I 
108TH CONGRESS 
2D SESSION 
H. R. 5398
To amend the Internal Revenue Code of 1986 to improve the retirement 
security of American families. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 19, 2004
Mr. ANDREWS introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to improve 
the retirement security of American families.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Retirement Enhancement Revenue Act of 2004’’. 
(b) TABLE OF CONTENTS.—The table of contents is 
as follows:
Sec. 1. Short title and table of contents. 
TITLE I—PUBLIC EMPLOYEE PENSION PLANS 
Sec. 101. New qualification requirements for public employee pension plans. 
TITLE II—PENSION IMPROVEMENTS
Sec. 201. Automatic enrollment of all employees in 401(k) plans. 
Sec. 202. Diversification requirements for defined contribution plans that hold 
employer securities. 
Sec. 203. Improvements in simplified employee pensions. 
Sec. 204. Pension integration rules. 
Sec. 205. Increase to age 75 for beginning mandatory distributions. 
Sec. 206. Restrictions on exclusion of unionized employees from participation in 
401(k) plans. 
Sec. 207. Removal of $5,000 limit on plans subject to automatic rollover upon 
mandatory distribution. 
TITLE III—TAX CREDITS TO PROMOTE PENSION COVERAGE 
Sec. 301. Savers credit made refundable and permanent. 
Sec. 302. Credit for qualified pension plan contributions of small employers. 
Sec. 303. Notice. 
TITLE IV—IMPROVED PENSION PROTECTIONS FOR WOMEN 
Sec. 401. Modifications of joint and survivor annuity requirements. 
Sec. 402. Entitlement of divorced spouses to railroad retirement annuities inde-
pendent of actual entitlement of employee. 
Sec. 403. Extension of tier II railroad retirement benefits to surviving former 
spouses pursuant to divorce agreements. 
TITLE V—DEFINED BENEFIT PLANS WHICH INCLUDE 
QUALIFIED CASH OR DEFERRED ARRANGEMENTS 
Sec. 501. Defined benefit plan with deferred compensation arrangement in a 
single plan. 
Sec. 502. Defined benefit accruals satisfy 401(k) safe harbor. 
Sec. 503. Additional accruals under defined benefit plan provided as matching 
contributions. 
Sec. 504. Limitation on deductions where combination of defined contribution 
plan and defined benefit plan. 
Sec. 505. Conforming amendments to the Employee Retirement Income Secu-
rity Act of 1974. 
TITLE VI—ADDITIONAL AMENDMENTS 
Sec. 601. Exemption from prohibited transaction rules for certain aborted 
emergent transactions. 
Sec. 602. Loans from retirement plans for health insurance and job training ex-
penses. 
Sec. 603. Treatment of unclaimed benefits. 
Sec. 604. Income averaging of corrected civil service annuity benefit payments. 
Sec. 605. Prohibited transaction exemption for the provision of investment ad-
vice. 
Sec. 606. Increase in deductible contributions to single-employer defined benefit 
plan upon payment of increased premium to the Pension Ben-
efit Guaranty Corporation. 
Sec. 607. Exemption from prohibited transaction rules for certain aborted 
emergent transactions. 
Sec. 608. Pension benefit information. 
Sec. 609. Permanency of transition rule in Retirement Protection Act of 1994. 
TITLE VII—GENERAL PROVISIONS
Sec. 701. General effective date. 
Sec. 702. Plan amendments.
TITLE I—PUBLIC EMPLOYEE 
PENSION PLANS 
SEC. 101. NEW QUALIFICATION REQUIREMENTS FOR PUB-
LIC EMPLOYEE PENSION PLANS. 
(a) IN GENERAL.—Subsection (a) of section 401 of 
the Internal Revenue Code of 1986 (relating to require-
ments for qualification) is amended by inserting after 
paragraph (34) the following new paragraph: 
‘‘(35) PUBLIC EMPLOYEE PENSION PLANS.—A 
trust forming a part of a public employee pension 
plan (as defined in section 420C(a)(9)) shall not 
constitute a qualified trust under this section unless 
the requirements of subpart F of this part are met 
in connection with such plan. 
(b) REQUIREMENTS.—Part I of subchapter D of 
chapter 1 of such Code (relating to pension, profit-shar-
ing, stock bonus plans, etc.) is amended by inserting after 
subpart E the following new subpart: 
‘‘Subpart F—Public Employee Pension Plans
‘‘Sec. 420A. Reporting and disclosure requirements. 
‘‘Sec. 420B. Review by qualified review boards of changes in employer contribu-
tions. 
‘‘Sec. 420C. Definitions and coverage.
‘‘SEC. 420A. REPORTING AND DISCLOSURE REQUIREMENTS. 
‘‘(a) IN GENERAL.—A public employee pension plan 
does not meet the requirements of section 401(a)(35) un-
less the terms of the plan include the requirements of this 
section. 
‘‘(b) REQUIRED DISCLOSURES.—The plan shall pro-
vide that, within 210 days after the close of each plan 
year, the administrator of the plan shall furnish to each 
participant, and to each beneficiary receiving benefits 
under the plan—
‘‘(1) a statement of the assets and liabilities of 
the plan aggregated by categories and valued at 
their current value, and the same data displayed in 
comparative form for the end of the previous plan 
year, 
‘‘(2) a statement of receipts and disbursements 
during the preceding 12-month period aggregated by 
general sources and applications, 
‘‘(3) a report containing—
‘‘(A) a description of all investments and 
assets of the plan, including their value, 
‘‘(B) the names and positions of all of the 
trustees of the plan, and the time remaining be-
fore the expiration of their term, 
‘‘(C) a description of the method of trustee 
selection,
‘‘(D) a description of any changes in in-
vestment policy of the plan during the fiscal 
year, 
‘‘(E) an evaluation of the long-term sol-
vency of the plan, including the number of par-
ticipants and beneficiaries and a summary of 
their benefits, and a projection of the amount 
of benefits expected to be paid for the fifth, 
tenth, and fifteenth plan year following the date 
of the publication of the report, and 
‘‘(F) the percentage which the current 
value of the assets of the plan is of the current 
liability under the plan, and 
‘‘(4) any other material as is necessary to fairly 
summarize the latest annual report. 
Such information shall be written and calculated to be un-
derstood by the average plan participant, and shall be suf-
ficiently accurate and comprehensive to reasonably apprise 
such participants and beneficiaries of their rights and obli-
gations under the plan. 
‘‘(c) AVAILABILITY OF PLAN DOCUMENTS FOR EX-
AMINATION.—The plan shall provide that the adminis-
trator shall make copies of the plan description and the 
latest annual report and the bargaining agreement, trust 
agreement, contract, or other instruments under which the
plan was established or is operated available for examina-
tion by any plan participant or beneficiary in the principal 
office of the administrator and in such other places as may 
be necessary to make available all pertinent information 
to all participants (including such places as the Secretary 
may prescribe by regulations). 
‘‘(d) AVAILABILITY
OF INFORMATION UPON RE-
QUEST.—The plan shall provide that the administrator 
shall, upon written request of any participant or bene-
ficiary, furnish a copy of the latest annual report, any ter-
minal report, the bargaining agreement, trust agreement, 
contract, or other instruments under which the plan is es-
tablished or operated. The administrator may make a rea-
sonable charge to cover the cost of furnishing such com-
plete copies. The Secretary may by regulation prescribe 
the maximum amount which will constitute a reasonable 
charge under the preceding sentence. 
‘‘SEC. 420B. REVIEW BY QUALIFIED REVIEW BOARDS OF 
CHANGES IN EMPLOYER CONTRIBUTIONS. 
