< Back to H.R. 1498 (107th Congress, 2001–2002)

Text of the Retirement Security Act of 2001

This bill was introduced on April 4, 2001, in a previous session of Congress, but was not enacted. The text of the bill below is as of Apr 4, 2001 (Introduced).

Source: GPO

HR 1498 IH

107th CONGRESS

1st Session

H. R. 1498

To amend the Internal Revenue Code of 1986 to allow individuals a refundable credit for elective deferrals and IRA contributions and to allow small employers credits for pension plan startup costs and for pension plan contributions.

IN THE HOUSE OF REPRESENTATIVES

April 4, 2001

Mr. NEAL of Massachusetts (for himself, Mr. RANGEL, Mr. MATSUI, Mr. COYNE, and Mr. ANDREWS) 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 allow individuals a refundable credit for elective deferrals and IRA contributions and to allow small employers credits for pension plan startup costs and for pension plan contributions.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Retirement Security Act of 2001’.

SEC. 2. REFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS.

    (a) IN GENERAL- Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 35 as section 36 and by inserting after section 34 the following new section:

‘SEC. 35. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN INDIVIDUALS.

    ‘(a) ALLOWANCE OF CREDIT- In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the applicable percentage of so much of the qualified retirement savings contributions of the eligible individual for the taxable year as do not exceed $2,000.

    ‘(b) APPLICABLE PERCENTAGE- For purposes of this section, the applicable percentage is the percentage determined in accordance with the following table:

-----------------------------------------------------------------------------------------------------------
Adjusted Gross Income                                                                Applicable percentage 
         Joint return          Head of a household          All other cases                                
                 Over Not over                Over Not over            Over Not over                       
-----------------------------------------------------------------------------------------------------------
                   $0  $25,000                  $0  $18,750              $0  $12,500                    50 
               25,000   35,000              18,750   26,250          12,500   17,500                    45 
               35,000   45,000              26,250   33,750          17,500   22,500                    35 
               45,000   55,000              33,750   41,250          22,500   27,500                    25 
               55,000   75,000              41,250   56,250          27,500   37,500                    15 
               75,000                       56,250                   37,500                              0 
-----------------------------------------------------------------------------------------------------------

    ‘(c) ELIGIBLE INDIVIDUAL- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘eligible individual’ means any individual if--

        ‘(A) such individual has attained the age of 18 as of the close of the taxable year, and

        ‘(B) the compensation (as defined in section 219(f)(1)) includible in the gross income of the individual (or, in the case of a joint return, of the taxpayer) for such taxable year is at least $5,000.

      ‘(2) DEPENDENTS AND FULL-TIME STUDENTS NOT ELIGIBLE- The term ‘eligible individual’ shall not include--

        ‘(A) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins, and

        ‘(B) any individual who is a student (as defined in section 151(c)(4)).

      ‘(3) INDIVIDUALS RECEIVING CERTAIN RETIREMENT DISTRIBUTIONS NOT ELIGIBLE-

        ‘(A) IN GENERAL- The term ‘eligible individual’ shall not include, with respect to a taxable year, any individual who received during the testing period--

          ‘(i) any distribution from a qualified retirement plan (as defined in section 4974(c)), or from an eligible deferred compensation plan (as defined in section 457(b)), which is includible in gross income, or

          ‘(ii) any distribution from a Roth IRA which is not a qualified rollover contribution (as defined in section 408A(e)) to a Roth IRA.

        ‘(B) TESTING PERIOD- For purposes of subparagraph (A), the testing period, with respect to a taxable year, is the period which includes--

          ‘(i) such taxable year,

          ‘(ii) the preceding taxable year, and

          ‘(iii) the period after such taxable year and before the due date (without extensions) for filing the return of tax for such taxable year.

        ‘(C) EXCEPTED DISTRIBUTIONS- There shall not be taken into account under subparagraph (A)--

          ‘(i) any distribution referred to in section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4),

          ‘(ii) any distribution to which section 408A(d)(3) applies, and

          ‘(iii) any distribution before January 1, 2002.

        ‘(D) TREATMENT OF DISTRIBUTIONS RECEIVED BY SPOUSE OF INDIVIDUAL- For purposes of determining whether an individual is an eligible individual for any taxable year, any distribution received by the spouse of such individual shall be treated as received by such individual if such individual and spouse file a joint return for such taxable year and for the taxable year during which the spouse receives the distribution.

