II 

109TH CONGRESS 

2D SESSION S. 2431 

To amend the Internal Revenue Code of 1986 to encourage all Americans 

to save for retirement by increasing their access to pension plans and 

other retirement savings vehicles, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 16 (legislative day, MARCH 15), 2006 

Mr. BAUCUS introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to encourage 

all Americans to save for retirement by increasing their 

access to pension plans and other retirement savings 

vehicles, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; 

4 TABLE OF CONTENTS. 

5 (a) SHORT TITLE.—This Act may be cited as the 

6 ‘‘Savings Competitiveness Act of 2006’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amendVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 ment or repeal is expressed in terms of an amendment 

2 to, or repeal of, a section or other provision, the reference 

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986. 

5 (c) TABLE OF CONTENTS.—The table of contents of 

6 this Act is as follows: 

Sec. 1. Short title; amendment of 1986 Code; table of contents. 

TITLE I—EMPLOYEE ACCESS TO RETIREMENT SAVINGS 

PROGRAMS AT WORK 

Sec. 101. Employees not covered by qualified retirement plans or arrangements 

entitled to participate in payroll retirement savings programs 

at work. 

Sec. 102. Credit for small employers maintaining payroll retirement savings arrangements. 

Sec. 103. Establishment of Secure Retirement Accounts. 

TITLE II—FEDERAL MATCHING OF CERTAIN RETIREMENT 

CONTRIBUTIONS 

Sec. 201. Refundable credit to provide a Federal match for retirement contributions of certain taxpayers. 

TITLE III—OTHER PROVISIONS TO INCREASE RETIREMENT 

SAVINGS 

Sec. 301. Young Savers Accounts. 

Sec. 302. Increasing participation in cash or deferred plans through automatic 

contribution arrangements. 

Sec. 303. Treatment of investment of assets by plan where participant fails to 

exercise investment election. 

Sec. 304. Credit for qualified pension plan contributions of small employers. 

Sec. 305. Account funds disregarded for purposes of certain means-tested Federal programs. 

Sec. 306. Direct payment of tax refunds to individual retirement plans. 

TITLE IV—SIMPLIFICATION PROVISIONS 

Sec. 401. Exception from required distributions where aggregate retirement 

savings less than $50,000. 

Sec. 402. Allowance of additional nonelective contributions to simple plans. 

Sec. 403. Extension of certain exceptions from tax on early distributions to 

plans other than individual retirement plans. 

Sec. 404. Elimination of higher penalty on certain simple plan distributions. 

Sec. 405. Simple plan portability. 

Sec. 406. Allow direct rollovers from retirement plans to Roth IRAS. 

Sec. 407. Coordination of ordering rules for distributions from Roth IRAs and 

designated Roth accounts. 


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TITLE V—PAY-GO PROVISIONS 

Sec. 501. Pay-as-you-go point of order in the Senate. 

TITLE VI—ADMINISTRATIVE PROVISIONS 

Sec. 601. Provisions relating to plan amendments. 

1 TITLE I—EMPLOYEE ACCESS TO 

2 RETIREMENT SAVINGS PRO3 GRAMS AT WORK 

4 SEC. 101. EMPLOYEES NOT COVERED BY QUALIFIED RE5 TIREMENT PLANS OR ARRANGEMENTS ENTI6 TLED TO PARTICIPATE IN PAYROLL RETIRE7 MENT SAVINGS PROGRAMS AT WORK. 

8 (a) IN GENERAL.—Subpart A of part I of subchapter 

9 A of chapter 1 (relating to pension, profit-sharing, stock 

10 bonus plans, etc.) is amended by inserting after section 

11 408A the following new section: 

12 ‘‘SEC. 408B. RIGHT TO PAYROLL RETIREMENT SAVINGS 

13 PROGRAMS AT WORK. 

14 ‘‘(a) REQUIREMENT TO PROVIDE PAYROLL PRO15 GRAM.—Each employer (other than a small employer de16 scribed in subsection (e)) shall provide to each applicable 

17 employee of the employer for any calendar year the oppor18 tunity to participate in a payroll retirement savings ar19 rangement which meets the requirements of this section. 

20 ‘‘(b) PAYROLL RETIREMENT SAVINGS ARRANGE21 MENT.—For purposes of this section— 


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1 ‘‘(1) IN GENERAL.—The term ‘payroll retire2 ment savings arrangement’ means a written ar3 rangement of an employer— 

4 ‘‘(A) under which an applicable employee 

5 eligible to participate in the arrangement may 

6 elect to contribute to an individual retirement 

7 plan established by or on behalf of the employee 

8 by having the employer make direct deposit 

9 payments to the plan by payroll deduction, and 

10 ‘‘(B) which meets the requirements of 

11 paragraph (2). 

12 ‘‘(2) ADMINISTRATIVE REQUIREMENTS.—The 

13 requirements of this paragraph are met with respect 

14 to any payroll retirement savings arrangement if— 

15 ‘‘(A) the employer must make the pay16 ments elected under paragraph (1)(A)(i) not 

17 later than the close of the 30-day period fol18 lowing the last day of the month in which the 

19 payroll deduction occurs, 

20 ‘‘(B) subject to a requirement for reason21 able notice, an employee may elect to terminate 

22 participation in the arrangement at any time 

23 during the year, except that if an employee so 

24 terminates, the arrangement may provide that 


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1 the employee may not elect to resume participa2 tion until the beginning of the next year, 

3 ‘‘(C) each employee eligible to participate 

4 may elect, during the 60-day period before the 

5 beginning of any year (and the 60-day period 

6 before the first day the employee is eligible to 

7 participate), to participate in the arrangement, 

8 or to modify the amounts subject to the ar9 rangement, for such year, 

10 ‘‘(D) immediately before the period for 

11 which an election described in paragraph (1)(A) 

12 may be made, the employer provides a notice to 

13 each employee of the employee’s opportunity to 

14 make the election and the maximum amount 

15 which may be contributed to an individual re16 tirement plan on an annual basis, and 

17 ‘‘(E) subject to subsection (f), the arrange18 ment provides that an employee may elect to 

19 have contributions made to any individual re20 tirement plan specified by the employee. 

21 ‘‘(c) APPLICABLE EMPLOYEE.—For purposes of this 

22 section— 

23 ‘‘(1) IN GENERAL.—The term ‘applicable em24 ployee’ means, with respect to any calendar year, 

25 any employee— 


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1 ‘‘(A) who did not benefit (within the mean2 ing of section 410(b)) under a qualified plan or 

3 arrangement maintained by the employer for 

4 service during the preceding calendar year, and 

5 ‘‘(B) with respect to whom it is reasonable 

6 to expect that the employee will not so benefit 

7 during the calendar year under such a qualified 

8 plan or arrangement. 

9 ‘‘(2) EXCLUDABLE EMPLOYEES.—An employer 

10 may elect to exclude from treatment as applicable 

11 employees under subparagraph (A)— 

12 ‘‘(A) employees described in section 

13 410(b)(3), 

14 ‘‘(B) employees who have not attained the 

15 age of 18 before the beginning of the calendar 

16 year, 

17 ‘‘(C) employees who have not completed at 

18 least 3 months of service with the employer, 

19 ‘‘(D) employees who are reasonably ex20 pected to receive less than $5,000 of compensa21 tion from the employer during the calendar 

22 year, and 

23 ‘‘(E) employees who will be eligible to par24 ticipate in a qualified cash or deferred arrange25 ment (as defined in section 401(k)(2)) of the 


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1 employer upon the completion of a year of serv2 ice requirement which, under the arrangement, 

3 is not more than 500 hours. 

4 ‘‘(3) QUALIFIED PLAN OR ARRANGEMENT.— 

5 The term ‘qualified plan or arrangement’ means a 

6 plan, contract, pension, or trust described in section 

7 219(g)(5). 

8 ‘‘(4) EXCEPTION FOR EMPLOYEES OF GOVERN9 MENTS AND CHURCHES.—The term ‘applicable em10 ployee’ shall not include an employee of— 

11 ‘‘(A) a government or entity described in 

12 section 414(d), or 

13 ‘‘(B) a church or a convention or associa14 tion of churches which is exempt from tax 

15 under section 501, including any employee de16 scribed in section 414(e)(3)(B). 

17 ‘‘(d) PAYROLL SAVINGS CONTRIBUTIONS TREATED

18 LIKE OTHER CONTRIBUTIONS TO INDIVIDUAL RETIRE19 MENT PLANS.— 

20 ‘‘(1) TAX TREATMENT UNAFFECTED.—The fact 

21 that a contribution to an individual retirement plan 

22 is made on behalf of an employee under a payroll re23 tirement savings arrangement instead of being made 

24 directly by the employee shall not affect the deductVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 ibility or other tax treatment of the contribution or 

2 of other amounts under this title. 

3 ‘‘(2) PAYROLL SAVINGS CONTRIBUTIONS TAKEN

4 INTO ACCOUNT.—Any contribution made on behalf 

5 of an employee under a payroll retirement savings 

6 arrangement shall be taken into account in applying 

7 the limitations on contributions to individual retire8 ment plans and the other provisions of this title ap9 plicable to individual retirement plans as if the con10 tribution had been made directly by the employee. 

11 ‘‘(e) EXCEPTION FOR CERTAIN SMALL EMPLOY12 ERS.— 

13 ‘‘(1) IN GENERAL.—The requirements of this 

14 section shall not apply for any calendar year to an 

15 employer which had not more than 4 employees who 

16 received at least $5,000 of compensation from the 

17 employer for the preceding calendar year. 

18 ‘‘(2) OPERATING RULES.—In determining the 

19 number of employees for purposes of this sub20 section— 

21 ‘‘(A) any rule applicable in determining the 

22 number of employees for purposes of section 

23 408(p)(2)(C) shall be applicable under this sub24 section, and 


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1 ‘‘(B) all members of the same family 

2 (within the meaning of section 318(a)(1)) shall 

3 be treated as 1 individual. 

4 ‘‘(f) USE OF DESIGNATED FINANCIAL INSTITU5 TION.—An employer shall not be treated as failing to sat6 isfy the requirements of this section or any other provision 

7 of this title merely because the employer makes all con8 tributions (or all contributions on behalf of employees who 

9 do not specify an individual retirement plan, trustee, or 

10 issuer to receive the contributions) to Secure Retirement 

11 Accounts, or other arrangements specified in regulations 

12 prescribed by the Secretary, of a designated trustee or 

13 issuer. The preceding sentence shall not apply unless each 

14 participant is notified in writing that the participant’s bal15 ance may be transferred without cost or penalty to another 

16 individual retirement plan in accordance with subsection 

17 (b)(1)(A). 

18 ‘‘(g) COORDINATION WITH AUTOMATIC ENROLL19 MENT PROVISIONS.— 

20 ‘‘(1) IN GENERAL.—A payroll retirement sav21 ings arrangement may provide that contributions 

22 under the arrangement will be made pursuant to an 

23 automatic contribution arrangement but only if the 

24 arrangement meets the requirements applicable to 

25 an eligible automatic contribution arrangement 


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1 under section 414(w). The Secretary may modify 

2 such requirements to the extent necessary to carry 

3 out the purposes of this section. 

4 ‘‘(2) DEFAULT INVESTMENTS.—If an employee 

5 does not make an investment election under an auto6 matic contribution arrangement described in para7 graph (1)— 

8 ‘‘(A) the contributions shall be transferred 

9 to a Secure Retirement Account or other ar10 rangement specified in regulations prescribed by 

11 the Secretary, and 

12 ‘‘(B) such contributions (and any earnings 

13 thereon) shall be invested in accordance with 

14 the regulations prescribed under section 

15 404(c)(4) of the Employee Retirement Income 

16 Security Act of 1974. 

17 ‘‘(h) MODEL NOTICE.—The Secretary shall provide 

18 a model notice, written in a manner calculated to be un19 derstandable to the average worker, that employers may 

20 use— 

21 ‘‘(1) to notify employees of the requirement 

22 under this section for the employer to provide cer23 tain employees with the opportunity to participate in 

24 a payroll retirement savings arrangement, and 


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1 ‘‘(2) to satisfy the requirements of subsections 

2 (b)(2)(D) and (f).’’. 