‘‘(a) IN GENERAL.—A public employee pension plan 
does not meet the requirements of section 401(a)(35) un-
less, under the plan, changes in employer contributions are 
subject to review by a qualified review board established 
for the plan as provided in this section. For purposes of
this section, the term ‘qualified review board’ means a 
board—
‘‘(1) whose membership is determined under the 
law of the principal State in accordance with sub-
section (b), and 
‘‘(2) whose powers are determined under the 
law of the principal State in accordance with sub-
section (c). 
‘‘(b) MEMBERSHIP.—
‘‘(1) IN GENERAL.—The membership of a quali-
fied review board established for a plan shall consist 
of 3 members selected from among individuals who, 
by means of their education and experience, have 
demonstrated expertise in the area of pension fund 
management, as follows: 
‘‘(A) one member is appointed by the Gov-
ernor of the State, 
‘‘(B) one member is selected by the partici-
pants in the plan, by means of an election held 
in such form and manner as shall be prescribed 
in regulations of the Secretary, and 
‘‘(C) one member is selected jointly by the 
Governor and by a representative of partici-
pants in the plan (from a certified list of pen-
sion experts established in accordance with 
paragraph (2)). 
Each member of the board shall have 1 vote. Mem-
bers of the board shall serve for such equivalent 
terms as shall be prescribed under the law of the 
principal State. 
‘‘(2) CERTIFIED LIST OF EXPERTS.—The Gov-
ernor of the State shall, for purposes of paragraph 
(1)(C), establish and maintain with respect to each 
public employee pension plan (for which such State 
is the principal State) a certified list of pension ex-
perts meeting the requirements for membership on 
the qualified review board. Individuals may be in-
cluded on such list only by agreement between the 
Governor of the State and a representative elected 
by participants in the plan, entered into by means 
of collective bargaining in such form and manner as 
shall be prescribed in regulations of the Secretary. 
‘‘(c) POWERS.—The board shall be treated as a quali-
fied review board for purposes of this section with respect 
to any public employee pension plan (for which such State 
is the principal State) only if the powers of such board 
under the law of the principal State include review by the 
board, for approval or disapproval by the board, of any
change in the terms of such plan, as a necessary pre-
requisite for such change to take effect, if—
‘‘(1) such change would have the effect of 
changing levels of employer contributions to the 
plan, and 
‘‘(2) such review is requested, in such form and 
manner as shall be prescribed in regulations of the 
Secretary, by—
‘‘(A) at least one-third of the total number 
of trustees of any trust fund forming a part of 
the plan, or 
‘‘(B) the head of any employee organiza-
tion representing at least 20 percent of the 
total number of active participants in the plan. 
The board may be treated as a qualified review board for 
purposes of this section only if, under the law of the prin-
cipal State, any such change submitted to such review by 
the board may take effect only upon approval of the 
change by the board. 
‘‘SEC. 420C. DEFINITIONS AND COVERAGE. 
‘‘(a) DEFINITIONS.—For purposes of this subpart—
‘‘(1) ADMINISTRATOR.—The term ‘adminis-
trator’ means—
‘‘(A) the board of trustees, retirement 
board, or similar person with administrative re-
ployee representation committee, association, group, 
or plan, in which employees participate and which 
exists for the purpose, in whole or in part, of dealing 
with employers or employer representatives con-
cerning a public employee pension plan or other 
matters incidental to employment relationships; or 
any employees’ beneficiary association organized for 
the purpose, in whole or in part, of establishing such 
a plan. 
‘‘(6) 
EMPLOYER.—The 
term 
‘employer’ 
means—
‘‘(A) the government of any State or of 
any political subdivision of a State, 
‘‘(B) any agency or instrumentality of a 
government referred to in subparagraph (A), or 
‘‘(C) any agency or instrumentality of two 
or more governments referred to in subpara-
graph (A). 
‘‘(7) EMPLOYER
CONTRIBUTION.—The term 
‘employer contribution’ means any contribution to a 
public employee pension plan other than a contribu-
tion made by a participant in the plan. 
‘‘(8) EMPLOYER REPRESENTATIVE.—The term 
‘employer representative’ means—
‘‘(A) any group or association consisting, 
in whole or in part, of employers acting, in con-
nection with a public employee pension plan, for 
an employer, or 
‘‘(B) any person acting, in connection with 
a public employee pension plan, indirectly in the 
interest of an employer or of a group or asso-
ciation described in subparagraph (A). 
‘‘(9) PUBLIC EMPLOYEE PENSION PLAN.—The 
terms ‘public employee pension plan’ and ‘plan’ 
mean any plan, fund, or program which was here-
tofore or is hereafter established or maintained, in 
whole or in part, by an employer, an employer rep-
resentative, or an employee organization, or by a 
combination thereof, to the extent that by its express 
terms or as a result of surrounding circumstances 
such plan, fund, or program—
‘‘(A) provides retirement income to em-
ployees, or 
‘‘(B) results in a deferral of income by em-
ployees for periods extending to the termination 
of covered employment or beyond, 
regardless of the method of calculating the contribu-
tions made to the plan, the method of calculating
the benefits under the plan, or the method of distrib-
uting benefits from the plan. 
‘‘(10) PRINCIPAL STATE.—The term ‘principal 
State’ means, for any plan year with respect to a 
public employee pension plan, the State in which, as 
of the beginning of such plan year, the largest per-
centage of the participants of the plan employed in 
any single State is employed. 
‘‘(11) 
GOVERNOR.—The 
term 
‘Governor’ 
means, in connection with a public employee pension 
plan, the Governor (or equivalent official) of the 
principal State. 
‘‘(12) PARTICIPANT.—The term ‘participant’ 
means any individual who is or may become eligible 
to receive a benefit of any type from a public em-
ployee pension plan or whose beneficiaries may be el-
igible to receive any such benefit. 
‘‘(13) PERSON.—The term ‘person’ means a 
State, a political subdivision of a State, any agency 
or instrumentality of a State or a political subdivi-
sion of a State, an individual, a partnership, a joint 
venture, a corporation, a mutual company, a joint-
stock company, a trust, an estate, an unincorporated 
organization, an association, or an employee organi-
zation.
‘‘(14) PLAN SPONSOR.—The term ‘plan spon-
sor’ means—
‘‘(A) in the case of a plan established or 
maintained solely for employees of a single em-
ployer, such employer, 
‘‘(B) in the case of a plan established or 
maintained by an employee organization, the 
employee organization, or 
‘‘(C) in the case of a plan established or 
maintained by two or more employers or jointly 
by one or more employers and one or more em-
ployee organizations, the association, com-
mittee, board of trustees, or other similar group 
of representatives of the parties who establish 
or maintain the plan. 
‘‘(15) PLAN
YEAR.—The term ‘plan year’ 
means, with respect to a plan, the calendar, policy, 
or fiscal year on which the records of the plan are 
kept. 
‘‘(16) STATE.—The term ‘State’ means any 
State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, the Virgin Is-
lands, American Samoa, and Guam. 
‘‘(b) COVERAGE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), this subpart shall apply to any public em-
ployee pension plan. 
‘‘(2) EXCEPTIONS FROM COVERAGE.—The pro-
visions of this subpart shall not apply to—
‘‘(A) any employee benefit plan described 
in section 4(a) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 
1003(a)), which is not exempt under section 
4(b)(1) of such Act (29 U.S.C. 1003(b)(1)), 
‘‘(B) any plan which is unfunded and is 
maintained by an employer or employer rep-
resentative primarily for the purpose of pro-
viding deferred compensation for a select group 
of management or highly compensated employ-
ees, 
‘‘(C) any arrangement which would be a 
severance pay arrangement, as defined in regu-
lations of the Secretary of Labor under section 
3(2)(B)(i) of the Employee Retirement Income 
Security 
Act 
of 
1974 
(29 
U.S.C. 
