PUBLIC LAW 109–280—AUG. 17, 2006

PENSION PROTECTION ACT OF 2006

120 STAT. 780 PUBLIC LAW 109–280—AUG. 17, 2006

Public Law 109–280

109th Congress

An Act

To provide economic security for all Americans, and for other purposes.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Pension Protection Act of 2006’’.

(b) TABLE OF CONTENTS.—The table of contents for this Act

(other than so much of title XIV as follows section 1401) is as

follows:

Sec. 1. Short title and table of contents.

TITLE I—REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED

BENEFIT PENSION PLANS

Subtitle A—Amendments to Employee Retirement Income Security Act of 1974

Sec. 101. Minimum funding standards.

Sec. 102. Funding rules for single-employer defined benefit pension plans.

Sec. 103. Benefit limitations under single-employer plans.

Sec. 104. Special rules for multiple employer plans of certain cooperatives.

Sec. 105. Temporary relief for certain PBGC settlement plans.

Sec. 106. Special rules for plans of certain government contractors.

Sec. 107. Technical and conforming amendments.

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 111. Minimum funding standards.

Sec. 112. Funding rules for single-employer defined benefit pension plans.

Sec. 113. Benefit limitations under single-employer plans.

Sec. 114. Technical and conforming amendments.

Sec. 115. Modification of transition rule to pension funding requirements.

Sec. 116. Restrictions on funding of nonqualified deferred compensation plans by

employers maintaining underfunded or terminated single-employer

plans.

TITLE II—FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT

PLANS AND RELATED PROVISIONS

Subtitle A—Amendments to Employee Retirement Income Security Act of 1974

Sec. 201. Funding rules for multiemployer defined benefit plans.

Sec. 202. Additional funding rules for multiemployer plans in endangered or critical

status.

Sec. 203. Measures to forestall insolvency of multiemployer plans.

Sec. 204. Withdrawal liability reforms.

Sec. 205. Prohibition on retaliation against employers exercising their rights to

petition the Federal Government.

Sec. 206. Special rule for certain benefits funded under an agreement approved by

the Pension Benefit Guaranty Corporation.

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 211. Funding rules for multiemployer defined benefit plans.

Sec. 212. Additional funding rules for multiemployer plans in endangered or critical

status.

29 USC 1001

note.

Pension

Protection Act

of 2006.

Aug. 17, 2006

[H.R. 4]

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 781

Sec. 213. Measures to forestall insolvency of multiemployer plans.

Sec. 214. Exemption from excise taxes for certain multiemployer pension plans.

Subtitle C—Sunset of Additional Funding Rules

Sec. 221. Sunset of additional funding rules.

TITLE III—INTEREST RATE ASSUMPTIONS

Sec. 301. Extension of replacement of 30-year Treasury rates.

Sec. 302. Interest rate assumption for determination of lump sum distributions.

Sec. 303. Interest rate assumption for applying benefit limitations to lump sum distributions.

TITLE IV—PBGC GUARANTEE AND RELATED PROVISIONS

Sec. 401. PBGC premiums.

Sec. 402. Special funding rules for certain plans maintained by commercial airlines.

Sec. 403. Limitation on PBGC guarantee of shutdown and other benefits.

Sec. 404. Rules relating to bankruptcy of employer.

Sec. 405. PBGC premiums for small plans.

Sec. 406. Authorization for PBGC to pay interest on premium overpayment refunds.

Sec. 407. Rules for substantial owner benefits in terminated plans.

Sec. 408. Acceleration of PBGC computation of benefits attributable to recoveries

from employers.

Sec. 409. Treatment of certain plans where cessation or change in membership of

a controlled group.

Sec. 410. Missing participants.

Sec. 411. Director of the Pension Benefit Guaranty Corporation.

Sec. 412. Inclusion of information in the PBGC annual report.

TITLE V—DISCLOSURE

Sec. 501. Defined benefit plan funding notice.

Sec. 502. Access to multiemployer pension plan information.

Sec. 503. Additional annual reporting requirements.

Sec. 504. Electronic display of annual report information.

Sec. 505. Section 4010 filings with the PBGC.

Sec. 506. Disclosure of termination information to plan participants.

Sec. 507. Notice of freedom to divest employer securities.

Sec. 508. Periodic pension benefit statements.

Sec. 509. Notice to participants or beneficiaries of blackout periods.

TITLE VI—INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND

FIDUCIARY RULES

Subtitle A—Investment Advice

Sec. 601. Prohibited transaction exemption for provision of investment advice.

Subtitle B—Prohibited Transactions

Sec. 611. Prohibited transaction rules relating to financial investments.

Sec. 612. Correction period for certain transactions involving securities and commodities.

Subtitle C—Fiduciary and Other Rules

Sec. 621. Inapplicability of relief from fiduciary liability during suspension of ability of participant or beneficiary to direct investments.

Sec. 622. Increase in maximum bond amount.

Sec. 623. Increase in penalties for coercive interference with exercise of ERISA

rights.

Sec. 624. Treatment of investment of assets by plan where participant fails to exercise investment election.

Sec. 625. Clarification of fiduciary rules.

TITLE VII—BENEFIT ACCRUAL STANDARDS

Sec. 701. Benefit accrual standards.

Sec. 702. Regulations relating to mergers and acquisitions.

TITLE VIII—PENSION RELATED REVENUE PROVISIONS

Subtitle A—Deduction Limitations

Sec. 801. Increase in deduction limit for single-employer plans.

Sec. 802. Deduction limits for multiemployer plans.

120 STAT. 782 PUBLIC LAW 109–280—AUG. 17, 2006

Sec. 803. Updating deduction rules for combination of plans.

Subtitle B—Certain Pension Provisions Made Permanent

Sec. 811. Pensions and individual retirement arrangement provisions of Economic

Growth and Tax Relief Reconciliation Act of 2001 made permanent.

Sec. 812. Saver’s credit.

Subtitle C—Improvements in Portability, Distribution, and Contribution Rules

Sec. 821. Clarifications regarding purchase of permissive service credit.

Sec. 822. Allow rollover of after-tax amounts in annuity contracts.

Sec. 823. Clarification of minimum distribution rules for governmental plans.

Sec. 824. Allow direct rollovers from retirement plans to Roth IRAs.

Sec. 825. Eligibility for participation in retirement plans.

Sec. 826. Modifications of rules governing hardships and unforseen financial emergencies.

Sec. 827. Penalty-free withdrawals from retirement plans for individuals called to

active duty for at least 179 days.

Sec. 828. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees.

Sec. 829. Allow rollovers by nonspouse beneficiaries of certain retirement plan distributions.

Sec. 830. Direct payment of tax refunds to individual retirement plans.

Sec. 831. Allowance of additional IRA payments in certain bankruptcy cases.

Sec. 832. Determination of average compensation for section 415 limits.

Sec. 833. Inflation indexing of gross income limitations on certain retirement savings incentives.

Subtitle D—Health and Medical Benefits

Sec. 841. Use of excess pension assets for future retiree health benefits and collectively bargained retiree health benefits.

Sec. 842. Transfer of excess pension assets to multiemployer health plan.

Sec. 843. Allowance of reserve for medical benefits of plans sponsored by bona fide

associations.

Sec. 844. Treatment of annuity and life insurance contracts with a long-term care

insurance feature.

Sec. 845. Distributions from governmental retirement plans for health and longterm care insurance for public safety officers.

Subtitle E—United States Tax Court Modernization

Sec. 851. Cost-of-living adjustments for Tax Court judicial survivor annuities.

Sec. 852. Cost of life insurance coverage for Tax Court judges age 65 or over.

Sec. 853. Participation of Tax Court judges in the Thrift Savings Plan.

Sec. 854. Annuities to surviving spouses and dependent children of special trial

judges of the Tax Court.

Sec. 855. Jurisdiction of Tax Court over collection due process cases.

Sec. 856. Provisions for recall.

Sec. 857. Authority for special trial judges to hear and decide certain employment

status cases.

Sec. 858. Confirmation of authority of Tax Court to apply doctrine of equitable

recoupment.

Sec. 859. Tax Court filing fee in all cases commenced by filing petition.

Sec. 860. Expanded use of Tax Court practice fee for pro se taxpayers.

Subtitle F—Other Provisions

Sec. 861. Extension to all governmental plans of current moratorium on application

of certain nondiscrimination rules applicable to State and local plans.

Sec. 862. Elimination of aggregate limit for usage of excess funds from black lung

disability trusts.

Sec. 863. Treatment of death benefits from corporate-owned life insurance.

Sec. 864. Treatment of test room supervisors and proctors who assist in the administration of college entrance and placement exams.

Sec. 865. Grandfather rule for church plans which self-annuitize.

Sec. 866. Exemption for income from leveraged real estate held by church plans.

Sec. 867. Church plan rule.

Sec. 868. Gratuitous transfer for benefits of employees.

TITLE IX—INCREASE IN PENSION PLAN DIVERSIFICATION AND

PARTICIPATION AND OTHER PENSION PROVISIONS

Sec. 901. Defined contribution plans required to provide employees with freedom to

invest their plan assets.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 783

Sec. 902. Increasing participation through automatic contribution arrangements.

Sec. 903. Treatment of eligible combined defined benefit plans and qualified cash

or deferred arrangements.

Sec. 904. Faster vesting of employer nonelective contributions.

Sec. 905. Distributions during working retirement.

Sec. 906. Treatment of certain pension plans of Indian tribal governments.

TITLE X—PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

Sec. 1001. Regulations on time and order of issuance of domestic relations orders.

Sec. 1002. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee.

Sec. 1003. Extension of tier II railroad retirement benefits to surviving former

spouses pursuant to divorce agreements.

Sec. 1004. Requirement for additional survivor annuity option.

TITLE XI—ADMINISTRATIVE PROVISIONS

Sec. 1101. Employee plans compliance resolution system.

Sec. 1102. Notice and consent period regarding distributions.

Sec. 1103. Reporting simplification.

Sec. 1104. Voluntary early retirement incentive and employment retention plans

maintained by local educational agencies and other entities.

Sec. 1105. No reduction in unemployment compensation as a result of pension rollovers. Sec. 1106. Revocation of election relating to treatment as multiemployer plan.

Sec. 1107. Provisions relating to plan amendments.

TITLE XII—PROVISIONS RELATING TO EXEMPT ORGANIZATIONS

Subtitle A—Charitable Giving Incentives

Sec. 1201. Tax-free distributions from individual retirement plans for charitable

purposes.

Sec. 1202. Extension of modification of charitable deduction for contributions of

food inventory.

Sec. 1203. Basis adjustment to stock of S corporation contributing property.

Sec. 1204. Extension of modification of charitable deduction for contributions of

book inventory.

Sec. 1205. Modification of tax treatment of certain payments to controlling exempt

organizations.

Sec. 1206. Encouragement of contributions of capital gain real property made for

conservation purposes.

Sec. 1207. Excise taxes exemption for blood collector organizations.

Subtitle B—Reforming Exempt Organizations

PART 1—GENERAL REFORMS

Sec. 1211. Reporting on certain acquisitions of interests in insurance contracts in

which certain exempt organizations hold an interest.

Sec. 1212. Increase in penalty excise taxes relating to public charities, social welfare organizations, and private foundations.

Sec. 1213. Reform of charitable contributions of certain easements in registered

historic districts and reduced deduction for portion of qualified conservation contribution attributable to rehabilitation credit.

Sec. 1214. Charitable contributions of taxidermy property.

Sec. 1215. Recapture of tax benefit for charitable contributions of exempt use property not used for an exempt use.

Sec. 1216. Limitation of deduction for charitable contributions of clothing and

household items.

Sec. 1217. Modification of recordkeeping requirements for certain charitable contributions.

Sec. 1218. Contributions of fractional interests in tangible personal property.

Sec. 1219. Provisions relating to substantial and gross overstatements of valuations.

Sec. 1220. Additional standards for credit counseling organizations.

Sec. 1221. Expansion of the base of tax on private foundation net investment income.

Sec. 1222. Definition of convention or association of churches.

Sec. 1223. Notification requirement for entities not currently required to file.

Sec. 1224. Disclosure to State officials relating to exempt organizations.

Sec. 1225. Public disclosure of information relating to unrelated business income

tax returns.

Sec. 1226. Study on donor advised funds and supporting organizations.

120 STAT. 784 PUBLIC LAW 109–280—AUG. 17, 2006

PART 2—IMPROVED ACCOUNTABILITY OF DONOR ADVISED FUNDS

Sec. 1231. Excise taxes relating to donor advised funds.

Sec. 1232. Excess benefit transactions involving donor advised funds and sponsoring organizations. Sec. 1233. Excess business holdings of donor advised funds.

Sec. 1234. Treatment of charitable contribution deductions to donor advised funds.

Sec. 1235. Returns of, and applications for recognition by, sponsoring organizations.

PART 3—IMPROVED ACCOUNTABILITY OF SUPPORTING ORGANIZATIONS

Sec. 1241. Requirements for supporting organizations.

Sec. 1242. Excess benefit transactions involving supporting organizations.

Sec. 1243. Excess business holdings of supporting organizations.

Sec. 1244. Treatment of amounts paid to supporting organizations by private foundations.

Sec. 1245. Returns of supporting organizations.

TITLE XIII—OTHER PROVISIONS

Sec. 1301. Technical corrections relating to mine safety.

Sec. 1302. Going-to-the-sun road.

Sec. 1303. Exception to the local furnishing requirement of the tax-exempt bond

rules.

Sec. 1304. Qualified tuition programs.

TITLE XIV—TARIFF PROVISIONS

Sec. 1401. Short title; table of contents.

TITLE I—REFORM OF FUNDING RULES

FOR SINGLE-EMPLOYER DEFINED

BENEFIT PENSION PLANS

Subtitle A—Amendments to Employee

Retirement Income Security Act of 1974

SEC. 101. MINIMUM FUNDING STANDARDS.

(a) REPEAL OF EXISTING FUNDING RULES.—Sections 302 through

308 of the Employee Retirement Income Security Act of 1974 (29

U.S.C. 1082 through 1086) are repealed.

(b) NEW MINIMUM FUNDING STANDARDS.—Part 3 of subtitle

B of title I of such Act (as amended by subsection (a)) is amended

by inserting after section 301 the following new section:

‘‘SEC. 302. MINIMUM FUNDING STANDARDS.

‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING STANDARD.—

‘‘(1) IN GENERAL.—A plan to which this part applies shall

satisfy the minimum funding standard applicable to the plan

for any plan year.

‘‘(2) MINIMUM FUNDING STANDARD.—For purposes of paragraph (1), a plan shall be treated as satisfying the minimum

funding standard for a plan year if—

‘‘(A) in the case of a defined benefit plan which is

a single-employer plan, the employer makes contributions

to or under the plan for the plan year which, in the aggregate, are not less than the minimum required contribution

determined under section 303 for the plan for the plan

year,

‘‘(B) in the case of a money purchase plan which is

a single-employer plan, the employer makes contributions

to or under the plan for the plan year which are required

under the terms of the plan, and

29 USC 1082.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 785

‘‘(C) in the case of a multiemployer plan, the employers

make contributions to or under the plan for any plan year

which, in the aggregate, are sufficient to ensure that the

plan does not have an accumulated funding deficiency

under section 304 as of the end of the plan year.

‘‘(b) LIABILITY FOR CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

the amount of any contribution required by this section

(including any required installments under paragraphs (3) and

(4) of section 303(j)) shall be paid by the employer responsible

for making contributions to or under the plan.

‘‘(2) JOINT AND SEVERAL LIABILITY WHERE EMPLOYER

MEMBER OF CONTROLLED GROUP.—If the employer referred to

in paragraph (1) is a member of a controlled group, each

member of such group shall be jointly and severally liable

for payment of such contributions.

‘‘(c) VARIANCE FROM MINIMUM FUNDING STANDARDS.—

‘‘(1) WAIVER IN CASE OF BUSINESS HARDSHIP.—

‘‘(A) IN GENERAL.—If—

‘‘(i) an employer is (or in the case of a multiemployer plan, 10 percent or more of the number of

employers contributing to or under the plan is) unable

to satisfy the minimum funding standard for a plan

year without temporary substantial business hardship

(substantial business hardship in the case of a multiemployer plan), and

‘‘(ii) application of the standard would be adverse

to the interests of plan participants in the aggregate,

the Secretary of the Treasury may, subject to subparagraph

(C), waive the requirements of subsection (a) for such year

with respect to all or any portion of the minimum funding

standard. The Secretary of the Treasury shall not waive

the minimum funding standard with respect to a plan

for more than 3 of any 15 (5 of any 15 in the case of

a multiemployer plan) consecutive plan years.

‘‘(B) EFFECTS OF WAIVER.—If a waiver is granted under

subparagraph (A) for any plan year—

‘‘(i) in the case of a single-employer plan, the minimum required contribution under section 303 for the

plan year shall be reduced by the amount of the waived

funding deficiency and such amount shall be amortized

as required under section 303(e), and

‘‘(ii) in the case of a multiemployer plan, the

funding standard account shall be credited under section 304(b)(3)(C) with the amount of the waived

funding deficiency and such amount shall be amortized

as required under section 304(b)(2)(C).

‘‘(C) WAIVER OF AMORTIZED PORTION NOT ALLOWED.—

The Secretary of the Treasury may not waive under

subparagraph (A) any portion of the minimum funding

standard under subsection (a) for a plan year which is

attributable to any waived funding deficiency for any preceding plan year.

‘‘(2) DETERMINATION OF BUSINESS HARDSHIP.—For purposes

of this subsection, the factors taken into account in determining

temporary substantial business hardship (substantial business

120 STAT. 786 PUBLIC LAW 109–280—AUG. 17, 2006

hardship in the case of a multiemployer plan) shall include

(but shall not be limited to) whether or not—

‘‘(A) the employer is operating at an economic loss,

‘‘(B) there is substantial unemployment or underemployment in the trade or business and in the industry

concerned,

‘‘(C) the sales and profits of the industry concerned

are depressed or declining, and

‘‘(D) it is reasonable to expect that the plan will be

continued only if the waiver is granted.

‘‘(3) WAIVED FUNDING DEFICIENCY.—For purposes of this

part, the term ‘waived funding deficiency’ means the portion

of the minimum funding standard under subsection (a) (determined without regard to the waiver) for a plan year waived

by the Secretary of the Treasury and not satisfied by employer

contributions.

‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EMPLOYER PLANS,

CONSULTATIONS.—

‘‘(A) SECURITY MAY BE REQUIRED.—

‘‘(i) IN GENERAL.—Except as provided in subparagraph (C), the Secretary of the Treasury may require

an employer maintaining a defined benefit plan which

is a single-employer plan (within the meaning of section 4001(a)(15)) to provide security to such plan as

a condition for granting or modifying a waiver under

paragraph (1).

‘‘(ii) SPECIAL RULES.—Any security provided under

clause (i) may be perfected and enforced only by the

Pension Benefit Guaranty Corporation, or at the direction of the Corporation, by a contributing sponsor

(within the meaning of section 4001(a)(13)), or a

member of such sponsor’s controlled group (within the

meaning of section 4001(a)(14)).

‘‘(B) CONSULTATION WITH THE PENSION BENEFIT GUARANTY CORPORATION.—Except as provided in subparagraph

(C), the Secretary of the Treasury shall, before granting

or modifying a waiver under this subsection with respect

to a plan described in subparagraph (A)(i)—

‘‘(i) provide the Pension Benefit Guaranty Corporation with—

‘‘(I) notice of the completed application for any

waiver or modification, and

‘‘(II) an opportunity to comment on such

application within 30 days after receipt of such

notice, and

‘‘(ii) consider—

‘‘(I) any comments of the Corporation under

clause (i)(II), and

‘‘(II) any views of any employee organization

(within the meaning of section 3(4)) representing

participants in the plan which are submitted in

writing to the Secretary of the Treasury in connection with such application.

Information provided to the Corporation under this

subparagraph shall be considered tax return information

and subject to the safeguarding and reporting requirements

of section 6103(p) of the Internal Revenue Code of 1986.

Deadline.

Notice.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 787

‘‘(C) EXCEPTION FOR CERTAIN WAIVERS.— ‘‘(i) IN GENERAL.—The preceding provisions of this

paragraph shall not apply to any plan with respect

to which the sum of—

‘‘(I) the aggregate unpaid minimum required

contributions for the plan year and all preceding

plan years, and

‘‘(II) the present value of all waiver amortization installments determined for the plan year and

succeeding plan years under section 303(e)(2),

is less than $1,000,000.

‘‘(ii) TREATMENT OF WAIVERS FOR WHICH APPLICA- TIONS ARE PENDING.—The amount described in clause

(i)(I) shall include any increase in such amount which

would result if all applications for waivers of the minimum funding standard under this subsection which

are pending with respect to such plan were denied.

‘‘(iii) UNPAID MINIMUM REQUIRED CONTRIBUTION.—

For purposes of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘unpaid minimum

required contribution’ means, with respect to any

plan year, any minimum required contribution

under section 303 for the plan year which is not

paid on or before the due date (as determined

under section 303(j)(1)) for the plan year.

‘‘(II) ORDERING RULE.—For purposes of subclause (I), any payment to or under a plan for

any plan year shall be allocated first to unpaid

minimum required contributions for all preceding

plan years on a first-in, first-out basis and then

to the minimum required contribution under section 303 for the plan year.

‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER PLANS.—

‘‘(A) APPLICATION MUST BE SUBMITTED BEFORE DATE

21⁄2 MONTHS AFTER CLOSE OF YEAR.—In the case of a singleemployer plan, no waiver may be granted under this subsection with respect to any plan for any plan year unless

an application therefor is submitted to the Secretary of

the Treasury not later than the 15th day of the 3rd month

beginning after the close of such plan year.

‘‘(B) SPECIAL RULE IF EMPLOYER IS MEMBER OF CONTROLLED GROUP.—In the case of a single-employer plan,

if an employer is a member of a controlled group, the

temporary substantial business hardship requirements of

paragraph (1) shall be treated as met only if such requirements are met—

‘‘(i) with respect to such employer, and

‘‘(ii) with respect to the controlled group of which

such employer is a member (determined by treating

all members of such group as a single employer).

The Secretary of the Treasury may provide that an analysis

of a trade or business or industry of a member need not

be conducted if such Secretary determines such analysis

is not necessary because the taking into account of such

member would not significantly affect the determination

under this paragraph.

‘‘(6) ADVANCE NOTICE.—

Deadline.

120 STAT. 788 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) IN GENERAL.—The Secretary of the Treasury shall,

before granting a waiver under this subsection, require

each applicant to provide evidence satisfactory to such Secretary that the applicant has provided notice of the filing

of the application for such waiver to each affected party

(as defined in section 4001(a)(21)). Such notice shall include

a description of the extent to which the plan is funded

for benefits which are guaranteed under title IV and for

benefit liabilities.

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The

Secretary of the Treasury shall consider any relevant

information provided by a person to whom notice was given

under subparagraph (A).

‘‘(7) RESTRICTION ON PLAN AMENDMENTS.— ‘‘(A) IN GENERAL.—No amendment of a plan which

increases the liabilities of the plan by reason of any

increase in benefits, any change in the accrual of benefits,

or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver

under this subsection or an extension of time under section

304(d) is in effect with respect to the plan, or if a plan

amendment described in subsection (d)(2) has been made

at any time in the preceding 12 months (24 months in

the case of a multiemployer plan). If a plan is amended

in violation of the preceding sentence, any such waiver,

or extension of time, shall not apply to any plan year

ending on or after the date on which such amendment

is adopted.

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply

to any plan amendment which—

‘‘(i) the Secretary of the Treasury determines to

be reasonable and which provides for only de minimis

increases in the liabilities of the plan,

‘‘(ii) only repeals an amendment described in subsection (d)(2), or

‘‘(iii) is required as a condition of qualification

under part I of subchapter D of chapter 1 of the

Internal Revenue Code of 1986.

‘‘(8) CROSS REFERENCE.—For corresponding duties of the

Secretary of the Treasury with regard to implementation of

the Internal Revenue Code of 1986, see section 412(c) of such

Code.

‘‘(d) MISCELLANEOUS RULES.—

‘‘(1) CHANGE IN METHOD OR YEAR.—If the funding method,

the valuation date, or a plan year for a plan is changed,

the change shall take effect only if approved by the Secretary

of the Treasury.

‘‘(2) CERTAIN RETROACTIVE PLAN AMENDMENTS.—For purposes of this section, any amendment applying to a plan year

which—

‘‘(A) is adopted after the close of such plan year but

no later than 21⁄2 months after the close of the plan year

(or, in the case of a multiemployer plan, no later than

2 years after the close of such plan year),

‘‘(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year

to which the amendment applies, and

Deadlines.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 789

‘‘(C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the

extent required by the circumstances,

shall, at the election of the plan administrator, be deemed

to have been made on the first day of such plan year. No

amendment described in this paragraph which reduces the

accrued benefits of any participant shall take effect unless

the plan administrator files a notice with the Secretary of

the Treasury notifying him of such amendment and such Secretary has approved such amendment, or within 90 days after

the date on which such notice was filed, failed to disapprove

such amendment. No amendment described in this subsection

shall be approved by the Secretary of the Treasury unless

such Secretary determines that such amendment is necessary

because of a temporary substantial business hardship (as determined under subsection (c)(2)) or a substantial business hardship (as so determined) in the case of a multiemployer plan

and that a waiver under subsection (c) (or, in the case of

a multiemployer plan, any extension of the amortization period

under section 304(d)) is unavailable or inadequate.

‘‘(3) CONTROLLED GROUP.—For purposes of this section, the

term ‘controlled group’ means any group treated as a single

employer under subsection (b), (c), (m), or (o) of section 414

of the Internal Revenue Code of 1986.’’.

(c) CLERICAL AMENDMENT.—The table of contents in section

1 of such Act is amended by striking the items relating to sections

302 through 308 and inserting the following new item:

‘‘Sec. 302. Minimum funding standards.’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after 2007.

SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT

PENSION PLANS.

(a) IN GENERAL.—Part 3 of subtitle B of title I of the Employee

Retirement Income Security Act of 1974 (as amended by section

101 of this Act) is amended by inserting after section 302 the

following new section:

‘‘SEC. 303. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

DEFINED BENEFIT PENSION PLANS.

‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For purposes of this

section and section 302(a)(2)(A), except as provided in subsection

(f), the term ‘minimum required contribution’ means, with respect

to any plan year of a single-employer plan—

‘‘(1) in any case in which the value of plan assets of the

plan (as reduced under subsection (f)(4)(B)) is less than the

funding target of the plan for the plan year, the sum of—

‘‘(A) the target normal cost of the plan for the plan

year,

‘‘(B) the shortfall amortization charge (if any) for the

plan for the plan year determined under subsection (c),

and

‘‘(C) the waiver amortization charge (if any) for the

plan for the plan year as determined under subsection

(e); or

‘‘(2) in any case in which the value of plan assets of the

plan (as reduced under subsection (f)(4)(B)) equals or exceeds

29 USC 1083.

29 USC 1082

note.

120 STAT. 790 PUBLIC LAW 109–280—AUG. 17, 2006

the funding target of the plan for the plan year, the target

normal cost of the plan for the plan year reduced (but not

below zero) by such excess.

‘‘(b) TARGET NORMAL COST.—For purposes of this section, except

as provided in subsection (i)(2) with respect to plans in at-risk

status, the term ‘target normal cost’ means, for any plan year,

the present value of all benefits which are expected to accrue

or to be earned under the plan during the plan year. For purposes

of this subsection, if any benefit attributable to services performed

in a preceding plan year is increased by reason of any increase

in compensation during the current plan year, the increase in

such benefit shall be treated as having accrued during the current

plan year.

‘‘(c) SHORTFALL AMORTIZATION CHARGE.— ‘‘(1) IN GENERAL.—For purposes of this section, the shortfall

amortization charge for a plan for any plan year is the aggregate total (not less than zero) of the shortfall amortization

installments for such plan year with respect to the shortfall

amortization bases for such plan year and each of the 6 preceding plan years.

‘‘(2) SHORTFALL AMORTIZATION INSTALLMENT.—For purposes

of paragraph (1)—

‘‘(A) DETERMINATION.—The shortfall amortization

installments are the amounts necessary to amortize the

shortfall amortization base of the plan for any plan year

in level annual installments over the 7-plan-year period

beginning with such plan year.

‘‘(B) SHORTFALL INSTALLMENT.—The shortfall amortization installment for any plan year in the 7-plan-year period

under subparagraph (A) with respect to any shortfall

amortization base is the annual installment determined

under subparagraph (A) for that year for that base.

‘‘(C) SEGMENT RATES.—In determining any shortfall

amortization installment under this paragraph, the plan

sponsor shall use the segment rates determined under

subparagraph (C) of subsection (h)(2), applied under rules

similar to the rules of subparagraph (B) of subsection (h)(2).

‘‘(3) SHORTFALL AMORTIZATION BASE.—For purposes of this

section, the shortfall amortization base of a plan for a plan

year is—

‘‘(A) the funding shortfall of such plan for such plan

year, minus

‘‘(B) the present value (determined using the segment

rates determined under subparagraph (C) of subsection

(h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2)) of the aggregate total of

the shortfall amortization installments and waiver

amortization installments which have been determined for

such plan year and any succeeding plan year with respect

to the shortfall amortization bases and waiver amortization

bases of the plan for any plan year preceding such plan

year.

‘‘(4) FUNDING SHORTFALL.—For purposes of this section,

the funding shortfall of a plan for any plan year is the excess

(if any) of—

‘‘(A) the funding target of the plan for the plan year,

over

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 791

‘‘(B) the value of plan assets of the plan (as reduced

under subsection (f)(4)(B)) for the plan year which are

held by the plan on the valuation date.

‘‘(5) EXEMPTION FROM NEW SHORTFALL AMORTIZATION

BASE.—

‘‘(A) IN GENERAL.—In any case in which the value

of plan assets of the plan (as reduced under subsection

(f)(4)(A)) is equal to or greater than the funding target

of the plan for the plan year, the shortfall amortization

base of the plan for such plan year shall be zero.

‘‘(B) TRANSITION RULE.—

‘‘(i) IN GENERAL.—Except as provided in clauses

(iii) and (iv), in the case of plan years beginning after

2007 and before 2011, only the applicable percentage

of the funding target shall be taken into account under

paragraph (3)(A) in determining the funding shortfall

for the plan year for purposes of subparagraph (A).

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of

subparagraph (A), the applicable percentage shall be

determined in accordance with the following table:

‘‘In the case of a plan year The

applicable

beginning in calendar year: percentage is

2008 ..................................................................................... 92

2009 ..................................................................................... 94

2010 ..................................................................................... 96.

‘‘(iii) LIMITATION.—Clause (i) shall not apply with

respect to any plan year after 2008 unless the shortfall

amortization base for each of the preceding years beginning after 2007 was zero (determined after application

of this subparagraph).

‘‘(iv) TRANSITION RELIEF NOT AVAILABLE FOR NEW

OR DEFICIT REDUCTION PLANS.—Clause (i) shall not

apply to a plan—

‘‘(I) which was not in effect for a plan year

beginning in 2007, or

‘‘(II) which was in effect for a plan year beginning in 2007 and which was subject to section

302(d) (as in effect for plan years beginning in

2007), determined after the application of paragraphs (6) and (9) thereof.

‘‘(6) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall

of a plan for a plan year is zero, for purposes of determining

the shortfall amortization charge for such plan year and succeeding plan years, the shortfall amortization bases for all

preceding plan years (and all shortfall amortization installments determined with respect to such bases) shall be reduced

to zero.

‘‘(d) RULES RELATING TO FUNDING TARGET.—For purposes of

this section—

‘‘(1) FUNDING TARGET.—Except as provided in subsection

(i)(1) with respect to plans in at-risk status, the funding target

of a plan for a plan year is the present value of all benefits

accrued or earned under the plan as of the beginning of the

plan year.

120 STAT. 792 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(2) FUNDING TARGET ATTAINMENT PERCENTAGE.—The

‘funding target attainment percentage’ of a plan for a plan

year is the ratio (expressed as a percentage) which—

‘‘(A) the value of plan assets for the plan year (as

reduced under subsection (f)(4)(B)), bears to

‘‘(B) the funding target of the plan for the plan year

(determined without regard to subsection (i)(1)).

‘‘(e) WAIVER AMORTIZATION CHARGE.— ‘‘(1) DETERMINATION OF WAIVER AMORTIZATION CHARGE.— The waiver amortization charge (if any) for a plan for any

plan year is the aggregate total of the waiver amortization

installments for such plan year with respect to the waiver

amortization bases for each of the 5 preceding plan years.

‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—For purposes of

paragraph (1)—

‘‘(A) DETERMINATION.—The waiver amortization

installments are the amounts necessary to amortize the

waiver amortization base of the plan for any plan year

in level annual installments over a period of 5 plan years

beginning with the succeeding plan year.

‘‘(B) WAIVER INSTALLMENT.—The waiver amortization

installment for any plan year in the 5-year period under

subparagraph (A) with respect to any waiver amortization

base is the annual installment determined under subparagraph (A) for that year for that base.

‘‘(3) INTEREST RATE.—In determining any waiver amortization installment under this subsection, the plan sponsor shall

use the segment rates determined under subparagraph (C)

of subsection (h)(2), applied under rules similar to the rules

of subparagraph (B) of subsection (h)(2).

‘‘(4) WAIVER AMORTIZATION BASE.—The waiver amortization

base of a plan for a plan year is the amount of the waived

funding deficiency (if any) for such plan year under section

302(c).

‘‘(5) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall

of a plan for a plan year is zero, for purposes of determining

the waiver amortization charge for such plan year and succeeding plan years, the waiver amortization bases for all preceding plan years (and all waiver amortization installments

determined with respect to such bases) shall be reduced to

zero.

‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBUTION BY

PREFUNDING BALANCE AND FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(1) ELECTION TO MAINTAIN BALANCES.—

‘‘(A) PREFUNDING BALANCE.—The plan sponsor of a

single-employer plan may elect to maintain a prefunding

balance.

‘‘(B) FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(i) IN GENERAL.—In the case of a single-employer

plan described in clause (ii), the plan sponsor may

elect to maintain a funding standard carryover balance,

until such balance is reduced to zero.

‘‘(ii) PLANS MAINTAINING FUNDING STANDARD

ACCOUNT IN 2007.—A plan is described in this clause

if the plan—

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 793

‘‘(I) was in effect for a plan year beginning

in 2007, and

‘‘(II) had a positive balance in the funding

standard account under section 302(b) as in effect

for such plan year and determined as of the end

of such plan year.

‘‘(2) APPLICATION OF BALANCES.—A prefunding balance and

a funding standard carryover balance maintained pursuant to

this paragraph—

‘‘(A) shall be available for crediting against the minimum required contribution, pursuant to an election under

paragraph (3),

‘‘(B) shall be applied as a reduction in the amount

treated as the value of plan assets for purposes of this

section, to the extent provided in paragraph (4), and

‘‘(C) may be reduced at any time, pursuant to an election under paragraph (5).

‘‘(3) ELECTION TO APPLY BALANCES AGAINST MINIMUM

REQUIRED CONTRIBUTION.—

‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), in the case of any plan year in which

the plan sponsor elects to credit against the minimum

required contribution for the current plan year all or a

portion of the prefunding balance or the funding standard

carryover balance for the current plan year (not in excess

of such minimum required contribution), the minimum

required contribution for the plan year shall be reduced

as of the first day of the plan year by the amount so

credited by the plan sponsor. For purposes of the preceding

sentence, the minimum required contribution shall be

determined after taking into account any waiver under

section 302(c).

‘‘(B) COORDINATION WITH FUNDING STANDARD CARRYOVER BALANCE.—To the extent that any plan has a funding

standard carryover balance greater than zero, no amount

of the prefunding balance of such plan may be credited

under this paragraph in reducing the minimum required

contribution.

‘‘(C) LIMITATION FOR UNDERFUNDED PLANS.—The preceding provisions of this paragraph shall not apply for

any plan year if the ratio (expressed as a percentage)

which—

‘‘(i) the value of plan assets for the preceding plan

year (as reduced under paragraph (4)(C)), bears to

‘‘(ii) the funding target of the plan for the preceding

plan year (determined without regard to subsection

(i)(1)),

is less than 80 percent. In the case of plan years beginning

in 2008, the ratio under this subparagraph may be determined using such methods of estimation as the Secretary

of the Treasury may prescribe.

‘‘(4) EFFECT OF BALANCES ON AMOUNTS TREATED AS VALUE

OF PLAN ASSETS.—In the case of any plan maintaining a

prefunding balance or a funding standard carryover balance

pursuant to this subsection, the amount treated as the value

of plan assets shall be deemed to be such amount, reduced

as provided in the following subparagraphs:

120 STAT. 794 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) APPLICABILITY OF SHORTFALL AMORTIZATION

BASE.—For purposes of subsection (c)(5), the value of plan

assets is deemed to be such amount, reduced by the amount

of the prefunding balance, but only if an election under

paragraph (2) applying any portion of the prefunding balance in reducing the minimum required contribution is

in effect for the plan year.

‘‘(B) DETERMINATION OF EXCESS ASSETS, FUNDING

SHORTFALL, AND FUNDING TARGET ATTAINMENT PERCENT- AGE.— ‘‘(i) IN GENERAL.—For purposes of subsections (a),

(c)(4)(B), and (d)(2)(A), the value of plan assets is

deemed to be such amount, reduced by the amount

of the prefunding balance and the funding standard

carryover balance.

‘‘(ii) SPECIAL RULE FOR CERTAIN BINDING AGREEMENTS WITH PBGC.—For purposes of subsection

(c)(4)(B), the value of plan assets shall not be deemed

to be reduced for a plan year by the amount of the

specified balance if, with respect to such balance, there

is in effect for a plan year a binding written agreement

with the Pension Benefit Guaranty Corporation which

provides that such balance is not available to reduce

the minimum required contribution for the plan year.

For purposes of the preceding sentence, the term ‘specified balance’ means the prefunding balance or the

funding standard carryover balance, as the case may

be.

‘‘(C) AVAILABILITY OF BALANCES IN PLAN YEAR FOR

CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION.—

For purposes of paragraph (3)(C)(i) of this subsection, the

value of plan assets is deemed to be such amount, reduced

by the amount of the prefunding balance.

‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO DETERMINATIONS OF VALUE OF PLAN ASSETS AND CREDITING AGAINST MIN- IMUM REQUIRED CONTRIBUTION.—

‘‘(A) IN GENERAL.—The plan sponsor may elect to

reduce by any amount the balance of the prefunding balance and the funding standard carryover balance for any

plan year (but not below zero). Such reduction shall be

effective prior to any determination of the value of plan

assets for such plan year under this section and application

of the balance in reducing the minimum required contribution for such plan for such plan year pursuant to an election

under paragraph (2).

‘‘(B) COORDINATION BETWEEN PREFUNDING BALANCE

AND FUNDING STANDARD CARRYOVER BALANCE.—To the

extent that any plan has a funding standard carryover

balance greater than zero, no election may be made under

subparagraph (A) with respect to the prefunding balance.

‘‘(6) PREFUNDING BALANCE.— ‘‘(A) IN GENERAL.—A prefunding balance maintained

by a plan shall consist of a beginning balance of zero,

increased and decreased to the extent provided in subparagraphs (B) and (C), and adjusted further as provided in

paragraph (8).

‘‘(B) INCREASES.—

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 795

‘‘(i) IN GENERAL.—As of the first day of each plan

year beginning after 2008, the prefunding balance of

a plan shall be increased by the amount elected by

the plan sponsor for the plan year. Such amount shall

not exceed the excess (if any) of—

‘‘(I) the aggregate total of employer contributions to the plan for the preceding plan year,

over—

‘‘(II) the minimum required contribution for

such preceding plan year.

‘‘(ii) ADJUSTMENTS FOR INTEREST.—Any excess contributions under clause (i) shall be properly adjusted

for interest accruing for the periods between the first

day of the current plan year and the dates on which

the excess contributions were made, determined by

using the effective interest rate for the preceding plan

year and by treating contributions as being first used

to satisfy the minimum required contribution.

‘‘(iii) CERTAIN CONTRIBUTIONS NECESSARY TO AVOID

BENEFIT LIMITATIONS DISREGARDED.—The excess

described in clause (i) with respect to any preceding

plan year shall be reduced (but not below zero) by

the amount of contributions an employer would be

required to make under paragraph (1), (2), or (4) of

section 206(g) to avoid a benefit limitation which would

otherwise be imposed under such paragraph for the

preceding plan year. Any contribution which may be

taken into account in satisfying the requirements of

more than 1 of such paragraphs shall be taken into

account only once for purposes of this clause.

‘‘(C) DECREASE.—The prefunding balance of a plan

shall be decreased (but not below zero) by—

‘‘(i) as of the first day of each plan year after

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required

contribution of the plan for the preceding plan year,

and

‘‘(ii) as of the time specified in paragraph (5)(A),

any reduction in such balance elected under paragraph

(5).

‘‘(7) FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(A) IN GENERAL.—A funding standard carryover balance maintained by a plan shall consist of a beginning

balance determined under subparagraph (B), decreased to

the extent provided in subparagraph (C), and adjusted

further as provided in paragraph (8).

‘‘(B) BEGINNING BALANCE.—The beginning balance of

the funding standard carryover balance shall be the positive balance described in paragraph (1)(B)(ii)(II).

‘‘(C) DECREASES.—The funding standard carryover balance of a plan shall be decreased (but not below zero)

by—

‘‘(i) as of the first day of each plan year after

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required

contribution of the plan for the preceding plan year,

and

120 STAT. 796 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) as of the time specified in paragraph (5)(A),

any reduction in such balance elected under paragraph

(5).

‘‘(8) ADJUSTMENTS FOR INVESTMENT EXPERIENCE.—In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year,

the plan sponsor shall, in accordance with regulations prescribed by the Secretary of the Treasury, adjust such balance

to reflect the rate of return on plan assets for the preceding

plan year. Notwithstanding subsection (g)(3), such rate of

return shall be determined on the basis of fair market value

and shall properly take into account, in accordance with such

regulations, all contributions, distributions, and other plan payments made during such period.

‘‘(9) ELECTIONS.—Elections under this subsection shall be

made at such times, and in such form and manner, as shall

be prescribed in regulations of the Secretary of the Treasury.

‘‘(g) VALUATION OF PLAN ASSETS AND LIABILITIES.—

‘‘(1) TIMING OF DETERMINATIONS.—Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date

of the plan for such plan year.

‘‘(2) VALUATION DATE.—For purposes of this section—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(B), the valuation date of a plan for any plan year shall

be the first day of the plan year.

‘‘(B) EXCEPTION FOR SMALL PLANS.—If, on each day

during the preceding plan year, a plan had 100 or fewer

participants, the plan may designate any day during the

plan year as its valuation date for such plan year and

succeeding plan years. For purposes of this subparagraph,

all defined benefit plans which are single-employer plans

and are maintained by the same employer (or any member

of such employer’s controlled group) shall be treated as

1 plan, but only participants with respect to such employer

or member shall be taken into account.

‘‘(C) APPLICATION OF CERTAIN RULES IN DETERMINATION

OF PLAN SIZE.—For purposes of this paragraph—

‘‘(i) PLANS NOT IN EXISTENCE IN PRECEDING YEAR.—

In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into

account the number of participants that the plan is

reasonably expected to have on days during such first

plan year.

‘‘(ii) PREDECESSORS.—Any reference in subparagraph (B) to an employer shall include a reference

to any predecessor of such employer.

‘‘(3) DETERMINATION OF VALUE OF PLAN ASSETS.—For purposes of this section—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(B), the value of plan assets shall be the fair market

value of the assets.

‘‘(B) AVERAGING ALLOWED.—A plan may determine the

value of plan assets on the basis of the averaging of fair

market values, but only if such method—

‘‘(i) is permitted under regulations prescribed by

the Secretary of the Treasury,

Regulations.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 797

‘‘(ii) does not provide for averaging of such values

over more than the period beginning on the last day

of the 25th month preceding the month in which the

valuation date occurs and ending on the valuation

date (or a similar period in the case of a valuation

date which is not the 1st day of a month), and

‘‘(iii) does not result in a determination of the

value of plan assets which, at any time, is lower than

90 percent or greater than 110 percent of the fair

market value of such assets at such time.

Any such averaging shall be adjusted for contributions

and distributions (as provided by the Secretary of the

Treasury).

‘‘(4) ACCOUNTING FOR CONTRIBUTION RECEIPTS.—For purposes of determining the value of assets under paragraph (3)—

‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

‘‘(i) an employer makes any contribution to the

plan after the valuation date for the plan year in

which the contribution is made, and

‘‘(ii) the contribution is for a preceding plan year,

the contribution shall be taken into account as an asset

of the plan as of the valuation date, except that in the

case of any plan year beginning after 2008, only the present

value (determined as of the valuation date) of such contribution may be taken into account. For purposes of the

preceding sentence, present value shall be determined

using the effective interest rate for the preceding plan

year to which the contribution is properly allocable.

‘‘(B) SPECIAL RULE FOR CURRENT YEAR CONTRIBUTIONS

MADE BEFORE VALUATION DATE.—If any contributions for

any plan year are made to or under the plan during the

plan year but before the valuation date for the plan year,

the assets of the plan as of the valuation date shall not

include—

‘‘(i) such contributions, and

‘‘(ii) interest on such contributions for the period

between the date of the contributions and the valuation

date, determined by using the effective interest rate

for the plan year.

‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—

‘‘(1) IN GENERAL.—Subject to this subsection, the determination of any present value or other computation under

this section shall be made on the basis of actuarial assumptions

and methods—

‘‘(A) each of which is reasonable (taking into account

the experience of the plan and reasonable expectations),

and

‘‘(B) which, in combination, offer the actuary’s best

estimate of anticipated experience under the plan.

‘‘(2) INTEREST RATES.—

‘‘(A) EFFECTIVE INTEREST RATE.—For purposes of this

section, the term ‘effective interest rate’ means, with

respect to any plan for any plan year, the single rate

of interest which, if used to determine the present value

of the plan’s accrued or earned benefits referred to in

subsection (d)(1), would result in an amount equal to the

funding target of the plan for such plan year.

120 STAT. 798 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) INTEREST RATES FOR DETERMINING FUNDING TARGET.—For purposes of determining the funding target and

normal cost of a plan for any plan year, the interest rate

used in determining the present value of the benefits of

the plan shall be—

‘‘(i) in the case of benefits reasonably determined

to be payable during the 5-year period beginning on

the first day of the plan year, the first segment rate

with respect to the applicable month,

‘‘(ii) in the case of benefits reasonably determined

to be payable during the 15-year period beginning at

the end of the period described in clause (i), the second

segment rate with respect to the applicable month,

and

‘‘(iii) in the case of benefits reasonably determined

to be payable after the period described in clause (ii),

the third segment rate with respect to the applicable

month.

‘‘(C) SEGMENT RATES.—For purposes of this paragraph—

‘‘(i) FIRST SEGMENT RATE.—The term ‘first segment

rate’ means, with respect to any month, the single

rate of interest which shall be determined by the Secretary of the Treasury for such month on the basis

of the corporate bond yield curve for such month,

taking into account only that portion of such yield

curve which is based on bonds maturing during the

5-year period commencing with such month.

‘‘(ii) SECOND SEGMENT RATE.—The term ‘second

segment rate’ means, with respect to any month, the

single rate of interest which shall be determined by

the Secretary of the Treasury for such month on the

basis of the corporate bond yield curve for such month,

taking into account only that portion of such yield

curve which is based on bonds maturing during the

15-year period beginning at the end of the period

described in clause (i).

‘‘(iii) THIRD SEGMENT RATE.—The term ‘third segment rate’ means, with respect to any month, the

single rate of interest which shall be determined by

the Secretary of the Treasury for such month on the

basis of the corporate bond yield curve for such month,

taking into account only that portion of such yield

curve which is based on bonds maturing during periods

beginning after the period described in clause (ii).

‘‘(D) CORPORATE BOND YIELD CURVE.—For purposes of

this paragraph—

‘‘(i) IN GENERAL.—The term ‘corporate bond yield

curve’ means, with respect to any month, a yield curve

which is prescribed by the Secretary of the Treasury

for such month and which reflects the average, for

the 24-month period ending with the month preceding

such month, of monthly yields on investment grade

corporate bonds with varying maturities and that are

in the top 3 quality levels available.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 799

‘‘(ii) ELECTION TO USE YIELD CURVE.—Solely for

purposes of determining the minimum required contribution under this section, the plan sponsor may,

in lieu of the segment rates determined under subparagraph (C), elect to use interest rates under the corporate bond yield curve. For purposes of the preceding

sentence such curve shall be determined without

regard to the 24-month averaging described in clause

(i). Such election, once made, may be revoked only

with the consent of the Secretary of the Treasury.

‘‘(E) APPLICABLE MONTH.—For purposes of this paragraph, the term ‘applicable month’ means, with respect

to any plan for any plan year, the month which includes

the valuation date of such plan for such plan year or,

at the election of the plan sponsor, any of the 4 months

which precede such month. Any election made under this

subparagraph shall apply to the plan year for which the

election is made and all succeeding plan years, unless

the election is revoked with the consent of the Secretary

of the Treasury.

‘‘(F) PUBLICATION REQUIREMENTS.—The Secretary of

the Treasury shall publish for each month the corporate

bond yield curve (and the corporate bond yield curve

reflecting the modification described in section

205(g)(3)(B)(iii)(I)) for such month and each of the rates

determined under subparagraph (B) for such month. The

Secretary of the Treasury shall also publish a description

of the methodology used to determine such yield curve

and such rates which is sufficiently detailed to enable

plans to make reasonable projections regarding the yield

curve and such rates for future months based on the plan’s

projection of future interest rates.

‘‘(G) TRANSITION RULE.—

‘‘(i) IN GENERAL.—Notwithstanding the preceding

provisions of this paragraph, for plan years beginning

in 2008 or 2009, the first, second, or third segment

rate for a plan with respect to any month shall be

equal to the sum of—

‘‘(I) the product of such rate for such month

determined without regard to this subparagraph,

multiplied by the applicable percentage, and

‘‘(II) the product of the rate determined under

the rules of section 302(b)(5)(B)(ii)(II) (as in effect

for plan years beginning in 2007), multiplied by

a percentage equal to 100 percent minus the

applicable percentage.

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of

clause (i), the applicable percentage is 331⁄3 percent

for plan years beginning in 2008 and 662⁄3 percent

for plan years beginning in 2009.

‘‘(iii) NEW PLANS INELIGIBLE.—Clause (i) shall not

apply to any plan if the first plan year of the plan

begins after December 31, 2007.

‘‘(iv) ELECTION.—The plan sponsor may elect not

to have this subparagraph apply. Such election, once

made, may be revoked only with the consent of the

Secretary of the Treasury.

120 STAT. 800 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(3) MORTALITY TABLES.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph

(C) or (D), the Secretary of the Treasury shall by regulation

prescribe mortality tables to be used in determining any

present value or making any computation under this section. Such tables shall be based on the actual experience

of pension plans and projected trends in such experience.

In prescribing such tables, the Secretary of the Treasury

shall take into account results of available independent

studies of mortality of individuals covered by pension plans.

‘‘(B) PERIODIC REVISION.—The Secretary of the

Treasury shall (at least every 10 years) make revisions

in any table in effect under subparagraph (A) to reflect

the actual experience of pension plans and projected trends

in such experience.

‘‘(C) SUBSTITUTE MORTALITY TABLE.— ‘‘(i) IN GENERAL.—Upon request by the plan

sponsor and approval by the Secretary of the Treasury,

a mortality table which meets the requirements of

clause (iii) shall be used in determining any present

value or making any computation under this section

during the period of consecutive plan years (not to

exceed 10) specified in the request.

‘‘(ii) EARLY TERMINATION OF PERIOD.—Notwithstanding clause (i), a mortality table described in clause

(i) shall cease to be in effect as of the earliest of—

‘‘(I) the date on which there is a significant

change in the participants in the plan by reason

of a plan spinoff or merger or otherwise, or

‘‘(II) the date on which the plan actuary determines that such table does not meet the requirements of clause (iii).

‘‘(iii) REQUIREMENTS.—A mortality table meets the

requirements of this clause if—

‘‘(I) there is a sufficient number of plan participants, and the pension plans have been maintained for a sufficient period of time, to have credible information necessary for purposes of subclause (II), and

‘‘(II) such table reflects the actual experience

of the pension plans maintained by the sponsor

and projected trends in general mortality experience.

‘‘(iv) ALL PLANS IN CONTROLLED GROUP MUST USE

SEPARATE TABLE.—Except as provided by the Secretary

of the Treasury, a plan sponsor may not use a mortality

table under this subparagraph for any plan maintained

by the plan sponsor unless—

‘‘(I) a separate mortality table is established

and used under this subparagraph for each other

plan maintained by the plan sponsor and if the

plan sponsor is a member of a controlled group,

each member of the controlled group, and

‘‘(II) the requirements of clause (iii) are met

separately with respect to the table so established

for each such plan, determined by only taking

into account the participants of such plan, the

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 801

time such plan has been in existence, and the

actual experience of such plan.

‘‘(v) DEADLINE FOR SUBMISSION AND DISPOSITION

OF APPLICATION.—

‘‘(I) SUBMISSION.—The plan sponsor shall

submit a mortality table to the Secretary of the

Treasury for approval under this subparagraph

at least 7 months before the 1st day of the period

described in clause (i).

‘‘(II) DISPOSITION.—Any mortality table submitted to the Secretary of the Treasury for

approval under this subparagraph shall be treated

as in effect as of the 1st day of the period described

in clause (i) unless the Secretary of the Treasury,

during the 180-day period beginning on the date

of such submission, disapproves of such table and

provides the reasons that such table fails to meet

the requirements of clause (iii). The 180-day period

shall be extended upon mutual agreement of the

Secretary of the Treasury and the plan sponsor.

‘‘(D) SEPARATE MORTALITY TABLES FOR THE DISABLED.—

Notwithstanding subparagraph (A)—

‘‘(i) IN GENERAL.—The Secretary of the Treasury

shall establish mortality tables which may be used

(in lieu of the tables under subparagraph (A)) under

this subsection for individuals who are entitled to benefits under the plan on account of disability. The Secretary of the Treasury shall establish separate tables

for individuals whose disabilities occur in plan years

beginning before January 1, 1995, and for individuals

whose disabilities occur in plan years beginning on

or after such date.

‘‘(ii) SPECIAL RULE FOR DISABILITIES OCCURRING

AFTER 1994.—In the case of disabilities occurring in

plan years beginning after December 31, 1994, the

tables under clause (i) shall apply only with respect

to individuals described in such subclause who are

disabled within the meaning of title II of the Social

Security Act and the regulations thereunder.

‘‘(iii) PERIODIC REVISION.—The Secretary of the

Treasury shall (at least every 10 years) make revisions

in any table in effect under clause (i) to reflect the

actual experience of pension plans and projected trends

in such experience.

‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN THE FORM OF

LUMP SUMS OR OTHER OPTIONAL FORMS.—For purposes of determining any present value or making any computation under

this section, there shall be taken into account—

‘‘(A) the probability that future benefit payments under

the plan will be made in the form of optional forms of

benefits provided under the plan (including lump sum distributions, determined on the basis of the plan’s experience

and other related assumptions), and

‘‘(B) any difference in the present value of such future

benefit payments resulting from the use of actuarial

assumptions, in determining benefit payments in any such

Applicability.

120 STAT. 802 PUBLIC LAW 109–280—AUG. 17, 2006

optional form of benefits, which are different from those

specified in this subsection.

‘‘(5) APPROVAL OF LARGE CHANGES IN ACTUARIAL ASSUMPTIONS.—‘‘(A) IN GENERAL.—No actuarial assumption used to

determine the funding target for a plan to which this

paragraph applies may be changed without the approval

of the Secretary of the Treasury.

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan only if—

‘‘(i) the plan is a single-employer plan to which

title IV applies,

‘‘(ii) the aggregate unfunded vested benefits as of

the close of the preceding plan year (as determined

under section 4006(a)(3)(E)(iii)) of such plan and all

other plans maintained by the contributing sponsors

(as defined in section 4001(a)(13)) and members of

such sponsors’ controlled groups (as defined in section

4001(a)(14)) which are covered by title IV (disregarding

plans with no unfunded vested benefits) exceed

$50,000,000, and

‘‘(iii) the change in assumptions (determined after

taking into account any changes in interest rate and

mortality table) results in a decrease in the funding

shortfall of the plan for the current plan year that

exceeds $50,000,000, or that exceeds $5,000,000 and

that is 5 percent or more of the funding target of

the plan before such change.

‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.—

‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK STATUS.—

‘‘(A) IN GENERAL.—In the case of a plan which is in

at-risk status for a plan year, the funding target of the

plan for the plan year shall be equal to the sum of—

‘‘(i) the present value of all benefits accrued or

earned under the plan as of the beginning of the plan

year, as determined by using the additional actuarial

assumptions described in subparagraph (B), and

‘‘(ii) in the case of a plan which also has been

in at-risk status for at least 2 of the 4 preceding

plan years, a loading factor determined under subparagraph (C).

‘‘(B) ADDITIONAL ACTUARIAL ASSUMPTIONS.—The actuarial assumptions described in this subparagraph are as

follows:

‘‘(i) All employees who are not otherwise assumed

to retire as of the valuation date but who will be

eligible to elect benefits during the plan year and the

10 succeeding plan years shall be assumed to retire

at the earliest retirement date under the plan but

not before the end of the plan year for which the

at-risk funding target and at-risk target normal cost

are being determined.

‘‘(ii) All employees shall be assumed to elect the

retirement benefit available under the plan at the

assumed retirement age (determined after application

of clause (i)) which would result in the highest present

value of benefits.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 803

‘‘(C) LOADING FACTOR.—The loading factor applied with

respect to a plan under this paragraph for any plan year

is the sum of—

‘‘(i) $700, times the number of participants in the

plan, plus

‘‘(ii) 4 percent of the funding target (determined

without regard to this paragraph) of the plan for the

plan year.

‘‘(2) TARGET NORMAL COST OF AT-RISK PLANS.—In the case

of a plan which is in at-risk status for a plan year, the target

normal cost of the plan for such plan year shall be equal

to the sum of—

‘‘(A) the present value of all benefits which are expected

to accrue or be earned under the plan during the plan

year, determined using the additional actuarial assumptions described in paragraph (1)(B), plus

‘‘(B) in the case of a plan which also has been in

at-risk status for at least 2 of the 4 preceding plan years,

a loading factor equal to 4 percent of the target normal

cost (determined without regard to this paragraph) of the

plan for the plan year.

‘‘(3) MINIMUM AMOUNT.—In no event shall—

‘‘(A) the at-risk funding target be less than the funding

target, as determined without regard to this subsection,

or

‘‘(B) the at-risk target normal cost be less than the

target normal cost, as determined without regard to this

subsection.

‘‘(4) DETERMINATION OF AT-RISK STATUS.—For purposes of

this subsection—

‘‘(A) IN GENERAL.—A plan is in at-risk status for a

plan year if—

‘‘(i) the funding target attainment percentage for

the preceding plan year (determined under this section

without regard to this subsection) is less than 80 percent, and

‘‘(ii) the funding target attainment percentage for

the preceding plan year (determined under this section

by using the additional actuarial assumptions

described in paragraph (1)(B) in computing the funding

target) is less than 70 percent.

‘‘(B) TRANSITION RULE.—In the case of plan years beginning in 2008, 2009, and 2010, subparagraph (A)(i) shall

be applied by substituting the following percentages for

‘80 percent’:

‘‘(i) 65 percent in the case of 2008.

‘‘(ii) 70 percent in the case of 2009.

‘‘(iii) 75 percent in the case of 2010.

In the case of plan years beginning in 2008, the funding

target attainment percentage for the preceding plan year

under subparagraph (A)(ii) may be determined using such

methods of estimation as the Secretary of the Treasury

may provide.

‘‘(C) SPECIAL RULE FOR EMPLOYEES OFFERED EARLY

RETIREMENT IN 2006.— ‘‘(i) IN GENERAL.—For purposes of subparagraph

(A)(ii), the additional actuarial assumptions described

Applicability.

120 STAT. 804 PUBLIC LAW 109–280—AUG. 17, 2006

in paragraph (1)(B) shall not be taken into account

with respect to any employee if—

‘‘(I) such employee is employed by a specified

automobile manufacturer,

‘‘(II) such employee is offered a substantial

amount of additional cash compensation, substantially enhanced retirement benefits under the plan,

or materially reduced employment duties on the

condition that by a specified date (not later than

December 31, 2010) the employee retires (as

defined under the terms of the plan),

‘‘(III) such offer is made during 2006 and

pursuant to a bona fide retirement incentive program and requires, by the terms of the offer, that

such offer can be accepted not later than a specified

date (not later than December 31, 2006), and

‘‘(IV) such employee does not elect to accept

such offer before the specified date on which the

offer expires.

‘‘(ii) SPECIFIED AUTOMOBILE MANUFACTURER.—For

purposes of clause (i), the term ‘specified automobile

manufacturer’ means—

‘‘(I) any manufacturer of automobiles, and

‘‘(II) any manufacturer of automobile parts

which supplies such parts directly to a manufacturer of automobiles and which, after a transaction

or series of transactions ending in 1999, ceased

to be a member of a controlled group which

included such manufacturer of automobiles.

‘‘(5) TRANSITION BETWEEN APPLICABLE FUNDING TARGETS

AND BETWEEN APPLICABLE TARGET NORMAL COSTS.—

‘‘(A) IN GENERAL.—In any case in which a plan which

is in at-risk status for a plan year has been in such status

for a consecutive period of fewer than 5 plan years, the

applicable amount of the funding target and of the target

normal cost shall be, in lieu of the amount determined

without regard to this paragraph, the sum of—

‘‘(i) the amount determined under this section

without regard to this subsection, plus

‘‘(ii) the transition percentage for such plan year

of the excess of the amount determined under this

subsection (without regard to this paragraph) over the

amount determined under this section without regard

to this subsection.

‘‘(B) TRANSITION PERCENTAGE.—For purposes of

subparagraph (A), the transition percentage shall be determined in accordance with the following table:

‘‘If the consecutive number of

years (including the plan year) The

transition

the plan is in at-risk status is— percentage

is—

1 .............................................................................................. 20

2 .............................................................................................. 40

3 .............................................................................................. 60

4 .............................................................................................. 80.

Deadline.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 805

‘‘(C) YEARS BEFORE EFFECTIVE DATE.—For purposes of

this paragraph, plan years beginning before 2008 shall

not be taken into account.

‘‘(6) SMALL PLAN EXCEPTION.—If, on each day during the

preceding plan year, a plan had 500 or fewer participants,

the plan shall not be treated as in at-risk status for the plan

year. For purposes of this paragraph, all defined benefit plans

(other than multiemployer plans) maintained by the same

employer (or any member of such employer’s controlled group)

shall be treated as 1 plan, but only participants with respect

to such employer or member shall be taken into account and

the rules of subsection (g)(2)(C) shall apply.

‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBUTIONS.— ‘‘(1) IN GENERAL.—For purposes of this section, the due

date for any payment of any minimum required contribution

for any plan year shall be 81⁄2 months after the close of the

plan year.

‘‘(2) INTEREST.—Any payment required under paragraph

(1) for a plan year that is made on a date other than the

valuation date for such plan year shall be adjusted for interest

accruing for the period between the valuation date and the

payment date, at the effective rate of interest for the plan

for such plan year.

‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION SCHEDULE FOR

UNDERFUNDED PLANS.—

‘‘(A) FAILURE TO TIMELY MAKE REQUIRED INSTALLMENT.—In any case in which the plan has a funding shortfall for the preceding plan year, the employer maintaining

the plan shall make the required installments under this

paragraph and if the employer fails to pay the full amount

of a required installment for the plan year, then the amount

of interest charged under paragraph (2) on the underpayment for the period of underpayment shall be determined by using a rate of interest equal to the rate otherwise

used under paragraph (2) plus 5 percentage points.

‘‘(B) AMOUNT OF UNDERPAYMENT, PERIOD OF UNDERPAYMENT.—For purposes of subparagraph (A)—

‘‘(i) AMOUNT.—The amount of the underpayment

shall be the excess of—

‘‘(I) the required installment, over

‘‘(II) the amount (if any) of the installment

contributed to or under the plan on or before the

due date for the installment.

‘‘(ii) PERIOD OF UNDERPAYMENT.—The period for

which any interest is charged under this paragraph

with respect to any portion of the underpayment shall

run from the due date for the installment to the date

on which such portion is contributed to or under the

plan.

‘‘(iii) ORDER OF CREDITING CONTRIBUTIONS.—For

purposes of clause (i)(II), contributions shall be credited

against unpaid required installments in the order in

which such installments are required to be paid.

‘‘(C) NUMBER OF REQUIRED INSTALLMENTS; DUE

DATES.—For purposes of this paragraph—

‘‘(i) PAYABLE IN 4 INSTALLMENTS.—There shall be

4 required installments for each plan year.

Applicability.

120 STAT. 806 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) TIME FOR PAYMENT OF INSTALLMENTS.—The

due dates for required installments are set forth in

the following table:

‘‘In the case of the following

required installment:

The due date is:

1st ..................................................................... April 15

2nd .................................................................... July 15

3rd .................................................................... October 15

4th .................................................................... January 15 of the

following year.

‘‘(D) AMOUNT OF REQUIRED INSTALLMENT.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The amount of any required

installment shall be 25 percent of the required annual

payment.

‘‘(ii) REQUIRED ANNUAL PAYMENT.—For purposes

of clause (i), the term ‘required annual payment’ means

the lesser of—

‘‘(I) 90 percent of the minimum required contribution (determined without regard to this subsection) to the plan for the plan year under this

section, or

‘‘(II) 100 percent of the minimum required contribution (determined without regard to this subsection or to any waiver under section 302(c)) to

the plan for the preceding plan year.

Subclause (II) shall not apply if the preceding plan

year referred to in such clause was not a year of

12 months.

‘‘(E) FISCAL YEARS AND SHORT YEARS.—

‘‘(i) FISCAL YEARS.—In applying this paragraph to

a plan year beginning on any date other than January

1, there shall be substituted for the months specified

in this paragraph, the months which correspond

thereto.

‘‘(ii) SHORT PLAN YEAR.—This subparagraph shall

be applied to plan years of less than 12 months in

accordance with regulations prescribed by the Secretary of the Treasury.

‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION WITH QUARTERLY CONTRIBUTIONS.—

‘‘(A) IN GENERAL.—A plan to which this paragraph

applies shall be treated as failing to pay the full amount

of any required installment under paragraph (3) to the

extent that the value of the liquid assets paid in such

installment is less than the liquidity shortfall (whether

or not such liquidity shortfall exceeds the amount of such

installment required to be paid but for this paragraph).

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan (other than a plan described

in subsection (g)(2)(B)) which—

‘‘(i) is required to pay installments under paragraph (3) for a plan year, and

‘‘(ii) has a liquidity shortfall for any quarter during

such plan year.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 807

‘‘(C) PERIOD OF UNDERPAYMENT.—For purposes of paragraph (3)(A), any portion of an installment that is treated

as not paid under subparagraph (A) shall continue to be

treated as unpaid until the close of the quarter in which

the due date for such installment occurs.

‘‘(D) LIMITATION ON INCREASE.—If the amount of any

required installment is increased by reason of subparagraph (A), in no event shall such increase exceed the

amount which, when added to prior installments for the

plan year, is necessary to increase the funding target

attainment percentage of the plan for the plan year (taking

into account the expected increase in funding target due

to benefits accruing or earned during the plan year) to

100 percent.

‘‘(E) DEFINITIONS.—For purposes of this paragraph—

‘‘(i) LIQUIDITY SHORTFALL.—The term ‘liquidity

shortfall’ means, with respect to any required installment, an amount equal to the excess (as of the last

day of the quarter for which such installment is made)

of—

‘‘(I) the base amount with respect to such

quarter, over

‘‘(II) the value (as of such last day) of the

plan’s liquid assets.

‘‘(ii) BASE AMOUNT.—

‘‘(I) IN GENERAL.—The term ‘base amount’

means, with respect to any quarter, an amount

equal to 3 times the sum of the adjusted disbursements from the plan for the 12 months ending

on the last day of such quarter.

‘‘(II) SPECIAL RULE.—If the amount determined

under subclause (I) exceeds an amount equal to

2 times the sum of the adjusted disbursements

from the plan for the 36 months ending on the

last day of the quarter and an enrolled actuary

certifies to the satisfaction of the Secretary of the

Treasury that such excess is the result of nonrecurring circumstances, the base amount with

respect to such quarter shall be determined without regard to amounts related to those nonrecurring circumstances.

‘‘(iii) DISBURSEMENTS FROM THE PLAN.—The term

‘disbursements from the plan’ means all disbursements

from the trust, including purchases of annuities, payments of single sums and other benefits, and administrative expenses.

‘‘(iv) ADJUSTED DISBURSEMENTS.—The term

‘adjusted disbursements’ means disbursements from

the plan reduced by the product of—

‘‘(I) the plan’s funding target attainment

percentage for the plan year, and

‘‘(II) the sum of the purchases of annuities,

payments of single sums, and such other disbursements as the Secretary of the Treasury shall provide in regulations.

‘‘(v) LIQUID ASSETS.—The term ‘liquid assets’

means cash, marketable securities, and such other

120 STAT. 808 PUBLIC LAW 109–280—AUG. 17, 2006

assets as specified by the Secretary of the Treasury

in regulations.

‘‘(vi) QUARTER.—The term ‘quarter’ means, with

respect to any required installment, the 3-month period

preceding the month in which the due date for such

installment occurs.

‘‘(F) REGULATIONS.—The Secretary of the Treasury may

prescribe such regulations as are necessary to carry out

this paragraph.

‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO MAKE REQUIRED

CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—In the case of a plan to which this

subsection applies (as provided under paragraph (2)), if—

‘‘(A) any person fails to make a contribution payment

required by section 302 and this section before the due

date for such payment, and

‘‘(B) the unpaid balance of such payment (including

interest), when added to the aggregate unpaid balance

of all preceding such payments for which payment was

not made before the due date (including interest), exceeds

$1,000,000,

then there shall be a lien in favor of the plan in the amount

determined under paragraph (3) upon all property and rights

to property, whether real or personal, belonging to such person

and any other person who is a member of the same controlled

group of which such person is a member.

‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—This subsection

shall apply to a single-employer plan covered under section

4021 for any plan year for which the funding target attainment

percentage (as defined in subsection (d)(2)) of such plan is

less than 100 percent.

‘‘(3) AMOUNT OF LIEN.—For purposes of paragraph (1), the

amount of the lien shall be equal to the aggregate unpaid

balance of contribution payments required under this section

and section 302 for which payment has not been made before

the due date.

‘‘(4) NOTICE OF FAILURE; LIEN.—

‘‘(A) NOTICE OF FAILURE.—A person committing a

failure described in paragraph (1) shall notify the Pension

Benefit Guaranty Corporation of such failure within 10

days of the due date for the required contribution payment.

‘‘(B) PERIOD OF LIEN.—The lien imposed by paragraph

(1) shall arise on the due date for the required contribution

payment and shall continue until the last day of the first

plan year in which the plan ceases to be described in

paragraph (1)(B). Such lien shall continue to run without

regard to whether such plan continues to be described

in paragraph (2) during the period referred to in the preceding sentence.

‘‘(C) CERTAIN RULES TO APPLY.—Any amount with

respect to which a lien is imposed under paragraph (1)

shall be treated as taxes due and owing the United States

and rules similar to the rules of subsections (c), (d), and

(e) of section 4068 shall apply with respect to a lien imposed

by subsection (a) and the amount with respect to such

lien.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 809

‘‘(5) ENFORCEMENT.—Any lien created under paragraph (1)

may be perfected and enforced only by the Pension Benefit

Guaranty Corporation, or at the direction of the Pension Benefit

Guaranty Corporation, by the contributing sponsor (or any

member of the controlled group of the contributing sponsor).

‘‘(6) DEFINITIONS.—For purposes of this subsection—

‘‘(A) CONTRIBUTION PAYMENT.—The term ‘contribution

payment’ means, in connection with a plan, a contribution

payment required to be made to the plan, including any

required installment under paragraphs (3) and (4) of subsection (j).

‘‘(B) DUE DATE; REQUIRED INSTALLMENT.—The terms

‘due date’ and ‘required installment’ have the meanings

given such terms by subsection (j), except that in the case

of a payment other than a required installment, the due

date shall be the date such payment is required to be

made under section 303.

‘‘(C) CONTROLLED GROUP.—The term ‘controlled group’

means any group treated as a single employer under subsections (b), (c), (m), and (o) of section 414 of the Internal

Revenue Code of 1986.

‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT ACCOUNTS.— In the case of a qualified transfer (as defined in section 420 of

the Internal Revenue Code of 1986), any assets so transferred

shall not, for purposes of this section, be treated as assets in

the plan.’’.

(b) CLERICAL AMENDMENT.—The table of sections in section

1 of such Act (as amended by section 101) is amended by inserting

after the item relating to section 302 the following new item:

‘‘Sec. 303. Minimum funding standards for single-employer defined benefit pension

plans.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply with respect to plan years beginning after 2007.

SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

(a) FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT

ACCRUALS UNDER SINGLE-EMPLOYER PLANS.—Section 206 of the

Employee Retirement Income Security Act of 1974 (29 U.S.C. 1056)

is amended by adding at the end the following new subsection:

‘‘(g) FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT

ACCRUALS UNDER SINGLE-EMPLOYER PLANS.—

‘‘(1) FUNDING-BASED LIMITATION ON SHUTDOWN BENEFITS

AND OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS

UNDER SINGLE-EMPLOYER PLANS.—

‘‘(A) IN GENERAL.—If a participant of a defined benefit

plan which is a single-employer plan is entitled to an

unpredictable contingent event benefit payable with respect

to any event occurring during any plan year, the plan

shall provide that such benefit may not be provided if

the adjusted funding target attainment percentage for such

plan year—

‘‘(i) is less than 60 percent, or

‘‘(ii) would be less than 60 percent taking into

account such occurrence.

‘‘(B) EXEMPTION.—Subparagraph (A) shall cease to

apply with respect to any plan year, effective as of the

first day of the plan year, upon payment by the plan

Effective date.

29 USC 1083

note.

120 STAT. 810 PUBLIC LAW 109–280—AUG. 17, 2006

sponsor of a contribution (in addition to any minimum

required contribution under section 303) equal to—

‘‘(i) in the case of subparagraph (A)(i), the amount

of the increase in the funding target of the plan (under

section 303) for the plan year attributable to the occurrence referred to in subparagraph (A), and

‘‘(ii) in the case of subparagraph (A)(ii), the amount

sufficient to result in a funding target attainment

percentage of 60 percent.

‘‘(C) UNPREDICTABLE CONTINGENT EVENT.—For purposes of this paragraph, the term ‘unpredictable contingent

event benefit’ means any benefit payable solely by reason

of—

‘‘(i) a plant shutdown (or similar event, as determined by the Secretary of the Treasury), or

‘‘(ii) an event other than the attainment of any

age, performance of any service, receipt or derivation

of any compensation, or occurrence of death or disability.

‘‘(2) LIMITATIONS ON PLAN AMENDMENTS INCREASING

LIABILITY FOR BENEFITS.—

‘‘(A) IN GENERAL.—No amendment to a defined benefit

plan which is a single-employer plan which has the effect

of increasing liabilities of the plan by reason of increases

in benefits, establishment of new benefits, changing the

rate of benefit accrual, or changing the rate at which benefits become nonforfeitable may take effect during any plan

year if the adjusted funding target attainment percentage

for such plan year is—

‘‘(i) less than 80 percent, or

‘‘(ii) would be less than 80 percent taking into

account such amendment.

‘‘(B) EXEMPTION.—Subparagraph (A) shall cease to

apply with respect to any plan year, effective as of the

first day of the plan year (or if later, the effective date

of the amendment), upon payment by the plan sponsor

of a contribution (in addition to any minimum required

contribution under section 303) equal to—

‘‘(i) in the case of subparagraph (A)(i), the amount

of the increase in the funding target of the plan (under

section 303) for the plan year attributable to the

amendment, and

‘‘(ii) in the case of subparagraph (A)(ii), the amount

sufficient to result in an adjusted funding target attainment percentage of 80 percent.

‘‘(C) EXCEPTION FOR CERTAIN BENEFIT INCREASES.—

Subparagraph (A) shall not apply to any amendment which

provides for an increase in benefits under a formula which

is not based on a participant’s compensation, but only

if the rate of such increase is not in excess of the contemporaneous rate of increase in average wages of participants

covered by the amendment.

‘‘(3) LIMITATIONS ON ACCELERATED BENEFIT DISTRIBUTIONS.—

‘‘(A) FUNDING PERCENTAGE LESS THAN 60 PERCENT.— A defined benefit plan which is a single-employer plan

shall provide that, in any case in which the plan’s adjusted

Effective date.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 811

funding target attainment percentage for a plan year is

less than 60 percent, the plan may not pay any prohibited

payment after the valuation date for the plan year.

‘‘(B) BANKRUPTCY.—A defined benefit plan which is

a single-employer plan shall provide that, during any period

in which the plan sponsor is a debtor in a case under

title 11, United States Code, or similar Federal or State

law, the plan may not pay any prohibited payment. The

preceding sentence shall not apply on or after the date

on which the enrolled actuary of the plan certifies that

the adjusted funding target attainment percentage of such

plan is not less than 100 percent.

‘‘(C) LIMITED PAYMENT IF PERCENTAGE AT LEAST 60

PERCENT BUT LESS THAN 80 PERCENT.— ‘‘(i) IN GENERAL.—A defined benefit plan which

is a single-employer plan shall provide that, in any

case in which the plan’s adjusted funding target attainment percentage for a plan year is 60 percent or greater

but less than 80 percent, the plan may not pay any

prohibited payment after the valuation date for the

plan year to the extent the amount of the payment

exceeds the lesser of—

‘‘(I) 50 percent of the amount of the payment

which could be made without regard to this subsection, or

‘‘(II) the present value (determined under guidance prescribed by the Pension Benefit Guaranty

Corporation, using the interest and mortality

assumptions under section 205(g)) of the maximum

guarantee with respect to the participant under

section 4022.

‘‘(ii) ONE-TIME APPLICATION.—

‘‘(I) IN GENERAL.—The plan shall also provide

that only 1 prohibited payment meeting the

requirements of clause (i) may be made with

respect to any participant during any period of

consecutive plan years to which the limitations

under either subparagraph (A) or (B) or this

subparagraph applies.

‘‘(II) TREATMENT OF BENEFICIARIES.—For purposes of this clause, a participant and any beneficiary on his behalf (including an alternate payee,

as defined in section 206(d)(3)(K)) shall be treated

as 1 participant. If the accrued benefit of a participant is allocated to such an alternate payee and

1 or more other persons, the amount under clause

(i) shall be allocated among such persons in the

same manner as the accrued benefit is allocated

unless the qualified domestic relations order (as

defined in section 206(d)(3)(B)(i)) provides otherwise.

‘‘(D) EXCEPTION.—This paragraph shall not apply to

any plan for any plan year if the terms of such plan

(as in effect for the period beginning on September 1,

2005, and ending with such plan year) provide for no

benefit accruals with respect to any participant during

such period.

Certification.

120 STAT. 812 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(E) PROHIBITED PAYMENT.—For purpose of this paragraph, the term ‘prohibited payment’ means—

‘‘(i) any payment, in excess of the monthly amount

paid under a single life annuity (plus any social security supplements described in the last sentence of section 204(b)(1)(G)), to a participant or beneficiary whose

annuity starting date (as defined in section 205(h)(2))

occurs during any period a limitation under subparagraph (A) or (B) is in effect,

‘‘(ii) any payment for the purchase of an irrevocable

commitment from an insurer to pay benefits, and

‘‘(iii) any other payment specified by the Secretary

of the Treasury by regulations.

‘‘(4) LIMITATION ON BENEFIT ACCRUALS FOR PLANS WITH

SEVERE FUNDING SHORTFALLS.—

‘‘(A) IN GENERAL.—A defined benefit plan which is a

single-employer plan shall provide that, in any case in

which the plan’s adjusted funding target attainment

percentage for a plan year is less than 60 percent, benefit

accruals under the plan shall cease as of the valuation

date for the plan year.

‘‘(B) EXEMPTION.—Subparagraph (A) shall cease to

apply with respect to any plan year, effective as of the

first day of the plan year, upon payment by the plan

sponsor of a contribution (in addition to any minimum

required contribution under section 303) equal to the

amount sufficient to result in an adjusted funding target

attainment percentage of 60 percent.

‘‘(5) RULES RELATING TO CONTRIBUTIONS REQUIRED TO AVOID

BENEFIT LIMITATIONS.—

‘‘(A) SECURITY MAY BE PROVIDED.—

‘‘(i) IN GENERAL.—For purposes of this subsection,

the adjusted funding target attainment percentage

shall be determined by treating as an asset of the

plan any security provided by a plan sponsor in a

form meeting the requirements of clause (ii).

‘‘(ii) FORM OF SECURITY.—The security required

under clause (i) shall consist of—

‘‘(I) a bond issued by a corporate surety company that is an acceptable surety for purposes

of section 412 of this Act,

‘‘(II) cash, or United States obligations which

mature in 3 years or less, held in escrow by a

bank or similar financial institution, or

‘‘(III) such other form of security as is satisfactory to the Secretary of the Treasury and the parties involved.

‘‘(iii) ENFORCEMENT.—Any security provided under

clause (i) may be perfected and enforced at any time

after the earlier of—

‘‘(I) the date on which the plan terminates,

‘‘(II) if there is a failure to make a payment

of the minimum required contribution for any plan

year beginning after the security is provided, the

due date for the payment under section 303(j),

or

Effective date.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 813

‘‘(III) if the adjusted funding target attainment

percentage is less than 60 percent for a consecutive

period of 7 years, the valuation date for the last

year in the period.

‘‘(iv) RELEASE OF SECURITY.—The security shall be

released (and any amounts thereunder shall be

refunded together with any interest accrued thereon)

at such time as the Secretary of the Treasury may

prescribe in regulations, including regulations for partial releases of the security by reason of increases

in the funding target attainment percentage.

‘‘(B) PREFUNDING BALANCE OR FUNDING STANDARD

CARRYOVER BALANCE MAY NOT BE USED.—No prefunding

balance or funding standard carryover balance under section 303(f) may be used under paragraph (1), (2), or (4)

to satisfy any payment an employer may make under any

such paragraph to avoid or terminate the application of

any limitation under such paragraph.

‘‘(C) DEEMED REDUCTION OF FUNDING BALANCES.—

‘‘(i) IN GENERAL.—Subject to clause (iii), in any

case in which a benefit limitation under paragraph

(1), (2), (3), or (4) would (but for this subparagraph

and determined without regard to paragraph (1)(B),

(2)(B), or (4)(B)) apply to such plan for the plan year,

the plan sponsor of such plan shall be treated for

purposes of this Act as having made an election under

section 303(f) to reduce the prefunding balance or

funding standard carryover balance by such amount

as is necessary for such benefit limitation to not apply

to the plan for such plan year.

‘‘(ii) EXCEPTION FOR INSUFFICIENT FUNDING BALANCES.—Clause (i) shall not apply with respect to a

benefit limitation for any plan year if the application

of clause (i) would not result in the benefit limitation

not applying for such plan year.

‘‘(iii) RESTRICTIONS OF CERTAIN RULES TO COLLECTIVELY BARGAINED PLANS.—With respect to any benefit

limitation under paragraph (1), (2), or (4), clause (i)

shall only apply in the case of a plan maintained

pursuant to 1 or more collective bargaining agreements

between employee representatives and 1 or more

employers.

‘‘(6) NEW PLANS.—Paragraphs (1), (2), and (4) shall not

apply to a plan for the first 5 plan years of the plan. For

purposes of this paragraph, the reference in this paragraph

to a plan shall include a reference to any predecessor plan.

‘‘(7) PRESUMED UNDERFUNDING FOR PURPOSES OF BENEFIT

LIMITATIONS.—

‘‘(A) PRESUMPTION OF CONTINUED UNDERFUNDING.—In

any case in which a benefit limitation under paragraph

(1), (2), (3), or (4) has been applied to a plan with respect

to the plan year preceding the current plan year, the

adjusted funding target attainment percentage of the plan

for the current plan year shall be presumed to be equal

to the adjusted funding target attainment percentage of

the plan for the preceding plan year until the enrolled

actuary of the plan certifies the actual adjusted funding

Certification.

Applicability.

120 STAT. 814 PUBLIC LAW 109–280—AUG. 17, 2006

target attainment percentage of the plan for the current

plan year.

‘‘(B) PRESUMPTION OF UNDERFUNDING AFTER 10TH

MONTH.—In any case in which no certification of the

adjusted funding target attainment percentage for the current plan year is made with respect to the plan before

the first day of the 10th month of such year, for purposes

of paragraphs (1), (2), (3), and (4), such first day shall

be deemed, for purposes of such paragraph, to be the valuation date of the plan for the current plan year and the

plan’s adjusted funding target attainment percentage shall

be conclusively presumed to be less than 60 percent as

of such first day.

‘‘(C) PRESUMPTION OF UNDERFUNDING AFTER 4TH

MONTH FOR NEARLY UNDERFUNDED PLANS.—In any case

in which—

‘‘(i) a benefit limitation under paragraph (1), (2),

(3), or (4) did not apply to a plan with respect to

the plan year preceding the current plan year, but

the adjusted funding target attainment percentage of

the plan for such preceding plan year was not more

than 10 percentage points greater than the percentage

which would have caused such paragraph to apply

to the plan with respect to such preceding plan year,

and

‘‘(ii) as of the first day of the 4th month of the

current plan year, the enrolled actuary of the plan

has not certified the actual adjusted funding target

attainment percentage of the plan for the current plan

year,

until the enrolled actuary so certifies, such first day shall

be deemed, for purposes of such paragraph, to be the valuation date of the plan for the current plan year and the

adjusted funding target attainment percentage of the plan

as of such first day shall, for purposes of such paragraph,

be presumed to be equal to 10 percentage points less than

the adjusted funding target attainment percentage of the

plan for such preceding plan year.

‘‘(8) TREATMENT OF PLAN AS OF CLOSE OF PROHIBITED OR

CESSATION PERIOD.—For purposes of applying this part—

‘‘(A) OPERATION OF PLAN AFTER PERIOD.—Unless the

plan provides otherwise, payments and accruals will

resume effective as of the day following the close of the

period for which any limitation of payment or accrual of

benefits under paragraph (3) or (4) applies.

‘‘(B) TREATMENT OF AFFECTED BENEFITS.—Nothing in

this paragraph shall be construed as affecting the plan’s

treatment of benefits which would have been paid or

accrued but for this subsection.

‘‘(9) TERMS RELATING TO FUNDING TARGET ATTAINMENT

PERCENTAGE.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘funding target attainment

percentage’ has the same meaning given such term by

section 303(d)(2).

‘‘(B) ADJUSTED FUNDING TARGET ATTAINMENT PERCENTAGE.—The term ‘adjusted funding target attainment

Effective date.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 815

percentage’ means the funding target attainment percentage which is determined under subparagraph (A) by

increasing each of the amounts under subparagraphs (A)

and (B) of section 303(d)(2) by the aggregate amount of

purchases of annuities for employees other than highly

compensated employees (as defined in section 414(q) of

the Internal Revenue Code of 1986) which were made by

the plan during the preceding 2 plan years.

‘‘(C) APPLICATION TO PLANS WHICH ARE FULLY FUNDED

WITHOUT REGARD TO REDUCTIONS FOR FUNDING BALANCES.—

‘‘(i) IN GENERAL.—In the case of a plan for any

plan year, if the funding target attainment percentage

is 100 percent or more (determined without regard

to this subparagraph and without regard to the reduction in the value of assets under section 303(f)(4)),

the funding target attainment percentage for purposes

of subparagraphs (A) and (B) shall be determined without regard to such reduction.

‘‘(ii) TRANSITION RULE.—Clause (i) shall be applied

to plan years beginning after 2007 and before 2011

by substituting for ‘100 percent’ the applicable percentage determined in accordance with the following table:

‘‘In the case of a plan year The

applicable

beginning in calendar year: percentage is

2008 ................................................................................. 92

2009 ................................................................................. 94

2010 ................................................................................. 96.

‘‘(iii) LIMITATION.—Clause (ii) shall not apply with

respect to any plan year after 2008 unless the funding

target attainment percentage (determined without

regard to this subparagraph) of the plan for each preceding plan year after 2007 was not less than the

applicable percentage with respect to such preceding

plan year determined under clause (ii).

‘‘(10) SPECIAL RULE FOR 2008.—For purposes of this subsection, in the case of plan years beginning in 2008, the funding

target attainment percentage for the preceding plan year may

be determined using such methods of estimation as the Secretary of the Treasury may provide.’’.

(b) NOTICE REQUIREMENT.—

(1) IN GENERAL.—Section 101 of such Act (29 U.S.C. 1021)

is amended—

(A) by redesignating subsection (j) as subsection (k);

and

(B) by inserting after subsection (i) the following new

subsection:

‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS

OF DISTRIBUTION.—The plan administrator of a single-employer

plan shall provide a written notice to plan participants and beneficiaries within 30 days—

‘‘(1) after the plan has become subject to a restriction

described in paragraph (1) or (3) of section 206(g)),

‘‘(2) in the case of a plan to which section 206(g)(4) applies,

after the valuation date for the plan year described in section

206(g)(4)(B) for which the plan’s adjusted funding target attainment percentage for the plan year is less than 60 percent

Deadline.

120 STAT. 816 PUBLIC LAW 109–280—AUG. 17, 2006

(or, if earlier, the date such percentage is deemed to be less

than 60 percent under section 206(g)(7)), and

‘‘(3) at such other time as may be determined by the Secretary of the Treasury.

The notice required to be provided under this subsection shall

be in writing, except that such notice may be in electronic or

other form to the extent that such form is reasonably accessible

to the recipient.’’.

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C.

1132(c)(4)) is amended by striking ‘‘section 302(b)(7)(F)(iv)’’ and

inserting ‘‘section 101(j) or 302(b)(7)(F)(iv)’’.

(c) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007.

(2) COLLECTIVE BARGAINING EXCEPTION.—In the case of

a plan maintained pursuant to 1 or more collective bargaining

agreements between employee representatives and 1 or more

employers ratified before January 1, 2008, the amendments

made by this section shall not apply to plan years beginning

before the earlier of—

(A) the later of—

(i) the date on which the last collective bargaining

agreement relating to the plan terminates (determined

without regard to any extension thereof agreed to after

the date of the enactment of this Act), or

(ii) the first day of the first plan year to which

the amendments made by this subsection would (but

for this subparagraph) apply, or

(B) January 1, 2010.

For purposes of subparagraph (A)(i), any plan amendment made

pursuant to a collective bargaining agreement relating to the

plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination

of such collective bargaining agreement.

SEC. 104. SPECIAL RULES FOR MULTIPLE EMPLOYER PLANS OF CERTAIN COOPERATIVES.

(a) GENERAL RULE.—Except as provided in this section, if a

plan in existence on July 26, 2005, was an eligible cooperative

plan for its plan year which includes such date, the amendments

made by this subtitle and subtitle B shall not apply to plan years

beginning before the earlier of—

(1) the first plan year for which the plan ceases to be

an eligible cooperative plan, or

(2) January 1, 2017.

(b) INTEREST RATE.—In applying section 302(b)(5)(B) of the

Employee Retirement Income Security Act of 1974 and section

412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect

before the amendments made by this subtitle and subtitle B) to

an eligible cooperative plan for plan years beginning after December

31, 2007, and before the first plan year to which such amendments

apply, the third segment rate determined under section

303(h)(2)(C)(iii) of such Act and section 430(h)(2)(C)(iii) of such

Code (as added by such amendments) shall be used in lieu of

the interest rate otherwise used.

(c) ELIGIBLE COOPERATIVE PLAN DEFINED.—For purposes of

this section, a plan shall be treated as an eligible cooperative

26 USC 401 note.

29 USC 1021

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 817

plan for a plan year if the plan is maintained by more than 1

employer and at least 85 percent of the employers are—

(1) rural cooperatives (as defined in section 401(k)(7)(B)

of such Code without regard to clause (iv) thereof), or

(2) organizations which are—

(A) cooperative organizations described in section

1381(a) of such Code which are more than 50-percent owned

by agricultural producers or by cooperatives owned by agricultural producers, or

(B) more than 50-percent owned, or controlled by, one

or more cooperative organizations described in subparagraph (A).

A plan shall also be treated as an eligible cooperative plan for

any plan year for which it is described in section 210(a) of the

Employee Retirement Income Security Act of 1974 and is maintained by a rural telephone cooperative association described in

section 3(40)(B)(v) of such Act.

SEC. 105. TEMPORARY RELIEF FOR CERTAIN PBGC SETTLEMENT

PLANS.

(a) GENERAL RULE.—Except as provided in this section, if a

plan in existence on July 26, 2005, was a PBGC settlement plan

as of such date, the amendments made by this subtitle and subtitle

B shall not apply to plan years beginning before January 1, 2014.

(b) INTEREST RATE.—In applying section 302(b)(5)(B) of the

Employee Retirement Income Security Act of 1974 and section

412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect

before the amendments made by this subtitle and subtitle B), to

a PBGC settlement plan for plan years beginning after December

31, 2007, and before January 1, 2014, the third segment rate

determined under section 303(h)(2)(C)(iii) of such Act and section

430(h)(2)(C)(iii) of such Code (as added by such amendments) shall

be used in lieu of the interest rate otherwise used.

(c) PBGC SETTLEMENT PLAN.—For purposes of this section,

the term ‘‘PBGC settlement plan’’ means a defined benefit plan

(other than a multiemployer plan) to which section 302 of such

Act and section 412 of such Code apply and—

(1) which was sponsored by an employer which was in

bankruptcy, giving rise to a claim by the Pension Benefit Guaranty Corporation of not greater than $150,000,000, and the

sponsorship of which was assumed by another employer that

was not a member of the same controlled group as the bankrupt

sponsor and the claim of the Pension Benefit Guaranty Corporation was settled or withdrawn in connection with the assumption of the sponsorship, or

(2) which, by agreement with the Pension Benefit Guaranty

Corporation, was spun off from a plan subsequently terminated

by such Corporation under section 4042 of the Employee Retirement Income Security Act of 1974.

SEC. 106. SPECIAL RULES FOR PLANS OF CERTAIN GOVERNMENT CONTRACTORS.

(a) GENERAL RULE.—Except as provided in this section, if a

plan is an eligible government contractor plan, this subtitle and

subtitle B shall not apply to plan years beginning before the earliest

of—

(1) the first plan year for which the plan ceases to be

an eligible government contractor plan,

26 USC 401 note.

26 USC 401 note.

120 STAT. 818 PUBLIC LAW 109–280—AUG. 17, 2006

(2) the effective date of the Cost Accounting Standards

Pension Harmonization Rule, or

(3) January 1, 2011.

(b) INTEREST RATE.—In applying section 302(b)(5)(B) of the

Employee Retirement Income Security Act of 1974 and section

412(b)(5)(B) of the Internal Revenue Code of 1986 (as in effect

before the amendments made by this subtitle and subtitle B) to

an eligible government contractor plan for plan years beginning

after December 31, 2007, and before the first plan year to which

such amendments apply, the third segment rate determined under

section 303(h)(2)(C)(iii) of such Act and section 430(h)(2)(C)(iii) of

such Code (as added by such amendments) shall be used in lieu

of the interest rate otherwise used.

(c) ELIGIBLE GOVERNMENT CONTRACTOR PLAN DEFINED.—For

purposes of this section, a plan shall be treated as an eligible

government contractor plan if it is maintained by a corporation

or a member of the same affiliated group (as defined by section

1504(a) of the Internal Revenue Code of 1986), whose primary

source of revenue is derived from business performed under contracts with the United States that are subject to the Federal

Acquisition Regulations (chapter 1 of title 48, CFR) and that are

also subject to the Defense Federal Acquisition Regulation Supplement (chapter 2 of title 48, CFR), and whose revenue derived

from such business in the previous fiscal year exceeded

$5,000,000,000, and whose pension plan costs that are assignable

under those contracts are subject to sections 412 and 413 of the

Cost Accounting Standards (48 CFR 9904.412 and 9904.413).

(d) COST ACCOUNTING STANDARDS PENSION HARMONIZATION

RULE.—The Cost Accounting Standards Board shall review and

revise sections 412 and 413 of the Cost Accounting Standards

(48 CFR 9904.412 and 9904.413) to harmonize the minimum

required contribution under the Employee Retirement Income Security Act of 1974 of eligible government contractor plans and government reimbursable pension plan costs not later than January 1,

2010. Any final rule adopted by the Cost Accounting Standards

Board shall be deemed the Cost Accounting Standards Pension

Harmonization Rule.

SEC. 107. TECHNICAL AND CONFORMING AMENDMENTS.

(a) MISCELLANEOUS AMENDMENTS TO TITLE I.—Subtitle B of

title I of such Act (29 U.S.C. 1021 et seq.) is amended—

(1) in section 101(d)(3), by striking ‘‘section 302(e)’’ and

inserting ‘‘section 303(j)’’;

(2) in section 103(d)(8)(B), by striking ‘‘the requirements

of section 302(c)(3)’’ and inserting ‘‘the applicable requirements

of sections 303(h) and 304(c)(3)’’;

(3) in section 103(d), by striking paragraph (11) and

inserting the following:

‘‘(11) If the current value of the assets of the plan is

less than 70 percent of—

‘‘(A) in the case of a single-employer plan, the funding

target (as defined in section 303(d)(1)) of the plan, or

‘‘(B) in the case of a multiemployer plan, the current

liability (as defined in section 304(c)(6)(D)) under the plan,

the percentage which such value is of the amount described

in subparagraph (A) or (B).’’;

29 USC 1023.

29 USC 1021.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 819

(4) in section 203(a)(3)(C), by striking ‘‘section 302(c)(8)’’

and inserting ‘‘section 302(d)(2)’’;

(5) in section 204(g)(1), by striking ‘‘section 302(c)(8)’’ and

inserting ‘‘section 302(d)(2)’’;

(6) in section 204(i)(2)(B), by striking ‘‘section 302(c)(8)’’

and inserting ‘‘section 302(d)(2)’’;

(7) in section 204(i)(3), by striking ‘‘funded current liability

percentage (within the meaning of section 302(d)(8) of this

Act)’’ and inserting ‘‘funding target attainment percentage (as

defined in section 303(d)(2))’’;

(8) in section 204(i)(4), by striking ‘‘section 302(c)(11)(A),

without regard to section 302(c)(11)(B)’’ and inserting ‘‘section

302(b)(1), without regard to section 302(b)(2)’’;

(9) in section 206(e)(1), by striking ‘‘section 302(d)’’ and

inserting ‘‘section 303(j)(4)’’, and by striking ‘‘section 302(e)(5)’’

and inserting ‘‘section 303(j)(4)(E)(i)’’;

(10) in section 206(e)(3), by striking ‘‘section 302(e) by

reason of paragraph (5)(A) thereof’’ and inserting ‘‘section

303(j)(3) by reason of section 303(j)(4)(A)’’; and

(11) in sections 101(e)(3), 403(c)(1), and 408(b)(13), by

striking ‘‘American Jobs Creation Act of 2004’’ and inserting

‘‘Pension Protection Act of 2006’’.

(b) MISCELLANEOUS AMENDMENTS TO TITLE IV.—Title IV of

such Act is amended—

(1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by

striking ‘‘302(c)(11)(A)’’ and inserting ‘‘302(b)(1)’’, by striking

‘‘412(c)(11)(A)’’ and inserting ‘‘412(b)(1)’’, by striking

‘‘302(c)(11)(B)’’ and inserting ‘‘302(b)(2)’’, and by striking

‘‘412(c)(11)(B)’’ and inserting ‘‘412(b)(2)’’;

(2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by striking

‘‘302(f)(1)(A) and (B)’’ and inserting ‘‘303(k)(1)(A) and (B)’’, and

by striking ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A)

and (B)’’;

(3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by striking

‘‘302(f)(1)(A) and (B)’’ and inserting ‘‘303(k)(1)(A) and (B)’’, and

by striking ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A)

and (B)’’;

(4) in section 4062(c) (29 U.S.C. 1362(c)), by striking paragraphs (1), (2), and (3) and inserting the following:

‘‘(1) the sum of the shortfall amortization charge (within

the meaning of section 303(c)(1) of this Act and 430(d)(1) of

the Internal Revenue Code of 1986) with respect to the plan

(if any) for the plan year in which the termination date occurs,

plus the aggregate total of shortfall amortization installments

(if any) determined for succeeding plan years under section

303(c)(2) of this Act and section 430(d)(2) of such Code (which,

for purposes of this subparagraph, shall include any increase

in such sum which would result if all applications for waivers

of the minimum funding standard under section 302(c) of this

Act and section 412(c) of such Code which are pending with

respect to such plan were denied and if no additional contributions (other than those already made by the termination date)

were made for the plan year in which the termination date

occurs or for any previous plan year), and

‘‘(2) the sum of the waiver amortization charge (within

the meaning of section 303(e)(1) of this Act and 430(e)(1) of

the Internal Revenue Code of 1986) with respect to the plan

29 USC 1021,

1103, 1108.

29 USC 1056.

29 USC 1054.

29 USC 1053.

120 STAT. 820 PUBLIC LAW 109–280—AUG. 17, 2006

(if any) for the plan year in which the termination date occurs,

plus the aggregate total of waiver amortization installments

(if any) determined for succeeding plan years under section

303(e)(2) of this Act and section 430(e)(2) of such Code,’’;

(5) in section 4071 (29 U.S.C. 1371), by striking ‘‘302(f)(4)’’

and inserting ‘‘303(k)(4)’’;

(6) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by

striking ‘‘302(a)’’ and inserting ‘‘304(a)’’, and, in clause (i), by

striking ‘‘302(a)’’ and inserting ‘‘304(a)’’;

(7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by striking

‘‘303(a)’’ and inserting ‘‘302(c)’’;

(8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by striking

‘‘303(c)’’ and inserting ‘‘302(c)(3)’’; and

(9) in section 4243(g) (29 U.S.C. 1423(g)), by striking

‘‘302(c)(3)’’ and inserting ‘‘304(c)(3)’’.

(c) AMENDMENTS TO REORGANIZATION PLAN NO. 4 OF 1978.—

Section 106(b)(ii) of Reorganization Plan No. 4 of 1978 (ratified

and affirmed as law by Public Law 98–532 (98 Stat. 2705)) is

amended by striking ‘‘302(c)(8)’’ and inserting ‘‘302(d)(2)’’, by

striking ‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘304(d)(1), (d)(2), and

(e)(2)(A)’’, and by striking ‘‘412(c)(8), (e), and (f)(2)(A)’’ and inserting

‘‘412(c)(2) and 431(d)(1), (d)(2), and (e)(2)(A)’’.

(d) REPEAL OF EXPIRED AUTHORITY FOR TEMPORARY

VARIANCES.—Section 207 of such Act (29 U.S.C. 1057) is repealed.

(e) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after 2007.

Subtitle B—Amendments to Internal

Revenue Code of 1986

SEC. 111. MINIMUM FUNDING STANDARDS.

(a) NEW MINIMUM FUNDING STANDARDS.—Section 412 of the

Internal Revenue Code of 1986 (relating to minimum funding standards) is amended to read as follows:

‘‘SEC. 412. MINIMUM FUNDING STANDARDS.

‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING STANDARD.—

‘‘(1) IN GENERAL.—A plan to which this section applies

shall satisfy the minimum funding standard applicable to the

plan for any plan year.

‘‘(2) MINIMUM FUNDING STANDARD.—For purposes of paragraph (1), a plan shall be treated as satisfying the minimum

funding standard for a plan year if—

‘‘(A) in the case of a defined benefit plan which is

not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which, in

the aggregate, are not less than the minimum required

contribution determined under section 430 for the plan

for the plan year,

‘‘(B) in the case of a money purchase plan which is

not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which are

required under the terms of the plan, and

‘‘(C) in the case of a multiemployer plan, the employers

make contributions to or under the plan for any plan year

which, in the aggregate, are sufficient to ensure that the

26 USC 412.

29 USC 1021

note.

29 USC 1001

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 821

plan does not have an accumulated funding deficiency

under section 431 as of the end of the plan year.

‘‘(b) LIABILITY FOR CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

the amount of any contribution required by this section

(including any required installments under paragraphs (3) and

(4) of section 430(j)) shall be paid by the employer responsible

for making contributions to or under the plan.

‘‘(2) JOINT AND SEVERAL LIABILITY WHERE EMPLOYER

MEMBER OF CONTROLLED GROUP.—If the employer referred to

in paragraph (1) is a member of a controlled group, each

member of such group shall be jointly and severally liable

for payment of such contributions.

‘‘(c) VARIANCE FROM MINIMUM FUNDING STANDARDS.—

‘‘(1) WAIVER IN CASE OF BUSINESS HARDSHIP.—

‘‘(A) IN GENERAL.—If—

‘‘(i) an employer is (or in the case of a multiemployer plan, 10 percent or more of the number of

employers contributing to or under the plan is) unable

to satisfy the minimum funding standard for a plan

year without temporary substantial business hardship

(substantial business hardship in the case of a multiemployer plan), and

‘‘(ii) application of the standard would be adverse

to the interests of plan participants in the aggregate,

the Secretary may, subject to subparagraph (C), waive

the requirements of subsection (a) for such year with

respect to all or any portion of the minimum funding

standard. The Secretary shall not waive the minimum

funding standard with respect to a plan for more than

3 of any 15 (5 of any 15 in the case of a multiemployer

plan) consecutive plan years

‘‘(B) EFFECTS OF WAIVER.—If a waiver is granted under

subparagraph (A) for any plan year—

‘‘(i) in the case of a defined benefit plan which

is not a multiemployer plan, the minimum required

contribution under section 430 for the plan year shall

be reduced by the amount of the waived funding deficiency and such amount shall be amortized as required

under section 430(e), and

‘‘(ii) in the case of a multiemployer plan, the

funding standard account shall be credited under section 431(b)(3)(C) with the amount of the waived

funding deficiency and such amount shall be amortized

as required under section 431(b)(2)(C).

‘‘(C) WAIVER OF AMORTIZED PORTION NOT ALLOWED.—

The Secretary may not waive under subparagraph (A) any

portion of the minimum funding standard under subsection

(a) for a plan year which is attributable to any waived

funding deficiency for any preceding plan year.

‘‘(2) DETERMINATION OF BUSINESS HARDSHIP.—For purposes

of this subsection, the factors taken into account in determining

temporary substantial business hardship (substantial business

hardship in the case of a multiemployer plan) shall include

(but shall not be limited to) whether or not—

‘‘(A) the employer is operating at an economic loss,

120 STAT. 822 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) there is substantial unemployment or underemployment in the trade or business and in the industry

concerned,

‘‘(C) the sales and profits of the industry concerned

are depressed or declining, and

‘‘(D) it is reasonable to expect that the plan will be

continued only if the waiver is granted.

‘‘(3) WAIVED FUNDING DEFICIENCY.—For purposes of this

section and part III of this subchapter, the term ‘waived funding

deficiency’ means the portion of the minimum funding standard

under subsection (a) (determined without regard to the waiver)

for a plan year waived by the Secretary and not satisfied

by employer contributions.

‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EMPLOYER PLANS, CONSULTATIONS.— ‘‘(A) SECURITY MAY BE REQUIRED.— ‘‘(i) IN GENERAL.—Except as provided in subparagraph (C), the Secretary may require an employer

maintaining a defined benefit plan which is a singleemployer plan (within the meaning of section

4001(a)(15) of the Employee Retirement Income Security Act of 1974) to provide security to such plan as

a condition for granting or modifying a waiver under

paragraph (1).

‘‘(ii) SPECIAL RULES.—Any security provided under

clause (i) may be perfected and enforced only by the

Pension Benefit Guaranty Corporation, or at the direction of the Corporation, by a contributing sponsor

(within the meaning of section 4001(a)(13) of the

Employee Retirement Income Security Act of 1974),

or a member of such sponsor’s controlled group (within

the meaning of section 4001(a)(14) of such Act).

‘‘(B) CONSULTATION WITH THE PENSION BENEFIT GUARANTY CORPORATION.—Except as provided in subparagraph

(C), the Secretary shall, before granting or modifying a

waiver under this subsection with respect to a plan

described in subparagraph (A)(i)—

‘‘(i) provide the Pension Benefit Guaranty Corporation with—

‘‘(I) notice of the completed application for any

waiver or modification, and

‘‘(II) an opportunity to comment on such

application within 30 days after receipt of such

notice, and

‘‘(ii) consider—

‘‘(I) any comments of the Corporation under

clause (i)(II), and

‘‘(II) any views of any employee organization

(within the meaning of section 3(4) of the Employee

Retirement Income Security Act of 1974) representing participants in the plan which are submitted in writing to the Secretary in connection

with such application.

Information provided to the Corporation under this

subparagraph shall be considered tax return information

and subject to the safeguarding and reporting requirements

of section 6103(p).

Deadline.

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PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 823

‘‘(C) EXCEPTION FOR CERTAIN WAIVERS.—

‘‘(i) IN GENERAL.—The preceding provisions of this

paragraph shall not apply to any plan with respect

to which the sum of—

‘‘(I) the aggregate unpaid minimum required

contributions (within the meaning of section

4971(c)(4)) for the plan year and all preceding

plan years, and

‘‘(II) the present value of all waiver amortization installments determined for the plan year and

succeeding plan years under section 430(e)(2),

is less than $1,000,000.

‘‘(ii) TREATMENT OF WAIVERS FOR WHICH APPLICATIONS ARE PENDING.—The amount described in clause

(i)(I) shall include any increase in such amount which

would result if all applications for waivers of the minimum funding standard under this subsection which

are pending with respect to such plan were denied.

‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER PLANS.—

‘‘(A) APPLICATION MUST BE SUBMITTED BEFORE DATE

21⁄2 MONTHS AFTER CLOSE OF YEAR.—In the case of a defined

benefit plan which is not a multiemployer plan, no waiver

may be granted under this subsection with respect to any

plan for any plan year unless an application therefor is

submitted to the Secretary not later than the 15th day

of the 3rd month beginning after the close of such plan

year.

‘‘(B) SPECIAL RULE IF EMPLOYER IS MEMBER OF CONTROLLED GROUP.—In the case of a defined benefit plan

which is not a multiemployer plan, if an employer is a

member of a controlled group, the temporary substantial

business hardship requirements of paragraph (1) shall be

treated as met only if such requirements are met—

‘‘(i) with respect to such employer, and

‘‘(ii) with respect to the controlled group of which

such employer is a member (determined by treating

all members of such group as a single employer).

The Secretary may provide that an analysis of a trade

or business or industry of a member need not be conducted

if the Secretary determines such analysis is not necessary

because the taking into account of such member would

not significantly affect the determination under this paragraph.

‘‘(6) ADVANCE NOTICE.—

‘‘(A) IN GENERAL.—The Secretary shall, before granting

a waiver under this subsection, require each applicant to

provide evidence satisfactory to the Secretary that the

applicant has provided notice of the filing of the application

for such waiver to each affected party (as defined in section

4001(a)(21) of the Employee Retirement Income Security

Act of 1974). Such notice shall include a description of

the extent to which the plan is funded for benefits which

are guaranteed under title IV of the Employee Retirement

Income Security Act of 1974 and for benefit liabilities.

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The

Secretary shall consider any relevant information provided

Deadline.

120 STAT. 824 PUBLIC LAW 109–280—AUG. 17, 2006

by a person to whom notice was given under subparagraph

(A).

‘‘(7) RESTRICTION ON PLAN AMENDMENTS.—

‘‘(A) IN GENERAL.—No amendment of a plan which

increases the liabilities of the plan by reason of any

increase in benefits, any change in the accrual of benefits,

or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver

under this subsection or an extension of time under section

431(d) is in effect with respect to the plan, or if a plan

amendment described in subsection (d)(2) has been made

at any time in the preceding 12 months (24 months in

the case of a multiemployer plan). If a plan is amended

in violation of the preceding sentence, any such waiver,

or extension of time, shall not apply to any plan year

ending on or after the date on which such amendment

is adopted.

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply

to any plan amendment which—

‘‘(i) the Secretary determines to be reasonable and

which provides for only de minimis increases in the

liabilities of the plan,

‘‘(ii) only repeals an amendment described in subsection (d)(2), or

‘‘(iii) is required as a condition of qualification

under part I of subchapter D, of chapter 1.

‘‘(d) MISCELLANEOUS RULES.—

‘‘(1) CHANGE IN METHOD OR YEAR.—If the funding method,

the valuation date, or a plan year for a plan is changed,

the change shall take effect only if approved by the Secretary.

‘‘(2) CERTAIN RETROACTIVE PLAN AMENDMENTS.—For purposes of this section, any amendment applying to a plan year

which—

‘‘(A) is adopted after the close of such plan year but

no later than 21⁄2 months after the close of the plan year

(or, in the case of a multiemployer plan, no later than

2 years after the close of such plan year),

‘‘(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year

to which the amendment applies, and

‘‘(C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the

extent required by the circumstances,

shall, at the election of the plan administrator, be deemed

to have been made on the first day of such plan year. No

amendment described in this paragraph which reduces the

accrued benefits of any participant shall take effect unless

the plan administrator files a notice with the Secretary notifying him of such amendment and the Secretary has approved

such amendment, or within 90 days after the date on which

such notice was filed, failed to disapprove such amendment.

No amendment described in this subsection shall be approved

by the Secretary unless the Secretary determines that such

amendment is necessary because of a temporary substantial

business hardship (as determined under subsection (c)(2)) or

a substantial business hardship (as so determined) in the case

of a multiemployer plan and that a waiver under subsection

Notices.

Deadline.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 825

(c) (or, in the case of a multiemployer plan, any extension

of the amortization period under section 431(d)) is unavailable

or inadequate.

‘‘(3) CONTROLLED GROUP.—For purposes of this section, the

term ‘controlled group’ means any group treated as a single

employer under subsection (b), (c), (m), or (o) of section 414.

‘‘(e) PLANS TO WHICH SECTION APPLIES.—

‘‘(1) IN GENERAL.—Except as provided in paragraphs (2)

and (4), this section applies to a plan if, for any plan year

beginning on or after the effective date of this section for

such plan under the Employee Retirement Income Security

Act of 1974—

‘‘(A) such plan included a trust which qualified (or

was determined by the Secretary to have qualified) under

section 401(a), or

‘‘(B) such plan satisfied (or was determined by the

Secretary to have satisfied) the requirements of section

403(a).

‘‘(2) EXCEPTIONS.—This section shall not apply to—

‘‘(A) any profit-sharing or stock bonus plan,

‘‘(B) any insurance contract plan described in paragraph (3),

‘‘(C) any governmental plan (within the meaning of

section 414(d)),

‘‘(D) any church plan (within the meaning of section

414(e)) with respect to which the election provided by section 410(d) has not been made,

‘‘(E) any plan which has not, at any time after September 2, 1974, provided for employer contributions, or

‘‘(F) any plan established and maintained by a society,

order, or association described in section 501(c)(8) or (9),

if no part of the contributions to or under such plan are

made by employers of participants in such plan.

No plan described in subparagraph (C), (D), or (F) shall be

treated as a qualified plan for purposes of section 401(a) unless

such plan meets the requirements of section 401(a)(7) as in

effect on September 1, 1974.

‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.—A plan is

described in this paragraph if—

‘‘(A) the plan is funded exclusively by the purchase

of individual insurance contracts,

‘‘(B) such contracts provide for level annual premium

payments to be paid extending not later than the retirement age for each individual participating in the plan,

and commencing with the date the individual became a

participant in the plan (or, in the case of an increase

in benefits, commencing at the time such increase becomes

effective),

‘‘(C) benefits provided by the plan are equal to the

benefits provided under each contract at normal retirement

age under the plan and are guaranteed by an insurance

carrier (licensed under the laws of a State to do business

with the plan) to the extent premiums have been paid,

‘‘(D) premiums payable for the plan year, and all prior

plan years, under such contracts have been paid before

lapse or there is reinstatement of the policy,

120 STAT. 826 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(E) no rights under such contracts have been subject

to a security interest at any time during the plan year,

and

‘‘(F) no policy loans are outstanding at any time during

the plan year.

A plan funded exclusively by the purchase of group insurance

contracts which is determined under regulations prescribed

by the Secretary to have the same characteristics as contracts

described in the preceding sentence shall be treated as a plan

described in this paragraph.

‘‘(4) CERTAIN TERMINATED MULTIEMPLOYER PLANS.—This

section applies with respect to a terminated multiemployer

plan to which section 4021 of the Employee Retirement Income

Security Act of 1974 applies until the last day of the plan

year in which the plan terminates (within the meaning of

section 4041A(a)(2) of such Act).’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007.

SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT

PENSION PLANS.

(a) IN GENERAL.—Subchapter D of chapter 1 of the Internal

Revenue Code of 1986 (relating to deferred compensation, etc.)

is amended by adding at the end the following new part:

‘‘PART III—MINIMUM FUNDING STANDARDS

FOR SINGLE-EMPLOYER DEFINED BENEFIT

PENSION PLANS

‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

DEFINED BENEFIT PENSION PLANS.

‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For purposes of this

section and section 412(a)(2)(A), except as provided in subsection

(f), the term ‘minimum required contribution’ means, with respect

to any plan year of a defined benefit plan which is not a multiemployer plan—

‘‘(1) in any case in which the value of plan assets of the

plan (as reduced under subsection (f)(4)(B)) is less than the

funding target of the plan for the plan year, the sum of—

‘‘(A) the target normal cost of the plan for the plan

year,

‘‘(B) the shortfall amortization charge (if any) for the

plan for the plan year determined under subsection (c),

and

‘‘(C) the waiver amortization charge (if any) for the

plan for the plan year as determined under subsection

(e);

‘‘(2) in any case in which the value of plan assets of the

plan (as reduced under subsection (f)(4)(B)) equals or exceeds

the funding target of the plan for the plan year, the target

normal cost of the plan for the plan year reduced (but not

below zero) by such excess.

