307
plan will not be insolvent in any of the next 5 plan 
years.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to determinations 
made in plan years beginning after December 31, 2005. 
TITLE III—OTHER PROVISIONS 
SEC. 301. INTEREST RATE FOR 2006 FUNDING REQUIRE-
MENTS. 
(a) AMENDMENTS TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—
(1) IN
GENERAL.—Subclause (II) of section 
302(b)(5)(B)(ii) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1082(b)(5)(B)(ii)) 
is amended—
(A) by striking ‘‘January 1, 2006’’ and in-
serting ‘‘January 1, 2007’’, and 
(B) by striking ‘‘AND 2005’’ in the heading 
and inserting ‘‘, 2005, AND 2006’’. 
(2) CURRENT
LIABILITY.—Subclause (IV) of 
section 302(d)(7)(C)(i) of such Act (29 U.S.C. 
1082(d)(7)(C)(i)) is amended—
(A) by striking ‘‘or 2005’’ and inserting ‘‘, 
2005, or 2006’’, and 
(B) by striking ‘‘AND 2005’’ in the heading 
and inserting ‘‘, 2005, AND 2006’’.
308
(b) AMENDMENTS TO INTERNAL REVENUE CODE OF 
1986.—
(1) IN
GENERAL.—Subclause (II) of section 
412(b)(5)(B)(ii) of the Internal Revenue Code of 
1986 is amended—
(A) by striking ‘‘January 1, 2006’’ and in-
serting ‘‘January 1, 2007’’, and 
(B) by striking ‘‘AND 2005’’ in the heading 
and inserting ‘‘, 2005, AND 2006’’. 
(2) CURRENT
LIABILITY.—Subclause (IV) of 
section 412(l)(7)(C)(i) of such Code is amended—
(A) by striking ‘‘or 2005’’ and inserting ‘‘, 
2005, or 2006’’, and 
(B) by striking ‘‘AND 2005’’ in the heading 
and inserting ‘‘, 2005, AND 2006’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2005. 
SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINA-
TION OF LUMP SUM DISTRIBUTIONS. 
(a) AMENDMENT TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—Paragraph (3) of section 
205(g) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1055(g)(3)) is amended to read as 
follows:
309
‘‘(3)(A) For purposes of paragraphs (1) and (2), the 
present value shall not be less than the present value cal-
culated by using the applicable mortality table and the ap-
plicable interest rate. 
‘‘(B) For purposes of subparagraph (A)—
‘‘(i) The term ‘applicable mortality table’ means 
a mortality table, modified as appropriate by the 
Secretary of the Treasury, based on the mortality 
table specified for the plan year under section 
303(h)(3). 
‘‘(ii) The term ‘applicable interest rate’ means 
the adjusted first, second, and third segment rates 
applied under rules similar to the rules of section 
303(h)(2)(C) for the month before the date of the 
distribution or such other time as the Secretary of 
the Treasury may by regulations prescribe. 
‘‘(iii) For purposes of clause (ii), the adjusted 
first, second, and third segment rates are the first, 
second, and third segment rates which would be de-
termined under section 303(h)(2)(C) if— 
‘‘(I) section 303(h)(2)(D)(i) were applied 
by substituting ‘the yields’ for ‘a 3-year weight-
ed average of yields’, 
‘‘(II) section 303(h)(2)(G)(i)(II) were ap-
plied 
by 
substituting 
‘section
310
205(g)(3)(A)(ii)(II)’ 
for 
‘section 
302(b)(5)(B)(ii)(II)’, and 
‘‘(III) the applicable percentage under sec-
tion 303(h)(2)(G) were determined in accord-
ance with the following table:
‘‘In the case of plan years beginning 
in:
The applicable 
percentage is:
2007 ..............................................................
20 percent
2008 ..............................................................
40 percent
2009 ..............................................................
60 percent
2010 ..............................................................
80 percent.’’. 
(b) AMENDMENT TO INTERNAL REVENUE CODE OF 
1986.—Paragraph (3) of section 417(e) of the Internal 
Revenue Code of 1986 is amended to read as follows: 
‘‘(3) DETERMINATION OF PRESENT VALUE.—
‘‘(A) IN GENERAL.—For purposes of para-
graphs (1) and (2), the present value shall not 
be less than the present value calculated by 
using the applicable mortality table and the ap-
plicable interest rate. 
