Pension Coverage and Portability Act

TABLE OF CONTENTS:

Title I: Expanding Coverage for Small Business

Title II: Increasing Pension Access and Fairness for Women

Title III: Increasing Portability of Pension Plans

Title IV: Strengthening Pension Security and Enforcement

Title V: Encouraging Retirement Education

Title VI: Reducing Red Tape

Title VII: Plan Amendments

Pension Coverage and Portability Act - Title I: Expanding Coverage for Small Business - Amends the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of 1974 (ERISA) to revise requirements relating to pension plan loans for Subchapter S owners, partners, and sole proprietors.

(Sec. 102) Allows an employer to establish payroll deductions for contributions to employee individual retirement plans without incurring ERISA liability.

(Sec. 103) Amends the IRC to allow an eligible employer to establish and maintain a SAFE annuity (an individual retirement annuity) or a SAFE trust (a trust forming part of a defined benefit plan), both to be funded by the employer. Makes the employer contributions deductible without limitation and otherwise provides for the treatment of contributions and distributions. Mandates a penalty for early withdrawals. Requires simplified employer reports for SAFE annuities and simplified actuarial reports for SAFE trusts.

Amends the ERISA to exempt SAFE trusts from coverage requirements and SAFE annuities from certain employer reporting requirements.

(Sec. 104) Amends the IRC to modify definitions applicable to special rules for top-heavy plans. Requires consideration of employer matching contributions in determining whether a defined contribution plan meets minimum contribution requirements. Exempts frozen plans from a minimum benefit requirement. Provides an alternative test for top-heavy plans.

(Sec. 105) Allows employers to elect salary reduction only arrangements under IRC requirements for simple plans.

(Sec. 106) Establishes a small employer pension plan credit.

(Sec. 107) Increases (from $6,000 to $8,000) limits for deferrals to simple plans.

(Sec. 108) Amends ERISA to provide for a phase-in of an additional premium for new plans to pay to the Pension Benefit Guaranty Corporation (PBGC).

(Sec. 109) Provides for a reduced PBGC premium for new plans of small employers.

(Sec. 110) Eliminates user fee requirements for requests to the Internal Revenue Service (IRS) concerning the status of pension plans.

(Sec. 111) Declares the $150,000 compensation limit inapplicable to simple 401(k) arrangements.

(Sec. 112) Provides that elective deferrals shall not be taken into account for purposes of limits on certain plan contributions.

(Sec. 113) Repeals specified coordination requirements under the IRC for deferred compensation plans of State and local governments and tax-exempt organizations.

Title II: Increasing Pension Access and Fairness for Women - Sets forth requirements relating to equitable treatment for contributions of employees to defined contribution plans. Requires that certain contributions by church plans are not to be treated as exceeding a specified limit. Sets forth special rules for annuity contracts and simplified pensions.

(Sec. 202) Provides for faster vesting of certain employer matching contributions under IRC and ERISA.

(Sec. 203) Amends Federal civil service law to revise requirements for deferred annuities for surviving spouses of Federal employees under both the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).

(Sec. 204) Revises IRC requirements relating to tax treatment of division of section 457 plan benefits upon divorce.

(Sec. 205) Amends the IRC and ERISA to provide for the spouse's right to know specified distribution information relating to survivor annuities.

(Sec. 206) Revises minimum distribution rules under IRC. Revises requirements for actuarial adjustment of benefit under a defined benefit plan.

Directs the Secretary of the Treasury to: (1) simplify and finalize the regulations relating to minimum distribution requirements; and (2) modify such regulations to reflect increases in life expectancy, and revise required distribution methods so that, under reasonable assumptions, the amount of the required minimum distribution does not decrease over a participant's life expectancy. Provides that, during the first year that such revised regulations are in effect, required distributions for future years may be redetermined, with the opportunity to choose a new designated beneficiary and to elect a new method of calculating life expectancy.

Excludes specified amounts from minimum distribution requirements. Repeals a rule relating to distributions begun before death occurs.

(Sec. 207) Directs the Secretary to revise regulations relating to safe harbor relief for hardship withdrawals from cash or deferred arrangements.

Title III: Increasing Portability of Pension Plans - Permits rollovers from and to various types of plans under the IRC.

(Sec. 302) Permits individual retirement plan (IRA) rollovers into workplace retirement plans only if certain conditions are met.

(Sec. 303) Permits rollover of after-tax contributions in an exempt trust under specified conditions. Sets forth a hardship exception to the 60-day rule.

(Sec. 304) Revises restrictions on distributions from defined contribution plans, including the same desk exception. Repeals business sale requirements.

(Sec. 305) Provides that a transferee defined contribution plan shall not be treated as having failed to meet certain requirements because it does not provide for some or all of the distribution forms previously available under a transferor defined contribution plan.

