Understanding your 401k plan and plan fees

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Additional non-profit websites that include relevant unbiased information about 401k plans include: www.401ksoftware.com and www.401k-fees.com

Introduction

The Vital Statistics...
-- Eligibility Requirements
-- Contributions
-- Enrollment
-- Investments

Plan Responsibilities...
-- of the Plan Sponsor (Employer)
-- of the Trustees
-- of the Plan Administrator
-- of the Loan Administrator

Allowable Charges

Getting Started
-- Ordering account applications

Verifying Your Customized Software

Familiarizing Yourself with Your Customized Software...
-- The Company Information
-- The Employee Information
-- The Processing Functions
-- The Reports
-- The Utilities

Interfacing With Your Company Payroll Software

Introduction

Now that you know how to use the Quick Guide and this Supplement, you're ready to get started with your company plan. You'll need to know a little about 401ks in general and your company plan in particular because company employees will undoubtedly ask you questions; better to familiarize yourself with the plan's components before you try to sell the plan to company employees.

If you're already familiar with 401k plans in general, this will only take a few minutes: you just look at the parameters that have been established for your plan and incorporate them into what you already know about how a 401k works.

If, however, you're unfamiliar with 401ks, you might want to reserve a couple of hours to go through the important basic concepts listed below, which are explained within your plan's Summary Plan Description, a hard copy of which is delivered to you when you sign up. Definitions of terms can be found in the Glossary.

If you need more in-depth explanations, ones that go into, for instance, the ramifications of various actions, our technical support staff can be reached at (818) 501-1597.

The Vital Statistics

As a 401k plan sponsor, your company has discretion over certain variables in your company plan. In our run-it-yourself 401ks, the plan sponsor makes choices regardingЕ

Х The plan's participant eligibility criteria

Х The investments to be offered within the plan

Х Whether or not to allow participants to borrow from their 401k accounts (401k loans)

Х Whether or not the company will contribute to the plan participantsТ accounts (matching contributions)

Х The rate at which any such matching contributions will be made

Х The rate at which any matching contributions will be vested to participantsТ accounts.

The decisions your company made regarding the above have been hardwired into your plan administration software, and they appear, when relevant, on your plan's forms and documents. Changing any of these decisions constitutes a change to your plan in the eyes of the IRS and requires a formal revision. For this reason, your plan administration software will NOT allow you to change a matching contributions formula or vesting formula, loan provisions, or eligibility requirements. Please contact us if you want to change any of these parameters.

Also, if your company wants to change its plan investment offerings, please contact us. But remember, depending on the investment portfolio selected, such a change could prove costly to your plan's participants. Investment prospectuses spell out any fees that will be charged for early liquidation of investments.

Eligibility Requirements

Every person who works for your company is either eligible or ineligible to participate in your company plan based on the eligibility requirements you've chosen for that plan. Only eligible employees are relevant to 401k plans and therefore to your plan administration software.

Unless otherwise specifically arranged, your plan has the following eligibility requirements:

Х Three months of full-time employment with the company

Х Currently full-time employee; for purposes of 401k plans, any employee who works 1000 hours per calendar year is considered a full-time employee.

Х Non-union employee

Х Not a nonresident alien

Your company may have chosen to place additional restrictions on participation, such as requiring that participants be at least 21 years of age.

IMPORTANT!!!You need to maintain an employee record for every employee who currently meets your plan's eligibility requirements or who has met the requirements within the plan year, even if the person has left the company before the end of the plan year. This is very important to plan testing accuracy.

Fortunately, your plan administration software automatically calculates the eligibility of each employee for you as soon as you enter the employee's date of birth and date of hire. The software also prepares a УCurrent EligiblesФ report listing the names of all eligible employees for you to view or print at any time.

You need to know who the newly eligible employees are so that you can contact them, explain the plan to them, and encourage them to join the plan. Identifying eligible non-401k participants is easy because your 401k software's "Employee Census Report" (see Chapter 9) lists, among other things, the participation status of all eligible employees. To print the "Employee Census Report," click on Reports in your plan administration software main menu window, УWelcomeЕФ. Then click on Administrative Reports in the left-hand column, then on Employee Census in the right-hand column, then on Print. A pop-up window will appear, asking you to select your chosen options. Click on Eligibles and All Divisions, then on Print. The resulting screen displays the names of all eligible employees and their participation status, making it simple to identify eligible nonparticipants.

Contributions

If your company is making matching contributions, you must know what the contribution formula is so that you can calculate and process the proper amount into each participant's record. You must also know the vesting period. The vesting formula is hardwired into your plan administration software, and the program automatically keeps track of each participant's vesting percentage. The software also produces an УEmployee Vesting SummaryФ report, which lists, in addition to each participant's current vesting percentage, the amount of employer contributions to date and the amount vested.

Enrollment

Part and parcel of maintaining an employee record for each eligible employee, the IRS requires you to periodically notify eligible, nonparticipating employees (whether newly eligible or long-time eligible) about joining the plan. Times during which eligible employees can join the 401k plan are called open enrollment periods.

Many companies let an employee join the 401k plan the day he or she becomes eligible. Some companies, however, find so-called continuous open enrollment too cumbersome and limit open enrollment periods to the end of every quarter, the end of every other quarter, or sometimes the end of the plan year.

Other companies use what is called automatic (or passive or negative) 401k enrollment, in which every employee is automatically enrolled in the 401k plan as soon as he or she meets the plan's age and length of service participation requirements (see УAutomatic EnrollmentФ in Chapter 3).

The enrollment period(s) for your company are listed in your SPD.

Investments

These are the investments your company has selected for the company plan. Plan participants can direct 401k contributions and any returns earned on such contributions into one or more of the plan's investments. However, unless specified otherwise in your plan, participants cannot allocate less than $50 a month to each separate investment they select.

Plan Responsibilities

Your company has chosen to run its own 401k plan for its employees using your plan administration software. As employer-sponsor, the company has certain responsibilities; as Plan Administrator, you have other responsibilities. The following paragraphs list these responsibilities.

Responsibilities of the Employer-Sponsor

The plan sponsor (the employer) is responsible forЕ

Х Adopting the plan bank checking account that will be used as a transaction point, creating a permanent Уpaper trailФ of all contributions received, purchases, distributions, rollovers, loan repayments, etc.

Х Selecting the trustee of the plan and complying with Department of Labor (DOL) bonding requirements if individual trustees are selected

Х Designating a Plan Administrator

Х Designating a Loan Administrator, if your company offers loans and the Plan Administrator is not also the Loan Administrator

Х Arranging for an annual certified audit of plan assets for purposes of reporting to the government if the plan contains 100 or more participants at the beginning of the plan year

Responsibilities of the Trustee(s)

The trustees for your plan are responsible forЕ

Х They are the legally designated persons responsible for investing the assets of the plan trust by giving instructions for the purchase, sale, exchange, or transfer of shares.

Х They also execute any necessary forms in connection with said shares or in connection with the design of the plan.

Responsibilities of the Plan Administrator

The Plan Administrator is the authorized representative of the employer and is responsible for the day-to-day management and administration of the plan in accordance with the Adoption Agreement and applicable federal laws and regulations. But don't worry: most of these rules and regulations Ч and their annual changes and updates Ч are incorporated into your customized plan administration software. Plus, your plan administration software provides a framework and structure designed to guide you through the routine tasks automatically.

