"(4)(A) A defined contribution plan (in this subparagraph referred to as the 'transferee plan') shall not be treated as failing to meet the requirements of this subsection merely because the transferee plan does not provide some or all of the forms of distribution previously available under another defined contribution plan (in this subparagraph referred to as the 'transferor plan') to the extent that "(i) the forms of distribution previously available under the transferor plan applied to the account of a participant or beneficiary under the transferor plan that was transferred from the transferor plan to the transferee plan pursuant to a direct transfer rather than pursuant to a distribution from the transferor plan; "(ii) the terms of both the transferor plan and the transferee plan authorize the transfer described in clause (i); "(iii) the transfer described in clause (i) was made pursuant to a voluntary election by the participant or beneficiary whose account was transferred to the transferee plan; "(iv) the election described in clause (iii) was made after the participant or beneficiary received a notice describing the consequences of making the election; and "(v) the transferee plan allows the participant or beneficiary described in clause (iii) to receive any distribution to which the participant or beneficiary is entitled under the transferee plan in the form of a single sum distribution. *(B) Subparagraph (A) shall apply to plan mergers and other transactions having the effect of a direct transfer, including consolidations of benefits attributable to different employers within a multiple employer plan. "(5) Except to the extent provided in regulations promulgated by the Secretary of the Treasury, a defined contribution plan shall not be treated as failing to meet the requirements of this subsection merely because of the elimination of a form of distribution previously available thereunder. This paragraph shall not apply to the elimination of a form of distribution with respect to any participant unless “(A) a single sum payment is available to such participant at the same time or times as the form of distribution being eliminated; and "(B) such single sum payment is based on the same or greater portion of the participant's account as the form of distribution being eliminated.". (3) EFFECTIVE DATE.-The amendments made by this subsection shall apply to years beginning after December 31, 2001. (b) REGULATIONS. (1) AMENDMENT OF INTERNAL REVENUE CODE.-Paragraph (6)(B) of section 411(d) (relating to accrued benefit not to be decreased by amendment) is amended by inserting after the second sentence the following: "The Secretary shall by regulations provide that this subparagraph shall not apply to any plan amendment which reduces or eliminates benefits or subsidies which create significant burdens or complexities for the plan and plan participants, unless such amendment adversely affects the rights of any participant in a more than de minimis manner.". (2) AMENDMENT OF ERISA.-Section 204(g)(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Applicability. 26 USC 411 note. Deadline. 26 USC 411 note. Effective date. 26 USC 401 note. 1054(g)(2)) is amended by inserting after the second sentence the following: "The Secretary of the Treasury shall by regulations provide that this paragraph shall not apply to any plan amendment which reduces or eliminates benefits or subsidies which create significant burdens or complexities for the plan and plan participants, unless such amendment adversely affects the rights of any participant in a more than de minimis manner.". (3) SECRETARY DIRECTED.-Not later than December 31, 2003, the Secretary of the Treasury is directed to issue regulations under section 411(d)(6) of the Internal Revenue Code of 1986 and section 204(g) of the Employee Retirement Income Security Act of 1974, including the regulations required by the amendment made by this subsection. Such regulations shall apply to plan years beginning after December 31, 2003, or such earlier date as is specified by the Secretary of the Treasury. SEC. 646. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS. (A) Section 401(k)(2)(B)(i)(I) (relating to qualified cash or deferred arrangements) is amended by striking “separation from service" and inserting "severance from employment". (B) Subparagraph (A) of section 401(k) (10) (relating to distributions upon termination of plan or disposition of assets or subsidiary) is amended to read as follows: “(A) IN GENERAL.-An event described in this subparagraph is the termination of the plan without establishment or maintenance of another defined contribution plan (other than an employee stock ownership plan as defined in section 4975(e)(7)).". (C) Section 401(k)(10) is amended— (i) in subparagraph (B)— (I) by striking "An event" in clause (i) and inserting "A termination"; and (II) by striking "the event" in clause (i) and inserting "the termination"; (ii) by striking subparagraph (C); and (iii) by striking "OR DISPOSITION OF ASSETS OR SUB SIDIARY" in the heading. (2) SECTION 403(b).— (A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are each amended by striking "separates from service" and inserting "has a severance from employment”. (B) The heading for paragraph (11) of section 403(b) is amended by striking "SEPARATION FROM SERVICE" and inserting "SEVERANCE FROM EMPLOYMENT". (3) SECTION 457.-Clause (ii) of section 457(d)(1)(A) is amended by striking "is separated from service" and inserting "has a severance from employment". (b) EFFECTIVE DATE.-The amendments made by this section shall apply to distributions after December 31, 2001. SEC. 647. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT PLANS. (a) SECTION 403(b) PLANS.-Subsection (b) of section 403 is 26 USC 403. amended by adding at the end the following new paragraph: "(13) TRUSTEE-TO-TRUSTEE TRANSFERS ΤΟ PURCHASE PERMISSIVE SERVICE CREDIT.-No amount shall be includible in gross income by reason of a direct trustee-to-trustee transfer to a defined benefit governmental plan (as defined in section 414(d)) if such transfer is "(A) for the purchase of permissive service credit (as defined in section 415(n)(3)(A)) under such plan, or “(B) a repayment to which section 415 does not apply by reason of subsection (k)(3) thereof.". (b) SECTION 457 PLANS.