effect on the date of enactment of this Act.

(3) REGULATIONS- The Secretary shall issue regulations under this section no later than December 31, 2000.

SEC. 214. INSPECTOR GENERAL STUDY.

(a) STUDY- The Inspector General of the Department of Labor shall conduct a study on the need for regulatory standards and procedures to authorize the Secretary, in appropriate cases, to prohibit persons from serving as qualified accountants for purposes of section 103 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023).

(b) MATTERS TO BE STUDIED- In conducting the study under this section, the Inspector General shall address whether standards and procedures to prohibit persons from serving as qualified public accountants are likely to improve the quality of employee benefit plan audits, and the potential for increased costs to plans. If the Inspector General concludes that regulations incorporating standards and procedures would be appropriate, the study shall include recommended standards and procedures.

(c) REPORT- Not later than 1 year after the date of the enactment of this Act, the Inspector General shall submit a report on the results of the study conducted pursuant to this section to each house of Congress and the Secretary of Labor.

Subtitle C--Increase in Excise Tax on Employer Reversions

SEC. 221. INCREASE IN EXCISE TAX.

(a) IN GENERAL- Section 4980 of the Internal Revenue Code of 1986 (relating to tax on reversion of qualified plan assets to employer) is amended--

(1) in subsection (a), by striking `20 percent' and inserting `35 percent'; and

(2) in subsection (d)(1), by striking `substituting `50 percent' for `20 percent' with respect to any employer reversion' and inserting `substituting `65 percent' for `35 percent' with respect to any employer reversion'.

(b) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided in paragraph (2), the amendment made by this section shall apply to reversions occurring after December 31, 1999.

(2) EXCEPTION- The amendment made by this section shall not apply to any reversion after December 31, 1999, if--

(A) in the case of plans subject to title IV of the Employee Retirement Income Security

Act of 1974, a notice of intent to terminate under such title was provided to participants (or if no participants, to the Pension Benefit Guaranty Corporation) before June 25, 1999,

(B) in the case of plans subject to title I (and not to title IV) of such Act, a notice of intent to reduce future accruals under section 204(h) of such Act was provided to participants in connection with the termination before June 25, 1999,

(C) in the case of plans not subject to title I or IV of such Act, a request for a determination letter with respect to the termination was filed with the Secretary of the Treasury or the Secretary's delegate before June 25, 1999, or

(D) in the case of plans not subject to title I or IV of such Act and having only 1 participant, a resolution terminating the plan was adopted by the employer before June 25, 1999.

TITLE III--PORTABILITY

SEC. 301. FASTER VESTING OF EMPLOYER MATCHING CONTRIBUTIONS.

(a) AMENDMENT OF INTERNAL REVENUE CODE- Paragraph (2) of section 411(a) of the Internal Revenue Code of 1986 (relating to employer contributions) is amended--

(1) by inserting `, and, if applicable, (C)' after `or (B)', and

(2) by adding at the end the following new subparagraph:

`(C) MATCHING CONTRIBUTIONS- In the case of a plan that includes an accrued benefit derived from matching contributions (as defined in section 401(m)(4)(A)), the plan satisfies the requirements of this subparagraph if--

`(i) an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee's accrued benefit derived from such matching contributions, or

`(ii) an employee has a nonforfeitable right to a percentage of the employee's accrued benefit derived from employer matching contributions (as so defined) determined under the following table:

20

40

60

80

100.'

(b) AMENDMENT OF ERISA- Paragraph (2) of section 203(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended--

(1) by inserting `, and, if applicable, (C)' after `or (B)', and

(2) by adding at the end the following new subparagraph:

`(C) MATCHING CONTRIBUTIONS- In the case of a plan that includes an accrued benefit derived from matching contributions (as defined in section 401(m)(4)(A) of the Internal Revenue Code of 1986), the plan satisfies the requirements of this subparagraph if--

`(i) an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee's accrued benefit derived from such matching contributions, or

`(ii) an employee has a nonforfeitable right to a percentage of the employee's accrued benefit derived from employer matching contributions (as so defined) determined under the following table:

20

40

60

80

100.'

(c) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided in paragraphs (2) and (3), the amendments made by this section shall apply to plan years beginning after December 31, 1999.

(2) APPLICATION TO CURRENT EMPLOYEES- The amendments made by this section shall not apply to any employee who does not have at least 1 hour of service in any plan year beginning after December 31, 1999.

(3) COLLECTIVE BARGAINING AGREEMENTS- In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified by the date of the enactment of this Act, the amendments made by this section shall not apply to employees covered by any such agreement in 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 enactment), or

(ii) January 1, 2000, or

(B) January 1, 2004.

SEC. 302. RATIONALIZATION OF THE RESTRICTIONS ON DISTRIBUTIONS FROM 401(k) PLANS.

(a) IN GENERAL- Section 401(k)(2)(B)(i)(I) of the Internal Revenue Code of 1986 (relating to qualified cash or deferred arrangements) is amended by striking `separation from service' and inserting `severance from employment'.

(b) BUSINESS SALE REQUIREMENTS DELETED-

(1) IN GENERAL- Section 401(k)(2)(B)(i)(II) of the Internal Revenue Code of 1986 (relating to qualified cash or deferred arrangements) is amended by striking `an event' and inserting `a plan termination'.

(2) CONFORMING AMENDMENTS- Section 401(k)(10) of such Code is amended--

(A) by striking subparagraph (A) and inserting the following:

`(A) IN GENERAL- A plan termination is described in this paragraph if the termination of the plan is without establishment or maintenance of another defined contribution plan

(other than an employee stock ownership plan as defined in section 4975(e)(7)).',

(B) by striking subparagraph (C), and

(C) by striking `OR DISPOSITION OF ASSETS OR SUBSIDIARY' in the heading.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after December 31, 1999.

SEC. 303. TREATMENT OF TRANSFERS BETWEEN DEFINED CONTRIBUTION PLANS.

(a) IN GENERAL- Section 411(d)(6) of the Internal Revenue Code of 1986 (relating to accrued benefit not to be decreased by amendment) is amended by adding at the end the following new subparagraph:

`(D) PLAN TRANSFERS- 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 paragraph 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,

`(v) if the transferor plan provides for an annuity as the normal form of distribution under the plan in accordance with section 417, the transfer is made with the consent of the participant's spouse (if any), and such consent meets requirements similar to the requirements imposed by section 417(a)(2), and

`(vi) 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 transferee plan in the form of a single sum distribution.'

