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SEC. 1006. FASTER VESTING OF EMPLOYER NONELECTIVE
CONTRIBUTIONS.
(a) AMENDMENTS TO THE INTERNAL REVENUE CODE
OF 1986.—
(1) IN
GENERAL.—Paragraph (2) of section
411(a) of the Internal Revenue Code of 1986 (relating
to employer contributions) is amended to read as fol-
lows:
‘‘(2) EMPLOYER CONTRIBUTIONS.—
‘‘(A) DEFINED BENEFIT PLANS.—
‘‘(i) IN GENERAL.—In the case of a de-
fined benefit plan, a plan satisfies the re-
quirements of this paragraph if it satisfies
the requirements of clause (ii) or (iii).
‘‘(ii) 5-YEAR VESTING.—A plan satis-
fies the requirements of this clause if an em-
ployee who has completed at least 5 years of
service has a nonforfeitable right to 100 per-
cent of the employee’s accrued benefit de-
rived from employer contributions.
‘‘(iii) 3 TO 7 YEAR VESTING.—A plan
satisfies the requirements of this clause if an
employee has a nonforfeitable right to a per-
centage of the employee’s accrued benefit de-
rived from employer contributions deter-
mined under the following table:
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The nonforfeitable
‘‘Years of service:
percentage is:
3 ..................................................................................................
4 ..................................................................................................
5 ..................................................................................................
6 ..................................................................................................
7 or more ....................................................................................
100.
‘‘(B) DEFINED CONTRIBUTION PLANS.—
‘‘(i) IN GENERAL.—In the case of a de-
fined contribution plan, a plan satisfies the
requirements of this paragraph if it satisfies
the requirements of clause (ii) or (iii).
‘‘(ii) 3-YEAR VESTING.—A plan satis-
fies the requirements of this clause if an em-
ployee who has completed at least 3 years of
service has a nonforfeitable right to 100 per-
cent of the employee’s accrued benefit de-
rived from employer contributions.
‘‘(iii) 2 TO 6 YEAR VESTING.—A plan
satisfies the requirements of this clause if an
employee has a nonforfeitable right to a per-
centage of the employee’s accrued benefit de-
rived from employer contributions deter-
mined under the following table:
The nonforfeitable
‘‘Years of service:
percentage is:
2 ..................................................................................................
3 ..................................................................................................
4 ..................................................................................................
5 ..................................................................................................
6 or more ....................................................................................
100.’’.
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(2) CONFORMING AMENDMENT.—Section 411(a)
of such Code (relating to general rule for minimum
vesting standards) is amended by striking paragraph
(12).
(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—
(1) IN
GENERAL.—Paragraph (2) of section
203(a) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1053(a)(2)) is amended to
read as follows:
‘‘(2)(A)(i) In the case of a defined benefit plan,
a plan satisfies the requirements of this paragraph if
it satisfies the requirements of clause (ii) or (iii).
‘‘(ii) A plan satisfies the requirements of this
clause if an employee who has completed at least 5
years of service has a nonforfeitable right to 100 per-
cent of the employee’s accrued benefit derived from
employer contributions.
‘‘(iii) A plan satisfies the requirements of this
clause if an employee has a nonforfeitable right to a
percentage of the employee’s accrued benefit derived
from employer contributions determined under the fol-
lowing table:
The nonforfeitable
‘‘Years of service:
percentage is:
3 ..................................................................................................
4 ..................................................................................................
5 ..................................................................................................
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6 ..................................................................................................
7 or more ....................................................................................
100.
‘‘(B)(i) In the case of an individual account
plan, a plan satisfies the requirements of this para-
graph if it satisfies the requirements of clause (ii) or
(iii).
‘‘(ii) A plan satisfies the requirements of this
clause if an employee who has completed at least 3
years of service has a nonforfeitable right to 100 per-
cent of the employee’s accrued benefit derived from
employer contributions.
‘‘(iii) A plan satisfies the requirements of this
clause if an employee has a nonforfeitable right to a
percentage of the employee’s accrued benefit derived
from employer contributions determined under the fol-
lowing table:
The nonforfeitable
‘‘Years of service:
percentage is:
2 ..................................................................................................
3 ..................................................................................................
4 ..................................................................................................
5 ..................................................................................................
