designating paragraphs (9) and (10) as paragraphs (10) 
and (11), respectively, and by inserting after paragraph 
(8) the following new paragraph: 
‘‘(9) TREATMENT IN THE CASE OF DEATH OR 
DISABILITY
RESULTING
FROM
ACTIVE
MILITARY 
SERVICE.— 
‘‘(A) IN
GENERAL.—For benefit accrual 
purposes, an employer sponsoring a retirement 
plan may treat an individual who dies or be-
comes disabled (as defined under the terms of 
the plan) while performing qualified military 
service with respect to the employer maintain-
ing the plan as if the individual has resumed 
employment in accordance with the individual’s 
reemployment rights under chapter 43 of title 
38, United States Code, on the day preceding 
death or disability (as the case may be) and ter-
minated employment on the actual date of 
death or disability. In the case of any such 
treatment, and subject to subparagraphs (B) 
and (C), any full or partial compliance by such 
plan with respect to the benefit accrual require-
ments of paragraph (8) with respect to such in-
dividual shall be treated for purposes of para-
graph (1) as if such compliance were required 
under such chapter 43. 
‘‘(B) 
NONDISCRIMINATION
REQUIRE-
MENT.—Subparagraph (A) shall apply only if 
all individuals performing qualified military 
service with respect to the employer maintain-
ing the plan (as determined under subsections 
(b), (c), (m), and (o)) who die or became dis-
abled as a result of performing qualified mili-
tary service prior to reemployment by the em-
ployer are credited with service and benefits on 
reasonably equivalent terms. 
‘‘(C) DETERMINATION OF BENEFITS.—The 
amount of employee contributions and the 
amount of elective deferrals of an individual 
treated as reemployed under subparagraph (A) 
for purposes of applying paragraph (8)(C) shall 
be determined on the basis of the individual’s 
average actual employee contributions or elec-
tive deferrals for the lesser of— 
‘‘(i) the 12-month period of service 
with the employer immediately prior to 
qualified military service, or 
‘‘(ii) if service with the employer is 
less than such 12-month period, the actual
length of continuous service with the em-
ployer.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 404(a)(2) is amended by striking 
‘‘and (31)’’ and inserting ‘‘(31), and (37)’’. 
(2) Section 403(b) is amended by adding at the 
end the following new paragraph: 
‘‘(14) DEATH BENEFITS UNDER USERRA-QUALI-
FIED ACTIVE MILITARY SERVICE.—This subsection 
shall not apply to an annuity contract unless such 
contract 
meets 
the 
requirements 
of 
section 
401(a)(37).’’. 
(3) Section 457(g) is amended by adding at the 
end the following new paragraph: 
‘‘(4) DEATH BENEFITS UNDER USERRA-QUALI-
FIED ACTIVE MILITARY SERVICE.—A plan described 
in paragraph (1) shall not be treated as an eligible 
deferred compensation plan unless such plan meets 
the requirements of section 401(a)(37).’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply with respect to deaths and 
disabilities occurring on or after January 1, 2007. 
(2) PROVISIONS
RELATING
TO
PLAN
AMEND-
MENTS.—
(A) IN
GENERAL.—If this subparagraph 
applies to any plan or contract amendment, 
such plan or contract shall be treated as being 
operated in accordance with the terms of the 
plan during the period described in subpara-
graph (B)(iii). 
(B) AMENDMENTS
TO
WHICH
SUBPARA-
GRAPH (A) APPLIES.— 
(i) IN GENERAL.—Subparagraph (A) 
shall apply to any amendment to any plan 
or annuity contract which is made— 
(I) pursuant to the amendments 
made by subsection (a) or pursuant to 
any regulation issued by the Secretary 
of the Treasury under subsection (a), 
and 
(II) on or before the last day of 
the first plan year beginning on or 
after January 1, 2010. 
In the case of a governmental plan (as de-
fined in section 414(d) of the Internal Rev-
enue Code of 1986), this clause shall be 
applied by substituting ‘‘2012’’ for ‘‘2010’’ 
in subclause (II).
