< Back to H.R. 4534 (103rd Congress, 1993–1994)

Text of To amend the Internal Revenue Code of 1986 to facilitate portability, enhance pension coverage, and provide employers an optional simplified ...

...an optional simplified method of complying with certain pension requirements.

This bill was introduced on May 26, 1994, in a previous session of Congress, but was not enacted. The text of the bill below is as of May 26, 1994 (Introduced).

Source: GPO

HR 4534 IH

103d CONGRESS

2d Session

H. R. 4534

To amend the Internal Revenue Code of 1986 to facilitate portability, enhance pension coverage, and provide employers an optional simplified method of complying with certain pension requirements.

IN THE HOUSE OF REPRESENTATIVES

MAY 26, 1994

Mr. WHEAT introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

To amend the Internal Revenue Code of 1986 to facilitate portability, enhance pension coverage, and provide employers an optional simplified method of complying with certain pension requirements.

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

SECTION 1. SIMPLIFIED METHOD FOR COMPLYING WITH PENSION REQUIREMENTS.

    (a) GENERAL RULE- Subpart B of part I of subchapter D of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

‘SEC. 417A. SIMPLIFIED METHOD FOR COMPLYING WITH PENSION REQUIREMENTS.

    ‘(a) GENERAL RULE- An employer is entitled to the benefits of this section for any year if--

      ‘(1) such employer maintains a qualified simplified defined contribution plan during such year, and

      ‘(2) such employer maintains a qualified simplified defined benefit plan during such year.

    ‘(b) BENEFITS OF SECTION- If an employer is entitled to the benefits of this section for any year--

      ‘(1) INCREASE IN PERMITTED COMPENSATION- In applying sections 401(a)(17) and 404(l) to the qualified simplified defined contribution plan and the qualified simplified defined benefit plan, the dollar limitation contained in such sections shall be $200,000. The Secretary shall adjust the $200,000 amount contained in the preceding sentence at the same time and in the same manner as the adjustment under section 401(a)(17)(B).

      ‘(2) MODIFICATION OF FUNDING RULES-

        ‘(A) INCREASE IN FULL FUNDING LIMITATION- The full funding limitation for the qualified simplified defined benefit plan shall be determined under section 412(c)(7)(A) as if such section did not include subclause (I) of clause (i) thereof.

        ‘(B) WAIVER OF QUARTERLY CONTRIBUTION REQUIREMENTS- Section 412(m) shall not apply to the qualified simplified defined benefit plan.

      ‘(3) WAIVER OF CERTAIN DISCRIMINATION RULES- The requirements of section 401(k)(3) shall be treated as satisfied with respect to any cash or deferred arrangement maintained by the employer during such year and the requirements of section 401(m) shall be treated as satisfied with respect to any plan maintained by the employer during such year.

      ‘(4) COMBINED LIMIT WAIVED- The requirements of section 415(e) shall be treated as satisfied with respect to the qualified simplified defined contribution plan and the qualified simplified defined benefit plan.

      ‘(5) OTHER REQUIREMENTS DEEMED SATISFIED- The requirements of the following provisions shall be treated as satisfied with respect to the qualified simplified defined contribution plan and the qualified simplified defined benefit plan:

        ‘(A) Section 401(a)(4).

        ‘(B) Section 401(a)(26).

        ‘(C) Section 401(l).

        ‘(D) Subsections (a) and (b) of section 410.

        ‘(E) Subsection (b) of section 411.

        ‘(F) Section 416.

    ‘(c) SIMPLIFIED DEFINED CONTRIBUTION PLAN-

      ‘(1) IN GENERAL- A defined contribution plan is a qualified simplified defined contribution plan if--

        ‘(A) all employees of the employer (not excluded pursuant to paragraph (2)) are eligible to participate in such plan,

        ‘(B) the employer contribution for each year for each participant in the plan is a uniform percentage (which is not less than 3 percent) of such participant’s compensation (within the meaning of section 414(s)),

        ‘(C) such plan provides that each employee covered by the plan has a nonforfeitable right to 100 percent of such employee’s accrued benefit derived from employer contributions, and

        ‘(D) the balance to the credit of the employee under such plan--

          ‘(i) except as required by section 401(a)(9), may not be distributed earlier than separation from service, death, or disability, and

          ‘(ii) in the case of any distribution other than by reason of death, such distribution may be made only in the form of--

            ‘(I) an annuity for the life of the employee (or a joint and survivor annuity as provided in section 417),

            ‘(II) a direct trustee-to-trustee transfer as provided in section 401(a)(31), or

            ‘(III) a distribution to a pension portability clearinghouse (if any) established to accept distributions.

      ‘(2) CERTAIN EXCLUSIONS PERMITTED- For purposes of paragraph (1), an employee may be excluded until such employee has completed 6 months of service for the employer.