The Plan Administrator is responsible forЕ

Х Determining employee eligibility for participation (actually done by the plan administration software based on the birth and hire dates you enter for each employee)

Х Promoting participation in the plan to company employees

Х Responding to inquiries about the plan

Х Accepting and processing new enrollments and changes to existing enrollments, including interfacing with the company's Payroll organization

Х Determining matching contributions (if any) for each participant

Х Receiving regularly scheduled payroll information from Payroll, including participant identification and itemized contribution amounts

Х Recording contribution deposits from each participant and remitting contribution deposits to the investment account company

Х Receiving asset information from the investment account company at regularly scheduled intervals and reconciling fund activity at year's end

Х Determining if a rollover contribution is an eligible rollover from a qualified plan and processing eligible rollovers into the plan

Х Advising participants of rollover options prior to distribution of their account balances

Х Processing rollovers out of the plan

Х Handling distributions of plan assets resulting from participant employment termination, including terminations because of retirement, death, or disability

Х Recording loan information and repayments (if the Plan Administrator is also the Loan Administrator, see "Responsibilities of the Loan Administrator," below)

Х Handling other allowable distributions of participant balances, including hardship withdrawals and voluntary and mandatory distributions

Х Notifying the investment account company to make allowable disbursements to participants

Х Identifying highly compensated and key employees for compliance testing and running compliance tests during the year and at year's end

Х Preparing and filing with the government the necessary forms and reports

Х Preparing and distributing to employees the necessary forms and reports

Х Assuming responsibility for any other plan-related duties not mentioned above

Responsibilities of the Loan Administrator

The Loan Administrator is responsible forЕ

Х Distributing loan applications upon request by participants

Х Reviewing loan applications for completeness and accuracy

Х Approving loan applications

Х Setting the loan repayment schedule and interest rate

Х Determining when a loan is in default

Allowable Charges

Because administrating some of the elements of a 401k plan can be time-consuming and therefore costly to the company, there are certain allowable charges that you can pass on to the participant. The major charges include the following:

Х A reasonable charge for reproducing requested documents (other than each participant's first copy of the Summary Plan Description and any other documents required to be distributed to all participants)

Х Nominal annual loan fee of approximately $25 - $30 to process a loan application and/or maintain a loan for the year.

Getting Started

At this point, we assume that you have already familiarized yourself with the contents of the CD-ROM, you've run the demonstration often enough that you feel comfortable with the software, you've transferred the contents of the CD-ROM onto your hard disk, and you've inserted your plan-specific information into your plan administration software through use of the license diskette. (For regular operations, you must work from your plan administration software on your hard disk. You cannot save any information on the CD-ROM.)

You should first make a backup copy of all your plan administration software files and folders. To do this, click on Utilities in your plan administration software's main menu, then click on Backup Data File and follow the onscreen instructions.

You'll also want to make sure you have mastered the contents of the Summary Plan Description. The Summary Plan Description contains most of the educational information you will need to get going.

TIPЕThe Prototype Plan Document that is included in УReportsФ (under УForms -- Plan Documentation") is an official document you're required to keep on file. It is the IRS approved master 401k plan for our run-it-yourself systems and does not indicate which of the available plan options your company has selected for its particular plan. It is also written to IRS standards, which means its language is cumbersome and full of references to laws and legal documents. The Summary Plan Description, on the other hand, is designed to give the layperson an understanding of the plan and its offerings without being too cluttered with legalese. It is designed with the employee-participant in mind and a copy should be given to each current and prospective employee. Employees have the right to view a copy of the Plan Document, too, at any time. Except for each employee's initial SPD copy, your company can charge a reasonable photocopying and administrative fee for document distribution (for actual costs incurred); documents should be delivered to an employee within 30 days of being requested.

You may also want to print out a copy of each of the forms and documents you'll be using in running the company plan. All the forms are in the Reports section of your plan administration software; just click on Reports in the main menu window, then, in the resulting УReportsФ window, click on All Reports in the left-hand column, scroll down the right-hand column until you reach the report you want to print out, click on its name, then click on Print. (See below for how to choose between viewing a report on screen or printing out a hard copy.)

Before you hand any form or document over to an employee, you should first read through it carefully yourself and make sure you understand its content. There is a lot of useful information on these forms that you should know. Besides, you probably will have to explain them to the employee(s); it's much easier to sound knowledgeable when you really are knowledgeable!

Ordering Account Applications

Many investment companies require their own account applications be used in order for an account to be opened. In setting up your plan you should immediately order a supply of blank account applications.

When an account needs to be opened, your 401k plan administration software will prepare a generic account application; simply transfer the applicable information onto the investment company's official account application and forward the application to the investment company with the month's processing information (see Chapter 4 for details on processing).

Your 401k administration software provides you with a generic account application that contains the information you will need, but you will need to order your investment company's specific account applications and have them on hand

Verifying Your Customized Software

Your plan administration software is customized to match your 401k plan. In addition to basic company information (company name, address, telephone and fax numbers, and tax identification number), we've told the program whether or not to accept matching contribution entries and what vesting formula to apply to any such contributions based on the designations your company has made for its plan.

You should check the accuracy of this information IMMEDIATELY. Do not wait until it's time to use your software to process 401k contributions. As was mentioned previously, this information is hardwired into your plan administration software; to change anything you must contact us.

So let's introduce you to the software system that contains all these data.

Familiarizing Yourself with Your Customized Software

After a few seconds on the УsplashФ screen, your plan administration software opens on the main Welcome menu. We'll go through all the items on this main menu in order, but first, let's go to УPrinterФ and УScreen at the bottom of the menu.

Screen is the default choice. When it is selected, all information, including all reports, appears on your screen. The ability to УprintФ to the screen allows you to view the output quickly and without wasting paper, as some reports are many pages long.

At many points, you also have the choice of printing out a copy of the grid, report, or whatever is contained within the window. When this choice is available, a Print or Proof button will be an option within the menu at the bottom of the window.

When you select Print at the УWelcomeЕФ screen level, your plan administration software automatically sends final information straight to the printer, rather than showing you an on-screen version first. You usually won't want to do this. You may, however, want to print a report after viewing it on the screen. Reports displayed on the screen can be sent to your printer by pressing УCtrl-P.Ф

The Company Information

The first button on the УWelcome. . .Ф window, УCompany Information,Ф contains the specific data about your company's plan that we referred to earlier in this chapter. Click on Company Information, then on License Information. Check the basic information, then look to the Employer Matching designation. If your company will be making matching contributions to plan participantsТ accounts, Employer Matching should be labeled Matching Enabled.

If Employer Matching is enabled, you need to check on the vesting schedule(s) the program will apply to any matching contribution entries made into the program; exit License Information and click on Vesting (Employer Match) to make sure the vesting information for regular matching contributions matches what your company requested. Vesting (Qualified Non-Elective) shows vesting for qualified non-elective contributions (QNECs); such vesting is always 100% vested (see the Glossary for the definition of QNECs). Vesting (Disc. Employer PS) shows the vesting for discretionary employer contributions (profit sharing), the schedule for which your company has set.