(ii) 
CONDITIONS.—This 
paragraph 
shall not apply to any amendment unless— 
(I) the plan or contract is oper-
ated as if such plan or contract 
amendment were in effect for the pe-
riod described in clause (iii), and 
(II) such plan or contract amend-
ment applies retroactively for such pe-
riod. 
(iii) PERIOD DESCRIBED.—The period 
described in this clause is the period— 
(I) beginning on the effective 
date specified by the plan, and 
(II) ending on the date described 
in clause (i)(II) (or, if earlier, the 
date the plan or contract amendment 
is adopted). 
SEC. 105. TREATMENT OF DIFFERENTIAL MILITARY PAY AS 
WAGES. 
(a) INCOME TAX WITHHOLDING ON DIFFERENTIAL 
WAGE PAYMENTS.— 
(1) IN
GENERAL.—Section 3401 (relating to 
definitions) is amended by adding at the end the fol-
lowing new subsection:
‘‘(h) DIFFERENTIAL WAGE PAYMENTS TO ACTIVE 
DUTY MEMBERS OF THE UNIFORMED SERVICES.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), any differential wage payment shall be treated 
as a payment of wages by the employer to the em-
ployee. 
‘‘(2) DIFFERENTIAL
WAGE
PAYMENT.—For 
purposes of paragraph (1), the term ‘differential 
wage payment’ means any payment which— 
‘‘(A) is made by an employer to an indi-
vidual with respect to any period during which 
the individual is performing service in the uni-
formed services (as defined in chapter 43 of 
title 38, United States Code) while on active 
duty for a period of more than 30 days, and 
‘‘(B) represents all or a portion of the 
wages the individual would have received from 
the employer if the individual were performing 
service for the employer.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to remuneration paid 
after December 31, 2008. 
(b) TREATMENT
OF DIFFERENTIAL WAGE PAY-
MENTS FOR RETIREMENT PLAN PURPOSES.— 
(1) PENSION PLANS.—
(A) IN GENERAL.—Section 414(u) (relat-
ing to special rules relating to veterans’ reem-
ployment rights under USERRA), as amended 
by section 103(b), is amended by adding at the 
end the following new paragraph: 
‘‘(12) TREATMENT
OF
DIFFERENTIAL
WAGE 
PAYMENTS.— 
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, for purposes of applying this 
title to a retirement plan to which this sub-
section applies— 
‘‘(i) an individual receiving a differen-
tial wage payment shall be treated as an 
employee of the employer making the pay-
ment, 
‘‘(ii) the differential wage payment 
shall be treated as compensation, and 
‘‘(iii) the plan shall not be treated as 
failing to meet the requirements of any 
provision described in paragraph (1)(C) by 
reason of any contribution or benefit which 
is based on the differential wage payment. 
‘‘(B) 
SPECIAL
RULE
FOR
DISTRIBU-
TIONS.—
‘‘(i) IN
GENERAL.—Notwithstanding 
subparagraph (A)(i), for purposes of sec-
tion 401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii), 
403(b)(11)(A), or 457(d)(1)(A)(ii), an in-
dividual shall be treated as having been 
severed from employment during any pe-
riod the individual is performing service in 
the uniformed services described in section 
3401(h)(2)(A). 
‘‘(ii) LIMITATION.—If an individual 
elects to receive a distribution by reason of 
clause (i), the plan shall provide that the 
individual may not make an elective defer-
ral or employee contribution during the 6- 
month period beginning on the date of the 
distribution. 
‘‘(C) 
NONDISCRIMINATION
REQUIRE-
MENT.—Subparagraph (A)(iii) shall apply only 
if all employees of an employer (as determined 
under subsections (b), (c), (m), and (o)) per-
forming service in the uniformed services de-
scribed in section 3401(h)(2)(A) are entitled to 
receive differential wage payments on reason-
ably equivalent terms and, if eligible to partici-
pate in a retirement plan maintained by the
employer, to make contributions based on the 
payments on reasonably equivalent terms. For 
purposes of applying this subparagraph, the 
provisions of paragraphs (3), (4), and (5) of 
section 410(b) shall apply. 