3 (b) PREEMPTION OF CONFLICTING STATE REGULA4 TIONS.—Section 514(e)(1) of the Employee Retirement 

5 Income Security Act of 1974 (29 U.S.C. 1144(e)(1)), as 

6 added by section 302, is amended to read as follows: 

7 ‘‘(1) IN GENERAL.—Notwithstanding any other 

8 provision of this section, any law of a State shall be 

9 superseded if it would directly or indirectly prohibit 

10 or restrict— 

11 ‘‘(A) the inclusion in any plan of an eligi12 ble automatic contribution arrangement, or 

13 ‘‘(B) the establishment or operation of a 

14 payroll retirement savings arrangement meeting 

15 the requirements of section 408B of the Inter16 nal Revenue Code of 1986 (and the inclusion in 

17 such arrangement of an eligible automatic con18 tribution arrangement). 

19 This subsection shall apply to a plan or arrangement 

20 without regard to whether this title applies to such 

21 plan or arrangement.’’. 

22 (c) PROVISIONS TO ENSURE ADEQUATE NOTICE OF

23 AVAILABILITY OF PAYROLL RETIREMENT SAVINGS AR24 RANGEMENTS AND INVESTMENT GUIDELINES.— 

25 (1) EMPLOYER-PROVIDED NOTICE.— 


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1 (A) W-4 STATEMENTS.—Section 3402(f) 

2 (relating to withholding exemptions) is amended 

3 by adding at the end the following new para4 graph: 

5 ‘‘(8) INCLUSION OF PAYROLL SAVINGS NO6 TICE.—An employer shall include with any with7 holding exemption certificate provided to an em8 ployee under this subsection the model notice de9 scribed in section 408B(h) and notice of the avail10 ability of, and methods of acquiring, the model form 

11 prepared by the Secretary of Labor with respect to 

12 basic investment guidelines.’’. 

13 (B) POSTING AT WORKSITE.—Each em14 ployer required to maintain a payroll retirement 

15 savings arrangement under section 408B of the 

16 Internal Revenue Code of 1986 shall, in addi17 tion to any other requirement, post the fol18 lowing notices within the principal places of em19 ployment of any applicable employees which are 

20 customarily used for employer notices to em21 ployees with regard to employment and em22 ployee benefit matters: 

23 (i) The model notice described in sec24 tion 408B(h) of such Code (in such form 


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1 and manner as the Secretary may pre2 scribe). 

3 (ii) Notice of the availability of, and 

4 methods of acquiring, the model form pre5 pared by the Secretary of Labor with re6 spect to basic investment guidelines. 

7 (2) INCLUSION IN SOCIAL SECURITY NO8 TICES.—Section 1143 of the Social Security Act (42 

9 U.S.C. 1320b-13) is amended by adding at the end 

10 the following new subsection: 

11 ‘‘(e) NOTICE OF PAYROLL SAVINGS PROGRAMS.— 

12 The Commissioner shall include with each social security 

13 account statement required to be provided under this sec14 tion the notice described in section 408B(h).’’. 

15 (3) IRA NOTICES.—Section 408(i) (relating to 

16 reports) is amended by adding at the end the fol17 lowing new sentence: ‘‘Any report furnished under 

18 paragraph (2) to an individual shall include the no19 tice of the availability of, and methods of acquiring, 

20 the model form prepared by the Secretary of Labor 

21 with respect to basic investment guidelines.’’. 

22 (d) DEVELOPMENT OF MODEL FORM ESTABLISHING

23 BASIC INVESTMENT GUIDELINES.— 

24 (1) IN GENERAL.—The Secretary of Labor 

25 shall, in consultation with the Secretary of Treasury, 


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1 develop a model form containing basic guidelines for 

2 investing for retirement. Except as otherwise pro3 vided by the Secretary, such guidelines shall in4 clude— 

5 (A) information on the benefits of diver6 sification, 

7 (B) information on the essential dif8 ferences, in terms of risk and return, of pension 

9 plan investments, including stocks, bonds, mu10 tual funds, and money market investments, 

11 (C) information on how an individual’s 

12 pension plan investment allocations may differ 

13 depending on the individual’s age and years to 

14 retirement and on other factors determined by 

15 the Secretary of Labor, 

16 (D) sources of information where individ17 uals may learn more about pension rights, indi18 vidual investing, and investment advice, and 

19 (E) such other information related to indi20 vidual investing as the Secretary of Labor de21 termines appropriate. 

22 (2) CALCULATION INFORMATION.—The model 

23 form under paragraph (1) shall include addresses for 

24 Internet sites and worksheets which a participant or 

25 beneficiary may use to calculate— 


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1 (A) the retirement age value of the partici2 pant’s or beneficiary’s nonforfeitable pension 

3 benefits under the plan (expressed as an annu4 ity amount and determined by reference to var5 ied historical annual rates of return and annu6 ity interest rates), and 

7 (B) other important amounts relating to 

8 retirement savings, including the amount which 

9 a participant or beneficiary would be required 

10 to save annually to provide a retirement income 

11 equal to various percentages of their current 

12 salary (adjusted for expected growth prior to 

13 retirement). 

14 (3) PUBLIC COMMENT.—The Secretary of 

15 Labor shall provide at least 90 days for public com16 ment on a proposed form before publishing final no17 tice of the model form. 

18 (4) RULES RELATING TO FORM AND STATE19 MENT.—The model form under paragraph (1)— 

20 (A) shall be written in a manner calculated 

21 to be understood by the average plan partici22 pant, and 

23 (B) may be delivered in written, electronic, 

24 or other appropriate manner to the extent such 


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1 manner would ensure that the form is reason2 ably accessible to participants and beneficiaries. 

3 (e) PENALTY FOR FAILURE TO PROVIDE ACCESS TO

4 PAYROLL SAVINGS ARRANGEMENTS.—Chapter 43 (relat5 ing to qualified pension, etc., plans) is amended by adding 

6 at the end the following new section: 

7 ‘‘SEC. 4980H. REQUIREMENTS FOR EMPLOYERS TO PRO8 VIDE EMPLOYEES ACCESS TO PAYROLL RE9 TIREMENT SAVINGS ARRANGEMENTS. 

10 ‘‘(a) GENERAL RULE.—There is hereby imposed a 

11 tax on any failure by an employer to meet the require12 ments of subsection (d) for a calendar year. 

13 ‘‘(b) AMOUNT.— 

14 ‘‘(1) IN GENERAL.—The amount of the tax im15 posed by subsection (a) on any failure for any cal16 endar year shall be $100 with respect to each em17 ployee to whom such failure relates. 

18 ‘‘(2) TAX NOT TO APPLY WHERE FAILURE NOT

19 DISCOVERED AND REASONABLE DILIGENCE EXER20 CISED.—No tax shall be imposed by subsection (a) 

21 on any failure during any period for which it is es22 tablished to the satisfaction of the Secretary that 

23 any employer subject to liability for the tax did not 

24 know that the failure existed and exercised reason25 able diligence to meet the requirements of subsection 


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1 (d). In no event shall the tax be impaired with re2 spect to any failure that ends before the expiration 

3 of 90 days after the employer has responded or has 

4 had a reasonable opportunity to respond to a request 

5 for confirmation of compliance under subsection (c). 

6 ‘‘(3) TAX NOT TO APPLY TO FAILURES COR7 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

8 by subsection (a) on any failure if— 

9 ‘‘(A) the employer subject to liability for 

10 the tax under subsection (a) exercised reason11 able diligence to meet the requirements of sub12 section (d), and 

13 ‘‘(B) the employer provides the payroll re14 tirement savings arrangement described in sec15 tion 408B to each employee eligible to partici16 pate in the arrangement by the end of the 30- 

17 day period beginning on the first date the em18 ployer knew, or exercising reasonable diligence 

19 would have known, that such failure existed. 

20 ‘‘(4) WAIVER BY SECRETARY.—In the case of a 

21 failure which is due to reasonable cause and not to 

22 willful neglect, the Secretary may waive part or all 

23 of the tax imposed by subsection (a) to the extent 

24 that the payment of such tax would be excessive or 

25 otherwise inequitable relative to the failure involved. 


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1 ‘‘(c) PROCEDURES FOR NOTICE.—Not later than 6 

2 months after the date of the enactment of this section, 

3 the Secretary shall prescribe and implement procedures 

4 for obtaining from employers confirmation that such em5 ployers are in compliance with the requirements of sub6 section (d). The Secretary, in the Secretary’s discretion, 

7 may prescribe that the confirmation shall be obtained on 

8 an annual or less frequent basis, and may use for this 

9 purpose the annual report or quarterly report for employ10 ment taxes, or such other means as the Secretary may 

11 deem advisable. 

12 ‘‘(d) REQUIREMENT TO PROVIDE EMPLOYEE ACCESS

13 TO PAYROLL RETIREMENT SAVINGS ARRANGEMENTS.— 

14 The requirements of this subsection are met if the em15 ployer meets the requirements of section 408B.’’. 

16 (f) COORDINATION WITH ERISA FIDUCIARY DU17 TIES.—Section 404(c)(2) of such Act (29 U.S.C. 

18 1104(c)(2)) is amended— 

19 (1) by inserting ‘‘or an individual retirement 

20 plan established pursuant to a payroll retirement 

21 savings arrangement required under section 408B of 

22 such Code’’ after ‘‘1986’’, and 

23 (2) by inserting ‘‘or individual retirement plan 

24 established pursuant to a payroll retirement savings 

25 arrangement required under section 408B of such 


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1 Code’’ after ‘‘simple retirement account’’ each place 

2 it appears in subparagraph (B) or (C). 

3 (g) MODIFICATION OF TOP-HEAVY RULES.—Section 

4 416(i) (relating to definitions) is amended by adding at 

5 the end the following new paragraph: 

6 ‘‘(7) TREATMENT OF CERTAIN EMPLOYEES

7 UNDER CASH OR DEFERRED ARRANGEMENTS.—If 

8 employees are eligible to participate in a qualified 

9 cash or deferred arrangement (as defined in section 

10 401(k)(2)) of the employer during any year upon 

11 completion of a year of service requirement, which 

12 under the arrangement, is not more than 500 hours, 

13 the employer may elect to exclude from the applica14 tion of this section all such employees who do not 

15 meet the age and service requirements of section 

16 410(a)(1)(A).’’. 

17 (h) CONFORMING AMENDMENTS.— 

18 (1) The table of sections for subpart A of part 

19 I of subchapter A of chapter 1 is amended by insert20 ing after the item relating to section 408A the fol21 lowing new item: 

‘‘Sec. 408B. Right to payroll retirement savings programs at work.’’. 

22 (2) The table of sections for chapter 43 is 

23 amended by adding at the end the following new 

24 item: 


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‘‘Sec. 4980H. Requirements for employers to provide employees access to payroll retirement savings arrangements.’’. 

1 (i) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to calendar years beginning after 

3 December 31, 2007. 

4 SEC. 102. CREDIT FOR SMALL EMPLOYERS MAINTAINING 

5 PAYROLL RETIREMENT SAVINGS ARRANGE6 MENTS. 

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 (relating to business related cred9 its) is amended by adding at the end the following new 

10 section: 

11 ‘‘SEC. 45N. SMALL EMPLOYER PAYROLL RETIREMENT SAV12 INGS ARRANGEMENT COSTS. 

13 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

14 in the case of an eligible employer maintaining a payroll 

15 retirement savings arrangement meeting the requirements 

16 of section 408B (without regard to whether or not the em17 ployer is required to maintain the arrangement), the small 

18 employer payroll retirement savings arrangement cost 

19 credit determined under this section for any taxable year 

20 is the amount determined under subsection (b). 

21 ‘‘(b) AMOUNT OF CREDIT.— 

22 ‘‘(1) IN GENERAL.—The amount of the credit 

23 determined under this section for any taxable year 


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1 with respect to an eligible employer shall be equal to 

2 the lesser of— 

3 ‘‘(A) $25 multiplied by the number of ap4 plicable employees (within the meaning of sec5 tion 408B(c)) for whom contributions are made 

6 under the payroll retirement savings arrange7 ment referred to in subsection (a) for the cal8 endar year in which the taxable year begins, or 

9 ‘‘(B) $250. 

