II 

109TH CONGRESS 

1ST SESSION S. 219 

To amend the Internal Revenue Code of 1986 and the Employee Retirement 

Income Security Act of 1974 to protect the retirement security of American workers by ensuring that pension assets are adequately diversified 

and by providing workers with adequate access to, and information 

about, their pension plans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 31, 2005 

Mr. GRASSLEY (for himself and Mr. BAUCUS) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL

To amend the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 to protect the retirement security of American workers by ensuring that pension assets are adequately diversified and 

by providing workers with adequate access to, and information about, their pension plans, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

3 ‘‘National Employee Savings and Trust Equity Guarantee 

4 Act of 2005’’. 

5 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents. 

TITLE I—PROVISIONS RELATING TO INVESTMENT OF 

PARTICIPANTS’ ACCOUNTS 

SUBTITLE A—DIVERSIFICATION OF PENSION PLAN ASSETS

Sec. 101. Defined contribution plans required to provide employees with freedom 

to invest their plan assets. 

Sec. 102. Notice of freedom to divest employer securities or real property. 

SUBTITLE B—INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS

Sec. 111. Periodic pension benefit statements. 

Sec. 112. Defined contribution plans required to provide adequate investment 

education to participants. 

Sec. 113. Material information relating to investment in employer securities. 

Sec. 114. Fiduciary rules for plan sponsors designating independent investment 

advisers. 

Sec. 115. Treatment of qualified retirement planning services. 

SUBTITLE C—PROTECTION OF PENSION PLAN PARTICIPANTS

Sec. 121. Notice to participants or beneficiaries of blackout periods. 

Sec. 122. Allowance of catchup payments. 

TITLE II—PROVISIONS RELATING TO FUNDING, DEDUCTIONS, 

AND THE PENSION BENEFIT GUARANTY CORPORATION 

SUBTITLE A—REPLACEMENT OF INTEREST RATE ON 30-YEAR TREASURY

SECURITIES

Sec. 201. Replacement of 30-year Treasury rate for purposes of funding and 

PBGC premium rates. 

Sec. 202. Replacement of 30-year Treasury rate for calculating lump-sum distributions. 

Sec. 203. Section 415 limitation on defined benefit plans. 

SUBTITLE B—PROVISIONS RELATING TO PENSION PLAN FUNDING AND

DEDUCTIONS

Sec. 211. Deduction limits for plan contributions. 

Sec. 212. Benefit limitations for certain financially distressed plans. 

Sec. 213. Updating deduction rules for combination of plans. 

SUBTITLE C—PROVISIONS RELATING TO THE PENSION BENEFIT GUARANTY

CORPORATION
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Sec. 221. PBGC premiums for new plans of small employers. 

Sec. 222. Additional PBGC premium for new and small plans. 

Sec. 223. Authorization for PBGC to pay interest on premium overpayment refunds. 

Sec. 224. Substantial owner benefits in terminated plans. 

Sec. 225. Acceleration of computation of benefits attributable to recoveries of 

employer liability. 

SUBTITLE D—STUDIES

Sec. 231. Joint study on revitalizing defined benefit plans. 

Sec. 232. Study on floor-offset ESOPs. 

TITLE III—IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION 

RULES 

Sec. 301. Clarifications regarding purchase of permissive service credit. 

Sec. 302. Allow rollover of after-tax amounts in annuity contracts. 

Sec. 303. Clarification of minimum distribution rules. 

Sec. 304. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees. 

Sec. 305. Allow rollovers by nonspouse beneficiaries of certain retirement plan 

distributions. 

Sec. 306. Faster vesting of employer nonelective contributions. 

Sec. 307. Allow direct rollovers from retirement plans to Roth IRAs. 

Sec. 308. Elimination of higher penalty on certain simple plan distributions. 

Sec. 309. Simple plan portability. 

Sec. 310. Eligibility for participation in retirement plans. 

Sec. 311. Transfers to the PBGC. 

Sec. 312. Missing participants. 

TITLE IV—ADMINISTRATIVE PROVISIONS 

Sec. 401. Employee Plans Compliance Resolution System. 

Sec. 402. Extension to all governmental plans of moratorium on application of 

certain nondiscrimination rules applicable to State and local 

plans. 

Sec. 403. Notice and consent period regarding distributions. 

Sec. 404. Reporting simplification. 

Sec. 405. Voluntary early retirement incentive and employment retention plans 

maintained by local educational agencies and other entities. 

Sec. 406. No reduction in unemployment compensation as a result of pension 

rollovers. 

Sec. 407. Withholding on distributions from governmental Section 457 plans. 

Sec. 408. Provisions relating to plan amendments. 

TITLE V—PROVISIONS RELATING TO SPOUSAL PENSION 

PROTECTION 

SUBTITLE A—STUDY OF SPOUSAL CONSENT FOR DISTRIBUTIONS FROM

DEFINED CONTRIBUTION PLANS

Sec. 501. Joint study of application of spousal consent rules to defined contribution plans. 

SUBTITLE B—DIVISION OF PENSION BENEFITS UPON DIVORCE
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Sec. 511. Regulations on time and order of issuance of domestic relations orders. 

SUBTITLE C—RAILROAD RETIREMENT

Sec. 521. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee. 

Sec. 522. Extension of tier II railroad retirement benefits to surviving former 

spouses pursuant to divorce agreements. 

SUBTITLE D—MODIFICATIONS OF JOINT AND SURVIVOR ANNUITY

REQUIREMENTS

Sec. 531. Requirement for additional survivor annuity option. 

TITLE VI—TAX COURT PENSION AND COMPENSATION 

Sec. 600. Amendment of 1986 Code. 

Sec. 601. Annuities for survivors of Tax Court judges who are assassinated. 

Sec. 602. Cost-of-Living adjustments for Tax Court judicial survivor annuities. 

Sec. 603. Life insurance coverage for Tax Court judges. 

Sec. 604. Cost of life insurance coverage for Tax Court judges age 65 or over. 

Sec. 605. Modification of timing of Lump-Sum Payment of judges’ accrued annual leave. 

Sec. 606. Participation of Tax Court judges in the Thrift Savings Plan. 

Sec. 607. Exemption of teaching compensation of retired judges from limitation 

on outside earned income. 

Sec. 608. General provisions relating to Magistrate Judges of the Tax Court. 

Sec. 609. Annuities to surviving spouses and dependent children of Magistrate 

Judges of the Tax Court. 

Sec. 610. Retirement and annuity Program. 

Sec. 611. Incumbent Magistrate Judges of the Tax Court. 

Sec. 612. Provisions for recall. 

Sec. 613. Effective date. 

TITLE VII—OTHER PROVISIONS 

Sec. 701. Transfer of excess pension assets to multiemployer health plan. 

Sec. 702. Transfer of excess funds from black lung disability trusts to United 

Mine Workers of America Combined Benefit Fund. 

Sec. 703. Treatment of death benefits from corporate-owned life insurance.
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1 TITLE I—PROVISIONS RELATING 

2 TO INVESTMENT OF PARTICI3 PANTS’ ACCOUNTS 

4 Subtitle A—Diversification of 

5 Pension Plan Assets 

6 SEC. 101. DEFINED CONTRIBUTION PLANS REQUIRED TO 

7 PROVIDE EMPLOYEES WITH FREEDOM TO IN8 VEST THEIR PLAN ASSETS. 

9 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

10 (1) QUALIFICATION REQUIREMENT.—Section 

11 401(a) of the Internal Revenue Code of 1986 (relat12 ing to qualified pension, profit-sharing, and stock 

13 bonus plans) is amended by inserting after para14 graph (34) the following new paragraph: 

15 ‘‘(35) DIVERSIFICATION REQUIREMENTS FOR

16 CERTAIN DEFINED CONTRIBUTION PLANS.— 

17 ‘‘(A) IN GENERAL.—A trust which is part 

18 of an applicable defined contribution plan shall 

19 not be treated as a qualified trust unless the 

20 plan meets the diversification requirements of 

21 subparagraphs (B), (C), and (D). 

22 ‘‘(B) EMPLOYEE CONTRIBUTIONS AND

23 ELECTIVE DEFERRALS INVESTED IN EMPLOYER

24 SECURITIES OR REAL PROPERTY.—In the case 

25 of the portion of an applicable individual’s ac-
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1 count attributable to employee contributions 

2 and elective deferrals which is invested in em3 ployer securities or employer real property, a 

4 plan meets the requirements of this subpara5 graph if the applicable individual may elect to 

6 direct the plan to divest any such securities or 

7 real property and to reinvest an equivalent 

8 amount in other investment options meeting the 

9 requirements of subparagraph (D). 

10 ‘‘(C) EMPLOYER CONTRIBUTIONS IN11 VESTED IN EMPLOYER SECURITIES OR REAL

12 PROPERTY.—In the case of the portion of the 

13 account attributable to employer contributions 

14 other than elective deferrals which is invested in 

15 employer securities or employer real property, a 

16 plan meets the requirements of this subpara17 graph if each applicable individual who— 

18 ‘‘(i) is a participant who has com19 pleted at least 3 years of service, or 

20 ‘‘(ii) is a beneficiary of a participant 

21 described in clause (i) or of a deceased 

22 participant, 

23 may elect to direct the plan to divest any such 

24 securities or real property and to reinvest an 
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1 equivalent amount in other investment options 

2 meeting the requirements of subparagraph (D). 

3 ‘‘(D) INVESTMENT OPTIONS.— 

4 ‘‘(i) IN GENERAL.—The requirements 

5 of this subparagraph are met if the plan 

6 offers not less than 3 investment options, 

7 other than employer securities or employer 

8 real property, to which an applicable indi9 vidual may direct the proceeds from the di10 vestment of employer securities or em11 ployer real property pursuant to this para12 graph, each of which is diversified and has 

13 materially different risk and return charac14 teristics. 

15 ‘‘(ii) TREATMENT OF CERTAIN RE16 STRICTIONS AND CONDITIONS.— 

17 ‘‘(I) TIME FOR MAKING INVEST18 MENT CHOICES.—A plan shall not be 

19 treated as failing to meet the require20 ments of this subparagraph merely be21 cause the plan limits the time for di22 vestment and reinvestment to peri23 odic, reasonable opportunities occur24 ring no less frequently than quarterly. 
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1 ‘‘(II) CERTAIN RESTRICTIONS

2 AND CONDITIONS NOT ALLOWED.—

3 Except as provided in regulations, a 

4 plan shall not meet the requirements 

5 of this subparagraph if the plan im6 poses restrictions or conditions with 

7 respect to the investment of employer 

8 securities or employer real property 

9 which are not imposed on the invest10 ment of other assets of the plan. This 

11 subclause shall not apply to any re12 strictions or conditions imposed by 

13 reason of the application of securities 

14 laws. 

15 ‘‘(E) APPLICABLE DEFINED CONTRIBU16 TION PLAN.—For purposes of this paragraph— 

17 ‘‘(i) IN GENERAL.—The term ‘applica18 ble defined contribution plan’ means any 

19 defined contribution plan which holds any 

20 publicly traded employer securities. 

21 ‘‘(ii) EXCEPTION FOR CERTAIN

22 ESOPS.—Such term does not include an 

23 employee stock ownership plan if— 

24 ‘‘(I) there are no contributions to 

25 such plan (or earnings thereunder) 
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1 which are held within such plan and 

2 are subject to subsection (k) or (m), 

3 and 

4 ‘‘(II) such plan is a separate plan 

5 for purposes of section 414(l) with re6 spect to any other defined benefit plan 

7 or defined contribution plan main8 tained by the same employer or em9 ployers. 

10 ‘‘(iii) EXCEPTION FOR ONE PARTICI11 PANT PLANS.—Such term does not include 

12 a one-participant retirement plan. 

13 ‘‘(iv) ONE-PARTICIPANT RETIREMENT

14 PLAN.—For purposes of clause (iii), the 

15 term ‘one-participant retirement plan’ 

16 means a retirement plan that— 

17 ‘‘(I) on the first day of the plan 

18 year covered only one individual (or 

19 the individual and the individual’s 

20 spouse) and the individual owned 100 

21 percent of the plan sponsor (whether 

22 or not incorporated), or covered only 

23 one or more partners (or partners and 

24 their spouses) in the plan sponsor, 
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1 ‘‘(II) meets the minimum cov2 erage requirements of section 410(b) 

3 without being combined with any 

4 other plan of the business that covers 

5 the employees of the business, 

6 ‘‘(III) does not provide benefits 

7 to anyone except the individual (and 

8 the individual’s spouse) or the part9 ners (and their spouses), 

10 ‘‘(IV) does not cover a business 

11 that is a member of an affiliated serv12 ice group, a controlled group of cor13 porations, or a group of businesses 

14 under common control, and 

15 ‘‘(V) does not cover a business 

16 that uses the services of leased em17 ployees (within the meaning of section 

18 414(n)). 

19 For purposes of this clause, the term ‘part20 ner’ includes a 2-percent shareholder (as 

21 defined in section 1372(b)) of an S cor22 poration. 

23 ‘‘(F) CERTAIN PLANS TREATED AS HOLD24 ING PUBLICLY TRADED EMPLOYER SECURI25 TIES.— 
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1 ‘‘(i) IN GENERAL.—Except as pro2 vided in regulations or in clause (ii), a plan 

3 holding employer securities which are not 

4 publicly traded employer securities shall be 

5 treated as holding publicly traded employer 

6 securities if any employer corporation, or 

7 any member of a controlled group of cor8 porations which includes such employer 

9 corporation, has issued a class of stock 

10 which is a publicly traded employer secu11 rity. 

12 ‘‘(ii) EXCEPTION FOR CERTAIN CON13 TROLLED GROUPS WITH PUBLICLY TRAD14 ED SECURITIES.—Clause (i) shall not 

15 apply to a plan if— 

16 ‘‘(I) no employer corporation, or 

17 parent corporation of an employer 

18 corporation, has issued any publicly 

19 traded employer security, and 

20 ‘‘(II) no employer corporation, or 

21 parent corporation of an employer 

22 corporation, has issued any special 

23 class of stock which grants particular 

24 rights to, or bears particular risks for, 

25 the holder or issuer with respect to 
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1 any corporation described in clause (i) 

2 which has issued any publicly traded 

3 employer security. 

4 ‘‘(iii) DEFINITIONS.—For purposes of 

5 this subparagraph, the term— 

6 ‘‘(I) ‘controlled group of corpora7 tions’ has the meaning given such 

8 term by section 1563(a), except that 

9 ‘50 percent’ shall be substituted for 

10 ‘80 percent’ each place it appears, 

11 ‘‘(II) ‘employer corporation’ 

12 means a corporation which is an em13 ployer maintaining the plan, and 

14 ‘‘(III) ‘parent corporation’ has 

15 the meaning given such term by sec16 tion 424(e). 

17 ‘‘(G) OTHER DEFINITIONS.—For purposes 

18 of this paragraph— 

19 ‘‘(i) APPLICABLE INDIVIDUAL.—The 

20 term ‘applicable individual’ means— 

21 ‘‘(I) any participant in the plan, 

22 and 

23 ‘‘(II) any beneficiary who has an 

24 account under the plan with respect to 
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1 which the beneficiary is entitled to ex2 ercise the rights of a participant. 

3 ‘‘(ii) ELECTIVE DEFERRAL.—The 

4 term ‘elective deferral’ means an employer 

5 contribution described in section 

6 402(g)(3)(A). 

7 ‘‘(iii) EMPLOYER SECURITY.—The 

8 term ‘employer security’ has the meaning 

9 given such term by section 407(d)(1) of 

10 the Employee Retirement Income Security 

11 Act of 1974. 

12 ‘‘(iv) EMPLOYER REAL PROPERTY.—

13 The term ‘employer real property’ has the 

14 meaning given such term by section 

15 407(d)(2) of the Employee Retirement In16 come Security Act of 1974. 

17 ‘‘(v) EMPLOYEE STOCK OWNERSHIP

18 PLAN.—The term ‘employee stock owner19 ship plan’ has the meaning given such 

20 term by section 4975(e)(7). 

21 ‘‘(vi) PUBLICLY TRADED EMPLOYER

22 SECURITIES.—The term ‘publicly traded 

23 employer securities’ means employer secu24 rities which are readily tradable on an es25 tablished securities market. 
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1 ‘‘(vii) YEAR OF SERVICE.—The term 

2 ‘year of service’ has the meaning given 

3 such term by section 411(a)(5). 

4 ‘‘(H) TRANSITION RULE FOR SECURITIES

5 OR REAL PROPERTY ATTRIBUTABLE TO EM6 PLOYER CONTRIBUTIONS.— 

7 ‘‘(i) RULES PHASED IN OVER 3

8 YEARS.— 

9 ‘‘(I) IN GENERAL.—In the case 

10 of the portion of an account to which 

11 subparagraph (C) applies and which 

12 consists of employer securities or em13 ployer real property acquired in a plan 

14 year beginning before January 1, 

15 2006, subparagraph (C) shall only 

16 apply to the applicable percentage of 

17 such securities or real property. This 

18 subparagraph shall be applied sepa19 rately with respect to each class of se20 curities and employer real property. 

21 ‘‘(II) EXCEPTION FOR CERTAIN

22 PARTICIPANTS AGED 55 OR OVER.—

23 Subclause (I) shall not apply to an 

24 applicable individual who is a partici25 pant who has attained age 55 and 
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1 completed at least 3 years of service 

2 before the first plan year beginning 

3 after December 31, 2005. 

4 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

5 purposes of clause (i), the applicable per6 centage shall be determined as follows:

‘‘Plan year to which The applicable 

subparagraph (C) applies: percentage is: 

1st ............................................................................................ 33

2d ............................................................................................. 66

3d and following ....................................................................... 100.’’.

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Section 401(a)(28)(B) of such Code 

9 (relating to additional requirements relating to 

10 employee stock ownership plans) is amended by 

11 adding at the end the following new clause: 

12 ‘‘(v) EXCEPTION.—This subparagraph 

13 shall not apply to an applicable defined 

14 contribution plan (as defined in paragraph 

15 (35)(E)).’’ 

16 (B) Section 409(h)(7) of such Code is 

17 amended by inserting ‘‘or subparagraph (B) or 

18 (C) of section 401(a)(35)’’ before the period at 

19 the end. 

20 (C) Section 4980(c)(3)(A) of such Code is 

21 amended by striking ‘‘if—’’ and all that follows 

22 and inserting ‘‘if the requirements of subpara23 graphs (B), (C), and (D) are met.’’ 
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1 (b) AMENDMENTS OF ERISA.—Section 204 of the 

2 Employee Retirement Income Security Act of 1974 (29 

3 U.S.C. 1054) is amended by redesignating subsection (j) 

4 as subsection (k) and by inserting after subsection (i) the 

5 following new subsection: 

6 ‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN

7 INDIVIDUAL ACCOUNT PLANS.— 

8 ‘‘(1) IN GENERAL.—An applicable individual ac9 count plan shall meet the diversification require10 ments of paragraphs (2), (3), and (4). 

11 ‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELEC12 TIVE DEFERRALS INVESTED IN EMPLOYER SECURI13 TIES OR REAL PROPERTY.—In the case of the por14 tion of an applicable individual’s account attrib15 utable to employee contributions and elective defer16 rals which is invested in employer securities or em17 ployer real property, a plan meets the requirements 

18 of this paragraph if the applicable individual may 

19 elect to direct the plan to divest any such securities 

20 or real property and to reinvest an equivalent 

21 amount in other investment options meeting the re22 quirements of paragraph (4). 

23 ‘‘(3) EMPLOYER CONTRIBUTIONS INVESTED IN

24 EMPLOYER SECURITIES OR REAL PROPERTY.—In the 

25 case of the portion of the account attributable to 
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1 employer contributions other than elective deferrals 

2 which is invested in employer securities or employer 

3 real property, a plan meets the requirements of this 

4 paragraph if each applicable individual who— 

5 ‘‘(A) is a participant who has completed at 

6 least 3 years of service, or 

7 ‘‘(B) is a beneficiary of a participant de8 scribed in subparagraph (A) or of a deceased 

9 participant, 

10 may elect to direct the plan to divest any such secu11 rities or real property and to reinvest an equivalent 

12 amount in other investment options meeting the re13 quirements of paragraph (4). 

14 ‘‘(4) INVESTMENT OPTIONS.— 

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

16 this paragraph are met if the plan offers not 

17 less than 3 investment options, other than em18 ployer securities or employer real property, to 

19 which an applicable individual may direct the 

20 proceeds from the divestment of employer secu21 rities or employer real property pursuant to this 

22 subsection, each of which is diversified and has 

23 materially different risk and return characteris24 tics. 
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1 ‘‘(B) TREATMENT OF CERTAIN RESTRIC2 TIONS AND CONDITIONS.— 

3 ‘‘(i) TIME FOR MAKING INVESTMENT

4 CHOICES.—A plan shall not be treated as 

5 failing to meet the requirements of this 

6 paragraph merely because the plan limits 

7 the time for divestment and reinvestment 

8 to periodic, reasonable opportunities occur9 ring no less frequently than quarterly. 

10 ‘‘(ii) CERTAIN RESTRICTIONS AND

11 CONDITIONS NOT ALLOWED.—Except as 

12 provided in regulations, a plan shall not 

13 meet the requirements of this paragraph if 

14 the plan imposes restrictions or conditions 

15 with respect to the investment of employer 

16 securities or employer real property which 

17 are not imposed on the investment of other 

18 assets of the plan. This subparagraph shall 

19 not apply to any restrictions or conditions 

20 imposed by reason of the application of se21 curities laws. 

22 ‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT

23 PLAN.—For purposes of this subsection— 

24 ‘‘(A) IN GENERAL.—The term ‘applicable 

25 individual account plan’ means any individual 
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1 account plan (as defined in section 3(34)) which 

2 holds any publicly traded employer securities. 

3 ‘‘(B) EXCEPTION FOR CERTAIN ESOPS.—

4 Such term does not include an employee stock 

5 ownership plan if— 

6 ‘‘(i) there are no contributions to such 

7 plan (or earnings thereunder) which are 

8 held within such plan and are subject to 

9 subsection (k) or (m) of section 401 of the 

10 Internal Revenue Code of 1986, and 

11 ‘‘(ii) such plan is a separate plan (for 

12 purposes of section 414(l) of such Code) 

13 with respect to any other defined benefit 

14 plan or individual account plan maintained 

15 by the same employer or employers. 

16 ‘‘(C) EXCEPTION FOR ONE PARTICIPANT

17 PLANS.—Such term shall not include a one-par18 ticipant retirement plan (as defined in section 

19 101(i)(8)(B)). 

20 ‘‘(D) CERTAIN PLANS TREATED AS HOLD21 ING PUBLICLY TRADED EMPLOYER SECURI22 TIES.— 

23 ‘‘(i) IN GENERAL.—Except as pro24 vided in regulations or in clause (ii), a plan 

25 holding employer securities which are not 
20

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1 publicly traded employer securities shall be 

2 treated as holding publicly traded employer 

3 securities if any employer corporation, or 

4 any member of a controlled group of cor5 porations which includes such employer 

6 corporation, has issued a class of stock 

7 which is a publicly traded employer secu8 rity. 

9 ‘‘(ii) EXCEPTION FOR CERTAIN CON10 TROLLED GROUPS WITH PUBLICLY TRAD11 ED SECURITIES.—Clause (i) shall not 

12 apply to a plan if— 

13 ‘‘(I) no employer corporation, or 

14 parent corporation of an employer 

15 corporation, has issued any publicly 

16 traded employer security, and 

17 ‘‘(II) no employer corporation, or 

18 parent corporation of an employer 

19 corporation, has issued any special 

20 class of stock which grants particular 

21 rights to, or bears particular risks for, 

22 the holder or issuer with respect to 

23 any corporation described in clause (i) 

24 which has issued any publicly traded 

25 employer security. 
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1 ‘‘(iii) DEFINITIONS.—For purposes of 

2 this subparagraph, the term— 

3 ‘‘(I) ‘controlled group of corpora4 tions’ has the meaning given such 

5 term by section 1563(a) of the Inter6 nal Revenue Code of 1986, except 

7 that ‘50 percent’ shall be substituted 

8 for ‘80 percent’ each place it appears, 

9 ‘‘(II) ‘employer corporation’ 

10 means a corporation which is an em11 ployer maintaining the plan, and 

12 ‘‘(III) ‘parent corporation’ has 

13 the meaning given such term by sec14 tion 424(e) of such Code. 

15 ‘‘(6) OTHER DEFINITIONS.—For purposes of 

16 this paragraph— 

17 ‘‘(A) APPLICABLE INDIVIDUAL.—The term 

18 ‘applicable individual’ means— 

19 ‘‘(i) any participant in the plan, and 

20 ‘‘(ii) any beneficiary who has an ac21 count under the plan with respect to which 

22 the beneficiary is entitled to exercise the 

23 rights of a participant. 

24 ‘‘(B) ELECTIVE DEFERRAL.—The term 

25 ‘elective deferral’ means an employer contribu-
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1 tion described in section 402(g)(3)(A) of the In2 ternal Revenue Code of 1986. 

3 ‘‘(C) EMPLOYER SECURITY.—The term 

4 ‘employer security’ has the meaning given such 

5 term by section 407(d)(1). 

6 ‘‘(D) EMPLOYER REAL PROPERTY.—The 

7 term ‘employer real property’ has the meaning 

8 given such term by section 407(d)(2). 

9 ‘‘(E) EMPLOYEE STOCK OWNERSHIP

10 PLAN.—The term ‘employee stock ownership 

11 plan’ has the meaning given such term by sec12 tion 4975(e)(7) of such Code. 

13 ‘‘(F) PUBLICLY TRADED EMPLOYER SECU14 RITIES.—The term ‘publicly traded employer 

15 securities’ means employer securities which are 

16 readily tradable on an established securities 

17 market. 

18 ‘‘(G) YEAR OF SERVICE.—The term ‘year 

19 of service’ has the meaning given such term by 

20 section 203(b)(2). 

21 ‘‘(7) TRANSITION RULE FOR SECURITIES OR

22 REAL PROPERTY ATTRIBUTABLE TO EMPLOYER CON23 TRIBUTIONS.— 

24 ‘‘(A) RULES PHASED IN OVER 3 YEARS.— 
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1 ‘‘(i) IN GENERAL.—In the case of the 

2 portion of an account to which paragraph 

3 (3) applies and which consists of employer 

4 securities or employer real property ac5 quired in a plan year beginning before 

6 January 1, 2006, paragraph (3) shall only 

7 apply to the applicable percentage of such 

8 securities or real property. This subpara9 graph shall be applied separately with re10 spect to each class of securities and em11 ployer real property. 

12 ‘‘(ii) EXCEPTION FOR CERTAIN PAR13 TICIPANTS AGED 55 OR OVER.—Clause (i) 

14 shall not apply to an applicable individual 

15 who is a participant who has attained age 

16 55 and completed at least 3 years of serv17 ice before the first plan year beginning 

18 after December 31, 2005. 

19 ‘‘(B) APPLICABLE PERCENTAGE.—For 

20 purposes of subparagraph (A), the applicable 

21 percentage shall be determined as follows:

‘‘Plan year to which The applicable 

paragraph (3) applies: percentage is: 

1st ............................................................................................ 33

2d ............................................................................................. 66

3d and following ....................................................................... 100.’’.

22 (c) EFFECTIVE DATES.— 
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1 (1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), the amendments made by this 

3 section shall apply to plan years beginning after De4 cember 31, 2005. 

5 (2) SPECIAL RULE FOR COLLECTIVELY BAR6 GAINED AGREEMENTS.—In the case of a plan main7 tained pursuant to 1 or more collective bargaining 

8 agreements between employee representatives and 1 

9 or more employers ratified on or before the date of 

10 the enactment of this Act, paragraph (1) shall be 

11 applied to benefits pursuant to, and individuals cov12 ered by, any such agreement by substituting for 

13 ‘‘December 31, 2005’’ the earlier of— 

14 (A) the later of— 

15 (i) December 31, 2006, or 

16 (ii) the date on which the last of such 

17 collective bargaining agreements termi18 nates (determined without regard to any 

19 extension thereof after such date of enact20 ment), or 

21 (B) December 31, 2007. 

22 (3) SPECIAL RULE FOR CERTAIN EMPLOYER SE23 CURITIES HELD IN AN ESOP.— 

24 (A) IN GENERAL.—In the case of employer 

25 securities to which this paragraph applies, the 
25

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1 amendments made by this section shall apply to 

2 plan years beginning after the earlier of— 

3 (i) December 31, 2006, or 

4 (ii) the first date on which the fair 

5 market value of such securities exceeds the 

6 guaranteed minimum value described in 

7 subparagraph (B)(ii). 

8 (B) APPLICABLE SECURITIES.—This para9 graph shall apply to employer securities which 

10 are attributable to employer contributions other 

11 than elective deferrals, and which, on Sep12 tember 17, 2003— 

13 (i) consist of preferred stock, and 

14 (ii) are within an employee stock own15 ership plan (as defined in section 

16 4975(e)(7) of the Internal Revenue Code 

17 of 1986), the terms of which provide that 

18 the value of the securities cannot be less 

19 than the guaranteed minimum value speci20 fied by the plan on such date. 

21 (C) COORDINATION WITH TRANSITION

22 RULE.—In applying section 401(a)(35)(H) of 

23 the Internal Revenue Code of 1986 and section 

24 204(j)(7) of the Employee Retirement Income 

25 Security Act of 1974 (as added by this section) 
26

•S 219 IS

1 to employer securities to which this paragraph 

2 applies, the applicable percentage shall be de3 termined without regard to this paragraph. 

4 SEC. 102. NOTICE OF FREEDOM TO DIVEST EMPLOYER SE5 CURITIES OR REAL PROPERTY. 

6 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

7 (1) EXCISE TAX.—Chapter 43 of the Internal 

8 Revenue Code of 1986 (relating to qualified pension, 

9 etc., plans) is amended by adding at the end the fol10 lowing new section: 

11 ‘‘SEC. 4980H. FAILURE OF CERTAIN DEFINED CONTRIBU12 TION PLANS TO PROVIDE NOTICE OF FREE13 DOM TO DIVEST EMPLOYER SECURITIES. 

14 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

15 a tax on the failure of a defined contribution plan to meet 

16 the requirements of subsection (e) with respect to any par17 ticipant or beneficiary. 

18 ‘‘(b) AMOUNT OF TAX.— 

19 ‘‘(1) IN GENERAL.—The amount of the tax im20 posed by subsection (a) on any failure with respect 

21 to any participant or beneficiary shall be $100 for 

22 each day in the noncompliance period with respect to 

23 the failure. 

24 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

25 of this section, the term ‘noncompliance period’ 
27

•S 219 IS

1 means, with respect to any failure, the period begin2 ning on the date the failure first occurs and ending 

3 on the date the notice to which the failure relates is 

4 provided or the failure is otherwise corrected. 

5 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

6 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

7 DISCOVERED AND REASONABLE DILIGENCE EXER8 CISED.—No tax shall be imposed by subsection (a) 

9 on any failure during any period for which it is es10 tablished to the satisfaction of the Secretary that 

11 any person subject to liability for tax under sub12 section (d) did not know that the failure existed and 

13 exercised reasonable diligence to meet the require14 ments of subsection (e). 

15 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR16 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

17 by subsection (a) on any failure if— 

18 ‘‘(A) any person subject to liability for the 

19 tax under subsection (d) exercised reasonable 

20 diligence to meet the requirements of subsection 

21 (e), and 

22 ‘‘(B) such person provides the notice de23 scribed in subsection (e) during the 30-day pe24 riod beginning on the first date such person 
28

•S 219 IS

1 knew, or exercising reasonable diligence should 

2 have known, that such failure existed. 

3 ‘‘(3) OVERALL LIMITATION FOR UNINTEN4 TIONAL FAILURES.— 

5 ‘‘(A) IN GENERAL.—If the person subject 

6 to liability for tax under subsection (d) exer7 cised reasonable diligence to meet the require8 ments of subsection (e), the tax imposed by 

9 subsection (a) for failures during the taxable 

10 year of the employer (or, in the case of a multi11 employer plan, the taxable year of the trust 

12 forming part of the plan) shall not exceed 

13 $500,000. For purposes of the preceding sen14 tence, all multiemployer plans of which the 

15 same trust forms a part shall be treated as 1 

16 plan. 

17 ‘‘(B) TAXABLE YEARS IN THE CASE OF

18 CERTAIN CONTROLLED GROUPS.—For purposes 

19 of this paragraph, if all persons who are treated 

20 as a single employer for purposes of this section 

21 do not have the same taxable year, the taxable 

22 years taken into account shall be determined 

23 under principles similar to the principles of sec24 tion 1561. 
29

•S 219 IS

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

2 failure which is due to reasonable cause and not to 

3 willful neglect, the Secretary may waive part or all 

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

5 that the payment of such tax would be excessive or 

6 otherwise inequitable relative to the failure involved. 

7 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia8 ble for the tax imposed by subsection (a): 

9 ‘‘(1) In the case of a plan not described in 

10 paragraph (2), the employer. 

11 ‘‘(2) In the case of a multiemployer plan, the 

12 plan. 

13 ‘‘(e) NOTICE OF RIGHT TO DIVEST.—Not later than 

14 30 days before the first date on which an applicable indi15 vidual of an applicable defined contribution plan is eligible 

16 to exercise the right under section 401(a)(35) to direct 

17 the proceeds from the divestment of employer securities 

18 or employer real property with respect to any type of con19 tribution, the plan administrator shall provide to such in20 dividual a notice— 

21 ‘‘(1) setting forth such right under such sec22 tion, and 

23 ‘‘(2) describing the importance of diversifying 

24 the investment of retirement account assets. 
30

•S 219 IS

1 The notice required by this subsection shall be written in 

2 a manner calculated to be understood by the average plan 

3 participant and may be delivered in written, electronic, or 

4 other appropriate form to the extent that such form is rea5 sonably accessible to the applicable individual. 

6 ‘‘(f) DEFINITIONS.—Any term used in this section 

7 which is also used in section 401(a)(35) shall have the 

8 meaning given such term by section 401(a)(35).’’ 

9 (2) AGGREGATION.—Section 414(t) of such 

10 Code is amended by striking ‘‘or 4980B’’ and insert11 ing ‘‘4980B, or 4980H’’. 

12 (3) CLERICAL AMENDMENT.—The table of sec13 tions for chapter 43 of such Code is amended by 

14 adding at the end the following new item:

‘‘Sec. 4980H. Failure of certain defined contribution plans to provide notice of 

freedom to divest employer securities.’’.

