The amendment made by subsection (f)(7) shall apply to years beginning after December 31, 1978.

(2) RETROACTIVE APPLICATION OF AMENDMENT MADE BY SUBSECTION (d).—In determining the regular tax deduction under section 6 of the Internal Revenue Code of 1954 for any taxable year beginning before January 1, 1979, the amount of the credit allowable under section 38 shall be determined without regard to section 46(a)(2)(B) of such Code (as in effect before the enactment of the Energy Tax Act of 1978).

SEC. 142. CERTAIN LUMP SUM DISTRIBUTIONS EXCLUDED FROM GROSS ESTATE WHERE RECIPIENT ELECTS NOT TO APPLY 10-YEAR AVERAGING.

(a) IN GENERAL.-Subsection (c) of section 2039 (relating to exemption of annuities under certain trusts and plans) is amended by striking out "(other than a lump sum distribution described in section 402(e)(4), determined without regard to the next to the last sentence of section 402(e)(4)(A))" and inserting in lieu thereof “(other than an amount described in subsection (f))"

(b) DEFINITIONS.-Section 2039 is amended by adding at the end thereof the following new subsection:

"(1) IN GENERAL.-An amount is described in this subsection if it is a lump sum distribution described in section 402(e)(4) (determined without regard to the next to the last sentence of section 402(e)(4)(A)).

"(2) EXCEPTION WHERE RECIPIENT ELECTS NOT TO TAKE 10-YEAR AVERAGING.-A lump sum distribution described in paragraph (1) shall be treated as not described in this subsection if the recipient elects irrevocably (at such time and in such manner as the Secretary may by regulations prescribe) to treat the distribution as taxable under section 402(a) without the application of paragraph (2) thereof."

(c) EFFECTIVE DATE.-The amendments made by this section shall apply with respect to the estates of decedents dying after December 31, 1978.

SEC. 143. QUALIFIED PLANS REQUIRED TO PASS THROUGH VOTING RIGHTS ON EMPLOYER SECURITIES.

(a) IN GENERAL.-Subsection (a) of section 401 (relating to qualified pension, profit-sharing, and stock bonus plans) is amended by inserting after paragraph (21) the following new paragraph:

"(22) If a defined contributions plan

"(A) is established by an employer whose stock is not publicly traded, and

"(B) after acquiring securities of the employer, more than 10 percent of the total assets of the plan as securities of the employer,

any trust forming part of said plan shall not constitute a qualified trust under this section unless the plan meets the requirements of subsection (e) of section 409A."

(b) EFFECTIVE DATE.-The amendment made by subsection (a) shall apply to acquisitions of securities after December 31, 1979.

Subtitle E-Retirement Plans

SEC. 152. SIMPLIFIED EMPLOYEE PENSIONS.

(a) INCREASE IN MAXIMUM LIMITATION UNDER SECTION 408 TO $7,500.-Section 408 (relating to individual retirement account) is amended by redesignating subsection (j) as subsection (m) and by inserting after subsection (i) the following new subsection:

“(j) INCREASE IN Maximum LIMITATIONS FOR SIMPLIFIED EMPLOYEE PENSIONS.-In the case of a simplified employee pension, this section shall be applied by substituting '$7,500' for $1,500' in the following provisions:

"(1) paragraph (1) of subsection (a),

"(2) paragraph (2) of subsection (b), and

"(3) paragraph (5) of subsection (b).”

(b) SIMPLIFIED EMPLOYEE PENSION DEFINED.-Section 408 is amended by inserting after subsection (j) the following new subsection:

"(k) SIMPLIFIED EMPLOYEE PENSION DEFINED.—

"(1) IN GENERAL.-For purposes of this title, the term 'simplified employee pension' means an individual retirement account or individual retirement annuity with respect to which the requirements of paragraphs (2), (3), (4), and (5) of this subsection

are met.

"(2) PARTICIPATION REQUIREMENTS.-This paragraph is satisfied with respect to a simplified employee pension for a calendar year only if for such year the employer contributes to the simplified employee pension of each employee who

"(A) has attained age 25, and

"(B) has performed service for the employer during at least 3 of the immediately preceding 5 calendar years. "(3) CONTRIBUTIONS MAY NOT DISCRIMINATE IN FAVOR OF THE HIGHLY COMPENSATED, ETC.—

"(A) IN GENERAL.-The requirements of this paragraph are met with respect to a simplified employee pension for a calendar year if for such year the contributions made by the employer to simplified employee pensions for his employees do not discriminate in favor of any employee who is"(i) an officer,

"(ii) a shareholder,

"(iii) a self-employed individual, or

"(iv) highly compensated.