10 ‘‘(2) DURATION OF CREDIT.— 

11 ‘‘(A) IN GENERAL.—No credit shall be de12 termined under this section for any taxable year 

13 other than the first taxable year which begins 

14 in the first calendar year in which the eligible 

15 employer maintains a payroll retirement savings 

16 arrangement meeting the requirements of sec17 tion 408B. 

18 ‘‘(B) EXCEPTION FOR AUTOMATIC CON19 TRIBUTION ARRANGEMENTS.— 

20 ‘‘(i) IN GENERAL.—Subparagraph (A) 

21 shall not apply to any taxable year begin22 ning in a calendar year if the payroll re23 tirement savings arrangement includes an 

24 eligible automatic contribution arrange25 ment meeting the requirements of section 


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1 408B(g) at all times during the calendar 

2 year. 

3 ‘‘(ii) LIMITATION.—This subpara4 graph shall only apply to 2 taxable years. 

5 The taxpayer shall elect the applicable tax6 able years and such election, once made, 

7 shall be irrevocable. 

8 ‘‘(3) COORDINATION WITH SMALL EMPLOYER

9 STARTUP CREDIT.—No credit shall be allowed under 

10 this section for any taxable year if a credit is deter11 mined under section 45E for the taxable year. 

12 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this 

13 section, the term ‘eligible employer’ means, with respect 

14 to any calendar year in which the taxable year begins, an 

15 employer which maintains a payroll retirement savings ar16 rangement meeting the requirements of section 408B and 

17 which, on each day during the preceding calendar year, 

18 had no more than 25 employees.’’. 

19 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI20 NESS CREDIT.—Section 38(b) (defining current year busi21 ness credit) is amended by striking ‘‘and’’ at the end of 

22 paragraph (29), by striking the period at the end of para23 graph (30) and inserting ‘‘, and’’, and by adding at the 

24 end the following new paragraph: 


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1 ‘‘(31) in the case of an eligible employer (as de2 fined in section 45N(c)) maintaining a payroll retire3 ment savings arrangement meeting the requirements 

4 of section 408B, the small employer payroll retire5 ment savings arrangement cost credit determined 

6 under section 45N(a).’’ 

7 (c) CLERICAL AMENDMENT.—The table of sections 

8 for subpart D of part IV of subchapter A of chapter 1 

9 is amended by adding at the end the following new item: 

‘‘Sec. 45N. Small employer payroll retirement savings arrangement costs.’’. 

10 (d) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years beginning after 

12 December 31, 2007. 

13 SEC. 103. ESTABLISHMENT OF SECURE RETIREMENT AC14 COUNTS. 

15 (a) IN GENERAL.—Subpart A of part I of subchapter 

16 A of chapter 1 (relating to pension, profit-sharing, stock 

17 bonus plans, etc.), as amended by section 101, is amended 

18 by inserting after section 408B the following new section: 

19 ‘‘SEC. 408C. SECURE RETIREMENT ACCOUNTS. 

20 ‘‘(a) GENERAL RULE.—A Secure Retirement Ac21 count shall be treated for purposes of this title in the same 

22 manner as an individual retirement plan. A Secure Retire23 ment Account may also be treated as a Roth IRA for pur24 poses of this title if it meets the requirements of section 

25 408A. 


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1 ‘‘(b) SECURE RETIREMENT ACCOUNT.—For pur2 poses of this section, the term ‘Secure Retirement Ac3 count’ means an individual retirement plan (as defined in 

4 section 7701(a)(37)) which meets the investment and fee 

5 requirements under the regulations under subsection (c). 

6 ‘‘(c) INVESTMENT AND FEE REQUIREMENTS.— 

7 ‘‘(1) IN GENERAL.—The Secretary, in consulta8 tion with the Secretary of Labor, shall, not later 

9 than 1 year after the date of the enactment of this 

10 section, prescribe regulations which set forth the re11 quirements of this subsection which an individual re12 tirement plan must meet in order to be treated as 

13 a Secure Retirement Account. 

14 ‘‘(2) INVESTMENT OPTIONS.—The regulations 

15 under paragraph (1) shall provide that a Secure Re16 tirement Account shall allow the individual on whose 

17 behalf the individual retirement plan is established 

18 to invest contributions to, and earnings of, the plan 

19 in all of the following investment options: 

20 ‘‘(A) Options which are similar to all in21 vestment options which are available (at the 

22 time the plan is established) to a participant in 

23 the Thrift Savings Fund established under sub24 chapter III of chapter 84 of title 5, United 

25 States Code. 


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1 ‘‘(B) Any other investment option specified 

2 in the regulations. 

3 ‘‘(3) INVESTMENT FEES.— 

4 ‘‘(A) IN GENERAL.—The regulations under 

5 paragraph (1) shall provide that a Secure Re6 tirement Account shall not charge any invest7 ment fees which, in the aggregate, are not rea8 sonable (as determined under such regulations). 

9 ‘‘(B) INVESTMENT FEES.—For purposes of 

10 this paragraph, the term ‘investment fees’ in11 cludes any fee, commission, asset management 

12 fee, compensation for services, or any other 

13 charge or fee specified in the regulations under 

14 paragraph (1) which is imposed with respect to 

15 the Secure Retirement Account.’’. 

16 (b) MANDATORY TRANSFERS.—Section 

17 401(a)(31)(B) is amended— 

18 (1) by striking ‘‘an individual retirement plan’’ 

19 and inserting ‘‘a Secure Retirement Account under 

20 section 408C, or such other arrangement prescribed 

21 by the Secretary in regulations,’’, and 

22 (2) by adding at the end the following new sen23 tence: ‘‘Any amount so transferred (and any earn24 ings thereon) shall be invested in accordance with 

25 the regulations prescribed under section 404(c)(4) of 


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•S 2431 IS

1 the Employee Retirement Income Security Act of 

2 1974.’’ 

3 (c) CLERICAL AMENDMENT.—The table of sections 

4 for subpart A of part I of subchapter A of chapter 1 is 

5 amended by inserting after the item relating to section 

6 408B the following new item: 

‘‘Sec. 408C. Secure retirement accounts.’’. 

7 (d) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to calendar years beginning on or 

9 after the date on which final regulations described in sec10 tion 408C(c) of the Internal Revenue Code of 1986 (as 

11 added by this Act) are issued. 

12 TITLE II—FEDERAL MATCHING 

13 OF CERTAIN RETIREMENT 

14 CONTRIBUTIONS 

15 SEC. 201. REFUNDABLE CREDIT TO PROVIDE A FEDERAL 

16 MATCH FOR RETIREMENT CONTRIBUTIONS 

17 OF CERTAIN TAXPAYERS. 

18 (a) ALLOWANCE OF CREDIT.—Subpart C of part IV 

19 of subchapter A of chapter 1 (relating to refundable cred20 its) is amended by redesignating section 36 as section 37 

21 and by inserting after section 35 the following new section: 

22 ‘‘SEC. 36. MATCHING CONTRIBUTIONS FOR CERTAIN RE23 TIREMENT SAVINGS CONTRIBUTIONS. 

24 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli25 gible individual, there shall be allowed as a credit against 


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1 the tax imposed by this subtitle for the taxable year an 

2 amount equal to the retirement savings credit amount. 

3 ‘‘(b) RETIREMENT SAVINGS CREDIT AMOUNT.—For 

4 purposes of this section— 

5 ‘‘(1) IN GENERAL.—The term ‘retirement sav6 ings credit amount’ means an amount equal to 50 

7 percent of so much of the qualified retirement sav8 ings contributions of the eligible individual for the 

9 taxable year as does not exceed the applicable con10 tribution amount. 

11 ‘‘(2) MINIMUM CONTRIBUTIONS REQUIRED.— 

12 The retirement savings credit amount shall be zero 

13 if the qualified retirement savings contributions of 

14 the eligible individual for the taxable year do not ex15 ceed $200. 

16 ‘‘(c) APPLICABLE CONTRIBUTION AMOUNT.—For 

17 purposes of this section— 

18 ‘‘(1) IN GENERAL.—The term ‘applicable con19 tribution amount’ means $2,000. 

20 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—In the 

21 case of any taxable year beginning in a calendar 

22 year after 2007, the $2,000 dollar amount under 

23 paragraph (1) shall be increased by an amount equal 

24 to such dollar amount multiplied by the cost of living 

25 adjustment determined under section 1(f)(3) for the 


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1 calendar year in which the taxable year begins, de2 termined by substituting ‘2006’ for ‘1992’ in sub3 paragraph (B) thereof. If any amount so increased 

4 is not a multiple of $50, the amount shall be round5 ed to the next lower multiple of $50. 

6 ‘‘(3) ADJUSTED GROSS INCOME LIMITATION.— 

7 ‘‘(A) IN GENERAL.—If the taxpayer’s ad8 justed gross income for any taxable year ex9 ceeds the threshold amount, the applicable con10 tribution amount for the taxpayer for the tax11 able year (determined without regard to this 

12 paragraph) shall be reduced by an amount 

13 equal to the amount which bears the same ratio 

14 to such applicable contribution amount as such 

15 excess bears to $10,000 in the case of a joint 

16 return, $7,500 in the case of the head of a 

17 household, and $5,000 in the case of any other 

18 taxpayer. 

19 ‘‘(B) THRESHOLD AMOUNT.—For purposes 

20 of this paragraph, the term ‘threshold amount’ 

21 means— 

22 ‘‘(i) $50,000 in the case of a joint re23 turn, 

24 ‘‘(ii) $37,500 in the case of a head of 

25 household, 


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•S 2431 IS

1 ‘‘(iii) zero in the case of a married in2 dividual filing a separate return, and 

3 ‘‘(iv) $25,000 in the case of any other 

4 taxpayer. 

5 The rules of section 219(g)(4) shall apply for 

6 purposes of this paragraph. 

7 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—In 

8 the case of any taxable year beginning in a cal9 endar year after 2007— 

10 ‘‘(i) the $50,000 dollar amount under 

11 subparagraph (B)(i) shall— 

12 ‘‘(I) be increased by an amount 

13 equal to such dollar amount multi14 plied by the cost of living adjustment 

15 determined under section 1(f)(3) for 

16 the calendar year in which the taxable 

17 year begins, determined by sub18 stituting ‘2006’ for ‘1992’ in subpara19 graph (B) thereof, and 

20 ‘‘(II) after such increase be 

21 rounded as provided in section 

22 32(j)(2)(B), 

23 ‘‘(ii) the amount under subparagraph 

24 (B)(ii) shall be increased to an amount 

25 equal to 75 percent of the amount in effect 


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•S 2431 IS

1 under subparagraph (B)(i) for the taxable 

2 year after the increase under clause (i), 

3 and 

4 ‘‘(iii) the amount under subparagraph 

5 (B)(iv) shall be increased to an amount 

6 equal to 50 percent of the amount in effect 

7 under subparagraph (B)(i) for the taxable 

8 year after the increase under clause (i). 

9 ‘‘(d) ELIGIBLE INDIVIDUAL.—For purposes of this 

10 section— 

11 ‘‘(1) IN GENERAL.—The term ‘eligible indi12 vidual’ means any individual if such individual has 

13 attained the age of 18 as of the close of the taxable 

14 year. 

15 ‘‘(2) DEPENDENTS AND FULL-TIME STUDENTS

16 NOT ELIGIBLE.—The term ‘eligible individual’ shall 

17 not include— 

18 ‘‘(A) any individual with respect to whom 

19 a deduction under section 151 is allowed to an20 other taxpayer for a taxable year beginning in 

21 the calendar year in which such individual’s 

22 taxable year begins, and 

23 ‘‘(B) any individual who is a student (as 

24 defined in section 152(f)(2)). 