‘‘(b) TARGET NORMAL COST.—For purposes of this section, except

as provided in subsection (i)(2) with respect to plans in at-risk

status, the term ‘target normal cost’ means, for any plan year,

the present value of all benefits which are expected to accrue

26 USC 430.

26 USC 412 note.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 827

or to be earned under the plan during the plan year. For purposes

of this subsection, if any benefit attributable to services performed

in a preceding plan year is increased by reason of any increase

in compensation during the current plan year, the increase in

such benefit shall be treated as having accrued during the current

plan year.

‘‘(c) SHORTFALL AMORTIZATION CHARGE.— ‘‘(1) IN GENERAL.—For purposes of this section, the shortfall

amortization charge for a plan for any plan year is the aggregate total (not less than zero) of the shortfall amortization

installments for such plan year with respect to the shortfall

amortization bases for such plan year and each of the 6 preceding plan years.

‘‘(2) SHORTFALL AMORTIZATION INSTALLMENT.—For purposes

of paragraph (1)—

‘‘(A) DETERMINATION.—The shortfall amortization

installments are the amounts necessary to amortize the

shortfall amortization base of the plan for any plan year

in level annual installments over the 7-plan-year period

beginning with such plan year.

‘‘(B) SHORTFALL INSTALLMENT.—The shortfall amortization installment for any plan year in the 7-plan-year period

under subparagraph (A) with respect to any shortfall

amortization base is the annual installment determined

under subparagraph (A) for that year for that base.

‘‘(C) SEGMENT RATES.—In determining any shortfall

amortization installment under this paragraph, the plan

sponsor shall use the segment rates determined under

subparagraph (C) of subsection (h)(2), applied under rules

similar to the rules of subparagraph (B) of subsection (h)(2).

‘‘(3) SHORTFALL AMORTIZATION BASE.—For purposes of this

section, the shortfall amortization base of a plan for a plan

year is—

‘‘(A) the funding shortfall of such plan for such plan

year, minus

‘‘(B) the present value (determined using the segment

rates determined under subparagraph (C) of subsection

(h)(2), applied under rules similar to the rules of subparagraph (B) of subsection (h)(2)) of the aggregate total of

the shortfall amortization installments and waiver

amortization installments which have been determined for

such plan year and any succeeding plan year with respect

to the shortfall amortization bases and waiver amortization

bases of the plan for any plan year preceding such plan

year.

‘‘(4) FUNDING SHORTFALL.—For purposes of this section,

the funding shortfall of a plan for any plan year is the excess

(if any) of—

‘‘(A) the funding target of the plan for the plan year,

over

‘‘(B) the value of plan assets of the plan (as reduced

under subsection (f)(4)(B)) for the plan year which are

held by the plan on the valuation date.

‘‘(5) EXEMPTION FROM NEW SHORTFALL AMORTIZATION

BASE.— ‘‘(A) IN GENERAL.—In any case in which the value

of plan assets of the plan (as reduced under subsection

120 STAT. 828 PUBLIC LAW 109–280—AUG. 17, 2006

(f)(4)(A)) is equal to or greater than the funding target

of the plan for the plan year, the shortfall amortization

base of the plan for such plan year shall be zero.

‘‘(B) TRANSITION RULE.—

‘‘(i) IN GENERAL.—Except as provided in clauses

(iii) and (iv), in the case of plan years beginning after

2007 and before 2011, only the applicable percentage

of the funding target shall be taken into account under

paragraph (3)(A) in determining the funding shortfall

for the plan year for purposes of subparagraph (A).

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of

subparagraph (A), the applicable percentage shall be

determined in accordance with the following table:

‘‘In the case of a plan year The

applicable

beginning in calendar year: percentage is

2008 ................................................................................. 92

2009 ................................................................................. 94

2010 ................................................................................. 96.

‘‘(iii) LIMITATION.—Clause (i) shall not apply with

respect to any plan year after 2008 unless the shortfall

amortization base for each of the preceding years beginning after 2007 was zero (determined after application

of this subparagraph).

‘‘(iv) TRANSITION RELIEF NOT AVAILABLE FOR NEW

OR DEFICIT REDUCTION PLANS.—Clause (i) shall not

apply to a plan—

‘‘(I) which was not in effect for a plan year

beginning in 2007, or

‘‘(II) which was in effect for a plan year beginning in 2007 and which was subject to section

412(l) (as in effect for plan years beginning in

2007), determined after the application of paragraphs (6) and (9) thereof.

‘‘(6) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall

of a plan for a plan year is zero, for purposes of determining

the shortfall amortization charge for such plan year and succeeding plan years, the shortfall amortization bases for all

preceding plan years (and all shortfall amortization installments determined with respect to such bases) shall be reduced

to zero.

‘‘(d) RULES RELATING TO FUNDING TARGET.—For purposes of

this section—

‘‘(1) FUNDING TARGET.—Except as provided in subsection

(i)(1) with respect to plans in at-risk status, the funding target

of a plan for a plan year is the present value of all benefits

accrued or earned under the plan as of the beginning of the

plan year.

‘‘(2) FUNDING TARGET ATTAINMENT PERCENTAGE.—The

‘funding target attainment percentage’ of a plan for a plan

year is the ratio (expressed as a percentage) which—

‘‘(A) the value of plan assets for the plan year (as

reduced under subsection (f)(4)(B)), bears to

‘‘(B) the funding target of the plan for the plan year

(determined without regard to subsection (i)(1)).

‘‘(e) WAIVER AMORTIZATION CHARGE.—

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 829

‘‘(1) DETERMINATION OF WAIVER AMORTIZATION CHARGE.—

The waiver amortization charge (if any) for a plan for any

plan year is the aggregate total of the waiver amortization

installments for such plan year with respect to the waiver

amortization bases for each of the 5 preceding plan years.

‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—For purposes of

paragraph (1)—

‘‘(A) DETERMINATION.—The waiver amortization

installments are the amounts necessary to amortize the

waiver amortization base of the plan for any plan year

in level annual installments over a period of 5 plan years

beginning with the succeeding plan year.

‘‘(B) WAIVER INSTALLMENT.—The waiver amortization

installment for any plan year in the 5-year period under

subparagraph (A) with respect to any waiver amortization

base is the annual installment determined under subparagraph (A) for that year for that base.

‘‘(3) INTEREST RATE.—In determining any waiver amortization installment under this subsection, the plan sponsor shall

use the segment rates determined under subparagraph (C)

of subsection (h)(2), applied under rules similar to the rules

of subparagraph (B) of subsection (h)(2).

‘‘(4) WAIVER AMORTIZATION BASE.—The waiver amortization

base of a plan for a plan year is the amount of the waived

funding deficiency (if any) for such plan year under section

412(c).

‘‘(5) EARLY DEEMED AMORTIZATION UPON ATTAINMENT OF

FUNDING TARGET.—In any case in which the funding shortfall

of a plan for a plan year is zero, for purposes of determining

the waiver amortization charge for such plan year and succeeding plan years, the waiver amortization bases for all preceding plan years (and all waiver amortization installments

determined with respect to such bases) shall be reduced to

zero.

‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBUTION BY

PREFUNDING BALANCE AND FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(1) ELECTION TO MAINTAIN BALANCES.—

‘‘(A) PREFUNDING BALANCE.—The plan sponsor of a

defined benefit plan which is not a multiemployer plan

may elect to maintain a prefunding balance.

‘‘(B) FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(i) IN GENERAL.—In the case of a defined benefit

plan (other than a multiemployer plan) described in

clause (ii), the plan sponsor may elect to maintain

a funding standard carryover balance, until such balance is reduced to zero.

‘‘(ii) PLANS MAINTAINING FUNDING STANDARD

ACCOUNT IN 2007.—A plan is described in this clause

if the plan—

‘‘(I) was in effect for a plan year beginning

in 2007, and

‘‘(II) had a positive balance in the funding

standard account under section 412(b) as in effect

for such plan year and determined as of the end

of such plan year.

120 STAT. 830 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(2) APPLICATION OF BALANCES.—A prefunding balance and

a funding standard carryover balance maintained pursuant to

this paragraph—

‘‘(A) shall be available for crediting against the minimum required contribution, pursuant to an election under

paragraph (3),

‘‘(B) shall be applied as a reduction in the amount

treated as the value of plan assets for purposes of this

section, to the extent provided in paragraph (4), and

‘‘(C) may be reduced at any time, pursuant to an election under paragraph (5).

‘‘(3) ELECTION TO APPLY BALANCES AGAINST MINIMUM

REQUIRED CONTRIBUTION.—

‘‘(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), in the case of any plan year in which

the plan sponsor elects to credit against the minimum

required contribution for the current plan year all or a

portion of the prefunding balance or the funding standard

carryover balance for the current plan year (not in excess

of such minimum required contribution), the minimum

required contribution for the plan year shall be reduced

as of the first day of the plan year by the amount so

credited by the plan sponsor as of the first day of the

plan year. For purposes of the preceding sentence, the

minimum required contribution shall be determined after

taking into account any waiver under section 412(c).

‘‘(B) COORDINATION WITH FUNDING STANDARD CARRYOVER BALANCE.—To the extent that any plan has a funding

standard carryover balance greater than zero, no amount

of the prefunding balance of such plan may be credited

under this paragraph in reducing the minimum required

contribution.

‘‘(C) LIMITATION FOR UNDERFUNDED PLANS.—The preceding provisions of this paragraph shall not apply for

any plan year if the ratio (expressed as a percentage)

which—

‘‘(i) the value of plan assets for the preceding plan

year (as reduced under paragraph (4)(C)), bears to

‘‘(ii) the funding target of the plan for the preceding

plan year (determined without regard to subsection

(i)(1)),

is less than 80 percent. In the case of plan years beginning

in 2008, the ratio under this subparagraph may be determined using such methods of estimation as the Secretary

may prescribe.

‘‘(4) EFFECT OF BALANCES ON AMOUNTS TREATED AS VALUE

OF PLAN ASSETS.—In the case of any plan maintaining a

prefunding balance or a funding standard carryover balance

pursuant to this subsection, the amount treated as the value

of plan assets shall be deemed to be such amount, reduced

as provided in the following subparagraphs:

‘‘(A) APPLICABILITY OF SHORTFALL AMORTIZATION

BASE.—For purposes of subsection (c)(5), the value of plan

assets is deemed to be such amount, reduced by the amount

of the prefunding balance, but only if an election under

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 831

paragraph (2) applying any portion of the prefunding balance in reducing the minimum required contribution is

in effect for the plan year.

‘‘(B) DETERMINATION OF EXCESS ASSETS, FUNDING

SHORTFALL, AND FUNDING TARGET ATTAINMENT PERCENTAGE.—

‘‘(i) IN GENERAL.—For purposes of subsections (a),

(c)(4)(B), and (d)(2)(A), the value of plan assets is

deemed to be such amount, reduced by the amount

of the prefunding balance and the funding standard

carryover balance.

‘‘(ii) SPECIAL RULE FOR CERTAIN BINDING AGREEMENTS WITH PBGC.—For purposes of subsection

(c)(4)(B), the value of plan assets shall not be deemed

to be reduced for a plan year by the amount of the

specified balance if, with respect to such balance, there

is in effect for a plan year a binding written agreement

with the Pension Benefit Guaranty Corporation which

provides that such balance is not available to reduce

the minimum required contribution for the plan year.

For purposes of the preceding sentence, the term ‘specified balance’ means the prefunding balance or the

funding standard carryover balance, as the case may

be.

‘‘(C) AVAILABILITY OF BALANCES IN PLAN YEAR FOR

CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION.—

For purposes of paragraph (3)(C)(i) of this subsection, the

value of plan assets is deemed to be such amount, reduced

by the amount of the prefunding balance.

‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO DETERMINATIONS OF VALUE OF PLAN ASSETS AND CREDITING AGAINST MINIMUM REQUIRED CONTRIBUTION.—

‘‘(A) IN GENERAL.—The plan sponsor may elect to

reduce by any amount the balance of the prefunding balance and the funding standard carryover balance for any

plan year (but not below zero). Such reduction shall be

effective prior to any determination of the value of plan

assets for such plan year under this section and application

of the balance in reducing the minimum required contribution for such plan for such plan year pursuant to an election

under paragraph (2).

‘‘(B) COORDINATION BETWEEN PREFUNDING BALANCE

AND FUNDING STANDARD CARRYOVER BALANCE.—To the

extent that any plan has a funding standard carryover

balance greater than zero, no election may be made under

subparagraph (A) with respect to the prefunding balance.

‘‘(6) PREFUNDING BALANCE.—

‘‘(A) IN GENERAL.—A prefunding balance maintained

by a plan shall consist of a beginning balance of zero,

increased and decreased to the extent provided in subparagraphs (B) and (C), and adjusted further as provided in

paragraph (8).

‘‘(B) INCREASES.—

‘‘(i) IN GENERAL.—As of the first day of each plan

year beginning after 2008, the prefunding balance of

a plan shall be increased by the amount elected by

Effective date.

Effective date.

120 STAT. 832 PUBLIC LAW 109–280—AUG. 17, 2006

the plan sponsor for the plan year. Such amount shall

not exceed the excess (if any) of—

‘‘(I) the aggregate total of employer contributions to the plan for the preceding plan year,

over—

‘‘(II) the minimum required contribution for

such preceding plan year.

‘‘(ii) ADJUSTMENTS FOR INTEREST.—Any excess contributions under clause (i) shall be properly adjusted

for interest accruing for the periods between the first

day of the current plan year and the dates on which

the excess contributions were made, determined by

using the effective interest rate for the preceding plan

year and by treating contributions as being first used

to satisfy the minimum required contribution.

‘‘(iii) CERTAIN CONTRIBUTIONS NECESSARY TO AVOID

BENEFIT LIMITATIONS DISREGARDED.—The excess

described in clause (i) with respect to any preceding

plan year shall be reduced (but not below zero) by

the amount of contributions an employer would be

required to make under paragraph (1), (2), or (4) of

section 206(g) to avoid a benefit limitation which would

otherwise be imposed under such paragraph for the

preceding plan year. Any contribution which may be

taken into account in satisfying the requirements of

more than 1 of such paragraphs shall be taken into

account only once for purposes of this clause.

‘‘(C) DECREASES.—The prefunding balance of a plan

shall be decreased (but not below zero) by the sum of—

‘‘(i) as of the first day of each plan year after

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required

contribution of the plan for the preceding plan year,

and

‘‘(ii) as of the time specified in paragraph (5)(A),

any reduction in such balance elected under paragraph

(5).

‘‘(7) FUNDING STANDARD CARRYOVER BALANCE.—

‘‘(A) IN GENERAL.—A funding standard carryover balance maintained by a plan shall consist of a beginning

balance determined under subparagraph (B), decreased to

the extent provided in subparagraph (C), and adjusted

further as provided in paragraph (8).

‘‘(B) BEGINNING BALANCE.—The beginning balance of

the funding standard carryover balance shall be the positive balance described in paragraph (1)(B)(ii)(II).

‘‘(C) DECREASES.—The funding standard carryover balance of a plan shall be decreased (but not below zero)

by—

‘‘(i) as of the first day of each plan year after

2008, the amount of such balance credited under paragraph (2) (if any) in reducing the minimum required

contribution of the plan for the preceding plan year,

and

‘‘(ii) as of the time specified in paragraph (5)(A),

any reduction in such balance elected under paragraph

(5).

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 833

‘‘(8) ADJUSTMENTS FOR INVESTMENT EXPERIENCE.—In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year,

the plan sponsor shall, in accordance with regulations prescribed by the Secretary of the Treasury, adjust such balance

to reflect the rate of return on plan assets for the preceding

plan year. Notwithstanding subsection (g)(3), such rate of

return shall be determined on the basis of fair market value

and shall properly take into account, in accordance with such

regulations, all contributions, distributions, and other plan payments made during such period.

‘‘(9) ELECTIONS.—Elections under this subsection shall be

made at such times, and in such form and manner, as shall

be prescribed in regulations of the Secretary.

‘‘(g) VALUATION OF PLAN ASSETS AND LIABILITIES.— ‘‘(1) TIMING OF DETERMINATIONS.—Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date

of the plan for such plan year.

‘‘(2) VALUATION DATE.—For purposes of this section—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(B), the valuation date of a plan for any plan year shall

be the first day of the plan year.

‘‘(B) EXCEPTION FOR SMALL PLANS.—If, on each day

during the preceding plan year, a plan had 100 or fewer

participants, the plan may designate any day during the

plan year as its valuation date for such plan year and

succeeding plan years. For purposes of this subparagraph,

all defined benefit plans (other than multiemployer plans)

maintained by the same employer (or any member of such

employer’s controlled group) shall be treated as 1 plan,

but only participants with respect to such employer or

member shall be taken into account.

‘‘(C) APPLICATION OF CERTAIN RULES IN DETERMINATION

OF PLAN SIZE.—For purposes of this paragraph—

‘‘(i) PLANS NOT IN EXISTENCE IN PRECEDING YEAR.—

In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into

account the number of participants that the plan is

reasonably expected to have on days during such first

plan year.

‘‘(ii) PREDECESSORS.—Any reference in subparagraph (B) to an employer shall include a reference

to any predecessor of such employer.

‘‘(3) DETERMINATION OF VALUE OF PLAN ASSETS.—For purposes of this section—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(B), the value of plan assets shall be the fair market

value of the assets.

‘‘(B) AVERAGING ALLOWED.—A plan may determine the

value of plan assets on the basis of the averaging of fair

market values, but only if such method—

‘‘(i) is permitted under regulations prescribed by

the Secretary,

‘‘(ii) does not provide for averaging of such values

over more than the period beginning on the last day

of the 25th month preceding the month in which the

Deadline.

Regulations.

120 STAT. 834 PUBLIC LAW 109–280—AUG. 17, 2006

valuation date occurs and ending on the valuation

date (or a similar period in the case of a valuation

date which is not the 1st day of a month), and

‘‘(iii) does not result in a determination of the

value of plan assets which, at any time, is lower than

90 percent or greater than 110 percent of the fair

market value of such assets at such time.

Any such averaging shall be adjusted for contributions

and distributions (as provided by the Secretary).

‘‘(4) ACCOUNTING FOR CONTRIBUTION RECEIPTS.—For purposes of determining the value of assets under paragraph (3)—

‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

‘‘(i) an employer makes any contribution to the

plan after the valuation date for the plan year in

which the contribution is made, and

‘‘(ii) the contribution is for a preceding plan year,

the contribution shall be taken into account as an asset

of the plan as of the valuation date, except that in the

case of any plan year beginning after 2008, only the present

value (determined as of the valuation date) of such contribution may be taken into account. For purposes of the

preceding sentence, present value shall be determined

using the effective interest rate for the preceding plan

year to which the contribution is properly allocable.

‘‘(B) SPECIAL RULE FOR CURRENT YEAR CONTRIBUTIONS

MADE BEFORE VALUATION DATE.—If any contributions for

any plan year are made to or under the plan during the

plan year but before the valuation date for the plan year,

the assets of the plan as of the valuation date shall not

include—

‘‘(i) such contributions, and

‘‘(ii) interest on such contributions for the period

between the date of the contributions and the valuation

date, determined by using the effective interest rate

for the plan year.

‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—

‘‘(1) IN GENERAL.—Subject to this subsection, the determination of any present value or other computation under

this section shall be made on the basis of actuarial assumptions

and methods—

‘‘(A) each of which is reasonable (taking into account

the experience of the plan and reasonable expectations),

and

‘‘(B) which, in combination, offer the actuary’s best

estimate of anticipated experience under the plan.

‘‘(2) INTEREST RATES.—

‘‘(A) EFFECTIVE INTEREST RATE.—For purposes of this

section, the term ‘effective interest rate’ means, with

respect to any plan for any plan year, the single rate

of interest which, if used to determine the present value

of the plan’s accrued or earned benefits referred to in

subsection (d)(1), would result in an amount equal to the

funding target of the plan for such plan year.

‘‘(B) INTEREST RATES FOR DETERMINING FUNDING TARGET.—For purposes of determining the funding target of

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 835

a plan for any plan year, the interest rate used in determining the present value of the liabilities of the plan shall

be—

‘‘(i) in the case of benefits reasonably determined

to be payable during the 5-year period beginning on

the first day of the plan year, the first segment rate

with respect to the applicable month,

‘‘(ii) in the case of benefits reasonably determined

to be payable during the 15-year period beginning at

the end of the period described in clause (i), the second

segment rate with respect to the applicable month,

and

‘‘(iii) in the case of benefits reasonably determined

to be payable after the period described in clause (ii),

the third segment rate with respect to the applicable

month.

‘‘(C) SEGMENT RATES.—For purposes of this paragraph—

‘‘(i) FIRST SEGMENT RATE.—The term ‘first segment

rate’ means, with respect to any month, the single

rate of interest which shall be determined by the Secretary for such month on the basis of the corporate

bond yield curve for such month, taking into account

only that portion of such yield curve which is based

on bonds maturing during the 5-year period commencing with such month.

‘‘(ii) SECOND SEGMENT RATE.—The term ‘second

segment rate’ means, with respect to any month, the

single rate of interest which shall be determined by

the Secretary for such month on the basis of the corporate bond yield curve for such month, taking into

account only that portion of such yield curve which

is based on bonds maturing during the 15-year period

beginning at the end of the period described in clause

(i).

‘‘(iii) THIRD SEGMENT RATE.—The term ‘third segment rate’ means, with respect to any month, the

single rate of interest which shall be determined by

the Secretary for such month on the basis of the corporate bond yield curve for such month, taking into

account only that portion of such yield curve which

is based on bonds maturing during periods beginning

after the period described in clause (ii).

‘‘(D) CORPORATE BOND YIELD CURVE.—For purposes of

this paragraph—

‘‘(i) IN GENERAL.—The term ‘corporate bond yield

curve’ means, with respect to any month, a yield curve

which is prescribed by the Secretary for such month

and which reflects the average, for the 24-month period

ending with the month preceding such month, of

monthly yields on investment grade corporate bonds

with varying maturities and that are in the top 3

quality levels available.

‘‘(ii) ELECTION TO USE YIELD CURVE.—Solely for

purposes of determining the minimum required contribution under this section, the plan sponsor may,

120 STAT. 836 PUBLIC LAW 109–280—AUG. 17, 2006

in lieu of the segment rates determined under subparagraph (C), elect to use interest rates under the corporate bond yield curve. For purposes of the preceding

sentence such curve shall be determined without

regard to the 24-month averaging described in clause

(i). Such election, once made, may be revoked only

with the consent of the Secretary.

‘‘(E) APPLICABLE MONTH.—For purposes of this paragraph, the term ‘applicable month’ means, with respect

to any plan for any plan year, the month which includes

the valuation date of such plan for such plan year or,

at the election of the plan sponsor, any of the 4 months

which precede such month. Any election made under this

subparagraph shall apply to the plan year for which the

election is made and all succeeding plan years, unless

the election is revoked with the consent of the Secretary.

‘‘(F) PUBLICATION REQUIREMENTS.—The Secretary shall

publish for each month the corporate bond yield curve

(and the corporate bond yield curve reflecting the modification described in section 417(e)(3)(D)(i)) for such month

and each of the rates determined under subparagraph (B)

for such month. The Secretary shall also publish a description of the methodology used to determine such yield curve

and such rates which is sufficiently detailed to enable

plans to make reasonable projections regarding the yield

curve and such rates for future months based on the plan’s

projection of future interest rates.

‘‘(G) TRANSITION RULE.—

‘‘(i) IN GENERAL.—Notwithstanding the preceding

provisions of this paragraph, for plan years beginning

in 2008 or 2009, the first, second, or third segment

rate for a plan with respect to any month shall be

equal to the sum of—

‘‘(I) the product of such rate for such month

determined without regard to this subparagraph,

multiplied by the applicable percentage, and

‘‘(II) the product of the rate determined under

the rules of section 412(b)(5)(B)(ii)(II) (as in effect

for plan years beginning in 2007), multiplied by

a percentage equal to 100 percent minus the

applicable percentage.

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of

clause (i), the applicable percentage is 331⁄3 percent

for plan years beginning in 2008 and 662⁄3 percent

for plan years beginning in 2009.

‘‘(iii) NEW PLANS INELIGIBLE.—Clause (i) shall not

apply to any plan if the first plan year of the plan

begins after December 31, 2007.

‘‘(iv) ELECTION.—The plan sponsor may elect not

to have this subparagraph apply. Such election, once

made, may be revoked only with the consent of the

Secretary.

‘‘(3) MORTALITY TABLES.—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(C) or (D), the Secretary shall by regulation prescribe mortality tables to be used in determining any present value

or making any computation under this section. Such tables

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 837

shall be based on the actual experience of pension plans

and projected trends in such experience. In prescribing

such tables, the Secretary shall take into account results

of available independent studies of mortality of individuals

covered by pension plans.

‘‘(B) PERIODIC REVISION.—The Secretary shall (at least

every 10 years) make revisions in any table in effect under

subparagraph (A) to reflect the actual experience of pension

plans and projected trends in such experience.

‘‘(C) SUBSTITUTE MORTALITY TABLE.— ‘‘(i) IN GENERAL.—Upon request by the plan

sponsor and approval by the Secretary, a mortality

table which meets the requirements of clause (iii) shall

be used in determining any present value or making

any computation under this section during the period

of consecutive plan years (not to exceed 10) specified

in the request.

‘‘(ii) EARLY TERMINATION OF PERIOD.—Notwithstanding clause (i), a mortality table described in clause

(i) shall cease to be in effect as of the earliest of—

‘‘(I) the date on which there is a significant

change in the participants in the plan by reason

of a plan spinoff or merger or otherwise, or

‘‘(II) the date on which the plan actuary determines that such table does not meet the requirements of clause (iii).

‘‘(iii) REQUIREMENTS.—A mortality table meets the

requirements of this clause if—

‘‘(I) there is a sufficient number of plan participants, and the pension plans have been maintained for a sufficient period of time, to have credible information necessary for purposes of subclause (II), and

‘‘(II) such table reflects the actual experience

of the pension plans maintained by the sponsor

and projected trends in general mortality experience.

‘‘(iv) ALL PLANS IN CONTROLLED GROUP MUST USE

SEPARATE TABLE.—Except as provided by the Secretary,

a plan sponsor may not use a mortality table under

this subparagraph for any plan maintained by the

plan sponsor unless—

‘‘(I) a separate mortality table is established

and used under this subparagraph for each other

plan maintained by the plan sponsor and if the

plan sponsor is a member of a controlled group,

each member of the controlled group, and

‘‘(II) the requirements of clause (iii) are met

separately with respect to the table so established

for each such plan, determined by only taking

into account the participants of such plan, the

time such plan has been in existence, and the

actual experience of such plan.

‘‘(v) DEADLINE FOR SUBMISSION AND DISPOSITION

OF APPLICATION.— ‘‘(I) SUBMISSION.—The plan sponsor shall

submit a mortality table to the Secretary for

120 STAT. 838 PUBLIC LAW 109–280—AUG. 17, 2006

approval under this subparagraph at least 7

months before the 1st day of the period described

in clause (i).

‘‘(II) DISPOSITION.—Any mortality table submitted to the Secretary for approval under this

subparagraph shall be treated as in effect as of

the 1st day of the period described in clause (i)

unless the Secretary, during the 180-day period

beginning on the date of such submission, disapproves of such table and provides the reasons

that such table fails to meet the requirements

of clause (iii). The 180-day period shall be extended

upon mutual agreement of the Secretary and the

plan sponsor.

‘‘(D) SEPARATE MORTALITY TABLES FOR THE DISABLED.— Notwithstanding subparagraph (A)—

‘‘(i) IN GENERAL.—The Secretary shall establish

mortality tables which may be used (in lieu of the

tables under subparagraph (A)) under this subsection

for individuals who are entitled to benefits under the

plan on account of disability. The Secretary shall establish separate tables for individuals whose disabilities

occur in plan years beginning before January 1, 1995,

and for individuals whose disabilities occur in plan

years beginning on or after such date.

‘‘(ii) SPECIAL RULE FOR DISABILITIES OCCURRING

AFTER 1994.—In the case of disabilities occurring in

plan years beginning after December 31, 1994, the

tables under clause (i) shall apply only with respect

to individuals described in such subclause who are

disabled within the meaning of title II of the Social

Security Act and the regulations thereunder.

‘‘(iii) PERIODIC REVISION.—The Secretary shall (at

least every 10 years) make revisions in any table in

effect under clause (i) to reflect the actual experience

of pension plans and projected trends in such experience.

‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN THE FORM OF

LUMP SUMS OR OTHER OPTIONAL FORMS.—For purposes of determining any present value or making any computation under

this section, there shall be taken into account—

‘‘(A) the probability that future benefit payments under

the plan will be made in the form of optional forms of

benefits provided under the plan (including lump sum distributions, determined on the basis of the plan’s experience

and other related assumptions), and

‘‘(B) any difference in the present value of such future

benefit payments resulting from the use of actuarial

assumptions, in determining benefit payments in any such

optional form of benefits, which are different from those

specified in this subsection.

‘‘(5) APPROVAL OF LARGE CHANGES IN ACTUARIAL ASSUMPTIONS.—

‘‘(A) IN GENERAL.—No actuarial assumption used to

determine the funding target for a plan to which this

paragraph applies may be changed without the approval

of the Secretary.

Applicability.

Extension.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 839

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan only if—

‘‘(i) the plan is a defined benefit plan (other than

a multiemployer plan) to which title IV of the Employee

Retirement Income Security Act of 1974 applies,

‘‘(ii) the aggregate unfunded vested benefits as of

the close of the preceding plan year (as determined

under section 4006(a)(3)(E)(iii) of the Employee Retirement Income Security Act of 1974) of such plan and

all other plans maintained by the contributing sponsors

(as defined in section 4001(a)(13) of such Act) and

members of such sponsors’ controlled groups (as

defined in section 4001(a)(14) of such Act) which are

covered by title IV (disregarding plans with no

unfunded vested benefits) exceed $50,000,000, and

‘‘(iii) the change in assumptions (determined after

taking into account any changes in interest rate and

mortality table) results in a decrease in the funding

shortfall of the plan for the current plan year that

exceeds $50,000,000, or that exceeds $5,000,000 and

that is 5 percent or more of the funding target of

the plan before such change.

‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.—

‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK STATUS.—

‘‘(A) IN GENERAL.—In the case of a plan which is in

at-risk status for a plan year, the funding target of the

plan for the plan year shall be equal to the sum of—

‘‘(i) the present value of all benefits accrued or

earned under the plan as of the beginning of the plan

year, as determined by using the additional actuarial

assumptions described in subparagraph (B), and

‘‘(ii) in the case of a plan which also has been

in at-risk status for at least 2 of the 4 preceding

plan years, a loading factor determined under subparagraph (C).

‘‘(B) ADDITIONAL ACTUARIAL ASSUMPTIONS.—The actuarial assumptions described in this subparagraph are as

follows:

‘‘(i) All employees who are not otherwise assumed

to retire as of the valuation date but who will be

eligible to elect benefits during the plan year and the

10 succeeding plan years shall be assumed to retire

at the earliest retirement date under the plan but

not before the end of the plan year for which the

at-risk funding target and at-risk target normal cost

are being determined.

‘‘(ii) All employees shall be assumed to elect the

retirement benefit available under the plan at the

assumed retirement age (determined after application

of clause (i)) which would result in the highest present

value of benefits.

‘‘(C) LOADING FACTOR.—The loading factor applied with

respect to a plan under this paragraph for any plan year

is the sum of—

‘‘(i) $700, times the number of participants in the

plan, plus

120 STAT. 840 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) 4 percent of the funding target (determined

without regard to this paragraph) of the plan for the

plan year.

‘‘(2) TARGET NORMAL COST OF AT-RISK PLANS.—In the case

of a plan which is in at-risk status for a plan year, the target

normal cost of the plan for such plan year shall be equal

to the sum of—

‘‘(A) the present value of all benefits which are expected

to accrue or be earned under the plan during the plan

year, determined using the additional actuarial assumptions described in paragraph (1)(B), plus

‘‘(B) in the case of a plan which also has been in

at-risk status for at least 2 of the 4 preceding plan years,

a loading factor equal to 4 percent of the target normal

cost (determined without regard to this paragraph) of the

plan for the plan year.

‘‘(3) MINIMUM AMOUNT.—In no event shall—

‘‘(A) the at-risk funding target be less than the funding

target, as determined without regard to this subsection,

or

‘‘(B) the at-risk target normal cost be less than the

target normal cost, as determined without regard to this

subsection.

‘‘(4) DETERMINATION OF AT-RISK STATUS.—For purposes of

this subsection—

‘‘(A) IN GENERAL.—A plan is in at-risk status for a

plan year if—

‘‘(i) the funding target attainment percentage for

the preceding plan year (determined under this section

without regard to this subsection) is less than 80 percent, and

‘‘(ii) the funding target attainment percentage for

the preceding plan year (determined under this section

by using the additional actuarial assumptions

described in paragraph (1)(B) in computing the funding

target) is less than 70 percent.

‘‘(B) TRANSITION RULE.—In the case of plan years beginning in 2008, 2009, and 2010, subparagraph (A)(i) shall

be applied by substituting the following percentages for

‘80 percent’:

‘‘(i) 65 percent in the case of 2008.

‘‘(ii) 70 percent in the case of 2009.

‘‘(iii) 75 percent in the case of 2010.

In the case of plan years beginning in 2008, the funding

target attainment percentage for the preceding plan year

under subparagraph (A)(ii) may be determined using such

methods of estimation as the Secretary may provide.

‘‘(C) SPECIAL RULE FOR EMPLOYEES OFFERED EARLY

RETIREMENT IN 2006.—

‘‘(i) IN GENERAL.—For purposes of subparagraph

(A)(ii), the additional actuarial assumptions described

in paragraph (1)(B) shall not be taken into account

with respect to any employee if—

‘‘(I) such employee is employed by a specified

automobile manufacturer,

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 841

‘‘(II) such employee is offered a substantial

amount of additional cash compensation, substantially enhanced retirement benefits under the plan,

or materially reduced employment duties on the

condition that by a specified date (not later than

December 31, 2010) the employee retires (as

defined under the terms of the plan),

‘‘(III) such offer is made during 2006 and

pursuant to a bona fide retirement incentive program and requires, by the terms of the offer, that

such offer can be accepted not later than a specified

date (not later than December 31, 2006), and

‘‘(IV) such employee does not elect to accept

such offer before the specified date on which the

offer expires.

‘‘(ii) SPECIFIED AUTOMOBILE MANUFACTURER.—For

purposes of clause (i), the term ‘specified automobile

manufacturer’ means—

‘‘(I) any manufacturer of automobiles, and

‘‘(II) any manufacturer of automobile parts

which supplies such parts directly to a manufacturer of automobiles and which, after a transaction

or series of transactions ending in 1999, ceased

to be a member of a controlled group which

included such manufacturer of automobiles.

‘‘(5) TRANSITION BETWEEN APPLICABLE FUNDING TARGETS

AND BETWEEN APPLICABLE TARGET NORMAL COSTS.—

‘‘(A) IN GENERAL.—In any case in which a plan which

is in at-risk status for a plan year has been in such status

for a consecutive period of fewer than 5 plan years, the

applicable amount of the funding target and of the target

normal cost shall be, in lieu of the amount determined

without regard to this paragraph, the sum of—

‘‘(i) the amount determined under this section

without regard to this subsection, plus

‘‘(ii) the transition percentage for such plan year

of the excess of the amount determined under this

subsection (without regard to this paragraph) over the

amount determined under this section without regard

to this subsection.

‘‘(B) TRANSITION PERCENTAGE.—For purposes of

subparagraph (A), the transition percentage shall be determined in accordance with the following table:

‘‘If the consecutive number of

years (including the plan year) The

transition

the plan is in at-risk status is— percentage

is—

1 .............................................................................................. 20

2 .............................................................................................. 40

3 .............................................................................................. 60

4 .............................................................................................. 80.

‘‘(C) YEARS BEFORE EFFECTIVE DATE.—For purposes of

this paragraph, plan years beginning before 2008 shall

not be taken into account.

‘‘(6) SMALL PLAN EXCEPTION.—If, on each day during the

preceding plan year, a plan had 500 or fewer participants,

the plan shall not be treated as in at-risk status for the plan

Deadline.

Deadline.

120 STAT. 842 PUBLIC LAW 109–280—AUG. 17, 2006

year. For purposes of this paragraph, all defined benefit plans

(other than multiemployer plans) maintained by the same

employer (or any member of such employer’s controlled group)

shall be treated as 1 plan, but only participants with respect

to such employer or member shall be taken into account and

the rules of subsection (g)(2)(C) shall apply.

‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—For purposes of this section, the due

date for any payment of any minimum required contribution

for any plan year shall be 81⁄2 months after the close of the

plan year.

‘‘(2) INTEREST.—Any payment required under paragraph

(1) for a plan year that is made on a date other than the

valuation date for such plan year shall be adjusted for interest

accruing for the period between the valuation date and the

payment date, at the effective rate of interest for the plan

for such plan year.

‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION SCHEDULE FOR

UNDERFUNDED PLANS.—

‘‘(A) FAILURE TO TIMELY MAKE REQUIRED INSTALLMENT.—In any case in which the plan has a funding shortfall for the preceding plan year, the employer maintaining

the plan shall make the required installments under this

paragraph and if the employer fails to pay the full amount

of a required installment for the plan year, then the amount

of interest charged under paragraph (2) on the underpayment for the period of underpayment shall be determined by using a rate of interest equal to the rate otherwise

used under paragraph (2) plus 5 percentage points.

‘‘(B) AMOUNT OF UNDERPAYMENT, PERIOD OF UNDERPAYMENT.—For purposes of subparagraph (A)—

‘‘(i) AMOUNT.—The amount of the underpayment

shall be the excess of—

‘‘(I) the required installment, over

‘‘(II) the amount (if any) of the installment

contributed to or under the plan on or before the

due date for the installment.

‘‘(ii) PERIOD OF UNDERPAYMENT.—The period for

which any interest is charged under this paragraph

with respect to any portion of the underpayment shall

run from the due date for the installment to the date

on which such portion is contributed to or under the

plan.

‘‘(iii) ORDER OF CREDITING CONTRIBUTIONS.—For

purposes of clause (i)(II), contributions shall be credited

against unpaid required installments in the order in

which such installments are required to be paid.

‘‘(C) NUMBER OF REQUIRED INSTALLMENTS; DUE

DATES.—For purposes of this paragraph—

‘‘(i) PAYABLE IN 4 INSTALLMENTS.—There shall be

4 required installments for each plan year.

‘‘(ii) TIME FOR PAYMENT OF INSTALLMENTS.—The

due dates for required installments are set forth in

the following table:

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 843

‘‘In the case of the following

required installment:

The due date is:

1st ..................................................................... April 15

2nd .................................................................... July 15

3rd .................................................................... October 15

4th .................................................................... January 15 of the

following year.

‘‘(D) AMOUNT OF REQUIRED INSTALLMENT.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The amount of any required

installment shall be 25 percent of the required annual

payment.

‘‘(ii) REQUIRED ANNUAL PAYMENT.—For purposes

of clause (i), the term ‘required annual payment’ means

the lesser of—

‘‘(I) 90 percent of the minimum required contribution (determined without regard to this subsection) to the plan for the plan year under this

section, or

‘‘(II) 100 percent of the minimum required contribution (determined without regard to this subsection or to any waiver under section 302(c)) to

the plan for the preceding plan year.

Subclause (II) shall not apply if the preceding plan

year referred to in such clause was not a year of

12 months.

‘‘(E) FISCAL YEARS AND SHORT YEARS.—

‘‘(i) FISCAL YEARS.—In applying this paragraph to

a plan year beginning on any date other than January

1, there shall be substituted for the months specified

in this paragraph, the months which correspond

thereto.

‘‘(ii) SHORT PLAN YEAR.—This subparagraph shall

be applied to plan years of less than 12 months in

accordance with regulations prescribed by the Secretary.

‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION WITH QUARTERLY CONTRIBUTIONS.—

‘‘(A) IN GENERAL.—A plan to which this paragraph

applies shall be treated as failing to pay the full amount

of any required installment under paragraph (3) to the

extent that the value of the liquid assets paid in such

installment is less than the liquidity shortfall (whether

or not such liquidity shortfall exceeds the amount of such

installment required to be paid but for this paragraph).

‘‘(B) PLANS TO WHICH PARAGRAPH APPLIES.—This paragraph shall apply to a plan (other than a plan described

in subsection (g)(2)(B)) which—

‘‘(i) is required to pay installments under paragraph (3) for a plan year, and

‘‘(ii) has a liquidity shortfall for any quarter during

such plan year.

‘‘(C) PERIOD OF UNDERPAYMENT.—For purposes of paragraph (3)(A), any portion of an installment that is treated

as not paid under subparagraph (A) shall continue to be

120 STAT. 844 PUBLIC LAW 109–280—AUG. 17, 2006

treated as unpaid until the close of the quarter in which

the due date for such installment occurs.

‘‘(D) LIMITATION ON INCREASE.—If the amount of any

required installment is increased by reason of subparagraph (A), in no event shall such increase exceed the

amount which, when added to prior installments for the

plan year, is necessary to increase the funding target

attainment percentage of the plan for the plan year (taking

into account the expected increase in funding target due

to benefits accruing or earned during the plan year) to

100 percent.

‘‘(E) DEFINITIONS.—For purposes of this paragraph—

‘‘(i) LIQUIDITY SHORTFALL.—The term ‘liquidity

shortfall’ means, with respect to any required installment, an amount equal to the excess (as of the last

day of the quarter for which such installment is made)

of—

‘‘(I) the base amount with respect to such

quarter, over

‘‘(II) the value (as of such last day) of the

plan’s liquid assets.

‘‘(ii) BASE AMOUNT.—

‘‘(I) IN GENERAL.—The term ‘base amount’

means, with respect to any quarter, an amount

equal to 3 times the sum of the adjusted disbursements from the plan for the 12 months ending

on the last day of such quarter.

‘‘(II) SPECIAL RULE.—If the amount determined

under subclause (I) exceeds an amount equal to

2 times the sum of the adjusted disbursements

from the plan for the 36 months ending on the

last day of the quarter and an enrolled actuary

certifies to the satisfaction of the Secretary that

such excess is the result of nonrecurring circumstances, the base amount with respect to such

quarter shall be determined without regard to

amounts related to those nonrecurring circumstances.

‘‘(iii) DISBURSEMENTS FROM THE PLAN.—The term

‘disbursements from the plan’ means all disbursements

from the trust, including purchases of annuities, payments of single sums and other benefits, and administrative expenses.

‘‘(iv) ADJUSTED DISBURSEMENTS.—The term

‘adjusted disbursements’ means disbursements from

the plan reduced by the product of—

‘‘(I) the plan’s funding target attainment

percentage for the plan year, and

‘‘(II) the sum of the purchases of annuities,

payments of single sums, and such other disbursements as the Secretary shall provide in regulations.

‘‘(v) LIQUID ASSETS.—The term ‘liquid assets’

means cash, marketable securities, and such other

assets as specified by the Secretary in regulations.

‘‘(vi) QUARTER.—The term ‘quarter’ means, with

respect to any required installment, the 3-month period

Regulations.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 845

preceding the month in which the due date for such

installment occurs.

‘‘(F) REGULATIONS.—The Secretary may prescribe such

regulations as are necessary to carry out this paragraph.

‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO MAKE REQUIRED

CONTRIBUTIONS.—

‘‘(1) IN GENERAL.—In the case of a plan to which this

subsection applies, if—

‘‘(A) any person fails to make a contribution payment

required by section 412 and this section before the due

date for such payment, and

‘‘(B) the unpaid balance of such payment (including

interest), when added to the aggregate unpaid balance

of all preceding such payments for which payment was

not made before the due date (including interest), exceeds

$1,000,000,

then there shall be a lien in favor of the plan in the amount

determined under paragraph (3) upon all property and rights

to property, whether real or personal, belonging to such person

and any other person who is a member of the same controlled

group of which such person is a member.

‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—This subsection

shall apply to a defined benefit plan (other than a multiemployer plan) covered under section 4021 of the Employee Retirement Income Security Act of 1974 for any plan year for which

the funding target attainment percentage (as defined in subsection (d)(2)) of such plan is less than 100 percent.

‘‘(3) AMOUNT OF LIEN.—For purposes of paragraph (1), the

amount of the lien shall be equal to the aggregate unpaid

balance of contribution payments required under this section

and section 412 for which payment has not been made before

the due date.

‘‘(4) NOTICE OF FAILURE; LIEN.—

‘‘(A) NOTICE OF FAILURE.—A person committing a

failure described in paragraph (1) shall notify the Pension

Benefit Guaranty Corporation of such failure within 10

days of the due date for the required contribution payment.

‘‘(B) PERIOD OF LIEN.—The lien imposed by paragraph

(1) shall arise on the due date for the required contribution

payment and shall continue until the last day of the first

plan year in which the plan ceases to be described in

paragraph (1)(B). Such lien shall continue to run without

regard to whether such plan continues to be described

in paragraph (2) during the period referred to in the preceding sentence.

‘‘(C) CERTAIN RULES TO APPLY.—Any amount with

respect to which a lien is imposed under paragraph (1)

shall be treated as taxes due and owing the United States

and rules similar to the rules of subsections (c), (d), and

(e) of section 4068 of the Employee Retirement Income

Security Act of 1974 shall apply with respect to a lien

imposed by subsection (a) and the amount with respect

to such lien.

‘‘(5) ENFORCEMENT.—Any lien created under paragraph (1)

may be perfected and enforced only by the Pension Benefit

Guaranty Corporation, or at the direction of the Pension Benefit

Deadline.

120 STAT. 846 PUBLIC LAW 109–280—AUG. 17, 2006

Guaranty Corporation, by the contributing sponsor (or any

member of the controlled group of the contributing sponsor).

‘‘(6) DEFINITIONS.—For purposes of this subsection—

‘‘(A) CONTRIBUTION PAYMENT.—The term ‘contribution

payment’ means, in connection with a plan, a contribution

payment required to be made to the plan, including any

required installment under paragraphs (3) and (4) of subsection (j).

‘‘(B) DUE DATE; REQUIRED INSTALLMENT.—The terms

‘due date’ and ‘required installment’ have the meanings

given such terms by subsection (j), except that in the case

of a payment other than a required installment, the due

date shall be the date such payment is required to be

made under section 430.

‘‘(C) CONTROLLED GROUP.—The term ‘controlled group’

means any group treated as a single employer under subsections (b), (c), (m), and (o) of section 414.

‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT ACCOUNTS.—

In the case of a qualified transfer (as defined in section 420),

any assets so transferred shall not, for purposes of this section,

be treated as assets in the plan.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply with respect to plan years beginning after December

31, 2007.

SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

(a) PROHIBITION OF SHUTDOWN BENEFITS AND OTHER

UNPREDICTABLE CONTINGENT EVENT BENEFITS UNDER SINGLEEMPLOYER PLANS.—

(1) IN GENERAL.—Part III of subchapter D of chapter 1

of the Internal Revenue Code of 1986 (relating to deferred

compensation, etc.) is amended—

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

‘‘PART III—RULES RELATING TO MINIMUM

FUNDING STANDARDS AND BENEFIT LIMITATIONS

‘‘SUBPART A. MINIMUM FUNDING STANDARDS FOR PENSION PLANS.

‘‘SUBPART B. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

‘‘Subpart A—Minimum Funding Standards for

Pension Plans

‘‘Sec. 430. Minimum funding standards for single-employer defined benefit pension

plans.’’,

and

(B) by adding at the end the following new subpart:

26 USC prec.

430.

26 USC 430 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 847

‘‘Subpart B—Benefit Limitations Under SingleEmployer Plans

‘‘Sec. 436. Funding-based limitation on shutdown benefits and other unpredictable

contingent event benefits under single-employer plans.

‘‘SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BENEFIT

ACCRUALS UNDER SINGLE-EMPLOYER PLANS.

‘‘(a) GENERAL RULE.—For purposes of section 401(a)(29), a

defined benefit plan which is a single-employer plan shall be treated

as meeting the requirements of this section if the plan meets

the requirements of subsections (b), (c), (d), and (e).

‘‘(b) FUNDING-BASED LIMITATION ON SHUTDOWN BENEFITS AND

OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS UNDER

SINGLE-EMPLOYER PLANS.—

‘‘(1) IN GENERAL.—If a participant of a defined benefit

plan which is a single-employer plan is entitled to an unpredictable contingent event benefit payable with respect to any event

occurring during any plan year, the plan shall provide that

such benefit may not be provided if the adjusted funding target

attainment percentage for such plan year—

‘‘(A) is less than 60 percent, or

‘‘(B) would be less than 60 percent taking into account

such occurrence.

‘‘(2) EXEMPTION.—Paragraph (1) shall cease to apply with

respect to any plan year, effective as of the first day of the

plan year, upon payment by the plan sponsor of a contribution

(in addition to any minimum required contribution under section 303) equal to—

‘‘(A) in the case of paragraph (1)(A), the amount of

the increase in the funding target of the plan (under section

430) for the plan year attributable to the occurrence

referred to in paragraph (1), and

‘‘(B) in the case of paragraph (1)(B), the amount sufficient to result in a funding target attainment percentage

of 60 percent.

‘‘(3) UNPREDICTABLE CONTINGENT EVENT.—For purposes of

this subsection, the term ‘unpredictable contingent event benefit’ means any benefit payable solely by reason of—

‘‘(A) a plant shutdown (or similar event, as determined

by the Secretary), or

‘‘(B) any event other than the attainment of any age,

performance of any service, receipt or derivation of any

compensation, or occurrence of death or disability.

‘‘(c) LIMITATIONS ON PLAN AMENDMENTS INCREASING LIABILITY

FOR BENEFITS.—

‘‘(1) IN GENERAL.—No amendment to a defined benefit plan

which is a single-employer plan which has the effect of

increasing liabilities of the plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit

accrual, or changing the rate at which benefits become nonforfeitable may take effect during any plan year if the adjusted

funding target attainment percentage for such plan year is—

‘‘(A) less than 80 percent, or

‘‘(B) would be less than 80 percent taking into account

such amendment.

Effective date.

26 USC 436.

120 STAT. 848 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(2) EXEMPTION.—Paragraph (1) shall cease to apply with

respect to any plan year, effective as of the first day of the

plan year (or if later, the effective date of the amendment),

upon payment by the plan sponsor of a contribution (in addition

to any minimum required contribution under section 430) equal

to—

‘‘(A) in the case of paragraph (1)(A), the amount of

the increase in the funding target of the plan (under section

430) for the plan year attributable to the amendment,

and

‘‘(B) in the case of paragraph (1)(B), the amount sufficient to result in an adjusted funding target attainment

percentage of 80 percent.

‘‘(3) EXCEPTION FOR CERTAIN BENEFIT INCREASES.—Paragraph (1) shall not apply to any amendment which provides

for an increase in benefits under a formula which is not based

on a participant’s compensation, but only if the rate of such

increase is not in excess of the contemporaneous rate of increase

in average wages of participants covered by the amendment.

‘‘(d) LIMITATIONS ON ACCELERATED BENEFIT DISTRIBUTIONS.—

‘‘(1) FUNDING PERCENTAGE LESS THAN 60 PERCENT.—A

defined benefit plan which is a single-employer plan shall provide that, in any case in which the plan’s adjusted funding

target attainment percentage for a plan year is less than 60

percent, the plan may not pay any prohibited payment after

the valuation date for the plan year.

‘‘(2) BANKRUPTCY.—A defined benefit plan which is a singleemployer plan shall provide that, during any period in which

the plan sponsor is a debtor in a case under title 11, United

States Code, or similar Federal or State law, the plan may

not pay any prohibited payment. The preceding sentence shall

not apply on or after the date on which the enrolled actuary

of the plan certifies that the adjusted funding target attainment

percentage of such plan is not less than 100 percent.

‘‘(3) LIMITED PAYMENT IF PERCENTAGE AT LEAST 60 PERCENT

BUT LESS THAN 80 PERCENT.—

‘‘(A) IN GENERAL.—A defined benefit plan which is a

single-employer plan shall provide that, in any case in

which the plan’s adjusted funding target attainment

percentage for a plan year is 60 percent or greater but

less than 80 percent, the plan may not pay any prohibited

payment after the valuation date for the plan year to

the extent the amount of the payment exceeds the lesser

of—

‘‘(i) 50 percent of the amount of the payment which

could be made without regard to this section, or

‘‘(ii) the present value (determined under guidance

prescribed by the Pension Benefit Guaranty Corporation, using the interest and mortality assumptions

under section 417(e)) of the maximum guarantee with

respect to the participant under section 4022 of the

Employee Retirement Income Security Act of 1974.

‘‘(B) ONE-TIME APPLICATION.—

‘‘(i) IN GENERAL.—The plan shall also provide that

only 1 prohibited payment meeting the requirements

of subparagraph (A) may be made with respect to

any participant during any period of consecutive plan

Effective date.

Effective date.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 849

years to which the limitations under either paragraph

(1) or (2) or this paragraph applies.

‘‘(ii) TREATMENT OF BENEFICIARIES.—For purposes

of this subparagraph, a participant and any beneficiary

on his behalf (including an alternate payee, as defined

in section 414(p)(8)) shall be treated as 1 participant.

If the accrued benefit of a participant is allocated to

such an alternate payee and 1 or more other persons,

the amount under subparagraph (A) shall be allocated

among such persons in the same manner as the accrued

benefit is allocated unless the qualified domestic relations order (as defined in section 414(p)(1)(A)) provides

otherwise.

‘‘(4) EXCEPTION.—This subsection shall not apply to any

plan for any plan year if the terms of such plan (as in effect

for the period beginning on September 1, 2005, and ending

with such plan year) provide for no benefit accruals with respect

to any participant during such period.

‘‘(5) PROHIBITED PAYMENT.—For purpose of this subsection,

the term ‘prohibited payment’ means—

‘‘(A) any payment, in excess of the monthly amount

paid under a single life annuity (plus any social security

supplements described in the last sentence of section

411(a)(9)), to a participant or beneficiary whose annuity

starting date (as defined in section 417(f)(2)) occurs during

any period a limitation under paragraph (1) or (2) is in

effect,

‘‘(B) any payment for the purchase of an irrevocable

commitment from an insurer to pay benefits, and

‘‘(C) any other payment specified by the Secretary by

regulations.

‘‘(e) LIMITATION ON BENEFIT ACCRUALS FOR PLANS WITH SEVERE

FUNDING SHORTFALLS.—

‘‘(1) IN GENERAL.—A defined benefit plan which is a singleemployer plan shall provide that, in any case in which the

plan’s adjusted funding target attainment percentage for a

plan year is less than 60 percent, benefit accruals under the

plan shall cease as of the valuation date for the plan year.

‘‘(2) EXEMPTION.—Paragraph (1) shall cease to apply with

respect to any plan year, effective as of the first day of the

plan year, upon payment by the plan sponsor of a contribution

(in addition to any minimum required contribution under section 430) equal to the amount sufficient to result in an adjusted

funding target attainment percentage of 60 percent.

‘‘(f) RULES RELATING TO CONTRIBUTIONS REQUIRED TO AVOID

BENEFIT LIMITATIONS.—

‘‘(1) SECURITY MAY BE PROVIDED.—

‘‘(A) IN GENERAL.—For purposes of this section, the

adjusted funding target attainment percentage shall be

determined by treating as an asset of the plan any security

provided by a plan sponsor in a form meeting the requirements of subparagraph (B).

‘‘(B) FORM OF SECURITY.—The security required under

subparagraph (A) shall consist of—

‘‘(i) a bond issued by a corporate surety company

that is an acceptable surety for purposes of section

Effective dates.

120 STAT. 850 PUBLIC LAW 109–280—AUG. 17, 2006

412 of the Employee Retirement Income Security Act

of 1974,

‘‘(ii) cash, or United States obligations which

mature in 3 years or less, held in escrow by a bank

or similar financial institution, or

‘‘(iii) such other form of security as is satisfactory

to the Secretary and the parties involved.

‘‘(C) ENFORCEMENT.—Any security provided under

subparagraph (A) may be perfected and enforced at any

time after the earlier of—

‘‘(i) the date on which the plan terminates,

‘‘(ii) if there is a failure to make a payment of

the minimum required contribution for any plan year

beginning after the security is provided, the due date

for the payment under section 430(j), or

‘‘(iii) if the adjusted funding target attainment

percentage is less than 60 percent for a consecutive

period of 7 years, the valuation date for the last year

in the period.

‘‘(D) RELEASE OF SECURITY.—The security shall be

released (and any amounts thereunder shall be refunded

together with any interest accrued thereon) at such time

as the Secretary may prescribe in regulations, including

regulations for partial releases of the security by reason

of increases in the funding target attainment percentage.

‘‘(2) PREFUNDING BALANCE OR FUNDING STANDARD CARRYOVER BALANCE MAY NOT BE USED.—No prefunding balance

under section 430(f) or funding standard carryover balance

may be used under subsection (b), (c), or (e) to satisfy any

payment an employer may make under any such subsection

to avoid or terminate the application of any limitation under

such subsection.

‘‘(3) DEEMED REDUCTION OF FUNDING BALANCES.—

‘‘(A) IN GENERAL.—Subject to subparagraph (C), in any

case in which a benefit limitation under subsection (b),

(c), (d), or (e) would (but for this subparagraph and determined without regard to subsection (b)(2), (c)(2), or (e)(2))

apply to such plan for the plan year, the plan sponsor

of such plan shall be treated for purposes of this title

as having made an election under section 430(f) to reduce

the prefunding balance or funding standard carryover balance by such amount as is necessary for such benefit limitation to not apply to the plan for such plan year.

‘‘(B) EXCEPTION FOR INSUFFICIENT FUNDING BALANCES.—Subparagraph (A) shall not apply with respect

to a benefit limitation for any plan year if the application

of subparagraph (A) would not result in the benefit limitation not applying for such plan year.

‘‘(C) RESTRICTIONS OF CERTAIN RULES TO COLLECTIVELY

BARGAINED PLANS.—With respect to any benefit limitation

under subsection (b), (c), or (e), subparagraph (A) shall

only apply in the case of a plan maintained pursuant

to 1 or more collective bargaining agreements between

employee representatives and 1 or more employers.

‘‘(g) NEW PLANS.—Subsections (b), (c), and (e) shall not apply

to a plan for the first 5 plan years of the plan. For purposes

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 851

of this subsection, the reference in this subsection to a plan shall

include a reference to any predecessor plan.

‘‘(h) PRESUMED UNDERFUNDING FOR PURPOSES OF BENEFIT

LIMITATIONS.— ‘‘(1) PRESUMPTION OF CONTINUED UNDERFUNDING.—In any

case in which a benefit limitation under subsection (b), (c),

(d), or (e) has been applied to a plan with respect to the

plan year preceding the current plan year, the adjusted funding

target attainment percentage of the plan for the current plan

year shall be presumed to be equal to the adjusted funding

target attainment percentage of the plan for the preceding

plan year until the enrolled actuary of the plan certifies the

actual adjusted funding target attainment percentage of the

plan for the current plan year.

‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER 10TH MONTH.— In any case in which no certification of the adjusted funding

target attainment percentage for the current plan year is made

with respect to the plan before the first day of the 10th month

of such year, for purposes of subsections (b), (c), (d), and (e),

such first day shall be deemed, for purposes of such subsection,

to be the valuation date of the plan for the current plan year

and the plan’s adjusted funding target attainment percentage

shall be conclusively presumed to be less than 60 percent

as of such first day.

‘‘(3) PRESUMPTION OF UNDERFUNDING AFTER 4TH MONTH

FOR NEARLY UNDERFUNDED PLANS.—In any case in which—

‘‘(A) a benefit limitation under subsection (b), (c), (d),

or (e) did not apply to a plan with respect to the plan

year preceding the current plan year, but the adjusted

funding target attainment percentage of the plan for such

preceding plan year was not more than 10 percentage

points greater than the percentage which would have

caused such subsection to apply to the plan with respect

to such preceding plan year, and

‘‘(B) as of the first day of the 4th month of the current

plan year, the enrolled actuary of the plan has not certified

the actual adjusted funding target attainment percentage

of the plan for the current plan year,

until the enrolled actuary so certifies, such first day shall

be deemed, for purposes of such subsection, to be the valuation

date of the plan for the current plan year and the adjusted

funding target attainment percentage of the plan as of such

first day shall, for purposes of such subsection, be presumed

to be equal to 10 percentage points less than the adjusted

funding target attainment percentage of the plan for such preceding plan year.

‘‘(i) TREATMENT OF PLAN AS OF CLOSE OF PROHIBITED OR CESSATION PERIOD.—For purposes of applying this title—

‘‘(1) OPERATION OF PLAN AFTER PERIOD.—Unless the plan

provides otherwise, payments and accruals will resume effective

as of the day following the close of the period for which any

limitation of payment or accrual of benefits under subsection

(d) or (e) applies.

‘‘(2) TREATMENT OF AFFECTED BENEFITS.—Nothing in this

subsection shall be construed as affecting the plan’s treatment

of benefits which would have been paid or accrued but for

this section.

Effective date.

Certification.

120 STAT. 852 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(j) TERMS RELATING TO FUNDING TARGET ATTAINMENT

PERCENTAGE.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘funding target attainment

percentage’ has the same meaning given such term by section

430(d)(2).

‘‘(2) ADJUSTED FUNDING TARGET ATTAINMENT PERCENT- AGE.—The term ‘adjusted funding target attainment percentage’

means the funding target attainment percentage which is determined under paragraph (1) by increasing each of the amounts

under subparagraphs (A) and (B) of section 430(d)(2) by the

aggregate amount of purchases of annuities for employees other

than highly compensated employees (as defined in section

414(q)) which were made by the plan during the preceding

2 plan years.

‘‘(3) APPLICATION TO PLANS WHICH ARE FULLY FUNDED WITHOUT REGARD TO REDUCTIONS FOR FUNDING BALANCES.—

‘‘(A) IN GENERAL.—In the case of a plan for any plan

year, if the funding target attainment percentage is 100

percent or more (determined without regard to this paragraph and without regard to the reduction in the value

of assets under section 430(f)(4)(A)), the funding target

attainment percentage for purposes of paragraph (1) shall

be determined without regard to such reduction.

‘‘(B) TRANSITION RULE.—Subparagraph (A) shall be

applied to plan years beginning after 2007 and before 2011

by substituting for ‘100 percent’ the applicable percentage

determined in accordance with the following table:

‘‘In the case of a plan year The

applicable

beginning in calendar year: percentage is

2008 ............................................................................................ 92

2009 ............................................................................................ 94

2010 ............................................................................................ 96.

‘‘(C) LIMITATION.—Subparagraph (B) shall not apply

with respect to any plan year after 2008 unless the funding

target attainment percentage (determined without regard

to this paragraph) of the plan for each preceding plan

year after 2007 was not less than the applicable percentage

with respect to such preceding plan year determined under

subparagraph (B).

‘‘(k) SPECIAL RULE FOR 2008.—For purposes of this section,

in the case of plan years beginning in 2008, the funding target

attainment percentage for the preceding plan year may be determined using such methods of estimation as the Secretary may

provide.’’.

(2) CLERICAL AMENDMENT.—The table of parts for subchapter D of chapter 1 of the Internal Revenue Code of 1986

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

‘‘PART III—RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT

LIMITATIONS’’.

(b) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007.

(2) COLLECTIVE BARGAINING EXCEPTION.—In the case of

a plan maintained pursuant to 1 or more collective bargaining

agreements between employee representatives and 1 or more

employers ratified before January 1, 2008, the amendments

26 USC 436 note.

26 USC

prec. 401.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 853

made by this section shall not apply to plan years beginning

before the earlier of—

(A) the later of—

(i) the date on which the last collective bargaining

agreement relating to the plan terminates (determined

without regard to any extension thereof agreed to after

the date of the enactment of this Act), or

(ii) the first day of the first plan year to which

the amendments made by this subsection would (but

for this subparagraph) apply, or

(B) January 1, 2010.

For purposes of subparagraph (A)(i), any plan amendment made

pursuant to a collective bargaining agreement relating to the

plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination

of such collective bargaining agreement.

SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.

(a) AMENDMENTS RELATED TO QUALIFICATION REQUIREMENTS.—

(1) Section 401(a)(29) of the Internal Revenue Code of

1986 is amended to read as follows:

‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT-RISK STATUS.—

In the case of a defined benefit plan (other than a multiemployer plan) to which the requirements of section 412 apply,

the trust of which the plan is a part shall not constitute

a qualified trust under this subsection unless the plan meets

the requirements of section 436.’’.

(2) Section 401(a)(32) of such Code is amended—

(A) in subparagraph (A), by striking ‘‘412(m)(5)’’ each

place it appears and inserting ‘‘section 430(j)(4)’’, and

(B) in subparagraph (C), by striking ‘‘section 412(m)’’

and inserting ‘‘section 430(j)’’.

(3) Section 401(a)(33) of such Code is amended—

(A) in subparagraph (B)(i), by striking ‘‘funded current

liability percentage (within the meaning of section

412(l)(8))’’ and inserting ‘‘funding target attainment

percentage (as defined in section 430(d)(2))’’,

(B) in subparagraph (B)(iii), by striking ‘‘subsection

412(c)(8)’’ and inserting ‘‘section 412(c)(2)’’, and

(C) in subparagraph (D), by striking ‘‘section 412(c)(11)

(without regard to subparagraph (B) thereof)’’ and inserting

‘‘section 412(b)(2) (without regard to subparagraph (B)

thereof)’’.

(b) VESTING RULES.—Section 411 of such Code is amended—

(1) by striking ‘‘section 412(c)(8)’’ in subsection (a)(3)(C)

and inserting ‘‘section 412(c)(2)’’,

(2) in subsection (b)(1)(F)—

(A) by striking ‘‘paragraphs (2) and (3) of section 412(i)’’

in clause (ii) and inserting ‘‘subparagraphs (B) and (C)

of section 412(e)(3)’’, and

(B) by striking ‘‘paragraphs (4), (5), and (6) of section

412(i)’’ and inserting ‘‘subparagraphs (D), (E), and (F) of

section 412(e)(3)’’, and

(3) by striking ‘‘section 412(c)(8)’’ in subsection (d)(6)(A)

and inserting ‘‘section 412(e)(2)’’.

(c) MERGERS AND CONSOLIDATIONS OF PLANS.—Subclause (I)

of section 414(l)(2)(B)(i) of such Code is amended to read as follows:

26 USC 401.

120 STAT. 854 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(I) the amount determined under section

431(c)(6)(A)(i) in the case of a multiemployer plan

(and the sum of the funding shortfall and target

normal cost determined under section 430 in the

case of any other plan), over’’.

(d) TRANSFER OF EXCESS PENSION ASSETS TO RETIREE HEALTH

ACCOUNTS.—

(1) Section 420(e)(2) of such Code is amended to read

as follows:

‘‘(2) EXCESS PENSION ASSETS.—The term ‘excess pension

assets’ means the excess (if any) of—

‘‘(A) the lesser of—

‘‘(i) the fair market value of the plan’s assets

(reduced by the prefunding balance and funding

standard carryover balance determined under section

430(f)), or

‘‘(ii) the value of plan assets as determined under

section 430(g)(3) after reduction under section 430(f),

over

‘‘(B) 125 percent of the sum of the funding shortfall

and the target normal cost determined under section 430

for such plan year.’’.

(2) Section 420(e)(4) of such Code is amended to read

as follows:

‘‘(4) COORDINATION WITH SECTION 430.—In the case of a

qualified transfer, any assets so transferred shall not, for purposes of this section and section 430, be treated as assets

in the plan.’’.

(e) EXCISE TAXES.—

(1) IN GENERAL.—Subsections (a) and (b) of section 4971

of such Code are amended to read as follows:

‘‘(a) INITIAL TAX.—If at any time during any taxable year an

employer maintains a plan to which section 412 applies, there

is hereby imposed for the taxable year a tax equal to—

‘‘(1) in the case of a single-employer plan, 10 percent of

the aggregate unpaid minimum required contributions for all

plan years remaining unpaid as of the end of any plan year

ending with or within the taxable year, and

‘‘(2) in the case of a multiemployer plan, 5 percent of

the accumulated funding deficiency determined under section

431 as of the end of any plan year ending with or within

the taxable year.

‘‘(b) ADDITIONAL TAX.—If—

‘‘(1) a tax is imposed under subsection (a)(1) on any unpaid

required minimum contribution and such amount remains

unpaid as of the close of the taxable period, or

‘‘(2) a tax is imposed under subsection (a)(2) on any accumulated funding deficiency and the accumulated funding deficiency

is not corrected within the taxable period,

there is hereby imposed a tax equal to 100 percent of the unpaid

minimum required contribution or accumulated funding deficiency,

whichever is applicable, to the extent not so paid or corrected.’’.

(2) Section 4971(c) of such Code is amended—

(A) by striking ‘‘the last two sentences of section 412(a)’’

in paragraph (1) and inserting ‘‘section 431’’, and

(B) by adding at the end the following new paragraph:

‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBUTION.—

26 USC 420.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 855

‘‘(A) IN GENERAL.—The term ‘unpaid minimum

required contribution’ means, with respect to any plan

year, any minimum required contribution under section

430 for the plan year which is not paid on or before the

due date (as determined under section 430(j)(1)) for the

plan year.

‘‘(B) ORDERING RULE.—Any payment to or under a

plan for any plan year shall be allocated first to unpaid

minimum required contributions for all preceding plan

years on a first-in, first-out basis and then to the minimum

required contribution under section 430 for the plan year.’’.

(3) Section 4971(e)(1) of such Code is amended by striking

‘‘section 412(b)(3)(A)’’ and inserting ‘‘section 412(a)(1)(A)’’.

(4) Section 4971(f)(1) of such Code is amended—

(A) by striking ‘‘section 412(m)(5)’’ and inserting ‘‘section 430(j)(4)’’, and

(B) by striking ‘‘section 412(m)’’ and inserting ‘‘section

430(j)’’.

(5) Section 4972(c)(7) of such Code is amended by striking

‘‘except to the extent that such contributions exceed the fullfunding limitation (as defined in section 412(c)(7), determined

without regard to subparagraph (A)(i)(I) thereof)’’ and inserting

‘‘except, in the case of a multiemployer plan, to the extent

that such contributions exceed the full-funding limitation (as

defined in section 431(c)(6))’’.

(f) REPORTING REQUIREMENTS.—Section 6059(b) of such Code

is amended—

(1) by striking ‘‘the accumulated funding deficiency (as

defined in section 412(a))’’ in paragraph (2) and inserting ‘‘the

minimum required contribution determined under section 430,

or the accumulated funding deficiency determined under section

431,’’, and

(2) by striking paragraph (3)(B) and inserting:

‘‘(B) the requirements for reasonable actuarial assumptions under section 430(h)(1) or 431(c)(3), whichever are

applicable, have been complied with.’’.

SEC. 115. MODIFICATION OF TRANSITION RULE TO PENSION FUNDING

REQUIREMENTS.

(a) IN GENERAL.—In the case of a plan that—

(1) was not required to pay a variable rate premium for

the plan year beginning in 1996,

(2) has not, in any plan year beginning after 1995, merged

with another plan (other than a plan sponsored by an employer

that was in 1996 within the controlled group of the plan

sponsor), and

(3) is sponsored by a company that is engaged primarily

in the interurban or interstate passenger bus service,

the rules described in subsection (b) shall apply for any plan year

beginning after December 31, 2007.

(b) MODIFIED RULES.—The rules described in this subsection

are as follows:

(1) For purposes of section 430(j)(3) of the Internal Revenue

Code of 1986 and section 303(j)(3) of the Employee Retirement

Income Security Act of 1974, the plan shall be treated as

not having a funding shortfall for any plan year.

(2) For purposes of—

Applicability.

Effective date.

26 USC 430 note.

26 USC 4971.

120 STAT. 856 PUBLIC LAW 109–280—AUG. 17, 2006

(A) determining unfunded vested benefits under section

4006(a)(3)(E)(iii) of such Act, and

(B) determining any present value or making any computation under section 412 of such Code or section 302

of such Act,

the mortality table shall be the mortality table used by the

plan.

(3) Section 430(c)(5)(B) of such Code and section 303(c)(5)(B)

of such Act (relating to phase-in of funding target for exemption

from new shortfall amortization base) shall each be applied

by substituting ‘‘2012’’ for ‘‘2011’’ therein and by substituting

for the table therein the following:

‘‘In the case of a plan year

beginning in calendar year:

The applicable percentage

is:

2008 .......................................................................................................... 90 percent

2009 .......................................................................................................... 92 percent

2010 .......................................................................................................... 94 percent

2011 .......................................................................................................... 96 percent.

(c) DEFINITIONS.—Any term used in this section which is also

used in section 430 of such Code or section 303 of such Act shall

have the meaning provided such term in such section. If the same

term has a different meaning in such Code and such Act, such

term shall, for purposes of this section, have the meaning provided

by such Code when applied with respect to such Code and the

meaning provided by such Act when applied with respect to such

Act.

(d) SPECIAL RULE FOR 2006 AND 2007.—

(1) IN GENERAL.—Section 769(c)(3) of the Retirement

Protection Act of 1994, as added by section 201 of the Pension

Funding Equity Act of 2004, is amended by striking ‘‘and 2005’’

and inserting ‘‘, 2005, 2006, and 2007’’.

(2) EFFECTIVE DATE.—The amendment made by paragraph

(1) shall apply to plan years beginning after December 31,

2005.

(e) CONFORMING AMENDMENT.— (1) Section 769 of the Retirement Protection Act of 1994

is amended by striking subsection (c).

(2) The amendment made by paragraph (1) shall take effect

on December 31, 2007, and shall apply to plan years beginning

after such date.

SEC. 116. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED

COMPENSATION PLANS BY EMPLOYERS MAINTAINING

UNDERFUNDED OR TERMINATED SINGLE-EMPLOYER

PLANS.

(a) AMENDMENTS OF INTERNAL REVENUE CODE.—Subsection (b)

of section 409A of the Internal Revenue Code of 1986 (providing

rules relating to funding) is amended by redesignating paragraphs

(3) and (4) as paragraphs (4) and (5), respectively, and by inserting

after paragraph (2) the following new paragraph:

‘‘(3) TREATMENT OF EMPLOYER’S DEFINED BENEFIT PLAN

DURING RESTRICTED PERIOD.—

‘‘(A) IN GENERAL.—If—

‘‘(i) during any restricted period with respect to

a single-employer defined benefit plan, assets are set

26 USC 409A.

Effective date.

26 USC 412 note.

26 USC 412 note.

26 USC 412 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 857

aside or reserved (directly or indirectly) in a trust

(or other arrangement as determined by the Secretary)

or transferred to such a trust or other arrangement

for purposes of paying deferred compensation of an

applicable covered employee under a nonqualified

deferred compensation plan of the plan sponsor or

member of a controlled group which includes the plan

sponsor, or

‘‘(ii) a nonqualified deferred compensation plan of

the plan sponsor or member of a controlled group which

includes the plan sponsor provides that assets will

become restricted to the provision of benefits under

the plan in connection with such restricted period (or

other similar financial measure determined by the Secretary) with respect to the defined benefit plan, or

assets are so restricted,

such assets shall, for purposes of section 83, be treated

as property transferred in connection with the performance

of services whether or not such assets are available to

satisfy claims of general creditors. Clause (i) shall not

apply with respect to any assets which are so set aside

before the restricted period with respect to the defined

benefit plan.

‘‘(B) RESTRICTED PERIOD.—For purposes of this section,

the term ‘restricted period’ means, with respect to any

plan described in subparagraph (A)—

‘‘(i) any period during which the plan is in atrisk status (as defined in section 430(i));

‘‘(ii) any period the plan sponsor is a debtor in

a case under title 11, United States Code, or similar

Federal or State law, and

‘‘(iii) the 12-month period beginning on the date

which is 6 months before the termination date of the

plan if, as of the termination date, the plan is not

sufficient for benefit liabilities (within the meaning

of section 4041 of the Employee Retirement Income

Security Act of 1974).

‘‘(C) SPECIAL RULE FOR PAYMENT OF TAXES ON

DEFERRED COMPENSATION INCLUDED IN INCOME.—If an

employer provides directly or indirectly for the payment

of any Federal, State, or local income taxes with respect

to any compensation required to be included in gross

income by reason of this paragraph—

‘‘(i) interest shall be imposed under subsection

(a)(1)(B)(i)(I) on the amount of such payment in the

same manner as if such payment was part of the

deferred compensation to which it relates,

‘‘(ii) such payment shall be taken into account

in determining the amount of the additional tax under

subsection (a)(1)(B)(i)(II) in the same manner as if

such payment was part of the deferred compensation

to which it relates, and

‘‘(iii) no deduction shall be allowed under this title

with respect to such payment.

‘‘(D) OTHER DEFINITIONS.—For purposes of this section—

120 STAT. 858 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(i) APPLICABLE COVERED EMPLOYEE.—The term

‘applicable covered employee’ means any—

‘‘(I) covered employee of a plan sponsor,

‘‘(II) covered employee of a member of a controlled group which includes the plan sponsor, and

‘‘(III) former employee who was a covered

employee at the time of termination of employment

with the plan sponsor or a member of a controlled

group which includes the plan sponsor.

‘‘(ii) COVERED EMPLOYEE.—The term ‘covered

employee’ means an individual described in section

162(m)(3) or an individual subject to the requirements

of section 16(a) of the Securities Exchange Act of

1934.’’.

(b) CONFORMING AMENDMENTS.—Paragraphs (4) and (5) of section 409A(b) of such Code, as redesignated by subsection (a) of

this subsection, are each amended by striking ‘‘paragraph (1) or

(2)’’ each place it appears and inserting ‘‘paragraph (1), (2), or

(3)’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to transfers or other reservation of assets after the

date of the enactment of this Act.

TITLE II—FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS

AND RELATED PROVISIONS

Subtitle A—Amendments to Employee

Retirement Income Security Act of 1974

SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT

PLANS.

(a) IN GENERAL.—Part 3 of subtitle B of title I of the Employee

Retirement Income Security Act of 1974 (as amended by this Act)

is amended by inserting after section 303 the following new section:

‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS

‘‘SEC. 304. (a) IN GENERAL.—For purposes of section 302, the

accumulated funding deficiency of a multiemployer plan for any

plan year is—

‘‘(1) except as provided in paragraph (2), the amount, determined as of the end of the plan year, equal to the excess

(if any) of the total charges to the funding standard account

of the plan for all plan years (beginning with the first plan

year for which this part applies to the plan) over the total

credits to such account for such years, and

‘‘(2) if the multiemployer plan is in reorganization for any

plan year, the accumulated funding deficiency of the plan determined under section 4243.

‘‘(b) FUNDING STANDARD ACCOUNT.— ‘‘(1) ACCOUNT REQUIRED.—Each multiemployer plan to

which this part applies shall establish and maintain a funding

29 USC 1084.

26 USC 409A

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 859

standard account. Such account shall be credited and charged

solely as provided in this section.

‘‘(2) CHARGES TO ACCOUNT.—For a plan year, the funding

standard account shall be charged with the sum of—

‘‘(A) the normal cost of the plan for the plan year,

‘‘(B) the amounts necessary to amortize in equal annual

installments (until fully amortized)—

‘‘(i) in the case of a plan which comes into existence

on or after January 1, 2008, the unfunded past service

liability under the plan on the first day of the first

plan year to which this section applies, over a period

of 15 plan years,

‘‘(ii) separately, with respect to each plan year,

the net increase (if any) in unfunded past service

liability under the plan arising from plan amendments

adopted in such year, over a period of 15 plan years,

‘‘(iii) separately, with respect to each plan year,

the net experience loss (if any) under the plan, over

a period of 15 plan years, and

‘‘(iv) separately, with respect to each plan year,

the net loss (if any) resulting from changes in actuarial

assumptions used under the plan, over a period of

15 plan years,

‘‘(C) the amount necessary to amortize each waived

funding deficiency (within the meaning of section 302(c)(3))

for each prior plan year in equal annual installments (until

fully amortized) over a period of 15 plan years,

‘‘(D) the amount necessary to amortize in equal annual

installments (until fully amortized) over a period of 5 plan

years any amount credited to the funding standard account

under section 302(b)(3)(D) (as in effect on the day before

the date of the enactment of the Pension Protection Act

of 2006), and

‘‘(E) the amount necessary to amortize in equal annual

installments (until fully amortized) over a period of 20

years the contributions which would be required to be

made under the plan but for the provisions of section

302(c)(7)(A)(i)(I) (as in effect on the day before the date

of the enactment of the Pension Protection Act of 2006).

‘‘(3) CREDITS TO ACCOUNT.—For a plan year, the funding

standard account shall be credited with the sum of—

‘‘(A) the amount considered contributed by the

employer to or under the plan for the plan year,

‘‘(B) the amount necessary to amortize in equal annual

installments (until fully amortized)—

‘‘(i) separately, with respect to each plan year,

the net decrease (if any) in unfunded past service

liability under the plan arising from plan amendments

adopted in such year, over a period of 15 plan years,

‘‘(ii) separately, with respect to each plan year,

the net experience gain (if any) under the plan, over

a period of 15 plan years, and

‘‘(iii) separately, with respect to each plan year,

the net gain (if any) resulting from changes in actuarial

assumptions used under the plan, over a period of

15 plan years,

120 STAT. 860 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(C) the amount of the waived funding deficiency

(within the meaning of section 302(c)(3)) for the plan year,

and

‘‘(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding

standard account if such plan year follows a plan year

for which such deficiency was determined under the alternative minimum funding standard under section 305 (as

in effect on the day before the date of the enactment

of the Pension Protection Act of 2006), the excess (if any)

of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit

balance in the alternative minimum funding standard

account.

‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AMORTIZED IN PLAN

YEARS BEFORE 2008.—In the case of any amount amortized

under section 302(b) (as in effect on the day before the date

of the enactment of the Pension Protection Act of 2006) over

any period beginning with a plan year beginning before 2008,

in lieu of the amortization described in paragraphs (2)(B) and

(3)(B), such amount shall continue to be amortized under such

section as so in effect.

‘‘(5) COMBINING AND OFFSETTING AMOUNTS TO BE AMORTIZED.—Under regulations prescribed by the Secretary of the

Treasury, amounts required to be amortized under paragraph

(2) or paragraph (3), as the case may be—

‘‘(A) may be combined into one amount under such

paragraph to be amortized over a period determined on

the basis of the remaining amortization period for all items

entering into such combined amount, and

‘‘(B) may be offset against amounts required to be

amortized under the other such paragraph, with the

resulting amount to be amortized over a period determined

on the basis of the remaining amortization periods for

all items entering into whichever of the two amounts being

offset is the greater.

‘‘(6) INTEREST.—The funding standard account (and items

therein) shall be charged or credited (as determined under

regulations prescribed by the Secretary of the Treasury) with

interest at the appropriate rate consistent with the rate or

rates of interest used under the plan to determine costs.

‘‘(7) SPECIAL RULES RELATING TO CHARGES AND CREDITS

TO FUNDING STANDARD ACCOUNT.—For purposes of this part—

‘‘(A) WITHDRAWAL LIABILITY.—Any amount received by

a multiemployer plan in payment of all or part of an

employer’s withdrawal liability under part 1 of subtitle

E of title IV shall be considered an amount contributed

by the employer to or under the plan. The Secretary of

the Treasury may prescribe by regulation additional

charges and credits to a multiemployer plan’s funding

standard account to the extent necessary to prevent withdrawal liability payments from being unduly reflected as

advance funding for plan liabilities.

‘‘(B) ADJUSTMENTS WHEN A MULTIEMPLOYER PLAN

LEAVES REORGANIZATION.—If a multiemployer plan is not

in reorganization in the plan year but was in reorganization

in the immediately preceding plan year, any balance in

Regulations.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 861

the funding standard account at the close of such immediately preceding plan year—

‘‘(i) shall be eliminated by an offsetting credit or

charge (as the case may be), but

‘‘(ii) shall be taken into account in subsequent

plan years by being amortized in equal annual installments (until fully amortized) over 30 plan years.

The preceding sentence shall not apply to the extent of

any accumulated funding deficiency under section 4243(a)

as of the end of the last plan year that the plan was

in reorganization.

‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL PROGRAM OR

WITHDRAWAL LIABILITY PAYMENT FUND.—Any amount paid

by a plan during a plan year to the Pension Benefit Guaranty Corporation pursuant to section 4222 of this Act or

to a fund exempt under section 501(c)(22) of the Internal

Revenue Code of 1986 pursuant to section 4223 of this

Act shall reduce the amount of contributions considered

received by the plan for the plan year.

‘‘(D) INTERIM WITHDRAWAL LIABILITY PAYMENTS.—Any

amount paid by an employer pending a final determination

of the employer’s withdrawal liability under part 1 of subtitle E of title IV and subsequently refunded to the

employer by the plan shall be charged to the funding

standard account in accordance with regulations prescribed

by the Secretary of the Treasury.

‘‘(E) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION

OF NET EXPERIENCE LOSS.—If an election is in effect under

section 302(b)(7)(F) (as in effect on the day before the

date of the enactment of the Pension Protection Act of

2006) for any plan year, the funding standard account

shall be charged in the plan year to which the portion

of the net experience loss deferred by such election was

deferred with the amount so deferred (and paragraph

(2)(B)(iii) shall not apply to the amount so charged).

‘‘(F) FINANCIAL ASSISTANCE.—Any amount of any financial assistance from the Pension Benefit Guaranty Corporation to any plan, and any repayment of such amount,

shall be taken into account under this section and section

302 in such manner as is determined by the Secretary

of the Treasury.

‘‘(G) SHORT-TERM BENEFITS.—To the extent that any

plan amendment increases the unfunded past service

liability under the plan by reason of an increase in benefits

which are not payable as a life annuity but are payable

under the terms of the plan for a period that does not

exceed 14 years from the effective date of the amendment,

paragraph (2)(B)(ii) shall be applied separately with respect

to such increase in unfunded past service liability by substituting the number of years of the period during which

such benefits are payable for ‘15’.

‘‘(c) ADDITIONAL RULES.—

‘‘(1) DETERMINATIONS TO BE MADE UNDER FUNDING

METHOD.—For purposes of this part, normal costs, accrued

liability, past service liabilities, and experience gains and losses

shall be determined under the funding method used to determine costs under the plan.

Regulations.

120 STAT. 862 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(2) VALUATION OF ASSETS.— ‘‘(A) IN GENERAL.—For purposes of this part, the value

of the plan’s assets shall be determined on the basis of

any reasonable actuarial method of valuation which takes

into account fair market value and which is permitted

under regulations prescribed by the Secretary of the

Treasury.

‘‘(B) ELECTION WITH RESPECT TO BONDS.—The value

of a bond or other evidence of indebtedness which is not

in default as to principal or interest may, at the election

of the plan administrator, be determined on an amortized

basis running from initial cost at purchase to par value

at maturity or earliest call date. Any election under this

subparagraph shall be made at such time and in such

manner as the Secretary of the Treasury shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of such

Secretary.

‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REASONABLE.—For

purposes of this section, all costs, liabilities, rates of interest,

and other factors under the plan shall be determined on the

basis of actuarial assumptions and methods—

‘‘(A) each of which is reasonable (taking into account

the experience of the plan and reasonable expectations),

and

‘‘(B) which, in combination, offer the actuary’s best

estimate of anticipated experience under the plan.

‘‘(4) TREATMENT OF CERTAIN CHANGES AS EXPERIENCE GAIN

OR LOSS.—For purposes of this section, if—

‘‘(A) a change in benefits under the Social Security

Act or in other retirement benefits created under Federal

or State law, or

‘‘(B) a change in the definition of the term ‘wages’

under section 3121 of the Internal Revenue Code of 1986,

or a change in the amount of such wages taken into account

under regulations prescribed for purposes of section

401(a)(5) of such Code,

results in an increase or decrease in accrued liability under

a plan, such increase or decrease shall be treated as an experience loss or gain.

‘‘(5) FULL FUNDING.—If, as of the close of a plan year,

a plan would (without regard to this paragraph) have an

accumulated funding deficiency in excess of the full funding

limitation—

‘‘(A) the funding standard account shall be credited

with the amount of such excess, and

‘‘(B) all amounts described in subparagraphs (B), (C),

and (D) of subsection (b) (2) and subparagraph (B) of subsection (b)(3) which are required to be amortized shall

be considered fully amortized for purposes of such subparagraphs.

‘‘(6) FULL-FUNDING LIMITATION.—

‘‘(A) IN GENERAL.—For purposes of paragraph (5), the

term ‘full-funding limitation’ means the excess (if any) of—

‘‘(i) the accrued liability (including normal cost)

under the plan (determined under the entry age normal

funding method if such accrued liability cannot be

Applicability.

Regulations.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 863

directly calculated under the funding method used for

the plan), over

‘‘(ii) the lesser of—

‘‘(I) the fair market value of the plan’s assets,

or

‘‘(II) the value of such assets determined under

paragraph (2).

‘‘(B) MINIMUM AMOUNT.—

‘‘(i) IN GENERAL.—In no event shall the full-funding

limitation determined under subparagraph (A) be less

than the excess (if any) of—

‘‘(I) 90 percent of the current liability of the

plan (including the expected increase in current

liability due to benefits accruing during the plan

year), over

‘‘(II) the value of the plan’s assets determined

under paragraph (2).

‘‘(ii) ASSETS.—For purposes of clause (i), assets

shall not be reduced by any credit balance in the

funding standard account.

‘‘(C) FULL FUNDING LIMITATION.—For purposes of this

paragraph, unless otherwise provided by the plan, the

accrued liability under a multiemployer plan shall not

include benefits which are not nonforfeitable under the

plan after the termination of the plan (taking into consideration section 411(d)(3) of the Internal Revenue Code of

1986).

‘‘(D) CURRENT LIABILITY.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The term ‘current liability’

means all liabilities to employees and their beneficiaries under the plan.

‘‘(ii) TREATMENT OF UNPREDICTABLE CONTINGENT

EVENT BENEFITS.—For purposes of clause (i), any benefit contingent on an event other than—

‘‘(I) age, service, compensation, death, or disability, or

‘‘(II) an event which is reasonably and reliably

predictable (as determined by the Secretary of the

Treasury),

shall not be taken into account until the event on

which the benefit is contingent occurs.

‘‘(iii) INTEREST RATE USED.—The rate of interest

used to determine current liability under this paragraph shall be the rate of interest determined under

subparagraph (E).

‘‘(iv) MORTALITY TABLES.—

‘‘(I) COMMISSIONERS’ STANDARD TABLE.—In the

case of plan years beginning before the first plan

year to which the first tables prescribed under

subclause (II) apply, the mortality table used in

determining current liability under this paragraph

shall be the table prescribed by the Secretary of

the Treasury which is based on the prevailing

commissioners’ standard table (described in section

807(d)(5)(A) of the Internal Revenue Code of 1986)

120 STAT. 864 PUBLIC LAW 109–280—AUG. 17, 2006

used to determine reserves for group annuity contracts issued on January 1, 1993.

‘‘(II) SECRETARIAL AUTHORITY.—The Secretary

of the Treasury may by regulation prescribe for

plan years beginning after December 31, 1999,

mortality tables to be used in determining current

liability under this subsection. Such tables shall

be based upon the actual experience of pension

plans and projected trends in such experience. In

prescribing such tables, such Secretary shall take

into account results of available independent

studies of mortality of individuals covered by pension plans.

‘‘(v) SEPARATE MORTALITY TABLES FOR THE DISABLED.—Notwithstanding clause (iv)—

‘‘(I) IN GENERAL.—The Secretary of the

Treasury shall establish mortality tables which

may be used (in lieu of the tables under clause

(iv)) to determine current liability under this subsection for individuals who are entitled to benefits

under the plan on account of disability. Such Secretary shall establish separate tables for individuals whose disabilities occur in plan years beginning before January 1, 1995, and for individuals

whose disabilities occur in plan years beginning

on or after such date.

‘‘(II) SPECIAL RULE FOR DISABILITIES OCCURRING AFTER 1994.—In the case of disabilities occurring in plan years beginning after December 31,

1994, the tables under subclause (I) shall apply

only with respect to individuals described in such

subclause who are disabled within the meaning

of title II of the Social Security Act and the regulations thereunder.

‘‘(vi) PERIODIC REVIEW.—The Secretary of the

Treasury shall periodically (at least every 5 years)

review any tables in effect under this subparagraph

and shall, to the extent such Secretary determines

necessary, by regulation update the tables to reflect

the actual experience of pension plans and projected

trends in such experience.

‘‘(E) REQUIRED CHANGE OF INTEREST RATE.—For purposes of determining a plan’s current liability for purposes

of this paragraph—

‘‘(i) IN GENERAL.—If any rate of interest used under

the plan under subsection (b)(6) to determine cost is

not within the permissible range, the plan shall establish a new rate of interest within the permissible range.

‘‘(ii) PERMISSIBLE RANGE.—For purposes of this

subparagraph—

‘‘(I) IN GENERAL.—Except as provided in subclause (II), the term ‘permissible range’ means a

rate of interest which is not more than 5 percent

above, and not more than 10 percent below, the

weighted average of the rates of interest on 30-

year Treasury securities during the 4-year period

Regulations.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 865

ending on the last day before the beginning of

the plan year.

‘‘(II) SECRETARIAL AUTHORITY.—If the Secretary of the Treasury finds that the lowest rate

of interest permissible under subclause (I) is

unreasonably high, such Secretary may prescribe

a lower rate of interest, except that such rate

may not be less than 80 percent of the average

rate determined under such subclause.

‘‘(iii) ASSUMPTIONS.—Notwithstanding paragraph

(3)(A), the interest rate used under the plan shall

be—

‘‘(I) determined without taking into account

the experience of the plan and reasonable expectations, but

‘‘(II) consistent with the assumptions which

reflect the purchase rates which would be used

by insurance companies to satisfy the liabilities

under the plan.

‘‘(7) ANNUAL VALUATION.—

‘‘(A) IN GENERAL.—For purposes of this section, a determination of experience gains and losses and a valuation

of the plan’s liability shall be made not less frequently

than once every year, except that such determination shall

be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary

of the Treasury.

‘‘(B) VALUATION DATE.—

‘‘(i) CURRENT YEAR.—Except as provided in clause

(ii), the valuation referred to in subparagraph (A) shall

be made as of a date within the plan year to which

the valuation refers or within one month prior to the

beginning of such year.

‘‘(ii) USE OF PRIOR YEAR VALUATION.—The valuation referred to in subparagraph (A) may be made

as of a date within the plan year prior to the year

to which the valuation refers if, as of such date, the

value of the assets of the plan are not less than 100

percent of the plan’s current liability (as defined in

paragraph (6)(D) without regard to clause (iv) thereof).

‘‘(iii) ADJUSTMENTS.—Information under clause (ii)

shall, in accordance with regulations, be actuarially

adjusted to reflect significant differences in participants.

‘‘(iv) LIMITATION.—A change in funding method to

use a prior year valuation, as provided in clause (ii),

may not be made unless as of the valuation date within

the prior plan year, the value of the assets of the

plan are not less than 125 percent of the plan’s current

liability (as defined in paragraph (6)(D) without regard

to clause (iv) thereof).

‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS DEEMED MADE.—

For purposes of this section, any contributions for a plan year

made by an employer after the last day of such plan year,

but not later than two and one-half months after such day,

shall be deemed to have been made on such last day. For

purposes of this subparagraph, such two and one-half month

Deadline.

Regulations.

120 STAT. 866 PUBLIC LAW 109–280—AUG. 17, 2006

period may be extended for not more than six months under

regulations prescribed by the Secretary of the Treasury.

‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR MULTIEMPLOYER

PLANS.—

‘‘(1) AUTOMATIC EXTENSION UPON APPLICATION BY CERTAIN

PLANS.—

‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan—

‘‘(i) submits to the Secretary of the Treasury an

application for an extension of the period of years

required to amortize any unfunded liability described

in any clause of subsection (b)(2)(B) or described in

subsection (b)(4), and

‘‘(ii) includes with the application a certification

by the plan’s actuary described in subparagraph (B),

the Secretary of the Treasury shall extend the amortization

period for the period of time (not in excess of 5 years)

specified in the application. Such extension shall be in

addition to any extension under paragraph (2).

‘‘(B) CRITERIA.—A certification with respect to a multiemployer plan is described in this subparagraph if the

plan’s actuary certifies that, based on reasonable assumptions—

‘‘(i) absent the extension under subparagraph (A),

the plan would have an accumulated funding deficiency

in the current plan year or any of the 9 succeeding

plan years,

‘‘(ii) the plan sponsor has adopted a plan to

improve the plan’s funding status,

‘‘(iii) the plan is projected to have sufficient assets

to timely pay expected benefits and anticipated

expenditures over the amortization period as extended,

and

‘‘(iv) the notice required under paragraph (3)(A)

has been provided.

‘‘(C) TERMINATION.—The preceding provisions of this

paragraph shall not apply with respect to any application

submitted after December 31, 2014.

‘‘(2) ALTERNATIVE EXTENSION.—

‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan submits to the Secretary of the Treasury an

application for an extension of the period of years required

to amortize any unfunded liability described in any clause

of subsection (b)(2)(B) or described in subsection (b)(4),

the Secretary of the Treasury may extend the amortization

period for a period of time (not in excess of 10 years

reduced by the number of years of any extension under

paragraph (1) with respect to such unfunded liability) if

the Secretary of the Treasury makes the determination

described in subparagraph (B). Such extension shall be

in addition to any extension under paragraph (1).

‘‘(B) DETERMINATION.—The Secretary of the Treasury

may grant an extension under subparagraph (A) if such

Secretary determines that—

‘‘(i) such extension would carry out the purposes

of this Act and would provide adequate protection for

Notification.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 867

participants under the plan and their beneficiaries,

and

‘‘(ii) the failure to permit such extension would—

‘‘(I) result in a substantial risk to the voluntary continuation of the plan, or a substantial

curtailment of pension benefit levels or employee

compensation, and

‘‘(II) be adverse to the interests of plan participants in the aggregate.

‘‘(C) ACTION BY SECRETARY OF THE TREASURY.—The

Secretary of the Treasury shall act upon any application

for an extension under this paragraph within 180 days

of the submission of such application. If such Secretary

rejects the application for an extension under this paragraph, such Secretary shall provide notice to the plan

detailing the specific reasons for the rejection, including

references to the criteria set forth above.

‘‘(3) ADVANCE NOTICE.—

‘‘(A) IN GENERAL.—The Secretary of the Treasury shall,

before granting an extension under this subsection, require

each applicant to provide evidence satisfactory to such Secretary that the applicant has provided notice of the filing

of the application for such extension to each affected party

(as defined in section 4001(a)(21)) with respect to the

affected plan. Such notice shall include a description of

the extent to which the plan is funded for benefits which

are guaranteed under title IV and for benefit liabilities.

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The

Secretary of the Treasury shall consider any relevant

information provided by a person to whom notice was given

under paragraph (1).’’.

(b) SHORTFALL FUNDING METHOD.—

(1) IN GENERAL.—A multiemployer plan meeting the criteria

of paragraph (2) may adopt, use, or cease using, the shortfall

funding method and such adoption, use, or cessation of use

of such method, shall be deemed approved by the Secretary

of the Treasury under section 302(d)(1) of the Employee Retirement Income Security Act of 1974 and section 412(d)(1) of

the Internal Revenue Code of 1986.

(2) CRITERIA.—A multiemployer pension plan meets the

criteria of this clause if—

(A) the plan has not used the shortfall funding method

during the 5-year period ending on the day before the

date the plan is to use the method under paragraph (1);

and

(B) the plan is not operating under an amortization

period extension under section 304(d) of such Act and did

not operate under such an extension during such 5-year

period.

(3) SHORTFALL FUNDING METHOD DEFINED.—For purposes

of this subsection, the term ‘‘shortfall funding method’’ means

the shortfall funding method described in Treasury Regulations

section 1.412(c)(1)–2 (26 CFR 1.412(c)(1)–2).

(4) BENEFIT RESTRICTIONS TO APPLY.—The benefit restrictions under section 302(c)(7) of such Act and section 412(c)(7)

of such Code shall apply during any period a multiemployer

29 USC 1084

note.

Deadline.

Notification.

120 STAT. 868 PUBLIC LAW 109–280—AUG. 17, 2006

plan is on the shortfall funding method pursuant to this subsection.

(5) USE OF SHORTFALL METHOD NOT TO PRECLUDE OTHER

OPTIONS.—Nothing in this subsection shall be construed to

affect a multiemployer plan’s ability to adopt the shortfall

funding method with the Secretary’s permission under otherwise applicable regulations or to affect a multiemployer plan’s

right to change funding methods, with or without the Secretary’s consent, as provided in applicable rules and regulations.

(c) CONFORMING AMENDMENTS.— (1) Section 301 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1081) is amended by striking subsection (d).

(2) The table of contents in section 1 of such Act (as

amended by this Act) is amended by inserting after the item

relating to section 303 the following new item:

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’.

(d) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after 2007.

(2) SPECIAL RULE FOR CERTAIN AMORTIZATION EXTEN- SIONS.—If the Secretary of the Treasury grants an extension

under section 304 of the Employee Retirement Income Security

Act of 1974 and section 412(e) of the Internal Revenue Code

of 1986 with respect to any application filed with the Secretary

of the Treasury on or before June 30, 2005, the extension

(and any modification thereof) shall be applied and administered under the rules of such sections as in effect before the

enactment of this Act, including the use of the rate of interest

determined under section 6621(b) of such Code.

SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS

IN ENDANGERED OR CRITICAL STATUS.

(a) IN GENERAL.—Part 3 of subtitle B of title I of the Employee

Retirement Income Security Act of 1974 (as amended by the preceding provisions of this Act) is amended by inserting after section

304 the following new section:

‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN

ENDANGERED STATUS OR CRITICAL STATUS

‘‘SEC. 305. (a) GENERAL RULE.—For purposes of this part, in

the case of a multiemployer plan in effect on July 16, 2006—

‘‘(1) if the plan is in endangered status—

‘‘(A) the plan sponsor shall adopt and implement a

funding improvement plan in accordance with the requirements of subsection (c), and

‘‘(B) the requirements of subsection (d) shall apply

during the funding plan adoption period and the funding

improvement period, and

‘‘(2) if the plan is in critical status—

‘‘(A) the plan sponsor shall adopt and implement a

rehabilitation plan in accordance with the requirements

of subsection (e), and

‘‘(B) the requirements of subsection (f) shall apply

during the rehabilitation plan adoption period and the

rehabilitation period.

Applicability.

Applicability.

29 USC 1085.

Applicability.

29 USC 1081

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 869

‘‘(b) DETERMINATION OF ENDANGERED AND CRITICAL STATUS.— For purposes of this section—

‘‘(1) ENDANGERED STATUS.—A multiemployer plan is in

endangered status for a plan year if, as determined by the

plan actuary under paragraph (3), the plan is not in critical

status for the plan year and, as of the beginning of the plan

year, either—

‘‘(A) the plan’s funded percentage for such plan year

is less than 80 percent, or

‘‘(B) the plan has an accumulated funding deficiency

for such plan year, or is projected to have such an accumulated funding deficiency for any of the 6 succeeding plan

years, taking into account any extension of amortization

periods under section 304(d).

For purposes of this section, a plan shall be treated as in

seriously endangered status for a plan year if the plan is

described in both subparagraphs (A) and (B).

‘‘(2) CRITICAL STATUS.—A multiemployer plan is in critical

status for a plan year if, as determined by the plan actuary

under paragraph (3), the plan is described in 1 or more of

the following subparagraphs as of the beginning of the plan

year:

‘‘(A) A plan is described in this subparagraph if—

‘‘(i) the funded percentage of the plan is less than

65 percent, and

‘‘(ii) the sum of—

‘‘(I) the fair market value of plan assets, plus

‘‘(II) the present value of the reasonably anticipated employer contributions for the current plan

year and each of the 6 succeeding plan years,

assuming that the terms of all collective bargaining agreements pursuant to which the plan

is maintained for the current plan year continue

in effect for succeeding plan years,

is less than the present value of all nonforfeitable

benefits projected to be payable under the plan during

the current plan year and each of the 6 succeeding

plan years (plus administrative expenses for such plan

years).

‘‘(B) A plan is described in this subparagraph if—

‘‘(i) the plan has an accumulated funding deficiency

for the current plan year, not taking into account any

extension of amortization periods under section 304(d),

or

‘‘(ii) the plan is projected to have an accumulated

funding deficiency for any of the 3 succeeding plan

years (4 succeeding plan years if the funded percentage

of the plan is 65 percent or less), not taking into

account any extension of amortization periods under

section 304(d).

‘‘(C) A plan is described in this subparagraph if—

‘‘(i)(I) the plan’s normal cost for the current plan

year, plus interest (determined at the rate used for

determining costs under the plan) for the current plan

year on the amount of unfunded benefit liabilities

under the plan as of the last date of the preceding

plan year, exceeds

120 STAT. 870 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(II) the present value of the reasonably anticipated employer and employee contributions for the current plan year,

‘‘(ii) the present value, as of the beginning of the

current plan year, of nonforfeitable benefits of inactive

participants is greater than the present value of nonforfeitable benefits of active participants, and

‘‘(iii) the plan has an accumulated funding deficiency for the current plan year, or is projected to

have such a deficiency for any of the 4 succeeding

plan years, not taking into account any extension of

amortization periods under section 304(d).

‘‘(D) A plan is described in this subparagraph if the

sum of—

‘‘(i) the fair market value of plan assets, plus

‘‘(ii) the present value of the reasonably anticipated

employer contributions for the current plan year and

each of the 4 succeeding plan years, assuming that

the terms of all collective bargaining agreements

pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan

years,

is less than the present value of all benefits projected

to be payable under the plan during the current plan

year and each of the 4 succeeding plan years (plus administrative expenses for such plan years).

‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTUARY.—

‘‘(A) IN GENERAL.—Not later than the 90th day of each

plan year of a multiemployer plan, the plan actuary shall

certify to the Secretary of the Treasury and to the plan

sponsor—

‘‘(i) whether or not the plan is in endangered status

for such plan year and whether or not the plan is

or will be in critical status for such plan year, and

‘‘(ii) in the case of a plan which is in a funding

improvement or rehabilitation period, whether or not

the plan is making the scheduled progress in meeting

the requirements of its funding improvement or

rehabilitation plan.

‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS AND LIABILITIES.—

‘‘(i) IN GENERAL.—In making the determinations

and projections under this subsection, the plan actuary

shall make projections required for the current and

succeeding plan years of the current value of the assets

of the plan and the present value of all liabilities

to participants and beneficiaries under the plan for

the current plan year as of the beginning of such

year. The actuary’s projections shall be based on

reasonable actuarial estimates, assumptions, and

methods that, except as provided in clause (iii), offer

the actuary’s best estimate of anticipated experience

under the plan. The projected present value of liabilities as of the beginning of such year shall be determined based on the most recent of either—

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 871

‘‘(I) the actuarial statement required under

section 103(d) with respect to the most recently

filed annual report, or

‘‘(II) the actuarial valuation for the preceding

plan year.

‘‘(ii) DETERMINATIONS OF FUTURE CONTRIBU- TIONS.—Any actuarial projection of plan assets shall

assume—

‘‘(I) reasonably anticipated employer contributions for the current and succeeding plan years,

assuming that the terms of the one or more collective bargaining agreements pursuant to which the

plan is maintained for the current plan year continue in effect for succeeding plan years, or

‘‘(II) that employer contributions for the most

recent plan year will continue indefinitely, but only

if the plan actuary determines there have been

no significant demographic changes that would

make such assumption unreasonable.

‘‘(iii) PROJECTED INDUSTRY ACTIVITY.—Any projection of activity in the industry or industries covered

by the plan, including future covered employment and

contribution levels, shall be based on information provided by the plan sponsor, which shall act reasonably

and in good faith.

‘‘(C) PENALTY FOR FAILURE TO SECURE TIMELY ACTUARIAL CERTIFICATION.—Any failure of the plan’s actuary

to certify the plan’s status under this subsection by the

date specified in subparagraph (A) shall be treated for

purposes of section 502(c)(2) as a failure or refusal by

the plan administrator to file the annual report required

to be filed with the Secretary under section 101(b)(4).

‘‘(D) NOTICE.—

‘‘(i) IN GENERAL.—In any case in which it is certified under subparagraph (A) that a multiemployer

plan is or will be in endangered or critical status

for a plan year, the plan sponsor shall, not later than

30 days after the date of the certification, provide

notification of the endangered or critical status to the

participants and beneficiaries, the bargaining parties,

the Pension Benefit Guaranty Corporation, and the

Secretary.

‘‘(ii) PLANS IN CRITICAL STATUS.—If it is certified

under subparagraph (A) that a multiemployer plan

is or will be in critical status, the plan sponsor shall

include in the notice under clause (i) an explanation

of the possibility that—

‘‘(I) adjustable benefits (as defined in subsection (e)(8)) may be reduced, and

‘‘(II) such reductions may apply to participants

and beneficiaries whose benefit commencement

date is on or after the date such notice is provided

for the first plan year in which the plan is in

critical status.

‘‘(iii) MODEL NOTICE.—The Secretary shall prescribe a model notice that a multiemployer plan may

use to satisfy the requirements under clause (ii).

Deadline.

Reports.

120 STAT. 872 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE ADOPTED FOR

MULTIEMPLOYER PLANS IN ENDANGERED STATUS.—

‘‘(1) IN GENERAL.—In any case in which a multiemployer

plan is in endangered status for a plan year, the plan sponsor,

in accordance with this subsection—

‘‘(A) shall adopt a funding improvement plan not later

than 240 days following the required date for the actuarial

certification of endangered status under subsection

(b)(3)(A), and

‘‘(B) within 30 days after the adoption of the funding

improvement plan—

‘‘(i) shall provide to the bargaining parties 1 or

more schedules showing revised benefit structures,

revised contribution structures, or both, which, if

adopted, may reasonably be expected to enable the

multiemployer plan to meet the applicable benchmarks

in accordance with the funding improvement plan,

including—

‘‘(I) one proposal for reductions in the amount

of future benefit accruals necessary to achieve the

applicable benchmarks, assuming no amendments

increasing contributions under the plan (other

than amendments increasing contributions necessary to achieve the applicable benchmarks after

amendments have reduced future benefit accruals

to the maximum extent permitted by law), and

‘‘(II) one proposal for increases in contributions

under the plan necessary to achieve the applicable

benchmarks, assuming no amendments reducing

future benefit accruals under the plan, and

‘‘(ii) may, if the plan sponsor deems appropriate,

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to achieving the applicable benchmarks

in accordance with the funding improvement plan.

For purposes of this section, the term ‘applicable benchmarks’ means the requirements applicable to the multiemployer plan under paragraph (3) (as modified by paragraph

(5)).

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in

a funding plan adoption period or funding improvement period

by reason of the plan being in endangered status for a preceding

plan year. For purposes of this section, such preceding plan

year shall be the initial determination year with respect to

the funding improvement plan to which it relates.

‘‘(3) FUNDING IMPROVEMENT PLAN.—For purposes of this

section—

‘‘(A) IN GENERAL.—A funding improvement plan is a

plan which consists of the actions, including options or

a range of options to be proposed to the bargaining parties,

formulated to provide, based on reasonably anticipated

experience and reasonable actuarial assumptions, for the

attainment by the plan during the funding improvement

period of the following requirements:

Deadlines.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 873

‘‘(i) INCREASE IN PLAN’S FUNDING PERCENTAGE.— The plan’s funded percentage as of the close of the

funding improvement period equals or exceeds a

percentage equal to the sum of—

‘‘(I) such percentage as of the beginning of

such period, plus

‘‘(II) 33 percent of the difference between 100

percent and the percentage under subclause (I).

‘‘(ii) AVOIDANCE OF ACCUMULATED FUNDING DEFI- CIENCIES.—No accumulated funding deficiency for any

plan year during the funding improvement period

(taking into account any extension of amortization

periods under section 304(d)).

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of

a plan in seriously endangered status, except as provided

in paragraph (5), subparagraph (A)(i)(II) shall be applied

by substituting ‘20 percent’ for ‘33 percent’.

‘‘(4) FUNDING IMPROVEMENT PERIOD.—For purposes of this

section—

‘‘(A) IN GENERAL.—The funding improvement period

for any funding improvement plan adopted pursuant to

this subsection is the 10-year period beginning on the first

day of the first plan year of the multiemployer plan beginning after the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the funding improvement plan, or

‘‘(ii) the expiration of the collective bargaining

agreements in effect on the due date for the actuarial

certification of endangered status for the initial determination year under subsection (b)(3)(A) and covering,

as of such due date, at least 75 percent of the active

participants in such multiemployer plan.

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of

a plan in seriously endangered status, except as provided

in paragraph (5), subparagraph (A) shall be applied by

substituting ‘15-year period’ for ‘10-year period’.

‘‘(C) COORDINATION WITH CHANGES IN STATUS.—

‘‘(i) PLANS NO LONGER IN ENDANGERED STATUS.—

If the plan’s actuary certifies under subsection (b)(3)(A)

for a plan year in any funding plan adoption period

or funding improvement period that the plan is no

longer in endangered status and is not in critical

status, the funding plan adoption period or funding

improvement period, whichever is applicable, shall end

as of the close of the preceding plan year.

‘‘(ii) PLANS IN CRITICAL STATUS.—If the plan’s

actuary certifies under subsection (b)(3)(A) for a plan

year in any funding plan adoption period or funding

improvement period that the plan is in critical status,

the funding plan adoption period or funding improvement period, whichever is applicable, shall end as of

the close of the plan year preceding the first plan

year in the rehabilitation period with respect to such

status.

‘‘(D) PLANS IN ENDANGERED STATUS AT END OF

PERIOD.—If the plan’s actuary certifies under subsection

(b)(3)(A) for the first plan year following the close of the

Applicability.

Applicability.

120 STAT. 874 PUBLIC LAW 109–280—AUG. 17, 2006

period described in subparagraph (A) that the plan is in

endangered status, the provisions of this subsection and

subsection (d) shall be applied as if such first plan year

were an initial determination year, except that the plan

may not be amended in a manner inconsistent with the

funding improvement plan in effect for the preceding plan

year until a new funding improvement plan is adopted.

‘‘(5) SPECIAL RULES FOR SERIOUSLY ENDANGERED PLANS

MORE THAN 70 PERCENT FUNDED.—

‘‘(A) IN GENERAL.—If the funded percentage of a plan

in seriously endangered status was more than 70 percent

as of the beginning of the initial determination year—

‘‘(i) paragraphs (3)(B) and (4)(B) shall apply only

if the plan’s actuary certifies, within 30 days after

the certification under subsection (b)(3)(A) for the initial determination year, that, based on the terms of

the plan and the collective bargaining agreements in

effect at the time of such certification, the plan is

not projected to meet the requirements of paragraph

(3)(A) (without regard to paragraphs (3)(B) and (4)(B)),

and

‘‘(ii) if there is a certification under clause (i),

the plan may, in formulating its funding improvement

plan, only take into account the rules of paragraph

(3)(B) and (4)(B) for plan years in the funding improvement period beginning on or before the date on which

the last of the collective bargaining agreements

described in paragraph (4)(A)(ii) expires.

‘‘(B) SPECIAL RULE AFTER EXPIRATION OF AGREEMENTS.—Notwithstanding subparagraph (A)(ii), if, for any

plan year ending after the date described in subparagraph

(A)(ii), the plan actuary certifies (at the time of the annual

certification under subsection (b)(3)(A) for such plan year)

that, based on the terms of the plan and collective bargaining agreements in effect at the time of that annual

certification, the plan is not projected to be able to meet

the requirements of paragraph (3)(A) (without regard to

paragraphs (3)(B) and (4)(B)), paragraphs (3)(B) and (4)(B)

shall continue to apply for such year.

‘‘(6) UPDATES TO FUNDING IMPROVEMENT PLAN AND SCHEDULES.—

‘‘(A) FUNDING IMPROVEMENT PLAN.—The plan sponsor

shall annually update the funding improvement plan and

shall file the update with the plan’s annual report under

section 104.

‘‘(B) SCHEDULES.—The plan sponsor shall annually

update any schedule of contribution rates provided under

this subsection to reflect the experience of the plan.

‘‘(C) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied upon

by bargaining parties in negotiating a collective bargaining

agreement shall remain in effect for the duration of that

collective bargaining agreement.

‘‘(7) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE TO

ADOPT FUNDING IMPROVEMENT PLAN.—

‘‘(A) IN GENERAL.—If—

Applicability.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 875

‘‘(i) a collective bargaining agreement providing

for contributions under a multiemployer plan that was

in effect at the time the plan entered endangered status

expires, and

‘‘(ii) after receiving one or more schedules from

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail

to agree on changes to contribution or benefit schedules

necessary to meet the applicable benchmarks in accordance with the funding improvement plan,

the plan sponsor shall implement the schedule described

in paragraph (1)(B)(i)(I) beginning on the date specified

in subparagraph (B).

‘‘(B) DATE OF IMPLEMENTATION.—The date specified in

this subparagraph is the earlier of the date—

‘‘(i) on which the Secretary certifies that the parties

are at an impasse, or

‘‘(ii) which is 180 days after the date on which

the collective bargaining agreement described in

subparagraph (A) expires.

‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For purposes of this

section, the term ‘funding plan adoption period’ means the

period beginning on the date of the certification under subsection (b)(3)(A) for the initial determination year and ending

on the day before the first day of the funding improvement

period.

‘‘(d) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

IMPROVEMENT PERIODS.—

‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During

the funding plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for

any participants,

‘‘(ii) a suspension of contributions with respect to

any period of service, or

‘‘(iii) any new direct or indirect exclusion of

younger or newly hired employees from plan participation,

‘‘(B) no amendment of the plan which increases the

liabilities of the plan by reason of any increase in benefits,

any change in the accrual of benefits, or any change in

the rate at which benefits become nonforfeitable under

the plan may be adopted unless the amendment is required

as a condition of qualification under part I of subchapter

D of chapter 1 of the Internal Revenue Code of 1986 or

to comply with other applicable law, and

‘‘(C) in the case of a plan in seriously endangered

status, the plan sponsor shall take all reasonable actions

which are consistent with the terms of the plan and

applicable law and which are expected, based on reasonable

assumptions, to achieve—

‘‘(i) an increase in the plan’s funded percentage,

and

‘‘(ii) postponement of an accumulated funding deficiency for at least 1 additional plan year.

