Pension Simplification Act of 1995

TABLE OF CONTENTS:

Title I: Simplification of Nondiscrimination Provisions

Title II: Simplified Distribution Rules

Title III: Targeted Access to Pension Plans for Small

Employers

Title IV: Paperwork Reduction

Title V: Miscellaneous Simplification

Pension Simplification Act of 1995 - Title I: Simplification of Nondiscrimination Provisions - Redefines the term "highly compensated employee" for pension, profit sharing, stock bonus plan, etc. purposes. Makes such an employee one who is a five-percent owner, has compensation from the employer in excess of $80,000, or was the most highly compensated officer of the employer. Provides a special rule where no employees meet those criteria. Defines "participant's compensation" and "compensation" for purposes of specified provisions.

(Sec. 104) Provides alternative methods of satisfying the special nondiscrimination requirements applicable to elective deferrals and employer matching contributions.

Modifies the two-part nondiscrimination test for elective contributions under cash or deferred arrangements by permitting the average deferral percentage for nonhighly compensated employees for the preceding year to be used in determining the permitted average deferral percentage for highly compensated employees for the current year.

Title II: Simplified Distribution Rules - Amends the Internal Revenue Code to repeal: (1) the $5,000 limitation on the exclusion of employees' death benefits; and (2) the five-year forward income averaging for lump-sum distributions.

(Sec. 203) Establishes a method of taxing annuity payments by taking into account the investment in the contract and the number of anticipated payments.

Title III: Targeted Access to Pension Plans for Small Employers - Allows a current year business credit for small employer pension plan qualified start-up costs.

(Sec. 302) Modifies certain simplified employee pensions with respect to: (1) allowable participants and participation requirements; and (2) deferral percentages.

(Sec. 303) Prohibits treating a plan as a top-heavy plan if the employer has no highly compensated employees by reason of specified provisions.

(Sec. 304) Prohibits treating a cash or deferred arrangement as qualified if it is part of a plan maintained by a State or local government or subdivision or a tax-exempt organization described in Internal Revenue Code section 501(c)(3). (Current law applies that prohibition to all tax-exempt organizations, not just to 501(c)(3) tax-exempt organizations.)

(Sec. 305) Prohibits any proposed regulation relating to qualified pension plans from taking effect unless it includes provisions to address the special needs of small employers.

Title IV: Paperwork Reduction - Repeals provisions relating to a limitation in the case of a defined benefit plan and a defined contribution plan for the same employee.

(Sec. 402) Authorizes the Secretary, as a condition of sponsorship, to prescribe rules defining the duties and responsibilities of certain master and prototype retirement plans.

Title V: Miscellaneous Simplification - Revises the definition of a leased employee to mean one whose services are performed under the control of a service recipient, instead of one whose services are historically performed by employees.

(Sec. 502) Establishes a contribution limit for owner-employees of retirement plans.

(Sec. 503) Eliminates the special vesting rule for multiemployer plans.

(Sec. 504) Amends minimum funding standards provisions to provide for the treatment of multiemployer plans with regard to full funding limitation provisions and valuation provisions.

(Sec. 505) Permits certain employers to elect an alternative full funding limitation with respect to any defined benefit plan based solely on the accrued liability under such plan. Requires the Secretary to adjust the 150-percent current liability full funding limit for other plans if there is a revenue shortfall.

(Sec. 506) Defines affiliated employers for Treasury regulation purposes with respect to tax-exemption.

(Sec. 507) Modifies the treatment of governmental plans with respect to limits on contributions and benefits.

(Sec. 508) Provides special rules for distributions of deferred compensation plans of State and local governments and tax-exempt organizations.

(Sec. 509) Provides for the application of participant's compensation provisions to permanently and totally disabled participants when a defined contribution plan provides for the continuation of contributions on behalf of all such disabled participants for a fixed or determinable period.

(Sec. 510) Allows rural cooperative plans which include cash or deferred arrangements to make distributions to participants on the basis of hardship or after attainment of age 59 and one-half years.

(Sec. 511) Excludes non-pilots from consideration regarding the minimum coverage requirements of minimum participation standards provisions as they apply to a plan to provide contributions or benefits for air pilots.

(Sec. 512) Treats certain retirement incentive payments for tenured faculty as not providing for the deferral of compensation.

(Sec. 513) Makes the social security retirement age the uniform retirement age for purposes of discrimination testing.

(Sec. 514) Makes uniform the penalty provisions applicable to certain pension reporting requirements.

(Sec. 515) Establishes the National Commission on Private Pension Plans to report to the President and congressional leaders on a review of existing Federal incentives and programs that encourage and protect private retirement savings. Requires the report to make recommendations where appropriate for increasing the level and security of private retirement savings. Authorizes appropriations.