With regard to vesting for regular matching contributions, your plan administration software adheres to basic IRS guidelines and limitations, and allows vesting to be calculated either on a calendar year or on an anniversary date of an employee. The percentage of vesting for each participant is transferred to other reports, including the participant's monthly statement and the employee's profile report.

If your company will not make matching contributions to the plan, УEmployer MatchingФ should read УMatching DisabledФ and, because you cannot vest something that doesn't exist, no vesting formula will be entered in the program if you click on Vesting.

NOTEЕAn employee automatically becomes fully vested when he or she turns 65, even if the full vesting period is not fulfilled. An employee is also fully vested upon death, and all employees are fully vested if the company terminates the plan.

After checking the vesting information, check the eligibility criteria by clicking on Eligibility.

The next button in the УCompany InformationФ window is УDealer Information.Ф This window summarizes information about your broker of record, if applicable (applicability depends on the type of investments being offered within your plan). The information appears when relevant on generic investment account applications prepared by the software.

The following window, the УAnnouncementФ window, is a place where you can write in any announcement to all persons receiving a monthly account statement. There is a default announcement, but you can change it at will, and insert anything that promotes the 401k or alerts participants to upcoming 401k-related matters.

Another item you can access through the УCompany InformationФ window is the Divisions feature. This is also a screen you can make changes on.

Your plan administration software lets you assign your plan's participants to divisions of your choice and will sort information within its myriad of 401k-related reports by those divisions. You can use the feature for analysis of the plan and its popularity division by division, for example, or to contact individuals by division. It is especially useful if you have employees with geographically dispersed business locations, receiving payroll data from different sites. (The division to which you assign participants is a sorting feature only and in no way affects their participation in the plan or how their money is handled.) The division appears on employee statements.

Click on Divisions. A list of existing divisions, if any, appears in the left-hand box. To add a division, click New (lower left of window), then type the information in the cells in the right half of the window. You can simply name a division or assign it any degree of specification, such as an identifying code and/or a person to contact for that division.

After you've typed in as much information as you want recorded for the division, click Exit to return to the УCompany InformationФ window or click New to add another division. Add as many divisions as you like; your plan administration software places no restrictions on their number.

The last button on УCompany InformationФ is УInvestmentsФ. Click on it to verify the list of investments your company has chosen. Each has a unique cusip and ticker number assigned so it can be tracked in the newspapers and elsewhere.

УClosedФ investments are those that are closed to new (and sometimes existing) investors by the investment account company. There are various reasons for closing an investment: the portfolio may have been merged with another similar portfolio within the investment company, or the portfolio has become so popular that the company cannot invest more cash without degrading the fund's overall performance. The latter situation may be temporary or permanent. Your plan administration software will not accept new investments into a closed fund, but it will of course continue to track previous investments made to the portfolio.

УSuppressedФ investments are different from closed investments. They are investments that are suppressed by you, the Plan Administrator, or your company because you have reasons for not wanting them available to the participants. You or your employer may feel that the employees are being offered too many choices, and want to suppress a few, or you believe that your employees might run into trouble with certain portfolios (such as the Уjunk bondФ portfolios that took a big hit in the 1980s).

IMPORTANT!!!If you see any problems, contact us IMMEDIATELY. The program will not allow you to make any adjustments yourself to any of this fundamental information because, theoretically, you could make a change that would constitute a УchangeФ to your plan in the eyes of the IRS and that could therefore jeopardize your plan's IRS-qualified status.

The Employee Information

The second button of the УWelcomeЕФ window is УEmployee Information.Ф Your plan administration software uses the information you enter about each of your employees eligible to participate in the company plan to correctly process subsequent 401k contributions.

IMPORTANT!!!You must have an entry for every employee eligible to participate in the plan, regardless of whether or not the employee chooses to participate. The IRS has certain requirements about balanced participation among lower and higher-paid employees. If you don't have entries for every eligible employee, your plan administration software's top-heavy and other IRS-mandated testing functions will not be accurate.

УEmployee InformationФ stores the following information about each employee for whom you create a record:

Х name (last, middle initial, and first)

Х division, if any

Х social security number

Х title, if any (VIP)

Х current address and phone number

Х date of birth

Х date of hire

Х date of joining the 401k plan

Х date employment with the company terminated

Х amount of contribution to a prior plan (during the current year only)

Х year of contribution to prior plan (the current year, if such contributions have been made))

Х desired current monthly contribution (dollar amount or percentage of salary)

Х any notes or reminders about the employee that you wish for your own use. Throughout the Quick Guide and this Help Guide we'll suggest information that might be put here. The information in the УNotesФ field is not transferred anywhere or printed on any report.

The following information also needs to be entered as appropriate for each employee (click on the associated box and a check mark will appear):

Х if the employee is a U.S. citizen (US Citizen)

Х if the employee is an officer of the company (Officer)

Х if the employee is part time (Part Time -- less than 1,000 hours per year)

Х if the employee is a plan participant (Participant)

Х if the employee is a 1% or 5% owner of the company (1% Owner/5% Owner)

Х if the employee is a union member

Х if an enrollment application has not been received (No App)

Х if the employee is a nonresident alien (N.R. Alien)

The Suppress Auto Enrollment is checked if the employer has opted not to have this feature in the plan (for more on automatic enrollment, see Chapter 3).

The last items in the right-hand column of the УEmployee InformationФ window are whether the employee is eligible or not eligible to participate in the plan (calculated by your plan administration software) and whether or not the employee has terminated employment (if not, it's blank).

Information about an employee can be processed as follows: Click on New to add, or Delete to delete, employees from the list, Alloc. to designate their investment choices and deferral percentages, Loans to enter their 401k loans into the system, Activity to view participantsТ specific account history and/or make adjustments to their accounts (rollovers, distributions, etc.), and/or Profile to print profiles of the information about them, including their contribution history. The details of these processes are covered in relevant later chapters of this Help Guide.

IMPORTANT!!!Deleting an employee is (or should be) a rarity. It deletes all records for that employee, which is usually not desirable.

The Processing Functions

Clicking on Processing (the third button of the УWelcome . . .Ф window) offers six options:

Х Process Monthly Contributions

Х Reprocess Monthly Contributions

Х Edit Posting Period

Х Update Monthly Salaries

Х Update Year-to-Date Salaries

Х Batch Processing

УProcess Monthly ContributionsФ is used to process new monthly contributions; УReprocess Monthly SalariesФ to review or reprocess contributions for a prior month; УEdit Posting PeriodФ to change the month transactions were posted to investment accounts; УUpdate Monthly SalariesФ to update employeesТ earnings for a specific prior month; and УUpdate Year-to-Date SalariesФ to make adjustments to salaries at the end of the year to ensure that the salary data are correct for end-of-year compliance testing. These activities are described in detail in Chapters 4 and 8.

Batch Processing is used to work on a group of the same type of adjustments, such as trust-to-trust transfers into the plan (typically when one employer absorbs a group of employees and their 401k savings from another company). It lets you make entries for multiple employees, then process them all together (whereas if you go through the УEmployee InformationФ window you have to do each employee separately, processing each before moving on to the next).

The Reports

УReports,Ф the fourth button of УWelcomeЕФ window, is used to access the myriad of reports that your plan administration software compiles from posting and cross-referencing all the entries you put in each month. Chapter 9 describes these reports.