1002(2)(B)(i)), if the employer were an em-
ployer within the meaning of section 3(5) of 
such Act (29 U.S.C. 1002(5)),
‘‘(D) any agreement to the extent it is a 
coverage agreement entered into pursuant to 
section 218 of the Social Security Act (42 
U.S.C. 418), 
‘‘(E) any individual retirement account or 
any individual retirement annuity within the 
meaning of section 408, or a retirement bond 
within the meaning of section 409, 
‘‘(F) any plan described in section 401(d), 
‘‘(G) any individual account plan con-
sisting of an annuity contract described in sec-
tion 403(b), 
‘‘(H) any eligible State deferred compensa-
tion plan, as defined in section 457(b), or 
‘‘(I) any plan maintained solely for the 
purpose of complying with applicable workers’ 
compensation laws or disability insurance 
laws.’’. 
TITLE II—PENSION 
IMPROVEMENTS 
SEC. 201. AUTOMATIC ENROLLMENT OF ALL EMPLOYEES IN 
401(K) PLANS. 
(a) IN GENERAL.—Subparagraph (A) of section 
401(m)(11) of the Internal Revenue Code of 1986 (relat-
ing to additional alternative method of satisfying non-
regulation, or rule of a State or political subdivision of 
a State that would otherwise require an employer to obtain 
an employee’s consent before making a deduction from the 
wages of such employee. 
(d) GUIDELINES
FOR MEETING FIDUCIARY RE-
QUIREMENTS.—Section 404(a) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1104(a)) 
is amended by adding at the end the following new para-
graph: 
‘‘(3)(A) The Secretary shall prescribe by regulation 
guidelines for compliance with the requirements of the di-
versification requirement of paragraph (1)(C) and the pru-
dence requirement (to the extent that it requires diver-
sification) of paragraph (1)(B) in the case of plans which 
are treated as in compliance with the requirements of sec-
tion 401(m)(2) of the Internal Revenue Code of 1986 sole-
ly by reason of compliance with the requirements of sec-
tion 401(m)(11) of such Code. Such guidelines shall con-
sist of criteria for meeting a standard of well-balanced and 
highly diversified investment of plan assets. Compliance 
with such guidelines shall be deemed compliance with such 
requirements. 
‘‘(B) The criteria prescribed by the Secretary pursu-
ant to subparagraph (A) shall include at least the fol-
lowing:
‘‘(i) sufficiently limited investment of plan as-
sets in securities issued by any single issuer (other 
than in obligations issued by, or guaranteed as to 
both principal and interest by, the Government of 
the United States); 
‘‘(ii) sufficient diversification of investment 
among and within asset classes, which shall include 
at least sufficient diversification measured as be-
tween stocks and bonds, sufficient diversification 
measured as among varieties of stock categorized by 
large capitalization, medium capitalization, and 
small capitalization, and sufficient diversification 
measured as between investment funds focused on 
growth and investment funds focused on income; 
and 
‘‘(iii) adequate prospects for a reasonable rate 
of return on the investment, together with adequate 
assurance against loss of principal and minimization 
of fees and other associated costs chargeable to par-
ticipants.’’. 
SEC. 202. DIVERSIFICATION REQUIREMENTS FOR DEFINED 
CONTRIBUTION 
PLANS 
THAT 
HOLD 
EM-
PLOYER SECURITIES. 
(a) IN GENERAL.—Subsection (a) of section 401 of 
the Internal Revenue Code of 1986 (relating to require-
ments for qualification), as amended by this Act, is fur-
ther amended by inserting after paragraph (35) the fol-
lowing new paragraph: 
‘‘(36) DIVERSIFICATION
REQUIREMENTS
FOR 
DEFINED
CONTRIBUTION
PLANS
THAT
HOLD
EM-
PLOYER SECURITIES.—
‘‘(A) IN GENERAL.—In the case of a de-
fined contribution plan described in this sub-
section that includes a trust which is exempt 
from tax under section 501(a) and which holds 
employer securities that are readily tradable on 
an established securities market, such trust 
shall not constitute a qualified trust under this 
section unless such plan meets the requirements 
of subparagraphs (B) and (C). 
‘‘(B) ELECTIVE DEFERRALS INVESTED IN 
EMPLOYER SECURITIES.—
‘‘(i) IN GENERAL.—In the case of the 
portion of the account attributable to elec-
tive deferrals which is invested in employer 
securities, a plan meets the requirements 
of this subparagraph if each applicable in-
dividual in such plan may elect to direct 
the plan to divest any portion of such secu-
rities in the individual’s account and to re-
invest an equivalent amount in other in-
vestment options which meet the require-
ments of subparagraph (D). The preceding 
sentence shall apply to the extent that the 
amount attributable to reinvested portion 
exceeds the amount to which a prior elec-
tion under this subparagraph or paragraph 
(28) applies. 
‘‘(ii) APPLICABLE
INDIVIDUAL.—For 
purposes of this subparagraph, the term 
‘applicable individual’ means—
‘‘(I) any participant in the plan, 
‘‘(II) any beneficiary who is an 
alternate payee (within the meaning 
of section 414(p)(8)) under an appli-
cable 
qualified 
domestic 
relations 
order (within the meaning of section 
414(p)(1)(A)), and 
‘‘(III) any beneficiary of a de-
ceased participant or alternate payee. 
‘‘(C) 
OTHER
EMPLOYER
CONTRIBU-
TIONS.—
‘‘(i) IN GENERAL.—In the case of the 
portion of the account attributable to em-
ployer contributions (other than elective
deferrals) which is invested in employer se-
curities, a plan meets the requirements of 
this subparagraph if each qualified partici-
pant in the plan may elect to direct the 
plan to divest any portion of such securi-
ties in the participant’s account and to re-
invest an equivalent amount in other in-
vestment options which meet the require-
ments of subparagraph (E). The preceding 
sentence shall apply to the extent that the 
amount attributable to such reinvested 
portion exceeds the amount to which a 
prior election under this subparagraph or 
paragraph (28) applies. 
‘‘(ii) QUALIFIED
PARTICIPANT.—For 
purposes of this subparagraph, the term 
‘qualified participant’ means—
‘‘(I) any participant in the plan 
who has completed at least 3 years of 
service (as determined under section 
411(a)) under the plan, 
‘‘(II) any beneficiary who, with 
respect to a participant who met the 
service requirement in subclause (I), 
is an alternate payee (within the
meaning of section 414(p)(8)) under 
an applicable qualified domestic rela-
tions order (within the meaning of 
section 414(p)(1)(A)), and 
‘‘(III) any beneficiary of a de-
ceased participant who met the service 
requirement in subclause (I) or alter-
nate payee described in subclause (II). 
‘‘(D) INVESTMENT OPTIONS.—The require-
ments of this subparagraph are met if the plan 
offers not less than 3 investment options (not 
inconsistent with regulations prescribed by the 
Secretary) other than employer securities. 
‘‘(E) PRESERVATION
OF
AUTHORITY
OF 
PLAN TO LIMIT INVESTMENT.—Nothing in this 
paragraph shall be construed to limit the au-
thority of a plan to impose limitations on the 
portion of plan assets in any account which 
may be invested in employer securities. 
‘‘(F) OTHER DEFINITIONS AND RULES.—
For purposes of this paragraph—
‘‘(i) 
EMPLOYER
SECURITIES.—The 
term ‘employer securities’ shall have the 
meaning given such term by section
407(d)(1) of the Employee Retirement In-
come Security Act of 1974. 