120 STAT. 876 PUBLIC LAW 109–280—AUG. 17, 2006

Actions under subparagraph (C) include applications for extensions of amortization periods under section 304(d), use of the

shortfall funding method in making funding standard account

computations, amendments to the plan’s benefit structure,

reductions in future benefit accruals, and other reasonable

actions consistent with the terms of the plan and applicable

law.

‘‘(2) COMPLIANCE WITH FUNDING IMPROVEMENT PLAN.— ‘‘(A) IN GENERAL.—A plan may not be amended after

the date of the adoption of a funding improvement plan

so as to be inconsistent with the funding improvement

plan.

‘‘(B) NO REDUCTION IN CONTRIBUTIONS.—A plan sponsor

may not during any funding improvement period accept

a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides

for—

‘‘(i) a reduction in the level of contributions for

any participants,

‘‘(ii) a suspension of contributions with respect to

any period of service, or

‘‘(iii) any new direct or indirect exclusion of

younger or newly hired employees from plan participation.

‘‘(C) SPECIAL RULES FOR BENEFIT INCREASES.—A plan

may not be amended after the date of the adoption of

a funding improvement plan so as to increase benefits,

including future benefit accruals, unless the plan actuary

certifies that the benefit increase is consistent with the

funding improvement plan and is paid for out of contributions not required by the funding improvement plan to

meet the applicable benchmark in accordance with the

schedule contemplated in the funding improvement plan.

‘‘(e) REHABILITATION PLAN MUST BE ADOPTED FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.— ‘‘(1) IN GENERAL.—In any case in which a multiemployer

plan is in critical status for a plan year, the plan sponsor,

in accordance with this subsection—

‘‘(A) shall adopt a rehabilitation plan not later than

240 days following the required date for the actuarial certification of critical status under subsection (b)(3)(A), and

‘‘(B) within 30 days after the adoption of the rehabilitation plan—

‘‘(i) shall provide to the bargaining parties 1 or

more schedules showing revised benefit structures,

revised contribution structures, or both, which, if

adopted, may reasonably be expected to enable the

multiemployer plan to emerge from critical status in

accordance with the rehabilitation plan, and

‘‘(ii) may, if the plan sponsor deems appropriate,

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to emerging from critical status in accordance with the rehabilitation plan.

The schedule or schedules described in subparagraph (B)(i)

shall reflect reductions in future benefit accruals and adjustable

Deadlines.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 877

benefits, and increases in contributions, that the plan sponsor

determines are reasonably necessary to emerge from critical

status. One schedule shall be designated as the default schedule

and such schedule shall assume that there are no increases

in contributions under the plan other than the increases necessary to emerge from critical status after future benefit

accruals and other benefits (other than benefits the reduction

or elimination of which are not permitted under section 204(g))

have been reduced to the maximum extent permitted by law.

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in

a rehabilitation plan adoption period or rehabilitation period

by reason of the plan being in critical status for a preceding

plan year. For purposes of this section, such preceding plan

year shall be the initial critical year with respect to the

rehabilitation plan to which it relates.

‘‘(3) REHABILITATION PLAN.—For purposes of this section—

‘‘(A) IN GENERAL.—A rehabilitation plan is a plan which

consists of—

‘‘(i) actions, including options or a range of options

to be proposed to the bargaining parties, formulated,

based on reasonably anticipated experience and reasonable actuarial assumptions, to enable the plan to cease

to be in critical status by the end of the rehabilitation

period and may include reductions in plan expenditures

(including plan mergers and consolidations), reductions

in future benefit accruals or increases in contributions,

if agreed to by the bargaining parties, or any combination of such actions, or

‘‘(ii) if the plan sponsor determines that, based

on reasonable actuarial assumptions and upon exhaustion of all reasonable measures, the plan can not

reasonably be expected to emerge from critical status

by the end of the rehabilitation period, reasonable

measures to emerge from critical status at a later

time or to forestall possible insolvency (within the

meaning of section 4245).

A rehabilitation plan must provide annual standards for

meeting the requirements of such rehabilitation plan. Such

plan shall also include the schedules required to be provided under paragraph (1)(B)(i) and if clause (ii) applies,

shall set forth the alternatives considered, explain why

the plan is not reasonably expected to emerge from critical

status by the end of the rehabilitation period, and specify

when, if ever, the plan is expected to emerge from critical

status in accordance with the rehabilitation plan.

‘‘(B) UPDATES TO REHABILITATION PLAN AND SCHEDULES.—

‘‘(i) REHABILITATION PLAN.—The plan sponsor shall

annually update the rehabilitation plan and shall file

the update with the plan’s annual report under section

104.

‘‘(ii) SCHEDULES.—The plan sponsor shall annually

update any schedule of contribution rates provided

under this subsection to reflect the experience of the

plan.

Standards.

120 STAT. 878 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(iii) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied

upon by bargaining parties in negotiating a collective

bargaining agreement shall remain in effect for the

duration of that collective bargaining agreement.

‘‘(C) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE

TO ADOPT REHABILITATION PLAN.—

‘‘(i) IN GENERAL.—If—

‘‘(I) a collective bargaining agreement providing for contributions under a multiemployer

plan that was in effect at the time the plan entered

critical status expires, and

‘‘(II) after receiving one or more schedules from

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement

fail to adopt a contribution or benefit schedules

with terms consistent with the rehabilitation plan

and the schedule from the plan sponsor under

paragraph (1)(B)(i),

the plan sponsor shall implement the default schedule

described in the last sentence of paragraph (1) beginning on the date specified in clause (ii).

‘‘(ii) DATE OF IMPLEMENTATION.—The date specified

in this clause is the earlier of the date—

‘‘(I) on which the Secretary certifies that the

parties are at an impasse, or

‘‘(II) which is 180 days after the date on which

the collective bargaining agreement described in

clause (i) expires.

‘‘(4) REHABILITATION PERIOD.—For purposes of this section—

‘‘(A) IN GENERAL.—The rehabilitation period for a plan

in critical status is the 10-year period beginning on the

first day of the first plan year of the multiemployer plan

following the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the rehabilitation plan, or

‘‘(ii) the expiration of the collective bargaining

agreements in effect on the date of the due date for

the actuarial certification of critical status for the initial critical year under subsection (a)(1) and covering,

as of such date at least 75 percent of the active participants in such multiemployer plan.

If a plan emerges from critical status as provided under

subparagraph (B) before the end of such 10-year period,

the rehabilitation period shall end with the plan year preceding the plan year for which the determination under

subparagraph (B) is made.

‘‘(B) EMERGENCE.—A plan in critical status shall

remain in such status until a plan year for which the

plan actuary certifies, in accordance with subsection

(b)(3)(A), that the plan is not projected to have an accumulated funding deficiency for the plan year or any of the

9 succeeding plan years, without regard to the use of the

shortfall method and taking into account any extension

of amortization periods under section 304(d).

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 879

‘‘(5) REHABILITATION PLAN ADOPTION PERIOD.—For purposes

of this section, the term ‘rehabilitation plan adoption period’

means the period beginning on the date of the certification

under subsection (b)(3)(A) for the initial critical year and ending

on the day before the first day of the rehabilitation period.

‘‘(6) LIMITATION ON REDUCTION IN RATES OF FUTURE

ACCRUALS.—Any reduction in the rate of future accruals under

the default schedule described in paragraph (1)(B)(i) shall not

reduce the rate of future accruals below—

‘‘(A) a monthly benefit (payable as a single life annuity

commencing at the participant’s normal retirement age)

equal to 1 percent of the contributions required to be made

with respect to a participant, or the equivalent standard

accrual rate for a participant or group of participants under

the collective bargaining agreements in effect as of the

first day of the initial critical year, or

‘‘(B) if lower, the accrual rate under the plan on such

first day.

The equivalent standard accrual rate shall be determined by

the plan sponsor based on the standard or average contribution

base units which the plan sponsor determines to be representative for active participants and such other factors as the plan

sponsor determines to be relevant. Nothing in this paragraph

shall be construed as limiting the ability of the plan sponsor

to prepare and provide the bargaining parties with alternative

schedules to the default schedule that established lower or

higher accrual and contribution rates than the rates otherwise

described in this paragraph.

‘‘(7) AUTOMATIC EMPLOYER SURCHARGE.—

‘‘(A) IMPOSITION OF SURCHARGE.—Each employer otherwise obligated to make contributions for the initial critical

year shall be obligated to pay to the plan for such year

a surcharge equal to 5 percent of the contributions otherwise required under the applicable collective bargaining

agreement (or other agreement pursuant to which the

employer contributes). For each succeeding plan year in

which the plan is in critical status for a consecutive period

of years beginning with the initial critical year, the surcharge shall be 10 percent of the contributions otherwise

so required.

‘‘(B) ENFORCEMENT OF SURCHARGE.—The surcharges

under subparagraph (A) shall be due and payable on the

same schedule as the contributions on which the surcharges

are based. Any failure to make a surcharge payment shall

be treated as a delinquent contribution under section 515

and shall be enforceable as such.

‘‘(C) SURCHARGE TO TERMINATE UPON COLLECTIVE BARGAINING AGREEMENT RENEGOTIATION.—The surcharge

under this paragraph shall cease to be effective with respect

to employees covered by a collective bargaining agreement

(or other agreement pursuant to which the employer

contributes), beginning on the effective date of a collective

bargaining agreement (or other such agreement) that

includes terms consistent with a schedule presented by

the plan sponsor under paragraph (1)(B)(i), as modified

under subparagraph (B) of paragraph (3).

120 STAT. 880 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(D) SURCHARGE NOT TO APPLY UNTIL EMPLOYER

RECEIVES NOTICE.—The surcharge under this paragraph

shall not apply to an employer until 30 days after the

employer has been notified by the plan sponsor that the

plan is in critical status and that the surcharge is in

effect.

‘‘(E) SURCHARGE NOT TO GENERATE INCREASED BENEFIT

ACCRUALS.—Notwithstanding any provision of a plan to

the contrary, the amount of any surcharge under this paragraph shall not be the basis for any benefit accrual under

the plan.

‘‘(8) BENEFIT ADJUSTMENTS.—

‘‘(A) ADJUSTABLE BENEFITS.—

‘‘(i) IN GENERAL.—Notwithstanding section 204(g),

the plan sponsor shall, subject to the notice requirements in subparagraph (C), make any reductions to

adjustable benefits which the plan sponsor deems

appropriate, based upon the outcome of collective bargaining over the schedule or schedules provided under

paragraph (1)(B)(i).

‘‘(ii) EXCEPTION FOR RETIREES.—Except in the case

of adjustable benefits described in clause (iv)(III), the

plan sponsor of a plan in critical status shall not reduce

adjustable benefits of any participant or beneficiary

whose benefit commencement date is before the date

on which the plan provides notice to the participant

or beneficiary under subsection (b)(3)(D) for the initial

critical year.

‘‘(iii) PLAN SPONSOR FLEXIBILITY.—The plan

sponsor shall include in the schedules provided to the

bargaining parties an allowance for funding the benefits of participants with respect to whom contributions

are not currently required to be made, and shall reduce

their benefits to the extent permitted under this title

and considered appropriate by the plan sponsor based

on the plan’s then current overall funding status.

‘‘(iv) ADJUSTABLE BENEFIT DEFINED.—For purposes

of this paragraph, the term ‘adjustable benefit’

means—

‘‘(I) benefits, rights, and features under the

plan, including post-retirement death benefits, 60-

month guarantees, disability benefits not yet in

pay status, and similar benefits,

‘‘(II) any early retirement benefit or retirement-type subsidy (within the meaning of section

204(g)(2)(A)) and any benefit payment option

(other than the qualified joint and survivor

annuity), and

‘‘(III) benefit increases that would not be

eligible for a guarantee under section 4022A on

the first day of initial critical year because the

increases were adopted (or, if later, took effect)

less than 60 months before such first day.

‘‘(B) NORMAL RETIREMENT BENEFITS PROTECTED.—

Except as provided in subparagraph (A)(iv)(III), nothing

in this paragraph shall be construed to permit a plan

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 881

to reduce the level of a participant’s accrued benefit payable

at normal retirement age.

‘‘(C) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—No reduction may be made to

adjustable benefits under subparagraph (A) unless

notice of such reduction has been given at least 30

days before the general effective date of such reduction

for all participants and beneficiaries to—

‘‘(I) plan participants and beneficiaries,

‘‘(II) each employer who has an obligation to

contribute (within the meaning of section 4212(a))

under the plan, and

‘‘(III) each employee organization which, for

purposes of collective bargaining, represents plan

participants employed by such an employer.

‘‘(ii) CONTENT OF NOTICE.—The notice under clause

(i) shall contain—

‘‘(I) sufficient information to enable participants and beneficiaries to understand the effect

of any reduction on their benefits, including an

estimate (on an annual or monthly basis) of any

affected adjustable benefit that a participant or

beneficiary would otherwise have been eligible for

as of the general effective date described in clause

(i), and

‘‘(II) information as to the rights and remedies

of plan participants and beneficiaries as well as

how to contact the Department of Labor for further

information and assistance where appropriate.

‘‘(iii) FORM AND MANNER.—Any notice under clause

(i)—

‘‘(I) shall be provided in a form and manner

prescribed in regulations of the Secretary,

‘‘(II) shall be written in a manner so as to

be understood by the average plan participant,

and

‘‘(III) may be provided in written, electronic,

or other appropriate form to the extent such form

is reasonably accessible to persons to whom the

notice is required to be provided.

The Secretary shall in the regulations prescribed under

subclause (I) establish a model notice that a plan

sponsor may use to meet the requirements of this

subparagraph.

‘‘(9) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.—

‘‘(A) BENEFIT REDUCTIONS.—Any benefit reductions

under this subsection shall be disregarded in determining

a plan’s unfunded vested benefits for purposes of determining an employer’s withdrawal liability under section

4201.

‘‘(B) SURCHARGES.—Any surcharges under paragraph

(7) shall be disregarded in determining an employer’s withdrawal liability under section 4211, except for purposes

of determining the unfunded vested benefits attributable

to an employer under section 4211(c)(4) or a comparable

method approved under section 4211(c)(5).

Regulations.

Regulations.

Deadline.

120 STAT. 882 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(C) SIMPLIFIED CALCULATIONS.—The Pension Benefit

Guaranty Corporation shall prescribe simplified methods

for the application of this paragraph in determining withdrawal liability.

‘‘(f) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

REHABILITATION PERIOD.—

‘‘(1) COMPLIANCE WITH REHABILITATION PLAN.—

‘‘(A) IN GENERAL.—A plan may not be amended after

the date of the adoption of a rehabilitation plan under

subsection (e) so as to be inconsistent with the rehabilitation plan.

‘‘(B) SPECIAL RULES FOR BENEFIT INCREASES.—A plan

may not be amended after the date of the adoption of

a rehabilitation plan under subsection (e) so as to increase

benefits, including future benefit accruals, unless the plan

actuary certifies that such increase is paid for out of additional contributions not contemplated by the rehabilitation

plan, and, after taking into account the benefit increase,

the multiemployer plan still is reasonably expected to

emerge from critical status by the end of the rehabilitation

period on the schedule contemplated in the rehabilitation

plan.

‘‘(2) RESTRICTION ON LUMP SUMS AND SIMILAR BENEFITS.—

‘‘(A) IN GENERAL.—Effective on the date the notice

of certification of the plan’s critical status for the initial

critical year under subsection (b)(3)(D) is sent, and notwithstanding section 204(g), the plan shall not pay—

‘‘(i) any payment, in excess of the monthly amount

paid under a single life annuity (plus any social security supplements described in the last sentence of section 204(b)(1)(G)),

‘‘(ii) any payment for the purchase of an irrevocable

commitment from an insurer to pay benefits, and

‘‘(iii) any other payment specified by the Secretary

of the Treasury by regulations.

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply

to a benefit which under section 203(e) may be immediately

distributed without the consent of the participant or to

any makeup payment in the case of a retroactive annuity

starting date or any similar payment of benefits owed

with respect to a prior period.

‘‘(3) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.—Any benefit reductions under this subsection

shall be disregarded in determining a plan’s unfunded vested

benefits for purposes of determining an employer’s withdrawal

liability under section 4201.

‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During

the rehabilitation plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for

any participants,

‘‘(ii) a suspension of contributions with respect to

any period of service, or

Effective date.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 883

‘‘(iii) any new direct or indirect exclusion of

younger or newly hired employees from plan participation, and

‘‘(B) no amendment of the plan which increases the

liabilities of the plan by reason of any increase in benefits,

any change in the accrual of benefits, or any change in

the rate at which benefits become nonforfeitable under

the plan may be adopted unless the amendment is required

as a condition of qualification under part I of subchapter

D of chapter 1 of the Internal Revenue Code of 1986 or

to comply with other applicable law.

‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR DECISIONS.— If, within 60 days of the due date for adoption of a funding improvement plan or a rehabilitation plan under subsection (e), the plan

sponsor of a plan in endangered status or a plan in critical status

has not agreed on a funding improvement plan or rehabilitation

plan, then any member of the board or group that constitutes

the plan sponsor may require that the plan sponsor enter into

an expedited dispute resolution procedure for the development and

adoption of a funding improvement plan or rehabilitation plan.

‘‘(h) NONBARGAINED PARTICIPATION.—

‘‘(1) BOTH BARGAINED AND NONBARGAINED EMPLOYEEPARTICIPANTS.—In the case of an employer that contributes

to a multiemployer plan with respect to both employees who

are covered by one or more collective bargaining agreements

and employees who are not so covered, if the plan is in endangered status or in critical status, benefits of and contributions

for the nonbargained employees, including surcharges on those

contributions, shall be determined as if those nonbargained

employees were covered under the first to expire of the

employer’s collective bargaining agreements in effect when the

plan entered endangered or critical status.

‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In the case of an

employer that contributes to a multiemployer plan only with

respect to employees who are not covered by a collective bargaining agreement, this section shall be applied as if the

employer were the bargaining party, and its participation agreement with the plan were a collective bargaining agreement

with a term ending on the first day of the plan year beginning

after the employer is provided the schedule or schedules

described in subsections (c) and (e).

‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For purposes of this

section—

‘‘(1) BARGAINING PARTY.—The term ‘bargaining party’

means—

‘‘(A)(i) except as provided in clause (ii), an employer

who has an obligation to contribute under the plan; or

‘‘(ii) in the case of a plan described under section

404(c) of the Internal Revenue Code of 1986, or a continuation of such a plan, the association of employers that

is the employer settlor of the plan; and

‘‘(B) an employee organization which, for purposes of

collective bargaining, represents plan participants

employed by an employer who has an obligation to contribute under the plan.

‘‘(2) FUNDED PERCENTAGE.—The term ‘funded percentage’

means the percentage equal to a fraction—

120 STAT. 884 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) the numerator of which is the value of the plan’s

assets, as determined under section 304(c)(2), and

‘‘(B) the denominator of which is the accrued liability

of the plan, determined using actuarial assumptions

described in section 304(c)(3).

‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—The term

‘accumulated funding deficiency’ has the meaning given such

term in section 304(a).

‘‘(4) ACTIVE PARTICIPANT.—The term ‘active participant’

means, in connection with a multiemployer plan, a participant

who is in covered service under the plan.

‘‘(5) INACTIVE PARTICIPANT.—The term ‘inactive participant’

means, in connection with a multiemployer plan, a participant,

or the beneficiary or alternate payee of a participant, who—

‘‘(A) is not in covered service under the plan, and

‘‘(B) is in pay status under the plan or has a nonforfeitable right to benefits under the plan.

‘‘(6) PAY STATUS.—A person is in pay status under a multiemployer plan if—

‘‘(A) at any time during the current plan year, such

person is a participant or beneficiary under the plan and

is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan

related to a retirement benefit), or

‘‘(B) to the extent provided in regulations of the Secretary of the Treasury, such person is entitled to such

a benefit under the plan.

‘‘(7) OBLIGATION TO CONTRIBUTE.—The term ‘obligation to

contribute’ has the meaning given such term under section

4212(a).

‘‘(8) ACTUARIAL METHOD.—Notwithstanding any other

provision of this section, the actuary’s determinations with

respect to a plan’s normal cost, actuarial accrued liability, and

improvements in a plan’s funded percentage under this section

shall be based upon the unit credit funding method (whether

or not that method is used for the plan’s actuarial valuation).

‘‘(9) PLAN SPONSOR.—In the case of a plan described under

section 404(c) of the Internal Revenue Code of 1986, or a

continuation of such a plan, the term ‘plan sponsor’ means

the bargaining parties described under paragraph (1).

‘‘(10) BENEFIT COMMENCEMENT DATE.—The term ‘benefit

commencement date’ means the annuity starting date (or in

the case of a retroactive annuity starting date, the date on

which benefit payments begin).’’.

(b) ENFORCEMENT.—Section 502 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1132) is amended—

(1) in subsection (a)(6) by striking ‘‘(6), or (7)’’ and inserting

‘‘(6), (7), or (8)’’;

(2) by redesignating subsection (c)(8) as subsection (c)(9);

and

(3) by inserting after subsection (c)(7) the following new

paragraph:

‘‘(8) The Secretary may assess against any plan sponsor

of a multiemployer plan a civil penalty of not more than $1,100

per day—

‘‘(A) for each violation by such sponsor of the requirement under section 305 to adopt by the deadline established

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 885

in that section a funding improvement plan or rehabilitation plan with respect to a multiemployer which is in

endangered or critical status, or

‘‘(B) in the case of a plan in endangered status which

is not in seriously endangered status, for failure by the

plan to meet the applicable benchmarks under section 305

by the end of the funding improvement period with respect

to the plan.’’.

(c) CAUSE OF ACTION TO COMPEL ADOPTION OR IMPLEMENTA- TION OF FUNDING IMPROVEMENT OR REHABILITATION PLAN.—Section

502(a) of the Employee Retirement Income Security Act of 1974

is amended by striking ‘‘or’’ at the end of paragraph (8), by striking

the period at the end of paragraph (9) and inserting ‘‘; or’’ and

by adding at the end the following:

‘‘(10) in the case of a multiemployer plan that has been

certified by the actuary to be in endangered or critical status

under section 305, if the plan sponsor—

‘‘(A) has not adopted a funding improvement or

rehabilitation plan under that section by the deadline

established in such section, or

‘‘(B) fails to update or comply with the terms of the

funding improvement or rehabilitation plan in accordance

with the requirements of such section,

by an employer that has an obligation to contribute with respect

to the multiemployer plan or an employee organization that

represents active participants in the multiemployer plan, for

an order compelling the plan sponsor to adopt a funding

improvement or rehabilitation plan or to update or comply

with the terms of the funding improvement or rehabilitation

plan in accordance with the requirements of such section and

the funding improvement or rehabilitation plan.’’.

(d) NO ADDITIONAL CONTRIBUTIONS REQUIRED.—Section 302(b)

of the Employee Retirement Income Security Act of 1974, as

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

new paragraph:

‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STATUS.—Paragraph (1) shall not apply in the case of a multiemployer plan

for any plan year in which the plan is in critical status pursuant

to section 305. This paragraph shall only apply if the plan

adopts a rehabilitation plan in accordance with section 305(e)

and complies with the terms of such rehabilitation plan (and

any updates or modifications of the plan).’’.

(e) CONFORMING AMENDMENT.—The table of contents in section

1 of such Act (as amended by the preceding provisions of this

Act) is amended by inserting after the item relating to section

304 the following new item:

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status

or critical status.’’.

(f) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by this section

shall apply with respect to plan years beginning after 2007.

(2) SPECIAL RULE FOR CERTAIN NOTICES.—In any case in

which a plan’s actuary certifies that it is reasonably expected

that a multiemployer plan will be in critical status under

section 305(b)(3) of the Employee Retirement Income Security

Act of 1974, as added by this section, with respect to the

first plan year beginning after 2007, the notice required under

29 USC 1082

note.

29 USC 1082.

29 USC 1132.

120 STAT. 886 PUBLIC LAW 109–280—AUG. 17, 2006

subparagraph (D) of such section may be provided at any time

after the date of enactment, so long as it is provided on or

before the last date for providing the notice under such subparagraph.

(3) SPECIAL RULE FOR CERTAIN RESTORED BENEFITS.—In

the case of a multiemployer plan—

(A) with respect to which benefits were reduced pursuant to a plan amendment adopted on or after January

1, 2002, and before June 30, 2005, and

(B) which, pursuant to the plan document, the trust

agreement, or a formal written communication from the

plan sponsor to participants provided before June 30, 2005,

provided for the restoration of such benefits,

the amendments made by this section shall not apply to such

benefit restorations to the extent that any restriction on the

providing or accrual of such benefits would otherwise apply

by reason of such amendments.

SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

(a) ADVANCE DETERMINATION OF IMPENDING INSOLVENCY OVER

5 YEARS.—Section 4245(d)(1) of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1426(d)(1)) is amended—

(1) by striking ‘‘3 plan years’’ the second place it appears

and inserting ‘‘5 plan years’’; and

(2) by adding at the end the following new sentence: ‘‘If

the plan sponsor makes such a determination that the plan

will be insolvent in any of the next 5 plan years, the plan

sponsor shall make the comparison under this paragraph at

least annually until the plan sponsor makes a determination

that the plan will not be insolvent in any of the next 5 plan

years.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply with respect to determinations made in plan years

beginning after 2007.

SEC. 204. WITHDRAWAL LIABILITY REFORMS.

(a) UPDATE OF RULES RELATING TO LIMITATIONS ON WITHDRAWAL LIABILITY.—

(1) INCREASE IN LIMITS.—Section 4225(a)(2) of such Act

(29 U.S.C. 1405(a)(2)) is amended by striking the table contained therein and inserting the following new table:

‘‘If the liquidation or distribution value of the employer after the sale or exchange is— The portion is—

Not more than $5,000,000 ....................................................... 30 percent of the amount.

More than $5,000,000, but not more than $10,000,000 ........ $1,500,000, plus 35 percent of

the amount in excess of

$5,000,000.

More than $10,000,000, but not more than $15,000,000 ...... $3,250,000, plus 40 percent of

the amount in excess of

$10,000,000.

More than $15,000,000, but not more than $17,500,000 ...... $5,250,000, plus 45 percent of

the amount in excess of

$15,000,000.

More than $17,500,000, but not more than $20,000,000 ...... $6,375,000, plus 50 percent of

the amount in excess of

$17,500,000.

29 USC 1426

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 887

‘‘If the liquidation or distribution value of the employer after the sale or exchange is— The portion is—

More than $20,000,000, but not more than $22,500,000 ...... $7,625,000, plus 60 percent of

the amount in excess of

$20,000,000.

More than $22,500,000, but not more than $25,000,000 ...... $9,125,000, plus 70 percent of

the amount in excess of

$22,500,000.

More than $25,000,000 ............................................................ $10,875,000, plus 80 percent of

the amount in excess of

$25,000,000.’’.

(2) PLANS USING ATTRIBUTABLE METHOD.—Section

4225(a)(1)(B) of such Act (29 U.S.C. 1405(a)(1)(B)) is amended

to read as follows:

‘‘(B) in the case of a plan using the attributable method

of allocating withdrawal liability, the unfunded vested

benefits attributable to employees of the employer.’’.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to sales occurring on or after January 1,

2007.

(b) WITHDRAWAL LIABILITY CONTINUES IF WORK CONTRACTED

OUT.—

(1) IN GENERAL.—Clause (i) of section 4205(b)(2)(A) of such

Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting ‘‘or to

an entity or entities owned or controlled by the employer’’

after ‘‘to another location’’.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply with respect to work transferred on or

after the date of the enactment of this Act.

(c) APPLICATION OF RULES TO PLANS PRIMARILY COVERING

EMPLOYEES IN THE BUILDING AND CONSTRUCTION INDUSTRY.—

(1) IN GENERAL.—Section 4210(b) of such Act (29 U.S.C.

1390(b)) is amended—

(A) by striking paragraph (1); and

(B) by redesignating paragraphs (2) through (4) as

paragraphs (1) through (3), respectively.

(2) FRESH START OPTION.—Section 4211(c)(5) of such Act

(29 U.S.C. 1391(c)(5)) is amended by adding at the end the

following new subparagraph:

‘‘(E) FRESH START OPTION.—Notwithstanding paragraph (1), a plan may be amended to provide that the

withdrawal liability method described in subsection (b)

shall be applied by substituting the plan year which is

specified in the amendment and for which the plan has

no unfunded vested benefits for the plan year ending before

September 26, 1980.’’.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply with respect to plan withdrawals occurring

on or after January 1, 2007.

(d) PROCEDURES APPLICABLE TO DISPUTES INVOLVING PENSION

PLAN WITHDRAWAL LIABILITY.— (1) IN GENERAL.—Section 4221 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1401) is amended by

adding at the end the following:

‘‘(g) PROCEDURES APPLICABLE TO CERTAIN DISPUTES.—

‘‘(1) IN GENERAL.—If—

‘‘(A) a plan sponsor of a plan determines that—

29 USC 1390

note.

29 USC 1385

note.

29 USC 1405

note.

120 STAT. 888 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(i) a complete or partial withdrawal of an

employer has occurred, or

‘‘(ii) an employer is liable for withdrawal liability

payments with respect to such complete or partial withdrawal, and

‘‘(B) such determination is based in whole or in part

on a finding by the plan sponsor under section 4212(c)

that a principal purpose of any transaction which occurred

after December 31, 1998, and at least 5 years (2 years

in the case of a small employer) before the date of the

complete or partial withdrawal was to evade or avoid withdrawal liability under this subtitle,

then the person against which the withdrawal liability is

assessed based solely on the application of section 4212(c) may

elect to use the special rule under paragraph (2) in applying

subsection (d) of this section and section 4219(c) to such person.

‘‘(2) SPECIAL RULE.—Notwithstanding subsection (d) and

section 4219(c), if an electing person contests the plan sponsor’s

determination with respect to withdrawal liability payments

under paragraph (1) through an arbitration proceeding pursuant to subsection (a), through an action brought in a court

of competent jurisdiction for review of such an arbitration decision, or as otherwise permitted by law, the electing person

shall not be obligated to make the withdrawal liability payments until a final decision in the arbitration proceeding, or

in court, upholds the plan sponsor’s determination, but only

if the electing person—

‘‘(A) provides notice to the plan sponsor of its election

to apply the special rule in this paragraph within 90 days

after the plan sponsor notifies the electing person of its

liability by reason of the application of section 4212(c);

and

‘‘(B) if a final decision in the arbitration proceeding,

or in court, of the withdrawal liability dispute has not

been rendered within 12 months from the date of such

notice, the electing person provides to the plan, effective

as of the first day following the 12-month period, a bond

issued by a corporate surety company that is an acceptable

surety for purposes of section 412 of this Act, or an amount

held in escrow by a bank or similar financial institution

satisfactory to the plan, in an amount equal to the sum

of the withdrawal liability payments that would otherwise

be due under subsection (d) and section 4219(c) for the

12-month period beginning with the first anniversary of

such notice. Such bond or escrow shall remain in effect

until there is a final decision in the arbitration proceeding,

or in court, of the withdrawal liability dispute, at which

time such bond or escrow shall be paid to the plan if

such final decision upholds the plan sponsor’s determination.

‘‘(3) DEFINITION OF SMALL EMPLOYER.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘small employer’ means

any employer which, for the calendar year in which the

transaction referred to in paragraph (1)(B) occurred and

for each of the 3 preceding years, on average—

‘‘(i) employs not more than 500 employees, and

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 889

‘‘(ii) is required to make contributions to the plan

for not more than 250 employees.

‘‘(B) CONTROLLED GROUP.—Any group treated as a

single employer under subsection (b)(1) of section 4001,

without regard to any transaction that was a basis for

the plan’s finding under section 4212, shall be treated

as a single employer for purposes of this subparagraph.

‘‘(4) ADDITIONAL SECURITY PENDING RESOLUTION OF DISPUTE.—If a withdrawal liability dispute to which this subsection

applies is not concluded by 12 months after the electing person

posts the bond or escrow described in paragraph (2), the electing

person shall, at the start of each succeeding 12-month period,

provide an additional bond or amount held in escrow equal

to the sum of the withdrawal liability payments that would

otherwise be payable to the plan during that period.

‘‘(5) The liability of the party furnishing a bond or escrow

under this subsection shall be reduced, upon the payment of

the bond or escrow to the plan, by the amount thereof.’’.

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to any person that receives a notification

under section 4219(b)(1) of the Employee Retirement Income

Security Act of 1974 on or after the date of enactment of

this Act with respect to a transaction that occurred after

December 31, 1998.

SEC. 205. PROHIBITION ON RETALIATION AGAINST EMPLOYERS EXERCISING THEIR RIGHTS TO PETITION THE FEDERAL

GOVERNMENT.

Section 510 of the Employee Retirement Income Security Act

of 1974 (29 U.S.C. 1140) is amended by inserting before the last

sentence thereof the following new sentence: ‘‘In the case of a

multiemployer plan, it shall be unlawful for the plan sponsor or

any other person to discriminate against any contributing employer

for exercising rights under this Act or for giving information or

testifying in any inquiry or proceeding relating to this Act before

Congress.’’.

SEC. 206. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED UNDER

AN AGREEMENT APPROVED BY THE PENSION BENEFIT

GUARANTY CORPORATION.

In the case of a multiemployer plan that is a party to an

agreement that was approved by the Pension Benefit Guaranty

Corporation prior to June 30, 2005, and that—

(1) increases benefits, and

(2) provides for special withdrawal liability rules under

section 4203(f) of the Employee Retirement Income Security

Act of 1974 (29 U.S.C. 1383),

the amendments made by sections 201, 202, 211, and 212 of this

Act shall not apply to the benefit increases under any plan amendment adopted prior to June 30, 2005, that are funded pursuant

to such agreement if the plan is funded in compliance with such

agreement (and any amendments thereto).

26 USC 412 note.

29 USC 1401

note.

120 STAT. 890 PUBLIC LAW 109–280—AUG. 17, 2006

Subtitle B—Amendments to Internal

Revenue Code of 1986

SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT

PLANS.

(a) IN GENERAL.—Subpart A of part III of subchapter D of

chapter 1 of the Internal Revenue Code of 1986 (as added by

this Act) is amended by inserting after section 430 the following

new section:

‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER

PLANS.

‘‘(a) IN GENERAL.—For purposes of section 412, the accumulated

funding deficiency of a multiemployer plan for any plan year is—

‘‘(1) except as provided in paragraph (2), the amount, determined as of the end of the plan year, equal to the excess

(if any) of the total charges to the funding standard account

of the plan for all plan years (beginning with the first plan

year for which this part applies to the plan) over the total

credits to such account for such years, and

‘‘(2) if the multiemployer plan is in reorganization for any

plan year, the accumulated funding deficiency of the plan determined under section 4243 of the Employee Retirement Income

Security Act of 1974.

‘‘(b) FUNDING STANDARD ACCOUNT.— ‘‘(1) ACCOUNT REQUIRED.—Each multiemployer plan to

which this part applies shall establish and maintain a funding

standard account. Such account shall be credited and charged

solely as provided in this section.

‘‘(2) CHARGES TO ACCOUNT.—For a plan year, the funding

standard account shall be charged with the sum of—

‘‘(A) the normal cost of the plan for the plan year,

‘‘(B) the amounts necessary to amortize in equal annual

installments (until fully amortized)—

‘‘(i) in the case of a plan which comes into existence

on or after January 1, 2008, the unfunded past service

liability under the plan on the first day of the first

plan year to which this section applies, over a period

of 15 plan years,

‘‘(ii) separately, with respect to each plan year,

the net increase (if any) in unfunded past service

liability under the plan arising from plan amendments

adopted in such year, over a period of 15 plan years,

‘‘(iii) separately, with respect to each plan year,

the net experience loss (if any) under the plan, over

a period of 15 plan years, and

‘‘(iv) separately, with respect to each plan year,

the net loss (if any) resulting from changes in actuarial

assumptions used under the plan, over a period of

15 plan years,

‘‘(C) the amount necessary to amortize each waived

funding deficiency (within the meaning of section 412(c)(3))

for each prior plan year in equal annual installments (until

fully amortized) over a period of 15 plan years,

‘‘(D) the amount necessary to amortize in equal annual

installments (until fully amortized) over a period of 5 plan

26 USC 431.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 891

years any amount credited to the funding standard account

under section 412(b)(3)(D) (as in effect on the day before

the date of the enactment of the Pension Protection Act

of 2006), and

‘‘(E) the amount necessary to amortize in equal annual

installments (until fully amortized) over a period of 20

years the contributions which would be required to be

made under the plan but for the provisions of section

412(c)(7)(A)(i)(I) (as in effect on the day before the date

of the enactment of the Pension Protection Act of 2006).

‘‘(3) CREDITS TO ACCOUNT.—For a plan year, the funding

standard account shall be credited with the sum of—

‘‘(A) the amount considered contributed by the

employer to or under the plan for the plan year,

‘‘(B) the amount necessary to amortize in equal annual

installments (until fully amortized)—

‘‘(i) separately, with respect to each plan year,

the net decrease (if any) in unfunded past service

liability under the plan arising from plan amendments

adopted in such year, over a period of 15 plan years,

‘‘(ii) separately, with respect to each plan year,

the net experience gain (if any) under the plan, over

a period of 15 plan years, and

‘‘(iii) separately, with respect to each plan year,

the net gain (if any) resulting from changes in actuarial

assumptions used under the plan, over a period of

15 plan years,

‘‘(C) the amount of the waived funding deficiency

(within the meaning of section 412(c)(3)) for the plan year,

and

‘‘(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding

standard account if such plan year follows a plan year

for which such deficiency was determined under the alternative minimum funding standard under section 412(g)

(as in effect on the day before the date of the enactment

of the Pension Protection Act of 2006), the excess (if any)

of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit

balance in the alternative minimum funding standard

account.

‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AMORTIZED IN PLAN

YEARS BEFORE 2008.—In the case of any amount amortized

under section 412(b) (as in effect on the day before the date

of the enactment of the Pension Protection Act of 2006) over

any period beginning with a plan year beginning before 2008

in lieu of the amortization described in paragraphs (2)(B) and

(3)(B), such amount shall continue to be amortized under such

section as so in effect.

‘‘(5) COMBINING AND OFFSETTING AMOUNTS TO BE AMORTIZED.—Under regulations prescribed by the Secretary, amounts

required to be amortized under paragraph (2) or paragraph

(3), as the case may be—

‘‘(A) may be combined into one amount under such

paragraph to be amortized over a period determined on

the basis of the remaining amortization period for all items

entering into such combined amount, and

Regulations.

120 STAT. 892 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) may be offset against amounts required to be

amortized under the other such paragraph, with the

resulting amount to be amortized over a period determined

on the basis of the remaining amortization periods for

all items entering into whichever of the two amounts being

offset is the greater.

‘‘(6) INTEREST.—The funding standard account (and items

therein) shall be charged or credited (as determined under

regulations prescribed by the Secretary of the Treasury) with

interest at the appropriate rate consistent with the rate or

rates of interest used under the plan to determine costs.

‘‘(7) SPECIAL RULES RELATING TO CHARGES AND CREDITS

TO FUNDING STANDARD ACCOUNT.—For purposes of this part—

‘‘(A) WITHDRAWAL LIABILITY.—Any amount received by

a multiemployer plan in payment of all or part of an

employer’s withdrawal liability under part 1 of subtitle

E of title IV of the Employee Retirement Income Security

Act of 1974 shall be considered an amount contributed

by the employer to or under the plan. The Secretary may

prescribe by regulation additional charges and credits to

a multiemployer plan’s funding standard account to the

extent necessary to prevent withdrawal liability payments

from being unduly reflected as advance funding for plan

liabilities.

‘‘(B) ADJUSTMENTS WHEN A MULTIEMPLOYER PLAN

LEAVES REORGANIZATION.—If a multiemployer plan is not

in reorganization in the plan year but was in reorganization

in the immediately preceding plan year, any balance in

the funding standard account at the close of such immediately preceding plan year—

‘‘(i) shall be eliminated by an offsetting credit or

charge (as the case may be), but

‘‘(ii) shall be taken into account in subsequent

plan years by being amortized in equal annual installments (until fully amortized) over 30 plan years.

The preceding sentence shall not apply to the extent of

any accumulated funding deficiency under section 4243(a)

of such Act as of the end of the last plan year that the

plan was in reorganization.

‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL PROGRAM OR

WITHDRAWAL LIABILITY PAYMENT FUND.—Any amount paid

by a plan during a plan year to the Pension Benefit Guaranty Corporation pursuant to section 4222 of such Act

or to a fund exempt under section 501(c)(22) pursuant

to section 4223 of such Act shall reduce the amount of

contributions considered received by the plan for the plan

year.

‘‘(D) INTERIM WITHDRAWAL LIABILITY PAYMENTS.—Any

amount paid by an employer pending a final determination

of the employer’s withdrawal liability under part 1 of subtitle E of title IV of such Act and subsequently refunded

to the employer by the plan shall be charged to the funding

standard account in accordance with regulations prescribed

by the Secretary.

‘‘(E) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION

OF NET EXPERIENCE LOSS.—If an election is in effect under

section 412(b)(7)(F) (as in effect on the day before the

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 893

date of the enactment of the Pension Protection Act of

2006) for any plan year, the funding standard account

shall be charged in the plan year to which the portion

of the net experience loss deferred by such election was

deferred with the amount so deferred (and paragraph

(2)(B)(iii) shall not apply to the amount so charged).

‘‘(F) FINANCIAL ASSISTANCE.—Any amount of any financial assistance from the Pension Benefit Guaranty Corporation to any plan, and any repayment of such amount,

shall be taken into account under this section and section

412 in such manner as is determined by the Secretary.

‘‘(G) SHORT-TERM BENEFITS.—To the extent that any

plan amendment increases the unfunded past service

liability under the plan by reason of an increase in benefits

which are not payable as a life annuity but are payable

under the terms of the plan for a period that does not

exceed 14 years from the effective date of the amendment,

paragraph (2)(B)(ii) shall be applied separately with respect

to such increase in unfunded past service liability by substituting the number of years of the period during which

such benefits are payable for ‘15’.

‘‘(c) ADDITIONAL RULES.—

‘‘(1) DETERMINATIONS TO BE MADE UNDER FUNDING

METHOD.—For purposes of this part, normal costs, accrued

liability, past service liabilities, and experience gains and losses

shall be determined under the funding method used to determine costs under the plan. I22 ‘‘(2) VALUATION OF ASSETS.—

‘‘(A) IN GENERAL.—For purposes of this part, the value

of the plan’s assets shall be determined on the basis of

any reasonable actuarial method of valuation which takes

into account fair market value and which is permitted

under regulations prescribed by the Secretary.

‘‘(B) ELECTION WITH RESPECT TO BONDS.—The value

of a bond or other evidence of indebtedness which is not

in default as to principal or interest may, at the election

of the plan administrator, be determined on an amortized

basis running from initial cost at purchase to par value

at maturity or earliest call date. Any election under this

subparagraph shall be made at such time and in such

manner as the Secretary shall by regulations provide, shall

apply to all such evidences of indebtedness, and may be

revoked only with the consent of the Secretary.

‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REASONABLE.—For

purposes of this section, all costs, liabilities, rates of interest,

and other factors under the plan shall be determined on the

basis of actuarial assumptions and methods—

‘‘(A) each of which is reasonable (taking into account

the experience of the plan and reasonable expectations),

and

‘‘(B) which, in combination, offer the actuary’s best

estimate of anticipated experience under the plan.

‘‘(4) TREATMENT OF CERTAIN CHANGES AS EXPERIENCE GAIN

OR LOSS.—For purposes of this section, if—

‘‘(A) a change in benefits under the Social Security

Act or in other retirement benefits created under Federal

or State law, or

Regulations.

Applicability.

Regulations.

Applicability.

120 STAT. 894 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) a change in the definition of the term ‘wages’

under section 3121, or a change in the amount of such

wages taken into account under regulations prescribed for

purposes of section 401(a)(5),

results in an increase or decrease in accrued liability under

a plan, such increase or decrease shall be treated as an experience loss or gain.

‘‘(5) FULL FUNDING.—If, as of the close of a plan year,

a plan would (without regard to this paragraph) have an

accumulated funding deficiency in excess of the full funding

limitation—

‘‘(A) the funding standard account shall be credited

with the amount of such excess, and

‘‘(B) all amounts described in subparagraphs (B), (C),

and (D) of subsection (b)(2) and subparagraph (B) of subsection (b)(3) which are required to be amortized shall

be considered fully amortized for purposes of such subparagraphs.

‘‘(6) FULL-FUNDING LIMITATION.—

‘‘(A) IN GENERAL.—For purposes of paragraph (5), the

term ‘full-funding limitation’ means the excess (if any) of—

‘‘(i) the accrued liability (including normal cost)

under the plan (determined under the entry age normal

funding method if such accrued liability cannot be

directly calculated under the funding method used for

the plan), over

‘‘(ii) the lesser of—

‘‘(I) the fair market value of the plan’s assets,

or

‘‘(II) the value of such assets determined under

paragraph (2).

‘‘(B) MINIMUM AMOUNT.—

‘‘(i) IN GENERAL.—In no event shall the full-funding

limitation determined under subparagraph (A) be less

than the excess (if any) of—

‘‘(I) 90 percent of the current liability of the

plan (including the expected increase in current

liability due to benefits accruing during the plan

year), over

‘‘(II) the value of the plan’s assets determined

under paragraph (2).

‘‘(ii) ASSETS.—For purposes of clause (i), assets

shall not be reduced by any credit balance in the

funding standard account.

‘‘(C) FULL FUNDING LIMITATION.—For purposes of this

paragraph, unless otherwise provided by the plan, the

accrued liability under a multiemployer plan shall not

include benefits which are not nonforfeitable under the

plan after the termination of the plan (taking into consideration section 411(d)(3)).

‘‘(D) CURRENT LIABILITY.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The term ‘current liability’

means all liabilities to employees and their beneficiaries under the plan.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 895

‘‘(ii) TREATMENT OF UNPREDICTABLE CONTINGENT

EVENT BENEFITS.—For purposes of clause (i), any benefit contingent on an event other than—

‘‘(I) age, service, compensation, death, or disability, or

‘‘(II) an event which is reasonably and reliably

predictable (as determined by the Secretary),

shall not be taken into account until the event on

which the benefit is contingent occurs.

‘‘(iii) INTEREST RATE USED.—The rate of interest

used to determine current liability under this paragraph shall be the rate of interest determined under

subparagraph (E).

‘‘(iv) MORTALITY TABLES.— ‘‘(I) COMMISSIONERS’ STANDARD TABLE.—In the

case of plan years beginning before the first plan

year to which the first tables prescribed under

subclause (II) apply, the mortality table used in

determining current liability under this paragraph

shall be the table prescribed by the Secretary

which is based on the prevailing commissioners’

standard table (described in section 807(d)(5)(A))

used to determine reserves for group annuity contracts issued on January 1, 1993.

‘‘(II) SECRETARIAL AUTHORITY.—The Secretary

may by regulation prescribe for plan years beginning after December 31, 1999, mortality tables

to be used in determining current liability under

this subsection. Such tables shall be based upon

the actual experience of pension plans and projected trends in such experience. In prescribing

such tables, the Secretary shall take into account

results of available independent studies of mortality of individuals covered by pension plans.

‘‘(v) SEPARATE MORTALITY TABLES FOR THE DIS- ABLED.—Notwithstanding clause (iv)—

‘‘(I) IN GENERAL.—The Secretary shall establish mortality tables which may be used (in lieu

of the tables under clause (iv)) to determine current liability under this subsection for individuals

who are entitled to benefits under the plan on

account of disability. The Secretary shall establish

separate tables for individuals whose disabilities

occur in plan years beginning before January 1,

1995, and for individuals whose disabilities occur

in plan years beginning on or after such date.

‘‘(II) SPECIAL RULE FOR DISABILITIES OCCURRING AFTER 1994.—In the case of disabilities occurring in plan years beginning after December 31,

1994, the tables under subclause (I) shall apply

only with respect to individuals described in such

subclause who are disabled within the meaning

of title II of the Social Security Act and the regulations thereunder.

‘‘(vi) PERIODIC REVIEW.—The Secretary shall

periodically (at least every 5 years) review any tables

in effect under this subparagraph and shall, to the

Regulations.

Applicability.

120 STAT. 896 PUBLIC LAW 109–280—AUG. 17, 2006

extent such Secretary determines necessary, by regulation update the tables to reflect the actual experience

of pension plans and projected trends in such experience.

‘‘(E) REQUIRED CHANGE OF INTEREST RATE.—For purposes of determining a plan’s current liability for purposes

of this paragraph—

‘‘(i) IN GENERAL.—If any rate of interest used under

the plan under subsection (b)(6) to determine cost is

not within the permissible range, the plan shall establish a new rate of interest within the permissible range.

‘‘(ii) PERMISSIBLE RANGE.—For purposes of this

subparagraph—

‘‘(I) IN GENERAL.—Except as provided in subclause (II), the term ‘permissible range’ means a

rate of interest which is not more than 5 percent

above, and not more than 10 percent below, the

weighted average of the rates of interest on 30-

year Treasury securities during the 4-year period

ending on the last day before the beginning of

the plan year.

‘‘(II) SECRETARIAL AUTHORITY.—If the Secretary finds that the lowest rate of interest permissible under subclause (I) is unreasonably high,

the Secretary may prescribe a lower rate of

interest, except that such rate may not be less

than 80 percent of the average rate determined

under such subclause.

‘‘(iii) ASSUMPTIONS.—Notwithstanding paragraph

(3)(A), the interest rate used under the plan shall

be—

‘‘(I) determined without taking into account

the experience of the plan and reasonable expectations, but

‘‘(II) consistent with the assumptions which

reflect the purchase rates which would be used

by insurance companies to satisfy the liabilities

under the plan.

‘‘(7) ANNUAL VALUATION.—

‘‘(A) IN GENERAL.—For purposes of this section, a determination of experience gains and losses and a valuation

of the plan’s liability shall be made not less frequently

than once every year, except that such determination shall

be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary.

‘‘(B) VALUATION DATE.—

‘‘(i) CURRENT YEAR.—Except as provided in clause

(ii), the valuation referred to in subparagraph (A) shall

be made as of a date within the plan year to which

the valuation refers or within one month prior to the

beginning of such year.

‘‘(ii) USE OF PRIOR YEAR VALUATION.—The valuation referred to in subparagraph (A) may be made

as of a date within the plan year prior to the year

to which the valuation refers if, as of such date, the

value of the assets of the plan are not less than 100

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 897

percent of the plan’s current liability (as defined in

paragraph (6)(D) without regard to clause (iv) thereof).

‘‘(iii) ADJUSTMENTS.—Information under clause (ii)

shall, in accordance with regulations, be actuarially

adjusted to reflect significant differences in participants.

‘‘(iv) LIMITATION.—A change in funding method to

use a prior year valuation, as provided in clause (ii),

may not be made unless as of the valuation date within

the prior plan year, the value of the assets of the

plan are not less than 125 percent of the plan’s current

liability (as defined in paragraph (6)(D) without regard

to clause (iv) thereof).

‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS DEEMED MADE.— For purposes of this section, any contributions for a plan year

made by an employer after the last day of such plan year,

but not later than two and one-half months after such day,

shall be deemed to have been made on such last day. For

purposes of this subparagraph, such two and one-half month

period may be extended for not more than six months under

regulations prescribed by the Secretary.

‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR MULTIEMPLOYER

PLANS.—

‘‘(1) AUTOMATIC EXTENSION UPON APPLICATION BY CERTAIN

PLANS.—

‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan—

‘‘(i) submits to the Secretary an application for

an extension of the period of years required to amortize

any unfunded liability described in any clause of subsection (b)(2)(B) or described in subsection (b)(4), and

‘‘(ii) includes with the application a certification

by the plan’s actuary described in subparagraph (B),

the Secretary shall extend the amortization period for the

period of time (not in excess of 5 years) specified in the

application. Such extension shall be in addition to any

extension under paragraph (2).

‘‘(B) CRITERIA.—A certification with respect to a multiemployer plan is described in this subparagraph if the

plan’s actuary certifies that, based on reasonable assumptions—

‘‘(i) absent the extension under subparagraph (A),

the plan would have an accumulated funding deficiency

in the current plan year or any of the 9 succeeding

plan years,

‘‘(ii) the plan sponsor has adopted a plan to

improve the plan’s funding status,

‘‘(iii) the plan is projected to have sufficient assets

to timely pay expected benefits and anticipated

expenditures over the amortization period as extended,

and

‘‘(iv) the notice required under paragraph (3)(A)

has been provided.

‘‘(C) TERMINATION.—The preceding provisions of this

paragraph shall not apply with respect to any application

submitted after December 31, 2014.

‘‘(2) ALTERNATIVE EXTENSION.—

Certification.

Deadline.

120 STAT. 898 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) IN GENERAL.—If the plan sponsor of a multiemployer plan submits to the Secretary an application for

an extension of the period of years required to amortize

any unfunded liability described in any clause of subsection

(b)(2)(B) or described in subsection (b)(4), the Secretary

may extend the amortization period for a period of time

(not in excess of 10 years reduced by the number of years

of any extension under paragraph (1) with respect to such

unfunded liability) if the Secretary makes the determination described in subparagraph (B). Such extension shall

be in addition to any extension under paragraph (1).

‘‘(B) DETERMINATION.—The Secretary may grant an

extension under subparagraph (A) if the Secretary determines that—

‘‘(i) such extension would carry out the purposes

of this Act and would provide adequate protection for

participants under the plan and their beneficiaries,

and

‘‘(ii) the failure to permit such extension would—

‘‘(I) result in a substantial risk to the voluntary continuation of the plan, or a substantial

curtailment of pension benefit levels or employee

compensation, and

‘‘(II) be adverse to the interests of plan participants in the aggregate.

‘‘(C) ACTION BY SECRETARY.—The Secretary shall act

upon any application for an extension under this paragraph

within 180 days of the submission of such application.

If the Secretary rejects the application for an extension

under this paragraph, the Secretary shall provide notice

to the plan detailing the specific reasons for the rejection,

including references to the criteria set forth above.

‘‘(3) ADVANCE NOTICE.—

‘‘(A) IN GENERAL.—The Secretary shall, before granting

an extension under this subsection, require each applicant

to provide evidence satisfactory to such Secretary that the

applicant has provided notice of the filing of the application

for such extension to each affected party (as defined in

section 4001(a)(21) of the Employee Retirement Income

Security Act of 1974) with respect to the affected plan.

Such notice shall include a description of the extent to

which the plan is funded for benefits which are guaranteed

under title IV of such Act and for benefit liabilities.

‘‘(B) CONSIDERATION OF RELEVANT INFORMATION.—The

Secretary shall consider any relevant information provided

by a person to whom notice was given under paragraph

(1).’’.

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after 2007.

(2) SPECIAL RULE FOR CERTAIN AMORTIZATION EXTENSIONS.—If the Secretary of the Treasury grants an extension

under section 304 of the Employee Retirement Income Security

Act of 1974 and section 412(e) of the Internal Revenue Code

of 1986 with respect to any application filed with the Secretary

of the Treasury on or before June 30, 2005, the extension

Deadline.

Applicability.

26 USC 431 note.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 899

(and any modification thereof) shall be applied and administered under the rules of such sections as in effect before the

enactment of this Act, including the use of the rate of interest

determined under section 6621(b) of such Code.

SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS

IN ENDANGERED OR CRITICAL STATUS.

(a) IN GENERAL.—Subpart A of part III of subchapter D of

chapter 1 of the Internal Revenue Code of 1986 (as amended by

this Act) is amended by inserting after section 431 the following

new section:

‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS

IN ENDANGERED STATUS OR CRITICAL STATUS.

‘‘(a) GENERAL RULE.—For purposes of this part, in the case

of a multiemployer plan in effect on July 16, 2006—

‘‘(1) if the plan is in endangered status—

‘‘(A) the plan sponsor shall adopt and implement a

funding improvement plan in accordance with the requirements of subsection (c), and

‘‘(B) the requirements of subsection (d) shall apply

during the funding plan adoption period and the funding

improvement period, and

‘‘(2) if the plan is in critical status—

‘‘(A) the plan sponsor shall adopt and implement a

rehabilitation plan in accordance with the requirements

of subsection (e), and

‘‘(B) the requirements of subsection (f) shall apply

during the rehabilitation plan adoption period and the

rehabilitation period.

‘‘(b) DETERMINATION OF ENDANGERED AND CRITICAL STATUS.—

For purposes of this section—

‘‘(1) ENDANGERED STATUS.—A multiemployer plan is in

endangered status for a plan year if, as determined by the

plan actuary under paragraph (3), the plan is not in critical

status for the plan year and, as of the beginning of the plan

year, either—

‘‘(A) the plan’s funded percentage for such plan year

is less than 80 percent, or

‘‘(B) the plan has an accumulated funding deficiency

for such plan year, or is projected to have such an accumulated funding deficiency for any of the 6 succeeding plan

years, taking into account any extension of amortization

periods under section 431(d).

For purposes of this section, a plan shall be treated as in

seriously endangered status for a plan year if the plan is

described in both subparagraphs (A) and (B).

‘‘(2) CRITICAL STATUS.—A multiemployer plan is in critical

status for a plan year if, as determined by the plan actuary

under paragraph (3), the plan is described in 1 or more of

the following subparagraphs as of the beginning of the plan

year:

‘‘(A) A plan is described in this subparagraph if—

‘‘(i) the funded percentage of the plan is less than

65 percent, and

‘‘(ii) the sum of—

‘‘(I) the fair market value of plan assets, plus

Applicability.

Applicability.

26 USC 432.

120 STAT. 900 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(II) the present value of the reasonably anticipated employer contributions for the current plan

year and each of the 6 succeeding plan years,

assuming that the terms of all collective bargaining agreements pursuant to which the plan

is maintained for the current plan year continue

in effect for succeeding plan years,

is less than the present value of all nonforfeitable

benefits projected to be payable under the plan during

the current plan year and each of the 6 succeeding

plan years (plus administrative expenses for such plan

years).

‘‘(B) A plan is described in this subparagraph if—

‘‘(i) the plan has an accumulated funding deficiency

for the current plan year, not taking into account any

extension of amortization periods under section 431(d),

or

‘‘(ii) the plan is projected to have an accumulated

funding deficiency for any of the 3 succeeding plan

years (4 succeeding plan years if the funded percentage

of the plan is 65 percent or less), not taking into

account any extension of amortization periods under

section 431(d).

‘‘(C) A plan is described in this subparagraph if—

‘‘(i)(I) the plan’s normal cost for the current plan

year, plus interest (determined at the rate used for

determining costs under the plan) for the current plan

year on the amount of unfunded benefit liabilities

under the plan as of the last date of the preceding

plan year, exceeds

‘‘(II) the present value of the reasonably anticipated employer and employee contributions for the current plan year,

‘‘(ii) the present value, as of the beginning of the

current plan year, of nonforfeitable benefits of inactive

participants is greater than the present value of nonforfeitable benefits of active participants, and

‘‘(iii) the plan has an accumulated funding deficiency for the current plan year, or is projected to

have such a deficiency for any of the 4 succeeding

plan years, not taking into account any extension of

amortization periods under section 431(d).

‘‘(D) A plan is described in this subparagraph if the

sum of—

‘‘(i) the fair market value of plan assets, plus

‘‘(ii) the present value of the reasonably anticipated

employer contributions for the current plan year and

each of the 4 succeeding plan years, assuming that

the terms of all collective bargaining agreements

pursuant to which the plan is maintained for the current plan year continue in effect for succeeding plan

years,

is less than the present value of all benefits projected

to be payable under the plan during the current plan

year and each of the 4 succeeding plan years (plus administrative expenses for such plan years).

‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTUARY.—

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 901

‘‘(A) IN GENERAL.—Not later than the 90th day of each

plan year of a multiemployer plan, the plan actuary shall

certify to the Secretary and to the plan sponsor—

‘‘(i) whether or not the plan is in endangered status

for such plan year and whether or not the plan is

or will be in critical status for such plan year, and

‘‘(ii) in the case of a plan which is in a funding

improvement or rehabilitation period, whether or not

the plan is making the scheduled progress in meeting

the requirements of its funding improvement or

rehabilitation plan.

‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS AND LIABIL- ITIES.— ‘‘(i) IN GENERAL.—In making the determinations

and projections under this subsection, the plan actuary

shall make projections required for the current and

succeeding plan years of the current value of the assets

of the plan and the present value of all liabilities

to participants and beneficiaries under the plan for

the current plan year as of the beginning of such

year. The actuary’s projections shall be based on

reasonable actuarial estimates, assumptions, and

methods that, except as provided in clause (iii), offer

the actuary’s best estimate of anticipated experience

under the plan. The projected present value of liabilities as of the beginning of such year shall be determined based on the most recent of either—

‘‘(I) the actuarial statement required under

section 103(d) of the Employee Retirement Income

Security Act of 1974 with respect to the most

recently filed annual report, or

‘‘(II) the actuarial valuation for the preceding

plan year.

‘‘(ii) DETERMINATIONS OF FUTURE CONTRIBUTIONS.—Any actuarial projection of plan assets shall

assume—

‘‘(I) reasonably anticipated employer contributions for the current and succeeding plan years,

assuming that the terms of the one or more collective bargaining agreements pursuant to which the

plan is maintained for the current plan year continue in effect for succeeding plan years, or

‘‘(II) that employer contributions for the most

recent plan year will continue indefinitely, but only

if the plan actuary determines there have been

no significant demographic changes that would

make such assumption unreasonable.

‘‘(iii) PROJECTED INDUSTRY ACTIVITY.—Any projection of activity in the industry or industries covered

by the plan, including future covered employment and

contribution levels, shall be based on information provided by the plan sponsor, which shall act reasonably

and in good faith.

‘‘(C) PENALTY FOR FAILURE TO SECURE TIMELY ACTUARIAL CERTIFICATION.—Any failure of the plan’s actuary

to certify the plan’s status under this subsection by the

date specified in subparagraph (A) shall be treated for

Deadline.

120 STAT. 902 PUBLIC LAW 109–280—AUG. 17, 2006

purposes of section 502(c)(2) of the Employee Retirement

Income Security Act of 1974 as a failure or refusal by

the plan administrator to file the annual report required

to be filed with the Secretary under section 101(b)(4) of

such Act.

‘‘(D) NOTICE.—

‘‘(i) IN GENERAL.—In any case in which it is certified under subparagraph (A) that a multiemployer

plan is or will be in endangered or critical status

for a plan year, the plan sponsor shall, not later than

30 days after the date of the certification, provide

notification of the endangered or critical status to the

participants and beneficiaries, the bargaining parties,

the Pension Benefit Guaranty Corporation, and the

Secretary of Labor.

‘‘(ii) PLANS IN CRITICAL STATUS.—If it is certified

under subparagraph (A) that a multiemployer plan

is or will be in critical status, the plan sponsor shall

include in the notice under clause (i) an explanation

of the possibility that—

‘‘(I) adjustable benefits (as defined in subsection (e)(8)) may be reduced, and

‘‘(II) such reductions may apply to participants

and beneficiaries whose benefit commencement

date is on or after the date such notice is provided

for the first plan year in which the plan is in

critical status.

‘‘(iii) MODEL NOTICE.—The Secretary of Labor shall

prescribe a model notice that a multiemployer plan

may use to satisfy the requirements under clause (ii).

‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE ADOPTED FOR

MULTIEMPLOYER PLANS IN ENDANGERED STATUS.—

‘‘(1) IN GENERAL.—In any case in which a multiemployer

plan is in endangered status for a plan year, the plan sponsor,

in accordance with this subsection—

‘‘(A) shall adopt a funding improvement plan not later

than 240 days following the required date for the actuarial

certification of endangered status under subsection

(b)(3)(A), and

‘‘(B) within 30 days after the adoption of the funding

improvement plan—

‘‘(i) shall provide to the bargaining parties 1 or

more schedules showing revised benefit structures,

revised contribution structures, or both, which, if

adopted, may reasonably be expected to enable the

multiemployer plan to meet the applicable benchmarks

in accordance with the funding improvement plan,

including—

‘‘(I) one proposal for reductions in the amount

of future benefit accruals necessary to achieve the

applicable benchmarks, assuming no amendments

increasing contributions under the plan (other

than amendments increasing contributions necessary to achieve the applicable benchmarks after

amendments have reduced future benefit accruals

to the maximum extent permitted by law), and

Deadlines.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 903

‘‘(II) one proposal for increases in contributions

under the plan necessary to achieve the applicable

benchmarks, assuming no amendments reducing

future benefit accruals under the plan, and

‘‘(ii) may, if the plan sponsor deems appropriate,

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to achieving the applicable benchmarks

in accordance with the funding improvement plan.

For purposes of this section, the term ‘applicable benchmarks’ means the requirements applicable to the multiemployer plan under paragraph (3) (as modified by paragraph

(5)).

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in

a funding plan adoption period or funding improvement period

by reason of the plan being in endangered status for a preceding

plan year. For purposes of this section, such preceding plan

year shall be the initial determination year with respect to

the funding improvement plan to which it relates.

‘‘(3) FUNDING IMPROVEMENT PLAN.—For purposes of this

section—

‘‘(A) IN GENERAL.—A funding improvement plan is a

plan which consists of the actions, including options or

a range of options to be proposed to the bargaining parties,

formulated to provide, based on reasonably anticipated

experience and reasonable actuarial assumptions, for the

attainment by the plan during the funding improvement

period of the following requirements:

‘‘(i) INCREASE IN PLAN’S FUNDING PERCENTAGE.—

The plan’s funded percentage as of the close of the

funding improvement period equals or exceeds a

percentage equal to the sum of—

‘‘(I) such percentage as of the beginning of

such period, plus

‘‘(II) 33 percent of the difference between 100

percent and the percentage under subclause (I).

‘‘(ii) AVOIDANCE OF ACCUMULATED FUNDING DEFICIENCIES.—No accumulated funding deficiency for any

plan year during the funding improvement period

(taking into account any extension of amortization

periods under section 304(d)).

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of

a plan in seriously endangered status, except as provided

in paragraph (5), subparagraph (A)(i)(II) shall be applied

by substituting ‘20 percent’ for ‘33 percent’.

‘‘(4) FUNDING IMPROVEMENT PERIOD.—For purposes of this

section—

‘‘(A) IN GENERAL.—The funding improvement period

for any funding improvement plan adopted pursuant to

this subsection is the 10-year period beginning on the first

day of the first plan year of the multiemployer plan beginning after the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the funding improvement plan, or

120 STAT. 904 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) the expiration of the collective bargaining

agreements in effect on the due date for the actuarial

certification of endangered status for the initial determination year under subsection (b)(3)(A) and covering,

as of such due date, at least 75 percent of the active

participants in such multiemployer plan.

‘‘(B) SERIOUSLY ENDANGERED PLANS.—In the case of

a plan in seriously endangered status, except as provided

in paragraph (5), subparagraph (A) shall be applied by

substituting ‘15-year period’ for ‘10-year period’.

‘‘(C) COORDINATION WITH CHANGES IN STATUS.— ‘‘(i) PLANS NO LONGER IN ENDANGERED STATUS.— If the plan’s actuary certifies under subsection (b)(3)(A)

for a plan year in any funding plan adoption period

or funding improvement period that the plan is no

longer in endangered status and is not in critical

status, the funding plan adoption period or funding

improvement period, whichever is applicable, shall end

as of the close of the preceding plan year.

‘‘(ii) PLANS IN CRITICAL STATUS.—If the plan’s

actuary certifies under subsection (b)(3)(A) for a plan

year in any funding plan adoption period or funding

improvement period that the plan is in critical status,

the funding plan adoption period or funding improvement period, whichever is applicable, shall end as of

the close of the plan year preceding the first plan

year in the rehabilitation period with respect to such

status.

‘‘(D) PLANS IN ENDANGERED STATUS AT END OF

PERIOD.—If the plan’s actuary certifies under subsection

(b)(3)(A) for the first plan year following the close of the

period described in subparagraph (A) that the plan is in

endangered status, the provisions of this subsection and

subsection (d) shall be applied as if such first plan year

were an initial determination year, except that the plan

may not be amended in a manner inconsistent with the

funding improvement plan in effect for the preceding plan

year until a new funding improvement plan is adopted.

‘‘(5) SPECIAL RULES FOR SERIOUSLY ENDANGERED PLANS

MORE THAN 70 PERCENT FUNDED.—

‘‘(A) IN GENERAL.—If the funded percentage of a plan

in seriously endangered status was more than 70 percent

as of the beginning of the initial determination year—

‘‘(i) paragraphs (3)(B) and (4)(B) shall apply only

if the plan’s actuary certifies, within 30 days after

the certification under subsection (b)(3)(A) for the initial determination year, that, based on the terms of

the plan and the collective bargaining agreements in

effect at the time of such certification, the plan is

not projected to meet the requirements of paragraph

(3)(A) (without regard to paragraphs (3)(B) and (4)(B)),

and

‘‘(ii) if there is a certification under clause (i),

the plan may, in formulating its funding improvement

plan, only take into account the rules of paragraph

(3)(B) and (4)(B) for plan years in the funding improvement period beginning on or before the date on which

Termination

dates.

Applicability.

Expiration date.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 905

the last of the collective bargaining agreements

described in paragraph (4)(A)(ii) expires.

‘‘(B) SPECIAL RULE AFTER EXPIRATION OF AGREEMENTS.—Notwithstanding subparagraph (A)(ii), if, for any

plan year ending after the date described in subparagraph

(A)(ii), the plan actuary certifies (at the time of the annual

certification under subsection (b)(3)(A) for such plan year)

that, based on the terms of the plan and collective bargaining agreements in effect at the time of that annual

certification, the plan is not projected to be able to meet

the requirements of paragraph (3)(A) (without regard to

paragraphs (3)(B) and (4)(B)), paragraphs (3)(B) and (4)(B)

shall continue to apply for such year.

‘‘(6) UPDATES TO FUNDING IMPROVEMENT PLANS AND SCHED- ULES.— ‘‘(A) FUNDING IMPROVEMENT PLAN.—The plan sponsor

shall annually update the funding improvement plan and

shall file the update with the plan’s annual report under

section 104 of the Employee Retirement Income Security

Act of 1974.

‘‘(B) SCHEDULES.—The plan sponsor shall annually

update any schedule of contribution rates provided under

this subsection to reflect the experience of the plan.

‘‘(C) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied upon

by bargaining parties in negotiating a collective bargaining

agreement shall remain in effect for the duration of that

collective bargaining agreement.

‘‘(7) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE TO

ADOPT FUNDING IMPROVEMENT PLAN.—

‘‘(A) IN GENERAL.—If—

‘‘(i) a collective bargaining agreement providing

for contributions under a multiemployer plan that was

in effect at the time the plan entered endangered status

expires, and

‘‘(ii) after receiving one or more schedules from

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement fail

to agree on changes to contribution or benefit schedules

necessary to meet the applicable benchmarks in accordance with the funding improvement plan,

the plan sponsor shall implement the schedule described

in paragraph (1)(B)(i)(I) beginning on the date specified

in subparagraph (B).

‘‘(B) DATE OF IMPLEMENTATION.—The date specified in

this subparagraph is the earlier of the date—

‘‘(i) on which the Secretary of Labor certifies that

the parties are at an impasse, or

‘‘(ii) which is 180 days after the date on which

the collective bargaining agreement described in

subparagraph (A) expires.

‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For purposes of this

section, the term ‘funding plan adoption period’ means the

period beginning on the date of the certification under subsection (b)(3)(A) for the initial determination year and ending

on the day before the first day of the funding improvement

period.

120 STAT. 906 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(d) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

IMPROVEMENT PERIODS.— ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During

the funding plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for

any participants,

‘‘(ii) a suspension of contributions with respect to

any period of service, or

‘‘(iii) any new direct or indirect exclusion of

younger or newly hired employees from plan participation,

‘‘(B) no amendment of the plan which increases the

liabilities of the plan by reason of any increase in benefits,

any change in the accrual of benefits, or any change in

the rate at which benefits become nonforfeitable under

the plan may be adopted unless the amendment is required

as a condition of qualification under part I of subchapter

D of chapter 1 or to comply with other applicable law,

and

‘‘(C) in the case of a plan in seriously endangered

status, the plan sponsor shall take all reasonable actions

which are consistent with the terms of the plan and

applicable law and which are expected, based on reasonable

assumptions, to achieve—

‘‘(i) an increase in the plan’s funded percentage,

and

‘‘(ii) postponement of an accumulated funding deficiency for at least 1 additional plan year.

Actions under subparagraph (C) include applications for extensions of amortization periods under section 431(d), use of the

shortfall funding method in making funding standard account

computations, amendments to the plan’s benefit structure,

reductions in future benefit accruals, and other reasonable

actions consistent with the terms of the plan and applicable

law.

‘‘(2) COMPLIANCE WITH FUNDING IMPROVEMENT PLAN.—

‘‘(A) IN GENERAL.—A plan may not be amended after

the date of the adoption of a funding improvement plan

so as to be inconsistent with the funding improvement

plan.

‘‘(B) NO REDUCTION IN CONTRIBUTIONS.—A plan sponsor

may not during any funding improvement period accept

a collective bargaining agreement or participation agreement with respect to the multiemployer plan that provides

for—

‘‘(i) a reduction in the level of contributions for

any participants,

‘‘(ii) a suspension of contributions with respect to

any period of service, or

‘‘(iii) any new direct or indirect exclusion of

younger or newly hired employees from plan participation.

‘‘(C) SPECIAL RULES FOR BENEFIT INCREASES.—A plan

may not be amended after the date of the adoption of

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 907

a funding improvement plan so as to increase benefits,

including future benefit accruals, unless the plan actuary

certifies that the benefit increase is consistent with the

funding improvement plan and is paid for out of contributions not required by the funding improvement plan to

meet the applicable benchmark in accordance with the

schedule contemplated in the funding improvement plan.

‘‘(e) REHABILITATION PLAN MUST BE ADOPTED FOR MULTIEM- PLOYER PLANS IN CRITICAL STATUS.— ‘‘(1) IN GENERAL.—In any case in which a multiemployer

plan is in critical status for a plan year, the plan sponsor,

in accordance with this subsection—

‘‘(A) shall adopt a rehabilitation plan not later than

240 days following the required date for the actuarial certification of critical status under subsection (b)(3)(A), and

‘‘(B) within 30 days after the adoption of the rehabilitation plan—

‘‘(i) shall provide to the bargaining parties 1 or

more schedules showing revised benefit structures,

revised contribution structures, or both, which, if

adopted, may reasonably be expected to enable the

multiemployer plan to emerge from critical status in

accordance with the rehabilitation plan, and

‘‘(ii) may, if the plan sponsor deems appropriate,

prepare and provide the bargaining parties with additional information relating to contribution rates or benefit reductions, alternative schedules, or other information relevant to emerging from critical status in accordance with the rehabilitation plan.

The schedule or schedules described in subparagraph (B)(i)

shall reflect reductions in future benefit accruals and adjustable

benefits, and increases in contributions, that the plan sponsor

determines are reasonably necessary to emerge from critical

status. One schedule shall be designated as the default schedule

and such schedule shall assume that there are no increases

in contributions under the plan other than the increases necessary to emerge from critical status after future benefit

accruals and other benefits (other than benefits the reduction

or elimination of which are not permitted under section

411(d)(6)) have been reduced to the maximum extent permitted

by law.

‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BEGINS.—Paragraph (1) shall not apply to a plan year if such year is in

a rehabilitation plan adoption period or rehabilitation period

by reason of the plan being in critical status for a preceding

plan year. For purposes of this section, such preceding plan

year shall be the initial critical year with respect to the

rehabilitation plan to which it relates.

‘‘(3) REHABILITATION PLAN.—For purposes of this section—

‘‘(A) IN GENERAL.—A rehabilitation plan is a plan which

consists of—

‘‘(i) actions, including options or a range of options

to be proposed to the bargaining parties, formulated,

based on reasonably anticipated experience and reasonable actuarial assumptions, to enable the plan to cease

to be in critical status by the end of the rehabilitation

period and may include reductions in plan expenditures

Deadlines.

120 STAT. 908 PUBLIC LAW 109–280—AUG. 17, 2006

(including plan mergers and consolidations), reductions

in future benefit accruals or increases in contributions,

if agreed to by the bargaining parties, or any combination of such actions, or

‘‘(ii) if the plan sponsor determines that, based

on reasonable actuarial assumptions and upon exhaustion of all reasonable measures, the plan can not

reasonably be expected to emerge from critical status

by the end of the rehabilitation period, reasonable

measures to emerge from critical status at a later

time or to forestall possible insolvency (within the

meaning of section 4245 of the Employee Retirement

Income Security Act of 1974).

A rehabilitation plan must provide annual standards for

meeting the requirements of such rehabilitation plan. Such

plan shall also include the schedules required to be provided under paragraph (1)(B)(i) and if clause (ii) applies,

shall set forth the alternatives considered, explain why

the plan is not reasonably expected to emerge from critical

status by the end of the rehabilitation period, and specify

when, if ever, the plan is expected to emerge from critical

status in accordance with the rehabilitation plan.

‘‘(B) UPDATES TO REHABILITATION PLAN AND SCHEDULES.—

‘‘(i) REHABILITATION PLAN.—The plan sponsor shall

annually update the rehabilitation plan and shall file

the update with the plan’s annual report under section

104 of the Employee Retirement Income Security Act

of 1974.

‘‘(ii) SCHEDULES.—The plan sponsor shall annually

update any schedule of contribution rates provided

under this subsection to reflect the experience of the

plan.

‘‘(iii) DURATION OF SCHEDULE.—A schedule of contribution rates provided by the plan sponsor and relied

upon by bargaining parties in negotiating a collective

bargaining agreement shall remain in effect for the

duration of that collective bargaining agreement.

‘‘(C) IMPOSITION OF DEFAULT SCHEDULE WHERE FAILURE

TO ADOPT REHABILITATION PLAN.—

‘‘(i) IN GENERAL.—If—

‘‘(I) a collective bargaining agreement providing for contributions under a multiemployer

plan that was in effect at the time the plan entered

critical status expires, and

‘‘(II) after receiving one or more schedules from

the plan sponsor under paragraph (1)(B), the bargaining parties with respect to such agreement

fail to adopt a contribution or benefit schedules

with terms consistent with the rehabilitation plan

and the schedule from the plan sponsor under

paragraph (1)(B)(i),

the plan sponsor shall implement the default schedule

described in the last sentence of paragraph (1) beginning on the date specified in clause (ii).

‘‘(ii) DATE OF IMPLEMENTATION.—The date specified

in this clause is the earlier of the date—

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 909

‘‘(I) on which the Secretary of Labor certifies

that the parties are at an impasse, or

‘‘(II) which is 180 days after the date on which

the collective bargaining agreement described in

clause (i) expires.

‘‘(4) REHABILITATION PERIOD.—For purposes of this section—

‘‘(A) IN GENERAL.—The rehabilitation period for a plan

in critical status is the 10-year period beginning on the

first day of the first plan year of the multiemployer plan

following the earlier of—

‘‘(i) the second anniversary of the date of the adoption of the rehabilitation plan, or

‘‘(ii) the expiration of the collective bargaining

agreements in effect on the date of the due date for

the actuarial certification of critical status for the initial critical year under subsection (a)(1) and covering,

as of such date at least 75 percent of the active participants in such multiemployer plan.

If a plan emerges from critical status as provided under

subparagraph (B) before the end of such 10-year period,

the rehabilitation period shall end with the plan year preceding the plan year for which the determination under

subparagraph (B) is made.

‘‘(B) EMERGENCE.—A plan in critical status shall

remain in such status until a plan year for which the

plan actuary certifies, in accordance with subsection

(b)(3)(A), that the plan is not projected to have an accumulated funding deficiency for the plan year or any of the

9 succeeding plan years, without regard to the use of the

shortfall method and taking into account any extension

of amortization periods under section 431(d).

‘‘(5) REHABILITATION PLAN ADOPTION PERIOD.—For purposes

of this section, the term ‘rehabilitation plan adoption period’

means the period beginning on the date of the certification

under subsection (b)(3)(A) for the initial critical year and ending

on the day before the first day of the rehabilitation period.

‘‘(6) LIMITATION ON REDUCTION IN RATES OF FUTURE

ACCRUALS.—Any reduction in the rate of future accruals under

the default schedule described in paragraph (1)(B)(i) shall not

reduce the rate of future accruals below—

‘‘(A) a monthly benefit (payable as a single life annuity

commencing at the participant’s normal retirement age)

equal to 1 percent of the contributions required to be made

with respect to a participant, or the equivalent standard

accrual rate for a participant or group of participants under

the collective bargaining agreements in effect as of the

first day of the initial critical year, or

‘‘(B) if lower, the accrual rate under the plan on such

first day.

The equivalent standard accrual rate shall be determined by

the plan sponsor based on the standard or average contribution

base units which the plan sponsor determines to be representative for active participants and such other factors as the plan

sponsor determines to be relevant. Nothing in this paragraph

shall be construed as limiting the ability of the plan sponsor

to prepare and provide the bargaining parties with alternative

120 STAT. 910 PUBLIC LAW 109–280—AUG. 17, 2006

schedules to the default schedule that established lower or

higher accrual and contribution rates than the rates otherwise

described in this paragraph.

‘‘(7) AUTOMATIC EMPLOYER SURCHARGE.— ‘‘(A) IMPOSITION OF SURCHARGE.—Each employer otherwise obligated to make a contribution for the initial critical

year shall be obligated to pay to the plan for such year

a surcharge equal to 5 percent of the contribution otherwise

required under the applicable collective bargaining agreement (or other agreement pursuant to which the employer

contributes). For each succeeding plan year in which the

plan is in critical status for a consecutive period of years

beginning with the initial critical year, the surcharge shall

be 10 percent of the contribution otherwise so required.

‘‘(B) ENFORCEMENT OF SURCHARGE.—The surcharges

under subparagraph (A) shall be due and payable on the

same schedule as the contributions on which the surcharges

are based. Any failure to make a surcharge payment shall

be treated as a delinquent contribution under section 515

of the Employee Retirement Income Security Act of 1974

and shall be enforceable as such.

‘‘(C) SURCHARGE TO TERMINATE UPON COLLECTIVE BARGAINING AGREEMENT RENEGOTIATION.—The surcharge

under this paragraph shall cease to be effective with respect

to employees covered by a collective bargaining agreement

(or other agreement pursuant to which the employer

contributes), beginning on the effective date of a collective

bargaining agreement (or other such agreement) that

includes terms consistent with a schedule presented by

the plan sponsor under paragraph (1)(B)(i), as modified

under subparagraph (B) of paragraph (3).

‘‘(D) SURCHARGE NOT TO APPLY UNTIL EMPLOYER

RECEIVES NOTICE.—The surcharge under this paragraph

shall not apply to an employer until 30 days after the

employer has been notified by the plan sponsor that the

plan is in critical status and that the surcharge is in

effect.

‘‘(E) SURCHARGE NOT TO GENERATE INCREASED BENEFIT

ACCRUALS.—Notwithstanding any provision of a plan to

the contrary, the amount of any surcharge under this paragraph shall not be the basis for any benefit accrual under

the plan.

‘‘(8) BENEFIT ADJUSTMENTS.—

‘‘(A) ADJUSTABLE BENEFITS.—

‘‘(i) IN GENERAL.—Notwithstanding section 204(g),

the plan sponsor shall, subject to the notice requirement under subparagraph (C), make any reductions

to adjustable benefits which the plan sponsor deems

appropriate, based upon the outcome of collective bargaining over the schedule or schedules provided under

paragraph (1)(B)(i).

‘‘(ii) EXCEPTION FOR RETIREES.—Except in the case

of adjustable benefits described in clause (iv)(III), the

plan sponsor of a plan in critical status shall not reduce

adjustable benefits of any participant or beneficiary

whose benefit commencement date is before the date

on which the plan provides notice to the participant

Effective date.

Termination

date.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 911

or beneficiary under subsection (b)(3)(D) for the initial

critical year.

‘‘(iii) PLAN SPONSOR FLEXIBILITY.—The plan

sponsor shall include in the schedules provided to the

bargaining parties an allowance for funding the benefits of participants with respect to whom contributions

are not currently required to be made, and shall reduce

their benefits to the extent permitted under this title

and considered appropriate by the plan sponsor based

on the plan’s then current overall funding status.

‘‘(iv) ADJUSTABLE BENEFIT DEFINED.—For purposes

of this paragraph, the term ‘adjustable benefit’

means—

‘‘(I) benefits, rights, and features under the

plan, including post-retirement death benefits, 60-

month guarantees, disability benefits not yet in

pay status, and similar benefits,

‘‘(II) any early retirement benefit or retirement-type subsidy (within the meaning of section

411(d)(6)(B)(i)) and any benefit payment option

(other than the qualified joint and survivor

annuity), and

‘‘(III) benefit increases that would not be

eligible for a guarantee under section 4022A of

the Employee Retirement Income Security Act of

1974 on the first day of initial critical year because

the increases were adopted (or, if later, took effect)

less than 60 months before such first day.

‘‘(B) NORMAL RETIREMENT BENEFITS PROTECTED.—

Except as provided in subparagraph (A)(iv)(III), nothing

in this paragraph shall be construed to permit a plan

to reduce the level of a participant’s accrued benefit payable

at normal retirement age.

‘‘(C) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—No reduction may be made to

adjustable benefits under subparagraph (A) unless

notice of such reduction has been given at least 30

days before the general effective date of such reduction

for all participants and beneficiaries to—

‘‘(I) plan participants and beneficiaries,

‘‘(II) each employer who has an obligation to

contribute (within the meaning of section 4212(a))

under the plan, and

‘‘(III) each employee organization which, for

purposes of collective bargaining, represents plan

participants employed by such an employer.

‘‘(ii) CONTENT OF NOTICE.—The notice under clause

(i) shall contain—

‘‘(I) sufficient information to enable participants and beneficiaries to understand the effect

of any reduction on their benefits, including an

estimate (on an annual or monthly basis) of any

affected adjustable benefit that a participant or

beneficiary would otherwise have been eligible for

as of the general effective date described in clause

(i), and

120 STAT. 912 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(II) information as to the rights and remedies

of plan participants and beneficiaries as well as

how to contact the Department of Labor for further

information and assistance where appropriate.

‘‘(iii) FORM AND MANNER.—Any notice under clause

(i)—

‘‘(I) shall be provided in a form and manner

prescribed in regulations of the Secretary of Labor,

‘‘(II) shall be written in a manner so as to

be understood by the average plan participant,

and

‘‘(III) may be provided in written, electronic,

or other appropriate form to the extent such form

is reasonably accessible to persons to whom the

notice is required to be provided.

The Secretary of Labor shall in the regulations prescribed under subclause (I) establish a model notice

that a plan sponsor may use to meet the requirements

of this subparagraph.

‘‘(9) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.—

‘‘(A) BENEFIT REDUCTIONS.—Any benefit reductions

under this subsection shall be disregarded in determining

a plan’s unfunded vested benefits for purposes of determining an employer’s withdrawal liability under section

4201 of the Employee Retirement Income Security Act of

1974.

‘‘(B) SURCHARGES.—Any surcharges under paragraph

(7) shall be disregarded in determining an employer’s withdrawal liability under section 4211 of such Act, except

for purposes of determining the unfunded vested benefits

attributable to an employer under section 4211(c)(4) of

such Act or a comparable method approved under section

4211(c)(5) of such Act.

‘‘(C) SIMPLIFIED CALCULATIONS.—The Pension Benefit

Guaranty Corporation shall prescribe simplified methods

for the application of this paragraph in determining withdrawal liability.

‘‘(f) RULES FOR OPERATION OF PLAN DURING ADOPTION AND

REHABILITATION PERIOD.—

‘‘(1) COMPLIANCE WITH REHABILITATION PLAN.—

‘‘(A) IN GENERAL.—A plan may not be amended after

the date of the adoption of a rehabilitation plan under

subsection (e) so as to be inconsistent with the rehabilitation plan.

‘‘(B) SPECIAL RULES FOR BENEFIT INCREASES.—A plan

may not be amended after the date of the adoption of

a rehabilitation plan under subsection (e) so as to increase

benefits, including future benefit accruals, unless the plan

actuary certifies that such increase is paid for out of additional contributions not contemplated by the rehabilitation

plan, and, after taking into account the benefit increase,

the multiemployer plan still is reasonably expected to

emerge from critical status by the end of the rehabilitation

period on the schedule contemplated in the rehabilitation

plan.

‘‘(2) RESTRICTION ON LUMP SUMS AND SIMILAR BENEFITS.—

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 913

‘‘(A) IN GENERAL.—Effective on the date the notice

of certification of the plan’s critical status for the initial

critical year under subsection (b)(3)(D) is sent, and notwithstanding section 411(d)(6), the plan shall not pay—

‘‘(i) any payment, in excess of the monthly amount

paid under a single life annuity (plus any social security supplements described in the last sentence of section 411(b)(1)(A)),

‘‘(ii) any payment for the purchase of an irrevocable

commitment from an insurer to pay benefits, and

‘‘(iii) any other payment specified by the Secretary

by regulations.

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply

to a benefit which under section 411(a)(11) may be immediately distributed without the consent of the participant

or to any makeup payment in the case of a retroactive

annuity starting date or any similar payment of benefits

owed with respect to a prior period.

‘‘(3) ADJUSTMENTS DISREGARDED IN WITHDRAWAL LIABILITY

DETERMINATION.—Any benefit reductions under this subsection

shall be disregarded in determining a plan’s unfunded vested

benefits for purposes of determining an employer’s withdrawal

liability under section 4201 of the Employee Retirement Income

Security Act of 1974.

‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PERIOD.—During

the rehabilitation plan adoption period—

‘‘(A) the plan sponsor may not accept a collective bargaining agreement or participation agreement with respect

to the multiemployer plan that provides for—

‘‘(i) a reduction in the level of contributions for

any participants,

‘‘(ii) a suspension of contributions with respect to

any period of service, or

‘‘(iii) any new direct or indirect exclusion of

younger or newly hired employees from plan participation, and

‘‘(B) no amendment of the plan which increases the

liabilities of the plan by reason of any increase in benefits,

any change in the accrual of benefits, or any change in

the rate at which benefits become nonforfeitable under

the plan may be adopted unless the amendment is required

as a condition of qualification under part I of subchapter

D of chapter 1 or to comply with other applicable law.

‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR DECISIONS.—

If, within 60 days of the due date for adoption of a funding improvement plan or a rehabilitation plan under subsection (e), the plan

sponsor of a plan in endangered status or a plan in critical status

has not agreed on a funding improvement plan or rehabilitation

plan, then any member of the board or group that constitutes

the plan sponsor may require that the plan sponsor enter into

an expedited dispute resolution procedure for the development and

adoption of a funding improvement plan or rehabilitation plan.

‘‘(h) NONBARGAINED PARTICIPATION.—

‘‘(1) BOTH BARGAINED AND NONBARGAINED EMPLOYEEPARTICIPANTS.—In the case of an employer that contributes

to a multiemployer plan with respect to both employees who

are covered by one or more collective bargaining agreements

Deadline.

Effective date.

120 STAT. 914 PUBLIC LAW 109–280—AUG. 17, 2006

and employees who are not so covered, if the plan is in endangered status or in critical status, benefits of and contributions

for the nonbargained employees, including surcharges on those

contributions, shall be determined as if those nonbargained

employees were covered under the first to expire of the

employer’s collective bargaining agreements in effect when the

plan entered endangered or critical status.

‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In the case of an

employer that contributes to a multiemployer plan only with

respect to employees who are not covered by a collective bargaining agreement, this section shall be applied as if the

employer were the bargaining party, and its participation agreement with the plan were a collective bargaining agreement

with a term ending on the first day of the plan year beginning

after the employer is provided the schedule or schedules

described in subsections (c) and (e).

‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For purposes of this

section—

‘‘(1) BARGAINING PARTY.—The term ‘bargaining party’

means—

‘‘(A)(i) except as provided in clause (ii), an employer

who has an obligation to contribute under the plan; or

‘‘(ii) in the case of a plan described under section

404(c), or a continuation of such a plan, the association

of employers that is the employer settlor of the plan; and

‘‘(B) an employee organization which, for purposes of

collective bargaining, represents plan participants

employed by an employer who has an obligation to contribute under the plan.

‘‘(2) FUNDED PERCENTAGE.—The term ‘funded percentage’

means the percentage equal to a fraction—

‘‘(A) the numerator of which is the value of the plan’s

assets, as determined under section 431(c)(2), and

‘‘(B) the denominator of which is the accrued liability

of the plan, determined using actuarial assumptions

described in section 431(c)(3).

‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—The term

‘accumulated funding deficiency’ has the meaning given such

term in section 412(a).

‘‘(4) ACTIVE PARTICIPANT.—The term ‘active participant’

means, in connection with a multiemployer plan, a participant

who is in covered service under the plan.

‘‘(5) INACTIVE PARTICIPANT.—The term ‘inactive participant’

means, in connection with a multiemployer plan, a participant,

or the beneficiary or alternate payee of a participant, who—

‘‘(A) is not in covered service under the plan, and

‘‘(B) is in pay status under the plan or has a nonforfeitable right to benefits under the plan.

‘‘(6) PAY STATUS.—A person is in pay status under a multiemployer plan if—

‘‘(A) at any time during the current plan year, such

person is a participant or beneficiary under the plan and

is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan

related to a retirement benefit), or

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 915

‘‘(B) to the extent provided in regulations of the Secretary, such person is entitled to such a benefit under

the plan.

‘‘(7) OBLIGATION TO CONTRIBUTE.—The term ‘obligation to

contribute’ has the meaning given such term under section

4212(a) of the Employee Retirement Income Security Act of

1974.

‘‘(8) ACTUARIAL METHOD.—Notwithstanding any other

provision of this section, the actuary’s determinations with

respect to a plan’s normal cost, actuarial accrued liability, and

improvements in a plan’s funded percentage under this section

shall be based upon the unit credit funding method (whether

or not that method is used for the plan’s actuarial valuation).

‘‘(9) PLAN SPONSOR.—In the case of a plan described under

section 404(c), or a continuation of such a plan, the term

‘plan sponsor’ means the bargaining parties described under

paragraph (1).

‘‘(10) BENEFIT COMMENCEMENT DATE.—The term ‘benefit

commencement date’ means the annuity starting date (or in

the case of a retroactive annuity starting date, the date on

which benefit payments begin).’’

(b) EXCISE TAXES ON FAILURES RELATING TO MULTIEMPLOYER

PLANS IN ENDANGERED OR CRITICAL STATUS.—

(1) IN GENERAL.—Section 4971 of the Internal Revenue

Code of 1986 is amended by redesignating subsection (g) as

subsection (h) and by inserting after subsection (f) the following:

‘‘(g) MULTIEMPLOYER PLANS IN ENDANGERED OR CRITICAL

STATUS.—

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

‘‘(A) no tax shall be imposed under this section for

a taxable year with respect to a multiemployer plan if,

for the plan years ending with or within the taxable year,

the plan is in critical status pursuant to section 432, and

‘‘(B) any tax imposed under this subsection for a taxable year with respect to a multiemployer plan if, for the

plan years ending with or within the taxable year, the

plan is in endangered status pursuant to section 432 shall

be in addition to any other tax imposed by this section.

‘‘(2) FAILURE TO COMPLY WITH FUNDING IMPROVEMENT OR

REHABILITATION PLAN.—

‘‘(A) IN GENERAL.—If any funding improvement plan

or rehabilitation plan in effect under section 432 with

respect to a multiemployer plan requires an employer to

make a contribution to the plan, there is hereby imposed

a tax on each failure of the employer to make the required

contribution within the time required under such plan.

‘‘(B) AMOUNT OF TAX.—The amount of the tax imposed

by subparagraph (A) shall be equal to the amount of the

required contribution the employer failed to make in a

timely manner.

‘‘(C) LIABILITY FOR TAX.—The tax imposed by subparagraph (A) shall be paid by the employer responsible for

contributing to or under the rehabilitation plan which fails

to make the contribution.

‘‘(3) FAILURE TO MEET REQUIREMENTS FOR PLANS IN ENDANGERED OR CRITICAL STATUS.—If—

26 USC 4971.

120 STAT. 916 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) a plan which is in seriously endangered status

fails to meet the applicable benchmarks by the end of

the funding improvement period, or

‘‘(B) a plan which is in critical status either—

‘‘(i) fails to meet the requirements of section 432(e)

by the end of the rehabilitation period, or

‘‘(ii) has received a certification under section

432(b)(3)(A)(ii) for 3 consecutive plan years that the

plan is not making the scheduled progress in meeting

its requirements under the rehabilitation plan,

the plan shall be treated as having an accumulated funding

deficiency for purposes of this section for the last plan

year in such funding improvement, rehabilitation, or 3-

consecutive year period (and each succeeding plan year

until such benchmarks or requirements are met) in an

amount equal to the greater of the amount of the contributions necessary to meet such benchmarks or requirements

or the amount of such accumulated funding deficiency without regard to this paragraph.

‘‘(4) FAILURE TO ADOPT REHABILITATION PLAN.—

‘‘(A) IN GENERAL.—In the case of a multiemployer plan

which is in critical status, there is hereby imposed a tax

on the failure of such plan to adopt a rehabilitation plan

within the time prescribed under section 432.

‘‘(B) AMOUNT OF TAX.—The amount of the tax imposed

under subparagraph (A) with respect to any plan sponsor

for any taxable year shall be the greater of—

‘‘(i) the amount of tax imposed under subsection

(a) for the taxable year (determined without regard

to this subsection), or

‘‘(ii) the amount equal to $1,100 multiplied by the

number of days during the taxable year which are

included in the period beginning on the first day of

the 240-day period described in section 432(e)(1)(A)

and ending on the day on which the rehabilitation

plan is adopted.

‘‘(C) LIABILITY FOR TAX.—

‘‘(i) IN GENERAL.—The tax imposed by subparagraph (A) shall be paid by each plan sponsor.

‘‘(ii) PLAN SPONSOR.—For purposes of clause (i),

the term ‘plan sponsor’ in the case of a multiemployer

plan means the association, committee, joint board of

trustees, or other similar group of representatives of

the parties who establish or maintain the plan.

‘‘(5) WAIVER.—In the case of a failure described in paragraph (2) or (3) which is due to reasonable cause and not

to willful neglect, the Secretary may waive part or all of the

tax imposed by this subsection. For purposes of this paragraph,

reasonable cause includes unanticipated and material market

fluctuations, the loss of a significant contributing employer,

or other factors to the extent that the payment of tax under

this subsection with respect to the failure would be excessive

or otherwise inequitable relative to the failure involved.

‘‘(6) TERMS USED IN SECTION 432.—For purposes of this

subsection, any term used in this subsection which is also

used in section 432 shall have the meaning given such term

by section 432.’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 917

(2) CONTROLLED GROUPS.—Section 4971(c)(2) of such Code

is amended—

(A) by striking ‘‘In the case of a plan other than a

multiemployer plan, if the’’ and inserting ‘‘If an’’, and

(B) by striking ‘‘or (f)’’ and inserting ‘‘(f), or (g)’’.

(c) NO ADDITIONAL CONTRIBUTION REQUIRED.—Section 412(b)

of the Internal Revenue Code of 1986, as amended by this Act,

is amended by adding at the end the following new paragraph:

‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STATUS.—Paragraph (1) shall not apply in the case of a multiemployer plan

for any plan year in which the plan is in critical status pursuant

to section 432. This paragraph shall only apply if the plan

adopts a rehabilitation plan in accordance with section 432(e)

and complies with such rehabilitation plan (and any modifications of the plan).’’.

(d) CLERICAL AMENDMENT.—The table of sections for subpart

A of part III of subchapter D of chapter 1 of such Code is amended

by adding at the end the following new item:

‘‘Sec. 432. Additional funding rules for multiemployer plans in endangered status

or critical status.’’.

(e) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by this section

shall apply with respect to plan years beginning after 2007.

(2) SPECIAL RULE FOR CERTAIN NOTICES.—In any case in

which a plan’s actuary certifies that it is reasonably expected

that a multiemployer plan will be in critical status under

section 305(b)(3) of the Employee Retirement Income Security

Act of 1974, as added by this section, with respect to the

first plan year beginning after 2007, the notice required under

subparagraph (D) of such section may be provided at any time

after the date of enactment, so long as it is provided on or

before the last date for providing the notice under such subparagraph.

(3) SPECIAL RULE FOR CERTAIN RESTORED BENEFITS.—In

the case of a multiemployer plan—

(A) with respect to which benefits were reduced pursuant to a plan amendment adopted on or after January

1, 2002, and before June 30, 2005, and

(B) which, pursuant to the plan document, the trust

agreement, or a formal written communication from the

plan sponsor to participants provided before June 30, 2005,

provided for the restoration of such benefits,

the amendments made by this section shall not apply to such

benefit restorations to the extent that any restriction on the

providing or accrual of such benefits would otherwise apply

by reason of such amendments.

SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

(a) ADVANCE DETERMINATION OF IMPENDING INSOLVENCY OVER

5 YEARS.—Section 418E(d)(1) of the Internal Revenue Code of 1986

is amended—

(1) by striking ‘‘3 plan years’’ the second place it appears

and inserting ‘‘5 plan years’’; and

(2) by adding at the end the following new sentence: ‘‘If

the plan sponsor makes such a determination that the plan

will be insolvent in any of the next 5 plan years, the plan

26 USC 412 note.

26 USC 412.

26 USC 4971.

120 STAT. 918 PUBLIC LAW 109–280—AUG. 17, 2006

sponsor shall make the comparison under this paragraph at

least annually until the plan sponsor makes a determination

that the plan will not be insolvent in any of the next 5 plan

years.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply with respect to the determinations made in plan years

beginning after 2007.

SEC. 214. EXEMPTION FROM EXCISE TAXES FOR CERTAIN MULTIEMPLOYER PENSION PLANS.

(a) IN GENERAL.—Notwithstanding any other provision of law,

no tax shall be imposed under subsection (a) or (b) of section

4971 of the Internal Revenue Code of 1986 with respect to any

accumulated funding deficiency of a plan described in subsection

(b) of this section for any taxable year beginning before the earlier

of—

(1) the taxable year in which the plan sponsor adopts

a rehabilitation plan under section 305(e) of the Employee

Retirement Income Security Act of 1974 and section 432(e)

of such Code (as added by this Act); or

(2) the taxable year that contains January 1, 2009.

(b) PLAN DESCRIBED.—A plan described under this subsection

is a multiemployer pension plan—

(1) with less than 100 participants;

(2) with respect to which the contributing employers participated in a Federal fishery capacity reduction program;

(3) with respect to which employers under the plan participated in the Northeast Fisheries Assistance Program; and

(4) with respect to which the annual normal cost is less

than $100,000 and the plan is experiencing a funding deficiency

on the date of enactment of this Act.

Subtitle C—Sunset of Additional Funding

Rules

SEC. 221. SUNSET OF ADDITIONAL FUNDING RULES.

(a) REPORT.—Not later than December 31, 2011, the Secretary

of Labor, the Secretary of the Treasury, and the Executive Director

of the Pension Benefit Guaranty Corporation shall conduct a study

of the effect of the amendments made by this subtitle on the

operation and funding status of multiemployer plans and shall

report the results of such study, including any recommendations

for legislation, to the Congress.

(b) MATTERS INCLUDED IN STUDY.—The study required under

subsection (a) shall include—

(1) the effect of funding difficulties, funding rules in effect

before the date of the enactment of this Act, and the amendments made by this subtitle on small businesses participating

in multiemployer plans,

(2) the effect on the financial status of small employers

of—

(A) funding targets set in funding improvement and

rehabilitation plans and associated contribution increases,

(B) funding deficiencies,

(C) excise taxes,

(D) withdrawal liability,

26 USC 4971

note.

26 USC 418E

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 919

(E) the possibility of alternative schedules and procedures for financially troubled employers, and

(F) other aspects of the multiemployer system, and

(3) the role of the multiemployer pension plan system in

helping small employers to offer pension benefits.

(c) SUNSET.— (1) IN GENERAL.—Except as provided in this subsection,

notwithstanding any other provision of this Act, the provisions

of, and the amendments made by, sections 201(b), 202, and

212 shall not apply to plan years beginning after December

31, 2014.

(2) FUNDING IMPROVEMENT AND REHABILITATION PLANS.— If a plan is operating under a funding improvement or

rehabilitation plan under section 305 of such Act or 432 of

such Code for its last year beginning before January 1, 2015,

such plan shall continue to operate under such funding improvement or rehabilitation plan during any period after December

31, 2014, such funding improvement or rehabilitation plan is

in effect and all provisions of such Act or Code relating to

the operation of such funding improvement or rehabilitation

plan shall continue in effect during such period.

TITLE III—INTEREST RATE

ASSUMPTIONS

SEC. 301. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES.

(a) AMENDMENTS OF ERISA.—

(1) DETERMINATION OF RANGE.—Subclause (II) of section

302(b)(5)(B)(ii) of the Employee Retirement Income Security

Act of 1974 is amended—

(A) by striking ‘‘2006’’ and inserting ‘‘2008’’, and

(B) by striking ‘‘AND 2005’’ in the heading and inserting

‘‘, 2005, 2006, AND 2007’’.

(2) DETERMINATION OF CURRENT LIABILITY.—Subclause (IV)

of section 302(d)(7)(C)(i) of such Act is amended—

(A) by striking ‘‘or 2005’’ and inserting ‘‘, 2005, 2006,

or 2007’’, and

(B) by striking ‘‘AND 2005’’ in the heading and inserting

‘‘, 2005, 2006, AND 2007’’.

(3) PBGC PREMIUM RATE.—Subclause (V) of section

4006(a)(3)(E)(iii) of such Act is amended by striking ‘‘2006’’

and inserting ‘‘2008’’.

(b) AMENDMENTS OF INTERNAL REVENUE CODE.—

(1) DETERMINATION OF RANGE.—Subclause (II) of section

412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 is

amended—

(A) by striking ‘‘2006’’ and inserting ‘‘2008’’, and

(B) by striking ‘‘AND 2005’’ in the heading and inserting

‘‘, 2005, 2006, AND 2007’’.

(2) DETERMINATION OF CURRENT LIABILITY.—Subclause (IV)

of section 412(l)(7)(C)(i) of such Code is amended—

(A) by striking ‘‘or 2005’’ and inserting ‘‘, 2005, 2006,

or 2007’’, and

(B) by striking ‘‘AND 2005’’ in the heading and inserting

‘‘, 2005, 2006, AND 2007’’.

26 USC 412.

29 USC 1306.

29 USC 1082.

26 USC 412 note.

120 STAT. 920 PUBLIC LAW 109–280—AUG. 17, 2006

(c) PLAN AMENDMENTS.—Clause (ii) of section 101(c)(2)(A) of

the Pension Funding Equity Act of 2004 is amended by striking

‘‘2006’’ and inserting ‘‘2008’’.

SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINATION OF

LUMP SUM DISTRIBUTIONS.

(a) AMENDMENT TO EMPLOYEE RETIREMENT INCOME SECURITY

ACT OF 1974.—Paragraph (3) of section 205(g) of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1055(g)(3)) is

amended to read as follows:

‘‘(3)(A) For purposes of paragraphs (1) and (2), the present

value shall not be less than the present value calculated by using

the applicable mortality table and the applicable interest rate.

‘‘(B) For purposes of subparagraph (A)—

‘‘(i) The term ‘applicable mortality table’ means a mortality

table, modified as appropriate by the Secretary of the Treasury,

based on the mortality table specified for the plan year under

subparagraph (A) of section 303(h)(3) (without regard to

subparagraph (C) or (D) of such section).

‘‘(ii) The term ‘applicable interest rate’ means the adjusted

first, second, and third segment rates applied under rules

similar to the rules of section 303(h)(2)(C) for the month before

the date of the distribution or such other time as the Secretary

of the Treasury may by regulations prescribe.

‘‘(iii) For purposes of clause (ii), the adjusted first, second,

and third segment rates are the first, second, and third segment

rates which would be determined under section 303(h)(2)(C)

if—

‘‘(I) section 303(h)(2)(D) were applied by substituting

the average yields for the month described in clause (ii)

for the average yields for the 24-month period described

in such section,

‘‘(II) section 303(h)(2)(G)(i)(II) were applied by substituting ‘section 205(g)(3)(B)(iii)(II)’ for ‘section

302(b)(5)(B)(ii)(II)’, and

‘‘(III) the applicable percentage under section

303(h)(2)(G) were determined in accordance with the following table:

‘‘In the case of plan years

beginning in:

The applicable

percentage is:

2008 ........................................................................ 20 percent

2009 ........................................................................ 40 percent

2010 ........................................................................ 60 percent

2011 ........................................................................ 80 percent.’’.

(b) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—Paragraph (3) of section 417(e) of the Internal Revenue Code of 1986

is amended to read as follows:

‘‘(3) DETERMINATION OF PRESENT VALUE.—

‘‘(A) IN GENERAL.—For purposes of paragraphs (1) and

(2), the present value shall not be less than the present

value calculated by using the applicable mortality table

and the applicable interest rate.

‘‘(B) APPLICABLE MORTALITY TABLE.—For purposes of

subparagraph (A), the term ‘applicable mortality table’

means a mortality table, modified as appropriate by the

26 USC 417.

29 USC 1082.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 921

Secretary, based on the mortality table specified for the

plan year under subparagraph (A) of section 430(h)(3)

(without regard to subparagraph (C) or (D) of such section).

‘‘(C) APPLICABLE INTEREST RATE.—For purposes of

subparagraph (A), the term ‘applicable interest rate’ means

the adjusted first, second, and third segment rates applied

under rules similar to the rules of section 430(h)(2)(C)

for the month before the date of the distribution or such

other time as the Secretary may by regulations prescribe.

‘‘(D) APPLICABLE SEGMENT RATES.—For purposes of

subparagraph (C), the adjusted first, second, and third

segment rates are the first, second, and third segment

rates which would be determined under section 430(h)(2)(C)

if—

‘‘(i) section 430(h)(2)(D) were applied by substituting the average yields for the month described

in clause (ii) for the average yields for the 24-month

period described in such section,

‘‘(ii) section 430(h)(2)(G)(i)(II) were applied by substituting ‘section 417(e)(3)(A)(ii)(II)’ for ‘section

412(b)(5)(B)(ii)(II)’, and

‘‘(iii) the applicable percentage under section

430(h)(2)(G) were determined in accordance with the

following table:

‘‘In the case of plan years

beginning in:

The applicable

percentage is:

2008 ........................................................................ 20 percent

2009 ........................................................................ 40 percent

2010 ........................................................................ 60 percent

2011 ........................................................................ 80 percent.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply with respect to plan years beginning after December

31, 2007.

SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT

LIMITATIONS TO LUMP SUM DISTRIBUTIONS.

(a) IN GENERAL.—Clause (ii) of section 415(b)(2)(E) of the

Internal Revenue Code of 1986 is amended to read as follows:

‘‘(ii) For purposes of adjusting any benefit under

subparagraph (B) for any form of benefit subject to

section 417(e)(3), the interest rate assumption shall

not be less than the greatest of—

‘‘(I) 5.5 percent,

‘‘(II) the rate that provides a benefit of not

more than 105 percent of the benefit that would

be provided if the applicable interest rate (as

defined in section 417(e)(3)) were the interest rate

assumption, or

‘‘(III) the rate specified under the plan.’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to distributions made in years beginning after December

31, 2005.

26 USC 415 note.

26 USC 415.

26 USC 417 note.

120 STAT. 922 PUBLIC LAW 109–280—AUG. 17, 2006

TITLE IV—PBGC GUARANTEE AND

RELATED PROVISIONS

SEC. 401. PBGC PREMIUMS.

(a) VARIABLE-RATE PREMIUMS.— (1) CONFORMING AMENDMENTS RELATED TO FUNDING RULES

FOR SINGLE-EMPLOYER PLANS.—Section 4006(a)(3)(E) of the

Employee Retirement Income and Security Act of 1974 (29

U.S.C. 1306(a)(3)(E)) is amended by striking clauses (iii) and

(iv) and inserting the following:

‘‘(iii) For purposes of clause (ii), the term ‘unfunded vested

benefits’ means, for a plan year, the excess (if any) of—

‘‘(I) the funding target of the plan as determined under

section 303(d) for the plan year by only taking into account

vested benefits and by using the interest rate described in

clause (iv), over

‘‘(II) the fair market value of plan assets for the plan

year which are held by the plan on the valuation date.

‘‘(iv) The interest rate used in valuing benefits for purposes

of subclause (I) of clause (iii) shall be equal to the first, second,

or third segment rate for the month preceding the month in which

the plan year begins, which would be determined under section

303(h)(2)(C) if section 303(h)(2)(D) were applied by using the

monthly yields for the month preceding the month in which the

plan year begins on investment grade corporate bonds with varying

maturities and in the top 3 quality levels rather than the average

of such yields for a 24-month period.’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall apply with respect to plan years beginning after 2007.

(b) TERMINATION PREMIUMS.— (1) REPEAL OF SUNSET PROVISION.—Subparagraph (E) of

section 4006(a)(7) of such Act is repealed.

(2) TECHNICAL CORRECTION.— (A) IN GENERAL.—Section 4006(a)(7)(C)(ii) of such Act

is amended by striking ‘‘subparagraph (B)(i)(I)’’ and

inserting ‘‘subparagraph (B)’’.

(B) EFFECTIVE DATE.—The amendment made by this

paragraph shall take effect as if included in the provision

of the Deficit Reduction Act of 2005 to which it relates.

SEC. 402. SPECIAL FUNDING RULES FOR CERTAIN PLANS MAINTAINED

BY COMMERCIAL AIRLINES.

(a) IN GENERAL.—The plan sponsor of an eligible plan may

elect to either—

(1) have the rules of subsection (b) apply, or

(2) have section 303 of the Employee Retirement Income

Security Act of 1974 and section 430 of the Internal Revenue

Code of 1986 applied to its first taxable year beginning in

2008 by amortizing the shortfall amortization base for such

taxable year over a period of 10 plan years (rather than 7

plan years) beginning with such plan year.

(b) ALTERNATIVE FUNDING SCHEDULE.—

(1) IN GENERAL.—If an election is made under subsection

(a)(1) to have this subsection apply to an eligible plan and

the requirements of paragraphs (2) and (3) are met with respect

to the plan—

26 USC 430 note.

29 USC 1306

note.

29 USC 1306

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 923

(A) in the case of any applicable plan year beginning

before January 1, 2008, the plan shall not have an accumulated funding deficiency for purposes of section 302 of the

Employee Retirement Income Security Act of 1974 and

sections 412 and 4971 of the Internal Revenue Code of

1986 if contributions to the plan for the plan year are

not less than the minimum required contribution determined under subsection (e) for the plan for the plan year,

and

(B) in the case of any applicable plan year beginning

on or after January 1, 2008, the minimum required contribution determined under sections 303 of such Act and

430 of such Code shall, for purposes of sections 302 and

303 of such Act and sections 412, 430, and 4971 of such

Code, be equal to the minimum required contribution determined under subsection (e) for the plan for the plan year.

(2) ACCRUAL RESTRICTIONS.—

(A) IN GENERAL.—The requirements of this paragraph

are met if, effective as of the first day of the first applicable

plan year and at all times thereafter while an election

under this section is in effect, the plan provides that—

(i) the accrued benefit, any death or disability benefit, and any social security supplement described in

the last sentence of section 411(a)(9) of such Code

and section 204(b)(1)(G) of such Act, of each participant

are frozen at the amount of such benefit or supplement

immediately before such first day, and

(ii) all other benefits under the plan are eliminated,

but only to the extent the freezing or elimination of such

benefits would have been permitted under section 411(d)(6)

of such Code and section 204(g) of such Act if they had

been implemented by a plan amendment adopted immediately before such first day.

(B) INCREASES IN SECTION 415 LIMITS.—If a plan provides that an accrued benefit of a participant which has

been subject to any limitation under section 415 of such

Code will be increased if such limitation is increased, the

plan shall not be treated as meeting the requirements

of this section unless, effective as of the first day of the

first applicable plan year (or, if later, the date of the

enactment of this Act) and at all times thereafter while

an election under this section is in effect, the plan provides

that any such increase shall not take effect. A plan shall

not fail to meet the requirements of section 411(d)(6) of

such Code and section 204(g) of such Act solely because

the plan is amended to meet the requirements of this

subparagraph.

(3) RESTRICTION ON APPLICABLE BENEFIT INCREASES.—

(A) IN GENERAL.—The requirements of this paragraph

are met if no applicable benefit increase takes effect at

any time during the period beginning on July 26, 2005,

and ending on the day before the first day of the first

applicable plan year.

(B) APPLICABLE BENEFIT INCREASE.—For purposes of

this paragraph, the term ‘‘applicable benefit increase’’

means, with respect to any plan year, any increase in

120 STAT. 924 PUBLIC LAW 109–280—AUG. 17, 2006

liabilities of the plan by plan amendment (or otherwise

provided in regulations provided by the Secretary) which,

but for this paragraph, would occur during the plan year

by reason of—

(i) any increase in benefits,

(ii) any change in the accrual of benefits, or

(iii) any change in the rate at which benefits

become nonforfeitable under the plan.

(4) EXCEPTION FOR IMPUTED DISABILITY SERVICE.—Paragraphs (2) and (3) shall not apply to any accrual or increase

with respect to imputed service provided to a participant during

any period of the participant’s disability occurring on or after

the effective date of the plan amendment providing the restrictions under paragraph (2) (or on or after July 26, 2005, in

the case of the restrictions under paragraph (3)) if the participant—

(A) was receiving disability benefits as of such date,

or

(B) was receiving sick pay and subsequently determined to be eligible for disability benefits as of such date.

