Comprehensive Retirement Security and Pension Reform Act of 2001

H.R. 10 ~ Comprehensive Retirement Security and Pension Reform Act of 2001 Part 7

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H.R.10

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

(2) CONFORMING AMENDMENT- Section 415(b)(7) (relating to benefits under certain collectively bargained plans) is amended by inserting `(other than a multiemployer plan)' after `defined benefit plan' in the matter preceding subparagraph (A).

(b) COMBINING AND AGGREGATION OF PLANS-

(1) COMBINING OF PLANS- Subsection (f) of section 415 (relating to combining of plans) is amended by adding at the end the following:

`(3) EXCEPTION FOR MULTIEMPLOYER PLANS- Notwithstanding paragraph (1) and subsection (g), a multiemployer plan (as defined in section 414(f)) shall not be combined or aggregated--

`(A) with any other plan which is not a multiemployer plan for purposes of applying subsection (b)(1)(B) to such other plan, or

`(B) with any other multiemployer plan for purposes of applying the limitations established in this section.'.

(2) CONFORMING AMENDMENT FOR AGGREGATION OF PLANS- Subsection (g) of section 415 (relating to aggregation of plans) is amended by striking `The Secretary' and inserting `Except as provided in subsection (f)(3), the Secretary'.

SEC. 506. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS TO 401(K) PLANS.

(a) IN GENERAL- Section 1524(b) of the Taxpayer Relief Act of 1997 is amended to read as follows:

`(b) EFFECTIVE DATE-

`(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to elective deferrals for plan years beginning after December 31, 1998.

`(2) NONAPPLICATION TO PREVIOUSLY ACQUIRED PROPERTY- The amendments made by this section shall not apply to any elective deferral which is invested in assets consisting of qualifying employer securities, qualifying employer real property, or both, if such assets were acquired before January 1, 1999.'.

(b) EFFECTIVE DATE- The amendment made by this section shall apply as if included in the provision of the Taxpayer Relief Act of 1997 to which it relates.

SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.

(a) IN GENERAL- Section 105(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1025 (a)) is amended to read as follows:

`SEC. 105. (a)(1)(A) The administrator of an individual account plan shall furnish a pension benefit statement--

`(i) to a plan participant at least once annually, and

`(ii) to a plan beneficiary upon written request.

`(B) The administrator of a defined benefit plan shall furnish a pension benefit statement--

`(i) at least once every 3 years to each participant with a nonforfeitable accrued benefit who is employed by the employer maintaining the plan at the time the statement is furnished to participants, and

`(ii) to a plan participant or plan beneficiary of the plan upon written request.

`(2) A pension benefit statement under paragraph (1)--

`(A) shall indicate, on the basis of the latest available information--

`(i) the total benefits accrued, and

`(ii) the nonforfeitable pension benefits, if any, which have accrued, or the earliest date on which benefits will become nonforfeitable,

`(B) shall be written in a manner calculated to be understood by the average plan participant, and

`(C) may be provided in written, electronic, or other appropriate form.

`(3)(A) In the case of a defined benefit plan, the requirements of paragraph (1)(B)(i) shall be treated as met with respect to a participant if the administrator provides the participant at least once each year with notice of the availability of the pension benefit statement and the ways in which the participant may obtain such statement. Such notice shall be provided in written, electronic, or other appropriate form, and may be included with other communications to the participant if done in a manner reasonably designed to attract the attention of the participant.

`(B) The Secretary may provide that years in which no employee or former employee benefits (within the meaning of section 410(b) of the Internal Revenue Code of 1986) under the plan need not be taken into account in determining the 3-year period under paragraph (1)(B)(i).'.

(b) CONFORMING AMENDMENTS-

(1) Section 105 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1025) is amended by striking subsection (d).

(2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is amended to read as follows:

`(b) In no case shall a participant or beneficiary of a plan be entitled to more than one statement described in subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is applicable, in any 12-month period.'.

(c) MODEL STATEMENTS- The Secretary of Labor shall develop a model benefit statement, written in a manner calculated to be understood by the average plan participant, that may be used by plan administrators in complying with the requirements of section 105 of the Employee Retirement Income Security Act of 1974.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to plan years beginning after December 31, 2002.

SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S CORPORATION ESOP.

(a) IN GENERAL- Section 409 (relating to qualifications for tax credit employee stock ownership plans) is amended by redesignating subsection (p) as subsection (q) and by inserting after subsection (o) the following new subsection:

`(p) PROHIBITED ALLOCATIONS OF SECURITIES IN AN S CORPORATION-

`(1) IN GENERAL- An employee stock ownership plan holding employer securities consisting of stock in an S corporation shall provide that no portion of the assets of the plan attributable to (or allocable in lieu of) such employer securities may, during a nonallocation year, accrue (or be allocated directly or indirectly under any plan of the employer meeting the requirements of section 401(a)) for the benefit of any disqualified person.