‘‘(D) DIFFERENTIAL
WAGE
PAYMENT.— 
For purposes of this paragraph, the term ‘dif-
ferential wage payment’ has the meaning given 
such term by section 3401(h)(2).’’. 
(B) 
CONFORMING
AMENDMENT.—The 
heading for section 414(u) is amended by in-
serting ‘‘AND TO DIFFERENTIAL WAGE PAY-
MENTS TO MEMBERS ON ACTIVE DUTY’’ after 
‘‘USERRA’’. 
(2) DIFFERENTIAL WAGE PAYMENTS TREATED 
AS
COMPENSATION
FOR
INDIVIDUAL
RETIREMENT 
PLANS.—Section 219(f)(1) (defining compensation) 
is amended by adding at the end the following new 
sentence: ‘‘The term compensation includes any dif-
ferential wage payment (as defined in section 
3401(h)(2)).’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to years beginning 
after December 31, 2008.
(c) PROVISIONS
RELATING
TO
PLAN
AMEND-
MENTS.— 
(1) IN GENERAL.—If this subsection applies to 
any plan or annuity contract amendment, such plan 
or contract shall be treated as being operated in ac-
cordance with the terms of the plan or contract dur-
ing the period described in paragraph (2)(B)(i). 
(2) AMENDMENTS
TO
WHICH
SECTION
AP-
PLIES.— 
(A) IN
GENERAL.—This subsection shall 
apply to any amendment to any plan or annuity 
contract which is made— 
(i) pursuant to any amendment made 
by subsection (b)(1), and 
(ii) on or before the last day of the 
first plan year beginning on or after Janu-
ary 1, 2010. 
In the case of a governmental plan (as defined 
in section 414(d) of the Internal Revenue Code 
of 1986), this subparagraph shall be applied by 
substituting ‘‘2012’’ for ‘‘2010’’ in clause (ii). 
(B) CONDITIONS.—This subsection shall 
not apply to any plan or annuity contract 
amendment unless—
(i) during the period beginning on the 
date the amendment described in subpara-
graph (A)(i) takes effect and ending on the 
date described in subparagraph (A)(ii) (or, 
if earlier, the date the plan or contract 
amendment is adopted), the plan or con-
tract is operated as if such plan or con-
tract amendment were in effect, and 
(ii) such plan or contract amendment 
applies retroactively for such period. 
SEC. 106. SPECIAL PERIOD OF LIMITATION WHEN UNI-
FORMED SERVICES RETIRED PAY IS RE-
DUCED AS A RESULT OF AWARD OF DIS-
ABILITY COMPENSATION. 
(a) IN GENERAL.—Subsection (d) of section 6511 
(relating to special rules applicable to income taxes) is 
amended by adding at the end the following new para-
graph: 
‘‘(8) SPECIAL RULES WHEN UNIFORMED SERV-
ICES RETIRED PAY IS REDUCED AS A RESULT OF 
AWARD OF DISABILITY COMPENSATION.— 
‘‘(A) PERIOD OF LIMITATION ON FILING 
CLAIM.—If the claim for credit or refund re-
lates to an overpayment of tax imposed by sub-
title A on account of—
‘‘(i) the reduction of uniformed serv-
ices retired pay computed under section 
1406 or 1407 of title 10, United States 
Code, or 
‘‘(ii) the waiver of such pay under sec-
tion 5305 of title 38 of such Code, 
as a result of an award of compensation under 
title 38 of such Code pursuant to a determina-
tion by the Secretary of Veterans Affairs, the 3- 
year period of limitation prescribed in sub-
section (a) shall be extended, for purposes of 
permitting a credit or refund based upon the 
amount of such reduction or waiver, until the 
end of the 1-year period beginning on the date 
of such determination. 
