119
tice mailed to the last known address of the 
participant or beneficiary shall be treated as a 
notice to the participant or beneficiary for pur-
poses of this paragraph. 
‘‘(B) ONGOING PLAN.—The term ‘ongoing 
plan’ means any plan which has neither termi-
nated nor is in the process of terminating. 
‘‘(C) TERMINATED PLAN.—The term ‘ter-
minated plan’ means any plan which has termi-
nated or is in the process of terminating. 
‘‘(D) MISSING
PARTICIPANT.—The term 
‘missing participant’ shall have the meaning 
given to such term by section 4050(b)(1) of the 
Employee Retirement Income Security Act of 
1974.’’. 
(3) CONFORMING AMENDMENT.—Subparagraph 
(B) of section 401(a)(31) of such Code is amended 
by adding at the end the following: 
‘‘(iii) 
OTHER
PERMITTED
TRANS-
FERS.—A plan administrator shall be 
treated as having complied with the re-
quirements of this subparagraph if such 
plan administrator complies with the re-
quirements of section 414(y).’’.
120
(b) AMENDMENTS TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—
(1) IN
GENERAL.—Subsection (b) of section 
4050 of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1350) is amended by adding 
at the end the following paragraph: 
‘‘(3) UNCLAIMED
BENEFIT.—The term ‘un-
claimed benefit’ means—
‘‘(A) any benefit of a participant or bene-
ficiary which is distributable under the terms of 
the plan to the participant or beneficiary, if the 
distribution of the benefit has not commenced 
within 1 year after the later of the date on 
which the benefit first became so distributable 
or the participant’s severance from employment; 
‘‘(B) any benefit or other amount of a par-
ticipant or beneficiary which is distributable 
under the terms of the plan with respect to a 
missing participant; or 
‘‘(C) 
any 
benefit 
to 
which 
section 
401(a)(31)(B) of the Internal Revenue Code of 
1986 applies or would apply if subclause (I) of 
section 401(a)(31)(B)(i) of such Code did not 
require the distribution to exceed $1,000.
121
A benefit otherwise described in subparagraph (A) 
shall not be treated as an unclaimed benefit under 
subparagraph (A) if the participant or beneficiary 
elects not to have such treatment apply. Any such 
participant or beneficiary shall be given reasonable 
notice of the opportunity to make such an election. 
If the participant or beneficiary fails to make such 
an election within a reasonable period specified in 
the notice, any subsequent election shall not be given 
effect and the benefit shall be treated as an un-
claimed benefit. A notice mailed to the last known 
address of the participant or beneficiary shall be 
treated as a notice to the participant or beneficiary 
for purposes of this paragraph.’’. 
(2) OTHER
AMENDMENTS.—Section 4050 of 
such Act is amended by redesignating subsection (c) 
as subsection (f) and by inserting after subsection 
(b) the following new subsections: 
‘‘(c) MULTIEMPLOYER
PLANS.—The corporation 
shall prescribe rules similar to the rules in subsection (a) 
for multiemployer plans covered by this title that termi-
nate under section 4041A. 
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan 
administrator of a plan described in paragraph (4)
122
may elect to transfer a missing participant’s benefits 
to the corporation upon termination of the plan. 
‘‘(2) INFORMATION TO THE CORPORATION.—To 
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall, 
upon termination of the plan, provide the corpora-
tion information with respect to the benefits of a 
missing participant if the plan transfers such bene-
fits—
‘‘(A) to the corporation, or 
‘‘(B) to an entity other than the corpora-
tion or a plan described in paragraph (4)(B)(ii). 
‘‘(3) PAYMENT BY THE CORPORATION.—If ben-
efits of a missing participant were transferred to the 
corporation under paragraph (1), the corporation 
shall, upon location of the participant or beneficiary, 
pay to the participant or beneficiary the amount 
transferred (or the appropriate survivor benefit) ei-
ther—
‘‘(A) in a single sum (plus interest), or 
‘‘(B) in such other form as is specified in 
regulations of the corporation. 
‘‘(4) PLANS DESCRIBED.—A plan is described 
in this paragraph if—
123
‘‘(A) the plan is a pension plan (within the 
meaning of section 3(2))—
‘‘(i) to which the provisions of this 
section do not apply (without regard to 
this subsection), and 
‘‘(ii) which is not a plan described in 
paragraphs (2) through (11) of section 
4021(b), and 
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan—
‘‘(i) has missing participants, and 
‘‘(ii) has not provided for the transfer 
of assets to pay the benefits of all missing 
participants to another pension plan (with-
in the meaning of section 3(2)). 
