Comprehensive Retirement Security and Pension Reform Act of 2001

H.R. 10 ~ Comprehensive Retirement Security and Pension Reform Act of 2001 Part 2

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H.R.10

Comprehensive Retirement Security and Pension Reform Act of 2001 (Engrossed in House )

(3) CONFORMING AMENDMENTS-

(A) Subclause (I) of section 401(k)(11)(B)(i) is amended by striking `$6,000' and inserting `the amount in effect under section 408(p)(2)(A)(ii)'.

(B) Section 401(k)(11) is amended by striking subparagraph (E).

(g) ROUNDING RULE RELATING TO DEFINED BENEFIT PLANS AND DEFINED CONTRIBUTION PLANS- Paragraph (4) of section 415(d) is amended to read as follows:

`(4) ROUNDING-

`(A) $160,000 AMOUNT- Any increase under subparagraph (A) of paragraph (1) which is not a multiple of $5,000 shall be rounded to the next lowest multiple of $5,000.

`(B) $40,000 AMOUNT- Any increase under subparagraph (C) of paragraph (1) which is not a multiple of $1,000 shall be rounded to the next lowest multiple of $1,000.'.

(h) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after December 31, 2001.

SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE PROPRIETORS.

(a) AMENDMENT OF INTERNAL REVENUE CODE- Subparagraph (B) of section 4975(f)(6) (relating to exemptions not to apply to certain transactions) is amended by adding at the end the following new clause:

`(iii) LOAN EXCEPTION- For purposes of subparagraph (A)(i), the term `owner-employee' shall only include a person described in subclause (II) or (III) of clause (i).'.

(b) AMENDMENT OF ERISA- Section 408(d)(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) is amended by adding at the end the following new subparagraph:

`(C) For purposes of paragraph (1)(A), the term `owner-employee' shall only include a person described in clause (ii) or (iii) of subparagraph (A).'.

SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

(a) SIMPLIFICATION OF DEFINITION OF KEY EMPLOYEE-

(1) IN GENERAL- Section 416(i)(1)(A) (defining key employee) is amended--

(A) by striking `or any of the 4 preceding plan years' in the matter preceding clause (i);

(B) by striking clause (i) and inserting the following:

`(i) an officer of the employer having an annual compensation greater than $150,000,';

(D) by striking the second sentence in the matter following clause (iii), as redesignated by subparagraph (C).

(2) CONFORMING AMENDMENT- Section 416(i)(1)(B)(iii) is amended by striking `and subparagraph (A)(ii)'.

(b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS- Section 416(c)(2)(A) (relating to defined contribution plans) is amended by adding at the end the following: `Employer matching contributions (as defined in section 401(m)(4)(A)) shall be taken into account for purposes of this subparagraph.'.

(1) IN GENERAL- Paragraph (3) of section 416(g) is amended to read as follows:

`(3) DISTRIBUTIONS DURING LAST YEAR BEFORE DETERMINATION DATE TAKEN INTO ACCOUNT-

`(A) IN GENERAL- For purposes of determining--

`(i) the present value of the cumulative accrued benefit for any employee, or

`(ii) the amount of the account of any employee,

such present value or amount shall be increased by the aggregate distributions made with respect to such employee under the plan during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an aggregation group.

`(B) 5-YEAR PERIOD IN CASE OF IN-SERVICE DISTRIBUTION- In the case of any distribution made for a reason other than separation from service, death, or disability, subparagraph (A) shall be applied by substituting `5-year period' for `1-year period'.'.

(2) BENEFITS NOT TAKEN INTO ACCOUNT- Subparagraph (E) of section 416(g)(4) is amended--

(A) by striking `LAST 5 YEARS' in the heading and inserting `LAST YEAR BEFORE DETERMINATION DATE'; and

(B) by striking `5-year period' and inserting `1-year period'.

(d) DEFINITION OF TOP-HEAVY PLANS- Paragraph (4) of section 416(g) (relating to other special rules for top-heavy plans) is amended by adding at the end the following new subparagraph:

`(H) CASH OR DEFERRED ARRANGEMENTS USING ALTERNATIVE METHODS OF MEETING NONDISCRIMINATION REQUIREMENTS- The term `top-heavy plan' shall not include a plan which consists solely of--

`(i) a cash or deferred arrangement which meets the requirements of section 401(k)(12), and

`(ii) matching contributions with respect to which the requirements of section 401(m)(11) are met.

If, but for this subparagraph, a plan would be treated as a top-heavy plan because it is a member of an aggregation group which is a top-heavy group, contributions under the plan may be taken into account in determining whether any other plan in the group meets the requirements of subsection (c)(2).'.

(e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT REQUIREMENT- Subparagraph (C) of section 416(c)(1) (relating to defined benefit plans) is amended--

(A) by striking `clause (ii)' in clause (i) and inserting `clause (ii) or (iii)'; and

(B) by adding at the end the following:

`(iii) EXCEPTION FOR FROZEN PLAN- For purposes of determining an employee's years of service with the employer, any service with the employer shall be disregarded to the extent that such service occurs during a plan year when the plan benefits (within the meaning of section 410(b)) no key employee or former key employee.'.