6 or more ....................................................................................
100.’’.
(2) CONFORMING AMENDMENT.—Section 203(a)
of such Act is amended by striking paragraph (4).
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (4), the amendments made by this sec-
tion shall apply to contributions for plan years begin-
ning after December 31, 2005.
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(2) COLLECTIVE BARGAINING AGREEMENTS.—In
the case of a plan maintained pursuant to one or
more collective bargaining agreements between em-
ployee representatives and one or more employers
ratified before the date of the enactment of this Act,
the amendments made by this section shall not apply
to contributions on behalf of employees covered by any
such agreement for plan years beginning before the
earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any exten-
sion thereof on or after such date of the en-
actment); or
(ii) January 1, 2006; or
(B) January 1, 2008.
(3) SERVICE REQUIRED.—With respect to any
plan, the amendments made by this section shall not
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any
plan year to which the amendments made by this sec-
tion apply.
(4) SPECIAL
RULE
FOR
STOCK
OWNERSHIP
PLANS.—Notwithstanding paragraph (1) or (2), in
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the case of an employee stock ownership plan (as de-
fined in section 4975(e)(7) of the Internal Revenue
Code of 1986) which had outstanding on September
26, 2005, a loan incurred for the purpose of acquiring
qualifying employer securities (as defined in section
4975(e)(8) of such Code), the amendments made by
this section shall not apply to any plan year begin-
ning before the earlier of—
(A) the date on which the loan is fully re-
paid, or
(B) the date on which the loan was, as of
September 26, 2005, scheduled to be fully repaid.
SEC. 1007. ALLOW DIRECT ROLLOVERS FROM RETIREMENT
PLANS TO ROTH IRAS.
(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 pur-
poses of this section, the term ‘qualified rollover contribu-
tion’ means a rollover contribution—
‘‘(1) to a Roth IRA from another such account,
‘‘(2) from an eligible retirement plan, but only
if—
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‘‘(A) in the case of an individual retirement
plan, such rollover contribution meets the re-
quirements 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.
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 a Roth IRA) to a Roth
IRA.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 408A(c)(3)(B) of such Code is
amended—
(A) in the text by striking ‘‘individual re-
tirement plan’’ and inserting ‘‘an eligible retire-
ment plan (as defined by section 402(c)(8)(B))’’,
and
(B) in the heading by striking ‘‘IRA’’ and
inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.
(2) 
Section 
408A(d)(3) 
of 
such 
Code 
is
amended—
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(A) in subparagraph (A), by striking ‘‘sec-
tion 
408(d)(3)’’ 
inserting 
‘‘sections 
402(c),
403(b)(8), 408(d)(3), and 457(e)(16)’’,
(B) in subparagraph (B), by striking ‘‘indi-
vidual retirement plan’’ and inserting ‘‘eligible
retirement 
plan 
(as 
defined 
by 
section
402(c)(8)(B))’’,
(C) in subparagraph (D), by inserting ‘‘or
6047’’ after ‘‘408(i)’’,
(D) in subparagraph (D), by striking ‘‘or
both’’ and inserting ‘‘persons subject to section
6047(d)(1), or all of the foregoing persons’’, and
(E) in the heading, by striking ‘‘IRA’’ and
inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2005.
SEC. 1008. ELIMINATION OF HIGHER PENALTY ON CERTAIN
SIMPLE PLAN DISTRIBUTIONS.
(a) IN GENERAL.—Subsection (t) of section 72 of the
Internal Revenue Code of 1986 (relating to 10-percent addi-
tional tax on early distributions from qualified retirement
plans), as amended by section 1004, is amended by striking
paragraph (6) and redesignating paragraphs (7), (8), (9),
and (10) as paragraphs (6), (7), (8), and (9), respectively.
(b) CONFORMING AMENDMENTS.—
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(1) Section 72(t)(2)(E) of such Code is amended
by striking ‘‘paragraph (7)’’ and inserting ‘‘para-
graph (6)’’.
(2) Section 72(t)(2)(F) of such Code is amended
by striking ‘‘paragraph (8)’’ and inserting ‘‘para-
graph (7)’’.
(3) Section 408(d)(3)(G) of such Code is amend-
ed by striking ‘‘applies’’ and inserting ‘‘applied on
the day before the date of the enactment of the Pen-
sion Security and Transparency Act of 2005)’’.
