To amend the Internal Revenue Code of 1986 to improve the retirement security of American families.

November 19, 2004

Mr. ANDREWS introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to improve the retirement security of American families.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Retirement Enhancement Revenue Act of 2004'.

(b) Table of Contents- The table of contents is as follows:

Sec. 1. Short title and table of contents.

TITLE I--PUBLIC EMPLOYEE PENSION PLANS

Sec. 101. New qualification requirements for public employee pension plans.

TITLE II--PENSION IMPROVEMENTS

Sec. 201. Automatic enrollment of all employees in 401(k) plans.

Sec. 202. Diversification requirements for defined contribution plans that hold employer securities.

Sec. 203. Improvements in simplified employee pensions.

Sec. 204. Pension integration rules.

Sec. 205. Increase to age 75 for beginning mandatory distributions.

Sec. 206. Restrictions on exclusion of unionized employees from participation in 401(k) plans.

Sec. 207. Removal of $5,000 limit on plans subject to automatic rollover upon mandatory distribution.

TITLE III--TAX CREDITS TO PROMOTE PENSION COVERAGE

Sec. 301. Savers credit made refundable and permanent.

Sec. 302. Credit for qualified pension plan contributions of small employers.

Sec. 303. Notice.

TITLE IV--IMPROVED PENSION PROTECTIONS FOR WOMEN

Sec. 401. Modifications of joint and survivor annuity requirements.

Sec. 402. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee.

Sec. 403. Extension of tier II railroad retirement benefits to surviving former spouses pursuant to divorce agreements.

TITLE V--DEFINED BENEFIT PLANS WHICH INCLUDE QUALIFIED CASH OR DEFERRED ARRANGEMENTS

Sec. 501. Defined benefit plan with deferred compensation arrangement in a single plan.

Sec. 502. Defined benefit accruals satisfy 401(k) safe harbor.

Sec. 503. Additional accruals under defined benefit plan provided as matching contributions.

Sec. 504. Limitation on deductions where combination of defined contribution plan and defined benefit plan.

Sec. 505. Conforming amendments to the Employee Retirement Income Security Act of 1974.

TITLE VI--ADDITIONAL AMENDMENTS

Sec. 601. Exemption from prohibited transaction rules for certain aborted emergent transactions.

Sec. 602. Loans from retirement plans for health insurance and job training expenses.

Sec. 603. Treatment of unclaimed benefits.

Sec. 604. Income averaging of corrected civil service annuity benefit payments.

Sec. 605. Prohibited transaction exemption for the provision of investment advice.

Sec. 606. Increase in deductible contributions to single-employer defined benefit plan upon payment of increased premium to the Pension Benefit Guaranty Corporation.

Sec. 607. Exemption from prohibited transaction rules for certain aborted emergent transactions.

Sec. 608. Pension benefit information.

Sec. 609. Permanency of transition rule in Retirement Protection Act of 1994.

TITLE VII--GENERAL PROVISIONS

Sec. 701. General effective date.

Sec. 702. Plan amendments.

TITLE I--PUBLIC EMPLOYEE PENSION PLANS

SEC. 101. NEW QUALIFICATION REQUIREMENTS FOR PUBLIC EMPLOYEE PENSION PLANS.

(a) In General- Subsection (a) of section 401 of the Internal Revenue Code of 1986 (relating to requirements for qualification) is amended by inserting after paragraph (34) the following new paragraph:

`(35) PUBLIC EMPLOYEE PENSION PLANS- A trust forming a part of a public employee pension plan (as defined in section 420C(a)(9)) shall not constitute a qualified trust under this section unless the requirements of subpart F of this part are met in connection with such plan.

(b) Requirements- Part I of subchapter D of chapter 1 of such Code (relating to pension, profit-sharing, stock bonus plans, etc.) is amended by inserting after subpart E the following new subpart:

`Subpart F--Public Employee Pension Plans

`Sec. 420A. Reporting and disclosure requirements.

`Sec. 420B. Review by qualified review boards of changes in employer contributions.

`Sec. 420C. Definitions and coverage.

`SEC. 420A. REPORTING AND DISCLOSURE REQUIREMENTS.

`(a) In General- A public employee pension plan does not meet the requirements of section 401(a)(35) unless the terms of the plan include the requirements of this section.