(f) ELIMINATION OF FAMILY ATTRIBUTION- Section 416(i)(1)(B) (defining 5-percent owner) is amended by adding at the end the following new clause:

`(iv) FAMILY ATTRIBUTION DISREGARDED- Solely for purposes of applying this paragraph (and not for purposes of any provision of this title which incorporates by reference the definition of a key employee or 5-percent owner under this paragraph), section 318 shall be applied without regard to subsection (a)(1) thereof in determining whether any person is a 5-percent owner.'.

(g) EFFECTIVE DATE- The amendments made by this section shall apply to years beginning after December 31, 2001.

SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF DEDUCTION LIMITS.

(a) IN GENERAL- Section 404 (relating to deduction for contributions of an employer to an employees' trust or annuity plan and compensation under a deferred payment plan) is amended by adding at the end the following new subsection:

`(n) ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF DEDUCTION LIMITS- Elective deferrals (as defined in section 402(g)(3)) shall not be subject to any limitation contained in paragraph (3), (7), or (9) of subsection (a), and such elective deferrals shall not be taken into account in applying any such limitation to any other contributions.'.

(b) EFFECTIVE DATE- The amendment made by this section shall apply to years beginning after December 31, 2001.

SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

(a) IN GENERAL- Subsection (c) of section 457 (relating to deferred compensation plans of State and local governments and tax-exempt organizations), as amended by section 201, is amended to read as follows:

`(c) LIMITATION- The maximum amount of the compensation of any one individual which may be deferred under subsection (a) during any taxable year shall not exceed the amount in effect under subsection (b)(2)(A) (as modified by any adjustment provided under subsection (b)(3)).'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to years beginning after December 31, 2001.

SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING PENSION PLANS.

(a) ELIMINATION OF CERTAIN USER FEES- The Secretary of the Treasury or the Secretary's delegate shall not require payment of user fees under the program established under section 10511 of the Revenue Act of 1987 for requests to the Internal Revenue Service for determination letters with respect to the qualified status of a pension benefit plan maintained solely by one or more eligible employers or any trust which is part of the plan. The preceding sentence shall not apply to any request--

(1) made after the later of--

(A) the fifth plan year the pension benefit plan is in existence; or

(B) the end of any remedial amendment period with respect to the plan beginning within the first 5 plan years; or

(2) made by the sponsor of any prototype or similar plan which the sponsor intends to market to participating employers.

(b) PENSION BENEFIT PLAN- For purposes of this section, the term `pension benefit plan' means a pension, profit-sharing, stock bonus, annuity, or employee stock ownership plan.

(c) ELIGIBLE EMPLOYER- For purposes of this section, the term `eligible employer' has the same meaning given such term in section 408(p)(2)(C)(i)(I) of the Internal Revenue Code of 1986. The determination of whether an employer is an eligible employer under this section shall be made as of the date of the request described in subsection (a).

(d) DETERMINATION OF AVERAGE FEES CHARGED- For purposes of any determination of average fees charged, any request to which subsection (a) applies shall not be taken into account.

(e) EFFECTIVE DATE- The provisions of this section shall apply with respect to requests made after December 31, 2001.

SEC. 207. DEDUCTION LIMITS.

(a) STOCK BONUS AND PROFIT SHARING TRUSTS-

(1) IN GENERAL- Subclause (I) of section 404(a)(3)(A)(i) (relating to stock bonus and profit sharing trusts) is amended by striking `15 percent' and inserting `20 percent'.

(2) CONFORMING AMENDMENT- Subparagraph (C) of section 404(h)(1) is amended by striking `15 percent' each place it appears and inserting `20 percent'.

(b) COMPENSATION-

(1) IN GENERAL- Section 404(a) (relating to general rule) is amended by adding at the end the following:

`(12) DEFINITION OF COMPENSATION- For purposes of paragraphs (3), (7), (8), and (9), the term `compensation otherwise paid or accrued during the taxable year' shall include amounts treated as `participant's compensation' under subparagraph (C) or (D) of section 415(c)(3).'.

(2) CONFORMING AMENDMENTS-

(A) Subparagraph (B) of section 404(a)(3) is amended by striking the last sentence.

(B) Clause (i) of section 4972(c)(6)(B) is amended by striking `(within the meaning of section 404(a))' and inserting `(within the meaning of section 404(a) and as adjusted under section 404(a)(12))'.

SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX CONTRIBUTIONS.

(a) IN GENERAL- Subpart A of part I of subchapter D of chapter 1 (relating to deferred compensation, etc.) is amended by inserting after section 402 the following new section:

`SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS CONTRIBUTIONS.

`(a) GENERAL RULE- If an applicable retirement plan includes a qualified plus contribution program--

`(1) any designated plus contribution made by an employee pursuant to the program shall be treated as an elective deferral for purposes of this chapter, except that such contribution shall not be excludable from gross income, and

`(2) such plan (and any arrangement which is part of such plan) shall not be treated as failing to meet any requirement of this chapter solely by reason of including such program.