15 (b) AMENDMENTS OF ERISA.— 

16 (1) IN GENERAL.—Section 104 of the Employee 

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

18 1024) is amended by redesignating subsection (d) as 

19 subsection (e) and by inserting after subsection (c) 

20 the following new subsection: 

21 ‘‘(d) NOTICE OF RIGHT TO DIVEST.—Not later than 

22 30 days before the first date on which an applicable indi23 vidual of an applicable individual account plan is eligible 

24 to exercise the right under section 204(j) to direct the pro-
31

•S 219 IS

1 ceeds from the divestment of employer securities or em2 ployer real property with respect to any type of contribu3 tion, the administrator shall provide to such individual a 

4 notice— 

5 ‘‘(1) setting forth such right under such sec6 tion, and 

7 ‘‘(2) describing the importance of diversifying 

8 the investment of retirement account assets. 

9 The notice required by this subsection shall be written in 

10 a manner calculated to be understood by the average plan 

11 participant and may be delivered in written, electronic, or 

12 other appropriate form to the extent that such form is rea13 sonably accessible to the applicable individual.’’ 

14 (2) PENALTIES.—Section 502(c)(7) of the Em15 ployee Retirement Income Security Act of 1974 (29 

16 U.S.C. 1132(c)(7)) is amended by inserting ‘‘or sec17 tion 104(d)’’ after ‘‘section 101(i)’’. 

18 (c) MODEL NOTICE.—The Secretary of Labor shall, 

19 within 180 days after the date of the enactment of this 

20 subsection, prescribe a model notice for purposes of satis21 fying the requirements of the amendments made by this 

22 section. 

23 (d) EFFECTIVE DATES.— 
32

•S 219 IS

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

2 this section shall apply to plan years beginning after 

3 December 31, 2005. 

4 (2) TRANSITION RULE.—If notice under section 

5 4980H(e) of the Internal Revenue Code of 1986 or 

6 section 104(d) of the Employee Retirement Income 

7 Security Act of 1974 (as added by this section) 

8 would otherwise be required to be provided before 

9 the 90th day after the date of the enactment of this 

10 Act, such notice shall not be required to be provided 

11 until such 90th day. 

12 Subtitle B—Information to Assist 

13 Pension Plan Participants 

14 SEC. 111. PERIODIC PENSION BENEFIT STATEMENTS. 

15 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

16 (1) EXCISE TAX.—Chapter 43 of the Internal 

17 Revenue Code of 1986 (relating to qualified pension, 

18 etc., plans), as amended by this Act, is amended by 

19 adding at the end the following new section: 

20 ‘‘SEC. 4980I. FAILURE OF CERTAIN PENSION PLANS TO PRO21 VIDE REQUIRED INFORMATION. 

22 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

23 a tax on the failure of an applicable pension plan to meet 

24 the requirements of subsection (e) with respect to any par25 ticipant or beneficiary. 
33

•S 219 IS

1 ‘‘(b) AMOUNT OF TAX.— 

2 ‘‘(1) IN GENERAL.—The amount of the tax im3 posed by subsection (a) on any failure with respect 

4 to any participant or beneficiary shall be $100 for 

5 each day in the noncompliance period with respect to 

6 the failure. 

7 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

8 of this section, the term ‘noncompliance period’ 

9 means, with respect to any failure, the period begin10 ning on the date the failure first occurs and ending 

11 on the date the statement to which the failure re12 lates is provided or the failure is otherwise corrected. 

13 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

14 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

15 DISCOVERED AND REASONABLE DILIGENCE EXER16 CISED.—No tax shall be imposed by subsection (a) 

17 on any failure during any period for which it is es18 tablished to the satisfaction of the Secretary that 

19 any person subject to liability for tax under sub20 section (d) did not know that the failure existed and 

21 exercised reasonable diligence to meet the require22 ments of subsection (e). 

23 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR24 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

25 by subsection (a) on any failure if— 
34

•S 219 IS

1 ‘‘(A) any person subject to liability for the 

2 tax under subsection (d) exercised reasonable 

3 diligence to meet the requirements of subsection 

4 (e), and 

5 ‘‘(B) such person provides the statement 

6 described in subsection (e) during the 30-day 

7 period beginning on the first date such person 

8 knew, or exercising reasonable diligence should 

9 have known, that such failure existed. 

10 ‘‘(3) OVERALL LIMITATION FOR UNINTEN11 TIONAL FAILURES.— 

12 ‘‘(A) IN GENERAL.—If the person subject 

13 to liability for tax under subsection (d) exer14 cised reasonable diligence to meet the require15 ments of subsection (e), the tax imposed by 

16 subsection (a) for failures during the taxable 

17 year of the employer (or, in the case of a multi18 employer plan, the taxable year of the trust 

19 forming part of the plan) shall not exceed 

20 $500,000. For purposes of the preceding sen21 tence, all multiemployer plans of which the 

22 same trust forms a part shall be treated as 1 

23 plan. 

24 ‘‘(B) TAXABLE YEARS IN THE CASE OF

25 CERTAIN CONTROLLED GROUPS.—For purposes 
35

•S 219 IS

1 of this paragraph, if all persons who are treated 

2 as a single employer for purposes of this section 

3 do not have the same taxable year, the taxable 

4 years taken into account shall be determined 

5 under principles similar to the principles of sec6 tion 1561. 

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

8 failure which is due to reasonable cause and not to 

9 willful neglect, the Secretary may waive part or all 

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

11 that the payment of such tax would be excessive or 

12 otherwise inequitable relative to the failure involved. 

13 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia14 ble for the tax imposed by subsection (a): 

15 ‘‘(1) In the case of a plan not described in 

16 paragraph (2) or (3), the employer. 

17 ‘‘(2) In the case of a multiemployer plan, the 

18 plan. 

19 ‘‘(3) In the case of an arrangement described in 

20 subsection (e)(4), the person required to provide the 

21 statement under subsection (e). 

22 ‘‘(e) REQUIREMENTS TO PROVIDE PENSION BENEFIT

23 STATEMENTS.— 

24 ‘‘(1) REQUIREMENTS.— 
36

•S 219 IS

1 ‘‘(A) DEFINED CONTRIBUTION PLAN.—

2 The administrator of an applicable pension plan 

3 which is a defined contribution plan shall fur4 nish a pension benefit statement described in 

5 paragraph (2)— 

6 ‘‘(i) at least once each calendar quar7 ter to a participant or beneficiary who has 

8 the right to direct the investment of assets 

9 in his or her account under the plan, 

10 ‘‘(ii) at least once each calendar year 

11 to a participant or beneficiary who has his 

12 or her own account under the plan but who 

13 does not have the right to direct the invest14 ment of assets in that account, and 

15 ‘‘(iii) upon written request to a plan 

16 beneficiary who is not a participant or ben17 eficiary described in clause (i) or (ii), ex18 cept that this subparagraph shall apply to 

19 only 1 request during any 12-month pe20 riod. 

21 ‘‘(B) DEFINED BENEFIT PLAN.—The ad22 ministrator of an applicable pension plan which 

23 is a defined benefit plan shall furnish a pension 

24 benefit statement described in paragraph (2)— 
37

•S 219 IS

1 ‘‘(i) at least once every 3 years to 

2 each participant who has a nonforfeitable 

3 accrued benefit and who is employed by 

4 the employer maintaining the plan at the 

5 time the statement is to be furnished, and 

6 ‘‘(ii) to a participant or beneficiary of 

7 the plan upon written request, except that 

8 this clause shall apply to only 1 request 

9 during any 12-month period. 

10 Information furnished under clause (i) to a par11 ticipant may be based on reasonable estimates 

12 determined under regulations prescribed by the 

13 Secretary of Labor, in consultation with the 

14 Pension Benefit Guaranty Corporation. 

15 ‘‘(2) STATEMENTS.— 

16 ‘‘(A) IN GENERAL.—A pension benefit 

17 statement furnished under paragraph (1)— 

18 ‘‘(i) shall indicate, on the basis of the 

19 latest available information— 

20 ‘‘(I) the total benefits accrued, 

21 and 

22 ‘‘(II) the nonforfeitable pension 

23 benefits, if any, which have accrued, 

24 or the earliest date on which benefits 

25 will become nonforfeitable, 
38

•S 219 IS

1 ‘‘(ii) shall include an explanation of 

2 any permitted disparity under section 

3 401(l) or any floor-offset arrangement that 

4 may be applied in determining any accrued 

5 benefits described in clause (i), 

6 ‘‘(iii) shall be written in a manner cal7 culated to be understood by the average 

8 plan participant, and 

9 ‘‘(iv) may be delivered in written, elec10 tronic, or other appropriate form to the ex11 tent such form is reasonably accessible to 

12 the participant or beneficiary. 

13 ‘‘(B) ADDITIONAL INFORMATION.—In the 

14 case of a defined contribution plan, any pension 

15 benefit statement under clause (i) or (ii) of 

16 paragraph (1)(A) shall include— 

17 ‘‘(i) the value of each investment to 

18 which assets in the individual account have 

19 been allocated, determined as of the most 

20 recent valuation date under the plan, in21 cluding the value of any assets held in the 

22 form of employer securities or employer 

23 real property, without regard to whether 

24 such securities or real property were con25 tributed by the plan sponsor or acquired at 
39

•S 219 IS

1 the direction of the plan or of the partici2 pant or beneficiary, and 

3 ‘‘(ii) in the case of a pension benefit 

4 statement under paragraph (1)(A)(i)— 

5 ‘‘(I) an explanation of any limita6 tions or restrictions on any right of 

7 the participant or beneficiary under 

8 the plan to direct an investment, and 

9 ‘‘(II) a notice that investments in 

10 any individual account may not be 

11 adequately diversified if the value of 

12 any investment in the account exceeds 

13 20 percent of the fair market value of 

14 all investments in the account. 

15 ‘‘(C) ALTERNATIVE NOTICE.—The require16 ments of subparagraph (A)(i)(II) are met if, at 

17 least annually and in accordance with require18 ments of the Secretary of Labor, the plan— 

19 ‘‘(i) updates the information described 

20 in such paragraph which is provided in the 

21 pension benefit statement, or 

22 ‘‘(ii) provides in a separate statement 

23 such information as is necessary to enable 

24 a participant or beneficiary to determine 

25 their nonforfeitable vested benefits. 
40

•S 219 IS

1 ‘‘(3) DEFINED BENEFIT PLANS.— 

2 ‘‘(A) ALTERNATIVE NOTICE.—In the case 

3 of a defined benefit plan, the requirements of 

4 paragraph (1)(B)(i) shall be treated as met 

5 with respect to a participant if at least once 

6 each year the administrator provides to the par7 ticipant notice of the availability of the pension 

8 benefit statement and the ways in which the 

9 participant may obtain such statement. Such 

10 notice may be delivered in written, electronic, or 

11 other appropriate form to the extent such form 

12 is reasonably accessible to the participant. 

13 ‘‘(B) YEARS IN WHICH NO BENEFITS AC14 CRUE.—The Secretary may provide that years 

15 in which no employee or former employee bene16 fits (within the meaning of section 410(b)) 

17 under the plan need not be taken into account 

18 in determining the 3-year period under para19 graph (1)(B)(i). 

20 ‘‘(4) SPECIAL RULE FOR CERTAIN ANNU21 ITIES.—In the case of an annuity contract or custo22 dial account described in section 403(b) which is not 

23 a plan established or maintained by the employer, 

24 the pension benefit statement under this subsection 

25 shall be furnished by the issuer of the contract, the 
41

•S 219 IS

1 custodian of the account, or such other person as is 

2 specified by the Secretary. 

3 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur4 poses of this section— 

5 ‘‘(1) APPLICABLE PENSION PLAN.—The term 

6 ‘applicable pension plan’ means a plan described in 

7 clause (i), (ii), or (iv) of section 219(g)(5)(A) other 

8 than a one-participant retirement plan (as defined in 

9 section 401(a)(35)(E)(iv)). 

10 ‘‘(2) EXCEPTION FOR GOVERNMENT AND

11 CHURCH PLANS.—This section shall not apply to any 

12 governmental or church plan. For purposes of this 

13 paragraph, the terms ‘governmental plan’ and 

14 ‘church plan’ have the meanings given such terms by 

15 section 414.’’ 

16 (2) AGGREGATION.—Section 414(t) of such 

17 Code, as amended by this Act, is amended by strik18 ing ‘‘or 4980H’’ and inserting ‘‘4980H, or 4980I’’. 

19 (3) CLERICAL AMENDMENT.—The table of sec20 tions for chapter 43 of such Code, as amended by 

21 this Act, is amended by adding at the end the fol22 lowing new item:

‘‘Sec. 4980I. Failure of certain pension plans to provide required information.’’.

23 (b) AMENDMENTS OF ERISA.— 
42

•S 219 IS

1 (1) IN GENERAL.—Section 105(a) of the Em2 ployee Retirement Income Security Act of 1974 (29 

3 U.S.C. 1025(a)) is amended to read as follows: 

4 ‘‘(a) REQUIREMENTS TO PROVIDE PENSION BEN5 EFIT STATEMENTS.— 

6 ‘‘(1) REQUIREMENTS.— 

7 ‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The 

8 administrator of an individual account plan 

9 (other than a one-participant retirement plan 

10 described in section 101(i)(8)(B)) shall furnish 

11 a pension benefit statement— 

12 ‘‘(i) at least once each calendar quar13 ter to a participant or beneficiary who has 

14 the right to direct the investment of assets 

15 in his or her account under the plan, 

16 ‘‘(ii) at least once each calendar year 

17 to a participant or beneficiary who has his 

18 or her own account under the plan but 

19 does not have the right to direct the invest20 ment of assets in that account, and 

21 ‘‘(iii) upon written request to a plan 

22 beneficiary not described in clause (i) or 

23 (ii). 

24 ‘‘(B) DEFINED BENEFIT PLAN.—The ad25 ministrator of a defined benefit plan (other 
43

•S 219 IS

1 than a one-participant retirement plan de2 scribed in section 101(i)(8)(B)) shall furnish a 

3 pension benefit statement— 

4 ‘‘(i) at least once every 3 years to 

5 each participant with a nonforfeitable ac6 crued benefit and who is employed by the 

7 employer maintaining the plan at the time 

8 the statement is to be furnished, and 

9 ‘‘(ii) to a participant or beneficiary of 

10 the plan upon written request. 

11 Information furnished under clause (i) to a par12 ticipant may be based on reasonable estimates 

13 determined under regulations prescribed by the 

14 Secretary, in consultation with the Pension 

15 Benefit Guaranty Corporation. 

16 ‘‘(2) STATEMENTS.— 

17 ‘‘(A) IN GENERAL.—A pension benefit 

18 statement under paragraph (1)— 

19 ‘‘(i) shall indicate, on the basis of the 

20 latest available information— 

21 ‘‘(I) the total benefits accrued, 

22 and 

23 ‘‘(II) the nonforfeitable pension 

24 benefits, if any, which have accrued, 
44

•S 219 IS

1 or the earliest date on which benefits 

2 will become nonforfeitable, 

3 ‘‘(ii) shall include an explanation of 

4 any permitted disparity under section 

5 401(l) of the Internal Revenue Code of 

6 1986 or any floor-offset arrangement that 

7 may be applied in determining any accrued 

8 benefits described in clause (i), 

9 ‘‘(iii) shall be written in a manner cal10 culated to be understood by the average 

11 plan participant, and 

12 ‘‘(iv) may be delivered in written, elec13 tronic, or other appropriate form to the ex14 tent such form is reasonably accessible to 

15 the participant or beneficiary. 

16 ‘‘(B) ADDITIONAL INFORMATION.—In the 

17 case of an individual account plan, any pension 

18 benefit statement under clause (i) or (ii) of 

19 paragraph (1)(A) shall include— 

20 ‘‘(i) the value of each investment to 

21 which assets in the individual account have 

22 been allocated, determined as of the most 

23 recent valuation date under the plan, in24 cluding the value of any assets held in the 

25 form of employer securities or employer 
45

•S 219 IS

1 real property, without regard to whether 

2 such securities or real property were con3 tributed by the plan sponsor or acquired at 

4 the direction of the plan or of the partici5 pant or beneficiary, and 

6 ‘‘(ii) in the case of a pension benefit 

7 statement under paragraph (1)(A)(i)— 

8 ‘‘(I) an explanation of any limita9 tions or restrictions on any right of 

10 the participant or beneficiary under 

11 the plan to direct an investment, and 

12 ‘‘(II) a notice that investments in 

13 any individual account may not be 

14 adequately diversified if the value of 

15 any investment in the account exceeds 

16 20 percent of the fair market value of 

17 all investments in the account. 

18 ‘‘(C) ALTERNATIVE NOTICE.—The require19 ments of subparagraph (A)(i)(II) are met if, at 

20 least annually and in accordance with require21 ments of the Secretary, the plan— 

22 ‘‘(i) updates the information described 

23 in such paragraph which is provided in the 

24 pension benefit statement, or 
46

•S 219 IS

1 ‘‘(ii) provides in a separate statement 

2 such information as is necessary to enable 

3 a participant or beneficiary to determine 

4 their nonforfeitable vested benefits. 

5 ‘‘(3) DEFINED BENEFIT PLANS.— 

6 ‘‘(A) ALTERNATIVE NOTICE.—In the case 

7 of a defined benefit plan, the requirements of 

8 paragraph (1)(B)(i) shall be treated as met 

9 with respect to a participant if at least once 

10 each year the administrator provides to the par11 ticipant notice of the availability of the pension 

12 benefit statement and the ways in which the 

13 participant may obtain such statement. Such 

14 notice may be delivered in written, electronic, or 

15 other appropriate form to the extent such form 

16 is reasonably accessible to the participant. 

17 ‘‘(B) YEARS IN WHICH NO BENEFITS AC18 CRUE.—The Secretary may provide that years 

19 in which no employee or former employee bene20 fits (within the meaning of section 410(b) of 

21 the Internal Revenue Code of 1986) under the 

22 plan need not be taken into account in deter23 mining the 3-year period under paragraph 

24 (1)(B)(i).’’ 

25 (2) CONFORMING AMENDMENTS.— 
47

•S 219 IS

1 (A) Section 105 of the Employee Retire2 ment Income Security Act of 1974 (29 U.S.C. 

3 1025) is amended by striking subsection (d). 

4 (B) Section 105(b) of such Act (29 U.S.C. 

5 1025(b)) is amended to read as follows: 

6 ‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In 

7 no case shall a participant or beneficiary of a plan be enti8 tled to more than 1 statement described in subparagraph 

9 (A)(iii) or (B)(ii) of subsection (a)(1), whichever is appli10 cable, in any 12-month period.’’ 

11 (C) Section 502(c)(1) of such Act (29 

12 U.S.C. 1132(c)(1)) is amended by striking ‘‘or 

13 section 101(f)’’ and inserting ‘‘section 101(f), 

14 or section 105(a)’’. 

15 (c) MODEL STATEMENTS.—The Secretary of Labor 

16 shall, within 180 days after the date of the enactment of 

17 this section, develop 1 or more model benefit statements 

18 that are written in a manner calculated to be understood 

19 by the average plan participant and that may be used by 

20 plan administrators in complying with the requirements 

21 of section 4980I of the Internal Revenue Code of 1986 

22 and section 105 of the Employee Retirement Income Secu23 rity Act of 1974. 

24 (d) EFFECTIVE DATE.— 
48

•S 219 IS

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

2 this section shall apply to plan years beginning after 

3 December 31, 2006. 

4 (2) SPECIAL RULE FOR COLLECTIVELY BAR5 GAINED AGREEMENTS.—In the case of a plan main6 tained pursuant to 1 or more collective bargaining 

7 agreements between employee representatives and 1 

8 or more employers ratified on or before the date of 

9 the enactment of this Act, paragraph (1) shall be 

10 applied to benefits pursuant to, and individuals cov11 ered by, any such agreement by substituting for 

12 ‘‘December 31, 2006’’ the earlier of— 

13 (A) the later of— 

14 (i) December 31, 2007, or 

15 (ii) the date on which the last of such 

16 collective bargaining agreements termi17 nates (determined without regard to any 

18 extension thereof after such date of enact19 ment), or 

20 (B) December 31, 2008. 
49

•S 219 IS

1 SEC. 112. DEFINED CONTRIBUTION PLANS REQUIRED TO 

2 PROVIDE ADEQUATE INVESTMENT EDU3 CATION TO PARTICIPANTS. 

4 (a) EXCISE TAX ON FAILURE OF CERTAIN DEFINED

5 CONTRIBUTION PLANS TO PROVIDE ADEQUATE INVEST6 MENT INFORMATION.— 

7 (1) IN GENERAL.—Section 4980I(e)(1)(A) of 

8 the Internal Revenue Code of 1986, as added by sec9 tion 111, is amended by adding at the end the fol10 lowing new flush sentence: 

11 ‘‘In addition to the pension benefit statement, 

12 the administrator shall furnish at least once 

13 each year to each participant or beneficiary who 

14 has the right to direct the investment of assets 

15 in his or her account the model form relating 

16 to basic investment guidelines as provided in 

17 paragraph (5).’’ 

18 (2) BASIC INVESTMENT GUIDELINES.—Section 

19 4980I(e) of such Code, as so added, is amended by 

20 adding at the end the following new paragraph: 

21 ‘‘(5) BASIC INVESTMENT GUIDELINES.— 

22 ‘‘(A) IN GENERAL.—The Secretary shall, 

23 in consultation with the Secretary of Labor, de24 velop and make available to defined contribu25 tion plans for distribution under paragraph 

26 (1)(A) a model form containing basic guidelines 
50

•S 219 IS

1 for investing for retirement. Except as other2 wise provided by the Secretary, such guidelines 

3 shall include— 

4 ‘‘(i) information on the benefits of di5 versification, 

6 ‘‘(ii) information on the essential dif7 ferences, in terms of risk and return, of 

8 pension plan investments, including stocks, 

9 bonds, mutual funds, and money market 

10 investments, 

11 ‘‘(iii) information on how an individ12 ual’s pension plan investment allocations 

13 may differ depending on the individual’s 

14 age and years to retirement and on other 

15 factors determined by the Secretary, 

16 ‘‘(iv) sources of information where in17 dividuals may learn more about pension 

18 rights, individual investing, and investment 

19 advice, and 

20 ‘‘(v) such other information related to 

21 individual investing as the Secretary deter22 mines appropriate. 

23 ‘‘(B) CALCULATION INFORMATION.—The 

24 model form under subparagraph (A) shall in25 clude addresses for Internet sites, and a work-
51

•S 219 IS

1 sheet, which a participant or beneficiary may 

2 use to calculate— 

3 ‘‘(i) the retirement age value of the 

4 participant’s or beneficiary’s nonforfeitable 

5 pension benefits under the plan (expressed 

6 as an annuity amount and determined by 

7 reference to varied historical annual rates 

8 of return and annuity interest rates), and 

9 ‘‘(ii) other important amounts relating 

10 to retirement savings, including the 

11 amount which a participant or beneficiary 

12 would be required to save annually to pro13 vide a retirement income equal to various 

14 percentages of their current salary (ad15 justed for expected growth prior to retire16 ment). 

17 The Secretary of Labor shall develop an Inter18 net site which an individual may use in making 

19 such calculations and the address for such site 

20 shall be included with the form. 

21 ‘‘(C) PUBLIC COMMENT.—The Secretary 

22 shall provide at least 90 days for public com23 ment before publishing final notice of the model 

24 form. 
52

•S 219 IS

1 ‘‘(D) RULES RELATING TO FORM AND

2 STATEMENT.—The model form under subpara3 graph (A)— 

4 ‘‘(i) shall be written in a manner cal5 culated to be understood by the average 

6 plan participant, and 

7 ‘‘(ii) may be delivered in written, elec8 tronic, or other appropriate form to the ex9 tent such form is reasonably accessible to 

10 participants and beneficiaries.’’ 

11 (3) CONFORMING AMENDMENTS.—Section 

12 4980I of such Code is amended— 

13 (A) by adding at the end of subsection 

14 (c)(3) the following new subparagraph: 

15 ‘‘(C) SEPARATE APPLICATION.—This para16 graph shall be applied separately to failures to 

17 meet the requirements of subsection (e)(1)(A) 

18 to provide pension benefit statements and fail19 ures to meet the requirements of subsection 

20 (e)(1)(A) to provide model forms containing 

21 basic investment guidelines.’’; 

22 (B) by inserting ‘‘or model form’’ after 

23 ‘‘statement’’ in subsection (d)(3); and 
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•S 219 IS

1 (C) by inserting ‘‘or model form containing 

2 basic investment guidelines’’ after ‘‘statement’’ 

3 in subsection (e)(4). 

4 (b) ADEQUATE INVESTMENT EDUCATION.— 

5 (1) IN GENERAL.—Section 104 of the Employee 

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

7 1024), as amended by section 102, is amended by 

8 redesignating subsection (e) as subsection (f) and by 

9 inserting after subsection (d) the following new sub10 section: 

11 ‘‘(e) BASIC INVESTMENT GUIDELINES.— 

12 ‘‘(1) IN GENERAL.—The administrator of an in13 dividual account plan (other than a one-participant 

14 retirement plan described in section 101(i)(8)(B)) 

15 shall furnish at least once each year to each partici16 pant or beneficiary who has the right to direct the 

17 investment of assets in his or her account the model 

18 form relating to basic investment guidelines which is 

19 described in paragraph (2). 

20 ‘‘(2) MODEL FORM.— 

21 ‘‘(A) IN GENERAL.—The Secretary of the 

22 Treasury, in consultation with the Secretary, 

23 shall develop and make available to individual 

24 account plans for distribution under paragraph 

25 (1) a model form containing basic guidelines for 
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•S 219 IS

1 investing for retirement. Except as otherwise 

2 provided by the Secretary of the Treasury, such 

3 guidelines shall include— 

4 ‘‘(i) information on the benefits of di5 versification, 

6 ‘‘(ii) information on the essential dif7 ferences, in terms of risk and return, of 

8 pension plan investments, including stocks, 

9 bonds, mutual funds, and money market 

10 investments, 

11 ‘‘(iii) information on how an individ12 ual’s pension plan investment allocations 

13 may differ depending on the individual’s 

14 age and years to retirement and on other 

15 factors determined by the Secretary of the 

16 Treasury, 

17 ‘‘(iv) sources of information where in18 dividuals may learn more about pension 

19 rights, individual investing, and investment 

20 advice, and 

21 ‘‘(v) such other information related to 

22 individual investing as the Secretary of the 

23 Treasury determines appropriate. 

24 ‘‘(B) CALCULATION INFORMATION.—The 

25 model form under subparagraph (A) shall in-
55

•S 219 IS

1 clude addresses for Internet sites, and a work2 sheet, which a participant or beneficiary may 

3 use to calculate— 

4 ‘‘(i) the retirement age value of the 

5 participant’s or beneficiary’s nonforfeitable 

6 pension benefits under the plan (expressed 

7 as an annuity amount and determined by 

8 reference to varied historical annual rates 

9 of return and annuity interest rates), and 

10 ‘‘(ii) other important amounts relating 

11 to retirement savings, including the 

12 amount which a participant or beneficiary 

13 would be required to save annually to pro14 vide a retirement income equal to various 

15 percentages of their current salary (ad16 justed for expected growth prior to retire17 ment). 

18 The Secretary shall develop an Internet site which an indi19 vidual may use in making such calculations and the ad20 dress for such site shall be included with the form. 

21 ‘‘(3) RULES RELATING TO FORM AND STATE22 MENT.—The model form under paragraph (2)— 

23 ‘‘(A) shall be written in a manner cal24 culated to be understood by the average plan 

25 participant, and 
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•S 219 IS

1 ‘‘(B) may be delivered in written, elec2 tronic, or other appropriate form to the extent 

3 such form is reasonably accessible to partici4 pants and beneficiaries.’’ 

5 (2) ENFORCEMENT.—Section 502(c)(7) of such 

6 Act (29 U.S.C. 1132(c)(7)), as amended by section 

7 102, is amended by striking ‘‘section 104(d)’’ and 

8 inserting ‘‘subsection (d) or (e) of section 104’’. 

9 (c) EFFECTIVE DATE.— 

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

11 this section shall apply to plan years beginning after 

12 December 31, 2006. 

13 (2) SPECIAL RULE FOR COLLECTIVELY BAR14 GAINED AGREEMENTS.—In the case of a plan main15 tained pursuant to 1 or more collective bargaining 

16 agreements between employee representatives and 1 

17 or more employers ratified on or before the date of 

18 the enactment of this Act, paragraph (1) shall be 

19 applied to benefits pursuant to, and individuals cov20 ered by, any such agreement by substituting for 

21 ‘‘December 31, 2006’’ the earlier of— 

22 (A) the later of— 

23 (i) December 31, 2007, or 

24 (ii) the date on which the last of such 

25 collective bargaining agreements termi-
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•S 219 IS

1 nates (determined without regard to any 

2 extension thereof after such date of enact3 ment), or 

4 (B) December 31, 2008. 

5 SEC. 113. MATERIAL INFORMATION RELATING TO INVEST6 MENT IN EMPLOYER SECURITIES. 

7 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

8 (1) IN GENERAL.—Section 4980H(e) of the In9 ternal Revenue Code of 1986, as added by section 

10 102, is amended— 

11 (A) by striking ‘‘(e) NOTICE OF RIGHT TO

12 DIVEST.—Not’’ and inserting: 

13 ‘‘(e) NOTICE REQUIREMENTS.— 

14 ‘‘(1) NOTICE OF RIGHT TO DIVEST.—Not’’, 

15 (B) by redesignating paragraphs (1) and 

16 (2) as subparagraphs (A) and (B) and adjust17 ing all margins accordingly, and 

18 (C) by adding at the end the following new 

19 paragraph: 

20 ‘‘(2) MATERIAL INFORMATION.— 

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

22 a defined contribution plan (other than a one23 participant retirement plan) shall provide to 

24 each participant and beneficiary who has the 

25 right to direct the investment of assets in his or 
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•S 219 IS

1 her account in employer securities with all re2 ports, proxy statements, and other communica3 tions regarding investment of such assets in 

4 employer securities to the extent that such re5 ports, statements, and communications are re6 quired to be provided by the plan sponsor to in7 vestors in connection with such an investment 

8 under applicable securities laws. Such reports, 

9 statements, and communications may be deliv10 ered in written, electronic, or other appropriate 

11 form to the extent such form is reasonably ac12 cessible to participants and beneficiaries. 

13 ‘‘(B) PLAN SPONSOR.—If any information 

14 required to be provided under paragraph (1) is 

15 maintained by the plan sponsor, the plan spon16 sor shall transmit such information to the plan 

17 administrator.’’ 

18 (2) CONFORMING AMENDMENTS.— 

19 (A) Section 4980H(c)(3) of such Code, as 

20 so added, is amended by adding at the end the 

21 following new subparagraph: 

22 ‘‘(C) SEPARATE APPLICATION.—This para23 graph shall be applied separately for failures to 

24 meet the requirements of subsection (e)(1) and 
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•S 219 IS

1 failures to meet the requirements of subsection 

2 (e)(2).’’ 

3 (B)(i) The heading for section 4980H of 

4 such Code, as so added, is amended by striking 

5 ‘‘NOTICE OF FREEDOM TO DIVEST EM6 PLOYER SECURITIES’’ and inserting ‘‘INFOR7 MATION REGARDING INVESTMENT IN EM8 PLOYER SECURITIES’’. 

9 (ii) The item relating to section 4980H in 

10 the table of sections for chapter 43 of such 

11 Code, as so added, is amended by striking ‘‘no12 tice of freedom to divest employer securities’’ 

13 and inserting ‘‘information regarding invest14 ment in employer securities’’. 

15 (b) AMENDMENTS OF ERISA.— 

16 (1) IN GENERAL.—Section 104 of the Employee 

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

18 1024) as amended by sections 102 and 112, is 

19 amended by redesignating subsection (f) as sub20 section (g) and by inserting after subsection (e) the 

21 following new subsection: 

22 ‘‘(f) PROVIDING OF MATERIAL INFORMATION.— 

23 ‘‘(1) IN GENERAL.—The administrator of an in24 dividual account plan (other than a one-participant 

25 retirement plan described in section 101(i)(8)(B)) 
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•S 219 IS

1 shall provide to each participant and beneficiary who 

2 has the right to direct the investment of assets in 

3 his or her account in employer securities with all re4 ports, proxy statements, and other communications 

5 regarding investment of such assets in employer se6 curities to the extent that such reports, statements, 

7 and communications are required to be provided by 

8 the plan sponsor to investors in connection with such 

9 an investment under applicable securities laws. Such 

10 reports, statements, and communications may be de11 livered in written, electronic, or other appropriate 

12 form to the extent such form is reasonably accessible 

13 to participants and beneficiaries. 

14 ‘‘(2) PLAN SPONSOR.—If any information re15 quired to be provided under paragraph (1) is main16 tained by the plan sponsor, the plan sponsor shall 

17 transmit such information to the plan adminis18 trator.’’ 

19 (2) ENFORCEMENT.—Section 502 of such Act 

20 (29 U.S.C. 1132) is amended— 

21 (A) in subsection (a)(6), by striking ‘‘(6), 

22 or (7)’’ and inserting ‘‘(6), (7), or (8)’’; 

23 (B) by redesignating paragraph (8) of sub24 section (c) as paragraph (9); and 
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•S 219 IS

1 (C) by inserting after paragraph (7) of 

2 subsection (c) the following new paragraph: 

3 ‘‘(8) The Secretary may assess a civil penalty against 

4 any person of up to $1,000 a day from the date of the 

5 person’s failure or refusal to comply with the requirements 

6 of section 104(f) until such failure or refusal is corrected.’’ 

7 (c) EFFECTIVE DATE.— 

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

9 this section shall apply to plan years beginning after 

10 December 31, 2005. 

11 (2) SPECIAL RULE FOR COLLECTIVELY BAR12 GAINED AGREEMENTS.—In the case of a plan main13 tained pursuant to 1 or more collective bargaining 

14 agreements between employee representatives and 1 

15 or more employers ratified on or before the date of 

16 the enactment of this Act, paragraph (1) shall be 

17 applied to benefits pursuant to, and individuals cov18 ered by, any such agreement by substituting for 

19 ‘‘December 31, 2005’’ the earlier of— 

20 (A) the later of— 

21 (i) December 31, 2006, or 

22 (ii) the date on which the last of such 

23 collective bargaining agreements termi24 nates (determined without regard to any 
62

•S 219 IS

1 extension thereof after such date of enact2 ment), or 

3 (B) December 31, 2007. 

