To amend the Internal Revenue Code of 1986 to increase the contribution limits for individual retirement plans, defined contribution plans, and salary reduction plans, and for other purposes.

Summary: Retirement Enhancement Act of 2006 - Amends the Internal Revenue Code to increase limits on contributions to certain tax-exempt retirement plans, including: (1) individual retirement accounts; (2) deferred compensation plans, including plans of state and local governments and tax-exempt organizations; and (3) defined contribution plans.

 Allows a one-time taxpayer election to double adjusted gross income levels used to determine the allowable amount of the tax credit for retirement savings contributions. Makes such tax credit permanent.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Retirement Enhancement Act of 
2006''.

SEC. 2. MODIFICATION OF LIMITS ON CONTRIBUTIONS TO CERTAIN RETIREMENT 
              ACCOUNTS.

    (a) Individual Retirement Accounts.--
            (1) In general.--The table in subparagraph (A) of section 
        219(b)(5) of the Internal Revenue Code of 1986 (defining 
        deductible amount) is amended to read as follows:


 
                                                                 The
             ``For taxable years beginning in:                deductible
                                                              amount is:
 
2007 or 2008...............................................       $8,000
2009 or thereafter.........................................  $10,000.''.

            (2) Cost of living adjustment.--Clause (i) of section 
        219(b)(5)(C) of such Code is amended--
                    (A) in the matter preceding subclause (I) by 
                striking ``after 2008, the $5,000'' and inserting 
                ``after 2009, the $10,000'', and
                    (B) in subclause (II) by striking ``calendar year 
                2007'' and inserting ``calendar year 2008''.
            (3) Increase in catch-up contribution amount.--Subparagraph 
        (B) of section 219(b)(5) of such Code is amended to read as 
        follows:
                    ``(B) Catch-up contributions for individuals 50 or 
                older.--In the case of an individual who has attained 
                the age of 50 before the close of the taxable year, the 
                deductible amount for such taxable year shall be 
                increased by $2,000.''.
            (4) Increase in limitation on deduction for active 
        participants in certain pension plans.--
                    (A) Joint returns.--Clause (i) of section 
                219(g)(3)(B) of such Code is amended to read as 
                follows:
                            ``(i) In the case of a taxpayer filing a 
                        joint return for taxable years beginning in 
                        2007 or thereafter, the applicable dollar 
                        amount is $240,000.''.
                    (B) Returns other than joint and married filing 
                separately.--Clause (ii) of section 219(g)(3)(B) of 
                such Code is amended to read as follows:
                            ``(ii) In the case of any other taxpayer 
                        (other than a married individual filing a 
                        separate return), for taxable years beginning 
                        in 2007 or thereafter, the applicable dollar 
                        amount is $150,000.''.
                    (C) Cost-of-living adjustment.--Paragraph (3) of 
                section 219(g) of such Code (relating to adjusted gross 
                income; applicable dollar amount) is amended by adding 
                at the end the following new subparagraph:
                    ``(C) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2007, the $240,000 amount in clause (i) and the 
                        $150,000 in clause (ii) of subparagraph (B) 
                        shall each be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 2006' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding rules.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $500, such amount shall be rounded to the 
                        next lower multiple of $500.''.
    (b) Increase in Elective Deferrals to Qualified Plans.--
            (1) In general.--Subparagraph (A) of section 402(g)(1) of 
        the Internal Revenue Code of 1986 (relating to general rule on 
        limitation on exclusion for elective deferrals) is amended by 
        striking ``the applicable dollar amount'' and inserting 
        ``$30,000''.
            (2) Cost-of-living adjustment.--Paragraph (4) of section 
        402(g) of such Code (relating to is amended cost-of-living 
        adjustment) is amended--
                    (A) by striking ``December 31, 2006'' and inserting 
                ``December 31, 2007'', and
                    (B) by striking ``$15,000'' and inserting 
                ``$30,000''.
            (3) Catch-up contributions.--
                    (A) Plans other than simple and 401(k) plans.--
                Clause (i) of section 414(v)(2)(B) of such Code is 
                amended by striking ``applicable dollar amount shall be 
                determined'' and all that follows and inserting 
                ``applicable dollar amount shall be $10,000''.
                    (B) Simple and 401(k) plans.--Clause (ii) of 
                section 414(v)(2)(B) of such Code is amended by 
                striking ``applicable dollar amount shall be 
                determined'' and all that follows and inserting 
                ``applicable dollar amount shall be $5,000''.
                    (C) Inflation adjustment.--Subparagraph (C) of 
                section 414(v)(2) of such Code is amended--
                            (i) by striking ``December 31, 2006'' and 
                        inserting ``December 31, 2007'',
                            (ii) by striking ``$5,000'' and inserting 
                        ``$10,000'', and
                            (iii) by striking ``$2,500'' and inserting 
                        ``$5,000''.
    (c) Increase in Elective Deferrals to 457 Plans.--
            (1) In general.--Subparagraph (A) of section 457(b)(2) of 
        such Code (defining eligible deferred compensation plan) is 
        amended to read as follows:
                    ``(A) $30,000, or''.
            (2) Cost-of-living adjustment.--Paragraph (15) of section 
        457(e) of such Code (relating to other definitions and special 
        rules) is amended to read as follows:
            ``(15) Cost-of-living adjustment.--In the case of taxable 
        years beginning after December 31, 2007, the Secretary shall 
        adjust the $30,000 amount under subsection (b)(2)(A) at the 
        same time and in the same manner as under section 415(d), 
        except that the base period shall be the calendar quarter 
        beginning July 1, 2006, and any increase under this paragraph 
        which is not a multiple of $500 shall be rounded to the next 
        lowest multiple of $500.''.
    (d) Defined Contribution Plans.--
            (1) Dollar limit.--Subparagraph (A) of section 415(c)(1) of 
        such Code (relating to limitation for defined contribution 
        plans) is amended by striking ``$40,000'' and inserting 
        ``$80,000''.
            (2) Cost-of-living adjustments.--Subsection (d) of section 
        415 of such Code (relating to cost-of-living adjustments) is 
        amended--
                    (A) by striking ``$40,000'' in paragraph (1)(C) and 
                inserting ``$80,000'', and
                    (B) in paragraph (3)(D)--
                            (i) by striking ``$40,000'' in the heading 
                        and inserting ``$80,000'', and
                            (ii) by striking ``July 1, 2001'' and 
                        inserting ``July 1, 2006''.
    (e) Simple Retirement Accounts.--
            (1) In general.--Clause (i) of section 408(p)(2)(E) of such 
        Code is amended by striking ``applicable dollar amount shall be 
        determined'' and all that follows and inserting ``applicable 
        dollar amount shall be $20,000''.
            (2) Cost-of-living adjustment.--Clause (ii) of section 
        408(p)(2)(E) of such Code is amended--
                    (A) by striking ``December 31, 2005'' and inserting 
                ``December 31, 2007'',
                    (B) by striking ``$10,000'' and inserting 
                ``$20,000'', and
                    (C) by striking ``July 1, 2004'' and inserting 
                ``July 1, 2006''.
    (f) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2006.