‘‘(5) 
CERTAIN
PROVISIONS
NOT
TO 
APPLY.—Subsections (a)(1) and (a)(3) shall not 
apply to a plan described in paragraph (4). 
‘‘(e) UNCLAIMED BENEFITS.—
‘‘(1) TRANSFER TO CORPORATION.—The plan 
administrator of a plan described in paragraph (6) 
may elect to transfer unclaimed benefits to the cor-
poration. 
‘‘(2) INFORMATION
TO
THE
CORPORATION.—
The corporation may impose such conditions on
124
transfers of unclaimed benefits to the corporation as 
the corporation determines are necessary to facilitate 
administration of this subsection and are not incon-
sistent with the purposes of this subsection. Such 
conditions may include requirements that the trans-
ferring plan provide to the corporation specified in-
formation and documentation. 
‘‘(3) PAYMENT TO THE CORPORATION.—With 
respect to any participant, any transfer of an un-
claimed benefit to the corporation shall—
‘‘(A) in the case of a defined benefit plan, 
be a transfer of the participant’s designated 
benefit, or 
‘‘(B) in the case of an individual account 
plan, be a transfer of the participant’s vested 
account balance under the plan. 
‘‘(4) PAYMENT BY THE CORPORATION.—Subject 
to such reasonable restrictions as may be prescribed 
in regulations of the corporation (relating to invest-
ment limitations and otherwise)—
‘‘(A) unclaimed benefits of a participant or 
beneficiary which are transferred to the cor-
poration pursuant to this subsection shall be 
distributed by the corporation to the participant 
or beneficiary not later than upon application
125
filed by the participant or beneficiary with the 
corporation in such form and manner as may 
be prescribed in regulations of the corporation, 
and 
‘‘(B) such benefits shall—
‘‘(i) in the case of an individual ac-
count plan, be paid in a single sum (plus 
interest) or in such other form as is speci-
fied in regulations of the corporation, or 
‘‘(ii) in the case of a defined benefit 
plan, be paid—
‘‘(I) in an amount based on the 
designated benefit and the assump-
tions prescribed by the corporation at 
the time that the corporation received 
the benefit, and 
‘‘(II) in a form determined under 
regulations of the corporation. 
‘‘(5) NOTICE.—Any transfer of unclaimed bene-
fits of a participant or beneficiary to the corporation 
pursuant to this subsection may occur only after 
reasonable advance notice of such transfer is pro-
vided by the plan administrator to the participant or 
beneficiary. The plan administrator shall also pro-
vide to the participant or beneficiary notice of any
126
such transfer not later than 30 days after the date 
of the transfer. Notice mailed to the last known ad-
dress of the participant or beneficiary shall be treat-
ed as a notice to the participant or beneficiary for 
purposes of this paragraph. Any such notice shall in-
clude information regarding procedures for obtaining 
the distribution of benefits from the corporation in 
accordance with paragraph (4). 
‘‘(6) PLANS DESCRIBED.—A plan is described 
in this paragraph if the plan is a pension plan (with-
in the meaning of section 3(2)—
‘‘(A)(i) which has neither terminated nor is 
in the process of terminating, or 
‘‘(ii) in the case of an unclaimed benefit to 
which section 401(a)(31)(B) of the Internal 
Revenue Code of 1986 applies (other than an 
unclaimed benefit of a missing participant), 
which has terminated or is in the process of ter-
minating, and 
‘‘(B) which is not a plan described in para-
graphs (2) through (11) of section 4021(b). 
‘‘(7) CERTAIN PROVISIONS NOT TO APPLY.—
Subsections (a)(1) and (a)(3) shall not apply to a 
plan described in paragraph (6).’’.
127
(3) 
CONFORMING
AMENDMENT.—Section 
4021(b) of such Act (29 U.S.C. 1321(b)(1)) is 
amended by striking ‘‘This’’ and inserting ‘‘Except 
to the extent provided in subsections (d) and (e) of 
section 4050, this’’. 