‘‘(B) LIMITATION TO 5 TAXABLE YEARS.— 
Subparagraph (A) shall not apply with respect 
to any taxable year which began more than 5 
years before the date of such determination.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to claims for credit or refund 
filed after the date of the enactment of this Act. 
(c) TRANSITION RULES.—In the case of a determina-
tion described in paragraph (8) of section 6511(d) of the 
Internal Revenue Code of 1986 (as added by this section)
which is made by the Secretary of Veterans Affairs after 
December 31, 2000, and before the date of the enactment 
of this Act, such paragraph— 
(1) shall not apply with respect to any taxable 
year which began before January 1, 2001, and 
(2) shall be applied by substituting for ‘‘the 
date of such determination’’ in subparagraph (A) 
thereof. 
SEC. 107. DISTRIBUTIONS FROM RETIREMENT PLANS TO 
INDIVIDUALS CALLED TO ACTIVE DUTY. 
(a) IN GENERAL.—Clause (iv) of section 72(t)(2)(G) 
is amended by striking ‘‘, and before December 31, 2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to individuals ordered or called to 
active duty on or after December 31, 2007. 
SEC. 108. AUTHORITY TO DISCLOSE RETURN INFORMATION 
FOR CERTAIN VETERANS PROGRAMS MADE 
PERMANENT. 
(a) IN GENERAL.—Paragraph (7) of section 6103(l) 
is amended by striking the last sentence thereof. 
(b) 
CONFORMING
AMENDMENT.—Section 
6103(l)(7)(D)(viii)(III) is amended by striking ‘‘sections 
1710(a)(1)(I), 1710(a)(2), 1710(b), and 1712(a)(2)(B)’’ 
and inserting ‘‘sections 1710(a)(2)(G), 1710(a)(3), and 
1710(b)’’.
(c) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to requests made after Sep-
tember 30, 2008. 
SEC. 109. CONTRIBUTIONS OF MILITARY DEATH GRATU-
ITIES TO ROTH IRAS AND EDUCATION SAV-
INGS ACCOUNTS. 
(a) PROVISION IN EFFECT BEFORE PENSION PRO-
TECTION ACT.—Subsection (e) of section 408A (relating 
to qualified rollover contribution), as in effect before the 
amendments made by section 824 of the Pension Protec-
tion Act of 2006, is amended to read as follows: 
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified rollover 
contribution’ means a rollover contribution to a Roth 
IRA from another such account, or from an indi-
vidual retirement plan, but only if such rollover con-
tribution 
meets 
the 
requirements 
of 
section 
408(d)(3). Such term includes a rollover contribu-
tion described in section 402A(c)(3)(A). For pur-
poses of section 408(d)(3)(B), there shall be dis-
regarded any qualified rollover contribution from an 
individual retirement plan (other than a Roth IRA) 
to a Roth IRA. 
‘‘(2) MILITARY DEATH GRATUITY.—
‘‘(A) IN
GENERAL.—The term ‘qualified 
rollover contribution’ includes a contribution to 
a Roth IRA maintained for the benefit of an in-
dividual made before the end of the 1-year pe-
riod beginning on the date on which such indi-
vidual receives an amount under section 1477 
of title 10, United States Code, or section 1967 
of title 38 of such Code, with respect to a per-
son, to the extent that such contribution does 
not exceed— 
‘‘(i) the sum of the amounts received 
during such period by such individual 
under such sections with respect to such 
person, reduced by 
‘‘(ii) the amounts so received which 
were contributed to a Coverdell education 
savings account under section 530(d)(9). 
‘‘(B) ANNUAL
LIMIT
ON
NUMBER
OF 
ROLLOVERS
NOT
TO
APPLY.—Section 
408(d)(3)(B) shall not apply with respect to 
amounts treated as a rollover by subparagraph 
(A). 
‘‘(C) APPLICATION OF SECTION 72.—For 
purposes of applying section 72 in the case of 
a distribution which is not a qualified distribu-
tion, the amount treated as a rollover by reason 
of subparagraph (A) shall be treated as invest-
ment in the contract.’’. 