(b) CONFORMING AMENDMENT- Section 204(g) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is amended by adding at the end the following new paragraph:

`(4) A defined contribution plan (in this paragraph 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 paragraph referred to as the `transferor plan') to the extent that--

`(A) 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,

`(B) the terms of both the transferor plan and the transferee plan authorize the transfer described in subparagraph (A),

`(C) the transfer described in subparagraph (A) was made pursuant to a voluntary election by the participant or beneficiary whose account was transferred to the transferee plan,

`(D) the election described in subparagraph (C) was made after the participant or beneficiary received a notice describing the consequences of making the election,

`(E) if the transferor plan provides for an annuity as the normal form of distribution under the plan in accordance with section 205, the transfer is made with the consent of the participant's spouse (if

any), and such consent meets requirements similar to the requirements imposed by section 205(c)(2), and

`(F) the transferee plan allows the participant or beneficiary described in subparagraph (C) to receive any distribution to which the participant or beneficiary is entitled under transferee plan in the form of a single sum distribution.'

(b) EFFECTIVE DATE- The amendments made by this section shall apply to transfers after December 31, 1999.

SEC. 304. MISSING PARTICIPANTS.

(a) IN GENERAL- Section 4050 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating subsection (c) as subsection (e) and by inserting after subsection (b) the following new subsections:

`(c) MULTIEMPLOYER PLANS- The corporation shall prescribe rules similar to the rules in subsection (a) for multiemployer plans covered by this title that terminate under section 4041A.

`(d) PLANS NOT OTHERWISE SUBJECT TO TITLE-

`(1) TRANSFER TO CORPORATION- The plan administrator of a plan described in paragraph (4) may elect to transfer a missing participant's benefits to the corporation upon termination of the plan.

`(2) INFORMATION TO THE CORPORATION- To the extent provided in regulations, the plan administrator of a plan described in paragraph (4) shall, upon termination of the plan, provide the corporation information with respect to benefits of a missing participant if the plan transfers such benefits--

`(A) to the corporation, or

`(B) to an entity other than the corporation or a plan described in paragraph (4)(B)(ii).

`(3) PAYMENT BY THE CORPORATION- If benefits of a missing participant were transferred to the corporation under paragraph (1), the corporation shall, upon location of the participant or beneficiary, pay to the participant or beneficiary the amount transferred (or the appropriate survivor benefit) either--

`(A) in a single sum (plus interest), or

`(B) in such other form as is specified in regulations of the corporation.

`(4) PLANS DESCRIBED- A plan is described in this paragraph if--

`(A) the plan is a pension plan (within the meaning of section 3(2))--

`(i) to which the provisions of this section do not apply (without regard to this subsection), and

`(ii) which is not a plan described in paragraphs (2) through (11) of section 4021(b), and

`(B) at the time the assets are to be distributed upon termination, the plan--

`(i) has missing participants, and

`(ii) has not provided for the transfer of assets to pay the benefits of all missing participants to another pension plan (within the meaning of section 3(2)).

`(5) CERTAIN PROVISIONS NOT TO APPLY- Subsections (a)(1) and (a)(3) shall not apply to a plan described in paragraph (4).'

(b) CONFORMING AMENDMENTS-

(1) Section 206(f) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056(f)) is amended--

(A) by striking `title IV' and inserting `section 4050', and

(B) by striking `the plan shall provide that,'.

(2) Section 401(a)(34) of the Internal Revenue Code of 1986 (relating to benefits of missing participants on plan termination) is amended by striking `title IV' and inserting `section 4050'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to distributions made after final regulations implementing subsections (c) and (d) of section 4050 of the Employee Retirement Income Security Act of 1974 (as added by subsection (a)), respectively, are prescribed.

SEC. 305. ALLOWANCE OF ROLLOVERS FROM AND TO 403(b) PLANS.

(a) ROLLOVERS FROM SECTION 403(b) PLANS- Section 403(b)(8)(A)(ii) of the Internal Revenue Code of 1986 (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'.

(b) ROLLOVERS TO SECTION 403(b) PLANS- Section 402(c)(8)(B) of such Code (defining eligible retirement plan) is amended by striking `and' at the end of clause (ii), by striking the period at the end of clause (iv) and inserting `, and', and by adding at the end the following:

`(v) an annuity contract described in section 403(b).'

(c) CONFORMING AMENDMENTS-

(1) Section 72(o)(4) of such Code is amended by striking `and 408(d)(3)' and inserting `403(b)(8), and 408(d)(3)'.

(2) Section 401(a)(31)(B) of such Code is amended by striking `and 403(a)(4)' and inserting `, 403(a)(4), and 403(b)(8)'.

(3) Subparagraph (B) of section 403(b)(8) of such Code is amended by inserting `and (9)' after `through (7)'.

(4) Subparagraphs (A) and (B) of section 415(b)(2) of such Code are each amended by striking `and 408(d)(3)' and inserting `403(b)(8), and 408(d)(3)'.

(d) EFFECTIVE DATE; SPECIAL RULE-

(1) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after December 31, 1999.

(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 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. 306. ROLLOVER CONTRIBUTIONS FROM DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS.

(a) ROLLOVERS FROM SECTION 457 PLANS-

(1) IN GENERAL- Section 457(e) of the Internal Revenue Code of 1986 (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 of an eligible employer described in paragraph (1)(A), if--

`(i) any portion of the balance to the credit of an employee in such plan is paid to such employee in a rollover distribution (other than a distribution described in subsection (d)(1)(A)(iii) or in subparagraph (A) or (B) of section 402(c)(4)),

`(ii) the employee transfers any portion of the property such employee receives in such distribution to an individual retirement plan (as defined in section 7701(a)(37), 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- Rules similar to the rules of section 401(a)(31), paragraphs (2), (3), (5), (6), (7),

and (9) of section 402(c), and section 402(f) shall apply for purposes of subparagraph (A).'

(2) DISTRIBUTION REQUIREMENTS- Section 457(d)(1)(A) of such Code (relating to distribution requirements) is amended by inserting `except as provided in subsection (e)(16),' after `(A)'.

(3) CONFORMING AMENDMENTS-

(A) Section 72(o)(4) of such Code is amended--

(i) by striking `and 408(d)(3)' and inserting `408(d)(3), and 457(e)(16)',

(ii) by inserting `or excludable' after `deductible' each place it appears, and

(iii) in the heading by inserting `OR EXCLUDABLE' after `DEDUCTIBLE'.

(B) Section 219(d)(2) of such Code is amended by striking `or 408(d)(3)' and inserting `408(d)(3), or 457(e)(16)'.