    ‘(d) QUALIFIED RETIREMENT SAVINGS CONTRIBUTIONS- For purposes of this section, the term ‘qualified retirement savings contributions’ means the sum of--

      ‘(1) the amount of the qualified retirement contributions (as defined in section 219(e)) made by the eligible individual,

      ‘(2) the amount of--

        ‘(A) any elective deferrals (as defined in section 402(g)(3)) of such individual, and

        ‘(B) any elective deferral of compensation by such individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A), and

      ‘(3) the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974(c)).

    ‘(e) ADJUSTED GROSS INCOME- For purposes of this section, adjusted gross income shall be determined without regard to sections 911, 931, and 933.

    ‘(f) INVESTMENT IN THE CONTRACT- Notwithstanding any other provision of law, a qualified retirement savings contribution shall not fail to be included in determining the investment in the contract for purposes of section 72 by reason of the credit under this section.

    ‘(g) TRANSITIONAL RULES- In the case of taxable years beginning before January 1, 2008--

      ‘(1) CONTRIBUTION LIMIT- Subsection (a) shall be applied by substituting for ‘$2,000’--

        ‘(A) $600 in the case of taxable years beginning in 2002, 2003, or 2004, and

        ‘(B) $1,000 in the case of taxable years beginning in 2005, 2006, or 2007.

      ‘(2) APPLICABLE PERCENTAGE- The applicable percentage shall be determined under the following table (in lieu of the table in subsection (b)):

-----------------------------------------------------------------------------------------------------------
Adjusted Gross Income                                                                Applicable percentage 
         Joint return          Head of a household          All other cases                                
                 Over Not over                Over Not over            Over Not over                       
-----------------------------------------------------------------------------------------------------------
                   $0  $20,000                  $0  $15,000              $0  $10,000                    50 
               20,000   25,000              15,000   18,750          10,000   12,500                    45 
               25,000   30,000              18,750   22,500          12,500   15,000                    35 
               30,000   35,000              22,500   26,250          15,000   17,500                    25 
               35,000   40,000              26,250   30,000          17,500   20,000                    15 
               40,000                       30,000                   20,000                            0.’ 
-----------------------------------------------------------------------------------------------------------

    (b) CONFORMING AMENDMENTS-

      (1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period ‘, or from section 35 of such Code’.

      (2) The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by striking the last item and inserting the following new items:

‘Sec. 35. Elective deferrals and IRA contributions by certain individuals.

‘Sec. 36. Overpayments of tax.’

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

SEC. 3. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.

    (a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

‘SEC. 45E. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.

    ‘(a) GENERAL RULE- For purposes of section 38, in the case of an eligible employer, the small employer pension plan startup cost credit determined under this section for any taxable year is an amount equal to 50 percent of the qualified startup costs paid or incurred by the taxpayer during the taxable year.

    ‘(b) DOLLAR LIMITATION- The amount of the credit determined under this section for any taxable year shall not exceed--

      ‘(1) $1,000 for the first credit year,

      ‘(2) $500 for each of the 2 taxable years immediately following the first credit year, and

      ‘(3) zero for any other taxable year.

    ‘(c) ELIGIBLE EMPLOYER- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘eligible employer’ has the meaning given such term by section 408(p)(2)(C)(i).

      ‘(2) EMPLOYERS MAINTAINING QUALIFIED PLANS DURING 1998 NOT ELIGIBLE- Such term shall not include an employer if such employer (or any predecessor employer) maintained a qualified plan (as defined in section 408(p)(2)(D)(ii)) with respect to which contributions were made, or benefits were accrued, for service in 1998. If only individuals other than employees described in subparagraph (A) or (B) of section 410(b)(3) are eligible to participate in the qualified employer plan referred to in subsection (d)(1), then the preceding sentence shall be applied without regard to any qualified plan in which only employees so described are eligible to participate.

    ‘(d) OTHER DEFINITIONS- For purposes of this section--

      ‘(1) QUALIFIED STARTUP COSTS-

        ‘(A) IN GENERAL- The term ‘qualified startup costs’ means any ordinary and necessary expenses of an eligible employer which are paid or incurred in connection with--

          ‘(i) the establishment or administration of an eligible employer plan, or

          ‘(ii) the retirement-related education of employees with respect to such plan.

        ‘(B) PLAN MUST HAVE AT LEAST 2 PARTICIPANTS- Such term shall not include any expense in connection with a plan that does not have at least 2 individuals who are eligible to participate.

        ‘(C) PLAN MUST BE ESTABLISHED BEFORE JANUARY 1, 2010- Such term shall not include any expense in connection with a plan established after December 31, 2009.