Your plan administration software system also contains a number of forms and documents that are not reports per se, but that are critical to administrating your 401k plan and are included under УReportsФ; some of these are customized to your company's plan and others need no customization.

Major forms you will be using include the following:

Х The Enrollment Pac is used for initial enrollment and investment selection, or for changes in any of the enrollment designations: change of personal information (name, address, etc.) change in marital status, change of beneficiary or change in investment selection (whether it is a change in investments or just a change in the percentages of deferrals going to the same set of investments),

Х The Loan Pac is used when a participant wants to take out a loan against his or her plan balance.

Х The Hardship Withdrawal Pac is used when a participant wants to apply for a hardship withdrawal of funds in his or her account.

Х The Distribution Pac is used when the participant leaves the 401k plan, whether at retirement, termination of employment, or for another reason.

The forms associated with each chapter are listed at the top of each chapter's page. How they are used is described in the chapter.

The Utilities

УUtilitiesФ has six options:

Х Click on Repair & Compact to clean up your program; it should be done weekly if the volume of activity is large, monthly if the volume is low.

Х When you click on Backup Data File you will first be asked if you want to repair and compact the database; it's a good idea to say yes. Then you will be asked to type in the location to which you wish to back up the data.

Х Selecting УZip Data File to Diskette(s) compresses your plan administration software data file to floppy diskettes.

Х Selecting УUnzip Data File from Diskette(s)Ф uncompresses your plan administration software data file from floppy diskettes.

Х УChange Passcode:Ф Select this option to change your system password. If you set a password, any one wishing to use your plan administration software system will be required to enter the password upon first launching the software. Click on Change Passcode. Your plan administration software comes without a default password. To enter yours if you want it, type whatever alphanumeric password you want in the middle cell, retyping it in the bottom cell as confirmation. Click OK to set the new code into the program and return to the УUtilitiesФ window.

Interfacing With Your Company Payroll Software

Initially, and each month thereafter, you will need certain data from your payroll organization. (Chapters 3 and 4 list the needed data.) You can enter these data into your plan administration software either manually or automatically. An interface that links your company's automated payroll system with your plan administration software so that you can automatically enter the required data is not a standard feature of our system; however, our technical engineering staff will build such an interface into your system should your company desire it. Please contact us for details or a price quote.

US Government Programs For Small Business

`(1) PROGRAM LEVELS- The following program levels are authorized for fiscal year 1998:

`(A) For the programs authorized by this Act, the Administration is authorized to make--

`(i) $40,000,000 in technical assistance grants, as provided in section 7(m); and

`(ii) $60,000,000 in direct loans, as provided in section 7(m).

`(B) For the programs authorized by this Act, the Administration is authorized to make $16,040,000,000 in deferred participation loans and other financings. Of such sum, the Administration is authorized to make--

`(i) $12,000,000,000 in general business loans as provided in section 7(a);

`(ii) $3,000,000,000 in financings as provided in section 7(a)(13) of this Act and section 504 of the Small Business Investment Act of 1958;

`(iii) $1,000,000,000 in loans as provided in section 7(a)(21); and

`(iv) $40,000,000 in loans as provided in section 7(m).

`(C) For the programs authorized by title III of the Small Business Investment Act of 1958, the Administration is authorized to make--

`(i) $700,000,000 in purchases of participating securities; and

`(ii) $600,000,000 in guarantees of debentures.

`(D) For the programs authorized by part B of title IV of the Small Business Investment Act of 1958, the Administration is authorized to enter into guarantees not to exceed $2,000,000,000, of which not more than $650,000,000 may be in bonds approved pursuant to section 411(a)(3) of that Act.

`(E) The Administration is authorized to make grants or enter into cooperative agreements--

`(i) for the Service Corps of Retired Executives program authorized by section 8(b)(1), $4,000,000; and

`(ii) for activities of small business development centers pursuant to section 21(c)(3)(G), $15,000,000, to remain available until expended.

`(2) ADDITIONAL AUTHORIZATIONS-

`(A) There are authorized to be appropriated to the Administration for fiscal year 1998 such sums as may be necessary to carry out this Act, including administrative expenses and necessary loan capital for disaster loans pursuant to section 7(b), and to carry out the Small Business Investment Act of 1958, including salaries and expenses of the Administration.

`(B) Notwithstanding subparagraph (A), for fiscal year 1998--

`(i) no funds are authorized to be provided to carry out the loan program authorized by section 7(a)(21) except by transfer from another Federal department or agency to the Administration, unless the program level authorized for general business loans under paragraph (1)(B)(i) is fully funded; and

`(ii) the Administration may not approve loans on behalf of the Administration or on behalf of any other department or agency, by contract or otherwise, under terms and conditions other than those specifically authorized under this Act or the Small Business Investment Act of 1958, except that it may approve loans under section 7(a)(21) of this Act in gross amounts of not more than $1,250,000.

`(d) FISCAL YEAR 1999-

`(1) PROGRAM LEVELS- The following program levels are authorized for fiscal year 1999:

`(A) For the programs authorized by this Act, the Administration is authorized to make--

`(i) $40,000,000 in technical assistance grants as provided in section 7(m); and

`(ii) $60,000,000 in direct loans, as provided in section 7(m).

`(B) For the programs authorized by this Act, the Administration is authorized to make $17,540,000,000 in deferred participation loans and other financings. Of such sum, the Administration is authorized to make--

`(i) $13,000,000,000 in general business loans as provided in section 7(a);

`(ii) $3,500,000,000 in financings as provided in section 7(a)(13) of this Act and section 504 of the Small Business Investment Act of 1958;

`(iii) $1,000,000,000 in loans as provided in section 7(a)(21); and

`(iv) $40,000,000 in loans as provided in section 7(m).

`(C) For the programs authorized by title III of the Small Business Investment Act of 1958, the Administration is authorized to make--

`(i) $800,000,000 in purchases of participating securities; and

`(ii) $700,000,000 in guarantees of debentures.

`(E) The Administration is authorized to make grants or enter cooperative agreements--

`(i) for the Service Corps of Retired Executives program authorized by section 8(b)(1), $4,500,000; and

`(ii) for activities of small business development centers pursuant to section 21(c)(3)(G), not to exceed $15,000,000, to remain available until expended.

`(2) ADDITIONAL AUTHORIZATIONS-

`(A) There are authorized to be appropriated to the Administration for fiscal year 1999 such sums as may be necessary to carry out this Act, including administrative expenses and necessary loan capital for disaster loans pursuant to section 7(b), and to carry out the Small Business Investment Act of 1958, including salaries and expenses of the Administration.

`(B) Notwithstanding subparagraph (A), for fiscal year 1999--

`(e) FISCAL YEAR 2000-

`(1) PROGRAM LEVELS- The following program levels are authorized for fiscal year 2000:

`(A) For the programs authorized by this Act, the Administration is authorized to make--

`(i) $40,000,000 in technical assistance grants as provided in section 7(m); and

`(ii) $60,000,000 in direct loans, as provided in section 7(m).