`(b) QUALIFIED PLUS CONTRIBUTION PROGRAM- For purposes of this section--

`(1) IN GENERAL- The term `qualified plus contribution program' means a program under which an employee may elect to make designated plus contributions in lieu of all or a portion of elective deferrals the employee is otherwise eligible to make under the applicable retirement plan.

`(2) SEPARATE ACCOUNTING REQUIRED- A program shall not be treated as a qualified plus contribution program unless the applicable retirement plan--

`(A) establishes separate accounts (`designated plus accounts') for the designated plus contributions of each employee and any earnings properly allocable to the contributions, and

`(B) maintains separate recordkeeping with respect to each account.

`(c) DEFINITIONS AND RULES RELATING TO DESIGNATED PLUS CONTRIBUTIONS- For purposes of this section--

`(1) DESIGNATED PLUS CONTRIBUTION- The term `designated plus contribution' means any elective deferral which--

`(A) is excludable from gross income of an employee without regard to this section, and

`(B) the employee designates (at such time and in such manner as the Secretary may prescribe) as not being so excludable.

`(2) DESIGNATION LIMITS- The amount of elective deferrals which an employee may designate under paragraph (1) shall not exceed the excess (if any) of--

`(A) the maximum amount of elective deferrals excludable from gross income of the employee for the taxable year (without regard to this section), over

`(B) the aggregate amount of elective deferrals of the employee for the taxable year which the employee does not designate under paragraph (1).

`(3) ROLLOVER CONTRIBUTIONS-

`(A) IN GENERAL- A rollover contribution of any payment or distribution from a designated plus account which is otherwise allowable under this chapter may be made only if the contribution is to--

`(i) another designated plus account of the individual from whose account the payment or distribution was made, or

`(ii) a Roth IRA of such individual.

`(B) COORDINATION WITH LIMIT- Any rollover contribution to a designated plus account under subparagraph (A) shall not be taken into account for purposes of paragraph (1).

`(d) DISTRIBUTION RULES- For purposes of this title--

`(1) EXCLUSION- Any qualified distribution from a designated plus account shall not be includible in gross income.

`(2) QUALIFIED DISTRIBUTION- For purposes of this subsection--

`(A) IN GENERAL- The term `qualified distribution' has the meaning given such term by section 408A(d)(2)(A) (without regard to clause (iv) thereof).

`(B) DISTRIBUTIONS WITHIN NONEXCLUSION PERIOD- A payment or distribution from a designated plus account shall not be treated as a qualified distribution if such payment or distribution is made within the 5-taxable-year period beginning with the earlier of--

`(i) the first taxable year for which the individual made a designated plus contribution to any designated plus account established for such individual under the same applicable retirement plan, or

`(ii) if a rollover contribution was made to such designated plus account from a designated plus account previously established for such individual under another applicable retirement plan, the first taxable year for which the individual made a designated plus contribution to such previously established account.

`(C) DISTRIBUTIONS OF EXCESS DEFERRALS AND CONTRIBUTIONS AND EARNINGS THEREON- The term `qualified distribution' shall not include any distribution of an excess deferral under section 402(g)(2) or any excess contribution under section 401(k)(8), and any income on the excess deferral or contribution.

`(3) TREATMENT OF DISTRIBUTIONS OF CERTAIN EXCESS DEFERRALS- Notwithstanding section 72, if any excess deferral under section 402(g)(2) attributable to a designated plus contribution is not distributed on or before the 1st April 15 following the close of the taxable year in which such excess deferral is made, the amount of such excess deferral shall--

`(A) not be treated as investment in the contract, and

`(B) be included in gross income for the taxable year in which such excess is distributed.

`(4) AGGREGATION RULES- Section 72 shall be applied separately with respect to distributions and payments from a designated plus account and other distributions and payments from the plan.

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

`(1) APPLICABLE RETIREMENT PLAN- The term `applicable retirement plan' means--

`(A) an employees' trust described in section 401(a) which is exempt from tax under section 501(a), and

`(B) a plan under which amounts are contributed by an individual's employer for an annuity contract described in section 403(b).

`(2) ELECTIVE DEFERRAL- The term `elective deferral' means any elective deferral described in subparagraph (A) or (C) of section 402(g)(3).'.

(b) EXCESS DEFERRALS- Section 402(g) (relating to limitation on exclusion for elective deferrals) is amended--

(1) by adding at the end of paragraph (1)(A) (as added by section 201(d)(1)) the following new sentence: `The preceding sentence shall not apply to so much of such excess as does not exceed the designated plus contributions of the individual for the taxable year.'; and

(2) by inserting `(or would be included but for the last sentence thereof)' after `paragraph (1)' in paragraph (2)(A).

`If any portion of an eligible rollover distribution is attributable to payments or distributions from a designated plus account (as defined in section 402A), an eligible retirement plan with respect to such portion shall include only another designated plus account and a Roth IRA.'.

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