      ‘(2) ELIGIBLE EMPLOYER PLAN- The term ‘eligible employer plan’ means a qualified employer plan within the meaning of section 4972(d), or a qualified payroll deduction arrangement within the meaning of section 408(q)(1) (whether or not an election is made under section 408(q)(2)). A qualified payroll deduction arrangement shall be treated as an eligible employer plan only if all employees of the employer who--

        ‘(A) have been employed for 90 days, and

        ‘(B) are not described in subparagraph (A) or (C) of section 410(b)(3),

      are eligible to make the election under section 408(q)(1)(A).

      ‘(3) FIRST CREDIT YEAR- The term ‘first credit year’ means--

        ‘(A) the taxable year which includes the date that the eligible employer plan to which such costs relate becomes effective, or

        ‘(B) at the election of the eligible employer, the taxable year preceding the taxable year referred to in subparagraph (A).

    ‘(e) SPECIAL RULES- For purposes of this section--

      ‘(1) AGGREGATION RULES- All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (n) or (o) of section 414, shall be treated as one person. All eligible employer plans shall be treated as 1 eligible employer plan.

      ‘(2) DISALLOWANCE OF DEDUCTION- No deduction shall be allowed for that portion of the qualified startup costs paid or incurred for the taxable year which is equal to the credit determined under subsection (a).

      ‘(3) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.’

    (b) CREDIT ALLOWED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b) of such Code (defining current year business credit) is amended by striking ‘plus’ at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting ‘, plus’, and by adding at the end the following new paragraph:

      ‘(14) in the case of an eligible employer (as defined in section 45E(c)), the small employer pension plan startup cost credit determined under section 45E(a).’

    (c) CONFORMING AMENDMENTS-

      (1) Section 39(d) of such Code is amended by adding at the end the following new paragraph:

      ‘(10) NO CARRYBACK OF SMALL EMPLOYER PENSION PLAN STARTUP COST CREDIT BEFORE JANUARY 1, 2002- No portion of the unused business credit for any taxable year which is attributable to the small employer pension plan startup cost credit determined under section 45E may be carried back to a taxable year beginning before January 1, 2002.’

      (2) Subsection (c) of section 196 of such Code is amended by striking ‘and’ at the end of paragraph (8), by striking the period at the end of paragraph (9) and inserting ‘, and’, and by adding at the end the following new paragraph:

      ‘(10) the small employer pension plan startup cost credit determined under section 45E(a).’

      (3) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

‘Sec. 45E. Small employer pension plan startup costs.’

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to costs paid or incurred in taxable years beginning after December 31, 2001.

SEC. 4. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF SMALL EMPLOYERS.

    (a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

‘SEC. 45F. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.

    ‘(a) GENERAL RULE- For purposes of section 38, in the case of an eligible employer, the small employer pension plan contribution credit determined under this section for any taxable year is an amount equal to 50 percent of the amount which would (but for subsection (f)(1)) be allowed as a deduction under section 404 for such taxable year for qualified employer contributions made to any qualified retirement plan on behalf of any nonhighly compensated employee.

    ‘(b) CREDIT LIMITED TO 3 Years- The credit allowable by this section shall be allowed only with respect to the period of 3 taxable years beginning with the taxable year in which the qualified retirement plan becomes effective.

    ‘(c) QUALIFIED EMPLOYER CONTRIBUTION- For purposes of this section--

      ‘(1) DEFINED CONTRIBUTION PLANS- In the case of a defined contribution plan, the term ‘qualified employer contribution’ means the amount of nonelective and matching contributions to the plan made by the employer on behalf of any nonhighly compensated employee to the extent such amount does not exceed 3 percent of such employee’s compensation from the employer for the year.

      ‘(2) DEFINED BENEFIT PLANS- In the case of a defined benefit plan, the term ‘qualified employer contribution’ means the amount of employer contributions to the plan made on behalf of any nonhighly compensated employee to the extent that the accrued benefit of such employee derived from such contributions for the year do not exceed the equivalent (as determined under regulations prescribed by the Secretary and without regard to contributions and benefits under the Social Security Act) of 3 percent of such employee’s compensation from the employer for the year.

    ‘(d) QUALIFIED RETIREMENT PLAN-

      ‘(1) IN GENERAL- The term ‘qualified retirement plan’ means any plan described in section 401(a) which includes a trust exempt from tax under section 501(a) if the plan meets--

        ‘(A) the contribution requirements of paragraph (2),

        ‘(B) the vesting requirements of paragraph (3), and

        ‘(C) the distributions requirements of paragraph (4).

      ‘(2) CONTRIBUTION REQUIREMENTS-

        ‘(A) IN GENERAL- The requirements of this paragraph are met if, under the plan--

          ‘(i) the employer is required to make nonelective contributions of at least 1 percent of compensation (or the equivalent

thereof in the case of a defined benefit plan) for each nonhighly compensated employee who is eligible to participate in the plan, and

          ‘(ii) except in the case of a defined benefit plan, allocations of nonelective employer contributions are either in equal dollar amounts for all employees covered by the plan or bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of the employees covered by the plan.