(C) Section 401(a)(31)(B) of such Code is amended by striking `and 403(b)(8)' and inserting `, 403(b)(8), and 457(e)(16)'.

(D) Paragraph (4) of section 402(c) of such Code is amended by inserting `or in an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A)' after `qualified trust'.

(E) Section 408(a)(1) of such Code is amended by striking `or 403(b)(8)' and inserting `, 403(b)(8), or 457(e)(16)'.

(F) Section 408(d)(3)(A)(ii) of such Code is amended by striking `or' after `501(a)' and inserting a comma, and by inserting `, or from an eligible deferred compensation plan described in section 457(b)' after `contribution)'.

(G) Subparagraphs (A) and (B) of section 415(b)(2) of such Code are each amended by

striking `and 408(d)(3)' and inserting `408(d)(3), and 457(e)(16)'.

(H) Section 4973(b)(1)(A) of such Code is amended by striking `or 408(d)(3)' and inserting `408(d)(3), or 457(e)(16)'.

(d) EFFECTIVE DATE; SPECIAL RULE-

(1) EFFECTIVE DATE- The amendments made by this section shall apply to distributions after December 31, 1999.

(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 individual retirement plan 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. 307. EXTENSION OF 60-DAY ROLLOVER PERIOD IN THE CASE OF PRESIDENTIALLY DECLARED DISASTERS AND SERVICE IN COMBAT ZONE.

(a) IN GENERAL- Paragraph (1) of section 7508(a) of the Internal Revenue Code of 1986 (relating to time postponed for performing certain acts) is amended by striking `and' at the end of subparagraph (J), by redesignating subparagraph (K) as subparagraph (L), and by inserting after subparagraph (J) the following new subparagraph:

`(K) Rollover of any distribution within the 60-day period specified in section 402(c)(3) or 408(d)(3)(A); and'.

(b) EFFECTIVE DATE- The amendment made by this section shall apply to distributions made after December 31, 1999.

SEC. 308. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT PLANS.

(a) 403(b) PLANS- Subsection (b) of section 403 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

`(13) TRUSTEE-TO-TRUSTEE TRANSFERS TO PURCHASE PERMISSIVE SERVICE CREDIT- No amount shall be includible in gross income by reason of a direct trustee-to-trustee transfer to a defined benefit governmental plan (as defined in section 414(d)) if such transfer is--

`(A) for the purchase of permissive service credit (as defined in section 415(n)(3)(A)) under such plan, or

`(B) a repayment to which section 415 does not apply by reason of subsection (k)(3) thereof.'

(b) 457 PLANS- Subsection (e) of section 457 of such Code, as amended by section 306, is amended by adding at the end the following new paragraph:

`(17) TRUSTEE-TO-TRUSTEE TRANSFERS TO PURCHASE PERMISSIVE SERVICE CREDIT- No amount shall be includible in gross income by reason of a direct trustee-to-trustee transfer to a defined benefit governmental plan (as defined in section 414(d)) if such transfer is--

`(A) for the purchase of permissive service credit (as defined in section 415(n)(3)(A)) under such plan, or

`(B) a repayment to which section 415 does not apply by reason of subsection (k)(3) thereof.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to trustee-to-trustee transfers after December 31, 1999.

TITLE IV--COMPREHENSIVE WOMEN'S PENSION PROTECTION

Subtitle A--Pension Reform

SEC. 401. PENSION RIGHT TO KNOW PROPOSALS.

(a) SPOUSE'S RIGHT TO KNOW DISTRIBUTION INFORMATION-

(1) AMENDMENT OF INTERNAL REVENUE CODE- Paragraph (3) of section 417(a) of the Internal Revenue Code of 1986 (relating to definitions and special rules for purposes of minimum survivor annuity requirements) is amended by adding at the end the following new subparagraph:

`(C) EXPLANATION TO SPOUSE- At the time a plan provides a participant with a written explanation under subparagraph (A) or (B), such plan shall provide a copy of such explanation to such participant's spouse. If the last known address of the spouse is the same as the last known address of the participant, the requirement of the preceding sentence shall be treated as met if the copy referred to in the preceding sentence is included in a single mailing made to such address and addressed to both such participant and spouse.'

(2) AMENDMENT OF ERISA- Paragraph (3) of section 205(c) of Employee Retirement Income Security Act of 1974 is amended by adding at the end the following new subparagraph:

`(C) EXPLANATION TO SPOUSE- At the time a plan provides a participant with a written explanation under subparagraph (A) or (B),

such plan shall provide a copy of such explanation to such participant's spouse. If the last known address of the spouse is the same as the last known address of the participant, the requirement of the preceding sentence shall be treated as met if the copy referred to in the preceding sentence is included in a single mailing made to such address and addressed to both such participant and spouse.'

(b) EMPLOYEE'S RIGHT TO KNOW OF OPPORTUNITY FOR ELECTIVE CONTRIBUTIONS UNDER 401(k) PLANS- Subparagraph (D) of section 401(k)(12) of the Internal Revenue Code of 1986 (relating to notice requirements) is amended--

(1) by striking `, within a reasonable period before any year,' and inserting `before the 60th day before the beginning of any year', and

(2) by adding at the end the following new flush sentence:

`The requirements of paragraph (11)(B)(iii) shall apply for purposes of this subparagraph.'

SEC. 402. WOMEN'S PENSION TOLL-FREE PHONE NUMBER.

(a) IN GENERAL- The Secretary of Labor shall contract with an independent organization to create a women's pension toll-free telephone number and contact to serve as--

(1) a resource for women on pension questions and issues;

(2) a source for referrals to appropriate agencies; and

(3) a source for printed information.

(b) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated $1,000,000 for each of the fiscal years 2000, 2001, 2002, and 2003 to carry out subsection (a).

SEC. 403. MODIFICATION OF GOVERNMENT PENSION OFFSET.

(a) WIFE'S INSURANCE BENEFITS- Section 202(b)(4)(A) of the Social Security Act (42 U.S.C. 402(b)(4)(A)) is amended--

(1) by inserting `the amount (if any) by which the sum of such benefit (before reduction under this paragraph) and' after `two-thirds of'; and

(2) by inserting `exceeds the amount described in subsection (z) for such month,' before `if'.

(b) HUSBAND'S INSURANCE BENEFITS- Section 202(c)(2)(A) of such Act (42 U.S.C. 402(c)(2)(A)) is amended--

(1) by inserting `the amount (if any) by which the sum of such benefit (before reduction under this paragraph) and' after `two-thirds of'; and

(2) by inserting `exceeds the amount described in subsection (z) for such month,' before `if'.