‘‘(ii) 
ELECTIVE
DEFERRALS.—For 
purposes of this subparagraph, the term 
‘elective deferrals’ means an employer con-
tribution described in section 402(g)(3)(A) 
and any employee contribution. 
‘‘(iii) 
ELECTION.—Elections 
under 
this paragraph shall be not less frequently 
than quarterly. 
‘‘(iv) EMPLOYEE
STOCK
OWNERSHIP 
PLAN.—The term ‘employee stock owner-
ship plan’ shall have the same meaning 
given to such term by section 4975(e)(7).’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 401(a)(28) of such Code is amended 
by adding at the end the following new subpara-
graph: 
‘‘(D) APPLICATION.—This paragraph shall 
not apply with respect to employer securities 
which are readily tradable on an established se-
curities market.’’. 
(2) Section 409(h)(7) of such Code is amended 
by inserting at the end ‘‘or subparagraph (B) or (C) 
of section 401(a)(36)’’.
(3) Section 4975(e)(7) of such Code is amended 
by adding at the end the following new sentence: ‘‘A 
plan shall not fail to be treated as an employee stock 
ownership plan merely because the plan meets the 
requirements of section 401(a)(36) (or provides 
greater diversification rights) or because participants 
in such plan exercise diversification rights under 
such section (or greater diversification rights avail-
able under the plan).’’. 
(4) Section 4980(c)(3)(A) of such Code is 
amended by striking ‘‘if—’’ and all that follows and 
inserting ‘‘if the requirements of subparagraphs (B) 
and (C) are met.’’. 
(5) Section 407 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1107) is 
amended by adding at the end the following new 
subsection: 
‘‘(g) Notwithstanding section 408(e) or any other 
provision of this title, an individual account plan may not 
include provisions that do not meet the requirements of 
section 401(a)(36)(B) of the Internal Revenue Code of 
1986.’’.
SEC. 203. IMPROVEMENTS IN SIMPLIFIED EMPLOYEE PEN-
SIONS. 
(a) PARTICIPATION REQUIREMENTS.—Paragraph (2) 
of section 408(k) of the Internal Revenue Code of 1986 
(relating to participation requirements) is amended—
(1) in subparagraph (A), by adding ‘‘and’’ at 
the end, and 
(2) by striking subparagraphs (B) and (C) and 
inserting the following: 
‘‘(B) has completed at least 3 years of 
service (as defined in section 411(a)(5)) for the 
employer.’’. 
(b) 
NONDISCRIMINATION
RULES.—Subparagraph 
(C) of section 408(k)(3) of such Code (requiring contribu-
tion to bear uniform relationship to total compensation) 
is amended—
(1) in the heading, by striking ‘‘MUST BEAR 
UNIFORM RELATIONSHIP TO TOTAL COMPENSATION’’ 
and inserting ‘‘MUST BE UNIFORM’’, and 
(2) by inserting after ‘‘unless contributions 
thereto’’ the following: ‘‘are uniform for all employ-
ees maintaining a simplified employee pension or’’. 
(c) CONSENT TO PARTICIPATION NOT REQUIRED.—
Paragraph (2) of section 408(k) of such Code (relating 
to participation requirements) is amended by adding at 
the end the following new flush sentence: ‘‘An employer
may establish and maintain a simplified employee pension 
for an employee without the employee’s consent.’’. 
(d) SEPARATE TREATMENT OF CONTRIBUTIONS TO 
SIMPLIFIED EMPLOYEE PENSIONS.—Subsection (h) of 
section 404 of such Code is amended by striking para-
graphs (2) and (3) and inserting the following new para-
graph: 
‘‘(2) LIMITATION BASED ON COMBINATION OF 
PLANS
INAPPLICABLE.—Contributions to a sim-
plified employee pension shall not be taken into ac-
count for purposes of subsection (a)(7).’’. 
(e) JOINT
AND
SURVIVOR
ANNUITY
REQUIRE-
MENTS.—Section 408(k) of such Code is amended—
(1) by redesignating paragraph (9) as para-
graph (10), and 
(2) by inserting after paragraph (8) the fol-
lowing new paragraph: 
‘‘(9) JOINT AND SURVIVOR ANNUITY REQUIRE-
MENTS.—Requirements similar to the requirements 
of section 401(a)(11) shall apply with respect to an-
nuities purchased with amounts distributed from 
simplified employee pensions.’’. 
(f) ANNUAL REPORTING REQUIREMENTS FOR SIM-
PLIFIED EMPLOYEE PENSIONS.—Paragraph (1) of section
408(l) of such Code (relating to simplified employer re-
ports) is amended to read as follows: 
‘‘(1) IN GENERAL.—The Secretary shall require 
by regulations that an employer who makes a con-
tribution on behalf of an employee to a simplified 
employee pension shall provide simplified annual re-
ports. The reports required by this subsection shall 
be filed in such manner, and information with re-
spect to such contributions shall be furnished to the 
employee in such manner, as may be required by 
regulations, except that such reports shall include 
information sufficient to allow the employee to deter-
mine that the simplified employee pension is in com-
pliance with the requirements of this section.’’. 
(g) DEDUCTIBILITY
OF CONTRIBUTIONS
TO SIM-
PLIFIED EMPLOYEE PENSIONS
IN CONNECTION WITH 
DOMESTIC SERVICE.—
(1) IN GENERAL.—Section 404 of such Code 
(relating to deductions for contributions of an em-
ployer to an employee’s trust or annuity plan and 
compensation under a deferred-payment plan) is 
amended by adding at the end the following new 
subsection:
‘‘(o) DEDUCTIBILITY OF CONTRIBUTIONS TO SIM-
PLIFIED EMPLOYEE PENSIONS
IN CONNECTION WITH 
DOMESTIC SERVICE.—
‘‘(1) IN GENERAL.—Solely for purposes of sub-
section (a), contributions by an employer to a sim-
plified employee pension of an employee in connec-
tion with service constituting domestic service em-
ployment shall be treated as if such contributions 
would otherwise be deductible under section 162 but 
for subsection (a). 
‘‘(2) DOMESTIC
SERVICE
EMPLOYMENT.—For 
purposes of paragraph (1), the term ‘domestic serv-
ice employment’ means domestic service in a private 
home of the employer (within the meaning of the 
last sentence of section 3510(c)) in any case in 
which taxes are imposed by chapter 21 or 23 on re-
muneration paid for such service.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to taxable years begin-
ning after December 31, 2004. 
SEC. 204. PENSION INTEGRATION RULES. 
(a) APPLICABILITY OF NEW INTEGRATION RULES 
EXTENDED TO ALL EXISTING ACCRUED BENEFITS.—
Notwithstanding subsection (c)(1) of section 1111 of the 
Tax Reform Act of 1986 (relating to effective date of ap-
plication of nondiscrimination rules to integrated plans) 
(100 Stat. 2440), effective for plan years beginning after 
the date of the enactment of this Act, the amendments 
made by subsection (a) of such section 1111 shall also 
apply to benefits attributable to plan years beginning on 
or before December 31, 1988. 
(b) INTEGRATION DISALLOWED
FOR SIMPLIFIED 
EMPLOYEE PENSIONS.—
(1) IN GENERAL.—Subparagraph (D) of section 
408(k)(3) of the Internal Revenue Code of 1986 (re-
lating to permitted disparity under rules limiting 
discrimination under simplified employee pensions) 
is repealed. 
(2) CONFORMING AMENDMENT.—Subparagraph 
(C) of such section 408(k)(3) is amended by striking 
‘‘and except as provided in subparagraph (D),’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply with respect to taxable 
years beginning on or after January 1, 2005. 