`(B) For the programs authorized by this Act, the Administration is authorized to make $20,040,000,000 in deferred participation loans and other financings. Of such sum, the Administration is authorized to make--

`(i) $14,500,000,000 in general business loans as provided in section 7(a);

`(ii) $4,500,000,000 in financings as provided in section 7(a)(13) of this Act and section 504 of the Small Business Investment Act of 1958;

`(iii) $1,000,000,000 in loans as provided in section 7(a)(21); and

`(iv) $40,000,000 in loans as provided in section 7(m).

`(C) For the programs authorized by title III of the Small Business Investment Act of 1958, the Administration is authorized to make--

`(i) $900,000,000 in purchases of participating securities; and

`(ii) $800,000,000 in guarantees of debentures.

`(E) The Administration is authorized to make grants or enter cooperative agreements--

`(i) for the Service Corps of Retired Executives program authorized by section 8(b)(1), $5,000,000; and

`(ii) for activities of small business development centers pursuant to section 21(c)(3)(G), not to exceed $15,000,000, to remain available until expended.

`(2) ADDITIONAL AUTHORIZATIONS-

`(A) There are authorized to be appropriated to the Administration for fiscal year 2000 such sums as may be necessary to carry out this Act, including administrative expenses and necessary loan capital for disaster loans pursuant to section 7(b), and to carry out the Small Business Investment Act of 1958, including salaries and expenses of the Administration.

`(B) Notwithstanding subparagraph (A), for fiscal year 2000--

TITLE II--FINANCIAL ASSISTANCE

Subtitle A--Microloan Program

SEC. 201. MICROLOAN PROGRAM.

(a) LOAN LIMITS- Section 7(m)(3)(C) of the Small Business Act (15 U.S.C. 636(m)(3)(C)) is amended by striking `$2,500,000' and inserting `$3,500,000'.

(b) LOAN LOSS RESERVE FUND- Section 7(m)(3)(D) of the Small Business Act (15 U.S.C. 636(m)(3)(D)) is amended by striking clauses (i) and (ii), and inserting the following:

`(i) during the initial 5 years of the intermediary's participation in the program under this subsection, at a level equal to not more than 15 percent of the outstanding balance of the notes receivable owed to the intermediary; and

`(ii) in each year of participation thereafter, at a level equal to not more than the greater of--

`(I) 2 times an amount reflecting the total losses of the intermediary as a result of participation in the program under this subsection, as determined by the Administrator on a case-by-case basis; or

`(II) 10 percent of the outstanding balance of the notes receivable owed to the intermediary.'.

(1) in the subsection heading, by striking `DEMONSTRATION';

(2) by striking `Demonstration' each place that term appears;

(3) by striking `demonstration' each place that term appears; and

(4) in paragraph (12), by striking `during fiscal years 1995 through 1997' and inserting `during fiscal years 1998 through 2000'.

(d) TECHNICAL ASSISTANCE GRANTS- Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended--

(1) in paragraph (4)(E)--

(A) by striking `Each intermediary' and inserting the following:

`(i) IN GENERAL- Each intermediary';

(B) by striking `15' and inserting `25'; and

`(ii) TECHNICAL ASSISTANCE- An intermediary may expend not more than 25 percent of the funds received under paragraph (1)(B)(ii) to enter into third party contracts for the provision of technical assistance.'; and

(2) in paragraph (5)(A)--

(A) by striking `in each of the 5 years of the demonstration program established under this subsection,'; and

(B) by striking `for terms of up to 5 years' and inserting `annually'.

SEC. 202. WELFARE-TO-WORK MICROLOAN INITIATIVE.

(a) INITIATIVE- Section 7(m) of the Small Business Act (15 U.S.C. 636(m)) is amended--

(1) in paragraph (1)(A)--

(A) in clause (ii), by striking `and' at the end;

(B) in clause (iii), by striking the period at the end and inserting `; and'; and

`(iv) to establish a welfare-to-work microloan initiative, which shall be administered by the Administration, in order to test the feasibility of supplementing the technical assistance grants provided under clauses (ii) and (iii) of subparagraph (B) to individuals who are receiving assistance under the State program funded under part A of title IV of the Social Security Act (42 U.S.C. 601 et seq.), or under any comparable State funded means tested program of assistance for low-income individuals, in order to adequately assist those individuals in--

`(I) establishing small businesses; and

`(II) eliminating their dependence on that assistance.';

(2) in paragraph (4), by adding at the end the following:

`(F) SUPPLEMENTAL GRANT-

`(i) IN GENERAL- The Administration may accept any funds transferred to the Administration from other departments or agencies of the Federal Government to make grants in accordance with this subparagraph and section 202(b) of the Small Business Reauthorization Act of 1997 to participating intermediaries and technical assistance providers under paragraph (5), for use in accordance with clause (iii) to provide additional technical assistance and related services to recipients of assistance under a State program described in paragraph (1)(A)(iv) at the time they initially apply for assistance under this subparagraph.

`(ii) ELIGIBLE RECIPIENTS; GRANT AMOUNTS- In making grants under this subparagraph, the Administration may select, from among participating intermediaries and technical assistance providers described in clause (i), not more than 20 grantees in fiscal year 1998, not more than 25 grantees in fiscal year 1999, and not more than 30 grantees in fiscal year 2000, each of whom may receive a grant under this subparagraph in an amount not to exceed $200,000 per year.

`(iii) USE OF GRANT AMOUNTS- Grants under this subparagraph--

`(I) are in addition to other grants provided under this subsection and shall not require the contribution of matching amounts as a condition of eligibility; and

`(II) may be used by a grantee--

`(aa) to pay or reimburse a portion of child care and transportation costs of recipients of assistance described in clause (i), to the extent such costs are not otherwise paid by State block grants under the Child Care Development Block Grant Act of 1990 (42 U.S.C. 9858 et seq.) or under part A of title IV of the Social Security Act (42 U.S.C. 601 et seq.); and

`(bb) for marketing, management, and technical assistance to recipients of assistance described in clause (i).

`(iv) MEMORANDUM OF UNDERSTANDING- Prior to accepting any transfer of funds under clause (i) from a department or agency of the Federal Government, the Administration shall enter into a Memorandum of Understanding with the department or agency, which shall--

`(I) specify the terms and conditions of the grants under this subparagraph; and

`(II) provide for appropriate monitoring of expenditures by each grantee under this subparagraph and each recipient of assistance described in clause (i) who receives assistance from a grantee under this subparagraph, in order to ensure compliance with this subparagraph by those grantees and recipients of assistance.';

(3) in paragraph (6), by adding at the end the following:

`(E) ESTABLISHMENT OF CHILD CARE OR TRANSPORTATION BUSINESSES- In addition to other eligible small businesses concerns, borrowers under any program under this subsection may include individuals who will use the loan proceeds to establish for-profit or nonprofit child care establishments or businesses providing for-profit transportation services.';

(4) in paragraph (9)--

(A) by striking the paragraph designation and paragraph heading and inserting the following:

`(9) GRANTS FOR MANAGEMENT, MARKETING, TECHNICAL ASSISTANCE, AND RELATED SERVICES- '; and

(B) by adding at the end the following:

`(C) WELFARE-TO-WORK MICROLOAN INITIATIVE- Of amounts made available to carry out the welfare-to-work microloan initiative under paragraph (1)(A)(iv) in any fiscal year, the Administration may use not more than 5 percent to provide technical assistance, either directly or through contractors, to welfare-to-work microloan initiative grantees, to ensure that, as grantees, they have the knowledge, skills, and understanding of microlending and welfare-to-work transition, and other related issues, to operate a successful welfare-to-work microloan initiative.'; and

(5) by adding at the end the following:

`(13) EVALUATION OF WELFARE-TO-WORK MICROLOAN INITIATIVE- On January 31, 1999, and annually thereafter, the Administration shall submit to the Committees on Small Business of the House of Representatives and the Senate a report on any monies distributed pursuant to paragraph (4)(F).'.