(4) Section 457(a)(2) of such Code is amended
by striking ‘‘section 72(t)(9)’’ and inserting ‘‘section
72(t)(8)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2005.
SEC. 1009. SIMPLE PLAN PORTABILITY.
(a) REPEAL OF LIMITATION.—Paragraph (3) of sec-
tion 408(d) of the Internal Revenue Code of 1986 (relating
to rollover contributions), as amended by this Act, is
amended by striking subparagraph (G) and redesignating
subparagraphs (H) and (I) as subparagraphs (G) and (H),
respectively.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2005.
SEC. 1010. ELIGIBILITY FOR PARTICIPATION IN RETIRE-
MENT PLANS.
An individual shall not be precluded from partici-
pating in an eligible deferred compensation plan by reason
of having received a distribution under section 457(e)(9) of
the Internal Revenue Code of 1986, as in effect prior to the
enactment of the Small Business Job Protection Act of 1996.
SEC. 1011. TRANSFERS TO THE PBGC.
(a) MANDATORY DISTRIBUTIONS TO PBGC.—Clause
(i) of section 401(a)(31)(B) of the Internal Revenue Code
of 1986 (relating to general rule for certain mandatory dis-
tributions) is amended by inserting ‘‘to the Pension Benefit
Guaranty Corporation in accordance with section 4050(e)
of the Employee Retirement Income Security Act of 1974
or’’ after ‘‘such transfer’’.
(b) TAX TREATMENT OF DISTRIBUTIONS.—Subpara-
graph (B) of section 401(a)(31) of such Code is amended
by adding at the end the following new clause:
‘‘(iii) INCOME
TAX
TREATMENT
OF
TRANSFERS TO PBGC.—For purposes of de-
termining the income tax treatment relating
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to transfers to the Pension Benefit Guar-
anty Corporation under clause (i)—
‘‘(I) the transfer of amounts to the
Pension Benefit Guaranty Corporation
pursuant to clause (i) shall be treated
as a transfer to an individual retire-
ment plan under such clause, and
‘‘(II) the distribution of such
amounts from the Pension Benefit
Guaranty Corporation shall be treated
as a distribution from an individual
retirement plan.’’.
(c) MISSING PARTICIPANTS
AND BENEFICIARIES.—
Section 4050 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1350), as amended by section 1012,
is amended by redesignating subsection (e) as subsection (g)
and by inserting after subsection (d) the following new sub-
sections:
‘‘(e) INVOLUNTARY CASHOUTS.—
‘‘(1) PAYMENT BY THE CORPORATION.—If bene-
fits under a plan described in paragraph (3) were
transferred 
to 
the 
corporation 
under 
section
401(a)(31)(B) of the Internal Revenue Code of 1986,
the corporation shall, upon application filed by the
participant or beneficiary with the corporation in
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such form and manner as may be prescribed in regu-
lations of the corporation, pay to the participant or
beneficiary the amount transferred (or the appro-
priate survivor benefit) either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (3) shall,
upon a transfer of benefits to the corporation under
section 401(a)(31)(B) of such Code, provide the cor-
poration information with respect to benefits of the
participant or beneficiary so transferred.
‘‘(3) PLANS DESCRIBED.—A plan is described in
this paragraph if the plan is a pension plan (within
the meaning of section 3(2))—
‘‘(A) which provides for mandatory dis-
tributions under section 401(a)(31)(B) of the In-
ternal Revenue Code of 1986, and
‘‘(B) which is not a plan described in para-
graphs (2) through (11) of section 4021(b).
‘‘(4) CERTAIN PROVISIONS NOT TO APPLY.—Sub-
sections (a)(1) and (a)(3) shall not apply to a plan
described in paragraph (3).
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‘‘(f) AUTHORITY TO CHARGE FEE.—The corporation
may charge a reasonable fee for costs incurred in connection
with the transfer and management of amounts transferred
to the corporation under this section. Such fee may be im-
posed on the transferor and may be deducted from amounts
so transferred.’’.
(d) EFFECTIVE DATES.—
(1) INTERNAL REVENUE CODE PROVISIONS.—The
amendments made by subsections (a) and (b) shall
take effect as if included in the amendments made by
section 657 of the Economic Growth and Tax Relief
Reconciliation Act of 2001.