(c) EVENTUAL REPEAL OF INTEGRATION RULES.—
Effective for plan years beginning on or after January 1, 
2006—
(1) subparagraphs (C) and (D) of section 
401(a)(5) of the Internal Revenue Code of 1986 (re-
lating to pension integration exceptions under non-
discrimination requirements for qualification) are re-
pealed, and subparagraphs (E), (F), and (G) of such 
section 401(a)(5) are redesignated as subparagraphs 
(C), (D), and (E), respectively, and 
(2) subsection (l) of section 401 of such Code 
(relating to permitted disparity in plan contributions 
or benefits) is repealed. 
SEC. 205. INCREASE TO AGE 75 FOR BEGINNING MANDA-
TORY DISTRIBUTIONS. 
(a) QUALIFIED PENSION PLANS.—Subparagraph (C) 
of section 401(a)(9) of the Internal Revenue Code of 1986 
(relating to required distributions) is amended by striking 
‘‘age 701⁄2’’ each place it appears and inserting ‘‘the appli-
cable age’’. 
(b) APPLICABLE AGE.—Subparagraph (C) of section 
401(a)(9) of such Code is amended by adding at the end 
the following new clause: 
‘‘(v) APPLICABLE AGE.—
‘‘(I) IN GENERAL.—For purposes 
of this clause, the term applicable age 
shall be determined in accordance 
with the following table:
Applicable 
‘‘Calendar year: 
age: 
2005 .........................................................................................
2006 .........................................................................................
2007 .........................................................................................
2008 .........................................................................................
2009 and each calendar year thereafter ..................................
75.
‘‘(II) ELECTION TO USE AGE OF 
SPOUSE.—For purposes of this sub-
paragraph, an employee who files a 
joint return for a taxable year may 
elect to substitute the age of the em-
ployee’s spouse for his age.’’. 
(c) INDIVIDUAL RETIREMENT ACCOUNTS.—Para-
graph (1) of section 219(d) of such Code is amended—
(1) by striking ‘‘age 701⁄2’’ in the text and in-
serting ‘‘the applicable age (as defined in section 
401(a)(9)(C)(v))’’, and 
(2) by striking ‘‘AGE 701⁄2’’ in the heading and 
inserting ‘‘THE APPLICABLE AGE’’. 
(d) ROTH IRA’S.—Paragraph (4) of section 408A(c) 
of such Code is amended—
(1) by striking ‘‘age 701⁄2’’ in the text and in-
serting ‘‘the applicable age (as defined in section 
401(a)(9)(C)(v))’’, and 
(2) by striking ‘‘AGE 701⁄2’’ in the heading and 
inserting ‘‘THE APPLICABLE AGE’’. 
SEC. 206. RESTRICTIONS ON EXCLUSION OF UNIONIZED 
EMPLOYEES FROM PARTICIPATION IN 401(K) 
PLANS. 
Paragraph (4) of section 401(k) of the Internal Rev-
enue Code of 1986 (relating to other requirements) is
amended by adding at the end the following new subpara-
graph: 
‘‘(D) 
BENEFITS
SUBJECT
OF
BAR-
GAINING.—A cash or deferred arrangement of 
any employer shall not be treated as a qualified 
cash or deferred arrangement if any employee 
of such employer—
‘‘(i) who is described in section 
410(b)(3)(A), and 
‘‘(ii) who is not eligible to benefit 
under the arrangement, 
is not otherwise covered under an employee 
pension benefit plan (as defined in section 
3(2)(A) of the Employee Retirement Income 
Security Act of 1974) which is maintained for 
employees of such employer pursuant to an 
agreement which the Secretary of Labor finds 
to be a collective bargaining agreement between 
employee representatives and one or more em-
ployers and which is qualified under section 
401(a).’’.
SEC. 207. REMOVAL OF $5,000 LIMIT ON PLANS SUBJECT TO 
AUTOMATIC ROLLOVER UPON MANDATORY 
DISTRIBUTION. 
Section 401(a)(31)(B) of the Internal Revenue Code 
of 1986 (relating to certain mandatory distributions) is 
amended—
(1) in clause (i), by striking ‘‘In case of a trust 
which is part of an eligible plan, such trust’’ and in-
serting ‘‘A trust’’, 
(2) in clause (i)(I), by striking ‘‘in excess of 
$1,000’’, and 
(3) by striking clause (ii) and inserting the fol-
lowing new clause: 
‘‘(ii) DISTRIBUTION
DESCRIBED.—A 
distribution from a plan is described in 
this clause if such distribution is an imme-
diate distribution of the entire nonforfeit-
able accrued benefit of the participant and 
is in excess of $1,000.’’. 
TITLE III—TAX CREDITS TO 
PROMOTE PENSION COVERAGE 
SEC. 301. SAVERS CREDIT MADE REFUNDABLE AND PERMA-
NENT. 
(a) SAVERS CREDIT MADE REFUNDABLE.—
(1) IN GENERAL.—The Internal Revenue Code 
of 1986 is amended by redesignating section 25B as
section 35A and by moving such section after section 
35 in subpart C of part IV of subchapter A of chap-
ter 1 of such Code (relating to refundable credits). 
(2) CONFORMING AMENDMENTS.—
(A) Section 35A of such Code, as so redes-
ignated, is amended by striking subsection (g) 
and redesignating subsection (h) as subsection 
(g). 
(B) Subparagraph (B) of section 24(b)(3) 
of such Code is amended by striking ‘‘sections 
23 and 25B’’ and inserting ‘‘section 23’’. 
(C) Subparagraph (C) of section 25(e)(1) 
of such Code is amended by striking ‘‘25B,’’. 
(D) Each of the following provisions of 
such Code are amended by striking ‘‘24, and 
25B’’ and inserting ‘‘and 24’’: 
(i) Section 26(a)(1). 
(ii) Section 904(h). 
(iii) Section 1400C(d). 
(E) Paragraph (2) of section 1324(b) of 
title 31, United States Code, is amended by in-
serting ‘‘or 35A’’ after ‘‘section 35’’. 
(F) The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of the In-
ternal Revenue Code of 1986 is amended by 
striking the item relating to section 25B. 
(G) The table of sections for subpart C of 
part IV of subchapter A of chapter 1 of such 
Code is amended by inserting after the item re-
lating to section 35 the following new item:
‘‘Sec. 35A. Elective deferrals and IRA contributions by certain individuals.’’.
(b) SAVERS CREDIT MADE PERMANENT.—
(1) IN GENERAL.—Section 35A of the Internal 
Revenue Code of 1986, as amended by this section, 
is amended by striking subsection (g). 
(2) REPEAL OF EGTRRA SUNSET.—Title IX of 
the Economic Growth and Tax Relief Reconciliation 
Act of 2001 shall not apply to section 618 of such 
Act. 
SEC. 302. CREDIT FOR QUALIFIED PENSION PLAN CON-
TRIBUTIONS OF SMALL EMPLOYERS. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 45G. SMALL EMPLOYER PENSION PLAN CONTRIBU-
TIONS. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of an eligible employer, the small employer pen-
sion plan contribution credit determined under this section
for any taxable year is an amount equal to 50 percent 
of the amount which would (but for subsection (f)(1)) be 
allowed as a deduction under section 404 for such taxable 
year for qualified employer contributions made to any 
qualified retirement plan on behalf of any nonhighly com-
pensated employee. 
‘‘(b) CREDIT LIMITED TO 3 YEARS.—The credit al-
lowable by this section shall be allowed only with respect 
to the period of 3 taxable years beginning with the taxable 
year in which the qualified retirement plan becomes effec-
tive. 