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1 ‘‘(e) QUALIFIED RETIREMENT SAVINGS CONTRIBU2 TIONS.—For purposes of this section— 

3 ‘‘(1) IN GENERAL.—The term ‘qualified retire4 ment savings contributions’ means, with respect to 

5 any taxable year, the sum of— 

6 ‘‘(A) the amount of the qualified retire7 ment contributions (as defined in section 

8 219(e)) made by or on behalf of the eligible in9 dividual, 

10 ‘‘(B) the amount of— 

11 ‘‘(i) any elective deferrals (as defined 

12 in section 402(g)(3)) of such individual, 

13 and 

14 ‘‘(ii) any elective deferral of com15 pensation by such individual under an eli16 gible deferred compensation plan (as de17 fined in section 457(b)) of an eligible em18 ployer described in section 457(e)(1)(A), 

19 and 

20 ‘‘(C) the amount of voluntary employee 

21 contributions by such individual to any qualified 

22 retirement plan (as defined in section 4974(c)). 

23 ‘‘(2) REDUCTION FOR CERTAIN DISTRIBU24 TIONS.— 


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1 ‘‘(A) IN GENERAL.—The qualified retire2 ment savings contributions determined under 

3 paragraph (1) shall be reduced (but not below 

4 zero) by the aggregate distributions received by 

5 the individual during the testing period from 

6 any entity of a type to which contributions 

7 under paragraph (1) may be made. The pre8 ceding sentence shall not apply to the portion of 

9 any distribution which is not includible in gross 

10 income by reason of a trustee-to-trustee trans11 fer or a rollover distribution. 

12 ‘‘(B) TESTING PERIOD.—For purposes of 

13 subparagraph (A), the testing period, with re14 spect to a taxable year, is the period which in15 cludes— 

16 ‘‘(i) such taxable year, 

17 ‘‘(ii) the 2 preceding taxable years, 

18 and 

19 ‘‘(iii) the period after such taxable 

20 year and before the due date (including ex21 tensions) for filing the return of tax for 

22 such taxable year. 

23 ‘‘(C) EXCEPTED DISTRIBUTIONS.—There 

24 shall not be taken into account under subpara25 graph (A)— 


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1 ‘‘(i) any distribution referred to in 

2 section 72(p), 401(k)(8), 401(m)(6), 

3 402(g)(2), 404(k), or 408(d)(4), and 

4 ‘‘(ii) any distribution to which section 

5 408A(d)(3) applies. 

6 ‘‘(D) TREATMENT OF DISTRIBUTIONS RE7 CEIVED BY SPOUSE OF INDIVIDUAL.—For pur8 poses of determining distributions received by 

9 an individual under subparagraph (A) for any 

10 taxable year, any distribution received by the 

11 spouse of such individual shall be treated as re12 ceived by such individual if such individual and 

13 spouse file a joint return for such taxable year 

14 and for the taxable year during which the 

15 spouse receives the distribution. 

16 ‘‘(f) OTHER DEFINITIONS AND RULES.— 

17 ‘‘(1) ADJUSTED GROSS INCOME.—For purposes 

18 of this section, adjusted gross income shall be deter19 mined without regard to sections 911, 931, and 933. 

20 ‘‘(2) INVESTMENT IN THE CONTRACT.—Not21 withstanding any other provision of law— 

22 ‘‘(A) a qualified retirement savings con23 tribution shall not fail to be included in deter24 mining the investment in the contract for purVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 poses of section 72 by reason of the credit 

2 under this section, and 

3 ‘‘(B) any deposit under subsection (g) shall 

4 be included in determining investment in the 

5 contract for purposes of section 72. 

6 ‘‘(g) CREDIT MAY ONLY BE DEPOSITED IN ROTH

7 RETIREMENT SAVINGS ACCOUNT.— 

8 ‘‘(1) IN GENERAL.—The credit allowed under 

9 this section— 

10 ‘‘(A) shall not be treated as a credit al11 lowed under this part, but 

12 ‘‘(B) shall be treated as an overpayment of 

13 tax under section 6401(b)(3) which may, in ac14 cordance with section 6402(l), only be trans15 ferred to— 

16 ‘‘(i) a Roth IRA, or 

17 ‘‘(ii) a designated Roth account which 

18 is within any other plan or arrangement to 

19 which qualified retirement savings con20 tributions may be made. 

21 Any amount so transferred on behalf of an indi22 vidual (and any earnings thereon) shall be non23 forfeitable. 

24 ‘‘(2) COORDINATION WITH LIMITATIONS AND

25 OTHER CONTRIBUTIONS.—If there is any transfer to 


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•S 2431 IS

1 a plan or account under paragraph (1) by reason of 

2 a credit under this section, the rules of subpara3 graphs (A) and (C) of section 414(u)(1) shall apply 

4 with respect to the transfer. 

5 ‘‘(h) RECAPTURE OF CREDIT.— 

6 ‘‘(1) ADDITION TO TAX.—If, during the 5-tax7 able year period beginning with the taxable year for 

8 which a transfer is made under section 6402(l), a 

9 taxpayer receives a distribution or payment out of a 

10 plan or account described in clause (i) or (ii) of sub11 section (g)(1)(B), then, notwithstanding section 72, 

12 the taxpayer’s tax under this chapter for the taxable 

13 year in which the distribution or payment is received 

14 shall be increased by the amount described in para15 graph (2). This subsection shall not apply to a pay16 ment or distribution unless an additional tax would 

17 be imposed under section 72(t) with respect to the 

18 payment or distribution if it were includible in gross 

19 income. 

20 ‘‘(2) AMOUNT OF TAX.—The amount of the tax 

21 under paragraph (1) shall be equal to the amount 

22 transferred under section 6402(l) with respect to the 

23 amount so paid or distributed, reduced by any por24 tion of the amount so transferred with respect to 


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•S 2431 IS

1 which this subsection previously applied during the 

2 taxable year or any preceding taxable year. 

3 ‘‘(3) OPERATING RULES.—For purposes of de4 termining under paragraph (1)(B) whether an 

5 amount was transferred under section 6402(l) with 

6 respect to a distribution or payment, the following 

7 rules shall apply: 

8 ‘‘(A) FIFO RULE.—Distributions or pay9 ments shall be treated as made from contribu10 tions (and earning thereon) in the order in 

11 which the contributions were made, beginning 

12 with the least recent taxable year. 

13 ‘‘(B) UNMATCHED CONTRIBUTIONS

14 COUNTED FIRST.—If contributions were made 

15 in excess of the applicable amount for any tax16 able year, distributions or payments shall be 

17 treated as made first from contributions (and 

18 any earnings thereon) with respect to which no 

19 transfer was made under section 6402(l).’’. 

20 (b) CREDIT FOR MATCHING CONTRIBUTIONS TREAT21 ED AS OVERPAYMENT OF TAX.—Subsection (b) of section 

22 6401 (relating to amounts treated as overpayments) is 

23 amended by adding at the end the following new para24 graph: 


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•S 2431 IS

1 ‘‘(3) SPECIAL RULE FOR CREDIT FOR MATCH2 ING CONTRIBUTIONS UNDER SECTION 36.—Subject 

3 to the provisions of section 6402(l), the amount of 

4 any credit allowed under section 36 (relating to 

5 matching credit for retirement contributions) for any 

6 taxable year shall be considered an overpayment.’’. 

7 (c) TRANSFER OF CREDIT AMOUNT TO RETIREMENT

8 ACCOUNTS.— 

9 (1) IN GENERAL.—Section 6402 (relating to 

10 authority to make credits or refunds) is amended by 

11 adding at the end the following: 

12 ‘‘(l) OVERPAYMENTS ATTRIBUTABLE TO MATCHING

13 RETIREMENT CREDIT.— 

14 ‘‘(1) IN GENERAL.—In the case of any overpay15 ment described in section 6401(b)(3), the Secretary 

16 shall transfer an amount equal to the amount of 

17 such overpayment to the account designated under 

18 paragraph (2) by the individual entitled to the over19 payment. 

20 ‘‘(2) DESIGNATION OF ACCOUNT.—An eligible 

21 individual (as defined in section 36(d)) shall file a 

22 designation including the information described in 

23 paragraph (3) along with the return of the indi24 vidual for the taxable year of the overpayment (or 

25 if no return is required to be filed, on a form preVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00037 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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•S 2431 IS

1 scribed by the Secretary) not later than the later 

2 of— 

3 ‘‘(A) the due date (including extensions) 

4 for filing such return (if applicable), or 

5 ‘‘(B) the 15th day of April following the 

6 close of the taxable year. 

7 ‘‘(3) REQUIRED INFORMATION.—For purposes 

8 of paragraph (2), the information described in this 

9 paragraph is— 

10 ‘‘(A) the designation of the Roth IRA or 

11 designated Roth account described in section 

12 36(g)(1)(B) to which the transfer is to be 

13 made, 

14 ‘‘(B) such information as the Secretary 

15 may require to enable electronic transfer of the 

16 overpayment amount to such IRA or account, 

17 and 

18 ‘‘(C) the amount of qualified retirement 

19 savings contributions (as defined in section 

20 36(e)) for the taxable year with respect to the 

21 individual.’’. 

22 (d) REPORTING REQUIREMENTS.—Section 6047 (re23 lating to information relating to certain trusts and annuity 

24 plans) is amended by redesignating subsection (g) as subVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00038 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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•S 2431 IS

1 section (h) and by inserting after subsection (f) the fol2 lowing new subsection: 

3 ‘‘(g) MATCHING CONTRIBUTIONS.—The Secretary 

4 shall require the trustee of each plan or account to which 

5 overpayments are transferred under section 6402(l) to 

6 make such returns and reports regarding such transfers 

7 to the Secretary, participants, and beneficiaries of the 

8 plan, and such other persons as the Secretary may pre9 scribe.’’. 

10 (e) CONFORMING AMENDMENTS.— 

11 (1) Section 1324(b)(2) of title 31, United 

12 States Code, is amended by striking ‘‘or’’ before 

13 ‘‘enacted’’ and by inserting before the period at the 

14 end ‘‘, or enacted by the Savings Competitiveness 

15 Act of 2006’’. 

16 (2) The table of sections for subpart C of part 

17 IV of subchapter A of chapter 1 is amended by re18 designating the item relating to section 36 as the 

19 item relating to section 37 and by inserting after the 

20 item relating to section 35 the following new item: 

‘‘Sec. 36. Matching contributions for certain retirement savings contributions.’’. 

21 (3) Section 6402(a) is amended by striking ‘‘In 

22 the case’’ and inserting ‘‘Except as provided in sub23 section (l), in the case’’. 


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•S 2431 IS

1 (f) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2006. 

4 TITLE III—OTHER PROVISIONS 

5 TO INCREASE RETIREMENT 

6 SAVINGS 

7 SEC. 301. YOUNG SAVERS ACCOUNTS. 

8 (a) IN GENERAL.—Section 408A (relating to Roth 

9 IRAs) is amended by adding at the end the following new 

10 subsection: 

11 ‘‘(g) YOUNG SAVERS ACCOUNTS.— 

12 ‘‘(1) IN GENERAL.—Except as provided in this 

13 subsection, a young savers account shall be treated 

14 in the same manner as a Roth IRA. 

15 ‘‘(2) YOUNG SAVERS ACCOUNT.—For purposes 

16 of this subsection, the term ‘young savers account’ 

17 means, with respect to any taxable year, a Roth IRA 

18 which is established and maintained on behalf of an 

19 individual who has not attained the age of 18 before 

20 the close of the taxable year. 

21 ‘‘(3) CONTRIBUTION LIMITS.—In the case of 

22 any contributions for any taxable year to 1 or more 

23 young savers accounts established and maintained 

24 on behalf of an individual, each of the following conVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00040 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 tribution limits for the taxable year shall be in2 creased as follows: 

3 ‘‘(A) The contribution limit applicable to 

4 the individual under subsection (c)(2) shall be 

5 increased by the aggregate amount of qualified 

6 parental contributions to such accounts for the 

7 taxable year. 

8 ‘‘(B) The contribution limits applicable to 

9 the young savers accounts under subsection 

10 (a)(1) or (b)(2)(B) of section 408, whichever is 

11 appropriate, shall be increased by the dollar 

12 amount in effect under section 219(b)(1)(A) for 

13 the taxable year. 

14 ‘‘(4) QUALIFIED PARENTAL CONTRIBUTIONS.— 

15 For purposes of this subsection— 

16 ‘‘(A) IN GENERAL.—The term ‘qualified 

17 parental contribution’ means, with respect to 

18 any taxable year, a contribution by an indi19 vidual to a young savers account established 

20 and maintained on behalf of an individual 

21 who— 

22 ‘‘(i) is the child of the individual mak23 ing the contribution, and 

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1 able for the taxable year under section 

2 151(c) to the individual making the con3 tribution. 

