“(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. SEC. 657. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY DIS TRIBUTIONS. (a) DIRECT TRANSFERS OF MANDATORY DISTRIBUTIONS.— Applicability. (1) IN GENERAL.-Section 401(a)(31) (relating to optional 26 USC 401. direct transfer of eligible rollover distributions), as amended by section 643, is amended by redesignating subparagraphs (B), (C), and (D) as subparagraphs (C), (D), and (E), respectively, and by inserting after subparagraph (A) the following new subparagraph: "(B) CERTAIN MANDATORY DISTRIBUTIONS. "(i) IN GENERAL.-In case of a trust which is part of an eligible plan, such trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that if— 26 USC 401 note. Deadline. "(I) a distribution described in clause (ii) in excess of $1,000 is made, and "(II) the distributee does not make an election under subparagraph (A) and does not elect to receive the distribution directly, the plan administrator shall make such transfer to an individual retirement plan of a designated trustee or issuer and shall notify the distributee in writing (either separately or as part of the notice under section 402(f)) that the distribution may be transferred to another individual retirement plan. “(ii) ELIGIBLE PLAN.-For purposes of clause (i), the term 'eligible plan' means a plan which provides that any nonforfeitable accrued benefit for which the present value (as determined under section 411(a)(11)) does not exceed $5,000 shall be immediately distributed to the participant.". (2) CONFORMING AMENDMENTS. (A) The heading of section 401(a)(31) is amended by striking "OPTIONAL DIRECT" and inserting "DIRECT". (B) Section 401(a)(31)(C), as redesignated by paragraph (1), is amended by striking "Subparagraph (A)" and inserting "Subparagraphs (A) and (B)”. REQUIREMENT.-Subparagraph (b) NOTICE REQUIREMENT. Subparagraph (A) of section 402(f)(1) is amended by inserting before the comma at the end the following: "and that the automatic distribution by direct transfer applies to certain distributions in accordance with section 401(a)(31)(B)". (c) FIDUCIARY RULES. (1) IN GENERAL.-Section 404(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at the end the following new paragraph: "(3) In the case of a pension plan which makes a transfer to an individual retirement account or annuity of a designated trustee or issuer under section 401(a)(31)(B) of the Internal Revenue Code of 1986, the participant or beneficiary shall, for purposes of paragraph (1), be treated as exercising control over the assets in the account or annuity upon "(A) the earlier of the earlier of “(i) a rollover of all or a portion of the amount to another individual retirement account or annuity; or "(ii) one year after the transfer is made; or "(B) if the transfer is made in a manner consistent with guidance provided by the Secretary.". (2) REGULATIONS. (A) AUTOMATIC ROLLOVER SAFE HARBOR.-Not later than 3 years after the date of enactment of this Act, the Secretary of Labor shall prescribe regulations providing for safe harbors under which the designation of an institution and investment of funds in accordance with section 401(a)(31)(B) of the Internal Revenue Code of 1986 is deemed to satisfy the fiduciary requirements of section 404(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104(a)). (B) USE OF LOW-COST INDIVIDUAL RETIREMENT PLANS.The Secretary of the Treasury and the Secretary of Labor may provide, and shall give consideration to providing, (d) EFFECTIVE DATE.-The amendments made by this section shall apply to distributions made after final regulations implementing subsection (c)(2)(A) are prescribed. Applicability. SEC. 658. CLARIFICATION OF TREATMENT OF CONTRIBUTIONS TO 26 USC 404 note. MULTIEMPLOYER PLAN. (a) NOT CONSIDERED METHOD OF ACCOUNTING.-For purposes of section 446 of the Internal Revenue Code of 1986, a determination under section 404(a)(6) of such Code regarding the taxable year with respect to which a contribution to a multiemployer pension plan is deemed made shall not be treated as a method of accounting of the taxpayer. No deduction shall be allowed for any taxable year for any contribution to a multiemployer pension plan with respect to which a deduction was previously allowed. (b) REGULATIONS.-The Secretary of the Treasury shall promulgate such regulations as necessary to clarify that a taxpayer shall not be allowed an aggregate amount of deductions for contributions to a multiemployer pension plan which exceeds the amount of such contributions made or deemed made under section 404(a)(6) of the Internal Revenue Code of 1986 to such plan. (c) EFFECTIVE DATE.-Subsection (a), and any regulations promulgated under subsection (b), shall be effective for years ending after the date of the enactment of this Act. PART II—TREATMENT OF PLAN AMENDMENTS SEC. 659. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED (a) AMENDMENT OF INTERNAL REVENUE CODE.— (1) IN GENERAL.-Chapter 43 (relating to qualified pension, etc., plans) is amended by adding at the end the following new section: "SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT ACCRUALS TO SATISFY NOTICE REQUIREMENTS. "(a) IMPOSITION OF TAX.-There is hereby imposed a tax on the failure of any applicable pension plan to meet the requirements of subsection (e) with respect to any applicable individual. "(b) AMOUNT OF TAX. “(1) IN GENERAL.-The amount of the tax imposed by subsection (a) on any failure with respect to any applicable individual shall be $100 for each day in the noncompliance period with respect to such failure. "(2) NONCOMPLIANCE PERIOD.