-Subsection (e) of section 457, as amended by section 641, is amended by adding after paragraph (16) the following new paragraph: "(17) TRUSTEE-TO-TRUSTEE TRANSFERS ΤΟ 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, 2001. SEC. 648. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT AMOUNTS. (a) QUALIFIED PLANS.— (1) AMENDMENT OF INTERNAL REVENUE CODE.-Section 411(a)(11) (relating to restrictions on certain mandatory distributions) is amended by adding at the end the following: "(D) SPECIAL RULE FOR ROLLOVER CONTRIBUTIONS.— A plan shall not fail to meet the requirements of this paragraph if, under the terms of the plan, the present value of the nonforfeitable accrued benefit is determined without regard to that portion of such benefit which is attributable to rollover contributions (and earnings allocable thereto). For purposes of this subparagraph, the term 'rollover contributions' means any rollover contribution under sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16).". (2) AMENDMENT OF ERISA.—Section 203(e) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is amended by adding at the end the following: “(4) A plan shall not fail to meet the requirements of this subsection if, under the terms of the plan, the present value of the nonforfeitable accrued benefit is determined without regard to that portion of such benefit which is attributable to rollover contributions (and earnings allocable thereto). For purposes of this subparagraph, the term 'rollover contributions' means any rollover contribution under sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code of 1986.". Applicability. 26 USC 457. Applicability. Applicability. 26 USC 457 note. (b) ELIGIBLE DEFERRED COMPENSATION PLANS.-Clause (i) of section 457(e)(9)(A) is amended by striking "such amount" and inserting "the portion of such amount which is not attributable to rollover contributions (as defined in section 411(a)(11)(D))”. (c) EFFECTIVE DATE.-The amendments made by this section shall apply to distributions after December 31, 2001. SEC. 649. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS (a) MINIMUM DISTRIBUTION REQUIREMENTS.-Paragraph (2) of section 457(d) (relating to distribution requirements) is amended to read as follows: “(2) MINIMUM DISTRIBUTION REQUIREMENTS.-A plan meets the minimum distribution requirements of this paragraph if such plan meets the requirements of section 401(a)(9).”. (b) INCLUSION IN GROSS INCOME. (1) YEAR OF INCLUSION.-Subsection (a) of section 457 (relating to year of inclusion in gross income) is amended to read as follows: "(a) YEAR OF INCLUSION IN GROSS INCOME. “(1) IN GENERAL.-Any amount of compensation deferred under an eligible deferred compensation plan, and any income attributable to the amounts so deferred, shall be includible in gross income only for the taxable year in which such compensation or other income “(A) is paid to the participant or other beneficiary, in the case of a plan of an eligible employer described in subsection (e)(1)(A), and "(B) is paid or otherwise made available to the participant or other beneficiary, in the case of a plan of an eligible employer described in subsection (e)(1)(B). "(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.-To the extent provided in section 72(t)(9), section 72(t) shall apply to any amount includible in gross income under this subsection.". (2) CONFORMING AMENDMENTS. (A) So much of paragraph (9) of section 457(e) as precedes subparagraph (A) is amended to read as follows: "(9) BENEFITS OF TAX EXEMPT ORGANIZATION PLANS NOT TREATED AS MADE AVAILABLE BY REASON OF CERTAIN ELECTIONS, ETC. In the case of an eligible deferred compensation plan of an employer described in subsection (e)(1)(B)—". (B) Section 457(d) is amended by adding at the end the following new paragraph: “(3) SPECIAL RULE FOR GOVERNMENT PLAN.—An eligible deferred compensation plan of an employer described in subsection (e)(1)(A) shall not be treated as failing to meet the requirements of this subsection solely by reason of making a distribution described in subsection (e)(9)(A).”. (c) EFFECTIVE DATE.-The amendments made by subsections (a) and (b) shall apply to distributions after December 31, 2001. Subtitle E-Strengthening Pension PART I-GENERAL PROVISIONS SEC. 651. REPEAL OF 160 PERCENT OF CURRENT LIABILITY FUNDING LIMIT. (a) AMENDMENTS TO INTERNAL REVENUE CODE.-Section 412(c)(7) (relating to full-funding limitation) is amended— (1) by striking "the applicable percentage" in subparagraph (A)(i)(I) and inserting "in the case of plan years beginning before January 1, 2004, the applicable percentage"; and (2) by amending subparagraph (F) to read as follows: "(F) APPLICABLE PERCENTAGE.-For purposes of subparagraph (A)(i)(I), the applicable percentage shall be determined in accordance with the following table: "In the case of any plan year 2002.... 2003 The applicable percentage is 165 (b) AMENDMENT OF ERISA.—Section 302(c)(7) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) is amended(1) by striking "the applicable percentage" in subparagraph (A)(i)(I) and inserting "in the case of plan years beginning before January 1, 2004, the applicable percentage", and of (2) by amending subparagraph (F) to read as follows: 2002 2003 The applicable percentage is 165 26 USC 412. (c) EFFECTIVE DATE.-The amendments made by this section Applicability. shall apply to plan years beginning after December 31, 2001. SEC. 652. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED (a) IN GENERAL.-Subparagraph (D) of section 404(a)(1) (relating to special rule in case of certain plans) is amended to read as follows: "(D) SPECIAL RULE IN CASE OF CERTAIN PLANS.— “(i) IN GENERAL.-In the case of any defined benefit plan, except as provided in regulations, the maximum amount deductible under the limitations of this paragraph shall not be less than the unfunded current liability determined under section 412(1). "(ii) PLANS WITH 100 OR LESS PARTICIPANTS.-For purposes of this subparagraph, in the case of a plan which has 100 or less participants for the plan year, unfunded current liability shall not include the liability attributable to benefit increases for highly compensated employees (as defined in section 414(q)) resulting from a plan amendment which is made or 26 USC 412 note. |