(c) WIDOW'S INSURANCE BENEFITS- Section 202(e)(7)(A) of such Act (42 U.S.C. 402(e)(7)(A)) is amended--

(1) by inserting `the amount (if any) by which the sum of such benefit (before reduction under this paragraph) and' after `two-thirds of'; and

(2) by inserting `exceeds the amount described in subsection (z) for such month,' before `if'.

(d) WIDOWER'S INSURANCE BENEFITS- Section 202(f)(2)(A) of such Act (42 U.S.C. 402(f)(2)(A)) is amended--

(1) by inserting `the amount (if any) by which the sum of such benefit (before reduction under this paragraph) and' after `two-thirds of'; and

(2) by inserting `exceeds the amount described in subsection (z) for such month,' before `if'.

(e) MOTHER'S AND FATHER'S INSURANCE BENEFITS- Section 202(g)(4)(A) of such Act (42 U.S.C. 402(g)(4)(A)) is amended--

(1) by inserting `the amount (if any) by which the sum of such benefit (before reduction under this paragraph) and' after `two-thirds of'; and

(2) by inserting `exceeds the amount described in subsection (z) for such month,' before `if'.

(f) AMOUNT DESCRIBED- Section 202 of such Act (42 U.S.C. 402) is amended by adding at the end the following:

`(z) The amount described in this subsection is, for months in each 12-month period beginning in December of 1999, and each succeeding calendar year, the greater of--

`(1) $1,200; or

`(2) the amount applicable for months in the preceding 12-month period, increased by the cost-of-living adjustment for such period determined for an annuity under section 8340 of title 5, United States Code (without regard to any other provision of law).'

(g) LIMITATIONS ON REDUCTIONS IN BENEFITS- Section 202 of such Act (42 U.S.C. 402), as amended by subsection (f), is amended by adding at the end the following:

`(aa) For any month after December 1999, in no event shall an individual receive a reduction in a benefit under subsection (b)(4)(A), (c)(2)(A), (e)(7)(A), (f)(2)(A), or (g)(4)(A) for the month that is more than the reduction in such benefit that would have applied for such month under such subsections as in effect on December 1, 1999.'

(h) EFFECTIVE DATE- The amendments made by this section shall apply with respect to monthly insurance benefits payable under title II of the Social Security Act for months after December 1999.

SEC. 404. PERIODS OF FAMILY AND MEDICAL LEAVE TREATED AS HOURS OF SERVICE FOR PENSION PARTICIPATION AND VESTING.

(a) AMENDMENTS OF INTERNAL REVENUE CODE-

(1) PARTICIPATION-

(A) IN GENERAL- Paragraph (3) of section 410(a) (relating to minimum participation standards) is amended by adding at the end the following new subparagraph:

`(E) FAMILY AND MEDICAL LEAVE TREATED AS SERVICE-

`(i) IN GENERAL- For purposes of this subsection, in the case of an individual who is absent from work on leave required to be given to such individual under the Family and Medical Leave Act of 1993, the plan shall treat as hours of service--

`(I) the hours of service which otherwise would normally have been credited to such individual but for such absence, or

`(II) in any case in which the plan is unable to determine the hours described in subclause (I), 8 hours of service per day of absence.

`(ii) YEAR TO WHICH HOURS ARE CREDITED- The hours described in clause (i) shall be treated as hours of service as provided in this subparagraph--

`(I) only in the year in which the absence from work begins, if section 411(a)(5)(E)(ii)(I) requires hours to be credited to the year in which the absence from work begins, or

`(II) in any other case, in the immediately following year.'

(B) COORDINATION WITH TREATMENT OF MATERNITY AND PATERNITY ABSENCES UNDER BREAK IN SERVICE RULES- Subparagraph (E) of section 410(a)(5) is amended--

(i) by inserting `NOT UNDER FAMILY AND MEDICAL LEAVE ACT OF 1993' after `ABSENCES' in the heading, and

(ii) by adding at the end of clause (i) the following new sentence: `The preceding sentence shall apply to an absence from work only if no part of such absence is required to be given under the Family and Medical Leave Act of 1993.'

(2) VESTING-

(A) IN GENERAL- Paragraph (5) of section 411(a) (relating to minimum vesting standards) is amended by adding at the end the following new subparagraph:

`(E) FAMILY AND MEDICAL LEAVE TREATED AS SERVICE-

`(i) IN GENERAL- For purposes of this subsection, in the case of an individual who is absent from work on leave required to be given to such individual under the Family and Medical Leave Act of 1993, the plan shall treat as hours of service--

`(I) the hours of service which otherwise would normally have been credited to such individual but for such absence, or

`(II) in any case in which the plan is unable to determine the hours described in subclause (I), 8 hours of service per day of absence.

`(ii) YEAR TO WHICH HOURS ARE CREDITED- The hours described in clause (i) shall be treated as hours of service as provided in this subparagraph--

`(I) only in the year in which the absence from work begins, if the participant's rights in his accrued benefit derived from employer contributions are to any extent not nonforfeitable

and the participant would have a year of service solely because the period of absence is treated as hours of service as provided in clause (i); or

`(II) in any other case, in the immediately following year.'

(B) COORDINATION WITH TREATMENT OF MATERNITY AND PATERNITY ABSENCES UNDER BREAK IN SERVICE RULES- Subparagraph (E) of section 411(a)(6) is amended--

(i) by inserting `NOT UNDER FAMILY AND MEDICAL LEAVE ACT OF 1993' after `ABSENCES' in the heading, and

(ii) by adding at the end of clause (i) the following new sentence: `The preceding sentence shall apply to an absence from work only if no part of such absence is required to be given under the Family and Medical Leave Act of 1993.'

(b) AMENDMENTS OF ERISA-

(1) PARTICIPATION-

(A) IN GENERAL- Paragraph (3) of section 202(a) of the Employee Retirement Income Security Act of 1974 (relating to minimum participation standards) is amended by adding at the end the following new subparagraph:

`(E)(i) For purposes of this subsection, in the case of an individual who is absent from work on leave required to be given to such individual under the Family and Medical Leave Act of 1993, the plan shall treat as hours of service--

`(I) the hours of service which otherwise would normally have been credited to such individual but for such absence, or

`(II) in any case in which the plan is unable to determine the hours described in subclause (I), 8 hours of service per day of absence.