(Sec. 306) Authorizes trustee-to-trustee transfers to purchase permissive service credit with respect to governmental defined benefit plans.

(Sec. 307) Authorizes employers to disregard rollovers for purposes of employee cash-out amounts under the IRC and ERISA.

Title IV: Strengthening Pension Security and Enforcement - Amends the IRC and ERISA to revise the percentage of current liability funding limit. Revises maximum contribution deduction rules and applies them to all defined benefit plan under the IRC.

(Sec. 402) Increases dollar limits for employer-sponsored retirement plans.

(Sec. 403) Makes certain compensation limitations for defined benefit plans inapplicable to governmental and multiemployer plans. Prohibits combining or aggregating a multiemployer plan with any other plan maintained by the employer for the purpose of applying such limitations.

(Sec. 404) Amends ERISA to direct the PBGC to prescribe rules relating to missing participants for multiemployer plans covered by the PBGC that terminate.

(Sec. 405) Amends ERISA to make discretionary the imposition and amount of civil penalties for breach of fiduciary responsibility. Revises requirements for the applicable recovery amount and related rules.

(Sec. 406) Amends the IRC to allow an employer, in determining the amount of nondeductible contributions for any taxable year, to elect not to take into account any contributions to a defined benefit plan except to the extent that they exceed the full-funding limitation.

(Sec. 407) Amends the Taxpayer Relief Act of 1997 to protect investment of employee contributions to 401(k) plans by providing that specified requirements apply to elective deferrals for plan years beginning after December 31, 1998.

(Sec. 408) Bars the Secretaries of Labor and the Treasury from litigating any claim against a person under specified ERISA provisions if: (1) an action against that person with respect to the same plan is resolved by a court-approved settlement; (2) such proposed settlement is served upon the Secretaries at least 90 days before entry of final judgment approving the settlement; and (3) such claim was or could have been brought in such action.

Title V: Encouraging Retirement Education - Requires that pension benefit statements be furnished annually (once every three years for defined benefit plans) or on request. Allows written or electronic statements. Requires multiemployer plans to furnish a statement (written or electronic) on request.

(Sec. 502) Directs the Administrator of the Small Business Administration to prepare a plan to: (1) increase awareness of retirement benefits;(2) update small business owners concerning such benefits; and (3) post information on the Internet on types of retirement benefit plans and other options.

(Sec. 503) Treats the provision of certain retirement planning services by an employer to an employee as a de minimis fringe benefit to the extent it is not treated as a working condition fringe.

Prohibits including an amount in an employee's gross income solely because the employee may choose between any retirement planning fringe and compensation otherwise includible in gross income, providing such choices are available in a way that does not discriminate in favor of highly compensated employees.

Title VI: Reducing Red Tape - Amends the IRC and ERISA to revise requirements relating to timing of plan valuations.

(Sec. 602) Amends ERISA rules for substantial owners relating to plan terminations to revise: (1) the phase-in of the guarantee; and (2) the allocation of assets.

(Sec. 603) Amends IRC requirements for applicable dividends to allow dividends of employee stock ownership plans (ESOPs) to be reinvested without loss of dividend deduction.

(Sec. 604) Directs the Secretary of the Treasury to modify the regulations regarding the exclusion allowance to render void the requirement that contributions to a defined benefit pension plan be treated as previously excluded amounts.

(Sec. 605) Directs the Secretary to provide by regulation that a plan shall be deemed to satisfy specified requirements of the IRC if it satisfies a certain facts and circumstances test, under specified conditions.

(Sec. 606) Grants the Secretary discretion in applying a specified coverage test to a plan.

(Sec. 607) Makes inapplicable to certain mirror plans specified IRC requirements relating to deferred compensation plans of State and local governments and tax-exempt organizations.

(Sec. 608) Revises the notice and consent period regarding distributions. Directs the Secretary to modify certain regulations under the IRC to provide that the description of a participant's right, if any, to defer receipt of a distribution shall also describe the consequences of failing to defer such receipt.

(Sec. 609) Sets forth conforming amendments relating to election to receive taxable cash compensation in lieu of nontaxable transportation fringe benefits.

(Sec. 610) Repeals a transition rule relating to certain highly compensated employees under the Tax Reform Act of 1986.

(Sec. 611) Extends to international organizations the moratorium on application of certain nondiscrimination rules applicable to State and local plans.

(Sec. 612) Revises ERISA requirements for annual report dissemination.

(Sec. 613) Directs the Secretary to modify certain regulations with respect to certain plan participation by employees of tax-exempt entities under the IRC.

(Sec. 614) Repeals a multiple use test. Directs the Secretary prescribe regulations permitting appropriate aggregation of plans and contributions.

Title VII: Plan Amendments - Prescribes requirements for plan amendments or annuity contract amendments under the IRC and ERISA.