4 ‘‘(B) DOLLAR LIMITATIONS.— 

5 ‘‘(i) IN GENERAL.—The aggregate 

6 amount of qualified parental contributions 

7 which may be made for any taxable year 

8 on behalf of an individual shall not exceed 

9 the dollar amount in effect under section 

10 219(b)(1)(A) for the taxable year. 

11 ‘‘(ii) LIMIT ON EACH PARENT.—The 

12 aggregate amount of qualified parental 

13 contributions which an individual may 

14 make for any taxable year on behalf of 1 

15 or more of the individual’s children shall 

16 not exceed the contribution limit applicable 

17 to the individual under subsection (c)(2) 

18 for the taxable year, reduced by any con19 tributions made by or on behalf of the indi20 vidual to any Roth IRA established and 

21 maintained on behalf of the individual. 

22 ‘‘(5) COORDINATION WITH MATCHING CREDIT

23 FOR RETIREMENT SAVINGS CONTRIBUTIONS.—Any 

24 qualified parental contributions made by an eligible 

25 individual (as defined in section 36(d)) shall be 


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•S 2431 IS

1 treated as qualified retirement savings contributions 

2 for purposes of section 36.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2006. 

6 SEC. 302. INCREASING PARTICIPATION IN CASH OR DE7 FERRED PLANS THROUGH AUTOMATIC CON8 TRIBUTION ARRANGEMENTS. 

9 (a) IN GENERAL.—Section 401(k) (relating to cash 

10 or deferred arrangement) is amended by adding at the end 

11 the following new paragraph: 

12 ‘‘(13) NONDISCRIMINATION REQUIREMENTS

13 FOR AUTOMATIC CONTRIBUTION TRUSTS.— 

14 ‘‘(A) IN GENERAL.—A cash or deferred ar15 rangement shall be treated as meeting the re16 quirements of paragraph (3)(A)(ii) if such ar17 rangement constitutes an automatic contribu18 tion trust. 

19 ‘‘(B) AUTOMATIC CONTRIBUTION TRUST.— 

20 ‘‘(i) IN GENERAL.—For purposes of 

21 this paragraph, the term ‘automatic con22 tribution trust’ means an arrangement— 

23 ‘‘(I) except as provided in clauses 

24 (ii) and (iii), under which each em25 ployee eligible to participate in the arVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00043 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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•S 2431 IS

1 rangement is treated as having elected 

2 to have the employer make elective 

3 contributions in an amount equal to 

4 the applicable percentage of the em5 ployee’s compensation, and 

6 ‘‘(II) which meets the require7 ments of subparagraphs (C), (D), (E), 

8 and (F). 

9 ‘‘(ii) EXCEPTION FOR EXISTING EM10 PLOYEES.—In the case of any employee— 

11 ‘‘(I) who was eligible to partici12 pate in the arrangement (or a prede13 cessor arrangement) immediately be14 fore the first date on which the ar15 rangement is an automatic contribu16 tion trust, and 

17 ‘‘(II) whose rate of contribution 

18 immediately before such first date was 

19 less than the applicable percentage for 

20 the employee, 

21 clause (i)(I) shall not apply to such em22 ployee until the date which is 1 year after 

23 such first date (or such earlier date as the 

24 employer may elect). 


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•S 2431 IS

1 ‘‘(iii) ELECTION OUT.—Each em2 ployee eligible to participate in the ar3 rangement may specifically elect not to 

4 have contributions made under clause (i), 

5 and such clause shall cease to apply to 

6 compensation paid on or after the effective 

7 date of the election. 

8 ‘‘(iv) APPLICABLE PERCENTAGE.— 

9 For purposes of this subparagraph— 

10 ‘‘(I) IN GENERAL.—The term 

11 ‘applicable percentage’ means, with 

12 respect to any employee, the uniform 

13 percentage (not less than 3 percent) 

14 determined under the arrangement. In 

15 the case of an employee who was eligi16 ble to participate in the arrangement 

17 (or a predecessor arrangement) imme18 diately before the first date on which 

19 the arrangement is an automatic con20 tribution trust, the initial applicable 

21 percentage shall in no event be less 

22 than the percentage in effect with re23 spect to the employee under the ar24 rangement immediately before the emVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00045 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 ployee first begins participation in the 

2 automatic contribution trust. 

3 ‘‘(II) INCREASE IN PERCENT4 AGE.—In the case of the second plan 

5 year beginning after the first date on 

6 which the election under clause (i)(I) 

7 is in effect with respect to the em8 ployee and any succeeding plan year, 

9 the applicable percentage shall be a 

10 percentage (not greater than 10 per11 cent or such higher uniform percent12 age determined under the arrange13 ment) equal to the sum of the applica14 ble percentage for the employee as of 

15 the close of the preceding plan year 

16 plus 1 percentage point (or such high17 er percentage specified by the plan). A 

18 plan may elect to provide that, in lieu 

19 of any increase under the preceding 

20 sentence, the increase in the applica21 ble percentage required under this 

22 subclause shall occur after each in23 crease in compensation an employee 

24 receives on or after the first day of 

25 such second plan year and that the 


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•S 2431 IS

1 applicable percentage after each such 

2 increase in compensation shall be 

3 equal to the applicable percentage for 

4 the employee immediately before such 

5 increase in compensation plus 1 per6 centage point (or such higher percent7 age specified by the plan). 

8 ‘‘(C) MATCHING OR NONELECTIVE CON9 TRIBUTIONS.— 

10 ‘‘(i) IN GENERAL.—The requirements 

11 of this subparagraph are met if, under the 

12 arrangement, the employer— 

13 ‘‘(I) makes matching contribu14 tions on behalf of each employee who 

15 is not a highly compensated employee 

16 in an amount equal to 50 percent of 

17 the elective contributions of the em18 ployee to the extent such elective con19 tributions do not exceed 7 percent of 

20 compensation; or 

21 ‘‘(II) is required, without regard 

22 to whether the employee makes an 

23 elective contribution or employee con24 tribution, to make a contribution to a 

25 defined contribution plan on behalf of 


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1 each employee who is not a highly 

2 compensated employee and who is eli3 gible to participate in the arrange4 ment in an amount equal to at least 

5 3 percent of the employee’s compensa6 tion, 

7 The rules of clauses (ii) and (iii) of para8 graph (12)(B) shall apply for purposes of 

9 subclause (I). The rules of paragraph 

10 (12)(E)(ii) shall apply for purposes of sub11 clauses (I) and (II). 

12 ‘‘(ii) OTHER PLANS.—An arrange13 ment shall be treated as meeting the re14 quirements under clause (i) if any other 

15 plan maintained by the employer meets 

16 such requirements with respect to employ17 ees eligible under the arrangement. 

18 ‘‘(D) NOTICE REQUIREMENTS.— 

19 ‘‘(i) IN GENERAL.—The requirements 

20 of this subparagraph are met if the re21 quirements of clauses (ii) and (iii) are met. 

22 ‘‘(ii) REASONABLE PERIOD TO MAKE

23 ELECTION.—The requirements of this 

24 clause are met if each employee to whom 

25 subparagraph (B)(i) applies— 


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1 ‘‘(I) receives a notice explaining 

2 the employee’s right under the ar3 rangement to elect not to have elective 

4 contributions made on the employee’s 

5 behalf, and how contributions made 

6 under the arrangement will be in7 vested in the absence of any invest8 ment election by the employee, and 

9 ‘‘(II) has a reasonable period of 

10 time after receipt of such notice and 

11 before the first elective contribution is 

12 made to make such election. 

13 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

14 AND OBLIGATIONS.—The requirements of 

15 this clause are met if each employee eligi16 ble to participate in the arrangement is, 

17 within a reasonable period before any year 

18 (or if the plan elects to change the applica19 ble percentage after any increase in com20 pensation, before the increase), given no21 tice of the employee’s rights and obliga22 tions under the arrangement. 

23 The requirements of clauses (i) and (ii) of para24 graph (12)(D) shall be met with respect to the 


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1 notices described in clauses (ii) and (iii) of this 

2 subparagraph. 

3 ‘‘(E) PARTICIPATION, WITHDRAWAL, AND

4 VESTING REQUIREMENTS.—The requirements 

5 of this subparagraph are met if— 

6 ‘‘(i) the arrangement requires that 

7 each employee eligible to participate in the 

8 arrangement (determined without regard 

9 to any minimum service requirement other10 wise applicable under section 410(a) or the 

11 plan) commences participation in the ar12 rangement no later than the 1st day of the 

13 1st calendar quarter beginning after the 

14 date on which employee first becomes so 

15 eligible, 

16 ‘‘(ii) the withdrawal requirements of 

17 paragraph (2)(B) are met with respect to 

18 all employer contributions (including 

19 matching and elective contributions) taken 

20 into account in determining whether the 

21 arrangement meets the requirements of 

22 subparagraph (C), and 

23 ‘‘(iii) the arrangement requires that 

24 an employee’s right to the accrued benefit 

25 derived from employer contributions deVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00050 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 scribed in clause (ii) (other than elective 

2 contributions) is nonforfeitable after the 

3 employee has completed at least 2 years of 

4 service. 

5 ‘‘(F) CERTAIN WITHDRAWALS MUST BE

6 ALLOWED.—Notwithstanding any other provi7 sion of this subsection, the requirements of this 

8 subparagraph are met if the arrangement al9 lows employees to elect to make permissible 

10 withdrawals in accordance with section 

11 414(w).’’ 

12 (b) MATCHING CONTRIBUTIONS.—Section 401(m) 

13 (relating to nondiscrimination test for matching contribu14 tions and employee contributions) is amended by redesig15 nating paragraph (12) as paragraph (13) and by inserting 

16 after paragraph (11) the following new paragraph: 

17 ‘‘(12) ALTERNATE METHOD FOR AUTOMATIC

18 CONTRIBUTION TRUSTS.—A defined contribution 

19 plan shall be treated as meeting the requirements of 

20 paragraph (2) with respect to matching contribu21 tions if the plan— 

22 ‘‘(A) meets the contribution requirements 

23 of subparagraphs (B)(i) and (C) of subsection 

24 (k)(13); 


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1 ‘‘(B) meets the notice requirements of sub2 paragraph (D) of subsection (k)(13); and 

3 ‘‘(C) meets the requirements of paragraph 

4 (11)(B) (ii) and (iii).’’. 

5 (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY

6 PLANS.— 

7 (1) ELECTIVE CONTRIBUTION RULE.—Clause 

8 (i) of section 416(g)(4)(H) is amended by inserting 

9 ‘‘or 401(k)(13)’’ after ‘‘section 401(k)(12)’’. 

10 (2) MATCHING CONTRIBUTION RULE.—Clause 

11 (ii) of section 416(g)(4)(H) is amended by inserting 

12 ‘‘or 401(m)(12)’’ after ‘‘section 401(m)(11)’’. 

13 (d) SECTION 403(B) CONTRACTS.—Paragraph (11) 

14 of section 401(m) is amended by adding at the end the 

15 following: 

16 ‘‘(C) SECTION 403(b) CONTRACTS.—An 

17 annuity contract under section 403(b) shall be 

18 treated as meeting the requirements of para19 graph (2) with respect to matching contribu20 tions if such contract meets requirements simi21 lar to the requirements under subparagraph 

22 (A).’’. 

23 (e) PREEMPTION OF CONFLICTING STATE REGULA24 TION.—Section 514 of the Employee Retirement Income 


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1 Security of 1974 (29 U.S.C. 1144) is amended by insert2 ing at the end the following new subsection: 

3 ‘‘(e) AUTOMATIC CONTRIBUTION ARRANGEMENTS.— 

4 ‘‘(1) IN GENERAL.—Notwithstanding any other 

5 provision of this section, any law of a State shall be 

6 superseded if it would directly or indirectly prohibit 

7 or restrict the inclusion in any plan of an eligible 

8 automatic contribution arrangement. 