‘‘(B) APPLICABLE
MORTALITY
TABLE.—
For purposes of subparagraph (A), the term 
‘applicable mortality table’ means a mortality 
table, modified as appropriate by the Secretary, 
based on the mortality table specified for the 
plan year under section 430(h)(3).
311
‘‘(C) APPLICABLE
INTEREST
RATE.—For 
purposes of subparagraph (A), the term ‘appli-
cable interest rate’ means the adjusted first, 
second, and third segment rates applied under 
rules 
similar 
to 
the 
rules 
of 
section 
430(h)(2)(C) for the month before the date of 
the distribution or such other time as the Sec-
retary may by regulations prescribe. 
‘‘(D) APPLICABLE SEGMENT RATES.—For 
purposes of subparagraph (C), the adjusted 
first, second, and third segment rates are the 
first, second, and third segment rates which 
would 
be 
determined 
under 
section 
430(h)(2)(C) if—
‘‘(i) section 430(h)(2)(D)(i) were ap-
plied by substituting ‘the yields’ for ‘a 3-
year weighted average of yields’, 
‘‘(ii) section 430(h)(2)(G)(i)(II) were 
applied 
by 
substituting 
‘section 
417(e)(3)(A)(ii)(II)’ 
for 
‘section 
412(b)(5)(B)(ii)(II)’, and 
‘‘(iii) the applicable percentage under 
section 430(h)(2)(G) were determined in 
accordance with the following table:
312
‘‘In the case of plan years beginning in:
The applicable 
percentage is:
2007 .......................................................................
20 percent
2008 .......................................................................
40 percent
2009 .......................................................................
60 percent
2010 .......................................................................
80 percent.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2006. 
SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING 
BENEFIT LIMITATIONS TO LUMP SUM DIS-
TRIBUTIONS. 
(a) 
IN
GENERAL.—Clause 
(ii) 
of 
section 
415(b)(2)(E) of the Internal Revenue Code of 1986 is 
amended to read as follows: 
‘‘(ii) For purposes of adjusting any 
benefit under subparagraph (B) for any 
form 
of 
benefit 
subject 
to 
section 
417(e)(3), the interest rate assumption 
shall not be less than the greater of—
‘‘(I) 5.5 percent, 
‘‘(II) the rate that provides a 
benefit of not more than 105 percent 
of the benefit that would be provided 
if the applicable interest rate (as de-
fined in section 417(e)(3)) were the 
interest rate assumption, or
313
‘‘(III) the rate specified under 
the plan.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to distributions made in years 
beginning after December 31, 2005. 
SEC. 304. DISTRIBUTIONS DURING WORKING RETIREMENT. 
(a) AMENDMENT TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Subparagraph (A) of 
section 3(2) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1002(2)) is amended by adding 
at the end the following new sentence: ‘‘A distribution 
from a plan, fund, or program shall not be treated as 
made in a form other than retirement income or as a dis-
tribution prior to termination of covered employment sole-
ly because such distribution is made to an employee who 
has attained age 62 and who is not separated from em-
ployment at the time of such distribution.’’. 
(b) AMENDMENT TO THE INTERNAL REVENUE CODE 
OF 1986.—Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 is amended by inserting after para-
graph (34) the following new paragraph: 
‘‘(35) DISTRIBUTIONS
DURING
WORKING
RE-
TIREMENT.—A trust forming part of a pension plan 
shall not be treated as failing to constitute a quali-
fied trust under this section solely because a dis-
314
tribution is made from such trust to an employee 
who has attained age 62 and who is not separated 
from employment at the time of such distribution.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions in plan years be-
ginning after December 31, 2005. 
SEC. 305. OTHER AMENDMENTS RELATING TO PROHIBITED 
TRANSACTIONS. 
(a) DEFINITION
OF AMOUNT INVOLVED.—Section 
502(i) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1132(i)) is amended to read as follows: 
‘‘(i)(1) In the case of a transaction prohibited by sec-
tion 406 by a party in interest with respect to a plan to 
which this part applies, the Secretary may assess a civil 
penalty against such party in interest. Except as provided 
in paragraph (2), the amount of such penalty may not ex-
ceed 5 percent of the amount involved in each such trans-
action for each year or part thereof during which the pro-
hibited transaction continues. 
‘‘(2) If the transaction is not corrected (in such man-
ner as the Secretary shall prescribe in regulations) within 
90 days after notice from the Secretary (or such longer 
period as the Secretary may permit), such penalty may 
be in an amount not more than 100 percent of the amount 
involved.