4 SEC. 114. FIDUCIARY RULES FOR PLAN SPONSORS DESIG5 NATING INDEPENDENT INVESTMENT ADVIS6 ERS. 

7 (a) IN GENERAL.—Section 404 of the Employee Re8 tirement Income Security Act of 1974 (29 U.S.C. 1104) 

9 is amended by adding at the end the following new sub10 section: 

11 ‘‘(e) INDEPENDENT INVESTMENT ADVISER.— 

12 ‘‘(1) IN GENERAL.—In the case of an individual 

13 account plan which permits a plan participant or 

14 beneficiary to direct the investment of the assets in 

15 his or her account, if a plan sponsor or other person 

16 who is a fiduciary designates and monitors a quali17 fied investment adviser pursuant to the requirements 

18 of paragraph (3), such fiduciary— 

19 ‘‘(A) shall be deemed to have satisfied the 

20 requirements under this section for the prudent 

21 designation and periodic review of an invest22 ment adviser with whom the plan sponsor or 

23 other person who is a fiduciary enters into an 

24 arrangement for the provision of advice referred 

25 to in section 3(21)(A)(ii), 
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•S 219 IS

1 ‘‘(B) shall not be liable under this section 

2 for any loss, or by reason of any breach, with 

3 respect to the provision of investment advice 

4 given by such adviser to any plan participant or 

5 beneficiary, and 

6 ‘‘(C) shall not be liable for any co-fiduciary 

7 liability under subsections (a)(2) and (b) of sec8 tion 405 with respect to the provision of invest9 ment advice given by such adviser to any plan 

10 participant or beneficiary. 

11 ‘‘(2) QUALIFIED INVESTMENT ADVISER.— 

12 ‘‘(A) IN GENERAL.—For purposes of this 

13 subsection, the term ‘qualified investment ad14 viser’ means, with respect to a plan, a person— 

15 ‘‘(i) who is a fiduciary of the plan by 

16 reason of the provision of investment ad17 vice by such person to a plan participant 

18 or beneficiary; 

19 ‘‘(ii) who— 

20 ‘‘(I) is registered as an invest21 ment adviser under the Investment 

22 Advisers Act of 1940 (15 U.S.C. 80b–

23 1 et seq.), 

24 ‘‘(II) is registered as an invest25 ment adviser under the laws of the 
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•S 219 IS

1 State in which such adviser maintains 

2 the principal office and place of busi3 ness of such adviser, but only if such 

4 State laws are consistent with section 

5 203A of the Investment Advisers Act 

6 of 1940 (15 U.S.C. 80b–3a), 

7 ‘‘(III) is a bank or similar finan8 cial institution referred to in section 

9 408(b)(4), 

10 ‘‘(IV) is an insurance company 

11 qualified to do business under the 

12 laws of a State, or 

13 ‘‘(V) is any other comparably 

14 qualified entity which satisfies such 

15 criteria as the Secretary determines 

16 appropriate, consistent with the pur17 poses of this subsection, and 

18 ‘‘(iii) who meets the requirements of 

19 subparagraph (B). 

20 ‘‘(B) ADVISER REQUIREMENTS.—The re21 quirements of this subparagraph are met if 

22 every individual employed (or otherwise com23 pensated) by a person described in subpara24 graph (A)(ii) who provides investment advice on 
65

•S 219 IS

1 behalf of such person to any plan participant or 

2 beneficiary is— 

3 ‘‘(i) an individual described in sub4 clause (I) of subparagraph (A)(ii), 

5 ‘‘(ii) an individual described in sub6 clause (II) of subparagraph (A)(ii), but 

7 only if such State has an examination re8 quirement to qualify for registration, 

9 ‘‘(iii) registered as a broker or dealer 

10 under the Securities Exchange Act of 1934 

11 (15 U.S.C. 78a et seq.), 

12 ‘‘(iv) a registered representative as de13 scribed in section 3(a)(18) of the Securi14 ties Exchange Act of 1934 (15 U.S.C. 

15 78c(a)(18)) or section 202(a)(17) of the 

16 Investment Advisers Act of 1940 (15 

17 U.S.C. 80b–2(a)(17)), or 

18 ‘‘(v) any other comparably qualified 

19 individual who satisfies such criteria as the 

20 Secretary determines appropriate, con21 sistent with the purposes of this sub22 section. 

23 ‘‘(3) VERIFICATION REQUIREMENTS.—The re24 quirements of this paragraph are met if— 
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•S 219 IS

1 ‘‘(A) the plan sponsor or other person who 

2 is a fiduciary in designating a qualified invest3 ment adviser receives at the time of the des4 ignation, and annually thereafter, a written 

5 verification from the qualified investment ad6 viser that the investment adviser— 

7 ‘‘(i) is and remains a qualified invest8 ment adviser, 

9 ‘‘(ii) acknowledges that the investment 

10 adviser is a fiduciary with respect to the 

11 plan and is solely responsible for its invest12 ment advice, 

13 ‘‘(iii) has reviewed the plan documents 

14 (including investment options) and has de15 termined that its relationship with the plan 

16 and the investment advice provided to any 

17 plan participant or beneficiary, including 

18 any fees or other compensation it will re19 ceive, will not constitute a violation of sec20 tion 406, 

21 ‘‘(iv) will, in providing investment ad22 vice to any participant or beneficiary, con23 sider any employer securities or employer 

24 real property allocated to his or her ac25 count, and 
67

•S 219 IS

1 ‘‘(v) has the necessary insurance cov2 erage (as determined by the Secretary) for 

3 any claim by any plan participant or bene4 ficiary, 

5 ‘‘(B) the plan sponsor or other person who 

6 is a fiduciary in designating a qualified invest7 ment adviser reviews the documents described 

8 in paragraph (4) provided by such adviser and 

9 determines that there is no material reason not 

10 to enter into an arrangement for the provision 

11 of advice by such qualified investment adviser, 

12 and 

13 ‘‘(C) the plan sponsor or other person who 

14 is a fiduciary in designating a qualified invest15 ment adviser, within 30 days of having informa16 tion brought to its attention that the invest17 ment adviser is no longer qualified or that a 

18 substantial number of plan participants or 

19 beneficiaries have raised concerns about the 

20 services being provided by the investment ad21 viser— 

22 ‘‘(i) investigates such information and 

23 concerns, and 

24 ‘‘(ii) determines that there is no mate25 rial reason not to continue the designation 
68

•S 219 IS

1 of the adviser as a qualified investment ad2 viser. 

3 ‘‘(4) DOCUMENTATION.—A qualified investment 

4 adviser shall provide the following documents to the 

5 plan sponsor or other person who is a fiduciary in 

6 designating the adviser: 

7 ‘‘(A) The contract with the plan sponsor or 

8 other person who is a fiduciary for the services 

9 to be provided by the investment adviser to the 

10 plan participants and beneficiaries. 

11 ‘‘(B) A disclosure as to any fees or other 

12 compensation that will be received by the in13 vestment adviser for the provision of such in14 vestment advice and as to any fees and other 

15 compensation that will be received as a result of 

16 a participant’s investment election. 

17 ‘‘(C) The Uniform Application for Invest18 ment Adviser Registration as filed with the Se19 curities and Exchange Commission or a sub20 stantially similar disclosure application as de21 termined by and filed with the Secretary. 

22 ‘‘(5) TREATMENT AS FIDUCIARY.—Any quali23 fied investment adviser that acknowledges it is a fi24 duciary pursuant to paragraph (3)(A)(ii) shall be 

25 deemed a fiduciary under this part with respect to 
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•S 219 IS

1 the provision of investment advice to a plan partici2 pant or beneficiary.’’ 

3 (b) FIDUCIARY LIABILITY.—Section 404(c)(1)(B) of 

4 such Act is amended by inserting ‘‘(other than a qualified 

5 investment adviser)’’ after ‘‘fiduciary’’. 

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

7 this section shall apply with respect to investment advisers 

8 designated after the date of the enactment of this Act. 

9 SEC. 115. TREATMENT OF QUALIFIED RETIREMENT PLAN10 NING SERVICES. 

11 (a) IN GENERAL.—Subsection (m) of section 132 of 

12 the Internal Revenue Code of 1986 (defining qualified re13 tirement services) is amended by adding at the end the 

14 following new paragraph: 

15 ‘‘(4) NO CONSTRUCTIVE RECEIPT.— 

16 ‘‘(A) IN GENERAL.—No amount shall be 

17 included in the gross income of any employee 

18 solely because the employee may choose between 

19 any qualified retirement planning services pro20 vided by an eligible investment advisor and 

21 compensation which would otherwise be includ22 ible in the gross income of such employee. The 

23 preceding sentence shall apply to highly com24 pensated employees only if the choice described 

25 in such sentence is available on substantially 
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•S 219 IS

1 the same terms to each member of the group of 

2 employees normally provided education and in3 formation regarding the employer’s qualified 

4 employer plan. 

5 ‘‘(B) LIMITATION.—The maximum amount 

6 which may be excluded under subparagraph (A) 

7 with respect to any employee for any taxable 

8 year shall not exceed $1,000. 

9 ‘‘(C) ELIGIBLE INVESTMENT ADVISER.—

10 For purposes of this paragraph, the term ‘eligi11 ble investment adviser’ means, with respect to 

12 a plan, a person— 

13 ‘‘(i) who— 

14 ‘‘(I) is registered as an invest15 ment adviser under the Investment 

16 Advisers Act of 1940 (15 U.S.C. 80b–

17 1 et seq.), 

18 ‘‘(II) is registered as an invest19 ment adviser under the laws of the 

20 State in which such adviser maintains 

21 the principal office and place of busi22 ness of such adviser, but only if such 

23 State laws are consistent with section 

24 203A of the Investment Advisers Act 

25 of 1940 (15 U.S.C. 80b–3a), 
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1 ‘‘(III) is a bank or similar finan2 cial institution referred to in section 

3 408(b)(4), 

4 ‘‘(IV) is an insurance company 

5 qualified to do business under the 

6 laws of a State, or 

7 ‘‘(V) is any other comparably 

8 qualified entity which satisfies such 

9 criteria as the Secretary determines 

10 appropriate, consistent with the pur11 poses of this subsection, and 

12 ‘‘(ii) who meets the requirements of 

13 subparagraph (D). 

14 ‘‘(D) ADVISER REQUIREMENTS.—The re15 quirements of this subparagraph are met if 

16 every individual employed (or otherwise com17 pensated) by a person described in subpara18 graph (C)(i) who provides investment advice on 

19 behalf of such person to any plan participant or 

20 beneficiary is— 

21 ‘‘(i) an individual described in sub22 clause (I) of subparagraph (C)(i), 

23 ‘‘(ii) an individual described in sub24 clause (II) of subparagraph (C)(i), but 
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1 only if such State has an examination re2 quirement to qualify for registration, 

3 ‘‘(iii) registered as a broker or dealer 

4 under the Securities Exchange Act of 1934 

5 (15 U.S.C. 78a et seq.), 

6 ‘‘(iv) a registered representative as de7 scribed in section 3(a)(18) of the Securi8 ties Exchange Act of 1934 (15 U.S.C. 

9 78c(a)(18)) or section 202(a)(17) of the 

10 Investment Advisers Act of 1940 (15 

11 U.S.C. 80b–2(a)(17)), or 

12 ‘‘(v) any other comparably qualified 

13 individual who satisfies such criteria as the 

14 Secretary determines appropriate, con15 sistent with the purposes of this para16 graph. 

17 ‘‘(E) TERMINATION.—This paragraph 

18 shall not apply to taxable years beginning after 

19 December 31, 2010.’’ 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) Section 403(b)(3)(B) of such Code is 

22 amended by inserting ‘‘132(m)(4),’’ after 

23 ‘‘132(f)(4),’’. 

24 (2) Section 414(s)(2) of such Code is amended 

25 by inserting ‘‘132(m)(4),’’ after ‘‘132(f)(4),’’. 
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1 (3) Section 415(c)(3)(D)(ii) of such Code is 

2 amended by inserting ‘‘132(m)(4),’’ after 

3 ‘‘132(f)(4),’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2005. 

7 Subtitle C—Protection of Pension 

8 Plan Participants 

9 SEC. 121. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF 

10 BLACKOUT PERIODS. 

11 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

12 (1) EXCISE TAX.— 

13 (A) IN GENERAL.—Chapter 43 of the In14 ternal Revenue Code of 1986 (relating to quali15 fied pension, etc., plans), as amended by this 

16 Act, is amended by adding at the end the fol17 lowing new section: 

18 ‘‘SEC. 4980J. FAILURE OF CERTAIN DEFINED CONTRIBU19 TION PLANS TO PROVIDE NOTICE OF BLACK20 OUT PERIODS. 

21 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

22 a tax on the failure of any defined contribution plan to 

23 which this section applies to meet the requirements of sub24 section (e) with respect to any participant or beneficiary. 

25 ‘‘(b) AMOUNT OF TAX.— 
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•S 219 IS

1 ‘‘(1) IN GENERAL.—The amount of the tax im2 posed by subsection (a) on any failure with respect 

3 to any participant or beneficiary shall be $100 for 

4 each day in the noncompliance period with respect to 

5 the failure. 

6 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

7 of this section, the term ‘noncompliance period’ 

8 means, with respect to any failure, the period begin9 ning on the date the failure first occurs and ending 

10 on the date the notice to which the failure relates is 

11 provided or the failure is otherwise corrected. 

12 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 

13 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

14 DISCOVERED AND REASONABLE DILIGENCE EXER15 CISED.—No tax shall be imposed by subsection (a) 

16 on any failure during any period for which it is es17 tablished to the satisfaction of the Secretary that 

18 any person subject to liability for tax under sub19 section (d) did not know that the failure existed and 

20 exercised reasonable diligence to meet the require21 ments of subsection (e). 

22 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR23 RECTED AS SOON AS REASONABLY PRACTICABLE.—

24 No tax shall be imposed by subsection (a) on any 

25 failure if— 
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1 ‘‘(A) any person subject to liability for the 

2 tax under subsection (d) exercised reasonable 

3 diligence to meet the requirements of subsection 

4 (e), and 

5 ‘‘(B) such person provides the notice de6 scribed in subsection (e) as soon as reasonably 

7 practicable after the first date such person 

8 knew, or exercising reasonable diligence should 

9 have known, that such failure existed. 

10 ‘‘(3) OVERALL LIMITATION FOR UNINTEN11 TIONAL FAILURES.— 

12 ‘‘(A) IN GENERAL.—If the person subject 

13 to liability for tax under subsection (d) exer14 cised reasonable diligence to meet the require15 ments of subsection (e), the tax imposed by 

16 subsection (a) for failures during the taxable 

17 year of the employer (or, in the case of a multi18 employer plan, the taxable year of the trust 

19 forming part of the plan) shall not exceed 

20 $500,000. For purposes of the preceding sen21 tence, all multiemployer plans of which the 

22 same trust forms a part shall be treated as 1 

23 plan. 

24 ‘‘(B) TAXABLE YEARS IN THE CASE OF

25 CERTAIN CONTROLLED GROUPS.—For purposes 
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•S 219 IS

1 of this paragraph, if all persons who are treated 

2 as a single employer for purposes of this section 

3 do not have the same taxable year, the taxable 

4 years taken into account shall be determined 

5 under principles similar to the principles of sec6 tion 1561. 

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

8 failure which is due to reasonable cause and not to 

9 willful neglect, the Secretary may waive part or all 

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

11 that the payment of such tax would be excessive or 

12 otherwise inequitable relative to the failure involved. 

13 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia14 ble for the tax imposed by subsection (a): 

15 ‘‘(1) In the case of a plan not described in 

16 paragraph (2) or (3), the employer. 

17 ‘‘(2) In the case of a multiemployer plan, the 

18 plan. 

19 ‘‘(3) In the case of an arrangement described in 

20 subsection (e)(1)(B), the person required to provide 

21 the notice under subsection (e). 

22 ‘‘(e) NOTICE OF BLACKOUT PERIODS TO PARTICI23 PANT OR BENEFICIARY UNDER DEFINED CONTRIBUTION

24 PLAN.— 

25 ‘‘(1) IN GENERAL.— 
77

•S 219 IS

1 ‘‘(A) DUTIES OF PLAN ADMINISTRATOR.—

2 In advance of the commencement of any black3 out period with respect to a defined contribu4 tion plan, the plan administrator shall notify 

5 the plan participants and beneficiaries who are 

6 affected by such action in accordance with this 

7 subsection. 

8 ‘‘(B) SPECIAL RULE FOR CERTAIN ANNU9 ITIES.—In the case of an annuity contract or 

10 custodial account described in section 403(b) 

11 which is not a plan established or maintained 

12 by the employer, the notice shall be furnished 

13 by the issuer of the contract, the custodian of 

14 the account, or such other person as is specified 

15 by the Secretary. 

16 ‘‘(2) NOTICE REQUIREMENTS.— 

17 ‘‘(A) IN GENERAL.—The notices described 

18 in paragraph (1) shall be written in a manner 

19 calculated to be understood by the average plan 

20 participant and shall include— 

21 ‘‘(i) the reasons for the blackout pe22 riod, 

23 ‘‘(ii) an identification of the invest24 ments and other rights affected, 
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•S 219 IS

1 ‘‘(iii) the expected beginning date and 

2 length of the blackout period, 

3 ‘‘(iv) in the case of investments af4 fected, a statement that the participant or 

5 beneficiary should evaluate the appro6 priateness of their current investment deci7 sions in light of their inability to direct or 

8 diversify assets credited to their accounts 

9 during the blackout period, and 

10 ‘‘(v) such other matters as the Sec11 retary of Labor may require by regulation. 

12 ‘‘(B) NOTICE TO PARTICIPANTS AND

13 BENEFICIARIES.—Except as otherwise provided 

14 in this subsection, notices described in para15 graph (1) shall be furnished to all participants 

16 and beneficiaries under the plan to whom the 

17 blackout period applies at least 30 days in ad18 vance of the blackout period. 

19 ‘‘(C) EXCEPTION TO 30-DAY NOTICE RE20 QUIREMENT.—In any case in which— 

21 ‘‘(i) a deferral of the blackout period 

22 would violate the requirements of subpara23 graph (A) or (B) of section 404(a)(1) of 

24 the Employee Retirement Income Security 
79

•S 219 IS

1 Act of 1974, and a fiduciary of the plan 

2 reasonably so determines in writing, or 

3 ‘‘(ii) the inability to provide the 30-

4 day advance notice is due to events that 

5 were unforeseeable or circumstances be6 yond the reasonable control of the plan ad7 ministrator, and a fiduciary of the plan 

8 reasonably so determines in writing, 

9 subparagraph (B) shall not apply, and the no10 tice shall be furnished to all participants and 

11 beneficiaries under the plan to whom the black12 out period applies as soon as reasonably pos13 sible under the circumstances unless such a no14 tice in advance of the termination of the black15 out period is impracticable. 

16 ‘‘(D) WRITTEN NOTICE.—The notice re17 quired to be provided under this subsection 

18 shall be in writing, except that such notice may 

19 be in electronic or other form to the extent that 

20 such form is reasonably accessible to the recipi21 ent. 

22 ‘‘(E) NOTICE TO ISSUERS OF EMPLOYER

23 SECURITIES SUBJECT TO BLACKOUT PERIOD.—

24 In the case of any blackout period in connection 

25 with a defined contribution plan, the plan ad-
80

•S 219 IS

1 ministrator shall provide timely notice of such 

2 blackout period to the issuer of any employer 

3 securities subject to such blackout period. 

4 ‘‘(3) EXCEPTION FOR BLACKOUT PERIODS

5 WITH LIMITED APPLICABILITY.—In any case in 

6 which the blackout period applies only to 1 or more 

7 participants or beneficiaries in connection with a 

8 merger, acquisition, divestiture, or similar trans9 action involving the plan or plan sponsor and occurs 

10 solely in connection with becoming or ceasing to be 

11 a participant or beneficiary under the plan by reason 

12 of such merger, acquisition, divestiture, or trans13 action, the requirement of this subsection that the 

14 notice be provided to all participants and bene15 ficiaries shall be treated as met if the notice required 

16 under paragraph (1) is provided to such participants 

17 or beneficiaries to whom the blackout period applies 

18 as soon as reasonably practicable. 

19 ‘‘(4) CHANGES IN LENGTH OF BLACKOUT PE20 RIOD.—If, following the furnishing of the notice pur21 suant to this subsection, there is a change in the be22 ginning date or length of the blackout period (speci23 fied in such notice pursuant to paragraph 

24 (2)(A)(iii)), the administrator shall provide affected 

25 participants and beneficiaries notice of the change as 
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•S 219 IS

1 soon as reasonably practicable. In relation to the ex2 tended blackout period, such notice shall meet the 

3 requirements of paragraph (2)(D) and shall specify 

4 any material change in the matters referred to in 

5 clauses (i) through (v) of paragraph (2)(A). 

6 ‘‘(5) REGULATORY EXCEPTIONS.—The Sec7 retary of Labor may provide by regulation for addi8 tional exceptions to the requirements of this sub9 section which the Secretary of Labor determines are 

10 in the interests of participants and beneficiaries. 

11 ‘‘(6) GUIDANCE AND MODEL NOTICES.—The 

12 Secretary of Labor shall issue guidance and model 

13 notices which meet the requirements of this sub14 section. 

15 ‘‘(7) BLACKOUT PERIOD.—For purposes of this 

16 subsection— 

17 ‘‘(A) IN GENERAL.—The term ‘blackout 

18 period’ means, in connection with a defined con19 tribution plan, any period for which any ability 

20 of participants or beneficiaries under the plan, 

21 which is otherwise available under such plan, to 

22 direct or diversify assets credited to their ac23 counts, to obtain loans from the plan, or to ob24 tain distributions from the plan is temporarily 

25 suspended, limited, or restricted, if such sus-
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•S 219 IS

1 pension, limitation, or restriction is for any pe2 riod of more than 3 consecutive business days. 

3 ‘‘(B) EXCLUSIONS.—The term ‘blackout 

4 period’ does not include a suspension, limita5 tion, or restriction— 

6 ‘‘(i) which occurs by reason of the ap7 plication of the securities laws (as defined 

8 in section 3(a)(47) of the Securities Ex9 change Act of 1934), 

10 ‘‘(ii) which is a change to the plan 

11 which provides for a regularly scheduled 

12 suspension, limitation, or restriction which 

13 is disclosed to participants or beneficiaries 

14 through any summary of material modi15 fications, any materials describing specific 

16 investment alternatives under the plan, or 

17 any changes thereto, or 

18 ‘‘(iii) which applies only to 1 or more 

19 individuals, each of whom is the partici20 pant, an alternate payee (as defined in sec21 tion 414(p)(8)), or any other beneficiary 

22 pursuant to a qualified domestic relations 

23 order (as defined in section 414(p)(1)(A)). 

24 ‘‘(8) DEFINED CONTRIBUTION PLAN TO WHICH

25 SECTION APPLIES.— 
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•S 219 IS

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

2 this paragraph, this section applies to any de3 fined contribution plan described in clause (i), 

4 (ii), or (iv) of section 219(g)(5)(A). 

5 ‘‘(B) EXCEPTION FOR ONE-PARTICIPANT

6 RETIREMENT PLAN.—This section shall not 

7 apply to a one-participant retirement plan (as 

8 defined in section 401(a)(35)(E)(iv)). 

9 ‘‘(C) EXCEPTION FOR GOVERNMENTAL

10 AND CHURCH PLANS.—This section shall not 

11 apply to governmental and church plans. For 

12 purposes of this subparagraph, the terms ‘gov13 ernmental plan’ and ‘church plan’ have the 

14 meanings given such terms by section 414.’’ 

15 (B) AGGREGATION.—Section 414(t) of 

16 such Code, as amended by this Act, is amended 

17 by striking ‘‘or 4980I’’ and inserting ‘‘4980I, or 

18 4980J’’. 

19 (C) CLERICAL AMENDMENT.—The table of 

20 sections for chapter 43 of such Code is amend21 ed by adding at the end the following new item:

‘‘Sec. 4980J. Failure of applicable defined contribution plan to provide notice 

of blackout periods.’’.

22 (2) EFFECTIVE DATE.—The amendments made 

23 by this subsection shall apply to failures after the 

24 date of the enactment of this Act. 
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•S 219 IS

1 (b) AMENDMENTS OF ERISA.— 

2 (1) IN GENERAL.—Section 101(i) of the Em3 ployee Retirement Income Security Act of 1974 (29 

4 U.S.C. 1021(i)) is amended— 

5 (A) by striking ‘‘the terms of’’ in para6 graph (7)(A), 

7 (B) by striking clause (i) of paragraph 

8 (8)(B) and inserting: 

9 ‘‘(i) on the first day of the plan 

10 year— 

11 ‘‘(I) covered only one individual 

12 (or the individual and the individual’s 

13 spouse) and the individual owned 100 

14 percent of the plan sponsor (whether 

15 or not incorporated), or 

16 ‘‘(II) covered only one or more 

17 partners (or partners and their 

18 spouses) in the plan sponsor,’’, 

19 (C) by striking ‘‘employer’’ and ‘‘employ20 er’s’’ in paragraph (8)(B)(iii) and inserting ‘‘in21 dividual’’ and ‘‘individual’s’’, respectively, 

22 (D) by striking ‘‘leases employees’’ in 

23 paragraph (8)(B)(v) and inserting ‘‘uses the 

24 services of leased employees (within the mean-
85

•S 219 IS

1 ing of section 414(n) of the Internal Revenue 

2 Code of 1986)’’, and 

3 (E) by adding at the end of paragraph 

4 (8)(B) the following flush sentence: 

5 ‘‘For purposes of this paragraph, an individual 

6 shall be treated as a partner if the individual is 

7 so treated under section 401(a)(35)(E)(iv) of 

8 the Internal Revenue Code of 1986.’’ 

9 (2) EFFECTIVE DATE.—The amendments made 

10 by this subsection shall take effect as if included in 

11 the provisions of section 306 of Public Law 107–204 

12 (116 Stat. 745 et seq.). 

13 SEC. 122. ALLOWANCE OF CATCHUP PAYMENTS. 

14 (a) IN GENERAL.—Section 219(b)(5) of the Internal 

15 Revenue Code of 1986 (relating to deductible amount) is 

16 amended by redesignating subparagraph (C) as subpara17 graph (D) and by inserting after subparagraph (B) the 

18 following new subparagraph: 

19 ‘‘(C) CATCHUP CONTRIBUTIONS FOR CER20 TAIN INDIVIDUALS.— 

21 ‘‘(i) IN GENERAL.—In the case of an 

22 eligible individual who elects to make a 

23 qualified retirement contribution in addi24 tion to the deductible amount determined 

25 under subparagraph (A)— 
86

•S 219 IS

1 ‘‘(I) the deductible amount for 

2 any taxable year shall be increased by 

3 an amount equal to 3 times the appli4 cable amount determined under sub5 paragraph (B) for such taxable year, 

6 and 

7 ‘‘(II) subparagraph (B) shall not 

8 apply. 

9 ‘‘(ii) ELIGIBLE INDIVIDUAL.—For 

10 purposes of this subparagraph, the term 

11 ‘eligible individual’ means, with respect to 

12 any taxable year, any individual who was a 

13 qualified participant in a qualified cash or 

14 deferred arrangement (as defined in sec15 tion 401(k)) of an employer described in 

16 clause (ii) under which the employer 

17 matched at least 50 percent of the employ18 ee’s contributions to such arrangement 

19 with stock of such employer. 

20 ‘‘(iii) EMPLOYER DESCRIBED.—An 

21 employer is described in this clause if, in 

22 any taxable year preceding the taxable year 

23 described in clause (ii)— 

24 ‘‘(I) such employer (or any con25 trolling corporation of such employer) 
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•S 219 IS

1 was a debtor in a case under title 11 

2 of the United States Code, or similar 

3 Federal or State law, and 

4 ‘‘(II) such employer (or any other 

5 person) was subject to an indictment 

6 or conviction resulting from business 

7 transactions related to such case. 

8 ‘‘(iv) QUALIFIED PARTICIPANT.—For 

9 purposes of clause (ii), the term ‘qualified 

10 participant’ means any eligible individual 

11 who was a participant in the cash or de12 ferred arrangement described in clause (i) 

13 on the date that is 6 months before the fil14 ing of the case described in clause (iii). 

15 ‘‘(v) TERMINATION.—This subpara16 graph shall not apply to taxable years be17 ginning after December 31, 2009.’’ 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2004. 
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•S 219 IS

1 TITLE II—PROVISIONS RELAT2 ING TO FUNDING, DEDUC3 TIONS, AND THE PENSION 

4 BENEFIT GUARANTY COR5 PORATION 

6 Subtitle A—Replacement of Inter7 est Rate on 30-Year Treasury Se8 curities 

9 SEC. 201. REPLACEMENT OF 30-YEAR TREASURY RATE FOR 

10 PURPOSES OF FUNDING AND PBGC PREMIUM 

11 RATES. 

12 (a) AMENDMENTS OF INTERNAL REVENUE CODE.— 

13 (1) IN GENERAL.—Section 412(b)(5)(B) of the 

14 Internal Revenue Code of 1986 is amended to read 

15 as follows: 

16 ‘‘(B) DETERMINATION OF CURRENT LI17 ABILITY.—Notwithstanding subsection (c)(3), a 

18 plan’s current liability (including for purposes 

19 of determining a plan’s required contribution 

20 under subsection (l)) for any plan year shall be 

21 determined— 

22 ‘‘(i) in the case of plan years begin23 ning in 2006, by using an interest rate de24 termined in accordance with the rules pre25 scribed under subsection (o)(1), 
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•S 219 IS

1 ‘‘(ii) in the case of plan years begin2 ning in 2007, 2008, 2009, or 2010, by 

3 using the phase-in yield curve method (as 

4 defined in subsection (o)(3)), and 

5 ‘‘(iii) in the case of plan years begin6 ning after 2010, by using the yield curve 

7 method (as defined in subsection (o)(2)).’’ 

8 (2) RULES RELATING TO CURRENT LIABILITY

9 DETERMINATIONS.—Section 412 of such Code is 

10 amended by adding at the end the following new 

11 subsection: 

12 ‘‘(o) RULES RELATING TO CURRENT LIABILITY DE13 TERMINATIONS.—For purposes of subsection (b)(5)(B)— 

14 ‘‘(1) RULES RELATING TO INTEREST RATES

15 FOR 2006.— 

16 ‘‘(A) DETERMINATION OF RATE.— 

17 ‘‘(i) IN GENERAL.—If any rate of in18 terest used under the plan to determine 

19 cost is not within the permissible range, 

20 the plan shall establish a new rate of inter21 est within the permissible range. 

22 ‘‘(ii) PERMISSIBLE RANGE.—For pur23 poses of clause (i), the term ‘permissible 

24 range’ means a rate of interest which is 

25 not more than, and not more than 10 per-
90

•S 219 IS

1 cent below, the weighted average of con2 servative long-term corporate bond rates 

3 during the 4-year period ending on the last 

4 day before the beginning of the plan year. 

5 ‘‘(B) CONSERVATIVE LONG-TERM COR6 PORATE BOND RATES.—The Secretary shall, by 

7 regulation, prescribe a method for periodically 

8 determining conservative long-term corporate 

9 bond rates for purposes of this paragraph. Such 

10 rates shall reflect rates of interest on amounts 

11 invested in high-quality, long-term corporate 

12 bonds and shall be based on the use of 1 or 

13 more indices, as determined from time to time 

14 by the Secretary. 

15 ‘‘(2) YIELD CURVE METHOD.—For purposes of 

16 this subsection, the yield curve method is a method 

17 under which current liability is determined— 

18 ‘‘(A) by using interest rates drawn from a 

19 yield curve which is prescribed by the Secretary 

20 and which reflects high-quality corporate bonds, 

21 and 

22 ‘‘(B) by matching the timing of the ex23 pected benefit payments under the plan to the 

24 interest rates on such yield curve. 
91

•S 219 IS

1 The Secretary shall publish any yield curve pre2 scribed under this paragraph and the method by 

3 which the yield curve was established. 

4 ‘‘(3) PHASE-IN YIELD CURVE METHOD.— 

5 ‘‘(A) IN GENERAL.—The current liability 

6 under the phase-in yield curve method shall be 

7 equal to the sum of— 

8 ‘‘(i) the applicable percentage of cur9 rent liability determined under the yield 

10 curve method described in paragraph (2), 

11 and 

12 ‘‘(ii) the product of the current liabil13 ity determined by using the interest rate 

14 rules described in paragraph (1) and a per15 centage equal to 100 percent minus the ap16 plicable percentage. 

17 ‘‘(B) APPLICABLE PERCENTAGE.—For 

18 purposes of subparagraph (A), the applicable 

19 percentage shall be determined in accordance 

20 with the following table:

‘‘In the case of years The applicable 

beginning in— percentage is—

2007 ......................................................................................... 20

2008 ......................................................................................... 40

2009 ......................................................................................... 60

2010 ......................................................................................... 80.

21 ‘‘(4) SIMPLIFIED METHODS.— 
92

•S 219 IS

1 ‘‘(A) ESTABLISHMENT BY SECRETARY.—

2 The Secretary shall prescribe 1 or more sim3 plified methods under which current liability 

4 can be determined by substituting any such 

5 method for the yield curve method for purposes 

6 of paragraphs (2) and (3). 

7 ‘‘(B) USE OF SIMPLIFIED METHOD.—A 

8 plan (other than a multiemployer plan) may use 

9 a simplified method established under subpara10 graph (A) if, on each day during the preceding 

11 plan year, the plan had no more than 100 par12 ticipants. The aggregation rule under sub13 section (l)(6)(C) shall apply for purposes of this 

14 subparagraph.’’ 

15 (3) ADDITIONAL FUNDING REQUIREMENTS.—

16 Section 412(l)(7)(C)(i) of such Code is amended to 

17 read as follows: 

18 ‘‘(i) CURRENT LIABILITY.—Current li19 ability under this subsection for any plan 

20 year shall be determined under the rules or 

21 method provided under subsection (b)(5) 

22 for the plan year.’’ 

23 (b) AMENDMENTS OF ERISA.— 

24 (1) IN GENERAL.—Section 302(b)(5)(B) of the 

25 Employee Retirement Income Security Act of 1974 
93

•S 219 IS

1 (29 U.S.C. 1082(b)(5)(B)) is amended to read as 

2 follows: 

3 ‘‘(B) DETERMINATION OF CURRENT LI4 ABILITY.—Notwithstanding subsection (c)(3), a 

5 plan’s current liability (including for purposes 

6 of determining a plan’s required contribution 

7 under subsection (d)) for any plan year shall be 

8 determined— 

9 ‘‘(i) in the case of plan years begin10 ning in 2006, by using an interest rate de11 termined in accordance with the rules pre12 scribed under subsection (h)(1), 

13 ‘‘(ii) in the case of plan years begin14 ning in 2007, 2008, 2009, or 2010, by 

15 using the phase-in yield curve method (as 

16 defined in subsection (h)(3)), and 

17 ‘‘(iii) in the case of plan years begin18 ning after 2010, by using the yield curve 

19 method (as defined in subsection (h)(2)).’’ 