9 ‘‘(2) ELIGIBLE AUTOMATIC CONTRIBUTION AR10 RANGEMENT.—For purposes of this subsection, the 

11 term ‘eligible automatic contribution arrangement’ 

12 means an arrangement— 

13 ‘‘(A) under which a participant may elect 

14 to have the employer make payments as con15 tributions under the plan on behalf of the par16 ticipant, or to the participant directly in cash, 

17 ‘‘(B) under which the participant is treated 

18 as having elected to have the employer make 

19 such contributions in an amount equal to a uni20 form percentage of compensation provided 

21 under the plan until the participant specifically 

22 elects not to have such contributions made (or 

23 specifically elects to have such contributions 

24 made at a different percentage), 


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1 ‘‘(C) under which contributions described 

2 in subparagraph (B) are invested in accordance 

3 with regulations prescribed by the Secretary 

4 under section 404(c)(4), and 

5 ‘‘(D) which meets the requirements of 

6 paragraph (3). 

7 ‘‘(3) NOTICE REQUIREMENTS.— 

8 ‘‘(A) IN GENERAL.—The administrator of 

9 an individual account plan shall, within a rea10 sonable period before each plan year, give to 

11 each employee to whom an arrangement de12 scribed in paragraph (2) applies for such plan 

13 year notice of the employee’s rights and obliga14 tions under the arrangement which— 

15 ‘‘(i) is sufficiently accurate and com16 prehensive to apprise the employee of such 

17 rights and obligations, and 

18 ‘‘(ii) is written in a manner calculated 

19 to be understood by the average employee 

20 to whom the arrangement applies. 

21 ‘‘(B) TIME AND FORM OF NOTICE.—A no22 tice shall not be treated as meeting the require23 ments of subparagraph (A) with respect to an 

24 employee unless— 


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1 ‘‘(i) the notice includes a notice ex2 plaining the employee’s right under the ar3 rangement to elect not to have elective con4 tributions made on the employee’s behalf 

5 (or to elect to have such contributions 

6 made at a different percentage), 

7 ‘‘(ii) the employee has a reasonable 

8 period of time after receipt of the notice 

9 described in clause (i) and before the first 

10 elective contribution is made to make such 

11 election, and 

12 ‘‘(iii) the notice explains how contribu13 tions made under the arrangement will be 

14 invested in the absence of any investment 

15 election by the employee.’’. 

16 (f) TREATMENT OF WITHDRAWALS OF CONTRIBU17 TIONS DURING FIRST 60 DAYS.—Section 414 is amended 

18 by adding at the end the following new subsection: 

19 ‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS

20 FROM ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGE21 MENTS.— 

22 ‘‘(1) IN GENERAL.—If an eligible automatic 

23 contribution arrangement allows an employee to 

24 elect to make permissible withdrawals— 


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1 ‘‘(A) the amount of any such withdrawal 

2 shall be includible in the gross income of the 

3 employee for the taxable year of the employee 

4 in which the distribution is made, 

5 ‘‘(B) no tax shall be imposed under section 

6 72(t) with respect to the distribution, and 

7 ‘‘(C) the arrangement shall not be treated 

8 as violating any restriction on distributions 

9 under this title solely by reason of allowing the 

10 withdrawal. 

11 In the case of any distribution to an employee by 

12 reason of an election under this paragraph, employer 

13 matching contributions shall be forfeited or subject 

14 to such other treatment as the Secretary may pre15 scribe. 

16 ‘‘(2) PERMISSIBLE WITHDRAWAL.—For pur17 poses of this subsection— 

18 ‘‘(A) IN GENERAL.—The term ‘permissible 

19 withdrawal’ means any withdrawal from an eli20 gible automatic contribution arrangement meet21 ing the requirements of this paragraph which— 

22 ‘‘(i) is made pursuant to an election 

23 by an employee, and 


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1 ‘‘(ii) consists of elective contributions 

2 described in paragraph (3)(B) (and earn3 ings attributable thereto). 

4 ‘‘(B) TIME FOR MAKING ELECTION.—Sub5 paragraph (A) shall not apply to an election by 

6 an employee unless the election is made no later 

7 than the date which is 60 days after the date 

8 of the first elective contribution with respect to 

9 the employee under the arrangement. 

10 ‘‘(C) AMOUNT OF DISTRIBUTION.—Sub11 paragraph (A) shall not apply to any election by 

12 an employee unless the amount of any distribu13 tion by reason of the election is equal to the 

14 amount of elective contributions made with re15 spect to the first payroll period to which the eli16 gible automatic contribution arrangement ap17 plies to the employee and any succeeding pay18 roll period beginning before the effective date of 

19 the election (and earnings attributable thereto). 

20 ‘‘(3) ELIGIBLE AUTOMATIC CONTRIBUTION AR21 RANGEMENT.—For purposes of this subsection, the 

22 term ‘eligible automatic contribution arrangement’ 

23 means an arrangement— 

24 ‘‘(A) under which a participant may elect 

25 to have the employer make payments as conVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00057 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 tributions under the plan on behalf of the par2 ticipant, or to the participant directly in cash, 

3 ‘‘(B) under which the participant is treated 

4 as having elected to have the employer make 

5 such contributions in an amount equal to a uni6 form percentage of compensation provided 

7 under the plan until the participant specifically 

8 elects not to have such contributions made (or 

9 specifically elects to have such contributions 

10 made at a different percentage), 

11 ‘‘(C) under which contributions described 

12 in subparagraph (B) are invested in accordance 

13 with regulations prescribed by the Secretary of 

14 Labor under section 404(c)(4) of the Employee 

15 Retirement Income Security Act of 1974, and 

16 ‘‘(D) which meets the requirements of 

17 paragraph (4). 

18 ‘‘(4) NOTICE REQUIREMENTS.— 

19 ‘‘(A) IN GENERAL.—The administrator of 

20 a plan containing an arrangement described in 

21 paragraph (3) shall, within a reasonable period 

22 before each plan year, give to each employee to 

23 whom an arrangement described in paragraph 

24 (3) applies for such plan year notice of the emVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00058 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 ployee’s rights and obligations under the ar2 rangement which— 

3 ‘‘(i) is sufficiently accurate and com4 prehensive to apprise the employee of such 

5 rights and obligations, and 

6 ‘‘(ii) is written in a manner calculated 

7 to be understood by the average employee 

8 to whom the arrangement applies. 

9 ‘‘(B) TIME AND FORM OF NOTICE.—A no10 tice shall not be treated as meeting the require11 ments of subparagraph (A) with respect to an 

12 employee unless— 

13 ‘‘(i) the notice includes a notice ex14 plaining the employee’s right under the ar15 rangement to elect not to have elective con16 tributions made on the employee’s behalf 

17 (or to elect to have such contributions 

18 made at a different percentage), 

19 ‘‘(ii) the employee has a reasonable 

20 period of time after receipt of the notice 

21 described in clause (i) and before the first 

22 elective contribution is made to make such 

23 election, and 

24 ‘‘(iii) the notice explains how contribu25 tions made under the arrangement will be 


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1 invested in the absence of any investment 

2 election by the employee.’’. 

3 (g) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—Except as provided by para5 graph (2), the amendments made by this section 

6 shall apply to plan years beginning after December 

7 31, 2006. 

8 (2) SECTION 403(b) CONTRACTS.—The amend9 ments made by subsection (d) shall apply to years 

10 ending after the date of the enactment of this Act. 

11 SEC. 303. TREATMENT OF INVESTMENT OF ASSETS BY PLAN 

12 WHERE PARTICIPANT FAILS TO EXERCISE IN13 VESTMENT ELECTION. 

14 (a) IN GENERAL.—Section 404(c) of the Employee 

15 Retirement Income Security Act of 1974 (29 U.S.C. 

16 1104(c)) is amended by adding at the end the following 

17 new paragraph: 

18 ‘‘(4) DEFAULT INVESTMENT ARRANGE19 MENTS.— 

20 ‘‘(A) IN GENERAL.—For purposes of para21 graph (1), a participant in an individual ac22 count plan meeting the notice requirements of 

23 subparagraph (B) shall be treated as exercising 

24 control over the assets in the account with re25 spect to the amount of contributions and earnVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00060 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 ings which, in the absence of an investment 

2 election by the participant, are invested by the 

3 plan in accordance with regulations prescribed 

4 by the Secretary. The regulations under this 

5 subparagraph shall provide guidance on the ap6 propriateness of designating default investments 

7 that include a mix of asset classes consistent 

8 with capital preservation, long-term capital ap9 preciation, or a blend of both. 

10 ‘‘(B) NOTICE REQUIREMENTS.— 

11 ‘‘(i) IN GENERAL.—The requirements 

12 of this subparagraph are met if each par13 ticipant— 

14 ‘‘(I) receives, within a reasonable 

15 period of time before each plan year, 

16 a notice explaining the employee’s 

17 right under the plan to designate how 

18 contributions and earnings will be in19 vested and explaining how, in the ab20 sence of any investment election by 

21 the participant, such contributions 

22 and earnings will be invested, and 

23 ‘‘(II) has a reasonable period of 

24 time after receipt of such notice and 


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1 before the beginning of the plan year 

2 to make such designation. 

3 ‘‘(ii) FORM OF NOTICE.—The require4 ments of clauses (i) and (ii) of section 

5 401(k)(12)(D) of the Internal Revenue 

6 Code of 1986 shall be met with respect to 

7 the notices described in this subpara8 graph.’’. 

9 (b) EFFECTIVE DATE.— 

10 (1) IN GENERAL.—The amendments made by 

11 this section shall apply to plan years beginning after 

12 December 31, 2006. 

13 (2) REGULATIONS.—Final regulations under 

14 section 404(c)(4)(A) of the Employee Retirement In15 come Security Act of 1974 (as added by this section) 

16 shall be issued no later than 6 months after the date 

17 of the enactment of this Act. 

18 SEC. 304. CREDIT FOR QUALIFIED PENSION PLAN CON19 TRIBUTIONS OF SMALL EMPLOYERS. 

20 (a) IN GENERAL.—Subpart D of part IV of sub21 chapter A of chapter 1 (relating to business related cred22 its), as amended by this Act, is amended by adding at 

23 the end the following new section: 


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1 ‘‘SEC. 45O. SMALL EMPLOYER PENSION PLAN CONTRIBU2 TIONS. 

3 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

4 in the case of an eligible employer, the small employer pen5 sion plan contribution credit determined under this section 

6 for any taxable year is an amount equal to 50 percent 

7 of the amount which would (but for subsection (f)(1)) be 

8 allowed as a deduction under section 404 for such taxable 

9 year for qualified employer contributions made to any 

10 qualified retirement plan on behalf of any employee who 

11 is not a highly compensated employee. 

12 ‘‘(b) CREDIT LIMITED TO 3 YEARS.—The credit al13 lowable by this section shall be allowed only with respect 

14 to the period of 3 taxable years beginning with the first 

15 taxable year for which a credit is allowable with respect 

16 to a plan under this section. 

17 ‘‘(c) QUALIFIED EMPLOYER CONTRIBUTION.—For 

18 purposes of this section— 

19 ‘‘(1) DEFINED CONTRIBUTION PLANS.—In the 

20 case of a defined contribution plan, the term ‘quali21 fied employer contribution’ means the amount of 

22 nonelective and matching contributions to the plan 

23 made by the employer on behalf of any employee 

24 who is not a highly compensated employee to the ex25 tent such amount does not exceed 3 percent of such 


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1 employee’s compensation from the employer for the 

2 year. 

3 ‘‘(2) DEFINED BENEFIT PLANS.—In the case of 

4 a defined benefit plan, the term ‘qualified employer 

5 contribution’ means the amount of employer con6 tributions to the plan made on behalf of any em7 ployee who is not a highly compensated employee to 

8 the extent that the accrued benefit of such employee 

9 derived from employer contributions for the year 

10 does not exceed the equivalent (as determined under 

11 regulations prescribed by the Secretary and without 

12 regard to section 401(l) or contributions and bene13 fits under the Social Security Act) of 3 percent of 

14 such employee’s compensation from the employer for 

15 the year. 