(c) ESCHEAT LAWS SUPERSEDED.—Section 514(b) 
of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1144 (b) (as amended by this Act) is further 
amended—
(1) by redesignating paragraph (10) as para-
graph (11), and 
(2) by inserting after paragraph (9) the fol-
lowing new paragraph: 
‘‘(10) Any escheat or similar law of any State 
shall be superseded to the extent inconsistent with 
any transfer or other treatment of unclaimed bene-
fits (as defined in section 4050(b)(3)) permitted 
under the Internal Revenue Code of 1986.’’. 
(d) EFFECTIVE DATES AND RELATED RULES.—
(1) IN GENERAL.—The amendments made by 
subsections (a) and (b) shall apply to years begin-
ning after December 31, 2006. 
(2) REGULATIONS.—The Pension Benefit Guar-
anty Corporation shall issue regulations necessary to
128
carry out the amendments made by subsection (b) 
not later than December 31, 2006. 
(3) 
ESCHEAT
LAWS
SUPERSEDED.—The 
amendment made by subsection (c) shall apply as of 
the date of enactment of this Act. 
SEC. 504. ALLOW DIRECT ROLLOVERS FROM RETIREMENT 
PLANS TO RSA. 
(a) IN GENERAL.—Subsection (e) of section 408A of 
the Internal Revenue Code of 1986 (defining qualified roll-
over contribution) is amended to read as follows: 
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 
purposes of this section, the term ‘qualified rollover con-
tribution’ means a rollover contribution—
‘‘(1) to an RSA from another such account, 
‘‘(2) from an eligible retirement plan, but only 
if—
‘‘(A) in the case of an individual retire-
ment plan, such rollover contribution meets the 
requirements of section 408(d)(3), and 
‘‘(B) in the case of any eligible retirement 
plan (as defined in section 402(c)(8)(B) other 
than clauses (i) and (ii) thereof), such rollover 
contribution meets the requirements of section 
402(c), 403(b)(8), or 457(e)(16), as applicable.
129
For purposes of section 408(d)(3)(B), there shall be dis-
regarded any qualified rollover contribution from an indi-
vidual retirement plan (other than an RSA) to an RSA.’’. 
(b) 
CONFORMING
AMENDMENTS.—Section 
408A(d)(3) of such Code is amended—
(1) in subparagraph (A) by striking ‘‘section 
408(d)(3)’’ inserting ‘‘sections 402(c), 403(b)(8), 
408(d)(3), and 457(e)(16)’’, 
(2) in subparagraph (B) by striking ‘‘individual 
retirement plan’’ and inserting ‘‘eligible retirement 
plan (as defined by section 402(c)(8)(B))’’, 
(3) in subparagraph (D) by striking ‘‘or 6047’’ 
after ‘‘408(i)’’, 
(4) in subparagraph (D) by striking ‘‘or both’’ 
and 
inserting 
‘‘persons 
subject 
to 
section 
6047(d)(1), or all of the foregoing persons’’, and 
(5) in the heading by striking ‘‘IRA’’ and insert-
ing ‘‘ELIGIBLE RETIREMENT PLAN’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions after December 31, 
2005.
130
SEC. 505. REFORM EXCISE TAX ON EXCESS CONTRIBU-
TIONS. 
(a) EXPANSION OF CORRECTIVE DISTRIBUTION PE-
RIOD.—Subsection (f) of section 4979 of the Internal Rev-
enue Code of 1986 is amended—
(1) in paragraph (1) by striking ‘‘21⁄2 months’’ 
and inserting ‘‘6 months’’, and 
(2) in the heading by striking ‘‘21⁄2 MONTHS’’ 
and inserting ‘‘6 MONTHS’’. 
(b) YEAR OF INCLUSION.—Paragraph (2) of section 
4979(f) of such Code is amended to read as follows: 
‘‘(2) YEAR OF INCLUSION.—Any amount dis-
tributed as provided in paragraph (1) shall be treat-
ed as earned and received by the recipient in his tax-
able year in which such distributions were made.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2005. 
SEC. 506. INTERMEDIATE SANCTIONS FOR INADVERTENT 
FAILURES. 
(a) IN GENERAL.—Section 401(a) of the Internal 
Revenue Code of 1986 (relating to qualified pension, prof-
it-sharing, and stock bonus plans) is amended by inserting 
after paragraph (35) the following: 
‘‘(36) PROTECTION
FROM
DISQUALIFICATION 
UPON TIMELY CORRECTION OR PAYMENT OF FINE.—
131
A trust shall not fail to constitute a qualified trust 
under this section if the plan of which such trust is 
a part has made good faith efforts to meet the re-
quirements of this section, has inadvertently failed 
to satisfy 1 or more of such requirements, and ei-
ther—
‘‘(A) substantially corrects (to the extent 
possible) such failure before the date the plan 
becomes subject to a plan examination for the 
applicable year (as determined under rules pre-
scribed by the Secretary), or 
‘‘(B) substantially corrects (to the extent 
possible) such failure on or after such date. 