(b) TRANSFER OF FUNDS-

(1) IN GENERAL- No funds are authorized to be appropriated or otherwise provided to carry out the grant program under section 7(m)(4)(F) of the Small Business Act (15 U.S.C. 636(m)(4)(F)) (as added by this section), except by transfer from another department or agency of the Federal Government to the Administration in accordance with this subsection.

(2) LIMITATION ON AMOUNTS- The total amount transferred to the Administration from other departments and agencies of the Federal Government to carry out the grant program under section 7(m)(4)(F) of the Small Business Act (15 U.S.C. 636(m)(4)(F)) (as added by this section) shall not exceed--

(A) $3,000,000 for fiscal year 1998;

(B) $4,000,000 for fiscal year 1999; and

Subtitle B--Small Business Investment Company Program

SEC. 211. 5-YEAR COMMITMENTS FOR SBICs AT OPTION OF ADMINISTRATOR.

Section 20(a)(2) of the Small Business Act (15 U.S.C. 631 note) is amended in the last sentence by striking `the following fiscal year' and inserting `any 1 or more of the 4 subsequent fiscal years'.

SEC. 212. UNDERSERVED AREAS.

Section 301(c)(4)(B) of the Small Business Investment Act of 1958 (15 U.S.C. 681(c)(4)(B)) is amended to read as follows:

`(B) LEVERAGE- An applicant licensed pursuant to the exception provided in this paragraph shall not be eligible to receive leverage as a licensee until the applicant satisfies the requirements of section 302(a), unless the applicant--

`(i) files an application for a license not later than 180 days after the date of enactment of the Small Business Reauthorization Act of 1997;

`(ii) is located in a State that is not served by a licensee; and

`(iii) agrees to be limited to 1 tier of leverage available under section 302(b), until the applicant meets the requirements of section 302(a).'.

SEC. 213. PRIVATE CAPITAL.

Section 103(9)(B)(iii) of the Small Business Investment Act of 1958 (15 U.S.C. 662(9)(B)(iii)) is amended--

(1) by redesignating subclauses (I) and (II) as subclauses (II) and (III), respectively; and

(2) by inserting before subclause (II) (as redesignated) the following:

`(I) funds obtained from the business revenues (excluding any governmental appropriation) of any federally chartered or government-sponsored corporation established prior to October 1, 1987;'.

SEC. 214. FEES.

Section 301 of the Small Business Investment Act of 1958 (15 U.S.C. 681) is amended by adding at the end the following:

`(e) FEES-

`(1) IN GENERAL- The Administration may prescribe fees to be paid by each applicant for a license to operate as a small business investment company under this Act.

`(2) USE OF AMOUNTS- Fees collected under this subsection--

`(A) shall be deposited in the account for salaries and expenses of the Administration; and

`(B) are authorized to be appropriated solely to cover the costs of licensing examinations.'.

SEC. 215. SMALL BUSINESS INVESTMENT COMPANY PROGRAM REFORM.

(a) BANK INVESTMENTS- Section 302(b) of the Small Business Investment Act of 1958 (15 U.S.C. 682(b)) is amended by striking `1956,' and all that follows before the period and inserting the following: `1956, any national bank, or any member bank of the Federal Reserve System or nonmember insured bank to the extent permitted under applicable State law, may invest in any 1 or more small business investment companies, or in any entity established to invest solely in small business investment companies, except that in no event shall the total amount of such investments of any such bank exceed 5 percent of the capital and surplus of the bank'.

(b) INDEXING FOR LEVERAGE- Section 303 of the Small Business Investment Act of 1958 (15 U.S.C. 683) is amended--

(1) in subsection (b)--

(A) in paragraph (2), by adding at the end the following:

`(D)(i) The dollar amounts in subparagraphs (A), (B), and (C) shall be adjusted annually to reflect increases in the Consumer Price Index established by the Bureau of Labor Statistics of the Department of Labor.

`(ii) The initial adjustments made under this subparagraph after the date of enactment of the Small Business Reauthorization Act of 1997 shall reflect only increases from March 31, 1993.'; and

(B) by striking paragraph (4) and inserting the following:

`(4) MAXIMUM AGGREGATE AMOUNT OF LEVERAGE-

`(A) IN GENERAL- Except as provided in subparagraph (B), the aggregate amount of outstanding leverage issued to any company or companies that are commonly controlled (as determined by the Administrator) may not exceed $90,000,000, as adjusted annually for increases in the Consumer Price Index.

`(B) EXCEPTIONS- The Administrator may, on a case-by-case basis--

`(i) approve an amount of leverage that exceeds the amount described in subparagraph (A) for companies under common control; and

`(ii) impose such additional terms and conditions as the Administrator determines to be appropriate to minimize the risk of loss to the Administration in the event of default.

`(C) APPLICABILITY OF OTHER PROVISIONS- Any leverage that is issued to a company or companies commonly controlled in an amount that exceeds $90,000,000, whether as a result of an increase in the Consumer Price Index or a decision of the Administrator, is subject to subsection (d).'; and

(2) by striking subsection (d) and inserting the following:

`(d) REQUIRED CERTIFICATIONS-

`(1) IN GENERAL- The Administrator shall require each licensee, as a condition of approval of an application for leverage, to certify in writing--

`(A) for licensees with leverage less than or equal to $90,000,000, that not less than 20 percent of the licensee's aggregate dollar amount of financings will be provided to smaller enterprises; and

`(B) for licensees with leverage in excess of $90,000,000, that, in addition to satisfying the requirements of subparagraph (A), 100 percent of the licensee's aggregate dollar amount of financings made in whole or in part with leverage in excess of $90,000,000 will be provided to smaller enterprises (as defined in section 103(12)).

`(2) MULTIPLE LICENSEES- Multiple licensees under common control (as determined by the Administrator) shall be considered to be a single licensee for purposes of determining both the applicability of and compliance with the investment percentage requirements of this subsection.'.

(c) TAX DISTRIBUTIONS- Section 303(g)(8) of the Small Business Investment Act of 1958 (15 U.S.C. 683(g)(8)) is amended by adding at the end the following: `A company may also elect to make a distribution under this paragraph at the end of any calendar quarter based on a quarterly estimate of the maximum tax liability. If a company makes 1 or more quarterly distributions for a calendar year, and the aggregate amount of those distributions exceeds the maximum amount that the company could have distributed based on a single annual computation, any subsequent distribution by the company under this paragraph shall be reduced by an amount equal to the excess amount distributed.'.

(d) LEVERAGE FEE- Section 303(i) of the Small Business Investment Act of 1958 (15 U.S.C. 683(i)) is amended by striking `, payable upon' and all that follows before the period and inserting the following: `in the following manner: 1 percent upon the date on which the Administration enters into any commitment for such leverage with the licensee, and the balance of 2 percent (or 3 percent if no commitment has been entered into by the Administration) on the date on which the leverage is drawn by the licensee'.