20 (2) RULES RELATING TO CURRENT LIABILITY

21 DETERMINATIONS.—Section 302 of such Act (29 

22 U.S.C. 1082) is amended by redesignating sub23 section (h) as subsection (i) and by inserting after 

24 subsection (g) the following new subsection: 
94

•S 219 IS

1 ‘‘(h) RULES RELATING TO CURRENT LIABILITY DE2 TERMINATIONS.—For purposes of subsection (b)(5)(B)— 

3 ‘‘(1) RULES RELATING TO INTEREST RATES

4 FOR 2006.— 

5 ‘‘(A) DETERMINATION OF RATE.— 

6 ‘‘(i) IN GENERAL.—If any rate of in7 terest used under the plan to determine 

8 cost is not within the permissible range, 

9 the plan shall establish a new rate of inter10 est within the permissible range. 

11 ‘‘(ii) PERMISSIBLE RANGE.—For pur12 poses of clause (i), the term ‘permissible 

13 range’ means a rate of interest which is 

14 not more than, and not more than 10 per15 cent below, the weighted average of con16 servative long-term corporate bond rates 

17 during the 4-year period ending on the last 

18 day before the beginning of the plan year. 

19 ‘‘(B) CONSERVATIVE LONG-TERM COR20 PORATE BOND RATES.—The Secretary of the 

21 Treasury shall, by regulation, prescribe a meth22 od for periodically determining conservative 

23 long-term corporate bond rates for purposes of 

24 this paragraph. Such rates shall reflect rates of 

25 interest on amounts invested in high-quality, 
95

•S 219 IS

1 long-term corporate bonds and shall be based 

2 on the use of 1 or more indices, as determined 

3 from time to time by the Secretary of the 

4 Treasury. 

5 ‘‘(2) YIELD CURVE METHOD.—For purposes of 

6 this subsection, the yield curve method is a method 

7 under which current liability is determined— 

8 ‘‘(A) by using interest rates drawn from a 

9 yield curve which is prescribed by the Secretary 

10 of the Treasury and which reflects high-quality 

11 corporate bonds, and 

12 ‘‘(B) by matching the timing of the ex13 pected benefit payments under the plan to the 

14 interest rates on such yield curve. 

15 The Secretary of the Treasury shall publish any 

16 yield curve prescribed under this paragraph and the 

17 method by which the yield curve was established. 

18 ‘‘(3) PHASE-IN YIELD CURVE METHOD.— 

19 ‘‘(A) IN GENERAL.—The current liability 

20 under the phase-in yield curve method shall be 

21 equal to the sum of— 

22 ‘‘(i) the applicable percentage of cur23 rent liability determined under the yield 

24 curve method described in paragraph (2), 

25 and 
96

•S 219 IS

1 ‘‘(ii) the product of the current liabil2 ity determined by using the interest rate 

3 rules described in paragraph (1) and a per4 centage equal to 100 percent minus the ap5 plicable percentage. 

6 ‘‘(B) APPLICABLE PERCENTAGE.—For 

7 purposes of subparagraph (A), the applicable 

8 percentage shall be determined in accordance 

9 with the following table:

‘‘In the case of years The applicable 

beginning in— percentage is—

2007 ......................................................................................... 20

2008 ......................................................................................... 40

2009 ......................................................................................... 60

2010 ......................................................................................... 80.

10 ‘‘(4) SIMPLIFIED METHODS.— 

11 ‘‘(A) ESTABLISHMENT BY SECRETARY.—

12 The Secretary of the Treasury shall prescribe 1 

13 or more simplified methods under which current 

14 liability can be determined by substituting any 

15 such method for the yield curve method for pur16 poses of paragraphs (2) and (3). 

17 ‘‘(B) USE OF SIMPLIFIED METHOD.—A 

18 plan (other than a multiemployer plan) may use 

19 a simplified method established under subpara20 graph (A) if, on each day during the preceding 

21 plan year, the plan had no more than 100 par22 ticipants. The aggregation rule under sub-
97

•S 219 IS

1 section (d)(6)(C) shall apply for purposes of 

2 this subparagraph.’’ 

3 (3) ADDITIONAL FUNDING REQUIREMENTS.—

4 Section 302(d)(7)(C)(i) of such Act (29 U.S.C. 

5 1082(d)(7)(C)(i)) is amended to read as follows: 

6 ‘‘(i) CURRENT LIABILITY.—Current li7 ability under this subsection for any plan 

8 year shall be determined under the rules or 

9 method provided under subsection (b)(5) 

10 for the plan year.’’ 

11 (4) PBGC PREMIUM RATES.— 

12 (A) IN GENERAL.—Section 

13 4006(a)(3)(E)(iii)(II) of such Act (29 U.S.C. 

14 1306(a)(3)(E)(iii)(II)) is amended to read as 

15 follows: 

16 ‘‘(II) For purposes of deter17 mining unfunded current liability 

18 under subclause (I), current liability 

19 for any plan year shall be determined 

20 under the rules or method provided 

21 under section 302(b)(5) for the plan 

22 year, except that for purposes of plan 

23 years beginning in 2006, the interest 

24 rate used shall be the conservative 

25 long-term corporate bond rate for the 
98

•S 219 IS

1 month preceding the month in which 

2 the plan year begins. For purposes of 

3 the preceding sentence, a plan may, in 

4 lieu of the yield curve method, use a 

5 simplified method under section 

6 302(h)(4) in applying paragraph (2) 

7 or (3) of section 302(h).’’ 

8 (B) CONFORMING AMENDMENTS.—Section 

9 4006(a)(3)(E)(iii) of such Act (29 U.S.C. 

10 1306(a)(3)(E)(iii)) is amended by striking sub11 clauses (III), (IV), and (V). 

12 (c) CONFORMING CHANGES REGARDING QUARTERLY

13 CONTRIBUTIONS.— 

14 (1) AMENDMENT OF INTERNAL REVENUE

15 CODE.—Section 412(m)(1)(B) of the Internal Rev16 enue Code of 1986 (relating to quarterly contribu17 tions) is amended by striking ‘‘(including adjust18 ments under subsection (b)(5)(B))’’. 

19 (2) AMENDMENT OF ERISA.—Section 

20 302(e)(1)(B) of the Employee Retirement Income 

21 Security Act of 1974 (29 U.S.C. 1082(e)(1)(B)) is 

22 amended by striking ‘‘(including adjustments under 

23 subsection (b)(5)(B))’’. 

24 (d) EFFECTIVE DATES.— 
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•S 219 IS

1 (1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), the amendments made by this 

3 section shall apply to plan years beginning after De4 cember 31, 2004 

5 (2) LOOKBACK RULES.—For purposes of apply6 ing subsections (d)(9)(B) and (e)(1) of section 302 

7 of the Employee Retirement Income Security Act of 

8 1974 and subsections (l)(9)(B) and (m)(1) of section 

9 412 of the Internal Revenue Code of 1986 to plan 

10 years beginning after December 31, 2004, the 

11 amendments made by this section may be applied as 

12 if such amendments had been in effect for all prior 

13 plan years. The Secretary of the Treasury may pre14 scribe simplified assumptions which may be used in 

15 applying the amendments made by this section to 

16 such prior plan years. 

17 SEC. 202. REPLACEMENT OF 30-YEAR TREASURY RATE FOR 

18 CALCULATING LUMP-SUM DISTRIBUTIONS. 

19 (a) AMENDMENTS OF INTERNAL REVENUE CODE.—

20 Section 417(e)(3)(A) of the Internal Revenue Code of 

21 1986 (relating to determination of present value) is 

22 amended— 

23 (1) by striking ‘‘and the applicable interest 

24 rate.’’ in clause (i) and inserting ‘‘and by using— 
100

•S 219 IS

1 ‘‘(I) the phase-in yield curve 

2 method in the case of plan years be3 ginning in 2007, 2008, 2009, or 

4 2010, and 

5 ‘‘(II) the yield curve method for 

6 years beginning after 2010.’’, and 

7 (2) by striking subclause (II) of clause (ii) and 

8 inserting: 

9 ‘‘(II) YIELD CURVE METHODS.—

10 The terms ‘yield curve method’ and 

11 ‘phase-in yield curve method’ have the 

12 meanings given such terms by para13 graphs (2) and (3) of section 412(o), 

14 respectively, except that each such 

15 paragraph shall be applied by sub16 stituting ‘present value’ for ‘current 

17 liability’ and in applying paragraph 

18 (3)(A)(ii) of section 412(o), the an19 nual rate of interest on 30-year 

20 Treasury securities shall be sub21 stituted for the interest rate under 

22 section 412(o)(1). A plan may, in lieu 

23 of the yield curve method, use a sim24 plified method under section 
101

•S 219 IS

1 412(o)(4) for purposes of applying 

2 such paragraphs.’’ 

3 (b) AMENDMENTS OF ERISA.—Section 205(g)(3)(A) 

4 of the Employee Retirement Income Security Act of 1974 

5 (29 U.S.C. 1055(g)(3)) is amended— 

6 (1) by striking ‘‘and the applicable interest 

7 rate.’’ in clause (i) and inserting ‘‘and by using— 

8 ‘‘(I) the phase-in yield curve 

9 method in the case of plan years be10 ginning in 2007, 2008, 2009, or 

11 2010, and 

12 ‘‘(II) the yield curve method for 

13 years beginning after 2010.’’, and 

14 (2) by striking subclause (II) of clause (ii) and 

15 inserting: 

16 ‘‘(II) YIELD CURVE METHODS.—

17 The terms ‘yield curve method’ and 

18 ‘phase-in yield curve method’ have the 

19 meanings given such terms by para20 graphs (2) and (3) of section 302(h), 

21 respectively, except that each such 

22 paragraph shall be applied by sub23 stituting ‘present value’ for ‘current 

24 liability’ and in applying paragraph 

25 (3)(A)(ii) of section 302(h), the an-
102

•S 219 IS

1 nual rate of interest on 30-year 

2 Treasury securities shall be sub3 stituted for the interest rate under 

4 section 302(h)(1). A plan may, in lieu 

5 of the yield curve method, use a sim6 plified method under section 

7 302(h)(4) for purposes of applying 

8 such paragraphs.’’ 

9 (c) EFFECTIVE DATES.— 

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

11 this section shall apply to plan years beginning after 

12 December 31, 2006. 

13 (2) SPECIAL RULE FOR CERTAIN OPTIONAL

14 BENEFITS.—If— 

15 (A) for the last plan year of a plan begin16 ning in 2003, the plan provides that the appli17 cable interest rate under section 417(e)(3) of 

18 the Internal Revenue Code of 1986 and section 

19 205(g)(3) of Employee Retirement Income Se20 curity Act of 1974 shall be used for purposes 

21 of determining the amount of a benefit (other 

22 than the accrued benefit) to which such sections 

23 417(e)(3) and 205(g)(3) do not apply, and 

24 (B) such plan is amended to provide that 

25 a rate other than the applicable interest rate 
103

•S 219 IS

1 shall be used for such purposes and the first 

2 plan year for which such amendment is effective 

3 begins no later than January 1, 2007, 

4 such plan shall not fail to meet the requirements of 

5 section 411(d)(6) of the Internal Revenue Code of 

6 1986 and section 204(g) of Employee Retirement 

7 Income Security Act of 1974 by reason of such 

8 amendment. 

9 SEC. 203. SECTION 415 LIMITATION ON DEFINED BENEFIT 

10 PLANS. 

11 (a) IN GENERAL.—Section 415(b)(2)(E)(ii) of the 

12 Internal Revenue Code of 1986 (relating to limitation on 

13 certain assumptions) is amended to read as follows: 

14 ‘‘(ii) For purposes of adjusting any 

15 benefit under subparagraph (B) for any 

16 form of benefit subject to section 

17 417(e)(3), ‘5.5 percent’ shall be sub18 stituted for ‘5 percent’ in clause (i).’’ 

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

20 this section shall apply to years beginning after December 

21 31, 2005. 
104

•S 219 IS

1 Subtitle B—Provisions Relating to 

2 Pension Plan Funding and De3 ductions 

4 SEC. 211. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS. 

5 (a) IN GENERAL.—Clause (i) of section 404(a)(1)(D) 

6 of the Internal Revenue Code of 1986 (relating to special 

7 rule in case of certain plans) is amended by striking ‘‘sec8 tion 412(l)’’ and inserting ‘‘section 412(l)(8)(A), except 

9 that section 412(l)(8)(A) shall be applied for purposes of 

10 this clause by substituting ‘130 percent of current liability’ 

11 for ‘the current liability’ in clause (i).’’ 

12 (b) CONFORMING AMENDMENT.—Section 404(a)(1) 

13 of the Internal Revenue Code of 1986 is amended by strik14 ing subparagraph (F). 

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

16 this section shall apply to years beginning after December 

17 31, 2005. 

18 SEC. 212. BENEFIT LIMITATIONS FOR CERTAIN FINAN19 CIALLY DISTRESSED PLANS. 

20 (a) INTERNAL REVENUE CODE OF 1986.—Section 

21 401(a) of the Internal Revenue Code of 1986 (relating to 

22 qualified pension, profit-sharing, and stock bonus plans), 

23 as amended by this Act, is amended by adding after para24 graph (35) the following new paragraph: 
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1 ‘‘(36) BENEFIT LIMITATIONS FOR CERTAIN FI2 NANCIALLY DISTRESSED PLANS.— 

3 ‘‘(A) IN GENERAL.—Notwithstanding any 

4 other provision of this part, if a defined benefit 

5 plan to which the requirements of section 412(l) 

6 apply is a financially distressed plan for any 

7 plan year, a trust forming part of the plan shall 

8 not be treated as a qualified trust under this 

9 section unless— 

10 ‘‘(i) no amendment to the plan takes 

11 effect during the plan year if such amend12 ment increases liabilities of the plan by 

13 reason of increases in benefits, any change 

14 in the accrual of benefits, or any change in 

15 the rate at which benefits become non16 forfeitable, 

17 ‘‘(ii) notwithstanding any other provi18 sion of the plan— 

19 ‘‘(I) the accrued benefit, any 

20 death or disability benefit, and any so21 cial security supplement described in 

22 the last sentence of section 411(a)(9) 

23 of each participant are frozen at the 

24 amount of such benefit or supplement 

25 as of the end of the preceding plan 
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1 year, determined without regard to 

2 any plan amendment adopted during 

3 the preceding plan year which in4 creased any such benefit or supple5 ment and determined after the appli6 cation of this subclause, and 

7 ‘‘(II) all other benefits provided 

8 under the plan are eliminated, 

9 but only to the extent the freezing or elimi10 nation of such benefits would have been 

11 permitted under section 411(d)(6) if they 

12 had been implemented by a plan amend13 ment adopted at the end of the preceding 

14 plan year, and 

15 ‘‘(iii) no payments described in para16 graph (32)(B) are made to any participant 

17 or beneficiary whose annuity starting date 

18 occurs during the plan year. 

19 Clause (iii) shall apply to any plan year begin20 ning after such plan year and before the 1st 

21 plan year following such plan year for which the 

22 plan is not a financially distressed plan. 

23 ‘‘(B) SPECIAL RULES IF FUNDING IN24 CREASES TO AT LEAST 50 PERCENT.—If a plan 

25 is a financially distressed plan for any plan year 
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1 but the funded current liability percentage as of 

2 the beginning of the preceding plan year is at 

3 least 50 percent— 

4 ‘‘(i) an amendment described in sub5 paragraph (A)(i) may take effect but only 

6 if the funded current liability percentage 

7 as of the end of the plan year is projected 

8 (taking into the account the effect of the 

9 amendment) to be at least 50 percent, and 

10 ‘‘(ii) the requirements of subpara11 graph (A)(ii) shall not apply with respect 

12 to the plan year or any preceding plan 

13 year. 

14 ‘‘(C) SPECIAL RULES.—For purposes of 

15 this paragraph— 

16 ‘‘(i) IMPERMISSIBLE AMENDMENTS.—

17 If a plan adopts an amendment in violation 

18 of subparagraph (A)(i) or (B)(i), the provi19 sions of the plan shall be applied without 

20 regard to the amendment. 

21 ‘‘(ii) COLLECTIVELY BARGAINED

22 PLANS.—In the case of a plan maintained 

23 pursuant to a collective bargaining agree24 ment between employee representatives 

25 and the employer and in effect before the 
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1 beginning of the first plan year of any con2 tinuous period of 1 or more plan years for 

3 which a plan is a financially distressed 

4 plan, this paragraph shall not be applied to 

5 benefits pursuant to, and individuals cov6 ered by, such agreement for plan years be7 ginning before the date on which such col8 lective bargaining agreement terminates 

9 (determined without regard to any exten10 sion thereof). 

11 ‘‘(D) FINANCIALLY DISTRESSED PLAN.—

12 For purposes of this paragraph— 

13 ‘‘(i) IN GENERAL.—A plan shall be 

14 treated as a financially distressed plan for 

15 any plan year if— 

16 ‘‘(I) the plan sponsor during any 

17 2 of the 5 plan years immediately pre18 ceding such plan year has an out19 standing debt instrument which is 

20 rated speculative grade or lower by 1 

21 or more nationally recognized statis22 tical rating organizations for cor23 porate bonds, and 

24 ‘‘(II) the funded current liability 

25 percentage of the plan as of the begin-
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1 ning of the plan year preceding such 

2 plan year is less than 50 percent. 

3 The Secretary shall prescribe rules for the 

4 application of subclause (I) in cases where 

5 outstanding debt instruments of the plan 

6 sponsor are not rated. 

7 ‘‘(ii) FINANCIAL STATUS MUST IM8 PROVE FOR AT LEAST 5 YEARS.— 

9 ‘‘(I) IN GENERAL.—Notwith10 standing clause (i), if a plan is treated 

11 under clause (i) as a financially dis12 tressed plan for 1 or more plan years, 

13 the plan shall continue to be treated 

14 as a financially distressed plan for 

15 subsequent plan years beginning be16 fore the first plan year after the close 

17 of the first period described in sub18 clause (II). 

19 ‘‘(II) 5-YEAR PERIOD.—A period 

20 described in this subparagraph is a 5-

21 consecutive-plan year period if during 

22 each of the 5 plan years in the period 

23 the plan sponsor did not have an out24 standing debt obligation described in 

25 clause (i)(I) or during each of such 5 
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1 plan years the plan was not described 

2 in clause (i)(II). 

3 ‘‘(E) FUNDED CURRENT LIABILITY PER4 CENTAGE.—For purposes of this paragraph, the 

5 term ‘funded current liability percentage’ has 

6 the meaning given such term by section 

7 412(l)(8)(B), except that the current liability 

8 used in computing such percentage shall be de9 termined by only taking into account vested 

10 benefits and by using the interest rate described 

11 in section 4006(a)(3)(E)(iii)(II) of the Em12 ployee Retirement Income Security Act of 1974 

13 and the fair market value of the plan assets.’’ 

14 (b) EMPLOYEE RETIREMENT INCOME SECURITY ACT

15 OF 1974.— 

16 (1) IN GENERAL.—Section 206 of the Employee 

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

18 1056) is amended by adding at the end the following 

19 new subsection: 

20 ‘‘(g) BENEFIT LIMITATIONS FOR CERTAIN FINAN21 CIALLY DISTRESSED PLANS.— 

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

23 provision of this part, if a defined benefit plan to 

24 which the requirements of section 302(d) apply is a 

25 financially distressed plan for any plan year— 
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1 ‘‘(A) no amendment to the plan shall take 

2 effect during the plan year if such amendment 

3 increases liabilities of the plan by reason of in4 creases in benefits, any change in the accrual of 

5 benefits, or any change in the rate at which 

6 benefits become nonforfeitable, 

7 ‘‘(B) notwithstanding any other provision 

8 of the plan— 

9 ‘‘(i) the accrued benefit, any death or 

10 disability benefit, and any social security 

11 supplement described in the last sentence 

12 of section 3(22) of each participant shall 

13 be frozen at the amount of such benefit or 

14 supplement as of the end of the preceding 

15 plan year, determined without regard to 

16 any plan amendment adopted during the 

17 preceding plan year which increased any 

18 such benefit or supplement and determined 

19 after the application of this clause, and 

20 ‘‘(ii) all other benefits provided under 

21 the plan shall be eliminated, 

22 but only to the extent the freezing or elimi23 nation of such benefits would have been per24 mitted under section 204(g) if they had been 
112

•S 219 IS

1 implemented by a plan amendment adopted at 

2 the end of the preceding plan year, and 

3 ‘‘(C) the plan may not make any payments 

4 described in section 206(e)(2) to any partici5 pant or beneficiary whose annuity starting date 

6 occurs during the plan year. 

7 Subparagraph (C) shall apply to any plan year be8 ginning after such plan year and before the 1st plan 

9 year following such plan year for which the plan is 

10 not a financially distressed plan. 

11 ‘‘(2) SPECIAL RULES IF FUNDING INCREASES

12 TO AT LEAST 50 PERCENT.—If a plan is a financially 

13 distressed plan for any plan year but the funded 

14 current liability percentage as of the beginning of 

15 the preceding plan year is at least 50 percent— 

16 ‘‘(A) an amendment described in para17 graph (1)(A) may take effect but only if the 

18 funded current liability percentage as of the end 

19 of the plan year is projected (taking into the ac20 count the effect of the amendment) to be at 

21 least 50 percent, and 

22 ‘‘(B) the requirements of paragraph (1)(B) 

23 shall not apply with respect to the plan year or 

24 any preceding plan year. 
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1 ‘‘(3) SPECIAL RULES.—For purposes of this 

2 subsection— 

3 ‘‘(A) IMPERMISSIBLE AMENDMENTS.—If a 

4 plan adopts an amendment in violation of para5 graph (1)(A) or (2)(A), the provisions of the 

6 plan shall be applied without regard to the 

7 amendment. 

8 ‘‘(B) COLLECTIVELY BARGAINED PLANS.—

9 In the case of a plan maintained pursuant to a 

10 collective bargaining agreement between em11 ployee representatives and the employer and in 

12 effect before the beginning of the first plan year 

13 of any continuous period of 1 or more plan 

14 years for which a plan is a financially distressed 

15 plan, this paragraph shall not be applied to 

16 benefits pursuant to, and individuals covered 

17 by, such agreement for plan years beginning be18 fore the date on which such collective bar19 gaining agreement terminates (determined with20 out regard to any extension thereof). 

21 ‘‘(4) NOTICE REQUIREMENTS.— 

22 ‘‘(A) IN GENERAL.—The plan adminis23 trator of a plan which is a financially distressed 

24 plan for any year shall, at least 45 days before 

25 the beginning of the plan year, notify each plan 
114

•S 219 IS

1 participant or beneficiary, each labor organiza2 tion representing such participants or bene3 ficiaries, and the Pension Benefit Guaranty 

4 Corporation that— 

5 ‘‘(i) the plan is treated as a financially 

6 distressed plan for purposes of this sub7 section and the reasons why it is so treat8 ed, and 

9 ‘‘(ii) the restrictions applicable to the 

10 plan under this subsection for the plan 

11 year. 

12 The Secretary of the Treasury may provide for 

13 the coordination of the notice under this sub14 section with the notice under section 204(h). 

15 ‘‘(B) FORM AND MANNER.—Any notice 

16 under subparagraph (A)— 

17 ‘‘(i) shall be provided in a form and 

18 manner prescribed by the Secretary of the 

19 Treasury, 

20 ‘‘(ii) shall be written in a manner so 

21 as to be understood by the average plan 

22 participant, and 

23 ‘‘(iii) may be provided in written, elec24 tronic, or other appropriate form to the ex25 tent such form is reasonably accessible to 
115

•S 219 IS

1 persons to whom the notice is required to 

2 be provided. 

3 ‘‘(5) FINANCIALLY DISTRESSED PLAN.—For 

4 purposes of this subsection— 

5 ‘‘(A) IN GENERAL.—A plan shall be treat6 ed as a financially distressed plan for any plan 

7 year if— 

8 ‘‘(i) the plan sponsor during any 2 of 

9 the 5 plan years immediately preceding 

10 such plan year has an outstanding debt in11 strument which is rated speculative grade 

12 or lower by 1 or more nationally recognized 

13 statistical rating organizations for cor14 porate bonds, and 

15 ‘‘(ii) the funded current liability per16 centage of the plan as of the beginning of 

17 the plan year preceding such plan year is 

18 less than 50 percent. 

19 The Secretary of the Treasury shall prescribe 

20 rules for the application of clause (i) in cases 

21 where outstanding debt instruments of the plan 

22 sponsor are not rated. 

23 ‘‘(B) FINANCIAL STATUS MUST IMPROVE

24 FOR AT LEAST 5 YEARS.— 
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1 ‘‘(i) IN GENERAL.—Notwithstanding 

2 subparagraph (A), if a plan is treated 

3 under subparagraph (A) as a financially 

4 distressed plan for 1 or more plan years, 

5 the plan shall continue to be treated as a 

6 financially distressed plan for subsequent 

7 plan years beginning before the first plan 

8 year after the close of the first period de9 scribed in clause (ii). 

10 ‘‘(ii) 5-YEAR PERIOD.—A period de11 scribed in this clause is any 5-consecutive12 plan year period if during each of the 5 

13 plan years in the period the plan sponsor 

14 did not have an outstanding debt instru15 ment described in subparagraph (A)(i) or 

16 during each of such 5 plan years the plan 

17 was not described in subparagraph (A)(ii). 

18 ‘‘(6) FUNDED CURRENT LIABILITY PERCENT19 AGE.—For purposes of this subsection the term 

20 ‘funded current liability percentage’ has the meaning 

21 given such term by section 302(d)(8)(B), except that 

22 the current liability used in computing such percent23 age shall be determined by only taking into account 

24 vested benefits and by using the interest rate de-
117

•S 219 IS

1 scribed in section 4006(a)(3)(E)(iii)(II) and the fair 

2 market value of the plan assets.’’ 

3 (2) ENFORCEMENT.—Section 502(c)(3) of such 

4 Act (29 U.S.C. 1132(c)(3)) is amended by inserting 

5 ‘‘206(g)(4) or’’ before ‘‘302(d)(12)(E)’’. 

6 (c) EFFECTIVE DATES.— 

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

8 this section shall apply to plan years beginning after 

9 December 31, 2006. 

10 (2) RULES.—The Secretary of the Treasury 

11 shall, not later than December 31, 2005, publish 

12 such rules as are necessary to carry out the amend13 ments made by this section. 

14 (3) COLLECTIVE BARGAINING AGREEMENTS.—

15 In the case of a plan maintained pursuant to 1 or 

16 more collective bargaining agreements between em17 ployee representatives and 1 or more employers rati18 fied by the date of the enactment of this Act, the 

19 amendments made by this section shall not apply to 

20 employees covered by any such agreement for plan 

21 years beginning before the later of— 

22 (A) the date on which the last of such col23 lective bargaining agreements terminates (de24 termined without regard to any extension there25 of on or after such date of enactment); or 
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•S 219 IS

1 (B) January 1, 2007. 

2 SEC. 213. UPDATING DEDUCTION RULES FOR COMBINA3 TION OF PLANS. 

4 (a) IN GENERAL.—Subparagraph (C) of section 

5 404(a)(7) of the Internal Revenue Code of 1986 (relating 

6 to limitation on deductions where combination of defined 

7 contribution plan and defined benefit plan) is amended by 

8 adding after clause (ii) the following new clause: 

9 ‘‘(iii) LIMITATION.—In the case of 

10 employer contributions to 1 or more de11 fined contribution plans, this paragraph 

12 shall only apply to the extent that such 

13 contributions exceed 6 percent of the com14 pensation otherwise paid or accrued during 

15 the taxable year to the beneficiaries under 

16 such plans. For purposes of this clause, 

17 amounts carried over from preceding tax18 able years under subparagraph (B) shall 

19 be treated as employer contributions to 1 

20 or more defined contributions to the extent 

21 attributable to employer contributions to 

22 such plans in such preceding taxable 

23 years.’’ 
119

•S 219 IS

1 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

2 of section 4972(c)(6) of such Code (relating to nondeduct3 ible contributions) is amended to read as follows: 

4 ‘‘(A) so much of the contributions to 1 or 

5 more defined contribution plans which are not 

6 deductible when contributed solely because of 

7 section 404(a)(7) as does not exceed the 

8 amount of contributions described in section 

9 401(m)(4)(A), or’’. 

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

11 this section shall apply to contributions for taxable years 

12 beginning after December 31, 2004. 

13 Subtitle C—Provisions Relating to 

14 the Pension Benefit Guaranty 

15 Corporation 

16 SEC. 221. PBGC PREMIUMS FOR NEW PLANS OF SMALL EM17 PLOYERS. 

18 (a) IN GENERAL.—Subparagraph (A) of section 

19 4006(a)(3) of the Employee Retirement Income Security 

20 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended— 

21 (1) in clause (i), by inserting ‘‘other than a new 

22 single-employer plan (as defined in subparagraph 

23 (F)) maintained by a small employer (as so de24 fined),’’ after ‘‘single-employer plan,’’, 
120

•S 219 IS

1 (2) in clause (iii), by striking the period at the 

2 end and inserting ‘‘, and’’, and 

3 (3) by adding at the end the following new 

4 clause: 

5 ‘‘(iv) in the case of a new single-employer plan 

6 (as defined in subparagraph (F)) maintained by a 

7 small employer (as so defined) for the plan year, $5 

8 for each individual who is a participant in such plan 

9 during the plan year.’’ 

10 (b) DEFINITION OF NEW SINGLE-EMPLOYER

11 PLAN.—Section 4006(a)(3) of the Employee Retirement 

12 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is 

13 amended by adding at the end the following new subpara14 graph: 

15 ‘‘(F)(i) For purposes of this paragraph, a single-em16 ployer plan maintained by a contributing sponsor shall be 

17 treated as a new single-employer plan for each of its first 

18 5 plan years if, during the 36-month period ending on the 

19 date of the adoption of such plan, the sponsor or any 

20 member of such sponsor’s controlled group (or any prede21 cessor of either) did not establish or maintain a plan to 

22 which this title applies with respect to which benefits were 

23 accrued for substantially the same employees as are in the 

24 new single-employer plan. 
121

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1 ‘‘(ii)(I) For purposes of this paragraph, the term 

2 ‘small employer’ means an employer which on the first day 

3 of any plan year has, in aggregation with all members of 

4 the controlled group of such employer, 100 or fewer em5 ployees. 

6 ‘‘(II) In the case of a plan maintained by two or more 

7 contributing sponsors that are not part of the same con8 trolled group, the employees of all contributing sponsors 

9 and controlled groups of such sponsors shall be aggregated 

10 for purposes of determining whether any contributing 

11 sponsor is a small employer.’’ 

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

13 this section shall apply to plans first effective after Decem14 ber 31, 2005. 

15 SEC. 222. ADDITIONAL PBGC PREMIUM FOR NEW AND 

16 SMALL PLANS. 

17 (a) NEW PLANS.—Subparagraph (E) of section 

18 4006(a)(3) of the Employee Retirement Income Security 

19 Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by 

20 adding at the end the following new clause: 

21 ‘‘(v) In the case of a new defined benefit plan, the 

22 amount determined under clause (ii) for any plan year 

23 shall be an amount equal to the product of the amount 

24 determined under clause (ii) and the applicable percent-
122

•S 219 IS

1 age. For purposes of this clause, the term ‘applicable per2 centage’ means— 

3 ‘‘(I) 0 percent, for the first plan year. 

4 ‘‘(II) 20 percent, for the second plan year. 

5 ‘‘(III) 40 percent, for the third plan year. 

6 ‘‘(IV) 60 percent, for the fourth plan year. 

7 ‘‘(V) 80 percent, for the fifth plan year. 

8 For purposes of this clause, a defined benefit plan (as de9 fined in section 3(35)) maintained by a contributing spon10 sor shall be treated as a new defined benefit plan for each 

11 of its first 5 plan years if, during the 36-month period 

12 ending on the date of the adoption of the plan, the sponsor 

13 and each member of any controlled group including the 

14 sponsor (or any predecessor of either) did not establish 

15 or maintain a plan to which this title applies with respect 

16 to which benefits were accrued for substantially the same 

17 employees as are in the new plan.’’ 

18 (b) SMALL PLANS.—Paragraph (3) of section 

19 4006(a) of the Employee Retirement Income Security Act 

20 of 1974 (29 U.S.C. 1306(a)), as amended by section 

21 221(b), is amended— 

22 (1) by striking ‘‘The’’ in subparagraph (E)(i) 

23 and inserting ‘‘Except as provided in subparagraph 

24 (G), the’’, and 
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•S 219 IS

1 (2) by inserting after subparagraph (F) the fol2 lowing new subparagraph: 

3 ‘‘(G)(i) In the case of an employer who has 25 or 

4 fewer employees on the first day of the plan year, the addi5 tional premium determined under subparagraph (E) for 

6 each participant shall not exceed $5 multiplied by the 

7 number of participants in the plan as of the close of the 

8 preceding plan year. 

9 ‘‘(ii) For purposes of clause (i), whether an employer 

10 has 25 or fewer employees on the first day of the plan 

11 year is determined by taking into consideration all of the 

12 employees of all members of the contributing sponsor’s 

13 controlled group. In the case of a plan maintained by two 

14 or more contributing sponsors, the employees of all con15 tributing sponsors and their controlled groups shall be ag16 gregated for purposes of determining whether the 25-or17 fewer-employees limitation has been satisfied.’’ 

18 (c) EFFECTIVE DATES.— 

19 (1) SUBSECTION (a).—The amendments made 

20 by subsection (a) shall apply to plans first effective 

21 after December 31, 2005. 

22 (2) SUBSECTION (b).—The amendments made 

23 by subsection (b) shall apply to plan years beginning 

24 after December 31, 2005. 
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1 SEC. 223. AUTHORIZATION FOR PBGC TO PAY INTEREST ON 

2 PREMIUM OVERPAYMENT REFUNDS. 

3 (a) IN GENERAL.—Section 4007(b) of the Employ4 ment Retirement Income Security Act of 1974 (29 U.S.C. 

5 1307(b)) is amended— 

6 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, 

7 and 

8 (2) by inserting at the end the following new 

9 paragraph: 

10 ‘‘(2) The corporation is authorized to pay, subject to 

11 regulations prescribed by the corporation, interest on the 

12 amount of any overpayment of premium refunded to a des13 ignated payor. Interest under this paragraph shall be cal14 culated at the same rate and in the same manner as inter15 est is calculated for underpayments under paragraph (1).’’ 

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

17 subsection (a) shall apply to interest accruing for periods 

18 beginning not earlier than the date of the enactment of 

19 this Act. 