SEC. 3. ONE-TIME ELECTION TO APPLY HIGHER INCOME THRESHOLDS UNDER 
              SAVERS CREDIT.

    (a) In General.--Section 25B of the Internal Revenue Code of 1986 
(relating to elective deferrals and IRA contributions by certain 
individuals) is amended by redesignating subsections (e), (f), (g), and 
(h) as subsections (f), (g), (h), and (i), respectively, and by 
inserting after subsection (d) the following new subsection:
    ``(e) One-Time Election to Apply Higher Income Thresholds.--
            ``(1) In general.--In the case of an eligible individual 
        for whom an election is in effect under this subsection for any 
        taxable year, subsection (b) shall be applied by substituting 
        for each dollar amount specified in the table therein an amount 
        equal to 200 percent of such dollar amount.
            ``(2) Election applies only to 1 taxable year.--An election 
        to have paragraph (1) apply with respect to any eligible 
        individual may not be made for any taxable year if such an 
        election is in effect with respect to such individual for any 
        other prior taxable year.''.
    (b) Credit Made Permanent.--
            (1) Repeal of termination.--Section 25B of such Code, as 
        amended by subsection (a), is amended by striking subsection 
        (i).
            (2) Repeal of egtrra sunset.--Section 901 of the Economic 
        Growth and Tax Relief Reconciliation Act of 2001 shall not 
        apply to section 618 of such Act (relating to nonrefundable 
        credit to certain individuals for elective deferrals and IRA 
        contributions).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2006.