(c) DEFINITIONS.—For purposes of this section—

(1) ELIGIBLE PLAN.—The term ‘‘eligible plan’’ means a

defined benefit plan (other than a multiemployer plan) to which

sections 302 of such Act and 412 of such Code applies which

is sponsored by an employer—

(A) which is a commercial airline passenger airline,

or

(B) the principal business of which is providing catering

services to a commercial passenger airline.

(2) APPLICABLE PLAN YEAR.—The term ‘‘applicable plan

year’’ means each plan year to which the election under subsection (a)(1) applies under subsection (d)(1)(A).

(d) ELECTIONS AND RELATED TERMS.—

(1) YEARS FOR WHICH ELECTION MADE.—

(A) ALTERNATIVE FUNDING SCHEDULE.—If an election

under subsection (a)(1) was made with respect to an eligible

plan, the plan sponsor may select either a plan year beginning in 2006 or a plan year beginning in 2007 as the

first plan year to which such election applies. The election

shall apply to such plan year and all subsequent years.

The election shall be made—

(i) not later than December 31, 2006, in the case

of an election for a plan year beginning in 2006, or

(ii) not later than December 31, 2007, in the case

of an election for a plan year beginning in 2007.

(B) 10 YEAR AMORTIZATION.—An election under subsection (a)(2) shall be made not later than December 31,

2007.

(C) ELECTION OF NEW PLAN YEAR FOR ALTERNATIVE

FUNDING SCHEDULE.—In the case of an election under subsection (a)(1), the plan sponsor may specify a new plan

year in such election and the plan year of the plan may

be changed to such new plan year without the approval

of the Secretary of the Treasury.

(2) MANNER OF ELECTION.—A plan sponsor shall make any

election under subsection (a) in such manner as the Secretary

Deadlines.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 925

of the Treasury may prescribe. Such election, once made, may

be revoked only with the consent of such Secretary.

(e) MINIMUM REQUIRED CONTRIBUTION.—In the case of an

eligible plan with respect to which an election is made under

subsection (a)(1)—

(1) IN GENERAL.—In the case of any applicable plan year

during the amortization period, the minimum required contribution shall be the amount necessary to amortize the

unfunded liability of the plan, determined as of the first day

of the plan year, in equal annual installments (until fully

amortized) over the remainder of the amortization period. Such

amount shall be separately determined for each applicable plan

year.

(2) YEARS AFTER AMORTIZATION PERIOD.—In the case of

any plan year beginning after the end of the amortization

period, section 302(a)(2)(A) of such Act and section 412(a)(2)(A)

of such Code shall apply to such plan, but the prefunding

balance and funding standard carryover balance as of the first

day of the first of such years under section 303(f) of such

Act and section 430(f) of such Code shall be zero.

(3) DEFINITIONS.—For purposes of this section—

(A) UNFUNDED LIABILITY.—The term ‘‘unfunded

liability’’ means the unfunded accrued liability under the

plan, determined under the unit credit funding method.

(B) AMORTIZATION PERIOD.—The term ‘‘amortization

period’’ means the 17-plan year period beginning with the

first applicable plan year.

(4) OTHER RULES.—In determining the minimum required

contribution and amortization amount under this subsection—

(A) the provisions of section 302(c)(3) of such Act and

section 412(c)(3) of such Code, as in effect before the date

of enactment of this section, shall apply,

(B) a rate of interest of 8.85 percent shall be used

for all calculations requiring an interest rate, and

(C) the value of plan assets shall be equal to their

fair market value.

(5) SPECIAL RULE FOR CERTAIN PLAN SPINOFFS.—For purposes of subsection (b), if, with respect to any eligible plan

to which this subsection applies—

(A) any applicable plan year includes the date of the

enactment of this Act,

(B) a plan was spun off from the eligible plan during

the plan year but before such date of enactment,

the minimum required contribution under paragraph (1) for

the eligible plan for such applicable plan year shall be an

aggregate amount determined as if the plans were a single

plan for that plan year (based on the full 12-month plan year

in effect prior to the spin-off). The employer shall designate

the allocation of such aggregate amount between such plans

for the applicable plan year.

(f) SPECIAL RULES FOR CERTAIN BALANCES AND WAIVERS.— In the case of an eligible plan with respect to which an election

is made under subsection (a)(1)—

(1) FUNDING STANDARD ACCOUNT AND CREDIT BALANCES.—

Any charge or credit in the funding standard account under

section 302 of such Act or section 412 of such Code, and any

prefunding balance or funding standard carryover balance

Applicability.

120 STAT. 926 PUBLIC LAW 109–280—AUG. 17, 2006

under section 303 of such Act or section 430 of such Code,

as of the day before the first day of the first applicable plan

year, shall be reduced to zero.

(2) WAIVED FUNDING DEFICIENCIES.—Any waived funding

deficiency under sections 302 and 303 of such Act or section

412 of such Code, as in effect before the date of enactment

of this section, shall be deemed satisfied as of the first day

of the first applicable plan year and the amount of such waived

funding deficiency shall be taken into account in determining

the plan’s unfunded liability under subsection (e)(3)(A). In the

case of a plan amendment adopted to satisfy the requirements

of subsection (b)(2), the plan shall not be deemed to violate

section 304(b) of such Act or section 412(f) of such Code, as

so in effect, by reason of such amendment or any increase

in benefits provided to such plan’s participants under a separate

plan that is a defined contribution plan or a multiemployer

plan.

(g) OTHER RULES FOR PLANS MAKING ELECTION UNDER THIS

SECTION.—

(1) SUCCESSOR PLANS TO CERTAIN PLANS.—If—

(A) an election under paragraph (1) or (2) of subsection

(a) is in effect with respect to any eligible plan, and

(B) the eligible plan is maintained by an employer

that establishes or maintains 1 or more other defined benefit plans (other than any multiemployer plan), and such

other plans in combination provide benefit accruals to any

substantial number of successor employees,

the Secretary of the Treasury may, in the Secretary’s discretion,

determine that any trust of which any other such plan is

a part does not constitute a qualified trust under section 401(a)

of the Internal Revenue Code of 1986 unless all benefit obligations of the eligible plan have been satisfied. For purposes

of this paragraph, the term ‘‘successor employee’’ means any

employee who is or was covered by the eligible plan and any

employees who perform substantially the same type of work

with respect to the same business operations as an employee

covered by such eligible plan.

(2) SPECIAL RULES FOR TERMINATIONS.—

(A) PBGC LIABILITY LIMITED.—Section 4022 of the

Employee Retirement Income Security Act of 1974, as

amended by this Act, is amended by adding at the end

the following new subsection:

‘‘(h) SPECIAL RULE FOR PLANS ELECTING CERTAIN FUNDING

REQUIREMENTS.—If any plan makes an election under section

402(a)(1) of the Pension Protection Act of 2006 and is terminated

effective before the end of the 10-year period beginning on the

first day of the first applicable plan year—

‘‘(1) this section shall be applied—

‘‘(A) by treating the first day of the first applicable

plan year as the termination date of the plan, and

‘‘(B) by determining the amount of guaranteed benefits

on the basis of plan assets and liabilities as of such

assumed termination date, and

‘‘(2) notwithstanding section 4044(a), plan assets shall first

be allocated to pay the amount, if any, by which—

‘‘(A) the amount of guaranteed benefits under this section (determined without regard to paragraph (1) and on

29 USC 1322.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 927

the basis of plan assets and liabilities as of the actual

date of plan termination), exceeds

‘‘(B) the amount determined under paragraph (1).’’.

(B) TERMINATION PREMIUM.—In applying section

4006(a)(7)(A) of the Employee Retirement Income Security

Act of 1974 to an eligible plan during any period in which

an election under subsection (a)(1) is in effect—

(i) ‘‘$2,500’’ shall be substituted for ‘‘$1,250’’ in

such section if such plan terminates during the 5-

year period beginning on the first day of the first

applicable plan year with respect to such plan, and

(ii) such section shall be applied without regard

to subparagraph (B) of section 8101(d)(2) of the Deficit

Reduction Act of 2005 (relating to special rule for plans

terminated in bankruptcy).

The substitution described in clause (i) shall not apply

with respect to any plan if the Secretary of Labor determines that such plan terminated as a result of extraordinary circumstances such as a terrorist attack or other

similar event.

(3) LIMITATION ON DEDUCTIONS UNDER CERTAIN PLANS.—

Section 404(a)(7)(C)(iv) of the Internal Revenue Code of 1986,

as added by this Act, shall not apply with respect to any

taxable year of a plan sponsor of an eligible plan if any

applicable plan year with respect to such plan ends with or

within such taxable year.

(4) NOTICE.—In the case of a plan amendment adopted

in order to comply with this section, any notice required under

section 204(h) of such Act or section 4980F(e) of such Code

shall be provided within 15 days of the effective date of such

plan amendment. This subsection shall not apply to any plan

unless such plan is maintained pursuant to one or more collective bargaining agreements between employee representatives

and 1 or more employers.

(h) EXCLUSION OF CERTAIN EMPLOYEES FROM MINIMUM COV- ERAGE REQUIREMENTS.—

(1) IN GENERAL.—Section 410(b)(3) of such Code is amended

by striking the last sentence and inserting the following: ‘‘For

purposes of subparagraph (B), management pilots who are not

represented in accordance with title II of the Railway Labor

Act shall be treated as covered by a collective bargaining agreement described in such subparagraph if the management pilots

manage the flight operations of air pilots who are so represented

and the management pilots are, pursuant to the terms of the

agreement, included in the group of employees benefitting

under the trust described in such subparagraph. Subparagraph

(B) shall not apply in the case of a plan which provides contributions or benefits for employees whose principal duties are not

customarily performed aboard an aircraft in flight (other than

management pilots described in the preceding sentence).’’

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to years beginning before, on, or after the

date of the enactment of this Act.

(i) EXTENSION OF SPECIAL RULE FOR ADDITIONAL FUNDING

REQUIREMENTS.—In the case of an employer which is a commercial

passenger airline, section 302(d)(12) of the Employee Retirement

Income Security Act of 1974 and section 412(l)(12) of the Internal

26 USC 410.

Deadline.

Applicability.

120 STAT. 928 PUBLIC LAW 109–280—AUG. 17, 2006

Revenue Code of 1986, as in effect before the date of the enactment

of this Act, shall each be applied—

(1) by substituting ‘‘December 28, 2007’’ for ‘‘December

28, 2005’’ in subparagraph (D)(i) thereof, and

(2) without regard to subparagraph (D)(ii).

(j) EFFECTIVE DATE.—Except as otherwise provided in this section, the provisions of and amendments made by this section shall

apply to plan years ending after the date of the enactment of

this Act.

SEC. 403. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN AND

OTHER BENEFITS.

(a) IN GENERAL.—Section 4022(b) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1322(b)) is amended by

adding at the end the following:

‘‘(8) If an unpredictable contingent event benefit (as defined

in section 206(g)(1)) is payable by reason of the occurrence

of any event, this section shall be applied as if a plan amendment had been adopted on the date such event occurred.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to benefits that become payable as a result of an

event which occurs after July 26, 2005.

SEC. 404. RULES RELATING TO BANKRUPTCY OF EMPLOYER.

(a) GUARANTEE.—Section 4022 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1322) is amended by adding

at the end the following:

‘‘(g) BANKRUPTCY FILING SUBSTITUTED FOR TERMINATION

DATE.—If a contributing sponsor of a plan has filed or has had

filed against such person a petition seeking liquidation or reorganization in a case under title 11, United States Code, or under

any similar Federal law or law of a State or political subdivision,

and the case has not been dismissed as of the termination date

of the plan, then this section shall be applied by treating the

date such petition was filed as the termination date of the plan.’’.

(b) ALLOCATION OF ASSETS AMONG PRIORITY GROUPS IN BANK- RUPTCY PROCEEDINGS.—Section 4044 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1344) is amended by adding

at the end the following:

‘‘(e) BANKRUPTCY FILING SUBSTITUTED FOR TERMINATION

DATE.—If a contributing sponsor of a plan has filed or has had

filed against such person a petition seeking liquidation or reorganization in a case under title 11, United States Code, or under

any similar Federal law or law of a State or political subdivision,

and the case has not been dismissed as of the termination date

of the plan, then subsection (a)(3) shall be applied by treating

the date such petition was filed as the termination date of the

plan.’’.

(c) EFFECTIVE DATE.—The amendments made this section shall

apply with respect to proceedings initiated under title 11, United

States Code, or under any similar Federal law or law of a State

or political subdivision, on or after the date that is 30 days after

the date of enactment of this Act.

SEC. 405. PBGC PREMIUMS FOR SMALL PLANS.

(a) SMALL PLANS.—Paragraph (3) of section 4006(a) of the

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

1306(a)) is amended—

29 USC 1322

note.

29 USC 1322

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 929

(1) by striking ‘‘The additional’’ in subparagraph (E)(i) and

inserting ‘‘Except as provided in subparagraph (H), the additional’’, and

(2) by inserting after subparagraph (G) the following new

subparagraph:

‘‘(H)(i) In the case of an employer who has 25 or fewer

employees on the first day of the plan year, the additional premium

determined under subparagraph (E) for each participant shall not

exceed $5 multiplied by the number of participants in the plan

as of the close of the preceding plan year.

‘‘(ii) For purposes of clause (i), whether an employer has 25

or fewer employees on the first day of the plan year is determined

by taking into consideration all of the employees of all members

of the contributing sponsor’s controlled group. In the case of a

plan maintained by two or more contributing sponsors, the

employees of all contributing sponsors and their controlled groups

shall be aggregated for purposes of determining whether the 25-

or-fewer-employees limitation has been satisfied.’’

(b) EFFECTIVE DATES.—The amendment made by this section

shall apply to plan years beginning after December 31, 2006.

SEC. 406. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM

OVERPAYMENT REFUNDS.

(a) IN GENERAL.—Section 4007(b) of the Employment Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is amended—

(1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, and

(2) by inserting at the end the following new paragraph:

‘‘(2) The corporation is authorized to pay, subject to regulations

prescribed by the corporation, interest on the amount of any overpayment of premium refunded to a designated payor. Interest under

this paragraph shall be calculated at the same rate and in the

same manner as interest is calculated for underpayments under

paragraph (1).’’

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

(a) shall apply to interest accruing for periods beginning not earlier

than the date of the enactment of this Act.

SEC. 407. RULES FOR SUBSTANTIAL OWNER BENEFITS IN TERMINATED

PLANS.

(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—Section

4022(b)(5) of the Employee Retirement Income Security Act of 1974

(29 U.S.C. 1322(b)(5)) is amended to read as follows:

‘‘(5)(A) For purposes of this paragraph, the term ‘majority

owner’ means an individual who, at any time during the 60-month

period ending on the date the determination is being made—

‘‘(i) owns the entire interest in an unincorporated trade

or business,

‘‘(ii) in the case of a partnership, is a partner who owns,

directly or indirectly, 50 percent or more of either the capital

interest or the profits interest in such partnership, or

‘‘(iii) in the case of a corporation, owns, directly or

indirectly, 50 percent or more in value of either the voting

stock of that corporation or all the stock of that corporation.

For purposes of clause (iii), the constructive ownership rules of

section 1563(e) of the Internal Revenue Code of 1986 (other than

paragraph (3)(C) thereof) shall apply, including the application of

such rules under section 414(c) of such Code.

29 USC 1307

note.

Regulations.

29 USC 1306

note.

120 STAT. 930 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) In the case of a participant who is a majority owner,

the amount of benefits guaranteed under this section shall equal

the product of—

‘‘(i) a fraction (not to exceed 1) the numerator of which

is the number of years from the later of the effective date

or the adoption date of the plan to the termination date, and

the denominator of which is 10, and

‘‘(ii) the amount of benefits that would be guaranteed under

this section if the participant were not a majority owner.’’

(b) MODIFICATION OF ALLOCATION OF ASSETS.— (1) Section 4044(a)(4)(B) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is

amended by striking ‘‘section 4022(b)(5)’’ and inserting ‘‘section

4022(b)(5)(B)’’.

(2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is

amended—

(A) by striking ‘‘(5)’’ in paragraph (2) and inserting

‘‘(4), (5),’’, and

(B) by redesignating paragraphs (3) through (6) as

paragraphs (4) through (7), respectively, and by inserting

after paragraph (2) the following new paragraph:

‘‘(3) If assets available for allocation under paragraph (4)

of subsection (a) are insufficient to satisfy in full the benefits

of all individuals who are described in that paragraph, the

assets shall be allocated first to benefits described in subparagraph (A) of that paragraph. Any remaining assets shall then

be allocated to benefits described in subparagraph (B) of that

paragraph. If assets allocated to such subparagraph (B) are

insufficient to satisfy in full the benefits described in that

subparagraph, the assets shall be allocated pro rata among

individuals on the basis of the present value (as of the termination date) of their respective benefits described in that

subparagraph.’’.

(c) CONFORMING AMENDMENTS.—

(1) Section 4021 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1321) is amended—

(A) in subsection (b)(9), by striking ‘‘as defined in section 4022(b)(6)’’, and

(B) by adding at the end the following new subsection:

‘‘(d) For purposes of subsection (b)(9), the term ‘substantial

owner’ means an individual who, at any time during the 60-month

period ending on the date the determination is being made—

‘‘(1) owns the entire interest in an unincorporated trade

or business,

‘‘(2) in the case of a partnership, is a partner who owns,

directly or indirectly, more than 10 percent of either the capital

interest or the profits interest in such partnership, or

‘‘(3) in the case of a corporation, owns, directly or indirectly,

more than 10 percent in value of either the voting stock of

that corporation or all the stock of that corporation.

For purposes of paragraph (3), the constructive ownership rules

of section 1563(e) of the Internal Revenue Code of 1986 (other

than paragraph (3)(C) thereof) shall apply, including the application

of such rules under section 414(c) of such Code.’’.

(2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7))

is amended by striking ‘‘section 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 931

(d) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to plan terminations—

(A) under section 4041(c) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1341(c)) with

respect to which notices of intent to terminate are provided

under section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2))

after December 31, 2005, and

(B) under section 4042 of such Act (29 U.S.C. 1342)

with respect to which notices of determination are provided

under such section after such date.

(2) CONFORMING AMENDMENTS.—The amendments made by

subsection (c) shall take effect on January 1, 2006.

SEC. 408. ACCELERATION OF PBGC COMPUTATION OF BENEFITS

ATTRIBUTABLE TO RECOVERIES FROM EMPLOYERS.

(a) MODIFICATION OF AVERAGE RECOVERY PERCENTAGE OF OUTSTANDING AMOUNT OF BENEFIT LIABILITIES PAYABLE BY CORPORATION TO PARTICIPANTS AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii)

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

1322(c)(3)(B)(ii)) is amended to read as follows:

‘‘(ii) notices of intent to terminate were provided

(or in the case of a termination by the corporation,

a notice of determination under section 4042 was

issued) during the 5-Federal fiscal year period ending

with the third fiscal year preceding the fiscal year

in which occurs the date of the notice of intent to

terminate (or the notice of determination under section

4042) with respect to the plan termination for which

the recovery ratio is being determined.’’

(b) VALUATION OF SECTION 4062(c) LIABILITY FOR DETERMINING

AMOUNTS PAYABLE BY CORPORATION TO PARTICIPANTS AND BENEFICIARIES.—

(1) SINGLE-EMPLOYER PLAN BENEFITS GUARANTEED.—Section 4022(c)(3)(A) of the Employee Retirement Income Security

Act of 1974 (29 U.S.C. 13) is amended to read as follows:

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(C), the term ‘recovery ratio’ means the ratio which—

‘‘(i) the sum of the values of all recoveries under

section 4062, 4063, or 4064, determined by the corporation in connection with plan terminations described

under subparagraph (B), bears to

‘‘(ii) the sum of all unfunded benefit liabilities

under such plans as of the termination date in connection with any such prior termination.’’.

(2) ALLOCATION OF ASSETS.—Section 4044 of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1362) is

amended by adding at the end the following new subsection:

‘‘(e) VALUATION OF SECTION 4062(c) LIABILITY FOR DETERMINING

AMOUNTS PAYABLE BY CORPORATION TO PARTICIPANTS AND BENE- FICIARIES.—

‘‘(1) IN GENERAL.—In the case of a terminated plan, the

value of the recovery of liability under section 4062(c) allocable

as a plan asset under this section for purposes of determining

the amount of benefits payable by the corporation shall be

determined by multiplying—

29 USC 1344.

29 USC 1322.

Effective date.

29 USC 1321

note.

120 STAT. 932 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) the amount of liability under section 4062(c) as

of the termination date of the plan, by

‘‘(B) the applicable section 4062(c) recovery ratio.

‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For purposes of

this subsection—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(C), the term ‘section 4062(c) recovery ratio’ means the

ratio which—

‘‘(i) the sum of the values of all recoveries under

section 4062(c) determined by the corporation in

connection with plan terminations described under

subparagraph (B), bears to

‘‘(ii) the sum of all the amounts of liability under

section 4062(c) with respect to such plans as of the

termination date in connection with any such prior

termination.

‘‘(B) PRIOR TERMINATIONS.—A plan termination

described in this subparagraph is a termination with

respect to which—

‘‘(i) the value of recoveries under section 4062(c)

have been determined by the corporation, and

‘‘(ii) notices of intent to terminate were provided

(or in the case of a termination by the corporation,

a notice of determination under section 4042 was

issued) during the 5-Federal fiscal year period ending

with the third fiscal year preceding the fiscal year

in which occurs the date of the notice of intent to

terminate (or the notice of determination under section

4042) with respect to the plan termination for which

the recovery ratio is being determined.

‘‘(C) EXCEPTION.—In the case of a terminated plan

with respect to which the outstanding amount of benefit

liabilities exceeds $20,000,000, the term ‘section 4062(c)

recovery ratio’ means, with respect to the termination of

such plan, the ratio of—

‘‘(i) the value of the recoveries on behalf of the

plan under section 4062(c), to

‘‘(ii) the amount of the liability owed under section

4062(c) as of the date of plan termination to the trustee

appointed under section 4042 (b) or (c).

‘‘(3) SUBSECTION NOT TO APPLY.—This subsection shall not

apply with respect to the determination of—

‘‘(A) whether the amount of outstanding benefit liabilities exceeds $20,000,000, or

‘‘(B) the amount of any liability under section 4062

to the corporation or the trustee appointed under section

4042 (b) or (c).

‘‘(4) DETERMINATIONS.—Determinations under this subsection shall be made by the corporation. Such determinations

shall be binding unless shown by clear and convincing evidence

to be unreasonable.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply for any termination for which notices of intent to terminate are provided (or in the case of a termination by the corporation,

a notice of determination under section 4042 under the Employee

Retirement Income Security Act of 1974 is issued) on or after

29 USC 1322

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 933

the date which is 30 days after the date of enactment of this

section.

SEC. 409. TREATMENT OF CERTAIN PLANS WHERE CESSATION OR

CHANGE IN MEMBERSHIP OF A CONTROLLED GROUP.

(a) IN GENERAL.—Section 4041(b) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1341(b)) is amended by

adding at the end the following new paragraph:

‘‘(5) SPECIAL RULE FOR CERTAIN PLANS WHERE CESSATION

OR CHANGE IN MEMBERSHIP OF A CONTROLLED GROUP.—

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(B), if—

‘‘(i) there is transaction or series of transactions

which result in a person ceasing to be a member of

a controlled group, and

‘‘(ii) such person immediately before the transaction or series of transactions maintained a singleemployer plan which is a defined benefit plan which

is fully funded,

then the interest rate used in determining whether the

plan is sufficient for benefit liabilities or to otherwise assess

plan liabilities for purposes of this subsection or section

4042(a)(4) shall be not less than the interest rate used

in determining whether the plan is fully funded.

‘‘(B) LIMITATIONS.—Subparagraph (A) shall not apply

to any transaction or series of transactions unless—

‘‘(i) any employer maintaining the plan immediately before or after such transaction or series of

transactions—

‘‘(I) has an outstanding senior unsecured debt

instrument which is rated investment grade by

each of the nationally recognized statistical rating

organizations for corporate bonds that has issued

a credit rating for such instrument, or

‘‘(II) if no such debt instrument of such

employer has been rated by such an organization

but 1 or more of such organizations has made

an issuer credit rating for such employer, all such

organizations which have so rated the employer

have rated such employer investment grade, and

‘‘(ii) the employer maintaining the plan after the

transaction or series of transactions employs at least

20 percent of the employees located in the United

States who were employed by such employer immediately before the transaction or series of transactions.

‘‘(C) FULLY FUNDED.—For purposes of subparagraph

(A), a plan shall be treated as fully funded with respect

to any transaction or series of transactions if—

‘‘(i) in the case of a transaction or series of transactions which occur in a plan year beginning before

January 1, 2008, the funded current liability percentage determined under section 302(d) for the plan year

is at least 100 percent, and

‘‘(ii) in the case of a transaction or series of transactions which occur in a plan year beginning on or

120 STAT. 934 PUBLIC LAW 109–280—AUG. 17, 2006

after such date, the funding target attainment percentage determined under section 303 is, as of the valuation

date for such plan year, at least 100 percent.

‘‘(D) 2 YEAR LIMITATION.—Subparagraph (A) shall not

apply to any transaction or series of transactions if the

plan referred to in subparagraph (A)(ii) is terminated under

section 4041(c) or 4042 after the close of the 2-year period

beginning on the date on which the first such transaction

occurs.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to any transaction or series of transactions occurring

on and after the date of the enactment of this Act.

SEC. 410. MISSING PARTICIPANTS.

(a) IN GENERAL.—Section 4050 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating subsection (c) as subsection (e) and by inserting after subsection (b) the following new subsections:

‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall prescribe

rules similar to the rules in subsection (a) for multiemployer plans

covered by this title that terminate under section 4041A.

‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

‘‘(1) TRANSFER TO CORPORATION.—The plan administrator

of a plan described in paragraph (4) may elect to transfer

a missing participant’s benefits to the corporation upon termination of the plan.

‘‘(2) INFORMATION TO THE CORPORATION.—To the extent

provided in regulations, the plan administrator of a plan

described in paragraph (4) shall, upon termination of the plan,

provide the corporation information with respect to benefits

of a missing participant if the plan transfers such benefits—

‘‘(A) to the corporation, or

‘‘(B) to an entity other than the corporation or a plan

described in paragraph (4)(B)(ii).

‘‘(3) PAYMENT BY THE CORPORATION.—If benefits of a

missing participant were transferred to the corporation under

paragraph (1), the corporation shall, upon location of the participant or beneficiary, pay to the participant or beneficiary the

amount transferred (or the appropriate survivor benefit)

either—

‘‘(A) in a single sum (plus interest), or

‘‘(B) in such other form as is specified in regulations

of the corporation.

‘‘(4) PLANS DESCRIBED.—A plan is described in this paragraph if—

‘‘(A) the plan is a pension plan (within the meaning

of section 3(2))—

‘‘(i) to which the provisions of this section do not

apply (without regard to this subsection), and

‘‘(ii) which is not a plan described in paragraphs

(2) through (11) of section 4021(b), and

‘‘(B) at the time the assets are to be distributed upon

termination, the plan—

‘‘(i) has missing participants, and

‘‘(ii) has not provided for the transfer of assets

to pay the benefits of all missing participants to

Regulations.

29 USC 1341

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 935

another pension plan (within the meaning of section

3(2)).

‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—Subsections (a)(1)

and (a)(3) shall not apply to a plan described in paragraph

(4).’’.

(b) CONFORMING AMENDMENTS.—Section 206(f) of such Act (29

U.S.C. 1056(f)) is amended—

(1) by striking ‘‘title IV’’ and inserting ‘‘section 4050’’; and

(2) by striking ‘‘the plan shall provide that,’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to distributions made after final regulations implementing subsections (c) and (d) of section 4050 of the Employee

Retirement Income Security Act of 1974 (as added by subsection

(a)), respectively, are prescribed.

SEC. 411. DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION.

(a) IN GENERAL.—Title IV of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1301 et seq.) is amended—

(1) by striking the second sentence of section 4002(a) and

inserting the following: ‘‘In carrying out its functions under

this title, the corporation shall be administered by a Director,

who shall be appointed by the President, by and with the

advice and consent of the Senate, and who shall act in accordance with the policies established by the board.’’; and

(2) in section 4003(b), by—

(A) striking ‘‘under this title, any member’’ and

inserting ‘‘under this title, the Director, any member’’; and

(B) striking ‘‘designated by the chairman’’ and inserting

‘‘designated by the Director or chairman’’.

(b) COMPENSATION OF DIRECTOR.—Section 5314 of title 5,

United States Code, is amended by adding at the end the following

new item:

‘‘Director, Pension Benefit Guaranty Corporation.’’.

(c) JURISDICTION OF NOMINATION.—

(1) IN GENERAL.—The Committee on Finance of the Senate

and the Committee on Health, Education, Labor, and Pensions

of the Senate shall have joint jurisdiction over the nomination

of a person nominated by the President to fill the position

of Director of the Pension Benefit Guaranty Corporation under

section 4002 of the Employee Retirement Income Security Act

of 1974 (29 U.S.C. 1302) (as amended by this Act), and if

one committee votes to order reported such a nomination, the

other shall report within 30 calendar days, or be automatically

discharged.

(2) RULEMAKING OF THE SENATE.—This subsection is

enacted by Congress—

(A) as an exercise of rulemaking power of the Senate,

and as such it is deemed a part of the rules of the Senate,

but applicable only with respect to the procedure to be

followed in the Senate in the case of a nomination described

in such sentence, and it supersedes other rules only to

the extent that it is inconsistent with such rules; and

(B) with full recognition of the constitutional right

of the Senate to change the rules (so far as relating to

the procedure of the Senate) at any time, in the same

29 USC 1303.

29 USC 1302.

Regulations.

29 USC 1056

note.

120 STAT. 936 PUBLIC LAW 109–280—AUG. 17, 2006

manner and to the same extent as in the case of any

other rule of the Senate.

(d) TRANSITION.—The term of the individual serving as Executive Director of the Pension Benefit Guaranty Corporation on the

date of enactment of this Act shall expire on such date of enactment.

Such individual, or any other individual, may serve as interim

Director of such Corporation until an individual is appointed as

Director of such Corporation under section 4002 of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1302) (as

amended by this Act).

SEC. 412. INCLUSION OF INFORMATION IN THE PBGC ANNUAL REPORT.

Section 4008 of the Employee Retirement Income Security Act

of 1974 (29 U.S.C. 1308) is amended by—

(1) striking ‘‘As soon as practicable’’ and inserting ‘‘(a)

As soon as practicable’’; and

(2) adding at the end the following:

‘‘(b) The report under subsection (a) shall include—

‘‘(1) a summary of the Pension Insurance Modeling System

microsimulation model, including the specific simulation parameters, specific initial values, temporal parameters, and policy

parameters used to calculate the financial statements for the

corporation;

‘‘(2) a comparison of—

‘‘(A) the average return on investments earned with

respect to assets invested by the corporation for the year

to which the report relates; and

‘‘(B) an amount equal to 60 percent of the average

return on investment for such year in the Standard &

Poor’s 500 Index, plus 40 percent of the average return

on investment for such year in the Lehman Aggregate

Bond Index (or in a similar fixed income index); and

‘‘(3) a statement regarding the deficit or surplus for such

year that the corporation would have had if the corporation

had earned the return described in paragraph (2)(B) with

respect to assets invested by the corporation.’’.

TITLE V—DISCLOSURE

SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.

(a) IN GENERAL.—Section 101(f) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1021(f)) is amended to

read as follows:

‘‘(f) DEFINED BENEFIT PLAN FUNDING NOTICES.—

‘‘(1) IN GENERAL.—The administrator of a defined benefit

plan to which title IV applies shall for each plan year provide

a plan funding notice to the Pension Benefit Guaranty Corporation, to each plan participant and beneficiary, to each labor

organization representing such participants or beneficiaries,

and, in the case of a multiemployer plan, to each employer

that has an obligation to contribute to the plan.

‘‘(2) INFORMATION CONTAINED IN NOTICES.—

‘‘(A) IDENTIFYING INFORMATION.—Each notice required

under paragraph (1) shall contain identifying information,

including the name of the plan, the address and phone

number of the plan administrator and the plan’s principal

Termination

date.

29 USC 1302

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 937

administrative officer, each plan sponsor’s employer identification number, and the plan number of the plan.

‘‘(B) SPECIFIC INFORMATION.—A plan funding notice

under paragraph (1) shall include—

‘‘(i)(I) in the case of a single-employer plan, a statement as to whether the plan’s funding target attainment percentage (as defined in section 303(d)(2)) for

the plan year to which the notice relates, and for

the 2 preceding plan years, is at least 100 percent

(and, if not, the actual percentages), or

‘‘(II) in the case of a multiemployer plan, a statement as to whether the plan’s funded percentage (as

defined in section 305(i)) for the plan year to which

the notice relates, and for the 2 preceding plan years,

is at least 100 percent (and, if not, the actual percentages),

‘‘(ii)(I) in the case of a single-employer plan, a

statement of—

‘‘(aa) the total assets (separately stating the

prefunding balance and the funding standard

carryover balance) and liabilities of the plan, determined in the same manner as under section 303,

for the plan year for which the latest annual report

filed under section 104(a) was filed and for the

2 preceding plan years, as reported in the annual

report for each such plan year, and

‘‘(bb) the value of the plan’s assets and liabilities for the plan year to which the notice relates

as of the last day of the plan year to which the

notice relates determined using the asset valuation

under subclause (II) of section 4006(a)(3)(E)(iii)

and the interest rate under section

4006(a)(3)(E)(iv), and

‘‘(II) in the case of a multiemployer plan, a statement of the value of the plan’s assets and liabilities

for the plan year to which the notice relates as the

last day of such plan year and the preceding 2 plan

years,

‘‘(iii) a statement of the number of participants

who are—

‘‘(I) retired or separated from service and are

receiving benefits,

‘‘(II) retired or separated participants entitled

to future benefits, and

‘‘(III) active participants under the plan,

‘‘(iv) a statement setting forth the funding policy

of the plan and the asset allocation of investments

under the plan (expressed as percentages of total

assets) as of the end of the plan year to which the

notice relates,

‘‘(v) in the case of a multiemployer plan, whether

the plan was in critical or endangered status under

section 305 for such plan year and, if so—

‘‘(I) a statement describing how a person may

obtain a copy of the plan’s funding improvement

or rehabilitation plan, as appropriate, adopted

under section 305 and the actuarial and financial

120 STAT. 938 PUBLIC LAW 109–280—AUG. 17, 2006

data that demonstrate any action taken by the

plan toward fiscal improvement, and

‘‘(II) a summary of any funding improvement

plan, rehabilitation plan, or modification thereof

adopted under section 305 during the plan year

to which the notice relates,

‘‘(vi) in the case of any plan amendment, scheduled

benefit increase or reduction, or other known event

taking effect in the current plan year and having a

material effect on plan liabilities or assets for the

year (as defined in regulations by the Secretary), an

explanation of the amendment, schedule increase or

reduction, or event, and a projection to the end of

such plan year of the effect of the amendment, scheduled increase or reduction, or event on plan liabilities,

‘‘(vii)(I) in the case of a single-employer plan, a

summary of the rules governing termination of singleemployer plans under subtitle C of title IV, or

‘‘(II) in the case of a multiemployer plan, a summary of the rules governing reorganization or insolvency, including the limitations on benefit payments,

‘‘(viii) a general description of the benefits under

the plan which are eligible to be guaranteed by the

Pension Benefit Guaranty Corporation, along with an

explanation of the limitations on the guarantee and

the circumstances under which such limitations apply,

‘‘(ix) a statement that a person may obtain a copy

of the annual report of the plan filed under section

104(a) upon request, through the Internet website of

the Department of Labor, or through an Intranet

website maintained by the applicable plan sponsor (or

plan administrator on behalf of the plan sponsor), and

‘‘(x) if applicable, a statement that each contributing sponsor, and each member of the contributing

sponsor’s controlled group, of the single-employer plan

was required to provide the information under section

4010 for the plan year to which the notice relates.

‘‘(C) OTHER INFORMATION.—Each notice under paragraph (1) shall include—

‘‘(i) in the case of a multiemployer plan, a statement that the plan administrator shall provide, upon

written request, to any labor organization representing

plan participants and beneficiaries and any employer

that has an obligation to contribute to the plan, a

copy of the annual report filed with the Secretary

under section 104(a), and

‘‘(ii) any additional information which the plan

administrator elects to include to the extent not inconsistent with regulations prescribed by the Secretary.

‘‘(3) TIME FOR PROVIDING NOTICE.—

‘‘(A) IN GENERAL.—Any notice under paragraph (1)

shall be provided not later than 120 days after the end

of the plan year to which the notice relates.

‘‘(B) EXCEPTION FOR SMALL PLANS.—In the case of a

small plan (as such term is used under section 303(g)(2)(B))

any notice under paragraph (1) shall be provided upon

filing of the annual report under section 104(a).

Reports.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 939

‘‘(4) FORM AND MANNER.—Any notice under paragraph (1)—

‘‘(A) shall be provided in a form and manner prescribed

in regulations of the Secretary,

‘‘(B) shall be written in a manner so as to be understood

by the average plan participant, and

‘‘(C) may be provided in written, electronic, or other

appropriate form to the extent such form is reasonably

accessible to persons to whom the notice is required to

be provided.’’.

(b) REPEAL OF NOTICE TO PARTICIPANTS OF FUNDING STATUS.—

(1) IN GENERAL.—Title IV of such Act (29 U.S.C. 1301

et seq.) is amended by striking section 4011.

(2) CLERICAL AMENDMENT.—Section 1 of such Act is

amended in the table of contents by striking the item relating

to section 4011.

(c) MODEL NOTICE.—Not later than 1 year after the date of

the enactment of this Act, the Secretary of Labor shall publish

a model version of the notice required by section 101(f) of the

Employee Retirement Income Security Act of 1974. The Secretary

of Labor may promulgate any interim final rules as the Secretary

determines appropriate to carry out the provisions of this subsection.

(d) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007,

except that the amendment made by subsection (b) shall apply

to plan years beginning after December 31, 2006.

(2) TRANSITION RULE.—Any requirement under section

101(f) of the Employee Retirement Income Security Act of 1974

(as amended by this section) to report the funding target attainment percentage or funded percentage of a plan with respect

to any plan year beginning before January 1, 2008, shall be

treated as met if the plan reports—

(A) in the case of a plan year beginning in 2006,

the funded current liability percentage (as defined in section 302(d)(8) of such Act) of the plan for such plan year,

and

(B) in the case of a plan year beginning in 2007,

the funding target attainment percentage or funded

percentage as determined using such methods of estimation

as the Secretary of the Treasury may provide.

SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN INFORMATION.

(a) FINANCIAL INFORMATION WITH RESPECT TO MULTIEMPLOYER

PLANS.—

(1) IN GENERAL.—Section 101 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1021), as amended

by section 103, is amended—

(A) by redesignating subsection (k) as subsection (l);

and

(B) by inserting after subsection (j) the following new

subsection:

‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE AVAILABLE ON

REQUEST.—

‘‘(1) IN GENERAL.—Each administrator of a multiemployer

plan shall, upon written request, furnish to any plan participant

Reports.

29 USC 1021

note.

Deadline.

29 USC 1021

note.

29 USC 1311.

Regulations.

120 STAT. 940 PUBLIC LAW 109–280—AUG. 17, 2006

or beneficiary, employee representative, or any employer that

has an obligation to contribute to the plan—

‘‘(A) a copy of any periodic actuarial report (including

any sensitivity testing) received by the plan for any plan

year which has been in the plan’s possession for at least

30 days,

‘‘(B) a copy of any quarterly, semi-annual, or annual

financial report prepared for the plan by any plan investment manager or advisor or other fiduciary which has

been in the plan’s possession for at least 30 days, and

‘‘(C) a copy of any application filed with the Secretary

of the Treasury requesting an extension under section 304

of this Act or section 431(d) of the Internal Revenue Code

of 1986 and the determination of such Secretary pursuant

to such application.

‘‘(2) COMPLIANCE.—Information required to be provided

under paragraph (1)—

‘‘(A) shall be provided to the requesting participant,

beneficiary, or employer within 30 days after the request

in a form and manner prescribed in regulations of the

Secretary,

‘‘(B) may be provided in written, electronic, or other

appropriate form to the extent such form is reasonably

accessible to persons to whom the information is required

to be provided, and

‘‘(C) shall not—

‘‘(i) include any individually identifiable information regarding any plan participant, beneficiary,

employee, fiduciary, or contributing employer, or

‘‘(ii) reveal any proprietary information regarding

the plan, any contributing employer, or entity providing services to the plan.

‘‘(3) LIMITATIONS.—In no case shall a participant, beneficiary, or employer be entitled under this subsection to receive

more than one copy of any report or application described

in paragraph (1) during any one 12-month period. The administrator may make a reasonable charge to cover copying, mailing,

and other costs of furnishing copies of information pursuant

to paragraph (1). The Secretary may by regulations prescribe

the maximum amount which will constitute a reasonable charge

under the preceding sentence.’’.

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C.

1132(c)(4)) is amended by striking ‘‘section 101(j)’’ and inserting

‘‘subsection (j) or (k) of section 101’’.

(3) REGULATIONS.—The Secretary shall prescribe regulations under section 101(k)(2) of the Employee Retirement

Income Security Act of 1974 (as added by paragraph (1)) not

later than 1 year after the date of the enactment of this Act.

(b) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY TO MULTIEMPLOYER PLANS.—

(1) IN GENERAL.—Section 101 of such Act (as amended

by subsection (a)) is amended—

(A) by redesignating subsection (l) as subsection (m);

and

(B) by inserting after subsection (k) the following new

subsection:

‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY.—

29 USC 1021.

29 USC 1021

note.

Deadline.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 941

‘‘(1) IN GENERAL.—The plan sponsor or administrator of

a multiemployer plan shall, upon written request, furnish to

any employer who has an obligation to contribute to the plan

a notice of—

‘‘(A) the estimated amount which would be the amount

of such employer’s withdrawal liability under part 1 of

subtitle E of title IV if such employer withdrew on the

last day of the plan year preceding the date of the request,

and

‘‘(B) an explanation of how such estimated liability

amount was determined, including the actuarial assumptions and methods used to determine the value of the

plan liabilities and assets, the data regarding employer

contributions, unfunded vested benefits, annual changes

in the plan’s unfunded vested benefits, and the application

of any relevant limitations on the estimated withdrawal

liability.

For purposes of subparagraph (B), the term ‘employer contribution’ means, in connection with a participant, a contribution

made by an employer as an employer of such participant.

‘‘(2) COMPLIANCE.—Any notice required to be provided

under paragraph (1)—

‘‘(A) shall be provided in a form and manner prescribed

in regulations of the Secretary to the requesting employer

within—

‘‘(i) 180 days after the request, or

‘‘(ii) subject to regulations of the Secretary, such

longer time as may be necessary in the case of a

plan that determines withdrawal liability based on

any method described under paragraph (4) or (5) of

section 4211(c); and

‘‘(B) may be provided in written, electronic, or other

appropriate form to the extent such form is reasonably

accessible to employers to whom the information is required

to be provided.

‘‘(3) LIMITATIONS.—In no case shall an employer be entitled

under this subsection to receive more than one notice described

in paragraph (1) during any one 12-month period. The person

required to provide such notice may make a reasonable charge

to cover copying, mailing, and other costs of furnishing such

notice pursuant to paragraph (1). The Secretary may by regulations prescribe the maximum amount which will constitute

a reasonable charge under the preceding sentence.’’.

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C.

1132(c)(4)) is amended by striking ‘‘section 101(j) or (k)’’ and

inserting ‘‘subsection (j), (k), or (l) of section 101’’.

(c) NOTICE OF AMENDMENT REDUCING FUTURE ACCRUALS.—

(1) AMENDMENT OF ERISA.—Section 204(h)(1) of such Act

(29 U.S.C. 1054(h)(1)) is amended by inserting at the end

before the period the following: ‘‘and to each employer who

has an obligation to contribute to the plan’’.

(2) AMENDMENT OF INTERNAL REVENUE CODE.—Section

4980F(e)(1) of such Code is amended by adding at the end

before the period the following: ‘‘and to each employer who

has an obligation to contribute to the plan’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007.

26 USC 4980F

note.

26 USC 4980F.

Deadline.

Regulations.

120 STAT. 942 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIREMENTS.

(a) ADDITIONAL ANNUAL REPORTING REQUIREMENTS WITH

RESPECT TO DEFINED BENEFIT PLANS.—

(1) IN GENERAL.—Section 103 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1023) is amended—

(A) in subsection (a)(1)(B), by striking ‘‘subsections (d)

and (e)’’ and inserting ‘‘subsections (d), (e), and (f)’’; and

(B) by adding at the end the following new subsection:

‘‘(f) ADDITIONAL INFORMATION WITH RESPECT TO DEFINED BENEFIT PLANS.—

‘‘(1) LIABILITIES UNDER 2 OR MORE PLANS.—

‘‘(A) IN GENERAL.—In any case in which any liabilities

to participants or their beneficiaries under a defined benefit

plan as of the end of a plan year consist (in whole or

in part) of liabilities to such participants and beneficiaries

under 2 or more pension plans as of immediately before

such plan year, an annual report under this section for

such plan year shall include the funded percentage of each

of such 2 or more pension plans as of the last day of

such plan year and the funded percentage of the plan

with respect to which the annual report is filed as of

the last day of such plan year.

‘‘(B) FUNDED PERCENTAGE.—For purposes of this paragraph, the term ‘funded percentage’—

‘‘(i) in the case of a single-employer plan, means

the funding target attainment percentage, as defined

in section 303(d)(2), and

‘‘(ii) in the case of a multiemployer plan, has the

meaning given such term in section 305(i)(2).

‘‘(2) ADDITIONAL INFORMATION FOR MULTIEMPLOYER

PLANS.—With respect to any defined benefit plan which is a

multiemployer plan, an annual report under this section for

a plan year shall include, in addition to the information

required under paragraph (1), the following, as of the end

of the plan year to which the report relates:

‘‘(A) The number of employers obligated to contribute

to the plan.

‘‘(B) A list of the employers that contributed more

than 5 percent of the total contributions to the plan during

such plan year.

‘‘(C) The number of participants under the plan on

whose behalf no contributions were made by an employer

as an employer of the participant for such plan year and

for each of the 2 preceding plan years.

‘‘(D) The ratios of—

‘‘(i) the number of participants under the plan

on whose behalf no employer had an obligation to

make an employer contribution during the plan year,

to

‘‘(ii) the number of participants under the plan

on whose behalf no employer had an obligation to

make an employer contribution during each of the

2 preceding plan years.

‘‘(E) Whether the plan received an amortization extension under section 304(d) of this Act or section 431(d)

of the Internal Revenue Code of 1986 for such plan year

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 943

and, if so, the amount of the difference between the minimum required contribution for the year and the minimum

required contribution which would have been required

without regard to the extension, and the period of such

extension.

‘‘(F) Whether the plan used the shortfall funding

method (as such term is used in section 305) for such

plan year and, if so, the amount of the difference between

the minimum required contribution for the year and the

minimum required contribution which would have been

required without regard to the use of such method, and

the period of use of such method.

‘‘(G) Whether the plan was in critical or endangered

status under section 305 for such plan year, and if so,

a summary of any funding improvement or rehabilitation

plan (or modification thereto) adopted during the plan year,

and the funded percentage of the plan.

‘‘(H) The number of employers that withdrew from

the plan during the preceding plan year and the aggregate

amount of withdrawal liability assessed, or estimated to

be assessed, against such withdrawn employers.

‘‘(I) In the case of a multiemployer plan that has

merged with another plan or to which assets and liabilities

have been transferred, the actuarial valuation of the assets

and liabilities of each affected plan during the year preceding the effective date of the merger or transfer, based

upon the most recent data available as of the day before

the first day of the plan year, or other valuation method

performed under standards and procedures as the Secretary may prescribe by regulation.’’.

(2) GUIDANCE BY SECRETARY OF LABOR.—Not later than

1 year after the date of enactment of this Act, the Secretary

of Labor shall publish guidance to assist multiemployer defined

benefit plans to—

(A) identify and enumerate plan participants for whom

there is no employer with an obligation to make an

employer contribution under the plan; and

(B) report such information under section 103(f)(2)(D)

of the Employee Retirement Income Security Act of 1974

(as added by this section).

(b) ADDITIONAL INFORMATION IN ANNUAL ACTUARIAL STATEMENT REGARDING PLAN RETIREMENT PROJECTIONS.—Section 103(d)

of such Act (29 U.S.C. 1023(d)) is amended—

(1) by redesignating paragraphs (12) and (13) as paragraphs

(13) and (14), respectively; and

(2) by inserting after paragraph (11) the following new

paragraph:

‘‘(12) A statement explaining the actuarial assumptions

and methods used in projecting future retirements and forms

of benefit distributions under the plan.’’.

(c) REPEAL OF SUMMARY ANNUAL REPORT REQUIREMENT FOR

DEFINED BENEFIT PLANS.—

(1) IN GENERAL.—Section 104(b)(3) of such Act (29 U.S.C.

1024(b)(3)) is amended by inserting ‘‘(other than an administrator of a defined benefit plan to which the requirements

of section 103(f) applies)’’ after ‘‘the administrators’’.

Deadline.

29 USC 1023

note.

120 STAT. 944 PUBLIC LAW 109–280—AUG. 17, 2006

(2) CONFORMING AMENDMENT.—Section 101(a)(2) of such

Act (29 U.S.C. 1021(a)(2)) is amended by inserting ‘‘subsection

(f) and’’ before ‘‘sections 104(b)(3) and 105(a) and (c)’’.

(d) FURNISHING SUMMARY PLAN INFORMATION TO EMPLOYERS

AND EMPLOYEE REPRESENTATIVES OF MULTIEMPLOYER PLANS.—Section 104 of such Act (29 U.S.C. 1024) is amended—

(1) in the header, by striking ‘‘PARTICIPANTS’’ and inserting ‘‘PARTICIPANTS AND CERTAIN EMPLOYERS’’;

(2) by redesignating subsection (d) as subsection (e); and

(3) by inserting after subsection (c) the following:

‘‘(d) FURNISHING SUMMARY PLAN INFORMATION TO EMPLOYERS

AND EMPLOYEE REPRESENTATIVES OF MULTIEMPLOYER PLANS.— ‘‘(1) IN GENERAL.—With respect to a multiemployer plan

subject to this section, within 30 days after the due date under

subsection (a)(1) for the filing of the annual report for the

fiscal year of the plan, the administrators shall furnish to

each employee organization and to each employer with an

obligation to contribute to the plan a report that contains—

‘‘(A) a description of the contribution schedules and

benefit formulas under the plan, and any modification to

such schedules and formulas, during such plan year;

‘‘(B) the number of employers obligated to contribute

to the plan;

‘‘(C) a list of the employers that contributed more than

5 percent of the total contributions to the plan during

such plan year;

‘‘(D) the number of participants under the plan on

whose behalf no contributions were made by an employer

as an employer of the participant for such plan year and

for each of the 2 preceding plan years;

‘‘(E) whether the plan was in critical or endangered

status under section 305 for such plan year and, if so,

include—

‘‘(i) a list of the actions taken by the plan to

improve its funding status; and

‘‘(ii) a statement describing how a person may

obtain a copy of the plan’s improvement or rehabilitation plan, as applicable, adopted under section 305

and the actuarial and financial data that demonstrate

any action taken by the plan toward fiscal improvement;

‘‘(F) the number of employers that withdrew from the

plan during the preceding plan year and the aggregate

amount of withdrawal liability assessed, or estimated to

be assessed, against such withdrawn employers, as reported

on the annual report for the plan year to which the report

under this subsection relates;

‘‘(G) in the case of a multiemployer plan that has

merged with another plan or to which assets and liabilities

have been transferred, the actuarial valuation of the assets

and liabilities of each affected plan during the year preceding the effective date of the merger or transfer, based

upon the most recent data available as of the day before

the first day of the plan year, or other valuation method

performed under standards and procedures as the Secretary may prescribe by regulation;

‘‘(H) a description as to whether the plan—

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 945

‘‘(i) sought or received an amortization extension

under section 304(d) of this Act or section 431(d) of

the Internal Revenue Code of 1986 for such plan year;

or

‘‘(ii) used the shortfall funding method (as such

term is used in section 305) for such plan year; and

‘‘(I) notification of the right under this section of the

recipient to a copy of the annual report filed with the

Secretary under subsection (a), summary plan description,

summary of any material modification of the plan, upon

written request, but that—

‘‘(i) in no case shall a recipient be entitled to

receive more than one copy of any such document

described during any one 12-month period; and

‘‘(ii) the administrator may make a reasonable

charge to cover copying, mailing, and other costs of

furnishing copies of information pursuant to this

subparagraph.

‘‘(2) EFFECT OF SUBSECTION.—Nothing in this subsection

waives any other provision under this title requiring plan

administrators to provide, upon request, information to

employers that have an obligation to contribute under the

plan.’’.

(e) MODEL FORM.—Not later than 1 year after the date of

the enactment of this Act, the Secretary of Labor shall publish

a model form for providing the statements, schedules, and other

material required to be provided under section 101(f) of the

Employee Retirement Income Security Act of 1974, as amended

by this section. The Secretary of Labor may promulgate any interim

final rules as the Secretary determines appropriate to carry out

the provisions of this subsection.

(f) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007.

SEC. 504. ELECTRONIC DISPLAY OF ANNUAL REPORT INFORMATION.

(a) ELECTRONIC DISPLAY OF INFORMATION.—Section 104(b) of

such Act (29 U.S.C. 1024(b)) is amended by adding at the end

the following:

‘‘(5) Identification and basic plan information and actuarial

information included in the annual report for any plan year shall

be filed with the Secretary in an electronic format which accommodates display on the Internet, in accordance with regulations which

shall be prescribed by the Secretary. The Secretary shall provide

for display of such information included in the annual report, within

90 days after the date of the filing of the annual report, on an

Internet website maintained by the Secretary and other appropriate

media. Such information shall also be displayed on any Intranet

website maintained by the plan sponsor (or by the plan administrator on behalf of the plan sponsor) for the purpose of communicating with employees and not the public, in accordance with

regulations which shall be prescribed by the Secretary.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to plan years beginning after December 31, 2007.

29 USC 1024

note.

Regulations.

29 USC 1021

note.

Deadline.

29 USC 1021

note.

Notification.

120 STAT. 946 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.

(a) CHANGE IN CRITERIA FOR PERSONS REQUIRED TO PROVIDE

INFORMATION TO PBGC.—Section 4010(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1310(b)) is amended

by striking paragraph (1) and inserting the following:

‘‘(1) the funding target attainment percentage (as defined

in subsection (d)) at the end of the preceding plan year of

a plan maintained by the contributing sponsor or any member

of its controlled group is less than 80 percent;’’.

(b) ADDITIONAL INFORMATION REQUIRED.—Section 4010 of the

Employee Retirement Income Security Act of 1974 (29 U.S.C. 1310)

is amended by adding at the end the following new subsection:

‘‘(d) ADDITIONAL INFORMATION REQUIRED.—

‘‘(1) IN GENERAL.—The information submitted to the corporation under subsection (a) shall include—

‘‘(A) the amount of benefit liabilities under the plan

determined using the assumptions used by the corporation

in determining liabilities;

‘‘(B) the funding target of the plan determined as if

the plan has been in at-risk status for at least 5 plan

years; and

‘‘(C) the funding target attainment percentage of the

plan.

‘‘(2) DEFINITIONS.—For purposes of this subsection:

‘‘(A) FUNDING TARGET.—The term ‘funding target’ has

the meaning provided under section 303(d)(1).

‘‘(B) FUNDING TARGET ATTAINMENT PERCENTAGE.—The

term ‘funding target attainment percentage’ has the

meaning provided under section 302(d)(2).

‘‘(C) AT-RISK STATUS.—The term ‘at-risk status’ has

the meaning provided in section 303(i)(4).

‘‘(e) NOTICE TO CONGRESS.—The corporation shall, on an annual

basis, submit to the Committee on Health, Education, Labor, and

Pensions and the Committee on Finance of the Senate and the

Committee on Education and the Workforce and the Committee

on Ways and Means of the House of Representatives, a summary

report in the aggregate of the information submitted to the corporation under this section.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply with respect to years beginning after 2007.

SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO PLAN

PARTICIPANTS.

(a) DISTRESS TERMINATIONS.—

(1) IN GENERAL.—Section 4041(c)(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)) is

amended by adding at the end the following:

‘‘(D) DISCLOSURE OF TERMINATION INFORMATION.—

‘‘(i) IN GENERAL.—A plan administrator that has

filed a notice of intent to terminate under subsection

(a)(2) shall provide to an affected party any information

provided to the corporation under subsection (a)(2) not

later than 15 days after—

‘‘(I) receipt of a request from the affected party

for the information; or

‘‘(II) the provision of new information to the

corporation relating to a previous request.

29 USC 1310

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 947

‘‘(ii) CONFIDENTIALITY.—

‘‘(I) IN GENERAL.—The plan administrator

shall not provide information under clause (i) in

a form that includes any information that may

directly or indirectly be associated with, or otherwise identify, an individual participant or beneficiary.

‘‘(II) LIMITATION.—A court may limit disclosure

under this subparagraph of confidential information described in section 552(b) of title 5, United

States Code, to any authorized representative of

the participants or beneficiaries that agrees to

ensure the confidentiality of such information.

‘‘(iii) FORM AND MANNER OF INFORMATION;

CHARGES.—

‘‘(I) FORM AND MANNER.—The corporation may

prescribe the form and manner of the provision

of information under this subparagraph, which

shall include delivery in written, electronic, or

other appropriate form to the extent that such

form is reasonably accessible to individuals to

whom the information is required to be provided.

‘‘(II) REASONABLE CHARGES.—A plan administrator may charge a reasonable fee for any

information provided under this subparagraph in

other than electronic form.

‘‘(iv) AUTHORIZED REPRESENTATIVE.—For purposes

of this subparagraph, the term ‘authorized representative’ means any employee organization representing

participants in the pension plan.’’.

(2) CONFORMING AMENDMENT.—Section 4041(c)(1) of the

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

1341(c)(1)) is amended in subparagraph (C) by striking

‘‘subparagraph (B)’’ and inserting ‘‘subparagraphs (B) and (D)’’.

(b) INVOLUNTARY TERMINATIONS.—

(1) IN GENERAL.—Section 4042(c) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1342(c)) is

amended by—

(A) striking ‘‘(c) If the’’ and inserting ‘‘(c)(1) If the’’;

(B) redesignating paragraph (3) as paragraph (2); and

(C) adding at the end the following:

‘‘(3) DISCLOSURE OF TERMINATION INFORMATION.—

‘‘(A) IN GENERAL.—

‘‘(i) INFORMATION FROM PLAN SPONSOR OR ADMINISTRATOR.—A plan sponsor or plan administrator of a

single-employer plan that has received a notice from

the corporation of a determination that the plan should

be terminated under this section shall provide to an

affected party any information provided to the corporation in connection with the plan termination.

‘‘(ii) INFORMATION FROM CORPORATION.—The corporation shall provide a copy of the administrative

record, including the trusteeship decision record of a

termination of a plan described under clause (i).

120 STAT. 948 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) TIMING OF DISCLOSURE.—The plan sponsor, plan

administrator, or the corporation, as applicable, shall provide the information described in subparagraph (A) not

later than 15 days after—

‘‘(i) receipt of a request from an affected party

for such information; or

‘‘(ii) in the case of information described under

subparagraph (A)(i), the provision of any new information to the corporation relating to a previous request

by an affected party.

‘‘(C) CONFIDENTIALITY.—

‘‘(i) IN GENERAL.—The plan administrator and plan

sponsor shall not provide information under subparagraph (A)(i) in a form which includes any information

that may directly or indirectly be associated with, or

otherwise identify, an individual participant or beneficiary.

‘‘(ii) LIMITATION.—A court may limit disclosure

under this paragraph of confidential information

described in section 552(b) of title 5, United States

Code, to authorized representatives (within the

meaning of section 4041(c)(2)(D)(iv)) of the participants

or beneficiaries that agree to ensure the confidentiality

of such information.

‘‘(D) FORM AND MANNER OF INFORMATION; CHARGES.—

‘‘(i) FORM AND MANNER.—The corporation may prescribe the form and manner of the provision of information under this paragraph, which shall include delivery

in written, electronic, or other appropriate form to

the extent that such form is reasonably accessible to

individuals to whom the information is required to

be provided.

‘‘(ii) REASONABLE CHARGES.—A plan sponsor may

charge a reasonable fee for any information provided

under this paragraph in other than electronic form.’’.

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to any plan termination under title IV of the

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

1301 et seq.) with respect to which the notice of intent to

terminate (or in the case of a termination by the Pension

Benefit Guaranty Corporation, a notice of determination under

section 4042 of such Act (29 U.S.C. 1342)) occurs after the

date of enactment of this Act.

(2) TRANSITION RULE.—If notice under section 4041(c)(2)(D)

or 4042(c)(3) of the Employee Retirement Income Security Act

of 1974 (as added by this section) would otherwise be required

to be provided before the 90th day after the date of the enactment of this Act, such notice shall not be required to be provided

until such 90th day.

SEC. 507. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES.

(a) IN GENERAL.—Section 101 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1021), as amended by

this Act, is amended by redesignating subsection (m) as subsection

(n) and by inserting after subsection (l) the following:

29 USC 1341

note.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 949

‘‘(m) NOTICE OF RIGHT TO DIVEST.—Not later than 30 days

before the first date on which an applicable individual of an

applicable individual account plan is eligible to exercise the right

under section 204(j) to direct the proceeds from the divestment

of employer securities with respect to any type of contribution,

the administrator shall provide to such individual a notice—

‘‘(1) setting forth such right under such section, and

‘‘(2) describing the importance of diversifying the investment of retirement account assets.

The notice required by this subsection shall be written in a manner

calculated to be understood by the average plan participant and

may be delivered in written, electronic, or other appropriate form

to the extent that such form is reasonably accessible to the

recipient.’’.

(b) PENALTIES.—Section 502(c)(7) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1132(c)(7)) is amended

by striking ‘‘section 101(i)’’ and inserting ‘‘subsection (i) or (m)

of section 101’’.

(c) MODEL NOTICE.—The Secretary of the Treasury shall, within

180 days after the date of the enactment of this subsection, prescribe

a model notice for purposes of satisfying the requirements of the

amendments made by this section.

(d) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2006.

(2) TRANSITION RULE.—If notice under section 101(m) of

the Employee Retirement Income Security Act of 1974 (as added

by this section) would otherwise be required to be provided

before the 90th day after the date of the enactment of this

Act, such notice shall not be required to be provided until

such 90th day.

SEC. 508. PERIODIC PENSION BENEFIT STATEMENTS.

(a) AMENDMENTS OF ERISA.—

(1) IN GENERAL.—Section 105(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1025(a)) is

amended to read as follows:

‘‘(a) REQUIREMENTS TO PROVIDE PENSION BENEFIT STATEMENTS.—

‘‘(1) REQUIREMENTS.—

‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The administrator of

an individual account plan (other than a one-participant

retirement plan described in section 101(i)(8)(B)) shall furnish a pension benefit statement—

‘‘(i) at least once each calendar quarter to a participant or beneficiary who has the right to direct the

investment of assets in his or her account under the

plan,

‘‘(ii) at least once each calendar year to a participant or beneficiary who has his or her own account

under the plan but does not have the right to direct

the investment of assets in that account, and

‘‘(iii) upon written request to a plan beneficiary

not described in clause (i) or (ii).

29 USC 1021

note.

Deadline.

29 USC 1021

note.

Deadline.

120 STAT. 950 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) DEFINED BENEFIT PLAN.—The administrator of a

defined benefit plan (other than a one-participant retirement plan described in section 101(i)(8)(B)) shall furnish

a pension benefit statement—

‘‘(i) at least once every 3 years to each participant

with a nonforfeitable accrued benefit and who is

employed by the employer maintaining the plan at

the time the statement is to be furnished, and

‘‘(ii) to a participant or beneficiary of the plan

upon written request.

Information furnished under clause (i) to a participant

may be based on reasonable estimates determined under

regulations prescribed by the Secretary, in consultation

with the Pension Benefit Guaranty Corporation.

‘‘(2) STATEMENTS.—

‘‘(A) IN GENERAL.—A pension benefit statement under

paragraph (1)—

‘‘(i) shall indicate, on the basis of the latest available information—

‘‘(I) the total benefits accrued, and

‘‘(II) the nonforfeitable pension benefits, if any,

which have accrued, or the earliest date on which

benefits will become nonforfeitable,

‘‘(ii) shall include an explanation of any permitted

disparity under section 401(l) of the Internal Revenue

Code of 1986 or any floor-offset arrangement that may

be applied in determining any accrued benefits

described in clause (i),

‘‘(iii) shall be written in a manner calculated to

be understood by the average plan participant, and

‘‘(iv) may be delivered in written, electronic, or

other appropriate form to the extent such form is

reasonably accessible to the participant or beneficiary.

‘‘(B) ADDITIONAL INFORMATION.—In the case of an individual account plan, any pension benefit statement under

clause (i) or (ii) of paragraph (1)(A) shall include—

‘‘(i) the value of each investment to which assets

in the individual account have been allocated, determined as of the most recent valuation date under the

plan, including the value of any assets held in the

form of employer securities, without regard to whether

such securities were contributed by the plan sponsor

or acquired at the direction of the plan or of the participant or beneficiary, and

‘‘(ii) in the case of a pension benefit statement

under paragraph (1)(A)(i)—

‘‘(I) an explanation of any limitations or

restrictions on any right of the participant or beneficiary under the plan to direct an investment,

‘‘(II) an explanation, written in a manner calculated to be understood by the average plan

participant, of the importance, for the long-term

retirement security of participants and beneficiaries, of a well-balanced and diversified investment portfolio, including a statement of the risk

that holding more than 20 percent of a portfolio

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 951

in the security of one entity (such as employer

securities) may not be adequately diversified, and

‘‘(III) a notice directing the participant or beneficiary to the Internet website of the Department

of Labor for sources of information on individual

investing and diversification.

‘‘(C) ALTERNATIVE NOTICE.—The requirements of

subparagraph (A)(i)(II) are met if, at least annually and

in accordance with requirements of the Secretary, the

plan—

‘‘(i) updates the information described in such

paragraph which is provided in the pension benefit

statement, or

‘‘(ii) provides in a separate statement such information as is necessary to enable a participant or beneficiary to determine their nonforfeitable vested benefits.

‘‘(3) DEFINED BENEFIT PLANS.—

‘‘(A) ALTERNATIVE NOTICE.—In the case of a defined

benefit plan, the requirements of paragraph (1)(B)(i) shall

be treated as met with respect to a participant if at least

once each year the administrator provides to the participant

notice of the availability of the pension benefit statement

and the ways in which the participant may obtain such

statement. Such notice may be delivered in written, electronic, or other appropriate form to the extent such form

is reasonably accessible to the participant.

‘‘(B) YEARS IN WHICH NO BENEFITS ACCRUE.—The Secretary may provide that years in which no employee or

former employee benefits (within the meaning of section

410(b) of the Internal Revenue Code of 1986) under the

plan need not be taken into account in determining the

3-year period under paragraph (1)(B)(i).’’.

(2) CONFORMING AMENDMENTS.—

(A) Section 105 of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1025) is amended by

striking subsection (d).

(B) Section 105(b) of such Act (29 U.S.C. 1025(b)) is

amended to read as follows:

‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In no case shall

a participant or beneficiary of a plan be entitled to more than

1 statement described in subparagraph (A)(iii) or (B)(ii) of subsection

(a)(1), whichever is applicable, in any 12-month period.’’.

(C) Section 502(c)(1) of such Act (29 U.S.C. 1132(c)(1))

is amended by striking ‘‘or section 101(f)’’ and inserting

‘‘section 101(f), or section 105(a)’’.

(b) MODEL STATEMENTS.—

(1) IN GENERAL.—The Secretary of Labor shall, within 1

year after the date of the enactment of this section, develop

1 or more model benefit statements that are written in a

manner calculated to be understood by the average plan participant and that may be used by plan administrators in complying

with the requirements of section 105 of the Employee Retirement Income Security Act of 1974.

(2) INTERIM FINAL RULES.—The Secretary of Labor may

promulgate any interim final rules as the Secretary determines

appropriate to carry out the provisions of this subsection.

29 USC 1025

note.

Deadline.

Notices.

120 STAT. 952 PUBLIC LAW 109–280—AUG. 17, 2006

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2006.

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED AGREEMENTS.—In the case of a plan maintained pursuant to 1 or

more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before

the date of the enactment of this Act, paragraph (1) shall

be applied to benefits pursuant to, and individuals covered

by, any such agreement by substituting for ‘‘December 31,

2006’’ the earlier of—

(A) the later of—

(i) December 31, 2007, or

(ii) the date on which the last of such collective

bargaining agreements terminates (determined without

regard to any extension thereof after such date of

enactment), or

(B) December 31, 2008.

SEC. 509. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT

PERIODS.

(a) IN GENERAL.—Section 101(i)(8)(B) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021(i)(8)(B)) is

amended by striking clauses (i) through (iv), by redesignating clause

(v) as clause (ii), and by inserting before clause (ii), as so redesignated, the following new clause:

‘‘(i) on the first day of the plan year—

‘‘(I) covered only one individual (or the individual and the individual’s spouse) and the individual (or the individual and the individual’s

spouse) owned 100 percent of the plan sponsor

(whether or not incorporated), or

‘‘(II) covered only one or more partners (or

partners and their spouses) in the plan sponsor,

and’’.

(b) EFFECTIVE DATE.—The amendments made by this subsection shall take effect as if included in the provisions of section

306 of Public Law 107–204 (116 Stat. 745 et seq.).

TITLE VI—INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY RULES

Subtitle A—Investment Advice

SEC. 601. PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF

INVESTMENT ADVICE.

(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) EXEMPTION FROM PROHIBITED TRANSACTIONS.—Section

408(b) of the Employee Retirement Income Security Act of

1974 (29 U.S.C. 1108(b)) is amended by adding at the end

the following new paragraph:

29 USC 1021

note.

29 USC 1025

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 953

‘‘(14) Any transaction in connection with the provision of

investment advice described in section 3(21)(A)(ii) to a participant or beneficiary of an individual account plan that permits

such participant or beneficiary to direct the investment of assets

in their individual account, if—

‘‘(A) the transaction is—

‘‘(i) the provision of the investment advice to the

participant or beneficiary of the plan with respect to

a security or other property available as an investment

under the plan,

‘‘(ii) the acquisition, holding, or sale of a security

or other property available as an investment under

the plan pursuant to the investment advice, or

‘‘(iii) the direct or indirect receipt of fees or other

compensation by the fiduciary adviser or an affiliate

thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in

connection with the provision of the advice or in

connection with an acquisition, holding, or sale of a

security or other property available as an investment

under the plan pursuant to the investment advice;

and

‘‘(B) the requirements of subsection (g) are met.’’.

(2) REQUIREMENTS.—Section 408 of such Act is amended

further by adding at the end the following new subsection:

‘‘(g) PROVISION OF INVESTMENT ADVICE TO PARTICIPANT AND

BENEFICIARIES.—

‘‘(1) IN GENERAL.—The prohibitions provided in section 406

shall not apply to transactions described in subsection (b)(14)

if the investment advice provided by a fiduciary adviser is

provided under an eligible investment advice arrangement.

‘‘(2) ELIGIBLE INVESTMENT ADVICE ARRANGEMENT.—For purposes of this subsection, the term ‘eligible investment advice

arrangement’ means an arrangement—

‘‘(A) which either—

‘‘(i) provides that any fees (including any commission or other compensation) received by the fiduciary

adviser for investment advice or with respect to the

sale, holding, or acquisition of any security or other

property for purposes of investment of plan assets do

not vary depending on the basis of any investment

option selected, or

‘‘(ii) uses a computer model under an investment

advice program meeting the requirements of paragraph

(3) in connection with the provision of investment

advice by a fiduciary adviser to a participant or beneficiary, and

‘‘(B) with respect to which the requirements of paragraph (4), (5), (6), (7), (8), and (9) are met.

‘‘(3) INVESTMENT ADVICE PROGRAM USING COMPUTER

MODEL.—

‘‘(A) IN GENERAL.—An investment advice program

meets the requirements of this paragraph if the requirements of subparagraphs (B), (C), and (D) are met.

‘‘(B) COMPUTER MODEL.—The requirements of this

subparagraph are met if the investment advice provided

29 USC 1108.

120 STAT. 954 PUBLIC LAW 109–280—AUG. 17, 2006

under the investment advice program is provided pursuant

to a computer model that—

‘‘(i) applies generally accepted investment theories

that take into account the historic returns of different

asset classes over defined periods of time,

‘‘(ii) utilizes relevant information about the participant, which may include age, life expectancy, retirement age, risk tolerance, other assets or sources of

income, and preferences as to certain types of investments,

‘‘(iii) utilizes prescribed objective criteria to provide

asset allocation portfolios comprised of investment

options available under the plan,

‘‘(iv) operates in a manner that is not biased in

favor of investments offered by the fiduciary adviser

or a person with a material affiliation or contractual

relationship with the fiduciary adviser, and

‘‘(v) takes into account all investment options

under the plan in specifying how a participant’s

account balance should be invested and is not inappropriately weighted with respect to any investment

option.

‘‘(C) CERTIFICATION.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met with respect to any investment

advice program if an eligible investment expert certifies, prior to the utilization of the computer model

and in accordance with rules prescribed by the Secretary, that the computer model meets the requirements of subparagraph (B).

‘‘(ii) RENEWAL OF CERTIFICATIONS.—If, as determined under regulations prescribed by the Secretary,

there are material modifications to a computer model,

the requirements of this subparagraph are met only

if a certification described in clause (i) is obtained

with respect to the computer model as so modified.

‘‘(iii) ELIGIBLE INVESTMENT EXPERT.—The term

‘eligible investment expert’ means any person—

‘‘(I) which meets such requirements as the

Secretary may provide, and

‘‘(II) does not bear any material affiliation or

contractual relationship with any investment

adviser or a related person thereof (or any

employee, agent, or registered representative of

the investment adviser or related person).

‘‘(D) EXCLUSIVITY OF RECOMMENDATION.—The requirements of this subparagraph are met with respect to any

investment advice program if—

‘‘(i) the only investment advice provided under the

program is the advice generated by the computer model

described in subparagraph (B), and

‘‘(ii) any transaction described in subsection

(b)(14)(B)(ii) occurs solely at the direction of the participant or beneficiary.

Nothing in the preceding sentence shall preclude the

participant or beneficiary from requesting investment

advice other than that described in subparagraph (A), but

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 955

only if such request has not been solicited by any person

connected with carrying out the arrangement.

‘‘(4) EXPRESS AUTHORIZATION BY SEPARATE FIDUCIARY.—The

requirements of this paragraph are met with respect to an

arrangement if the arrangement is expressly authorized by

a plan fiduciary other than the person offering the investment

advice program, any person providing investment options under

the plan, or any affiliate of either.

‘‘(5) ANNUAL AUDIT.—The requirements of this paragraph

are met if an independent auditor, who has appropriate technical training or experience and proficiency and so represents

in writing—

‘‘(A) conducts an annual audit of the arrangement for

compliance with the requirements of this subsection, and

‘‘(B) following completion of the annual audit, issues

a written report to the fiduciary who authorized use of

the arrangement which presents its specific findings

regarding compliance of the arrangement with the requirements of this subsection.

For purposes of this paragraph, an auditor is considered independent if it is not related to the person offering the arrangement to the plan and is not related to any person providing

investment options under the plan.

‘‘(6) DISCLOSURE.—The requirements of this paragraph are

met if—

‘‘(A) the fiduciary adviser provides to a participant

or a beneficiary before the initial provision of the investment advice with regard to any security or other property

offered as an investment option, a written notification

(which may consist of notification by means of electronic

communication)—

‘‘(i) of the role of any party that has a material

affiliation or contractual relationship with the financial

adviser in the development of the investment advice

program and in the selection of investment options

available under the plan,

‘‘(ii) of the past performance and historical rates

of return of the investment options available under

the plan,

‘‘(iii) of all fees or other compensation relating

to the advice that the fiduciary adviser or any affiliate

thereof is to receive (including compensation provided

by any third party) in connection with the provision

of the advice or in connection with the sale, acquisition,

or holding of the security or other property,

‘‘(iv) of any material affiliation or contractual relationship of the fiduciary adviser or affiliates thereof

in the security or other property,

‘‘(v) the manner, and under what circumstances,

any participant or beneficiary information provided

under the arrangement will be used or disclosed,

‘‘(vi) of the types of services provided by the fiduciary adviser in connection with the provision of investment advice by the fiduciary adviser,

‘‘(vii) that the adviser is acting as a fiduciary of

the plan in connection with the provision of the advice,

and

Reports.

120 STAT. 956 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(viii) that a recipient of the advice may separately

arrange for the provision of advice by another adviser,

that could have no material affiliation with and receive

no fees or other compensation in connection with the

security or other property, and

‘‘(B) at all times during the provision of advisory services to the participant or beneficiary, the fiduciary

adviser—

‘‘(i) maintains the information described in

subparagraph (A) in accurate form and in the manner

described in paragraph (8),

‘‘(ii) provides, without charge, accurate information

to the recipient of the advice no less frequently than

annually,

‘‘(iii) provides, without charge, accurate information to the recipient of the advice upon request of

the recipient, and

‘‘(iv) provides, without charge, accurate information to the recipient of the advice concerning any material change to the information required to be provided

to the recipient of the advice at a time reasonably

contemporaneous to the change in information.

‘‘(7) OTHER CONDITIONS.—The requirements of this paragraph are met if—

‘‘(A) the fiduciary adviser provides appropriate disclosure, in connection with the sale, acquisition, or holding

of the security or other property, in accordance with all

applicable securities laws,

‘‘(B) the sale, acquisition, or holding occurs solely at

the direction of the recipient of the advice,

‘‘(C) the compensation received by the fiduciary adviser

and affiliates thereof in connection with the sale, acquisition, or holding of the security or other property is reasonable, and

‘‘(D) the terms of the sale, acquisition, or holding of

the security or other property are at least as favorable

to the plan as an arm’s length transaction would be.

‘‘(8) STANDARDS FOR PRESENTATION OF INFORMATION.—

‘‘(A) IN GENERAL.—The requirements of this paragraph

are met if the notification required to be provided to participants and beneficiaries under paragraph (6)(A) is written

in a clear and conspicuous manner and in a manner calculated to be understood by the average plan participant

and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of the

information required to be provided in the notification.

‘‘(B) MODEL FORM FOR DISCLOSURE OF FEES AND OTHER

COMPENSATION.—The Secretary shall issue a model form

for the disclosure of fees and other compensation required

in paragraph (6)(A)(iii) which meets the requirements of

subparagraph (A).

‘‘(9) MAINTENANCE FOR 6 YEARS OF EVIDENCE OF COMPLIANCE.—The requirements of this paragraph are met if a fiduciary adviser who has provided advice referred to in paragraph

(1) maintains, for a period of not less than 6 years after the

provision of the advice, any records necessary for determining

whether the requirements of the preceding provisions of this

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 957

subsection and of subsection (b)(14) have been met. A transaction prohibited under section 406 shall not be considered

to have occurred solely because the records are lost or destroyed

prior to the end of the 6-year period due to circumstances

beyond the control of the fiduciary adviser.

‘‘(10) EXEMPTION FOR PLAN SPONSOR AND CERTAIN OTHER

FIDUCIARIES.—

‘‘(A) IN GENERAL.—Subject to subparagraph (B), a plan

sponsor or other person who is a fiduciary (other than

a fiduciary adviser) shall not be treated as failing to meet

the requirements of this part solely by reason of the provision of investment advice referred to in section 3(21)(A)(ii)

(or solely by reason of contracting for or otherwise

arranging for the provision of the advice), if—

‘‘(i) the advice is provided by a fiduciary adviser

pursuant to an eligible investment advice arrangement

between the plan sponsor or other fiduciary and the

fiduciary adviser for the provision by the fiduciary

adviser of investment advice referred to in such section,

‘‘(ii) the terms of the eligible investment advice

arrangement require compliance by the fiduciary

adviser with the requirements of this subsection, and

‘‘(iii) the terms of the eligible investment advice

arrangement include a written acknowledgment by the

fiduciary adviser that the fiduciary adviser is a fiduciary of the plan with respect to the provision of the

advice.

‘‘(B) CONTINUED DUTY OF PRUDENT SELECTION OF

ADVISER AND PERIODIC REVIEW.—Nothing in subparagraph

(A) shall be construed to exempt a plan sponsor or other

person who is a fiduciary from any requirement of this

part for the prudent selection and periodic review of a

fiduciary adviser with whom the plan sponsor or other

person enters into an eligible investment advice arrangement for the provision of investment advice referred to

in section 3(21)(A)(ii). The plan sponsor or other person

who is a fiduciary has no duty under this part to monitor

the specific investment advice given by the fiduciary

adviser to any particular recipient of the advice.

‘‘(C) AVAILABILITY OF PLAN ASSETS FOR PAYMENT FOR

ADVICE.—Nothing in this part shall be construed to preclude the use of plan assets to pay for reasonable expenses

in providing investment advice referred to in section

3(21)(A)(ii).

‘‘(11) DEFINITIONS.—For purposes of this subsection and

subsection (b)(14)—

‘‘(A) FIDUCIARY ADVISER.—The term ‘fiduciary adviser’

means, with respect to a plan, a person who is a fiduciary

of the plan by reason of the provision of investment advice

referred to in section 3(21)(A)(ii) by the person to the

participant or beneficiary of the plan and who is—

‘‘(i) registered as an investment adviser under the

Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et

seq.) or under the laws of the State in which the

fiduciary maintains its principal office and place of

business,

120 STAT. 958 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) a bank or similar financial institution referred

to in section 408(b)(4) or a savings association (as

defined in section 3(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)), but only if the advice

is provided through a trust department of the bank

or similar financial institution or savings association

which is subject to periodic examination and review

by Federal or State banking authorities,

‘‘(iii) an insurance company qualified to do business

under the laws of a State,

‘‘(iv) a person registered as a broker or dealer

under the Securities Exchange Act of 1934 (15 U.S.C.

78a et seq.),

‘‘(v) an affiliate of a person described in any of

clauses (i) through (iv), or

‘‘(vi) an employee, agent, or registered representative of a person described in clauses (i) through (v)

who satisfies the requirements of applicable insurance,

banking, and securities laws relating to the provision

of the advice.

For purposes of this part, a person who develops the computer model described in paragraph (3)(B) or markets the

investment advice program or computer model shall be

treated as a person who is a fiduciary of the plan by

reason of the provision of investment advice referred to

in section 3(21)(A)(ii) to the participant or beneficiary and

shall be treated as a fiduciary adviser for purposes of

this subsection and subsection (b)(14), except that the Secretary may prescribe rules under which only 1 fiduciary

adviser may elect to be treated as a fiduciary with respect

to the plan.

‘‘(B) AFFILIATE.—The term ‘affiliate’ of another entity

means an affiliated person of the entity (as defined in

section 2(a)(3) of the Investment Company Act of 1940

(15 U.S.C. 80a–2(a)(3))).

‘‘(C) REGISTERED REPRESENTATIVE.—The term ‘registered representative’ of another entity means a person

described in section 3(a)(18) of the Securities Exchange

Act of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity

for the broker or dealer referred to in such section) or

a person described in section 202(a)(17) of the Investment

Advisers Act of 1940 (15 U.S.C. 80b-2(a)(17)) (substituting

the entity for the investment adviser referred to in such

section).’’.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply with respect to advice referred to in section

3(21)(A)(ii) of the Employee Retirement Income Security Act

of 1974 provided after December 31, 2006.

(b) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

(1) EXEMPTION FROM PROHIBITED TRANSACTIONS.—Subsection (d) of section 4975 of the Internal Revenue Code of

1986 (relating to exemption from tax on prohibited transactions)

is amended—

(A) in paragraph (15), by striking ‘‘or’’ at the end;

(B) in paragraph (16), by striking the period at the

end and inserting ‘‘;or’’; and

(C) by adding at the end the following new paragraph:

26 USC 4975.

29 USC 1108

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 959

‘‘(17) Any transaction in connection with the provision of

investment advice described in subsection (e)(3)(B) to a participant or beneficiary in a plan and that permits such participant

or beneficiary to direct the investment of plan assets in an

individual account, if—

‘‘(A) the transaction is—

‘‘(i) the provision of the investment advice to the

participant or beneficiary of the plan with respect to

a security or other property available as an investment

under the plan,

‘‘(ii) the acquisition, holding, or sale of a security

or other property available as an investment under

the plan pursuant to the investment advice, or

‘‘(iii) the direct or indirect receipt of fees or other

compensation by the fiduciary adviser or an affiliate

thereof (or any employee, agent, or registered representative of the fiduciary adviser or affiliate) in

connection with the provision of the advice or in

connection with an acquisition, holding, or sale of a

security or other property available as an investment

under the plan pursuant to the investment advice;

and

‘‘(B) the requirements of subsection (f)(8) are met.’’.

(2) REQUIREMENTS.—Subsection (f) of such section 4975

(relating to other definitions and special rules) is amended

by adding at the end the following new paragraph:

‘‘(8) PROVISION OF INVESTMENT ADVICE TO PARTICIPANT AND

BENEFICIARIES.— I24 ‘‘(A) IN GENERAL.—The prohibitions

provided in subsection (c) shall not apply to transactions

described in subsection (b)(14) if the investment advice provided

by a fiduciary adviser is provided under an eligible investment

advice arrangement.

‘‘(B) ELIGIBLE INVESTMENT ADVICE ARRANGEMENT.—For

purposes of this paragraph, the term ‘eligible investment

advice arrangement’ means an arrangement—

‘‘(i) which either—

‘‘(I) provides that any fees (including any

commission or other compensation) received by the

fiduciary adviser for investment advice or with

respect to the sale, holding, or acquisition of any

security or other property for purposes of investment of plan assets do not vary depending on

the basis of any investment option selected, or

‘‘(II) uses a computer model under an investment advice program meeting the requirements

of subparagraph (C) in connection with the provision of investment advice by a fiduciary adviser

to a participant or beneficiary, and

‘‘(ii) with respect to which the requirements of

subparagraphs (D), (E), (F), (G), (H), and (I) are met.

‘‘(C) INVESTMENT ADVICE PROGRAM USING COMPUTER

MODEL.—

‘‘(i) IN GENERAL.—An investment advice program

meets the requirements of this subparagraph if the

requirements of clauses (ii), (iii), and (iv) are met.

‘‘(ii) COMPUTER MODEL.—The requirements of this

clause are met if the investment advice provided under

26 USC 4975.

120 STAT. 960 PUBLIC LAW 109–280—AUG. 17, 2006

the investment advice program is provided pursuant

to a computer model that—

‘‘(I) applies generally accepted investment

theories that take into account the historic returns

of different asset classes over defined periods of

time,

‘‘(II) utilizes relevant information about the

participant, which may include age, life expectancy, retirement age, risk tolerance, other assets

or sources of income, and preferences as to certain

types of investments,

‘‘(III) utilizes prescribed objective criteria to

provide asset allocation portfolios comprised of

investment options available under the plan,

‘‘(IV) operates in a manner that is not biased

in favor of investments offered by the fiduciary

adviser or a person with a material affiliation or

contractual relationship with the fiduciary adviser,

and

‘‘(V) takes into account all investment options

under the plan in specifying how a participant’s

account balance should be invested and is not

inappropriately weighted with respect to any

investment option.

‘‘(iii) CERTIFICATION.—

‘‘(I) IN GENERAL.—The requirements of this

clause are met with respect to any investment

advice program if an eligible investment expert

certifies, prior to the utilization of the computer

model and in accordance with rules prescribed by

the Secretary of Labor, that the computer model

meets the requirements of clause (ii).

‘‘(II) RENEWAL OF CERTIFICATIONS.—If, as

determined under regulations prescribed by the

Secretary of Labor, there are material modifications to a computer model, the requirements of

this clause are met only if a certification described

in subclause (I) is obtained with respect to the

computer model as so modified.

‘‘(III) ELIGIBLE INVESTMENT EXPERT.—The

term ‘eligible investment expert’ means any person

which meets such requirements as the Secretary

of Labor may provide and which does not bear

any material affiliation or contractual relationship

with any investment adviser or a related person

thereof (or any employee, agent, or registered representative of the investment adviser or related

person).

‘‘(iv) EXCLUSIVITY OF RECOMMENDATION.—The

requirements of this clause are met with respect to

any investment advice program if—

‘‘(I) the only investment advice provided under

the program is the advice generated by the computer model described in clause (ii), and

‘‘(II) any transaction described in subsection

(b)(14)(B)(ii) occurs solely at the direction of the

participant or beneficiary.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 961

Nothing in the preceding sentence shall preclude the

participant or beneficiary from requesting investment

advice other than that described in clause (i), but only

if such request has not been solicited by any person

connected with carrying out the arrangement.

‘‘(D) EXPRESS AUTHORIZATION BY SEPARATE FIDU- CIARY.—The requirements of this subparagraph are met

with respect to an arrangement if the arrangement is

expressly authorized by a plan fiduciary other than the

person offering the investment advice program, any person

providing investment options under the plan, or any affiliate of either.

‘‘(E) AUDITS.— ‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if an independent auditor, who

has appropriate technical training or experience and

proficiency and so represents in writing—

‘‘(I) conducts an annual audit of the arrangement for compliance with the requirements of this

paragraph, and

‘‘(II) following completion of the annual audit,

issues a written report to the fiduciary who authorized use of the arrangement which presents its

specific findings regarding compliance of the

arrangement with the requirements of this paragraph.

‘‘(ii) SPECIAL RULE FOR INDIVIDUAL RETIREMENT

AND SIMILAR PLANS.—In the case of a plan described

in subparagraphs (B) through (F) (and so much of

subparagraph (G) as relates to such subparagraphs)

of subsection (e)(1), in lieu of the requirements of clause

(i), audits of the arrangement shall be conducted at

such times and in such manner as the Secretary of

Labor may prescribe.

‘‘(iii) INDEPENDENT AUDITOR.—For purposes of this

subparagraph, an auditor is considered independent

if it is not related to the person offering the arrangement to the plan and is not related to any person

providing investment options under the plan.

‘‘(F) DISCLOSURE.—The requirements of this subparagraph are met if—

‘‘(i) the fiduciary adviser provides to a participant

or a beneficiary before the initial provision of the

investment advice with regard to any security or other

property offered as an investment option, a written

notification (which may consist of notification by means

of electronic communication)—

‘‘(I) of the role of any party that has a material

affiliation or contractual relationship with the

financial adviser in the development of the investment advice program and in the selection of investment options available under the plan,

‘‘(II) of the past performance and historical

rates of return of the investment options available

under the plan,

‘‘(III) of all fees or other compensation relating

to the advice that the fiduciary adviser or any

Reports.

120 STAT. 962 PUBLIC LAW 109–280—AUG. 17, 2006

affiliate thereof is to receive (including compensation provided by any third party) in connection

with the provision of the advice or in connection

with the sale, acquisition, or holding of the security

or other property,

‘‘(IV) of any material affiliation or contractual

relationship of the fiduciary adviser or affiliates

thereof in the security or other property,

‘‘(V) the manner, and under what circumstances, any participant or beneficiary

information provided under the arrangement will

be used or disclosed,

‘‘(VI) of the types of services provided by the

fiduciary adviser in connection with the provision

of investment advice by the fiduciary adviser,

‘‘(VII) that the adviser is acting as a fiduciary

of the plan in connection with the provision of

the advice, and

‘‘(VIII) that a recipient of the advice may separately arrange for the provision of advice by

another adviser, that could have no material affiliation with and receive no fees or other compensation in connection with the security or other property, and

‘‘(ii) at all times during the provision of advisory

services to the participant or beneficiary, the fiduciary

adviser—

‘‘(I) maintains the information described in

clause (i) in accurate form and in the manner

described in subparagraph (H),

‘‘(II) provides, without charge, accurate

information to the recipient of the advice no less

frequently than annually,

‘‘(III) provides, without charge, accurate

information to the recipient of the advice upon

request of the recipient, and

‘‘(IV) provides, without charge, accurate

information to the recipient of the advice concerning any material change to the information

required to be provided to the recipient of the

advice at a time reasonably contemporaneous to

the change in information.

‘‘(G) OTHER CONDITIONS.—The requirements of this

subparagraph are met if—

‘‘(i) the fiduciary adviser provides appropriate

disclosure, in connection with the sale, acquisition, or

holding of the security or other property, in accordance

with all applicable securities laws,

‘‘(ii) the sale, acquisition, or holding occurs solely

at the direction of the recipient of the advice,

‘‘(iii) the compensation received by the fiduciary

adviser and affiliates thereof in connection with the

sale, acquisition, or holding of the security or other

property is reasonable, and

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 963

‘‘(iv) the terms of the sale, acquisition, or holding

of the security or other property are at least as favorable to the plan as an arm’s length transaction would

be.

‘‘(H) STANDARDS FOR PRESENTATION OF INFORMATION.— ‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if the notification required to

be provided to participants and beneficiaries under

subparagraph (F)(i) is written in a clear and conspicuous manner and in a manner calculated to be

understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably

apprise such participants and beneficiaries of the

information required to be provided in the notification.

‘‘(ii) MODEL FORM FOR DISCLOSURE OF FEES AND

OTHER COMPENSATION.—The Secretary of Labor shall

issue a model form for the disclosure of fees and other

compensation required in subparagraph (F)(i)(III)

which meets the requirements of clause (i).

‘‘(I) MAINTENANCE FOR 6 YEARS OF EVIDENCE OF COMPLIANCE.—The requirements of this subparagraph are met

if a fiduciary adviser who has provided advice referred

to in subparagraph (A) maintains, for a period of not less

than 6 years after the provision of the advice, any records

necessary for determining whether the requirements of

the preceding provisions of this paragraph and of subsection

(d)(17) have been met. A transaction prohibited under section 406 shall not be considered to have occurred solely

because the records are lost or destroyed prior to the end

of the 6-year period due to circumstances beyond the control

of the fiduciary adviser.

‘‘(J) DEFINITIONS.—For purposes of this paragraph and

subsection (d)(17)—

‘‘(i) FIDUCIARY ADVISER.—The term ‘fiduciary

adviser’ means, with respect to a plan, a person who

is a fiduciary of the plan by reason of the provision

of investment advice by the person to the participant

or beneficiary of the plan and who is—

‘‘(I) registered as an investment adviser under

the Investment Advisers Act of 1940 (15 U.S.C.

80b–1 et seq.) or under the laws of the State

in which the fiduciary maintains its principal office

and place of business,

‘‘(II) a bank or similar financial institution

referred to in section 408(b)(4) or a savings association (as defined in section 3(b)(1) of the Federal

Deposit Insurance Act (12 U.S.C. 1813(b)(1)), but

only if the advice is provided through a trust

department of the bank or similar financial institution or savings association which is subject to periodic examination and review by Federal or State

banking authorities,

‘‘(III) an insurance company qualified to do

business under the laws of a State,

‘‘(IV) a person registered as a broker or dealer

under the Securities Exchange Act of 1934 (15

U.S.C. 78a et seq.),

120 STAT. 964 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(V) an affiliate of a person described in any

of subclauses (I) through (IV), or

‘‘(VI) an employee, agent, or registered representative of a person described in subclauses

(I) through (V) who satisfies the requirements of

applicable insurance, banking, and securities laws

relating to the provision of the advice.

For purposes of this title, a person who develops the

computer model described in subparagraph (C)(ii) or

markets the investment advice program or computer

model shall be treated as a person who is a fiduciary

of the plan by reason of the provision of investment

advice referred to in subsection (e)(3)(B) to the participant or beneficiary and shall be treated as a fiduciary

adviser for purposes of this paragraph and subsection

(d)(17), except that the Secretary of Labor may prescribe rules under which only 1 fiduciary adviser may

elect to be treated as a fiduciary with respect to the

plan.

‘‘(ii) AFFILIATE.—The term ‘affiliate’ of another

entity means an affiliated person of the entity (as

defined in section 2(a)(3) of the Investment Company

Act of 1940 (15 U.S.C. 80a–2(a)(3))).

‘‘(iii) REGISTERED REPRESENTATIVE.—The term ‘registered representative’ of another entity means a person described in section 3(a)(18) of the Securities

Exchange Act of 1934 (15 U.S.C. 78c(a)(18)) (substituting the entity for the broker or dealer referred

to in such section) or a person described in section

202(a)(17) of the Investment Advisers Act of 1940 (15

U.S.C. 80b-2(a)(17)) (substituting the entity for the

investment adviser referred to in such section).’’.

(3) DETERMINATION OF FEASIBILITY OF APPLICATION OF COMPUTER MODEL INVESTMENT ADVICE PROGRAMS FOR INDIVIDUAL

RETIREMENT AND SIMILAR PLANS.— (A) SOLICITATION OF INFORMATION.—As soon as practicable after the date of the enactment of this Act, the

Secretary of Labor, in consultation with the Secretary of

the Treasury, shall—

(i) solicit information as to the feasibility of the

application of computer model investment advice programs for plans described in subparagraphs (B)

through (F) (and so much of subparagraph (G) as

relates to such subparagraphs) of section 4975(e)(1)

of the Internal Revenue Code of 1986, including soliciting information from—

(I) at least the top 50 trustees of such plans,

determined on the basis of assets held by such

trustees, and

(II) other persons offering computer model

investment advice programs based on nonproprietary products, and

(ii) shall on the basis of such information make

the determination under subparagraph (B).

The information solicited by the Secretary of Labor under

clause (i) from persons described in subclauses (I) and

(II) of clause (i) shall include information on computer

26 USC 4975

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 965

modeling capabilities of such persons with respect to the

current year and preceding year, including such capabilities

for investment accounts maintained by such persons.

(B) DETERMINATION OF FEASIBILITY.—The Secretary of

Labor, in consultation with the Secretary of the Treasury,

shall, on the basis of information received under subparagraph (A), determine whether there is any computer model

investment advice program which may be utilized by a

plan described in subparagraph (A)(i) to provide investment

advice to the account beneficiary of the plan which—

(i) utilizes relevant information about the account

beneficiary, which may include age, life expectancy,

retirement age, risk tolerance, other assets or sources

of income, and preferences as to certain types of investments,

(ii) takes into account the full range of investments, including equities and bonds, in determining

the options for the investment portfolio of the account

beneficiary, and

(iii) allows the account beneficiary, in directing

the investment of assets, sufficient flexibility in

obtaining advice to evaluate and select investment

options.

The Secretary of Labor shall report the results of such

determination to the committees of Congress referred to

in subparagraph (D)(ii) not later than December 31, 2007.

(C) APPLICATION OF COMPUTER MODEL INVESTMENT

ADVICE PROGRAM.—

(i) CERTIFICATION REQUIRED FOR USE OF COMPUTER

MODEL.—

(I) RESTRICTION ON USE.—Subclause (II) of section 4975(f)(8)(B)(i) of the Internal Revenue Code

of 1986 shall not apply to a plan described in

subparagraph (A)(i).

(II) RESTRICTION LIFTED IF MODEL CERTIFIED.—If the Secretary of Labor determines

under subparagraph (B) or (D) that there is a

computer model investment advice program

described in subparagraph (B), subclause (I) shall

cease to apply as of the date of such determination.

(ii) CLASS EXEMPTION IF NO INITIAL CERTIFICATION

BY SECRETARY.—If the Secretary of Labor determines

under subparagraph (B) that there is no computer

model investment advice program described in

subparagraph (B), the Secretary of Labor shall grant

a class exemption from treatment as a prohibited transaction under section 4975(c) of the Internal Revenue

Code of 1986 to any transaction described in section

4975(d)(17)(A) of such Code with respect to plans

described in subparagraph (A)(i), subject to such conditions as set forth in such exemption as are in the

interests of the plan and its account beneficiary and

protective of the rights of the account beneficiary and

as are necessary to—

Reports.

Deadline.

120 STAT. 966 PUBLIC LAW 109–280—AUG. 17, 2006

(I) ensure the requirements of sections

4975(d)(17) and 4975(f)(8) (other than subparagraph (C) thereof) of the Internal Revenue Code

of 1986 are met, and

(II) ensure the investment advice provided

under the investment advice program utilizes prescribed objective criteria to provide asset allocation

portfolios comprised of securities or other property

available as investments under the plan.

If the Secretary of Labor solicits any information under

subparagraph (A) from a person and such person does

not provide such information within 60 days after the

solicitation, then, unless such failure was due to

reasonable cause and not wilful neglect, such person

shall not be entitled to utilize the class exemption

under this clause.

(D) SUBSEQUENT DETERMINATION.—

(i) IN GENERAL.—If the Secretary of Labor initially

makes a determination described in subparagraph

(C)(ii), the Secretary may subsequently determine that

there is a computer model investment advice program

described in subparagraph (B). If the Secretary makes

such subsequent determination, then the class exemption described in subparagraph (C)(ii) shall cease to

apply after the later of—

(I) the date which is 2 years after such subsequent determination, or

(II) the date which is 3 years after the first

date on which such exemption took effect.

(ii) REQUESTS FOR DETERMINATION.—Any person

may request the Secretary of Labor to make a determination under this subparagraph with respect to any

computer model investment advice program, and the

Secretary of Labor shall make a determination with

respect to such request within 90 days. If the Secretary

of Labor makes a determination that such program

is not described in subparagraph (B), the Secretary

shall, within 10 days of such determination, notify

the Committee on Ways and Means and the Committee

on Education and the Workforce of the House of Representatives and the Committee on Finance and the

Committee on Health, Education, Labor, and Pensions

of the Senate of such determination and the reasons

for such determination.

(E) EFFECTIVE DATE.—The provisions of this paragraph

shall take effect on the date of the enactment of this

Act.

(4) EFFECTIVE DATE.—Except as provided in this subsection,

the amendments made by this subsection shall apply with

respect to advice referred to in section 4975(c)(3)(B) of the

Internal Revenue Code of 1986 provided after December 31,

2006.

(c) COORDINATION WITH EXISTING EXEMPTIONS.—Any exemption under section 408(b) of the Employee Retirement Income Security Act of 1974 and section 4975(d) of the Internal Revenue Code

of 1986 provided by the amendments made by this section shall

26 USC 4975

note.

26 USC 4975

note.

Deadlines.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 967

not in any manner alter existing individual or class exemptions,

provided by statute or administrative action.

Subtitle B—Prohibited Transactions

SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO FINANCIAL

INVESTMENTS.

(a) EXEMPTION FOR BLOCK TRADING.— (1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C.

1108(b)), as amended by section 601, is amended by adding

at the end the following new paragraph:

‘‘(15)(A) Any transaction involving the purchase or sale

of securities, or other property (as determined by the Secretary),

between a plan and a party in interest (other than a fiduciary

described in section 3(21)(A)) with respect to a plan if—

‘‘(i) the transaction involves a block trade,

‘‘(ii) at the time of the transaction, the interest of

the plan (together with the interests of any other plans

maintained by the same plan sponsor), does not exceed

10 percent of the aggregate size of the block trade,

‘‘(iii) the terms of the transaction, including the price,

are at least as favorable to the plan as an arm’s length

transaction, and

‘‘(iv) the compensation associated with the purchase

and sale is not greater than the compensation associated

with an arm’s length transaction with an unrelated party.

‘‘(B) For purposes of this paragraph, the term ‘block trade’

means any trade of at least 10,000 shares or with a market

value of at least $200,000 which will be allocated across two

or more unrelated client accounts of a fiduciary.’’.

(2) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

(A) IN GENERAL.—Subsection (d) of section 4975 of

the Internal Revenue Code of 1986 (relating to exemptions),

as amended by section 601, is amended by striking ‘‘or’’

at the end of paragraph (16), by striking the period at

the end of paragraph (17) and inserting ‘‘, or’’, and by

adding at the end the following new paragraph:

‘‘(18) any transaction involving the purchase or sale of

securities, or other property (as determined by the Secretary

of Labor), between a plan and a party in interest (other than

a fiduciary described in subsection (e)(3)(B)) with respect to

a plan if—

‘‘(A) the transaction involves a block trade,

‘‘(B) at the time of the transaction, the interest of

the plan (together with the interests of any other plans

maintained by the same plan sponsor), does not exceed

10 percent of the aggregate size of the block trade,

‘‘(C) the terms of the transaction, including the price,

are at least as favorable to the plan as an arm’s length

transaction, and

‘‘(D) the compensation associated with the purchase

and sale is not greater than the compensation associated

with an arm’s length transaction with an unrelated party.’’.

(B) SPECIAL RULE RELATING TO BLOCK TRADE.—Subsection (f) of section 4975 of such Code (relating to other

120 STAT. 968 PUBLIC LAW 109–280—AUG. 17, 2006

definitions and special rules), as amended by section 601,

is amended by adding at the end the following new paragraph:

‘‘(9) BLOCK TRADE.—The term ‘block trade’ means any trade

of at least 10,000 shares or with a market value of at least

$200,000 which will be allocated across two or more unrelated

client accounts of a fiduciary.’’.

(b) BONDING RELIEF.—Section 412(a) of such Act (29 U.S.C.

1112(a)) is amended—

(1) by redesignating paragraph (2) as paragraph (3),

(2) by striking ‘‘and’’ at the end of paragraph (1), and

(3) by inserting after paragraph (1) the following new paragraph:

‘‘(2) no bond shall be required of any entity which is registered as a broker or a dealer under section 15(b) of the

Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) if the broker

or dealer is subject to the fidelity bond requirements of a

self-regulatory organization (within the meaning of section

3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).’’.

(c) EXEMPTION FOR ELECTRONIC COMMUNICATION NETWORK.—

(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Section 408(b) of such Act, as amended

by subsection (a), is amended by adding at the end the following:

‘‘(16) Any transaction involving the purchase or sale of

securities, or other property (as determined by the Secretary),

between a plan and a party in interest if—

‘‘(A) the transaction is executed through an electronic

communication network, alternative trading system, or

similar execution system or trading venue subject to regulation and oversight by—

‘‘(i) the applicable Federal regulating entity, or

‘‘(ii) such foreign regulatory entity as the Secretary

may determine by regulation,

‘‘(B) either—

‘‘(i) the transaction is effected pursuant to rules

designed to match purchases and sales at the best

price available through the execution system in accordance with applicable rules of the Securities and

Exchange Commission or other relevant governmental

authority, or

‘‘(ii) neither the execution system nor the parties

to the transaction take into account the identity of

the parties in the execution of trades,

‘‘(C) the price and compensation associated with the

purchase and sale are not greater than the price and compensation associated with an arm’s length transaction with

an unrelated party,

‘‘(D) if the party in interest has an ownership interest

in the system or venue described in subparagraph (A),

the system or venue has been authorized by the plan

sponsor or other independent fiduciary for transactions

described in this paragraph, and

‘‘(E) not less than 30 days prior to the initial transaction described in this paragraph executed through any

system or venue described in subparagraph (A), a plan

fiduciary is provided written or electronic notice of the

Deadline.

Notice.

29 USC 1108.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 969

execution of such transaction through such system or

venue.’’.

(2) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

Subsection (d) of section 4975 of the Internal Revenue Code

of 1986 (relating to exemptions), as amended by subsection

(a), is amended by striking ‘‘or’’ at the end of paragraph (17),

by striking the period at the end of paragraph (18) and inserting

‘‘, or’’, and by adding at the end the following new paragraph:

‘‘(19) any transaction involving the purchase or sale of

securities, or other property (as determined by the Secretary

of Labor), between a plan and a party in interest if—

‘‘(A) the transaction is executed through an electronic

communication network, alternative trading system, or

similar execution system or trading venue subject to regulation and oversight by—

‘‘(i) the applicable Federal regulating entity, or

‘‘(ii) such foreign regulatory entity as the Secretary

of Labor may determine by regulation,

‘‘(B) either—

‘‘(i) the transaction is effected pursuant to rules

designed to match purchases and sales at the best

price available through the execution system in accordance with applicable rules of the Securities and

Exchange Commission or other relevant governmental

authority, or

‘‘(ii) neither the execution system nor the parties

to the transaction take into account the identity of

the parties in the execution of trades,

‘‘(C) the price and compensation associated with the

purchase and sale are not greater than the price and compensation associated with an arm’s length transaction with

an unrelated party,

‘‘(D) if the party in interest has an ownership interest

in the system or venue described in subparagraph (A),

the system or venue has been authorized by the plan

sponsor or other independent fiduciary for transactions

described in this paragraph, and

‘‘(E) not less than 30 days prior to the initial transaction described in this paragraph executed through any

system or venue described in subparagraph (A), a plan

fiduciary is provided written or electronic notice of the

execution of such transaction through such system or

venue.’’.

(d) EXEMPTION FOR SERVICE PROVIDERS.—

(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C. 1106),

as amended by subsection (c), is amended by adding at the

end the following new paragraph:

‘‘(17)(A) Transactions described in subparagraphs (A), (B),

and (D) of section 406(a)(1) between a plan and a person that

is a party in interest other than a fiduciary (or an affiliate)

who has or exercises any discretionary authority or control

with respect to the investment of the plan assets involved

in the transaction or renders investment advice (within the

meaning of section 3(21)(A)(ii)) with respect to those assets,

solely by reason of providing services to the plan or solely

by reason of a relationship to such a service provider described

29 USC 1108.

Deadline.

Notice.

120 STAT. 970 PUBLIC LAW 109–280—AUG. 17, 2006

in subparagraph (F), (G), (H), or (I) of section 3(14), or both,

but only if in connection with such transaction the plan receives

no less, nor pays no more, than adequate consideration.

‘‘(B) For purposes of this paragraph, the term ‘adequate

consideration’ means—

‘‘(i) in the case of a security for which there is

a generally recognized market—

‘‘(I) the price of the security prevailing on a

national securities exchange which is registered

under section 6 of the Securities Exchange Act

of 1934, taking into account factors such as the

size of the transaction and marketability of the

security, or

‘‘(II) if the security is not traded on such a

national securities exchange, a price not less favorable to the plan than the offering price for the

security as established by the current bid and

asked prices quoted by persons independent of the

issuer and of the party in interest, taking into

account factors such as the size of the transaction

and marketability of the security, and

‘‘(ii) in the case of an asset other than a security

for which there is a generally recognized market, the

fair market value of the asset as determined in good

faith by a fiduciary or fiduciaries in accordance with

regulations prescribed by the Secretary.’’.

(2) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—

(A) IN GENERAL.—Subsection (d) of section 4975 of

the Internal Revenue Code of 1986 (relating to exemptions),

as amended by subsection (c), is amended by striking ‘‘or’’

at the end of paragraph (18), by striking the period at

the end of paragraph (19) and inserting ‘‘, or’’, and by

adding at the end the following new paragraph:

‘‘(20) transactions described in subparagraphs (A), (B), and

(D) of subsection (c)(1) between a plan and a person that

is a party in interest other than a fiduciary (or an affiliate)

who has or exercises any discretionary authority or control

with respect to the investment of the plan assets involved

in the transaction or renders investment advice (within the

meaning of subsection (e)(3)(B)) with respect to those assets,

solely by reason of providing services to the plan or solely

by reason of a relationship to such a service provider described

in subparagraph (F), (G), (H), or (I) of subsection (e)(2), or

both, but only if in connection with such transaction the plan

receives no less, nor pays no more, than adequate consideration.’’.

(B) SPECIAL RULE RELATING TO SERVICE PROVIDERS.—

Subsection (f) of section 4975 of such Code (relating to

other definitions and special rules), as amended by subsection (a), is amended by adding at the end the following

new paragraph:

‘‘(10) ADEQUATE CONSIDERATION.—The term ‘adequate

consideration’ means—

‘‘(A) in the case of a security for which there is a

generally recognized market—

‘‘(i) the price of the security prevailing on a

national securities exchange which is registered under

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 971

section 6 of the Securities Exchange Act of 1934, taking

into account factors such as the size of the transaction

and marketability of the security, or

‘‘(ii) if the security is not traded on such a national

securities exchange, a price not less favorable to the

plan than the offering price for the security as established by the current bid and asked prices quoted

by persons independent of the issuer and of the party

in interest, taking into account factors such as the

size of the transaction and marketability of the security, and

‘‘(B) in the case of an asset other than a security

for which there is a generally recognized market, the fair

market value of the asset as determined in good faith

by a fiduciary or fiduciaries in accordance with regulations

prescribed by the Secretary of Labor.’’.

(e) RELIEF FOR FOREIGN EXCHANGE TRANSACTIONS.—

(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C.

1108(b)), as amended by subsection (d), is amended by adding

at the end the following new paragraph:

‘‘(18) FOREIGN EXCHANGE TRANSACTIONS.—Any foreign

exchange transactions, between a bank or broker-dealer (or

any affiliate of either), and a plan (as defined in section 3(3))

with respect to which such bank or broker-dealer (or affiliate)

is a trustee, custodian, fiduciary, or other party in interest,

if—

‘‘(A) the transaction is in connection with the purchase,

holding, or sale of securities or other investment assets

(other than a foreign exchange transaction unrelated to

any other investment in securities or other investment

assets),

‘‘(B) at the time the foreign exchange transaction is

entered into, the terms of the transaction are not less

favorable to the plan than the terms generally available

in comparable arm’s length foreign exchange transactions

between unrelated parties, or the terms afforded by the

bank or broker-dealer (or any affiliate of either) in comparable arm’s-length foreign exchange transactions

involving unrelated parties,

‘‘(C) the exchange rate used by such bank or brokerdealer (or affiliate) for a particular foreign exchange transaction does not deviate by more or less than 3 percent

from the interbank bid and asked rates for transactions

of comparable size and maturity at the time of the transaction as displayed on an independent service that reports

rates of exchange in the foreign currency market for such

currency, and

‘‘(D) the bank or broker-dealer (or any affiliate of

either) does not have investment discretion, or provide

investment advice, with respect to the transaction.’’.

(2) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—

Subsection (d) of section 4975 of the Internal Revenue Code

of 1986 (relating to exemptions), as amended by subsection

(d), is amended by striking ‘‘or’’ at the end of paragraph (19),

by striking the period at the end of paragraph (20) and inserting

‘‘, or’’, and by adding at the end the following new paragraph:

120 STAT. 972 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(21) any foreign exchange transactions, between a bank

or broker-dealer (or any affiliate of either) and a plan (as

defined in this section) with respect to which such bank or

broker-dealer (or affiliate) is a trustee, custodian, fiduciary,

or other party in interest person, if—

‘‘(A) the transaction is in connection with the purchase,

holding, or sale of securities or other investment assets

(other than a foreign exchange transaction unrelated to

any other investment in securities or other investment

assets),

‘‘(B) at the time the foreign exchange transaction is

entered into, the terms of the transaction are not less

favorable to the plan than the terms generally available

in comparable arm’s length foreign exchange transactions

between unrelated parties, or the terms afforded by the

bank or broker-dealer (or any affiliate of either) in comparable arm’s-length foreign exchange transactions

involving unrelated parties,

‘‘(C) the exchange rate used by such bank or brokerdealer (or affiliate) for a particular foreign exchange transaction does not deviate by more or less than 3 percent

from the interbank bid and asked rates for transactions

of comparable size and maturity at the time of the transaction as displayed on an independent service that reports

rates of exchange in the foreign currency market for such

currency, and

‘‘(D) the bank or broker-dealer (or any affiliate of

either) does not have investment discretion, or provide

investment advice, with respect to the transaction.’’.

(f) DEFINITION OF PLAN ASSET VEHICLE.—Section 3 of such

Act (29 U.S.C. 1002) is amended by adding at the end the following

new paragraph:

‘‘(42) the term ‘plan assets’ means plan assets as defined by

such regulations as the Secretary may prescribe, except that under

such regulations the assets of any entity shall not be treated as

plan assets if, immediately after the most recent acquisition of

any equity interest in the entity, less than 25 percent of the total

value of each class of equity interest in the entity is held by

benefit plan investors. For purposes of determinations pursuant

to this paragraph, the value of any equity interest held by a person

(other than such a benefit plan investor) who has discretionary

authority or control with respect to the assets of the entity or

any person who provides investment advice for a fee (direct or

indirect) with respect to such assets, or any affiliate of such a

person, shall be disregarded for purposes of calculating the 25

percent threshold. An entity shall be considered to hold plan assets

only to the extent of the percentage of the equity interest held

by benefit plan investors. For purposes of this paragraph, the term

‘benefit plan investor’ means an employee benefit plan subject to

part 4, any plan to which section 4975 of the Internal Revenue

Code of 1986 applies, and any entity whose underlying assets

include plan assets by reason of a plan’s investment in such entity.’’.

(g) EXEMPTION FOR CROSS TRADING.—

(1) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Section 408(b) of such Act (29 U.S.C.