        ‘(B) COMPENSATION LIMITATION- The compensation taken into account under subparagraph (A) for any year shall not exceed the limitation in effect for such year under section 401(a)(17).

      ‘(3) VESTING REQUIREMENTS- The requirements of this paragraph are met if the plan satisfies the requirements of subparagraph (A) or (B).

        ‘(A) 3-YEAR VESTING- A plan satisfies the requirements of this subparagraph if an employee who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions.

        ‘(B) 5-YEAR GRADED VESTING- A plan satisfies the requirements of this subparagraph if an employee has a nonforfeitable right to a percentage of the employee’s accrued benefit derived from employer contributions determined under the following table:

The nonforfeitable

‘Years of service:

percentage is:

1

20

2

40

3

60

4

80

5

100.

      ‘(4) DISTRIBUTION REQUIREMENTS-

        ‘(A) IN GENERAL- Except as provided in subparagraph (B), the requirements of this paragraph are met if, under the plan--

          ‘(i) in the case of a profit-sharing or stock bonus plan, amounts are distributable only as provided in section 401(k)(2)(B), and

          ‘(ii) in the case of a pension plan, amounts are distributable subject to the limitations applicable to other distributions from the plan.

        ‘(B) DISTRIBUTIONS WITHIN 5 YEARS AFTER SEPARATION, ETC- In no event shall a plan meet the requirements of this paragraph unless, under the plan, amounts distributed--

          ‘(i) after separation from service or severance from employment, and

          ‘(ii) within 5 years after the date of the earliest employer contribution to the plan,

        may be distributed only in a direct trustee-to-trustee transfer to a plan having the same distribution restrictions as the distributing plan.

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

      ‘(1) ELIGIBLE EMPLOYER- The term ‘eligible employer’ has the meaning given such term by section 408(p)(2)(C)(i).

      ‘(2) NONHIGHLY COMPENSATED EMPLOYEES- The term ‘highly compensated employee’ has the meaning given such term by section 414(q) (determined without regard to section 414(q)(1)(B)(ii)).

    ‘(f) SPECIAL RULES-

      ‘(1) DISALLOWANCE OF DEDUCTION- No deduction shall be allowed for that portion of the qualified employer contributions paid or incurred for the taxable year which is equal to the credit determined under subsection (a).

      ‘(2) ELECTION NOT TO CLAIM CREDIT- This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.

    ‘(g) RECAPTURE OF CREDIT ON FORFEITED CONTRIBUTIONS- If any accrued benefit which is forfeitable by reason of subsection (d)(3) is forfeited, the employer’s tax imposed by this chapter for the taxable year in which the forfeiture occurs shall be increased by 35 percent of the employer contributions from which such benefit is derived to the extent such contributions were taken into account in determining the credit under this section.

    ‘(h) REGULATIONS- The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section, including regulations to prevent the abuse of the purposes of this section through the use of multiple plans.

    ‘(i) TERMINATION- This section shall not apply to any plan established after December 31, 2009.’

    (b) CREDIT ALLOWED AS PART OF GENERAL BUSINESS CREDIT- Section 38(b) of such Code (defining current year business credit) is amended by striking ‘plus’ at the end of paragraph (13), by striking the period at the end of paragraph (14) and inserting ‘, plus’, and by adding at the end the following new paragraph:

      ‘(15) in the case of an eligible employer (as defined in section 45F(e)), the small employer pension plan contribution credit determined under section 45F(a).’

    (c) CONFORMING AMENDMENTS-

      (1) Section 39(d) of such Code is amended by adding at the end the following new paragraph:

      ‘(11) NO CARRYBACK OF SMALL EMPLOYER PENSION PLAN CONTRIBUTION CREDIT BEFORE JANUARY 1, 2002- No portion of the unused business credit for any taxable year which is attributable to the small employer pension plan contribution credit determined under section 45F may be carried back to a taxable year beginning before January 1, 2002.’

      (2) Subsection (c) of section 196 of such Code is amended by striking ‘and’ at the end of paragraph (9), by striking the period at the end of paragraph (10) and inserting ‘, and’, and by adding at the end the following new paragraph:

      ‘(11) the small employer pension plan contribution credit determined under section 45F(a).’

      (3) The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

‘Sec. 45F. Small employer pension plan contributions.’

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to contributions paid or incurred in taxable years beginning after December 31, 2001.