`(2) FAILURE TO MEET REQUIREMENTS-

`(A) IN GENERAL- If a plan fails to meet the requirements of paragraph (1), the plan shall be treated as having distributed to any disqualified person the amount allocated to the account of such person in violation of paragraph (1) at the time of such allocation.

`(B) CROSS REFERENCE-

`For excise tax relating to violations of paragraph (1) and ownership of synthetic equity, see section 4979A.

`(3) NONALLOCATION YEAR- For purposes of this subsection--

`(A) IN GENERAL- The term `nonallocation year' means any plan year of an employee stock ownership plan if, at any time during such plan year--

`(i) such plan holds employer securities consisting of stock in an S corporation, and

`(ii) disqualified persons own at least 50 percent of the number of shares of stock in the S corporation.

`(B) ATTRIBUTION RULES- For purposes of subparagraph (A)--

`(i) IN GENERAL- The rules of section 318(a) shall apply for purposes of determining ownership, except that--

`(I) in applying paragraph (1) thereof, the members of an individual's family shall include members of the family described in paragraph (4)(D), and

`(II) paragraph (4) thereof shall not apply.

`(ii) DEEMED-OWNED SHARES- Notwithstanding the employee trust exception in section 318(a)(2)(B)(i), individual shall be treated as owning deemed-owned shares of the individual.

Solely for purposes of applying paragraph (5), this subparagraph shall be applied after the attribution rules of paragraph (5) have been applied.

`(4) DISQUALIFIED PERSON- For purposes of this subsection--

`(A) IN GENERAL- The term `disqualified person' means any person if--

`(i) the aggregate number of deemed-owned shares of such person and the members of such person's family is at least 20 percent of the number of deemed-owned shares of stock in the S corporation, or

`(ii) in the case of a person not described in clause (i), the number of deemed-owned shares of such person is at least 10 percent of the number of deemed-owned shares of stock in such corporation.

`(B) TREATMENT OF FAMILY MEMBERS- In the case of a disqualified person described in subparagraph (A)(i), any member of such person's family with deemed-owned shares shall be treated as a disqualified person if not otherwise treated as a disqualified person under subparagraph (A).

`(C) DEEMED-OWNED SHARES-

`(i) IN GENERAL- The term `deemed-owned shares' means, with respect to any person--

`(I) the stock in the S corporation constituting employer securities of an employee stock ownership plan which is allocated to such person under the plan, and

`(II) such person's share of the stock in such corporation which is held by such plan but which is not allocated under the plan to participants.

`(ii) PERSON'S SHARE OF UNALLOCATED STOCK- For purposes of clause (i)(II), a person's share of unallocated S corporation stock held by such plan is the amount of the unallocated stock which would be allocated to such person if the unallocated stock were allocated to all participants in the same proportions as the most recent stock allocation under the plan.

`(D) MEMBER OF FAMILY- For purposes of this paragraph, the term `member of the family' means, with respect to any individual--

`(i) the spouse of the individual,

`(ii) an ancestor or lineal descendant of the individual or the individual's spouse,

`(iii) a brother or sister of the individual or the individual's spouse and any lineal descendant of the brother or sister, and

`(iv) the spouse of any individual described in clause (ii) or (iii).

A spouse of an individual who is legally separated from such individual under a decree of divorce or separate maintenance shall not be treated as such individual's spouse for purposes of this subparagraph.

`(5) TREATMENT OF SYNTHETIC EQUITY- For purposes of paragraphs (3) and (4), in the case of a person who owns synthetic equity in the S corporation, except to the extent provided in regulations, the shares of stock in such corporation on which such synthetic equity is based shall be treated as outstanding stock in such corporation and deemed-owned shares of such person if such treatment of synthetic equity of 1 or more such persons results in--

`(A) the treatment of any person as a disqualified person, or

`(B) the treatment of any year as a nonallocation year.

For purposes of this paragraph, synthetic equity shall be treated as owned by a person in the same manner as stock is treated as owned by a person under the rules of paragraphs (2) and (3) of section 318(a). If, without regard to this paragraph, a person is treated as a disqualified person or a year is treated as a nonallocation year, this paragraph shall not be construed to result in the person or year not being so treated.

`(6) DEFINITIONS- For purposes of this subsection--

`(A) EMPLOYEE STOCK OWNERSHIP PLAN- The term `employee stock ownership plan' has the meaning given such term by section 4975(e)(7).

`(B) EMPLOYER SECURITIES- The term `employer security' has the meaning given such term by section 409(l).

`(C) SYNTHETIC EQUITY- The term `synthetic equity' means any stock option, warrant, restricted stock, deferred issuance stock right, or similar interest or right that gives the holder the right to acquire or receive stock of the S corporation in the future. Except to the extent provided in regulations, synthetic equity also includes a stock appreciation right, phantom stock unit, or similar right to a future cash payment based on the value of such stock or appreciation in such value.