1108(b)), as amended by subsection (e), is amended by adding

at the end the following new paragraph:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 973

‘‘(19) CROSS TRADING.—Any transaction described in sections 406(a)(1)(A) and 406(b)(2) involving the purchase and

sale of a security between a plan and any other account managed by the same investment manager, if—

‘‘(A) the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery

of a security for which market quotations are readily available,

‘‘(B) the transaction is effected at the independent current market price of the security (within the meaning of

section 270.17a–7(b) of title 17, Code of Federal Regulations),

‘‘(C) no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant

to subparagraph (D)), or other remuneration is paid in

connection with the transaction,

‘‘(D) a fiduciary (other than the investment manager

engaging in the cross-trades or any affiliate) for each plan

participating in the transaction authorizes in advance of

any cross-trades (in a document that is separate from any

other written agreement of the parties) the investment

manager to engage in cross trades at the investment manager’s discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades

may take place (but only if such disclosure is separate

from any other agreement or disclosure involving the asset

management relationship), including the written policies

and procedures of the investment manager described in

subparagraph (H),

‘‘(E) each plan participating in the transaction has

assets of at least $100,000,000, except that if the assets

of a plan are invested in a master trust containing the

assets of plans maintained by employers in the same controlled group (as defined in section 407(d)(7)), the master

trust has assets of at least $100,000,000,

‘‘(F) the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph

(D) a quarterly report detailing all cross trades executed

by the investment manager in which the plan participated

during such quarter, including the following information,

as applicable: (i) the identity of each security bought or

sold; (ii) the number of shares or units traded; (iii) the

parties involved in the cross-trade; and (iv) trade price

and the method used to establish the trade price,

‘‘(G) the investment manager does not base its fee

schedule on the plan’s consent to cross trading, and no

other service (other than the investment opportunities and

cost savings available through a cross trade) is conditioned

on the plan’s consent to cross trading,

‘‘(H) the investment manager has adopted, and crosstrades are effected in accordance with, written cross-trading

policies and procedures that are fair and equitable to all

accounts participating in the cross-trading program, and

that include a description of the manager’s pricing policies

and procedures, and the manager’s policies and procedures

for allocating cross trades in an objective manner among

accounts participating in the cross-trading program, and

120 STAT. 974 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(I) the investment manager has designated an individual responsible for periodically reviewing such purchases

and sales to ensure compliance with the written policies

and procedures described in subparagraph (H), and following such review, the individual shall issue an annual

written report no later than 90 days following the period

to which it relates signed under penalty of perjury to

the plan fiduciary who authorized cross trading under

subparagraph (D) describing the steps performed during

the course of the review, the level of compliance, and any

specific instances of non-compliance.

The written report under subparagraph (I) shall also notify

the plan fiduciary of the plan’s right to terminate participation

in the investment manager’s cross-trading program at any

time.’’.

(2) AMENDMENTS OF INTERNAL REVENUE CODE OF 1986.— Subsection (d) of section 4975 of the Internal Revenue Code

of 1986 (relating to exemptions), as amended by subsection

(e), is amended by striking ‘‘or’’ at the end of paragraph (20),

by striking the period at the end of paragraph (21) and inserting

‘‘, or’’, and by adding at the end the following new paragraph:

‘‘(22) any transaction described in subsection (c)(1)(A)

involving the purchase and sale of a security between a plan

and any other account managed by the same investment manager, if—

‘‘(A) the transaction is a purchase or sale, for no consideration other than cash payment against prompt delivery

of a security for which market quotations are readily available,

‘‘(B) the transaction is effected at the independent current market price of the security (within the meaning of

section 270.17a–7(b) of title 17, Code of Federal Regulations),

‘‘(C) no brokerage commission, fee (except for customary transfer fees, the fact of which is disclosed pursuant

to subparagraph (D)), or other remuneration is paid in

connection with the transaction,

‘‘(D) a fiduciary (other than the investment manager

engaging in the cross-trades or any affiliate) for each plan

participating in the transaction authorizes in advance of

any cross-trades (in a document that is separate from any

other written agreement of the parties) the investment

manager to engage in cross trades at the investment manager’s discretion, after such fiduciary has received disclosure regarding the conditions under which cross trades

may take place (but only if such disclosure is separate

from any other agreement or disclosure involving the asset

management relationship), including the written policies

and procedures of the investment manager described in

subparagraph (H),

‘‘(E) each plan participating in the transaction has

assets of at least $100,000,000, except that if the assets

of a plan are invested in a master trust containing the

assets of plans maintained by employers in the same controlled group (as defined in section 407(d)(7) of the

Employee Retirement Income Security Act of 1974), the

master trust has assets of at least $100,000,000,

Notification.

Reports.

Deadline.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 975

‘‘(F) the investment manager provides to the plan fiduciary who authorized cross trading under subparagraph

(D) a quarterly report detailing all cross trades executed

by the investment manager in which the plan participated

during such quarter, including the following information,

as applicable: (i) the identity of each security bought or

sold; (ii) the number of shares or units traded; (iii) the

parties involved in the cross-trade; and (iv) trade price

and the method used to establish the trade price,

‘‘(G) the investment manager does not base its fee

schedule on the plan’s consent to cross trading, and no

other service (other than the investment opportunities and

cost savings available through a cross trade) is conditioned

on the plan’s consent to cross trading,

‘‘(H) the investment manager has adopted, and crosstrades are effected in accordance with, written cross-trading

policies and procedures that are fair and equitable to all

accounts participating in the cross-trading program, and

that include a description of the manager’s pricing policies

and procedures, and the manager’s policies and procedures

for allocating cross trades in an objective manner among

accounts participating in the cross-trading program, and

‘‘(I) the investment manager has designated an individual responsible for periodically reviewing such purchases

and sales to ensure compliance with the written policies

and procedures described in subparagraph (H), and following such review, the individual shall issue an annual

written report no later than 90 days following the period

to which it relates signed under penalty of perjury to

the plan fiduciary who authorized cross trading under

subparagraph (D) describing the steps performed during

the course of the review, the level of compliance, and any

specific instances of non-compliance.

The written report shall also notify the plan fiduciary of the

plan’s right to terminate participation in the investment manager’s cross-trading program at any time.’’.

(3) REGULATIONS.—No later than 180 days after the date

of the enactment of this Act, the Secretary of Labor, after

consultation with the Securities and Exchange Commission,

shall issue regulations regarding the content of policies and

procedures required to be adopted by an investment manager

under section 408(b)(19) of the Employee Retirement Income

Security Act of 1974.

(h) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to transactions

occurring after the date of the enactment of this Act.

(2) BONDING RULE.—The amendments made by subsection

(b) shall apply to plan years beginning after such date.

SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS

INVOLVING SECURITIES AND COMMODITIES.

(a) AMENDMENT OF EMPLOYEE RETIREMENT INCOME SECURITY

ACT OF 1974.—Section 408(b) of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1108(b)), as amended by sections

601 and 611, is further amended by adding at the end the following

new paragraph:

26 USC 4975

note.

Deadline.

29 USC 1108

note.

Notification.

Reports.

Deadline.

120 STAT. 976 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(20)(A) Except as provided in subparagraphs (B) and (C),

a transaction described in section 406(a) in connection with

the acquisition, holding, or disposition of any security or commodity, if the transaction is corrected before the end of the

correction period.

‘‘(B) Subparagraph (A) does not apply to any transaction

between a plan and a plan sponsor or its affiliates that involves

the acquisition or sale of an employer security (as defined

in section 407(d)(1)) or the acquisition, sale, or lease of employer

real property (as defined in section 407(d)(2)).

‘‘(C) In the case of any fiduciary or other party in interest

(or any other person knowingly participating in such transaction), subparagraph (A) does not apply to any transaction

if, at the time the transaction occurs, such fiduciary or party

in interest (or other person) knew (or reasonably should have

known) that the transaction would (without regard to this

paragraph) constitute a violation of section 406(a).

‘‘(D) For purposes of this paragraph, the term ‘correction

period’ means, in connection with a fiduciary or party in interest

(or other person knowingly participating in the transaction),

the 14-day period beginning on the date on which such fiduciary

or party in interest (or other person) discovers, or reasonably

should have discovered, that the transaction would (without

regard to this paragraph) constitute a violation of section 406(a).

‘‘(E) For purposes of this paragraph—

‘‘(i) The term ‘security’ has the meaning given such

term by section 475(c)(2) of the Internal Revenue Code

of 1986 (without regard to subparagraph (F)(iii) and the

last sentence thereof).

‘‘(ii) The term ‘commodity’ has the meaning given such

term by section 475(e)(2) of such Code (without regard

to subparagraph (D)(iii) thereof).

‘‘(iii) The term ‘correct’ means, with respect to a transaction—

‘‘(I) to undo the transaction to the extent possible

and in any case to make good to the plan or affected

account any losses resulting from the transaction, and

‘‘(II) to restore to the plan or affected account

any profits made through the use of assets of the

plan.’’.

(b) AMENDMENT OF INTERNAL REVENUE CODE OF 1986.—

(1) IN GENERAL.—Subsection (d) of section 4975 of the

Internal Revenue Code of 1986 (relating to exemptions), as

amended by sections 601 and 611, is amended by striking

‘‘or’’ at the end of paragraph (21), by striking the period at

the end of paragraph (22) and inserting ‘‘, or’’, and by adding

at the end the following new paragraph:

‘‘(23) except as provided in subsection (f)(11), a transaction

described in subparagraph (A), (B), (C), or (D) of subsection

(c)(1) in connection with the acquisition, holding, or disposition

of any security or commodity, if the transaction is corrected

before the end of the correction period.’’.

(2) SPECIAL RULES RELATING TO CORRECTION PERIOD.—Subsection (f) of section 4975 of such Code (relating to other definitions and special rules), as amended by sections 601 and 611,

is amended by adding at the end the following new paragraph:

‘‘(11) CORRECTION PERIOD.—

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 977

‘‘(A) IN GENERAL.—For purposes of subsection (d)(23),

the term ‘correction period’ means the 14-day period beginning on the date on which the disqualified person discovers,

or reasonably should have discovered, that the transaction

would (without regard to this paragraph and subsection

(d)(23)) constitute a prohibited transaction.

‘‘(B) EXCEPTIONS.—

‘‘(i) EMPLOYER SECURITIES.—Subsection (d)(23)

does not apply to any transaction between a plan and

a plan sponsor or its affiliates that involves the acquisition or sale of an employer security (as defined in

section 407(d)(1)) or the acquisition, sale, or lease of

employer real property (as defined in section 407(d)(2)).

‘‘(ii) KNOWING PROHIBITED TRANSACTION.—In the

case of any disqualified person, subsection (d)(23) does

not apply to a transaction if, at the time the transaction

is entered into, the disqualified person knew (or reasonably should have known) that the transaction would

(without regard to this paragraph) constitute a prohibited transaction.

‘‘(C) ABATEMENT OF TAX WHERE THERE IS A CORRECTION.—If a transaction is not treated as a prohibited transaction by reason of subsection (d)(23), then no tax under

subsections (a) and (b) shall be assessed with respect to

such transaction, and if assessed the assessment shall be

abated, and if collected shall be credited or refunded as

an overpayment.

‘‘(D) DEFINITIONS.—For purposes of this paragraph and

subsection (d)(23)—

‘‘(i) SECURITY.—The term ‘security’ has the

meaning given such term by section 475(c)(2) (without

regard to subparagraph (F)(iii) and the last sentence

thereof).

‘‘(ii) COMMODITY.—The term ‘commodity’ has the

meaning given such term by section 475(e)(2) (without

regard to subparagraph (D)(iii) thereof).

‘‘(iii) CORRECT.—The term ‘correct’ means, with

respect to a transaction—

‘‘(I) to undo the transaction to the extent possible and in any case to make good to the plan

or affected account any losses resulting from the

transaction, and

‘‘(II) to restore to the plan or affected account

any profits made through the use of assets of the

plan.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to any transaction which the fiduciary or disqualified

person discovers, or reasonably should have discovered, after the

date of the enactment of this Act constitutes a prohibited transaction.

26 USC 4975

note.

120 STAT. 978 PUBLIC LAW 109–280—AUG. 17, 2006

Subtitle C—Fiduciary and Other Rules

SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY

DURING SUSPENSION OF ABILITY OF PARTICIPANT OR

BENEFICIARY TO DIRECT INVESTMENTS.

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

Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended—

(1) in paragraph (1)—

(A) by redesignating subparagraphs (A) and (B) as

clauses (i) and (ii), respectively, and by inserting ‘‘(A)’’

after ‘‘(c)(1)’’,

(B) in subparagraph (A)(ii) (as redesignated by paragraph (1)), by inserting before the period the following:

‘‘, except that this clause shall not apply in connection

with such participant or beneficiary for any blackout period

during which the ability of such participant or beneficiary

to direct the investment of the assets in his or her account

is suspended by a plan sponsor or fiduciary’’, and

(C) by adding at the end the following new subparagraphs:

‘‘(B) If a person referred to in subparagraph (A)(ii) meets the

requirements of this title in connection with authorizing and implementing the blackout period, any person who is otherwise a fiduciary shall not be liable under this title for any loss occurring

during such period.

‘‘(C) For purposes of this paragraph, the term ‘blackout period’

has the meaning given such term by section 101(i)(7).’’; and

(2) by adding at the end the following:

‘‘(4)(A) In any case in which a qualified change in investment options occurs in connection with an individual account

plan, a participant or beneficiary shall not be treated for purposes of paragraph (1) as not exercising control over the assets

in his account in connection with such change if the requirements of subparagraph (C) are met in connection with such

change.

‘‘(B) For purposes of subparagraph (A), the term ‘qualified

change in investment options’ means, in connection with an

individual account plan, a change in the investment options

offered to the participant or beneficiary under the terms of

the plan, under which—

‘‘(i) the account of the participant or beneficiary is

reallocated among one or more remaining or new investment options which are offered in lieu of one or more

investment options offered immediately prior to the effective date of the change, and

‘‘(ii) the stated characteristics of the remaining or new

investment options provided under clause (i), including

characteristics relating to risk and rate of return, are,

as of immediately after the change, reasonably similar

to those of the existing investment options as of immediately before the change.

‘‘(C) The requirements of this subparagraph are met in

connection with a qualified change in investment options if—

‘‘(i) at least 30 days and no more than 60 days prior

to the effective date of the change, the plan administrator

furnishes written notice of the change to the participants

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 979

and beneficiaries, including information comparing the

existing and new investment options and an explanation

that, in the absence of affirmative investment instructions

from the participant or beneficiary to the contrary, the

account of the participant or beneficiary will be invested

in the manner described in subparagraph (B),

‘‘(ii) the participant or beneficiary has not provided

to the plan administrator, in advance of the effective date

of the change, affirmative investment instructions contrary

to the change, and

‘‘(iii) the investments under the plan of the participant

or beneficiary as in effect immediately prior to the effective

date of the change were the product of the exercise by

such participant or beneficiary of control over the assets

of the account within the meaning of paragraph (1).’’.

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007.

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED AGREEMENTS.—In the case of a plan maintained pursuant to 1 or

more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before

the date of the enactment of this Act, paragraph (1) shall

be applied to benefits pursuant to, and individuals covered

by, any such agreement by substituting for ‘‘December 31,

2007’’ the earlier of—

(A) the later of—

(i) December 31, 2008, or

(ii) the date on which the last of such collective

bargaining agreements terminates (determined without

regard to any extension thereof after such date of

enactment), or

(B) December 31, 2009.

SEC. 622. INCREASE IN MAXIMUM BOND AMOUNT.

(a) IN GENERAL.—Section 412(a) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1112), as amended by

section 611(b), is amended by adding at the end the following:

‘‘In the case of a plan that holds employer securities (within the

meaning of section 407(d)(1)), this subsection shall be applied by

substituting ‘$1,000,000’ for ‘$500,000’ each place it appears.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to plan years beginning after December 31, 2007.

SEC. 623. INCREASE IN PENALTIES FOR COERCIVE INTERFERENCE

WITH EXERCISE OF ERISA RIGHTS.

(a) IN GENERAL.—Section 511 of the Employment Retirement

Income Security Act of 1974 (29 U.S.C. 1141) is amended—

(1) by striking ‘‘$10,000’’ and inserting ‘‘$100,000’’, and

(2) by striking ‘‘one year’’ and inserting ‘‘10 years’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to violations occurring on and after the date of the

enactment of this Act.

29 USC 1141

note.

29 USC 1112

note.

Applicability.

29 USC 1104

note.

120 STAT. 980 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 624. TREATMENT OF INVESTMENT OF ASSETS BY PLAN WHERE

PARTICIPANT FAILS TO EXERCISE INVESTMENT ELECTION.

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

Income Security Act of 1974 (29 U.S.C. 1104(c)), as amended by

section 622, is amended by adding at the end the following new

paragraph:

‘‘(5) DEFAULT INVESTMENT ARRANGEMENTS.—

‘‘(A) IN GENERAL.—For purposes of paragraph (1), a

participant in an individual account plan meeting the notice

requirements of subparagraph (B) shall be treated as exercising control over the assets in the account with respect

to the amount of contributions and earnings which, in

the absence of an investment election by the participant,

are invested by the plan in accordance with regulations

prescribed by the Secretary. The regulations under this

subparagraph shall provide guidance on the appropriateness of designating default investments that include a mix

of asset classes consistent with capital preservation or longterm capital appreciation, or a blend of both.

‘‘(B) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if each participant—

‘‘(I) receives, within a reasonable period of time

before each plan year, a notice explaining the

employee’s right under the plan to designate how

contributions and earnings will be invested and

explaining how, in the absence of any investment

election by the participant, such contributions and

earnings will be invested, and

‘‘(II) has a reasonable period of time after

receipt of such notice and before the beginning

of the plan year to make such designation.

‘‘(ii) FORM OF NOTICE.—The requirements of

clauses (i) and (ii) of section 401(k)(12)(D) of the

Internal Revenue Code of 1986 shall apply with respect

to the notices described in this subparagraph.’’.

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2006.

(2) REGULATIONS.—Final regulations under section

404(c)(5)(A) of the Employee Retirement Income Security Act

of 1974 (as added by this section) shall be issued no later

than 6 months after the date of the enactment of this Act.

SEC. 625. CLARIFICATION OF FIDUCIARY RULES.

(a) IN GENERAL.—Not later than 1 year after the date of the

enactment of this Act, the Secretary of Labor shall issue final

regulations clarifying that the selection of an annuity contract

as an optional form of distribution from an individual account

plan to a participant or beneficiary—

(1) is not subject to the safest available annuity standard

under Interpretive Bulletin 95–1 (29 CFR 2509.95–1), and

(2) is subject to all otherwise applicable fiduciary standards.

(b) EFFECTIVE DATE.—This section shall take effect on the

date of enactment of this Act.

29 USC 1104

note.

Deadline.

Deadline.

29 USC 1104

note.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 981

TITLE VII—BENEFIT ACCRUAL

STANDARDS

SEC. 701. BENEFIT ACCRUAL STANDARDS.

(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—

(1) RULES RELATING TO REDUCTION IN RATE OF BENEFIT

ACCRUAL.—Section 204(b) of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1054(b)) is amended by adding

at the end the following new paragraph:

‘‘(5) SPECIAL RULES RELATING TO AGE.— ‘‘(A) COMPARISON TO SIMILARLY SITUATED YOUNGER

INDIVIDUAL.— ‘‘(i) IN GENERAL.—A plan shall not be treated as

failing to meet the requirements of paragraph (1)(H)(i)

if a participant’s accrued benefit, as determined as

of any date under the terms of the plan, would be

equal to or greater than that of any similarly situated,

younger individual who is or could be a participant.

‘‘(ii) SIMILARLY SITUATED.—For purposes of this

subparagraph, a participant is similarly situated to

any other individual if such participant is identical

to such other individual in every respect (including

period of service, compensation, position, date of hire,

work history, and any other respect) except for age.

‘‘(iii) DISREGARD OF SUBSIDIZED EARLY RETIREMENT

BENEFITS.—In determining the accrued benefit as of

any date for purposes of this clause, the subsidized

portion of any early retirement benefit or retirementtype subsidy shall be disregarded.

‘‘(iv) ACCRUED BENEFIT.—For purposes of this

subparagraph, the accrued benefit may, under the

terms of the plan, be expressed as an annuity payable

at normal retirement age, the balance of a hypothetical

account, or the current value of the accumulated

percentage of the employee’s final average compensation.

‘‘(B) APPLICABLE DEFINED BENEFIT PLANS.— ‘‘(i) INTEREST CREDITS.— ‘‘(I) IN GENERAL.—An applicable defined benefit plan shall be treated as failing to meet the

requirements of paragraph (1)(H) unless the terms

of the plan provide that any interest credit (or

an equivalent amount) for any plan year shall

be at a rate which is not greater than a market

rate of return. A plan shall not be treated as

failing to meet the requirements of this subclause

merely because the plan provides for a reasonable

minimum guaranteed rate of return or for a rate

of return that is equal to the greater of a fixed

or variable rate of return.

‘‘(II) PRESERVATION OF CAPITAL.—An interest

credit (or an equivalent amount) of less than zero

shall in no event result in the account balance

or similar amount being less than the aggregate

amount of contributions credited to the account.

120 STAT. 982 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(III) MARKET RATE OF RETURN.—The Secretary of the Treasury may provide by regulation

for rules governing the calculation of a market

rate of return for purposes of subclause (I) and

for permissible methods of crediting interest to

the account (including fixed or variable interest

rates) resulting in effective rates of return meeting

the requirements of subclause (I).

‘‘(ii) SPECIAL RULE FOR PLAN CONVERSIONS.—If,

after June 29, 2005, an applicable plan amendment

is adopted, the plan shall be treated as failing to meet

the requirements of paragraph (1)(H) unless the

requirements of clause (iii) are met with respect to

each individual who was a participant in the plan

immediately before the adoption of the amendment.

‘‘(iii) RATE OF BENEFIT ACCRUAL.—Subject to clause

(iv), the requirements of this clause are met with

respect to any participant if the accrued benefit of

the participant under the terms of the plan as in

effect after the amendment is not less than the sum

of—

‘‘(I) the participant’s accrued benefit for years

of service before the effective date of the amendment, determined under the terms of the plan

as in effect before the amendment, plus

‘‘(II) the participant’s accrued benefit for years

of service after the effective date of the amendment, determined under the terms of the plan

as in effect after the amendment.

‘‘(iv) SPECIAL RULES FOR EARLY RETIREMENT SUBSIDIES.—For purposes of clause (iii)(I), the plan shall

credit the accumulation account or similar amount with

the amount of any early retirement benefit or retirement-type subsidy for the plan year in which the

participant retires if, as of such time, the participant

has met the age, years of service, and other requirements under the plan for entitlement to such benefit

or subsidy.

‘‘(v) APPLICABLE PLAN AMENDMENT.—For purposes

of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘applicable plan

amendment’ means an amendment to a defined

benefit plan which has the effect of converting

the plan to an applicable defined benefit plan.

‘‘(II) SPECIAL RULE FOR COORDINATED BENEFITS.—If the benefits of 2 or more defined benefit

plans established or maintained by an employer

are coordinated in such a manner as to have the

effect of the adoption of an amendment described

in subclause (I), the sponsor of the defined benefit

plan or plans providing for such coordination shall

be treated as having adopted such a plan amendment as of the date such coordination begins.

‘‘(III) MULTIPLE AMENDMENTS.—The Secretary

of the Treasury shall issue regulations to prevent

the avoidance of the purposes of this subparagraph

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 983

through the use of 2 or more plan amendments

rather than a single amendment.

‘‘(IV) APPLICABLE DEFINED BENEFIT PLAN.—For

purposes of this subparagraph, the term ‘applicable

defined benefit plan’ has the meaning given such

term by section 203(f)(3).

‘‘(vi) TERMINATION REQUIREMENTS.—An applicable

defined benefit plan shall not be treated as meeting

the requirements of clause (i) unless the plan provides

that, upon the termination of the plan—

‘‘(I) if the interest credit rate (or an equivalent

amount) under the plan is a variable rate, the

rate of interest used to determine accrued benefits

under the plan shall be equal to the average of

the rates of interest used under the plan during

the 5-year period ending on the termination date,

and

‘‘(II) the interest rate and mortality table used

to determine the amount of any benefit under the

plan payable in the form of an annuity payable

at normal retirement age shall be the rate and

table specified under the plan for such purpose

as of the termination date, except that if such

interest rate is a variable rate, the interest rate

shall be determined under the rules of subclause

(I).

‘‘(C) CERTAIN OFFSETS PERMITTED.—A plan shall not

be treated as failing to meet the requirements of paragraph

(1)(H)(i) solely because the plan provides offsets against

benefits under the plan to the extent such offsets are

allowable in applying the requirements of section 401(a)

of the Internal Revenue Code of 1986.

‘‘(D) PERMITTED DISPARITIES IN PLAN CONTRIBUTIONS

OR BENEFITS.—A plan shall not be treated as failing to

meet the requirements of paragraph (1)(H) solely because

the plan provides a disparity in contributions or benefits

with respect to which the requirements of section 401(l)

of the Internal Revenue Code of 1986 are met.

‘‘(E) INDEXING PERMITTED.—

‘‘(i) IN GENERAL.—A plan shall not be treated as

failing to meet the requirements of paragraph (1)(H)

solely because the plan provides for indexing of accrued

benefits under the plan.

‘‘(ii) PROTECTION AGAINST LOSS.—Except in the

case of any benefit provided in the form of a variable

annuity, clause (i) shall not apply with respect to any

indexing which results in an accrued benefit less than

the accrued benefit determined without regard to such

indexing.

‘‘(iii) INDEXING.—For purposes of this subparagraph, the term ‘indexing’ means, in connection with

an accrued benefit, the periodic adjustment of the

accrued benefit by means of the application of a recognized investment index or methodology.

‘‘(F) EARLY RETIREMENT BENEFIT OR RETIREMENT-TYPE

SUBSIDY.—For purposes of this paragraph, the terms ‘early

120 STAT. 984 PUBLIC LAW 109–280—AUG. 17, 2006

retirement benefit’ and ‘retirement-type subsidy’ have the

meaning given such terms in subsection (g)(2)(A).

‘‘(G) BENEFIT ACCRUED TO DATE.—For purposes of this

paragraph, any reference to the accrued benefit shall be

a reference to such benefit accrued to date.’’.

(2) DETERMINATIONS OF ACCRUED BENEFIT AS BALANCE OF

BENEFIT ACCOUNT OR EQUIVALENT AMOUNTS.—Section 203 of

such Act (29 U.S.C. 1053) is amended by adding at the end

the following new subsection:

‘‘(f) SPECIAL RULES FOR PLANS COMPUTING ACCRUED BENEFITS

BY REFERENCE TO HYPOTHETICAL ACCOUNT BALANCE OR EQUIVA- LENT AMOUNTS.— ‘‘(1) IN GENERAL.—An applicable defined benefit plan shall

not be treated as failing to meet—

‘‘(A) subject to paragraph (2), the requirements of subsection (a)(2), or

‘‘(B) the requirements of section 204(c) or section 205(g)

with respect to contributions other than employee contributions,

solely because the present value of the accrued benefit (or

any portion thereof) of any participant is, under the terms

of the plan, equal to the amount expressed as the balance

in the hypothetical account described in paragraph (3) or as

an accumulated percentage of the participant’s final average

compensation.

‘‘(2) 3-YEAR VESTING.—In the case of an applicable defined

benefit plan, such plan shall be treated as meeting the requirements of subsection (a)(2) only if an employee who has completed at least 3 years of service has a nonforfeitable right

to 100 percent of the employee’s accrued benefit derived from

employer contributions.

‘‘(3) APPLICABLE DEFINED BENEFIT PLAN AND RELATED

RULES.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘applicable defined benefit

plan’ means a defined benefit plan under which the accrued

benefit (or any portion thereof) is calculated as the balance

of a hypothetical account maintained for the participant

or as an accumulated percentage of the participant’s final

average compensation.

‘‘(B) REGULATIONS TO INCLUDE SIMILAR PLANS.—The

Secretary of the Treasury shall issue regulations which

include in the definition of an applicable defined benefit

plan any defined benefit plan (or any portion of such a

plan) which has an effect similar to an applicable defined

benefit plan.’’.

(b) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.—

(1) RULES RELATING TO REDUCTION IN RATE OF BENEFIT

ACCRUAL.—Subsection (b) of section 411 of the Internal Revenue

Code of 1986 is amended by adding at the end the following

new paragraph:

‘‘(5) SPECIAL RULES RELATING TO AGE.— ‘‘(A) COMPARISON TO SIMILARLY SITUATED YOUNGER

INDIVIDUAL.—

‘‘(i) IN GENERAL.—A plan shall not be treated as

failing to meet the requirements of paragraph (1)(H)(i)

if a participant’s accrued benefit, as determined as

of any date under the terms of the plan, would be

26 USC 411.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 985

equal to or greater than that of any similarly situated,

younger individual who is or could be a participant.

‘‘(ii) SIMILARLY SITUATED.—For purposes of this

subparagraph, a participant is similarly situated to

any other individual if such participant is identical

to such other individual in every respect (including

period of service, compensation, position, date of hire,

work history, and any other respect) except for age.

‘‘(iii) DISREGARD OF SUBSIDIZED EARLY RETIREMENT

BENEFITS.—In determining the accrued benefit as of

any date for purposes of this clause, the subsidized

portion of any early retirement benefit or retirementtype subsidy shall be disregarded.

‘‘(iv) ACCRUED BENEFIT.—For purposes of this

subparagraph, the accrued benefit may, under the

terms of the plan, be expressed as an annuity payable

at normal retirement age, the balance of a hypothetical

account, or the current value of the accumulated

percentage of the employee’s final average compensation.

‘‘(B) APPLICABLE DEFINED BENEFIT PLANS.—

‘‘(i) INTEREST CREDITS.—

‘‘(I) IN GENERAL.—An applicable defined benefit plan shall be treated as failing to meet the

requirements of paragraph (1)(H) unless the terms

of the plan provide that any interest credit (or

an equivalent amount) for any plan year shall

be at a rate which is not greater than a market

rate of return. A plan shall not be treated as

failing to meet the requirements of this subclause

merely because the plan provides for a reasonable

minimum guaranteed rate of return or for a rate

of return that is equal to the greater of a fixed

or variable rate of return.

‘‘(II) PRESERVATION OF CAPITAL.—An interest

credit (or an equivalent amount) of less than zero

shall in no event result in the account balance

or similar amount being less than the aggregate

amount of contributions credited to the account.

‘‘(III) MARKET RATE OF RETURN.—The Secretary may provide by regulation for rules governing the calculation of a market rate of return

for purposes of subclause (I) and for permissible

methods of crediting interest to the account

(including fixed or variable interest rates) resulting

in effective rates of return meeting the requirements of subclause (I).

‘‘(ii) SPECIAL RULE FOR PLAN CONVERSIONS.—If,

after June 29, 2005, an applicable plan amendment

is adopted, the plan shall be treated as failing to meet

the requirements of paragraph (1)(H) unless the

requirements of clause (iii) are met with respect to

each individual who was a participant in the plan

immediately before the adoption of the amendment.

‘‘(iii) RATE OF BENEFIT ACCRUAL.—Subject to clause

(iv), the requirements of this clause are met with

respect to any participant if the accrued benefit of

120 STAT. 986 PUBLIC LAW 109–280—AUG. 17, 2006

the participant under the terms of the plan as in

effect after the amendment is not less than the sum

of—

‘‘(I) the participant’s accrued benefit for years

of service before the effective date of the amendment, determined under the terms of the plan

as in effect before the amendment, plus

‘‘(II) the participant’s accrued benefit for years

of service after the effective date of the amendment, determined under the terms of the plan

as in effect after the amendment.

‘‘(iv) SPECIAL RULES FOR EARLY RETIREMENT SUB- SIDIES.—For purposes of clause (iii)(I), the plan shall

credit the accumulation account or similar amount with

the amount of any early retirement benefit or retirement-type subsidy for the plan year in which the

participant retires if, as of such time, the participant

has met the age, years of service, and other requirements under the plan for entitlement to such benefit

or subsidy.

‘‘(v) APPLICABLE PLAN AMENDMENT.—For purposes

of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘applicable plan

amendment’ means an amendment to a defined

benefit plan which has the effect of converting

the plan to an applicable defined benefit plan.

‘‘(II) SPECIAL RULE FOR COORDINATED BENEFITS.—If the benefits of 2 or more defined benefit

plans established or maintained by an employer

are coordinated in such a manner as to have the

effect of the adoption of an amendment described

in subclause (I), the sponsor of the defined benefit

plan or plans providing for such coordination shall

be treated as having adopted such a plan amendment as of the date such coordination begins.

‘‘(III) MULTIPLE AMENDMENTS.—The Secretary

shall issue regulations to prevent the avoidance

of the purposes of this subparagraph through the

use of 2 or more plan amendments rather than

a single amendment.

‘‘(IV) APPLICABLE DEFINED BENEFIT PLAN.—For

purposes of this subparagraph, the term ‘applicable

defined benefit plan’ has the meaning given such

term by section 411(a)(13).

‘‘(vi) TERMINATION REQUIREMENTS.—An applicable

defined benefit plan shall not be treated as meeting

the requirements of clause (i) unless the plan provides

that, upon the termination of the plan—

‘‘(I) if the interest credit rate (or an equivalent

amount) under the plan is a variable rate, the

rate of interest used to determine accrued benefits

under the plan shall be equal to the average of

the rates of interest used under the plan during

the 5-year period ending on the termination date,

and

‘‘(II) the interest rate and mortality table used

to determine the amount of any benefit under the

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 987

plan payable in the form of an annuity payable

at normal retirement age shall be the rate and

table specified under the plan for such purpose

as of the termination date, except that if such

interest rate is a variable rate, the interest rate

shall be determined under the rules of subclause

(I).

‘‘(C) CERTAIN OFFSETS PERMITTED.—A plan shall not

be treated as failing to meet the requirements of paragraph

(1)(H)(i) solely because the plan provides offsets against

benefits under the plan to the extent such offsets are

allowable in applying the requirements of section 401(a).

‘‘(D) PERMITTED DISPARITIES IN PLAN CONTRIBUTIONS

OR BENEFITS.—A plan shall not be treated as failing to

meet the requirements of paragraph (1)(H) solely because

the plan provides a disparity in contributions or benefits

with respect to which the requirements of section 401(l)

are met.

‘‘(E) INDEXING PERMITTED.—

‘‘(i) IN GENERAL.—A plan shall not be treated as

failing to meet the requirements of paragraph (1)(H)

solely because the plan provides for indexing of accrued

benefits under the plan.

‘‘(ii) PROTECTION AGAINST LOSS.—Except in the

case of any benefit provided in the form of a variable

annuity, clause (i) shall not apply with respect to any

indexing which results in an accrued benefit less than

the accrued benefit determined without regard to such

indexing.

‘‘(iii) INDEXING.—For purposes of this subparagraph, the term ‘indexing’ means, in connection with

an accrued benefit, the periodic adjustment of the

accrued benefit by means of the application of a recognized investment index or methodology.

‘‘(F) EARLY RETIREMENT BENEFIT OR RETIREMENT-TYPE

SUBSIDY.—For purposes of this paragraph, the terms ‘early

retirement benefit’ and ‘retirement-type subsidy’ have the

meaning given such terms in subsection (d)(6)(B)(i).

‘‘(G) BENEFIT ACCRUED TO DATE.—For purposes of this

paragraph, any reference to the accrued benefit shall be

a reference to such benefit accrued to date.’’.

(2) DETERMINATIONS OF ACCRUED BENEFIT AS BALANCE OF

BENEFIT ACCOUNT OR EQUIVALENT AMOUNTS.—Subsection (a)

of section 411 of such Code is amended by adding at the

end the following new paragraph:

‘‘(13) SPECIAL RULES FOR PLANS COMPUTING ACCRUED BENEFITS BY REFERENCE TO HYPOTHETICAL ACCOUNT BALANCE OR

EQUIVALENT AMOUNTS.—

‘‘(A) IN GENERAL.—An applicable defined benefit plan

shall not be treated as failing to meet—

‘‘(i) subject to paragraph (2), the requirements of

subsection (a)(2), or

‘‘(ii) the requirements of subsection (c) or section

417(e) with respect to contributions other than

employee contributions,

solely because the present value of the accrued benefit

(or any portion thereof) of any participant is, under the

120 STAT. 988 PUBLIC LAW 109–280—AUG. 17, 2006

terms of the plan, equal to the amount expressed as the

balance in the hypothetical account described in paragraph

(3) or as an accumulated percentage of the participant’s

final average compensation.

‘‘(B) 3-YEAR VESTING.—In the case of an applicable

defined benefit plan, such plan shall be treated as meeting

the requirements of subsection (a)(2) only if an employee

who has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s accrued

benefit derived from employer contributions.

‘‘(C) APPLICABLE DEFINED BENEFIT PLAN AND RELATED

RULES.—For purposes of this subsection—

‘‘(i) IN GENERAL.—The term ‘applicable defined

benefit plan’ means a defined benefit plan under which

the accrued benefit (or any portion thereof) is calculated as the balance of a hypothetical account maintained for the participant or as an accumulated

percentage of the participant’s final average compensation.

‘‘(ii) REGULATIONS TO INCLUDE SIMILAR PLANS.—

The Secretary shall issue regulations which include

in the definition of an applicable defined benefit plan

any defined benefit plan (or any portion of such a

plan) which has an effect similar to an applicable

defined benefit plan.’’.

(c) AMENDMENTS TO AGE DISCRIMINATION IN EMPLOYMENT

ACT.—Section 4(i) of the Age Discrimination in Employment Act

of 1967 (29 U.S.C. 623(i)) is amended by adding at the end the

following new paragraph:

‘‘(10) SPECIAL RULES RELATING TO AGE.—

‘‘(A) COMPARISON TO SIMILARLY SITUATED YOUNGER

INDIVIDUAL.—

‘‘(i) IN GENERAL.—A plan shall not be treated as

failing to meet the requirements of paragraph (1) if

a participant’s accrued benefit, as determined as of

any date under the terms of the plan, would be equal

to or greater than that of any similarly situated,

younger individual who is or could be a participant.

‘‘(ii) SIMILARLY SITUATED.—For purposes of this

subparagraph, a participant is similarly situated to

any other individual if such participant is identical

to such other individual in every respect (including

period of service, compensation, position, date of hire,

work history, and any other respect) except for age.

‘‘(iii) DISREGARD OF SUBSIDIZED EARLY RETIREMENT

BENEFITS.—In determining the accrued benefit as of

any date for purposes of this clause, the subsidized

portion of any early retirement benefit or retirementtype subsidy shall be disregarded.

‘‘(iv) ACCRUED BENEFIT.—For purposes of this

subparagraph, the accrued benefit may, under the

terms of the plan, be expressed as an annuity payable

at normal retirement age, the balance of a hypothetical

account, or the current value of the accumulated

percentage of the employee’s final average compensation.

‘‘(B) APPLICABLE DEFINED BENEFIT PLANS.—

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 989

‘‘(i) INTEREST CREDITS.—

‘‘(I) IN GENERAL.—An applicable defined benefit plan shall be treated as failing to meet the

requirements of paragraph (1) unless the terms

of the plan provide that any interest credit (or

an equivalent amount) for any plan year shall

be at a rate which is not greater than a market

rate of return. A plan shall not be treated as

failing to meet the requirements of this subclause

merely because the plan provides for a reasonable

minimum guaranteed rate of return or for a rate

of return that is equal to the greater of a fixed

or variable rate of return.

‘‘(II) PRESERVATION OF CAPITAL.—An interest

credit (or an equivalent amount) of less than zero

shall in no event result in the account balance

or similar amount being less than the aggregate

amount of contributions credited to the account.

‘‘(III) MARKET RATE OF RETURN.—The Secretary of the Treasury may provide by regulation

for rules governing the calculation of a market

rate of return for purposes of subclause (I) and

for permissible methods of crediting interest to

the account (including fixed or variable interest

rates) resulting in effective rates of return meeting

the requirements of subclause (I).

‘‘(ii) SPECIAL RULE FOR PLAN CONVERSIONS.—If,

after June 29, 2005, an applicable plan amendment

is adopted, the plan shall be treated as failing to meet

the requirements of paragraph (1)(H) unless the

requirements of clause (iii) are met with respect to

each individual who was a participant in the plan

immediately before the adoption of the amendment.

‘‘(iii) RATE OF BENEFIT ACCRUAL.—Subject to clause

(iv), the requirements of this clause are met with

respect to any participant if the accrued benefit of

the participant under the terms of the plan as in

effect after the amendment is not less than the sum

of—

‘‘(I) the participant’s accrued benefit for years

of service before the effective date of the amendment, determined under the terms of the plan

as in effect before the amendment, plus

‘‘(II) the participant’s accrued benefit for years

of service after the effective date of the amendment, determined under the terms of the plan

as in effect after the amendment.

‘‘(iv) SPECIAL RULES FOR EARLY RETIREMENT SUBSIDIES.—For purposes of clause (iii)(I), the plan shall

credit the accumulation account or similar amount with

the amount of any early retirement benefit or retirement-type subsidy for the plan year in which the

participant retires if, as of such time, the participant

has met the age, years of service, and other requirements under the plan for entitlement to such benefit

or subsidy.

120 STAT. 990 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(v) APPLICABLE PLAN AMENDMENT.—For purposes

of this subparagraph—

‘‘(I) IN GENERAL.—The term ‘applicable plan

amendment’ means an amendment to a defined

benefit plan which has the effect of converting

the plan to an applicable defined benefit plan.

‘‘(II) SPECIAL RULE FOR COORDINATED BENE- FITS.—If the benefits of 2 or more defined benefit

plans established or maintained by an employer

are coordinated in such a manner as to have the

effect of the adoption of an amendment described

in subclause (I), the sponsor of the defined benefit

plan or plans providing for such coordination shall

be treated as having adopted such a plan amendment as of the date such coordination begins.

‘‘(III) MULTIPLE AMENDMENTS.—The Secretary

of the Treasury shall issue regulations to prevent

the avoidance of the purposes of this subparagraph

through the use of 2 or more plan amendments

rather than a single amendment.

‘‘(IV) APPLICABLE DEFINED BENEFIT PLAN.—For

purposes of this subparagraph, the term ‘applicable

defined benefit plan’ has the meaning given such

term by section 203(f)(3) of the Employee Retirement Income Security Act of 1974.

‘‘(vi) TERMINATION REQUIREMENTS.—An applicable

defined benefit plan shall not be treated as meeting

the requirements of clause (i) unless the plan provides

that, upon the termination of the plan—

‘‘(I) if the interest credit rate (or an equivalent

amount) under the plan is a variable rate, the

rate of interest used to determine accrued benefits

under the plan shall be equal to the average of

the rates of interest used under the plan during

the 5-year period ending on the termination date,

and

‘‘(II) the interest rate and mortality table used

to determine the amount of any benefit under the

plan payable in the form of an annuity payable

at normal retirement age shall be the rate and

table specified under the plan for such purpose

as of the termination date, except that if such

interest rate is a variable rate, the interest rate

shall be determined under the rules of subclause

(I).

‘‘(C) CERTAIN OFFSETS PERMITTED.—A plan shall not

be treated as failing to meet the requirements of paragraph

(1) solely because the plan provides offsets against benefits

under the plan to the extent such offsets are allowable

in applying the requirements of section 401(a) of the

Internal Revenue Code of 1986.

‘‘(D) PERMITTED DISPARITIES IN PLAN CONTRIBUTIONS

OR BENEFITS.—A plan shall not be treated as failing to

meet the requirements of paragraph (1) solely because the

plan provides a disparity in contributions or benefits with

respect to which the requirements of section 401(l) of the

Internal Revenue Code of 1986 are met.

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 991

‘‘(E) INDEXING PERMITTED.— ‘‘(i) IN GENERAL.—A plan shall not be treated as

failing to meet the requirements of paragraph (1) solely

because the plan provides for indexing of accrued benefits under the plan.

‘‘(ii) PROTECTION AGAINST LOSS.—Except in the

case of any benefit provided in the form of a variable

annuity, clause (i) shall not apply with respect to any

indexing which results in an accrued benefit less than

the accrued benefit determined without regard to such

indexing.

‘‘(iii) INDEXING.—For purposes of this subparagraph, the term ‘indexing’ means, in connection with

an accrued benefit, the periodic adjustment of the

accrued benefit by means of the application of a recognized investment index or methodology.

‘‘(F) EARLY RETIREMENT BENEFIT OR RETIREMENT-TYPE

SUBSIDY.—For purposes of this paragraph, the terms ‘early

retirement benefit’ and ‘retirement-type subsidy’ have the

meaning given such terms in section 203(g)(2)(A) of the

Employee Retirement Income Security Act of 1974.

‘‘(G) BENEFIT ACCRUED TO DATE.—For purposes of this

paragraph, any reference to the accrued benefit shall be

a reference to such benefit accrued to date.’’.

(d) NO INFERENCE.—Nothing in the amendments made by this

section shall be construed to create an inference with respect to—

(1) the treatment of applicable defined benefit plans or

conversions to applicable defined benefit plans under sections

204(b)(1)(H) of the Employee Retirement Income Security Act

of 1974, 4(i)(1) of the Age Discrimination in Employment Act

of 1967, and 411(b)(1)(H) of the Internal Revenue Code of

1986, as in effect before such amendments, or

(2) the determination of whether an applicable defined

benefit plan fails to meet the requirements of sections 203(a)(2),

204(c), or 204(g) of the Employee Retirement Income Security

Act of 1974 or sections 411(a)(2), 411(c), or 417(e) of such

Code, as in effect before such amendments, solely because the

present value of the accrued benefit (or any portion thereof)

of any participant is, under the terms of the plan, equal to

the amount expressed as the balance in a hypothetical account

or as an accumulated percentage of the participant’s final average compensation.

For purposes of this subsection, the term ‘‘applicable defined benefit

plan’’ has the meaning given such term by section 203(f)(3) of

the Employee Retirement Income Security Act of 1974 and section

411(a)(13)(C) of such Code, as in effect after such amendments.

(e) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section

shall apply to periods beginning on or after June 29, 2005.

(2) PRESENT VALUE OF ACCRUED BENEFIT.—The amendments made by subsections (a)(2) and (b)(2) shall apply to

distributions made after the date of the enactment of this

Act.

(3) VESTING AND INTEREST CREDIT REQUIREMENTS.—In the

case of a plan in existence on June 29, 2005, the requirements

of clause (i) of section 411(b)(5)(B) of the Internal Revenue

Code of 1986, clause (i) of section 204(b)(5)(B) of the Employee

Applicability.

26 USC 411 note.

26 USC 411 note.

120 STAT. 992 PUBLIC LAW 109–280—AUG. 17, 2006

Retirement Income Security Act of 1974, and clause (i) of section

4(i)(10)(B) of the Age Discrimination in Employment Act of

1967 (as added by this Act) and the requirements of 203(f)(2)

of the Employee Retirement Income Security Act of 1974 and

section 411(a)(13)(B) of the Internal Revenue Code of 1986

(as so added) shall, for purposes of applying the amendments

made by subsections (a) and (b), apply to years beginning

after December 31, 2007, unless the plan sponsor elects the

application of such requirements for any period after June

29, 2005, and before the first year beginning after December

31, 2007.

(4) SPECIAL RULE FOR COLLECTIVELY BARGAINED PLANS.— In the case of a plan maintained pursuant to 1 or more collective

bargaining agreements between employee representatives and

1 or more employers ratified on or before the date of the

enactment of this Act, the requirements described in paragraph

(3) shall, for purposes of applying the amendments made by

subsections (a) and (b), not apply to plan years beginning

before—

(A) the earlier of—

(i) the date on which the last of such collective

bargaining agreements terminates (determined without

regard to any extension thereof on or after such date

of enactment), or

(ii) January 1, 2008, or

(B) January 1, 2010.

(5) CONVERSIONS.—The requirements of clause (ii) of section 411(b)(5)(B) of the Internal Revenue Code of 1986, clause

(ii) of section 204(b)(5)(B) of the Employee Retirement Income

Security Act of 1974, and clause (ii) of section 4(i)(10)(B) of

the Age Discrimination in Employment Act of 1967 (as added

by this Act), shall apply to plan amendments adopted after,

and taking effect after, June 29, 2005, except that the plan

sponsor may elect to have such amendments apply to plan

amendments adopted before, and taking effect after, such date.

SEC. 702. REGULATIONS RELATING TO MERGERS AND ACQUISITIONS.

The Secretary of the Treasury or his delegate shall, not later

than 12 months after the date of the enactment of this Act, prescribe

regulations for the application of the amendments made by, and

the provisions of, this title in cases where the conversion of a

plan to an applicable defined benefit plan is made with respect

to a group of employees who become employees by reason of a

merger, acquisition, or similar transaction.

TITLE VIII—PENSION RELATED

REVENUE PROVISIONS

Subtitle A—Deduction Limitations

SEC. 801. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER

PLANS.

(a) IN GENERAL.—Section 404 of the Internal Revenue Code

26 USC 404. of 1986 (relating to deduction for contributions of an employer

Deadline.

26 USC 411 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 993

to an employees’ trust or annuity plan and compensation under

a deferred payment plan) is amended—

(1) in subsection (a)(1)(A), by inserting ‘‘in the case of

a defined benefit plan other than a multiemployer plan, in

an amount determined under subsection (o), and in the case

of any other plan’’ after ‘‘section 501(a),’’, and

(2) by inserting at the end the following new subsection:

‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS.—For purposes of subsection (a)(1)(A)—

‘‘(1) IN GENERAL.—In the case of a defined benefit plan

to which subsection (a)(1)(A) applies (other than a multiemployer plan), the amount determined under this subsection

for any taxable year shall be equal to the greater of—

‘‘(A) the sum of the amounts determined under paragraph (2) with respect to each plan year ending with or

within the taxable year, or

‘‘(B) the sum of the minimum required contributions

under section 430 for such plan years.

‘‘(2) DETERMINATION OF AMOUNT.—

‘‘(A) IN GENERAL.—The amount determined under this

paragraph for any plan year shall be equal to the excess

(if any) of—

‘‘(i) the sum of—

‘‘(I) the funding target for the plan year,

‘‘(II) the target normal cost for the plan year,

and

‘‘(III) the cushion amount for the plan year,

over

‘‘(ii) the value (determined under section 430(g)(2))

of the assets of the plan which are held by the plan

as of the valuation date for the plan year.

‘‘(B) SPECIAL RULE FOR CERTAIN EMPLOYERS.—If section

430(i) does not apply to a plan for a plan year, the amount

determined under subparagraph (A)(i) for the plan year

shall in no event be less than the sum of—

‘‘(i) the funding target for the plan year (determined as if section 430(i) applied to the plan), plus

‘‘(ii) the target normal cost for the plan year (as

so determined).

‘‘(3) CUSHION AMOUNT.—For purposes of paragraph

(2)(A)(i)(III)—

‘‘(A) IN GENERAL.—The cushion amount for any plan

year is the sum of—

‘‘(i) 50 percent of the funding target for the plan

year, and

‘‘(ii) the amount by which the funding target for

the plan year would increase if the plan were to take

into account—

‘‘(I) increases in compensation which are

expected to occur in succeeding plan years, or

‘‘(II) if the plan does not base benefits for

service to date on compensation, increases in benefits which are expected to occur in succeeding plan

years (determined on the basis of the average

annual increase in benefits over the 6 immediately

preceding plan years).

‘‘(B) LIMITATIONS.—

120 STAT. 994 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(i) IN GENERAL.—In making the computation

under subparagraph (A)(ii), the plan’s actuary shall

assume that the limitations under subsection (l) and

section 415(b) shall apply.

‘‘(ii) EXPECTED INCREASES.—In the case of a plan

year during which a plan is covered under section

4021 of the Employee Retirement Income Security Act

of 1974, the plan’s actuary may, notwithstanding subsection (l), take into account increases in the limitations which are expected to occur in succeeding plan

years.

‘‘(4) SPECIAL RULES FOR PLANS WITH 100 OR FEWER PARTICIPANTS.—

‘‘(A) IN GENERAL.—For purposes of determining the

amount under paragraph (3) for any plan year, in the

case of a plan which has 100 or fewer participants for

the plan year, the liability of the plan attributable to benefit

increases for highly compensated employees (as defined

in section 414(q)) resulting from a plan amendment which

is made or becomes effective, whichever is later, within

the last 2 years shall not be taken into account in determining the target liability.

‘‘(B) RULE FOR DETERMINING NUMBER OF PARTICIPANTS.—For purposes of determining the number of plan

participants, all defined benefit plans maintained by the

same employer (or any member of such employer’s controlled group (within the meaning of section 412(f)(4)))

shall be treated as one plan, but only participants of such

member or employer shall be taken into account.

‘‘(5) SPECIAL RULE FOR TERMINATING PLANS.—In the case

of a plan which, subject to section 4041 of the Employee Retirement Income Security Act of 1974, terminates during the plan

year, the amount determined under paragraph (2) shall in

no event be less than the amount required to make the plan

sufficient for benefit liabilities (within the meaning of section

4041(d) of such Act).

‘‘(6) ACTUARIAL ASSUMPTIONS.—Any computation under this

subsection for any plan year shall use the same actuarial

assumptions which are used for the plan year under section

430.

‘‘(7) DEFINITIONS.—Any term used in this subsection which

is also used in section 430 shall have the same meaning given

such term by section 430.’’.

(b) EXCEPTION FROM LIMITATION ON DEDUCTION WHERE COMBINATION OF DEFINED CONTRIBUTION AND DEFINED BENEFIT

PLANS.—Section 404(a)(7)(C) of such Code, as amended by this

Act, is amended by adding at the end the following new clause:

‘‘(iv) GUARANTEED PLANS.—In applying this paragraph, any single-employer plan covered under section

4021 of the Employee Retirement Income Security Act

of 1974 shall not be taken into account.’’.

(c) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) The last sentence of section 404(a)(1)(A) of such Code

is amended by striking ‘‘section 412’’ each place it appears

and inserting ‘‘section 431’’.

(2) Section 404(a)(1)(B) of such Code is amended—

26 USC 404.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 995

(A) by striking ‘‘In the case of a plan’’ and inserting

‘‘In the case of a multiemployer plan’’,

(B) by striking ‘‘section 412(c)(7)’’ each place it appears

and inserting ‘‘section 431(c)(6)’’,

(C) by striking ‘‘section 412(c)(7)(B)’’ and inserting ‘‘section 431(c)(6)(A)(ii)’’,

(D) by striking ‘‘section 412(c)(7)(A)’’ and inserting ‘‘section 431(c)(6)(A)(i)’’, and

(E) by striking ‘‘section 412’’ and inserting ‘‘section

431’’.

(3) Section 404(a)(7) of such Code, as amended by this

Act, is amended—

(A) by adding at the end of subparagraph (A) the

following new sentence: ‘‘In the case of a defined benefit

plan which is a single employer plan, the amount necessary

to satisfy the minimum funding standard provided by section 412 shall not be less than the plan’s funding shortfall

determined under section 430.’’, and

(B) by striking subparagraph (D) and inserting:

‘‘(D) INSURANCE CONTRACT PLANS.—For purposes of this

paragraph, a plan described in section 412(e)(3) shall be

treated as a defined benefit plan.’’.

(4) Section 404A(g)(3)(A) of such Code is amended by

striking ‘‘paragraphs (3) and (7) of section 412(c)’’ and inserting

‘‘paragraphs (3) and (6) of section 431(c)’’.

(d) SPECIAL RULE FOR 2006 AND 2007.—

(1) IN GENERAL.—Clause (i) of section 404(a)(1)(D) of the

Internal Revenue Code of 1986 (relating to special rule in

case of certain plans) is amended by striking ‘‘section 412(l)’’

and inserting ‘‘section 412(l)(8)(A), except that section

412(l)(8)(A) shall be applied for purposes of this clause by

substituting ‘150 percent (140 percent in the case of a multiemployer plan) of current liability’ for ‘the current liability’ in

clause (i).’’.

(2) CONFORMING AMENDMENT.—Section 404(a)(1) of the

Internal Revenue Code of 1986 is amended by striking subparagraph (F).

(e) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to years beginning after December 31, 2007.

(2) SPECIAL RULES.—The amendments made by subsection

(d) shall apply to years beginning after December 31, 2005.

SEC. 802. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.

(a) INCREASE IN DEDUCTION.—Section 404(a)(1)(D) of the

Internal Revenue Code of 1986, as amended by this Act, is amended

to read as follows:

‘‘(D) AMOUNT DETERMINED ON BASIS OF UNFUNDED CURRENT LIABILITY.—In the case of a defined benefit plan which

is a multiemployer plan, except as provided in regulations,

the maximum amount deductible under the limitations of

this paragraph shall not be less than the excess (if any)

of—

‘‘(i) 140 percent of the current liability of the plan

determined under section 431(c)(6)(C), over

26 USC 404 note.

Applicability.

26 USC 404.

120 STAT. 996 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) the value of the plan’s assets determined

under section 431(c)(2).’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to years beginning after December 31, 2007.

SEC. 803. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.

(a) IN GENERAL.—Subparagraph (C) of section 404(a)(7) of the

Internal Revenue Code of 1986 (relating to limitation on deductions

where combination of defined contribution plan and defined benefit

plan) is amended by adding after clause (ii) the following new

clause:

‘‘(iii) LIMITATION.—In the case of employer contributions to 1 or more defined contribution plans,

this paragraph shall only apply to the extent that

such contributions exceed 6 percent of the compensation otherwise paid or accrued during the taxable year

to the beneficiaries under such plans. For purposes

of this clause, amounts carried over from preceding

taxable years under subparagraph (B) shall be treated

as employer contributions to 1 or more defined contributions to the extent attributable to employer contributions to such plans in such preceding taxable

years.’’.

(b) EXCEPTION FROM LIMITATION ON DEDUCTION WHERE COMBINATION OF DEFINED CONTRIBUTION AND DEFINED BENEFIT

PLANS.—Section 404(a)(7)(C) of such Code, as amended by this

Act, is amended by adding at the end the following new clause:

‘‘(v) MULTIEMPLOYER PLANS.—In applying this

paragraph, any multiemployer plan shall not be taken

into account.’’.

(c) CONFORMING AMENDMENT.—Subparagraph (A) of section

4972(c)(6) of such Code (relating to nondeductible contributions)

is amended to read as follows:

‘‘(A) so much of the contributions to 1 or more defined

contribution plans which are not deductible when contributed solely because of section 404(a)(7) as does not exceed

the amount of contributions described in section

401(m)(4)(A), or’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to contributions for taxable years beginning after

December 31, 2005.

Subtitle B—Certain Pension Provisions

Made Permanent

SEC. 811. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT

PROVISIONS OF ECONOMIC GROWTH AND TAX RELIEF

RECONCILIATION ACT OF 2001 MADE PERMANENT.

Title IX of the Economic Growth and Tax Relief Reconciliation

Act of 2001 shall not apply to the provisions of, and amendments

made by, subtitles A through F of title VI of such Act (relating

to pension and individual retirement arrangement provisions).

26 USC 1 note.

26 USC 404 note.

26 USC 404.

26 USC 404 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 997

SEC. 812. SAVER’S CREDIT.

Section 25B of the Internal Revenue Code of 1986 (relating

to elective deferrals and IRA contributions by certain individuals)

is amended by striking subsection (h).

Subtitle C—Improvements in Portability,

Distribution, and Contribution Rules

SEC. 821. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE

SERVICE CREDIT.

(a) IN GENERAL.—Section 415(n) of the Internal Revenue Code

of 1986 (relating to special rules for the purchase of permissive

service credit) is amended—

(1) by striking ‘‘an employee’’ in paragraph (1) and inserting

‘‘a participant’’, and

(2) by adding at the end of paragraph (3)(A) the following

new flush sentence:

‘‘Such term may include service credit for periods for which

there is no performance of service, and, notwithstanding

clause (ii), may include service credited in order to provide

an increased benefit for service credit which a participant

is receiving under the plan.’’.

(b) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE TRANSFERS.—Section 415(n)(3) of such Code is amended by adding at the end

the following new subparagraph:

‘‘(D) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE TRANSFERS.—In the case of a trustee-to-trustee transfer to which

section 403(b)(13)(A) or 457(e)(17)(A) applies (without

regard to whether the transfer is made between plans

maintained by the same employer)—

‘‘(i) the limitations of subparagraph (B) shall not

apply in determining whether the transfer is for the

purchase of permissive service credit, and

‘‘(ii) the distribution rules applicable under this

title to the defined benefit governmental plan to which

any amounts are so transferred shall apply to such

amounts and any benefits attributable to such

amounts.’’.

(c) NONQUALIFIED SERVICE.—Section 415(n)(3) of such Code

is amended—

(1) by striking ‘‘permissive service credit attributable to

nonqualified service’’ each place it appears in subparagraph

(B) and inserting ‘‘nonqualified service credit’’,

(2) by striking so much of subparagraph (C) as precedes

clause (i) and inserting:

‘‘(C) NONQUALIFIED SERVICE CREDIT.—For purposes of

subparagraph (B), the term ‘nonqualified service credit’

means permissive service credit other than that allowed

with respect to—’’, and

(3) by striking ‘‘elementary or secondary education (through

grade 12), as determined under State law’’ in subparagraph

(C)(ii) and inserting ‘‘elementary or secondary education

(through grade 12), or a comparable level of education, as

determined under the applicable law of the jurisdiction in which

the service was performed’’.

Applicability.

26 USC 25B.

120 STAT. 998 PUBLIC LAW 109–280—AUG. 17, 2006

(d) EFFECTIVE DATES.— (1) IN GENERAL.—The amendments made by subsections

(a) and (c) shall take effect as if included in the amendments

made by section 1526 of the Taxpayer Relief Act of 1997.

(2) SUBSECTION (b).—The amendments made by subsection

(b) shall take effect as if included in the amendments made

by section 647 of the Economic Growth and Tax Relief Reconciliation Act of 2001.

SEC. 822. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY

CONTRACTS.

(a) IN GENERAL.—Subparagraph (A) of section 402(c)(2)

(relating to the maximum amount which may be rolled over) is

amended—

(1) by striking ‘‘which is part of a plan which is a defined

contribution plan and which agrees to separately account’’ and

inserting ‘‘or to an annuity contract described in section 403(b)

and such trust or contract provides for separate accounting’’;

and

(2) by inserting ‘‘(and earnings thereon)’’ after ‘‘so transferred’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to taxable years beginning after December 31, 2006.

SEC. 823. CLARIFICATION OF MINIMUM DISTRIBUTION RULES FOR

GOVERNMENTAL PLANS.

The Secretary of the Treasury shall issue regulations under

which a governmental plan (as defined in section 414(d) of the

Internal Revenue Code of 1986) shall, for all years to which section

401(a)(9) of such Code applies to such plan, be treated as having

complied with such section 401(a)(9) if such plan complies with

a reasonable good faith interpretation of such section 401(a)(9).

SEC. 824. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO

ROTH IRAS.

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

Revenue Code of 1986 (defining qualified rollover contribution) is

amended to read as follows:

‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For purposes of this

section, the term ‘qualified rollover contribution’ means a rollover

contribution—

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

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

‘‘(A) in the case of an individual retirement plan, such

rollover contribution meets the requirements of section

408(d)(3), and

‘‘(B) in the case of any eligible retirement plan (as

defined in section 402(c)(8)(B) other than clauses (i) and

(ii) thereof), such rollover contribution meets the requirements of section 402(c), 403(b)(8), or 457(e)(16), as

applicable.

For purposes of section 408(d)(3)(B), there shall be disregarded

any qualified rollover contribution from an individual retirement

plan (other than a Roth IRA) to a Roth IRA.’’.

(b) CONFORMING AMENDMENTS.—

(1) Section 408A(c)(3)(B) of such Code, as in effect before

the Tax Increase Prevention and Reconciliation Act of 2005,

is amended—

26 USC 408A

and note.

Regulations.

26 USC 402 note.

26 USC 402.

26 USC 415 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 999

(A) in the text by striking ‘‘individual retirement plan’’

and inserting ‘‘an eligible retirement plan (as defined by

section 402(c)(8)(B))’’, and

(B) in the heading by striking ‘‘IRA’’ the first place

it appears and inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.

(2) Section 408A(d)(3) of such Code is amended—

(A) in subparagraph (A), by striking ‘‘section 408(d)(3)’’

inserting ‘‘sections 402(c), 403(b)(8), 408(d)(3), and

457(e)(16)’’,

(B) in subparagraph (B), by striking ‘‘individual retirement plan’’ and inserting ‘‘eligible retirement plan (as

defined by section 402(c)(8)(B))’’,

(C) in subparagraph (D), by inserting ‘‘or 6047’’ after

‘‘408(i)’’,

(D) in subparagraph (D), by striking ‘‘or both’’ and

inserting ‘‘persons subject to section 6047(d)(1), or all of

the foregoing persons’’, and

(E) in the heading, by striking ‘‘IRA’’ the first place

it appears and inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to distributions after December 31, 2007.

SEC. 825. ELIGIBILITY FOR PARTICIPATION IN RETIREMENT PLANS.

An individual shall not be precluded from participating in an

eligible deferred compensation plan by reason of having received

a distribution under section 457(e)(9) of the Internal Revenue Code

of 1986, as in effect prior to the enactment of the Small Business

Job Protection Act of 1996.

SEC. 826. MODIFICATIONS OF RULES GOVERNING HARDSHIPS AND

UNFORSEEN FINANCIAL EMERGENCIES.

Within 180 days after the date of the enactment of this Act,

the Secretary of the Treasury shall modify the rules for determining

whether a participant has had a hardship for purposes of section

401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide

that if an event (including the occurrence of a medical expense)

would constitute a hardship under the plan if it occurred with

respect to the participant’s spouse or dependent (as defined in

section 152 of such Code), such event shall, to the extent permitted

under a plan, constitute a hardship if it occurs with respect to

a person who is a beneficiary under the plan with respect to

the participant. The Secretary of the Treasury shall issue similar

rules for purposes of determining whether a participant has had—

(1) a hardship for purposes of section 403(b)(11)(B) of such

Code; or

(2) an unforeseen financial emergency for purposes of sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and 457(d)(1)(A)(iii) of

such Code.

SEC. 827. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS

FOR INDIVIDUALS CALLED TO ACTIVE DUTY FOR AT

LEAST 179 DAYS.

(a) IN GENERAL.—Paragraph (2) of section 72(t) of the Internal

Revenue Code of 1986 (relating to 10-percent additional tax on

early distributions from qualified retirement plans) is amended

by adding at the end the following new subparagraph:

‘‘(G) DISTRIBUTIONS FROM RETIREMENT PLANS TO

INDIVIDUALS CALLED TO ACTIVE DUTY.—

Deadline.

26 USC 401 note.

26 USC 457 note.

26 USC 408A

note.

26 USC 408A.

120 STAT. 1000 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(i) IN GENERAL.—Any qualified reservist distribution.

‘‘(ii) AMOUNT DISTRIBUTED MAY BE REPAID.—Any

individual who receives a qualified reservist distribution may, at any time during the 2-year period beginning on the day after the end of the active duty period,

make one or more contributions to an individual retirement plan of such individual in an aggregate amount

not to exceed the amount of such distribution. The

dollar limitations otherwise applicable to contributions

to individual retirement plans shall not apply to any

contribution made pursuant to the preceding sentence.

No deduction shall be allowed for any contribution

pursuant to this clause.

‘‘(iii) QUALIFIED RESERVIST DISTRIBUTION.—For

purposes of this subparagraph, the term ‘qualified

reservist distribution’ means any distribution to an

individual if—

‘‘(I) such distribution is from an individual

retirement plan, or from amounts attributable to

employer contributions made pursuant to elective

deferrals described in subparagraph (A) or (C) of

section 402(g)(3) or section 501(c)(18)(D)(iii),

‘‘(II) such individual was (by reason of being

a member of a reserve component (as defined in

section 101 of title 37, United States Code))

ordered or called to active duty for a period in

excess of 179 days or for an indefinite period,

and

‘‘(III) such distribution is made during the

period beginning on the date of such order or call

and ending at the close of the active duty period.

‘‘(iv) APPLICATION OF SUBPARAGRAPH.—This

subparagraph applies to individuals ordered or called

to active duty after September 11, 2001, and before

December 31, 2007. In no event shall the 2-year period

referred to in clause (ii) end before the date which

is 2 years after the date of the enactment of this

subparagraph.’’.

(b) CONFORMING AMENDMENTS.—

(1) Section 401(k)(2)(B)(i) of such Code is amended by

striking ‘‘or’’ at the end of subclause (III), by striking ‘‘and’’

at the end of subclause (IV) and inserting ‘‘or’’, and by inserting

after subclause (IV) the following new subclause:

‘‘(V) in the case of a qualified reservist distribution (as defined in section 72(t)(2)(G)(iii)), the

date on which a period referred to in subclause

(III) of such section begins, and’’.

(2) Section 403(b)(7)(A)(ii) of such Code is amended by

inserting ‘‘(unless such amount is a distribution to which section

72(t)(2)(G) applies)’’ after ‘‘distributee’’.

(3) Section 403(b)(11) of such Code is amended by striking

‘‘or’’ at the end of subparagraph (A), by striking the period

at the end of subparagraph (B) and inserting ‘‘, or’’, and by

inserting after subparagraph (B) the following new subparagraph:

26 USC 401.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1001

‘‘(C) for distributions to which section 72(t)(2)(G)

applies.’’.

(c) EFFECTIVE DATE; WAIVER OF LIMITATIONS.—

(1) EFFECTIVE DATE.—The amendment made by this section

shall apply to distributions after September 11, 2001.

(2) WAIVER OF LIMITATIONS.—If refund or credit of any

overpayment of tax resulting from the amendments made by

this section is prevented at any time before the close of the

1-year period beginning on the date of the enactment of this

Act by the operation of any law or rule of law (including

res judicata), such refund or credit may nevertheless be made

or allowed if claim therefor is filed before the close of such

period.

SEC. 828. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX

ON CERTAIN DISTRIBUTIONS OF PENSION PLANS FOR

PUBLIC SAFETY EMPLOYEES.

(a) IN GENERAL.—Section 72(t) of the Internal Revenue Code

of 1986 (relating to subsection not to apply to certain distributions)

is amended by adding at the end the following new paragraph:

‘‘(10) DISTRIBUTIONS TO QUALIFIED PUBLIC SAFETY

EMPLOYEES IN GOVERNMENTAL PLANS.—

‘‘(A) IN GENERAL.—In the case of a distribution to a

qualified public safety employee from a governmental plan

(within the meaning of section 414(d)) which is a defined

benefit plan, paragraph (2)(A)(v) shall be applied by substituting ‘age 50’ for ‘age 55’.

‘‘(B) QUALIFIED PUBLIC SAFETY EMPLOYEE.—For purposes of this paragraph, the term ‘qualified public safety

employee’ means any employee of a State or political subdivision of a State who provides police protection, firefighting services, or emergency medical services for any

area within the jurisdiction of such State or political subdivision.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to distributions after the date of the enactment of

this Act.

SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF CERTAIN RETIREMENT PLAN DISTRIBUTIONS.

(a) IN GENERAL.—

(1) QUALIFIED PLANS.—Section 402(c) of the Internal Revenue Code of 1986 (relating to rollovers from exempt trusts)

is amended by adding at the end the following new paragraph:

‘‘(11) DISTRIBUTIONS TO INHERITED INDIVIDUAL RETIREMENT

PLAN OF NONSPOUSE BENEFICIARY.—

‘‘(A) IN GENERAL.—If, with respect to any portion of

a distribution from an eligible retirement plan of a deceased

employee, a direct trustee-to-trustee transfer is made to

an individual retirement plan described in clause (i) or

(ii) of paragraph (8)(B) established for the purposes of

receiving the distribution on behalf of an individual who

is a designated beneficiary (as defined by section

401(a)(9)(E)) of the employee and who is not the surviving

spouse of the employee—

‘‘(i) the transfer shall be treated as an eligible

rollover distribution for purposes of this subsection,

26 USC 72 note.

26 USC 72.

26 USC 72 note.

120 STAT. 1002 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) the individual retirement plan shall be treated

as an inherited individual retirement account or individual retirement annuity (within the meaning of section 408(d)(3)(C)) for purposes of this title, and

‘‘(iii) section 401(a)(9)(B) (other than clause (iv)

thereof) shall apply to such plan.

‘‘(B) CERTAIN TRUSTS TREATED AS BENEFICIARIES.—For

purposes of this paragraph, to the extent provided in rules

prescribed by the Secretary, a trust maintained for the

benefit of one or more designated beneficiaries shall be

treated in the same manner as a trust designated beneficiary.’’.

(2) SECTION 403(a) PLANS.—Subparagraph (B) of section

403(a)(4) of such Code (relating to rollover amounts) is amended

by inserting ‘‘and (11)’’ after ‘‘(7)’’.

(3) SECTION 403(b) PLANS.—Subparagraph (B) of section

403(b)(8) of such Code (relating to rollover amounts) is amended

by striking ‘‘and (9)’’ and inserting ‘‘, (9), and (11)’’.

(4) SECTION 457 PLANS.—Subparagraph (B) of section

457(e)(16) of such Code (relating to rollover amounts) is

amended by striking ‘‘and (9)’’ and inserting ‘‘, (9), and (11)’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to distributions after December 31, 2006.

SEC. 830. DIRECT PAYMENT OF TAX REFUNDS TO INDIVIDUAL RETIREMENT PLANS.

(a) IN GENERAL.—The Secretary of the Treasury (or the Secretary’s delegate) shall make available a form (or modify existing

forms) for use by individuals to direct that a portion of any refund

of overpayment of tax imposed by chapter 1 of the Internal Revenue

Code of 1986 be paid directly to an individual retirement plan

(as defined in section 7701(a)(37) of such Code) of such individual.

(b) EFFECTIVE DATE.—The form required by subsection (a) shall

be made available for taxable years beginning after December 31,

2006.

SEC. 831. ALLOWANCE OF ADDITIONAL IRA PAYMENTS IN CERTAIN

BANKRUPTCY CASES.

(a) ALLOWANCE OF CONTRIBUTIONS.—Section 219(b)(5) of the

Internal Revenue Code of 1986 (relating to deductible amount)

is amended by redesignating subparagraph (C) as subparagraph

(D) and by inserting after subparagraph (B) the following new

subparagraph:

‘‘(C) CATCHUP CONTRIBUTIONS FOR CERTAIN INDIVID- UALS.— ‘‘(i) IN GENERAL.—In the case of an applicable individual who elects to make a qualified retirement contribution in addition to the deductible amount determined under subparagraph (A)—

‘‘(I) the deductible amount for any taxable year

shall be increased by an amount equal to 3 times

the applicable amount determined under subparagraph (B) for such taxable year, and

‘‘(II) subparagraph (B) shall not apply.

‘‘(ii) APPLICABLE INDIVIDUAL.—For purposes of this

subparagraph, the term ‘applicable individual’ means,

with respect to any taxable year, any individual who

was a qualified participant in a qualified cash or

26 USC 408 note.

26 USC 402 note.

26 USC 403.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1003

deferred arrangement (as defined in section 401(k))

of an employer described in clause (iii) under which

the employer matched at least 50 percent of the

employee’s contributions to such arrangement with

stock of such employer.

‘‘(iii) EMPLOYER DESCRIBED.—An employer is

described in this clause if, in any taxable year preceding the taxable year described in clause (ii)—

‘‘(I) such employer (or any controlling corporation of such employer) was a debtor in a case

under title 11 of the United States Code, or similar

Federal or State law, and

‘‘(II) such employer (or any other person) was

subject to an indictment or conviction resulting

from business transactions related to such case.

‘‘(iv) QUALIFIED PARTICIPANT.—For purposes of

clause (ii), the term ‘qualified participant’ means any

applicable individual who was a participant in the

cash or deferred arrangement described in such clause

on the date that is 6 months before the filing of the

case described in clause (iii).

‘‘(v) TERMINATION.—This subparagraph shall not

apply to taxable years beginning after December 31,

2009.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2006.

SEC. 832. DETERMINATION OF AVERAGE COMPENSATION FOR SECTION

415 LIMITS.

(a) IN GENERAL.—Section 415(b)(3) of the Internal Revenue

Code of 1986 is amended by striking ‘‘both was an active participant

in the plan and’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to years beginning after December 31, 2005.

SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITATIONS ON

CERTAIN RETIREMENT SAVINGS INCENTIVES.

(a) SAVER’S CREDIT.—Subsection (b) of section 25B of the

Internal Revenue Code of 1986 is amended to read as follows:

‘‘(b) APPLICABLE PERCENTAGE.—For purposes of this section—

‘‘(1) JOINT RETURNS.—In the case of a joint return, the

applicable percentage is—

‘‘(A) if the adjusted gross income of the taxpayer is

not over $30,000, 50 percent,

‘‘(B) if the adjusted gross income of the taxpayer is

over $30,000 but not over $32,500, 20 percent,

‘‘(C) if the adjusted gross income of the taxpayer is

over $32,500 but not over $50,000, 10 percent, and

‘‘(D) if the adjusted gross income of the taxpayer is

over $50,000, zero percent.

‘‘(2) OTHER RETURNS.—In the case of—

‘‘(A) a head of household, the applicable percentage

shall be determined under paragraph (1) except that such

paragraph shall be applied by substituting for each dollar

amount therein (as adjusted under paragraph (3)) a dollar

amount equal to 75 percent of such dollar amount, and

26 USC 415 note.

26 USC 415.

26 USC 219 note.

120 STAT. 1004 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) any taxpayer not described in paragraph (1) or

subparagraph (A), the applicable percentage shall be determined under paragraph (1) except that such paragraph

shall be applied by substituting for each dollar amount

therein (as adjusted under paragraph (3)) a dollar amount

equal to 50 percent of such dollar amount.

‘‘(3) INFLATION ADJUSTMENT.—In the case of any taxable

year beginning in a calendar year after 2006, each of the

dollar amounts in paragraph (1) shall be increased by an

amount equal to—

‘‘(A) such dollar amount, multiplied by

‘‘(B) the cost-of-living adjustment determined under

section 1(f)(3) for the calendar year in which the taxable

year begins, determined by substituting ‘calendar year

2005’ for ‘calendar year 1992’ in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall

be rounded to the nearest multiple of $500.’’.

(b) DEDUCTION OF RETIREMENT CONTRIBUTIONS FOR ACTIVE

PARTICIPANTS.—Section 219(g) of such Code is amended by adding

at the end the following new paragraph:

‘‘(8) INFLATION ADJUSTMENT.—In the case of any taxable

year beginning in a calendar year after 2006, the dollar amount

in the last row of the table contained in paragraph (3)(B)(i),

the dollar amount in the last row of the table contained in

paragraph (3)(B)(ii), and the dollar amount contained in paragraph (7)(A), shall each be increased by an amount equal to—

‘‘(A) such dollar amount, multiplied by

‘‘(B) the cost-of-living adjustment determined under

section 1(f)(3) for the calendar year in which the taxable

year begins, determined by substituting ‘calendar year

2005’ for ‘calendar year 1992’ in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall

be rounded to the nearest multiple of $1,000.’’.

(c) CONTRIBUTION LIMITATION FOR ROTH IRAS.—Section

408A(c)(3) of such Code is amended by adding at the end the

following new subparagraph:

‘‘(C) INFLATION ADJUSTMENT.—In the case of any taxable year beginning in a calendar year after 2006, the

dollar amounts in subclauses (I) and (II) of subparagraph

(C)(ii) shall each be increased by an amount equal to—

‘‘(i) such dollar amount, multiplied by

‘‘(ii) the cost-of-living adjustment determined

under section 1(f)(3) for the calendar year in which

the taxable year begins, determined by substituting

‘calendar year 2005’ for ‘calendar year 1992’ in

subparagraph (B) thereof.

Any increase determined under the preceding sentence

shall be rounded to the nearest multiple of $1,000.’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after 2006.

26 USC 25B note.

26 USC 219.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1005

Subtitle D—Health and Medical Benefits

SEC. 841. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE

HEALTH BENEFITS AND COLLECTIVELY BARGAINED

RETIREE HEALTH BENEFITS.

(a) IN GENERAL.—Section 420 of the Internal Revenue Code

of 1986 (relating to transfers of excess pension assets to retiree

health accounts) is amended by adding at the end the following

new subsection:

‘‘(f) QUALIFIED TRANSFERS TO COVER FUTURE RETIREE HEALTH

COSTS AND COLLECTIVELY BARGAINED RETIREE HEALTH BENEFITS.—

‘‘(1) IN GENERAL.—An employer maintaining a defined benefit plan (other than a multiemployer plan) may, in lieu of

a qualified transfer, elect for any taxable year to have the

plan make—

‘‘(A) a qualified future transfer, or

‘‘(B) a collectively bargained transfer.

Except as provided in this subsection, a qualified future transfer

and a collectively bargained transfer shall be treated for purposes of this title and the Employee Retirement Income Security

Act of 1974 as if it were a qualified transfer.

‘‘(2) QUALIFIED FUTURE AND COLLECTIVELY BARGAINED

TRANSFERS.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The terms ‘qualified future transfer’

and ‘collectively bargained transfer’ mean a transfer which

meets all of the requirements for a qualified transfer,

except that—

‘‘(i) the determination of excess pension assets

shall be made under subparagraph (B),

‘‘(ii) the limitation on the amount transferred shall

be determined under subparagraph (C),

‘‘(iii) the minimum cost requirements of subsection

(c)(3) shall be modified as provided under subparagraph (D), and

‘‘(iv) in the case of a collectively bargained transfer,

the requirements of subparagraph (E) shall be met

with respect to the transfer.

‘‘(B) EXCESS PENSION ASSETS.—

‘‘(i) IN GENERAL.—In determining excess pension

assets for purposes of this subsection, subsection (e)(2)

shall be applied by substituting ‘120 percent’ for ‘125

percent’.

‘‘(ii) REQUIREMENT TO MAINTAIN FUNDED STATUS.—

If, as of any valuation date of any plan year in the

transfer period, the amount determined under subsection (e)(2)(B) (after application of clause (i)) exceeds

the amount determined under subsection (e)(2)(A),

either—

‘‘(I) the employer maintaining the plan shall

make contributions to the plan in an amount not

less than the amount required to reduce such

excess to zero as of such date, or

‘‘(II) there is transferred from the health benefits account to the plan an amount not less than

the amount required to reduce such excess to zero

as of such date.

26 USC 420.

120 STAT. 1006 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(C) LIMITATION ON AMOUNT TRANSFERRED.—Notwithstanding subsection (b)(3), the amount of the excess pension

assets which may be transferred—

‘‘(i) in the case of a qualified future transfer shall

be equal to the sum of—

‘‘(I) if the transfer period includes the taxable

year of the transfer, the amount determined under

subsection (b)(3) for such taxable year, plus

‘‘(II) in the case of all other taxable years

in the transfer period, the sum of the qualified

current retiree health liabilities which the plan

reasonably estimates, in accordance with guidance

issued by the Secretary, will be incurred for each

of such years, and

‘‘(ii) in the case of a collectively bargained transfer,

shall not exceed the amount which is reasonably estimated, in accordance with the provisions of the collective bargaining agreement and generally accepted

accounting principles, to be the amount the employer

maintaining the plan will pay (whether directly or

through reimbursement) out of such account during

the collectively bargained cost maintenance period for

collectively bargained retiree health liabilities.

‘‘(D) MINIMUM COST REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of subsection

(c)(3) shall be treated as met if—

‘‘(I) in the case of a qualified future transfer,

each group health plan or arrangement under

which applicable health benefits are provided provides applicable health benefits during the period

beginning with the first year of the transfer period

and ending with the last day of the 4th year following the transfer period such that the annual

average amount of such the applicable employer

cost during such period is not less than the

applicable employer cost determined under subsection (c)(3)(A) with respect to the transfer, and

‘‘(II) in the case of a collectively bargained

transfer, each collectively bargained group health

plan under which collectively bargained health

benefits are provided provides that the collectively

bargained employer cost for each taxable year

during the collectively bargained cost maintenance

period shall not be less than the amount specified

by the collective bargaining agreement.

‘‘(ii) ELECTION TO MAINTAIN BENEFITS FOR FUTURE

TRANSFERS.—An employer may elect, in lieu of the

requirements of clause (i)(I), to meet the requirements

of subsection (c)(3) by meeting the requirements of

such subsection (as in effect before the amendments

made by section 535 of the Tax Relief Extension Act

of 1999) for each of the years described in the period

under clause (i)(I).

‘‘(iii) COLLECTIVELY BARGAINED EMPLOYER COST.—

For purposes of this subparagraph, the term ‘collectively bargained employer cost’ means the average cost

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1007

per covered individual of providing collectively bargained retiree health benefits as determined in accordance with the applicable collective bargaining agreement. Such agreement may provide for an appropriate

reduction in the collectively bargained employer cost

to take into account any portion of the collectively

bargained retiree health benefits that is provided or

financed by a government program or other source.

‘‘(E) SPECIAL RULES FOR COLLECTIVELY BARGAINED

TRANSFERS.—

‘‘(i) IN GENERAL.—A collectively bargained transfer

shall only include a transfer which—

‘‘(I) is made in accordance with a collective

bargaining agreement,

‘‘(II) before the transfer, the employer designates, in a written notice delivered to each

employee organization that is a party to the collective bargaining agreement, as a collectively bargained transfer in accordance with this section,

and

‘‘(III) involves a plan maintained by an

employer which, in its taxable year ending in 2005,

provided health benefits or coverage to retirees

and their spouses and dependents under all of

the benefit plans maintained by the employer, but

only if the aggregate cost (including administrative

expenses) of such benefits or coverage which would

have been allowable as a deduction to the employer

(if such benefits or coverage had been provided

directly by the employer and the employer used

the cash receipts and disbursements method of

accounting) is at least 5 percent of the gross

receipts of the employer (determined in accordance

with the last sentence of subsection (c)(2)(E)(ii)(II))

for such taxable year, or a plan maintained by

a successor to such employer.

‘‘(ii) USE OF ASSETS.—Any assets transferred to

a health benefits account in a collectively bargained

transfer (and any income allocable thereto) shall be

used only to pay collectively bargained retiree health

liabilities (other than liabilities of key employees not

taken into account under paragraph (6)(B)(iii)) for the

taxable year of the transfer or for any subsequent

taxable year during the collectively bargained cost

maintenance period (whether directly or through

reimbursement).

‘‘(3) COORDINATION WITH OTHER TRANSFERS.—In applying

subsection (b)(3) to any subsequent transfer during a taxable

year in a transfer period or collectively bargained cost maintenance period, qualified current retiree health liabilities shall

be reduced by any such liabilities taken into account with

respect to the qualified future transfer or collectively bargained

transfer to which such period relates.

‘‘(4) SPECIAL DEDUCTION RULES FOR COLLECTIVELY BARGAINED TRANSFERS.—In the case of a collectively bargained

transfer—

120 STAT. 1008 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) the limitation under subsection (d)(1)(C) shall not

apply, and

‘‘(B) notwithstanding subsection (d)(2), an employer

may contribute an amount to a health benefits account

or welfare benefit fund (as defined in section 419(e)(1))

with respect to collectively bargained retiree health liabilities for which transferred assets are required to be used

under subsection (c)(1)(B), and the deductibility of any

such contribution shall be governed by the limits applicable

to the deductibility of contributions to a welfare benefit

fund under a collective bargaining agreement (as determined under section 419A(f)(5)(A)) without regard to

whether such contributions are made to a health benefits

account or welfare benefit fund and without regard to

the provisions of section 404 or the other provisions of

this section.

The Secretary shall provide rules to ensure that the application

of this paragraph does not result in a deduction being allowed

more than once for the same contribution or for 2 or more

contributions or expenditures relating to the same collectively

bargained retiree health liabilities.

‘‘(5) TRANSFER PERIOD.—For purposes of this subsection,

the term ‘transfer period’ means, with respect to any transfer,

a period of consecutive taxable years (not less than 2) specified

in the election under paragraph (1) which begins and ends

during the 10-taxable-year period beginning with the taxable

year of the transfer.

‘‘(6) TERMS RELATING TO COLLECTIVELY BARGAINED TRANSFERS.—For purposes of this subsection—

‘‘(A) COLLECTIVELY BARGAINED COST MAINTENANCE

PERIOD.—The term ‘collectively bargained cost maintenance

period’ means, with respect to each covered retiree and

his covered spouse and dependents, the shorter of—

‘‘(i) the remaining lifetime of such covered retiree

and his covered spouse and dependents, or

‘‘(ii) the period of coverage provided by the collectively bargained health plan (determined as of the

date of the collectively bargained transfer) with respect

to such covered retiree and his covered spouse and

dependents.

‘‘(B) COLLECTIVELY BARGAINED RETIREE HEALTH LIABILITIES.—

‘‘(i) IN GENERAL.—The term ‘collectively bargained

retiree health liabilities’ means the present value, as

of the beginning of a taxable year and determined

in accordance with the applicable collective bargaining

agreement, of all collectively bargained health benefits

(including administrative expenses) for such taxable

year and all subsequent taxable years during the collectively bargained cost maintenance period.

‘‘(ii) REDUCTION FOR AMOUNTS PREVIOUSLY SET

ASIDE.—The amount determined under clause (i) shall

be reduced by the value (as of the close of the plan

year preceding the year of the collectively bargained

transfer) of the assets in all health benefits accounts

or welfare benefit funds (as defined in section 419(e)(1))

Rules.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1009

set aside to pay for the collectively bargained retiree

health liabilities.

‘‘(iii) KEY EMPLOYEES EXCLUDED.—If an employee

is a key employee (within the meaning of section

416(I)(1)) with respect to any plan year ending in a

taxable year, such employee shall not be taken into

account in computing collectively bargained retiree

health liabilities for such taxable year or in calculating

collectively bargained employer cost under subsection

(c)(3)(C).

‘‘(C) COLLECTIVELY BARGAINED HEALTH BENEFITS.—The

term ‘collectively bargained health benefits’ means health

benefits or coverage which are provided to—

‘‘(i) retired employees who, immediately before the

collectively bargained transfer, are entitled to receive

such benefits upon retirement and who are entitled

to pension benefits under the plan, and their spouses

and dependents, and

‘‘(ii) if specified by the provisions of the collective

bargaining agreement governing the collectively bargained transfer, active employees who, following their

retirement, are entitled to receive such benefits and

who are entitled to pension benefits under the plan,

and their spouses and dependents.

‘‘(D) COLLECTIVELY BARGAINED HEALTH PLAN.—The

term ‘collectively bargained health plan’ means a group

health plan or arrangement for retired employees and their

spouses and dependents that is maintained pursuant to

1 or more collective bargaining agreements.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to transfers after the date of the enactment of this

Act.

SEC. 842. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER

HEALTH PLAN.

(a) IN GENERAL.—Section 420 of the Internal Revenue Code

of 1986 is amended—

(1) by striking ‘‘(other than a multiemployer plan)’’ in subsection (a), and

(2) by adding at the end of subsection (e) the following

new paragraph:

‘‘(5) APPLICATION TO MULTIEMPLOYER PLANS.—In the case

of a multiemployer plan, this section shall be applied to any

such plan—

‘‘(A) by treating any reference in this section to an

employer as a reference to all employers maintaining the

plan (or, if appropriate, the plan sponsor), and

‘‘(B) in accordance with such modifications of this section (and the provisions of this title relating to this section)

as the Secretary determines appropriate to reflect the fact

the plan is not maintained by a single employer.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to transfers made in taxable years beginning after

December 31, 2006.

26 USC 420 note.

26 USC 420.

26 USC 420 note.

120 STAT. 1010 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS

SPONSORED BY BONA FIDE ASSOCIATIONS.

(a) IN GENERAL.—Section 419A(c) of the Internal Revenue Code

of 1986 (relating to account limit) is amended by adding at the

end the following new paragraph:

‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BENEFITS OF BONA

FIDE ASSOCIATION PLANS.—

‘‘(A) IN GENERAL.—An applicable account limit for any

taxable year may include a reserve in an amount not

to exceed 35 percent of the sum of—

‘‘(i) the qualified direct costs, and

‘‘(ii) the change in claims incurred but unpaid,

for such taxable year with respect to medical benefits (other

than post-retirement medical benefits).

‘‘(B) APPLICABLE ACCOUNT LIMIT.—For purposes of this

subsection, the term ‘applicable account limit’ means an

account limit for a qualified asset account with respect

to medical benefits provided through a plan maintained

by a bona fide association (as defined in section 2791(d)(3)

of the Public Health Service Act (42 U.S.C. 300gg–

91(d)(3)).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after December 31, 2006.

SEC. 844. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS

WITH A LONG-TERM CARE INSURANCE FEATURE.

(a) EXCLUSION FROM GROSS INCOME.—Subsection (e) of section

72 of the Internal Revenue Code of 1986 (relating to amounts

not received as annuities) is amended by redesignating paragraph

(11) as paragraph (12) and by inserting after paragraph (10) the

following new paragraph:

‘‘(11) SPECIAL RULES FOR CERTAIN COMBINATION CONTRACTS

PROVIDING LONG-TERM CARE INSURANCE.—Notwithstanding

paragraphs (2), (5)(C), and (10), in the case of any charge

against the cash value of an annuity contract or the cash

surrender value of a life insurance contract made as payment

for coverage under a qualified long-term care insurance contract

which is part of or a rider on such annuity or life insurance

contract—

‘‘(A) the investment in the contract shall be reduced

(but not below zero) by such charge, and

‘‘(B) such charge shall not be includible in gross

income.’’.

(b) TAX-FREE EXCHANGES AMONG CERTAIN INSURANCE POLICIES.—

(1) ANNUITY CONTRACTS CAN INCLUDE QUALIFIED LONGTERM CARE INSURANCE RIDERS.—Paragraph (2) of section

1035(b) of such Code is amended by adding at the end the

following new sentence: ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as an annuity

contract solely because a qualified long-term care insurance

contract is a part of or a rider on such contract.’’.

(2) LIFE INSURANCE CONTRACTS CAN INCLUDE QUALIFIED

LONG-TERM CARE INSURANCE RIDERS.—Paragraph (3) of section

1035(b) of such Code is amended by adding at the end the

following new sentence: ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as a life insurance

26 USC 419A

note.

26 USC 419A.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1011

contract solely because a qualified long-term care insurance

contract is a part of or a rider on such contract.’’.

(3) EXPANSION OF TAX-FREE EXCHANGES OF LIFE INSURANCE,

ENDOWMENT, AND ANNUITY CONTRACTS FOR LONG-TERM CARE

CONTRACTS.—Subsection (a) of section 1035 of such Code

(relating to certain exchanges of insurance policies) is

amended—

(A) in paragraph (1) by inserting ‘‘or for a qualified

long-term care insurance contract’’ before the semicolon

at the end,

(B) in paragraph (2) by inserting ‘‘, or (C) for a qualified

long-term care insurance contract’’ before the semicolon

at the end, and

(C) in paragraph (3) by inserting ‘‘or for a qualified

long-term care insurance contract’’ before the period at

the end.

(4) TAX-FREE EXCHANGES OF QUALIFIED LONG-TERM CARE

INSURANCE CONTRACT.—Subsection (a) of section 1035 of such

Code (relating to certain exchanges of insurance policies) is

amended by striking ‘‘or’’ at the end of paragraph (2), by

striking the period at the end of paragraph (3) and inserting

‘‘; or’’, and by inserting after paragraph (3) the following new

paragraph:

‘‘(4) a qualified long-term care insurance contract for a

qualified long-term care insurance contract.’’.

(c) TREATMENT OF COVERAGE PROVIDED AS PART OF A LIFE

INSURANCE OR ANNUITY CONTRACT.—Subsection (e) of section 7702B

of such Code (relating to treatment of qualified long-term care

insurance) is amended to read as follows:

‘‘(e) TREATMENT OF COVERAGE PROVIDED AS PART OF A LIFE

INSURANCE OR ANNUITY CONTRACT.—Except as otherwise provided

in regulations prescribed by the Secretary, in the case of any

long-term care insurance coverage (whether or not qualified) provided by a rider on or as part of a life insurance contract or

an annuity contract—

‘‘(1) IN GENERAL.—This title shall apply as if the portion

of the contract providing such coverage is a separate contract.

‘‘(2) DENIAL OF DEDUCTION UNDER SECTION 213.—No deduction shall be allowed under section 213(a) for any payment

made for coverage under a qualified long-term care insurance

contract if such payment is made as a charge against the

cash surrender value of a life insurance contract or the cash

value of an annuity contract.

‘‘(3) PORTION DEFINED.—For purposes of this subsection,

the term ‘portion’ means only the terms and benefits under

a life insurance contract or annuity contract that are in addition

to the terms and benefits under the contract without regard

to long-term care insurance coverage.

‘‘(4) ANNUITY CONTRACTS TO WHICH PARAGRAPH (1) DOES

NOT APPLY.—For purposes of this subsection, none of the following shall be treated as an annuity contract:

‘‘(A) A trust described in section 401(a) which is exempt

from tax under section 501(a).

‘‘(B) A contract—

‘‘(i) purchased by a trust described in subparagraph (A),

Applicability.

Regulations.

26 USC 1035.

120 STAT. 1012 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) purchased as part of a plan described in section 403(a),

‘‘(iii) described in section 403(b),

‘‘(iv) provided for employees of a life insurance

company under a plan described in section 818(a)(3),

or

‘‘(v) from an individual retirement account or an

individual retirement annuity.

‘‘(C) A contract purchased by an employer for the benefit of the employee (or the employee’s spouse).

Any dividend described in section 404(k) which is received

by a participant or beneficiary shall, for purposes of this paragraph, be treated as paid under a separate contract to which

subparagraph (B)(i) applies.’’.

(d) INFORMATION REPORTING.— (1) Subpart B of part III of subchapter A of chapter 61

of such Code (relating to information concerning transactions

with other persons) is amended by adding at the end the

following new section:

‘‘SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED LONG-TERM

CARE INSURANCE CONTRACTS UNDER COMBINED

ARRANGEMENTS.

‘‘(a) REQUIREMENT OF REPORTING.—Any person who makes a

charge against the cash value of an annuity contract, or the cash

surrender value of a life insurance contract, which is excludible

from gross income under section 72(e)(11) shall make a return,

according to the forms or regulations prescribed by the Secretary,

setting forth—

‘‘(1) the amount of the aggregate of such charges against

each such contract for the calendar year,

‘‘(2) the amount of the reduction in the investment in

each such contract by reason of such charges, and

‘‘(3) the name, address, and TIN of the individual who

is the holder of each such contract.

‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS WITH RESPECT

TO WHOM INFORMATION IS REQUIRED.—Every person required to

make a return under subsection (a) shall furnish to each individual

whose name is required to be set forth in such return a written

statement showing—

‘‘(1) the name, address, and phone number of the information contact of the person making the payments, and

‘‘(2) the information required to be shown on the return

with respect to such individual.

The written statement required under the preceding sentence shall

be furnished to the individual on or before January 31 of the

year following the calendar year for which the return under subsection (a) was required to be made.’’.

(2) PENALTY FOR FAILURE TO FILE.—

(A) RETURN.—Subparagraph (B) of section 6724(d)(1)

of such Code is amended by striking ‘‘or’’ at the end of

clause (xvii), by striking ‘‘and’’ at the end of clause (xviii)

and inserting ‘‘or’’, and by adding at the end the following

new clause:

‘‘(xix) section 6050U (relating to charges or payments for qualified long-term care insurance contracts

under combined arrangements), and’’.

26 USC 6724.

Deadline.

Regulations.

26 USC 6050U.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1013

(B) STATEMENT.—Paragraph (2) of section 6724(d) of

such Code is amended by striking ‘‘or’’ at the end of

subparagraph (AA), by striking the period at the end of

subparagraph (BB), and by inserting after subparagraph

(BB) the following new subparagraph:

‘‘(CC) section 6050U (relating to charges or payments

for qualified long-term care insurance contracts under combined arrangements).’’.

(3) CLERICAL AMENDMENT.—The table of sections for subpart B of part III of subchapter A of such chapter 61 of such

Code is amended by adding at the end the following new

item:

‘‘Sec. 6050U. Charges or payments for qualified long-term care insurance contracts

under combined arrangements.’’.

(e) TREATMENT OF POLICY ACQUISITION EXPENSES.—Subsection

(e) of section 848 of such Code (relating to classification of contracts)

is amended by adding at the end the following new paragraph:

‘‘(6) TREATMENT OF CERTAIN QUALIFIED LONG-TERM CARE

INSURANCE CONTRACT ARRANGEMENTS.—An annuity or life

insurance contract which includes a qualified long-term care

insurance contract as a part of or a rider on such annuity

or life insurance contract shall be treated as a specified insurance contract not described in subparagraph (A) or (B) of subsection (c)(1).’’.

(f) TECHNICAL AMENDMENT.—Paragraph (1) of section 7702B(e)

of such Code (as in effect before amendment by subsection (c))

is amended by striking ‘‘section’’ and inserting ‘‘title’’.

(g) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to

contracts issued after December 31, 1996, but only with respect

to taxable years beginning after December 31, 2009.

(2) TAX-FREE EXCHANGES.—The amendments made by subsection (b) shall apply with respect to exchanges occurring

after December 31, 2009.

(3) INFORMATION REPORTING.—The amendments made by

subsection (d) shall apply to charges made after December

31, 2009.

(4) POLICY ACQUISITION EXPENSES.—The amendment made

by subsection (e) shall apply to specified policy acquisition

expenses determined for taxable years beginning after

December 31, 2009.

(5) TECHNICAL AMENDMENT.—The amendment made by

subsection (f) shall take effect as if included in section 321(a)

of the Health Insurance Portability and Accountability Act of

1996.

SEC. 845. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS

FOR HEALTH AND LONG-TERM CARE INSURANCE FOR

PUBLIC SAFETY OFFICERS.

(a) IN GENERAL.—Section 402 of the Internal Revenue Code

of 1986 (relating to taxability of beneficiary of employees’ trust)

is amended by adding at the end the following new subsection:

‘‘(l) DISTRIBUTIONS FROM GOVERNMENTAL PLANS FOR HEALTH

AND LONG-TERM CARE INSURANCE.— ‘‘(1) IN GENERAL.—In the case of an employee who is an

eligible retired public safety officer who makes the election

Applicability.

26 USC 72 note.

26 USC 6724.

120 STAT. 1014 PUBLIC LAW 109–280—AUG. 17, 2006

described in paragraph (6) with respect to any taxable year

of such employee, gross income of such employee for such

taxable year does not include any distribution from an eligible

retirement plan to the extent that the aggregate amount of

such distributions does not exceed the amount paid by such

employee for qualified health insurance premiums of the

employee, his spouse, or dependents (as defined in section 152)

for such taxable year.

‘‘(2) LIMITATION.—The amount which may be excluded from

gross income for the taxable year by reason of paragraph (1)

shall not exceed $3,000.

‘‘(3) DISTRIBUTIONS MUST OTHERWISE BE INCLUDIBLE.— ‘‘(A) IN GENERAL.—An amount shall be treated as a

distribution for purposes of paragraph (1) only to the extent

that such amount would be includible in gross income

without regard to paragraph (1).

‘‘(B) APPLICATION OF SECTION 72.—Notwithstanding

section 72, in determining the extent to which an amount

is treated as a distribution for purposes of subparagraph

(A), the aggregate amounts distributed from an eligible

retirement plan in a taxable year (up to the amount

excluded under paragraph (1)) shall be treated as includible

in gross income (without regard to subparagraph (A)) to

the extent that such amount does not exceed the aggregate

amount which would have been so includible if all amounts

distributed from all eligible retirement plans were treated

as 1 contract for purposes of determining the inclusion

of such distribution under section 72. Proper adjustments

shall be made in applying section 72 to other distributions

in such taxable year and subsequent taxable years.

‘‘(4) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ELIGIBLE RETIREMENT PLAN.—For purposes of

paragraph (1), the term ‘eligible retirement plan’ means

a governmental plan (within the meaning of section 414(d))

which is described in clause (iii), (iv), (v), or (vi) of subsection (c)(8)(B).

‘‘(B) ELIGIBLE RETIRED PUBLIC SAFETY OFFICER.—The

term ‘eligible retired public safety officer’ means an individual who, by reason of disability or attainment of normal

retirement age, is separated from service as a public safety

officer with the employer who maintains the eligible retirement plan from which distributions subject to paragraph

(1) are made.

‘‘(C) PUBLIC SAFETY OFFICER.—The term ‘public safety

officer’ shall have the same meaning given such term by

section 1204(9)(A) of the Omnibus Crime Control and Safe

Streets Act of 1968 (42 U.S.C. 3796b(9)(A)).

‘‘(D) QUALIFIED HEALTH INSURANCE PREMIUMS.—The

term ‘qualified health insurance premiums’ means premiums for coverage for the eligible retired public safety

officer, his spouse, and dependents, by an accident or health

insurance plan or qualified long-term care insurance contract (as defined in section 7702B(b)).

‘‘(5) SPECIAL RULES.—For purposes of this subsection—

‘‘(A) DIRECT PAYMENT TO INSURER REQUIRED.—Paragraph (1) shall only apply to a distribution if payment

of the premiums is made directly to the provider of the

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1015

accident or health insurance plan or qualified long-term

care insurance contract by deduction from a distribution

from the eligible retirement plan.

‘‘(B) RELATED PLANS TREATED AS 1.—All eligible retirement plans of an employer shall be treated as a single

plan.

‘‘(6) ELECTION DESCRIBED.—

‘‘(A) IN GENERAL.—For purposes of paragraph (1), an

election is described in this paragraph if the election is

made by an employee after separation from service with

respect to amounts not distributed from an eligible retirement plan to have amounts from such plan distributed

in order to pay for qualified health insurance premiums.

‘‘(B) SPECIAL RULE.—A plan shall not be treated as

violating the requirements of section 401, or as engaging

in a prohibited transaction for purposes of section 503(b),

merely because it provides for an election with respect

to amounts that are otherwise distributable under the plan

or merely because of a distribution made pursuant to an

election described in subparagraph (A).

‘‘(7) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.—

The amounts excluded from gross income under paragraph

(1) shall not be taken into account under section 213.

‘‘(8) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.—The amounts

excluded from gross income under paragraph (1) shall not be

taken into account under section 162(l).’’.

(b) CONFORMING AMENDMENTS.—

(1) Section 403(a) of such Code (relating to taxability of

beneficiary under a qualified annuity plan) is amended by

inserting after paragraph (1) the following new paragraph:

‘‘(2) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—To the extent provided in section 402(l), paragraph

(1) shall not apply to the amount distributed under the contract

which is otherwise includible in gross income under this subsection.’’.

(2) Section 403(b) of such Code (relating to taxability of

beneficiary under annuity purchased by section 501(c)(3)

organization or public school) is amended by inserting after

paragraph (1) the following new paragraph:

‘‘(2) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—To the extent provided in section 402(l), paragraph

(1) shall not apply to the amount distributed under the contract

which is otherwise includible in gross income under this subsection.’’.

(3) Section 457(a) of such Code (relating to year of inclusion

in gross income) is amended by adding at the end the following

new paragraph:

‘‘(3) SPECIAL RULE FOR HEALTH AND LONG-TERM CARE INSURANCE.—In the case of a plan of an eligible employer described

in subsection (e)(1)(A), to the extent provided in section 402(l),

paragraph (1) shall not apply to amounts otherwise includible

in gross income under this subsection.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to distributions in taxable years beginning after

December 31, 2006.

26 USC 402 note.

26 USC 403.

120 STAT. 1016 PUBLIC LAW 109–280—AUG. 17, 2006

Subtitle E—United States Tax Court

Modernization

SEC. 851. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL

SURVIVOR ANNUITIES.

(a) IN GENERAL.—Subsection (s) of section 7448 of the Internal

Revenue Code of 1986 (relating to annuities to surviving spouses

and dependent children of judges) is amended to read as follows:

‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each time that an

increase is made under section 8340(b) of title 5, United States

Code, in annuities payable under subchapter III of chapter 83

of that title, each annuity payable from the survivors annuity

fund under this section shall be increased at the same time by

the same percentage by which annuities are increased under such

section 8340(b).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply with respect to increases made under section 8340(b)

of title 5, United States Code, in annuities payable under subchapter

III of chapter 83 of that title, taking effect after the date of the

enactment of this Act.

SEC. 852. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT

JUDGES AGE 65 OR OVER.

Section 7472 of the Internal Revenue Code of 1986 (relating

to expenditures) is amended by inserting after the first sentence

the following new sentence: ‘‘Notwithstanding any other provision

of law, the Tax Court is authorized to pay on behalf of its judges,

age 65 or over, any increase in the cost of Federal Employees’

Group Life Insurance imposed after the date of the enactment

of the Pension Protection Act of 2006, including any expenses generated by such payments, as authorized by the chief judge in

a manner consistent with such payments authorized by the Judicial

Conference of the United States pursuant to section 604(a)(5) of

title 28, United States Code.’’.

SEC. 853. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT

SAVINGS PLAN.

(a) IN GENERAL.—Section 7447 of the Internal Revenue Code

of 1986 (relating to retirement of judges) is amended by adding

at the end the following new subsection:

‘‘(j) THRIFT SAVINGS PLAN.—

‘‘(1) ELECTION TO CONTRIBUTE.—

‘‘(A) IN GENERAL.—A judge of the Tax Court may elect

to contribute to the Thrift Savings Fund established by

section 8437 of title 5, United States Code.

‘‘(B) PERIOD OF ELECTION.—An election may be made

under this paragraph only during a period provided under

section 8432(b) of title 5, United States Code, for individuals subject to chapter 84 of such title.

‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—Except as

otherwise provided in this subsection, the provisions of subchapters III and VII of chapter 84 of title 5, United States

Code, shall apply with respect to a judge who makes an election

under paragraph (1).

‘‘(3) SPECIAL RULES.—

26 USC 7448

note.

26 USC 7448.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1017

‘‘(A) AMOUNT CONTRIBUTED.—The amount contributed

by a judge to the Thrift Savings Fund in any pay period

shall not exceed the maximum percentage of such judge’s

basic pay for such period as allowable under section 8440f

of title 5, United States Code. Basic pay does not include

any retired pay paid pursuant to this section.

‘‘(B) CONTRIBUTIONS FOR BENEFIT OF JUDGE.—No contributions may be made for the benefit of a judge under

section 8432(c) of title 5, United States Code.

‘‘(C) APPLICABILITY OF SECTION 8433(b) OF TITLE 5

WHETHER OR NOT JUDGE RETIRES.—Section 8433(b) of title

5, United States Code, applies with respect to a judge

who makes an election under paragraph (1) and who

either—

‘‘(i) retires under subsection (b), or

‘‘(ii) ceases to serve as a judge of the Tax Court

but does not retire under subsection (b).

Retirement under subsection (b) is a separation from

service for purposes of subchapters III and VII of chapter

84 of that title.

‘‘(D) APPLICABILITY OF SECTION 8351(b)(5) OF TITLE 5.—

The provisions of section 8351(b)(5) of title 5, United States

Code, shall apply with respect to a judge who makes an

election under paragraph (1).

‘‘(E) EXCEPTION.—Notwithstanding subparagraph (C),

if any judge retires under this section, or resigns without

having met the age and service requirements set forth

under subsection (b)(2), and such judge’s nonforfeitable

account balance is less than an amount that the Executive

Director of the Federal Retirement Thrift Investment Board

prescribes by regulation, the Executive Director shall pay

the nonforfeitable account balance to the participant in

a single payment.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect on the date of the enactment of this Act, except

that United States Tax Court judges may only begin to participate

in the Thrift Savings Plan at the next open season beginning

after such date.

SEC. 854. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF SPECIAL TRIAL JUDGES OF THE TAX COURT.

(a) DEFINITIONS.—Section 7448(a) of the Internal Revenue Code

of 1986 (relating to definitions), as amended by this Act, is amended

by redesignating paragraphs (5), (6), (7), and (8) as paragraphs

(7), (8), (9), and (10), respectively, and by inserting after paragraph

(4) the following new paragraphs:

‘‘(5) The term ‘special trial judge’ means a judicial officer

appointed pursuant to section 7443A, including any individual

receiving an annuity under chapter 83 or 84 of title 5, United

States Code, whether or not performing judicial duties under

section 7443B.

‘‘(6) The term ‘special trial judge’s salary’ means the salary

of a special trial judge received under section 7443A(d), any

amount received as an annuity under chapter 83 or 84 of

title 5, United States Code, and compensation received under

section 7443B.’’.

26 USC 7447

note.

Regulations.

120 STAT. 1018 PUBLIC LAW 109–280—AUG. 17, 2006

(b) ELECTION.—Subsection (b) of section 7448 of such Code

(relating to annuities to surviving spouses and dependent children

of judges) is amended—

(1) by striking the subsection heading and inserting the

following:

‘‘(b) ELECTION.—

‘‘(1) JUDGES.—’’,

(2) by moving the text 2 ems to the right, and

(3) by adding at the end the following new paragraph:

‘‘(2) SPECIAL TRIAL JUDGES.—Any special trial judge may

by written election filed with the chief judge bring himself

or herself within the purview of this section. Such election

shall be filed not later than the later of 6 months after—

‘‘(A) 6 months after the date of the enactment of this

paragraph,

‘‘(B) the date the judge takes office, or

‘‘(C) the date the judge marries.’’.

(c) CONFORMING AMENDMENTS.—

(1) The heading of section 7448 of such Code is amended

by inserting ‘‘AND SPECIAL TRIAL JUDGES’’ after ‘‘JUDGES’’.

(2) The item relating to section 7448 in the table of sections

for part I of subchapter C of chapter 76 of such Code is amended

by inserting ‘‘and special trial judges’’ after ‘‘judges’’.

(3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), and

(u) of section 7448 of such Code, as amended by this Act,

are each amended—

(A) by inserting ‘‘or special trial judge’’ after ‘‘judge’’

each place it appears other than in the phrase ‘‘chief judge’’,

and

(B) by inserting ‘‘or special trial judge’s’’ after ‘‘judge’s’’

each place it appears.

(4) Section 7448(c) of such Code is amended—

(A) in paragraph (1), by striking ‘‘Tax Court judges’’

and inserting ‘‘Tax Court judicial officers’’, and

(B) in paragraph (2)—

(i) in subparagraph (A), by inserting ‘‘and section

7443A(d)’’ after ‘‘(a)(4)’’, and

(ii) in subparagraph (B), by striking ‘‘subsection

(a)(4)’’ and inserting ‘‘subsection (a)(4) and (a)(6)’’.

(5) Section 7448(j)(1) of such Code is amended—

(A) in subparagraph (A), by striking ‘‘service or retired’’

and inserting ‘‘service, retired’’, and by inserting ‘‘, or

receiving any annuity under chapter 83 or 84 of title 5,

United States Code,’’ after ‘‘section 7447’’, and

(B) in the last sentence, by striking ‘‘subsections (a)

(6) and (7)’’ and inserting ‘‘paragraphs (8) and (9) of subsection (a)’’.

(6) Section 7448(m)(1) of such Code, as amended by this

Act, is amended by inserting ‘‘or any annuity under chapter

83 or 84 of title 5, United States Code’’ after ‘‘7447(d)’’.

(7) Section 7448(n) of such Code is amended by inserting

‘‘his years of service pursuant to any appointment under section

7443A,’’ after ‘‘of the Tax Court,’’.

(8) Section 3121(b)(5)(E) of such Code is amended by

inserting ‘‘or special trial judge’’ before ‘‘of the United States

Tax Court’’.

Deadline.

26 USC 7448.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1019

(9) Section 210(a)(5)(E) of the Social Security Act is

amended by inserting ‘‘or special trial judge’’ before ‘‘of the

United States Tax Court’’.

SEC. 855. JURISDICTION OF TAX COURT OVER COLLECTION DUE

PROCESS CASES.

(a) IN GENERAL.—Paragraph (1) of section 6330(d) of the

Internal Revenue Code of 1986 (relating to proceeding after hearing)

is amended to read as follows:

‘‘(1) JUDICIAL REVIEW OF DETERMINATION.—The person may,

within 30 days of a determination under this section, appeal

such determination to the Tax Court (and the Tax Court shall

have jurisdiction with respect to such matter).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to determinations made after the date which is 60

days after the date of the enactment of this Act.

SEC. 856. PROVISIONS FOR RECALL.

(a) IN GENERAL.—Part I of subchapter C of chapter 76 of

the Internal Revenue Code of 1986 is amended by inserting after

section 7443A the following new section:

‘‘SEC. 7443B. RECALL OF SPECIAL TRIAL JUDGES OF THE TAX COURT.

‘‘(a) RECALLING OF RETIRED SPECIAL TRIAL JUDGES.—Any individual who has retired pursuant to the applicable provisions of

title 5, United States Code, upon reaching the age and service

requirements established therein, may at or after retirement be

called upon by the chief judge of the Tax Court to perform such

judicial duties with the Tax Court as may be requested of such

individual for any period or periods specified by the chief judge;

except that in the case of any such individual—

‘‘(1) the aggregate of such periods in any 1 calendar year

shall not (without such individual’s consent) exceed 90 calendar

days, and

‘‘(2) such individual shall be relieved of performing such

duties during any period in which illness or disability precludes

the performance of such duties.

Any act, or failure to act, by an individual performing judicial

duties pursuant to this subsection shall have the same force and

effect as if it were the act (or failure to act) of a special trial

judge of the Tax Court.

‘‘(b) COMPENSATION.—For the year in which a period of recall

occurs, the special trial judge shall receive, in addition to the

annuity provided under the applicable provisions of title 5, United

States Code, an amount equal to the difference between that

annuity and the current salary of the office to which the special

trial judge is recalled.

‘‘(c) RULEMAKING AUTHORITY.—The provisions of this section

may be implemented under such rules as may be promulgated

by the Tax Court.’’.

(b) CONFORMING AMENDMENT.—The table of sections for part

I of subchapter C of chapter 76 of such Code is amended by

inserting after the item relating to section 7443A the following

new item:

‘‘Sec. 7443B. Recall of special trial judges of the Tax Court.’’.

26 USC 7443B.

Deadline.

42 USC 410.

120 STAT. 1020 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 857. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND

DECIDE CERTAIN EMPLOYMENT STATUS CASES.

(a) IN GENERAL.—Section 7443A(b) of the Internal Revenue

Code of 1986 (relating to proceedings which may be assigned to

special trial judges) is amended by striking ‘‘and’’ at the end of

paragraph (4), by redesignating paragraph (5) as paragraph (6),

and by inserting after paragraph (4) the following new paragraph:

‘‘(5) any proceeding under section 7436(c), and’’.

(b) CONFORMING AMENDMENT.—Section 7443A(c) of such Code

is amended by striking ‘‘or (4)’’ and inserting ‘‘(4), or (5)’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to any proceeding under section 7436(c) of the Internal

Revenue Code of 1986 with respect to which a decision has not

become final (as determined under section 7481 of such Code)

before the date of the enactment of this Act.

SEC. 858. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY

DOCTRINE OF EQUITABLE RECOUPMENT.

(a) CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY

DOCTRINE OF EQUITABLE RECOUPMENT.—Section 6214(b) of the

Internal Revenue Code of 1986 (relating to jurisdiction over other

years and quarters) is amended by adding at the end the following

new sentence: ‘‘Notwithstanding the preceding sentence, the Tax

Court may apply the doctrine of equitable recoupment to the same

extent that it is available in civil tax cases before the district

courts of the United States and the United States Court of Federal

Claims.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to any action or proceeding in the United States Tax

Court with respect to which a decision has not become final (as

determined under section 7481 of the Internal Revenue Code of

1986) as of the date of the enactment of this Act.