16 ‘‘(d) QUALIFIED RETIREMENT PLAN.— 

17 ‘‘(1) IN GENERAL.—The term ‘qualified retire18 ment plan’ means any plan described in section 

19 401(a) which includes a trust exempt from tax 

20 under section 501(a), or any plan described in sec21 tion 408(k) or (p), if the plan meets— 

22 ‘‘(A) the contribution requirements of 

23 paragraph (2), and 

24 ‘‘(B) the distribution requirements of para25 graph (3). 


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1 ‘‘(2) CONTRIBUTION REQUIREMENTS.— 

2 ‘‘(A) IN GENERAL.—The requirements of 

3 this paragraph are met if, under the plan— 

4 ‘‘(i) the employer is required to make 

5 nonelective contributions of at least 1 per6 cent of compensation (or the equivalent 

7 thereof in the case of a defined benefit 

8 plan) for each employee who is not a high9 ly compensated employee who is eligible to 

10 participate in the plan, and 

11 ‘‘(ii) allocations of nonelective em12 ployer contributions, in the case of a de13 fined contribution plan, are either in equal 

14 dollar amounts for all employees covered 

15 by the plan or bear a uniform relationship 

16 to the total compensation, of the employees 

17 covered by the plan (and an equivalent re18 quirement is met with respect to a defined 

19 benefit plan). 

20 ‘‘(B) COMPENSATION LIMITATION.—The 

21 compensation taken into account under sub22 paragraph (A) for any year shall not exceed the 

23 limitation in effect for such year under section 

24 401(a)(17). 


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1 ‘‘(3) DISTRIBUTION REQUIREMENTS.—In the 

2 case of a profit-sharing or stock bonus plan, the re3 quirements of this paragraph are met if, under the 

4 plan, qualified employer contributions are distribut5 able only as provided in section 401(k)(2)(B). 

6 ‘‘(e) OTHER DEFINITIONS.—For purposes of this 

7 section— 

8 ‘‘(1) ELIGIBLE EMPLOYER.— 

9 ‘‘(A) IN GENERAL.—The term ‘eligible em10 ployer’ means, with respect to any year, an em11 ployer which has no more than 25 employees 

12 who received at least $5,000 of compensation 

13 from the employer for the preceding year. In 

14 determining the number of employees for pur15 poses of this paragraph, any rule applicable in 

16 determining the number of employees for pur17 poses of section 408(p)(2)(C) shall be applicable 

18 under ths paragraph. 

19 ‘‘(B) REQUIREMENT FOR NEW QUALIFIED

20 EMPLOYER PLANS.—Such term shall not in21 clude an employer if, during the 3-taxable year 

22 period immediately preceding the 1st taxable 

23 year for which the credit under this section is 

24 otherwise allowable for a qualified employer 

25 plan of the employer, the employer or any memVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00066 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 ber of any controlled group including the em2 ployer (or any predecessor of either) established 

3 or maintained a qualified employer plan with 

4 respect to which contributions were made, or 

5 benefits were accrued, for substantially the 

6 same employees as are in the qualified employer 

7 plan. 

8 ‘‘(2) HIGHLY COMPENSATED EMPLOYEE.—The 

9 term ‘highly compensated employee’ has the mean10 ing given such term by section 414(q) (determined 

11 without regard to section 414(q)(1)(B)(ii)). 

12 ‘‘(f) SPECIAL RULES.— 

13 ‘‘(1) DISALLOWANCE OF DEDUCTION.—No de14 duction shall be allowed for that portion of the quali15 fied employer contributions paid or incurred for the 

16 taxable year which is equal to the credit determined 

17 under subsection (a). 

18 ‘‘(2) ELECTION NOT TO CLAIM CREDIT.—This 

19 section shall not apply to a taxpayer for any taxable 

20 year if such taxpayer elects to have this section not 

21 apply for such taxable year. 

22 ‘‘(3) AGGREGATION RULES.—All persons treat23 ed as a single employer under subsection (a) or (b) 

24 of section 52, or subsection (n) or (o) of section 414, 


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1 shall be treated as one person. All eligible employer 

2 plans shall be treated as 1 eligible employer plan. 

3 ‘‘(g) RECAPTURE OF CREDIT ON FORFEITED CON4 TRIBUTIONS.—If any accrued benefit which is forfeitable 

5 by reason of subsection (d)(3) is forfeited, the employer’s 

6 tax imposed by this chapter for the taxable year in which 

7 the forfeiture occurs shall be increased by 35 percent of 

8 the employer contributions from which such benefit is de9 rived to the extent such contributions were taken into ac10 count in determining the credit under this section.’’. 

11 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI12 NESS CREDIT.—Section 38(b) (defining current year busi13 ness credit), as amended by this Act, is amended by strik14 ing ‘‘and’’ at the end of paragraph (30), by striking the 

15 period at the end of paragraph (31) and inserting ‘‘, and’’, 

16 and by adding at the end the following new paragraph: 

17 ‘‘(32) in the case of an eligible employer (as de18 fined in section 45O(e)), the small employer pension 

19 plan contribution credit determined under section 

20 45O(a).’’. 

21 (c) CONFORMING AMENDMENTS.— 

22 (1) Subsection (c) of section 196 is amended by 

23 striking ‘‘and’’ at the end of paragraph (12), by 

24 striking the period at the end of paragraph (13) and 


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1 inserting ‘‘, and’’, and by adding at the end the fol2 lowing new paragraph: 

3 ‘‘(14) the small employer pension plan contribu4 tion credit determined under section 45O(a).’’. 

5 (2) The table of sections for subpart D of part 

6 IV of subchapter A of chapter 1, as amended by this 

7 Act, is amended by adding at the end the following 

8 new item: 

‘‘Sec. 45O. Small employer pension plan contributions.’’. 

9 (d) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to contributions paid or incurred 

11 in taxable years beginning after December 31, 2006. 

12 SEC. 305. ACCOUNT FUNDS DISREGARDED FOR PURPOSES 

13 OF CERTAIN MEANS-TESTED FEDERAL PRO14 GRAMS. 

15 Notwithstanding any other provision of Federal law 

16 (other than the Internal Revenue Code of 1986) that re17 quires consideration of 1 or more financial circumstances 

18 of an individual for the purpose of determining eligibility 

19 to receive, or the amount of, any assistance or benefit au20 thorized by— 

21 (1) the United States Housing Act of 1937, 

22 (2) title V of the Housing Act of 1949, 

23 (3) section 101 of the Housing and Urban De24 velopment Act of 1965, 


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1 (4) sections 221(d)(3), 235, and 236 of the Na2 tional Housing Act, and 

3 (5) the Food Stamp Act of 1977, 

4 any amount (including earnings thereon) in any qualified 

5 retirement plan (as defined in section 4974(c) of such 

6 Code), or any eligible deferred compensation plan (as de7 fined in section 457(b) of such Code) maintained by an 

8 employer described in section 457(e)(1)(A) of such Code, 

9 of such individual shall be disregarded for such purpose 

10 with respect to any period during which such individual 

11 has not attained normal retirement age (as defined in sec12 tion 216(l)(1) of the Social Security Act). 

13 SEC. 306. DIRECT PAYMENT OF TAX REFUNDS TO INDI14 VIDUAL RETIREMENT PLANS. 

15 (a) IN GENERAL.—The Secretary of the Treasury (or 

16 the Secretary’s delegate) shall make available a form (or 

17 modify existing forms) for use by individuals to direct that 

18 a portion of any refund of overpayment of tax imposed 

19 by chapter 1 of the Internal Revenue Code of 1986 be 

20 paid directly to an individual retirement plan (as defined 

21 in section 7701(a)(37) of such Code) of such individual, 

22 except that in the case of a joint return, the form or forms 

23 shall provide that each spouse shall be entitled to des24 ignate an individual retirement plan with respect to the 

25 payments attributable to the spouse. 


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1 (b) EFFECTIVE DATE.—The form required by sub2 section (a) shall be made available for taxable years begin3 ning after December 31, 2006. 

4 TITLE IV—SIMPLIFICATION 

5 PROVISIONS 

6 SEC. 401. EXCEPTION FROM REQUIRED DISTRIBUTIONS 

7 WHERE AGGREGATE RETIREMENT SAVINGS 

8 LESS THAN $50,000. 

9 (a) IN GENERAL.—Section 401(a)(9) (relating to re10 quired distributions) is amended by adding at the end the 

11 following new subparagraph: 

12 ‘‘(H) EXCEPTION FROM REQUIRED DIS13 TRIBUTIONS DURING LIFE OF EMPLOYEE

14 WHERE ASSETS DO NOT EXCEED $50,000.— 

15 ‘‘(i) IN GENERAL.—If, as of the close 

16 of any calendar year, the aggregate bal17 ance to the credit of an individual in all 

18 applicable eligible retirement plans and 

19 health savings accounts— 

20 ‘‘(I) does not exceed $50,000, 

21 then the requirements of subpara22 graph (A) (and the requirements of 

23 any provision of this title which incor24 porates the requirements of subpara25 graph (A) by reference) shall not 


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1 apply during the succeeding calendar 

2 year, or 

3 ‘‘(II) exceeds $50,000 but does 

4 not exceed $200,000, then such re5 quirements shall apply during the suc6 ceeding calendar year only to the ex7 cess. 

8 ‘‘(ii) APPLICABLE ELIGIBLE RETIRE9 MENT PLAN.—For purposes of this sub10 paragraph, the term ‘applicable eligible re11 tirement plan’ means an eligible retirement 

12 plan (as defined in section 402(c)(8)(B)), 

13 except that in applying such section— 

14 ‘‘(I) only qualified trusts which 

15 are part of a defined contribution plan 

16 shall be taken into account under 

17 clause (iii), and 

18 ‘‘(II) clause (iv) shall be dis19 regarded. 

20 ‘‘(iii) SPECIAL RULE FOR ROTH AND

21 HEALTH SAVINGS ACCOUNTS.—For pur22 poses of applying clause (i) for any cal23 endar year, each of the $50,000 and 

24 $200,000 amounts shall be reduced by the 

25 aggregate balance to the credit of an indiVerDate Aug 31 2005 21:04 Mar 20, 2006 Jkt 049200 PO 00000 Frm 00072 Fmt 6652 Sfmt 6201 E:\BILLS\S2431.IS S2431

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1 vidual in all Roth IRAs, designated Roth 

2 accounts under section 402A, and health 

3 savings accounts which was taken into ac4 count in computing the aggregate balance 

5 under clause (i). 

6 ‘‘(iv) SPECIAL RULE FOR ANNUITY

7 CONTRACTS.—In determining the aggre8 gate balance under clause (i) for any cal9 endar year, there shall not be taken into 

10 account the value of any commercial annu11 ity which was acquired by an applicable eli12 gible retirement plan and from which dis13 tributions are being made, but the dis14 tributions shall be taken into account for 

15 purposes of this paragraph in the same 

16 manner as the distributions are taken into 

17 account without regard to this subpara18 graph. 

19 ‘‘(v) HEALTH SAVINGS ACCOUNT.— 

20 For purposes of this subparagraph, the 

21 term ‘health savings account’ has the 

22 meaning given such term by section 

23 223(d).’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to distributions after December 31, 

3 2006. 

4 SEC. 402. ALLOWANCE OF ADDITIONAL NONELECTIVE CON5 TRIBUTIONS TO SIMPLE PLANS. 

6 (a) SIMPLE RETIREMENT ACCOUNTS.—Section 

7 408(p)(2) (defining qualified salary reduction arrange8 ment) is amended by adding at the end the following: 

9 ‘‘(F) ADDITIONAL NONELECTIVE CON10 TRIBUTIONS.—An employer shall not be treated 

11 as failing to meet the requirements of subpara12 graph (A)(iii) or (B) for any year if, in addition 

13 to any contributions described in either such 

14 subparagraph, the employer elects to make non15 elective contributions of a uniform percentage 

16 (not greater than 10 percent) of compensation 

17 for each employee eligible to participate in the 

18 arrangement and who has at least $5,000 of 

19 compensation from the employer for the year.’’. 