`(ii) The hours described in clause (i) shall be treated as hours of service as provided in this subparagraph--

`(I) only in the year in which the absence from work begins, if section 203(b)(2)(E)(ii)(I) requires hours to be credited to the year in which the absence from work begins, or

`(II) in any other case, in the immediately following year.'

(B) COORDINATION WITH TREATMENT OF MATERNITY AND PATERNITY ABSENCES UNDER BREAK IN SERVICE RULES- Subparagraph (A) of section 202(b)(5) of such Act is amended by adding at the end of clause (i) the following new sentence: `The preceding sentence shall apply to an absence from work only if no part of such absence is required to be given under the Family and Medical Leave Act of 1993.'

(2) VESTING-

(A) IN GENERAL- Paragraph (2) of section 203(b) of such Act (relating to minimum vesting standards) is amended by adding at the end the following new subparagraph:

`(E)(i) For purposes of this subsection, in the case of an individual who is absent from work on leave required to be given to such individual under the Family and Medical Leave Act of 1993, the plan shall treat as hours of service--

`(I) the hours of service which otherwise would normally have been credited to such individual but for such absence, or

`(II) in any case in which the plan is unable to determine the hours described in subclause (I), 8 hours of service per day of absence.

`(ii) The hours described in clause (i) shall be treated as hours of service as provided in this subparagraph--

`(I) only in the year in which the absence from work begins, if the participant's rights in his accrued benefit derived from employer contributions are to any extent not nonforfeitable and the participant would have a year of service solely because the period of absence is treated as hours of service as provided in clause (i); or

`(II) in any other case, in the immediately following year.'

(B) COORDINATION WITH TREATMENT OF MATERNITY AND PATERNITY ABSENCES UNDER BREAK IN SERVICE RULES- Clause (i) of section 203(b)(3)(E) of such Act is amended by adding at the end of clause (i) the following new sentence: `The preceding sentence shall apply to an absence from work only if no part of such absence is required to be given under the Family and Medical Leave Act of 1993.'

(c) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to plan years beginning after December 31, 1999.

(2) APPLICATION TO CURRENT EMPLOYEES- The amendments made by this section shall not apply to any employee who does not have at least 1 hour of service in any plan year beginning after December 31, 1999.

SEC. 405. PENSION INTEGRATION RULES.

(a) APPLICABILITY OF NEW INTEGRATION RULES EXTENDED TO ALL EXISTING ACCRUED BENEFITS- Notwithstanding subsection (c)(1) of section 1111 of the Tax Reform Act of 1986 (relating to effective date of application of nondiscrimination rules to integrated plans) (100 Stat. 2440), effective for plan years beginning after the date of the enactment of this Act, the amendments made by subsection (a) of such section 1111 shall also apply to benefits attributable to plan years beginning on or before December 31, 1988.

(b) INTEGRATION DISALLOWED FOR SIMPLIFIED EMPLOYEE PENSIONS-

(1) IN GENERAL- Subparagraph (D) of section 408(k)(3) of the Internal Revenue Code of 1986 (relating to permitted disparity under rules limiting discrimination under simplified employee pensions) is repealed.

(2) CONFORMING AMENDMENT- Subparagraph (C) of such section 408(k)(3) is amended by striking `and except as provided in subparagraph (D),'.

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply with respect to taxable years beginning on or after January 1, 1999.

(c) EVENTUAL REPEAL OF INTEGRATION RULES- Effective for plan years beginning on or after January 1, 2004--

(1) subparagraphs (C) and (D) of section 401(a)(5) of the Internal Revenue Code of 1986 (relating to pension integration exceptions under nondiscrimination requirements for qualification) are repealed, and subparagraph (E) of such section 401(a)(5) is redesignated as subparagraph (C); and

(2) subsection (l) of section 401 of such Code (relating to nondiscriminatory coordination of defined contribution plans with OASDI) is repealed.

SEC. 406. DIVISION OF PENSION BENEFITS UPON DIVORCE.

(a) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986- Section 414(p) of the Internal Revenue Code of 1986 (relating to qualified domestic relations order defined) is amended by redesignating paragraph (12) as paragraph (13) and by adding at the end the following new paragraph:

`(12) SPECIAL RULES AND PROCEDURES FOR DOMESTIC RELATIONS ORDERS NOT SPECIFYING DIVISION OF PENSION BENEFITS-

`(A) IN GENERAL- If--

`(i) a domestic relations order (including an annulment or other order of marital dissolution) relates to provision of marital property with respect to a marriage of at least 5 years duration between the participant and the former spouse,

`(ii)(I) such order (and any prior order) does not specifically provide that pension benefits were considered by the parties and no division is intended, and

`(II) such order is not a qualified domestic relations order without regard to this paragraph and there is no other prior qualified domestic relations order issued in connection with the dissolution of the marriage to which such order relates, and

`(iii) the former spouse notifies a plan within the period prescribed under subparagraph (C) that the former spouse is entitled to benefits under the plan in accordance with the provisions of this paragraph,

then such domestic relations order shall be treated as a qualified domestic relations order for purposes of this subsection and section 401(a)(13).

`(B) AMOUNT OF BENEFIT-

`(i) IN GENERAL- Any domestic relations order treated as a qualified domestic relations order under subparagraph (A) shall be treated as specifying that the former spouse is entitled to the applicable percentage of the marital share of the participant's accrued benefit.

`(ii) MARITAL SHARE- For purposes of clause (i), the marital share of a participant's accrued benefit is an amount equal to the product of--

`(I) such benefit as of the date of the first payment under the plan (to the extent such accrued benefit is vested at the date of the divorce or any later date), and

`(II) a fraction the numerator of which is the period of participation by the participant under the plan starting with the date of marriage and ending with the date of divorce, and the denominator of which is the total period of participation by the participant under the plan.

`(iii) APPLICABLE PERCENTAGE- For purposes of this subparagraph, the applicable percentage is--

`(I) except as provided in subclause (II), 50 percent, and

`(II) in the case of a participant who fails to provide the plan with notice of a domestic relations order within the time prescribed under subparagraph (C), 67 percent.

`(C) NOTICE REQUIREMENTS-

`(i) NOTICE BY EMPLOYEE- Each employee who is a participant in a pension plan shall, within 60 days after the dissolution of the marriage of the employee--

`(I) notify the plan administrator of the plan of such dissolution, and

`(II) provide to the plan administrator a copy of the domestic relations order (including an annulment or other order of marital dissolution) providing for such dissolution and the

last known address of the employee's former spouse.

`(ii) NOTICE BY PLAN ADMINISTRATOR- Each plan administrator receiving notice under clause (i) shall promptly notify the former spouse of a participant of such spouse's rights under this paragraph, including the time period within which such spouse is required to notify the plan of the spouse's intention to claim rights under this paragraph.

