To amend the Internal Revenue Code of 1986 to alter the tests for determining whether an individual is an employee under the employee leasing rules.

Amends the Internal Revenue Code to revise the definition of a leased employee for pension plan purposes to require: (1) a contract for such services pursuant to which payments are made, directly or indirectly, by the recipient to the leasing organization; (2) the leased employee to perform at least 1,000 hours during a plan year for the recipient; and (3) the leased employee to be under the control of the recipient. Requires hospitals which are leasing organizations to contract for payment for services to be made directly or indirectly to the hospital.

Allows a recipient to elect not to treat a leased employee as such an employee for a plan year if such employee performs services for less than 501 hours during such plan year.

Authorizes the establishment of additional safe harbor plans if such plans provide significant retirement benefits and meet the requirements of qualified pension plans or are governmental plans.

Provides that regulations issued to carry out employee leasing provisions shall apply to any plan year beginning before the date the regulation is published in final form, unless taxpayers elect to apply such regulations retroactively.