‘‘(c) QUALIFIED EMPLOYER CONTRIBUTION.—For 
purposes of this section—
‘‘(1) DEFINED CONTRIBUTION PLANS.—In the 
case of a defined contribution plan, the term ‘quali-
fied employer contribution’ means the amount of 
nonelective and matching contributions to the plan 
made by the employer on behalf of any nonhighly 
compensated employee to the extent such amount 
does not exceed 3 percent of such employee’s com-
pensation from the employer for the year. 
‘‘(2) DEFINED BENEFIT PLANS.—In the case of 
a defined benefit plan, the term ‘qualified employer 
contribution’ means the amount of employer con-
tributions to the plan made on behalf of any non-
highly compensated employee to the extent that the 
accrued benefit of such employee derived from such 
contributions for the year do not exceed the equiva-
lent (as determined under regulations prescribed by 
the Secretary and without regard to contributions 
and benefits under the Social Security Act) of 3 per-
cent of such employee’s compensation from the em-
ployer for the year. 
‘‘(d) QUALIFIED RETIREMENT PLAN.—
‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment plan’ means any plan described in section 
401(a) which includes a trust exempt from tax 
under section 501(a) if the plan meets—
‘‘(A) the contribution requirements of 
paragraph (2), 
‘‘(B) the vesting requirements of para-
graph (3), and 
‘‘(C) the distributions requirements of 
paragraph (4). 
‘‘(2) CONTRIBUTION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of 
this paragraph are met if, under the plan—
‘‘(i) the employer is required to make 
nonelective contributions of at least 1 per-
cent of compensation (or the equivalent
thereof in the case of a defined benefit 
plan) for each nonhighly compensated em-
ployee who is eligible to participate in the 
plan, and 
‘‘(ii) except in the case of a defined 
benefit plan, allocations of nonelective em-
ployer contributions are either in equal dol-
lar amounts for all employees covered by 
the plan or bear a uniform relationship to 
the total compensation, or the basic or reg-
ular rate of compensation, of the employ-
ees covered by the plan. 
‘‘(B) COMPENSATION
LIMITATION.—The 
compensation taken into account under sub-
paragraph (A) for any year shall not exceed the 
limitation in effect for such year under section 
401(a)(17). 
‘‘(3) VESTING
REQUIREMENTS.—The require-
ments of this paragraph are met if the plan satisfies 
the requirements of subparagraph (A) or (B). 
‘‘(A) 3-YEAR
VESTING.—A plan satisfies 
the requirements of this subparagraph if an em-
ployee who has completed at least 3 years of 
service has a nonforfeitable right to 100 percent
of the employee’s accrued benefit derived from 
employer contributions. 
‘‘(B) 5-YEAR
GRADED
VESTING.—A plan 
satisfies the requirements of this subparagraph 
if an employee has a nonforfeitable right to a 
percentage of the employee’s accrued benefit de-
rived from employer contributions determined 
under the following table:
The nonforfeitable 
‘‘Years of service: 
percentage is: 
1 .........................................................................................................
2 .........................................................................................................
3 .........................................................................................................
4 .........................................................................................................
5 or more ...........................................................................................
100.
‘‘(4) DISTRIBUTION REQUIREMENTS.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the requirements of this 
paragraph are met if, under the plan—
‘‘(i) in the case of a profit-sharing or 
stock bonus plan, amounts are distribut-
able 
only 
as 
provided 
in 
section 
401(k)(2)(B), and 
‘‘(ii) in the case of a pension plan, 
amounts are distributable subject to the 
limitations applicable to other distributions 
from the plan. 
‘‘(B) DISTRIBUTIONS
WITHIN
YEARS 
AFTER SEPARATION, ETC.—In no event shall a
plan meet the requirements of this paragraph 
unless, under the plan, amounts distributed—
‘‘(i) after separation from service or 
severance from employment, and 
‘‘(ii) within 5 years after the date of 
the earliest employer contribution to the 
plan, 
may be distributed only in a direct trustee-to-
trustee transfer to a plan having the same dis-
tribution restrictions as the distributing plan. 
‘‘(e) OTHER DEFINITIONS.—For purposes of this 
section—
‘‘(1) ELIGIBLE EMPLOYER.—The term ‘eligible 
employer’ has the meaning given such term by sec-
tion 408(p)(2)(C)(i). 
‘‘(2) 
NONHIGHLY
COMPENSATED
EMPLOY-
EES.—The term ‘highly compensated employee’ has 
the meaning given such term by section 414(q) (de-
termined without regard to section 414(q)(1)(B)(ii)). 
‘‘(f) SPECIAL RULES.—
‘‘(1) DISALLOWANCE OF DEDUCTION.—No de-
duction shall be allowed for that portion of the quali-
fied employer contributions paid or incurred for the 
taxable year which is equal to the credit determined 
under subsection (a).
‘‘(2) ELECTION NOT TO CLAIM CREDIT.—This 
section shall not apply to a taxpayer for any taxable 
year if such taxpayer elects to have this section not 
apply for such taxable year. 
‘‘(g) RECAPTURE OF CREDIT ON FORFEITED CON-
TRIBUTIONS.—If any accrued benefit which is forfeitable 
by reason of subsection (d)(3) is forfeited, the employer’s 
tax imposed by this chapter for the taxable year in which 
the forfeiture occurs shall be increased by 35 percent of 
the employer contributions from which such benefit is de-
rived to the extent such contributions were taken into ac-
count in determining the credit under this section. 
‘‘(h) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be appropriate to carry out the 
purposes of this section, including regulations to prevent 
the abuse of the purposes of this section through the use 
of multiple plans. 
‘‘(i) TERMINATION.—This section shall not apply to 
any plan established after December 31, 2012.’’. 
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) of such Code (defining cur-
rent year business credit) is amended by striking ‘‘plus’’ 
at the end of paragraph (13), by striking the period at 
the end of paragraph (14) and inserting ‘‘, plus’’, and by 
adding at the end the following new paragraph:
‘‘(16) in the case of an eligible employer (as de-
fined in section 45G(e)), the small employer pension 
plan contribution credit determined under section 
45G(a).’’. 
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) of such Code is amended by 
adding at the end the following new paragraph: 
‘‘(11) NO
CARRYBACK
OF
SMALL
EMPLOYER 
PENSION PLAN CONTRIBUTION CREDIT BEFORE JAN-
UARY 1, 2002.—No portion of the unused business 
credit for any taxable year which is attributable to 
the small employer pension plan contribution credit 
determined under section 45G may be carried back 
to a taxable year beginning before January 1, 
2005.’’. 
(2) Subsection (c) of section 196 of such Code 
is amended by striking ‘‘and’’ at the end of para-
graph (9), by striking the period at the end of para-
graph (10) and inserting ‘‘, and’’, and by adding at 
the end the following new paragraph: 
‘‘(11) the small employer pension plan contribu-
tion credit determined under section 45G(a).’’. 
(3) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new 
item:
‘‘Sec 45G. Small employer pension plan contributions.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions paid or incurred 
in taxable years beginning after December 31, 2004. 
SEC. 303. NOTICE. 
The Secretary of the Treasury shall establish an on-
going program, in coordination with employers, under 
which the Secretary shall ensure that employees and other 
affected individuals remain fully and effectively notified of 
the availability of tax credits under sections 35, 35A, and 
45G of the Internal Revenue Code of 1986. 
TITLE IV—IMPROVED PENSION 
PROTECTIONS FOR WOMEN 
SEC. 401. MODIFICATIONS OF JOINT AND SURVIVOR ANNU-
ITY REQUIREMENTS. 