`(b) Required Disclosures- The plan shall provide that, within 210 days after the close of each plan year, the administrator of the plan shall furnish to each participant, and to each beneficiary receiving benefits under the plan--

`(1) a statement of the assets and liabilities of the plan aggregated by categories and valued at their current value, and the same data displayed in comparative form for the end of the previous plan year,

`(2) a statement of receipts and disbursements during the preceding 12-month period aggregated by general sources and applications,

`(3) a report containing--

`(A) a description of all investments and assets of the plan, including their value,

`(B) the names and positions of all of the trustees of the plan, and the time remaining before the expiration of their term,

`(C) a description of the method of trustee selection,

`(D) a description of any changes in investment policy of the plan during the fiscal year,

`(E) an evaluation of the long-term solvency of the plan, including the number of participants and beneficiaries and a summary of their benefits, and a projection of the amount of benefits expected to be paid for the fifth, tenth, and fifteenth plan year following the date of the publication of the report, and

`(F) the percentage which the current value of the assets of the plan is of the current liability under the plan, and

`(4) any other material as is necessary to fairly summarize the latest annual report.

Such information shall be written and calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan.

`(c) Availability of Plan Documents for Examination- The plan shall provide that the administrator shall make copies of the plan description and the latest annual report and the bargaining agreement, trust agreement, contract, or other instruments under which the plan was established or is operated available for examination by any plan participant or beneficiary in the principal office of the administrator and in such other places as may be necessary to make available all pertinent information to all participants (including such places as the Secretary may prescribe by regulations).

`(d) Availability of Information Upon Request- The plan shall provide that the administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence.

`SEC. 420B. REVIEW BY QUALIFIED REVIEW BOARDS OF CHANGES IN EMPLOYER CONTRIBUTIONS.

`(a) In General- A public employee pension plan does not meet the requirements of section 401(a)(35) unless, under the plan, changes in employer contributions are subject to review by a qualified review board established for the plan as provided in this section. For purposes of this section, the term `qualified review board' means a board--

`(1) whose membership is determined under the law of the principal State in accordance with subsection (b), and

`(2) whose powers are determined under the law of the principal State in accordance with subsection (c).

`(b) Membership-

`(1) IN GENERAL- The membership of a qualified review board established for a plan shall consist of 3 members selected from among individuals who, by means of their education and experience, have demonstrated expertise in the area of pension fund management, as follows:

`(A) one member is appointed by the Governor of the State,

`(B) one member is selected by the participants in the plan, by means of an election held in such form and manner as shall be prescribed in regulations of the Secretary, and

`(C) one member is selected jointly by the Governor and by a representative of participants in the plan (from a certified list of pension experts established in accordance with paragraph (2)).

Each member of the board shall have 1 vote. Members of the board shall serve for such equivalent terms as shall be prescribed under the law of the principal State.

`(2) CERTIFIED LIST OF EXPERTS- The Governor of the State shall, for purposes of paragraph (1)(C), establish and maintain with respect to each public employee pension plan (for which such State is the principal State) a certified list of pension experts meeting the requirements for membership on the qualified review board. Individuals may be included on such list only by agreement between the Governor of the State and a representative elected by participants in the plan, entered into by means of collective bargaining in such form and manner as shall be prescribed in regulations of the Secretary.

`(c) Powers- The board shall be treated as a qualified review board for purposes of this section with respect to any public employee pension plan (for which such State is the principal State) only if the powers of such board under the law of the principal State include review by the board, for approval or disapproval by the board, of any change in the terms of such plan, as a necessary prerequisite for such change to take effect, if--

`(1) such change would have the effect of changing levels of employer contributions to the plan, and

`(2) such review is requested, in such form and manner as shall be prescribed in regulations of the Secretary, by--

`(A) at least one-third of the total number of trustees of any trust fund forming a part of the plan, or

`(B) the head of any employee organization representing at least 20 percent of the total number of active participants in the plan.

The board may be treated as a qualified review board for purposes of this section only if, under the law of the principal State, any such change submitted to such review by the board may take effect only upon approval of the change by the board.

`SEC. 420C. DEFINITIONS AND COVERAGE.