SEC. 859. TAX COURT FILING FEE IN ALL CASES COMMENCED BY

FILING PETITION.

(a) IN GENERAL.—Section 7451 of the Internal Revenue Code

of 1986 (relating to fee for filing a Tax Court petition) is amended

by striking all that follows ‘‘petition’’ and inserting a period.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect on the date of the enactment of this Act.

SEC. 860. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO

SE TAXPAYERS.

(a) IN GENERAL.—Section 7475(b) of the Internal Revenue Code

of 1986 (relating to use of fees) is amended by inserting before

the period at the end ‘‘and to provide services to pro se taxpayers’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect on the date of the enactment of this Act.

Subtitle F—Other Provisions

SEC. 861. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT

MORATORIUM ON APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE TO STATE AND

LOCAL PLANS.

(a) IN GENERAL.—

26 USC 7475

note.

26 USC 7451

note.

26 USC 6214

note.

26 USC 7443A.

26 USC 7443A.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1021

(1) Subparagraph (G) of section 401(a)(5) and subparagraph

(G) of section 401(a)(26) of the Internal Revenue Code of 1986

are each amended by striking ‘‘section 414(d))’’ and all that

follows and inserting ‘‘section 414(d)).’’.

(2) Subparagraph (G) of section 401(k)(3) of such Code

and paragraph (2) of section 1505(d) of the Taxpayer Relief

Act of 1997 (Public Law 105–34; 111 Stat. 1063) are each

amended by striking ‘‘maintained by a State or local government or political subdivision thereof (or agency or instrumentality thereof)’’.

(b) CONFORMING AMENDMENTS.— (1) The heading of subparagraph (G) of section 401(a)(5)

of the Internal Revenue Code of 1986 is amended by striking

‘‘STATE AND LOCAL GOVERNMENTAL’’ and inserting ‘‘GOVERN- MENTAL’’.

(2) The heading of subparagraph (G) of section 401(a)(26)

of such Code is amended by striking ‘‘EXCEPTION FOR STATE

AND LOCAL’’ and inserting ‘‘EXCEPTION FOR’’.

(3) Section 401(k)(3)(G) of such Code is amended by

inserting ‘‘GOVERNMENTAL PLAN.—’’ after ‘‘(G)’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to any year beginning after the date of the enactment

of this Act.

SEC. 862. ELIMINATION OF AGGREGATE LIMIT FOR USAGE OF EXCESS

FUNDS FROM BLACK LUNG DISABILITY TRUSTS.

(a) IN GENERAL.—So much of section 501(c)(21)(C) of the

Internal Revenue Code of 1986 (relating to black lung disability

trusts) as precedes the last sentence is amended to read as follows:

‘‘(C) Payments described in subparagraph (A)(i)(IV)

may be made from such trust during a taxable year only

to the extent that the aggregate amount of such payments

during such taxable year does not exceed the excess (if

any), as of the close of the preceding taxable year, of—

‘‘(i) the fair market value of the assets of the

trust, over

‘‘(ii) 110 percent of the present value of the liability

described in subparagraph (A)(i)(I) of such person.’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2006.

SEC. 863. TREATMENT OF DEATH BENEFITS FROM CORPORATE-OWNED

LIFE INSURANCE.

(a) IN GENERAL.—Section 101 of the Internal Revenue Code

of 1986 (relating to certain death benefits) is amended by adding

at the end the following new subsection:

‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED LIFE INSURANCE

CONTRACTS.— ‘‘(1) GENERAL RULE.—In the case of an employer-owned

life insurance contract, the amount excluded from gross income

of an applicable policyholder by reason of paragraph (1) of

subsection (a) shall not exceed an amount equal to the sum

of the premiums and other amounts paid by the policyholder

for the contract.

‘‘(2) EXCEPTIONS.—In the case of an employer-owned life

insurance contract with respect to which the notice and consent

requirements of paragraph (4) are met, paragraph (1) shall

not apply to any of the following:

26 USC 501 note.

26 USC 401 and

note.

26 USC 401.

120 STAT. 1022 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) EXCEPTIONS BASED ON INSURED’S STATUS.—Any

amount received by reason of the death of an insured

who, with respect to an applicable policyholder—

‘‘(i) was an employee at any time during the 12-

month period before the insured’s death, or

‘‘(ii) is, at the time the contract is issued—

‘‘(I) a director,

‘‘(II) a highly compensated employee within

the meaning of section 414(q) (without regard to

paragraph (1)(B)(ii) thereof), or

‘‘(III) a highly compensated individual within

the meaning of section 105(h)(5), except that ‘35

percent’ shall be substituted for ‘25 percent’ in

subparagraph (C) thereof.

‘‘(B) EXCEPTION FOR AMOUNTS PAID TO INSURED’S

HEIRS.—Any amount received by reason of the death of

an insured to the extent—

‘‘(i) the amount is paid to a member of the family

(within the meaning of section 267(c)(4)) of the insured,

any individual who is the designated beneficiary of

the insured under the contract (other than the

applicable policyholder), a trust established for the benefit of any such member of the family or designated

beneficiary, or the estate of the insured, or

‘‘(ii) the amount is used to purchase an equity

(or capital or profits) interest in the applicable policyholder from any person described in clause (i).

‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CONTRACT.—

‘‘(A) IN GENERAL.—For purposes of this subsection, the

term ‘employer-owned life insurance contract’ means a life

insurance contract which—

‘‘(i) is owned by a person engaged in a trade or

business and under which such person (or a related

person described in subparagraph (B)(ii)) is directly

or indirectly a beneficiary under the contract, and

‘‘(ii) covers the life of an insured who is an

employee with respect to the trade or business of the

applicable policyholder on the date the contract is

issued.

For purposes of the preceding sentence, if coverage for

each insured under a master contract is treated as a separate contract for purposes of sections 817(h), 7702, and

7702A, coverage for each such insured shall be treated

as a separate contract.

‘‘(B) APPLICABLE POLICYHOLDER.—For purposes of this

subsection—

‘‘(i) IN GENERAL.—The term ‘applicable policyholder’ means, with respect to any employer-owned

life insurance contract, the person described in

subparagraph (A)(i) which owns the contract.

‘‘(ii) RELATED PERSONS.—The term ‘applicable

policyholder’ includes any person which—

‘‘(I) bears a relationship to the person

described in clause (i) which is specified in section

267(b) or 707(b)(1), or

‘‘(II) is engaged in trades or businesses with

such person which are under common control

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1023

(within the meaning of subsection (a) or (b) of

section 52).

‘‘(4) NOTICE AND CONSENT REQUIREMENTS.—The notice and

consent requirements of this paragraph are met if, before the

issuance of the contract, the employee—

‘‘(A) is notified in writing that the applicable policyholder intends to insure the employee’s life and the maximum face amount for which the employee could be insured

at the time the contract was issued,

‘‘(B) provides written consent to being insured under

the contract and that such coverage may continue after

the insured terminates employment, and

‘‘(C) is informed in writing that an applicable policyholder will be a beneficiary of any proceeds payable upon

the death of the employee.

‘‘(5) DEFINITIONS.—For purposes of this subsection—

‘‘(A) EMPLOYEE.—The term ‘employee’ includes an

officer, director, and highly compensated employee (within

the meaning of section 414(q)).

‘‘(B) INSURED.—The term ‘insured’ means, with respect

to an employer-owned life insurance contract, an individual

covered by the contract who is a United States citizen

or resident. In the case of a contract covering the joint

lives of 2 individuals, references to an insured include

both of the individuals.’’.

(b) REPORTING REQUIREMENTS.—Subpart A of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986

(relating to information concerning persons subject to special provisions) is amended by inserting after section 6039H the following

new section:

‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO EMPLOYEROWNED LIFE INSURANCE CONTRACTS.

‘‘(a) IN GENERAL.—Every applicable policyholder owning 1 or

more employer-owned life insurance contracts issued after the date

of the enactment of this section shall file a return (at such time

and in such manner as the Secretary shall by regulations prescribe)

showing for each year such contracts are owned—

‘‘(1) the number of employees of the applicable policyholder

at the end of the year,

‘‘(2) the number of such employees insured under such

contracts at the end of the year,

‘‘(3) the total amount of insurance in force at the end

of the year under such contracts,

‘‘(4) the name, address, and taxpayer identification number

of the applicable policyholder and the type of business in which

the policyholder is engaged, and

‘‘(5) that the applicable policyholder has a valid consent

for each insured employee (or, if all such consents are not

obtained, the number of insured employees for whom such

consent was not obtained).

‘‘(b) RECORDKEEPING REQUIREMENT.—Each applicable policyholder owning 1 or more employer-owned life insurance contracts

during any year shall keep such records as may be necessary

for purposes of determining whether the requirements of this section

and section 101(j) are met.

Regulations.

26 USC 6039I.

120 STAT. 1024 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(c) DEFINITIONS.—Any term used in this section which is used

in section 101(j) shall have the same meaning given such term

by section 101(j).’’.

(c) CONFORMING AMENDMENTS.—

(1) Paragraph (1) of section 101(a) of the Internal Revenue

Code of 1986 is amended by striking ‘‘and subsection (f)’’ and

inserting ‘‘subsection (f), and subsection (j)’’.

(2) The table of sections for subpart A of part III of subchapter A of chapter 61 of such Code is amended by inserting

after the item relating to section 6039H the following new

item:

‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance

contracts.’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to life insurance contracts issued after the date of

the enactment of this Act, except for a contract issued after such

date pursuant to an exchange described in section 1035 of the

Internal Revenue Code of 1986 for a contract issued on or prior

to that date. For purposes of the preceding sentence, any material

increase in the death benefit or other material change shall cause

the contract to be treated as a new contract except that, in the

case of a master contract (within the meaning of section 264(f)(4)(E)

of such Code), the addition of covered lives shall be treated as

a new contract only with respect to such additional covered lives.

SEC. 864. TREATMENT OF TEST ROOM SUPERVISORS AND PROCTORS

WHO ASSIST IN THE ADMINISTRATION OF COLLEGE

ENTRANCE AND PLACEMENT EXAMS.

(a) IN GENERAL.—Section 530 of the Revenue Reconciliation

Act of 1978 is amended by adding at the end the following new

subsection:

‘‘(f) TREATMENT OF TEST ROOM SUPERVISORS AND PROCTORS

WHO ASSIST IN THE ADMINISTRATION OF COLLEGE ENTRANCE AND

PLACEMENT EXAMS.—

‘‘(1) IN GENERAL.—In the case of an individual described

in paragraph (2) who is providing services as a test proctor

or room supervisor by assisting in the administration of college

entrance or placement examinations, this section shall be

applied to such services performed after December 31, 2006

(and remuneration paid for such services) without regard to

subsection (a)(3) thereof.

‘‘(2) APPLICABILITY.—An individual is described in this

paragraph if the individual—

‘‘(A) is providing the services described in subsection

(a) to an organization described in section 501(c), and

exempt from tax under section 501(a), of the Internal Revenue Code of 1986, and

‘‘(B) is not otherwise treated as an employee of such

organization for purposes of subtitle C of such Code

(relating to employment taxes).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to remuneration for services performed after December

31, 2006.

26 USC 3401

note.

Applicability.

26 USC 3401

note.

Applicability.

26 USC 101 note.

26 USC 101.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1025

SEC. 865. GRANDFATHER RULE FOR CHURCH PLANS WHICH SELFANNUITIZE.

(a) IN GENERAL.—In the case of any plan year ending after

the date of the enactment of this Act, annuity payments provided

with respect to any account maintained for a participant or beneficiary under a qualified church plan shall not fail to satisfy the

requirements of section 401(a)(9) of the Internal Revenue Code

of 1986 merely because the payments are not made under an

annuity contract purchased from an insurance company if such

payments would not fail such requirements if provided with respect

to a retirement income account described in section 403(b)(9) of

such Code.

(b) QUALIFIED CHURCH PLAN.—For purposes of this section,

the term ‘‘qualified church plan’’ means any money purchase pension plan described in section 401(a) of such Code which—

(1) is a church plan (as defined in section 414(e) of such

Code) with respect to which the election provided by section

410(d) of such Code has not been made, and

(2) was in existence on April 17, 2002.

SEC. 866. EXEMPTION FOR INCOME FROM LEVERAGED REAL ESTATE

HELD BY CHURCH PLANS.

(a) IN GENERAL.—Section 514(c)(9)(C) of the Internal Revenue

Code of 1986 is amended by striking ‘‘or’’ after clause (ii), by

striking the period at the end of clause (iii) and inserting ‘‘; or’’,

and by inserting after clause (iii) the following:

‘‘(iv) a retirement income account described in section 403(b)(9).’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to taxable years beginning on or after the date of

enactment of this Act.

SEC. 867. CHURCH PLAN RULE.

(a) IN GENERAL.—Paragraph (11) of section 415(b) of the

Internal Revenue Code of 1986 is amended by adding at the end

the following: ‘‘Subparagraph (B) of paragraph (1) shall not apply

to a plan maintained by an organization described in section

3121(w)(3)(A) except with respect to highly compensated benefits.

For purposes of this paragraph, the term ‘highly compensated benefits’ means any benefits accrued for an employee in any year on

or after the first year in which such employee is a highly compensated employee (as defined in section 414(q)) of the organization

described in section 3121(w)(3)(A). For purposes of applying paragraph (1)(B) to highly compensated benefits, all benefits of the

employee otherwise taken into account (without regard to this paragraph) shall be taken into account.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to years beginning after December 31, 2006.

SEC. 868. GRATUITOUS TRANSFER FOR BENEFITS OF EMPLOYEES.

(a) IN GENERAL.—Subparagraph (E) of section 664(g)(3) of the

Internal Revenue Code of 1986 is amended by inserting ‘‘(determined on the basis of fair market value of securities when allocated

to participants)’’ after ‘‘paragraph (7)’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect on the date of the enactment of this Act.

26 USC 664 note.

26 USC 415 note.

26 USC 514 note.

26 USC 514.

26 USC 401 note.

120 STAT. 1026 PUBLIC LAW 109–280—AUG. 17, 2006

TITLE IX—INCREASE IN PENSION PLAN

DIVERSIFICATION AND PARTICIPATION AND OTHER PENSION PROVISIONS

SEC. 901. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE

EMPLOYEES WITH FREEDOM TO INVEST THEIR PLAN

ASSETS.

(a) AMENDMENTS OF INTERNAL REVENUE CODE.—

(1) QUALIFICATION REQUIREMENT.—Section 401(a) of the

Internal Revenue Code of 1986 (relating to qualified pension,

profit-sharing, and stock bonus plans) is amended by inserting

after paragraph (34) the following new paragraph:

‘‘(35) DIVERSIFICATION REQUIREMENTS FOR CERTAIN DEFINED

CONTRIBUTION PLANS.—

‘‘(A) IN GENERAL.—A trust which is part of an

applicable defined contribution plan shall not be treated

as a qualified trust unless the plan meets the diversification

requirements of subparagraphs (B), (C), and (D).

‘‘(B) EMPLOYEE CONTRIBUTIONS AND ELECTIVE DEFERRALS INVESTED IN EMPLOYER SECURITIES.—In the case of

the portion of an applicable individual’s account attributable to employee contributions and elective deferrals

which is invested in employer securities, a plan meets

the requirements of this subparagraph if the applicable

individual may elect to direct the plan to divest any such

securities and to reinvest an equivalent amount in other

investment options meeting the requirements of subparagraph (D).

‘‘(C) EMPLOYER CONTRIBUTIONS INVESTED IN EMPLOYER

SECURITIES.—In the case of the portion of the account

attributable to employer contributions other than elective

deferrals which is invested in employer securities, a plan

meets the requirements of this subparagraph if each

applicable individual who—

‘‘(i) is a participant who has completed at least

3 years of service, or

‘‘(ii) is a beneficiary of a participant described in

clause (i) or of a deceased participant,

may elect to direct the plan to divest any such securities

and to reinvest an equivalent amount in other investment

options meeting the requirements of subparagraph (D).

‘‘(D) INVESTMENT OPTIONS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if the plan offers not less than

3 investment options, other than employer securities,

to which an applicable individual may direct the proceeds from the divestment of employer securities pursuant to this paragraph, each of which is diversified

and has materially different risk and return characteristics.

‘‘(ii) TREATMENT OF CERTAIN RESTRICTIONS AND

CONDITIONS.—

26 USC 401.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1027

‘‘(I) TIME FOR MAKING INVESTMENT CHOICES.—

A plan shall not be treated as failing to meet

the requirements of this subparagraph merely

because the plan limits the time for divestment

and reinvestment to periodic, reasonable

opportunities occurring no less frequently than

quarterly.

‘‘(II) CERTAIN RESTRICTIONS AND CONDITIONS

NOT ALLOWED.—Except as provided in regulations,

a plan shall not meet the requirements of this

subparagraph if the plan imposes restrictions or

conditions with respect to the investment of

employer securities which are not imposed on the

investment of other assets of the plan. This subclause shall not apply to any restrictions or conditions imposed by reason of the application of securities laws.

‘‘(E) APPLICABLE DEFINED CONTRIBUTION PLAN.—For

purposes of this paragraph—

‘‘(i) IN GENERAL.—The term ‘applicable defined contribution plan’ means any defined contribution plan

which holds any publicly traded employer securities.

‘‘(ii) EXCEPTION FOR CERTAIN ESOPS.—Such term

does not include an employee stock ownership plan

if—

‘‘(I) there are no contributions to such plan

(or earnings thereunder) which are held within

such plan and are subject to subsection (k) or

(m), and

‘‘(II) such plan is a separate plan for purposes

of section 414(l) with respect to any other defined

benefit plan or defined contribution plan maintained by the same employer or employers.

‘‘(iii) EXCEPTION FOR ONE PARTICIPANT PLANS.—

Such term does not include a one-participant retirement plan.

‘‘(iv) ONE-PARTICIPANT RETIREMENT PLAN.—For

purposes of clause (iii), the term ‘one-participant retirement plan’ means a retirement plan that—

‘‘(I) on the first day of the plan year covered

only one individual (or the individual and the

individual’s spouse) and the individual owned 100

percent of the plan sponsor (whether or not incorporated), or covered only one or more partners

(or partners and their spouses) in the plan sponsor,

‘‘(II) meets the minimum coverage requirements of section 410(b) without being combined

with any other plan of the business that covers

the employees of the business,

‘‘(III) does not provide benefits to anyone

except the individual (and the individual’s spouse)

or the partners (and their spouses),

‘‘(IV) does not cover a business that is a

member of an affiliated service group, a controlled

group of corporations, or a group of businesses

under common control, and

120 STAT. 1028 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(V) does not cover a business that uses the

services of leased employees (within the meaning

of section 414(n)).

For purposes of this clause, the term ‘partner’ includes

a 2-percent shareholder (as defined in section 1372(b))

of an S corporation.

‘‘(F) CERTAIN PLANS TREATED AS HOLDING PUBLICLY

TRADED EMPLOYER SECURITIES.—

‘‘(i) IN GENERAL.—Except as provided in regulations or in clause (ii), a plan holding employer securities which are not publicly traded employer securities

shall be treated as holding publicly traded employer

securities if any employer corporation, or any member

of a controlled group of corporations which includes

such employer corporation, has issued a class of stock

which is a publicly traded employer security.

‘‘(ii) EXCEPTION FOR CERTAIN CONTROLLED GROUPS

WITH PUBLICLY TRADED SECURITIES.—Clause (i) shall

not apply to a plan if—

‘‘(I) no employer corporation, or parent corporation of an employer corporation, has issued

any publicly traded employer security, and

‘‘(II) no employer corporation, or parent corporation of an employer corporation, has issued

any special class of stock which grants particular

rights to, or bears particular risks for, the holder

or issuer with respect to any corporation described

in clause (i) which has issued any publicly traded

employer security.

‘‘(iii) DEFINITIONS.—For purposes of this subparagraph, the term—

‘‘(I) ‘controlled group of corporations’ has the

meaning given such term by section 1563(a), except

that ‘50 percent’ shall be substituted for ‘80 percent’ each place it appears,

‘‘(II) ‘employer corporation’ means a corporation which is an employer maintaining the plan,

and

‘‘(III) ‘parent corporation’ has the meaning

given such term by section 424(e).

‘‘(G) OTHER DEFINITIONS.—For purposes of this paragraph—

‘‘(i) APPLICABLE INDIVIDUAL.—The term ‘applicable

individual’ means—

‘‘(I) any participant in the plan, and

‘‘(II) any beneficiary who has an account under

the plan with respect to which the beneficiary

is entitled to exercise the rights of a participant.

‘‘(ii) ELECTIVE DEFERRAL.—The term ‘elective

deferral’ means an employer contribution described in

section 402(g)(3)(A).

‘‘(iii) EMPLOYER SECURITY.—The term ‘employer

security’ has the meaning given such term by section

407(d)(1) of the Employee Retirement Income Security

Act of 1974.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1029

‘‘(iv) EMPLOYEE STOCK OWNERSHIP PLAN.—The

term ‘employee stock ownership plan’ has the meaning

given such term by section 4975(e)(7).

‘‘(v) PUBLICLY TRADED EMPLOYER SECURITIES.—The

term ‘publicly traded employer securities’ means

employer securities which are readily tradable on an

established securities market.

‘‘(vi) YEAR OF SERVICE.—The term ‘year of service’

has the meaning given such term by section 411(a)(5).

‘‘(H) TRANSITION RULE FOR SECURITIES ATTRIBUTABLE

TO EMPLOYER CONTRIBUTIONS.—

‘‘(i) RULES PHASED IN OVER 3 YEARS.—

‘‘(I) IN GENERAL.—In the case of the portion

of an account to which subparagraph (C) applies

and which consists of employer securities acquired

in a plan year beginning before January 1, 2007,

subparagraph (C) shall only apply to the applicable

percentage of such securities. This subparagraph

shall be applied separately with respect to each

class of securities.

‘‘(II) EXCEPTION FOR CERTAIN PARTICIPANTS

AGED 55 OR OVER.—Subclause (I) shall not apply

to an applicable individual who is a participant

who has attained age 55 and completed at least

3 years of service before the first plan year beginning after December 31, 2005.

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of

clause (i), the applicable percentage shall be determined as follows:

‘‘Plan year to which The

applicable

subparagraph (C) applies: percentage is:

1st ........................................................................................... 33

2d ............................................................................................ 66

3d and following .................................................................... 100.’’.

(2) CONFORMING AMENDMENTS.—

(A) Section 401(a)(28)(B) of such Code (relating to additional requirements relating to employee stock ownership

plans) is amended by adding at the end the following

new clause:

‘‘(v) EXCEPTION.—This subparagraph shall not

apply to an applicable defined contribution plan (as

defined in paragraph (35)(E)).’’.

(B) Section 409(h)(7) of such Code is amended by

inserting ‘‘or subparagraph (B) or (C) of section 401(a)(35)’’

before the period at the end.

(C) Section 4980(c)(3)(A) of such Code is amended by

striking ‘‘if—’’ and all that follows and inserting ‘‘if the

requirements of subparagraphs (B), (C), and (D) are met.’’.

(b) AMENDMENTS OF ERISA.—

(1) IN GENERAL.—Section 204 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1054) is amended by

redesignating subsection (j) as subsection (k) and by inserting

after subsection (i) the following new subsection:

‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN INDIVIDUAL

ACCOUNT PLANS.—

26 USC 401.

Applicability.

120 STAT. 1030 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(1) IN GENERAL.—An applicable individual account plan

shall meet the diversification requirements of paragraphs (2),

(3), and (4).

‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELECTIVE DEFERRALS

INVESTED IN EMPLOYER SECURITIES.—In the case of the portion

of an applicable individual’s account attributable to employee

contributions and elective deferrals which is invested in

employer securities, a plan meets the requirements of this

paragraph if the applicable individual may elect to direct the

plan to divest any such securities and to reinvest an equivalent

amount in other investment options meeting the requirements

of paragraph (4).

‘‘(3) EMPLOYER CONTRIBUTIONS INVESTED IN EMPLOYER

SECURITIES.—In the case of the portion of the account attributable to employer contributions other than elective deferrals

which is invested in employer securities, a plan meets the

requirements of this paragraph if each applicable individual

who—

‘‘(A) is a participant who has completed at least 3

years of service, or

‘‘(B) is a beneficiary of a participant described in

subparagraph (A) or of a deceased participant,

may elect to direct the plan to divest any such securities and

to reinvest an equivalent amount in other investment options

meeting the requirements of paragraph (4).

‘‘(4) INVESTMENT OPTIONS.—

‘‘(A) IN GENERAL.—The requirements of this paragraph

are met if the plan offers not less than 3 investment

options, other than employer securities, to which an

applicable individual may direct the proceeds from the

divestment of employer securities pursuant to this subsection, each of which is diversified and has materially

different risk and return characteristics.

‘‘(B) TREATMENT OF CERTAIN RESTRICTIONS AND CONDITIONS.—

‘‘(i) TIME FOR MAKING INVESTMENT CHOICES.—A

plan shall not be treated as failing to meet the requirements of this paragraph merely because the plan limits

the time for divestment and reinvestment to periodic,

reasonable opportunities occurring no less frequently

than quarterly.

‘‘(ii) CERTAIN RESTRICTIONS AND CONDITIONS NOT

ALLOWED.—Except as provided in regulations, a plan

shall not meet the requirements of this paragraph

if the plan imposes restrictions or conditions with

respect to the investment of employer securities which

are not imposed on the investment of other assets

of the plan. This subparagraph shall not apply to any

restrictions or conditions imposed by reason of the

application of securities laws.

‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—For purposes

of this subsection—

‘‘(A) IN GENERAL.—The term ‘applicable individual

account plan’ means any individual account plan (as

defined in section 3(34)) which holds any publicly traded

employer securities.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1031

‘‘(B) EXCEPTION FOR CERTAIN ESOPS.—Such term does

not include an employee stock ownership plan if—

‘‘(i) there are no contributions to such plan (or

earnings thereunder) which are held within such plan

and are subject to subsection (k) or (m) of section

401 of the Internal Revenue Code of 1986, and

‘‘(ii) such plan is a separate plan (for purposes

of section 414(l) of such Code) with respect to any

other defined benefit plan or individual account plan

maintained by the same employer or employers.

‘‘(C) EXCEPTION FOR ONE PARTICIPANT PLANS.—Such

term shall not include a one-participant retirement plan

(as defined in section 101(i)(8)(B)).

‘‘(D) CERTAIN PLANS TREATED AS HOLDING PUBLICLY

TRADED EMPLOYER SECURITIES.—

‘‘(i) IN GENERAL.—Except as provided in regulations or in clause (ii), a plan holding employer securities which are not publicly traded employer securities

shall be treated as holding publicly traded employer

securities if any employer corporation, or any member

of a controlled group of corporations which includes

such employer corporation, has issued a class of stock

which is a publicly traded employer security.

‘‘(ii) EXCEPTION FOR CERTAIN CONTROLLED GROUPS

WITH PUBLICLY TRADED SECURITIES.—Clause (i) shall

not apply to a plan if—

‘‘(I) no employer corporation, or parent corporation of an employer corporation, has issued

any publicly traded employer security, and

‘‘(II) no employer corporation, or parent corporation of an employer corporation, has issued

any special class of stock which grants particular

rights to, or bears particular risks for, the holder

or issuer with respect to any corporation described

in clause (i) which has issued any publicly traded

employer security.

‘‘(iii) DEFINITIONS.—For purposes of this subparagraph, the term—

‘‘(I) ‘controlled group of corporations’ has the

meaning given such term by section 1563(a) of

the Internal Revenue Code of 1986, except that

‘50 percent’ shall be substituted for ‘80 percent’

each place it appears,

‘‘(II) ‘employer corporation’ means a corporation which is an employer maintaining the plan,

and

‘‘(III) ‘parent corporation’ has the meaning

given such term by section 424(e) of such Code.

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

‘‘(A) APPLICABLE INDIVIDUAL.—The term ‘applicable

individual’ means—

‘‘(i) any participant in the plan, and

‘‘(ii) any beneficiary who has an account under

the plan with respect to which the beneficiary is entitled to exercise the rights of a participant.

120 STAT. 1032 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) ELECTIVE DEFERRAL.—The term ‘elective deferral’

means an employer contribution described in section

402(g)(3)(A) of the Internal Revenue Code of 1986.

‘‘(C) EMPLOYER SECURITY.—The term ‘employer security’ has the meaning given such term by section 407(d)(1).

‘‘(D) EMPLOYEE STOCK OWNERSHIP PLAN.—The term

‘employee stock ownership plan’ has the meaning given

such term by section 4975(e)(7) of such Code.

‘‘(E) PUBLICLY TRADED EMPLOYER SECURITIES.—The

term ‘publicly traded employer securities’ means employer

securities which are readily tradable on an established

securities market.

‘‘(F) YEAR OF SERVICE.—The term ‘year of service’ has

the meaning given such term by section 203(b)(2).

‘‘(7) TRANSITION RULE FOR SECURITIES ATTRIBUTABLE TO

EMPLOYER CONTRIBUTIONS.—

‘‘(A) RULES PHASED IN OVER 3 YEARS.—

‘‘(i) IN GENERAL.—In the case of the portion of

an account to which paragraph (3) applies and which

consists of employer securities acquired in a plan year

beginning before January 1, 2007, paragraph (3) shall

only apply to the applicable percentage of such securities. This subparagraph shall be applied separately

with respect to each class of securities.

‘‘(ii) EXCEPTION FOR CERTAIN PARTICIPANTS AGED

55 OR OVER.—Clause (i) shall not apply to an applicable

individual who is a participant who has attained age

55 and completed at least 3 years of service before

the first plan year beginning after December 31, 2005.

‘‘(B) APPLICABLE PERCENTAGE.—For purposes of

subparagraph (A), the applicable percentage shall be determined as follows:

‘‘Plan year to which The

applicable

paragraph (3) applies: percentage is:

1st .................................................................................................. 33

2d ................................................................................................... 66

3d ................................................................................................... 100.’’.

(2) CONFORMING AMENDMENT.—Section 407(b)(3) of such

Act (29 U.S.C. 1107(b)(3)) is amended by adding at the end

the following:

‘‘(D) For diversification requirements for qualifying

employer securities held in certain individual account plans,

see section 204(j).’’.

(c) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraphs (2)

and (3), the amendments made by this section shall apply

to plan years beginning after December 31, 2006.

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED AGREEMENTS.—In the case of a plan maintained pursuant to 1 or

more collective bargaining agreements between employee representatives and 1 or more employers ratified on or before

the date of the enactment of this Act, paragraph (1) shall

be applied to benefits pursuant to, and individuals covered

by, any such agreement by substituting for ‘‘December 31,

2006’’ the earlier of—

(A) the later of—

Applicability.

26 USC 401 note.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1033

(i) December 31, 2007, or

(ii) the date on which the last of such collective

bargaining agreements terminates (determined without

regard to any extension thereof after such date of

enactment), or

(B) December 31, 2008.

(3) SPECIAL RULE FOR CERTAIN EMPLOYER SECURITIES HELD

IN AN ESOP.—

(A) IN GENERAL.—In the case of employer securities

to which this paragraph applies, the amendments made

by this section shall apply to plan years beginning after

the earlier of—

(i) December 31, 2007, or

(ii) the first date on which the fair market value

of such securities exceeds the guaranteed minimum

value described in subparagraph (B)(ii).

(B) APPLICABLE SECURITIES.—This paragraph shall

apply to employer securities which are attributable to

employer contributions other than elective deferrals, and

which, on September 17, 2003—

(i) consist of preferred stock, and

(ii) are within an employee stock ownership plan

(as defined in section 4975(e)(7) of the Internal Revenue Code of 1986), the terms of which provide that

the value of the securities cannot be less than the

guaranteed minimum value specified by the plan on

such date.

(C) COORDINATION WITH TRANSITION RULE.—In

applying section 401(a)(35)(H) of the Internal Revenue Code

of 1986 and section 204(j)(7) of the Employee Retirement

Income Security Act of 1974 (as added by this section)

to employer securities to which this paragraph applies,

the applicable percentage shall be determined without

regard to this paragraph.

SEC. 902. INCREASING PARTICIPATION THROUGH AUTOMATIC CONTRIBUTION ARRANGEMENTS.

(a) IN GENERAL.—Section 401(k) of the Internal Revenue Code

of 1986 (relating to cash or deferred arrangement) is amended

by adding at the end the following new paragraph:

‘‘(13) ALTERNATIVE METHOD FOR AUTOMATIC CONTRIBUTION

ARRANGEMENTS TO MEET NONDISCRIMINATION REQUIREMENTS.—

‘‘(A) IN GENERAL.—A qualified automatic contribution

arrangement shall be treated as meeting the requirements

of paragraph (3)(A)(ii).

‘‘(B) QUALIFIED AUTOMATIC CONTRIBUTION ARRANGEMENT.—For purposes of this paragraph, the term ‘qualified

automatic contribution arrangement’ means any cash or

deferred arrangement which meets the requirements of

subparagraphs (C) through (E).

‘‘(C) AUTOMATIC DEFERRAL.— ‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if, under the arrangement, each

employee eligible to participate in the arrangement

is treated as having elected to have the employer make

elective contributions in an amount equal to a qualified

percentage of compensation.

26 USC 401.

120 STAT. 1034 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) ELECTION OUT.—The election treated as

having been made under clause (i) shall cease to apply

with respect to any employee if such employee makes

an affirmative election—

‘‘(I) to not have such contributions made, or

‘‘(II) to make elective contributions at a level

specified in such affirmative election.

‘‘(iii) QUALIFIED PERCENTAGE.—For purposes of this

subparagraph, the term ‘qualified percentage’ means,

with respect to any employee, any percentage determined under the arrangement if such percentage is

applied uniformly, does not exceed 10 percent, and

is at least—

‘‘(I) 3 percent during the period ending on

the last day of the first plan year which begins

after the date on which the first elective contribution described in clause (i) is made with respect

to such employee,

‘‘(II) 4 percent during the first plan year following the plan year described in subclause (I),

‘‘(III) 5 percent during the second plan year

following the plan year described in subclause (I),

and

‘‘(IV) 6 percent during any subsequent plan

year.

‘‘(iv) AUTOMATIC DEFERRAL FOR CURRENT

EMPLOYEES NOT REQUIRED.—Clause (i) may be applied

without taking into account any employee who—

‘‘(I) was eligible to participate in the arrangement (or a predecessor arrangement) immediately

before the date on which such arrangement

becomes a qualified automatic contribution

arrangement (determined after application of this

clause), and

‘‘(II) had an election in effect on such date

either to participate in the arrangement or to not

participate in the arrangement.

‘‘(D) MATCHING OR NONELECTIVE CONTRIBUTIONS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if, under the arrangement, the

employer—

‘‘(I) makes matching contributions on behalf

of each employee who is not a highly compensated

employee in an amount equal to the sum of 100

percent of the elective contributions of the

employee to the extent that such contributions

do not exceed 1 percent of compensation plus 50

percent of so much of such compensation as

exceeds 1 percent but does not exceed 6 percent

of compensation, or

‘‘(II) is required, without regard to whether

the employee makes an elective contribution or

employee contribution, to make a contribution to

a defined contribution plan on behalf of each

employee who is not a highly compensated

employee and who is eligible to participate in the

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1035

arrangement in an amount equal to at least 3

percent of the employee’s compensation.

‘‘(ii) APPLICATION OF RULES FOR MATCHING CONTRIBUTIONS.—The rules of clauses (ii) and (iii) of paragraph (12)(B) shall apply for purposes of clause (i)(I).

‘‘(iii) WITHDRAWAL AND VESTING RESTRICTIONS.— An arrangement shall not be treated as meeting the

requirements of clause (i) unless, with respect to

employer contributions (including matching contributions) taken into account in determining whether the

requirements of clause (i) are met—

‘‘(I) any employee who has completed at least

2 years of service (within the meaning of section

411(a)) has a nonforfeitable right to 100 percent

of the employee’s accrued benefit derived from such

employer contributions, and

‘‘(II) the requirements of subparagraph (B) of

paragraph (2) are met with respect to all such

employer contributions.

‘‘(iv) APPLICATION OF CERTAIN OTHER RULES.—The

rules of subparagraphs (E)(ii) and (F) of paragraph

(12) shall apply for purposes of subclauses (I) and

(II) of clause (i).

‘‘(E) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if, within a reasonable period

before each plan year, each employee eligible to participate in the arrangement for such year receives written

notice of the employee’s rights and obligations under

the arrangement which—

‘‘(I) is sufficiently accurate and comprehensive

to apprise the employee of such rights and obligations, and

‘‘(II) is written in a manner calculated to be

understood by the average employee to whom the

arrangement applies.

‘‘(ii) TIMING AND CONTENT REQUIREMENTS.—A

notice shall not be treated as meeting the requirements

of clause (i) with respect to an employee unless—

‘‘(I) the notice explains the employee’s right

under the arrangement to elect not to have elective

contributions made on the employee’s behalf (or

to elect to have such contributions made at a different percentage),

‘‘(II) in the case of an arrangement under

which the employee may elect among 2 or more

investment options, the notice explains how contributions made under the arrangement will be

invested in the absence of any investment election

by the employee, and

‘‘(III) the employee has a reasonable period

of time after receipt of the notice described in

subclauses (I) and (II) and before the first elective

contribution is made to make either such election.’’.

(b) MATCHING CONTRIBUTIONS.—Section 401(m) of such Code

(relating to nondiscrimination test for matching contributions and

employee contributions) is amended by redesignating paragraph

26 USC 401.

120 STAT. 1036 PUBLIC LAW 109–280—AUG. 17, 2006

(12) as paragraph (13) and by inserting after paragraph (11) the

following new paragraph:

‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC CONTRIBUTION

ARRANGEMENTS.—A defined contribution plan shall be treated

as meeting the requirements of paragraph (2) with respect

to matching contributions if the plan—

‘‘(A) is a qualified automatic contribution arrangement

(as defined in subsection (k)(13)), and

‘‘(B) meets the requirements of paragraph (11)(B).’’.

(c) EXCLUSION FROM DEFINITION OF TOP-HEAVY PLANS.— (1) ELECTIVE CONTRIBUTION RULE.—Clause (i) of section

416(g)(4)(H) of such Code is amended by inserting ‘‘or

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

(2) MATCHING CONTRIBUTION RULE.—Clause (ii) of section

416(g)(4)(H) of such Code is amended by inserting ‘‘or

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

(d) TREATMENT OF WITHDRAWALS OF CONTRIBUTIONS DURING

FIRST 90 DAYS.—

(1) IN GENERAL.—Section 414 of the Internal Revenue Code

of 1986 is amended by adding at the end the following new

subsection:

‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS FROM ELIGIBLE

AUTOMATIC CONTRIBUTION ARRANGEMENTS.—

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

arrangement allows an employee to elect to make permissible

withdrawals—

‘‘(A) the amount of any such withdrawal shall be

includible in the gross income of the employee for the

taxable year of the employee in which the distribution

is made,

‘‘(B) no tax shall be imposed under section 72(t) with

respect to the distribution, and

‘‘(C) the arrangement shall not be treated as violating

any restriction on distributions under this title solely by

reason of allowing the withdrawal.

In the case of any distribution to an employee by reason of

an election under this paragraph, employer matching contributions shall be forfeited or subject to such other treatment as

the Secretary may prescribe.

‘‘(2) PERMISSIBLE WITHDRAWAL.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘permissible withdrawal’

means any withdrawal from an eligible automatic contribution arrangement meeting the requirements of this paragraph which—

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

employee, and

‘‘(ii) consists of elective contributions described in

paragraph (3)(B) (and earnings attributable thereto).

‘‘(B) TIME FOR MAKING ELECTION.—Subparagraph (A)

shall not apply to an election by an employee unless the

election is made no later than the date which is 90 days

after the date of the first elective contribution with respect

to the employee under the arrangement.

‘‘(C) AMOUNT OF DISTRIBUTION.—Subparagraph (A)

shall not apply to any election by an employee unless

the amount of any distribution by reason of the election

26 USC 416.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1037

is equal to the amount of elective contributions made with

respect to the first payroll period to which the eligible

automatic contribution arrangement applies to the

employee and any succeeding payroll period beginning

before the effective date of the election (and earnings attributable thereto).

‘‘(3) ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGEMENT.— For purposes of this subsection, the term ‘eligible automatic

contribution arrangement’ means an arrangement under an

applicable employer plan—

‘‘(A) under which a participant may elect to have the

employer make payments as contributions under the plan

on behalf of the participant, or to the participant directly

in cash,

‘‘(B) under which the participant is treated as having

elected to have the employer make such contributions in

an amount equal to a uniform percentage of compensation

provided under the plan until the participant specifically

elects not to have such contributions made (or specifically

elects to have such contributions made at a different

percentage),

‘‘(C) under which, in the absence of an investment

election by the participant, contributions described in

subparagraph (B) are invested in accordance with regulations prescribed by the Secretary of Labor under section

404(c)(5) of the Employee Retirement Income Security Act

of 1974, and

‘‘(D) which meets the requirements of paragraph (4).

‘‘(4) NOTICE REQUIREMENTS.—

‘‘(A) IN GENERAL.—The administrator of a plan containing an arrangement described in paragraph (3) shall,

within a reasonable period before each plan year, give

to each employee to whom an arrangement described in

paragraph (3) applies for such plan year notice of the

employee’s rights and obligations under the arrangement

which—

‘‘(i) is sufficiently accurate and comprehensive to

apprise the employee of such rights and obligations,

and

‘‘(ii) is written in a manner calculated to be understood by the average employee to whom the arrangement applies.

‘‘(B) TIME AND FORM OF NOTICE.—A notice shall not

be treated as meeting the requirements of subparagraph

(A) with respect to an employee unless—

‘‘(i) the notice includes an explanation of the

employee’s right under the arrangement to elect not

to have elective contributions made on the employee’s

behalf (or to elect to have such contributions made

at a different percentage),

‘‘(ii) the employee has a reasonable period of time

after receipt of the notice described in clause (i) and

before the first elective contribution is made to make

such election, and

‘‘(iii) the notice explains how contributions made

under the arrangement will be invested in the absence

of any investment election by the employee.

120 STAT. 1038 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(5) APPLICABLE EMPLOYER PLAN.—For purposes of this subsection, the term ‘applicable employer plan’ means—

‘‘(A) an employees’ trust described in section 401(a)

which is exempt from tax under section 501(a),

‘‘(B) a plan under which amounts are contributed by

an individual’s employer for an annuity contract described

in section 403(b), and

‘‘(C) an eligible deferred compensation plan described

in section 457(b) which is maintained by an eligible

employer described in section 457(e)(1)(A).

‘‘(6) SPECIAL RULE.—A withdrawal described in paragraph

(1) (subject to the limitation of paragraph (2)(C)) shall not

be taken into account for purposes of section 401(k)(3).’’.

(2) VESTING CONFORMING AMENDMENTS.—

(A) Section 411(a)(3)(G) of such Code is amended by

inserting ‘‘an erroneous automatic contribution under section 414(w),’’ after ‘‘402(g)(2)(A),’’.

(B) The heading of section 411(a)(3)(G) of such Code

is amended by inserting ‘‘OR ERRONEOUS AUTOMATIC CONTRIBUTION’’ before the period.

(C) Section 401(k)(8)(E) of such Code is amended by

inserting ‘‘an erroneous automatic contribution under section 414(w),’’ after ‘‘402(g)(2)(A),’’.

(D) The heading of section 401(k)(8)(E) of such Code

is amended by inserting ‘‘OR ERRONEOUS AUTOMATIC CONTRIBUTION’’ before the period.

(E) Section 203(a)(3)(F) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1053(a)(3)(F)) is

amended by inserting ‘‘an erroneous automatic contribution

under section 414(w) of such Code,’’ after ‘‘402(g)(2)(A) of

such Code,’’.

(e) EXCESS CONTRIBUTIONS.—

(1) EXPANSION OF CORRECTIVE DISTRIBUTION PERIOD FOR

AUTOMATIC CONTRIBUTION ARRANGEMENTS.—Subsection (f) of

section 4979 of the Internal Revenue Code of 1986 is amended—

(A) by inserting ‘‘(6 months in the case of an excess

contribution or excess aggregate contribution to an eligible

automatic contribution arrangement (as defined in section

414(w)(3)))’’ after ‘‘21⁄2 months’’ in paragraph (1), and

(B) by striking ‘‘21⁄2 MONTHS OF’’ in the heading and

inserting ‘‘SPECIFIED PERIOD AFTER’’.

(2) YEAR OF INCLUSION.—Paragraph (2) of section 4979(f)

of such Code is amended to read as follows:

‘‘(2) YEAR OF INCLUSION.—Any amount distributed as provided in paragraph (1) shall be treated as earned and received

by the recipient in the recipient’s taxable year in which such

distributions were made.’’.

(3) SIMPLIFICATION OF ALLOCABLE EARNINGS.—

(A) SECTION 4979.—Paragraph (1) of section 4979(f) of

such Code is amended by adding ‘‘through the end of the

plan year for which the contribution was made’’ after

‘‘thereto’’.

(B) SECTION 401(k) AND 401(m).—

(i) Clause (i) of section 401(k)(8)(A) of such Code

is amended by adding ‘‘through the end of such year’’

after ‘‘such contributions’’.

26 USC 411.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1039

(ii) Subparagraph (A) of section 401(m)(6) of such

Code is amended by adding ‘‘through the end of such

year’’ after ‘‘to such contributions’’.

(f) PREEMPTION OF CONFLICTING STATE REGULATION.—

(1) IN GENERAL.—Section 514 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1144) is amended by

adding at the end the following new subsection:

‘‘(e)(1) Notwithstanding any other provision of this section, this

title shall supersede any law of a State which would directly or

indirectly prohibit or restrict the inclusion in any plan of an automatic contribution arrangement. The Secretary may prescribe regulations which would establish minimum standards that such an

arrangement would be required to satisfy in order for this subsection

to apply in the case of such arrangement.

‘‘(2) For purposes of this subsection, the term ‘automatic contribution arrangement’ means an arrangement—

‘‘(A) under which a participant may elect to have the plan

sponsor make payments as contributions under the plan on

behalf of the participant, or to the participant directly in cash,

‘‘(B) under which a participant is treated as having elected

to have the plan sponsor make such contributions in an amount

equal to a uniform percentage of compensation provided under

the plan until the participant specifically elects not to have

such contributions made (or specifically elects to have such

contributions made at a different percentage), and

‘‘(C) under which such contributions are invested in accordance with regulations prescribed by the Secretary under section

404(c)(5).

‘‘(3)(A) The plan administrator of an automatic contribution

arrangement shall, within a reasonable period before such plan

year, provide to each participant to whom the arrangement applies

for such plan year notice of the participant’s rights and obligations

under the arrangement which—

‘‘(i) is sufficiently accurate and comprehensive to apprise

the participant of such rights and obligations, and

‘‘(ii) is written in a manner calculated to be understood

by the average participant to whom the arrangement applies.

‘‘(B) A notice shall not be treated as meeting the requirements

of subparagraph (A) with respect to a participant unless—

‘‘(i) the notice includes an explanation of the participant’s

right under the arrangement not to have elective contributions

made on the participant’s behalf (or to elect to have such

contributions made at a different percentage),

‘‘(ii) the participant has a reasonable period of time, after

receipt of the notice described in clause (i) and before the

first elective contribution is made, to make such election, and

‘‘(iii) the notice explains how contributions made under

the arrangement will be invested in the absence of any investment election by the participant.’’.

(2) ENFORCEMENT.—Section 502(c)(4) of such Act (29 U.S.C.

1132(c)(4)) is amended by striking ‘‘or section 302(b)(7)(F)(vi)’’

inserting ‘‘, section 302(b)(7)(F)(vi), or section 514(e)(3)’’.

(g) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007, except

that the amendments made by subsection (f) shall take effect on

the date of the enactment of this Act.

26 USC 401 note.

26 USC 401.

120 STAT. 1040 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 903. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT

PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS.

(a) AMENDMENTS OF INTERNAL REVENUE CODE.—Section 414

of the Internal Revenue Code of 1986, as amended by this Act,

is amended by adding at the end the following new subsection:

‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DEFINED BENEFIT

PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS.— ‘‘(1) GENERAL RULE.—Except as provided in this subsection,

the requirements of this title shall be applied to any defined

benefit plan or applicable defined contribution plan which are

part of an eligible combined plan in the same manner as

if each such plan were not a part of the eligible combined

plan.

‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘eligible combined plan’

means a plan—

‘‘(i) which is maintained by an employer which,

at the time the plan is established, is a small employer,

‘‘(ii) which consists of a defined benefit plan and

an applicable defined contribution plan,

‘‘(iii) the assets of which are held in a single trust

forming part of the plan and are clearly identified

and allocated to the defined benefit plan and the

applicable defined contribution plan to the extent necessary for the separate application of this title under

paragraph (1), and

‘‘(iv) with respect to which the benefit, contribution, vesting, and nondiscrimination requirements of

subparagraphs (B), (C), (D), (E), and (F) are met.

For purposes of this subparagraph, the term ‘small

employer’ has the meaning given such term by section

4980D(d)(2), except that such section shall be applied by

substituting ‘500’ for ‘50’ each place it appears.

‘‘(B) BENEFIT REQUIREMENTS.—

‘‘(i) IN GENERAL.—The benefit requirements of this

subparagraph are met with respect to the defined benefit plan forming part of the eligible combined plan

if the accrued benefit of each participant derived from

employer contributions, when expressed as an annual

retirement benefit, is not less than the applicable

percentage of the participant’s final average pay. For

purposes of this clause, final average pay shall be

determined using the period of consecutive years (not

exceeding 5) during which the participant had the

greatest aggregate compensation from the employer.

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of

clause (i), the applicable percentage is the lesser of—

‘‘(I) 1 percent multiplied by the number of

years of service with the employer, or

‘‘(II) 20 percent.

‘‘(iii) SPECIAL RULE FOR APPLICABLE DEFINED BENEFIT PLANS.—If the defined benefit plan under clause

(i) is an applicable defined benefit plan as defined

in section 411(a)(13)(B) which meets the interest credit

requirements of section 411(b)(5)(B)(i), the plan shall

Applicability.

26 USC 414.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1041

be treated as meeting the requirements of clause (i)

with respect to any plan year if each participant

receives a pay credit for the year which is not less

than the percentage of compensation determined in

accordance with the following table:

‘‘If the participant’s age as of the

beginning of the year is— The

percentage

is—

30 or less ................................................................................ 2

Over 30 but less than 40 ....................................................... 4

40 or over but less than 50 ................................................... 6

50 or over ............................................................................... 8.

‘‘(iv) YEARS OF SERVICE.—For purposes of this

subparagraph, years of service shall be determined

under the rules of paragraphs (4), (5), and (6) of section

411(a), except that the plan may not disregard any

year of service because of a participant making, or

failing to make, any elective deferral with respect to

the qualified cash or deferred arrangement to which

subparagraph (C) applies.

‘‘(C) CONTRIBUTION REQUIREMENTS.— ‘‘(i) IN GENERAL.—The contribution requirements

of this subparagraph with respect to any applicable

defined contribution plan forming part of an eligible

combined plan are met if—

‘‘(I) the qualified cash or deferred arrangement

included in such plan constitutes an automatic

contribution arrangement, and

‘‘(II) the employer is required to make

matching contributions on behalf of each employee

eligible to participate in the arrangement in an

amount equal to 50 percent of the elective contributions of the employee to the extent such elective

contributions do not exceed 4 percent of compensation.

Rules similar to the rules of clauses (ii) and (iii) of

section 401(k)(12)(B) shall apply for purposes of this

clause.

‘‘(ii) NONELECTIVE CONTRIBUTIONS.—An applicable

defined contribution plan shall not be treated as failing

to meet the requirements of clause (i) because the

employer makes nonelective contributions under the

plan but such contributions shall not be taken into

account in determining whether the requirements of

clause (i)(II) are met.

‘‘(D) VESTING REQUIREMENTS.—The vesting requirements of this subparagraph are met if—

‘‘(i) in the case of a defined benefit plan forming

part of an eligible combined plan an employee who

has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s

accrued benefit under the plan derived from employer

contributions, and

‘‘(ii) in the case of an applicable defined contribution plan forming part of eligible combined plan—

‘‘(I) an employee has a nonforfeitable right

to any matching contribution made under the

Applicability.

120 STAT. 1042 PUBLIC LAW 109–280—AUG. 17, 2006

qualified cash or deferred arrangement included

in such plan by an employer with respect to any

elective contribution, including matching contributions in excess of the contributions required under

subparagraph (C)(i)(II), and

‘‘(II) an employee who has completed at least

3 years of service has a nonforfeitable right to

100 percent of the employee’s accrued benefit

derived under the arrangement from nonelective

contributions of the employer.

For purposes of this subparagraph, the rules of section

411 shall apply to the extent not inconsistent with

this subparagraph.

‘‘(E) UNIFORM PROVISION OF CONTRIBUTIONS AND BENEFITS.—In the case of a defined benefit plan or applicable

defined contribution plan forming part of an eligible combined plan, the requirements of this subparagraph are

met if all contributions and benefits under each such plan,

and all rights and features under each such plan, must

be provided uniformly to all participants.

‘‘(F) REQUIREMENTS MUST BE MET WITHOUT TAKING INTO

ACCOUNT SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS AND

BENEFITS OR OTHER PLANS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if the requirements of clauses

(ii) and (iii) are met.

‘‘(ii) SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS.—The requirements of this clause are met if—

‘‘(I) the requirements of subparagraphs (B) and

(C) are met without regard to section 401(l), and

‘‘(II) the requirements of sections 401(a)(4) and

410(b) are met with respect to both the applicable

defined contribution plan and defined benefit plan

forming part of an eligible combined plan without

regard to section 401(l).

‘‘(iii) OTHER PLANS AND ARRANGEMENTS.—The

requirements of this clause are met if the applicable

defined contribution plan and defined benefit plan

forming part of an eligible combined plan meet the

requirements of sections 401(a)(4) and 410(b) without

being combined with any other plan.

‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR QUALIFIED

CASH OR DEFERRED ARRANGEMENT.—

‘‘(A) IN GENERAL.—A qualified cash or deferred

arrangement which is included in an applicable defined

contribution plan forming part of an eligible combined plan

shall be treated as meeting the requirements of section

401(k)(3)(A)(ii) if the requirements of paragraph (2)(C) are

met with respect to such arrangement.

‘‘(B) MATCHING CONTRIBUTIONS.—In applying section

401(m)(11) to any matching contribution with respect to

a contribution to which paragraph (2)(C) applies, the contribution requirement of paragraph (2)(C) and the notice

requirements of paragraph (5)(B) shall be substituted for

the requirements otherwise applicable under clauses (i)

and (ii) of section 401(m)(11)(A).

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1043

‘‘(4) SATISFACTION OF TOP-HEAVY RULES.—A defined benefit

plan and applicable defined contribution plan forming part

of an eligible combined plan for any plan year shall be treated

as meeting the requirements of section 416 for the plan year.

‘‘(5) AUTOMATIC CONTRIBUTION ARRANGEMENT.—For purposes of this subsection—

‘‘(A) IN GENERAL.—A qualified cash or deferred

arrangement shall be treated as an automatic contribution

arrangement if the arrangement—

‘‘(i) provides that each employee eligible to participate in the arrangement is treated as having elected

to have the employer make elective contributions in

an amount equal to 4 percent of the employee’s compensation unless the employee specifically elects not

to have such contributions made or to have such contributions made at a different rate, and

‘‘(ii) meets the notice requirements under subparagraph (B).

‘‘(B) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if the requirements of clauses

(ii) and (iii) are met.

‘‘(ii) REASONABLE PERIOD TO MAKE ELECTION.—The

requirements of this clause are met if each employee

to whom subparagraph (A)(i) applies—

‘‘(I) receives a notice explaining the employee’s

right under the arrangement to elect not to have

elective contributions made on the employee’s

behalf or to have the contributions made at a

different rate, and

‘‘(II) has a reasonable period of time after

receipt of such notice and before the first elective

contribution is made to make such election.

‘‘(iii) ANNUAL NOTICE OF RIGHTS AND OBLIGATIONS.—The requirements of this clause are met if

each employee eligible to participate in the arrangement is, within a reasonable period before any year,

given notice of the employee’s rights and obligations

under the arrangement.

The requirements of clauses (i) and (ii) of section

401(k)(12)(D) shall be met with respect to the notices

described in clauses (ii) and (iii) of this subparagraph.

‘‘(6) COORDINATION WITH OTHER REQUIREMENTS.—

‘‘(A) TREATMENT OF SEPARATE PLANS.—Section 414(k)

shall not apply to an eligible combined plan.

‘‘(B) REPORTING.—An eligible combined plan shall be

treated as a single plan for purposes of sections 6058

and 6059.

‘‘(7) APPLICABLE DEFINED CONTRIBUTION PLAN.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘applicable defined contribution plan’ means a defined contribution plan which

includes a qualified cash or deferred arrangement.

‘‘(B) QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

The term ‘qualified cash or deferred arrangement’ has the

meaning given such term by section 401(k)(2).’’.

120 STAT. 1044 PUBLIC LAW 109–280—AUG. 17, 2006

(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECU- RITY ACT OF 1974.—

(1) IN GENERAL.—Section 210 of the Employee Retirement

Income Security Act of 1974 is amended by adding at the

end the following new subsection:

‘‘(e) SPECIAL RULES FOR ELIGIBLE COMBINED DEFINED BENEFIT

PLANS AND QUALIFIED CASH OR DEFERRED ARRANGEMENTS.— ‘‘(1) GENERAL RULE.—Except as provided in this subsection,

this Act shall be applied to any defined benefit plan or

applicable individual account plan which are part of an eligible

combined plan in the same manner as if each such plan were

not a part of the eligible combined plan.

‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘eligible combined plan’

means a plan—

‘‘(i) which is maintained by an employer which,

at the time the plan is established, is a small employer,

‘‘(ii) which consists of a defined benefit plan and

an applicable individual account plan each of which

qualifies under section 401(a) of the Internal Revenue

Code of 1986,

‘‘(iii) the assets of which are held in a single trust

forming part of the plan and are clearly identified

and allocated to the defined benefit plan and the

applicable individual account plan to the extent necessary for the separate application of this Act under

paragraph (1), and

‘‘(iv) with respect to which the benefit, contribution, vesting, and nondiscrimination requirements of

subparagraphs (B), (C), (D), (E), and (F) are met.

For purposes of this subparagraph, the term ‘small

employer’ has the meaning given such term by section

4980D(d)(2) of the Internal Revenue Code of 1986, except

that such section shall be applied by substituting ‘500’

for ‘50’ each place it appears.

‘‘(B) BENEFIT REQUIREMENTS.—

‘‘(i) IN GENERAL.—The benefit requirements of this

subparagraph are met with respect to the defined benefit plan forming part of the eligible combined plan

if the accrued benefit of each participant derived from

employer contributions, when expressed as an annual

retirement benefit, is not less than the applicable

percentage of the participant’s final average pay. For

purposes of this clause, final average pay shall be

determined using the period of consecutive years (not

exceeding 5) during which the participant had the

greatest aggregate compensation from the employer.

‘‘(ii) APPLICABLE PERCENTAGE.—For purposes of

clause (i), the applicable percentage is the lesser of—

‘‘(I) 1 percent multiplied by the number of

years of service with the employer, or

‘‘(II) 20 percent.

‘‘(iii) SPECIAL RULE FOR APPLICABLE DEFINED BENEFIT PLANS.—If the defined benefit plan under clause

(i) is an applicable defined benefit plan as defined

in section 203(f)(3)(B) which meets the interest credit

Applicability.

Applicability.

29 USC 1060.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1045

requirements of section 204(b)(5)(B)(i), the plan shall

be treated as meeting the requirements of clause (i)

with respect to any plan year if each participant

receives pay credit for the year which is not less than

the percentage of compensation determined in accordance with the following table:

‘‘If the participant’s age as of the

beginning of the year is— The

percentage

is—

30 or less ................................................................................ 2

Over 30 but less than 40 ....................................................... 4

40 or over but less than 50 ................................................... 6

50 or over ............................................................................... 8.

‘‘(iv) YEARS OF SERVICE.—For purposes of this

subparagraph, years of service shall be determined

under the rules of paragraphs (1), (2), and (3) of section

203(b), except that the plan may not disregard any

year of service because of a participant making, or

failing to make, any elective deferral with respect to

the qualified cash or deferred arrangement to which

subparagraph (C) applies.

‘‘(C) CONTRIBUTION REQUIREMENTS.—

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

of this subparagraph with respect to any applicable

individual account plan forming part of an eligible

combined plan are met if—

‘‘(I) the qualified cash or deferred arrangement

included in such plan constitutes an automatic

contribution arrangement, and

‘‘(II) the employer is required to make

matching contributions on behalf of each employee

eligible to participate in the arrangement in an

amount equal to 50 percent of the elective contributions of the employee to the extent such elective

contributions do not exceed 4 percent of compensation.

Rules similar to the rules of clauses (ii) and (iii) of

section 401(k)(12)(B) of the Internal Revenue Code of

1986 shall apply for purposes of this clause.

‘‘(ii) NONELECTIVE CONTRIBUTIONS.—An applicable

individual account plan shall not be treated as failing

to meet the requirements of clause (i) because the

employer makes nonelective contributions under the

plan but such contributions shall not be taken into

account in determining whether the requirements of

clause (i)(II) are met.

‘‘(D) VESTING REQUIREMENTS.—The vesting requirements of this subparagraph are met if—

‘‘(i) in the case of a defined benefit plan forming

part of an eligible combined plan an employee who

has completed at least 3 years of service has a nonforfeitable right to 100 percent of the employee’s

accrued benefit under the plan derived from employer

contributions, and

‘‘(ii) in the case of an applicable individual account

plan forming part of eligible combined plan—

Applicability.

120 STAT. 1046 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(I) an employee has a nonforfeitable right

to any matching contribution made under the

qualified cash or deferred arrangement included

in such plan by an employer with respect to any

elective contribution, including matching contributions in excess of the contributions required under

subparagraph (C)(i)(II), and

‘‘(II) an employee who has completed at least

3 years of service has a nonforfeitable right to

100 percent of the employee’s accrued benefit

derived under the arrangement from nonelective

contributions of the employer.

For purposes of this subparagraph, the rules of section

203 shall apply to the extent not inconsistent with

this subparagraph.

‘‘(E) UNIFORM PROVISION OF CONTRIBUTIONS AND BENEFITS.—In the case of a defined benefit plan or applicable

individual account plan forming part of an eligible combined plan, the requirements of this subparagraph are

met if all contributions and benefits under each such plan,

and all rights and features under each such plan, must

be provided uniformly to all participants.

‘‘(F) REQUIREMENTS MUST BE MET WITHOUT TAKING INTO

ACCOUNT SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS AND

BENEFITS OR OTHER PLANS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if the requirements of clauses

(ii) and (iii) are met.

‘‘(ii) SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS.—The requirements of this clause are met if—

‘‘(I) the requirements of subparagraphs (B) and

(C) are met without regard to section 401(l) of

the Internal Revenue Code of 1986, and

‘‘(II) the requirements of sections 401(a)(4) and

410(b) of the Internal Revenue Code of 1986 are

met with respect to both the applicable defined

contribution plan and defined benefit plan forming

part of an eligible combined plan without regard

to section 401(l) of the Internal Revenue Code

of 1986.

‘‘(iii) OTHER PLANS AND ARRANGEMENTS.—The

requirements of this clause are met if the applicable

defined contribution plan and defined benefit plan

forming part of an eligible combined plan meet the

requirements of sections 401(a)(4) and 410(b) of the

Internal Revenue Code of 1986 without being combined

with any other plan.

‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR QUALIFIED

CASH OR DEFERRED ARRANGEMENT.—

‘‘(A) IN GENERAL.—A qualified cash or deferred

arrangement which is included in an applicable individual

account plan forming part of an eligible combined plan

shall be treated as meeting the requirements of section

401(k)(3)(A)(ii) of the Internal Revenue Code of 1986 if

the requirements of paragraph (2) are met with respect

to such arrangement.

Applicability.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1047

‘‘(B) MATCHING CONTRIBUTIONS.—In applying section

401(m)(11) of such Code to any matching contribution with

respect to a contribution to which paragraph (2)(C) applies,

the contribution requirement of paragraph (2)(C) and the

notice requirements of paragraph (5)(B) shall be substituted

for the requirements otherwise applicable under clauses

(i) and (ii) of section 401(m)(11)(A) of such Code.

‘‘(4) AUTOMATIC CONTRIBUTION ARRANGEMENT.—For purposes of this subsection—

‘‘(A) IN GENERAL.—A qualified cash or deferred

arrangement shall be treated as an automatic contribution

arrangement if the arrangement—

‘‘(i) provides that each employee eligible to participate in the arrangement is treated as having elected

to have the employer make elective contributions in

an amount equal to 4 percent of the employee’s compensation unless the employee specifically elects not

to have such contributions made or to have such contributions made at a different rate, and

‘‘(ii) meets the notice requirements under subparagraph (B).

‘‘(B) NOTICE REQUIREMENTS.—

‘‘(i) IN GENERAL.—The requirements of this

subparagraph are met if the requirements of clauses

(ii) and (iii) are met.

‘‘(ii) REASONABLE PERIOD TO MAKE ELECTION.—The

requirements of this clause are met if each employee

to whom subparagraph (A)(i) applies—

‘‘(I) receives a notice explaining the employee’s

right under the arrangement to elect not to have

elective contributions made on the employee’s

behalf or to have the contributions made at a

different rate, and

‘‘(II) has a reasonable period of time after

receipt of such notice and before the first elective

contribution is made to make such election.

‘‘(iii) ANNUAL NOTICE OF RIGHTS AND OBLIGATIONS.—The requirements of this clause are met if

each employee eligible to participate in the arrangement is, within a reasonable period before any year,

given notice of the employee’s rights and obligations

under the arrangement.

The requirements of this subparagraph shall not be treated

as met unless the requirements of clauses (i) and (ii) of

section 401(k)(12)(D) of the Internal Revenue Code of 1986

are met with respect to the notices described in clauses

(ii) and (iii) of this subparagraph.

‘‘(5) COORDINATION WITH OTHER REQUIREMENTS.—

‘‘(A) TREATMENT OF SEPARATE PLANS.—The except

clause in section 3(35) shall not apply to an eligible combined plan.

‘‘(B) REPORTING.—An eligible combined plan shall be

treated as a single plan for purposes of section 103.

‘‘(6) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—For purposes

of this subsection—

120 STAT. 1048 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) IN GENERAL.—The term ‘applicable individual

account plan’ means an individual account plan which

includes a qualified cash or deferred arrangement.

‘‘(B) QUALIFIED CASH OR DEFERRED ARRANGEMENT.— The term ‘qualified cash or deferred arrangement’ has the

meaning given such term by section 401(k)(2) of the

Internal Revenue Code of 1986.’’.

(2) CONFORMING CHANGES.— (A) The heading for section 210 of such Act is amended

to read as follows:

‘‘SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPECIAL RULES.’’.

(B) The table of contents in section 1 of such Act

is amended by striking the item relating to section 210

and inserting the following new item:

‘‘Sec. 210. Multiple employer plans and other special rules.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after December 31, 2009.

SEC. 904. FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS.

(a) AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.—

(1) IN GENERAL.—Paragraph (2) of section 411(a) of the

Internal Revenue Code of 1986 (relating to employer contributions) is amended to read as follows:

‘‘(2) EMPLOYER CONTRIBUTIONS.—

‘‘(A) DEFINED BENEFIT PLANS.—

‘‘(i) IN GENERAL.—In the case of a defined benefit

plan, a plan satisfies the requirements of this paragraph if it satisfies the requirements of clause (ii)

or (iii).

‘‘(ii) 5-YEAR VESTING.—A plan satisfies the requirements of this clause if an employee who has completed

at least 5 years of service has a nonforfeitable right

to 100 percent of the employee’s accrued benefit derived

from employer contributions.

‘‘(iii) 3 TO 7 YEAR VESTING.—A plan satisfies the

requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s

accrued benefit derived from employer contributions

determined under the following table:

‘‘Years of service: The

nonforfeitable

percentage is:

3 .............................................................................................. 20

4 .............................................................................................. 40

5 .............................................................................................. 60

6 .............................................................................................. 80

7 or more ................................................................................ 100.

‘‘(B) DEFINED CONTRIBUTION PLANS.—

‘‘(i) IN GENERAL.—In the case of a defined contribution plan, a plan satisfies the requirements of this

paragraph if it satisfies the requirements of clause

(ii) or (iii).

‘‘(ii) 3-YEAR VESTING.—A plan satisfies the requirements of this clause if an employee who has completed

at least 3 years of service has a nonforfeitable right

26 USC 411.

26 USC 414 note.

29 USC 1060.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1049

to 100 percent of the employee’s accrued benefit derived

from employer contributions.

‘‘(iii) 2 TO 6 YEAR VESTING.—A plan satisfies the

requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee’s

accrued benefit derived from employer contributions

determined under the following table:

‘‘Years of service: The

nonforfeitable

percentage is:

2 .............................................................................................. 20

3 .............................................................................................. 40

4 .............................................................................................. 60

5 .............................................................................................. 80

6 or more ................................................................................ 100.’’.

(2) CONFORMING AMENDMENT.—Section 411(a) of such Code

(relating to general rule for minimum vesting standards) is

amended by striking paragraph (12).

(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) IN GENERAL.—Paragraph (2) of section 203(a) of the

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

1053(a)(2)) is amended to read as follows:

‘‘(2)(A)(i) In the case of a defined benefit plan, a plan

satisfies the requirements of this paragraph if it satisfies the

requirements of clause (ii) or (iii).

‘‘(ii) A plan satisfies the requirements of this clause if

an employee who has completed at least 5 years of service

has a nonforfeitable right to 100 percent of the employee’s

accrued benefit derived from employer contributions.

‘‘(iii) A plan satisfies the requirements of this clause if

an employee has a nonforfeitable right to a percentage of the

employee’s accrued benefit derived from employer contributions

determined under the following table:

‘‘Years of service: The

nonforfeitable

percentage is:

3 .............................................................................................. 20

4 .............................................................................................. 40

5 .............................................................................................. 60

6 .............................................................................................. 80

7 or more ................................................................................ 100.

‘‘(B)(i) In the case of an individual account plan, a plan

satisfies the requirements of this paragraph if it satisfies the

requirements of clause (ii) or (iii).

‘‘(ii) A plan satisfies the requirements of this clause if

an employee who has completed at least 3 years of service

has a nonforfeitable right to 100 percent of the employee’s

accrued benefit derived from employer contributions.

‘‘(iii) A plan satisfies the requirements of this clause if

an employee has a nonforfeitable right to a percentage of the

employee’s accrued benefit derived from employer contributions

determined under the following table:

‘‘Years of service: The

nonforfeitable

percentage is:

2 .............................................................................................. 20

3 .............................................................................................. 40

4 .............................................................................................. 60

120 STAT. 1050 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘Years of service: The

nonforfeitable

percentage is:

5 .............................................................................................. 80

6 or more ................................................................................ 100.’’.

(2) CONFORMING AMENDMENT.—Section 203(a) of such Act

is amended by striking paragraph (4).

(c) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraphs (2)

and (4), the amendments made by this section shall apply

to contributions for plan years beginning after December 31,

2006.

(2) COLLECTIVE BARGAINING AGREEMENTS.—In the case of

a plan maintained pursuant to one or more collective bargaining

agreements between employee representatives and one or more

employers ratified before the date of the enactment of this

Act, the amendments made by this section shall not apply

to contributions on behalf of employees covered by any such

agreement for plan years beginning before the earlier of—

(A) the later of—

(i) the date on which the last of such collective

bargaining agreements terminates (determined without

regard to any extension thereof on or after such date

of the enactment); or

(ii) January 1, 2007; or

(B) January 1, 2009.

(3) SERVICE REQUIRED.—With respect to any plan, the

amendments made by this section shall not apply to any

employee before the date that such employee has 1 hour of

service under such plan in any plan year to which the amendments made by this section apply.

(4) SPECIAL RULE FOR STOCK OWNERSHIP PLANS.—Notwithstanding paragraph (1) or (2), in the case of an employee

stock ownership plan (as defined in section 4975(e)(7) of the

Internal Revenue Code of 1986) which had outstanding on

September 26, 2005, a loan incurred for the purpose of acquiring

qualifying employer securities (as defined in section 4975(e)(8)

of such Code), the amendments made by this section shall

not apply to any plan year beginning before the earlier of—

(A) the date on which the loan is fully repaid, or

(B) the date on which the loan was, as of September

26, 2005, scheduled to be fully repaid.

SEC. 905. DISTRIBUTIONS DURING WORKING RETIREMENT.

(a) AMENDMENT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Subparagraph (A) of section 3(2) of the

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

1002(2)) is amended by adding at the end the following new sentence: ‘‘A distribution from a plan, fund, or program shall not

be treated as made in a form other than retirement income or

as a distribution prior to termination of covered employment solely

because such distribution is made to an employee who has attained

age 62 and who is not separated from employment at the time

of such distribution.’’.

(b) AMENDMENT TO THE INTERNAL REVENUE CODE OF 1986.—

Subsection (a) of section 401 of the Internal Revenue Code of

1986 (as amended by this Act) is amended by inserting after paragraph (35) the following new paragraph:

26 USC 401.

26 USC 411 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1051

‘‘(36) DISTRIBUTIONS DURING WORKING RETIREMENT.—A

trust forming part of a pension plan shall not be treated as

failing to constitute a qualified trust under this section solely

because the plan provides that a distribution may be made

from such trust to an employee who has attained age 62 and

who is not separated from employment at the time of such

distribution.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to distributions in plan years beginning after December

31, 2006.

SEC. 906. TREATMENT OF CERTAIN PENSION PLANS OF INDIAN TRIBAL

GOVERNMENTS.

(a) DEFINITION OF GOVERNMENT PLAN TO INCLUDE CERTAIN

PENSION PLANS OF INDIAN TRIBAL GOVERNMENTS.—

(1) AMENDMENT TO INTERNAL REVENUE CODE OF 1986.—

Section 414(d) of the Internal Revenue Code of 1986 (defining

governmental plan) is amended by adding at the end the following: ‘‘The term ‘governmental plan’ includes a plan which

is established and maintained by an Indian tribal government

(as defined in section 7701(a)(40)), a subdivision of an Indian

tribal government (determined in accordance with section

7871(d)), or an agency or instrumentality of either, and all

of the participants of which are employees of such entity

substantially all of whose services as such an employee are

in the performance of essential governmental functions but

not in the performance of commercial activities (whether or

not an essential government function).’’.

(2) AMENDMENT TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(A) Section 3(32) of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1002(32)) is amended by

adding at the end the following: ‘‘The term ‘governmental

plan’ includes a plan which is established and maintained

by an Indian tribal government (as defined in section

7701(a)(40) of the Internal Revenue Code of 1986), a subdivision of an Indian tribal government (determined in

accordance with section 7871(d) of such Code), or an agency

or instrumentality of either, and all of the participants

of which are employees of such entity substantially all

of whose services as such an employee are in the performance of essential governmental functions but not in the

performance of commercial activities (whether or not an

essential government function)’’.

(B) Section 4021(b)(2) of such Act is amended by adding

at the end the following: ‘‘or which is described in the

last sentence of section 3(32)’’.

(b) CLARIFICATION THAT TRIBAL GOVERNMENTS ARE SUBJECT

TO THE SAME PENSION PLAN RULES AND REGULATIONS APPLIED

TO STATE AND OTHER LOCAL GOVERNMENTS AND THEIR POLICE

AND FIREFIGHTERS.—

(1) AMENDMENTS TO INTERNAL REVENUE CODE OF 1986.—

(A) POLICE AND FIREFIGHTERS.—Subparagraph (H) section 415(b)(2) of the Internal Revenue Code of 1986

(defining participant) is amended—

26 USC 415.

29 USC 1321.

26 USC 414.

26 USC 401 note.

120 STAT. 1052 PUBLIC LAW 109–280—AUG. 17, 2006

(i) in clause (i), by striking ‘‘State or political subdivision’’ and inserting ‘‘State, Indian tribal government (as defined in section 7701(a)(40)), or any political

subdivision’’; and

(ii) in clause (ii)(I), by striking ‘‘State or political

subdivision’’ each place it appears and inserting ‘‘State,

Indian tribal government (as so defined), or any political subdivision’’.

(B) STATE AND LOCAL GOVERNMENT PLANS.— (i) IN GENERAL.—Subparagraph (A) of section

415(b)(10) of such Code (relating to limitation to equal

accrued benefit) is amended by inserting ‘‘or a governmental plan described in the last sentence of section

414(d) (relating to plans of Indian tribal governments),’’

after ‘‘foregoing,’’.

(ii) CONFORMING AMENDMENT.—The heading of

paragraph (1) of section 415(b) of such Code is amended

by striking ‘‘SPECIAL RULE FOR STATE AND’’ and

inserting ‘‘SPECIAL RULE FOR STATE, INDIAN TRIBAL,

AND’’.

(C) GOVERNMENT PICK UP CONTRIBUTIONS.—Paragraph

(2) of section 414(h) of such Code (relating to designation

by units of government) is amended by inserting ‘‘or a

governmental plan described in the last sentence of section

414(d) (relating to plans of Indian tribal governments),’’

after ‘‘foregoing,’’.

(2) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—Section 4021(b) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1321(b)) is amended—

(A) in paragraph (12), by striking ‘‘or’’ at the end;

(B) in paragraph (13), by striking ‘‘plan.’’ and inserting

‘‘plan; or’’; and

(C) by adding at the end the following:

‘‘(14) established and maintained by an Indian tribal

government (as defined in section 7701(a)(40) of the Internal

Revenue Code of 1986), a subdivision of an Indian tribal government (determined in accordance with section 7871(d) of such

Code), or an agency or instrumentality of either, and all of

the participants of which are employees of such entity substantially all of whose services as such an employee are in the

performance of essential governmental functions but not in

the performance of commercial activities (whether or not an

essential government function).’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to any year beginning on or after the date of the

enactment of this Act.

TITLE X—PROVISIONS RELATING TO

SPOUSAL PENSION PROTECTION

SEC. 1001. REGULATIONS ON TIME AND ORDER OF ISSUANCE OF

DOMESTIC RELATIONS ORDERS.

Not later than 1 year after the date of the enactment of this

Act, the Secretary of Labor shall issue regulations under section

206(d)(3) of the Employee Retirement Security Act of 1974 and

Deadline.

26 USC 414 note.

26 USC 415.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1053

section 414(p) of the Internal Revenue Code of 1986 which clarify

that—

(1) a domestic relations order otherwise meeting the

requirements to be a qualified domestic relations order,

including the requirements of section 206(d)(3)(D) of such Act

and section 414(p)(3) of such Code, shall not fail to be treated

as a qualified domestic relations order solely because—

(A) the order is issued after, or revises, another

domestic relations order or qualified domestic relations

order; or

(B) of the time at which it is issued; and

(2) any order described in paragraph (1) shall be subject

to the same requirements and protections which apply to qualified domestic relations orders, including the provisions of section 206(d)(3)(H) of such Act and section 414(p)(7) of such

Code.

SEC. 1002. ENTITLEMENT OF DIVORCED SPOUSES TO RAILROAD

RETIREMENT ANNUITIES INDEPENDENT OF ACTUAL

ENTITLEMENT OF EMPLOYEE.

(a) IN GENERAL.—Section 2 of the Railroad Retirement Act

of 1974 (45 U.S.C. 231a) is amended—

(1) in subsection (c)(4)(i), by striking ‘‘(A) is entitled to

an annuity under subsection (a)(1) and (B)’’; and

(2) in subsection (e)(5), by striking ‘‘or divorced wife’’ the

second place it appears.

(b) EFFECTIVE DATE.—The amendments made by this section

shall take effect 1 year after the date of the enactment of this

Act.

SEC. 1003. EXTENSION OF TIER II RAILROAD RETIREMENT BENEFITS

TO SURVIVING FORMER SPOUSES PURSUANT TO

DIVORCE AGREEMENTS.

(a) IN GENERAL.—Section 5 of the Railroad Retirement Act

of 1974 (45 U.S.C. 231d) is amended by adding at the end the

following:

‘‘(d) Notwithstanding any other provision of law, the payment

of any portion of an annuity computed under section 3(b) to a

surviving former spouse in accordance with a court decree of divorce,

annulment, or legal separation or the terms of any court-approved

property settlement incident to any such court decree shall not

be terminated upon the death of the individual who performed

the service with respect to which such annuity is so computed

unless such termination is otherwise required by the terms of

such court decree.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect 1 year after the date of the enactment of this

Act.

SEC. 1004. REQUIREMENT FOR ADDITIONAL SURVIVOR ANNUITY

OPTION.

(a) AMENDMENTS TO INTERNAL REVENUE CODE.— (1) ELECTION OF SURVIVOR ANNUITY.—Section 417(a)(1)(A)

of the Internal Revenue Code of 1986 is amended—

(A) in clause (i), by striking ‘‘, and’’ and inserting

a comma;

(B) by redesignating clause (ii) as clause (iii); and

(C) by inserting after clause (i) the following:

26 USC 417.

45 USC 231d

note.

45 USC 231a

note.

120 STAT. 1054 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) if the participant elects a waiver under clause

(i), may elect the qualified optional survivor annuity at

any time during the applicable election period, and’’.

(2) DEFINITION.—Section 417 of such Code is amended by

adding at the end the following:

‘‘(g) DEFINITION OF QUALIFIED OPTIONAL SURVIVOR ANNUITY.—

‘‘(1) IN GENERAL.—For purposes of this section, the term

‘qualified optional survivor annuity’ means an annuity—

‘‘(A) for the life of the participant with a survivor

annuity for the life of the spouse which is equal to the

applicable percentage of the amount of the annuity which

is payable during the joint lives of the participant and

the spouse, and

‘‘(B) which is the actuarial equivalent of a single

annuity for the life of the participant.

Such term also includes any annuity in a form having the

effect of an annuity described in the preceding sentence.

‘‘(2) APPLICABLE PERCENTAGE.—

‘‘(A) IN GENERAL.—For purposes of paragraph (1), if

the survivor annuity percentage—

‘‘(i) is less than 75 percent, the applicable percentage is 75 percent, and

‘‘(ii) is greater than or equal to 75 percent, the

applicable percentage is 50 percent.

‘‘(B) SURVIVOR ANNUITY PERCENTAGE.—For purposes of

subparagraph (A), the term ‘survivor annuity percentage’

means the percentage which the survivor annuity under

the plan’s qualified joint and survivor annuity bears to

the annuity payable during the joint lives of the participant

and the spouse.’’.

(3) NOTICE.—Section 417(a)(3)(A)(i) of such Code is

amended by inserting ‘‘and of the qualified optional survivor

annuity’’ after ‘‘annuity’’.

(b) AMENDMENTS TO ERISA.—

(1) ELECTION OF SURVIVOR ANNUITY.—Section 205(c)(1)(A)

of the Employee Retirement Income Security Act of 1974 (29

U.S.C. 1055(c)(1)(A)) is amended—

(A) in clause (i), by striking ‘‘, and’’ and inserting

a comma;

(B) by redesignating clause (ii) as clause (iii); and

(C) by inserting after clause (i) the following:

‘‘(ii) if the participant elects a waiver under clause

(i), may elect the qualified optional survivor annuity at

any time during the applicable election period, and’’.

(2) DEFINITION.—Section 205(d) of such Act (29 U.S.C.

1055(d)) is amended—

(A) by inserting ‘‘(1)’’ after ‘‘(d)’’;

(B) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; and

(C) by adding at the end the following:

‘‘(2)(A) For purposes of this section, the term ‘qualified optional

survivor annuity’ means an annuity—

‘‘(i) for the life of the participant with a survivor annuity

for the life of the spouse which is equal to the applicable

percentage of the amount of the annuity which is payable

during the joint lives of the participant and the spouse, and

26 USC 417.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1055

‘‘(ii) which is the actuarial equivalent of a single annuity

for the life of the participant.

Such term also includes any annuity in a form having the effect

of an annuity described in the preceding sentence.

‘‘(B)(i) For purposes of subparagraph (A), if the survivor annuity

percentage—

‘‘(I) is less than 75 percent, the applicable percentage is

75 percent, and

‘‘(II) is greater than or equal to 75 percent, the applicable

percentage is 50 percent.

‘‘(ii) For purposes of clause (i), the term ‘survivor annuity

percentage’ means the percentage which the survivor annuity under

the plan’s qualified joint and survivor annuity bears to the annuity

payable during the joint lives of the participant and the spouse.’’.

(3) NOTICE.—Section 205(c)(3)(A)(i) of such Act (29 U.S.C.

1055(c)(3)(A)(i)) is amended by inserting ‘‘and of the qualified

optional survivor annuity’’ after ‘‘annuity’’.

(c) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section

shall apply to plan years beginning after December 31, 2007.

(2) SPECIAL RULE FOR COLLECTIVELY BARGAINED PLANS.—

In the case of a plan maintained pursuant to 1 or more collective

bargaining agreements between employee representatives and

1 or more employers ratified on or before the date of the

enactment of this Act, the amendments made by this section

shall not apply to plan years beginning before the earlier of—

(A) the later of—

(i) January 1, 2008, or

(ii) the date on which the last collective bargaining

agreement related to the plan terminates (determined

without regard to any extension thereof after the date

of enactment of this Act), or

(B) January 1, 2009.

TITLE XI—ADMINISTRATIVE

PROVISIONS

SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

(a) IN GENERAL.—The Secretary of the Treasury shall have

full authority to establish and implement the Employee Plans

Compliance Resolution System (or any successor program) and any

other employee plans correction policies, including the authority

to waive income, excise, or other taxes to ensure that any tax,

penalty, or sanction is not excessive and bears a reasonable relationship to the nature, extent, and severity of the failure.

(b) IMPROVEMENTS.—The Secretary of the Treasury shall continue to update and improve the Employee Plans Compliance Resolution System (or any successor program), giving special attention

to—

(1) increasing the awareness and knowledge of small

employers concerning the availability and use of the program;

(2) taking into account special concerns and circumstances

that small employers face with respect to compliance and correction of compliance failures;

Establishment.

29 USC 1202a.

26 USC 417 note.

120 STAT. 1056 PUBLIC LAW 109–280—AUG. 17, 2006

(3) extending the duration of the self-correction period

under the Self-Correction Program for significant compliance

failures;

(4) expanding the availability to correct insignificant

compliance failures under the Self-Correction Program during

audit; and

(5) assuring that any tax, penalty, or sanction that is

imposed by reason of a compliance failure is not excessive

and bears a reasonable relationship to the nature, extent, and

severity of the failure.

SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

(a) EXPANSION OF PERIOD.—

(1) AMENDMENT OF INTERNAL REVENUE CODE.—

(A) IN GENERAL.—Section 417(a)(6)(A) of the Internal

Revenue Code of 1986 is amended by striking ‘‘90-day’’

and inserting ‘‘180-day’’.

(B) MODIFICATION OF REGULATIONS.—The Secretary of

the Treasury shall modify the regulations under sections

402(f), 411(a)(11), and 417 of the Internal Revenue Code

of 1986 by substituting ‘‘180 days’’ for ‘‘90 days’’ each place

it appears in Treasury Regulations sections 1.402(f)–1,

1.411(a)–11(c), and 1.417(e)–1(b).

(2) AMENDMENT OF ERISA.—

(A) IN GENERAL.—Section 205(c)(7)(A) of the Employee

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

1055(c)(7)(A)) is amended by striking ‘‘90-day’’ and inserting

‘‘180-day’’.

(B) MODIFICATION OF REGULATIONS.—The Secretary of

the Treasury shall modify the regulations under part 2

of subtitle B of title I of the Employee Retirement Income

Security Act of 1974 relating to sections 203(e) and 205

of such Act by substituting ‘‘180 days’’ for ‘‘90 days’’ each

place it appears.

(3) EFFECTIVE DATE.—The amendments and modifications

made or required by this subsection shall apply to years beginning after December 31, 2006.

(b) NOTIFICATION OF RIGHT TO DEFER.—

(1) IN GENERAL.—The Secretary of the Treasury shall

modify the regulations under section 411(a)(11) of the Internal

Revenue Code of 1986 and under section 205 of the Employee

Retirement Income Security Act of 1974 to provide that the

description of a participant’s right, if any, to defer receipt

of a distribution shall also describe the consequences of failing

to defer such receipt.

(2) EFFECTIVE DATE.—

(A) IN GENERAL.—The modifications required by paragraph (1) shall apply to years beginning after December

31, 2006.

(B) REASONABLE NOTICE.—A plan shall not be treated

as failing to meet the requirements of section 411(a)(11)

of such Code or section 205 of such Act with respect to

any description of consequences described in paragraph

(1) made within 90 days after the Secretary of the Treasury

issues the modifications required by paragraph (1) if the

Deadline.

26 USC 417 note.

26 USC 417 note.

26 USC 417.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1057

plan administrator makes a reasonable attempt to comply

with such requirements.

SEC. 1103. REPORTING SIMPLIFICATION.

(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR OWNERS AND

THEIR SPOUSES.—

(1) IN GENERAL.—The Secretary of the Treasury shall

modify the requirements for filing annual returns with respect

to one-participant retirement plans to ensure that such plans

with assets of $250,000 or less as of the close of the plan

year need not file a return for that year.

(2) ONE-PARTICIPANT RETIREMENT PLAN DEFINED.—For purposes of this subsection, the term ‘‘one-participant retirement

plan’’ means a retirement plan with respect to which the following requirements are met:

(A) on the first day of the plan year—

(i) the plan covered only one individual (or the

individual and the individual’s spouse) and the individual owned 100 percent of the plan sponsor (whether

or not incorporated), or

(ii) the plan covered only one or more partners

(or partners and their spouses) in the plan sponsor;

(B) the plan meets the minimum coverage requirements of section 410(b) of the Internal Revenue Code of

1986 without being combined with any other plan of the

business that covers the employees of the business;

(C) the plan does not provide benefits to anyone except

the individual (and the individual’s spouse) or the partners

(and their spouses);

(D) the plan does not cover a business that is a member

of an affiliated service group, a controlled group of corporations, or a group of businesses under common control;

and

(E) the plan does not cover a business that uses the

services of leased employees (within the meaning of section

414(n) of such Code).

For purposes of this paragraph, the term ‘‘partner’’ includes

a 2-percent shareholder (as defined in section 1372(b) of such

Code) of an S corporation.

(3) OTHER DEFINITIONS.—Terms used in paragraph (2)

which are also used in section 414 of the Internal Revenue

Code of 1986 shall have the respective meanings given such

terms by such section.

(4) EFFECTIVE DATE.—The provisions of this subsection

shall apply to plan years beginning on or after January 1,

2007.

(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR PLANS WITH

FEWER THAN 25 PARTICIPANTS.—In the case of plan years beginning

after December 31, 2006, the Secretary of the Treasury and the

Secretary of Labor shall provide for the filing of a simplified annual

return for any retirement plan which covers less than 25 participants on the first day of a plan year and which meets the requirements described in subparagraphs (B), (D), and (E) of subsection

(a)(2).

26 USC 6058

note.

120 STAT. 1058 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT RETENTION PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES AND OTHER ENTITIES.

(a) VOLUNTARY EARLY RETIREMENT INCENTIVE PLANS.—

(1) TREATMENT AS PLAN PROVIDING SEVERANCE PAY.—Section 457(e)(11) of the Internal Revenue Code of 1986 (relating

to certain plans excluded) is amended by adding at the end

the following new subparagraph:

‘‘(D) CERTAIN VOLUNTARY EARLY RETIREMENT INCENTIVE PLANS.—

‘‘(i) IN GENERAL.—If an applicable voluntary early

retirement incentive plan—

‘‘(I) makes payments or supplements as an

early retirement benefit, a retirement-type subsidy, or a benefit described in the last sentence

of section 411(a)(9), and

‘‘(II) such payments or supplements are made

in coordination with a defined benefit plan which

is described in section 401(a) and includes a trust

exempt from tax under section 501(a) and which

is maintained by an eligible employer described

in paragraph (1)(A) or by an education association

described in clause (ii)(II),

such applicable plan shall be treated for purposes of

subparagraph (A)(i) as a bona fide severance pay plan

with respect to such payments or supplements to the

extent such payments or supplements could otherwise

have been provided under such defined benefit plan

(determined as if section 411 applied to such defined

benefit plan).

‘‘(ii) APPLICABLE VOLUNTARY EARLY RETIREMENT

INCENTIVE PLAN.—For purposes of this subparagraph,

the term ‘applicable voluntary early retirement incentive plan’ means a voluntary early retirement incentive

plan maintained by—

‘‘(I) a local educational agency (as defined in

section 9101 of the Elementary and Secondary

Education Act of 1965 (20 U.S.C. 7801)), or

‘‘(II) an education association which principally

represents employees of 1 or more agencies

described in subclause (I) and which is described

in section 501(c) (5) or (6) and exempt from tax

under section 501(a).’’.

(2) AGE DISCRIMINATION IN EMPLOYMENT ACT.—Section

4(l)(1) of the Age Discrimination in Employment Act of 1967

(29 U.S.C. 623(l)(1)) is amended—

(A) by inserting ‘‘(A)’’ after ‘‘(1)’’,

(B) by redesignating subparagraphs (A) and (B) as

clauses (i) and (ii), respectively,

(C) by redesignating clauses (i) and (ii) of subparagraph

(B) (as in effect before the amendments made by subparagraph (B)) as subclauses (I) and (II), respectively, and

(D) by adding at the end the following:

‘‘(B) A voluntary early retirement incentive plan that—

‘‘(i) is maintained by—

26 USC 457.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1059

‘‘(I) a local educational agency (as defined in section 9101 of the Elementary and Secondary Education

Act of 1965 (20 U.S.C. 7801), or

‘‘(II) an education association which principally

represents employees of 1 or more agencies described

in subclause (I) and which is described in section 501(c)

(5) or (6) of the Internal Revenue Code of 1986 and

exempt from taxation under section 501(a) of such

Code, and

‘‘(ii) makes payments or supplements described in subclauses (I) and (II) of subparagraph (A)(ii) in coordination

with a defined benefit plan (as so defined) maintained

by an eligible employer described in section 457(e)(1)(A)

of such Code or by an education association described in

clause (i)(II),

shall be treated solely for purposes of subparagraph (A)(ii)

as if it were a part of the defined benefit plan with respect

to such payments or supplements. Payments or supplements

under such a voluntary early retirement incentive plan shall

not constitute severance pay for purposes of paragraph (2).’’.

(b) EMPLOYMENT RETENTION PLANS.—

(1) IN GENERAL.—Section 457(f)(2) of the Internal Revenue

Code of 1986 (relating to exceptions) is amended by striking

‘‘and’’ at the end of subparagraph (D), by striking the period

at the end of subparagraph (E) and inserting ‘‘, and’’, and

by adding at the end the following:

‘‘(F) that portion of any applicable employment retention plan described in paragraph (4) with respect to any

participant.’’.

(2) DEFINITIONS AND RULES RELATING TO EMPLOYMENT

RETENTION PLANS.—Section 457(f) of such Code is amended

by adding at the end the following new paragraph:

‘‘(4) EMPLOYMENT RETENTION PLANS.—For purposes of paragraph (2)(F)—

‘‘(A) IN GENERAL.—The portion of an applicable employment retention plan described in this paragraph with

respect to any participant is that portion of the plan which

provides benefits payable to the participant not in excess

of twice the applicable dollar limit determined under subsection (e)(15).

‘‘(B) OTHER RULES.—

‘‘(i) LIMITATION.—Paragraph (2)(F) shall only apply

to the portion of the plan described in subparagraph

(A) for years preceding the year in which such portion

is paid or otherwise made available to the participant.

‘‘(ii) TREATMENT.—A plan shall not be treated for

purposes of this title as providing for the deferral of

compensation for any year with respect to the portion

of the plan described in subparagraph (A).

‘‘(C) APPLICABLE EMPLOYMENT RETENTION PLAN.—The

term ‘applicable employment retention plan’ means an

employment retention plan maintained by—

‘‘(i) a local educational agency (as defined in section

9101 of the Elementary and Secondary Education Act

of 1965 (20 U.S.C. 7801), or

‘‘(ii) an education association which principally represents employees of 1 or more agencies described in

Applicability.

26 USC 457.

120 STAT. 1060 PUBLIC LAW 109–280—AUG. 17, 2006

clause (i) and which is described in section 501(c) (5)

or (6) and exempt from taxation under section 501(a).

‘‘(D) EMPLOYMENT RETENTION PLAN.—The term

‘employment retention plan’ means a plan to pay, upon

termination of employment, compensation to an employee

of a local educational agency or education association

described in subparagraph (C) for purposes of—

‘‘(i) retaining the services of the employee, or

‘‘(ii) rewarding such employee for the employee’s

service with 1 or more such agencies or associations.’’.

(c) COORDINATION WITH ERISA.—Section 3(2)(B) of the

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

1002(2)(B)) is amended by adding at the end the following: ‘‘An

applicable voluntary early retirement incentive plan (as defined

in section 457(e)(11)(D)(ii) of the Internal Revenue Code of 1986)

making payments or supplements described in section

457(e)(11)(D)(i) of such Code, and an applicable employment retention plan (as defined in section 457(f)(4)(C) of such Code) making

payments of benefits described in section 457(f)(4)(A) of such Code,

shall, for purposes of this title, be treated as a welfare plan (and

not a pension plan) with respect to such payments and supplements.’’.

(d) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this Act shall

take effect on the date of the enactment of this Act.

(2) TAX AMENDMENTS.—The amendments made by subsections (a)(1) and (b) shall apply to taxable years ending after

the date of the enactment of this Act.

(3) ERISA AMENDMENTS.—The amendment made by subsection (c) shall apply to plan years ending after the date

of the enactment of this Act.

(4) CONSTRUCTION.—Nothing in the amendments made by

this section shall alter or affect the construction of the Internal

Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, or the Age Discrimination in Employment

Act of 1967 as applied to any plan, arrangement, or conduct

to which such amendments do not apply.

SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSATION AS

A RESULT OF PENSION ROLLOVERS.

(a) IN GENERAL.—Section 3304(a) of the Internal Revenue Code

of 1986 (relating to requirements for State unemployment laws)

is amended by adding at the end the following new flush sentence:

‘‘Compensation shall not be reduced under paragraph (15) for any

pension, retirement or retired pay, annuity, or similar payment

which is not includible in gross income of the individual for the

taxable year in which paid because it was part of a rollover distribution.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to weeks beginning on or after the date of the enactment

of this Act.

SEC. 1106. REVOCATION OF ELECTION RELATING TO TREATMENT AS

MULTIEMPLOYER PLAN.

(a) AMENDMENT TO ERISA.—Section 3(37) of the Employee

Retirement Income Security Act of 1974 is amended by adding

at the end the following new subparagraph (G):

29 USC 1002.

26 USC 3304

note.

26 USC 3304.

26 USC 457 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1061

‘‘(G)(i) Within 1 year after the enactment of the Pension

Protection Act of 2006—

‘‘(I) an election under subparagraph (E) may be

revoked, pursuant to procedures prescribed by the Pension

Benefit Guaranty Corporation, if, for each of the 3 plan

years prior to the date of the enactment of that Act, the

plan would have been a multiemployer plan but for the

election under subparagraph (E), and

‘‘(II) a plan that meets the criteria in clauses (i) and

(ii) of subparagraph (A) of this paragraph or that is

described in clause (vi) may, pursuant to procedures prescribed by the Pension Benefit Guaranty Corporation, elect

to be a multiemployer plan, if—

‘‘(aa) for each of the 3 plan years immediately

before the date of the enactment of the Pension Protection Act of 2006, the plan has met those criteria or

is so described,

‘‘(bb) substantially all of the plan’s employer contributions for each of those plan years were made

or required to be made by organizations that were

exempt from tax under section 501 of the Internal

Revenue Code of 1986, and

‘‘(cc) the plan was established prior to September

2, 1974.

‘‘(ii) An election under this paragraph shall be effective

for all purposes under this Act and under the Internal Revenue

Code of 1986, starting with the first plan year ending after

the date of the enactment of the Pension Protection Act of

2006.

‘‘(iii) Once made, an election under this paragraph shall

be irrevocable, except that a plan described in subclause (i)(II)

shall cease to be a multiemployer plan as of the plan year

beginning immediately after the first plan year for which the

majority of its employer contributions were made or required

to be made by organizations that were not exempt from tax

under section 501 of the Internal Revenue Code of 1986.

‘‘(iv) The fact that a plan makes an election under clause

(i)(II) does not imply that the plan was not a multiemployer

plan prior to the date of the election or would not be a multiemployer plan without regard to the election.

‘‘(v)(I) No later than 30 days before an election is made

under this paragraph, the plan administrator shall provide

notice of the pending election to each plan participant and

beneficiary, each labor organization representing such participants or beneficiaries, and each employer that has an obligation

to contribute to the plan, describing the principal differences

between the guarantee programs under title IV and the benefit

restrictions under this title for single employer and multiemployer plans, along with such other information as the plan

administrator chooses to include.

‘‘(II) Within 180 days after the date of enactment of the

Pension Protection Act of 2006, the Secretary shall prescribe

a model notice under this subparagraph.

‘‘(III) A plan administrator’s failure to provide the notice

required under this subparagraph shall be treated for purposes

Deadlines.

Notices.

Effective date.

Deadline.

120 STAT. 1062 PUBLIC LAW 109–280—AUG. 17, 2006

of section 502(c)(2) as a failure or refusal by the plan administrator to file the annual report required to be filed with the

Secretary under section 101(b)(4).

‘‘(vi) A plan is described in this clause if it is a plan—

‘‘(I) that was established in Chicago, Illinois, on August

12, 1881; and

‘‘(II) sponsored by an organization described in section

501(c)(5) of the Internal Revenue Code of 1986 and exempt

from tax under section 501(a) of such Code.’’.

(b) AMENDMENT TO INTERNAL REVENUE CODE.—Subsection (f)

of section 414 of the Internal Revenue Code of 1986 is amended

by adding at the end the following new paragraph (6):

‘‘(6) ELECTION WITH REGARD TO MULTIEMPLOYER STATUS.— ‘‘(A) Within 1 year after the enactment of the Pension

Protection Act of 2006—

‘‘(i) An election under paragraph (5) may be

revoked, pursuant to procedures prescribed by the Pension Benefit Guaranty Corporation, if, for each of the

3 plan years prior to the date of the enactment of

that Act, the plan would have been a multiemployer

plan but for the election under paragraph (5), and

‘‘(ii) a plan that meets the criteria in subparagraph

(A) and (B) of paragraph (1) of this subsection or that

is described in subparagraph (E) may, pursuant to

procedures prescribed by the Pension Benefit Guaranty

Corporation, elect to be a multiemployer plan, if—

‘‘(I) for each of the 3 plan years immediately

before the date of enactment of the Pension Protection Act of 2006, the plan has met those criteria

or is so described,

‘‘(II) substantially all of the plan’s employer

contributions for each of those plan years were

made or required to be made by organizations

that were exempt from tax under section 501, and

‘‘(III) the plan was established prior to September 2, 1974.

‘‘(B) An election under this paragraph shall be effective

for all purposes under this Act and under the Employee

Retirement Income Security Act of 1974, starting with the

first plan year ending after the date of the enactment

of the Pension Protection Act of 2006.

‘‘(C) Once made, an election under this paragraph shall

be irrevocable, except that a plan described in subparagraph (A)(ii) shall cease to be a multiemployer plan as

of the plan year beginning immediately after the first plan

year for which the majority of its employer contributions

were made or required to be made by organizations that

were not exempt from tax under section 501.

‘‘(D) The fact that a plan makes an election under

subparagraph (A)(ii) does not imply that the plan was

not a multiemployer plan prior to the date of the election

or would not be a multiemployer plan without regard to

the election.

‘‘(E) A plan is described in this subparagraph if it

is a plan—

‘‘(i) that was established in Chicago, Illinois, on

August 12, 1881; and

Effective date.

Deadline.

26 USC 414.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1063

‘‘(ii) sponsored by an organization described in section 501(c)(5) and exempt from tax under section

501(a).’’.

SEC. 1107. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

or contract amendment—

(1) such pension plan or contract shall be treated as being

operated in accordance with the terms of the plan during the

period described in subsection (b)(2)(A), and

(2) except as provided by the Secretary of the Treasury,

such pension plan shall not fail to meet the requirements

of section 411(d)(6) of the Internal Revenue Code of 1986 and

section 204(g) of the Employee Retirement Income Security

Act of 1974 by reason of such amendment.

(b) AMENDMENTS TO WHICH SECTION APPLIES.— (1) IN GENERAL.—This section shall apply to any amendment to any pension plan or annuity contract which is made—

(A) pursuant to any amendment made by this Act

or pursuant to any regulation issued by the Secretary

of the Treasury or the Secretary of Labor under this Act,

and

(B) on or before the last day of the first plan year

beginning on or after January 1, 2009.

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

414(d) of the Internal Revenue Code of 1986), this paragraph

shall be applied by substituting ‘‘2011’’ for ‘‘2009’’.

(2) CONDITIONS.—This section shall not apply to any

amendment unless—

(A) during the period—

(i) beginning on the date the legislative or regulatory amendment described in paragraph (1)(A) takes

effect (or in the case of a plan or contract amendment

not required by such legislative or regulatory amendment, the effective date specified by the plan), and

(ii) ending on the date described in paragraph

(1)(B) (or, if earlier, the date the plan or contract

amendment is adopted), the plan or contract is operated as if such plan or contract amendment were in

effect; and

(B) such plan or contract amendment applies retroactively for such period.

TITLE XII—PROVISIONS RELATING TO

EXEMPT ORGANIZATIONS

Subtitle A—Charitable Giving Incentives

SEC. 1201. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

PLANS FOR CHARITABLE PURPOSES.

(a) IN GENERAL.—Subsection (d) of section 408 (relating to

individual retirement accounts) is amended by adding at the end

the following new paragraph:

‘‘(8) DISTRIBUTIONS FOR CHARITABLE PURPOSES.—

26 USC 408.

Effective date.

26 USC 411 note.

120 STAT. 1064 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) IN GENERAL.—So much of the aggregate amount

of qualified charitable distributions with respect to a taxpayer made during any taxable year which does not exceed

$100,000 shall not be includible in gross income of such

taxpayer for such taxable year.

‘‘(B) QUALIFIED CHARITABLE DISTRIBUTION.—For purposes of this paragraph, the term ‘qualified charitable distribution’ means any distribution from an individual retirement plan (other than a plan described in subsection (k)

or (p))—

‘‘(i) which is made directly by the trustee to an

organization described in section 170(b)(1)(A) (other

than any organization described in section 509(a)(3)

or any fund or account described in section 4966(d)(2)),

and

‘‘(ii) which is made on or after the date that the

individual for whose benefit the plan is maintained

has attained age 701⁄2.

A distribution shall be treated as a qualified charitable

distribution only to the extent that the distribution would

be includible in gross income without regard to subparagraph (A).

‘‘(C) CONTRIBUTIONS MUST BE OTHERWISE DEDUCTIBLE.—For purposes of this paragraph, a distribution to

an organization described in subparagraph (B)(i) shall be

treated as a qualified charitable distribution only if a

deduction for the entire distribution would be allowable

under section 170 (determined without regard to subsection

(b) thereof and this paragraph).

‘‘(D) APPLICATION OF SECTION 72.—Notwithstanding

section 72, in determining the extent to which a distribution

is a qualified charitable distribution, the entire amount

of the distribution shall be treated as includible in gross

income without regard to subparagraph (A) to the extent

that such amount does not exceed the aggregate amount

which would have been so includible if all amounts distributed from all individual retirement plans were treated

as 1 contract under paragraph (2)(A) for purposes of determining the inclusion of such distribution under section

72. Proper adjustments shall be made in applying section

72 to other distributions in such taxable year and subsequent taxable years.

‘‘(E) DENIAL OF DEDUCTION.—Qualified charitable distributions which are not includible in gross income pursuant to subparagraph (A) shall not be taken into account

in determining the deduction under section 170.

‘‘(F) TERMINATION.—This paragraph shall not apply

to distributions made in taxable years beginning after

December 31, 2007.’’.

(b) MODIFICATIONS RELATING TO INFORMATION RETURNS BY

CERTAIN TRUSTS.—

(1) RETURNS.—Section 6034 (relating to returns by trusts

described in section 4947(a)(2) or claiming charitable deductions

under section 642(c)) is amended to read as follows:

26 USC 6034.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1065

‘‘SEC. 6034. RETURNS BY CERTAIN TRUSTS.

‘‘(a) SPLIT-INTEREST TRUSTS.—Every trust described in section

4947(a)(2) shall furnish such information with respect to the taxable

year as the Secretary may by forms or regulations require.

‘‘(b) TRUSTS CLAIMING CERTAIN CHARITABLE DEDUCTIONS.—

‘‘(1) IN GENERAL.—Every trust not required to file a return

under subsection (a) but claiming a deduction under section

642(c) for the taxable year shall furnish such information with

respect to such taxable year as the Secretary may by forms

or regulations prescribe, including—

‘‘(A) the amount of the deduction taken under section

642(c) within such year,

‘‘(B) the amount paid out within such year which represents amounts for which deductions under section 642(c)

have been taken in prior years,

‘‘(C) the amount for which such deductions have been

taken in prior years but which has not been paid out

at the beginning of such year,

‘‘(D) the amount paid out of principal in the current

and prior years for the purposes described in section 642(c),

‘‘(E) the total income of the trust within such year

and the expenses attributable thereto, and

‘‘(F) a balance sheet showing the assets, liabilities,

and net worth of the trust as of the beginning of such

year.

‘‘(2) EXCEPTIONS.—Paragraph (1) shall not apply to a trust

for any taxable year if—

‘‘(A) all the net income for such year, determined under

the applicable principles of the law of trusts, is required

to be distributed currently to the beneficiaries, or

‘‘(B) the trust is described in section 4947(a)(1).’’.

(2) INCREASE IN PENALTY RELATING TO FILING OF INFORMATION RETURN BY SPLIT-INTEREST TRUSTS.—Paragraph (2) of section 6652(c) (relating to returns by exempt organizations and

by certain trusts) is amended by adding at the end the following

new subparagraph:

‘‘(C) SPLIT-INTEREST TRUSTS.—In the case of a trust

which is required to file a return under section 6034(a),

subparagraphs (A) and (B) of this paragraph shall not

apply and paragraph (1) shall apply in the same manner

as if such return were required under section 6033, except

that—

‘‘(i) the 5 percent limitation in the second sentence

of paragraph (1)(A) shall not apply,

‘‘(ii) in the case of any trust with gross income

in excess of $250,000, the first sentence of paragraph

(1)(A) shall be applied by substituting ‘$100’ for ‘$20’,

and the second sentence thereof shall be applied by

substituting ‘$50,000’ for ‘$10,000’, and

‘‘(iii) the third sentence of paragraph (1)(A) shall

be disregarded.

In addition to any penalty imposed on the trust pursuant

to this subparagraph, if the person required to file such

return knowingly fails to file the return, such penalty shall

also be imposed on such person who shall be personally

liable for such penalty.’’.

Applicability.

26 USC 6652.

120 STAT. 1066 PUBLIC LAW 109–280—AUG. 17, 2006

(3) CONFIDENTIALITY OF NONCHARITABLE BENEFICIARIES.— Subsection (b) of section 6104 (relating to inspection of annual

information returns) is amended by adding at the end the

following new sentence: ‘‘In the case of a trust which is required

to file a return under section 6034(a), this subsection shall

not apply to information regarding beneficiaries which are not

organizations described in section 170(c).’’.

(4) CLERICAL AMENDMENT.—The item in the table of sections for subpart A of part III of subchapter A of chapter

61 relating to section 6034 is amended to read as follows:

‘‘Sec. 6034. Returns by certain trusts.’’.

(c) EFFECTIVE DATES.— (1) SUBSECTION (a).—The amendment made by subsection

(a) shall apply to distributions made in taxable years beginning

after December 31, 2005.

(2) SUBSECTION (b).—The amendments made by subsection

(b) shall apply to returns for taxable years beginning after

December 31, 2006.

SEC. 1202. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION

FOR CONTRIBUTIONS OF FOOD INVENTORY.

(a) IN GENERAL.—Section 170(e)(3)(C)(iv) (relating to termination) is amended by striking ‘‘2005’’ and inserting ‘‘2007’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to contributions made after December 31, 2005.

SEC. 1203. BASIS ADJUSTMENT TO STOCK OF S CORPORATION

CONTRIBUTING PROPERTY.

(a) IN GENERAL.—Paragraph (2) of section 1367(a) (relating

to adjustments to basis of stock of shareholders, etc.) is amended

by adding at the end the following new flush sentence:

‘‘The decrease under subparagraph (B) by reason of a charitable

contribution (as defined in section 170(c)) of property shall

be the amount equal to the shareholder’s pro rata share of

the adjusted basis of such property. The preceding sentence

shall not apply to contributions made in taxable years beginning

after December 31, 2007.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to contributions made in taxable years beginning after

December 31, 2005.

SEC. 1204. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION

FOR CONTRIBUTIONS OF BOOK INVENTORY.

(a) IN GENERAL.—Section 170(e)(3)(D)(iv) (relating to termination) is amended by striking ‘‘2005’’ and inserting ‘‘2007’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to contributions made after December 31, 2005.

SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS

TO CONTROLLING EXEMPT ORGANIZATIONS.

(a) IN GENERAL.—Paragraph (13) of section 512(b) (relating

to special rules for certain amounts received from controlled entities)

is amended by redesignating subparagraph (E) as subparagraph

(F) and by inserting after subparagraph (D) the following new

subparagraph:

‘‘(E) PARAGRAPH TO APPLY ONLY TO CERTAIN EXCESS

PAYMENTS.—

26 USC 170 note.

26 USC 1367

note.

26 USC 170 note.

26 USC 6034

note.

26 USC 408 note.

26 USC 6104.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1067

‘‘(i) IN GENERAL.—Subparagraph (A) shall apply

only to the portion of a qualifying specified payment

received or accrued by the controlling organization that

exceeds the amount which would have been paid or

accrued if such payment met the requirements prescribed under section 482.

‘‘(ii) ADDITION TO TAX FOR VALUATION

MISSTATEMENTS.—The tax imposed by this chapter on

the controlling organization shall be increased by an

amount equal to 20 percent of the larger of—

‘‘(I) such excess determined without regard to

any amendment or supplement to a return of tax,

or

‘‘(II) such excess determined with regard to

all such amendments and supplements.

‘‘(iii) QUALIFYING SPECIFIED PAYMENT.—The term

‘qualifying specified payment’ means a specified payment which is made pursuant to—

‘‘(I) a binding written contract in effect on

the date of the enactment of this subparagraph,

or

‘‘(II) a contract which is a renewal, under

substantially similar terms, of a contract described

in subclause (I).

‘‘(iv) TERMINATION.—This subparagraph shall not

apply to payments received or accrued after December

31, 2007.’’.

(b) REPORTING.—

(1) IN GENERAL.—Section 6033 (relating to returns by

exempt organizations) is amended by redesignating subsection

(h) as subsection (i) and by inserting after subsection (g) the

following new subsection:

‘‘(h) CONTROLLING ORGANIZATIONS.—Each controlling organization (within the meaning of section 512(b)(13)) which is subject

to the requirements of subsection (a) shall include on the return

required under subsection (a)—

‘‘(1) any interest, annuities, royalties, or rents received

from each controlled entity (within the meaning of section

512(b)(13)),

‘‘(2) any loans made to each such controlled entity, and

‘‘(3) any transfers of funds between such controlling

organization and each such controlled entity.’’.

(2) REPORT TO CONGRESS.—Not later than January 1, 2009,

the Secretary of the Treasury shall submit to the Committee

on Finance of the Senate and the Committee on Ways and

Means of the House of Representatives a report on the effectiveness of the Internal Revenue Service in administering the

amendments made by subsection (a) and on the extent to which

payments by controlled entities (within the meaning of section

512(b)(13) of the Internal Revenue Code of 1986) to controlling

organizations (within the meaning of section 512(b)(13) of such

Code) meet the requirements under section 482 of such Code.

Such report shall include the results of any audit of any controlling organization or controlled entity and recommendations

relating to the tax treatment of payments from controlled entities to controlling organizations.

(c) EFFECTIVE DATE.—

26 USC 6033.

Applicability.

120 STAT. 1068 PUBLIC LAW 109–280—AUG. 17, 2006

(1) SUBSECTION (a).—The amendments made by subsection

(a) shall apply to payments received or accrued after December

31, 2005.

(2) SUBSECTION (b).—The amendments made by subsection

(b) shall apply to returns the due date (determined without

regard to extensions) of which is after the date of the enactment

of this Act.

SEC. 1206. ENCOURAGEMENT OF CONTRIBUTIONS OF CAPITAL GAIN

REAL PROPERTY MADE FOR CONSERVATION PURPOSES.

(a) IN GENERAL.—

(1) INDIVIDUALS.—Paragraph (1) of section 170(b) (relating

to percentage limitations) is amended by redesignating subparagraphs (E) and (F) as subparagraphs (F) and (G), respectively,

and by inserting after subparagraph (D) the following new

subparagraph:

‘‘(E) CONTRIBUTIONS OF QUALIFIED CONSERVATION CONTRIBUTIONS.—

‘‘(i) IN GENERAL.—Any qualified conservation contribution (as defined in subsection (h)(1)) shall be

allowed to the extent the aggregate of such contributions does not exceed the excess of 50 percent of the

taxpayer’s contribution base over the amount of all

other charitable contributions allowable under this

paragraph.

‘‘(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the limitation

of clause (i), such excess shall be treated (in a manner

consistent with the rules of subsection (d)(1)) as a

charitable contribution to which clause (i) applies in

each of the 15 succeeding years in order of time.

