[COMMITTEE PRINT] SUMMARY OF DIFFERENCES BETWEEN THE SENATE VERSION AND THE HOUSE VERSION TO PROVIDE FOR PENSION REFORM PREPARED FOR THE USE OF THE HOUSE AND SENATE CONFEREES ON H. R. 2 PART FOUR LIMITATIONS ON CONTRIBUTIONS AND BENEFITS, EMPLOYEE CONTENTS Page Limitations on contributions and benefits... 1. Specific contribution limits on proprietorships, partnerships, or 2. Defined benefit limits for proprietorships, partnerships, and sub chapter S corporations__ 3. Excess contributions. 4. Premature distributions. 5. Withdrawing of voluntary contributions by owner-employees. 7. Overall limitation-coverage of provisions. 8. Overall limitation-defined benefit plans.. 9. Overall limitation-defined contribution plans. 10. Overall limitation-combinations of plans... 11. Overall limitation-section 403(b) annuities for teachers or employees of tax exempt organizations. 12. Overall limitation-additional benefits__ 13. Overall limitation-special rule where records not available.. 14. Overall limitation-grandfather clause.. 15. Maximum deduction limits-in general. 16. Aggregate deduction limits-profit-sharing and pension plans, etc... 17. Timing of contributions... 18. Effective dates____ Employee savings for retirement.. A. Individual retirement accounts. 1. Deductions for contributions to individual retirement 2. Individual retirement accounts-requirements. 3. Individual retirement annuities requirements. 4. Employer- and union-sponsored accounts.. 5. Taxation of distributions-in general. 6. Premature distributions, etc... 7. Taxation of individual retirement accounts, etc. 14 B. Salary reduction plans and other matters. 17 1. Salary reduction plans and cash and deferred profit- 17 2. Amounts designated as employee contributions.. 3. Integration with social security. Lump-sum distributions___. 1. Post-1973 portion-ordinary income-averaging; pre-1974 por- 2. Definition of lump-sum distribution. 3. Multiple lump-sum distributions in one taxable year.. 4. Aggregation of distributions over 6 years.. 5. Treatment of distributions of annuity contracts.. 6. Number of elections... 7. Distributions to trusts.. 8. Lump-sum distributions to the self-employed.. 9. Whether an employee is to be taxed as self-employed_ (III) IV Administration and enforcement.. 1. Tax Court declaratory judgment proceedings. 2. Administering office in Internal Revenue Service.. 3. Reporting and disclosure-Internal Revenue Serivce.. b. Sanctions for failure to file. c. Disclosure....... d. Effective dates. Miscellaneous: 1. Trustees of H. R. 10 plans.. 2. Custodial accounts. 3. Section 403(b) plan investments in mutual funds. 6. Deduction for severance payments required by foreign law. 4. Federal credit unions. 5. Certain Puerto Rican pension plans.. Page 23 23 24 24 24 25 25 26 26 26 26 26 27 27 27 27 LIMITATIONS ON CONTRIBUTIONS AND BENEFITS 1. Specific Contribution Limits on Proprietorships, Partnerships, or Subchapter S Corporations House bill' 2 (1) The bill increases the maximum deductible contribution on behalf of self-employed persons to the lesser of (a) $7,500 or (b) 15 percent of earned income. (Under present law, the limitation is the lesser of (a) $2,500 or (b) 10 percent of earned income.) The same change is made as to excludible contributions on behalf of subchapter S corporation shareholderemployees.3 (2) No more than the first $100,000 of earned income may be taken into account in applying the percentage limits, both as to self-employed persons and as to shareholder-employees. (3) Self-employed persons (but not shareholderemployees) are permitted to set aside up to $750 a year out of earned income, even though it exceeds the 15-percent limitation of point (1). Senate amendment.— (1) The Senate amendment is the same with respect to self-employed persons. As to shareholder-employees of subchapter S corporations, the Senate amendment repeals the limitations, instead of merely increasing them. (2) The Senate amendment is essentially the same as the House bill except that, consistent with point (1), it does not apply to subchapter S corporation shareholder-employees. (3) Essentially the same as the House bill. 2. Defined Benefit Limits for Proprietorships, Partnerships, and Subchapter S Corporations House bill.-(1) The bill authorizes Treasury regulations to allow self-employed persons and shareholder-employees to translate, in effect, the 15-percent$7,500 limitations on contributions into limitations on "Page numbers" outside parentheses are the numbers of the relevant pages in the print of H.R. 2 dated March 4, 1974. The first 353 pages of that print, in linetype, represent the bill as passed by the House of Representatives; the remaining pages of that print, in Italic type, constitute the Senate amendment. "Page numbers" inside parentheses are the numbers of the relevant pages in the comparative prints prepared by the staffs. 1 The House bill provisions relating to limitations on contributions and benefits are those of title II only. Title I does not deal with limitations on contributions and benefits. Sole proprietors and partners are "self-employed persons". A shareholder-employee of a subchapter S corporation is an employee of the corporation who owns more than 5 percent of the Corporation's outstanding stock. (1) |