20 (b) SIMPLE CASH OR DEFERRED PLANS.—Section 

21 401(k)(11)(B) (relating to contribution requirements) is 

22 amended by adding at the end the following: 

23 ‘‘(iv) ADDITIONAL NONELECTIVE CON24 TRIBUTIONS.—An employer shall not be 

25 treated as failing to meet the requirements 


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1 of clause (i)(II) or (ii) for any year if, in 

2 addition to any contributions described in 

3 either such clause, the employer elects to 

4 make nonelective contributions of a uni5 form percentage (not greater than 10 per6 cent) of compensation for each employee 

7 eligible to participate in the arrangement 

8 and who has at least $5,000 of compensa9 tion from the employer for the year.’’. 

10 (c) EFFECTIVE DATES.—The amendments made by 

11 this section shall apply to years beginning after December 

12 31, 2006. 

13 SEC. 403. EXTENSION OF CERTAIN EXCEPTIONS FROM TAX 

14 ON EARLY DISTRIBUTIONS TO PLANS OTHER 

15 THAN INDIVIDUAL RETIREMENT PLANS. 

16 (a) IN GENERAL.—Subparagraphs (D), (E), and (F) 

17 of section 72(t)(2) (relating to subsection not to apply to 

18 certain distributions) are each amended by striking ‘‘from 

19 an individual retirement plan’’. 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) The heading for section 72(t)(2)(E) is 

22 amended by striking ‘‘FROM INDIVIDUAL RETIRE23 MENT PLANS’’. 

24 (2) The heading for section 72(t)(2)(F) is 

25 amended by striking ‘‘FROM CERTAIN PLANS’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2006. 

4 SEC. 404. ELIMINATION OF HIGHER PENALTY ON CERTAIN 

5 SIMPLE PLAN DISTRIBUTIONS. 

6 (a) IN GENERAL.—Subsection (t) of section 72 (re7 lating to 10-percent additional tax on early distributions 

8 from qualified retirement plans) is amended by striking 

9 paragraph (6) and redesignating paragraphs (7), (8), and 

10 (9) as paragraphs (6), (7), and (8), respectively. 

11 (b) CONFORMING AMENDMENTS.— 

12 (1) Section 72(t)(2)(E) is amended by striking 

13 ‘‘paragraph (7)’’ and inserting ‘‘paragraph (6)’’. 

14 (2) Section 72(t)(2)(F) is amended by striking 

15 ‘‘paragraph (8)’’ and inserting ‘‘paragraph (7)’’. 

16 (3) Section 408(d)(3)(G) is amended by strik17 ing ‘‘applies’’ and inserting ‘‘applied on the day be18 fore the date of the enactment of the Savings Com19 petitiveness Act of 2006’’. 

20 (4) Section 457(a)(2) is amended by striking 

21 ‘‘section 72(t)(9)’’ and inserting ‘‘section 72(t)(8)’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to years beginning after December 

24 31, 2006. 


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1 SEC. 405. SIMPLE PLAN PORTABILITY. 

2 (a) REPEAL OF LIMITATION.—Paragraph (3) of sec3 tion 408(d) (relating to rollover contributions) is amended 

4 by striking subparagraph (G) and redesignating subpara5 graphs (H) and (I) as subparagraphs (G) and (H), respec6 tively. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 this section shall apply to years beginning after December 

9 31, 2006. 

10 SEC. 406. ALLOW DIRECT ROLLOVERS FROM RETIREMENT 

11 PLANS TO ROTH IRAS. 

12 (a) IN GENERAL.—Subsection (e) of section 408A 

13 (defining qualified rollover contribution) is amended to 

14 read as follows: 

15 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 

16 purposes of this section, the term ‘qualified rollover con17 tribution’ means a rollover contribution— 

18 ‘‘(1) to a Roth IRA from another such account, 

19 ‘‘(2) from an eligible retirement plan, but only 

20 if— 

21 ‘‘(A) in the case of an individual retire22 ment plan, such rollover contribution meets the 

23 requirements of section 408(d)(3), and 

24 ‘‘(B) in the case of any eligible retirement 

25 plan (as defined in section 402(c)(8)(B) other 

26 than clauses (i) and (ii) thereof), such rollover 


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1 contribution meets the requirements of section 

2 402(c), 403(b)(8), or 457(e)(16), as applicable. 

3 For purposes of section 408(d)(3)(B), there shall be dis4 regarded any qualified rollover contribution from an indi5 vidual retirement plan (other than a Roth IRA) to a Roth 

6 IRA.’’ 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 408A(c)(3)(B) is amended— 

9 (A) in the text by striking ‘‘individual re10 tirement plan’’ and inserting ‘‘an eligible retire11 ment plan (as defined by section 

12 402(c)(8)(B))’’, and 

13 (B) in the heading by striking ‘‘IRA’’ and 

14 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

15 (2) Section 408A(d)(3) is amended— 

16 (A) in subparagraph (A), by striking ‘‘sec17 tion 408(d)(3)’’ inserting ‘‘sections 402(c), 

18 403(b)(8), 408(d)(3), and 457(e)(16)’’, 

19 (B) in subparagraph (B), by striking ‘‘in20 dividual retirement plan’’ and inserting ‘‘eligible 

21 retirement plan (as defined by section 

22 402(c)(8)(B))’’, 

23 (C) in subparagraph (D), by inserting ‘‘or 

24 6047’’ after ‘‘408(i)’’, 


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1 (D) in subparagraph (D), by striking ‘‘or 

2 both’’ and inserting ‘‘persons subject to section 

3 6047(d)(1), or all of the foregoing persons’’, 

4 and 

5 (E) in the heading, by striking ‘‘IRA’’ and 

6 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to distributions after December 31, 

9 2006. 

10 SEC. 407. COORDINATION OF ORDERING RULES FOR DIS11 TRIBUTIONS FROM ROTH IRAS AND DES12 IGNATED ROTH ACCOUNTS. 

13 (a) IN GENERAL.—Section 402A(d) is amended by 

14 adding at the end the following new paragraph: 

15 ‘‘(5) ORDERING RULE.—For purposes of apply16 ing this section, section 72, and section 402 to any 

17 distribution from a designated Roth account, such 

18 distribution shall be treated as made from contribu19 tions to the extent that the amount of such distribu20 tion, when added to all previous distributions from 

21 the designated Roth account, does not exceed the ag22 gregate contributions to the designated Roth ac23 count.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to distributions after December 31, 

3 2006. 

4 TITLE V—PAY-GO PROVISIONS 

5 SEC. 501. PAY-AS-YOU-GO POINT OF ORDER IN THE SENATE. 

6 (a) POINT OF ORDER.— 

7 (1) IN GENERAL.—It shall not be in order in 

8 the Senate to consider any direct spending or rev9 enue legislation that would increase the on-budget 

10 deficit or cause an on-budget deficit (as measured in 

11 paragraphs (5) and (6)) for any 1 of the 3 applica12 ble time periods. 

13 (2) APPLICABLE TIME PERIODS.—For purposes 

14 of this subsection, the term ‘‘applicable time period’’ 

15 means any 1 of the 3 following periods: 

16 (A) The first year covered by the most re17 cently adopted concurrent resolution on the 

18 budget. 

19 (B) The period of the first 5 fiscal years 

20 covered by the most recently adopted concur21 rent resolution on the budget. 

22 (C) The period of the 5 fiscal years fol23 lowing the first 5 fiscal years covered in the 

24 most recently adopted concurrent resolution on 

25 the budget. 


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1 (3) DIRECT-SPENDING LEGISLATION.—For pur2 poses of this subsection and except as provided in 

3 paragraph (4), the term ‘‘direct-spending legisla4 tion’’ means any bill, joint resolution, amendment, 

5 motion, or conference report that affects direct 

6 spending as that term is defined by, and interpreted 

7 for purposes of, the Balanced Budget and Emer8 gency Deficit Control Act of 1985. 

9 (4) EXCLUSION.—For purposes of this sub10 section, the terms ‘‘direct-spending legislation’’ and 

11 ‘‘revenue legislation’’ do not include— 

12 (A) any concurrent resolution on the budg13 et; or 

14 (B) any provision of legislation that affects 

15 the full funding of, and continuation of, the de16 posit insurance guarantee commitment in effect 

17 on the date of enactment of the Budget En18 forcement Act of 1990. 

19 (5) BASELINE.—Estimates prepared pursuant 

20 to this section shall— 

21 (A) use the baseline surplus or deficit used 

22 for the most recently adopted concurrent resolu23 tion on the budget; and 

24 (B) be calculated under the requirements 

25 of subsections (b) through (d) of section 257 of 


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1 the Balanced Budget and Emergency Deficit 

2 Control Act of 1985 for fiscal years beyond 

3 those covered by that concurrent resolution on 

4 the budget. 

5 (6) PRIOR SURPLUS.—If direct spending or rev6 enue legislation increases the on-budget deficit or 

7 causes an on-budget deficit when taken individually, 

8 it must also increase the on-budget deficit or cause 

9 an on-budget deficit when taken together with all di10 rect spending and revenue legislation enacted since 

11 the beginning of the calendar year not accounted for 

12 in the baseline under paragraph (5)(A), except that 

13 direct spending or revenue effects resulting in net 

14 deficit reduction enacted pursuant to reconciliation 

15 instructions since the beginning of that same cal16 endar year shall not be available. 

17 (b) WAIVER.—This section may be waived or suspended in the Senate only by the affirmative vote of 3 18 ⁄5

19 of the Members, duly chosen and sworn. 

20 (c) APPEALS.—Appeals in the Senate from the deci21 sions of the Chair relating to any provision of this section 

22 shall be limited to 1 hour, to be equally divided between, 

23 and controlled by, the appellant and the manager of the 

24 bill or joint resolution, as the case may be. An affirmative 

vote of 3 25 ⁄5 of the Members of the Senate, duly chosen and 


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1 sworn, shall be required to sustain an appeal of the ruling 

2 of the Chair on a point of order raised under this section. 

3 (d) DETERMINATION OF BUDGET LEVELS.—For 

4 purposes of this section, the levels of new budget author5 ity, outlays, and revenues for a fiscal year shall be deter6 mined on the basis of estimates made by the Committee 

7 on the Budget of the Senate. 

8 (e) SUNSET.—This section shall expire on September 

9 30, 2011. 

10 TITLE VI—ADMINISTRATIVE 

11 PROVISIONS 

12 SEC. 601. PROVISIONS RELATING TO PLAN AMENDMENTS. 

13 (a) IN GENERAL.—If this section applies to any plan 

14 or contract amendment— 

15 (1) such plan or contract shall be treated as 

16 being operated in accordance with the terms of the 

17 plan during the period described in subsection 

18 (b)(2)(A), and 

19 (2) except as provided by the Secretary of the 

20 Treasury, such plan shall not fail to meet the re21 quirements of section 411(d)(6) of the Internal Rev22 enue Code of 1986 and section 204(g) of the Em23 ployee Retirement Income Security Act of 1974 by 

24 reason of such amendment. 

25 (b) AMENDMENTS TO WHICH SECTION APPLIES.— 


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1 (1) IN GENERAL.—This section shall apply to 

2 any amendment to any plan or annuity contract 

3 which is made— 

4 (A) pursuant to any amendment made by 

5 this Act, or pursuant to any regulation issued 

6 by the Secretary of the Treasury or the Sec7 retary of Labor under this Act, and 

8 (B) on or before the last day of the first 

9 plan year beginning on or after January 1, 

10 2007, or such later date as the Secretary of the 

11 Treasury may prescribe. 

12 In the case of a governmental plan (as defined in 

13 section 414(d) of the Internal Revenue Code of 

14 1986), subparagraph (B) shall be applied by sub15 stituting the date which is 2 years after the date 

16 otherwise applied under subparagraph (B). 

17 (2) CONDITIONS.—This section shall not apply 

18 to any amendment unless— 

19 (A) during the period— 

20 (i) beginning on the date the legisla21 tive or regulatory amendment described in 

22 paragraph (1)(A) takes effect (or in the 

23 case of a plan or contract amendment not 

24 required by such legislative or regulatory 


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1 amendment, the effective date specified by 

2 the plan), and 

3 (ii) ending on the date described in 

4 paragraph (1)(B) (or, if earlier, the date 

5 the plan or contract amendment is adopt6 ed), 

7 the plan or contract is operated as if such plan 

8 or contract amendment were in effect; and 

9 (B) such plan or contract amendment ap10 plies retroactively for such period. 

Æ 


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