`(a) Definitions- For purposes of this subpart--

`(1) ADMINISTRATOR- The term `administrator' means--

`(A) the board of trustees, retirement board, or similar person with administrative responsibilities in connection with a plan, or any other person specifically so designated in connection with any requirement of this subpart by the terms of the instrument or instruments under which the plan is operated, including but not limited to the law of any State or of any political subdivision of any State, or

`(B) in any case in which there is no person described in subparagraph (A) in connection with the plan, the plan sponsor.

`(2) BENEFICIARY- The term `beneficiary' means a person designated by a participant, or by the terms of a public employee pension plan, who is or may become entitled to a benefit thereunder.

`(3) CURRENT LIABILITY- The term `current liability' has the meaning provided in section 302(d)(7) of the Employee Retirement Income Security Act of 1974.

`(4) EMPLOYEE- The term `employee' means any individual employed by an employer, employer representative, or other person required to make employer contributions under the plan.

`(5) EMPLOYEE ORGANIZATION- The term `employee organization' means any labor union or any organization of any kind, or any agency or employee representation committee, association, group, or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers or employer representatives concerning a public employee pension plan or other matters incidental to employment relationships; or any employees' beneficiary association organized for the purpose, in whole or in part, of establishing such a plan.

`(6) EMPLOYER- The term `employer' means--

`(A) the government of any State or of any political subdivision of a State,

`(B) any agency or instrumentality of a government referred to in subparagraph (A), or

`(C) any agency or instrumentality of two or more governments referred to in subparagraph (A).

`(7) EMPLOYER CONTRIBUTION- The term `employer contribution' means any contribution to a public employee pension plan other than a contribution made by a participant in the plan.

`(8) EMPLOYER REPRESENTATIVE- The term `employer representative' means--

`(A) any group or association consisting, in whole or in part, of employers acting, in connection with a public employee pension plan, for an employer, or

`(B) any person acting, in connection with a public employee pension plan, indirectly in the interest of an employer or of a group or association described in subparagraph (A).

`(9) PUBLIC EMPLOYEE PENSION PLAN- The terms `public employee pension plan' and `plan' mean any plan, fund, or program which was heretofore or is hereafter established or maintained, in whole or in part, by an employer, an employer representative, or an employee organization, or by a combination thereof, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program--

`(A) provides retirement income to employees, or

`(B) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond,

regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan, or the method of distributing benefits from the plan.

`(10) PRINCIPAL STATE- The term `principal State' means, for any plan year with respect to a public employee pension plan, the State in which, as of the beginning of such plan year, the largest percentage of the participants of the plan employed in any single State is employed.

`(11) GOVERNOR- The term `Governor' means, in connection with a public employee pension plan, the Governor (or equivalent official) of the principal State.

`(12) PARTICIPANT- The term `participant' means any individual who is or may become eligible to receive a benefit of any type from a public employee pension plan or whose beneficiaries may be eligible to receive any such benefit.

`(13) PERSON- The term `person' means a State, a political subdivision of a State, any agency or instrumentality of a State or a political subdivision of a State, an individual, a partnership, a joint venture, a corporation, a mutual company, a joint-stock company, a trust, an estate, an unincorporated organization, an association, or an employee organization.

`(14) PLAN SPONSOR- The term `plan sponsor' means--

`(A) in the case of a plan established or maintained solely for employees of a single employer, such employer,

`(B) in the case of a plan established or maintained by an employee organization, the employee organization, or

`(C) in the case of a plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.

`(15) PLAN YEAR- The term `plan year' means, with respect to a plan, the calendar, policy, or fiscal year on which the records of the plan are kept.

`(16) STATE- The term `State' means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, and Guam.

`(b) Coverage-

`(1) IN GENERAL- Except as provided in paragraph (2), this subpart shall apply to any public employee pension plan.

`(2) EXCEPTIONS FROM COVERAGE- The provisions of this subpart shall not apply to--

`(A) any employee benefit plan described in section 4(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1003(a)), which is not exempt under section 4(b)(1) of such Act (29 U.S.C. 1003(b)(1)),

`(B) any plan which is unfunded and is maintained by an employer or employer representative primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees,

`(C) any arrangement which would be a severance pay arrangement, as defined in regulations of the Secretary of Labor under section 3(2)(B)(i) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)(B)(i)), if the employer were an employer within the meaning of section 3(5) of such Act (29 U.S.C. 1002(5)),

`(D) any agreement to the extent it is a coverage agreement entered into pursuant to section 218 of the Social Security Act (42 U.S.C. 418),