‘‘(iii) COORDINATION WITH OTHER SUBPARAGRAPHS.—For purposes of applying this subsection and

subsection (d)(1), contributions described in clause (i)

shall not be treated as described in subparagraph (A),

(B), (C), or (D) and such subparagraphs shall apply

without regard to such contributions.

‘‘(iv) SPECIAL RULE FOR CONTRIBUTION OF PROPERTY

USED IN AGRICULTURE OR LIVESTOCK PRODUCTION.—

‘‘(I) IN GENERAL.—If the individual is a qualified farmer or rancher for the taxable year for

which the contribution is made, clause (i) shall

be applied by substituting ‘100 percent’ for ‘50

percent’.

‘‘(II) EXCEPTION.—Subclause (I) shall not apply

to any contribution of property made after the

date of the enactment of this subparagraph which

is used in agriculture or livestock production (or

available for such production) unless such contribution is subject to a restriction that such property remain available for such production. This

subparagraph shall be applied separately with

respect to property to which subclause (I) does

not apply by reason of the preceding sentence prior

to its application to property to which subclause

(I) does apply.

Applicability.

Applicability.

26 USC 170.

26 USC 6033

note.

26 USC 512 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1069

‘‘(v) DEFINITION.—For purposes of clause (iv), the

term ‘qualified farmer or rancher’ means a taxpayer

whose gross income from the trade or business of

farming (within the meaning of section 2032A(e)(5))

is greater than 50 percent of the taxpayer’s gross

income for the taxable year.

‘‘(vi) TERMINATION.—This subparagraph shall not

apply to any contribution made in taxable years beginning after December 31, 2007.’’.

(2) CORPORATIONS.—Paragraph (2) of section 170(b) is

amended to read as follows:

‘‘(2) CORPORATIONS.—In the case of a corporation—

‘‘(A) IN GENERAL.—The total deductions under subsection (a) for any taxable year (other than for contributions

to which subparagraph (B) applies) shall not exceed 10

percent of the taxpayer’s taxable income.

‘‘(B) QUALIFIED CONSERVATION CONTRIBUTIONS BY CERTAIN CORPORATE FARMERS AND RANCHERS.—

‘‘(i) IN GENERAL.—Any qualified conservation contribution (as defined in subsection (h)(1))—

‘‘(I) which is made by a corporation which,

for the taxable year during which the contribution

is made, is a qualified farmer or rancher (as

defined in paragraph (1)(E)(v)) and the stock of

which is not readily tradable on an established

securities market at any time during such year,

and

‘‘(II) which, in the case of contributions made

after the date of the enactment of this subparagraph, is a contribution of property which is used

in agriculture or livestock production (or available

for such production) and which is subject to a

restriction that such property remain available for

such production,

shall be allowed to the extent the aggregate of such

contributions does not exceed the excess of the taxpayer’s taxable income over the amount of charitable

contributions allowable under subparagraph (A).

‘‘(ii) CARRYOVER.—If the aggregate amount of contributions described in clause (i) exceeds the limitation

of clause (i), such excess shall be treated (in a manner

consistent with the rules of subsection (d)(2)) as a

charitable contribution to which clause (i) applies in

each of the 15 succeeding years in order of time.

‘‘(iii) TERMINATION.—This subparagraph shall not

apply to any contribution made in taxable years beginning after December 31, 2007.

‘‘(C) TAXABLE INCOME.—For purposes of this paragraph,

taxable income shall be computed without regard to—

‘‘(i) this section,

‘‘(ii) part VIII (except section 248),

‘‘(iii) any net operating loss carryback to the taxable year under section 172,

‘‘(iv) section 199, and

‘‘(v) any capital loss carryback to the taxable year

under section 1212(a)(1).’’.

(b) CONFORMING AMENDMENTS.—

Applicability.

26 USC 170.

120 STAT. 1070 PUBLIC LAW 109–280—AUG. 17, 2006

(1) Paragraph (2) of section 170(d) is amended by striking

‘‘subsection (b)(2)’’ each place it appears and inserting ‘‘subsection (b)(2)(A)’’.

(2) Section 545(b)(2) is amended by striking ‘‘and (D)’’ and

inserting ‘‘(D), and (E)’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to contributions made in taxable years beginning after

December 31, 2005.

SEC. 1207. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR

ORGANIZATIONS.

(a) EXEMPTION FROM IMPOSITION OF SPECIAL FUELS TAX.— Section 4041(g) (relating to other exemptions) is amended by

striking ‘‘and’’ at the end of paragraph (3), by striking the period

in paragraph (4) and inserting ‘‘; and’’, and by inserting after

paragraph (4) the following new paragraph:

‘‘(5) with respect to the sale of any liquid to a qualified

blood collector organization (as defined in section 7701(a)(49))

for such organization’s exclusive use in the collection, storage,

or transportation of blood.’’.

(b) EXEMPTION FROM MANUFACTURERS EXCISE TAX.—

(1) IN GENERAL.—Section 4221(a) (relating to certain taxfree sales) is amended by striking ‘‘or’’ at the end of paragraph

(4), by adding ‘‘or’’ at the end of paragraph (5), and by inserting

after paragraph (5) the following new paragraph:

‘‘(6) to a qualified blood collector organization (as defined

in section 7701(a)(49)) for such organization’s exclusive use

in the collection, storage, or transportation of blood,’’.

(2) NO EXEMPTION WITH RESPECT TO VACCINES AND RECREATIONAL EQUIPMENT.—Section 4221(a) is amended by adding

at the end the following new sentence: ‘‘In the case of taxes

imposed by subchapter C or D, paragraph (6) shall not apply.’’.

(3) CONFORMING AMENDMENTS.—

(A) The second sentence of section 4221(a) is amended

by striking ‘‘Paragraphs (4) and (5)’’ and inserting ‘‘Paragraphs (4), (5), and (6)’’.

(B) Section 6421(c) is amended by striking ‘‘or (5)’’

and inserting ‘‘(5), or (6)’’.

(c) EXEMPTION FROM COMMUNICATION EXCISE TAX.—

(1) IN GENERAL.—Section 4253 (relating to exemptions) is

amended by redesignating subsection (k) as subsection (l) and

inserting after subsection (j) the following new subsection:

‘‘(k) EXEMPTION FOR QUALIFIED BLOOD COLLECTOR ORGANIZATIONS.—Under regulations provided by the Secretary, no tax shall

be imposed under section 4251 on any amount paid by a qualified

blood collector organization (as defined in section 7701(a)(49)) for

services or facilities furnished to such organization.’’.

(2) CONFORMING AMENDMENT.—Section 4253(l), as redesignated by paragraph (1), is amended by striking ‘‘or (j)’’ and

inserting ‘‘(j), or (k)’’.

(d) EXEMPTION FROM TAX ON HEAVY VEHICLES.—Section 4483

is amended by redesignating subsection (h) as subsection (i) and

by inserting after subsection (g) the following new subsection:

‘‘(h) EXEMPTION FOR VEHICLES USED IN BLOOD COLLECTION.—

‘‘(1) IN GENERAL.—No tax shall be imposed by section 4481

on the use of any qualified blood collector vehicle by a qualified

blood collector organization.

Regulations.

26 USC 170 note.

26 USC 170.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1071

‘‘(2) QUALIFIED BLOOD COLLECTOR VEHICLE.—For purposes

of this subsection, the term ‘qualified blood collector vehicle’

means a vehicle at least 80 percent of the use of which during

the prior taxable period was by a qualified blood collector

organization in the collection, storage, or transportation of

blood.

‘‘(3) SPECIAL RULE FOR VEHICLES FIRST PLACED IN SERVICE

IN A TAXABLE PERIOD.—In the case of a vehicle first placed

in service in a taxable period, a vehicle shall be treated as

a qualified blood collector vehicle for such taxable period if

such qualified blood collector organization certifies to the Secretary that the organization reasonably expects at least 80

percent of the use of such vehicle by the organization during

such taxable period will be in the collection, storage, or

transportation of blood.

‘‘(4) QUALIFIED BLOOD COLLECTOR ORGANIZATION.—The

term ‘qualified blood collector organization’ has the meaning

given such term by section 7701(a)(49).’’.

(e) CREDIT OR REFUND FOR CERTAIN TAXES ON SALES AND

SERVICES.—

(1) DEEMED OVERPAYMENT.—

(A) IN GENERAL.—Section 6416(b)(2) is amended by

redesignating subparagraphs (E) and (F) as subparagraphs

(F) and (G), respectively, and by inserting after subparagraph (D) the following new subparagraph:

‘‘(E) sold to a qualified blood collector organization

(as defined in section 7701(a)(49)) for such organization’s

exclusive use in the collection, storage, or transportation

of blood;’’.

(B) NO CREDIT OR REFUND FOR VACCINES OR RECREATIONAL EQUIPMENT.—Section 6416(b)(2) is amended by

adding at the end the following new sentence: ‘‘In the

case of taxes imposed by subchapter C or D of chapter

32, subparagraph (E) shall not apply.’’.

(C) CONFORMING AMENDMENTS.—Section 6416(b)(2) is

amended—

(i) by striking ‘‘Subparagraphs (C) and (D)’’ in the

second sentence and inserting ‘‘Subparagraphs (C), (D),

and (E)’’.

(ii) by striking ‘‘(B), (C), and (D)’’ and inserting

‘‘(B), (C), (D), and (E)’’.

(2) SALES OF TIRES.—Section 6416(b)(4)(B) is amended by

striking ‘‘or’’ at the end of clause (i), by striking the period

at the end of clause (ii) and inserting ‘‘, or’’, and by adding

after clause (ii) the following:

‘‘(iii) sold to a qualified blood collector organization

for its exclusive use in connection with a vehicle the

organization certifies will be primarily used in the

collection, storage, or transportation of blood.’’.

(f) DEFINITION OF QUALIFIED BLOOD COLLECTOR ORGANIZATION.—Section 7701(a) is amended by inserting at the end the

following new paragraph:

‘‘(49) QUALIFIED BLOOD COLLECTOR ORGANIZATION.—The

term ‘qualified blood collector organization’ means an organization which is—

‘‘(A) described in section 501(c)(3) and exempt from

tax under section 501(a),

26 USC 6416.

120 STAT. 1072 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(B) primarily engaged in the activity of the collection

of human blood,

‘‘(C) registered with the Secretary for purposes of excise

tax exemptions, and

‘‘(D) registered by the Food and Drug Administration

to collect blood.’’.

(g) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section

shall take effect on January 1, 2007.

(2) SUBSECTION (d).—The amendment made by subsection

(d) shall apply to taxable periods beginning on or after July

1, 2007.

Subtitle B—Reforming Exempt

Organizations

PART 1—GENERAL REFORMS

SEC. 1211. REPORTING ON CERTAIN ACQUISITIONS OF INTERESTS IN

INSURANCE CONTRACTS IN WHICH CERTAIN EXEMPT

ORGANIZATIONS HOLD AN INTEREST.

(a) REPORTING REQUIREMENTS.—

(1) IN GENERAL.—Subpart B of part III of subchapter A

of chapter 61 (relating to information concerning transactions

with other persons), as amended by this Act, is amended by

adding at the end the following new section:

‘‘SEC. 6050V. RETURNS RELATING TO APPLICABLE INSURANCE CONTRACTS IN WHICH CERTAIN EXEMPT ORGANIZATIONS

HOLD INTERESTS.

‘‘(a) IN GENERAL.—Each applicable exempt organization which

makes a reportable acquisition shall make the return described

in subsection (c).

‘‘(b) TIME FOR MAKING RETURN.—Any applicable exempt

organization required to make a return under subsection (a) shall

file such return at such time as may be established by the Secretary.

‘‘(c) FORM AND MANNER OF RETURNS.—A return is described

in this subsection if such return—

‘‘(1) is in such form as the Secretary prescribes,

‘‘(2) contains the name, address, and taxpayer identification

number of the applicable exempt organization and the issuer

of the applicable insurance contract, and

‘‘(3) contains such other information as the Secretary may

prescribe.

‘‘(d) DEFINITIONS.—For purposes of this section—

‘‘(1) REPORTABLE ACQUISITION.—The term ‘reportable

acquisition’ means the acquisition by an applicable exempt

organization of a direct or indirect interest in any applicable

insurance contract in any case in which such acquisition is

a part of a structured transaction involving a pool of such

contracts.

‘‘(2) APPLICABLE INSURANCE CONTRACT.—

‘‘(A) IN GENERAL.—The term ‘applicable insurance contract’ means any life insurance, annuity, or endowment

contract with respect to which both an applicable exempt

organization and a person other than an applicable exempt

26 USC 6050V.

26 USC 4041

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1073

organization have directly or indirectly held an interest

in the contract (whether or not at the same time).

‘‘(B) EXCEPTIONS.—Such term shall not include a life

insurance, annuity, or endowment contract if—

‘‘(i) all persons directly or indirectly holding any

interest in the contract (other than applicable exempt

organizations) have an insurable interest in the

insured under the contract independent of any interest

of an applicable exempt organization in the contract,

‘‘(ii) the sole interest in the contract of an

applicable exempt organization or each person other

than an applicable exempt organization is as a named

beneficiary, or

‘‘(iii) the sole interest in the contract of each person

other than an applicable exempt organization is—

‘‘(I) as a beneficiary of a trust holding an

interest in the contract, but only if the person’s

designation as such beneficiary was made without

consideration and solely on a purely gratuitous

basis, or

‘‘(II) as a trustee who holds an interest in

the contract in a fiduciary capacity solely for the

benefit of applicable exempt organizations or persons otherwise described in subclause (I) or clause

(i) or (ii).

‘‘(3) APPLICABLE EXEMPT ORGANIZATION.—The term

‘applicable exempt organization’ means—

‘‘(A) an organization described in section 170(c),

‘‘(B) an organization described in section

168(h)(2)(A)(iv), or

‘‘(C) an organization not described in paragraph (1)

or (2) which is described in section 2055(a) or section

2522(a).

‘‘(e) TERMINATION.—This section shall not apply to reportable

acquisitions occurring after the date which is 2 years after the

date of the enactment of this section.’’.

(2) CONFORMING AMENDMENT.—The table of sections for

subpart B of part III of subchapter A of chapter 61 is amended

by adding at the end the following new item:

‘‘Sec. 6050V. Returns relating to applicable insurance contracts in which certain exempt organizations hold interests.’’.

(b) PENALTIES.— (1) IN GENERAL.—Subparagraph (B) of section 6724(d)(1),

as amended by this Act, is amended by redesignating clauses

(xiv) through (xix) as clauses (xv) through (xx) and by inserting

after clause (xiii) the following new clause:

‘‘(xiv) section 6050V (relating to returns relating

to applicable insurance contracts in which certain

exempt organizations hold interests),’’.

(2) INTENTIONAL DISREGARD.—Section 6721(e)(2) is

amended by striking ‘‘or’’ at the end of subparagraph (B), by

striking ‘‘and’’ at the end of subparagraph (C) and inserting

‘‘or’’, and by adding at the end the following new subparagraph:

‘‘(D) in the case of a return required to be filed under

section 6050V, 10 percent of the value of the benefit of

any contract with respect to which information is required

to be included on the return, and’’.

26 USC 6724.

120 STAT. 1074 PUBLIC LAW 109–280—AUG. 17, 2006

(c) STUDY.—

(1) IN GENERAL.—The Secretary of the Treasury shall

undertake a study on—

(A) the use by tax exempt organizations of applicable

insurance contracts (as defined under section 6050V(d)(2)

of the Internal Revenue Code of 1986, as added by subsection (a)) for the purpose of sharing the benefits of the

organization’s insurable interest in individuals insured

under such contracts with investors, and

(B) whether such activities are consistent with the

tax exempt status of such organizations.

(2) REPORT.—Not later than 30 months after the date of

the enactment of this Act, the Secretary of the Treasury shall

report on the study conducted under paragraph (1) to the

Committee on Finance of the Senate and the Committee on

Ways and Means of the House of Representatives.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to acquisitions of contracts after the date of enactment

of this Act.

SEC. 1212. INCREASE IN PENALTY EXCISE TAXES RELATING TO PUBLIC

CHARITIES, SOCIAL WELFARE ORGANIZATIONS, AND PRIVATE FOUNDATIONS.

(a) TAXES ON SELF-DEALING AND EXCESS BENEFIT TRANSACTIONS.—

(1) IN GENERAL.—Section 4941(a) (relating to initial taxes)

is amended—

(A) in paragraph (1), by striking ‘‘5 percent’’ and

inserting ‘‘10 percent’’, and

(B) in paragraph (2), by striking ‘‘21⁄2 percent’’ and

inserting ‘‘5 percent’’.

(2) INCREASED LIMITATION FOR MANAGERS ON SELFDEALING.—Section 4941(c)(2) is amended by striking ‘‘$10,000’’

each place it appears in the text and heading thereof and

inserting ‘‘$20,000’’.

(3) INCREASED LIMITATION FOR MANAGERS ON EXCESS BENEFIT TRANSACTIONS.—Section 4958(d)(2) is amended by striking

‘‘$10,000’’ and inserting ‘‘$20,000’’.

(b) TAXES ON FAILURE TO DISTRIBUTE INCOME.—Section 4942(a)

(relating to initial tax) is amended by striking ‘‘15 percent’’ and

inserting ‘‘30 percent’’.

(c) TAXES ON EXCESS BUSINESS HOLDINGS.—Section 4943(a)(1)

(relating to imposition) is amended by striking ‘‘5 percent’’ and

inserting ‘‘10 percent’’.

(d) TAXES ON INVESTMENTS WHICH JEOPARDIZE CHARITABLE

PURPOSE.—

(1) IN GENERAL.—Section 4944(a) (relating to initial taxes)

is amended by striking ‘‘5 percent’’ both places it appears and

inserting ‘‘10 percent’’.

(2) INCREASED LIMITATION FOR MANAGERS.—Section

4944(d)(2) is amended—

(A) by striking ‘‘$5,000,’’ and inserting ‘‘$10,000,’’, and

(B) by striking ‘‘$10,000.’’ and inserting ‘‘$20,000.’’.

(e) TAXES ON TAXABLE EXPENDITURES.—

(1) IN GENERAL.—Section 4945(a) (relating to initial taxes)

is amended—

26 USC 4941.

26 USC 6050V.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1075

(A) in paragraph (1), by striking ‘‘10 percent’’ and

inserting ‘‘20 percent’’, and

(B) in paragraph (2), by striking ‘‘21⁄2 percent’’ and

inserting ‘‘5 percent’’.

(2) INCREASED LIMITATION FOR MANAGERS.—Section

4945(c)(2) is amended—

(A) by striking ‘‘$5,000,’’ and inserting ‘‘$10,000,’’, and

(B) by striking ‘‘$10,000.’’ and inserting ‘‘$20,000.’’.

(f) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 1213. REFORM OF CHARITABLE CONTRIBUTIONS OF CERTAIN

EASEMENTS IN REGISTERED HISTORIC DISTRICTS AND

REDUCED DEDUCTION FOR PORTION OF QUALIFIED

CONSERVATION CONTRIBUTION ATTRIBUTABLE TO

REHABILITATION CREDIT.

(a) SPECIAL RULES WITH RESPECT TO BUILDINGS IN REGISTERED

HISTORIC DISTRICTS.—

(1) IN GENERAL.—Paragraph (4) of section 170(h) (relating

to definition of conservation purpose) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting

after subparagraph (A) the following new subparagraph:

‘‘(B) SPECIAL RULES WITH RESPECT TO BUILDINGS IN

REGISTERED HISTORIC DISTRICTS.—In the case of any contribution of a qualified real property interest which is a

restriction with respect to the exterior of a building

described in subparagraph (C)(ii), such contribution shall

not be considered to be exclusively for conservation purposes unless—

‘‘(i) such interest—

‘‘(I) includes a restriction which preserves the

entire exterior of the building (including the front,

sides, rear, and height of the building), and

‘‘(II) prohibits any change in the exterior of

the building which is inconsistent with the historical character of such exterior,

‘‘(ii) the donor and donee enter into a written

agreement certifying, under penalty of perjury, that

the donee—

‘‘(I) is a qualified organization (as defined in

paragraph (3)) with a purpose of environmental

protection, land conservation, open space preservation, or historic preservation, and

‘‘(II) has the resources to manage and enforce

the restriction and a commitment to do so, and

‘‘(iii) in the case of any contribution made in a

taxable year beginning after the date of the enactment

of this subparagraph, the taxpayer includes with the

taxpayer’s return for the taxable year of the contribution—

‘‘(I) a qualified appraisal (within the meaning

of subsection (f)(11)(E)) of the qualified property

interest,

‘‘(II) photographs of the entire exterior of the

building, and

26 USC 4941

note.

26 USC 4945.

120 STAT. 1076 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(III) a description of all restrictions on the

development of the building.’’.

(b) DISALLOWANCE OF DEDUCTION FOR STRUCTURES AND LAND

IN REGISTERED HISTORIC DISTRICTS.—Subparagraph (C) of section

170(h)(4), as redesignated by subsection (a), is amended—

(1) by striking ‘‘any building, structure, or land area which’’,

(2) by inserting ‘‘any building, structure, or land area

which’’ before ‘‘is listed’’ in clause (i), and

(3) by inserting ‘‘any building which’’ before ‘‘is located’’

in clause (ii).

(c) FILING FEE FOR CERTAIN CONTRIBUTIONS.—Subsection (f)

of section 170 (relating to disallowance of deduction in certain

cases and special rules) is amended by adding at the end the

following new paragraph:

‘‘(13) CONTRIBUTIONS OF CERTAIN INTERESTS IN BUILDINGS

LOCATED IN REGISTERED HISTORIC DISTRICTS.—

‘‘(A) IN GENERAL.—No deduction shall be allowed with

respect to any contribution described in subparagraph (B)

unless the taxpayer includes with the return for the taxable

year of the contribution a $500 filing fee.

‘‘(B) CONTRIBUTION DESCRIBED.—A contribution is

described in this subparagraph if such contribution is a

qualified conservation contribution (as defined in subsection (h)) which is a restriction with respect to the exterior of a building described in subsection (h)(4)(C)(ii) and

for which a deduction is claimed in excess of $10,000.

‘‘(C) DEDICATION OF FEE.—Any fee collected under this

paragraph shall be used for the enforcement of the provisions of subsection (h).’’.

(d) REDUCED DEDUCTION FOR PORTION OF QUALIFIED CONSERVATION CONTRIBUTION ATTRIBUTABLE TO THE REHABILITATION

CREDIT.—Subsection (f) of section 170, as amended by subsection

(c), is amended by adding at the end the following new paragraph:

‘‘(14) REDUCTION FOR AMOUNTS ATTRIBUTABLE TO

REHABILITATION CREDIT.—In the case of any qualified conservation contribution (as defined in subsection (h)), the amount

of the deduction allowed under this section shall be reduced

by an amount which bears the same ratio to the fair market

value of the contribution as—

‘‘(A) the sum of the credits allowed to the taxpayer

under section 47 for the 5 preceding taxable years with

respect to any building which is a part of such contribution,

bears to

‘‘(B) the fair market value of the building on the date

of the contribution.’’.

(e) EFFECTIVE DATES.—

(1) SPECIAL RULES FOR BUILDINGS IN REGISTERED HISTORIC

DISTRICTS.—The amendments made by subsection (a) shall

apply to contributions made after July 25, 2006.

(2) DISALLOWANCE OF DEDUCTION FOR STRUCTURES AND

LAND; REDUCTION FOR REHABILITATION CREDIT.—The amendments made by subsections (b) and (d) shall apply to contributions made after the date of the enactment of this Act.

(3) FILING FEE.—The amendment made by subsection (c)

shall apply to contributions made 180 days after the date

of the enactment of this Act.

26 USC 170 note.

26 USC 170.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1077

SEC. 1214. CHARITABLE CONTRIBUTIONS OF TAXIDERMY PROPERTY.

(a) DENIAL OF LONG-TERM CAPITAL GAIN.—Subparagraph (B)

of section 170(e)(1) is amended by striking ‘‘or’’ at the end of

clause (ii), by inserting ‘‘or’’ at the end of clause (iii), and by

inserting after clause (iii) the following new clause:

‘‘(iv) of any taxidermy property which is contributed by the person who prepared, stuffed, or mounted

the property or by any person who paid or incurred

the cost of such preparation, stuffing, or mounting,’’.

(b) TREATMENT OF BASIS.—Subsection (f) of section 170, as

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

new paragraph:

‘‘(15) SPECIAL RULE FOR TAXIDERMY PROPERTY.—

‘‘(A) BASIS.—For purposes of this section and notwithstanding section 1012, in the case of a charitable contribution of taxidermy property which is made by the person

who prepared, stuffed, or mounted the property or by any

person who paid or incurred the cost of such preparation,

stuffing, or mounting, only the cost of the preparing,

stuffing, or mounting shall be included in the basis of

such property.

‘‘(B) TAXIDERMY PROPERTY.—For purposes of this section, the term ‘taxidermy property’ means any work of

art which—

‘‘(i) is the reproduction or preservation of an

animal, in whole or in part,

‘‘(ii) is prepared, stuffed, or mounted for purposes

of recreating one or more characteristics of such

animal, and

‘‘(iii) contains a part of the body of the dead

animal.’’.

(c) EFFECTIVE DATE.—The amendment made by this section

shall apply to contributions made after July 25, 2006.

SEC. 1215. RECAPTURE OF TAX BENEFIT FOR CHARITABLE CONTRIBUTIONS OF EXEMPT USE PROPERTY NOT USED FOR AN

EXEMPT USE.

(a) RECAPTURE OF DEDUCTION ON CERTAIN SALES OF EXEMPT

USE PROPERTY.—

(1) IN GENERAL.—Clause (i) of section 170(e)(1)(B) (related

to certain contributions of ordinary income and capital gain

property) is amended to read as follows:

‘‘(i) of tangible personal property—

‘‘(I) if the use by the donee is unrelated to

the purpose or function constituting the basis for

its exemption under section 501 (or, in the case

of a governmental unit, to any purpose or function

described in subsection (c)), or

‘‘(II) which is applicable property (as defined

in paragraph (7)(C)) which is sold, exchanged, or

otherwise disposed of by the donee before the last

day of the taxable year in which the contribution

was made and with respect to which the donee

has not made a certification in accordance with

paragraph (7)(D),’’.

26 USC 170 note.

26 USC 170.

120 STAT. 1078 PUBLIC LAW 109–280—AUG. 17, 2006

(2) DISPOSITIONS AFTER CLOSE OF TAXABLE YEAR.—Section

170(e) is amended by adding at the end the following new

paragraph:

‘‘(7) RECAPTURE OF DEDUCTION ON CERTAIN DISPOSITIONS

OF EXEMPT USE PROPERTY.—

‘‘(A) IN GENERAL.—In the case of an applicable disposition of applicable property, there shall be included in the

income of the donor of such property for the taxable year

of such donor in which the applicable disposition occurs

an amount equal to the excess (if any) of—

‘‘(i) the amount of the deduction allowed to the

donor under this section with respect to such property,

over

‘‘(ii) the donor’s basis in such property at the time

such property was contributed.

‘‘(B) APPLICABLE DISPOSITION.—For purposes of this

paragraph, the term ‘applicable disposition’ means any sale,

exchange, or other disposition by the donee of applicable

property—

‘‘(i) after the last day of the taxable year of the

donor in which such property was contributed, and

‘‘(ii) before the last day of the 3-year period beginning on the date of the contribution of such property,

unless the donee makes a certification in accordance with

subparagraph (D).

‘‘(C) APPLICABLE PROPERTY.—For purposes of this paragraph, the term ‘applicable property’ means charitable

deduction property (as defined in section 6050L(a)(2)(A))—

‘‘(i) which is tangible personal property the use

of which is identified by the donee as related to the

purpose or function constituting the basis of the donee’s

exemption under section 501, and

‘‘(ii) for which a deduction in excess of the donor’s

basis is allowed.

‘‘(D) CERTIFICATION.—A certification meets the requirements of this subparagraph if it is a written statement

which is signed under penalty of perjury by an officer

of the donee organization and—

‘‘(i) which—

‘‘(I) certifies that the use of the property by

the donee was related to the purpose or function

constituting the basis for the donee’s exemption

under section 501, and

‘‘(II) describes how the property was used and

how such use furthered such purpose or function,

or

‘‘(ii) which—

‘‘(I) states the intended use of the property

by the donee at the time of the contribution, and

‘‘(II) certifies that such intended use has

become impossible or infeasible to implement.’’.

(b) REPORTING REQUIREMENTS.—Paragraph (1) of section

6050L(a) (relating to returns relating to certain dispositions of

donated property) is amended—

(1) by striking ‘‘2 years’’ and inserting ‘‘3 years’’, and

26 USC 170.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1079

(2) by striking ‘‘and’’ at the end of subparagraph (D), by

striking the period at the end of subparagraph (E) and inserting

a comma, and by inserting at the end the following:

‘‘(F) a description of the donee’s use of the property,

and

‘‘(G) a statement indicating whether the use of the

property was related to the purpose or function constituting

the basis for the donee’s exemption under section 501.

In any case in which the donee indicates that the use of

applicable property (as defined in section 170(e)(7)(C)) was

related to the purpose or function constituting the basis for

the exemption of the donee under section 501 under subparagraph (G), the donee shall include with the return the certification described in section 170(e)(7)(D) if such certification is

made under section 170(e)(7).’’.

(c) PENALTY.— (1) IN GENERAL.—Part I of subchapter B of chapter 68

(relating to assessable penalties) is amended by inserting after

section 6720A the following new section:

‘‘SEC. 6720B. FRAUDULENT IDENTIFICATION OF EXEMPT USE PROPERTY.

‘‘In addition to any criminal penalty provided by law, any

person who identifies applicable property (as defined in section

170(e)(7)(C)) as having a use which is related to a purpose or

function constituting the basis for the donee’s exemption under

section 501 and who knows that such property is not intended

for such a use shall pay a penalty of $10,000.’’.

(2) CLERICAL AMENDMENT.—The table of sections for part

I of subchapter B of chapter 68 is amended by adding after

the item relating to section 6720A the following new item:

‘‘Sec. 6720B. Fraudulent identification of exempt use property.’’.

(d) EFFECTIVE DATE.—

(1) RECAPTURE.—The amendments made by subsection (a)

shall apply to contributions after September 1, 2006.

(2) REPORTING.—The amendments made by subsection (b)

shall apply to returns filed after September 1, 2006.

(3) PENALTY.—The amendments made by subsection (c)

shall apply to identifications made after the date of the enactment of this Act.

SEC. 1216. LIMITATION OF DEDUCTION FOR CHARITABLE CONTRIBUTIONS OF CLOTHING AND HOUSEHOLD ITEMS.

(a) IN GENERAL.—Subsection (f) of section 170, as amended

by this Act, is amended by adding at the end the following new

paragraph:

‘‘(16) CONTRIBUTIONS OF CLOTHING AND HOUSEHOLD

ITEMS.—

‘‘(A) IN GENERAL.—In the case of an individual, partnership, or corporation, no deduction shall be allowed under

subsection (a) for any contribution of clothing or a household item unless such clothing or household item is in

good used condition or better.

‘‘(B) ITEMS OF MINIMAL VALUE.—Notwithstanding

subparagraph (A), the Secretary may by regulation deny

a deduction under subsection (a) for any contribution of

26 USC 170.

26 USC 6720B

note.

26 USC 6050L.

26 USC 170 note.

26 USC 6720B.

120 STAT. 1080 PUBLIC LAW 109–280—AUG. 17, 2006

clothing or a household item which has minimal monetary

value.

‘‘(C) EXCEPTION FOR CERTAIN PROPERTY.—Subparagraphs (A) and (B) shall not apply to any contribution

of a single item of clothing or a household item for which

a deduction of more than $500 is claimed if the taxpayer

includes with the taxpayer’s return a qualified appraisal

with respect to the property.

‘‘(D) HOUSEHOLD ITEMS.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—The term ‘household items’

includes furniture, furnishings, electronics, appliances,

linens, and other similar items.

‘‘(ii) EXCLUDED ITEMS.—Such term does not

include—

‘‘(I) food,

‘‘(II) paintings, antiques, and other objects of

art,

‘‘(III) jewelry and gems, and

‘‘(IV) collections.

‘‘(E) SPECIAL RULE FOR PASS-THRU ENTITIES.—In the

case of a partnership or S corporation, this paragraph

shall be applied at the entity level, except that the deduction shall be denied at the partner or shareholder level.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to contributions made after the date of enactment of

this Act.

SEC. 1217. MODIFICATION OF RECORDKEEPING REQUIREMENTS FOR

CERTAIN CHARITABLE CONTRIBUTIONS.

(a) RECORDKEEPING REQUIREMENT.—Subsection (f) of section

170, as amended by this Act, is amended by adding at the end

the following new paragraph:

‘‘(17) RECORDKEEPING.—No deduction shall be allowed

under subsection (a) for any contribution of a cash, check,

or other monetary gift unless the donor maintains as a record

of such contribution a bank record or a written communication

from the donee showing the name of the donee organization,

the date of the contribution, and the amount of the contribution.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to contributions made in taxable years beginning after

the date of the enactment of this Act.

SEC. 1218. CONTRIBUTIONS OF FRACTIONAL INTERESTS IN TANGIBLE

PERSONAL PROPERTY.

(a) INCOME TAX.—Section 170 (relating to charitable, etc., contributions and gifts) is amended by redesignating subsection (o)

as subsection (p) and by inserting after subsection (n) the following

new subsection:

‘‘(o) SPECIAL RULES FOR FRACTIONAL GIFTS.—

‘‘(1) DENIAL OF DEDUCTION IN CERTAIN CASES.— ‘‘(A) IN GENERAL.—No deduction shall be allowed for

a contribution of an undivided portion of a taxpayer’s entire

interest in tangible personal property unless all interest

in the property is held immediately before such contribution

by—

‘‘(i) the taxpayer, or

26 USC 170 note.

26 USC 170.

26 USC 170 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1081

‘‘(ii) the taxpayer and the donee.

‘‘(B) EXCEPTIONS.—The Secretary may, by regulation,

provide for exceptions to subparagraph (A) in cases where

all persons who hold an interest in the property make

proportional contributions of an undivided portion of the

entire interest held by such persons.

‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In the case of any

additional contribution, the fair market value of such contribution shall be determined by using the lesser of—

‘‘(A) the fair market value of the property at the time

of the initial fractional contribution, or

‘‘(B) the fair market value of the property at the time

of the additional contribution.

‘‘(3) RECAPTURE OF DEDUCTION IN CERTAIN CASES; ADDITION

TO TAX.—

‘‘(A) RECAPTURE.—The Secretary shall provide for the

recapture of the amount of any deduction allowed under

this section (plus interest) with respect to any contribution

of an undivided portion of a taxpayer’s entire interest in

tangible personal property—

‘‘(i) in any case in which the donor does not contribute all of the remaining interest in such property

to the donee (or, if such donee is no longer in existence,

to any person described in section 170(c)) before the

earlier of—

‘‘(I) the date that is 10 years after the date

of the initial fractional contribution, or

‘‘(II) the date of the death of the donor, and

‘‘(ii) in any case in which the donee has not, during

the period beginning on the date of the initial fractional

contribution and ending on the date described in clause

(i)—

‘‘(I) had substantial physical possession of the

property, and

‘‘(II) used the property in a use which is

related to a purpose or function constituting the

basis for the organizations’ exemption under section 501.

‘‘(B) ADDITION TO TAX.—The tax imposed under this

chapter for any taxable year for which there is a recapture

under subparagraph (A) shall be increased by 10 percent

of the amount so recaptured.

‘‘(4) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ADDITIONAL CONTRIBUTION.—The term ‘additional

contribution’ means any charitable contribution by the taxpayer of any interest in property with respect to which

the taxpayer has previously made an initial fractional contribution.

‘‘(B) INITIAL FRACTIONAL CONTRIBUTION.—The term ‘initial fractional contribution’ means, with respect to any

taxpayer, the first charitable contribution of an undivided

portion of the taxpayer’s entire interest in any tangible

personal property.’’.

(b) ESTATE TAX.—Section 2055 (relating to transfers for public,

charitable, and religious uses) is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f)

the following new subsection:

26 USC 2055.

120 STAT. 1082 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(g) VALUATION OF SUBSEQUENT GIFTS.—

‘‘(1) IN GENERAL.—In the case of any additional contribution, the fair market value of such contribution shall be determined by using the lesser of—

‘‘(A) the fair market value of the property at the time

of the initial fractional contribution, or

‘‘(B) the fair market value of the property at the time

of the additional contribution.

‘‘(2) DEFINITIONS.—For purposes of this paragraph—

‘‘(A) ADDITIONAL CONTRIBUTION.—The term ‘additional

contribution’ means a bequest, legacy, devise, or transfer

described in subsection (a) of any interest in a property

with respect to which the decedent had previously made

an initial fractional contribution.

‘‘(B) INITIAL FRACTIONAL CONTRIBUTION.—The term ‘initial fractional contribution’ means, with respect to any

decedent, any charitable contribution of an undivided portion of the decedent’s entire interest in any tangible personal property for which a deduction was allowed under

section 170.’’.

(c) GIFT TAX.—Section 2522 (relating to charitable and similar

gifts) is amended by redesignating subsection (e) as subsection

(f) and by inserting after subsection (d) the following new subsection:

‘‘(e) SPECIAL RULES FOR FRACTIONAL GIFTS.—

‘‘(1) DENIAL OF DEDUCTION IN CERTAIN CASES.—

‘‘(A) IN GENERAL.—No deduction shall be allowed for

a contribution of an undivided portion of a taxpayer’s entire

interest in tangible personal property unless all interest

in the property is held immediately before such contribution

by—

‘‘(i) the taxpayer, or

‘‘(ii) the taxpayer and the donee.

‘‘(B) EXCEPTIONS.—The Secretary may, by regulation,

provide for exceptions to subparagraph (A) in cases where

all persons who hold an interest in the property make

proportional contributions of an undivided portion of the

entire interest held by such persons.

‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In the case of any

additional contribution, the fair market value of such contribution shall be determined by using the lesser of—

‘‘(A) the fair market value of the property at the time

of the initial fractional contribution, or

‘‘(B) the fair market value of the property at the time

of the additional contribution.

‘‘(3) RECAPTURE OF DEDUCTION IN CERTAIN CASES; ADDITION

TO TAX.—

‘‘(A) IN GENERAL.—The Secretary shall provide for the

recapture of an amount equal to any deduction allowed

under this section (plus interest) with respect to any contribution of an undivided portion of a taxpayer’s entire

interest in tangible personal property—

‘‘(i) in any case in which the donor does not contribute all of the remaining interest in such property

to the donee (or, if such donee is no longer in existence,

to any person described in section 170(c)) before the

earlier of—

26 USC 2522.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1083

‘‘(I) the date that is 10 years after the date

of the initial fractional contribution, or

‘‘(II) the date of the death of the donor, and

‘‘(ii) in any case in which the donee has not, during

the period beginning on the date of the initial fractional

contribution and ending on the date described in clause

(i)—

‘‘(I) had substantial physical possession of the

property, and

‘‘(II) used the property in a use which is

related to a purpose or function constituting the

basis for the organizations’ exemption under section 501.

‘‘(B) ADDITION TO TAX.—The tax imposed under this

chapter for any taxable year for which there is a recapture

under subparagraph (A) shall be increased by 10 percent

of the amount so recaptured.

‘‘(4) DEFINITIONS.—For purposes of this subsection—

‘‘(A) ADDITIONAL CONTRIBUTION.—The term ‘additional

contribution’ means any gift for which a deduction is

allowed under subsection (a) or (b) of any interest in a

property with respect to which the donor has previously

made an initial fractional contribution.

‘‘(B) INITIAL FRACTIONAL CONTRIBUTION.—The term ‘initial fractional contribution’ means, with respect to any

donor, the first gift of an undivided portion of the donor’s

entire interest in any tangible personal property for which

a deduction is allowed under subsection (a) or (b).’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to contributions, bequests, and gifts made after the

date of the enactment of this Act.

SEC. 1219. PROVISIONS RELATING TO SUBSTANTIAL AND GROSS OVERSTATEMENTS OF VALUATIONS.

(a) MODIFICATION OF THRESHOLDS FOR SUBSTANTIAL AND GROSS

VALUATION MISSTATEMENTS.—

(1) SUBSTANTIAL VALUATION MISSTATEMENT.—

(A) INCOME TAXES.—Subparagraph (A) of section

6662(e)(1) (relating to substantial valuation misstatement

under chapter 1) is amended by striking ‘‘200 percent’’

and inserting ‘‘150 percent’’.

(B) ESTATE AND GIFT TAXES.—Paragraph (1) of section

6662(g) is amended by striking ‘‘50 percent’’ and inserting

‘‘65 percent’’.

(2) GROSS VALUATION MISSTATEMENT.—

(A) INCOME TAXES.—Clauses (i) and (ii) of section

6662(h)(2)(A) (relating to increase in penalty in case of

gross valuation misstatements) are amended to read as

follows:

‘‘(i) in paragraph (1)(A), ‘200 percent’ for ‘150 percent’,

‘‘(ii) in paragraph (1)(B)(i)—

‘‘(I) ‘400 percent’ for ‘200 percent’, and

‘‘(II) ‘25 percent’ for ‘50 percent’, and’’.

(B) ESTATE AND GIFT TAXES.—Subparagraph (C) of section 6662(h)(2) is amended by striking ‘‘ ‘25 percent’ for

‘50 percent’ ’’ and inserting ‘‘ ‘40 percent’ for ‘65 percent’ ’’.

26 USC 6662.

26 USC 170 note.

120 STAT. 1084 PUBLIC LAW 109–280—AUG. 17, 2006

(3) ELIMINATION OF REASONABLE CAUSE EXCEPTION FOR

GROSS MISSTATEMENTS.—Section 6664(c)(2) (relating to reasonable cause exception for underpayments) is amended by striking

‘‘paragraph (1) shall not apply unless’’ and inserting ‘‘paragraph

(1) shall not apply. The preceding sentence shall not apply

to a substantial valuation overstatement under chapter 1 if’’.

(b) PENALTY ON APPRAISERS WHOSE APPRAISALS RESULT IN

SUBSTANTIAL OR GROSS VALUATION MISSTATEMENTS.— (1) IN GENERAL.—Part I of subchapter B of chapter 68

(relating to assessable penalties) is amended by inserting after

section 6695 the following new section:

‘‘SEC. 6695A. SUBSTANTIAL AND GROSS VALUATION MISSTATEMENTS

ATTRIBUTABLE TO INCORRECT APPRAISALS.

‘‘(a) IMPOSITION OF PENALTY.—If—

‘‘(1) a person prepares an appraisal of the value of property

and such person knows, or reasonably should have known,

that the appraisal would be used in connection with a return

or a claim for refund, and

‘‘(2) the claimed value of the property on a return or claim

for refund which is based on such appraisal results in a substantial valuation misstatement under chapter 1 (within the

meaning of section 6662(e)), or a gross valuation misstatement

(within the meaning of section 6662(h)), with respect to such

property, then such person shall pay a penalty in the amount

determined under subsection (b).

‘‘(b) AMOUNT OF PENALTY.—The amount of the penalty imposed

under subsection (a) on any person with respect to an appraisal

shall be equal to the lesser of—

‘‘(1) the greater of—

‘‘(A) 10 percent of the amount of the underpayment

(as defined in section 6664(a)) attributable to the

misstatement described in subsection (a)(2), or

‘‘(B) $1,000, or

‘‘(2) 125 percent of the gross income received by the person

described in subsection (a)(1) from the preparation of the

appraisal.

‘‘(c) EXCEPTION.—No penalty shall be imposed under subsection

(a) if the person establishes to the satisfaction of the Secretary

that the value established in the appraisal was more likely than

not the proper value.’’.

(2) RULES APPLICABLE TO PENALTY.—Section 6696 (relating

to rules applicable with respect to sections 6694 and 6695)

is amended—

(A) by striking ‘‘6694 and 6695’’ each place it appears

in the text and heading thereof and inserting ‘‘6694, 6695,

and 6695A’’, and

(B) by striking ‘‘6694 or 6695’’ each place it appears

in the text and inserting ‘‘6694, 6695, or 6695A’’.

(3) CONFORMING AMENDMENT.—The table of sections for

part I of subchapter B of chapter 68 is amended by striking

the item relating to section 6696 and inserting the following

new items:

‘‘Sec. 6695A. Substantial and gross valuation misstatements attributable to incorrect appraisals. ‘‘Sec. 6696. Rules applicable with respect to sections 6694, 6695, and 6695A.’’.

(c) QUALIFIED APPRAISERS AND APPRAISALS.—

26 USC 6695A.

26 USC 6664.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1085

(1) IN GENERAL.—Subparagraph (E) of section 170(f)(11)

is amended to read as follows:

‘‘(E) QUALIFIED APPRAISAL AND APPRAISER.—For purposes of this paragraph—

‘‘(i) QUALIFIED APPRAISAL.—The term ‘qualified

appraisal’ means, with respect to any property, an

appraisal of such property which—

‘‘(I) is treated for purposes of this paragraph

as a qualified appraisal under regulations or other

guidance prescribed by the Secretary, and

‘‘(II) is conducted by a qualified appraiser in

accordance with generally accepted appraisal

standards and any regulations or other guidance

prescribed under subclause (I).

‘‘(ii) QUALIFIED APPRAISER.—Except as provided in

clause (iii), the term ‘qualified appraiser’ means an

individual who—

‘‘(I) has earned an appraisal designation from

a recognized professional appraiser organization

or has otherwise met minimum education and

experience requirements set forth in regulations

prescribed by the Secretary,

‘‘(II) regularly performs appraisals for which

the individual receives compensation, and

‘‘(III) meets such other requirements as may

be prescribed by the Secretary in regulations or

other guidance.

‘‘(iii) SPECIFIC APPRAISALS.—An individual shall

not be treated as a qualified appraiser with respect

to any specific appraisal unless—

‘‘(I) the individual demonstrates verifiable education and experience in valuing the type of property subject to the appraisal, and

‘‘(II) the individual has not been prohibited

from practicing before the Internal Revenue

Service by the Secretary under section 330(c) of

title 31, United States Code, at any time during

the 3-year period ending on the date of the

appraisal.’’.

(2) REASONABLE CAUSE EXCEPTION.—Subparagraphs (B)

and (C) of section 6664(c)(3) are amended to read as follows:

‘‘(B) QUALIFIED APPRAISAL.—The term ‘qualified

appraisal’ has the meaning given such term by section

170(f)(11)(E)(i).

‘‘(C) QUALIFIED APPRAISER.—The term ‘qualified

appraiser’ has the meaning given such term by section

170(f)(11)(E)(ii).’’.

(d) DISCIPLINARY ACTIONS AGAINST APPRAISERS.—Section 330(c)

of title 31, United States Code, is amended by striking ‘‘with respect

to whom a penalty has been assessed under section 6701(a) of

the Internal Revenue Code of 1986’’.

(e) EFFECTIVE DATES.—

(1) MISSTATEMENT PENALTIES.—Except as provided in paragraph (3), the amendments made by subsection (a) shall apply

to returns filed after the date of the enactment of this Act.

(2) APPRAISER PROVISIONS.—Except as provided in paragraph (3), the amendments made by subsections (b), (c), and

Applicability.

26 USC 170 note.

Regulations.

26 USC 170.

120 STAT. 1086 PUBLIC LAW 109–280—AUG. 17, 2006

(d) shall apply to appraisals prepared with respect to returns

or submissions filed after the date of the enactment of this

Act.

(3) SPECIAL RULE FOR CERTAIN EASEMENTS.—In the case

of a contribution of a qualified real property interest which

is a restriction with respect to the exterior of a building

described in section 170(h)(4)(C)(ii) of the Internal Revenue

Code of 1986, and an appraisal with respect to the contribution,

the amendments made by subsections (a) and (b) shall apply

to returns filed after July 25, 2006.

SEC. 1220. ADDITIONAL STANDARDS FOR CREDIT COUNSELING

ORGANIZATIONS.

(a) IN GENERAL.—Section 501 (relating to exemption from tax

on corporations, certain trusts, etc.) is amended by redesignating

subsection (q) as subsection (r) and by inserting after subsection

(p) the following new subsection:

‘‘(q) SPECIAL RULES FOR CREDIT COUNSELING ORGANIZATIONS.—

‘‘(1) IN GENERAL.—An organization with respect to which

the provision of credit counseling services is a substantial purpose shall not be exempt from tax under subsection (a) unless

such organization is described in paragraph (3) or (4) of subsection (c) and such organization is organized and operated

in accordance with the following requirements:

‘‘(A) The organization—

‘‘(i) provides credit counseling services tailored to

the specific needs and circumstances of consumers,

‘‘(ii) makes no loans to debtors (other than loans

with no fees or interest) and does not negotiate the

making of loans on behalf of debtors,

‘‘(iii) provides services for the purpose of improving

a consumer’s credit record, credit history, or credit

rating only to the extent that such services are incidental to providing credit counseling services, and

‘‘(iv) does not charge any separately stated fee

for services for the purpose of improving any consumer’s credit record, credit history, or credit rating.

‘‘(B) The organization does not refuse to provide credit

counseling services to a consumer due to the inability of

the consumer to pay, the ineligibility of the consumer for

debt management plan enrollment, or the unwillingness

of the consumer to enroll in a debt management plan.

‘‘(C) The organization establishes and implements a

fee policy which—

‘‘(i) requires that any fees charged to a consumer

for services are reasonable,

‘‘(ii) allows for the waiver of fees if the consumer

is unable to pay, and

‘‘(iii) except to the extent allowed by State law,

prohibits charging any fee based in whole or in part

on a percentage of the consumer’s debt, the consumer’s

payments to be made pursuant to a debt management

plan, or the projected or actual savings to the consumer

resulting from enrolling in a debt management plan.

‘‘(D) At all times the organization has a board of directors or other governing body—

26 USC 501.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1087

‘‘(i) which is controlled by persons who represent

the broad interests of the public, such as public officials

acting in their capacities as such, persons having special knowledge or expertise in credit or financial education, and community leaders,

‘‘(ii) not more than 20 percent of the voting power

of which is vested in persons who are employed by

the organization or who will benefit financially, directly

or indirectly, from the organization’s activities (other

than through the receipt of reasonable directors’ fees

or the repayment of consumer debt to creditors other

than the credit counseling organization or its affiliates),

and

‘‘(iii) not more than 49 percent of the voting power

of which is vested in persons who are employed by

the organization or who will benefit financially, directly

or indirectly, from the organization’s activities (other

than through the receipt of reasonable directors’ fees).

‘‘(E) The organization does not own more than 35 percent of—

‘‘(i) the total combined voting power of any corporation (other than a corporation which is an organization

described in subsection (c)(3) and exempt from tax

under subsection (a)) which is in the trade or business

of lending money, repairing credit, or providing debt

management plan services, payment processing, or

similar services,

‘‘(ii) the profits interest of any partnership (other

than a partnership which is an organization described

in subsection (c)(3) and exempt from tax under subsection (a)) which is in the trade or business of lending

money, repairing credit, or providing debt management

plan services, payment processing, or similar services,

and

‘‘(iii) the beneficial interest of any trust or estate

(other than a trust which is an organization described

in subsection (c)(3) and exempt from tax under subsection (a)) which is in the trade or business of lending

money, repairing credit, or providing debt management

plan services, payment processing, or similar services.

‘‘(F) The organization receives no amount for providing

referrals to others for debt management plan services, and

pays no amount to others for obtaining referrals of consumers.

‘‘(2) ADDITIONAL REQUIREMENTS FOR ORGANIZATIONS

DESCRIBED IN SUBSECTION (c)(3).—

‘‘(A) IN GENERAL.—In addition to the requirements

under paragraph (1), an organization with respect to which

the provision of credit counseling services is a substantial

purpose and which is described in paragraph (3) of subsection (c) shall not be exempt from tax under subsection

(a) unless such organization is organized and operated

in accordance with the following requirements:

‘‘(i) The organization does not solicit contributions

from consumers during the initial counseling process

or while the consumer is receiving services from the

organization.

120 STAT. 1088 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) The aggregate revenues of the organization

which are from payments of creditors of consumers

of the organization and which are attributable to debt

management plan services do not exceed the applicable

percentage of the total revenues of the organization.

‘‘(B) APPLICABLE PERCENTAGE.— ‘‘(i) IN GENERAL.—For purposes of subparagraph

(A)(ii), the applicable percentage is 50 percent.

‘‘(ii) TRANSITION RULE.—Notwithstanding clause

(i), in the case of an organization with respect to which

the provision of credit counseling services is a substantial purpose and which is described in paragraph (3)

of subsection (c) and exempt from tax under subsection

(a) on the date of the enactment of this subsection,

the applicable percentage is—

‘‘(I) 80 percent for the first taxable year of

such organization beginning after the date which

is 1 year after the date of the enactment of this

subsection, and

‘‘(II) 70 percent for the second such taxable

year beginning after such date, and

‘‘(III) 60 percent for the third such taxable

year beginning after such date.

‘‘(3) ADDITIONAL REQUIREMENT FOR ORGANIZATIONS

DESCRIBED IN SUBSECTION (c)(4).—In addition to the requirements under paragraph (1), an organization with respect to

which the provision of credit counseling services is a substantial

purpose and which is described in paragraph (4) of subsection

(c) shall not be exempt from tax under subsection (a) unless

such organization notifies the Secretary, in such manner as

the Secretary may by regulations prescribe, that it is applying

for recognition as a credit counseling organization.

‘‘(4) CREDIT COUNSELING SERVICES; DEBT MANAGEMENT PLAN

SERVICES.—For purposes of this subsection—

‘‘(A) CREDIT COUNSELING SERVICES.—The term ‘credit

counseling services’ means—

‘‘(i) the providing of educational information to

the general public on budgeting, personal finance,

financial literacy, saving and spending practices, and

the sound use of consumer credit,

‘‘(ii) the assisting of individuals and families with

financial problems by providing them with counseling,

or

‘‘(iii) a combination of the activities described in

clauses (i) and (ii).

‘‘(B) DEBT MANAGEMENT PLAN SERVICES.—The term

‘debt management plan services’ means services related

to the repayment, consolidation, or restructuring of a consumer’s debt, and includes the negotiation with creditors

of lower interest rates, the waiver or reduction of fees,

and the marketing and processing of debt management

plans.’’.

(b) DEBT MANAGEMENT PLAN SERVICES TREATED AS AN UNRELATED BUSINESS.—Section 513 (relating to unrelated trade or business) is amended by adding at the end the following:

‘‘(j) DEBT MANAGEMENT PLAN SERVICES.—The term ‘unrelated

trade or business’ includes the provision of debt management plan

26 USC 513.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1089

services (as defined in section 501(q)(4)(B)) by any organization

other than an organization which meets the requirements of section

501(q).’’.

(c) EFFECTIVE DATE.— (1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to taxable years

beginning after the date of the enactment of this Act.

(2) TRANSITION RULE FOR EXISTING ORGANIZATIONS.—In the

case of any organization described in paragraph (3) or (4) of

section 501(c) of the Internal Revenue Code of 1986 and with

respect to which the provision of credit counseling services

is a substantial purpose on the date of the enactment of this

Act, the amendments made by this section shall apply to taxable

years beginning after the date which is 1 year after the date

of the enactment of this Act.

SEC. 1221. EXPANSION OF THE BASE OF TAX ON PRIVATE FOUNDATION

NET INVESTMENT INCOME.

(a) GROSS INVESTMENT INCOME.— (1) IN GENERAL.—Paragraph (2) of section 4940(c) (relating

to gross investment income) is amended by adding at the end

the following new sentence: ‘‘Such term shall also include

income from sources similar to those in the preceding sentence.’’.

(2) CONFORMING AMENDMENT.—Subsection (e) of section

509 (relating to gross investment income) is amended by adding

at the end the following new sentence: ‘‘Such term shall also

include income from sources similar to those in the preceding

sentence.’’.

(b) CAPITAL GAIN NET INCOME.—Paragraph (4) of section

4940(c) (relating to capital gains and losses) is amended—

(1) in subparagraph (A), by striking ‘‘used for the production of interest, dividends, rents, and royalties’’ and inserting

‘‘used for the production of gross investment income (as defined

in paragraph (2))’’,

(2) in subparagraph (C), by inserting ‘‘or carrybacks’’ after

‘‘carryovers’’, and

(3) by adding at the end the following new subparagraph:

‘‘(D) Except to the extent provided by regulation, under

rules similar to the rules of section 1031 (including the

exception under subsection (a)(2) thereof), no gain or loss

shall be taken into account with respect to any portion

of property used for a period of not less than 1 year for

a purpose or function constituting the basis of the private

foundation’s exemption if the entire property is exchanged

immediately following such period solely for property of

like kind which is to be used primarily for a purpose

or function constituting the basis for such foundation’s

exemption.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 1222. DEFINITION OF CONVENTION OR ASSOCIATION OF

CHURCHES.

Section 7701 (relating to definitions) is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

26 USC 509 note.

26 USC 4940.

26 USC 501 note.

120 STAT. 1090 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(o) CONVENTION OR ASSOCIATION OF CHURCHES.—For purposes

of this title, any organization which is otherwise a convention

or association of churches shall not fail to so qualify merely because

the membership of such organization includes individuals as well

as churches or because individuals have voting rights in such

organization.’’.

SEC. 1223. NOTIFICATION REQUIREMENT FOR ENTITIES NOT CURRENTLY REQUIRED TO FILE.

(a) IN GENERAL.—Section 6033 (relating to returns by exempt

organizations), as amended by this Act, is amended by redesignating

subsection (i) as subsection (j) and by inserting after subsection

(h) the following new subsection:

‘‘(i) ADDITIONAL NOTIFICATION REQUIREMENTS.—Any organization the gross receipts of which in any taxable year result in

such organization being referred to in subsection (a)(3)(A)(ii) or

(a)(3)(B)—

‘‘(1) shall furnish annually, in electronic form, and at such

time and in such manner as the Secretary may by regulations

prescribe, information setting forth—

‘‘(A) the legal name of the organization,

‘‘(B) any name under which such organization operates

or does business,

‘‘(C) the organization’s mailing address and Internet

web site address (if any),

‘‘(D) the organization’s taxpayer identification number,

‘‘(E) the name and address of a principal officer, and

‘‘(F) evidence of the continuing basis for the organization’s exemption from the filing requirements under subsection (a)(1), and

‘‘(2) upon the termination of the existence of the organization, shall furnish notice of such termination.’’.

(b) LOSS OF EXEMPT STATUS FOR FAILURE TO FILE RETURN

OR NOTICE.—Section 6033 (relating to returns by exempt organizations), as amended by subsection (a), is amended by redesignating

subsection (j) as subsection (k) and by inserting after subsection

(i) the following new subsection:

‘‘(j) LOSS OF EXEMPT STATUS FOR FAILURE TO FILE RETURN

OR NOTICE.—

‘‘(1) IN GENERAL.—If an organization described in subsection (a)(1) or (i) fails to file an annual return or notice

required under either subsection for 3 consecutive years, such

organization’s status as an organization exempt from tax under

section 501(a) shall be considered revoked on and after the

date set by the Secretary for the filing of the third annual

return or notice. The Secretary shall publish and maintain

a list of any organization the status of which is so revoked.

‘‘(2) APPLICATION NECESSARY FOR REINSTATEMENT.—Any

organization the tax-exempt status of which is revoked under

paragraph (1) must apply in order to obtain reinstatement

of such status regardless of whether such organization was

originally required to make such an application.

‘‘(3) RETROACTIVE REINSTATEMENT IF REASONABLE CAUSE

SHOWN FOR FAILURE.—If, upon application for reinstatement

of status as an organization exempt from tax under section

501(a), an organization described in paragraph (1) can show

to the satisfaction of the Secretary evidence of reasonable cause

Publication.

Records.

Revocation.

26 USC 6033.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1091

for the failure described in such paragraph, the organization’s

exempt status may, in the discretion of the Secretary, be

reinstated effective from the date of the revocation under such

paragraph.’’.

(c) NO DECLARATORY JUDGMENT RELIEF.—Section 7428(b)

(relating to limitations) is amended by adding at the end the following new paragraph:

‘‘(4) NONAPPLICATION FOR CERTAIN REVOCATIONS.—No

action may be brought under this section with respect to any

revocation of status described in section 6033(j)(1).’’.

(d) NO MONETARY PENALTY FOR FAILURE TO NOTIFY.—Section

6652(c)(1) (relating to annual returns under section 6033 or

6012(a)(6)) is amended by adding at the end the following new

subparagraph:

‘‘(E) NO PENALTY FOR CERTAIN ANNUAL NOTICES.—This

paragraph shall not apply with respect to any notice

required under section 6033(i).’’.

(e) SECRETARIAL OUTREACH REQUIREMENTS.—

(1) NOTICE REQUIREMENT.—The Secretary of the Treasury

shall notify in a timely manner every organization described

in section 6033(i) of the Internal Revenue Code of 1986 (as

added by this section) of the requirement under such section

6033(i) and of the penalty established under section 6033(j)

of such Code—

(A) by mail, in the case of any organization the identity

and address of which is included in the list of exempt

organizations maintained by the Secretary, and

(B) by Internet or other means of outreach, in the

case of any other organization.

(2) LOSS OF STATUS PENALTY FOR FAILURE TO FILE

RETURN.—The Secretary of the Treasury shall publicize, in

a timely manner in appropriate forms and instructions and

through other appropriate means, the penalty established under

section 6033(j) of such Code for the failure to file a return

under subsection (a)(1) or (i) of section 6033 of such Code.

(f) EFFECTIVE DATE.—The amendments made by this section

shall apply to notices and returns with respect to annual periods

beginning after 2006.

SEC. 1224. DISCLOSURE TO STATE OFFICIALS RELATING TO EXEMPT

ORGANIZATIONS.

(a) IN GENERAL.—Subsection (c) of section 6104 is amended

by striking paragraph (2) and inserting the following new paragraphs:

‘‘(2) DISCLOSURE OF PROPOSED ACTIONS RELATED TO CHARITABLE ORGANIZATIONS.—

‘‘(A) SPECIFIC NOTIFICATIONS.—In the case of an

organization to which paragraph (1) applies, the Secretary

may disclose to the appropriate State officer—

‘‘(i) a notice of proposed refusal to recognize such

organization as an organization described in section

501(c)(3) or a notice of proposed revocation of such

organization’s recognition as an organization exempt

from taxation,

‘‘(ii) the issuance of a letter of proposed deficiency

of tax imposed under section 507 or chapter 41 or

42, and

26 USC 6033

note.

Public

information.

26 USC 6033

note.

26 USC 7428.

120 STAT. 1092 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(iii) the names, addresses, and taxpayer identification numbers of organizations which have applied for

recognition as organizations described in section

501(c)(3).

‘‘(B) ADDITIONAL DISCLOSURES.—Returns and return

information of organizations with respect to which information is disclosed under subparagraph (A) may be made

available for inspection by or disclosed to an appropriate

State officer.

‘‘(C) PROCEDURES FOR DISCLOSURE.—Information may

be inspected or disclosed under subparagraph (A) or (B)

only—

‘‘(i) upon written request by an appropriate State

officer, and

‘‘(ii) for the purpose of, and only to the extent

necessary in, the administration of State laws regulating such organizations.

Such information may only be inspected by or disclosed

to a person other than the appropriate State officer if

such person is an officer or employee of the State and

is designated by the appropriate State officer to receive

the returns or return information under this paragraph

on behalf of the appropriate State officer.

‘‘(D) DISCLOSURES OTHER THAN BY REQUEST.—The Secretary may make available for inspection or disclose returns

and return information of an organization to which paragraph (1) applies to an appropriate State officer of any

State if the Secretary determines that such returns or

return information may constitute evidence of noncompliance under the laws within the jurisdiction of the appropriate State officer.

‘‘(3) DISCLOSURE WITH RESPECT TO CERTAIN OTHER EXEMPT

ORGANIZATIONS.—Upon written request by an appropriate State

officer, the Secretary may make available for inspection or

disclosure returns and return information of any organization

described in section 501(c) (other than organizations described

in paragraph (1) or (3) thereof) for the purpose of, and only

to the extent necessary in, the administration of State laws

regulating the solicitation or administration of the charitable

funds or charitable assets of such organizations. Such information may only be inspected by or disclosed to a person other

than the appropriate State officer if such person is an officer

or employee of the State and is designated by the appropriate

State officer to receive the returns or return information under

this paragraph on behalf of the appropriate State officer.

‘‘(4) USE IN CIVIL JUDICIAL AND ADMINISTRATIVE PROCEEDINGS.—Returns and return information disclosed pursuant

to this subsection may be disclosed in civil administrative and

civil judicial proceedings pertaining to the enforcement of State

laws regulating such organizations in a manner prescribed

by the Secretary similar to that for tax administration proceedings under section 6103(h)(4).

‘‘(5) NO DISCLOSURE IF IMPAIRMENT.—Returns and return

information shall not be disclosed under this subsection, or

in any proceeding described in paragraph (4), to the extent

that the Secretary determines that such disclosure would seriously impair Federal tax administration.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1093

‘‘(6) DEFINITIONS.—For purposes of this subsection—

‘‘(A) RETURN AND RETURN INFORMATION.—The terms

‘return’ and ‘return information’ have the respective

meanings given to such terms by section 6103(b).

‘‘(B) APPROPRIATE STATE OFFICER.—The term ‘appropriate State officer’ means—

‘‘(i) the State attorney general,

‘‘(ii) the State tax officer,

‘‘(iii) in the case of an organization to which paragraph (1) applies, any other State official charged with

overseeing organizations of the type described in section 501(c)(3), and

‘‘(iv) in the case of an organization to which paragraph (3) applies, the head of an agency designated

by the State attorney general as having primary

responsibility for overseeing the solicitation of funds

for charitable purposes.’’.

(b) CONFORMING AMENDMENTS.—

(1) Paragraph (2) of section 6103(a) is amended by inserting

‘‘or section 6104(c)’’ after ‘‘this section’’.

(2) Subparagraph (A) of section 6103(p)(3) is amended by

inserting ‘‘and section 6104(c)’’ after ‘‘section’’ in the first sentence.

(3) Paragraph (4) of section 6103(p) is amended—

(A) in the matter preceding subparagraph (A), by

inserting ‘‘, any appropriate State officer (as defined in

section 6104(c)),’’ before ‘‘or any other person’’,

(B) in subparagraph (F)(i), by inserting ‘‘any appropriate State officer (as defined in section 6104(c)),’’ before

‘‘or any other person’’, and

(C) in the matter following subparagraph (F), by

inserting ‘‘, an appropriate State officer (as defined in section 6104(c)),’’ after ‘‘including an agency’’ each place it

appears.

(4) The heading for paragraph (1) of section 6104(c) is

amended by inserting ‘‘FOR CHARITABLE ORGANIZATIONS’’ after

‘‘RULE’’.

(5) Paragraph (2) of section 7213(a) is amended by inserting

‘‘or under section 6104(c)’’ after ‘‘6103’’.

(6) Paragraph (2) of section 7213A(a) is amended by

inserting ‘‘or under section 6104(c)’’ after ‘‘7213(a)(2)’’.

(7) Paragraph (2) of section 7431(a) is amended by inserting

‘‘or in violation of section 6104(c)’’ after ‘‘6103’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall take effect on the date of the enactment of this Act but

shall not apply to requests made before such date.

SEC. 1225. PUBLIC DISCLOSURE OF INFORMATION RELATING TO UNRELATED BUSINESS INCOME TAX RETURNS.

(a) IN GENERAL.—Subparagraph (A) of section 6104(d)(1) is

amended by redesignating clauses (ii) and (iii) as clauses (iii) and

(iv), respectively, and by inserting after clause (i) the following

new clause:

‘‘(ii) any annual return filed under section 6011

which relates to any tax imposed by section 511

(relating to imposition of tax on unrelated business

income of charitable, etc., organizations) by such

26 USC 6103.

120 STAT. 1094 PUBLIC LAW 109–280—AUG. 17, 2006

organization, but only if such organization is described

in section 501(c)(3),’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to returns filed after the date of the enactment of

this Act.

SEC. 1226. STUDY ON DONOR ADVISED FUNDS AND SUPPORTING

ORGANIZATIONS.

(a) STUDY.—The Secretary of the Treasury shall undertake

a study on the organization and operation of donor advised funds

(as defined in section 4966(d)(2) of the Internal Revenue Code

of 1986, as added by this Act) and of organizations described in

section 509(a)(3) of such Code. The study shall specifically consider—

(1) whether the deductions allowed for the income, gift,

or estate taxes for charitable contributions to sponsoring

organizations (as defined in section 4966(d)(1) of such Code,

as added by this Act) of donor advised funds or to organizations

described in section 509(a)(3) of such Code are appropriate

in consideration of—

(A) the use of contributed assets (including the type,

extent, and timing of such use), or

(B) the use of the assets of such organizations for

the benefit of the person making the charitable contribution

(or a person related to such person),

(2) whether donor advised funds should be required to

distribute for charitable purposes a specified amount (whether

based on the income or assets of the fund) in order to ensure

that the sponsoring organization with respect to such donor

advised fund is operating consistent with the purposes or functions constituting the basis for its exemption under section

501, or its status as an organization described in section 509(a),

of such Code,

(3) whether the retention by donors to organizations

described in paragraph (1) of rights or privileges with respect

to amounts transferred to such organizations (including

advisory rights or privileges with respect to the making of

grants or the investment of assets) is consistent with the treatment of such transfers as completed gifts that qualify for a

deduction for income, gift, or estate taxes, and

(4) whether the issues raised by paragraphs (1), (2), and

(3) are also issues with respect to other forms of charities

or charitable donations.

(b) REPORT.—Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall submit to

the Committee on Finance of the Senate and the Committee on

Ways and Means of the House of Representatives a report on

the study conducted under subsection (a) and make such recommendations as the Secretary of the Treasury considers appropriate.

PART 2—IMPROVED ACCOUNTABILITY OF

DONOR ADVISED FUNDS

SEC. 1231. EXCISE TAXES RELATING TO DONOR ADVISED FUNDS.

(a) IN GENERAL.—Chapter 42 (relating to private foundations

and certain other tax-exempt organizations), as amended by the

26 USC 6104

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1095

Tax Increase Prevention and Reconciliation Act of 2005, is amended

by adding at the end the following new subchapter:

‘‘Subchapter G—Donor Advised Funds

‘‘Sec. 4966. Taxes on taxable distributions.

‘‘Sec. 4967. Taxes on prohibited benefits.

‘‘SEC. 4966. TAXES ON TAXABLE DISTRIBUTIONS.

‘‘(a) IMPOSITION OF TAXES.— ‘‘(1) ON THE SPONSORING ORGANIZATION.—There is hereby

imposed on each taxable distribution a tax equal to 20 percent

of the amount thereof. The tax imposed by this paragraph

shall be paid by the sponsoring organization with respect to

the donor advised fund.

‘‘(2) ON THE FUND MANAGEMENT.—There is hereby imposed

on the agreement of any fund manager to the making of a

distribution, knowing that it is a taxable distribution, a tax

equal to 5 percent of the amount thereof. The tax imposed

by this paragraph shall be paid by any fund manager who

agreed to the making of the distribution.

‘‘(b) SPECIAL RULES.—For purposes of subsection (a)—

‘‘(1) JOINT AND SEVERAL LIABILITY.—If more than one person is liable under subsection (a)(2) with respect to the making

of a taxable distribution, all such persons shall be jointly and

severally liable under such paragraph with respect to such

distribution.

‘‘(2) LIMIT FOR MANAGEMENT.—With respect to any one

taxable distribution, the maximum amount of the tax imposed

by subsection (a)(2) shall not exceed $10,000.

‘‘(c) TAXABLE DISTRIBUTION.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘taxable distribution’ means

any distribution from a donor advised fund—

‘‘(A) to any natural person, or

‘‘(B) to any other person if—

‘‘(i) such distribution is for any purpose other than

one specified in section 170(c)(2)(B), or

‘‘(ii) the sponsoring organization does not exercise

expenditure responsibility with respect to such distribution in accordance with section 4945(h).

‘‘(2) EXCEPTIONS.—Such term shall not include any distribution from a donor advised fund—

‘‘(A) to any organization described in section

170(b)(1)(A) (other than a disqualified supporting organization),

‘‘(B) to the sponsoring organization of such donor

advised fund, or

‘‘(C) to any other donor advised fund.

‘‘(d) DEFINITIONS.—For purposes of this subchapter—

‘‘(1) SPONSORING ORGANIZATION.—The term ‘sponsoring

organization’ means any organization which—

‘‘(A) is described in section 170(c) (other than in paragraph (1) thereof, and without regard to paragraph (2)(A)

thereof),

‘‘(B) is not a private foundation (as defined in section

509(a)), and

‘‘(C) maintains 1 or more donor advised funds.

‘‘(2) DONOR ADVISED FUND.—

26 USC 4966.

120 STAT. 1096 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(A) IN GENERAL.—Except as provided in subparagraph

(B) or (C), the term ‘donor advised fund’ means a fund

or account—

‘‘(i) which is separately identified by reference to

contributions of a donor or donors,

‘‘(ii) which is owned and controlled by a sponsoring

organization, and

‘‘(iii) with respect to which a donor (or any person

appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect

to the distribution or investment of amounts held in

such fund or account by reason of the donor’s status

as a donor.

‘‘(B) EXCEPTIONS.—The term ‘donor advised fund’ shall

not include any fund or account—

‘‘(i) which makes distributions only to a single

identified organization or governmental entity, or

‘‘(ii) with respect to which a person described in

subparagraph (A)(iii) advises as to which individuals

receive grants for travel, study, or other similar purposes, if—

‘‘(I) such person’s advisory privileges are performed exclusively by such person in the person’s

capacity as a member of a committee all of the

members of which are appointed by the sponsoring

organization,

‘‘(II) no combination of persons described in

subparagraph (A)(iii) (or persons related to such

persons) control, directly or indirectly, such committee, and

‘‘(III) all grants from such fund or account

are awarded on an objective and nondiscriminatory

basis pursuant to a procedure approved in advance

by the board of directors of the sponsoring

organization, and such procedure is designed to

ensure that all such grants meet the requirements

of paragraph (1), (2), or (3) of section 4945(g).

‘‘(C) SECRETARIAL AUTHORITY.—The Secretary may

exempt a fund or account not described in subparagraph

(B) from treatment as a donor advised fund—

‘‘(i) if such fund or account is advised by a committee not directly or indirectly controlled by the donor

or any person appointed or designated by the donor

for the purpose of advising with respect to distributions

from such fund (and any related parties), or

‘‘(ii) if such fund benefits a single identified charitable purpose.

‘‘(3) FUND MANAGER.—The term ‘fund manager’ means, with

respect to any sponsoring organization—

‘‘(A) an officer, director, or trustee of such sponsoring

organization (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of

the sponsoring organization), and

‘‘(B) with respect to any act (or failure to act), the

employees of the sponsoring organization having authority

or responsibility with respect to such act (or failure to

act).

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1097

‘‘(4) DISQUALIFIED SUPPORTING ORGANIZATION.—

‘‘(A) IN GENERAL.—The term ‘disqualified supporting

organization’ means, with respect to any distribution—

‘‘(i) any type III supporting organization (as

defined in section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as

defined in section 4943(f)(5)(B)), and

‘‘(ii) any organization which is described in

subparagraph (B) or (C) if—

‘‘(I) the donor or any person designated by

the donor for the purpose of advising with respect

to distributions from a donor advised fund (and

any related parties) directly or indirectly controls

a supported organization (as defined in section

509(f)(3)) of such organization, or

‘‘(II) the Secretary determines by regulations

that a distribution to such organization otherwise

is inappropriate.

‘‘(B) TYPE I AND TYPE II SUPPORTING ORGANIZATIONS.—

An organization is described in this subparagraph if the

organization meets the requirements of subparagraphs (A)

and (C) of section 509(a)(3) and is—

‘‘(i) operated, supervised, or controlled by one or

more organizations described in paragraph (1) or (2)

of section 509(a), or

‘‘(ii) supervised or controlled in connection with

one or more such organizations.

‘‘(C) FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

ORGANIZATIONS.—An organization is described in this

subparagraph if the organization is a functionally

integrated type III supporting organization (as defined

under section 4943(f)(5)(B)).

‘‘SEC. 4967. TAXES ON PROHIBITED BENEFITS.

‘‘(a) IMPOSITION OF TAXES.—

‘‘(1) ON THE DONOR, DONOR ADVISOR, OR RELATED PERSON.—

There is hereby imposed on the advice of any person described

in subsection (d) to have a sponsoring organization make a

distribution from a donor advised fund which results in such

person or any other person described in subsection (d) receiving,

directly or indirectly, a more than incidental benefit as a result

of such distribution, a tax equal to 125 percent of such benefit.

The tax imposed by this paragraph shall be paid by any person

described in subsection (d) who advises as to the distribution

or who receives such a benefit as a result of the distribution.

‘‘(2) ON THE FUND MANAGEMENT.—There is hereby imposed

on the agreement of any fund manager to the making of a

distribution, knowing that such distribution would confer a

benefit described in paragraph (1), a tax equal to 10 percent

of the amount of such benefit. The tax imposed by this paragraph shall be paid by any fund manager who agreed to the

making of the distribution.

‘‘(b) EXCEPTION.—No tax shall be imposed under this section

with respect to any distribution if a tax has been imposed with

respect to such distribution under section 4958.

‘‘(c) SPECIAL RULES.—For purposes of subsection (a)—

26 USC 4967.

Regulations.

120 STAT. 1098 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(1) JOINT AND SEVERAL LIABILITY.—If more than one person is liable under paragraph (1) or (2) of subsection (a) with

respect to a distribution described in subsection (a), all such

persons shall be jointly and severally liable under such paragraph with respect to such distribution.

‘‘(2) LIMIT FOR MANAGEMENT.—With respect to any one

distribution described in subsection (a), the maximum amount

of the tax imposed by subsection (a)(2) shall not exceed $10,000.

‘‘(d) PERSON DESCRIBED.—A person is described in this subsection if such person is described in section 4958(f)(7) with respect

to a donor advised fund.’’.

(b) CONFORMING AMENDMENTS.— (1) Section 4963 is amended by inserting ‘‘4966, 4967,’’

after ‘‘4958,’’ each place it appears in subsections (a) and (c).

(2) The table of subchapters for chapter 42 is amended

by adding at the end the following new item:

‘‘SUBCHAPTER G—DONOR ADVISED FUNDS’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 1232. EXCESS BENEFIT TRANSACTIONS INVOLVING DONOR

ADVISED FUNDS AND SPONSORING ORGANIZATIONS.

(a) DISQUALIFIED PERSONS.—

(1) IN GENERAL.—Paragraph (1) of section 4958(f) is

amended by striking ‘‘and’’ at the end of subparagraph (B),

by striking the period at the end of subparagraph (C) and

inserting a comma, and by adding after subparagraph (C) the

following new subparagraphs:

‘‘(D) which involves a donor advised fund (as defined

in section 4966(d)(2)), any person who is described in paragraph (7) with respect to such donor advised fund (as

so defined), and

‘‘(E) which involves a sponsoring organization (as

defined in section 4966(d)(1)), any person who is described

in paragraph (8) with respect to such sponsoring organization (as so defined).’’.

(2) DONORS, DONOR ADVISORS, AND INVESTMENT ADVISORS

TREATED AS DISQUALIFIED PERSONS.—Section 4958(f) is amended

by adding at the end the following new paragraphs:

‘‘(7) DONORS AND DONOR ADVISORS.—For purposes of paragraph (1)(E), a person is described in this paragraph if such

person—

‘‘(A) is described in section 4966(d)(2)(A)(iii),

‘‘(B) is a member of the family of an individual

described in subparagraph (A), or

‘‘(C) is a 35-percent controlled entity (as defined in

paragraph (3) by substituting ‘persons described in

subparagraph (A) or (B) of paragraph (7)’ for ‘persons

described in subparagraph (A) or (B) of paragraph (1)’

in subparagraph (A)(i) thereof).

‘‘(8) INVESTMENT ADVISORS.—For purposes of paragraph

(1)(F)—

‘‘(A) IN GENERAL.—A person is described in this paragraph if such person—

‘‘(i) is an investment advisor,

26 USC 4963

note.

26 USC 4963.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1099

‘‘(ii) is a member of the family of an individual

described in clause (i), or

‘‘(iii) is a 35-percent controlled entity (as defined

in paragraph (3) by substituting ‘persons described

in clause (i) or (ii) of paragraph (8)(A)’ for ‘persons

described in subparagraph (A) or (B) of paragraph

(1)’ in subparagraph (A)(i) thereof).

‘‘(B) INVESTMENT ADVISOR DEFINED.—For purposes of

subparagraph (A), the term ‘investment advisor’ means,

with respect to any sponsoring organization (as defined

in section 4966(d)(1)), any person (other than an employee

of such organization) compensated by such organization

for managing the investment of, or providing investment

advice with respect to, assets maintained in donor advised

funds (as defined in section 4966(d)(2)) owned by such

organization.’’.

(b) CERTAIN TRANSACTIONS TREATED AS EXCESS BENEFIT TRANSACTIONS.—

(1) IN GENERAL.—Section 4958(c) is amended by redesignating paragraph (2) as paragraph (3) and by inserting after

paragraph (1) the following new paragraph:

‘‘(2) SPECIAL RULES FOR DONOR ADVISED FUNDS.—In the

case of any donor advised fund (as defined in section

4966(d)(2))—

‘‘(A) the term ‘excess benefit transaction’ includes any

grant, loan, compensation, or other similar payment from

such fund to a person described in subsection (f)(7) with

respect to such fund, and

‘‘(B) the term ‘excess benefit’ includes, with respect

to any transaction described in subparagraph (A), the

amount of any such grant, loan, compensation, or other

similar payment.’’.

(2) SPECIAL RULE FOR CORRECTION OF TRANSACTION.—Section 4958(f)(6) is amended by inserting ‘‘, except that in the

case of any correction of an excess benefit transaction described

in subsection (c)(2), no amount repaid in a manner prescribed

by the Secretary may be held in any donor advised fund’’

after ‘‘standards’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to transactions occurring after the date of the enactment

of this Act.

SEC. 1233. EXCESS BUSINESS HOLDINGS OF DONOR ADVISED FUNDS.

(a) IN GENERAL.—Section 4943 is amended by adding at the

end the following new subsection:

‘‘(e) APPLICATION OF TAX TO DONOR ADVISED FUNDS.—

‘‘(1) IN GENERAL.—For purposes of this section, a donor

advised fund (as defined in section 4966(d)(2)) shall be treated

as a private foundation.

‘‘(2) DISQUALIFIED PERSON.—In applying this section to any

donor advised fund (as so defined), the term ‘disqualified person’

means, with respect to the donor advised fund, any person

who is—

‘‘(A) described in section 4966(d)(2)(A)(iii),

‘‘(B) a member of the family of an individual described

in subparagraph (A), or

26 USC 4958

note.

26 USC 4958.

120 STAT. 1100 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(C) a 35-percent controlled entity (as defined in section

4958(f)(3) by substituting ‘persons described in subparagraph (A) or (B) of section 4943(e)(2)’ for ‘persons described

in subparagraph (A) or (B) of paragraph (1)’ in subparagraph (A)(i) thereof).

‘‘(3) PRESENT HOLDINGS.—For purposes of this subsection,

rules similar to the rules of paragraphs (4), (5), and (6) of

subsection (c) shall apply to donor advised funds (as so defined),

except that—

‘‘(A) ‘the date of the enactment of this subsection’ shall

be substituted for ‘May 26, 1969’ each place it appears

in paragraphs (4), (5), and (6), and

‘‘(B) ‘January 1, 2007’ shall be substituted for ‘January

1, 1970’ in paragraph (4)(E).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 1234. TREATMENT OF CHARITABLE CONTRIBUTION DEDUCTIONS

TO DONOR ADVISED FUNDS.

(a) INCOME.—Section 170(f) (relating to disallowance of deduction in certain cases and special rules), as amended by this Act,

is amended by adding at the end the following new paragraph:

‘‘(18) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction otherwise allowed under subsection (a) for any contribution

to a donor advised fund (as defined in section 4966(d)(2)) shall

only be allowed if—

‘‘(A) the sponsoring organization (as defined in section

4966(d)(1)) with respect to such donor advised fund is not—

‘‘(i) described in paragraph (3), (4), or (5) of subsection (c), or

‘‘(ii) a type III supporting organization (as defined

in section 4943(f)(5)(A)) which is not a functionally

integrated type III supporting organization (as defined

in section 4943(f)(5)(B)), and

‘‘(B) the taxpayer obtains a contemporaneous written

acknowledgment (determined under rules similar to the

rules of paragraph (8)(C)) from the sponsoring organization

(as so defined) of such donor advised fund that such

organization has exclusive legal control over the assets

contributed.’’.

(b) ESTATE.—Section 2055(e) is amended by adding at the end

the following new paragraph:

‘‘(5) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction otherwise allowed under subsection (a) for any contribution

to a donor advised fund (as defined in section 4966(d)(2)) shall

only be allowed if—

‘‘(A) the sponsoring organization (as defined in section

4966(d)(1)) with respect to such donor advised fund is not—

‘‘(i) described in paragraph (3) or (4) of subsection

(a), or

‘‘(ii) a type III supporting organization (as defined

in section 4943(f)(5)(A)) which is not a functionally

integrated type III supporting organization (as defined

in section 4943(f)(5)(B)), and

‘‘(B) the taxpayer obtains a contemporaneous written

acknowledgment (determined under rules similar to the

26 USC 170.

26 USC 4943

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1101

rules of section 170(f)(8)(C)) from the sponsoring organization (as so defined) of such donor advised fund that such

organization has exclusive legal control over the assets

contributed.’’.

(c) GIFT.—Section 2522(c) is amended by adding at the end

the following new paragraph:

‘‘(5) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction otherwise allowed under subsection (a) for any contribution

to a donor advised fund (as defined in section 4966(d)(2)) shall

only be allowed if—

‘‘(A) the sponsoring organization (as defined in section

4966(d)(1)) with respect to such donor advised fund is not—

‘‘(i) described in paragraph (3) or (4) of subsection

(a), or

‘‘(ii) a type III supporting organization (as defined

in section 4943(f)(5)(A)) which is not a functionally

integrated type III supporting organization (as defined

in section 4943(f)(5)(B)), and

‘‘(B) the taxpayer obtains a contemporaneous written

acknowledgment (determined under rules similar to the

rules of section 170(f)(8)(C)) from the sponsoring organization (as so defined) of such donor advised fund that such

organization has exclusive legal control over the assets

contributed.’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to contributions made after the date which is 180

days after the date of the enactment of this Act.

SEC. 1235. RETURNS OF, AND APPLICATIONS FOR RECOGNITION BY,

SPONSORING ORGANIZATIONS.

(a) MATTERS INCLUDED ON RETURNS.—

(1) IN GENERAL.—Section 6033, as amended by this Act,

is amended by redesignating subsection (k) as subsection (l)

and by inserting after subsection (j) the following new subsection:

‘‘(k) ADDITIONAL PROVISIONS RELATING TO SPONSORING

ORGANIZATIONS.—Every organization described in section 4966(d)(1)

shall, on the return required under subsection (a) for the taxable

year—

‘‘(1) list the total number of donor advised funds (as defined

in section 4966(d)(2)) it owns at the end of such taxable year,

‘‘(2) indicate the aggregate value of assets held in such

funds at the end of such taxable year, and

‘‘(3) indicate the aggregate contributions to and grants

made from such funds during such taxable year.’’.

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to returns filed for taxable years ending

after the date of the enactment of this Act.

(b) MATTERS INCLUDED ON EXEMPT STATUS APPLICATION.—

(1) IN GENERAL.—Section 508 is amended by adding at

the end the following new subsection:

‘‘(f) ADDITIONAL PROVISIONS RELATING TO SPONSORING

ORGANIZATIONS.—A sponsoring organization (as defined in section

4966(d)(1)) shall give notice to the Secretary (in such manner as

the Secretary may provide) whether such organization maintains

or intends to maintain donor advised funds (as defined in section

Notification.

26 USC 6033

note.

26 USC 170 note.

26 USC 2522.

120 STAT. 1102 PUBLIC LAW 109–280—AUG. 17, 2006

4966(d)(2)) and the manner in which such organization plans to

operate such funds.’’.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to organizations applying for tax-exempt

status after the date of the enactment of this Act.

PART 3—IMPROVED ACCOUNTABILITY OF

SUPPORTING ORGANIZATIONS

SEC. 1241. REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.

(a) TYPES OF SUPPORTING ORGANIZATIONS.—Subparagraph (B)

of section 509(a)(3) is amended to read as follows:

‘‘(B) is—

‘‘(i) operated, supervised, or controlled by one or

more organizations described in paragraph (1) or (2),

‘‘(ii) supervised or controlled in connection with

one or more such organizations, or

‘‘(iii) operated in connection with one or more such

organizations, and’’.

(b) REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.—Section

509 (relating to private foundation defined) is amended by adding

at the end the following new subsection:

‘‘(f) REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.— ‘‘(1) TYPE III SUPPORTING ORGANIZATIONS.—For purposes

of subsection (a)(3)(B)(iii), an organization shall not be considered to be operated in connection with any organization

described in paragraph (1) or (2) of subsection (a) unless such

organization meets the following requirements:

‘‘(A) RESPONSIVENESS.—For each taxable year beginning after the date of the enactment of this subsection,

the organization provides to each supported organization

such information as the Secretary may require to ensure

that such organization is responsive to the needs or

demands of the supported organization.

‘‘(B) FOREIGN SUPPORTED ORGANIZATIONS.— ‘‘(i) IN GENERAL.—The organization is not operated

in connection with any supported organization that

is not organized in the United States.

‘‘(ii) TRANSITION RULE FOR EXISTING ORGANIZA- TIONS.—If the organization is operated in connection

with an organization that is not organized in the

United States on the date of the enactment of this

subsection, clause (i) shall not apply until the first

day of the third taxable year of the organization beginning after the date of the enactment of this subsection.

‘‘(2) ORGANIZATIONS CONTROLLED BY DONORS.— ‘‘(A) IN GENERAL.—For purposes of subsection (a)(3)(B),

an organization shall not be considered to be—

‘‘(i) operated, supervised, or controlled by any

organization described in paragraph (1) or (2) of subsection (a), or

‘‘(ii) operated in connection with any organization

described in paragraph (1) or (2) of subsection (a),

if such organization accepts any gift or contribution from

any person described in subparagraph (B).

‘‘(B) PERSON DESCRIBED.—A person is described in this

subparagraph if, with respect to a supported organization

26 USC 509.

26 USC 508 note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1103

of an organization described in subparagraph (A), such

person is—

‘‘(i) a person (other than an organization described

in paragraph (1), (2), or (4) of section 509(a)) who

directly or indirectly controls, either alone or together

with persons described in clauses (ii) and (iii), the

governing body of such supported organization,

‘‘(ii) a member of the family (determined under

section 4958(f)(4)) of an individual described in clause

(i), or

‘‘(iii) a 35-percent controlled entity (as defined in

section 4958(f)(3) by substituting ‘persons described

in clause (i) or (ii) of section 509(f)(2)(B)’ for ‘persons

described in subparagraph (A) or (B) of paragraph

(1)’ in subparagraph (A)(i) thereof).

‘‘(3) SUPPORTED ORGANIZATION.—For purposes of this subsection, the term ‘supported organization’ means, with respect

to an organization described in subsection (a)(3), an organization described in paragraph (1) or (2) of subsection (a)—

‘‘(A) for whose benefit the organization described in

subsection (a)(3) is organized and operated, or

‘‘(B) with respect to which the organization performs

the functions of, or carries out the purposes of.’’.

(c) CHARITABLE TRUSTS WHICH ARE TYPE III SUPPORTING

ORGANIZATIONS.—For purposes of section 509(a)(3)(B)(iii) of the

Internal Revenue Code of 1986, an organization which is a trust

shall not be considered to be operated in connection with any

organization described in paragraph (1) or (2) of section 509(a)

of such Code solely because—

(1) it is a charitable trust under State law,

(2) the supported organization (as defined in section

509(f)(3) of such Code) is a beneficiary of such trust, and

(3) the supported organization (as so defined) has the power

to enforce the trust and compel an accounting.

(d) PAYOUT REQUIREMENTS FOR TYPE III SUPPORTING ORGANIZATIONS.—

(1) IN GENERAL.—The Secretary of the Treasury shall

promulgate new regulations under section 509 of the Internal

Revenue Code of 1986 on payments required by type III supporting organizations which are not functionally integrated type

III supporting organizations. Such regulations shall require

such organizations to make distributions of a percentage of

either income or assets to supported organizations (as defined

in section 509(f)(3) of such Code) in order to ensure that a

significant amount is paid to such organizations.

(2) TYPE III SUPPORTING ORGANIZATION; FUNCTIONALLY

INTEGRATED TYPE III SUPPORTING ORGANIZATION.—For purposes

of paragraph (1), the terms ‘‘type III supporting organization’’

and ‘‘functionally integrated type III supporting organization’’

have the meanings given such terms under subparagraphs

(A) and (B) section 4943(f)(5) of the Internal Revenue Code

of 1986 (as added by this Act), respectively.

(e) EFFECTIVE DATES.—

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

(a) and (b) shall take effect on the date of the enactment

of this Act.

26 USC 509 note.

Regulations.

26 USC 509 note.

26 USC 509 note.

120 STAT. 1104 PUBLIC LAW 109–280—AUG. 17, 2006

(2) CHARITABLE TRUSTS WHICH ARE TYPE III SUPPORTING

ORGANIZATIONS.—Subsection (c) shall take effect—

(A) in the case of trusts operated in connection with

an organization described in paragraph (1) or (2) of section

509(a) of the Internal Revenue Code of 1986 on the date

of the enactment of this Act, on the date that is one

year after the date of the enactment of this Act, and

(B) in the case of any other trust, on the date of

the enactment of this Act.

SEC. 1242. EXCESS BENEFIT TRANSACTIONS INVOLVING SUPPORTING

ORGANIZATIONS.

(a) DISQUALIFIED PERSONS.—Paragraph (1) of section 4958(f),

as amended by this Act, is amended by redesignating subparagraphs

(D) and (E) as subparagraphs (E) and (F), respectively, and by

adding after subparagraph (C) the following new subparagraph:

‘‘(D) any person who is described in subparagraph (A),

(B), or (C) with respect to an organization described in

section 509(a)(3) and organized and operated exclusively

for the benefit of, to perform the functions of, or to carry

out the purposes of the applicable tax-exempt organization.’’.

(b) CERTAIN TRANSACTIONS TREATED AS EXCESS BENEFIT TRANSACTIONS.—Section 4958(c), as amended by this Act, is amended

by redesignating paragraph (3) as paragraph (4) and by inserting

after paragraph (2) the following new paragraph:

‘‘(3) SPECIAL RULES FOR SUPPORTING ORGANIZATIONS.—

‘‘(A) IN GENERAL.—In the case of any organization

described in section 509(a)(3)—

‘‘(i) the term ‘excess benefit transaction’ includes—

‘‘(I) any grant, loan, compensation, or other

similar payment provided by such organization to

a person described in subparagraph (B), and

‘‘(II) any loan provided by such organization

to a disqualified person (other than an organization described in paragraph (1), (2), or (4) of section

509(a)), and

‘‘(ii) the term ‘excess benefit’ includes, with respect

to any transaction described in clause (i), the amount

of any such grant, loan, compensation, or other similar

payment.

‘‘(B) PERSON DESCRIBED.—A person is described in this

subparagraph if such person is—

‘‘(i) a substantial contributor to such organization,

‘‘(ii) a member of the family (determined under

section 4958(f)(4)) of an individual described in clause

(i), or

‘‘(iii) a 35-percent controlled entity (as defined in

section 4958(f)(3) by substituting ‘persons described

in clause (i) or (ii) of section 4958(c)(3)(B)’ for ‘persons

described in subparagraph (A) or (B) of paragraph

(1)’ in subparagraph (A)(i) thereof).

‘‘(C) SUBSTANTIAL CONTRIBUTOR.—For purposes of this

paragraph—

‘‘(i) IN GENERAL.—The term ‘substantial contributor’ means any person who contributed or bequeathed

an aggregate amount of more than $5,000 to the

26 USC 4958.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1105

organization, if such amount is more than 2 percent

of the total contributions and bequests received by

the organization before the close of the taxable year

of the organization in which the contribution or bequest

is received by the organization from such person. In

the case of a trust, such term also means the creator

of the trust. Rules similar to the rules of subparagraphs

(B) and (C) of section 507(d)(2) shall apply for purposes

of this subparagraph.

‘‘(ii) EXCEPTION.—Such term shall not include any

organization described in paragraph (1), (2), or (4) of

section 509(a).’’.

(c) EFFECTIVE DATES.— (1) SUBSECTION (a).—The amendments made by subsection

(a) shall apply to transactions occurring after the date of the

enactment of this Act.

(2) SUBSECTION (b).—The amendments made by subsection

(a) shall apply to transactions occurring after July 25, 2006.

SEC. 1243. EXCESS BUSINESS HOLDINGS OF SUPPORTING ORGANIZATIONS.

(a) IN GENERAL.—Section 4943, as amended by this Act, is

amended by adding at the end the following new subsection:

‘‘(f) APPLICATION OF TAX TO SUPPORTING ORGANIZATIONS.—

‘‘(1) IN GENERAL.—For purposes of this section, an organization which is described in paragraph (3) shall be treated as

a private foundation.

‘‘(2) EXCEPTION.—The Secretary may exempt the excess

business holdings of any organization from the application of

this subsection if the Secretary determines that such holdings

are consistent with the purpose or function constituting the

basis for its exemption under section 501.

‘‘(3) ORGANIZATIONS DESCRIBED.—An organization is

described in this paragraph if such organization is—

‘‘(A) a type III supporting organization (other than

a functionally integrated type III supporting organization),

or

‘‘(B) an organization which meets the requirements

of subparagraphs (A) and (C) of section 509(a)(3) and which

is supervised or controlled in connection with one or more

organizations described in paragraph (1) or (2) of section

509(a), but only if such organization accepts any gift or

contribution from any person described in section

509(f)(2)(B).

‘‘(4) DISQUALIFIED PERSON.—

‘‘(A) IN GENERAL.—In applying this section to any

organization described in paragraph (3), the term ‘disqualified person’ means, with respect to the organization—

‘‘(i) any person who was, at any time during the

5-year period ending on the date described in subsection (a)(2)(A), in a position to exercise substantial

influence over the affairs of the organization,

‘‘(ii) any member of the family (determined under

section 4958(f)(4)) of an individual described in clause

(i),

‘‘(iii) any 35-percent controlled entity (as defined

in section 4958(f)(3) by substituting ‘persons described

26 USC 4943.

26 USC 4958

note.

120 STAT. 1106 PUBLIC LAW 109–280—AUG. 17, 2006

in clause (i) or (ii) of section 4943(f)(4)(A)’ for ‘persons

described in subparagraph (A) or (B) of paragraph

(1)’ in subparagraph (A)(i) thereof),

‘‘(iv) any person described in section 4958(c)(3)(B),

and

‘‘(v) any organization—

‘‘(I) which is effectively controlled (directly or

indirectly) by the same person or persons who

control the organization in question, or

‘‘(II) substantially all of the contributions to

which were made (directly or indirectly) by the

same person or persons described in subparagraph

(B) or a member of the family (within the meaning

of section 4946(d)) of such a person.

‘‘(B) PERSONS DESCRIBED.—A person is described in

this subparagraph if such person is—

‘‘(i) a substantial contributor to the organization

(as defined in section 4958(c)(3)(C)),

‘‘(ii) an officer, director, or trustee of the organization (or an individual having powers or responsibilities

similar to those of the officers, directors, or trustees

of the organization), or

‘‘(iii) an owner of more than 20 percent of—

‘‘(I) the total combined voting power of a corporation,

‘‘(II) the profits interest of a partnership, or

‘‘(III) the beneficial interest of a trust or

unincorporated enterprise,

which is a substantial contributor (as so defined) to

the organization.

‘‘(5) TYPE III SUPPORTING ORGANIZATION; FUNCTIONALLY

INTEGRATED TYPE III SUPPORTING ORGANIZATION.—For purposes

of this subsection—

‘‘(A) TYPE III SUPPORTING ORGANIZATION.—The term

‘type III supporting organization’ means an organization

which meets the requirements of subparagraphs (A) and

(C) of section 509(a)(3) and which is operated in connection

with one or more organizations described in paragraph

(1) or (2) of section 509(a).

‘‘(B) FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

ORGANIZATION.—The term ‘functionally integrated type III

supporting organization’ means a type III supporting

organization which is not required under regulations established by the Secretary to make payments to supported

organizations (as defined under section 509(f)(3)) due to

the activities of the organization related to performing

the functions of, or carrying out the purposes of, such

supported organizations.

‘‘(6) SPECIAL RULE FOR CERTAIN HOLDINGS OF TYPE III SUPPORTING ORGANIZATIONS.—For purposes of this subsection, the

term ‘excess business holdings’ shall not include any holdings

of a type III supporting organization in any business enterprise

if, as of November 18, 2005, the holdings were held (and at

all times thereafter, are held) for the benefit of the community

pursuant to the direction of a State attorney general or a

State official with jurisdiction over such organization.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1107

‘‘(7) PRESENT HOLDINGS.—For purposes of this subsection,

rules similar to the rules of paragraphs (4), (5), and (6) of

subsection (c) shall apply to organizations described in section

509(a)(3), except that—

‘‘(A) ‘the date of the enactment of this subsection’ shall

be substituted for ‘May 26, 1969’ each place it appears

in paragraphs (4), (5), and (6), and

‘‘(B) ‘January 1, 2007’ shall be substituted for ‘January

1, 1970’ in paragraph (4)(E).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 1244. TREATMENT OF AMOUNTS PAID TO SUPPORTING ORGANIZATIONS BY PRIVATE FOUNDATIONS.

(a) QUALIFYING DISTRIBUTIONS.—Paragraph (4) of section

4942(g) is amended to read as follows:

‘‘(4) LIMITATION ON DISTRIBUTIONS BY NONOPERATING PRIVATE FOUNDATIONS TO SUPPORTING ORGANIZATIONS.—

‘‘(A) IN GENERAL.—For purposes of this section, the

term ‘qualifying distribution’ shall not include any amount

paid by a private foundation which is not an operating

foundation to—

‘‘(i) any type III supporting organization (as

defined in section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as

defined in section 4943(f)(5)(B)), and

‘‘(ii) any organization which is described in

subparagraph (B) or (C) if—

‘‘(I) a disqualified person of the private foundation directly or indirectly controls such organization or a supported organization (as defined in

section 509(f)(3)) of such organization, or

‘‘(II) the Secretary determines by regulations

that a distribution to such organization otherwise

is inappropriate.

‘‘(B) TYPE I AND TYPE II SUPPORTING ORGANIZATIONS.—

An organization is described in this subparagraph if the

organization meets the requirements of subparagraphs (A)

and (C) of section 509(a)(3) and is—

‘‘(i) operated, supervised, or controlled by one or

more organizations described in paragraph (1) or (2)

of section 509(a), or

‘‘(ii) supervised or controlled in connection with

one or more such organizations.

‘‘(C) FUNCTIONALLY INTEGRATED TYPE III SUPPORTING

ORGANIZATIONS.—An organization is described in this

subparagraph if the organization is a functionally

integrated type III supporting organization (as defined

under section 4943(f)(5)(B)).’’.

(b) TAXABLE EXPENDITURES.—Subparagraph (A) of section

4945(d)(4) is amended to read as follows:

‘‘(A) such organization—

‘‘(i) is described in paragraph (1) or (2) of section

509(a),

Regulations.

26 USC 4942.

26 USC 4943

note.

Deadlines.

120 STAT. 1108 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘(ii) is an organization described in section

509(a)(3) (other than an organization described in

clause (i) or (ii) of section 4942(g)(4)(A)), or

‘‘(iii) is an exempt operating foundation (as defined

in section 4940(d)(2)), or’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to distributions and expenditures after the date of

the enactment of this Act.

SEC. 1245. RETURNS OF SUPPORTING ORGANIZATIONS.

(a) REQUIREMENT TO FILE RETURN.—Subparagraph (B) of section 6033(a)(3) is amended by inserting ‘‘(other than an organization

described in section 509(a)(3))’’ after ‘‘paragraph (1)’’.

(b) MATTERS INCLUDED ON RETURNS.—Section 6033, as

amended by this Act, is amended by redesignating subsection (l)

as subsection (m) and by inserting after subsection (k) the following

new subsection:

‘‘(l) ADDITIONAL PROVISIONS RELATING TO SUPPORTING

ORGANIZATIONS.—Every organization described in section 509(a)(3)

shall, on the return required under subsection (a)—

‘‘(1) list the supported organizations (as defined in section

509(f)(3)) with respect to which such organization provides support,

‘‘(2) indicate whether the organization meets the requirements of clause (i), (ii), or (iii) of section 509(a)(3)(B), and

‘‘(3) certify that the organization meets the requirements

of section 509(a)(3)(C).’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to returns filed for taxable years ending after the

date of the enactment of this Act.

TITLE XIII—OTHER PROVISIONS

SEC. 1301. TECHNICAL CORRECTIONS RELATING TO MINE SAFETY.

Section 110 of the Federal Mine Safety and Health Act of

1977 (30 U.S.C. 820), as amended by the Mine Improvement and

New Emergency Response Act of 2006 (Public Law 109–236), is

amended—

(1) by striking subsection (d); and

(2) in subsection (a)—

(A) by striking ‘‘(1)(1) The operator’’ and inserting ‘‘(1)

The operator’’;

(B) in the paragraph (2) added by section 8(a)(1)(B)

of the Mine Improvement and New Emergency Response

Act of 2006 (Public Law 109–236)—

(i) by striking ‘‘paragraph (1)’’ and inserting ‘‘subsection (a)(1)’’; and

(ii) by redesignating such paragraph as subsection

(d) and transferring such subsection so as to appear

after subsection (c); and

(3) in subsection (b)—

(A) by striking ‘‘Any operator’’ and inserting ‘‘(1) Any

operator’’; and

(B) in the second sentence, as added by section 8(a)(2)

of the Mine Improvement and New Emergency Response

Ante, p. 500.

26 USC 6033

note.

26 USC 6033.

26 USC 4942

note.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1109

Act of 2006 (Public Law 109–236), by striking ‘‘Violations’’

and inserting the following:

‘‘(2) Violations’’.

SEC. 1302. GOING-TO-THE-SUN ROAD.

(a) IN GENERAL.—Section 1940 of the Safe, Accountable,

Flexible, Efficient Transportation Equity Act: A Legacy for Users

(119 Stat. 1511) is amended—

(1) in subsection (a)—

(A) by striking paragraphs (1) and (2);

(B) by redesignating paragraphs (3) through (5) as

paragraphs (1) through (3), respectively; and (C) by striking ‘‘$10,000,000’’ each place that it appears and inserting ‘‘$16,666,666’’; and

(2) by adding at the end the following:

‘‘(c) CONTRACT AUTHORITY.—Except as otherwise provided in

this section, funds authorized to be appropriated under this section

shall be available for obligation in the same manner as if the

funds were apportioned under chapter 1 of title 23, United States

Code.’’.

(b) RESCISSION.—Section 10212 of the Safe, Accountable,

Flexible, Efficient Transportation Equity Act: A Legacy for Users

(119 Stat. 1937) is amended by striking ‘‘$8,543,000,000’’ each place

it appears and inserting ‘‘$8,593,000,000’’.

SEC. 1303. EXCEPTION TO THE LOCAL FURNISHING REQUIREMENT

OF THE TAX-EXEMPT BOND RULES.

(a) SNETTISHAM HYDROELECTRIC FACILITY.—For purposes of

determining whether any private activity bond issued before May

31, 2006, and used to finance the acquisition of the Snettisham

hydroelectric facility is a qualified bond for purposes of section

142(a)(8) of the Internal Revenue Code of 1986, the electricity

furnished by such facility to the City of Hoonah, Alaska, shall

not be taken into account for purposes of section 142(f)(1) of such

Code.

(b) LAKE DOROTHY HYDROELECTRIC FACILITY.—For purposes

of determining whether any private activity bond issued before

May 31, 2006, and used to finance the Lake Dorothy hydroelectric

facility is a qualified bond for purposes of section 142(a)(8) of

the Internal Revenue Code of 1986, the electricity furnished by

such facility to the City of Hoonah, Alaska, shall not be taken

into account for purposes of paragraphs (1) and (3) of section 142(f)

of such Code.

(c) DEFINITIONS.—For purposes of this section—

(1) LAKE DOROTHY HYDROELECTRIC FACILITY.—The term

‘‘Lake Dorothy hydroelectric facility’’ means the hydroelectric

facility located approximately 10 miles south of Juneau, Alaska,

and commonly referred to as the ‘‘Lake Dorothy project’’.

(2) SNETTISHAM HYDROELECTRIC FACILITY.—The term

‘‘Snettisham hydroelectric facility’’ means the hydroelectric

project described in section 1804 of the Small Business Job

Protection Act of 1996.

SEC. 1304. QUALIFIED TUITION PROGRAMS.

(a) PERMANENT EXTENSION OF MODIFICATIONS.—Section 901

of the Economic Growth and Tax Relief Reconciliation Act of 2001

(relating to sunset provisions) shall not apply to section 402 of

such Act (relating to modifications to qualified tuition programs).

26 USC 1 note.

23 USC 101 note.

120 STAT. 1110 PUBLIC LAW 109–280—AUG. 17, 2006

(b) REGULATORY AUTHORITY TO PREVENT ABUSE.—Section 529

(relating to qualified tuition programs) is amended by adding at

the end the following new subsection:

‘‘(f) REGULATIONS.—Notwithstanding any other provision of this

section, the Secretary shall prescribe such regulations as may be

necessary or appropriate to carry out the purposes of this section

and to prevent abuse of such purposes, including regulations under

chapters 11, 12, and 13 of this title.’’.

TITLE XIV—TARIFF PROVISIONS

SEC. 1401. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This title may be cited as the ‘‘Miscellaneous

Trade and Technical Corrections Act of 2006’’.

(b) TABLE OF CONTENTS.—The table of contents of this title

is as follows:

TITLE XIV—TARIFF PROVISIONS

Sec. 1401. Short title; table of contents.

Sec. 1402. Reference.

Subtitle A—Temporary Duty Suspensions and Reductions

CHAPTER 1—NEW DUTY SUSPENSIONS AND REDUCTIONS

Sec. 1411. Certain non-knit gloves designed for use by auto mechanics.

Sec. 1412. Certain microphones for use in automotive interiors.

Sec. 1413. Acrylic or modacrylic synthetic filament tow.

Sec. 1414. Acrylic or modacrylic synthetic staple fibers, carded, combed, or otherwise processed for spinning.

Sec. 1415. Nitrocellulose.

Sec. 1416. Potassium sorbate.

Sec. 1417. Sorbic acid.

Sec. 1418. Certain capers.

Sec. 1419. Certain pepperoncini prepared or preserved otherwise than by vinegar

or acetic acid.

Sec. 1420. Certain capers.

Sec. 1421. Certain pepperoncini prepared or preserved by vinegar or acetic acid in

concentrations at 0.5 percent or greater.

Sec. 1422. Certain pepperoncini prepared or preserved otherwise than by vinegar

or acetic acid in concentrations less than 0.5 percent.

Sec. 1423. Chloral.

Sec. 1424. Imidacloprid technical (imidacloprid).

Sec. 1425. Triadimefon.

Sec. 1426. Polyethylene HE1878.

Sec. 1427. Thiacloprid.

Sec. 1428. Pyrimethanil.

Sec. 1429. Foramsulfuron.

Sec. 1430. Fenamidone.

Sec. 1431. Cyclanilide technical.

Sec. 1432. Para-benzoquinone.

Sec. 1433. O-Anisidine.

Sec. 1434. 2,4-Xylidine.

Sec. 1435. Crotonaldehyde.

Sec. 1436. Butanedioic acid, dimethyl ester, polymer with 4-hydroxy-2,2,6,6,-

tetramethyl-1-piperidineethanol.

Sec. 1437. Mixtures of CAS Nos. 106990-43-6 and 65447-77-0.

Sec. 1438. MCPA.

Sec. 1439. Bronate advanced.

Sec. 1440. Bromoxynil octanoate tech.

Sec. 1441. Bromoxynil meo.

Sec. 1442. Hydraulic control units.

Sec. 1443. Shield asy-steering gear.

Sec. 1444. 2,4-Dichloroaniline.

Sec. 1445. 2-Acetylbutyrolactone.

Sec. 1446. Alkylketone.

Sec. 1447. Cyfluthrin (baythroid).

Miscellaneous

Trade and

Technical

Corrections Act

of 2006.

19 USC 1654

note.

26 USC 529.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1111

Sec. 1448. Beta-cyfluthrin.

Sec. 1449. Cyclopropane-1,1-dicarboxylic acid, dimethyl ester.

Sec. 1450. Spiroxamine.

Sec. 1451. Spiromesifen.

Sec. 1452. 4-Chlorobenzaldehyde.

Sec. 1453. Oxadiazon.

Sec. 1454. NAHP.

Sec. 1455. Phosphorus thiochloride.

Sec. 1456. Trifloxystrobin.

Sec. 1457. Phosphoric acid, lanthanum salt, cerium terbium-doped.

Sec. 1458. Lutetium oxide.

Sec. 1459. ACM.

Sec. 1460. Permethrin.

Sec. 1461. Thidiazuron.

Sec. 1462. Flutolanil.

Sec. 1463. Resmethrin.

Sec. 1464. Clothianidin.

Sec. 1465. Certain master cylinder assembles.

Sec. 1466. Certain transaxles.

Sec. 1467. Converter asy.

Sec. 1468. Module and bracket asy-power steering.

Sec. 1469. Unit asy-battery hi volt.

Sec. 1470. Certain articles of natural cork.

Sec. 1471. Glyoxylic acid.

Sec. 1472. Cyclopentanone.

Sec. 1473. Mesotrione technical.

Sec. 1474. Malonic acid-dinitrile 50% NMP.

Sec. 1475. Formulations of NOA 446510.

Sec. 1476. DEMBB distilled-ISO tank.

Sec. 1477. Methylionone.

Sec. 1478. Certain acrylic fiber tow.

Sec. 1479. Certain acrylic fiber tow.

Sec. 1480. MKH 6561 isocyanate.

Sec. 1481. Endosulfan.

Sec. 1482. Tetraconazole.

Sec. 1483. M-alcohol.

Sec. 1484. Certain machines for use in the assembly of motorcycle wheels.

Sec. 1485. Deltamethrin.

Sec. 1486. Palm fatty acid distillate.

Sec. 1487. 4-Methoxy-2-methyldiphenylamine.

Sec. 1488. 2-Methylhydroquinone.

Sec. 1489. 1-Fluoro-2-nitrobenzene.

Sec. 1490. Cosmetic bags with a flexible outer surface of reinforced or laminated

polyvinyl chloride (PVC).

Sec. 1491. Mixtures of methyl 4-iodo-2-[3-(4-methoxy-6-methyl-1,3,5-triazin-2-

yl)ureidosulfonyl]benzoate, sodium salt (iodosulfuron methyl, sodium

salt).

Sec. 1492. Ethyl 4,5-dihydro-5,5-diphenyl-1,2-oxazole-3-carboxylate (isoxadifenethyl).

Sec. 1493. (5-cyclopropyl-4-isoxazolyl)[2-(methylsulfonyl)–4-

(trifluoromethyl)phenyl]methanone (isoxaflutole).

Sec. 1494. Methyl 2-[(4,6-dimethoxypyrimidin-2-ylcarbamoyl)sulfamoyl]-α-

(methanesulfonamido)-p-toluate (mesosulfuron-methyl) whether or not

mixed with application adjuvants.

Sec. 1495. Mixtures of foramsulfuron and iodosulfuron-methyl-sodium.

Sec. 1496. Vulcuren UPKA 1988.

Sec. 1497. Vullcanox 41010 NA/LG.

Sec. 1498. Vulkazon AFS/LG.

Sec. 1499. P-Anisaldehyde.

Sec. 1500. 1,2-Pentanediol.

Sec. 1501. Agrumex.

Sec. 1502. Cohedur RL.

Sec. 1503. Formulations of prosulfuron.

Sec. 1504. Lewatit.

Sec. 1505. Para-Chlorophenol.

Sec. 1506. Cypermethrin.

Sec. 1507. Ion-exchange resin powder.

Sec. 1508. Ion-exchange resin powder.

Sec. 1509. Desmodur E 14.

Sec. 1510. Desmodur VP LS 2253.

Sec. 1511. Desmodur R-E.

Sec. 1512. Walocel MW 3000 PFV.

120 STAT. 1112 PUBLIC LAW 109–280—AUG. 17, 2006

Sec. 1513. TSME.

Sec. 1514. Walocel VP-M 20660.

Sec. 1515. Xama 2.

Sec. 1516. Xama 7.

Sec. 1517. Certain cases for toys.

Sec. 1518. Certain cases for toys.

Sec. 1519. Aniline 2.5-disulfonic acid.

Sec. 1520. 1,4-benzenedicarboxylic acid, polymer with n,n′-bis(2-aminoethyl)–1,2-

ethanediamine, cyclized, methosulfate.

Sec. 1521. Sulfur blue 7.

Sec. 1522. Formaldehyde, reaction products with 1,4-benzenediol and mphenylenediamine, sulfurized.

Sec. 1523. Isocyanatosulfonyl.

Sec. 1524. Isocyanatosulfonyl.

Sec. 1525. Gemifloxacin, gemifloxacin mesylate, and gemifloxacin mesylate

sesquihydrate.

Sec. 1526. Butralin.

Sec. 1527. Spirodiclofen.

Sec. 1528. Propamocarb HCL (PREVICUR).

Sec. 1529. Desmodur IL.

Sec. 1530. Chloroacetone.

Sec. 1531. IPN (isophthalonitrile).

Sec. 1532. NOA 446510 technical.

Sec. 1533. Hexythiazox technical.

Sec. 1534. Crelan (self-blocked cycloaliphatic polyuretdione).