315
‘‘(3) For purposes of paragraph (1)—
‘‘(A) Except as provided in subparagraphs (C) 
and (D), the term ‘amount involved’ means, with re-
spect to a prohibited transaction, the greater of—
‘‘(i) the amount of money and the fair 
market value of the other property given, or 
‘‘(ii) the amount of money and the fair 
market value of the other property received. 
‘‘(B) For purposes of subparagraph (A), fair 
market value shall be determined as of the date on 
which the prohibited transaction occurs, except that 
in the case described in paragraph (2) fair market 
value shall be the highest fair market value during 
the period between the date of the transaction and 
the date of correction. 
‘‘(C) In the case of services described in sub-
section (b)(2) or (c)(2) of section 408, the term 
‘amount involved’ means only the amount of excess 
compensation. 
‘‘(D) In the case of principal transactions pro-
hibited under section 406(a) involving securities or 
commodities, the term ‘amount involved’ means only 
the amount received by the disqualified person in ex-
cess of the amount such person would have received
316
in an arm’s length transaction with an unrelated 
party as of the same date. 
‘‘(E) For the purposes of this paragraph—
‘‘(i) the term ‘security’ has the meaning 
given such term by section 475(c)(2) of the In-
ternal Revenue Code of 1986 (without regard to 
subparagraph (F)(iii) and the last sentence 
thereof), and 
‘‘(ii) the term ‘commodity’ has the mean-
ing given such term by section 475(e)(2) of 
such Code (without regard to subparagraph 
(D)(iii) thereof).’’. 
(b) EXEMPTION FOR BLOCK TRADING.—
(1) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 408(b) of 
such Act (29 U.S.C. 1108(b)), as amended by sec-
tion 601, is further amended by adding at the end 
the following new paragraph: 
‘‘(15)(A) Any transaction involving the pur-
chase or sale of securities between a plan and a 
party in interest (other than a fiduciary described in 
section 3(21)(A)(ii)) with respect to a plan if—
‘‘(i) the transaction involves a block trade, 
‘‘(ii) at the time of the transaction, the in-
terest of the plan (together with the interests of
317
any other plans maintained by the same plan 
sponsor), does not exceed 10 percent of the ag-
gregate size of the block trade, and 
‘‘(iii) the terms of the transaction, includ-
ing the price, are at least as favorable to the 
plan as an arm’s length transaction. 
‘‘(B) For purposes of this paragraph, the term 
‘block trade’ includes any trade which will be allo-
cated across two or more client accounts of a fidu-
ciary.’’. 
(2) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.—
(A) IN GENERAL.—Subsection (d) of sec-
tion 4975 of the Internal Revenue Code of 1986 
(relating to exemptions) is amended by striking 
‘‘or’’ at the end of paragraph (15), by striking 
the period at the end of paragraph (16) and in-
serting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(17) any transaction involving the purchase or 
sale of securities between a plan and a party in in-
terest (other than a fiduciary described in subsection 
(e)(3)(B)) with respect to a plan if—
‘‘(A) the transaction involves a block trade,
318
‘‘(B) at the time of the transaction, the in-
terest of the plan (together with the interests of 
any other plans maintained by the same plan 
sponsor), does not exceed 10 percent of the ag-
gregate size of the block trade, and 
‘‘(C) the terms of the transaction, includ-
ing the price, are at least as favorable to the 
plan as an arm’s length transaction. 
‘‘(D) For purposes of this paragraph, the term 
‘block trade’ includes any trade which will be allo-
cated across two or more client accounts of a fidu-
ciary.’’. 
(B) SPECIAL RULE RELATING TO BLOCK 
TRADE.—Subsection (f) of section 4975 of such 
Code (relating to other definitions and special 
rules) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(8) BLOCK
TRADE.—For purposes of sub-
section (d)(17), the term ‘block trade’ includes any 
trade which will be allocated across two or more cli-
ent accounts of a fiduciary.’’. 
(c) BONDING RELIEF.—Section 412(a) of such Act 
(29 U.S.C. 1112(a)) is amended—
(1) by redesignating paragraph (2) as para-
graph (3);
319
(2) by striking ‘‘and’’ at the end of paragraph 
(1); and 
(3) by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) no bond shall be required of an entity 
which is subject to regulation as a broker or a dealer 
under section 15 of the Securities Exchange Act of 
1934 (15 U.S.C. 78a et seq.) or an entity registered 
under the Investment Advisers Act of 1940 (15 
U.S.C. 80b-1 et seq.), including requirements im-
posed by a self-regulatory organization (within the 
meaning of section 3(a)(26) of such Act (15 U.S.C. 