20 SEC. 224. SUBSTANTIAL OWNER BENEFITS IN TERMINATED 

21 PLANS. 

22 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

23 Section 4022(b)(5) of the Employee Retirement Income 

24 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended 

25 to read as follows: 
125

•S 219 IS

1 ‘‘(5)(A) For purposes of this paragraph, the term 

2 ‘majority owner’ means an individual who, at any time 

3 during the 60-month period ending on the date the deter4 mination is being made— 

5 ‘‘(i) owns the entire interest in an unincor6 porated trade or business, 

7 ‘‘(ii) in the case of a partnership, is a partner 

8 who owns, directly or indirectly, 50 percent or more 

9 of either the capital interest or the profits interest 

10 in such partnership, or 

11 ‘‘(iii) in the case of a corporation, owns, directly 

12 or indirectly, 50 percent or more in value of either 

13 the voting stock of that corporation or all the stock 

14 of that corporation. 

15 For purposes of clause (iii), the constructive ownership 

16 rules of section 1563(e) of the Internal Revenue Code of 

17 1986 shall apply (determined without regard to section 

18 1563(e)(3)(C)). 

19 ‘‘(B) In the case of a participant who is a majority 

20 owner, the amount of benefits guaranteed under this sec21 tion shall equal the product of— 

22 ‘‘(i) a fraction (not to exceed 1) the numerator 

23 of which is the number of years from the later of the 

24 effective date or the adoption date of the plan to the 
126

•S 219 IS

1 termination date, and the denominator of which is 

2 10, and 

3 ‘‘(ii) the amount of benefits that would be guar4 anteed under this section if the participant were not 

5 a majority owner.’’ 

6 (b) MODIFICATION OF ALLOCATION OF ASSETS.— 

7 (1) Section 4044(a)(4)(B) of the Employee Re8 tirement Income Security Act of 1974 (29 U.S.C. 

9 1344(a)(4)(B)) is amended by striking ‘‘section 

10 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’. 

11 (2) Section 4044(b) of such Act (29 U.S.C. 

12 1344(b)) is amended— 

13 (A) by striking ‘‘(5)’’ in paragraph (2) and 

14 inserting ‘‘(4), (5),’’, and 

15 (B) by redesignating paragraphs (3) 

16 through (6) as paragraphs (4) through (7), re17 spectively, and by inserting after paragraph (2) 

18 the following new paragraph: 

19 ‘‘(3) If assets available for allocation under 

20 paragraph (4) of subsection (a) are insufficient to 

21 satisfy in full the benefits of all individuals who are 

22 described in that paragraph, the assets shall be allo23 cated first to benefits described in subparagraph (A) 

24 of that paragraph. Any remaining assets shall then 

25 be allocated to benefits described in subparagraph 
127

•S 219 IS

1 (B) of that paragraph. If assets allocated to such 

2 subparagraph (B) are insufficient to satisfy in full 

3 the benefits described in that subparagraph, the as4 sets shall be allocated pro rata among individuals on 

5 the basis of the present value (as of the termination 

6 date) of their respective benefits described in that 

7 subparagraph.’’ 

8 (c) CONFORMING AMENDMENTS.— 

9 (1) Section 4021 of the Employee Retirement 

10 Income Security Act of 1974 (29 U.S.C. 1321) is 

11 amended— 

12 (A) in subsection (b)(9), by striking ‘‘as 

13 defined in section 4022(b)(6)’’, and 

14 (B) by adding at the end the following new 

15 subsection: 

16 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub17 stantial owner’ means an individual who, at any time dur18 ing the 60-month period ending on the date the determina19 tion is being made— 

20 ‘‘(1) owns the entire interest in an unincor21 porated trade or business, 

22 ‘‘(2) in the case of a partnership, is a partner 

23 who owns, directly or indirectly, more than 10 per24 cent of either the capital interest or the profits inter25 est in such partnership, or 
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1 ‘‘(3) in the case of a corporation, owns, directly 

2 or indirectly, more than 10 percent in value of either 

3 the voting stock of that corporation or all the stock 

4 of that corporation. 

5 For purposes of paragraph (3), the constructive ownership 

6 rules of section 1563(e) of the Internal Revenue Code of 

7 1986 shall apply (determined without regard to section 

8 1563(e)(3)(C)).’’ 

9 (2) Section 4043(c)(7) of such Act (29 U.S.C. 

10 1343(c)(7)) is amended by striking ‘‘section 

11 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’. 

12 (d) EFFECTIVE DATES.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (2), the amendments made by this section 

15 shall apply to plan terminations— 

16 (A) under section 4041(c) of the Employee 

17 Retirement Income Security Act of 1974 (29 

18 U.S.C. 1341(c)) with respect to which notices 

19 of intent to terminate are provided under sec20 tion 4041(a)(2) of such Act (29 U.S.C. 

21 1341(a)(2)) after December 31, 2005, and 

22 (B) under section 4042 of such Act (29 

23 U.S.C. 1342) with respect to which proceedings 

24 are instituted by the corporation after such 

25 date. 
129

•S 219 IS

1 (2) CONFORMING AMENDMENTS.—The amend2 ments made by subsection (c) shall take effect on 

3 January 1, 2006. 

4 SEC. 225. ACCELERATION OF COMPUTATION OF BENEFITS 

5 ATTRIBUTABLE TO RECOVERIES OF EM6 PLOYER LIABILITY. 

7 (a) MODIFICATION OF AVERAGE RECOVERY PER8 CENTAGE OF OUTSTANDING AMOUNT OF BENEFIT LI9 ABILITIES PAYABLE BY CORPORATION TO PARTICIPANTS

10 AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii) of the 

11 Employee Retirement Income Security Act of 1974 (29 

12 U.S.C. 1322(c)(3)(B)(ii)) is amended to read as follows: 

13 ‘‘(ii) notices of intent to terminate 

14 were provided (or in the case of a termi15 nation by the corporation, a notice of de16 termination under section 4042 was 

17 issued) during the 5-Federal fiscal year pe18 riod ending with the third fiscal year pre19 ceding the fiscal year in which occurs the 

20 date of the notice of intent to terminate 

21 (or the notice of determination under sec22 tion 4042) with respect to the plan termi23 nation for which the recovery ratio is being 

24 determined.’’ 
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1 (b) VALUATION OF SECTION 4062(c) LIABILITY FOR

2 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

3 PARTICIPANTS AND BENEFICIARIES.—Section 4044 of the 

4 Employee Retirement Income Security Act of 1974 (29 

5 U.S.C. 1362) is amended by adding at the end the fol6 lowing new subsection: 

7 ‘‘(e) VALUATION OF SECTION 4062(c) LIABILITY FOR

8 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

9 PARTICIPANTS AND BENEFICIARIES.— 

10 ‘‘(1) IN GENERAL.—In the case of a terminated 

11 plan, the value of the recovery of liability under sec12 tion 4062(c) allocable as a plan asset under this sec13 tion for purposes of determining the amount of ben14 efits payable by the corporation shall be determined 

15 by multiplying— 

16 ‘‘(A) the amount of liability under section 

17 4062(c) as of the termination date of the plan, 

18 by 

19 ‘‘(B) the applicable section 4062(c) recov20 ery ratio. 

21 ‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For 

22 purposes of this subsection— 

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

24 subparagraph (C), the term ‘section 4062(c) re25 covery ratio’ means the average, determined 
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1 with respect to prior plan terminations de2 scribed in subparagraph (B), of the ratio 

3 which— 

4 ‘‘(i) the value of the recovery under 

5 section 4062(c) determined by the corpora6 tion in connection with any such prior ter7 mination, bears to 

8 ‘‘(ii) the amount of liability under sec9 tion 4062(c) with respect to such plans as 

10 of the termination date in connection with 

11 any such prior termination. 

12 ‘‘(B) PRIOR TERMINATIONS.—A plan ter13 mination described in this subparagraph is a 

14 termination with respect to which— 

15 ‘‘(i) the value of recoveries under sec16 tion 4062(c) have been determined by the 

17 corporation, and 

18 ‘‘(ii) notices of intent to terminate 

19 were provided (or in the case of a termi20 nation by the corporation, a notice of de21 termination under section 4042 was 

22 issued) during the 5-Federal fiscal year pe23 riod ending with the third fiscal year pre24 ceding the fiscal year in which occurs the 

25 date of the notice of intent to terminate 
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1 (or the notice of determination under sec2 tion 4042) with respect to the plan termi3 nation for which the recovery ratio is being 

4 determined. 

5 ‘‘(C) EXCEPTION.—In the case of a termi6 nated plan with respect to which the out7 standing amount of benefit liabilities exceeds 

8 $20,000,000, the term ‘section 4062(c) recovery 

9 ratio’ means, with respect to the termination of 

10 such plan, the ratio of— 

11 ‘‘(i) the value of the recoveries on be12 half of the plan under section 4062(c), to 

13 ‘‘(ii) the amount of the liability owed 

14 under section 4062(c) as of the date of 

15 plan termination to the trustee appointed 

16 under section 4042 (b) or (c). 

17 ‘‘(3) SUBSECTION NOT TO APPLY.—This sub18 section shall not apply with respect to the deter19 mination of— 

20 ‘‘(A) whether the amount of outstanding 

21 benefit liabilities exceeds $20,000,000, or 

22 ‘‘(B) the amount of any liability under sec23 tion 4062 to the corporation or the trustee ap24 pointed under section 4042 (b) or (c). 
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1 ‘‘(4) DETERMINATIONS.—Determinations under 

2 this subsection shall be made by the corporation. 

3 Such determinations shall be binding unless shown 

4 by clear and convincing evidence to be unreason5 able.’’ 

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

7 this section shall apply for any termination for which no8 tices of intent to terminate are provided (or in the case 

9 of a termination by the corporation, a notice of determina10 tion under section 4042 is issued) on or after the date 

11 which is 30 days after the date of enactment of this sec12 tion. 

13 Subtitle D—Studies 

14 SEC. 231. JOINT STUDY ON REVITALIZING DEFINED BEN15 EFIT PLANS. 

16 (a) STUDY.—As soon as practicable after the date of 

17 the enactment of this Act, the Secretary of the Treasury, 

18 the Secretary of Labor, and the Executive Director of the 

19 Pension Benefit Guaranty Corporation shall jointly under20 take a study on ways to revitalize interest in defined ben21 efit plans among employers. In conducting such study, the 

22 Secretaries and the Executive Director shall consider— 

23 (1) ways to encourage the establishment of de24 fined benefit plans by small- and mid-sized employ25 ers, 
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1 (2) ways to encourage the continued mainte2 nance of defined benefit plans by larger employers, 

3 and 

4 (3) legislative proposals to accomplish the objec5 tives described in paragraphs (1) and (2). 

6 (b) REPORT.—Not later than 2 years after the date 

7 of the enactment of this Act, the Secretaries and the Exec8 utive Director shall report the results of the study, to9 gether with any recommendations for legislative changes, 

10 to the Committees on Ways and Means and Education and 

11 the Workforce of the House of Representatives and the 

12 Committees on Finance and Health, Education, Labor, 

13 and Pensions of the Senate. 

14 SEC. 232. STUDY ON FLOOR-OFFSET ESOPS. 

15 (a) STUDY.—As soon as practicable after the date of 

16 the enactment of this Act, the Secretary of the Treasury 

17 and the Pension Benefit Guaranty Corporation shall un18 dertake a study to determine the number of floor-offset 

19 employee stock ownership plans still in existence and the 

20 extent to which such plans pose a risk to plan participants 

21 or beneficiaries and to the Corporation. Such study shall 

22 consider legislative proposals to address such risks. 

23 (b) REPORT.—Not later than 1 year after the date 

24 of the enactment of this Act, the Secretary and the Cor25 poration shall report the results of the study, together 
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1 with any recommendations for legislative changes, to the 

2 Committees on Ways and Means and Education and the 

3 Workforce of the House of Representatives and the Com4 mittees on Finance and Health, Education, Labor, and 

5 Pensions of the Senate. 

6 TITLE III—IMPROVEMENTS IN 

7 PORTABILITY AND DISTRIBU8 TION RULES 

9 SEC. 301. CLARIFICATIONS REGARDING PURCHASE OF PER10 MISSIVE SERVICE CREDIT. 

11 (a) IN GENERAL.—Section 415(n) of the Internal 

12 Revenue Code of 1986 (relating to special rules for the 

13 purchase of permissive service credit) is amended— 

14 (1) by striking ‘‘an employee’’ in paragraph (1) 

15 and inserting ‘‘a participant’’, and 

16 (2) by adding at the end of paragraph (3)(A) 

17 the following new flush sentence: 

18 ‘‘Such term may include service credit for peri19 ods for which there is no performance of serv20 ice, and notwithstanding clause (ii), may in21 clude service credited in order to provide an in22 creased benefit for service credit which a partic23 ipant is receiving under the plan.’’ 
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1 (b) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE

2 TRANSFERS.—Section 415(n)(3) of such Code is amended 

3 by adding at the end the following new subparagraph: 

4 ‘‘(D) SPECIAL RULES FOR TRUSTEE-TO5 TRUSTEE TRANSFERS.—In the case of a trust6 ee-to-trustee transfer to which section 

7 403(b)(13)(A) or 457(e)(17)(A) applies (with8 out regard to whether the transfer is made be9 tween plans maintained by the same em10 ployer)— 

11 ‘‘(i) the limitations of subparagraph 

12 (B) shall not apply in determining whether 

13 the transfer is for the purchase of permis14 sive service credit, and 

15 ‘‘(ii) the distribution rules applicable 

16 under this title to the defined benefit gov17 ernmental plan to which any amounts are 

18 so transferred shall apply to such amounts 

19 and any benefits attributable to such 

20 amounts.’’ 

21 (c) NONQUALIFIED SERVICE.—Section 415(n)(3) of 

22 such Code is amended— 

23 (1) by striking ‘‘permissive service credit attrib24 utable to nonqualified service’’ each place it appears 
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1 in subparagraph (B) and inserting ‘‘nonqualified 

2 service credit’’, 

3 (2) by striking so much of subparagraph (C) as 

4 precedes clause (i) and inserting: 

5 ‘‘(C) NONQUALIFIED SERVICE CREDIT.—

6 For purposes of subparagraph (B), the term 

7 ‘nonqualified service credit’ means permissive 

8 service credit other than that allowed with re9 spect to—’’, and 

10 (3) by striking ‘‘elementary or secondary edu11 cation (through grade 12), as determined under 

12 State law’’ and inserting ‘‘elementary or secondary 

13 education (through grade 12), or a comparable level 

14 of education, as determined under the applicable law 

15 of the jurisdiction in which the service was per16 formed’’. 

17 (d) EFFECTIVE DATES.— 

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

19 subsections (a) and (c) shall take effect as if in20 cluded in the amendments made by section 1526 of 

21 the Taxpayer Relief Act of 1997. 

22 (2) SUBSECTION (b).—The amendments made 

23 by subsection (b) shall take effect as if included in 

24 the amendments made by section 647 of the Eco-
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•S 219 IS

1 nomic Growth and Tax Relief Reconciliation Act of 

2 2001. 

3 SEC. 302. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN 

4 ANNUITY CONTRACTS. 

5 (a) IN GENERAL.—Subparagraph (A) of section 

6 402(c)(2) (maximum amount which may be rolled over) 

7 is amended— 

8 (1) by striking ‘‘which is part of a plan which 

9 is a defined contribution plan and which agrees to 

10 separately account’’ and inserting ‘‘or to an annuity 

11 contract described in section 403(b) and such trust 

12 or contract provides for separate accounting’’; and 

13 (2) by inserting ‘‘(and earnings thereon)’’ after 

14 ‘‘so transferred’’. 

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

16 subsection (a) shall apply to taxable years beginning after 

17 December 31, 2005. 

18 SEC. 303. CLARIFICATION OF MINIMUM DISTRIBUTION 

19 RULES. 

20 The Secretary of the Treasury shall issue regulations 

21 under which a governmental plan (as defined in section 

22 414(d) of the Internal Revenue Code of 1986) shall, for 

23 all years to which section 401(a)(9) of such Code applies 

24 to such plan, be treated as having complied with such sec-
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1 tion 401(a)(9) if such plan complies with a reasonable 

2 good faith interpretation of such section 401(a)(9). 

3 SEC. 304. WAIVER OF 10 PERCENT EARLY WITHDRAWAL 

4 PENALTY TAX ON CERTAIN DISTRIBUTIONS 

5 OF PENSION PLANS FOR PUBLIC SAFETY EM6 PLOYEES. 

7 (a) IN GENERAL.—Section 72(t) of the Internal Rev8 enue Code of 1986 (relating to subsection not to apply 

9 to certain distributions) is amended by adding at the end 

10 the following new paragraph: 

11 ‘‘(10) DISTRIBUTIONS TO QUALIFIED PUBLIC

12 SAFETY EMPLOYEES IN GOVERNMENTAL PLANS.— 

13 ‘‘(A) IN GENERAL.—In the case of a dis14 tribution to a qualified public safety employee 

15 from a governmental plan (within the meaning 

16 of section 414(d)) which is a defined benefit 

17 plan, paragraph (2)(A)(v) shall be applied by 

18 substituting ‘age 50’ for ‘age 55’. 

19 ‘‘(B) QUALIFIED PUBLIC SAFETY EM20 PLOYEE.—For purposes of this paragraph, the 

21 term ‘qualified public safety employee’ means 

22 any employee of a State or political subdivision 

23 of a State who provides police protection, fire24 fighting services, or emergency medical services 
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1 for any area within the jurisdiction of such 

2 State or political subdivision.’’ 

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

4 this section shall apply to distributions after the date of 

5 the enactment of this Act. 

6 SEC. 305. ALLOW ROLLOVERS BY NONSPOUSE BENE7 FICIARIES OF CERTAIN RETIREMENT PLAN 

8 DISTRIBUTIONS. 

9 (a) IN GENERAL.— 

10 (1) QUALIFIED PLANS.—Section 402(c) of the 

11 Internal Revenue Code of 1986 (relating to rollovers 

12 from exempt trusts) is amended by adding at the 

13 end the following new paragraph: 

14 ‘‘(11) DISTRIBUTIONS TO INHERITED INDI15 VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE16 FICIARY.— 

17 ‘‘(A) IN GENERAL.—If, with respect to any 

18 portion of a distribution from an eligible retire19 ment plan of a deceased employee, a direct 

20 trustee-to-trustee transfer is made to an indi21 vidual retirement plan described in clause (i) or 

22 (ii) of paragraph (8)(B) established for the pur23 poses of receiving the distribution on behalf of 

24 an individual who is a designated beneficiary 

25 (as defined by section 401(a)(9)(E)) of the em-
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1 ployee and who is not the surviving spouse of 

2 the employee— 

3 ‘‘(i) the transfer shall be treated as an 

4 eligible rollover distribution for purposes of 

5 this subsection, 

6 ‘‘(ii) the individual retirement plan 

7 shall be treated as an inherited individual 

8 retirement account or individual retirement 

9 annuity (within the meaning of section 

10 408(d)(3)(C)) for purposes of this title, 

11 and 

12 ‘‘(iii) section 401(a)(9)(B) (other than 

13 clause (iv) thereof) shall apply to such 

14 plan. 

15 ‘‘(B) CERTAIN TRUSTS TREATED AS BENE16 FICIARIES.—For purposes of this paragraph, to 

17 the extent provided in rules prescribed by the 

18 Secretary, a trust maintained for the benefit of 

19 one or more designated beneficiaries shall be 

20 treated in the same manner as a designated 

21 beneficiary.’’ 

22 (2) SECTION 403(a) PLANS.—Subparagraph (B) 

23 of section 403(a)(4) of such Code (relating to roll24 over amounts) is amended by striking ‘‘and (9)’’ and 

25 inserting ‘‘, (9), and (11)’’. 
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1 (3) SECTION 403(b) PLANS.—Subparagraph (B) 

2 of section 403(b)(8) of such Code (relating to roll3 over amounts) is amended by striking ‘‘and (9)’’ and 

4 inserting ‘‘, (9), and (11)’’. 

5 (4) SECTION 457 PLANS.—Subparagraph (B) of 

6 section 457(e)(16) of such Code (relating to rollover 

7 amounts) is amended by striking ‘‘and (9)’’ and in8 serting ‘‘, (9), and (11)’’. 

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

10 this section shall apply to distributions after December 31, 

11 2005. 

12 SEC. 306. FASTER VESTING OF EMPLOYER NONELECTIVE 

13 CONTRIBUTIONS. 

14 (a) AMENDMENTS TO THE INTERNAL REVENUE

15 CODE OF 1986.— 

16 (1) IN GENERAL.—Paragraph (2) of section 

17 411(a) of the Internal Revenue Code of 1986 (relat18 ing to employer contributions) is amended to read as 

19 follows: 

20 ‘‘(2) EMPLOYER CONTRIBUTIONS.— 

21 ‘‘(A) DEFINED BENEFIT PLANS.— 

22 ‘‘(i) IN GENERAL.—In the case of a 

23 defined benefit plan, a plan satisfies the 

24 requirements of this paragraph if it satis25 fies the requirements of clause (ii) or (iii). 
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•S 219 IS

1 ‘‘(ii) 5-YEAR VESTING.—A plan satis2 fies the requirements of this clause if an 

3 employee who has completed at least 5 

4 years of service has a nonforfeitable right 

5 to 100 percent of the employee’s accrued 

6 benefit derived from employer contribu7 tions. 

8 ‘‘(iii) 3 TO 7 YEAR VESTING.—A plan 

9 satisfies the requirements of this clause if 

10 an employee has a nonforfeitable right to 

11 a percentage of the employee’s accrued 

12 benefit derived from employer contribu13 tions determined under the following table: 

The nonforfeitable 

‘‘Years of service: percentage is: 

3 ........................................................................................... 20

4 ........................................................................................... 40

5 ........................................................................................... 60

6 ........................................................................................... 80

7 or more ............................................................................. 100. 

14 ‘‘(B) DEFINED CONTRIBUTION PLANS.— 

15 ‘‘(i) IN GENERAL.—In the case of a 

16 defined contribution plan, a plan satisfies 

17 the requirements of this paragraph if it 

18 satisfies the requirements of clause (ii) or 

19 (iii). 

20 ‘‘(ii) 3-YEAR VESTING.—A plan satis21 fies the requirements of this clause if an 

22 employee who has completed at least 3 
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1 years of service has a nonforfeitable right 

2 to 100 percent of the employee’s accrued 

3 benefit derived from employer contribu4 tions. 

5 ‘‘(iii) 2 TO 6 YEAR VESTING.—A plan 

6 satisfies the requirements of this clause if 

7 an employee has a nonforfeitable right to 

8 a percentage of the employee’s accrued 

9 benefit derived from employer contribu10 tions determined under the following table: 

The nonforfeitable 

‘‘Years of service: percentage is: 

2 ........................................................................................... 20

3 ........................................................................................... 40

4 ........................................................................................... 60

5 ........................................................................................... 80

6 or more ............................................................................. 100.’’. 

11 (2) CONFORMING AMENDMENT.—Section 

12 411(a) of such Code (relating to general rule for 

13 minimum vesting standards) is amended by striking 

14 paragraph (12). 

15 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

16 INCOME SECURITY ACT OF 1974.— 

17 (1) IN GENERAL.—Paragraph (2) of section 

18 203(a) of the Employee Retirement Income Security 

19 Act of 1974 (29 U.S.C. 1053(a)(2)) is amended to 

20 read as follows: 
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•S 219 IS

1 ‘‘(2)(A)(i) In the case of a defined benefit plan, 

2 a plan satisfies the requirements of this paragraph 

3 if it satisfies the requirements of clause (ii) or (iii). 

4 ‘‘(ii) A plan satisfies the requirements of this 

5 clause if an employee who has completed at least 5 

6 years of service has a nonforfeitable right to 100 

7 percent of the employee’s accrued benefit derived 

8 from employer contributions. 

9 ‘‘(iii) A plan satisfies the requirements of this 

10 clause if an employee has a nonforfeitable right to 

11 a percentage of the employee’s accrued benefit de12 rived from employer contributions determined under 

13 the following table: 

The nonforfeitable 

‘‘Years of service: percentage is: 

3 ........................................................................................... 20

4 ........................................................................................... 40

5 ........................................................................................... 60

6 ........................................................................................... 80

7 or more ............................................................................. 100. 

14 ‘‘(B)(i) In the case of an individual account 

15 plan, a plan satisfies the requirements of this para16 graph if it satisfies the requirements of clause (ii) or 

17 (iii). 

18 ‘‘(ii) A plan satisfies the requirements of this 

19 clause if an employee who has completed at least 3 

20 years of service has a nonforfeitable right to 100 

21 percent of the employee’s accrued benefit derived 

22 from employer contributions. 
146 

•S 219 IS

1 ‘‘(iii) A plan satisfies the requirements of this 

2 clause if an employee has a nonforfeitable right to 

3 a percentage of the employee’s accrued benefit de4 rived from employer contributions determined under 

5 the following table: 

The nonforfeitable 

‘‘Years of service: percentage is: 

2 ........................................................................................... 20

3 ........................................................................................... 40

4 ........................................................................................... 60

5 ........................................................................................... 80

6 or more ............................................................................. 100.’’. 

6 (2) CONFORMING AMENDMENT.—Section 

7 203(a) of such Act is amended by striking para8 graph (4). 

9 (c) EFFECTIVE DATES.— 

10 (1) IN GENERAL.—Except as provided in para11 graph (2), the amendments made by this section 

12 shall apply to contributions for plan years beginning 

13 after December 31, 2005. 

14 (2) COLLECTIVE BARGAINING AGREEMENTS.— 

15 In the case of a plan maintained pursuant to one or 

16 more collective bargaining agreements between em17 ployee representatives and one or more employers 

18 ratified before the date of the enactment of this Act, 

19 the amendments made by this section shall not apply 

20 to contributions on behalf of employees covered by 

21 any such agreement for plan years beginning before 

22 the earlier of— 
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•S 219 IS

1 (A) the later of— 

2 (i) the date on which the last of such 

3 collective bargaining agreements termi4 nates (determined without regard to any 

5 extension thereof on or after such date of 

6 the enactment); or 

7 (ii) January 1, 2006; or 

8 (B) January 1, 2008. 

9 (3) SERVICE REQUIRED.—With respect to any 

10 plan, the amendments made by this section shall not 

11 apply to any employee before the date that such em12 ployee has 1 hour of service under such plan in any 

13 plan year to which the amendments made by this 

14 section apply. 

15 SEC. 307. ALLOW DIRECT ROLLOVERS FROM RETIREMENT 

16 PLANS TO ROTH IRAS. 

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

18 the Internal Revenue Code of 1986 (defining qualified roll19 over contribution) is amended to read as follows: 

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

21 purposes of this section, the term ‘qualified rollover con22 tribution’ means a rollover contribution— 

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

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

25 if— 
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1 ‘‘(A) in the case of an individual retire2 ment plan, such rollover contribution meets the 

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

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

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

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

7 contribution meets the requirements of section 

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

9 For purposes of section 408(d)(3)(B), there shall be dis10 regarded any qualified rollover contribution from an indi11 vidual retirement plan (other than a Roth IRA) to a Roth 

12 IRA.’’ 

13 (b) CONFORMING AMENDMENTS.— 

14 (1) Section 408A(c)(3)(B) of such Code is 

15 amended— 

16 (A) in the text by striking ‘‘individual re17 tirement plan’’ and inserting ‘‘an eligible retire18 ment plan (as defined by section 

19 402(c)(8)(B))’’, and 

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

21 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

22 (2) Section 408A(d)(3) of such Code is amend23 ed— 
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1 (A) in subparagraph (A), by striking ‘‘sec2 tion 408(d)(3)’’ inserting ‘‘sections 402(c), 

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

4 (B) in subparagraph (B), by striking ‘‘in5 dividual retirement plan’’ and inserting ‘‘eligible 

6 retirement plan (as defined by section 

7 402(c)(8)(B))’’, 

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

9 6047’’ after ‘‘408(i)’’, 

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

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

12 6047(d)(1), or all of the foregoing persons’’, 

13 and 

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

15 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’. 

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

17 this section shall apply to distributions after December 31, 

18 2005. 

19 SEC. 308. ELIMINATION OF HIGHER PENALTY ON CERTAIN 

20 SIMPLE PLAN DISTRIBUTIONS. 

21 (a) IN GENERAL.—Subsection (t) of section 72 of the 

22 Internal Revenue Code of 1986 (relating to 10-percent ad23 ditional tax on early distributions from qualified retire24 ment plans), as amended by section 304, is amended by 

25 striking paragraph (6) and redesignating paragraphs (7), 
150

•S 219 IS

1 (8), (9), and (10) as paragraphs (6), (7), (8), and (9), 

2 respectively. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 72(t)(2)(E) of such Code is amend5 ed by striking ‘‘paragraph (7)’’ and inserting ‘‘para6 graph (6)’’. 

7 (2) Section 72(t)(2)(F) of such Code is amend8 ed by striking ‘‘paragraph (8)’’ and inserting ‘‘para9 graph (7)’’. 

10 (3) Section 408(d)(3)(G) of such Code is 

11 amended by striking ‘‘applies’’ and inserting ‘‘ap12 plied on the day before the date of the enactment of 

13 the National Employee Savings and Trust Equity 

14 Guarantee Act of 2005)’’. 

15 (4) Section 457(a)(2) of such Code is amended 

16 by striking ‘‘section 72(t)(9)’’ and inserting ‘‘section 

17 72(t)(8)’’. 

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

19 this section shall apply to years beginning after December 

20 31, 2005. 

21 SEC. 309. SIMPLE PLAN PORTABILITY. 

22 (a) REPEAL OF LIMITATION.—Paragraph (3) of sec23 tion 408(d) of the Internal Revenue Code of 1986 (relat24 ing to rollover contributions), as amended by this Act, is 

25 amended by striking subparagraph (G) and redesignating 
151

•S 219 IS

1 subparagraphs (H) and (I) as subparagraphs (G) and (H), 

2 respectively. 

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

4 this section shall apply to years beginning after December 

5 31, 2005. 

6 SEC. 310. ELIGIBILITY FOR PARTICIPATION IN RETIRE7 MENT PLANS. 

8 An individual shall not be precluded from partici9 pating in an eligible deferred compensation plan by reason 

10 of having received a distribution under section 457(e)(9) 

11 of the Internal Revenue Code of 1986, as in effect prior 

12 to the enactment of the Small Business Job Protection 

13 Act of 1996. 

14 SEC. 311. TRANSFERS TO THE PBGC. 

15 (a) MANDATORY DISTRIBUTIONS TO PBGC.—Clause 

16 (i) of section 401(a)(31)(B) of the Internal Revenue Code 

17 of 1986 (relating to general rule for certain mandatory 

18 distributions) is amended by inserting ‘‘to the Pension 

19 Benefit Guaranty Corporation in accordance with section 

20 4050(e) of the Employee Retirement Income Security Act 

21 of 1974 or’’ after ‘‘such transfer’’. 

22 (b) TAX TREATMENT OF DISTRIBUTIONS.—Subpara23 graph (B) of section 401(a)(31) of such Code is amended 

24 by adding at the end the following new clause: 
152

•S 219 IS

1 ‘‘(iii) INCOME TAX TREATMENT OF

2 TRANSFERS TO PBGC.—For purposes of 

3 determining the income tax treatment re4 lating to transfers to the Pension Benefit 

5 Guaranty Corporation under clause (i)— 

6 ‘‘(I) the transfer of amounts to 

7 the Pension Benefit Guaranty Cor8 poration pursuant to clause (i) shall 

9 be treated as a transfer to an indi10 vidual retirement plan under such 

11 clause, and 

12 ‘‘(II) the distribution of such 

13 amounts from the Pension Benefit 

14 Guaranty Corporation shall be treated 

15 as a distribution from an individual 

16 retirement plan.’’ 

17 (c) MISSING PARTICIPANTS AND BENEFICIARIES.—

18 Section 4050 of the Employee Retirement Income Security 

19 Act of 1974 (29 U.S.C. 1350), as amended by section 312, 

20 is amended by redesignating subsection (e) as subsection 

21 (f) and by inserting after subsection (d) the following new 

22 subsection: 

23 ‘‘(e) INVOLUNTARY CASHOUTS.— 

24 ‘‘(1) PAYMENT BY THE CORPORATION.—If ben25 efits under a plan described in paragraph (3) were 
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•S 219 IS

1 transferred to the corporation under section 

2 401(a)(31)(B) of the Internal Revenue Code of 

3 1986, the corporation shall, upon application filed by 

4 the participant or beneficiary with the corporation in 

5 such form and manner as may be prescribed in regu6 lations of the corporation, pay to the participant or 

7 beneficiary the amount transferred (or the appro8 priate survivor benefit) either— 

9 ‘‘(A) in a single sum (plus interest), or 

10 ‘‘(B) in such other form as is specified in 

11 regulations of the corporation. 

12 ‘‘(2) INFORMATION TO THE CORPORATION.—To 

13 the extent provided in regulations, the plan adminis14 trator of a plan described in paragraph (3) shall, 

15 upon a transfer of benefits to the corporation under 

16 section 401(a)(31)(B) of such Code, provide the cor17 poration information with respect to benefits of the 

18 participant or beneficiary so transferred. 

19 ‘‘(3) PLANS DESCRIBED.—A plan is described 

20 in this paragraph if the plan is a pension plan (with21 in the meaning of section 3(2))— 

22 ‘‘(A) which provides for mandatory dis23 tributions under section 401(a)(31)(B) of the 

24 Internal Revenue Code of 1986, and 
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•S 219 IS

1 ‘‘(B) which is not a plan described in para2 graphs (2) through (11) of section 4021(b). 

3 ‘‘(4) CERTAIN PROVISIONS NOT TO APPLY.—

4 Subsections (a)(1) and (a)(3) shall not apply to a 

5 plan described in paragraph (3).’’ 

6 (d) EFFECTIVE DATES.— 

7 (1) INTERNAL REVENUE CODE PROVISIONS.—

8 The amendments made by subsections (a) and (b) 

9 shall take effect as if included in the amendments 

10 made by section 657 of the Economic Growth and 

11 Tax Relief Reconciliation Act of 2001. 

12 (2) EMPLOYEE RETIREMENT INCOME SECURITY

13 ACT OF 1974 PROVISIONS.—The amendments made 

14 by subsection (c) shall apply to distributions made 

15 after final regulations implementing subsection (e) 

16 of section 4050 of the Employee Retirement Income 

17 Security Act of 1974 (as added by subsection (c)) 

18 are prescribed. 

19 (3) REGULATIONS.—The Pension Benefit Guar20 anty Corporation shall issue regulations necessary to 

21 carry out the amendments made by subsection (c) 

22 not later than December 31, 2006. 