`(iii) NOTICE BY FORMER SPOUSE- A former spouse may notify the plan administrator of such spouse's intent to claim rights under this paragraph at any time before the last day of the 1-year period following receipt of notice under clause (ii).

`(iv) COORDINATION WITH PLAN PROCEDURES- The determination under paragraph (6)(A)(ii) with respect to a domestic relations order to which this paragraph applies shall be made within a reasonable period of time after the plan administrator receives the notice described in clause (iii).

`(D) INTERPRETATION AS QUALIFIED DOMESTIC RELATIONS ORDER- Each plan shall establish reasonable rules for determining how any such deemed domestic relations order is to be interpreted under the plan so as to constitute a qualified domestic relations order that satisfies paragraphs (2) through (4) (and a copy of such rules shall be provided to such former spouse promptly after delivery of the divorce decree). Such rules--

`(i) may delay the effect of such an order until the earlier of the date the participant is fully vested or has terminated employment,

`(ii) may allow the former spouse to be paid out immediately,

`(iii) shall permit the former spouse to be paid not later than the earliest retirement age under the plan or the participant's death,

`(iv) may require the submitter of the divorce decree to present a marriage certificate or other evidence of the marriage date to assist in benefit calculations, and

`(v) may conform to the rules applicable to qualified domestic relations orders regarding form or type of benefit.'

(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974- Section 206(d)(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)) is amended by redesignating subparagraph (N) as subparagraph (O) and by inserting after subparagraph (M) the following new subparagraph:

`(N) SPECIAL RULES AND PROCEDURES FOR DOMESTIC RELATIONS ORDERS NOT SPECIFYING DIVISION OF PENSION BENEFITS-

`(i) IN GENERAL- If--

`(I) a domestic relations order (including an annulment or other order of marital dissolution) relates to provision of marital property with respect to a marriage of at least 5 years duration between the participant and the former spouse,

`(II)(aa) such order (and any prior order) does not specifically provide that pension benefits were considered by the parties and no division is intended, or

`(bb) such order is a qualified domestic relations order without regard to this subparagraph or there is no other prior qualified domestic relations order issued in connection with the dissolution of the marriage to which such order relates, and

`(III) the former spouse notifies a plan within the period prescribed under clause (iii) that the former spouse is entitled to benefits under the plan in accordance with the provisions of this subparagraph,

then such domestic relations order shall be treated as a qualified domestic relations order for purposes of this paragraph.

`(ii) AMOUNT OF BENEFIT-

`(I) IN GENERAL- Any domestic relations order treated as a qualified domestic relations order under clause (i) shall be treated as specifying that the former spouse is entitled to the applicable percentage of the marital share of the participant's accrued benefit.

`(II) MARITAL SHARE- For purposes of subclause (I), the marital share of a participant's accrued benefit is an amount equal to the product of--

`(aa) such benefit as of the date of the first payment under the plan (to the extent such accrued benefit is vested at the date of the divorce or any later date), and

`(bb) the numerator of which is the period of participation by the participant under the plan starting with the date of marriage and ending with the date of divorce, and the denominator of which is the total period of participation by the participant under the plan.

`(III) APPLICABLE PERCENTAGE- For purposes of this clause, the applicable percentage is--

`(aa) except as provided in item (bb), 50 percent, and

`(bb) in the case of a participant who fails to provide the plan with notice of a domestic relations order within the time prescribed under clause (iii), 67 percent.

`(iii) NOTICE REQUIREMENTS-

`(I) NOTICE BY EMPLOYEE- Each employee who is a participant in a pension plan shall, within 60 days after the dissolution of the marriage of the employee--

`(aa) notify the plan administrator of the plan of such dissolution, and

`(bb) provide to the plan administrator a copy of the domestic relations order (including an annulment or other order of marital dissolution) providing for such dissolution and the

last known address of the employee's former spouse.

`(II) NOTICE BY PLAN ADMINISTRATOR- Each plan administrator

receiving notice under subclause (I) shall promptly notify the former spouse of a participant of such spouse's rights under this subparagraph, including the time period within which such spouse is required to notify the plan of the spouse's intention to claim rights under this subparagraph.

`(III) NOTICE BY FORMER SPOUSE- A former spouse may notify the plan administrator of such spouse's intent to claim rights under this subparagraph at any time before the last day of the 1-year period following receipt of notice under subclause (II).

`(IV) COORDINATION WITH PLAN PROCEDURES- The determination under subparagraph (G)(i)(II) with respect to a domestic relations order to which this subparagraph applies shall be made within a reasonable period of time after the plan administrator receives the notice described in subclause (III).

`(iv) INTERPRETATION AS QUALIFIED DOMESTIC RELATIONS ORDER- Each plan shall establish reasonable rules for determining how any such deemed domestic relations order is to be interpreted under the plan so as to constitute a qualified domestic relations order that satisfies subparagraphs (C) through (E) (and a copy of such rules shall be provided to such former spouse promptly after delivery of the divorce decree). Such rules--

`(I) may delay the effect of such an order until the earlier of the date the participant is fully vested or has terminated employment,

`(II) may allow the former spouse to be paid out immediately,

`(III) shall permit the former spouse to be paid not later than the earliest retirement age under the plan or the participant's death,

`(IV) may require the submitter of the divorce decree to present a marriage certificate or other evidence of the marriage date to assist in benefit calculations, and

`(V) may conform to the rules applicable to qualified domestic relations orders regarding form or type of benefit.'

SEC. 407. ENTITLEMENT OF DIVORCED SPOUSES TO RAILROAD RETIREMENT ANNUITIES INDEPENDENT OF ACTUAL ENTITLEMENT OF EMPLOYEE.

Section 2 of the Railroad Retirement Act of 1974 (45 U.S.C. 231a) is amended--

(1) in subsection (c)(4)(i), by striking `(A) is entitled to an annuity under subsection (a)(1) and (B)'; and

(2) in subsection (e)(5), by striking `or divorced wife' the second place it appears.

SEC. 408. EFFECTIVE DATES.

(a) IN GENERAL- Except as provided in subsection (b), the amendments made by this subtitle, other than sections 403 and 405, shall apply with respect to plan years beginning on or after January 1, 2000, and the amendments made by section 406 shall apply only with respect to divorces becoming final in such plan years.

