VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT RETENTION PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES AND OTHER ENTITIES.

SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT RETENTION PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES AND OTHER ENTITIES.(a) Voluntary Early Retirement Incentive Plans.—(1) Treatment as plan providing severance pay.—Section 457(e)(11) of the Internal Revenue Code of 1986 (relating to certain plans excluded) is amended by adding at the end the following new subparagraph:“(D) Certain voluntary early retirement incentive plans.—“(i) In general.—If an applicable voluntary early retirement incentive plan—“(I) makes payments or supplements as an early retirement benefit, a retirement-type subsidy, or a benefit described in the last sentence of section 411(a)(9), and“(II) such payments or supplements are made in coordination with a defined benefit plan which is described in section 401(a) and includes a trust exempt from tax under section 501(a) and which is maintained by an eligible employer described in paragraph (1)(A) or by an education association described in clause (ii)(II),such applicable plan shall be treated for purposes of subparagraph (A)(i) as a bona fide severance pay plan with respect to such payments or supplements to the extent such payments or supplements could otherwise have been provided under such defined benefit plan (determined as if section 411 applied to such defined benefit plan).“(ii) Applicable voluntary early retirement incentive plan.—For purposes of this subparagraph, the term ‘applicable voluntary early retirement incentive plan’ means a voluntary early retirement incentive plan maintained by—“(I) a local educational agency (as defined in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801)), or“(II) an education association which principally represents employees of 1 or more agencies described in subclause (I) and which is described in section 501(c) (5) or (6) and exempt from tax under section 501(a).”.(2) Age discrimination in employment act.—Section 4(l)(1) of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 623(l)(1)) is amended—(A) by inserting “(A)” after “(1)”,(B) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively,(C) by redesignating clauses (i) and (ii) of subparagraph (B) (as in effect before the amendments made by subparagraph (B)) as subclauses (I) and (II), respectively, and(D) by adding at the end the following:“(B) A voluntary early retirement incentive plan that—“(i) is maintained by—120 STAT. 1059“(I) a local educational agency (as defined in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801), or“(II) an education association which principally represents employees of 1 or more agencies described in subclause (I) and which is described in section 501(c) (5) or (6) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code, and“(ii) makes payments or supplements described in subclauses (I) and (II) of subparagraph (A)(ii) in coordination with a defined benefit plan (as so defined) maintained by an eligible employer described in section 457(e)(1)(A) of such Code or by an education association described in clause (i)(II),shall be treated solely for purposes of subparagraph (A)(ii) as if it were a part of the defined benefit plan with respect to such payments or supplements. Payments or supplements under such a voluntary early retirement incentive plan shall not constitute severance pay for purposes of paragraph (2).”.(b) Employment Retention Plans.—(1) In general.—Section 457(f)(2) of the Internal Revenue Code of 1986 (relating to exceptions) is amended by striking “and” at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting “, and”, and by adding at the end the following:“(F) that portion of any applicable employment retention plan described in paragraph (4) with respect to any participant.”.(2) Definitions and rules relating to employment retention plans.—Section 457(f) of such Code is amended by adding at the end the following new paragraph:“(4) Employment retention plans.—For purposes of paragraph (2)(F)—“(A) In general.—The portion of an applicable employment retention plan described in this paragraph with respect to any participant is that portion of the plan which provides benefits payable to the participant not in excess of twice the applicable dollar limit determined under subsection (e)(15).“(B) Other rules.—“(i) Limitation.—Paragraph (2)(F) shall only apply to the portion of the plan described in subparagraph (A) for years preceding the year in which such portion is paid or otherwise made available to the participant.“(ii) Treatment.—A plan shall not be treated for purposes of this title as providing for the deferral of compensation for any year with respect to the portion of the plan described in subparagraph (A).“(C) Applicable employment retention plan.—The term ‘applicable employment retention plan’ means an employment retention plan maintained by—“(i) a local educational agency (as defined in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801), or“(ii) an education association which principally represents employees of 1 or more agencies described in 120 STAT. 1060 clause (i) and which is described in section 501(c) (5) or (6) and exempt from taxation under section 501(a).“(D) Employment retention plan.—The term ‘employment retention plan’ means a plan to pay, upon termination of employment, compensation to an employee of a local educational agency or education association described in subparagraph (C) for purposes of—“(i) retaining the services of the employee, or“(ii) rewarding such employee for the employee’s service with 1 or more such agencies or associations.”.(c) Coordination With ERISA.—Section 3(2)(B) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)(B)) is amended by adding at the end the following: “An applicable voluntary early retirement incentive plan (as defined in section 457(e)(11)(D)(ii) of the Internal Revenue Code of 1986) making payments or supplements described in section 457(e)(11)(D)(i) of such Code, and an applicable employment retention plan (as defined in section 457(f)(4)(C) of such Code) making payments of benefits described in section 457(f)(4)(A) of such Code, shall, for purposes of this title, be treated as a welfare plan (and not a pension plan) with respect to such payments and supplements.”.(d) Effective Dates.—(1) In general.—The amendments made by this Act shall take effect on the date of the enactment of this Act.(2) Tax amendments.—The amendments made by subsections (a)(1) and (b) shall apply to taxable years ending after the date of the enactment of this Act.(3) ERISA amendments.—The amendment made by subsection (c) shall apply to plan years ending after the date of the enactment of this Act.(4) Construction.—Nothing in the amendments made by this section shall alter or affect the construction of the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, or the Age Discrimination in Employment Act of 1967 as applied to any plan, arrangement, or conduct to which such amendments do not apply.