`(7) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection.'.

(b) COORDINATION WITH SECTION 4975(e)(7)- The last sentence of section 4975(e)(7) (defining employee stock ownership plan) is amended by inserting `, section 409(p),' after `409(n)'.

(1) APPLICATION OF TAX- Subsection (a) of section 4979A (relating to tax on certain prohibited allocations of employer securities) is amended--

(A) by striking `or' at the end of paragraph (1), and

(B) by striking all that follows paragraph (2) and inserting the following:

`(3) there is any allocation of employer securities which violates the provisions of section 409(p), or a nonallocation year described in subsection (e)(2)(C) with respect to an employee stock ownership plan, or

`(4) any synthetic equity is owned by a disqualified person in any nonallocation year,

there is hereby imposed a tax on such allocation or ownership equal to 50 percent of the amount involved.'.

(2) LIABILITY- Section 4979A(c) (defining liability for tax) is amended to read as follows:

`(c) LIABILITY FOR TAX- The tax imposed by this section shall be paid--

`(1) in the case of an allocation referred to in paragraph (1) or (2) of subsection (a), by--

`(A) the employer sponsoring such plan, or

`(B) the eligible worker-owned cooperative,

which made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be), and

`(2) in the case of an allocation or ownership referred to in paragraph (3) or (4) of subsection (a), by the S corporation the stock in which was so allocated or owned.'.

(3) DEFINITIONS- Section 4979A(e) (relating to definitions) is amended to read as follows:

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

`(1) DEFINITIONS- Except as provided in paragraph (2), terms used in this section have the same respective meanings as when used in sections 409 and 4978.

`(2) SPECIAL RULES RELATING TO TAX IMPOSED BY REASON OF PARAGRAPH (3) OR (4) OF SUBSECTION (a)-

`(A) PROHIBITED ALLOCATIONS- The amount involved with respect to any tax imposed by reason of subsection (a)(3) is the amount allocated to the account of any person in violation of section 409(p)(1).

`(B) SYNTHETIC EQUITY- The amount involved with respect to any tax imposed by reason of subsection (a)(4) is the value of the shares on which the synthetic equity is based.

`(C) SPECIAL RULE DURING FIRST NONALLOCATION YEAR- For purposes of subparagraph (A), the amount involved for the first nonallocation year of any employee stock ownership plan shall be determined by taking into account the total value of all the deemed-owned shares of all disqualified persons with respect to such plan.

`(D) STATUTE OF LIMITATIONS- The statutory period for the assessment of any tax imposed by this section by reason of paragraph (3) or (4) of subsection (a) shall not expire before the date which is 3 years from the later of--

`(i) the allocation or ownership referred to in such paragraph giving rise to such tax, or

`(ii) the date on which the Secretary is notified of such allocation or ownership.'.

(d) EFFECTIVE DATES-

(1) IN GENERAL- The amendments made by this section shall apply to plan years beginning after December 31, 2004.

(2) EXCEPTION FOR CERTAIN PLANS- In the case of any--

(A) employee stock ownership plan established after March 14, 2001, or

(B) employee stock ownership plan established on or before such date if employer securities held by the plan consist of stock in a corporation with respect to which an election under section 1362(a) of the Internal Revenue Code of 1986 is not in effect on such date,

the amendments made by this section shall apply to plan years ending after March 14, 2001.

TITLE VI--REDUCING REGULATORY BURDENS

SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

(a) AMENDMENT OF INTERNAL REVENUE CODE- Paragraph (9) of section 412(c) (relating to annual valuation) is amended to read as follows:

`(9) ANNUAL VALUATION-

`(A) IN GENERAL- For purposes of this section, a determination of experience gains and losses and a valuation of the plan's liability shall be made not less frequently than once every year, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary.

`(B) VALUATION DATE-

`(i) CURRENT YEAR- Except as provided in clause (ii), the valuation referred to in subparagraph (A) shall be made as of a date within the plan year to which the valuation refers or within one month prior to the beginning of such year.

`(ii) ELECTION TO USE PRIOR YEAR VALUATION- The valuation referred to in subparagraph (A) may be made as of a date within the plan year prior to the year to which the valuation refers if--

`(I) an election is in effect under this clause with respect to the plan, and

`(II) as of such date, the value of the assets of the plan are not less than 125 percent of the plan's current liability (as defined in paragraph (7)(B)).

`(iii) ADJUSTMENTS- Information under clause (ii) shall, in accordance with regulations, be actuarially adjusted to reflect significant differences in participants.

`(iv) ELECTION- An election under clause (ii), once made, shall be irrevocable without the consent of the Secretary.'.

(b) AMENDMENT OF ERISA- Paragraph (9) of section 302(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is amended--

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