23 SEC. 312. MISSING PARTICIPANTS. 

24 (a) IN GENERAL.—Section 4050 of the Employee Re25 tirement Income Security Act of 1974 (29 U.S.C. 1350) 
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1 is amended by redesignating subsection (c) as subsection 

2 (e) and by inserting after subsection (b) the following new 

3 subsections: 

4 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation 

5 shall prescribe rules similar to the rules in subsection (a) 

6 for multiemployer plans covered by this title that termi7 nate under section 4041A. 

8 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.— 

9 ‘‘(1) TRANSFER TO CORPORATION.—The plan 

10 administrator of a plan described in paragraph (4) 

11 may elect to transfer a missing participant’s benefits 

12 to the corporation upon termination of the plan. 

13 ‘‘(2) INFORMATION TO THE CORPORATION.—To 

14 the extent provided in regulations, the plan adminis15 trator of a plan described in paragraph (4) shall, 

16 upon termination of the plan, provide the corpora17 tion information with respect to benefits of a miss18 ing participant if the plan transfers such benefits— 

19 ‘‘(A) to the corporation, or 

20 ‘‘(B) to an entity other than the corpora21 tion or a plan described in paragraph (4)(B)(ii). 

22 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben23 efits of a missing participant were transferred to the 

24 corporation under paragraph (1), the corporation 

25 shall, upon location of the participant or beneficiary, 
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•S 219 IS

1 pay to the participant or beneficiary the amount 

2 transferred (or the appropriate survivor benefit) ei3 ther— 

4 ‘‘(A) in a single sum (plus interest), or 

5 ‘‘(B) in such other form as is specified in 

6 regulations of the corporation. 

7 ‘‘(4) PLANS DESCRIBED.—A plan is described 

8 in this paragraph if— 

9 ‘‘(A) the plan is a pension plan (within the 

10 meaning of section 3(2))— 

11 ‘‘(i) to which the provisions of this 

12 section do not apply (without regard to 

13 this subsection), and 

14 ‘‘(ii) which is not a plan described in 

15 paragraphs (2) through (11) of section 

16 4021(b), and 

17 ‘‘(B) at the time the assets are to be dis18 tributed upon termination, the plan— 

19 ‘‘(i) has missing participants, and 

20 ‘‘(ii) has not provided for the transfer 

21 of assets to pay the benefits of all missing 

22 participants to another pension plan (with23 in the meaning of section 3(2)). 
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1 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

2 Subsections (a)(1) and (a)(3) shall not apply to a 

3 plan described in paragraph (4).’’ 

4 (b) CONFORMING AMENDMENTS.—Section 206(f) of 

5 such Act (29 U.S.C. 1056(f)) is amended— 

6 (1) by striking ‘‘title IV’’ and inserting ‘‘section 

7 4050’’; and 

8 (2) by striking ‘‘the plan shall provide that,’’. 

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

10 this section shall apply to distributions made after final 

11 regulations implementing subsections (c) and (d) of sec12 tion 4050 of the Employee Retirement Income Security 

13 Act of 1974 (as added by subsection (a)), respectively, are 

14 prescribed. 

15 TITLE IV—ADMINISTRATIVE 

16 PROVISIONS 

17 SEC. 401. EMPLOYEE PLANS COMPLIANCE RESOLUTION 

18 SYSTEM. 

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

20 shall have full authority to establish and implement the 

21 Employee Plans Compliance Resolution System (or any 

22 successor program) and any other employee plans correc23 tion policies, including the authority to waive income, ex24 cise, or other taxes to ensure that any tax, penalty, or 
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1 sanction is not excessive and bears a reasonable relation2 ship to the nature, extent, and severity of the failure. 

3 (b) IMPROVEMENTS.—The Secretary of the Treasury 

4 shall continue to update and improve the Employee Plans 

5 Compliance Resolution System (or any successor pro6 gram), giving special attention to— 

7 (1) increasing the awareness and knowledge of 

8 small employers concerning the availability and use 

9 of the program; 

10 (2) taking into account special concerns and 

11 circumstances that small employers face with respect 

12 to compliance and correction of compliance failures; 

13 (3) extending the duration of the self-correction 

14 period under the Self-Correction Program for signifi15 cant compliance failures; 

16 (4) expanding the availability to correct insig17 nificant compliance failures under the Self-Correc18 tion Program during audit; and 

19 (5) assuring that any tax, penalty, or sanction 

20 that is imposed by reason of a compliance failure is 

21 not excessive and bears a reasonable relationship to 

22 the nature, extent, and severity of the failure. 
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1 SEC. 402. EXTENSION TO ALL GOVERNMENTAL PLANS OF 

2 MORATORIUM ON APPLICATION OF CERTAIN 

3 NONDISCRIMINATION RULES APPLICABLE TO 

4 STATE AND LOCAL PLANS. 

5 (a) IN GENERAL.—The following provisions are each 

6 amended by striking ‘‘maintained by a State or local gov7 ernment or political subdivision thereof (or agency or in8 strumentality thereof)’’: 

9 (1) Section 401(a)(5)(G) of the Internal Rev10 enue Code of 1986. 

11 (2) Section 401(a)(26)(H) of such Code. 

12 (3) Section 401(k)(3)(G) of such Code. 

13 (4) Section 1505(d)(2) of the Taxpayer Relief 

14 Act of 1997. 

15 (b) CONFORMING AMENDMENTS.— 

16 (1) The heading for section 401(a)(5)(G) of 

17 such Code is amended to read as follows: ‘‘GOVERN18 MENTAL PLANS.—’’. 

19 (2) The heading for section 401(a)(26)(H) of 

20 such Code is amended to read as follows: ‘‘EXCEP21 TION FOR GOVERNMENTAL PLANS.—’’. 

22 (3) Section 401(k)(3)(G) of such Code is 

23 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’ 

24 after ‘‘(G)’’. 
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•S 219 IS

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

2 this section shall apply to plan years beginning after De3 cember 31, 2005. 

4 SEC. 403. NOTICE AND CONSENT PERIOD REGARDING DIS5 TRIBUTIONS. 

6 (a) EXPANSION OF PERIOD.— 

7 (1) AMENDMENT OF INTERNAL REVENUE

8 CODE.— 

9 (A) IN GENERAL.—Section 417(a)(6)(A) of 

10 the Internal Revenue Code of 1986 is amended 

11 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 

12 (B) MODIFICATION OF REGULATIONS.—

13 The Secretary of the Treasury shall modify the 

14 regulations under sections 402(f), 411(a)(11), 

15 and 417 of the Internal Revenue Code of 1986 

16 by substituting ‘‘180 days’’ for ‘‘90 days’’ each 

17 place it appears in Treasury Regulations sec18 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–

19 1(b). 

20 (2) AMENDMENT OF ERISA.— 

21 (A) IN GENERAL.—Section 205(c)(7)(A) of 

22 the Employee Retirement Income Security Act 

23 of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended 

24 by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 
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1 (B) MODIFICATION OF REGULATIONS.—

2 The Secretary of the Treasury shall modify the 

3 regulations under part 2 of subtitle B of title 

4 I of the Employee Retirement Income Security 

5 Act of 1974 relating to sections 203(e) and 205 

6 of such Act by substituting ‘‘180 days’’ for ‘‘90 

7 days’’ each place it appears. 

8 (3) EFFECTIVE DATE.—The amendments and 

9 modifications made or required by this subsection 

10 shall apply to years beginning after December 31, 

11 2005. 

12 (b) NOTIFICATION OF RIGHT TO DEFER.— 

13 (1) IN GENERAL.—The Secretary of the Treas14 ury shall modify the regulations under section 

15 411(a)(11) of the Internal Revenue Code of 1986 

16 and under section 205 of the Employee Retirement 

17 Income Security Act of 1974 to provide that the de18 scription of a participant’s right, if any, to defer re19 ceipt of a distribution shall also describe the con20 sequences of failing to defer such receipt. 

21 (2) EFFECTIVE DATE.— 

22 (A) IN GENERAL.—The modifications re23 quired by paragraph (1) shall apply to years be24 ginning after December 31, 2005. 
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1 (B) REASONABLE NOTICE.—A plan shall 

2 not be treated as failing to meet the require3 ments of section 411(a)(11) of such Code or 

4 section 205 of such Act with respect to any de5 scription of consequences described in para6 graph (1) made within 90 days after the Sec7 retary of the Treasury issues the modifications 

8 required by paragraph (1) if the plan adminis9 trator makes a reasonable attempt to comply 

10 with such requirements. 

11 SEC. 404. REPORTING SIMPLIFICATION. 

12 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

13 OWNERS AND THEIR SPOUSES.— 

14 (1) IN GENERAL.—The Secretary of the Treas15 ury and the Secretary of Labor shall modify the re16 quirements for filing annual returns with respect to 

17 one-participant retirement plans to ensure that such 

18 plans with assets of $250,000 or less as of the close 

19 of the plan year need not file a return for that year. 

20 (2) ONE-PARTICIPANT RETIREMENT PLAN DE21 FINED.—For purposes of this subsection, the term 

22 ‘‘one-participant retirement plan’’ means a retire23 ment plan with respect to which the following re24 quirements are met: 

25 (A) on the first day of the plan year— 
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•S 219 IS

1 (i) the plan covered only one indi2 vidual (or the individual and the individ3 ual’s spouse) and the individual owned 100 

4 percent of the plan sponsor (whether or 

5 not incorporated), or 

6 (ii) the plan covered only one or more 

7 partners (or partners and their spouses) in 

8 the plan sponsor; 

9 (B) the plan meets the minimum coverage 

10 requirements of section 410(b) of the Internal 

11 Revenue Code of 1986 without being combined 

12 with any other plan of the business that covers 

13 the employees of the business; 

14 (C) the plan does not provide benefits to 

15 anyone except the individual (and the individ16 ual’s spouse) or the partners (and their 

17 spouses); 

18 (D) the plan does not cover a business that 

19 is a member of an affiliated service group, a 

20 controlled group of corporations, or a group of 

21 businesses under common control; and 

22 (E) the plan does not cover a business that 

23 uses the services of leased employees (within 

24 the meaning of section 414(n) of such Code). 
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1 For purposes of this paragraph, the term ‘‘partner’’ 

2 includes a 2-percent shareholder (as defined in sec3 tion 1372(b) of such Code) of an S corporation. 

4 (3) OTHER DEFINITIONS.—Terms used in para5 graph (2) which are also used in section 414 of the 

6 Internal Revenue Code of 1986 shall have the re7 spective meanings given such terms by such section. 

8 (4) EFFECTIVE DATE.—The provisions of this 

9 subsection shall apply to plan years beginning on or 

10 after January 1, 2006. 

11 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

12 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case 

13 of plan years beginning after December 31, 2006, the Sec14 retary of the Treasury and the Secretary of Labor shall 

15 provide for the filing of a simplified annual return for any 

16 retirement plan which covers less than 25 employees on 

17 the first day of a plan year and which meets the require18 ments described in subparagraphs (B), (D), and (E) of 

19 subsection (a)(2). 

20 SEC. 405. VOLUNTARY EARLY RETIREMENT INCENTIVE AND 

21 EMPLOYMENT RETENTION PLANS MAIN22 TAINED BY LOCAL EDUCATIONAL AGENCIES 

23 AND OTHER ENTITIES. 

24 (a) VOLUNTARY EARLY RETIREMENT INCENTIVE

25 PLANS.— 
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1 (1) TREATMENT AS PLAN PROVIDING SEVER2 ANCE PAY.—Section 457(e)(11) of the Internal Rev3 enue Code of 1986 (relating to certain plans ex4 cluded) is amended by adding at the end the fol5 lowing new subparagraph: 

6 ‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE7 MENT INCENTIVE PLANS.— 

8 ‘‘(i) IN GENERAL.—If an applicable 

9 voluntary early retirement incentive plan— 

10 ‘‘(I) makes payments or supple11 ments as an early retirement benefit, 

12 a retirement-type subsidy, or a benefit 

13 described in the last sentence of sec14 tion 411(a)(9), and 

15 ‘‘(II) such payments or supple16 ments are made in coordination with 

17 a defined benefit plan which is de18 scribed in section 401(a) and includes 

19 a trust exempt from tax under section 

20 501(a) and which is maintained by an 

21 eligible employer described in para22 graph (1)(A) or by an education asso23 ciation described in clause (ii)(II), 

24 such applicable plan shall be treated for 

25 purposes of subparagraph (A)(i) as a bona 
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•S 219 IS

1 fide severance pay plan with respect to 

2 such payments or supplements to the ex3 tent such payments or supplements could 

4 otherwise have been provided under such 

5 defined benefit plan (determined as if sec6 tion 411 applied to such defined benefit 

7 plan). 

8 ‘‘(ii) APPLICABLE VOLUNTARY EARLY

9 RETIREMENT INCENTIVE PLAN.—For pur10 poses of this subparagraph, the term ‘ap11 plicable voluntary early retirement incen12 tive plan’ means a voluntary early retire13 ment incentive plan maintained by— 

14 ‘‘(I) a local educational agency 

15 (as defined in section 9101 of the Ele16 mentary and Secondary Education 

17 Act of 1965 (20 U.S.C. 7801)), or 

18 ‘‘(II) an education association 

19 which principally represents employees 

20 of 1 or more agencies described in 

21 subclause (I) and which is described 

22 in section 501(c) (5) or (6) and ex23 empt from tax under section 501(a).’’ 

24 (2) AGE DISCRIMINATION IN EMPLOYMENT

25 ACT.—Section 4(l)(1) of the Age Discrimination in 
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•S 219 IS

1 Employment Act of 1967 (29 U.S.C. 623(l)(1)) is 

2 amended— 

3 (A) by inserting ‘‘(A)’’ after ‘‘(1)’’, 

4 (B) by redesignating subparagraphs (A) 

5 and (B) as clauses (i) and (ii), respectively, 

6 (C) by redesignating clauses (i) and (ii) of 

7 subparagraph (B) (as in effect before the 

8 amendments made by subparagraph (B)) as 

9 subclauses (I) and (II), respectively, and 

10 (D) by adding at the end the following: 

11 ‘‘(B) A voluntary early retirement incentive 

12 plan that— 

13 ‘‘(i) is maintained by— 

14 ‘‘(I) a local educational agency (as de15 fined in section 9101 of the Elementary 

16 and Secondary Education Act of 1965 (20 

17 U.S.C. 7801), or 

18 ‘‘(II) an education association which 

19 principally represents employees of 1 or 

20 more agencies described in subclause (I) 

21 and which is described in section 501(c) 

22 (5) or (6) of the Internal Revenue Code of 

23 1986 and exempt from taxation under sec24 tion 501(a) of such Code, and 
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1 ‘‘(ii) makes payments or supplements de2 scribed in subclauses (I) and (II) of subpara3 graph (A)(ii) in coordination with a defined 

4 benefit plan (as so defined) maintained by an 

5 eligible employer described in section 

6 457(e)(1)(A) of such Code or by an education 

7 association described in clause (i)(II), 

8 shall be treated solely for purposes of subparagraph 

9 (A)(ii) as if it were a part of the defined benefit plan 

10 with respect to such payments or supplements. Pay11 ments or supplements under such a voluntary early 

12 retirement incentive plan shall not constitute sever13 ance pay for purposes of section 4(l)(2) of the Age 

14 Discrimination in Employment Act (29 U.S.C. 

15 623(l)(2)).’’ 

16 (b) EMPLOYMENT RETENTION PLANS.— 

17 (1) IN GENERAL.—Section 457(f)(2) of the In18 ternal Revenue Code of 1986 (relating to exceptions) 

19 is amended by striking ‘‘and’’ at the end of subpara20 graph (D), by striking the period at the end of sub21 paragraph (E) and inserting ‘‘, and’’, and by adding 

22 at the end the following: 

23 ‘‘(F) that portion of any applicable employ24 ment retention plan described in paragraph (4) 

25 with respect to any participant.’’ 
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•S 219 IS

1 (2) DEFINITIONS AND RULES RELATING TO EM2 PLOYMENT RETENTION PLANS.—Section 457(f) of 

3 such Code is amended by adding at the end the fol4 lowing new paragraph: 

5 ‘‘(4) EMPLOYMENT RETENTION PLANS.—For 

6 purposes of paragraph (2)(F)— 

7 ‘‘(A) IN GENERAL.—The portion of an ap8 plicable employment retention plan described in 

9 this paragraph with respect to any participant 

10 is that portion of the plan which provides bene11 fits payable to the participant not in excess of 

12 twice the applicable dollar limit determined 

13 under subsection (e)(15). 

14 ‘‘(B) OTHER RULES.— 

15 ‘‘(i) LIMITATION.—Paragraph (2)(F) 

16 shall only apply to the portion of the plan 

17 described in subparagraph (A) for years 

18 preceding the year in which such portion is 

19 paid or otherwise made available to the 

20 participant. 

21 ‘‘(ii) TREATMENT.—A plan shall not 

22 be treated for purposes of this title as pro23 viding for the deferral of compensation for 

24 any year with respect to the portion of the 

25 plan described in subparagraph (A). 
170

•S 219 IS

1 ‘‘(C) APPLICABLE EMPLOYMENT RETEN2 TION PLAN.—The term ‘applicable employment 

3 retention plan’ means an employment retention 

4 plan maintained by— 

5 ‘‘(i) a local educational agency (as de6 fined in section 9101 of the Elementary 

7 and Secondary Education Act of 1965 (20 

8 U.S.C. 7801), or 

9 ‘‘(ii) an education association which 

10 principally represents employees of 1 or 

11 more agencies described in clause (i) and 

12 which is described in section 501(c) (5) or 

13 (6) and exempt from taxation under sec14 tion 501(a). 

15 ‘‘(D) EMPLOYMENT RETENTION PLAN.—

16 The term ‘employment retention plan’ means a 

17 plan to pay, upon termination of employment, 

18 compensation to an employee of a local edu19 cational agency or education association de20 scribed in subparagraph (C) for purposes of— 

21 ‘‘(i) retaining the services of the em22 ployee, or 

23 ‘‘(ii) rewarding such employee for the 

24 employee’s service with 1 or more such 

25 agencies or associations.’’ 
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•S 219 IS

1 (c) COORDINATION WITH ERISA.—Section 3(2)(B) 

2 of the Employee Retirement Income Security Act of 1974 

3 (29 U.S.C. 1002(2)(B)) is amended by adding at the end 

4 the following: ‘‘An applicable voluntary early retirement 

5 incentive plan (as defined in section 457(e)(11)(D)(ii) of 

6 the Internal Revenue Code of 1986) making payments or 

7 supplements described in section 457(e)(11)(D)(i) of such 

8 Code, and an applicable employment retention plan (as de9 fined in section 457(f)(4)(C) of such Code) making pay10 ments of benefits described in section 457(f)(4)(A) of such 

11 Code, shall, for purposes of this title, be treated as a wel12 fare plan (and not a pension plan) with respect to such 

13 payments and supplements.’’ 

14 (d) EFFECTIVE DATES.— 

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

16 this Act shall take effect on the date of the enact17 ment of this Act. 

18 (2) TAX AMENDMENTS.—The amendments 

19 made by subsections (a)(1) and (b) shall apply to 

20 taxable years ending after the date of the enactment 

21 of this Act. 

22 (3) ERISA AMENDMENTS.—The amendment 

23 made by subsection (c) shall apply to plan years 

24 ending after the date of the enactment of this Act. 
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•S 219 IS

1 (4) CONSTRUCTION.—Nothing in the amend2 ments made by this section shall alter or affect the 

3 construction of the Internal Revenue Code of 1986, 

4 the Employee Retirement Income Security Act of 

5 1974, or the Age Discrimination in Employment Act 

6 of 1967 as applied to any plan, arrangement, or con7 duct to which such amendments do not apply. 

8 SEC. 406. NO REDUCTION IN UNEMPLOYMENT COMPENSA9 TION AS A RESULT OF PENSION ROLLOVERS. 

10 (a) IN GENERAL.—Section 3304(a) of the Internal 

11 Revenue Code of 1986 (relating to requirements for State 

12 unemployment laws) is amended by adding at the end the 

13 following new flush sentence: 

14 ‘‘Compensation shall not be reduced under paragraph (15) 

15 for any pension, retirement or retired pay, annuity, or 

16 similar payment which is not includible in gross income 

17 of the individual for the taxable year in which paid because 

18 it was part of a rollover distribution.’’ 

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

20 this section shall apply to weeks beginning on or after the 

21 date of the enactment of this Act. 

22 SEC. 407. WITHHOLDING ON DISTRIBUTIONS FROM GOV23 ERNMENTAL SECTION 457 PLANS. 

24 (a) IN GENERAL.—Section 641(f) of the Economic 

25 Growth and Tax Relief Reconciliation Act of 2001 is 
173

•S 219 IS

1 amended by adding at the end the following new para2 graph: 

3 ‘‘(4) TRANSITION RULE FOR CERTAIN GOVERN4 MENTAL PLANS.—In the case of distributions from 

5 an eligible deferred compensation plan of an em6 ployer described in section 457(e)(1)(A) of the Inter7 nal Revenue Code of 1986 which are made after De8 cember 31, 2001, and which are part of a series of 

9 distributions which— 

10 ‘‘(A) began before January 1, 2002, and 

11 ‘‘(B) are payable for 10 years or less, the 

12 Internal Revenue Code of 1986 may be applied 

13 to such distributions without regard to the 

14 amendments made by subsection (a)(1)(D).’’ 

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

16 subsection (a) shall take effect as if included in the provi17 sions of section 641 of the Economic Growth and Tax Re18 lief Reconciliation Act of 2001. 

19 SEC. 408. PROVISIONS RELATING TO PLAN AMENDMENTS. 

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

21 or contract amendment— 

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

23 being operated in accordance with the terms of the 

24 plan during the period described in subsection 

25 (b)(2)(A), and 
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•S 219 IS

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

2 Treasury, such plan shall not fail to meet the re3 quirements of section 411(d)(6) of the Internal Rev4 enue Code of 1986 and section 204(g) of the Em5 ployee Retirement Income Security Act of 1974 by 

6 reason of such amendment. 

7 (b) AMENDMENTS TO WHICH SECTION APPLIES.— 

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

9 any amendment to any plan or annuity contract 

10 which is made— 

11 (A) pursuant to any amendment made by 

12 this Act or the Economic Growth and Tax Re13 lief Reconciliation Act of 2001, or pursuant to 

14 any regulation issued by the Secretary of the 

15 Treasury or the Secretary of Labor under such 

16 Acts, and 

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

18 plan year beginning on or after January 1, 

19 2007, or such later date as the Secretary of the 

20 Treasury may prescribe. 

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

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

23 1986), subparagraph (B) shall be applied by sub24 stituting the date which is 2 years after the date 

25 otherwise applied under subparagraph (B). 
175

•S 219 IS

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

2 to any amendment unless— 

3 (A) during the period— 

4 (i) beginning on the date the legisla5 tive or regulatory amendment described in 

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

7 case of a plan or contract amendment not 

8 required by such legislative or regulatory 

9 amendment, the effective date specified by 

10 the plan), and 

11 (ii) ending on the date described in 

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

13 the plan or contract amendment is adopt14 ed), 

15 the plan or contract is operated as if such plan 

16 or contract amendment were in effect; and 

17 (B) such plan or contract amendment ap18 plies retroactively for such period. 
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•S 219 IS

1 TITLE V—PROVISIONS RELAT2 ING TO SPOUSAL PENSION 

3 PROTECTION 

4 Subtitle A—Study of Spousal Con5 sent for Distributions From De6 fined Contribution Plans 

7 SEC. 501. JOINT STUDY OF APPLICATION OF SPOUSAL CON8 SENT RULES TO DEFINED CONTRIBUTION 

9 PLANS. 

10 (a) STUDY.—The Secretary of Labor and the Sec11 retary of the Treasury shall jointly conduct a study of the 

12 feasibility and desirability of extending the application of 

13 the requirements of section 205 of the Employee Retire14 ment Income Security Act of 1974 and sections 

15 401(a)(11) and 417 of the Internal Revenue Code of 1986 

16 (relating to spousal consent requirements) to defined con17 tribution plans to which such requirements do not apply. 

18 Such study shall include consideration of— 

19 (1) any modifications of such requirements that 

20 are necessary to apply such requirements to such 

21 plans, and 

22 (2) the feasibility of providing notice and spous23 al consent in 1 or more electronic forms that are ca24 pable of authentication. 
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•S 219 IS

1 (b) REPORT.—Not later than 2 years after the date 

2 of the enactment of this Act, the Secretaries shall report 

3 the results of the study, together with any recommenda4 tions for legislative changes, to the Committees on Ways 

5 and Means and Education and the Workforce of the 

6 House of Representatives and the Committees on Finance 

7 and Health, Education, Labor, and Pensions of the Sen8 ate. 

9 Subtitle B—Division Of Pension 

10 Benefits Upon Divorce 

11 SEC. 511. REGULATIONS ON TIME AND ORDER OF 

12 ISSUANCE OF DOMESTIC RELATIONS OR13 DERS. 

14 Not later than 1 year after the date of the enactment 

15 of this Act, the Secretary of Labor shall issue regulations 

16 under section 206(d)(3) of the Employee Retirement Secu17 rity Act of 1974 and section 414(p) of the Internal Rev18 enue Code of 1986 which clarify that— 

19 (1) a domestic relations order otherwise meet20 ing the requirements to be a qualified domestic rela21 tions order, including the requirements of section 

22 206(d)(3)(D) of such Act and section 414(p)(3) of 

23 such Code, shall not fail to be treated as a qualified 

24 domestic relations order solely because— 
178

•S 219 IS

1 (A) the order is issued after, or revises, an2 other domestic relations order or qualified do3 mestic relations order; or 

4 (B) of the time at which it is issued; and 

5 (2) any order described in paragraph (1) shall 

6 be subject to the same requirements and protections 

7 which apply to qualified domestic relations orders, 

8 including the provisions of section 206(d)(3)(H) of 

9 such Act and section 414(p)(7) of such Code. 

10 Subtitle C—Railroad Retirement 

11 SEC. 521. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL12 ROAD RETIREMENT ANNUITIES INDE13 PENDENT OF ACTUAL ENTITLEMENT OF EM14 PLOYEE. 

15 (a) IN GENERAL.—Section 2 of the Railroad Retire16 ment Act of 1974 (45 U.S.C. 231a) is amended— 

17 (1) in subsection (c)(4)(i), by striking ‘‘(A) is 

18 entitled to an annuity under subsection (a)(1) and 

19 (B)’’; and 

20 (2) in subsection (e)(5), by striking ‘‘or di21 vorced wife’’ the second place it appears. 

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

23 this section shall take effect 1 year after the date of the 

24 enactment of this Act. 
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•S 219 IS

1 SEC. 522. EXTENSION OF TIER II RAILROAD RETIREMENT 

2 BENEFITS TO SURVIVING FORMER SPOUSES 

3 PURSUANT TO DIVORCE AGREEMENTS. 

4 (a) IN GENERAL.—Section 5 of the Railroad Retire5 ment Act of 1974 (45 U.S.C. 231d) is amended by adding 

6 at the end the following: 

7 ‘‘(d) Notwithstanding any other provision of law, the 

8 payment of any portion of an annuity computed under sec9 tion 3(b) to a surviving former spouse in accordance with 

10 a court decree of divorce, annulment, or legal separation 

11 or the terms of any court-approved property settlement 

12 incident to any such court decree shall not be terminated 

13 upon the death of the individual who performed the service 

14 with respect to which such annuity is so computed unless 

15 such termination is otherwise required by the terms of 

16 such court decree.’’ 

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

18 this section shall take effect 1 year after the date of the 

19 enactment of this Act. 

20 Subtitle D—Modifications of Joint 

21 and Survivor Annuity Require22 ments 

23 SEC. 531. REQUIREMENT FOR ADDITIONAL SURVIVOR AN24 NUITY OPTION. 

25 (a) AMENDMENTS TO INTERNAL REVENUE CODE.— 
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1 (1) ELECTION OF SURVIVOR ANNUITY.—Section 

2 417(a)(1)(A) of the Internal Revenue Code of 1986 

3 is amended— 

4 (A) in clause (i), by striking ‘‘, and’’ and 

5 inserting a comma; 

6 (B) by redesignating clause (ii) as clause 

7 (iii); and 

8 (C) by inserting after clause (i) the fol9 lowing: 

10 ‘‘(ii) if the participant elects a waiver 

11 under clause (i), may elect the qualified op12 tional survivor annuity at any time during the 

13 applicable election period, and’’. 

14 (2) DEFINITION.—Section 417 of such Code is 

15 amended by adding at the end the following: 

16 ‘‘(g) DEFINITION OF QUALIFIED OPTIONAL SUR17 VIVOR ANNUITY.— 

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion, the term ‘qualified optional survivor annuity’ 

20 means an annuity— 

21 ‘‘(A) for the life of the participant with a 

22 survivor annuity for the life of the spouse which 

23 is equal to the applicable percentage of the 

24 amount of the annuity which is payable during 
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1 the joint lives of the participant and the spouse, 

2 and 

3 ‘‘(B) which is the actuarial equivalent of a 

4 single annuity for the life of the participant. 

5 Such term also includes any annuity in a form hav6 ing the effect of an annuity described in the pre7 ceding sentence. 

8 ‘‘(2) APPLICABLE PERCENTAGE.— 

9 ‘‘(A) IN GENERAL.—For purposes of para10 graph (1), if the survivor annuity percentage— 

11 ‘‘(i) is less than 75 percent, the appli12 cable percentage is 75 percent, and 

13 ‘‘(ii) is greater than or equal to 75 

14 percent, the applicable percentage is 50 

15 percent. 

16 ‘‘(B) SURVIVOR ANNUITY PERCENTAGE.—

17 For purposes of subparagraph (A), the term 

18 ‘survivor annuity percentage’ means the per19 centage which the survivor annuity under the 

20 plan’s qualified joint and survivor annuity bears 

21 to the annuity payable during the joint lives of 

22 the participant and the spouse.’’ 

23 (3) NOTICE.—Section 417(a)(3)(A)(i) of such 

24 Code is amended by inserting ‘‘and of the qualified 

25 optional survivor annuity’’ after ‘‘annuity’’. 
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1 (b) AMENDMENTS TO ERISA.— 

2 (1) ELECTION OF SURVIVOR ANNUITY.—Section 

3 205(c)(1)(A) of the Employee Retirement Income 

4 Security Act of 1974 (29 U.S.C. 1055(c)(1)(A)) is 

5 amended— 

6 (A) in clause (i), by striking ‘‘, and’’ and 

7 inserting a comma; 

8 (B) by redesignating clause (ii) as clause 

9 (iii); and 

10 (C) by inserting after clause (i) the fol11 lowing: 

12 ‘‘(ii) if the participant elects a waiver 

13 under clause (i), may elect the qualified op14 tional survivor annuity at any time during the 

15 applicable election period, and’’. 

16 (2) DEFINITION.—Section 205(d) of such Act 

17 (29 U.S.C. 1055(d)) is amended— 

18 (A) by inserting ‘‘(1)’’ after ‘‘(d)’’; 

19 (B) by redesignating paragraphs (1) and 

20 (2) as subparagraphs (A) and (B), respectively; 

21 and 

22 (C) by adding at the end the following: 

23 ‘‘(2)(A) For purposes of this section, the term ‘quali24 fied optional survivor annuity’ means an annuity— 
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1 ‘‘(i) for the life of the participant with a sur2 vivor annuity for the life of the spouse which is 

3 equal to the applicable percentage of the amount of 

4 the annuity which is payable during the joint lives 

5 of the participant and the spouse, and 

6 ‘‘(ii) which is the actuarial equivalent of a sin7 gle annuity for the life of the participant. 

8 Such term also includes any annuity in a form having the 

9 effect of an annuity described in the preceding sentence. 

10 ‘‘(B)(i) For purposes of subparagraph (A), if the sur11 vivor annuity percentage— 

12 ‘‘(I) is less than 75 percent, the applicable per13 centage is 75 percent, and 

14 ‘‘(II) is greater than or equal to 75 percent, the 

15 applicable percentage is 50 percent. 

16 ‘‘(ii) For purposes of clause (i), the term ‘survivor 

17 annuity percentage’ means the percentage which the sur18 vivor annuity under the plan’s qualified joint and survivor 

19 annuity bears to the annuity payable during the joint lives 

20 of the participant and the spouse.’’ 

21 (3) NOTICE.—Section 205(c)(3)(A)(i) of such 

22 Act (29 U.S.C. 1055(c)(3)(A)(i)) is amended by in23 serting ‘‘and of the qualified optional survivor annu24 ity’’ after ‘‘annuity’’. 

25 (c) EFFECTIVE DATES.— 
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•S 219 IS

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

2 this section shall apply to plan years beginning after 

3 December 31, 2005. 

4 (2) SPECIAL RULE FOR COLLECTIVELY BAR5 GAINED PLANS.—In the case of a plan maintained 

6 pursuant to 1 or more collective bargaining agree7 ments between employee representatives and 1 or 

8 more employers ratified on or before the date of the 

9 enactment of this Act, the amendments made by this 

10 section shall apply to the first plan year beginning 

11 on or after the earlier of— 

12 (A) the later of— 

13 (i) January 1, 2006, or 

14 (ii) the date on which the last of such 

15 collective bargaining agreements termi16 nates (determined without regard to any 

17 extension thereof after the date of enact18 ment of this Act), or 

19 (B) January 1, 2007. 

20 TITLE VI—TAX COURT PENSION 

21 AND COMPENSATION 

22 SEC. 600. AMENDMENT OF 1986 CODE. 

23 Except as otherwise expressly provided, whenever in 

24 this title an amendment or repeal is expressed in terms 

25 of an amendment to, or repeal of, a section or other provi-
185

•S 219 IS

1 sion, the reference shall be considered to be made to a 

2 section or other provision of the Internal Revenue Code 

3 of 1986. 

4 SEC. 601. ANNUITIES FOR SURVIVORS OF TAX COURT 

5 JUDGES WHO ARE ASSASSINATED. 

6 (a) ELIGIBILITY IN CASE OF DEATH BY ASSASSINA7 TION.—Subsection (h) of section 7448 (relating to annu8 ities to surviving spouses and dependent children of 

9 judges) is amended to read as follows: 

10 ‘‘(h) ENTITLEMENT TO ANNUITY.— 

11 ‘‘(1) IN GENERAL.— 

12 ‘‘(A) ANNUITY TO SURVIVING SPOUSE.—If 

13 a judge described in paragraph (2) is survived 

14 by a surviving spouse but not by a dependent 

15 child, there shall be paid to such surviving 

16 spouse an annuity beginning with the day of the 

17 death of the judge or following the surviving 

18 spouse’s attainment of the age of 50 years, 

19 whichever is the later, in an amount computed 

20 as provided in subsection (m). 