(2) EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974 PROVISIONS.—The amendments made by
subsection (c) shall apply to distributions made after
final regulations implementing subsections (e) and (f)
of section 4050 of the Employee Retirement Income
Security Act of 1974 (as added by subsection (c)) are
prescribed.
(3) REGULATIONS.—The Pension Benefit Guar-
anty Corporation shall issue regulations necessary to
carry out the amendments made by subsection (c) not
later than December 31, 2006.
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SEC. 1012. MISSING PARTICIPANTS.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350) is
amended by redesignating subsection (c) as subsection (e)
and by inserting after subsection (b) the following new sub-
sections:
‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall
prescribe rules similar to the rules in subsection (a) for mul-
tiemployer plans covered by this title that terminate under
section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan ad-
ministrator of a plan described in paragraph (4) 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 corporation
information with respect to benefits of a missing par-
ticipant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corporation
or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If bene-
fits of a missing participant were transferred to the
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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)
either—
‘‘(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—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this sec-
tion 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 distrib-
uted 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)).
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‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—Sub-
sections (a)(1) and (a)(3) shall not apply to a plan
described in paragraph (4).’’.
(b) CONFORMING AMENDMENTS.—Section 206(f) of
such Act (29 U.S.C. 1056(f)) is amended—
(1) by striking ‘‘title IV’’ and inserting ‘‘section
4050’’; and
(2) by striking ‘‘the plan shall provide that,’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions made after final regula-
tions implementing subsections (c) and (d) of section 4050
of the Employee Retirement Income Security Act of 1974
(as added by subsection (a)), respectively, are prescribed.
SEC. 1013. MODIFICATIONS OF RULES GOVERNING HARD-
SHIPS AND UNFORSEEN FINANCIAL EMER-
GENCIES.
Within 180 days after the date of the enactment of this
Act, the Secretary of the Treasury shall modify the rules
for determining whether a participant has had a hardship
for purposes of section 401(k)(2)(B)(i)(IV) of the Internal
Revenue Code of 1986 to provide that if an event (including
the occurrence of a medical expense) would constitute a
hardship under the plan if it occurred with respect to the
participant’s spouse or dependent (as defined in section 152
of such Code), such event shall, to the extent permitted
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under a plan, constitute a hardship if it occurs with respect
to a person who is a beneficiary under the plan with respect
to the participant. The Secretary of the Treasury shall issue
similar rules for purposes of determining whether a partici-
pant has had—
(1) 
a 
hardship 
for 
purposes 
of 
section
403(b)(11)(B) of such Code; or
(2) an unforeseen financial emergency for pur-
poses of sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii),
and 457(d)(1)(A)(iii) of such Code.
TITLE XI—ADMINISTRATIVE
PROVISIONS
SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION
SYSTEM.
(a) IN GENERAL.—The Secretary of the Treasury shall
have full authority to establish and implement the Em-
ployee Plans Compliance Resolution System (or any suc-
cessor program) and any other employee plans correction
policies, including the authority to waive income, excise,
or other taxes to ensure that any tax, penalty, or sanction
is not excessive and bears a reasonable relationship to the
nature, extent, and severity of the failure.
(b) IMPROVEMENTS.—The Secretary of the Treasury
shall continue to update and improve the Employee Plans
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Compliance Resolution System (or any successor program),
giving special attention to—
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program;
(2) taking into account special concerns and cir-
cumstances that small employers face with respect to
compliance and correction of compliance failures;
(3) extending the duration of the self-correction
period under the Self-Correction Program for signifi-
cant compliance failures;
(4) expanding the availability to correct insig-
nificant compliance failures under the Self-Correction
Program during audit; and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) 
AMENDMENT
OF
INTERNAL
REVENUE
CODE.—
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(A) IN GENERAL.—Section 417(a)(6)(A) of
the Internal Revenue Code of 1986 is amended
by striking ‘‘90-day’’ and inserting ‘‘180-day’’.
(B) MODIFICATION OF REGULATIONS.—The
Secretary of the Treasury shall modify the regu-
lations under sections 402(f), 411(a)(11), and
417 of the Internal Revenue Code of 1986 by sub-
stituting ‘‘180 days’’ for ‘‘90 days’’ each place it
appears 
in 
Treasury 
Regulations 
sections
1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–1(b).
