Simplified employee pensions for independent workers

(a) In general Subsection (k) of section 408 of the Internal Revenue Code of 1986 is amended by redesignating paragraph (10) as paragraph (11) and by inserting after paragraph (9) the following new paragraph: (10) Independent workers (A) In general At the election of the employer, an independent worker may be treated for purposes of this subsection in the same manner as an employee, as provided in this paragraph. (B) Participation In the case of independent workers— (i) Participation An employer may elect to exclude such workers in applying paragraph (2). (ii) Employees electing Paragraph (6)(A)(ii) shall not apply. (C) Independent workers treated separately For purposes of applying paragraphs (3)(C), (5), and (6)(A)(iii), the employer may elect to treat independent workers separately from employees. (D) Not counted in employer size Independent workers shall not be taken into account as employees in applying paragraph (6)(B). (E) Contribution of bonuses Notwithstanding paragraphs (3)(C) and (5), in the case of any independent worker who is entitled to receive a cash bonus from the employer, at the election of the independent worker such bonus may be contributed to the account or annuity of the worker pursuant to the simplified employee pension and not paid to the worker in cash. Any bonus so contributed shall not be taken into account in determining the percentage of compensation contributed with respect to the worker. (F) Deposits into suspension account An account or annuity shall not fail to be treated as a simplified employee pension solely because the terms of the pension allow the employer, at the election of the independent worker, to deposit contributions into a suspension account instead of into the account or annuity, if such contributions are either— (i) returned to the independent worker in cash, or (ii) contributed into the account or annuity pursuant to the terms of the pension, within the same taxable year or not later than the last date on which contributions may be made for such taxable year. Amounts contributed to the account or annuity pursuant to the preceding sentence shall be treated for purposes of this subsection as if contributed directly to such account or annuity, and amounts returned to the independent worker in cash shall be treated as never contributed under the simplified employee pension. (G) Definitions For purposes of this paragraph— (i) Independent worker The term independent worker has the meaning given the term in section 3(43)(E) of the Employee Retirement Income Security Act of 1974. (ii) Suspension account The term suspension account has the meaning given the term in section 5 of the Independent Retirement Fairness Act.. (b) Effective date The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.