(e) PERIODIC ISSUANCE OF GUARANTEES AND TRUST CERTIFICATES- Section 320 of the Small Business Investment Act of 1958 (15 U.S.C. 687m) is amended by striking `three months' and inserting `6 months'.

SEC. 216. EXAMINATION FEES.

Section 310(b) of the Small Business Investment Act of 1958 (15 U.S.C. 687b(b)) is amended by inserting after the first sentence the following: `Fees collected under this subsection shall be deposited in the account for salaries and expenses of the Administration, and are authorized to be appropriated solely to cover the costs of examinations and other program oversight activities.'.

Subtitle C--Certified Development Company Program

SEC. 221. LOANS FOR PLANT ACQUISITION, CONSTRUCTION, CONVERSION, AND EXPANSION.

Section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 696) is amended--

(1) by striking paragraph (1) and inserting the following:

`(1) USE OF PROCEEDS- The proceeds of any such loan shall be used solely by the borrower to assist 1 or more identifiable small business concerns and for a sound business purpose approved by the Administration.';

(2) in paragraph (3), by adding at the end the following:

`(D) SELLER FINANCING- Seller-provided financing may be used to meet the requirements of subparagraph (B), if the seller subordinates the interest of the seller in the property to the debenture guaranteed by the Administration.

`(E) COLLATERALIZATION- The collateral provided by the small business concern shall generally include a subordinate lien position on the property being financed under this title, and is only 1 of the factors to be evaluated in the credit determination. Additional collateral shall be required only if the Administration determines, on a case-by-case basis, that additional security is necessary to protect the interest of the Government.'; and

(3) by adding at the end the following:

`(5) LIMITATION ON LEASING- In addition to any portion of the project permitted to be leased under paragraph (4), not to exceed 20 percent of the project may be leased by the assisted small business to 1 or more other tenants, if the assisted small business occupies permanently and uses not less than a total of 60 percent of the space in the project after the execution of any leases authorized under this section.'.

SEC. 222. DEVELOPMENT COMPANY DEBENTURES.

Section 503 of the Small Business Investment Act of 1958 (15 U.S.C. 697) is amended--

(1) in subsection (b)(7), by striking subparagraph (A) and inserting the following:

`(A) assesses and collects a fee, which shall be payable by the borrower, in an amount established annually by the Administration, which amount shall not exceed the lesser of--

`(i) 0.9375 percent per year of the outstanding balance of the loan; and

`(ii) the minimum amount necessary to reduce the cost (as defined in section 502 of the Federal Credit Reform Act of 1990) to the Administration of purchasing and guaranteeing debentures under this Act to zero; and'; and

(2) in subsection (f), by striking `1997' and inserting `2000'.

SEC. 223. PREMIER CERTIFIED LENDERS PROGRAM.

(a) IN GENERAL- Section 508 of the Small Business Investment Act of 1958 (15 U.S.C. 697e) is amended--

(1) in subsection (a), by striking `not more than 15';

(2) in subsection (b)--

(A) in paragraph (2)--

(i) in the matter preceding subparagraph (A), by striking `if such company';

(ii) by striking subparagraphs (A) and (B) and inserting the following:

`(A) if the company is an active certified development company in good standing and has been an active participant in the accredited lenders program during the entire 12-month period preceding the date on which the company submits an application under paragraph (1), except that the Administration may waive this requirement if the company is qualified to participate in the accredited lenders program;

`(B) if the company has a history of--

`(i) submitting to the Administration adequately analyzed debenture guarantee application packages; and

`(ii) of properly closing section 504 loans and servicing its loan portfolio;';

(iii) in subparagraph (C)--

(I) by inserting `if the company' after `(C)'; and

(II) by striking the period at the end and inserting `; and'; and

(iv) by adding at the end the following:

`(D) the Administrator determines, with respect to the company, that the loss reserve established in accordance with subsection (c)(2) is sufficient for the company to meet its obligations to protect the Federal Government from risk of loss.'; and

(B) by adding at the end the following:

`(3) APPLICABILITY OF CRITERIA AFTER DESIGNATION- The Administrator may revoke the designation of a certified development company as a premier certified lender under this section at any time, if the Administrator determines that the certified development company does not meet any requirement described in subparagraphs (A) through (D) of paragraph (2).';

(3) by striking subsection (c) and inserting the following:

`(c) LOSS RESERVE-

`(1) ESTABLISHMENT- A company designated as a premier certified lender shall establish a loss reserve for financing approved pursuant to this section.

`(2) AMOUNT- The amount of each loss reserve established under paragraph (1) shall be 10 percent of the amount of the company's exposure, as determined under subsection (b)(2)(C).

`(3) ASSETS- Each loss reserve established under paragraph (1) shall be comprised of--

`(A) segregated funds on deposit in an account or accounts with a federally insured depository institution or institutions selected by the company, subject to a collateral assignment in favor of, and in a format acceptable to, the Administration;

`(B) irrevocable letter or letters of credit, with a collateral assignment in favor of, and a commercially reasonable format acceptable to, the Administration; or

`(C) any combination of the assets described in subparagraphs (A) and (B).

`(4) CONTRIBUTIONS- The company shall make contributions to the loss reserve, either cash or letters of credit as provided above, in the following amounts and at the following intervals:

`(A) 50 percent when a debenture is closed.

`(B) 25 percent additional not later than 1 year after a debenture is closed.

`(C) 25 percent additional not later than 2 years after a debenture is closed.

`(5) REPLENISHMENT- If a loss has been sustained by the Administration, any portion of the loss reserve, and other funds provided by the premier company as necessary, may be used to reimburse the Administration for the premier company's 10 percent share of the loss as provided in subsection (b)(2)(C). If the company utilizes the reserve, within 30 days it shall replace an equivalent amount of funds.

`(6) DISBURSEMENTS- The Administration shall allow the certified development company to withdraw from the loss reserve amounts attributable to any debenture that has been repaid.';

(4) in subsection (d)(1), by striking `to approve loans' and inserting `to approve, authorize, close, service, foreclose, litigate (except that the Administration may monitor the conduct of any such litigation to which a premier certified lender is a party), and liquidate loans';

(5) in subsection (f), by striking `State or local' and inserting `certified';

(6) in subsection (g), by striking the subsection heading and inserting the following:

`(g) EFFECT OF SUSPENSION OR REVOCATION- ';

(7) by striking subsection (h) and inserting the following:

`(h) PROGRAM GOALS- Each certified development company participating in the program under this section shall establish a goal of processing a minimum of not less than 50 percent of the loan applications for assistance under section 504 pursuant to the program authorized under this section.'; and

(8) in subsection (i), by striking `other lenders' and inserting `other lenders, specifically comparing default rates and recovery rates on liquidations'.

(b) REGULATIONS- The Administrator shall--

(1) not later than 150 days after the date of enactment of this Act, promulgate regulations to carry out the amendments made by subsection (a); and

(2) not later than 180 days after the date of enactment of this Act, issue program guidelines and fully implement the amendments made by subsection (a).