(b) SPECIAL RULE FOR COLLECTIVELY BARGAINED PLANS- In the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before the date of the enactment of this Act, subsection (a) shall be applied to benefits pursuant to, and individuals covered by, any such agreement by substituting for `January 1, 2000' the date of the commencement of the first plan year beginning on or after the earlier of--

(1) the later of--

(A) January 1, 2001, or

(B) the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after the date of the enactment of this Act), or

(2) January 1, 2002.

Subtitle B--Protection of Rights of Former Spouses to Pension Benefits Under Certain Government and Government-Sponsored Retirement Programs

SEC. 411. EXTENSION OF TIER II RAILROAD RETIREMENT BENEFITS TO SURVIVING FORMER SPOUSES PURSUANT TO DIVORCE AGREEMENTS.

(a) IN GENERAL- Section 5 of the Railroad Retirement Act of 1974 (45 U.S.C. 231d) is amended by adding at the end the following new subsection:

`(d) Notwithstanding any other provision of law, the payment of any portion of an annuity computed under section 3(b) to a surviving former spouse in accordance with a court decree of divorce, annulment, or legal separation or the terms of any court-approved property settlement incident to any such court decree shall not be terminated upon the death of the individual who performed the service with respect to which such annuity is so computed unless such termination is otherwise required by the terms of such court decree.'

(b) EFFECTIVE DATE- The amendment made by this section shall take effect on the date of the enactment of this Act.

SEC. 412. SURVIVOR ANNUITIES FOR WIDOWS, WIDOWERS, AND FORMER SPOUSES OF FEDERAL EMPLOYEES WHO DIE BEFORE ATTAINING AGE FOR DEFERRED ANNUITY UNDER CIVIL SERVICE RETIREMENT SYSTEM.

(a) BENEFITS FOR WIDOW OR WIDOWER- Section 8341(f) of title 5, United States Code, is amended--

(1) in the matter preceding paragraph (1) by--

(A) by inserting `a former employee separated from the service with title to deferred annuity from the Fund dies before having established a valid claim for annuity and is survived by a spouse, or if' before `a Member'; and

(B) by inserting `of such former employee or Member' after `the surviving spouse';

(2) in paragraph (1)--

(A) by inserting `former employee or' before `Member commencing'; and

(B) by inserting `former employee or' before `Member dies'; and

(3) in the undesignated sentence following paragraph (2)--

(A) in the matter preceding subparagraph (A) by inserting `former employee or' before `Member'; and

(B) in subparagraph (B) by inserting `former employee or' before `Member'.

(b) BENEFITS FOR FORMER SPOUSE- Section 8341(h) of title 5, United States Code, is amended--

(1) in paragraph (1) by adding after the first sentence `Subject to paragraphs (2) through (5) of this subsection, a former spouse of a former employee who dies after having separated from the service with title to a deferred annuity under section 8338(a) but before having established a valid claim for annuity is entitled to a survivor annuity under this subsection, if and to the extent expressly provided for in an election under section 8339(j)(3) of this title, or in the terms of any decree of divorce or annulment or any court order or court-approved property settlement agreement incident to such decree.'; and

(2) in paragraph (2)--

(A) in subparagraph (A)(ii) by striking `or annuitant,' and inserting `annuitant, or former employee'; and

(B) in subparagraph (B)(iii) by inserting `former employee or' before `Member'.

(c) PROTECTION OF SURVIVOR BENEFIT RIGHTS- Section 8339(j)(3) of title 5, United States Code, is

amended by inserting at the end the following: `The Office shall provide by regulation for the application of this subsection to the widow, widower, or surviving former spouse of a former employee who dies after having separated from the service with title to a deferred annuity under section 8338(a) but before having established a valid claim for annuity.'

(d) EFFECTIVE DATE- The amendments made by this section shall take effect on the date of the enactment of this Act and shall apply only in the case of a former employee who dies on or after such date.

SEC. 413. PAYMENT OF LUMP-SUM BENEFITS TO FORMER SPOUSES OF FEDERAL EMPLOYEES.

(a) CIVIL SERVICE RETIREMENT SYSTEM- Chapter 83 of title 5, United States Code, is amended--

(1) in section 8342(c), by striking `Lump-sum' and inserting `Except as provided in section 8345(j), lump-sum';

(2) in section 8345(j) by adding at the end of paragraph (1) the following: `Except for purposes of subparagraph (B), the first sentence of this paragraph shall be deemed to be amended by inserting after `that individual' the following: `, and any lump-sum benefits authorized by section 8342(d) through (f) which would otherwise be paid to any person or persons under section 8342(c),' '; and

(3) by adding at the end the following:

`(4) Any payment under this subsection to a person bars recovery by any other person.'

(b) FEDERAL EMPLOYEES' RETIREMENT SYSTEM- Chapter 84 of title 5, United States Code, is amended--

(1) in section 8424(d), by striking `Lump-sum' and inserting `Except as provided in section 8467(a), lump-sum'; and

(2) in section 8467--

(A) in subsection (a), by adding at the end the following: `Except for purposes of paragraph (2), the first sentence of this subsection shall be deemed to be amended by inserting after `that individual' the following: `, and any lump-sum benefits authorized by section 8424(e) through (g) which would otherwise be paid to any individual or individuals under section 8424(d),' '; and

(B) by adding at the end the following:

`(d) Any payment under this section to a person bars recovery by any other person.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply with respect to any amount payable by reason of any death occurring on or after the date of the enactment of this Act.

Subtitle C--Modifications of Joint and Survivor Annuity Requirements

SEC. 421. MODIFICATIONS OF JOINT AND SURVIVOR ANNUITY REQUIREMENTS.

(a) AMENDMENTS TO ERISA-

(1) AMOUNT OF ANNUITY-

(A) IN GENERAL- Paragraph (1) of section 205(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1055(a)) is amended by inserting `or, at the election of the participant, shall be provided in the form of a qualified joint and 2/3 survivor annuity' after `survivor annuity,'.

(B) DEFINITION- Subsection (d) of section 205 of such Act (29 U.S.C. 1055) is amended--

(i) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively,

(ii) by inserting `(1)' after `(d)', and

(iii) by adding at the end the following new paragraph:

`(2) For purposes of this section, the term `qualified joint and 2/3 survivor annuity' means a joint and survivor annuity under which the survivor annuity for the life of the surviving spouse is equal to at least 2/3 of the amount of the annuity which is payable during the joint lives of the participant and spouse.'

