Employee Benefits Simplification Act of 1991

Employee Benefits Simplification Act of 1991 - Title I: Nondiscrimination Provisions - Amends the Internal Revenue Code with respect to employee benefit plans. Redefines the term "highly compensated employee" for pension, profit sharing, stock bonus plans, etc. purposes. Makes such an employee one who is a five-percent owner or who has compensation from the employer in excess of $50,000. Provides a special rule where no employees are treated as highly compensated. Allows employers to use prior year compensation in determining highly compensated employees.

Provides that the cost-of-living adjustment with respect to any calendar year is based on the increase in the applicable index as of the close of the calendar quarter ending September 30 of the preceding calendar year over such index as of the close of the calendar quarter starting October 1, 1986. Requires the rounding of such amounts to the nearest $1,000, except that elective deferrals and elective contributions to simplified employee pensions are rounded to the nearest $100.

Provides that the minimum participation requirements rule applies only to defined benefit pension plans. Requires such plans to benefit not less than 25 employees, or the greater of 40 percent of all employees or two employees (or if there is only one employee, such employee).

Provides that a plan satisfies participation requirements on each day of a plan year if it satisfies such requirements on a single plan day of such year, but only if such day is reasonably representative of the employer's workforce and the plan's coverage.

Sets forth alternative methods of meeting nondiscrimination requirements for cash or deferred arrangements, including specified contribution and notice requirements. Sets forth alternative methods of satisfying the nondiscrimination test for matching contributions. Revises the method of distributing excess contributions to highly compensated employees. Provides for determining the actual deferral percentage of highly compensated employees by using the prior plan year of highly compensated employees.

Title II: Distributions - Allows distributions from qualified pension plans to an employee's spouse, as well as to an employee, to be rolled over tax-free to a retirement plan. Repeals special rules for partial distribution rollovers, payments from certain pension plan termination trusts, and treatment of potential future vesting.

Eliminates five-year averaging for lump-sum distributions from qualified plans after 1996.

Allows distributions to be made from qualified plans by April 1 of the calendar year following calendar year in which the employee retires, if he or she retires after reaching age 70 1/2. (Present law restricts such distributions to April 1 of the calendar year following the calendar year in which the employee attains age 70 1/2.)

Title III: Miscellaneous Provisions - Revises the definition of a leased employee to mean a service-providing non-employee if the recipient of services exercises primary control over the manner in which the services are performed. (Currently the standard is that the services in question are historically performed by employees.)

Eliminates the special aggregation rules that apply to plans maintained by owner-employees that do not apply to other qualified plans.

Revises the 150 percent current liability limitation on the deduction allowed for employer contributions to qualified pension plans to eliminate the fair market value of assets from the limitation formula for multiemployer plans. Repeals the present law annual valuation requirement for such plans and applies the prior law requirement that valuations be performed at least every three years.

Sets forth affiliation requirements for employers jointly maintaining a voluntary employees' beneficiary association.

Provides that compensation, in the case of a governmental plan, includes any amount which is contributed by the employer pursuant to a salary reduction agreement and which is not includible in the gross income of an employee under cafeteria plans, cash or deferred arrangements, tax-exempt organization or public school annuities, State or local government plans, or deferred compensation plans of State and local governments and tax-exempt organizations.

Makes the following limitations inapplicable to plans maintained by State and local governments and certain tax-exempt organizations: (1) excess benefit limitations; (2) certain compensation limitations on benefits; and (3) limitations on disability and survivor benefits.

Allows government plan employers to revoke the grandfather election on the limitation to equal accrued benefits.

Modifies provisions relating to simplified employee pensions. Increases the number of allowable participants for salary reduction arrangements from 25 to 100. Allows participation after one year of service (currently, three years of service is required). Repeals the requirement that at least 50 percent of eligible employees participate in a salary reduction arrangement.

Eliminates certain requirements regarding contributions on behalf of disabled employees.

Allows rural cooperative plans which include cash or deferred arrangements to make distributions to participants after attainment of age 59 1/2.

Includes reports of pension and annuity payments in information returns and payee statements. Provides a $10 reporting threshold for designated distributions.

Provides for the disaggregation of union benefit plans by allowing for consideration in reckoning the average benefit percentage test of a plan a unit of employees who benefit under the plan on the same terms even though they would otherwise be disregarded for specified reasons.

Requires social security supplements to be considered a retirement-type subsidy in determining whether a plan is discriminatory in favor of highly compensated employees. Disregards such supplements in determining permitted disparity in plan contributions or benefits.

Provides for treating the social security retirement age, in lieu of age 65, as the uniform retirement age for pension plans.

Includes the use of an employee's basic or regular rate of compensation as an alternative method of determining compensation.

Provides that a plan shall not be considered discriminatory in favor of highly compensated employees merely because it provides that the benefit of employees who transfer between members of the controlled group of employers which includes the plan sponsor, or between different employee groups within the employer, is based on all years of service and is offset by the benefit accrued under any other plans of the employer.

Establishes a special grandfather rule for integrated plans.

Revises the method of determining interest on employee contributions. Limits the accrued benefit to be derived from such contributions.

Declares a plan to be nondiscriminatory if the average rate of accrual for highly compensated employees is not greater than the average rate of accrual for all other employees.

Repeals the requirement that a plan be nondiscriminatory to qualify for line of business exception to minimum coverage requirements.

Provides for the treatment of headquarters personnel as a separate line of business for employers with other separate lines of business.

Declares that rules governing deferred compensation plans of State and local governments and tax-exempt organizations do not apply to nonelective deferred compensation.