(c) PROGRAM EXTENSION- Section 217(b) of the Small Business Reauthorization and Amendments Act of 1994 (15 U.S.C. 697e note) is amended by striking `October 1, 1997' and inserting `October 1, 2000'.

Subtitle D--Miscellaneous Provisions

SEC. 231. BACKGROUND CHECK OF LOAN APPLICANTS.

Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is amended--

(1) by striking `(a) The Administration' and inserting the following:

`(a) LOANS TO SMALL BUSINESS CONCERNS; ALLOWABLE PURPOSES; QUALIFIED BUSINESS; RESTRICTIONS AND LIMITATIONS- The Administration'; and

(2) in paragraph (1)--

(A) by striking `(1) No financial' and inserting the following:

`(1) IN GENERAL-

`(A) CREDIT ELSEWHERE- No financial'; and

(B) by adding at the end the following:

`(B) BACKGROUND CHECKS- Prior to the approval of any loan made pursuant to this subsection, or section 503 of the Small Business Investment Act of 1958, the Administrator may verify the applicant's criminal background, or lack thereof, through the best available means, including, if possible, use of the National Crime Information Center computer system at the Federal Bureau of Investigation.'.

SEC. 232. REPORT ON INCREASED LENDER APPROVAL, SERVICING, FORECLOSURE, LIQUIDATION, AND LITIGATION OF SECTION 7(a) LOANS.

(a) IN GENERAL-

(1) SUBMISSION- Not later than 6 months after the date of enactment of this Act, the Administrator shall submit to the Committees a report on action taken and planned for future reliance on private sector lender resources to originate, approve, close, service, liquidate, foreclose, and litigate loans made under section 7(a) of the Small Business Act.

(2) CONTENTS- The report under this subsection shall address administrative and other steps necessary to achieve the results described in paragraph (1), including--

(A) streamlining the process for approving lenders and standardizing requirements;

(B) establishing uniform reporting requirements using on-line automated capabilities to the maximum extent feasible;

(D) providing uniform standards for approval, closing, servicing, foreclosure, and liquidation;

(E) promulgating new regulations or amending existing ones;

(F) establishing a timetable for implementing the plan for reliance on private sector lenders;

(G) implementing organizational changes at SBA; and

(H) estimating the annual savings that would occur as a result of implementation.

(b) CONSULTATION- In preparing the report under subsection (a), the Administrator shall consult with, among others--

(1) borrowers and lenders under section 7(a) of the Small Business Act;

(2) small businesses that are potential program participants under section 7(a) of the Small Business Act;

(3) financial institutions that are potential program lenders under section 7(a) of the Small Business Act; and

(4) representative industry associations.

SEC. 233. COMPLETION OF PLANNING FOR LOAN MONITORING SYSTEM.

(a) IN GENERAL- The Administrator shall perform and complete the planning needed to serve as the basis for funding the development and implementation of the computerized loan monitoring system, including--

(1) fully defining the system requirement using on-line, automated capabilities to the extent feasible;

(2) identifying all data inputs and outputs necessary for timely report generation;

(3) benchmark loan monitoring business processes and systems against comparable industry processes and, if appropriate, simplify or redefine work processes based on these benchmarks;

(4) determine data quality standards and control systems for ensuring information accuracy;

(5) identify an acquisition strategy and work increments to completion;

(6) analyze the benefits and costs of alternatives and use to demonstrate the advantage of the final project;

(7) ensure that the proposed information system is consistent with the agency's information architecture; and

(8) estimate the cost to system completion, identifying the essential cost element.

(b) REPORT-

(1) IN GENERAL- On the date that is 6 months after the date of enactment of this Act, the Administrator shall submit a report on the progress of the Administrator in carrying out subsection (a) to--

(A) the Committees; and

(B) the Comptroller General of the United States.

(2) EVALUATION- Not later than 28 days after receipt of the report under paragraph (1)(B), the Comptroller General of the United States shall--

(A) prepare a written evaluation of the report for compliance with subsection (a); and

(B) submit the evaluation to the Committees.

(3) LIMITATION- None of the funds provided for the purchase of the loan monitoring system may be obligated or expended until 45 days after the date on which the Committees and the Comptroller General of the United States receive the report under paragraph (1).

TITLE III--WOMEN'S BUSINESS ENTERPRISES

SEC. 301. INTERAGENCY COMMITTEE PARTICIPATION.

Section 403 of the Women's Business Ownership Act of 1988 (15 U.S.C. 631 note) is amended--

(1) in subsection (a)(2)(A)--

(A) by striking `and Amendments Act of 1994' and inserting `Act of 1997'; and

(B) by inserting before the final period `, and who shall report directly to the head of the agency on the status of the activities of the Interagency Committee';

(2) in subsection (a)(2)(B), by inserting before the final period the following: `and shall report directly to the Administrator on the status of the activities on the Interagency Committee and shall serve as the Interagency Committee Liaison to the National Women's Business Council established under section 405'; and

(3) in subsection (b), by striking `and Amendments Act of 1994' and inserting `Act of 1997'.

SEC. 302. REPORTS.

Section 404 of the Women's Business Ownership Act of 1988 (15 U.S.C. 631 note) is amended--

(1) by inserting `, through the Small Business Administration,' after `transmit';

(2) by striking paragraph (1) and redesignating paragraphs (2) through (4) as paragraphs (1) through (3), respectively; and

(3) in paragraph (1), as redesignated, by inserting before the semicolon the following: `, including a verbatim report on the status of progress of the Interagency Committee in meeting its responsibilities and duties under section 402(a)'.

SEC. 303. COUNCIL DUTIES.

Section 406 of the Women's Business Ownership Act of 1988 (15 U.S.C. 631 note) is amended--

(1) in subsection (c), by inserting after `Administrator' the following: `(through the Assistant Administrator of the Office of Women's Business Ownership)'; and

(2) in subsection (d)--

(A) in paragraph (4), by striking `and' at the end;

(B) in paragraph (5), by striking the period at the end and inserting a semicolon; and

`(6) not later than 90 days after the last day of each fiscal year, submit to the President and to the Committee on Small Business of the Senate and the Committee on Small Business of the House of Representatives, a report containing--

`(A) a detailed description of the activities of the council, including a status report on the Council's progress toward meeting its duties outlined in subsections (a) and (d) of section 406;

`(B) the findings, conclusions, and recommendations of the Council; and

`(C) the Council's recommendations for such legislation and administrative actions as the Council considers appropriate to promote the development of small business concerns owned and controlled by women.

`(e) FORM OF TRANSMITTAL- The information included in each report under subsection (d) that is described in subparagraphs (A) through (C) of subsection (d)(6), shall be reported verbatim, together with any separate additional, concurring, or dissenting views of the Administrator.'.

SEC. 304. COUNCIL MEMBERSHIP.

Section 407 of the Women's Business Ownership Act of 1988 (15 U.S.C. 631 note) is amended--

(1) in subsection (a), by striking `and Amendments Act of 1994' and inserting `Act of 1997';

(2) in subsection (b)--

(A) by striking `and Amendments Act of 1994' and inserting `Act of 1997';

(B) by inserting after `the Administrator shall' the following: `, after receiving the recommendations of the Chairman and the Ranking Member of the Committees on Small Business of the House of Representatives and the Senate,';

(D) in paragraph (1), by striking `2' and inserting `4';