78c(a)(26)), or any affiliate with respect to which 
the broker or dealer agrees to be liable to the same 
extent as if they held the assets directly.’’. 
(d) EXEMPTION FOR ELECTRONIC COMMUNICATION 
NETWORK.—
(1) IN GENERAL.—Section 408(b) of such Act 
(as amended by subsection (b)) is further amended 
by adding at the end the following: 
‘‘(16) Any transaction involving the purchase or 
sale of securities, or other property (as determined 
in regulations of the Secretary) between a plan and 
a fiduciary or a party in interest if—
320
‘‘(A) the transaction is executed through 
an exchange, electronic communication network, 
alternative trading system, or similar execution 
system or trading venue subject to regulation 
and oversight by—
‘‘(i) the applicable Federal regulating 
entity, or 
‘‘(ii) such other applicable govern-
mental regulating agency as the Secretary 
may determine appropriate in the case of 
any fiduciary or party in interest or class 
of fiduciaries or parties in interest or any 
transaction or class of transactions, 
‘‘(B) neither the execution system nor the 
parties to the transaction take into account the 
identity of the parties in the execution of 
trades, 
‘‘(C) the transaction is effected pursuant 
to rules designed to match purchases and sales 
at the best price available through the execution 
system, 
‘‘(D) the price and compensation associ-
ated with the purchase and sale are not greater 
than an arm’s length transaction with an unre-
lated party,
321
‘‘(E) if the fiduciary or party in interest 
has an ownership interest in the system or 
venue described in subparagraph (A), the sys-
tem or venue has been authorized under the 
plan for transactions described in this para-
graph, and 
‘‘(F) not less than 30 days prior to the ini-
tial transaction described in this paragraph exe-
cuted through any system or venue described in 
subparagraph (A), the plan administrator is 
provided written notice of the execution of such 
transaction through such system or venue.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall take effect 30 days after the 
date of the enactment of this Act. 
(e) CONFORMING
ERISA’S PROHIBITED
TRANS-
ACTION PROVISION TO FERSA.—Section 408(b) of such 
Act (29 U.S.C. 1106), as amended by subsection (d), is 
further amended by adding at the end the following new 
paragraph: 
‘‘(17)(A) transactions described in subpara-
graphs (A), (B), and (D) of section 406(a)(1) be-
tween a plan and a party that is a party in interest 
(under section 3(14)) solely by reason of providing 
services, but only if in connection with such trans-
322
action the plan receives no less, nor pays no more, 
than adequate consideration. 
‘‘(B) For purposes of this paragraph, the term 
‘adequate consideration’ means—
‘‘(i) in the case of a security for which 
there is a generally recognized market—
‘‘(I) the price of the security pre-
vailing on a national securities exchange 
which is registered under section 6 of the 
Securities Exchange Act of 1934, taking 
into account factors such as the size of the 
transaction and marketability of the secu-
rity, or 
‘‘(II) if the security is not traded on 
such a national securities exchange, a price 
not less favorable to the plan than the of-
fering price for the security as established 
by the current bid and asked prices quoted 
by persons independent of the issuer and 
of the party in interest, taking into ac-
count factors such as the size of the trans-
action and marketability of the security, 
and 
‘‘(ii) in the case of an asset other than a 
security for which there is a generally recog-
323
nized market, the fair market value of the asset 
as determined in good faith by a fiduciary or fi-
duciaries in accordance with regulations pre-
scribed by the Secretary.’’. 
(f) RELIEF
FOR
FOREIGN
EXCHANGE
TRANS-
ACTIONS.—Section 408(b) of such Act (as amended by the 
preceding provisions of this section) is further amended 
by adding at the end the following new paragraph: 
‘‘(18) Any foreign exchange transactions, be-
tween a bank or broker-dealer, or any affiliate of ei-
ther thereof, and a plan with respect to which the 
bank or broker-dealer, or any affiliate, is a trustee, 
custodian, fiduciary, or other party in interest, if—
‘‘(A) the transaction is in connection with 
the purchase or sale of securities, 
‘‘(B) at the time the foreign exchange 
transaction is entered into, the terms of the 
transaction are not less favorable to the plan 
than the terms generally available in com-
parable arm’s length foreign exchange trans-
actions between unrelated parties, or the terms 
afforded by the bank or the broker-dealer (or 
any affiliate thereof) in comparable arm’s-
length foreign exchange transactions involving 
unrelated parties, and