"(B) SPECIAL RULES.-For purposes of subparagraph (A)— "(i) there shall be excluded from consideration employees described in subparagraph (A) or (C) of section 410(b)(2), and

"(ii) an individual shall be considered a shareholder if he owns (with the application of section 318) more than 10 percent of the value of the stock of the employer. "(C) CONTRIBUTIONS MUST BEAR A UNIFORM RELATIONSHIP TO TOTAL COMPENSATION.-For purposes of subparagraph (A), employer contributions to simplified employee pensions shall be considered discriminatory unless contributions thereto bear a uniform relationship to the total compensation (not in excess of the first $100,000) of each employee maintaining a simplified employee pension.

"(D) TREATMENT OF CERTAIN CONTRIBUTIONS AND TAXES.— Except as provided in this subparagraph, employer contributions do not meet the requirements of this paragraph unless such contributions meet the requirements of this paragraph without taking into account contributions or benefits under chapter 2 (relating to tax on self-employment income), chapter 21 (relating to Federal Insurance Contribution Act), title II of the Social Security Act, or any other Federal or State law. Taxes paid under section 3111 (relating to tax on employers) with respect to an employee may, for purposes of this paragraph, be taken into account as a contribution by the employer to an employee's simplified employee pension. If contributions are made to the simplified employee pension of an owner-employee, the preceding sentence shall not apply unless taxes paid by all such owner-employees under chapter 2, and the taxes which would be payable under chapter 2 by such owner-employees but for paragraphs (4) and (5) of section 1402(c), are taken into account as contributions by the employer on behalf of such owner-employees. "(4) WITHDRAWALS MUST BE PERMITTED.-A simplified employee pension meets the requirements of this paragraph only if

"(A) employer contributions thereto are not conditioned on the retention in such pension of any portion of the amount contributed, and

"(B) there is no prohibition imposed by the employer on withdrawals from the simplified employee pension.

“(5) CONTRIBUTIONS MUST BE MADE UNDER WRITTEN ALLOCATION FORMULA.-The requirements of this paragraph are met with respect to a simplified employee pension only if employer contributions to such pension are determined under a definite written allocation formula which specifies

"(A) the requirements which an employee must satisfy to share in an allocation, and

"(B) the manner in which the amount allocated is computed.

"(6) DEFINITIONS.-For purposes of this subsection and subsection (1)—

"(A) EMPLOYEE, EMPLOYER, OR OWNER-EMPLOYEE.-The terms 'employee', 'employer', and 'owner-employee' shall have the respective meanings given such terms by section 401(c).

"(B) COMPENSATION.-The term 'compensation' means, in the case of an employee within the meaning of section 401(c)(1), earned income within the meaning of section 401(c)(2).

"(1) SIMPLIFIED EMPLOYER REPORTS.-An employer who makes a contribution on behalf of an employee to a simplified employee pension shall provide such simplified reports with respect to such contributions as the Secretary may require by regulations. The reports required by this subsection shall be filed at such time and in such manner, and information with respect to such contributions shall be furnished to the employee at such time and in such manner, as may be required by regulations."

(c) MAXIMUM DEDUCTION UNDER SECTION 219.-Subsection (b) of section 219 (relating to maximum deduction in the case of retirement

savings) is amended by adding at the end thereof the following new paragraph:

"(7) SIMPLIFIED EMPLOYEE PENSIONS.-In the case of an employer contribution on behalf of the employee to a simplified employee pension, paragraph (2) shall not apply with respect to the employer contribution and the limitation under paragraph (1) shall be the lesser of—

"(A) 15 percent of compensation includible in the employee's gross income for the taxable year (determined without regard to the employer contribution to the simplified employee pension), or

"(B) the sum of—

"(i) the amount contributed by the employer to the simplified employee pension and included in gross income (but not in excess of $7,500), and

"(ii) $1,500, reduced (but not below zero) by the amount described in clause (i).

In the case of an employee who is an officer, shareholder, or owner-employee described in section 408(k)(3), the amount referred to in subparagraph (B) shall be reduced by the amount of tax taken into account with respect to such individual under subparagraph (D) of section 408(k)(3).”