(2) ILLUSTRATION REQUIREMENT- Clause (i) of section 205(c)(3)(A) of such Act (29 U.S.C. 1055(c)(3)(A)) is amended to read as follows:

`(i) the terms and conditions of each qualified joint and survivor annuity and qualified joint and 2/3 survivor annuity offered, accompanied by an illustration of the benefits under each such annuity for the particular participant and spouse and an acknowledgement form to be signed by the participant and the spouse that they have read and considered the illustration before any form of retirement benefit is chosen,'.

(b) AMENDMENTS TO INTERNAL REVENUE CODE-

(1) AMOUNT OF ANNUITY-

(A) IN GENERAL- Clause (i) of section 401(a)(11)(A) of the Internal Revenue Code of 1986 (relating to requirement of joint and survivor annuity and preretirement survivor annuity) is amended by inserting `or, at the election of the participant, shall be provided in the form of a qualified joint and 2/3 survivor annuity' after `survivor annuity,'.

(B) DEFINITION- Section 417 of such Code (relating to definitions and special rules for purposes of minimum survivor annuity requirements), as amended by section 422, is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

`(f) DEFINITION OF QUALIFIED JOINT AND 2/3 SURVIVOR ANNUITY- For purposes of this section and section 401(a)(11), the term `qualified joint and 2/3 survivor annuity' means a joint and survivor annuity under which the survivor annuity for the life of the surviving spouse is equal to at least 2/3 of the amount of the annuity which is payable during the joint lives of the participant and spouse.'

(2) ILLUSTRATION REQUIREMENT- Clause (i) of section 417(a)(3)(A) of such Code (relating to explanation of joint and survivor annuity) is amended to read as follows:

`(i) the terms and conditions of each qualified joint and survivor annuity and qualified joint and 2/3 survivor annuity offered, accompanied by an illustration of the benefits under each such annuity for the particular participant and spouse and an acknowledgement form to be signed by the participant and the spouse that they have read and considered the illustration before any form of retirement benefit is chosen,'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to plan years beginning on or after January 1, 2000.

SEC. 422. SPOUSAL CONSENT REQUIRED FOR DISTRIBUTIONS FROM DEFINED CONTRIBUTION PLANS.

(a) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986-

(1) IN GENERAL- Section 401(a)(11) of the Internal Revenue Code of 1986 (relating to requirement of joint and survivor annuity and preretirement survivor annuity) is amended by striking subparagraphs (B), (C), and (D), by redesignating subparagraphs (E) and (F) as subparagraphs (C) and (D), respectively, and by inserting after subparagraph (A) the following new subparagraph:

`(B) PLANS TO WHICH PARAGRAPH APPLIES- This paragraph shall apply to any defined benefit plan and to any defined contribution plan.'

(2) EXCEPTION FOR HARDSHIP DISTRIBUTIONS- Section 417(f) of such Code is amended by adding at the end the following new paragraph:

`(8) HARDSHIP DISTRIBUTIONS- The requirements of section 401(a)(11) and this section shall not apply to a hardship distribution under section 401(k)(2)(B)(i)(IV).'

(3) SPECIAL RULE FOR CASH-OUTS- Section 417(e) of such Code is amended by adding at the end the following new paragraph:

`(4) SPECIAL RULE FOR DEFINED CONTRIBUTION PLANS-

`(A) IN GENERAL- In the case of a defined contribution plan, notwithstanding paragraph (2), if the present value of the qualified joint and survivor annuity does not exceed $10,000, the plan may immediately distribute 50 percent of the present value of such annuity to each spouse.

`(B) EXCEPTION- The plan may distribute a different percentage of the present value of an annuity to each spouse if a court order or contractual agreement provides for such different percentage.'

(b) AMENDMENTS TO ERISA-

(1) IN GENERAL- Section 205(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1055(b)) is amended to read as follows:

`(b)(1) This section shall apply to any defined benefit plan and to any individual account plan.

`(2) This section shall not apply to a plan which the Secretary of the Treasury or his delegate has determined is a plan described in section 404(c) of the Internal Revenue Code of 1986 (or a continuation thereof) in which participation is substantially limited to individuals who, before January 1, 1976, ceased employment covered by the plan.'

(2) HARDSHIP DISTRIBUTION- Section 205 of such Act (29 U.S.C. 1055) is amended by adding at the end the following new subsection:

`(m) This section shall not apply to a hardship distribution under section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986.'

(3) SPECIAL RULE FOR CASH-OUTS- Section 205(g) of such Act (29 U.S.C. 1055(g)) is amended by adding at the end the following new paragraph:

`(4) SPECIAL RULE FOR DEFINED CONTRIBUTION PLANS-

`(A) IN GENERAL- In the case of an individual account plan, notwithstanding paragraph (2), if the present value of the qualified joint and survivor annuity or the qualified preretirement survivor annuity exceeds $10,000, the plan may immediately distribute 50 percent of the present value of such annuity to each spouse.

`(B) EXCEPTION- The plan may distribute a different percentage of the present value of an annuity to each spouse if a court order or contractual agreement provides for such different percentage.'

(c) EFFECTIVE DATE- The amendments made by this section shall apply to plan years beginning after December 31, 2000.

TITLE V--DATE FOR ADOPTION OF PLAN AMENDMENTS

SEC. 501. DATE FOR ADOPTION OF PLAN AMENDMENTS.

(a) IN GENERAL- Except as otherwise provided in this Act, if any amendment made by this Act requires an amendment to any plan, such plan amendment shall not be required to be made before the last day of the first plan year beginning on or after January 1, 2000, if--

(1) during the period after such amendment takes effect and before the last day of such first plan year, the plan is operated in accordance with the requirements of such amendment, and

(2) such plan amendment applies retroactively to such period.

A plan shall not be treated as failing to provide definitely determinable benefits or contributions, or to be operated in accordance with the provisions of the plan, merely because it operates in accordance with this subsection.

(b) GOVERNMENTAL PLANS- In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), subsection (a) shall be applied by substituting for `January 1, 2000' the later of--

(1) January 1, 2001, or

(2) the date which is 90 days after the opening of the first legislative session beginning after January 1, 2000, of the governing body with authority to amend the plan, but only if such governing body does not meet continuously.

(c) SPECIAL RULE FOR COLLECTIVELY BARGAINED PLANS- Notwithstanding any other provision of this Act, in the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before the date of the enactment of this Act, any amendment made by this Act which requires an amendment to such plan shall not be required to be made before the last day of the first plan year beginning on or after the earlier of--

(1) the later of--

(A) January 1, 2000, or

(B) the date on which the last of such collective bargaining agreements terminates (determined without regard to any extension thereof after the date of the enactment of this Act), or

(2) January 1, 2001.

END