To amend the Internal Revenue Code of 1986 to require that qualified cash or deferred arrangements allow certain long-term employees to participate.

I 116TH CONGRESS 1ST SESSION H. R. 1874 To amend the Internal Revenue Code of 1986 to require that qualified cash or deferred arrangements allow certain long-term employees to par- ticipate. IN THE HOUSE OF REPRESENTATIVES MARCH 26, 2019 Mrs. MURPHY introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to require that qualified cash or deferred arrangements allow cer- tain long-term employees to participate. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. QUALIFIED CASH OR DEFERRED ARRANGE- 3 MENTS MUST ALLOW LONG-TERM EMPLOY- 4 EES WORKING MORE THAN 500 BUT LESS 5 THAN 1,000 HOURS PER YEAR TO PARTICI- 6 PATE. 7 (a) PARTICIPATION REQUIREMENT.— 8 VerDate Sep 11 2014 00:46 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1874.IH H1874 kjohnson on DSK79L0C42 with BILLS 2 •HR 1874 IH (1) IN GENERAL.—Section 401(k)(2)(D) of the 1 Internal Revenue Code of 1986 is amended to read 2 as follows: 3 ‘‘(D) which does not require, as a condi- 4 tion of participation in the arrangement, that 5 an employee complete a period of service with 6 the employer (or employers) maintaining the 7 plan extending beyond the close of the earlier 8 of— 9 ‘‘(i) the period permitted under sec- 10 tion 410(a)(1) (determined without regard 11 to subparagraph (B)(i) thereof), or 12 ‘‘(ii) subject to the provisions of para- 13 graph (15), the first period of 3 consecu- 14 tive 12-month periods during each of which 15 the employee has at least 500 hours of 16 service.’’. 17 (2) SPECIAL RULES.—Section 401(k) of such 18 Code is amended by adding at the end the following 19 new paragraph: 20 ‘‘(15) SPECIAL RULES FOR PARTICIPATION RE- 21 QUIREMENT FOR LONG-TERM, PART-TIME WORK- 22 ERS.—For purposes of paragraph (2)(D)(ii)— 23 ‘‘(A) AGE REQUIREMENT MUST BE MET.— 24 Paragraph (2)(D)(ii) shall not apply to an em- 25 VerDate Sep 11 2014 00:46 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1874.IH H1874 kjohnson on DSK79L0C42 with BILLS 3 •HR 1874 IH ployee unless the employee has met the require- 1 ment of section 410(a)(1)(A)(i) by the close of 2 the last of the 12-month periods described in 3 such paragraph. 4 ‘‘(B) NONDISCRIMINATION AND TOP- 5 HEAVY RULES NOT TO APPLY.— 6 ‘‘(i) NONDISCRIMINATION RULES.—In 7 the case of employees who are eligible to 8 participate in the arrangement solely by 9 reason of paragraph (2)(D)(ii)— 10 ‘‘(I) notwithstanding subsection 11 (a)(4), an employer shall not be re- 12 quired to make nonelective or match- 13 ing contributions on behalf of such 14 employees even if such contributions 15 are made on behalf of other employees 16 eligible to participate in the arrange- 17 ment, and 18 ‘‘(II) an employer may elect to 19 exclude such employees from the ap- 20 plication of subsection (a)(4), para- 21 graph (3), subsection (m)(2), and sec- 22 tion 410(b). 23 ‘‘(ii) TOP-HEAVY RULES.—An em- 24 ployer may elect to exclude all employees 25 VerDate Sep 11 2014 00:46 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1874.IH H1874 kjohnson on DSK79L0C42 with BILLS 4 •HR 1874 IH who are eligible to participate in a plan 1 maintained by the employer solely by rea- 2 son of paragraph (2)(D)(ii) from the appli- 3 cation of the vesting and benefit require- 4 ments under subsections (b) and (c) of sec- 5 tion 416. 6 ‘‘(iii) VESTING.—For purposes of de- 7 termining whether an employee described 8 in clause (i) has a nonforfeitable right to 9 employer contributions (other than con- 10 tributions described in paragraph 11 (3)(D)(i)) under the arrangement, each 12 12-month period for which the employee 13 has at least 500 hours of service shall be 14 treated as a year of service. 15 ‘‘(iv) EMPLOYEES WHO BECOME 16 FULL-TIME EMPLOYEES.—This subpara- 17 graph shall cease to apply to any employee 18 as of the first plan year beginning after 19 the plan year in which the employee meets 20 the requirements of section 21 410(a)(1)(A)(ii) without regard to para- 22 graph (2)(D)(ii). 23 ‘‘(C) EXCEPTION FOR EMPLOYEES UNDER 24 COLLECTIVELY BARGAINED PLANS, ETC.—Para- 25 VerDate Sep 11 2014 00:46 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1874.IH H1874 kjohnson on DSK79L0C42 with BILLS 5 •HR 1874 IH graph (2)(D)(ii) shall not apply to employees 1 described in section 410(b)(3). 2 ‘‘(D) SPECIAL RULES.— 3 ‘‘(i) TIME OF PARTICIPATION.—The 4 rules of section 410(a)(4) shall apply to an 5 employee eligible to participate in an ar- 6 rangement solely by reason of paragraph 7 (2)(D)(ii). 8 ‘‘(ii) 12-MONTH PERIODS.—12-month 9 periods shall be determined in the same 10 manner as under the last sentence of sec- 11 tion 410(a)(3)(A).’’. 12 (b) EFFECTIVE DATE.—The amendments made by 13 this section shall apply to plan years beginning after De- 14 cember 31, 2020, except that, for purposes of section 15 401(k)(2)(D)(ii) of the Internal Revenue Code of 1986 (as 16 added by such amendments), 12-month periods beginning 17 before January 1, 2021, shall not be taken into account. 18 Æ VerDate Sep 11 2014 00:46 Apr 06, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H1874.IH H1874 kjohnson on DSK79L0C42 with BILLS