(b) PROVISION IN EFFECT AFTER PENSION PROTEC-
TION ACT.—Subsection (e) of section 408A, as in effect 
after the amendments made by section 824 of the Pension 
Protection Act of 2006, is amended to read as follows: 
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified rollover 
contribution’ means a rollover contribution— 
‘‘(A) to a Roth IRA from another such ac-
count, 
‘‘(B) from an eligible retirement plan, but 
only if— 
‘‘(i) in the case of an individual retire-
ment plan, such rollover contribution meets 
the requirements of section 408(d)(3), and 
‘‘(ii) in the case of any eligible retire-
ment 
plan 
(as 
defined 
in 
section 
402(c)(8)(B) other than clauses (i) and (ii) 
thereof), such rollover contribution meets 
the 
requirements 
of 
section 
402(c), 
403(b)(8), or 457(e)(16), as applicable.
For purposes of section 408(d)(3)(B), there 
shall be disregarded any qualified rollover con-
tribution from an individual retirement plan 
(other than a Roth IRA) to a Roth IRA. 
‘‘(2) MILITARY DEATH GRATUITY.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
rollover contribution’ includes a contribution to 
a Roth IRA maintained for the benefit of an in-
dividual made before the end of the 1-year pe-
riod beginning on the date on which such indi-
vidual receives an amount under section 1477 
of title 10, United States Code, or section 1967 
of title 38 of such Code, with respect to a per-
son, to the extent that such contribution does 
not exceed— 
‘‘(i) the sum of the amounts received 
during such period by such individual 
under such sections with respect to such 
person, reduced by 
‘‘(ii) the amounts so received which 
were contributed to a Coverdell education 
savings account under section 530(d)(9). 
‘‘(B) ANNUAL
LIMIT
ON
NUMBER
OF 
ROLLOVERS
NOT
TO
APPLY.—Section 
408(d)(3)(B) shall not apply with respect to
amounts treated as a rollover by the subpara-
graph (A). 
‘‘(C) APPLICATION OF SECTION 72.—For 
purposes of applying section 72 in the case of 
a distribution which is not a qualified distribu-
tion, the amount treated as a rollover by reason 
of subparagraph (A) shall be treated as invest-
ment in the contract.’’. 
(c) EDUCATION SAVINGS ACCOUNTS.—Subsection 
(d) of section 530 is amended by adding at the end the 
following new paragraph: 
‘‘(9) MILITARY DEATH GRATUITY.— 
‘‘(A) IN GENERAL.—For purposes of this 
section, the term ‘rollover contribution’ includes 
a contribution to a Coverdell education savings 
account made before the end of the 1-year pe-
riod beginning on the date on which the con-
tributor receives an amount under section 1477 
of title 10, United States Code, or section 1967 
of title 38 of such Code, with respect to a per-
son, to the extent that such contribution does 
not exceed— 
‘‘(i) the sum of the amounts received 
during such period by such contributor
of section 408, a qualified tuition program (as de-
fined in section 529), a Coverdell education savings 
account (as defined in section 530), a health savings 
account (as defined in section 223), and an Archer 
MSA (as defined in section 220). 
‘‘(f) SPECIAL RULES FOR NONGRANTOR TRUSTS.— 
‘‘(1) IN GENERAL.—In the case of a distribu-
tion (directly or indirectly) of any property from a 
nongrantor trust to a covered expatriate— 
‘‘(A) the trustee shall deduct and withhold 
from such distribution an amount equal to 30 
percent of the taxable portion of the distribu-
tion, and 
‘‘(B) if the fair market value of such prop-
erty exceeds its adjusted basis in the hands of 
the trust, gain shall be recognized to the trust 
as if such property were sold to the expatriate 
at its fair market value. 
‘‘(2) TAXABLE PORTION.—For purposes of this 
subsection, the term ‘taxable portion’ means, with 
respect to any distribution, that portion of the dis-
tribution which would be includible in the gross in-
come of the covered expatriate if such expatriate 
continued to be subject to tax as a citizen or resi-
dent of the United States.