    ‘(d) SIMPLIFIED DEFINED BENEFIT PLAN-

      ‘(1) IN GENERAL- A defined benefit plan is a qualified simplified defined benefit plan if--

        ‘(A) all employees of the employer (not excluded pursuant to paragraph (3)) are eligible to participate in such plan, and

        ‘(B) the accrued benefit derived from employer contributions for each participant, when expressed as an annual retirement benefit, is equal to the required benefit determined under paragraph (2).

      ‘(2) AMOUNT OF REQUIRED BENEFIT-

        ‘(A) IN GENERAL- The required benefit determined under this paragraph is an amount equal to the product of--

          ‘(i) the plan’s qualified accrual rate multiplied by the number of years of service with the employer, and

          ‘(ii) the participant’s average compensation for the testing period.

        ‘(B) QUALIFIED ACCRUAL RATE- For purposes of subparagraph (A):

          ‘(i) A plan’s qualified accrual rate is the uniform accrual rate set forth in such plan so long as such rate exceeds 0.5 percent.

          ‘(ii) A plan may provide that the accrual rate with respect to so much of the participant’s average compensation for the testing period as does not exceed covered compensation (as defined in section 401(l)(5)(E)) shall be less than the accrual rate for compensation above covered compensation (as so defined) so long as such difference is not greater than 1 percentage point. Nothing in the preceding sentence shall be construed as permitting an accrual rate of less than 0.5 percent.

        ‘(C) YEARS OF SERVICE- For purposes of this paragraph, years of service shall be determined under the rules of paragraphs (4), (5), and (6) of section 411(a).

        ‘(D) ANNUAL RETIREMENT BENEFIT- For purposes of this paragraph, the term ‘annual retirement benefit’ means a benefit payable annually in the form of a single life annuity (with no ancillary benefits) beginning at the normal retirement age under the plan.

        ‘(E) TESTING PERIOD- For purposes of this paragraph--

          ‘(i) IN GENERAL- A participant’s testing period shall be the period of years (not less than 3 nor exceeding 5) during which the participant has the greatest aggregate compensation from the employer.

          ‘(ii) YEAR MUST BE INCLUDED IN YEAR OF SERVICE- The years taken into account under clause (i) shall be properly adjusted for years not included in a year of service.

      ‘(3) EXCLUDED EMPLOYEES- For purposes of this subsection--

        ‘(A) IN GENERAL- The employer may exclude--

          ‘(i) employees who have not completed 6 months of service,

          ‘(ii) employees who normally work less than 17 1/2 hours per week,

          ‘(iii) employees who normally work during not more than 6 months during the year,

          ‘(iv) employees who have not attained age 21, and

          ‘(v) 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) EMPLOYEES COVERED BY EXISTING DEFINED BENEFIT PLAN- The employer may exclude employees who are covered under another defined benefit plan maintained by the employer if--

          ‘(i) such plan was in existence on the date of the enactment of this section, and

          ‘(ii) such plan meets the applicable requirements of this part without regard to this section.

        The employer may exclude employees under the preceding sentence only if all employees described in the preceding sentence are so excluded.

        ‘(C) SPECIAL RULE- If accruals under any defined benefit plan referred to in subparagraph (B) cease and the employees covered by such defined benefit plan are covered by another plan which would otherwise qualify under this subsection, such other plan shall not be treated as meeting the requirements of this subsection unless, in determining the annual retirement benefit of each such employee under the plan referred to in subparagraph (B), such employee’s average compensation for the testing period (determined by treating such plans as 1 plan) is used.

    ‘(e) SPECIAL RULES-

      ‘(1) AGGREGATION RULES- All employees treated as employed by a single employer under subsections (a) and (b) of section 414 shall be so treated for purposes of this section.

      ‘(2) INTEGRATION WITH SOCIAL SECURITY NOT COMMITTED- Except as provided in subsection (d)(2)(B), a plan shall not be treated as meeting the requirements of subsection (c) or (d) unless such plan meets such requirements without taking into account contributions or benefits under chapter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal Insurance Contribution Act), title II of the Social Security Act, or any other Federal or State law.’

    (b) CLERICAL AMENDMENT- The table of sections for subpart B of part I of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item:

‘Sec. 417A. Simplified method for complying with pension requirements.’

SEC. 2. STUDY.

    (a) GENERAL RULE- The Secretary of Labor and the Secretary of the Treasury shall conduct a joint study on the feasibility of establishing a pension portability clearinghouse to accept rollovers from tax-qualified pension plans as well as to receive tax deductible contributions from employers not maintaining qualified pension plans. Such study shall also determine the feasibility of having participant-directed accounts with various investment options with varying degrees of risk.

    (b) REPORT- Not later than the date 1 year after the date of the enactment of this Act, the Secretaries referred to in subsection (a) shall submit a report to the Congress on the study conducted under subsection (a), together with such recommendations as such Secretaries may deem advisable.