21 ‘‘(B) ANNUITY TO CHILD.—If such a judge 

22 is survived by a surviving spouse and a depend23 ent child or children, there shall be paid to such 

24 surviving spouse an immediate annuity in an 

25 amount computed as provided in subsection 
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•S 219 IS

1 (m), and there shall also be paid to or on behalf 

2 of each such child an immediate annuity equal 

3 to the lesser of— 

4 ‘‘(i) 10 percent of the average annual 

5 salary of such judge (determined in accord6 ance with subsection (m)), or 

7 ‘‘(ii) 20 percent of such average an8 nual salary, divided by the number of such 

9 children. 

10 ‘‘(C) ANNUITY TO SURVIVING DEPENDENT

11 CHILDREN.—If such a judge leaves no surviving 

12 spouse but leaves a surviving dependent child or 

13 children, there shall be paid to or on behalf of 

14 each such child an immediate annuity equal to 

15 the lesser of— 

16 ‘‘(i) 20 percent of the average annual 

17 salary of such judge (determined in accord18 ance with subsection (m)), or 

19 ‘‘(ii) 40 percent of such average an20 nual salary, divided by the number of such 

21 children. 

22 ‘‘(2) COVERED JUDGES.—Paragraph (1) applies 

23 to any judge electing under subsection (b)— 

24 ‘‘(A) who dies while a judge after having 

25 rendered at least 5 years of civilian service com-
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•S 219 IS

1 puted as prescribed in subsection (n), for the 

2 last 5 years of which the salary deductions pro3 vided for by subsection (c)(1) or the deposits 

4 required by subsection (d) have actually been 

5 made or the salary deductions required by the 

6 civil service retirement laws have actually been 

7 made, or 

8 ‘‘(B) who dies by assassination after hav9 ing rendered less than 5 years of civilian service 

10 computed as prescribed in subsection (n) if, for 

11 the period of such service, the salary deductions 

12 provided for by subsection (c)(1) or the deposits 

13 required by subsection (d) have actually been 

14 made. 

15 ‘‘(3) TERMINATION OF ANNUITY.— 

16 ‘‘(A) IN THE CASE OF A SURVIVING

17 SPOUSE.—The annuity payable to a surviving 

18 spouse under this subsection shall be terminable 

19 upon such surviving spouse’s death or such sur20 viving spouse’s remarriage before attaining age 

21 55. 

22 ‘‘(B) IN THE CASE OF A CHILD.—The an23 nuity payable to a child under this subsection 

24 shall be terminable upon (i) the child attaining 

25 the age of 18 years, (ii) the child’s marriage, or 
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1 (iii) the child’s death, whichever first occurs, ex2 cept that if such child is incapable of self-sup3 port by reason of mental or physical disability 

4 the child’s annuity shall be terminable only 

5 upon death, marriage, or recovery from such 

6 disability. 

7 ‘‘(C) IN THE CASE OF A DEPENDENT

8 CHILD AFTER DEATH OF SURVIVING SPOUSE.—

9 In case of the death of a surviving spouse of a 

10 judge leaving a dependent child or children of 

11 the judge surviving such spouse, the annuity of 

12 such child or children shall be recomputed and 

13 paid as provided in paragraph (1)(C). 

14 ‘‘(D) RECOMPUTATION.—In any case in 

15 which the annuity of a dependent child is termi16 nated under this subsection, the annuities of 

17 any remaining dependent child or children, 

18 based upon the service of the same judge, shall 

19 be recomputed and paid as though the child 

20 whose annuity was so terminated had not sur21 vived such judge. 

22 ‘‘(4) SPECIAL RULE FOR ASSASSINATED

23 JUDGES.—In the case of a survivor or survivors of 

24 a judge described in paragraph (2)(B), there shall be 
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1 deducted from the annuities otherwise payable under 

2 this section an amount equal to— 

3 ‘‘(A) the amount of salary deductions pro4 vided for by subsection (c)(1) that would have 

5 been made if such deductions had been made 

6 for 5 years of civilian service computed as pre7 scribed in subsection (n) before the judge’s 

8 death, reduced by 

9 ‘‘(B) the amount of such salary deductions 

10 that were actually made before the date of the 

11 judge’s death.’’ 

12 (b) DEFINITION OF ASSASSINATION.—Section 

13 7448(a) (relating to definitions) is amended by adding at 

14 the end the following new paragraph: 

15 ‘‘(8) The terms ‘assassinated’ and ‘assassina16 tion’ mean the killing of a judge that is motivated 

17 by the performance by that judge of his or her offi18 cial duties.’’ 

19 (c) DETERMINATION OF ASSASSINATION.—Sub20 section (i) of section 7448 is amended— 

21 (1) by striking the subsection heading and in22 serting the following: 

23 ‘‘(i) DETERMINATIONS BY CHIEF JUDGE.— 

24 ‘‘(1) DEPENDENCY AND DISABILITY.—’’, 

25 (2) by moving the text 2 ems to the right, and 
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•S 219 IS

1 (3) by adding at the end the following new 

2 paragraph: 

3 ‘‘(2) ASSASSINATION.—The chief judge shall 

4 determine whether the killing of a judge was an as5 sassination, subject to review only by the Tax Court. 

6 The head of any Federal agency that investigates 

7 the killing of a judge shall provide information to 

8 the chief judge that would assist the chief judge in 

9 making such a determination.’’ 

10 (d) COMPUTATION OF ANNUITIES.—Subsection (m) 

11 of section 7448 is amended— 

12 (1) by striking the subsection heading and in13 serting the following: 

14 ‘‘(m) COMPUTATION OF ANNUITIES.— 

15 ‘‘(1) IN GENERAL.—’’, 

16 (2) by moving the text 2 ems to the right, and 

17 (3) by adding at the end the following new 

18 paragraph: 

19 ‘‘(2) ASSASSINATED JUDGES.—In the case of a 

20 judge who is assassinated and who has served less 

21 than 3 years, the annuity of the surviving spouse of 

22 such judge shall be based upon the average annual 

23 salary received by such judge for judicial service.’’ 

24 (e) OTHER BENEFITS.—Section 7448 is amended by 

25 adding at the end the following: 
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1 ‘‘(u) OTHER BENEFITS.—In the case of a judge who 

2 is assassinated, an annuity shall be paid under this section 

3 notwithstanding a survivor’s eligibility for or receipt of 

4 benefits under chapter 81 of title 5, United States Code, 

5 except that the annuity for which a surviving spouse is 

6 eligible under this section shall be reduced to the extent 

7 that the total benefits paid under this section and chapter 

8 81 of that title for any year would exceed the current sal9 ary for that year of the office of the judge.’’ 

10 SEC. 602. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT 

11 JUDICIAL SURVIVOR ANNUITIES. 

12 (a) IN GENERAL.—Subsection (s) of section 7448 

13 (relating to annuities to surviving spouses and dependent 

14 children of judges) is amended to read as follows: 

15 ‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each 

16 time that an increase is made under section 8340(b) of 

17 title 5, United States Code, in annuities payable under 

18 subchapter III of chapter 83 of that title, each annuity 

19 payable from the survivors annuity fund under this section 

20 shall be increased at the same time by the same percent21 age by which annuities are increased under such section 

22 8340(b).’’ 

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

24 this section shall apply with respect to increases made 

25 under section 8340(b) of title 5, United States Code, in 
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1 annuities payable under subchapter III of chapter 83 of 

2 that title, taking effect after the date of the enactment 

3 of this Act. 

4 SEC. 603. LIFE INSURANCE COVERAGE FOR TAX COURT 

5 JUDGES. 

6 (a) IN GENERAL.—Section 7447 (relating to retire7 ment of judges) is amended by adding at the end the fol8 lowing new subsection: 

9 ‘‘(j) LIFE INSURANCE COVERAGE.—For purposes of 

10 chapter 87 of title 5, United States Code (relating to life 

11 insurance), any individual who is serving as a judge of 

12 the Tax Court or who is retired under this section is 

13 deemed to be an employee who is continuing in active em14 ployment.’’ 

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

16 this section shall apply to any individual serving as a judge 

17 of the United States Tax Court or to any retired judge 

18 of the United States Tax Court on the date of the enact19 ment of this Act. 

20 SEC. 604. COST OF LIFE INSURANCE COVERAGE FOR TAX 

21 COURT JUDGES AGE 65 OR OVER. 

22 Section 7472 (relating to expenditures) is amended 

23 by inserting after the first sentence the following new sen24 tence: ‘‘Notwithstanding any other provision of law, the 

25 Tax Court is authorized to pay on behalf of its judges, 
193

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1 age 65 or over, any increase in the cost of Federal Em2 ployees’ Group Life Insurance imposed after April 24, 

3 1999, including any expenses generated by such payments, 

4 as authorized by the chief judge in a manner consistent 

5 with such payments authorized by the Judicial Conference 

6 of the United States pursuant to section 604(a)(5) of title 

7 28, United States Code.’’ 

8 SEC. 605. MODIFICATION OF TIMING OF LUMP-SUM PAY9 MENT OF JUDGES’ ACCRUED ANNUAL LEAVE. 

10 (a) IN GENERAL.—Section 7443 (relating to mem11 bership of the Tax Court) is amended by adding at the 

12 end the following new subsection: 

13 ‘‘(h) LUMP-SUM PAYMENT OF JUDGES’ ACCRUED

14 ANNUAL LEAVE.—Notwithstanding the provisions of sec15 tions 5551 and 6301 of title 5, United States Code, when 

16 an individual subject to the leave system provided in chap17 ter 63 of that title is appointed by the President to be 

18 a judge of the Tax Court, the individual shall be entitled 

19 to receive, upon appointment to the Tax Court, a lump20 sum payment from the Tax Court of the accumulated and 

21 accrued current annual leave standing to the individual’s 

22 credit as certified by the agency from which the individual 

23 resigned.’’ 

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

25 this section shall apply to any judge of the United States 
194

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1 Tax Court who has an outstanding leave balance on the 

2 date of the enactment of this Act and to any individual 

3 appointed by the President to serve as a judge of the 

4 United States Tax Court after such date. 

5 SEC. 606. PARTICIPATION OF TAX COURT JUDGES IN THE 

6 THRIFT SAVINGS PLAN. 

7 (a) IN GENERAL.—Section 7447 (relating to retire8 ment of judges), as amended by this Act, is amended by 

9 adding at the end the following new subsection: 

10 ‘‘(k) THRIFT SAVINGS PLAN.— 

11 ‘‘(1) ELECTION TO CONTRIBUTE.— 

12 ‘‘(A) IN GENERAL.—A judge of the Tax 

13 Court may elect to contribute to the Thrift Sav14 ings Fund established by section 8437 of title 

15 5, United States Code. 

16 ‘‘(B) PERIOD OF ELECTION.—An election 

17 may be made under this paragraph only during 

18 a period provided under section 8432(b) of title 

19 5, United States Code, for individuals subject to 

20 chapter 84 of such title. 

21 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—

22 Except as otherwise provided in this subsection, the 

23 provisions of subchapters III and VII of chapter 84 

24 of title 5, United States Code, shall apply with re-
195

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1 spect to a judge who makes an election under para2 graph (1). 

3 ‘‘(3) SPECIAL RULES.— 

4 ‘‘(A) AMOUNT CONTRIBUTED.—The 

5 amount contributed by a judge to the Thrift 

6 Savings Fund in any pay period shall not ex7 ceed the maximum percentage of such judge’s 

8 basic pay for such period as allowable under 

9 section 8440f of title 5, United States Code. 

10 Basic pay does not include any retired pay paid 

11 pursuant to this section. 

12 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

13 JUDGE.—No contributions may be made for the 

14 benefit of a judge under section 8432(c) of title 

15 5, United States Code. 

16 ‘‘(C) APPLICABILITY OF SECTION 8433(b) 

17 OF TITLE 5 WHETHER OR NOT JUDGE RE18 TIRES.—Section 8433(b) of title 5, United 

19 States Code, applies with respect to a judge 

20 who makes an election under paragraph (1) and 

21 who either— 

22 ‘‘(i) retires under subsection (b), or 

23 ‘‘(ii) ceases to serve as a judge of the 

24 Tax Court but does not retire under sub25 section (b). 
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1 Retirement under subsection (b) is a separation 

2 from service for purposes of subchapters III 

3 and VII of chapter 84 of that title. 

4 ‘‘(D) APPLICABILITY OF SECTION

5 8351(b)(5) OF TITLE 5.—The provisions of sec6 tion 8351(b)(5) of title 5, United States Code, 

7 shall apply with respect to a judge who makes 

8 an election under paragraph (1). 

9 ‘‘(E) EXCEPTION.—Notwithstanding sub10 paragraph (C), if any judge retires under this 

11 section, or resigns without having met the age 

12 and service requirements set forth under sub13 section (b)(2), and such judge’s nonforfeitable 

14 account balance is less than an amount that the 

15 Executive Director of the Office of Personnel 

16 Management prescribes by regulation, the Exec17 utive Director shall pay the nonforfeitable ac18 count balance to the participant in a single pay19 ment.’’ 

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

21 this section shall take effect on the date of the enactment 

22 of this Act, except that United States Tax Court judges 

23 may only begin to participate in the Thrift Savings Plan 

24 at the next open season beginning after such date. 
197

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1 SEC. 607. EXEMPTION OF TEACHING COMPENSATION OF 

2 RETIRED JUDGES FROM LIMITATION ON 

3 OUTSIDE EARNED INCOME. 

4 (a) IN GENERAL.—Section 7447 (relating to retire5 ment of judges), as amended by this Act, is amended by 

6 adding at the end the following new subsection: 

7 ‘‘(l) TEACHING COMPENSATION OF RETIRED

8 JUDGES.—For purposes of the limitation under section 

9 501(a) of the Ethics in Government Act of 1978 (5 U.S.C. 

10 App.), any compensation for teaching approved under sec11 tion 502(a)(5) of such Act shall not be treated as outside 

12 earned income when received by a judge of the Tax Court 

13 who has retired under subsection (b) for teaching per14 formed during any calendar year for which such a judge 

15 has met the requirements of subsection (c), as certified 

16 by the chief judge of the Tax Court.’’ 

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

18 this section shall apply to any individual serving as a re19 tired judge of the United States Tax Court on or after 

20 the date of the enactment of this Act. 

21 SEC. 608. GENERAL PROVISIONS RELATING TO MAG22 ISTRATE JUDGES OF THE TAX COURT. 

23 (a) TITLE OF SPECIAL TRIAL JUDGE CHANGED TO

24 MAGISTRATE JUDGE OF THE TAX COURT.—The heading 

25 of section 7443A is amended to read as follows: 
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1 ‘‘SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.’’

2 (b) APPOINTMENT, TENURE, AND REMOVAL.—Sub3 section (a) of section 7443A is amended to read as follows: 

4 ‘‘(a) APPOINTMENT, TENURE, AND REMOVAL.— 

5 ‘‘(1) APPOINTMENT.—The chief judge may, 

6 from time to time, appoint and reappoint magistrate 

7 judges of the Tax Court for a term of 8 years. The 

8 magistrate judges of the Tax Court shall proceed 

9 under such rules as may be promulgated by the Tax 

10 Court. 

11 ‘‘(2) REMOVAL.—Removal of a magistrate 

12 judge of the Tax Court during the term for which 

13 he or she is appointed shall be only for incom14 petency, misconduct, neglect of duty, or physical or 

15 mental disability, but the office of a magistrate 

16 judge of the Tax Court shall be terminated if the 

17 judges of the Tax Court determine that the services 

18 performed by the magistrate judge of the Tax Court 

19 are no longer needed. Removal shall not occur unless 

20 a majority of all the judges of the Tax Court concur 

21 in the order of removal. Before any order of removal 

22 shall be entered, a full specification of the charges 

23 shall be furnished to the magistrate judge of the Tax 

24 Court, and he or she shall be accorded by the judges 

25 of the Tax Court an opportunity to be heard on the 

26 charges.’’ 
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1 (c) SALARY.—Section 7443A(d) (relating to salary) 

2 is amended by striking ‘‘90’’ and inserting ‘‘92’’. 

3 (d) EXEMPTION FROM FEDERAL LEAVE PROVI4 SIONS.—Section 7443A is amended by adding at the end 

5 the following new subsection: 

6 ‘‘(f) EXEMPTION FROM FEDERAL LEAVE PROVI7 SIONS.— 

8 ‘‘(1) IN GENERAL.—A magistrate judge of the 

9 Tax Court appointed under this section shall be ex10 empt from the provisions of subchapter I of chapter 

11 63 of title 5, United States Code. 

12 ‘‘(2) TREATMENT OF UNUSED LEAVE.— 

13 ‘‘(A) AFTER SERVICE AS MAGISTRATE

14 JUDGE.—If an individual who is exempted 

15 under paragraph (1) from the subchapter re16 ferred to in such paragraph was previously sub17 ject to such subchapter and, without a break in 

18 service, again becomes subject to such sub19 chapter on completion of the individual’s service 

20 as a magistrate judge, the unused annual leave 

21 and sick leave standing to the individual’s cred22 it when such individual was exempted from this 

23 subchapter is deemed to have remained to the 

24 individual’s credit. 
200

•S 219 IS

1 ‘‘(B) COMPUTATION OF ANNUITY.—In 

2 computing an annuity under section 8339 of 

3 title 5, United States Code, the total service of 

4 an individual specified in subparagraph (A) who 

5 retires on an immediate annuity or dies leaving 

6 a survivor or survivors entitled to an annuity 

7 includes, without regard to the limitations im8 posed by subsection (f) of such section 8339, 

9 the days of unused sick leave standing to the 

10 individual’s credit when such individual was ex11 empted from subchapter I of chapter 63 of title 

12 5, United States Code, except that these days 

13 will not be counted in determining average pay 

14 or annuity eligibility. 

15 ‘‘(C) LUMP SUM PAYMENT.—Any accumu16 lated and current accrued annual leave or vaca17 tion balances credited to a magistrate judge as 

18 of the date of the enactment of this subsection 

19 shall be paid in a lump sum at the time of sepa20 ration from service pursuant to the provisions 

21 and restrictions set forth in section 5551 of 

22 title 5, United States Code, and related provi23 sions referred to in such section.’’ 

24 (e) CONFORMING AMENDMENTS.— 
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1 (1) The heading of subsection (b) of section 

2 7443A is amended by striking ‘‘SPECIAL TRIAL

3 JUDGES’’ and inserting ‘‘Magistrate Judges of the 

4 Tax Court’’. 

5 (2) Section 7443A(b) is amended by striking 

6 ‘‘special trial judges of the court’’ and inserting 

7 ‘‘magistrate judges of the Tax Court’’. 

8 (3) Subsections (c) and (d) of section 7443A 

9 are amended by striking ‘‘special trial judge’’ and 

10 inserting ‘‘magistrate judge of the Tax Court’’ each 

11 place it appears. 

12 (4) Section 7443A(e) is amended by striking 

13 ‘‘special trial judges’’ and inserting ‘‘magistrate 

14 judges of the Tax Court’’. 

15 (5) Section 7456(a) is amended by striking 

16 ‘‘special trial judge’’ each place it appears and in17 serting ‘‘magistrate judge’’. 

18 (6) Subsection (c) of section 7471 is amend19 ed— 

20 (A) by striking the subsection heading and 

21 inserting ‘‘MAGISTRATE JUDGES OF THE TAX

22 COURT.—’’, and 

23 (B) by striking ‘‘special trial judges’’ and 

24 inserting ‘‘magistrate judges’’. 
202

•S 219 IS

1 SEC. 609. ANNUITIES TO SURVIVING SPOUSES AND DE2 PENDENT CHILDREN OF MAGISTRATE 

3 JUDGES OF THE TAX COURT. 

4 (a) DEFINITIONS.—Section 7448(a) (relating to defi5 nitions), as amended by this Act, is amended by redesig6 nating paragraphs (5), (6), (7), and (8) as paragraphs (7), 

7 (8), (9), and (10), respectively, and by inserting after 

8 paragraph (4) the following new paragraphs: 

9 ‘‘(5) The term ‘magistrate judge’ means a judi10 cial officer appointed pursuant to section 7443A, in11 cluding any individual receiving an annuity under 

12 section 7443B, or chapters 83 or 84, as the case 

13 may be, of title 5, United States Code, whether or 

14 not performing judicial duties under section 7443C. 

15 ‘‘(6) The term ‘magistrate judge’s salary’ 

16 means the salary of a magistrate judge received 

17 under section 7443A(d), any amount received as an 

18 annuity under section 7443B, or chapters 83 or 84, 

19 as the case may be, of title 5, United States Code, 

20 and compensation received under section 7443C.’’ 

21 (b) ELECTION.—Subsection (b) of section 7448 (re22 lating to annuities to surviving spouses and dependent 

23 children of judges) is amended— 

24 (1) by striking the subsection heading and in25 serting the following: 

26 ‘‘(b) ELECTION.— 
203

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1 ‘‘(1) JUDGES.—’’, 

2 (2) by moving the text 2 ems to the right, and 

3 (3) by adding at the end the following new 

4 paragraph: 

5 ‘‘(2) MAGISTRATE JUDGES.—Any magistrate 

6 judge may by written election filed with the chief 

7 judge bring himself or herself within the purview of 

8 this section. Such election shall be filed not later 

9 than the later of 6 months after— 

10 ‘‘(A) 6 months after the date of the enact11 ment of this paragraph, 

12 ‘‘(B) the date the judge takes office, or 

13 ‘‘(C) the date the judge marries.’’ 

14 (c) CONFORMING AMENDMENTS.— 

15 (1) The heading of section 7448 is amended by 

16 inserting ‘‘AND MAGISTRATE JUDGES’’ after 

17 ‘‘JUDGES’’. 

18 (2) The item relating to section 7448 in the 

19 table of sections for part I of subchapter C of chap20 ter 76 is amended by inserting ‘‘and magistrate 

21 judges’’ after ‘‘judges’’. 

22 (3) Subsections (c)(1), (d), (f), (g), (h), (j), 

23 (m), (n), and (u) of section 7448, as amended by 

24 this Act, are each amended— 
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1 (A) by inserting ‘‘or magistrate judge’’ 

2 after ‘‘judge’’ each place it appears other than 

3 in the phrase ‘‘chief judge’’, and 

4 (B) by inserting ‘‘or magistrate judge’s’’ 

5 after ‘‘judge’s’’ each place it appears. 

6 (4) Section 7448(c) is amended— 

7 (A) in paragraph (1), by striking ‘‘Tax 

8 Court judges’’ and inserting ‘‘Tax Court judi9 cial officers’’, 

10 (B) in paragraph (2)— 

11 (i) in subparagraph (A), by inserting 

12 ‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’, 

13 and 

14 (ii) in subparagraph (B), by striking 

15 ‘‘subsection (a)(4)’’ and inserting ‘‘sub16 sections (a)(4) and (a)(6)’’. 

17 (5) Section 7448(g) is amended by inserting 

18 ‘‘or section 7443B’’ after ‘‘section 7447’’ each place 

19 it appears, and by inserting ‘‘or an annuity’’ after 

20 ‘‘retired pay’’. 

21 (6) Section 7448(j)(1) is amended— 

22 (A) in subparagraph (A), by striking 

23 ‘‘service or retired’’ and inserting ‘‘service, re24 tired’’, and by inserting ‘‘, or receiving any an25 nuity under section 7443B or chapters 83 or 84 
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•S 219 IS

1 of title 5, United States Code,’’ after ‘‘section 

2 7447’’, and 

3 (B) in the last sentence, by striking ‘‘sub4 sections (a) (6) and (7)’’ and inserting ‘‘para5 graphs (8) and (9) of subsection (a)’’. 

6 (7) Section 7448(m)(1), as amended by this 

7 Act, is amended— 

8 (A) by inserting ‘‘or any annuity under 

9 section 7443B or chapters 83 or 84 of title 5, 

10 United States Code’’ after ‘‘7447(d)’’, and 

11 (B) by inserting ‘‘or 7443B(m)(1)(B) after 

12 ‘‘7447(f)(4)’’. 

13 (8) Section 7448(n) is amended by inserting 

14 ‘‘his years of service pursuant to any appointment 

15 under section 7443A,’’ after ‘‘of the Tax Court,’’. 

16 (9) Section 3121(b)(5)(E) is amended by in17 serting ‘‘or magistrate judge’’ before ‘‘of the United 

18 States Tax Court’’. 

19 (10) Section 210(a)(5)(E) of the Social Secu20 rity Act is amended by inserting ‘‘or magistrate 

21 judge’’ before ‘‘of the United States Tax Court’’. 

22 SEC. 610. RETIREMENT AND ANNUITY PROGRAM. 

23 (a) RETIREMENT AND ANNUITY PROGRAM.—Part I 

24 of subchapter C of chapter 76 is amended by inserting 

25 after section 7443A the following new section: 
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•S 219 IS

1 ‘‘SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF 

2 THE TAX COURT. 

3 ‘‘(a) RETIREMENT BASED ON YEARS OF SERVICE.—

4 A magistrate judge of the Tax Court to whom this section 

5 applies and who retires from office after attaining the age 

6 of 65 years and serving at least 14 years, whether continu7 ously or otherwise, as such magistrate judge shall, subject 

8 to subsection (f), be entitled to receive, during the remain9 der of the magistrate judge’s lifetime, an annuity equal 

10 to the salary being received at the time the magistrate 

11 judge leaves office. 

12 ‘‘(b) RETIREMENT UPON FAILURE OF REAPPOINT13 MENT.—A magistrate judge of the Tax Court to whom 

14 this section applies who is not reappointed following the 

15 expiration of the term of office of such magistrate judge 

16 and who retires upon the completion of the term shall, 

17 subject to subsection (f), be entitled to receive, upon at18 taining the age of 65 years and during the remainder of 

19 such magistrate judge’s lifetime, an annuity equal to that 

20 portion of the salary being received at the time the mag21 istrate judge leaves office which the aggregate number of 

22 years of service, not to exceed 14, bears to 14, if— 

23 ‘‘(1) such magistrate judge has served at least 

24 1 full term as a magistrate judge, and 

25 ‘‘(2) not earlier than 9 months before the date 

26 on which the term of office of such magistrate judge 
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•S 219 IS

1 expires, and not later than 6 months before such 

2 date, such magistrate judge notified the chief judge 

3 of the Tax Court in writing that such magistrate 

4 judge was willing to accept reappointment to the po5 sition in which such magistrate judge was serving. 

6 ‘‘(c) SERVICE OF AT LEAST 8 YEARS.—A magistrate 

7 judge of the Tax Court to whom this section applies and 

8 who retires after serving at least 8 years, whether continu9 ously or otherwise, as such a magistrate judge shall, sub10 ject to subsection (f), be entitled to receive, upon attaining 

11 the age of 65 years and during the remainder of the mag12 istrate judge’s lifetime, an annuity equal to that portion 

13 of the salary being received at the time the magistrate 

14 judge leaves office which the aggregate number of years 

15 of service, not to exceed 14, bears to 14. Such annuity 

shall be reduced by 1 16 ⁄6 of 1 percent for each full month 

17 such magistrate judge was under the age of 65 at the time 

18 the magistrate judge left office, except that such reduction 

19 shall not exceed 20 percent. 

20 ‘‘(d) RETIREMENT FOR DISABILITY.—A magistrate 

21 judge of the Tax Court to whom this section applies, who 

22 has served at least 5 years, whether continuously or other23 wise, as such a magistrate judge and who retires or is re24 moved from office upon the sole ground of mental or phys25 ical disability shall, subject to subsection (f), be entitled 
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1 to receive, during the remainder of the magistrate judge’s 

2 lifetime, an annuity equal to 40 percent of the salary being 

3 received at the time of retirement or removal or, in the 

4 case of a magistrate judge who has served for at least 10 

5 years, an amount equal to that proportion of the salary 

6 being received at the time of retirement or removal which 

7 the aggregate number of years of service, not to exceed 

8 14, bears to 14. 

9 ‘‘(e) COST-OF-LIVING ADJUSTMENTS.—A magistrate 

10 judge of the Tax Court who is entitled to an annuity under 

11 this section is also entitled to a cost-of-living adjustment 

12 in such annuity, calculated and payable in the same man13 ner as adjustments under section 8340(b) of title 5, 

14 United States Code, except that any such annuity, as in15 creased under this subsection, may not exceed the salary 

16 then payable for the position from which the magistrate 

17 judge retired or was removed. 

18 ‘‘(f) ELECTION; ANNUITY IN LIEU OF OTHER ANNU19 ITIES.— 

20 ‘‘(1) IN GENERAL.—A magistrate judge of the 

21 Tax Court shall be entitled to an annuity under this 

22 section if the magistrate judge elects an annuity 

23 under this section by notifying the chief judge of the 

24 Tax Court not later than the later of— 
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•S 219 IS

1 ‘‘(A) 5 years after the magistrate judge of 

2 the Tax Court begins judicial service, or 

3 ‘‘(B) 5 years after the date of the enact4 ment of this subsection. 

5 Such notice shall be given in accordance with proce6 dures prescribed by the Tax Court. 

7 ‘‘(2) ANNUITY IN LIEU OF OTHER ANNUITY.—

8 A magistrate judge who elects to receive an annuity 

9 under this section shall not be entitled to receive— 

10 ‘‘(A) any annuity to which such magistrate 

11 judge would otherwise have been entitled under 

12 subchapter III of chapter 83, or under chapter 

13 84 (except for subchapters III and VII), of title 

14 5, United States Code, for service performed as 

15 a magistrate or otherwise, 

16 ‘‘(B) an annuity or salary in senior status 

17 or retirement under section 371 or 372 of title 

18 28, United States Code, 

19 ‘‘(C) retired pay under section 7447, or 

20 ‘‘(D) retired pay under section 7296 of 

21 title 38, United States Code. 

22 ‘‘(3) COORDINATION WITH TITLE 5.—A mag23 istrate judge of the Tax Court who elects to receive 

24 an annuity under this section— 
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•S 219 IS

1 ‘‘(A) shall not be subject to deductions and 

2 contributions otherwise required by section 

3 8334(a) of title 5, United States Code, 

4 ‘‘(B) shall be excluded from the operation 

5 of chapter 84 (other than subchapters III and 

6 VII) of such title 5, and 

7 ‘‘(C) is entitled to a lump-sum credit under 

8 section 8342(a) or 8424 of such title 5, as the 

9 case may be. 

10 ‘‘(g) CALCULATION OF SERVICE.—For purposes of 

11 calculating an annuity under this section— 

12 ‘‘(1) service as a magistrate judge of the Tax 

13 Court to whom this section applies may be credited, 

14 and 

15 ‘‘(2) each month of service shall be credited as 

1 16 ⁄12 of a year, and the fractional part of any month 

17 shall not be credited. 

18 ‘‘(h) COVERED POSITIONS AND SERVICE.—This sec19 tion applies to any magistrate judge of the Tax Court or 

20 special trial judge of the Tax Court appointed under this 

21 subchapter, but only with respect to service as such a mag22 istrate judge or special trial judge after a date not earlier 

than 91 23 ⁄2 years before the date of the enactment of this 

24 subsection. 

25 ‘‘(i) PAYMENTS PURSUANT TO COURT ORDER.— 
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•S 219 IS

1 ‘‘(1) IN GENERAL.—Payments under this sec2 tion which would otherwise be made to a magistrate 

3 judge of the Tax Court based upon his or her service 

4 shall be paid (in whole or in part) by the chief judge 

5 of the Tax Court to another person if and to the ex6 tent expressly provided for in the terms of any court 

7 decree of divorce, annulment, or legal separation, or 

8 the terms of any court order or court-approved prop9 erty settlement agreement incident to any court de10 cree of divorce, annulment, or legal separation. Any 

11 payment under this paragraph to a person bars re12 covery by any other person. 

13 ‘‘(2) REQUIREMENTS FOR PAYMENT.—Para14 graph (1) shall apply only to payments made by the 

15 chief judge of the Tax Court after the date of re16 ceipt by the chief judge of written notice of such de17 cree, order, or agreement, and such additional infor18 mation as the chief judge may prescribe. 

19 ‘‘(3) COURT DEFINED.—For purposes of this 

20 subsection, the term ‘court’ means any court of any 

21 State, the District of Columbia, the Commonwealth 

22 of Puerto Rico, Guam, the Northern Mariana Is23 lands, or the Virgin Islands, and any Indian tribal 

24 court or courts of Indian offense. 
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1 ‘‘(j) DEDUCTIONS, CONTRIBUTIONS, AND DEPOS2 ITS.— 

3 ‘‘(1) DEDUCTIONS.—Beginning with the next 

4 pay period after the chief judge of the Tax Court re5 ceives a notice under subsection (f) that a mag6 istrate judge of the Tax Court has elected an annu7 ity under this section, the chief judge shall deduct 

8 and withhold 1 percent of the salary of such mag9 istrate judge. Amounts shall be so deducted and 

10 withheld in a manner determined by the chief judge. 

11 Amounts deducted and withheld under this sub12 section shall be deposited in the Treasury of the 

13 United States to the credit of the Tax Court Judi14 cial Officers’ Retirement Fund. Deductions under 

15 this subsection from the salary of a magistrate judge 

16 shall terminate upon the retirement of the mag17 istrate judge or upon completion of 14 years of serv18 ice for which contributions under this section have 

19 been made, whether continuously or otherwise, as 

20 calculated under subsection (g), whichever occurs 

21 first. 

22 ‘‘(2) CONSENT TO DEDUCTIONS; DISCHARGE OF

23 CLAIMS.—Each magistrate judge of the Tax Court 

24 who makes an election under subsection (f) shall be 

25 deemed to consent and agree to the deductions from 
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•S 219 IS

1 salary which are made under paragraph (1). Pay2 ment of such salary less such deductions (and any 

3 deductions made under section 7448) is a full and 

4 complete discharge and acquittance of all claims and 

5 demands for all services rendered by such magistrate 

6 judge during the period covered by such payment, 

7 except the right to those benefits to which the mag8 istrate judge is entitled under this section (and sec9 tion 7448). 

10 ‘‘(k) DEPOSITS FOR PRIOR SERVICE.—Each mag11 istrate judge of the Tax Court who makes an election 

12 under subsection (f) may deposit, for service performed 

13 before such election for which contributions may be made 

14 under this section, an amount equal to 1 percent of the 

15 salary received for that service. Credit for any period cov16 ered by that service may not be allowed for purposes of 

17 an annuity under this section until a deposit under this 

18 subsection has been made for that period. 