If the plan satisfies the requirement under subpara-
graph (B), the Secretary may require the sponsoring 
employer to make a payment to the Secretary in an 
amount that does not exceed an amount that bears 
a reasonable relationship to the severity of the plan’s 
failure to satisfy the requirements of this section.’’. 
(b) APPLICATION TO CASH OR DEFERRED ARRANGE-
MENTS.—Section 401(k) of such Code is amended by in-
serting after paragraph (13) the following new paragraph: 
‘‘(14) PROTECTION FROM DISQUALIFICATION.—
Rules similar to the rules set forth in section 
401(a)(36) shall apply for purposes of determining
132
whether a cash or deferred arrangement is a quali-
fied cash or deferred arrangement.’’. 
(c) APPLICATION TO SECTION 403(b) ANNUITY CON-
TRACTS.—Section 403(b) of such Code is amended by in-
serting after paragraph (12) the following: 
‘‘(13) CORRECTION OF ERRORS.—For purposes 
of determining whether the exclusion from gross in-
come under paragraph (1) is applicable to an em-
ployee for any taxable year, rules similar to the rules 
set forth in section 401(a)(36) shall apply to any an-
nuity contract purchased under this subsection or 
any plan established to meet the requirements of 
this subsection.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of enactment of 
this Act. 
SEC. 507. CLARIFICATION OF SUBSTANTIALLY EQUAL PERI-
ODIC PAYMENT RULE. 
(a) IN GENERAL.—Paragraph (4) of section 72(t) of 
the Internal Revenue Code of 1986 (relating to change 
in substantially equal payments) is amended by inserting 
at the end the following new subparagraphs: 
‘‘(C) 
ROLLOVERS
TO
SUBSEQUENT 
PLAN.—If—
133
‘‘(i) payments satisfying paragraph 
(2)(A)(iv) are being made from a qualified 
retirement plan, 
‘‘(ii) a transfer or a rollover from the 
qualified retirement plan is made to an-
other qualified retirement plan of all or a 
portion of the taxpayer’s benefit under the 
transferor plan, and 
‘‘(iii) distributions from the transferor 
and transferee plans would in combination 
continue to satisfy paragraph (2)(A)(iv) if 
made only from the transferor plan, 
such transfer or rollover shall not be treated as 
a modification under subparagraph (A)(ii) and 
compliance with paragraph (2)(A)(iv) shall be 
determined on the basis of the combined dis-
tributions described in clause (iii). 
‘‘(D) INTEREST RATE.—Any reasonable in-
terest rate may be used in determining whether 
payments are substantially equal under para-
graph (2)(A)(iv).’’. 
(b) EFFECTIVE DATES.—
(1) ROLLOVERS.—Section 72(t)(4)(C) of the 
Internal Revenue Code of 1986, as added by sub-
134
section (a), shall apply to transfers and rollovers 
after the date of enactment of this Act. 
(2) INTEREST
RATE.—Section 72(t)(4)(D) of 
such Code, as so added, shall apply to series of pay-
ments commencing on or after the date of enactment 
of this Act. 
SEC. 508. CLARIFICATION OF TREATMENT OF DISTRIBU-
TIONS OF ANNUITY CONTRACTS. 
(a) IN GENERAL.—Clause (i) of section 402(e)(4)(D) 
of the Internal Revenue Code of 1986 is amended by add-
ing after ‘‘section 401(c)(1).’’ the following: ‘‘A distribu-
tion of an annuity contract from a trust or annuity plan 
referred to in the first sentence of this clause may be 
treated as a part of a lump sum distribution.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect as if included in section 
1401(b)(1) of the Small Business Job Protection Act of 
1996. 
SEC. 509. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO 
EXCESSIVE EMPLOYEE REMUNERATION PAID 
BY CORPORATION AFTER DECLARATION OF 
BANKRUPTCY. 
(a) IN GENERAL.—Section 4999 of the Internal Rev-
enue Code of 1986 (relating to golden parachute pay-
ments) is amended by redesignating subsection (c) as sub-