(a) AMOUNT OF ANNUITY.—
(1) OPTION
TO
ELECT
QUALIFIED
ALTER-
NATIVE JOINT AND SURVIVOR ANNUITY FORM OF 
BENEFIT UPON WAIVER OF QUALIFIED JOINT AND 
SURVIVOR
ANNUITY
FORM
OF
BENEFIT.—Section 
417(a)(1)(A) of the Internal Revenue Code of 1986 
is amended to read as follows: 
‘‘(A) under the plan, each participant—
‘‘(i) may elect at any time during the 
applicable election period to waive the 
qualified joint and survivor annuity form 
of benefit, 
‘‘(ii) may elect at any time during the 
applicable election period to waive the 
qualified preretirement survivor annuity 
form of benefit, 
‘‘(iii) may elect at any time during the 
applicable election period, in any case in 
which the qualified joint and survivor an-
nuity form of benefit is not provided by 
reason of a waiver under clause (i), to be 
provided a qualified alternative joint and 
survivor annuity form of benefit, and 
‘‘(iv) may revoke any such election at 
any time during the applicable election pe-
riod, and’’. 
(2) QUALIFIED ALTERNATIVE JOINT AND SUR-
VIVOR
ANNUITY
DEFINED.—Section 417 of such 
Code is amended by adding at the end the following 
new subsection: 
‘‘(i) DEFINITION
OF QUALIFIED OPTIONAL SUR-
VIVOR ANNUITY.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified alternative joint and sur-
vivor annuity’ means an annuity—
‘‘(A) for the life of the participant with a 
survivor annuity for the life of the spouse which 
is equal to the applicable percentage (deter-
mined under paragraph (2)) of (and not greater 
than 100 percent of) the amount of the annuity 
which is payable during the joint lives of the 
participant and the spouse, and 
‘‘(B) which is the actuarial equivalent of a 
single annuity for the life of the participant. 
Such term also includes any annuity form having the 
effect of an annuity described in the preceding sen-
tence. 
‘‘(2) APPLICABLE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)—
‘‘(i) if the base survivor annuity per-
centage is less than 75 percent, the appli-
cable percentage is 75 percent, and 
‘‘(ii) if the base survivor annuity per-
centage is equal to at least 75 percent, the 
applicable percentage is 50 percent.
‘‘(i) the terms and conditions of the qualified 
joint and survivor annuity form of benefit offered by 
the plan, the terms and conditions of the qualified 
preretirement survivor annuity form of benefit of-
fered by the plan, and the terms and conditions of 
the qualified alternative joint and survivor annuity 
form of benefit offered by the plan, accompanied by 
an illustration of the benefits under each such form 
of benefit for the particular participant and spouse 
and an acknowledgement form to be signed by the 
participant and the spouse that they have read and 
considered the illustration before any election is 
made pursuant to clause (i) or (ii) of subsection 
(c)(1)(A).’’. 
(d) RULE OF CONSTRUCTION.—For purposes of sec-
tion 411(d)(6) of the Internal Revenue Code of 1986, a 
plan shall not be treated as having decreased the accrued 
benefit of a participant solely by reason of the adoption 
of a plan amendment under which a qualified alternative 
joint and survivor annuity form of benefit is added to the 
plan in accordance with section 417(a)(1)(A)(ii) of such 
Code (as amended by this section).
SEC. 402. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL-
ROAD 
RETIREMENT 
ANNUITIES 
INDE-
PENDENT OF ACTUAL ENTITLEMENT OF EM-
PLOYEE. 
(a) IN GENERAL.—Section 2 of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231a) is amended—
(1) in subsection (c)(4)(i), by striking ‘‘(A) is 
entitled to an annuity under subsection (a)(1) and 
(B)’’; and 
(2) in subsection (e)(5), by striking ‘‘or di-
vorced wife’’ the second place it appears. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect 1 year after the date of the 
enactment of this Act. 
SEC. 403. EXTENSION OF TIER II RAILROAD RETIREMENT 
BENEFITS TO SURVIVING FORMER SPOUSES 
PURSUANT TO DIVORCE AGREEMENTS. 
(a) IN GENERAL.—Section 5 of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231d) is amended by adding 
at the end the following: 
‘‘(d) Notwithstanding any other provision of law, the 
payment of any portion of an annuity computed under sec-
tion 3(b) to a surviving former spouse in accordance with 
a court decree of divorce, annulment, or legal separation 
or the terms of any court-approved property settlement 
incident to any such court decree shall not be terminated
upon the death of the individual who performed the service 
with respect to which such annuity is so computed unless 
such termination is otherwise required by the terms of 
such court decree.’’
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect 1 year after the date of the 
enactment of this Act. 
TITLE 
V—DEFINED 
BENEFIT 
PLANS 
WHICH 
INCLUDE 
QUALIFIED 
CASH 
OR 
DE-
FERRED ARRANGEMENTS 
SEC. 501. DEFINED BENEFIT PLAN WITH DEFERRED COM-
PENSATION ARRANGEMENT IN A SINGLE 
PLAN. 
(a) DEFINED BENEFIT PLAN PERMITTED TO HAVE 
401(K) ARRANGEMENT.—
(1) IN GENERAL.—Paragraphs (1) and (2) of 
section 401(k) of the Internal Revenue Code of 1986 
are both amended by striking ‘‘or a rural cooperative 
plan’’ and inserting ‘‘, a rural cooperative plan, or 
a defined benefit plan’’. 
(2) ADJUSTMENT
OF
401(K)
RULES.—Section 
401(k) of such Code is amended—
(A) in paragraph (2)(B)(i)(III), by striking 
‘‘in the case of a profit-sharing or stock bonus 
plan,’’, 
(B) in paragraph (2)(B)(i)(IV), by striking 
‘‘to a profit-sharing or stock bonus plan’’, and 
(C) in paragraph (10)(A), by inserting be-
fore the period at the end the following: ‘‘or a 
defined benefit plan that includes a qualified 
cash or deferred arrangement’’. 
(b) QUALIFIED CASH OR DEFERRED ARRANGEMENT 
UNDER DEFINED BENEFIT PLAN SATISFIES DEFINITELY 
DETERMINABLE
BENEFIT
REQUIREMENT.—Subsection 
(a) of section 401 of such Code is amended by inserting 
after paragraph (34) the following new paragraph: 
‘‘(35) QUALIFIED
CASH
OR
DEFERRED
AR-
RANGEMENT UNDER DEFINED BENEFIT PLAN SATIS-
FIES
DEFINITELY
DETERMINABLE
BENEFIT
RE-
QUIREMENT.—A trust forming part of a defined 
benefit plan shall not be treated as failing to con-
stitute a qualified trust merely because such plan in-
cludes a qualified cash or deferred arrangement.’’. 
(c) CLARIFICATION OF EXTENT TO WHICH DEFINED 
CONTRIBUTION AND DEFINED BENEFIT RULES APPLY.—
(1) TREATMENT AS DEFINED BENEFIT PLAN.—
Subsection (j) of section 414 of such Code is amend-
ed to read as follows: 
‘‘(j) DEFINED BENEFIT PLAN.—For purposes of this 
part—
‘‘(1) IN GENERAL.—The term ‘defined benefit 
plan’ means any plan which is not a defined con-
tribution plan. 
‘‘(2) PLANS INCLUDING QUALIFIED CASH AND 
DEFERRED
ARRANGEMENTS.—Except as otherwise 
provided in this title—
‘‘(A) a pension plan which provides bene-
fits other than benefits described in subsection 
(i) shall not be treated as a ‘defined contribu-
tion plan’ on the basis of the inclusion in the 
plan of a qualified cash or deferred arrange-
ment, and 
‘‘(B) any such pension plan which includes 
such an arrangement shall be treated as a sin-
gle plan.’’. 