-For purposes of this section, the term 'noncompliance period' means, with respect to any failure, the period beginning on the date the failure first occurs and ending on the date the notice to which the failure relates is provided or the failure is otherwise corrected. "(c) LIMITATIONS ON AMOUNT OF TAX. "(1) TAX NOT TO APPLY WHERE FAILURE NOT DISCOVERED AND REASONABLE DILIGENCE EXERCISED.-No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that any person subject to liability for the tax under subsection (d) did not know that the failure existed and exercised reasonable diligence to meet the requirements of subsection (e). "(2) TAX NOT TO APPLY TO FAILURES CORRECTED WITHIN 30 DAYS.-No tax shall be imposed by subsection (a) on any failure if "(A) any person subject to liability for the tax under subsection (d) exercised reasonable diligence to meet the requirements of subsection (e), and "(B) such person provides the notice described in subsection (e) during the 30-day period beginning on the first date such person knew, or exercising reasonable diligence would have known, that such failure existed. “(3) OVERALL LIMITATION FOR UNINTENTIONAL FAILURES.— “(A) IN GENERAL.-If the person subject to liability for tax under subsection (d) exercised reasonable diligence to meet the requirements of subsection (e), the tax imposed by subsection (a) for failures during the taxable year of the employer (or, in the case of a multiemployer plan, the taxable year of the trust forming part of the plan) shall not exceed $500,000. For purposes of the preceding sentence, all multiemployer plans of which the same trust forms a part shall be treated as 1 plan. "(B) TAXABLE YEARS IN THE CASE OF CERTAIN CONTROLLED GROUPS.-For purposes of this paragraph, if all persons who are treated as a single employer for purposes of this section do not have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561. "(4) WAIVER BY SECRETARY.-In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive or otherwise inequitable relative to the failure involved. "(d) LIABILITY FOR TAX.-The following shall be liable for the tax imposed by subsection (a): “(1) In the case of a plan other than a multiemployer plan, the employer. "(2) In the case of a multiemployer plan, the plan. "(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFICANTLY REDUCING BENEFIT ACCRUALS.— “(1) IN GENERAL.-If an applicable pension plan is amended to provide for a significant reduction in the rate of future benefit accrual, the plan administrator shall provide written notice to each applicable individual (and to each employee organization representing applicable individuals). “(2) NOTICE.-The notice required by paragraph (1) shall be written in a manner calculated to be understood by the average plan participant and shall provide sufficient information (as determined in accordance with regulations prescribed by the Secretary) to allow applicable individuals to understand the effect of the plan amendment. The Secretary may provide a simplified form of notice for, or exempt from any notice requirement, a plan "(A) which has fewer than 100 participants who have accrued a benefit under the plan, or "(B) which offers participants the option to choose between the new benefit formula and the old benefit formula. "(3) TIMING OF NOTICE.-Except as provided in regulations, the notice required by paragraph (1) shall be provided within a reasonable time before the effective date of the plan amendment. "(4) DESIGNEES.-Any notice under paragraph (1) may be provided to a person designated, in writing, by the person to which it would otherwise be provided. “(5) NOTICE BEFORE ADOPTION OF AMENDMENT.—A plan shall not be treated as failing to meet the requirements of paragraph (1) merely because notice is provided before the adoption of the plan amendment if no material modification of the amendment occurs before the amendment is adopted. “(f) DEFINITIONS AND SPECIAL RULES.-For purposes of this section "(1) APPLICABLE INDIVIDUAL.-The term 'applicable individual' means, with respect to any plan amendment "(A) each participant in the plan, and "(B) any beneficiary who is an alternate payee (within the meaning of section 414(p)(8)) under an applicable qualified domestic relations order (within the meaning of section 414(p)(1)(A)), whose rate of future benefit accrual under the plan may reasonably be expected to be significantly reduced by such plan amendment. "(2) APPLICABLE PENSION PLAN.-The term 'applicable pension plan' means— "(A) any defined benefit plan, or "(B) an individual account plan which is subject to the funding standards of section 412. Such term shall not include a governmental plan (within the meaning of section 414(d)) or a church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made. "(3) EARLY RETIREMENT.-A plan amendment which eliminates or significantly reduces any early retirement benefit or retirement-type subsidy (within the meaning of section 411(d)(6)(B)(i)) shall be treated as having the effect of significantly reducing the rate of future benefit accrual. "(g) NEW TECHNOLOGIES.-The Secretary may by regulations allow any notice under subsection (e) to be provided by using new technologies.". (2) CLERICAL AMENDMENT.-The table of sections for chapter 43 is amended by adding at the end the following new item: "Sec. 4980F. Failure of applicable plans reducing benefit accruals to satisfy notice requirements.". (b) AMENDMENT OF ERISA.-Subsection (h) of section 204 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054) is amended to read as follows: |