Sec. 1535. Aspirin.

Sec. 1536. Desmodur BL XP 2468.

Sec. 1537. Desmodur RF-E.

Sec. 1538. Desmodur HL.

Sec. 1539. D-Mannose.

Sec. 1540. Certain camel hair.

Sec. 1541. Waste of camel hair.

Sec. 1542. Certain camel hair.

Sec. 1543. Woven fabric of vicuna hair.

Sec. 1544. Certain camel hair.

Sec. 1545. Noils of camel hair.

Sec. 1546. Chloroacetic acid, ethyl ester.

Sec. 1547. Chloroacetic acid, sodium salt.

Sec. 1548. Low expansion laboratory glass.

Sec. 1549. Stoppers, lids, and other closures.

Sec. 1550. Pigment yellow 213.

Sec. 1551. Indoxacarb.

Sec. 1552. Dimethyl carbonate.

Sec. 1553. 5-Chloro-1-indanone (EK179).

Sec. 1554. Mixtures of famoxadone and cymoxanil.

Sec. 1555. Decanedioic acid, bis(2,2,6,6-tetramethyl-4-piperidinyl) ester.

Sec. 1556. Acid blue 80.

Sec. 1557. Pigment brown 25.

Sec. 1558. Formulations of azoxystrobin.

Sec. 1559. Formulations of pinoxaden/cloquintocet.

Sec. 1560. Mixtures of difenoconazole/mefenoxam.

Sec. 1561. Fludioxinil technical.

Sec. 1562. Mixtures of clodinafop-propargyl.

Sec. 1563. Avermectin b, 1,4′′-deoxy-4′′-methylamino-, (4′′r)-, benzoate.

Sec. 1564. Cloquintocet-mexyl.

Sec. 1565. Metalaxyl-M technical.

Sec. 1566. Cyproconazole technical.

Sec. 1567. Pinoxaden technical.

Sec. 1568. Mixtures of tralkoxydim.

Sec. 1569. Certain chemicals.

Sec. 1570. Mixtures of ( ± )–(cis and trans)–1-[[2-(2,4-dichlorophenyl)–4-propyl-1,3-

dioxolan-2-yl]-methyl]-1h-1,2,4-triazole.

Sec. 1571. Paraquat dichloride.

Sec. 1572. Certain basketballs.

Sec. 1573. Certain leather basketballs.

Sec. 1574. Certain rubber basketballs.

Sec. 1575. Certain volleyballs.

Sec. 1576. 4-Chloro-3-[[3-(4-methoxyphenyl)–1,3-dioxopropyl]-amino]-dodecyl ester.

Sec. 1577. Linuron.

Sec. 1578. N,N-Dimethylpiperidinium chloride (mepiquat chloride).

Sec. 1579. Diuron.

Sec. 1580. Formulated product Krovar I DF.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1113

Sec. 1581. Triasulfuron technical.

Sec. 1582. Brodifacoum technical.

Sec. 1583. Pymetrozine technical.

Sec. 1584. Formulations of thiamethoxam, difenoconazole, fludioxinil, and

mefenoxam.

Sec. 1585. Trifloxysulfuron-sodium technical.

Sec. 1586. 2 Benzylthio-3-ethyl sulfonyl pyridine.

Sec. 1587. 2-Amino-4-methoxy-6-methyl-1,3,5-triazine.

Sec. 1588. Formulated products containing mixtures of the active ingredient 2-

chloro-n-[[(4-methoxy-6-methyl-1,3,5-triazin-2yl) amino]carbonyl]

benzenesulfonamide and application adjuvants.

Sec. 1589. 2-methyl-4-methoxy-6-methylamino-1,3,5-triazine.

Sec. 1590. Mixtures of sodium-2-chloro-6-[(4,6 dimethoxypyrimidin-2-

yl)thio]benzoate and application adjuvants (pyrithiobac-sodium).

Sec. 1591. Certain decorative plates, decorative sculptures, decorative plaques, and

architectural miniatures.

Sec. 1592. Certain music boxes.

Sec. 1593. 2-Methyl-4-chlorophenoxyacetic acid.

Sec. 1594. Phenmedipham.

Sec. 1595. Desmedipham.

Sec. 1596. Certain footwear with open toes or heels.

Sec. 1597. Certain work footwear.

Sec. 1598. Certain refracting and reflecting telescopes.

Sec. 1600. Certain work footwear.

Sec. 1601. Certain footwear for men.

Sec. 1602. Certain rubber or plastic footwear.

Sec. 1604. Zinc dimethyldithiocarbamate.

Sec. 1605. Certain liquid crystal device (LCD) panel assemblies.

Sec. 1606. Certain watertube boilers and reactor vessel heads.

CHAPTER 2—EXISTING DUTY SUSPENSIONS AND REDUCTIONS

Sec. 1611. Extension of certain existing duty suspensions and reductions.

Subtitle B—Other Tariff Provisions

CHAPTER 1—LIQUIDATION OR RELIQUIDATION OF CERTAIN ENTRIES

Sec. 1621. Certain tramway cars and associated spare parts.

Sec. 1622. Reliquidation of certain entries of candles.

Sec. 1623. Certain entries of roller chain.

Sec. 1624. Certain entries of soundspa clock radios.

CHAPTER 2—MISCELLANEOUS PROVISIONS

Sec. 1631. Vessel repair duties.

Sec. 1632. Suspension of new shipper review provision.

Sec. 1633. Extension and modification of duty suspension on wool products; wool

research fund; wool duty refunds.

Sec. 1634. Authorities relating to DR–CAFTA Agreement.

Sec. 1635. Technical amendments to Customs modernization.

Subtitle C—Effective Date

Sec. 1641. Effective date.

SEC. 1402. REFERENCE.

Except as otherwise expressly provided, whenever in this title

an amendment or repeal is expressed in terms of an amendment

to, or repeal of, a chapter, subchapter, note, additional U.S. note,

heading, subheading, or other provision, the reference shall be

considered to be made to a chapter, subchapter, note, additional

U.S. note, heading, subheading, or other provision of the Harmonized Tariff Schedule of the United States (19 U.S.C. 3007).

120 STAT. 1114 PUBLIC LAW 109–280—AUG. 17, 2006

Subtitle A—Temporary Duty Suspensions

and Reductions

CHAPTER 1—NEW DUTY SUSPENSIONS AND

REDUCTIONS

SEC. 1411. CERTAIN NON-KNIT GLOVES DESIGNED FOR USE BY AUTO

MECHANICS.

(a) IN GENERAL.—Subchapter II of chapter 99 is amended by

inserting in numerical sequence the following new headings:

‘‘ 9902.14.01 Mechanics’ work gloves,

valued not over $3.50 per

pair (provided for in subheading 6216.00.58) ......... 2.8% No change No change On or before

12/31/2009

9902.14.02 Mechanics’ work gloves,

valued over $3.50 but not

over $3.70 per pair (provided for in subheading

6216.00.58) ........................ 2.8% No change No change On or before

12/31/2009 ’’.

9902.14.03 Mechanics’ work gloves,

valued over $3.70 but not

over $4.99 per pair (provided for in subheading

6216.00.58) ........................ 2.8% No change No change On or before

12/31/2009 ’’.

9902.14.04 Mechanics’ work gloves,

valued over $4.99 but not

over $7.72 per pair (provided for in subheading

6216.00.58) ........................ 2.8% No change No change On or before

12/31/2009 ’’.

9902.14.05 Mechanics’ work gloves,

valued over $7.72 per pair

(provided for in subheading 6216.00.58) ......... 2.8% No change No change On or before

12/31/2009 ’’.

(b) AMENDMENT TO U.S. NOTES.—Subchapter II of chapter 99

is amended by adding at the end of the U.S. Notes to such subchapter the following new U.S. Note:

‘‘18. For purposes of headings 9902.14.01, 9902.14.02,

9902.14.03, 9902.14.04, and 9902.14.05, the term ‘mechanics’ work

gloves’ means gloves, of man-made fibers, having synthetic leather

palms and fingers; fourchettes of synthetic leather or of fabric

of nylon or elastomeric yarn; backs comprising either one layer

of knitted fabric of elastomeric yarn or three layers, with the

outer layer of knitted fabric of elastomeric yarn, the center layer

of foam and the inner layer of tricot fabric; the foregoing, whether

or not including an thermoplastic rubber logo or pad on the back;

and elastic wrist straps with molded thermoplastic rubber hookand-loop enclosures.’’.

SEC. 1412. CERTAIN MICROPHONES FOR USE IN AUTOMOTIVE INTERIORS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1115

‘‘ 9902.10.17 Unidirectional (cardioid)

electret condenser microphone modules for use in

motor vehicles provided

for in headings 8701

through 8705 (other than

such modules designed for

handheld, microphone

stand, or lapel use), the

foregoing each including

wire leads for external

connection, whether or not

including a multi-pin

board level type connector

but not including a battery compartment; having

a typical frequency response of 250 Hertz

through 7,000 Hertz with

no more than a 20 decibel

deviation in that frequency range and an electrostatic discharge immunity of 4,000 V (contact)

and 8,000 V (air); and capable of operation and

storage in the temperature range of -40°C

through 85°C and a humidity of not over 95 percent (provided for in subheading 8518.10.80) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1413. ACRYLIC OR MODACRYLIC SYNTHETIC FILAMENT TOW.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.21 Synthetic filament tow:

acrylic or modacrylic (provided for in subheading

5501.30.00) ........................ 6.8% No change No change On or before

12/31/2009 ’’.

SEC. 1414. ACRYLIC OR MODACRYLIC SYNTHETIC STAPLE FIBERS,

CARDED, COMBED, OR OTHERWISE PROCESSED FOR

SPINNING.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.22 Synthetic staple fibers,

carded, combed, or otherwise processed for spinning: acrylic or modacrylic

(provided for in subheading 5506.30.00) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1415. NITROCELLULOSE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.23 Cellulose nitrates (nitrocellulose, including collodions) (CAS 9004-70-0)

(provided for in subheading 3912.20.00) ......... 4.4% No change No change On or before

12/31/2009 ’’.

SEC. 1416. POTASSIUM SORBATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1116 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.10.24 Potassium sorbate (CAS

No. 24634–61–5) (provided for in subheading

2916.19.10) ........................ 1.4% No change No change On or before

12/31/2009 ’’.

SEC. 1417. SORBIC ACID.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.25 Sorbic acid (CAS No. 110–

44–1) (provided for in subheading 2916.19.20) ......... 1.9% No change No change On or before

12/31/2009 ’’.

SEC. 1418. CERTAIN CAPERS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.26 Capers, prepared or preserved by vinegar other

than such goods in immediate containers each

holding 3.4 kg or less

(provided for in subheading 2001.90.20) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1419. CERTAIN PEPPERONCINI PREPARED OR PRESERVED

OTHERWISE THAN BY VINEGAR OR ACETIC ACID.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.27 Pepperoncini, prepared or

preserved otherwise than

by vinegar, not frozen

(provided for in subheading 2005.90.55) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1420. CERTAIN CAPERS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.28 Capers, prepared or preserved by vinegar in immediate containers each

holding more than 3.4 kg

(provided for in subheading 2001.90.10) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1421. CERTAIN PEPPERONCINI PREPARED OR PRESERVED BY

VINEGAR OR ACETIC ACID IN CONCENTRATIONS AT 0.5

PERCENT OR GREATER.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.29 Pepperoncini, prepared or

preserved by vinegar (provided for in subheading

2001.90.38) ........................ 2.2% No change No change On or before

12/31/2009 ’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1117

SEC. 1422. CERTAIN PEPPERONCINI PREPARED OR PRESERVED

OTHERWISE THAN BY VINEGAR OR ACETIC ACID IN CONCENTRATIONS LESS THAN 0.5 PERCENT.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.30 Giardiniera, prepared or

preserved otherwise than

by vinegar, not frozen

(provided for in subheading 2005.90.55) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1423. CHLORAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.31 Trichloroacetaldehyde

(CAS No. 75–87–6) (provided for in subheading

2913.00.50) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1424. IMIDACLOPRID TECHNICAL (IMIDACLOPRID).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.32 1-[(6-Chloro-3-

pyrdinyl)methyl]-N-nitro2-imidazolidinimine

(Imidacloprid) (CAS No.

138261–41–3) (provided

for in subheading

2933.39.27) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1425. TRIADIMEFON.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.33 1-(4-Chlorophenoxy)–3,3-

dimethyl-1-(1H-1,2,4-

triazol-1-y1)–2-butanone

(CAS No. 43121–43–3)

(Triadimefon) (provided

for in subheading

2933.99.22) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1426. POLYETHYLENE HE1878.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.34 Polyethylene HE1878

(CAS No. 25087–34–7),

with l-butene as comonomer (provided for in subheading 3901.20.50) ......... 3.6% No change No change On or before

12/31/2009 ’’.

SEC. 1427. THIACLOPRID.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1118 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.10.35 (Z)-[3-[(6-chloro-3-

pyridinyl)methyl]-2-

thiazolidinylidene]cyanamide (thiacloprid)

(CAS No. 111988–49–9)

(provided for in subheading 2934.10.10) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1428. PYRIMETHANIL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.36 4,6-Dimethyl-N-phenyl-2-

pyrimidinamine

(pyrimethanil) (CAS No.

53112–28–0) (provided for

in subheading 2933.59.15) Free No change No change On or before

12/31/2009 ’’.

SEC. 1429. FORAMSULFURON.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.37 Foramsulfuron (Benzamide, 2-(((((4,6-

dimethoxy-2-

pyrimidinyl)amino) carbonyl)amino)sulfonyl)–4-

(formylamino)- N,N-dimethyl-,) (CAS No.

173159–57–4), in bulk or

put up in forms or packaging for retail sale (provided for in subheading

2935.00.75 or 3808.30.15) 2.6% No change No change On or before

12/31/2009 ’’.

SEC. 1430. FENAMIDONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.38 (5S)–3,5-Dihydro-5- methyl-2-(methylthio)- 5-

phenyl-3-(phenylamino)-

4H-imidazol-4-one

(Fenamidone) (CAS No.

161326–34–7) (provided

for in subheading

2933.29.35) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1431. CYCLANILIDE TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.39 1-(2,4-

Dichlorophenylaminocarbonyl)cyclopropane-carboxylic acid (Cyclanilide)

(CAS No. 113136–77–9)

(provided for in subheading 2924.29.47) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1432. PARA-BENZOQUINONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1119

‘‘ 9902.10.40 1,4-Benzoquinone (CAS

No. 106–51–4) (provided

for in subheading

2914.69.90) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1433. O-ANISIDINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.41 o-Anisidine (CAS No. 90–

04–4) (provided for in subheading 2922.22.10) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1434. 2,4-XYLIDINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.43 2,4-Xylidine (CAS No. 95–

68–1) (provided for in subheading 2921.49.10) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1435. CROTONALDEHYDE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.44 Crotonaldehyde (2-

butenaldehyde) (CAS No.

4170–30–3) (provided for

in subheading 2912.19.50) Free No change No change On or before

12/31/2009 ’’.

SEC. 1436. BUTANEDIOIC ACID, DIMETHYL ESTER, POLYMER WITH 4-

HYDROXY-2,2,6,6,-TETRAMETHYL-1-PIPERIDINEETHANOL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.47 Butanedioic acid, dimethyl ester, polymer

with 4-hydroxy-2,2,6,6,-

tetramethyl-1-

piperidineethanol (CAS

No. 65447–77–0) (provided for in subheading

3907.99.00) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1437. MIXTURES OF CAS NOS. 106990-43-6 AND 65447-77-0.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1120 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.10.48 1,3,5-Triazine-2,4,6-triamine, N,N′′′-[1,2-

ethanediylbis[[[4,6-

bis[butyl (1,2,2,6,6-

pentamethyl-4-

piperidinyl)amino]-1,3,5-

triazine-2-yl]imino]-3,1-

propanediyl]]bis[N′,N′′-

dibutyl-N′,N′′-

bis(1,2,2,6,6-pentamethyl4-piperidinyl)- (CAS No.

106990–43–6) and

Butanedioic acid,

dimethylester polymer

with 4-hyroxy-2,2,6,6-

tetramethyl-1-piperdine

ethanol (CAS No. 65447–

77–0) (Provided for in

subheading 3812.30.90) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1438. MCPA.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.54 2-Ethylhexyl (4-chloro-2-

methylphenoxy)acetate

(CAS No. 29450–45–1)

(provided for in subheading 2918.90.20) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1439. BRONATE ADVANCED.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.55 Formulations of 2,6-

dibromo-4-cyanophenyl octanoate (CAS No. 1689–

99–2), 2, 6-dibromo-4-

cyanophenyl heptanoate

(CAS No. 56634–95–8),

and 2-ethylhexyl (4-

chloro-2-

methylphenoxy)acetate

(CAS No. 29450–45–1)

(provided for in subheading 3808.30.15) ......... 2.8% No change No change On or before

12/31/2009 ’’.

SEC. 1440. BROMOXYNIL OCTANOATE TECH.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.56 2,6-dibromo-4-

cyanophenyl octanoate

(CAS No. 1689–99–2)

(provided for in subheading 2926.90.25) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1441. BROMOXYNIL MEO.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1121

‘‘ 9902.10.57 2,6-Dibromo-4-

cyanophenyl octanoate/

heptanoate (CAS Nos.

1689–99–2 and 56634–95–

8) (provided for in subheading 3808.30.15) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1442. HYDRAULIC CONTROL UNITS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.62 Hydraulic control units

designed for use in braking systems of hybrid

motor vehicles of heading

8703 (provided for in subheading 9032.89.60) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1443. SHIELD ASY-STEERING GEAR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.63 Steering gear assemblies

for single-pinion constantratio electronic power assisted steering systems

rated at 80 amperes at

12V, the foregoing designed for use in hybrid

motor vehicles of heading

8703 (provided for in subheading 8708.99.73) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1444. 2,4-DICHLOROANILINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.64 2,4-Dichloroaniline (CAS

No. 554–00–7) (provided

for in subheading

2921.42.18) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1445. 2-ACETYLBUTYROLACTONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.65 2-Acetylbutyrolactone

(CAS No. 517–23–7) (provided for in subheading

2932.29.50) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1446. ALKYLKETONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.66 1-(4-Chlorophenyl)–4, 4-

dimethyl-3-pentanone

(CAS No. 66346–01–8)

(provided for in subheading 2914.70.40) ......... Free No change No change On or before

12/31/2009 ’’.

120 STAT. 1122 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1447. CYFLUTHRIN (BAYTHROID).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.67 Cyano(4-fluoro-3-

phenoxyphenyl)methyl 3-

(2,2-dichloroethenyl)–2,2-

dimethylcyclopropanecarboxylate (Cyfluthrin, excluding β-Cyfluthrin)

(CAS No. 68359–37–5)

(provided for in subheading 2926.90.30) ......... 3.5% No change No change On or before

12/31/2009 ’’.

SEC. 1448. BETA-CYFLUTHRIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.68 Reaction mixture comprising the enantiomeric

pair (R)-α-cyano-4-fluoro3-phenoxybenzyl (1S,3S)–

3-(2,2-dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate and (S)-α-cyano-4-

fluoro-3-phenoxybenzyl

(1R,3R)–3-(2,2-

dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate in ratio 1:2 with

the enantiomeric pair (R)-

α-cyano-4-fluoro-3-

phenoxybenzyl (1S,3R)–3-

(2,2-dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate and (S)-α-cyano-4-

fluoro-3-phenoxybenzyl

(1R,3S)–3-(2,2-

dichlorovinyl)–2,2-

dimethylcyclopropanecarboxylate (β-Cyfluthrin)

(CAS No. 68359–37–5)

(provided for in subheading 2926.90.30) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1449. CYCLOPROPANE-1,1-DICARBOXYLIC ACID, DIMETHYL ESTER.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.69 Cyclopropane-1,1-

dicarboxylic acid, dimethyl ester (CAS No.

6914–71–2) (provided for

in subheading 2917.20.00) 1.8% No change No change On or before

12/31/2009 ’’.

SEC. 1450. SPIROXAMINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.70 8-(1,1-Dimethylethyl)-Nethyl-N-propyl-1,4-

dioxaspiro[4,5]decane-2-

methanamine (CAS

118134–30–8) (provided

for in subheading

2932.99.90) ........................ Free No change No change On or before

12/31/2009 ’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1123

SEC. 1451. SPIROMESIFEN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.71 3,3-Dimethylbutanoic

acid, 2-oxo-3-(2,4,6-

trimethylphenyl)–1-

oxaspiro[4.4]non-3-en-yl

ester (CAS 283594–90–1)

(provided for in subheading 2932.29.10) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1452. 4-CHLOROBENZALDEHYDE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.72 4-Chlorobenzaldehyde

(CAS No. 104–88–1) (provided for in subheading

2913.00.40) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1453. OXADIAZON.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.73 5-tert-butyl-3-(2,4-

dichloro-5-

isopropoxyphenyl)–1,3,4-

oxadiazol-2(3H)-one

(Oxadiazon) (CAS No.

19666–30–9) (provided for

in subheading 2934.99.11) Free No change No change On or before

12/31/2009 ’’.

SEC. 1454. NAHP.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.74 2-(1,1-Dimethylethyl)–5-

hydroxypyrimidine, sodium salt (CAS No.

146237–62–9) (provided

for in subheading

2933.59.70) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1455. PHOSPHORUS THIOCHLORIDE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.75 Phosphorus Thiochloride

(CAS No. 3982–91–0)

(provided for in subheading 2851.00.00) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1456. TRIFLOXYSTROBIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1124 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.10.76. Methyl (E)-methoxyimino-

{(E)-α-[1-(α,α,α-trifluoromtolyl)ethylideneaminooxy]-

o-tolyl}acetate

(Trifloxystrobin) (CAS No.

141517–21–7) (provided

for in subheading

2929.90.20) ........................ 2.4% No change No change On or before

12/31/2009 ’’.

SEC. 1457. PHOSPHORIC ACID, LANTHANUM SALT, CERIUM TERBIUMDOPED.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.77 Phosphoric acid, lanthanum salt, cerium terbium-doped (CAS No.

95823–34–0) (provided for

in subheading 2846.90.80) Free No change No change On or before

12/31/2009 ’’.

SEC. 1458. LUTETIUM OXIDE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.78 Lutetium oxide (CAS No.

12032–20–1) (provided for

in subheading 2846.90.80) Free No change No change On or before

12/31/2009 ’’.

SEC. 1459. ACM.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.79 (3-Acetoxy-3-cyanopropyl)

methylphosphinic acid,

butyl ester (CAS No.

167004–78–6) (provided

for in subheading

2931.00.90) ........................ 0.7% No change No change On or before

12/31/2009 ’’.

SEC. 1460. PERMETHRIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.80 (3-Phenoxyphenyl)methyl

3-(2,2-dichloroethenyl)–

2,2-

dimethylcyclopropanecarboxylate (Permethrin) (CAS

No. 52645–53–1) (provided for in subheading

2916.20.50) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1461. THIDIAZURON.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1125

‘‘ 9902.10.81 N-Phenyl-N -(1,2,3-

thiadiazol-5-yl)urea

(Thidiazuron) CAS No.

51707–55–2), whether or

not mixed with application adjuvants (provided

for in subheading

2934.99.15 or 3808.30.15) Free No change No change On or before

12/31/2009 ’’.

SEC. 1462. FLUTOLANIL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.82 N-[3-(1-

Methylethoxy)phenyl]-2-

(trifluoromethyl)benzamide (Flutolanil)

(CAS No. 66332–96–5)

(provided for in subheading 2924.29.47) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1463. RESMETHRIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.83 [5-(Phenylmethyl)–3-

furanyl]methyl 2,2-dimethyl-3-(2-methyl-1-propenyl)

cyclopropanecarboxylate

(Resmethrin) (CAS No.

10453–86–8) (provided for

in subheading 2932.19.10) Free No change No change On or before

12/31/2009 ’’.

SEC. 1464. CLOTHIANIDIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.84 (E)–1-(2-Chloro-1,3-

thiazol-5-ylmethyl)–3-

methyl-2-nitroguanidine

(Clothianidin) (CAS No.

210880–92–5) (provided

for in subheading

2934.10.90) ........................ 5.4% No change No change On or before

12/31/2009 ’’.

SEC. 1465. CERTAIN MASTER CYLINDER ASSEMBLES.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.92 Master cylinder assemblies for braking systems,

not incorporating a vacuum booster, the foregoing

designed for use in hybrid

motor vehicles of heading

8703 (provided for in subheading 8708.39.50) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1466. CERTAIN TRANSAXLES.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1126 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.10.93 Transaxles, each incorporating an integral electronic controller, the foregoing designed for use in

hybrid motor vehicles of

heading 8703 (provided

for in subheading

8708.40.20) ........................ 1.5% No change No change On or before

12/31/2009 ’’.

SEC. 1467. CONVERTER ASY.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.94 Static converters capable

of converting 300 V direct

current to 12 V direct current, designed for use in

hybrid motor vehicles of

heading 8703 (provided

for in subheading

8504.40.95) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1468. MODULE AND BRACKET ASY-POWER STEERING.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.95 Controllers for electronic

power assisted steering

systems, rated at 80 amperes at 12 V, designed

for use in hybrid motor

vehicles of heading 8703

(provided for in subheading 8537.10.90) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1469. UNIT ASY-BATTERY HI VOLT.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.96 Nickel metal-hydride storage batteries, exceeding

300 V, the foregoing designed for use in hybrid

motor vehicles of heading

8703 (provided for in subheading 8507.80.80) ......... 2.8% No change No change On or before

12/31/2009 ’’.

SEC. 1470. CERTAIN ARTICLES OF NATURAL CORK.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.10.99 Articles of natural cork,

not elsewhere specified or

included (provided for in

subheading 4503.90.60) .... 6% No change No change On or before

12/31/2009 ’’.

SEC. 1471. GLYOXYLIC ACID.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1127

‘‘ 9902.11.01 Glyoxylic acid (CAS No.

298–12–4) (provided for in

subheading 2918.30.90) .... 1.6% No change No change On or before

12/31/2009 ’’.

SEC. 1472. CYCLOPENTANONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.02 Cyclopentanone (CAS No.

120–92–3) (provided for in

subheading 2914.29.50) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1473. MESOTRIONE TECHNICAL.

(a) CALENDAR YEAR 2006.—Subchapter II of chapter 99 is

amended by inserting in numerical sequence the following new

heading:

‘‘ 9902.11.03 2-[4-(Methylsulfonyl)–2-

nitrobenzoyl]-1,3-

cyclohexanedione

(Mesotrione) (CAS No.

104206–82–8) (provided

for in subheading

2930.90.10) ........................ 6.04% No change No change On or before

12/31/2006 ’’.

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.11.03, as added by subsection (a), is amended—

(A) by striking ‘‘6.04%’’ and inserting ‘‘6.08%’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2007’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2007.

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.11.03, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘6.08%’’ and inserting ‘‘6.11%’’; and

(B) by striking ‘‘12/31/2007’’ and inserting ‘‘12/31/2009’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2008.

SEC. 1474. MALONIC ACID-DINITRILE 50% NMP.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.04 50% solution of

malononitrile in methyl-2-

pyrrolidone solvent (CAS

Nos. 109–77–3 and 872–

50–4) (provided for in subheading 3824.90.9190) ..... Free No change No change On or before

12/31/2009 ’’.

SEC. 1475. FORMULATIONS OF NOA 446510.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1128 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.11.05 Formulations of NOA

446510 which include

NOA 446510 Technical, 2-

(4-chloro-phenyl)-N-[2-(3-

methoxy-4-prop-2-ynyloxyphenyl)ethyl]-2-prop-2-

ynyloxyacetamide (CAS

No. 374726–62–2) (provided for in subheading

3808.20.15) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1476. DEMBB DISTILLED-ISO TANK.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.06 2-Bromo-1,3-diethyl-5-

methylbenzene (CAS No.

314084–61–2) (DEMBB)

(provided for in subheading 2903.69.80) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1477. METHYLIONONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.10 3-Methyl-4-(2,6,6-

trimethylcyclohex-2-

enyl)but-3-en-2-one

(Methylionone) (CAS No.

1335–46–2) (provided for

in subheading 2914.23.00) Free No change No change On or before

12/31/2009 ’’.

SEC. 1478. CERTAIN ACRYLIC FIBER TOW.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.11 Acrylic fiber tow

(polyacrylonitrile tow)

containing by weight a

minimum of 92 percent

acrylonitrile, not more

than 0.1 percent zinc and

from 4 to 8 percent water,

imported in the form of

from 1 to 12 sub-bundles

crimped together, each

containing 24,000 filaments (plus or minus 0.06

percent) and with average

filament denier of 1.5

decitex (plus or minus

0.08 percent) (provided for

in subheading 5501.30.00) Free No change No change On or before

12/31/2009 ’’.

SEC. 1479. CERTAIN ACRYLIC FIBER TOW.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1129

‘‘ 9902.11.12 Acrylic fiber tow

(polyacrylonitrile tow)

containing by weight a

minimum of 92 percent

acrylonitrile, not more

than 0.1 percent zinc and

from 2 to 8 percent water,

imported in the form of 6

sub-bundles crimped together, each containing

45,000 filaments (plus or

minus 0.06 percent) and

with average filament denier of either 1.48 decitex

(plus or minus 0.08 percent) or 1.32 decitex (plus

or minus 0.09 percent)

(provided for in subheading 5501.30.00) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1480. MKH 6561 ISOCYANATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.13 2-(Carbomethoxy)

benzenesulfonyl

isocyanate (CAS No.

74222–95–0) (provided for

in subheading 2930.90.29) Free No change No change On or before

12/31/2009 ’’.

SEC. 1481. ENDOSULFAN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.14 6,7,8,9,10,10-

Hexachlorohexahydromethano-2,4,3-

benzodioxathiepin-3-oxide

(Endosulfan) (CAS No.

115–29–7) (provided for in

subheading 2920.90.50 or

3808.10.50) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1482. TETRACONAZOLE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.15 1-[2-(2,4-dichlorophenyl)–

3-(1,1,2,2-

tetrafluoroethoxy)propyl]-

1H-1,2,4-triazole

(Tetraconazole) (CAS No.

112281–77–3) (provided

for in subheading

2933.99.22) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1483. M-ALCOHOL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.16 2-(2,4-Dichlorophenyl)–3-

(1H-1,2,4-triazol-1-

yl)propanol (CAS No.

112281–82–0) (provided

for in subheading

2933.99.82) ........................ 1% No change No change On or before

12/31/2009 ’’.

120 STAT. 1130 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1484. CERTAIN MACHINES FOR USE IN THE ASSEMBLY OF MOTORCYCLE WHEELS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.17 Wheel spoke tightening

machines (provided for in

subheading 8479.89.98),

for use with wheels of vehicles of heading 8711 ...... Free No change No change On or before

12/31/2009 ’’.

SEC. 1485. DELTAMETHRIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.26 (S)-α-Cyano-3-

phenoxybenzyl (1R,3R)–3-

(2,2-dibromovinyl)–2,2-

dimethylcyclopropanecarboxylate (Deltamethrin)

(CAS No. 52918–63–5)

(provided for in subheading 2926.90.30) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1486. PALM FATTY ACID DISTILLATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.32 Monocarboxylic fatty acids

derived from palm oil

(provided for in subheading 3823.19.20) ......... 1% No change No change On or before

12/31/2009 ’’.

SEC. 1487. 4-METHOXY-2-METHYLDIPHENYLAMINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.35 4-Methoxy-2-

methyldiphenylamine

(CAS No. 41317–15–1)

(provided for in subheading 2922.29.60) ......... 1.1% No change No change On or before

12/31/2009 ’’.

SEC. 1488. 2-METHYLHYDROQUINONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.36 2-Methylhydroquinone

(CAS No. 95–71–6) (provided for in subheading

2907.29.90) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1489. 1-FLUORO-2-NITROBENZENE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1131

‘‘ 9902.11.37 1-Fluoro-2-nitrobenzene

(CAS No. 1493–27–2)

(provided for in subheading 2904.90.30) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1490. COSMETIC BAGS WITH A FLEXIBLE OUTER SURFACE OF

REINFORCED OR LAMINATED POLYVINYL CHLORIDE

(PVC).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.43 Vanity cases that are of a

soft sided construction, of

reinforced or laminated

polyvinyl chloride plastics,

and are of a kind normally carried in the pocket or in the handbag and

used to contain and apply

cosmetic preparations

(provided for in subheading 4202.12.20) ......... 13.3% No change No change On or before

12/31/2009 ’’.

SEC. 1491. MIXTURES OF METHYL 4-IODO-2-[3-(4-METHOXY-6-METHYL1,3,5-TRIAZIN-2-YL)UREIDOSULFONYL]BENZOATE,

SODIUM SALT (IODOSULFURON METHYL, SODIUM SALT).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.44 Mixtures of methyl 4-iodo2-[3-(4-methoxy-6-methyl1,3,5- triazin-2-yl)

ureidosulfonyl] benzoate,

sodium salt (Iodosulfuron

methyl, sodium salt) (CAS

No. 144550–36–7) and application adjuvants (provided for in subheading

3808.30.15) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1492. ETHYL 4,5-DIHYDRO-5,5-DIPHENYL-1,2-OXAZOLE-3-

CARBOXYLATE (ISOXADIFEN-ETHYL).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.45 Ethyl 4,5-dihydro-5,5-diphenyl-1,2-oxazole-3-

carboxylate (Isoxadifenethyl) (CAS No. 163520–

33–0) (provided for in subheading 2934.99.39) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1493. (5-CYCLOPROPYL-4-ISOXAZOLYL)[2-(METHYLSULFONYL)–4-

(TRIFLUOROMETHYL)PHENYL]METHANONE

(ISOXAFLUTOLE).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1132 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.11.46 (5-cyclopropyl-4-

isoxazolyl)[2-

(methylsulfonyl)–4-

(trifluoromethyl)

phenyl]methanone

(Isoxaflutole) (CAS No.

141112–29–0) (provided

for in subheading

2934.99.15) ........................ 4.8% No change No change On or before

12/31/2009 ’’.

SEC. 1494. METHYL 2-[(4,6-DIMETHOXYPYRIMIDIN-2-

YLCARBAMOYL)SULFAMOYL]-α-

(METHANESULFONAMIDO)-P-TOLUATE (MESOSULFURONMETHYL) WHETHER OR NOT MIXED WITH APPLICATION

ADJUVANTS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.48 Methyl 2-[(4,6-

dimethoxypyrimidin-2-

ylcarbamoyl)sulfamoyl]-α-

(methanesulfonamido)-ptoluate (Mesosulfuronmethyl) (CAS No. 208465–

21–8) whether or not

mixed with application

adjuvants (provided for in

subheading 2935.00.75 or

3808.30.15) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1495. MIXTURES OF FORAMSULFURON AND IODOSULFURONMETHYL-SODIUM.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.49 Mixtures of N,N-dimethyl2[3-(4,6-

dimethoxypyrimidin-2-yl)

ureidosulfonyl]-4-

formylaminobenzamide

(Foramsulfuron) (CAS No.

173159–57–4), methyl 4-

iodo-2-[3-(4-methoxy-6-methyl-1,3,5-triazin-2-yl)

ureidosulfonyl]benzoate, sodium salt (Iodosulfuronmethyl-sodium) (CAS No.

144550–36–7) and application adjuvants (provided for

in subheading 3808.30.15) ... Free No change No change On or before

12/31/2009 ’’.

SEC. 1496. VULCUREN UPKA 1988.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.54 1,6-Bis(N,N’-

dibenzylthiocarbamoyldithio)hexane (CAS No.

151900–44–6) (provided

for in subheading

2930.20.20) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1497. VULLCANOX 41010 NA/LG.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1133

‘‘ 9902.11.55 N-Isopropyl-N’-phenyl-pphenylenediamine (CAS

No. 101–72–4) (provided

for in subheading

2921.51.50) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1498. VULKAZON AFS/LG.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.56 Pentaerythritolbis(tetrahydrobenzaldehyde

acetal) (CAS No. 6600–

31–3) (provided for in subheading 2932.99.90) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1499. P-ANISALDEHYDE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.57 P-Anisaldehyde (CAS No.

123–11–5) (Benzoldehyde,

4-methoxy-) (provided for

in subheading 2912.49.10) Free No change No change On or before

12/31/2009 ’’.

SEC. 1500. 1,2-PENTANEDIOL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.60 1,2-Pentanediol (CAS No.

5343–92–0) (provided for

in subheading 2905.39.90) Free No change No change On or before

12/31/2009 ’’.

SEC. 1501. AGRUMEX.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following:

‘‘ 9902.11.62 o-tert-Butylcyclohexyl acetate, cis form (CAS No.

20298–69–9) (Agrumex)

(Cyclohexanol, 2-(1,1-dimethyl-) (provided for in

subheading 2915.39.45) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1502. COHEDUR RL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.63 Mixtures of resorcinol

(CAS No. 108–46–3),

hexamethylolmelamine

ether (CAS No. 3089–11–

0) and dibutyl phthalate

(CAS No. 84–74–2) (provided for in subheading

3824.90.28) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1503. FORMULATIONS OF PROSULFURON.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1134 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.11.64 Mixtures of Prosulfuron

(1-(4-methoxy-6-methyl1,3,5-triazin-2-yl)–3-[2-

(3,3,3-trifluoropropyl)-

phenylsulfonyl]urea )

(CAS No. 94125–34–5)

and application adjuvants

(provided for in subheading 3808.30.15) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1504. LEWATIT.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.71 Ion-exchange resins (cationic H form), consisting

of copolymers of acrylic

acid and diethylene glycol

divinyl ether (CAS No.

359785–58–3) (provided

for in subheading

3914.00.60) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1505. PARA-CHLOROPHENOL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.72 para-Chlorophenol (CAS

No. 106–48–9) (provided

for in subheading

2908.10.60) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1506. CYPERMETHRIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.74 Cyano(3-

phenoxyphenyl)methyl 3-

(2,2-dichloroethenyl)–2,2-

dimethylcyclopropanecarboxylate (Cypermethrin)

(CAS No. 52315–07–8)

(provided for in subheading 2926.90.30) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1507. ION-EXCHANGE RESIN POWDER.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.78 Ion-exchange resin powder comprised of a copolymer of methacrylic acid

cross-linked with

divinylbenzene, in the hydrogen ionic form, of a

nominal partical size between 0.025mm and 0.150

mm, dried to less than 5%

moisture (CAS No. 50602–

21–6)(provided for in subheading 3914.00.60) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1508. ION-EXCHANGE RESIN POWDER.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1135

‘‘ 9902.11.79 Ion-exchange resin powder comprised of a copolymer of methacrylic acid

cross-linked with

divinylbenzene, in the potassium ionic form, of a

nominal particle size between 0.025mm and 0.150

mm, dried to less than

10% moisture (CAS No.

65405–55–2) (provided for

in subheading 3914.00.60) Free No change No change On or before

12/31/2009 ’’.

SEC. 1509. DESMODUR E 14.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.80 1,2,3-Propanetriol, polymer with 2,4-diisocyanato1-methylbenzene, 2-ethyl2-(hydroxymethyl)–1,3-

propanediol,

methyloxirane and

oxirane (CAS No. 127821–

00–5) (provided for in subheading 3909.50.50) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1510. DESMODUR VP LS 2253.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.82 Hexane, 1,6-diisocyanato-,

homopolymer, 3,5-dimethyl-1H-pyrazoleblocked (CAS No. 163206–

31–3) (provided for in subheading 3911.90.90) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1511. DESMODUR R-E.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.83 4,4′, 4′′-TT Desmodur R-E

in solvent (CAS No. 2422–

91–5) in solvent (provided

for in subheading

3824.90.28) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1512. WALOCEL MW 3000 PFV.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.84 Methyl hydroxyethyl cellulose products containing

30% or greater content of

2-hydroxyethyl methyl

ether cellulose (‘‘MHEC’’ )

reaction products with

glyoxal (CAS No. 68441–

63–4) (provided for in subheading 3912.39.00) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1513. TSME.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1136 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.11.85 ortho/para-Toluenesulfonic

acid, methyl ester (TSME)

(CAS Nos. 23373–38–8

and 80–48–8) (provided

for in subheading

2904.10.32) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1514. WALOCEL VP-M 20660.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.86 Methyl Hydroxyethyl Cellulose with a 77% or

greater content of 2-hydroxyethyl methyl ether

cellulose (CAS No. 9032–

42–2) (provided for in subheading 3912.39.00) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1515. XAMA 2.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.87 Trimethylopropane tris(3-

aziridinylpropanoate)

(CAS No. 52234–82–9)

(provided for in subheading 2933.99.97) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1516. XAMA 7.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.88 Polyfunctional aziridine

(CAS No. 57116–45–7)

(provided for in subheading 2933.99.97) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1517. CERTAIN CASES FOR TOYS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.90 Cases or containers (provided for in subheading

4202.92.90 and not including goods described in

heading 9902.01.81), specially shaped or fitted for,

and with labeling, logo or

other descriptive information on the exterior of the

case or container indicating its intention to be

used for, electronic drawing toys or electronic

games of heading 9503 or

9504 ................................... Free No change No change On or before

12/31/2009 ’’.

SEC. 1518. CERTAIN CASES FOR TOYS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1137

‘‘ 9902.11.91 Cases or containers (provided for in subheadings

4402.12.80 or 4202.92.90),

having one or more molded plastic holders, clips or

fasteners, for holding a

doll or dolls, whether or

not the case or container

is also capable of holding

other goods ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1519. ANILINE 2.5-DISULFONIC ACID.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.92 Aniline 2,5- disulfonic acid

(CAS No. 98–44–2) (1,4-

Benzenedisnlfonic acid, 2-

amino-) (provided for in

subheading 2921.42.90) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1520. 1,4-BENZENEDICARBOXYLIC ACID, POLYMER WITH N,N′-

BIS(2-AMINOETHYL)–1,2-ETHANEDIAMINE, CYCLIZED,

METHOSULFATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.93 1,4-Benzenedicarboxylic

acid, polymer With N,N′-

Bis(2-aminoethyl)–1,2-

ethanediamine, cyclized,

methosulfate (CAS No.

68187–22–4) (provided for

in subheading 3908.90.70) Free No change No change On or before

12/31/2009 ’’.

SEC. 1521. SULFUR BLUE 7.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.94 4-[(4-Amino-3-

methylphenyl)amino]phenol, reaction

products with sodium sulfide (Sulfur Blue 7) (CAS

No. 1327–57–7) (provided

for in subheading

3204.19.50) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1522. FORMALDEHYDE, REACTION PRODUCTS WITH 1,4-BENZENEDIOL AND M-PHENYLENEDIAMINE, SULFURIZED.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.95 Formaldehyde, reaction

products with 1,4-benzenediol and mphenylenediamine,

sulfurized (CAS No.

110392–46–6) (provided

for in subheading

3204.19.50) ........................ Free No change No change On or before

12/31/2009 ’’.

120 STAT. 1138 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1523. ISOCYANATOSULFONYL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.96 2-

(Isocyanatosulfonyl)benzoic acid, ethyl ester

(CAS No. 77375–79–2)

(provided for in subheading 2930.90.29) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1524. ISOCYANATOSULFONYL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.97 2-

(Isocyanatosulfonyl)benzoic acid, methyl

ester (CAS No. 74222–95–

0) (provided for in subheading 2930.90.29) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1525. GEMIFLOXACIN, GEMIFLOXACIN MESYLATE, AND

GEMIFLOXACIN MESYLATE SESQUIHYDRATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.11.99 Gemifloxacin (CAS No.

175463–14–6);

gemifloxacin mesylate

(CAS No. 210353–53–0 or

204519–65–3); and

gemifloxacin mesylate

sesquihydrate (CAS No.

210353–56–3 ) (the foregoing provided for in subheading 2933.99.46) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1526. BUTRALIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.01 Butralin (CAS No. 33629-

47-9) (Benzenamine, 4-

(1,1-dimethylethyl)-N- (1-

methylpropyl)-2,6-dintro-)

(provided for in subheading 2921.43.90) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1527. SPIRODICLOFEN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.02 2,2-Dimethylbutanoic

acid, 3-(2,4-

dichlorophenyl)–2-oxo-1-

oxaspiro(4.5)dec-3-en-4-yl

ester (Spirodiclofen) (CAS

No. 148477–71–8) (provided for in subheading

2932.29.10) ........................ Free No change No change On or before

12/31/2009 ’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1139

SEC. 1528. PROPAMOCARB HCL (PREVICUR).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.03 Mixtures of propyl 3-

(dimethylamino)

propylcarbamate

monohydrochloride

(Propamocarb hydrochloride) (CAS No. 25606–

41–1) and application adjuvants (provided for in

subheading 3808.20.50) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1529. DESMODUR IL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.04 Poly(toluene diisocyanate)

(CAS No. 26006–20–2)

dissolved in organic solvents (provided for in subheading 3911.90.45) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1530. CHLOROACETONE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.05 1-Chloro-2-propanone

(CAS No. 78–95–5) (provided for in subheading

2914.70.90) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1531. IPN (ISOPHTHALONITRILE).

(a) CALENDAR YEAR 2006.—Subchapter II of chapter 99 is

amended by inserting in numerical sequence the following new

heading:

‘‘ 9902.12.06 1,3-Benzenedicarbonitrile

(CAS No. 626–17–5) (provided for in subheading

2926.90.48) ........................ 3.04% No change No change On or before

12/31/2006 ’’.

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.12.06, as added by subsection (a), is amended—

(A) by striking ‘‘3.04%’’ and inserting ‘‘3.23%’’; and

(B) by striking ‘‘On or before 12/31/2006’’ and inserting

‘‘On or before 12/31/2007’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2007.

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.12.06, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘3.23%’’ and inserting ‘‘3.4%’’; and

(B) by striking ‘‘On or before 12/31/2007’’ and inserting

‘‘On or before 12/31/2009’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2008.

120 STAT. 1140 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1532. NOA 446510 TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.07 4-Chloro-N-[2-[3-methoxy4-(2-

propynyloxy)phenyl]ethyl]-α-(2-

propynyloxy)benzeneacetamide

(Mandipropamid) (CAS

No. 374726–62–2) (provided for in subheading

2924.29.47) ........................ 1.2% No change No change On or before

12/31/2009 ’’.

SEC. 1533. HEXYTHIAZOX TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.08 trans-5-(4-Chlorophenyl)-

N-cyclohexyl-4-methyl-2-

oxothiazolidine-3-

carboxamide (Hexythiazox

Technical) (CAS No.

78587–05–0) (provided for

in subheading 2934.10.10) Free No change No change On or before

12/31/2009 ’’.

SEC. 1534. CRELAN (SELF-BLOCKED CYCLOALIPHATIC

POLYURETDIONE).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.10 2-Oxepanone polymer

with 1,4-butanediol and 5-

isocyanato-1-

(isocyanatomethyl)–1,3,3-

trimethylcyclohexane, 2-

ethyl-1-hexanol-blocked

(CAS No. 189020–69–7)

(provided for in subheading 3909.50.50) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1535. ASPIRIN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.11 o-Acetylsalicylic acid (aspirin) (CAS No. 50–78–2)

(provided for in subheading 2918.22.10) ......... 3.0% No change No change On or before

12/31/2009 ’’.

SEC. 1536. DESMODUR BL XP 2468.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.12 Copolymer of methyl ethyl

ketoxime and

toluenediisocyanate (CAS

No. 352462–03–4) (provided for in subheading

3911.90.45) ........................ Free No change No change On or before

12/31/2009 ’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1141

SEC. 1537. DESMODUR RF-E.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.17 Mixtures of tris(4-

isocyanatophenyl)thiophosphate (CAS No.

4151–51–3) and ethyl acetate and

monochlorobenzene as solvents (provided for in subheading 3824.90.28) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1538. DESMODUR HL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.18 Benzene, 1,3-

diisocyanatomethyl-, polymer with 1,6-

diisocyanatohexane (CAS

No. 63368–95–6) dissolved

in n-butyl acetate (provided for in subheading

3911.90.45) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1539. D-MANNOSE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.19 D-Mannose (CAS No.

3458–28–4) (provided for

in subheading 2940.00.60) Free No change No change On or before

12/31/2009 ’’.

SEC. 1540. CERTAIN CAMEL HAIR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.20 Camel hair, processed beyond the degreased or carbonized condition (provided for in subheading

5102.19.90) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1541. WASTE OF CAMEL HAIR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.21 Waste of camel hair (provided for in subheading

5103.20.00) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1542. CERTAIN CAMEL HAIR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.22 Camel hair carded or

combed (provided for in

subheading 5105.39.00) .... Free No change No change On or before

12/31/2009 ’’.

120 STAT. 1142 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1543. WOVEN FABRIC OF VICUNA HAIR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.23 Woven fabrics containing

85 percent or more by

weight of vicuna hair (provided for in subheadings

5111.11.70, 5111.19.60,

5112.11.60, or 5112.19.95) Free No change No change On or before

12/31/2009 ’’.

SEC. 1544. CERTAIN CAMEL HAIR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.24 Camel hair, not processed

in any manner beyond the

degreased or carbonized

condition (provided for in

subheading 5102.19.20) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1545. NOILS OF CAMEL HAIR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.25 Noils of camel hair (provided for in subheading

5103.10.00) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1546. CHLOROACETIC ACID, ETHYL ESTER.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.33 Chloroacetic acid, ethyl

ester (CAS No. 105–39–5)

(provided for in subheading 2915.40.50) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1547. CHLOROACETIC ACID, SODIUM SALT.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.34 Chloroacetic acid, sodium

salt (CAS No. 3926–62–3)

(provided for in subheading 2915.40.50) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1548. LOW EXPANSION LABORATORY GLASS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1143

‘‘ 9902.12.39 Laboratory, hygienic, or

pharmaceutical glassware,

whether or not graduated

or calibrated, of low expansion borosilicate glass

or alumino-borosilicate

glass, having a linear coefficient of expansion not

exceeding 3.3 x 107 per

Kelvin within a temperature range of 0 to 300° C

(provided for in subheading 7017.20.00) ......... 3.6% No change No change On or before

12/31/2009 ’’.

SEC. 1549. STOPPERS, LIDS, AND OTHER CLOSURES.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.40 Stoppers, lids, and other

closures of low expansion

borosilicate glass or

alumino-borosilicate glass,

having a linear coefficient

of expansion not exceeding 3.3 x 107 per Kelvin

within a temperature

range of 0 to 300° C, produced by automatic machine (provided for in subheading 7010.20.20) or

produced by hand (provided for in subheading

7010.20.30) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1550. PIGMENT YELLOW 213.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.41 1,4- Benzenedicarboxylic

acid, 2-[[2-oxo-1-[[1,2,3,4-

tetrahydro-7-methoxy-2,3-

dioxo-6-quinoxalinyl)

amino]carbonyl]

propyl]azo]-, dimethyl

ester (Pigment Yellow

213) (CAS No. 220198–

21–0) (provided for in subheading 3204.17.60) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1551. INDOXACARB.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.42 (4aS) -7-Chloro-2, 5-

dihydro-2- [[(methoxycarbonyl)[4-

(trifluoromethoxy) phenyl]

amino] carbonyl]-indeno

[1,2-e][1,3,4] oxadiazine4a (3H)-carboxylic acid

methyl ester (CAS No.

173584–44–6) (provided

for in subheading

2934.99.16) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1552. DIMETHYL CARBONATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1144 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.12.43 Dimethyl carbonate (CAS

No. 616–38–6) (provided

for in subheading

2920.90.50) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1553. 5-CHLORO-1-INDANONE (EK179).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.44 5-Chloro-1-indanone (CAS

No. 42348–86–7) (provided for in subheading

2914.39.90) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1554. MIXTURES OF FAMOXADONE AND CYMOXANIL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.45 Mixtures of 5-methyl-5-(4-

phenoxyphenyl)–3-

(phenylamino)–2,4-

oxazolidinedione]

(famoxadone) (CAS No.

131807–57–3), 2-cyano-N-

[(ethylamino)carbonyl]-2-

(methoxyimino)acetamide

(Cymoxanil) (CAS No.

57966–95–7) and application adjuvants (provided

for in subheading

3808.20.15) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1555. DECANEDIOIC ACID, BIS(2,2,6,6-TETRAMETHYL-4-

PIPERIDINYL) ESTER.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.47 Decanedioic acid,

bis(2,2,6,6-tetramethyl-4-

piperidinyl) ester (CAS

No. 52829–07–9) (provided for in subheading

2933.39.91) ........................ Free No change No change On or Before

12/31/2009 ’’.

SEC. 1556. ACID BLUE 80.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.49 Acid Blue 80 (CAS No.

4474–24–2) (provided for

in subheading 3204.12.50) Free No change No change On or before

12/31/2009 ’’.

SEC. 1557. PIGMENT BROWN 25.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.50 Pigment Brown 25 (CAS

No. 6992–11–6) (provided

for in subheading

3204.17.04) ........................ Free No change No change On or before

12/31/2009 ’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1145

SEC. 1558. FORMULATIONS OF AZOXYSTROBIN.

(a) CALENDAR YEAR 2006.—Subchapter II of chapter 99 is

amended by inserting in numerical sequence the following new

heading:

‘‘ 9902.12.51 Mixtures of benzeneacetic

acid, (α E)- 2-[[6-(2-

cyanophenoxy)–4-

pyrimidinyl]oxy]-α-

(methoxymethylene)-,

methyl ester

(Azoxystrobin) (CAS No.

131860–33–8) and application adjuvants (provided

for in subheading

3808.20.15) ........................ 6.14% No change No change On or before

12/31/2006 ’’.

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.12.51, as added by subsection (a), is amended—

(A) by striking ‘‘6.14%’’ and inserting ‘‘6.15%’’; and

(B) by striking ‘‘On or before 12/31/2006’’ and inserting

‘‘On or before 12/31/2007’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2007.

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.12.51, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘6.15%’’ and inserting ‘‘6.17%’’; and

(B) by striking ‘‘On or before 12/31/2007’’ and inserting

‘‘On or before 12/31/2009’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2008.

SEC. 1559. FORMULATIONS OF PINOXADEN/CLOQUINTOCET.

(a) CALENDAR YEARS 2006 AND 2007.—Subchapter II of chapter

99 is amended by inserting in numerical sequence the following

new heading:

‘‘ 9902.12.52 Mixtures of 8(2,6-diethylp-tolyl)–1,2,4,5-

tetrahydro-7-oxo-7Hpyrazolo[[1,2-d][1,4,5]

oxadiazepin-9-yl 2,2-

dimethylpropionate

(Pinoxaden) (CAS No.

243973–20–8), acetic acid,

[5-chloro-8-quinolinyl]oxy]-, 1-methylhexyl

ester (Cloquintocet) (CAS

No. 99607–70–2) and application adjuvants (provided for in subheading

3808.30.15) ........................ Free No change No change On or before

12/31/2007 ’’.

(b) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.12.52, as added by subsection (a), is further amended—

(A) by striking ‘‘Free’’ and inserting ‘‘1.74%’’; and

(B) by striking ‘‘On or before 12/31/2007’’ and inserting

‘‘On or before 12/31/2009’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2008.

120 STAT. 1146 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1560. MIXTURES OF DIFENOCONAZOLE/MEFENOXAM.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.53 Mixtures of 1H-1,2,4-triazole, 1-((2-

chlorophenoxy)phenyl)–4-

methyl-1,3-dioxolan-2-

yl)methyl)-

(Difenoconazole) (CAS No.

119446–68–3), (R,S)–2-

((2,6-dimethylphenyl)

methoxyacetylamino) propionic acid, methyl ester

(Mefenoxam) (CAS Nos.

70630–17–0, and 69516–

34–3) and application adjuvants (provided for in

subheading 3808.20.15) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1561. FLUDIOXINIL TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.54 1H-Pyrrole-3-carbonitrile,

4-(2,2-difluoro-1,3-

benzodioxol-4-yl)-

(fludioxinil) (CAS No.

131341–86–1) (provided

for in subheading

2934.99.12) ........................ 1.6% No change No change On or before

12/31/2009 ’’.

SEC. 1562. MIXTURES OF CLODINAFOP-PROPARGYL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.55 Mixtures of propionic acid,

2-(4-((5-chloro-3-fluoro-2-

pyridynyl)oxy)phenoxy-2-

propynyl ester,

(clodinafop-propargyl)

(CAS No. 105512–06–9)

(provided for in subheading 3808.30.15) ......... 1.7% No change No change On or before

12/31/2009 ’’.

SEC. 1563. AVERMECTIN B, 1,4′′-DEOXY-4′′-METHYLAMINO-, (4′′R)-, BENZOATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.56 Avermectin B, 1,4′′-deoxy4′′-methylamino-, (4′′R)-,

benzoate (CAS No.

155569–91–8) (provided

for in subheading

3824.90.91 or 2932.29.50) Free No change No change On or before

12/31/2009 ’’.

SEC. 1564. CLOQUINTOCET-MEXYL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1147

‘‘ 9902.12.57 Acetic acid, 5-chloro-8-

quinolinoxy-, 1-

methylhexyl ester

(Cloquintocet-mexyl) (CAS

No. 99607–70–2) (provided for in subheading

2933.49.30) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1565. METALAXYL-M TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.58 (R,S)–2-((2,6-

Dimethylphenyl)

methoxyacetylamino) propionic acid, methyl ester

(Metalaxyl-M and LMetalaxylfenoxam) (CAS

Nos. 70630–17–0 and

69516–34–3) (provided for

in subheading 2924.29.47) Free No change No change On or before

12/31/2009 ’’.

SEC. 1566. CYPROCONAZOLE TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.59 [α-(4-Chlorophenyl)-α-(1-

cyclopropylethyl)–1H-1–

1,2,4-triazole-1-ethanol

(Cyproconazole) (CAS No.

94361–06–5) (provided for

in subheading 2934.99.12) Free No change No change On or before

12/31/2009 ’’.

SEC. 1567. PINOXADEN TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.60 8-(2,6-Diethyl-4-

methylphenyl)–1,2,4,5-

tetrahydro-7-oxo-7Hpyrazolo[1,2-

d][1,4,5]oxadiazepin-9-yl

2,2-dimethylpropanoate

(Pinoxaden) (CAS No.

243973–20–8) (provided

for in subheading

2934.99.15) ........................ 1.8% No change No change On or before

12/31/2009 ’’.

SEC. 1568. MIXTURES OF TRALKOXYDIM.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.12.61 Mixtures of 2-[1-

(ethoxyimino)propyl]-3-hydroxy-5-(2,4,6-

trimethylphenyl)–2-cyclohexen-1-one

(Tralkoxydim) (CAS No.

87820–88–0) as the active

ingredient and application

adjuvants (provided for in

subheading 3808.30.15) .... Free No change No change On or before

12/31/2009 ’’.

120 STAT. 1148 PUBLIC LAW 109–280—AUG. 17, 2006

SEC. 1569. CERTAIN CHEMICALS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new headings:

‘‘ 9902.12.72 Mixtures of zinc

dialkyldithiophosphate

(CAS No. 6990–43–8)

with an elastomer

binder of ethylene-propylene-diene monomer

and ethyl vinyl acetate,

dispersing agents and

silica (provided for in

subheading 3812.10.50) Free No change No change On or before 12/

31/2009

9902.12.73 Mixtures of

dithiocarbamate, thiazole, thiuram and thiourea with an elastomer

binder of ethylene-propylene-diene monomer

and ethyl vinyl acetate,

and dispersing agents

(provided for in subheading 3812.10.50) .... Free No change No change On or before 12/

31/2009

9902.12.74 Mixtures of

caprolactam disulfide

(CAS No. 23847–08–7)

with an elastomer

binder of ethylene-propylene-diene monomer

and ethyl vinyl acetate,

and dispersing agents

(provided for in subheading 3812.10.50) .... Free No change No change On or before 12/

31/2009

9902.12.75 Mixtures of N′-(3,4-

dichloro-phenyl)-N,Ndimethylurea (CAS No.

330–54–1) with acrylate rubber (provided

for in subheading

3812.10.50) ................... Free No change No change On or before 12/

31/2009

9902.12.76 Mixtures of zinc

dicyanato diamine

(CAS No. 122012–52–

6) with an elastomer

binder of ethylene-propylene-diene monomer

and ethyl vinyl acetate,

and dispersing agents

(provided for in subheading 3812.10.50) .... Free No change No change On or before 12/

31/2009

9902.12.77 4,8-Dicyclohexyl -6–

2,10-dimethyl -12Hdibenzo [d,g][1,3,2]

dioxaphosphocin (CAS

No. 73912–21–7) (provided for in subheading

2920.90.50) ................... Free No change No change On or before 12/

31/2009

9902.12.78 Mixtures of

benzenesulfonic acid,

dodecyl-, with 2-

aminoethanol (CAS No.

26836–07–7) and Poly

(oxy-1,2-ethanediyl), α-

[1-oxo-9- octadecenyl]-

w-hydroxy-, (9Z) (CAS

No. 9004–96–0) (provided for in subheading

3402.90.50) ................... Free No change No change On or before 12/

31/2009

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1149

9902.12.79 1,3- Dihydro-3,3-bis (4-

hydroxy-m-tolyl) -2Hindol-2-one (CAS No.

47465–97–4) (provided

for in subheading

2933.79.08) ................... Free No change No change On or before 12/

31/2009 ’’.

SEC. 1570. MIXTURES OF (≤)–(CIS AND TRANS)–1-[[2-(2,4-

DICHLOROPHENYL)–4-PROPYL-1,3-DIOXOLAN-2-YL]-

METHYL]-1H-1,2,4-TRIAZOLE.

(a) IN GENERAL.—Subchapter II of chapter 99 is amended by

inserting in numerical sequence the following new heading:

‘‘ 9902.12.80 Mixtures of ( ± )–(cis and

trans)–1-[[2-(2,4-

Dichlorophenyl)–4-propyl1,3-dioxolan-2-yl]-methyl]-

1H-1,2,4-triazole (CAS No.

60207–90–1) and application adjuvants (provided

for in subheading

3808.20.15) ........................ 1.1% No change No change On or before

12/31/2009 ’’.

(b) CONFORMING AMENDMENT.—Subchapter II of chapter 99

is amended by striking heading 9902.32.04.

SEC. 1571. PARAQUAT DICHLORIDE.

(a) IN GENERAL.—Subchapter II of chapter 99 is amended by

inserting in numerical sequence the following new heading:

‘‘ 9902.13.06 Paraquat dichloride

(1,1’dimethyl-4,4’-

bipyridinium dichloride)

(CAS No. 1910–42–5)

(provided for in subheading 2933.39.23) ......... 3.59% No change No change On or before

12/31/2006 ’’.

(b) CALENDAR YEAR 2007.—

(1) IN GENERAL.—Heading 9902.13.06, as added by subsection (a), is amended—

(A) by striking ‘‘3.59%’’ and inserting ‘‘4.02%’’; and

(B) by striking ‘‘On or before 12/31/2006’’ and inserting

‘‘On or before 12/31/2007’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2007.

(c) CALENDAR YEARS 2008 AND 2009.—

(1) IN GENERAL.—Heading 9902.13.06, as added by subsection (a) and amended by subsection (b), is further amended—

(A) by striking ‘‘4.02%’’ and inserting ‘‘4.41%’’; and

(B) by striking ‘‘On or before 12/31/2007’’ and inserting

‘‘On or before 12/31/2009’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on January 1, 2008.

SEC. 1572. CERTAIN BASKETBALLS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1150 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.13.07 Basketballs, having an external surface other than

leather, rubber, or synthetic (provided for in

subheading 9506.62.80) .... 0.9% No change No change On or before

12/31/2009 ’’.

SEC. 1573. CERTAIN LEATHER BASKETBALLS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.08 Leather basketballs (provided for in subheading

9506.62.80) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1574. CERTAIN RUBBER BASKETBALLS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.09 Rubber basketballs (provided for in subheading

9506.62.80) ........................ 1.5% No change No change On or before

12/31/2009 ’’.

SEC. 1575. CERTAIN VOLLEYBALLS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.10 Volleyballs (provided for

in subheading 9506.62.80) Free No change No change On or before

12/31/2009 ’’.

SEC. 1576. 4-CHLORO-3-[[3-(4-METHOXYPHENYL)–1,3-DIOXOPROPYL]-

AMINO]-DODECYL ESTER.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.11 4-Chloro-3-[[3-(4-

methoxyphenyl)–1,3-

dioxopropyl]-amino]-

dodecyl ester (CAS No.

33942–96–0) (provided for

in subheading 2924.29.71) Free No change No change On or before

12/31/2009 ’’.

SEC. 1577. LINURON.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.24 3-(3,4-Dichlorophenyl)–1-

methoxy-1-methylurea

(CAS No. 330–55–2)

(Linuron) (provided for in

subheading 2924.21.16) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1578. N,N-DIMETHYLPIPERIDINIUM CHLORIDE (MEPIQUAT CHLORIDE).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1151

‘‘ 9902.13.25 N,NDimethylpiperidinium

chloride (Mepiquat chloride) (CAS No. 24307–26–

4) (provided for in subheading 2933.39.25) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1579. DIURON.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.26 Formulations of 3-(3,4-

dichlorophenyl)–1,1-

dimethylurea (CAS No.

330–54–1) (Diuron) and

application adjuvants

(provided for in subheading 3808.30.15) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1580. FORMULATED PRODUCT KROVAR I DF.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.27 Formulations containing

5-bromo-3-sec-butyl-6-

methyluracil (Bromacil)

(CAS No. 314–40–9), 3-

(3,4-Dichlorophenyl)–1,1-

dimethylurea (Diuron)

(CAS No. 330–54–1), and

application adjuvants

(provided for in subheading 3808.30.15) ......... 2.5% No change No change On or before

12/31/2009 ’’.

SEC. 1581. TRIASULFURON TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.28 3-(6-Methoxy-4-methyl1,3,5-triazin-2-yl)–1-[2-(2-

chloroethoxy)

phenylsulfonyl]urea

(Triasulfuron) (CAS No.

82097–50–5) (provided for

in subheading 2935.00.75) Free No change No change On or before

12/31/2009 ’’.

SEC. 1582. BRODIFACOUM TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.29 3-[3-(4’-Bromo[1,1’-

biphenyl]-4-yl)–1,2,3,4-

tetrahydro-1-

naphthalenyl]-4-hydroxy2H-1-benzopyran- 2-one

(Brodifacoum) (CAS No.

56073–10–0) (provided for

in subheading 2932.29.10) Free No change No change On or before

12/31/2009 ’’.

SEC. 1583. PYMETROZINE TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1152 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.13.30 1,2,4-Triazin-3(2H)-one,

4,5-dihydro-6-methyl-4-

[(3-

pyridinylmethylene)amino]- (Pymetrozine)

(CAS No. 123312–89–0)

(provided for in subheading 2933.69.60) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1584. FORMULATIONS OF THIAMETHOXAM, DIFENOCONAZOLE,

FLUDIOXINIL, AND MEFENOXAM.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.31 Formulations of 3-[(2-

chloro-5-

thiazolyl)methyl]tetrahydro-5-

methyl-N-nitro-1,3,5-

oxadiazin-4-imine)

(Thiamethoxam) (CAS No.

153719–23–4 ); 1H-1,2,4-

triazole, 1-[[2-[2-chloro-4-

(4-chlorophenoxy)phenyl]-

4-methyl- 1,3-dioxolan-2-

yl]methyl]-

(Difenoconazole) (CAS No.

119446–68–3); 1HPyrrole-3-carbonitrile, 4-

(2,2-difluoro-1,3-

benzodioxol-4-yl)-

(Fludioxinil) (CAS No.

131341–86–1); and (R,S)–

2-[(2,6-

dimethylphenylmethoxy)acetylamino]-propionic

acid methyl ester

(Mefenoxam) (CAS Nos.

70630–17–0 and 69516–

34–3) (provided for in subheading 3808.20.15) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1585. TRIFLOXYSULFURON-SODIUM TECHNICAL.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.32 N-[[(4,6-Dimethoxy-2-

pyrimidinyl)amino]carbonyl]-3-(2,2,2-

trifluoroethoxy)–2-

pyridinesulfonamide

monosodium salt (CAS

No. 199119–58–9)

(trifloxysulfuron-sodium)

(provided for in subheading 2935.00.75) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1586. 2 BENZYLTHIO-3-ETHYL SULFONYL PYRIDINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.41 2-Benzylthio-3-ethyl

sulfonyl pyridine (CAS

No. 175729–82–5) (provided for in subheading

2933.39.61) ........................ Free No change No change On or before

12/31/2009 ’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1153

SEC. 1587. 2-AMINO-4-METHOXY-6-METHYL-1,3,5-TRIAZINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.42 2-Amino-4-methoxy-6-

methyl-1,3,5-triazine (CAS

No. 1668–54–8) (provided

for in subheading

2933.69.60) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1588. FORMULATED PRODUCTS CONTAINING MIXTURES OF THE

ACTIVE INGREDIENT 2-CHLORO-N-[[(4-METHOXY-6-

METHYL-1,3,5-TRIAZIN-2YL) AMINO]CARBONYL]

BENZENESULFONAMIDE AND APPLICATION ADJUVANTS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.43 Formulated products containing mixtures of the active ingredient 2-chloro-N-

[[(4-methoxy-6-methyl1,3,5-triazin-2yl)

amino]carbonyl]

benzenesulfonamide and

application adjuvants

(Chlorosulfuon) (CAS No.

64902–72–3) (provided for

in subheading 3808.30.15) Free No change No change On or before

12/31/2009 ’’.

SEC. 1589. 2-METHYL-4-METHOXY-6-METHYLAMINO-1,3,5-TRIAZINE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.44 2-Methyl-4-methoxy-6-

methylamino-1,3,5-triazine (CAS No. 5248–39–

5) (provided for in subheading 2933.69.60) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1590. MIXTURES OF SODIUM-2-CHLORO-6-[(4,6

DIMETHOXYPYRIMIDIN-2-YL)THIO]BENZOATE AND

APPLICATION ADJUVANTS (PYRITHIOBAC-SODIUM).

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.45 Mixtures of sodium-2-

chloro-6-[(4,6

dimethoxypyrimidin-2-

yl)thio]benzoate (CAS No.

123343–16–8) and application adjuvants

(Pyrithiobac-sodium) (provided for in subheading

3808.30.15) ........................ 3.5% No change No change On or before

12/31/2009 ’’.

SEC. 1591. CERTAIN DECORATIVE PLATES, DECORATIVE SCULPTURES,

DECORATIVE PLAQUES, AND ARCHITECTURAL MINIATURES.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1154 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.13.46 Decorative plates, whether or not with decorative

rim or attached sculpture;

decorative sculptures,

each with plate or plaque

attached, and decorative

plaques each not over 7.65

cm in thickness; architectural miniatures, whether

or not put up in sets; all

the foregoing of resin materials and containing agglomerated stone, put up

for mail order retail sale,

whether for wall or tabletop display and each

weighing not over 1.36 kg

together with their retail

packaging (provided for in

subheading 3926.40.00) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1592. CERTAIN MUSIC BOXES.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.47 Music boxes with mechanical musical movements,

presented in the immediate packaging for shipment to the ultimate purchaser, and each weighing

not over 6 kg together

with retail packaging

(provided for in subheading 9208.10.00) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1593. 2-METHYL-4-CHLOROPHENOXYACETIC ACID.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.60 2-Methyl-4-

chlorophenoxyacetic acid

(CAS No. 94–74–6) (provided for in subheading

2918.90.20) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1594. PHENMEDIPHAM.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.76 3-

Methylcarbonylaminophenyl-3-methyl-carbanilate

(Phenmedipham) (CAS

No. 13684–63–4) in bulk

or mixed with application

adjuvants (provided for in

subheadings 2924.29.47

and 3808.30.15) ................. Free No change No change On or before

12/31/2009 ’’.

SEC. 1595. DESMEDIPHAM.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1155

‘‘ 9902.13.77 3-

Ethoxycarbonylaminophenyl-N-phenylcarbamate

(Desmedipham) (CAS No.

13684–56–5) in bulk or

mixed with application

adjuvants (provided for in

subheadings 2924.29.43

and 3808.30.15) ................. Free No change No change On or before

12/31/2009 ’’.

SEC. 1596. CERTAIN FOOTWEAR WITH OPEN TOES OR HEELS.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.78 Footwear with outer soles

of rubber or plastics and

uppers of vegetable fibers,

with open toes or open

heels, other than house

slippers (provided for in

subheading 6404.19.25) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1597. CERTAIN WORK FOOTWEAR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.85 House slippers with outer

soles of rubber, plastics,

leather or composition

leather and uppers of

leather, valued not over

$2.50/pair (provided for in

subheading 6403.99.75);

Sports footwear; tennis

shoes, basketball shoes,

gym shoes, training shoes

and the like, all the foregoing with outer soles of

rubber or plastics and uppers of textile materials

for women (provided for in

subheading 6404.11.20) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1598. CERTAIN REFRACTING AND REFLECTING TELESCOPES.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.86 Refracting telescopes with

50 mm or smaller objective lenses and reflecting

telescopes with 76 mm or

smaller mirrors, and parts

and accessories thereof

(provided for in subheading 9005.80.40 or

9005.90.80) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1600. CERTAIN WORK FOOTWEAR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

120 STAT. 1156 PUBLIC LAW 109–280—AUG. 17, 2006

‘‘ 9902.13.90 Welt footwear with outer

soles of rubber, plastics,

leather or composition

leather and uppers of pigskin, incorporating a protective metal toe-cap (provided for in subheading

6403.40.30) ........................ Free No change No change On or before

12/31/2009 ’’.

SEC. 1601. CERTAIN FOOTWEAR FOR MEN.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.91 Other footwear with uppers of vegetable fibers,

for men (provided for in

subheading 6405.20.30) .... 4.5% No change No change On or before

12/31/2009 ’’.

SEC. 1602. CERTAIN RUBBER OR PLASTIC FOOTWEAR.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.92 Other footwear with uppers of vegetable fibers,

other than such footwear

for men or women (provided for in subheading

6405.20.30) ........................ 6.5% No change No change On or before

12/31/2009 ’’.

SEC. 1604. ZINC DIMETHYLDITHIOCARBAMATE.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.13.97 Zinc

dimethyldithiocarbamate

(Ziram) (CAS No. 137–30–

4) (provided for in subheading 3808.20.28) ......... Free No change No change On or before

12/31/2009 ’’.

SEC. 1605. CERTAIN LIQUID CRYSTAL DEVICE (LCD) PANEL ASSEMBLIES.

Subchapter II of chapter 99 is amended by inserting in numerical sequence the following new heading:

‘‘ 9902.85.21 Liquid Crystal Device

(LCD) panel assemblies

for use in LCD direct view

televisions (provided for in

subheading 9013.80.90) .... Free No change No change On or before

12/31/2009 ’’.

SEC. 1606. CERTAIN WATERTUBE BOILERS AND REACTOR VESSEL

HEADS.

(a) WATERTUBE BOILERS.—Subchapter II of chapter 99 is

amended by inserting in numerical sequence the following new

heading:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1157

‘‘ 9902.84.01 Watertube boilers with a

steam production exceeding 45 t per hour, for use

in nuclear facilities entered after 12/31/2008 and

on or before 12/31/2010 if

the contract for the purchase of such watertube

boilers was entered into

on or before 7/31/2006

(provided for in subheading 8402.11.00) ......... Free No change No change On or before

12/31/2010 ’’.

(b) REACTOR VESSEL HEADS.—Subchapter II of chapter 99 is

amended by inserting in numerical sequence the following new

heading:

‘‘ 9902.84.04 Reactor vessel heads and

pressurizers for nuclear

reactors entered after 12/

31/2008 and on or before

12/31/2010 if the contract

for the purchase of such

heads and pressurizers

was entered into on or before 7/31/2006 (provided

for in subheading

8401.40.00) ........................ Free No change No change On or before

12/31/2010 ’’.

CHAPTER 2—EXISTING DUTY SUSPENSIONS AND

REDUCTIONS

SEC. 1611. EXTENSION OF CERTAIN EXISTING DUTY SUSPENSIONS AND

REDUCTIONS.

(a) EXISTING DUTY SUSPENSIONS AND REDUCTION.—Each of the

following headings is amended by striking the date in the effective

period column and inserting ‘‘12/31/2009’’:

(1) Heading 9902.39.08 (relating to ORGASOL polyamide

powders).

(2) Heading 9902.30.90 (relating to 3-amino-2′-(sulfatoethyl sulfonyl) ethyl benzamide).

(3) Heading 9902.32.91 (relating to MUB 738 INT).

(4) Heading 9902.30.31 (relating to 5-amino-N-(2-hydroxyethyl)–2,3-xylenesulfonamide).

(5) Heading 9902.01.83 (relating to Ethoprop).

(6) Heading 9902.01.73 (relating to Fosetyl-Al).

(7) Heading 9902.03.38 (relating to Flufenacet (FOE

hydroxy)).

(8) Heading 9902.02.02 (relating to Methidathion Technical).

(9) Heading 9902.02.12 (relating to difenoconazole).

(10) Heading 9902.02.09 (relating to Lambda-Cyhalothrin).

(11) Heading 9902.02.08 (relating to cyprodinil).

(12) Heading 9902.02.04 (relating to Wakil XL).

(13) Heading 9902.02.06 (relating to Azoxystrobin Technical).

(14) Heading 9902.02.05 (relating to mucochloric acid).

(15) Heading 9902.03.06 (relating to high tenacity multiple

(folded) or cabled yarn of viscose rayon).

(16) Heading 9902.05.07 (relating to high tenacity single

yarn of viscose rayon with a decitex equal to or greater than

1,000).

120 STAT. 1158 PUBLIC LAW 109–280—AUG. 17, 2006

(17) Heading 9902.38.31 (relating to Vulkalent E/C).

(18) Heading 9902.01.71 (relating to hexanedioic acid,

polymer with 1,3-benzenedimethanamine).

(19) Heading 9902.29.93 (relating to Trinexapac-ethyl).

(20) Heading 9902.38.52 (relating to formulations of

triasulfuron).

(21) Heading 9902.39.30 (relating to certain ion-exchange

resins).

(22) Heading 9902.32.82 (relating to 2,6 Dichlorotoluene).

(23) Heading 9902.02.33 (relating to Ion exchange resin

comprising a compolymer of styrene crosslinked with

ethenylbenzene, aminophosphonic acid sodium form).

(24) Heading 9902.02.32 (relating toIon exchange resin

comprising a copolymer of styrene crosslinked with

divinylbenzene, iminodiacetic acid, sodium form)).

(25) Heading 9902.01.78 (relating to certain bags for toys).

(26) Heading 9902.01.81 (relating to cases for certain children’s products).

(27) Heading 9902.01.80 (relating to certain children’s products).

(28) Heading 9902.29.34 (relating to certain light absorbing

photo dyes).

(29) Heading 9902.85.04 (relating to certain R-core transformers).

(30) Heading 9902.03.04 (relating to reduced vat blue 43).

(31) Heading 9902.03.03 (relating to sulfur black 1).

(32) Heading 9902.01.22 (relating to DMSIP).

(33) Heading 9902.29.35 (relating to 2-(Methoxycarbonyl)benzylsulfonamide).

(34) Heading 9902.02.52 (relating to Imidacloprid pesticides).

(35) Heading 9902.38.15 (relating to Baytron C-R).

(36) Heading 9902.29.87 (relating to 3,4-

Ethylenedioxythiophene).

(37) Heading 9902.01.90 (relating to certain filament

yarns).

(38) Heading 9902.01.91 (relating to certain filament

yarns).

(39) Heading 9902.71.08 (relating to certain semi-manufactured forms of gold).

(40) Heading 9902.04.10 (relating to Crotonic Acid).

(41) Heading 9902.04.09 (relating to 3,6,9-

Trioxaundecanedioic acid).

(42) Heading 9902.02.51 (relating to benzoic acid, 2-amino4-[[(2,5-dichlorophenyl)amino]carbonyl]-, methyl ester).

(43) Heading 9902.32.73 (relating to Solvent blue 124).

(44) Heading 9902.32.55 (relating to Methyl thioglycolate

(MTG)).

(45) Heading 9902.01.48 (relating to Ethyl pyruvate).

(46) Heading 9902.04.11 (relating to 1,3-

Benzenedicarboxamide, N, N′-Bis (2,2,6,6-tetramethyl-4-

piperidinyl)-).

(47) Heading 9902.04.07 (relating to reaction products of

phosphorus trichloride with 1,1′-biphenyl and 2,4-bis(1,1-

dimethylethyl)phenol).

(48) Heading 9902.04.05 (relating to preparations based

on ethanediamide, N-(2-ethoxyphenyl)-N′-(4-isodecylphenyl)-).

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1159

(49) Heading 9902.04.06 (relating to 1-Acetyl-4-(3-dodecyl2,5-dioxo-1-pyrrolidinyl)–2,2,6,6-tetramethylpiperidine).

(50) Heading 9902.04.12 (relating to 3-Dodecyl-1-(2,2,6,6-

tetramethyl-4-piperidinyl)–2,5-pyrrolidinedione).

(51) Heading 9902.29.70 (relating to

Tetraacetylethylenediamine).

(52) Heading 9902.34.01 (relating to sodium petroleum

sulfonate).

(53) Heading 9902.02.75 (relating to esters and sodium

esters of parahydroxybenzoic acid).

(54) Heading 9902.30.16 (relating to Diclofop methyl).

(55) Heading 9902.33.61 (relating to ((3-

((Dimethylamino)carbonyl)–2-pyridinyl)sulfonyl) carbamic acid,

phenyl ester).

(56) Heading 9902.01.45 (relating to Esfenvalerate).

(57) Heading 9902.05.01 (relating to Methyl 2-[[[[[4-

(dimethylamino)–6- (2,2,2-trifluoroethoxy)-1,3,5-triazin-2-yl]-

amino]carbonyl]amino]sulfonyl]-3-methylbenzoate and application adjuvants).

(58) Heading 9902.01.44 (relating to Benzyl carbazate).

(59) Heading 9902.05.14 (relating to Pyromellitic

Dianhydride).

(60) Heading 9902.05.13 (relating to 4,4’-Oxydiphthalic

Anhydride).

(61) Heading 9902.05.12 (relating to 4,4’-Oxydianiline).

(62) Heading 9902.05.11 (relating to 3,3’,4,4’-

Biphenyltetracarboxylic Dianhydride).

(63) Heading 9902.29.80 (relating to 1-[[2-(2,4-

dichlorophenyl)–4-propyl-1,3-dioxolan-2-yl]-methyl]-1H-1,2,4-

triazole).

(64) Heading 9902.05.19 (relating to ethofumesate).

(65) Heading 9902.02.60 (relating to Nemacur VL).

(66) Heading 9902.03.77 (relating to thiophanate methyl).

(67) Heading 9902.84.14 (relating to ceiling fans).

(b) OTHER MODIFICATIONS.— (1) 2-CHLOROBENZYL CHLORIDE.—Heading 9902.01.56 is

amended—

(A) by striking ‘‘2903.69.70’’ and inserting ‘‘2903.69.80’’;

and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(2) TRIETHYLENE GLYCOL BIS[3-(3-TERT-BUTYL-4-HYDROXY-5-

METHYLPHENYL)PROPIONATE] .—Heading 9902.01.88 is

amended—

(A) by striking ‘‘Free’’ and inserting ‘‘4.1%’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(3) FORMULATIONS OF TRIASULFURON AND DICAMBA.—

Heading 9902.38.21 is amended—

(A) in the article description column—

(i) by inserting ‘‘(Triasulfuron)’’ before ‘‘(CAS No.

82097-50-5)’’; and

(ii) by inserting ‘‘(Dicamba)’’ before ‘‘(CAS No.

1918-00-9)’’; and

(B) by striking ‘‘12/31/2003’’ and inserting ‘‘12/31/2009’’.

(4) 11-AMINOUNDECANOIC ACID.—Heading 9902.32.49 is

amended—

(A) by striking ‘‘Free’’ and inserting ‘‘2.3%’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

120 STAT. 1160 PUBLIC LAW 109–280—AUG. 17, 2006

(5) PHBA.—Heading 9902.29.03 is amended—

(A) by striking ‘‘Free’’ and inserting ‘‘3.1%’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(6) ACETAMIPRID TECHNICAL.—Heading 9902.03.92 is

amended—

(A) by striking ‘‘Free’’ and inserting ‘‘2.5%’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(7) BAYTRON AND BAYTRON P.—Heading 9902.39.15 is

amended—

(A) by inserting ‘‘, whether or not containing binder

resin and organic solvent’’ before ‘‘(CAS No.’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(8) IPRODIONE.—Heading 9902.01.51 is amended—

(A) by striking ‘‘4.1%’’ and inserting ‘‘2.0%’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(9) ETHANEDIAMIDE, N-(2-ETHOXYPHENYL)-N′-(2-

ETHYLPHENYL)-).—Heading 9902.04.13 is amended—

(A) by striking ‘‘2924.29.76’’ and inserting ‘‘2924.29.71’’;

and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(10) THIAMETHOXAM TECHNICAL.—Heading 9902.03.11 is

amended—

(A) by striking ‘‘3.2%’’ and inserting ‘‘3.0%’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(11) 1,3-BIS(4-AMINOPHENOXY)BENZENE (RODA).—Heading

9902.05.15 is amended—

(A) by inserting ‘‘(RODA)’’ after ‘‘benzene’’; and

(B) by striking ‘‘12/31/2006’’ and inserting ‘‘12/31/2009’’.

(12) MIXTURES OF N-[[(4,6-DIMETHOXYPYRIMIDIN-2-

YL)AMINO]CARBONYL]-3-(ETHYLSULFONYL)–2-

PYRIDINESULFONAMIDE AND APPLICATION ADJUVANTS.—Heading

9902.33.60 is amended—

(A) by striking the article description and inserting

the following: ‘‘Mixtures of N-[[(4,6-dimethoxypyrimidin-2-

yl)amino]carbonyl]-3-(ethylsulfonyl)–2-pyridinesulfonamide

and application adjuvants (CAS No. 122931–48–0) (provided for in subheading 3808.30.15)’’; and

(B) by striking ‘‘12/31/2003’’ and inserting ‘‘12/31/2009’’.

Subtitle B—Other Tariff Provisions

CHAPTER 1—LIQUIDATION OR RELIQUIDATION OF

CERTAIN ENTRIES

SEC. 1621. CERTAIN TRAMWAY CARS AND ASSOCIATED SPARE PARTS.

(a) IN GENERAL.—The Commissioner of the Bureau of Customs

and Border Protection of the Department of Homeland Security

shall admit free of duty 3 tramway cars (provided for in subheading

8603.10.00 of the Harmonized Tariff Schedule of the United States)

manufactured in Ostrava, Czech Republic, for the use by the city

of Portland, Oregon, and imported pursuant to a contract with

the city of Portland, Oregon, and associated spare parts for such

tramway cars (provided for in applicable subheadings of heading

8607 or other headings of the Harmonized Tariff Schedule of the

United States) imported pursuant to such contract, the foregoing

Czech Republic.

Oregon.

Deadlines.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1161

to be entered into the customs territory of the United States by

not later than December 31, 2006.

(b) RELIQUIDATION; REFUND OF AMOUNTS OWED.— If the liquidation of the entry of any of the tramway cars or associated

spare parts described in subsection (a) becomes final before the

date of the enactment of this Act, the Commissioner of the Bureau

of Customs and Border Protection, notwithstanding any other provision of law, shall—

(1) within 15 days after such date, reliquidate the entry

in accordance with the provisions of this section; and

(2) at the time of such reliquidation, make the appropriate

refund of any duty paid with respect to the entry.

SEC. 1622. RELIQUIDATION OF CERTAIN ENTRIES OF CANDLES.

(a) RELIQUIDATION OF ENTRIES.—Notwithstanding sections 514

and 520 of the Tariff Act of 1930 (19 U.S.C. 1514 and 1520)

or any other provision of law, the Bureau of Customs and Border

Protection shall, not later than 90 days after the date of the enactment of this Act—

(1) reliquidate the entries listed in subsection (b) without

assessment of antidumping duties or interest; and

(2) refund any antidumping duties and interest which were

previously paid on such entries.

(b) AFFECTED ENTRIES.—The entries referred to in subsection

(a) are the following:

Entry number Date of entry Port

110–3447557–3 03/18/00 Los Angeles

110–3447591–2 03/19/00 Los Angeles

110–3447595–3 03/19/00 Los Angeles

110–1201638–1 03/21/00 Detroit

110–1201639–9 03/21/00 Detroit

110–1201640–7 03/21/00 Detroit

110–3447613–4 03/21/00 Los Angeles

110–1201697–7 03/23/00 Detroit

110–1201695–1 03/23/00 Detroit

110–1201696–9 03/23/00 Detroit

110–1201756–1 03/27/00 Detroit

110–1201757–9 03/27/00 Detroit

110–1201758–7 03/27/00 Detroit

110–1740905–2 03/30/00 Los Angeles

110–1740943–3 03/30/00 Los Angeles

110–1201845–2 03/31/00 Detroit

110–1201813–0 04/03/00 Detroit

110–1201814–8 04/03/00 Detroit

110–1201815–5 04/03/00 Detroit

110–1201875–9 04/04/00 Detroit

110–1201868–4 04/04/00 Detroit

110–1201858–5 04/04/00 Detroit

110–3447959–1 04/11/00 Los Angeles

110–3447958–3 04/11/00 Los Angeles

110–3759536–9 04/12/00 Detroit

110–3759561–7 04/12/00 Detroit

110–3759542–7 04/12/00 Detroit

110–3759540–1 04/12/00 Detroit

110–3447977–3 04/12/00 Los Angeles

110–3759539–3 04/12/00 Detroit

110–3448045–8 04/14/00 Los Angeles

110–3448046–6 04/14/00 Los Angeles

110–3448110–0 04/20/00 Los Angeles

110–3759670–6 04/25/00 Detroit

110–3759673–0 04/25/00 Detroit

110–3759669–8 04/25/00 Detroit

110–3759667–2 04/25/00 Detroit

Deadline.

120 STAT. 1162 PUBLIC LAW 109–280—AUG. 17, 2006

Entry number Date of entry Port

110–3759671–4 04/25/00 Detroit

110–3759668–0 04/25/00 Detroit

110–3448241–3 04/27/00 Los Angeles

110–3448247–0 04/27/00 Los Angeles

110–3448276–9 04/28/00 Memphis

110–3448274–4 04/28/00 Memphis

110–3448282–7 05/04/00 Memphis

101–4081779–1 05/07/00 Memphis

101–4088945–1 05/23/00 Memphis

101–4089954–3 05/23/00 Memphis

101–4088960–0 05/23/00 Memphis

101–4092192–4 05/25/00 Memphis

101–4089312–3 05/26/00 Detroit

101–4089942–7 05/26/00 Detroit

101–4089893–2 05/26/00 Detroit

101–4092221–1 05/26/00 Memphis

101–4089697–7 05/26/00 Los Angeles

101–4092215–3 05/26/00 Memphis

101–4086053–6 05/26/00 Los Angeles

101–4122700–8 07/27/00 Los Angeles

101–4122707–3 07/27/00 Los Angeles

101–4122712–3 07/27/00 Los Angeles

101–4127147–7 08/03/00 Los Angeles

101–4132485–4 08/09/00 Norfolk

101–4129989–0 08/11/00 Detroit

101–4130345–2 08/17/00 Detroit

101–4129976–7 08/23/00 Detroit

101–4149476–4 09/06/00 Los Angeles

101–4149483–0 09/06/00 Los Angeles

101–4149493–9 09/06/00 Los Angeles

101–4148595–2 09/08/00 Detroit

101–4153301–7 09/18/00 Detroit

101–4154523–5 09/14/00 Los Angeles

101–4153389–2 09/18/00 Detroit

101–4157161–1 09/20/00 Norfolk

101–4153333–0 09/21/00 Detroit

101–4155542–4 09/26/00 Detroit

101–4166291–5 10/07/00 Los Angeles

101–4167325–0 10/09/00 Detroit

101–4167363–1 10/12/00 Detroit

101–4164567–0 10/13/00 Norfolk

101–4168049–5 10/14/00 Los Angeles

101–4172904–5 10/21/00 Los Angeles

101–4175579–2 10/30/00 Los Angeles

101–4183996–8 11/07/00 Detroit

101–4183234–4 11/09/00 Detroit

101–4183251–8 11/09/00 Detroit

101–4183253–4 11/09/00 Detroit

101–4183257–5 11/09/00 Detroit

101–4183264–1 11/09/00 Detroit

101–4183264–1 11/09/00 Detroit

101–4184811–8 11/13/00 Los Angeles

101–4184819–1 11/13/00 Los Angeles

101–4189001–1 11/14/00 Tampa

101–4185526–1 11/16/00 Detroit

101–4185535–2 11/16/00 Detroit

101–4186580–7 11/20/00 Detroit

101–4189830–3 11/20/00 Detroit

101–4189774–3 11/21/00 Detroit

101–4191183–3 11/24/00 Los Angeles

101–4191188–2 11/24/00 Los Angeles

101–4191193–2 11/24/00 Los Angeles

101–4194796–9 11/29/00 Detroit

101–4194801–7 11/29/00 Detroit

101–4196383–4 12/01/00 Los Angeles

101–4196389–1 12/01/00 Los Angeles

101–4199308–8 12/13/00 Detroit

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1163

SEC. 1623. CERTAIN ENTRIES OF ROLLER CHAIN.

(a) LIQUIDATION OR RELIQUIDATION OF ENTRIES.—Notwithstanding sections 514 and 520 of the Tariff Act of 1930 (19 U.S.C.

1514 and 1520) or any other provision of law, the Bureau of Customs

and Border Protection shall, not later than 90 days after the date

of enactment of this Act, liquidate or reliquidate the entries listed

in subsection (b) without assessment of interest and shall refund

any interest which was previously paid.

(b) AFFECTED ENTRIES.—The entries referred to in subsections

(a) and (b) are the following:

Entry number Date of entry Port

858442975 08/21/85 Chicago

868558147 01/28/86 Chicago

868565499 03/14/86 Chicago

858440922 07/31/85 Chicago

868565499 03/14/86 Chicago

868558147 01/28/86 Chicago

858442975 08/21/85 Chicago

858440922 07/31/85 Chicago

847648353 06/18/84 Chicago

858268324 01/04/85 Chicago

858264302 11/08/84 Chicago

858265107 11/19/84 Chicago

847658150 07/18/84 Chicago

847412877 05/09/84 Chicago

837078386 03/21/83 Chicago

837077691 02/07/83 Chicago

837077701 02/07/83 Chicago

826735834 01/13/82 Chicago

826736309 01/18/82 Chicago

821020081 02/12/82 Chicago

821020052 02/17/82 Chicago

821026768 04/13/82 Chicago

827119569 06/18/82 Chicago

837075114 10/06/82 Chicago

826727088 10/14/81 Chicago

837124777 05/19/83 Chicago

847405240 11/28/83 Chicago

837127606 08/18/83 Chicago

837125132 06/08/83 Chicago

847406100 12/22/83 Chicago

847404034 11/02/83 Chicago

837128090 09/07/83 Chicago

837126762 08/05/83 Chicago

837125569 06/22/83 Chicago

837078991 04/12/83 Chicago

837129222 10/03/83 Chicago

847406414 12/29/83 Chicago

847408014 01/31/84 Chicago

868569204 07/03/86 Chicago

868730813 08/14/86 Chicago

SEC. 1624. CERTAIN ENTRIES OF SOUNDSPA CLOCK RADIOS.

(a) IN GENERAL.—Notwithstanding section 514 of the Tariff

Act of 1930 (19 U.S.C. 1514) or any other provision of law, the

Bureau of Customs and Border Protection shall, not later than

90 days after the date of the enactment of this Act—

(1) reliquidate each entry described in subsection (c) containing any merchandise which, on the date of original liquidation, was classified under subheading 8527.19.50 of the Harmonized Tariff Schedule of the United States; and

(2) make such reliquidation at the rate of duty that would

have been applicable to such merchandise if the merchandise

Deadline.

Deadline.

120 STAT. 1164 PUBLIC LAW 109–280—AUG. 17, 2006

had been liquidated under subheading 8527.19.10 of such

Schedule on the date of entry of the merchandise.

(b) REFUND OF AMOUNTS OWED.—Any amounts owed by the

United States under subsection (a) shall be refunded with interest.

(c) AFFECTED ENTRIES.—The entries referred to in subsection

(a) are as follows:

Entry number

110–1199345–7

110–1199542–9

110–1199558–5

110–1201694–4

110–3759754–8

110–3759785–2

101–4082299–9

101–4088073–2

101–4089053–3

101–4120875–0

101–4133671–8

101–4138302–5

101–4145092–3

101–4148477–3

101–4153108–6

101–4159322–7

101–4158601–5

101–4163243–9

101–4164448–3

101–4168318–4

101–4172197–6

101–4172489–7

101–4193123–7

101–4264820–2

101–4271724–7

101–4277850–4

101–4287672–0

101–4301588–0

101–4306238–7

101–4306235–3

101–6011727–0

101–6012796–4

101–6015492–7

101–6021099–2

101–6026903–0

101–6024120–3

101–6028079–7

101–6027052–5

101–6036728–9

101–6048069–4

101–6079830–1

101–6082949–4

101–6115954–5

101–6119379–1

101–6127048–2

101–6150035–9

101–6148556–9

101–6172630–1

101–6172406–6

101–6186497–9

101–4208407–7

101–6035939–3

CHAPTER 2—MISCELLANEOUS PROVISIONS

SEC. 1631. VESSEL REPAIR DUTIES.

(a) EXEMPTION.—Section 466(h) of the Tariff Act of 1930 (19

U.S.C. 1466(h)) is amended by striking paragraph (4) and inserting

the following:

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1165

‘‘(4) the cost of equipment, repair parts, and materials

that are installed on a vessel documented under the laws

of the United States and engaged in the foreign or coasting

trade, if the installation is done by members of the regular

crew of such vessel while the vessel is on the high seas, in

foreign waters, or in a foreign port, and does not involve foreign

shipyard repairs by foreign labor.’’.

(b) AMENDMENT TO HTS.—The U.S. Notes to subchapter XVIII

of chapter 98 of the Harmonized Tariff Schedule of the United

States are amended by amending U.S. Note 2 to read as follows:

‘‘2. Notwithstanding the provisions of subheadings 9818.00.03

through 9818.00.07, no duty shall apply to the cost of equipment,

repair parts, and materials that are installed in a vessel documented

under the laws of the United States and engaged in the foreign

or coasting trade, if the installation is done by members of the

regular crew of such vessel while the vessel is on the high seas,

in foreign waters, or in a foreign port and does not involve foreign

shipyard repairs by foreign labor. Declaration and entry shall not

be required with respect to such installation, equipment, parts,

and materials.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

apply to vessel equipment, repair parts, and materials installed

on or after April 25, 2001.

SEC. 1632. SUSPENSION OF NEW SHIPPER REVIEW PROVISION.

(a) SUSPENSION OF THE AVAILABILITY OF BONDS TO NEW SHIPPERS.—Clause (iii) of section 751(a)(2)(B) of the Tariff Act of 1930

(19 U.S.C. 1675(a)(2)(B)(iii)) shall not be effective during the period

beginning on April 1, 2006, and ending on June 30, 2009.

(b) REPORT ON THE IMPACT OF THE SUSPENSION.—Not later

than December 31, 2008, the Secretary of the Treasury, in consultation with the Secretary of Commerce, the United States Trade

Representative, and the Secretary of Homeland Security, shall

submit to the Committee on Ways and Means of the House of

Representatives and the Committee on Finance of the Senate a

report containing—

(1) recommendations on whether the suspension of section

751(a)(2)(B)(iii) of the Tariff Act of 1930 should be extended

beyond the date provided in subsection (a); and

(2) an assessment of the effectiveness of any administrative

measure that was implemented to address the difficulties that

necessitated the suspension under subsection (a), including—

(A) any problem in the collection of antidumping duties

on imports from new shippers; and

(B) any burden imposed on legitimate trade and commerce by the suspension of bonds to new shippers.

(c) REPORT ON COLLECTION PROBLEMS AND ANALYSIS OF PROPOSED SOLUTIONS.—

(1) REPORT.—Not later than 180 days after the date of

the enactment of this Act, the Secretary of the Treasury, in

consultation with the Secretary of Homeland Security and the

Secretary of Commerce, shall submit to the Committee on Ways

and Means of the House of Representatives and the Committee

on Finance of the Senate a report describing—

(A) any major problem experienced in the collection

of duties during the 4 most recent fiscal years for which

Deadline.

Deadline.

19 USC 1675

note.

19 USC 1466

note.

120 STAT. 1166 PUBLIC LAW 109–280—AUG. 17, 2006

data are available, including any fraudulent activity

intended to avoid payment of duties; and

(B) an estimate of the total amount of duties that

were uncollected during the most recent fiscal year for

which data are available, including, with respect to each

product, a description of why the duties were uncollected.

(2) RECOMMENDATIONS.—The report shall include—

(A) recommendations on any additional action needed

to address problems related to the collection of duties;

and

(B) for each recommendation—

(i) an analysis of how the recommendation would

address the specific problem; and

(ii) an assessment of the impact that implementing

the recommendation would have on international trade

and commerce (including any additional costs imposed

on United States businesses).

SEC. 1633. EXTENSION AND MODIFICATION OF DUTY SUSPENSION ON

WOOL PRODUCTS; WOOL RESEARCH FUND; WOOL DUTY

REFUNDS.

(a) EXTENSION OF TEMPORARY DUTY REDUCTIONS.—Each of the

following headings of the Harmonized Tariff Schedule of the United

States is amended by striking the date in the effective period

column and inserting ‘‘12/31/2009’’:

(1) Heading 9902.51.11 (relating to fabrics of worsted wool).

(2) Heading 9902.51.13 (relating to yarn of combed wool).

(3) Heading 9902.51.14 (relating to wool fiber, waste,

garnetted stock, combed wool, or wool top).

(4) Heading 9902.51.15 (relating to fabrics of combed wool).

(5) Heading 9902.51.16 (relating to fabrics of combed wool).

(b) EXTENSION OF DUTY REFUNDS AND WOOL RESEARCH TRUST

FUND.—

(1) IN GENERAL.—Section 4002(c) of the Wool Suit and

Textile Trade Extension Act of 2004 (Public Law 108–429;

118 Stat. 2603 (7 U.S.C. 7101 note)) is amended—

(A) in paragraph (3)—

(i) by striking ‘‘2 additional payments’’ and

inserting ‘‘annual additional payments’’; and

(ii) by adding at the end the following:

‘‘(C) Each subsequent annual payment to be made after

January 1 of each subsequent year, but on or before April

15 of such year through calendar year 2010.’’; and

(B) in paragraph (6)—

(i) in subparagraph (A), by striking ‘‘through 2007’’

and inserting ‘‘through 2009’’; and

(ii) by adding at the end the following:

‘‘(C) ELIGIBLE MANUFACTURERS.—Only manufacturers

who weave worsted wool fabric in the United States shall

be eligible for a grant under this paragraph.’’.

(2) SUNSET.—Section 506(f) of the Trade and Development

Act of 2000 (Public 106–200; 114 Stat. 303), as amended by

section 4002(c)(5) of the Wool Suit and Textile Trade Extension

Act of 2004 (Public 108–429; 118 Stat. 2603), is amended by

striking ‘‘2008’’ and inserting ‘‘2010’’.

Trust fund.

Extension.

7 USC 7101 note.

Grants.

Grants.

Extension.

Deadline.

Effective dates.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1167

SEC. 1634. AUTHORITIES RELATING TO DR–CAFTA AGREEMENT.

(a) AUTHORITY TO IMPLEMENT CERTAIN AMENDMENTS TO DR–

CAFTA AGREEMENT WITH NICARAGUA, EL SALVADOR, HONDURAS, AND GUATEMALA.— (1) PROCLAMATION AUTHORITY.—The President is authorized to proclaim modifications to the Harmonized Tariff

Schedule of the United States as necessary to carry out amendments proposed by the United States and the CAFTA–DR countries to the Agreement, the terms of which are contained in

the letters of understanding described in paragraph (2).

(2) LETTERS OF UNDERSTANDING.—The letters of understanding referred to in paragraph (1) are the following:

(A) The letter of March 24, 2006, from Nicaraguan

Vice Minister of Trade Julio Teran to United States Special

Textile Negotiator Scott Quesenberry.

(B) The letter of March 27, 2006, from United States

Special Textile Negotiator Scott Quesenberry to Nicaraguan

Vice Minister of Trade Julio Teran.

(C) The letter of January 27, 2006, from El Salvadoran

Vice Minister of Economy Eduardo Ayala to United States

Special Textile Negotiator Scott Quesenberry.

(D) The letter of January 27, 2006, from United States

Special Textile Negotiator Scott Quesenberry to El Salvadoran Vice Minister of Economy Eduardo Ayala.

(E) The letter of March 7, 2006, from Honduran Vice

Minister of Foreign Trade Jorge Rosa to United States

Special Textile Negotiator Scott Quesenberry.

(F) The letter of March 7, 2006, from United States

Special Textile Negotiator Scott Quesenberry to Honduran

Vice Minister of Foreign Trade Jorge Rosa.

(G) The letter of June 23, 2006, from Guatemalan

Minister of Economy Marcio Cuevas Quezada to United

States Special Textile Negotiator Scott Quesenberry.

(H) The letter of June 23, 2006, from United States

Special Textile Negotiator Scott Quesenberry to Guatemalan Minister of Economy Marcio Cuevas Quezada.

(3) SUNSET.—The authority of the President to proclaim

modifications pursuant to paragraph (1) expires on December

31, 2007.

(b) AUTHORITY TO IMPLEMENT CERTAIN AMENDMENTS TO DR–

CAFTA AGREEMENT WITH COSTA RICA AND THE DOMINICAN

REPUBLIC.—

(1) PROCLAMATION AUTHORITY.—The President is authorized to proclaim modifications to the Harmonized Tariff

Schedule of the United States as necessary to carry out amendments proposed by the United States, Costa Rica, and the

Dominican Republic to the Agreement, the terms of which

are contained in the letters of understanding described in paragraph (2).

(2) LETTERS OF UNDERSTANDING.—

(A) IN GENERAL.—The letters of understanding referred

to in paragraph (1) are letters of understanding exchanged

between the countries described in paragraph (1) relating

to the rules of origin for articles containing pocket bag

fabric described in subparagraph (B).

(B) POCKET BAG FABRIC DESCRIBED.—For purposes of

subparagraph (A), the term ‘‘pocket bag fabric’’ means

Name listing.

120 STAT. 1168 PUBLIC LAW 109–280—AUG. 17, 2006

pocket bag fabric used in an apparel article classifiable

under chapter 61 or 62 of the Harmonized Tariff Schedule

of the United States that contains a pocket or pockets.

(3) CONSULTATION AND LAYOVER REQUIREMENTS.—Any

modification proclaimed by the President pursuant to paragraph (1) shall be subject to the consultation and layover provisions of section 104 of the Dominican Republic–Central

America–United States Free Trade Agreement Implementation

Act (Public Law 109–53; 19 U.S.C. 4014).

(4) CONGRESSIONAL DISAPPROVAL.—

(A) IN GENERAL.—Any modification proclaimed by the

President pursuant to paragraph (1) shall not be effective

if a joint resolution described in subparagraph (B) is

enacted into law.

(B) JOINT RESOLUTION DESCRIBED.—For purposes of

subparagraph (A), the term ‘‘joint resolution’’ means a joint

resolution of Congress, the sole matter after the resolving

clause of which is as follows: ‘‘That the Congress disapproves the modification proclaimed by the President contained in the report submitted to the Committee on Finance

of the Senate and the Committee on Ways and Means

of the House of Representatives pursuant to section 104(2)

of the Dominican Republic—Central America—United

States Free Trade Agreement Implementation Act (Public

Law 109–53; 19 U.S.C. 4014(2)) on llllllllll.’’,

with the blank space being filled with the appropriate

date.

(5) SUNSET.—The authority of the President to proclaim

modifications pursuant to paragraph (1) expires on December

31, 2007.

(c) AUTHORITY RELATING TO NICARAGUAN TARIFF PREFERENCE

LEVEL UNDER DR–CAFTA AGREEMENT.—

(1) CERTIFICATE OF ELIGIBILITY.—The Commissioner of Customs may require an importer to submit at the time the

importer files a claim for preferential tariff treatment under

Annex 3.28 of the Agreement a certificate of eligibility, properly

completed and signed, or transmitted pursuant to an authorized

electronic data interchange system, by an authorized official

of the Government of Nicaragua for purposes of implementing

the tariff preference level for Nicaragua provided in Annex

3.28 of the Agreement.

(2) ENFORCEMENT OF COMMITMENTS.—The President is

authorized to proclaim a reduction in the overall limit in the

tariff preference level for Nicaragua provided in Annex 3.28

of the Agreement if the President determines that Nicaragua

has failed to comply with a commitment under an agreement

between the United States and Nicaragua with regard to the

administration of such tariff preference level.

(3) EFFECTIVE DATE.—Paragraph (1) applies with respect

to entries made on or after April 1, 2006.

(d) TECHNICAL CORRECTION RELATING TO CO-PRODUCTION OF

CERTAIN TEXTILE AND APPAREL GOODS.—Section 205(a)(2) of the

Dominican Republic–Central America–United States Free Trade

Agreement Implementation Act (19 U.S.C. 4034(a)(2)) is amended

by inserting after ‘‘with respect to that country’’ the following:

‘‘or any other CAFTA–DR country’’.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1169

(e) REPORTING REQUIREMENTS ON CERTAIN NEGOTIATIONS AND

AMENDMENTS TO DR–CAFTA AGREEMENT.—

(1) IN GENERAL.—Not later than 30 days after the date

of the enactment of this Act, and at least quarterly thereafter,

the United States Trade Representative shall submit to the

appropriate congressional committees a report on the status

of negotiations and amendments proposed by the United States,

Nicaragua, El Salvador, Honduras, Guatemala, Costa Rica, and

the Dominican Republic to the Agreement regarding any change

to the rule of origin or alteration of the tariff treatment of

socks described in paragraph (2) or any technical correction

described in paragraph (3). In addition, the United States Trade

Representative shall provide to the appropriate congressional

committees copies of any amendments to be proposed by the

United States before the amendments are offered and copies

of any amendments received by the United States relating

to such negotiations.

(2) SOCKS DESCRIBED.—For purposes of paragraph (1), the

term ‘‘socks’’ means articles classifiable under subheading

6111.20.6050, 6111.30.5050, 6111.90.5050, 6115.91.00,

6115.92.60, 6115.92.90, 6115.93.60, 6115.93.90, 6115.99.14, or

6115.99.18 of the Harmonized Tariff Schedule of the United

States.

(3) TECHNICAL CORRECTIONS DESCRIBED.—Technical corrections referred to in paragraph (1) are the following:

(A) Clarification of references to ‘‘elastomeric yarns’’

contained in the notes, subheading notes, additional U.S.

notes, and statistical notes to chapters 50 to 63 (section

XI) of the Harmonized Tariff Schedule of the United States.

(B) Clarification of the ability to apply short supply

provisions to sewing thread, narrow elastics, and visible

linings.

(C) Treatment of women’s and girls’ woven sleep bottoms under Annex 4.1 of the Agreement.

(D) Addition of a rule of origin for women’s and girls’

woven sleep bottoms to reflect the rule of origin provided

for in subheading 6207.11.00 of the Harmonized Tariff

Schedule of the United States and contained in Annex

4.1 of the Agreement.

(E) Provision of women’s and girls’ sleep bottoms under

Annex 4.1–A of the Agreement.

(4) DEFINITION.—In this subsection, the term ‘‘appropriate

congressional committees’’ means the Committee on Ways and

Means of the House of Representatives and the Committee

on Finance of the Senate.

(5) SUNSET.—The requirements of paragraph (1) expire on

the date on which any change is made to the rule of origin

pursuant to article 3.25 of the Agreement for any good described

in paragraph (2), or December 31, 2007, whichever occurs later.

(f) DEFINITIONS.—In this section:

(1) AGREEMENT.—The term ‘‘Agreement’’ has the meaning

given the term in section 3(1) of the Dominican Republic–

Central America–United States Free Trade Agreement

Implementation Act (Public Law 109–53; 19 U.S.C. 4002(1)).

(2) CAFTA–DR COUNTRY.—The term ‘‘CAFTA–DR country’’

has the meaning given the term in section 3(2) of the Dominican

Deadline.

120 STAT. 1170 PUBLIC LAW 109–280—AUG. 17, 2006

Republic–Central America–United States Free Trade Agreement Implementation Act (Public Law 109–53; 19 U.S.C.

4002(2)).

SEC. 1635. TECHNICAL AMENDMENTS TO CUSTOMS MODERNIZATION.

(a) ENTRY OF MERCHANDISE.—Section 484(a) of the Tariff Act

of 1930 (19 U.S.C. 1484(a)) is amended—

(1) in paragraph (1), by amending subparagraph (A) to

read as follows:

‘‘(A) make entry therefor by filing with the Bureau

of Customs and Border Protection such documentation or,

pursuant to an authorized electronic data interchange

system, such information as is necessary to enable the

Bureau of Customs and Border Protection to determine

whether the merchandise may be released from custody

of the Bureau of Customs and Border Protection;’’; and

(2) in paragraph (2)(A), in the second sentence, by inserting

after ‘‘covering’’ the following: ‘‘merchandise released under a

special delivery permit pursuant to section 448(b) and’’.

(b) REFUNDS AND ERRORS.—Section 520(a) of the Tariff Act

of 1930 (19 U.S.C. 1520(a)) is amended—

(1) in paragraph (1), by striking the semicolon at the end

and inserting a period;

(2) in paragraph (2), by striking ‘‘; and’’ at the end and

inserting a period; and

(3) in paragraph (4)—

(A) by inserting ‘‘an importer of record declares or’’

before ‘‘it is ascertained’’; and

(B) by striking ‘‘by reason of clerical error’’.

(c) ENTRY FROM WAREHOUSE.—Section 557(a) of the Tariff Act

of 1930 (19 U.S.C. 1557(a)) is amended—

(1) in paragraph (1)—

(A) in the second sentence, by inserting after ‘‘the

date of importation’’ the following: ‘‘, or such longer period

of time as the Bureau of Customs and Border Protection

may at its discretion permit upon proper request being

filed and good cause shown’’; and

(B) in subparagraph (A), by inserting after ‘‘the date

of importation’’ the following: ‘‘or such longer period of

time as the Bureau of Customs and Border Protection

may at its discretion permit upon proper request being

filed and good cause shown’’; and

(2) in paragraph (2), by inserting after ‘‘the date of importation’’ the following: ‘‘, or such longer period of time as the

Bureau of Customs and Border Protection may at its discretion

permit upon proper request being filed and good cause shown,’’.

(d) ABANDONED GOODS.—Section 559 of the Tariff Act of 1930

(19 U.S.C. 1559) is amended by inserting after ‘‘the date of importation’’ each place it appears the following: ‘‘, or such longer period

of time as the Bureau of Customs and Border Protection may

at its discretion permit upon proper request being filed and good

cause shown’’.

(e) MANIPULATION IN WAREHOUSE.—Section 562 of the Tariff

Act of 1930 (19 U.S.C. 1562) is amended—

(1) by amending the first sentence to read as follows: ‘‘Merchandise shall only be withdrawn from a bonded warehouse

Regulations.

PUBLIC LAW 109–280—AUG. 17, 2006 120 STAT. 1171

in such quantity and in such condition as the Secretary of

the Treasury shall by regulation prescribe.’’; and

(2) in the second sentence, by striking ‘‘All merchandise

so withdrawn’’ and all that follows through ‘‘except that upon

permission therefor’’ and inserting ‘‘Upon permission’’.

(f) OTHER TECHNICAL AMENDMENTS.—(1) Section 629(e) of the

Tariff Act of 1930 (19 U.S.C. 1629(e)) is amended by striking

‘‘insuring’’ and inserting ‘‘ensuring’’.

(2) Section 135(f)(2)(B) of the Trade Act of 1974, as amended

by section 2004(i)(1) of the Miscellaneous Trade and Technical

Corrections Act of 2004, is amended by striking ‘‘their establishment’’ and insert ‘‘its establishment’’.

(3) Section 245(a) of the Trade Act of 1974 (19 U.S.C. 2317(a))

is amended by striking ‘‘, other than subchapter D’’.

(4) Section 291(2) of the Trade Act of 1974 (19 U.S.C. 2401(2))

is amended—

(A) by striking ‘‘1001(5)’’ and inserting ‘‘1001(e)’’; and

(B) by striking ‘‘1308(5)’’ and inserting ‘‘1308(e)’’.

(5) Section 13031(e)(6)(C)(i) of the Consolidated Omnibus

Budget Reconciliation Act of 1985 (19 U.S.C. 58c(e)(6)(C)(i)) is

amended by striking ‘‘commonly know’’ and inserting ‘‘commonly

known’’.

(6) Section 2107(a)(4) of the Bipartisan Trade Promotion

Authority Act of 2002 (19 U.S.C. 3807(a)(4)) is amended—

(A) by striking ‘‘paragraph (2)(A)’’ and inserting ‘‘paragraphs (2)(A)’’; and

(B) by striking ‘‘paragraph (2)(B)’’ and inserting ‘‘paragraphs (2)(B)’’.

(7) Section 514(c)(3) of the Tariff Act of 1930 (19 U.S.C.

1514(c)(3)) is amended by moving the last 2 sentences 2 ems to

the left as flush left text.

120 STAT. 1172 PUBLIC LAW 109–280—AUG. 17, 2006

LEGISLATIVE HISTORY—H.R. 4:

CONGRESSIONAL RECORD, Vol. 152 (2006):

July 28, considered and passed House.

Aug. 3, considered and passed Senate.

WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 42 (2006):

Aug. 17, Presidential remarks.

Æ

Subtitle C—Effective Date

SEC. 1641. EFFECTIVE DATE.

Except as otherwise provided in this title, the amendments

made by this title shall apply with respect to goods entered, or

withdrawn from warehouse for consumption, on or after the 15th

day after the date of the enactment of this Act.

Approved August 17, 2006.

19 USC 58c note.