(2) SPECIAL RULES.—Subsection (k) of section 
414 of such Code is amended—
(A) by redesignating paragraphs (1), (2), 
and (3), as subparagraphs (A), (B), and (C),
respectively, and by moving such subparagraphs 
2 ems to the right, 
(B) by striking ‘‘A defined benefit plan’’ 
and inserting the following: 
‘‘(1) PLANS
WITH
SEPARATE
ACCOUNTS.—A 
defined benefit plan’’, and 
(C) by adding at the end the following new 
paragraph: 
‘‘(2) PLANS
WITH
CASH
OR
DEFERRED
AR-
RANGEMENTS.—In the case of a defined benefit plan 
which includes a qualified cash or deferred arrange-
ment—
‘‘(A) rules similar to the rules of subpara-
graphs (A), (B), and (C) of paragraph (1) shall 
apply, 
‘‘(B) for purposes of section 401(a)(4) (re-
lating to nondiscrimination testing), section 
401(a)(9) (relating to required distributions), 
section 401(a)(26) (relating to additional par-
ticipation requirements), section 401(a)(31) (re-
lating to direct transfer of eligible rollover dis-
tributions), section 404 (relating to deduction 
for contributions of an employer to an employ-
ees’ trust or annuity plan and compensation 
under a deferred-payment plan), section 412
‘‘(E) SPECIAL RULE FOR DEFINED BEN-
EFIT
PLANS
WITH
QUALIFIED
CASH
OR
DE-
FERRED ARRANGEMENTS.—In the case of a de-
fined benefit plan which includes a qualified 
cash or deferred arrangement, the maximum 
amount deductible under this section (notwith-
standing any other limitation under this para-
graph) with respect to such plan shall not be 
less than the full funding limitation that would 
be determined under section 412(c)(7)(A) if 
130 percent of the amount determined clause 
(i) of such section were substituted for the 
amount otherwise determined under clause 
(i).’’. 
(g) ALLOWABLE REDUCTIONS IN RATE OF BENEFIT 
ACCRUAL.—Subsection (e) of section 4980F of such Code 
is amended by adding at the end the following new para-
graph: 
‘‘(6) EXCEPTION FOR QUALIFIED CASH OR DE-
FERRED
ARRANGEMENTS.—A plan shall not be 
treated as failing to meet the requirements of para-
graph (1) merely because of a reduction in, or elimi-
nation of, any contributions to a qualified cash or 
deferred arrangement which is part of such plan.’’.
(h) DEFINED BENEFIT FUNDING STANDARDS NOT 
TO APPLY TO QUALIFIED CASH OR DEFERRED ARRANGE-
MENTS.—Subsection (h) of section 412 of such Code is 
amended by striking ‘‘or’’ at the end of paragraph (5), 
by striking the period at the end of paragraph (6) and 
inserting ‘‘, or’’, and by inserting after paragraph (6) the 
following new paragraph: 
‘‘(7) any qualified cash or deferred arrangement 
which is part of a defined benefit plan.’’. 
(i) INCLUSION IN CAFETERIA PLAN.—Subparagraph 
(B) of section 125(d)(2) of such Code is amended by strik-
ing ‘‘or rural cooperative plan (within the meaning of sec-
tion 401(k)(7))’’ and inserting ‘‘rural cooperative plan 
(within the meaning of section 401(k)(7)), or a defined 
benefit plan’’. 
(j) VESTING REQUIREMENTS.—Section 411(a) is 
amended by adding the following new paragraph: 
‘‘(13) FASTER VESTING FOR ACCRUALS UNDER 
DEFINED BENEFIT PLANS WITH CASH OR DEFERRED 
ARRANGEMENTS.—In the case of a defined benefit 
plan which includes a qualified cash or deferred ar-
rangement, benefit accruals and employer contribu-
tions (other than elective deferrals, as defined in sec-
tion 401(m)(4)) shall be treated as matching con-
tributions for purposes of paragraph (12).’’.
(k) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2005. 
SEC. 502. DEFINED BENEFIT ACCRUALS SATISFY 401(K) 
SAFE HARBOR. 
(a) IN GENERAL.—Paragraph (12) of section 401(k) 
of the Internal Revenue Code of 1986 is amended—
(1) in subparagraph (A)(i) by inserting ‘‘or the 
benefit accrual requirements of subparagraph (D)’’ 
after ‘‘or (C)’’, and 
(2) by redesignating subparagraphs (D), (E), 
and (F) as subparagraphs (E), (F), and (G), respec-
tively, and by inserting after subparagraph (C) the 
following new subparagraph: 
‘‘(D) BENEFIT ACCRUALS.—
‘‘(i) IN GENERAL.—The requirements 
of this subparagraph are met if the re-
quirements of clause (ii) or (iii) are met. 
‘‘(ii) TRADITIONAL FORMULA.—
‘‘(I) IN GENERAL.—The require-
ments of this clause are met if, under 
the arrangement, the employer is re-
quired, without regard to whether the 
employee makes an elective contribu-
tion or employee contribution, to pro-
vide an accrual under a defined ben-
efit plan on behalf of each employee 
who is not a highly compensated em-
ployee and who is eligible to partici-
pate in the arrangement. Such accrual 
shall be for each year in which the 
participant is eligible for the arrange-
ment, and the plan is satisfying the 
requirements of this subparagraph, in 
an amount equal to at least 1 percent 
of average compensation multiplied by 
years of service, payable as a life an-
nuity commencing at age 65. The plan 
may cap the cumulative benefit ac-
crued under such formula to an 
amount that is not less than 20 per-
cent of average compensation. 
‘‘(II) 
AVERAGE
COMPENSA-
TION.—For purposes of subclause (I), 
the 
term 
‘average 
compensation’ 
means the average compensation (as 
defined by section 414(s)) received by 
the participant during the testing pe-
riod. The plan may define the testing 
period as all years of service of the
participant, as a period of consecutive 
years of service of the participant 
which produces the highest average 
compensation, or as a period of con-
secutive years of service which in-
cludes the last year of service of the 
participant. The testing period shall 
not include fewer than 3 years of serv-
ice except in the case of participants 
with fewer than 3 years of service. 
‘‘(III) YEARS OF SERVICE.—For 
purposes of this clause, a year of serv-
ice shall be determined under para-
graphs (4), (5), and (6) of section 
411(a), except the plan need not in-
clude as a year of service any year of 
service ending in a plan year that 
began before the employee became a 
participant in the plan, or any year of 
service that begins in a plan year in 
which the participant dies, has a sev-
erance from employment, or becomes 
disabled (within the meaning of sec-
tion 72(m)(7)).
‘‘(IV) ADJUSTMENTS FOR EARLY 
AND
LATE
RETIREMENT.—The 
amount determined under subclause 
(I) shall be adjusted actuarially if 
benefits under the plan commence 
later than age 65. Such amount may 
(but is not required to) be adjusted 
for early retirement if benefits com-
mence (or normal retirement age is) 
earlier than age 65. 
‘‘(iii) CASH BALANCE FORMULA.—
‘‘(I) IN GENERAL.—The require-
ments of this clause are met if, under 
the arrangement, the employer is re-
quired, without regard to whether the 
employee makes an elective contribu-
tion or employee contribution, to pro-
vide a hypothetical allocation under a 
cash balance plan on behalf of each 
employee who is not a highly com-
pensated employee and who is eligible 
to participate in the arrangement in 
any year in an amount which is not 
less than the product of the average 
compensation of the employee (within