(d) EMPLOYEES OF ENTERPRISES UNDER COMMON CONTROL.-Subsections (b) and (c) of section 414 are each amended by inserting “408(k)," after "401,".

(e) SIMPLIFIED EMPLOYEE PENSION MAY BE TAKEN INTO ACCOUNT IN DETERMINING WHETHER EMPLOYER MEETS CERTAIN OTHER NONDISCRIMINATION PROVISIONS.-Paragraph (5) of section 401(a) is amended by adding at the end thereof the following new sentence: "For purposes of determining whether one or more plans of an employer satisfy the requirements of paragraph (4) and of section 410(b), an employer may take into account all simplified employee pensions to which only the employer contributes."

(f) EMPLOYER DEDUCTIONS.-Section 404 (relating to deduction for contributions of an employer) is amended by adding the following new subsection at the end thereof:

"(h) SPECIAL RULES FOR SIMPLIFIED EMPLOYEE PENSIONS.

"(1) IN GENERAL.-Employer contributions to a simplified employee pension shall be treated as if they are made to a plan subject to the requirements of this section. Employer contributions to a simplified employee pension are subject to the following limitations:

"(A) Contributions made for a calendar year are deductible for the taxable year with which or within which the calendar year ends.

"(B) Contributions made within 32 months after the close of a calendar year are treated as if they were made on the last day of such calendar year if they are made on account of such calendar year.

"(C) The amount deductible in a taxable year for a simplified employee pension shall not exceed 15 percent of the compensation paid to the employees during the calendar year ending with or within the taxable year. The excess of the amount contributed over the amount deductible for a taxable year shall be deductible in the succeeding taxable years in order of time, subject to the 15 percent limit of the preceding sentence.

"(2) EFFECT ON STOCK BONUS AND PROFIT-SHARING TRUST.-For any taxable year for which the employer has a deduction under subparagraph (1), the otherwise applicable limitations in subsection (a)(3)(A) shall be reduced by the amount of the allowable deductions under subparagraph (1) with respect to participants in the stock bonus or profit-sharing trust.

"(3) EFFECT ON LIMIT ON DEDUCTIONS.-For any taxable year for which the employer has a deduction under subparagraph (1), the otherwise applicable 25 percent limitations in subsection (a)(7) shall be reduced by the amount of the allowable deductions under subparagraph (1) with respect to participants in the stock bonus or profit-sharing trust.

"(4) EFFECT ON SELF-EMPLOYED INDIVIDUALS.-The limitations described in paragraphs (1), (2)(A), and (4) of subsection (e) for any taxable year shall be reduced by the amount of the allowable deductions under subparagraph (1) with respect to an employee within the meaning of section 401(c)(1)."

(g) AMENDMENTS TO SECTION 415.-Section 415 (relating to limitations on benefits and contributions under certain plans) is amended— (1) by redesignating subparagraphs (E) and (F) of subsection (a)(2) as subparagraphs (F) and (G) and by inserting after subparagraph (D) the following new subparagraph:

"(E) a simplified employee pension,'

(2) by inserting "408(k)," after "408(b)," in the material immediately following subparagraph (G) of section 415(b)(2);

(3) by inserting "any simplified employee pension," after "section 408(b)," in section 415(e)(5); and

(4) by striking out "or" in section 415(k)(1)(F), by redesignating subparagraph (G) of section 415(k)(1) as subparagraph (H), and by inserting after section 415(k)(1)(F) the following new subparagraph:

"(G) a simplified employee pension, or".

(h) EFFECTIVE DATE.-The amendments made by this section shall apply to taxable years beginning after December 31, 1978.

SEC. 153. DEFINED BENEFIT PLAN LIMITS.

(a) IN GENERAL.-Subsection (b) of section 415 (relating to limitation for defined benefit plans) is amended by adding at the end thereof the following new paragraph:

"(7) BENEFITS UNDER CERTAIN COLLECTIVELY BARGAINED PLANS.-For a year, the limitation referred to in paragraph (1)(B) shall not apply to benefits with respect to a participant under a defined benefit plan

"(A) which is maintained for such year pursuant to a collective bargaining agreement between employee representatives and one or more employers,

"(B) which, at all times during such year, has at least 100 participants,

"(C) benefits under which are determined by multiplying a specified amount (which is the same amount for each participant) by the number of the participant's years of service,

"(D) which provides that an employee who has at least 4 years of service has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions, and

"(E) which requires, as a condition of participation in the plan, that an employee complete a period of not more than