19 ‘‘(l) INDIVIDUAL RETIREMENT RECORDS.—The 

20 amounts deducted and withheld under subsection (j), and 

21 the amounts deposited under subsection (k), shall be cred22 ited to individual accounts in the name of each magistrate 

23 judge of the Tax Court from whom such amounts are re24 ceived, for credit to the Tax Court Judicial Officers’ Re25 tirement Fund. 
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•S 219 IS

1 ‘‘(m) ANNUITIES AFFECTED IN CERTAIN CASES.— 

2 ‘‘(1) 1-YEAR FORFEITURE FOR FAILURE TO

3 PERFORM JUDICIAL DUTIES.—Subject to paragraph 

4 (3), any magistrate judge of the Tax Court who re5 tires under this section and who fails to perform ju6 dicial duties required of such individual by section 

7 7443C shall forfeit all rights to an annuity under 

8 this section for a 1-year period which begins on the 

9 1st day on which such individual fails to perform 

10 such duties. 

11 ‘‘(2) PERMANENT FORFEITURE OF RETIRED

12 PAY WHERE CERTAIN NON-GOVERNMENT SERVICES

13 PERFORMED.—Subject to paragraph (3), any mag14 istrate judge of the Tax Court who retires under this 

15 section and who thereafter performs (or supervises 

16 or directs the performance of) legal or accounting 

17 services in the field of Federal taxation for the indi18 vidual’s client, the individual’s employer, or any of 

19 such employer’s clients, shall forfeit all rights to an 

20 annuity under this section for all periods beginning 

21 on or after the first day on which the individual per22 forms (or supervises or directs the performance of) 

23 such services. The preceding sentence shall not apply 

24 to any civil office or employment under the Govern25 ment of the United States. 
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•S 219 IS

1 ‘‘(3) FORFEITURES NOT TO APPLY WHERE IN2 DIVIDUAL ELECTS TO FREEZE AMOUNT OF ANNU3 ITY.— 

4 ‘‘(A) IN GENERAL.—If a magistrate judge 

5 of the Tax Court makes an election under this 

6 paragraph— 

7 ‘‘(i) paragraphs (1) and (2) (and sec8 tion 7443C) shall not apply to such mag9 istrate judge beginning on the date such 

10 election takes effect, and 

11 ‘‘(ii) the annuity payable under this 

12 section to such magistrate judge, for peri13 ods beginning on or after the date such 

14 election takes effect, shall be equal to the 

15 annuity to which such magistrate judge is 

16 entitled on the day before such effective 

17 date. 

18 ‘‘(B) ELECTION REQUIREMENTS.—An elec19 tion under subparagraph (A)— 

20 ‘‘(i) may be made by a magistrate 

21 judge of the Tax Court eligible for retire22 ment under this section, and 

23 ‘‘(ii) shall be filed with the chief judge 

24 of the Tax Court. 
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•S 219 IS

1 Such an election, once it takes effect, shall be 

2 irrevocable. 

3 ‘‘(C) EFFECTIVE DATE OF ELECTION.—

4 Any election under subparagraph (A) shall take 

5 effect on the first day of the first month fol6 lowing the month in which the election is made. 

7 ‘‘(4) ACCEPTING OTHER EMPLOYMENT.—Any 

8 magistrate judge of the Tax Court who retires under 

9 this section and thereafter accepts compensation for 

10 civil office or employment under the United States 

11 Government (other than for the performance of 

12 functions as a magistrate judge of the Tax Court 

13 under section 7443C) shall forfeit all rights to an 

14 annuity under this section for the period for which 

15 such compensation is received. For purposes of this 

16 paragraph, the term ‘compensation’ includes retired 

17 pay or salary received in retired status. 

18 ‘‘(n) LUMP-SUM PAYMENTS.— 

19 ‘‘(1) ELIGIBILITY.— 

20 ‘‘(A) IN GENERAL.—Subject to paragraph 

21 (2), an individual who serves as a magistrate 

22 judge of the Tax Court and— 

23 ‘‘(i) who leaves office and is not re24 appointed as a magistrate judge of the Tax 

25 Court for at least 31 consecutive days, 
217

•S 219 IS

1 ‘‘(ii) who files an application with the 

2 chief judge of the Tax Court for payment 

3 of a lump-sum credit, 

4 ‘‘(iii) is not serving as a magistrate 

5 judge of the Tax Court at the time of fil6 ing of the application, and 

7 ‘‘(iv) will not become eligible to re8 ceive an annuity under this section within 

9 31 days after filing the application, 

10 is entitled to be paid the lump-sum credit. Pay11 ment of the lump-sum credit voids all rights to 

12 an annuity under this section based on the serv13 ice on which the lump-sum credit is based, until 

14 that individual resumes office as a magistrate 

15 judge of the Tax Court. 

16 ‘‘(B) PAYMENT TO SURVIVORS.—Lump17 sum benefits authorized by subparagraphs (C), 

18 (D), and (E) of this paragraph shall be paid to 

19 the person or persons surviving the magistrate 

20 judge of the Tax Court and alive on the date 

21 title to the payment arises, in the order of prec22 edence set forth in subsection (o) of section 376 

23 of title 28, United States Code, and in accord24 ance with the last 2 sentences of paragraph (1) 

25 of that subsection. For purposes of the pre-
218

•S 219 IS

1 ceding sentence, the term ‘judicial official’ as 

2 used in subsection (o) of such section 376 shall 

3 be deemed to mean ‘magistrate judge of the 

4 Tax Court’ and the terms ‘Administrative Of5 fice of the United States Courts’ and ‘Director 

6 of the Administrative Office of the United 

7 States Courts’ shall be deemed to mean ‘chief 

8 judge of the Tax Court’. 

9 ‘‘(C) PAYMENT UPON DEATH OF JUDGE

10 BEFORE RECEIPT OF ANNUITY.—If a mag11 istrate judge of the Tax Court dies before re12 ceiving an annuity under this section, the lump13 sum credit shall be paid. 

14 ‘‘(D) PAYMENT OF ANNUITY REMAIN15 DER.—If all annuity rights under this section 

16 based on the service of a deceased magistrate 

17 judge of the Tax Court terminate before the 

18 total annuity paid equals the lump-sum credit, 

19 the difference shall be paid. 

20 ‘‘(E) PAYMENT UPON DEATH OF JUDGE

21 DURING RECEIPT OF ANNUITY.—If a magistrate 

22 judge of the Tax Court who is receiving an an23 nuity under this section dies, any accrued annu24 ity benefits remaining unpaid shall be paid. 
219

•S 219 IS

1 ‘‘(F) PAYMENT UPON TERMINATION.—Any 

2 accrued annuity benefits remaining unpaid on 

3 the termination, except by death, of the annuity 

4 of a magistrate judge of the Tax Court shall be 

5 paid to that individual. 

6 ‘‘(G) PAYMENT UPON ACCEPTING OTHER

7 EMPLOYMENT.—Subject to paragraph (2), a 

8 magistrate judge of the Tax Court who forfeits 

9 rights to an annuity under subsection (m)(4) 

10 before the total annuity paid equals the lump11 sum credit shall be entitled to be paid the dif12 ference if the magistrate judge of the Tax 

13 Court files an application with the chief judge 

14 of the Tax Court for payment of that dif15 ference. A payment under this subparagraph 

16 voids all rights to an annuity on which the pay17 ment is based. 

18 ‘‘(2) SPOUSES AND FORMER SPOUSES.— 

19 ‘‘(A) IN GENERAL.—Payment of the lump20 sum credit under paragraph (1)(A) or a pay21 ment under paragraph (1)(G)— 

22 ‘‘(i) may be made only if any current 

23 spouse and any former spouse of the mag24 istrate judge of the Tax Court are notified 

25 of the magistrate judge’s application, and 
220

•S 219 IS

1 ‘‘(ii) shall be subject to the terms of 

2 a court decree of divorce, annulment, or 

3 legal separation, or any court or court ap4 proved property settlement agreement inci5 dent to such decree, if— 

6 ‘‘(I) the decree, order, or agree7 ment expressly relates to any portion 

8 of the lump-sum credit or other pay9 ment involved, and 

10 ‘‘(II) payment of the lump-sum 

11 credit or other payment would extin12 guish entitlement of the magistrate 

13 judge’s spouse or former spouse to 

14 any portion of an annuity under sub15 section (i). 

16 ‘‘(B) NOTIFICATION.—Notification of a 

17 spouse or former spouse under this paragraph 

18 shall be made in accordance with such proce19 dures as the chief judge of the Tax Court shall 

20 prescribe. The chief judge may provide under 

21 such procedures that subparagraph (A)(i) may 

22 be waived with respect to a spouse or former 

23 spouse if the magistrate judge establishes to the 

24 satisfaction of the chief judge that the where-
221

•S 219 IS

1 abouts of such spouse or former spouse cannot 

2 be determined. 

3 ‘‘(C) RESOLUTION OF 2 OR MORE OR4 DERS.—The chief judge shall prescribe proce5 dures under which this paragraph shall be ap6 plied in any case in which the chief judge re7 ceives 2 or more orders or decrees described in 

8 subparagraph (A). 

9 ‘‘(3) DEFINITION.—For purposes of this sub10 section, the term ‘lump-sum credit’ means the 

11 unrefunded amount consisting of— 

12 ‘‘(A) retirement deductions made under 

13 this section from the salary of a magistrate 

14 judge of the Tax Court, 

15 ‘‘(B) amounts deposited under subsection 

16 (k) by a magistrate judge of the Tax Court cov17 ering earlier service, and 

18 ‘‘(C) interest on the deductions and depos19 its which, for any calendar year, shall be equal 

20 to the overall average yield to the Tax Court 

21 Judicial Officers’ Retirement Fund during the 

22 preceding fiscal year from all obligations pur23 chased by the Secretary during such fiscal year 

24 under subsection (o); but does not include inter25 est— 
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•S 219 IS

1 ‘‘(i) if the service covered thereby ag2 gregates 1 year or less, or 

3 ‘‘(ii) for the fractional part of a 

4 month in the total service. 

5 ‘‘(o) TAX COURT JUDICIAL OFFICERS’ RETIREMENT

6 FUND.— 

7 ‘‘(1) ESTABLISHMENT.—There is established in 

8 the Treasury a fund which shall be known as the 

9 ‘Tax Court Judicial Officers’ Retirement Fund’. 

10 Amounts in the Fund are authorized to be appro11 priated for the payment of annuities, refunds, and 

12 other payments under this section. 

13 ‘‘(2) INVESTMENT OF FUND.—The Secretary 

14 shall invest, in interest bearing securities of the 

15 United States, such currently available portions of 

16 the Tax Court Judicial Officers’ Retirement Fund as 

17 are not immediately required for payments from the 

18 Fund. The income derived from these investments 

19 constitutes a part of the Fund. 

20 ‘‘(3) UNFUNDED LIABILITY.— 

21 ‘‘(A) IN GENERAL.—There are authorized 

22 to be appropriated to the Tax Court Judicial 

23 Officers’ Retirement Fund amounts required to 

24 reduce to zero the unfunded liability of the 

25 Fund. 
223

•S 219 IS

1 ‘‘(B) UNFUNDED LIABILITY.—For pur2 poses of subparagraph (A), the term ‘unfunded 

3 liability’ means the estimated excess, deter4 mined on an annual basis in accordance with 

5 the provisions of section 9503 of title 31, 

6 United States Code, of the present value of all 

7 benefits payable from the Tax Court Judicial 

8 Officers’ Retirement Fund over the sum of— 

9 ‘‘(i) the present value of deductions to 

10 be withheld under this section from the fu11 ture basic pay of magistrate judges of the 

12 Tax Court, plus 

13 ‘‘(ii) the balance in the Fund as of the 

14 date the unfunded liability is determined. 

15 ‘‘(p) PARTICIPATION IN THRIFT SAVINGS PLAN.— 

16 ‘‘(1) ELECTION TO CONTRIBUTE.— 

17 ‘‘(A) IN GENERAL.—A magistrate judge of 

18 the Tax Court who elects to receive an annuity 

19 under this section or under section 611 of the 

20 National Employee Savings and Trust Equity 

21 Guarantee Act of 2005 may elect to contribute 

22 an amount of such individual’s basic pay to the 

23 Thrift Savings Fund established by section 

24 8437 of title 5, United States Code. 
224

•S 219 IS

1 ‘‘(B) PERIOD OF ELECTION.—An election 

2 may be made under this paragraph only during 

3 a period provided under section 8432(b) of title 

4 5, United States Code, for individuals subject to 

5 chapter 84 of such title. 

6 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—

7 Except as otherwise provided in this subsection, the 

8 provisions of subchapters III and VII of chapter 84 

9 of title 5, United States Code, shall apply with re10 spect to a magistrate judge who makes an election 

11 under paragraph (1). 

12 ‘‘(3) SPECIAL RULES.— 

13 ‘‘(A) AMOUNT CONTRIBUTED.—The 

14 amount contributed by a magistrate judge to 

15 the Thrift Savings Fund in any pay period shall 

16 not exceed the maximum percentage of such 

17 judge’s basic pay for such pay period as allow18 able under section 8440f of title 5, United 

19 States Code. 

20 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

21 JUDGE.—No contributions may be made for the 

22 benefit of a magistrate judge under section 

23 8432(c) of title 5, United States Code. 

24 ‘‘(C) APPLICABILITY OF SECTION 8433(b) 

25 OF TITLE 5.—Section 8433(b) of title 5, United 
225

•S 219 IS

1 States Code, applies with respect to a mag2 istrate judge who makes an election under para3 graph (1) and— 

4 ‘‘(i) who retires entitled to an imme5 diate annuity under this section (including 

6 a disability annuity under subsection (d) of 

7 this section) or section 611 of the National 

8 Employee Savings and Trust Equity Guar9 antee Act of 2005, 

10 ‘‘(ii) who retires before attaining age 

11 65 but is entitled, upon attaining age 65, 

12 to an annuity under this section or section 

13 611 of the National Employee Savings and 

14 Trust Equity Guarantee Act of 2005, or 

15 ‘‘(iii) who retires before becoming en16 titled to an immediate annuity, or an an17 nuity upon attaining age 65, under this 

18 section or section 611 of the National Em19 ployee Savings and Trust Equity Guar20 antee Act of 2005. 

21 ‘‘(D) SEPARATION FROM SERVICE.—With 

22 respect to a magistrate judge to whom this sub23 section applies, retirement under this section or 

24 section 611 of the National Employee Savings 

25 and Trust Equity Guarantee Act of 2005 is a 
226

•S 219 IS

1 separation from service for purposes of sub2 chapters III and VII of chapter 84 of title 5, 

3 United States Code. 

4 ‘‘(4) DEFINITIONS.—For purposes of this sub5 section, the terms ‘retirement’ and ‘retire’ include 

6 removal from office under section 7443A(a)(2) on 

7 the sole ground of mental or physical disability. 

8 ‘‘(5) OFFSET.—In the case of a magistrate 

9 judge who receives a distribution from the Thrift 

10 Savings Fund and who later receives an annuity 

11 under this section, that annuity shall be offset by an 

12 amount equal to the amount which represents the 

13 Government’s contribution to that person’s Thrift 

14 Savings Account, without regard to earnings attrib15 utable to that amount. Where such an offset would 

16 exceed 50 percent of the annuity to be received in 

17 the first year, the offset may be divided equally over 

18 the first 2 years in which that person receives the 

19 annuity. 

20 ‘‘(6) EXCEPTION.—Notwithstanding clauses (i) 

21 and (ii) of paragraph (3)(C), if any magistrate judge 

22 retires under circumstances making such magistrate 

23 judge eligible to make an election under subsection 

24 (b) of section 8433 of title 5, United States Code, 

25 and such magistrate judge’s nonforfeitable account 
227

•S 219 IS

1 balance is less than an amount that the Executive 

2 Director of the Office of Personnel Management pre3 scribes by regulation, the Executive Director shall 

4 pay the nonforfeitable account balance to the partici5 pant in a single payment.’’ 

6 (b) CONFORMING AMENDMENT.—The table of sec7 tions for part I of subchapter C of chapter 76 is amended 

8 by inserting after the item relating to section 7443A the 

9 following new item:

‘‘Sec. 7443B. Retirement for magistrate judges of the Tax Court.’’.

10 SEC. 611. INCUMBENT MAGISTRATE JUDGES OF THE TAX 

11 COURT. 

12 (a) RETIREMENT ANNUITY UNDER TITLE 5 AND

13 SECTION 7443B OF THE INTERNAL REVENUE CODE OF

14 1986.—A magistrate judge of the United States Tax 

15 Court in active service on the date of the enactment of 

16 this Act shall, subject to subsection (b), be entitled, in lieu 

17 of the annuity otherwise provided under the amendments 

18 made by this title, to— 

19 (1) an annuity under subchapter III of chapter 

20 83, or under chapter 84 (except for subchapters III 

21 and VII), of title 5, United States Code, as the case 

22 may be, for creditable service before the date on 

23 which service would begin to be credited for pur24 poses of paragraph (2), and 
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1 (2) an annuity calculated under subsection (b) 

2 or (c) and subsection (g) of section 7443B of the In3 ternal Revenue Code of 1986, as added by this Act, 

4 for any service as a magistrate judge of the United 

5 States Tax Court or special trial judge of the United 

6 States Tax Court but only with respect to service as 

7 such a magistrate judge or special trial judge after 

a date not earlier than 91 8 ⁄2 years prior to the date 

9 of the enactment of this Act (as specified in the elec10 tion pursuant to subsection (b)) for which deduc11 tions and deposits are made under subsections (j) 

12 and (k) of such section 7443B, as applicable, with13 out regard to the minimum number of years of serv14 ice as such a magistrate judge of the United States 

15 Tax Court, except that— 

16 (A) in the case of a magistrate judge who 

17 retired with less than 8 years of service, the an18 nuity under subsection (c) of such section 

19 7443B shall be equal to that proportion of the 

20 salary being received at the time the magistrate 

21 judge leaves office which the years of service 

22 bears to 14, subject to a reduction in accord23 ance with subsection (c) of such section 7443B 

24 if the magistrate judge is under age 65 at the 

25 time he or she leaves office, and 
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1 (B) the aggregate amount of the annuity 

2 initially payable on retirement under this sub3 section may not exceed the rate of pay for the 

4 magistrate judge which is in effect on the day 

5 before the retirement becomes effective. 

6 (b) FILING OF NOTICE OF ELECTION.—A magistrate 

7 judge of the United States Tax Court shall be entitled to 

8 an annuity under this section only if the magistrate judge 

9 files a notice of that election with the chief judge of the 

10 United States Tax Court specifying the date on which 

11 service would begin to be credited under section 7443B 

12 of the Internal Revenue Code of 1986, as added by this 

13 Act, in lieu of chapter 83 or chapter 84 of title 5, United 

14 States Code. Such notice shall be filed in accordance with 

15 such procedures as the chief judge of the United States 

16 Tax Court shall prescribe. 

17 (c) LUMP-SUM CREDIT UNDER TITLE 5.—A mag18 istrate judge of the United States Tax Court who makes 

19 an election under subsection (b) shall be entitled to a 

20 lump-sum credit under section 8342 or 8424 of title 5, 

21 United States Code, as the case may be, for any service 

22 which is covered under section 7443B of the Internal Rev23 enue Code of 1986, as added by this Act, pursuant to that 

24 election, and with respect to which any contributions were 
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1 made by the magistrate judge under the applicable provi2 sions of title 5, United States Code. 

3 (d) RECALL.—With respect to any magistrate judge 

4 of the United States Tax Court receiving an annuity under 

5 this section who is recalled to serve under section 7443C 

6 of the Internal Revenue Code of 1986, as added by this 

7 Act— 

8 (1) the amount of compensation which such re9 called magistrate judge receives under such section 

10 7443C shall be calculated on the basis of the annu11 ity received under this section, and 

12 (2) such recalled magistrate judge of the United 

13 States Tax Court may serve as a reemployed annu14 itant to the extent otherwise permitted under title 5, 

15 United States Code. 

16 Section 7443B(m)(4) of the Internal Revenue Code of 

17 1986, as added by this Act, shall not apply with respect 

18 to service as a reemployed annuitant described in para19 graph (2). 

20 SEC. 612. PROVISIONS FOR RECALL. 

21 (a) IN GENERAL.—Part I of subchapter C of chapter 

22 76, as amended by this Act, is amended by inserting after 

23 section 7443B the following new section: 
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1 ‘‘SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX 

2 COURT. 

3 ‘‘(a) RECALLING OF RETIRED MAGISTRATE

4 JUDGES.—Any individual who has retired pursuant to sec5 tion 7443B or the applicable provisions of title 5, United 

6 States Code, upon reaching the age and service require7 ments established therein, may at or after retirement be 

8 called upon by the chief judge of the Tax Court to perform 

9 such judicial duties with the Tax Court as may be re10 quested of such individual for any period or periods speci11 fied by the chief judge; except that in the case of any such 

12 individual— 

13 ‘‘(1) the aggregate of such periods in any 1 cal14 endar year shall not (without such individual’s con15 sent) exceed 90 calendar days, and 

16 ‘‘(2) such individual shall be relieved of per17 forming such duties during any period in which ill18 ness or disability precludes the performance of such 

19 duties. 

20 Any act, or failure to act, by an individual performing ju21 dicial duties pursuant to this subsection shall have the 

22 same force and effect as if it were the act (or failure to 

23 act) of a magistrate judge of the Tax Court. 

24 ‘‘(b) COMPENSATION.—For the year in which a pe25 riod of recall occurs, the magistrate judge shall receive, 

26 in addition to the annuity provided under the provisions 
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1 of section 7443B or under the applicable provisions of title 

2 5, United States Code, an amount equal to the difference 

3 between that annuity and the current salary of the office 

4 to which the magistrate judge is recalled. The annuity of 

5 the magistrate judge who completes that period of service, 

6 who is not recalled in a subsequent year, and who retired 

7 under section 7443B, shall be equal to the salary in effect 

8 at the end of the year in which the period of recall oc9 curred for the office from which such individual retired. 

10 ‘‘(c) RULEMAKING AUTHORITY.—The provisions of 

11 this section may be implemented under such rules as may 

12 be promulgated by the Tax Court.’’ 

13 (b) CONFORMING AMENDMENT.—The table of sec14 tions for part I of subchapter C of chapter 76, as amended 

15 by this Act, is amended by inserting after the item relating 

16 to section 7443B the following new item:

‘‘Sec. 7443C. Recall of magistrate judges of the Tax Court.’’.

17 SEC. 613. EFFECTIVE DATE. 

18 Except as otherwise provided, the amendments made 

19 by this title shall take effect on the date of the enactment 

20 of this Act. 

21 TITLE VII—OTHER PROVISIONS 

22 SEC. 701. TRANSFER OF EXCESS PENSION ASSETS TO MUL23 TIEMPLOYER HEALTH PLAN. 

24 (a) IN GENERAL.—Section 420(e) of the Internal 

25 Revenue Code of 1986 (relating to definitions and special 
233

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1 rules) is amended by adding at the end the following new 

2 paragraph: 

3 ‘‘(5) APPLICATION TO MULTIEMPLOYER

4 PLAN.—In the case of any plan to which section 

5 404(c) applies (or any successor plan primarily cov6 ering employees in the building and construction in7 dustry)— 

8 ‘‘(A) the prohibition under subsection (a) 

9 on the application of this section to a multiem10 ployer plan shall not apply, and 

11 ‘‘(B) this section shall be applied to any 

12 such plan— 

13 ‘‘(i) by treating any reference in this 

14 section to an employer as a reference to all 

15 employers maintaining the plan (or, if ap16 propriate, the plan sponsor), and 

17 ‘‘(ii) in accordance with such modi18 fications of this section (and the provisions 

19 of this title and the Employee Retirement 

20 Income Security Act of 1974 relating to 

21 this section) as the Secretary determines 

22 appropriate to reflect the fact the plan is 

23 not maintained by a single employer.’’ 

24 (b) AMENDMENTS OF ERISA.— 
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1 (1) Section 101(e)(3) of the Employee Retire2 ment Income Security Act of 1974 (29 U.S.C. 

3 1021(e)(3)) is amended by striking ‘‘American Jobs 

4 Creation Act of 2004’’ and inserting ‘‘National Em5 ployee Savings and Trust Equity Guarantee Act of 

6 2005’’. 

7 (2) Section 403(c)(1) of such Act (29 U.S.C. 

8 1103(c)(1)) is amended by striking ‘‘American Jobs 

9 Creation Act of 2004’’ and inserting ‘‘National Em10 ployee Savings and Trust Equity Guarantee Act of 

11 2005’’. 

12 (3) Section 408(b)(13) of such Act (29 U.S.C. 

13 1108(b)(13)) is amended by striking ‘‘American 

14 Jobs Creation Act of 2004’’ and inserting ‘‘National 

15 Employee Savings and Trust Equity Guarantee Act 

16 of 2005’’. 

17 (c) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to transfers made in taxable years 

19 beginning after December 31, 2004. 

20 SEC. 702. TRANSFER OF EXCESS FUNDS FROM BLACK LUNG 

21 DISABILITY TRUSTS TO UNITED MINE WORK22 ERS OF AMERICA COMBINED BENEFIT FUND. 

23 (a) IN GENERAL.—So much of section 501(c)(21)(C) 

24 of the Internal Revenue Code of 1986 (relating to black 
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1 lung disability trusts) as precedes the last sentence is 

2 amended to read as follows: 

3 ‘‘(C) Payments described in subparagraph 

4 (A)(i)(IV) may be made from such trust during 

5 a taxable year only to the extent that the aggre6 gate amount of such payments during such tax7 able year does not exceed the excess (if any), as 

8 of the close of the preceding taxable year, of— 

9 ‘‘(i) the fair market value of the as10 sets of the trust, over 

11 ‘‘(ii) 110 percent of the present value 

12 of the liability described in subparagraph 

13 (A)(i)(I) of such person.’’ 

14 (b) TRANSFER.—Section 9705 of such Code (relating 

15 to transfer) is amended by adding at the end the following 

16 new subsection: 

17 ‘‘(c) TRANSFER FROM BLACK LUNG DISABILITY

18 TRUSTS.— 

19 ‘‘(1) IN GENERAL.—The Secretary shall trans20 fer each fiscal year to the Fund from the general 

21 fund of the Treasury an amount which the Secretary 

22 estimates to be the additional amounts received in 

23 the Treasury for that fiscal year by reason of the 

24 amendment made by section 804(a) of the National 

25 Employee Savings and Trust Equity Guarantee Act 
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1 of 2005. The Secretary shall adjust the amount 

2 transferred for any year to the extent necessary to 

3 correct errors in any estimate for any prior year. 

4 ‘‘(2) USE OF FUNDS.—Any amount transferred 

5 to the Combined Fund under paragraph (1) shall be 

6 used to proportionately reduce the unassigned bene7 ficiary premium under section 9704(a)(3) of each 

8 assigned operator for the plan year in which trans9 ferred.’’ 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2002. 

13 SEC. 703. TREATMENT OF DEATH BENEFITS FROM COR14 PORATE-OWNED LIFE INSURANCE. 

15 (a) IN GENERAL.—Section 101 of the Internal Rev16 enue Code of 1986 (relating to certain death benefits) is 

17 amended by adding at the end the following new sub18 section: 

19 ‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED

20 LIFE INSURANCE CONTRACTS.— 

21 ‘‘(1) GENERAL RULE.—In the case of an em22 ployer-owned life insurance contract, the amount ex23 cluded from gross income of an applicable policy24 holder by reason of paragraph (1) of subsection (a) 

25 shall not exceed an amount equal to the sum of the 
237

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1 premiums and other amounts paid by the policy2 holder for the contract. 

3 ‘‘(2) EXCEPTIONS.—In the case of an employer4 owned life insurance contract with respect to which 

5 the notice and consent requirements of paragraph 

6 (4) are met, paragraph (1) shall not apply to any of 

7 the following: 

8 ‘‘(A) EXCEPTIONS BASED ON INSURED’S

9 STATUS.—Any amount received by reason of 

10 the death of an insured who, with respect to an 

11 applicable policyholder— 

12 ‘‘(i) was an employee at any time dur13 ing the 12-month period before the in14 sured’s death, or 

15 ‘‘(ii) is, at the time the contract is 

16 issued— 

17 ‘‘(I) a director, 

18 ‘‘(II) a highly compensated em19 ployee within the meaning of section 

20 414(q) (without regard to paragraph 

21 (1)(B)(ii) thereof), or 

22 ‘‘(III) a highly compensated indi23 vidual within the meaning of section 

24 105(h)(5), except that ‘35 percent’ 
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1 shall be substituted for ‘25 percent’ in 

2 subparagraph (C) thereof. 

3 ‘‘(B) EXCEPTION FOR AMOUNTS PAID TO

4 INSURED’S HEIRS.—Any amount received by 

5 reason of the death of an insured to the ex6 tent— 

7 ‘‘(i) the amount is paid to a member 

8 of the family (within the meaning of sec9 tion 267(c)(4)) of the insured, any indi10 vidual who is the designated beneficiary of 

11 the insured under the contract (other than 

12 the applicable policyholder), a trust estab13 lished for the benefit of any such member 

14 of the family or designated beneficiary, or 

15 the estate of the insured, or 

16 ‘‘(ii) the amount is used to purchase 

17 an equity (or capital or profits) interest in 

18 the applicable policyholder from any person 

19 described in clause (i). 

20 ‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CON21 TRACT.— 

22 ‘‘(A) IN GENERAL.—For purposes of this 

23 subsection, the term ‘employer-owned life insur24 ance contract’ means a life insurance contract 

25 which— 
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•S 219 IS

1 ‘‘(i) is owned by a person engaged in 

2 a trade or business and under which such 

3 person (or a related person described in 

4 subparagraph (B)(ii)) is directly or indi5 rectly a beneficiary under the contract, and 

6 ‘‘(ii) covers the life of an insured who 

7 is an employee with respect to the trade or 

8 business of the applicable policyholder on 

9 the date the contract is issued. 

10 For purposes of the preceding sentence, if cov11 erage for each insured under a master contract 

12 is treated as a separate contract for purposes of 

13 sections 817(h), 7702, and 7702A, coverage for 

14 each such insured shall be treated as a separate 

15 contract. 

16 ‘‘(B) APPLICABLE POLICYHOLDER.—For 

17 purposes of this subsection— 

18 ‘‘(i) IN GENERAL.—The term ‘applica19 ble policyholder’ means, with respect to 

20 any employer-owned life insurance con21 tract, the person described in subpara22 graph (A)(i) which owns the contract. 

23 ‘‘(ii) RELATED PERSONS.—The term 

24 ‘applicable policyholder’ includes any per25 son which— 
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•S 219 IS

1 ‘‘(I) bears a relationship to the 

2 person described in clause (i) which is 

3 specified in section 267(b) or 

4 707(b)(1), or 

5 ‘‘(II) is engaged in trades or 

6 businesses with such person which are 

7 under common control (within the 

8 meaning of subsection (a) or (b) of 

9 section 52). 

10 ‘‘(4) NOTICE AND CONSENT REQUIREMENTS.—

11 The notice and consent requirements of this para12 graph are met if, before the issuance of the contract, 

13 the employee— 

14 ‘‘(A) is notified in writing that the applica15 ble policyholder intends to insure the employee’s 

16 life and the maximum face amount for which 

17 the employee could be insured at the time the 

18 contract was issued, 

19 ‘‘(B) provides written consent to being in20 sured under the contract and that such cov21 erage may continue after the insured terminates 

22 employment, and 

23 ‘‘(C) is informed in writing that an appli24 cable policyholder will be a beneficiary of any 
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1 proceeds payable upon the death of the em2 ployee. 

3 ‘‘(5) DEFINITIONS.—For purposes of this sub4 section— 

5 ‘‘(A) EMPLOYEE.—The term ‘employee’ in6 cludes an officer, director, and highly com7 pensated employee (within the meaning of sec8 tion 414(q)). 

9 ‘‘(B) INSURED.—The term ‘insured’ 

10 means, with respect to an employer-owned life 

11 insurance contract, an individual covered by the 

12 contract who is a United States citizen or resi13 dent. In the case of a contract covering the 

14 joint lives of 2 individuals, references to an in15 sured include both of the individuals.’’. 

16 (b) REPORTING REQUIREMENTS.—Subpart A of part 

17 III of subchapter A of chapter 61 of the Internal Revenue 

18 Code of 1986 (relating to information concerning persons 

19 subject to special provisions) is amended by inserting after 

20 section 6039H the following new section: 

21 ‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO 

22 EMPLOYER-OWNED LIFE INSURANCE CON23 TRACTS. 

24 ‘‘(a) IN GENERAL.—Every applicable policyholder 

25 owning 1 or more employer-owned life insurance contracts 
242

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1 issued after the date of the enactment of this section shall 

2 file a return (at such time and in such manner as the 

3 Secretary shall by regulations prescribe) showing for each 

4 year such contracts are owned— 

5 ‘‘(1) the number of employees of the applicable 

6 policyholder at the end of the year, 

7 ‘‘(2) the number of such employees insured 

8 under such contracts at the end of the year, 

9 ‘‘(3) the total amount of insurance in force at 

10 the end of the year under such contracts, 

11 ‘‘(4) the name, address, and taxpayer identifica12 tion number of the applicable policyholder and the 

13 type of business in which the policyholder is en14 gaged, and 

15 ‘‘(5) that the applicable policyholder has a valid 

16 consent for each insured employee (or, if all such 

17 consents are not obtained, the number of insured 

18 employees for whom such consent was not obtained). 

19 ‘‘(b) RECORDKEEPING REQUIREMENT.—Each appli20 cable policyholder owning 1 or more employer-owned life 

21 insurance contracts during any year shall keep such 

22 records as may be necessary for purposes of determining 

23 whether the requirements of this section and section 

24 101(j) are met. 
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1 ‘‘(c) DEFINITIONS.—Any term used in this section 

2 which is used in section 101(j) shall have the same mean3 ing given such term by section 101(j).’’. 

4 (c) CONFORMING AMENDMENTS.— 

5 (1) Paragraph (1) of section 101(a) of the In6 ternal Revenue Code of 1986 is amended by striking 

7 ‘‘and subsection (f)’’ and inserting ‘‘subsection (f), 

8 and subsection (j)’’. 

9 (2) The table of sections for subpart A of part 

10 III of subchapter A of chapter 61 of such Code is 

11 amended by inserting after the item relating to sec12 tion 6039H the following new item:

‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance 

contracts.’’.

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

14 this section shall apply to life insurance contracts issued 

15 after the date of the enactment of this Act, except for a 

16 contract issued after such date pursuant to an exchange 

17 described in section 1035 of the Internal Revenue Code 

18 of 1986 for a contract issued on or prior to that date. 

19 For purposes of the preceding sentence, any material in20 crease in the death benefit or other material change shall 

21 cause the contract to be treated as a new contract except 

22 that, in the case of a master contract (within the meaning 

23 of section 264(f)(4)(E) of such Code), the addition of cov-
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1 ered lives shall be treated as a new contract only with re2 spect to such additional covered lives.

Æ