(2) AMENDMENT OF ERISA.—
(A) IN GENERAL.—Section 205(c)(7)(A) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1055(c)(7)(A)) is amended by
striking ‘‘90-day’’ and inserting ‘‘180-day’’.
(B) MODIFICATION OF REGULATIONS.—The
Secretary of the Treasury shall modify the regu-
lations under part 2 of subtitle B of title I of the
Employee Retirement Income Security Act of
1974 relating to sections 203(e) and 205 of such
Act by substituting ‘‘180 days’’ for ‘‘90 days’’
each place it appears.
(3) EFFECTIVE
DATE.—The amendments and
modifications made or required by this subsection
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shall apply to years beginning after December 31,
2005.
(b) NOTIFICATION OF RIGHT TO DEFER.—
(1) IN GENERAL.—The Secretary of the Treasury
shall modify the regulations under section 411(a)(11)
of the Internal Revenue Code of 1986 and under sec-
tion 205 of the Employee Retirement Income Security
Act of 1974 to provide that the description of a par-
ticipant’s right, if any, to defer receipt of a distribu-
tion shall also describe the consequences of failing to
defer such receipt.
(2) EFFECTIVE DATE.—
(A) IN
GENERAL.—The modifications re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2005.
(B) REASONABLE
NOTICE.—A plan shall
not be treated as failing to meet the requirements
of section 411(a)(11) of such Code or section 205
of such Act with respect to any description of
consequences described in paragraph (1) made
within 90 days after the Secretary of the Treas-
ury issues the modifications required by para-
graph (1) if the plan administrator makes a rea-
sonable attempt to comply with such require-
ments.
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SEC. 1103. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treasury
shall modify the requirements for filing annual re-
turns with respect to one-participant retirement plans
to ensure that such plans with assets of $250,000 or
less as of the close of the plan year need not file a
return for that year.
(2) ONE-PARTICIPANT
RETIREMENT
PLAN
DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan with respect to which the following require-
ments are met:
(A) on the first day of the plan year—
(i) the plan covered only one indi-
vidual (or the individual and the individ-
ual’s spouse) and the individual owned 100
percent of the plan sponsor (whether or not
incorporated), or
(ii) the plan covered only one or more
partners (or partners and their spouses) in
the plan sponsor;
(B) the plan meets the minimum coverage
requirements of section 410(b) of the Internal
Revenue Code of 1986 without being combined
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with any other plan of the business that covers
the employees of the business;
(C) the plan does not provide benefits to
anyone except the individual (and the individ-
ual’s spouse) or the partners (and their spouses);
(D) the plan does not cover a business that
is a member of an affiliated service group, a con-
trolled group of corporations, or a group of busi-
nesses under common control; and
(E) the plan does not cover a business that
uses the services of leased employees (within the
meaning of section 414(n) of such Code).
For purposes of this paragraph, the term ‘‘partner’’
includes a 2-percent shareholder (as defined in section
1372(b) of such Code) of an S corporation.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
Internal Revenue Code of 1986 shall have the respec-
tive meanings given such terms by such section.
(4) EFFECTIVE
DATE.—The provisions of this
subsection shall apply to plan years beginning on or
after January 1, 2006.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the case
of plan years beginning after December 31, 2006, the Sec-
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retary of the Treasury and the Secretary of Labor shall pro-
vide for the filing of a simplified annual return for any
retirement plan which covers less than 25 participants on
the first day of a plan year and which meets the require-
ments described in subparagraphs (B), (D), and (E) of sub-
section (a)(2).
SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE
AND EMPLOYMENT RETENTION PLANS MAIN-
TAINED BY LOCAL EDUCATIONAL AGENCIES
AND OTHER ENTITIES.
(a) VOLUNTARY
EARLY
RETIREMENT
INCENTIVE
PLANS.—
(1) TREATMENT AS PLAN PROVIDING SEVERANCE
PAY.—Section 457(e)(11) of the Internal Revenue
Code of 1986 (relating to certain plans excluded) is
amended by adding at the end the following new sub-
paragraph:
‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE-
MENT INCENTIVE PLANS.—
‘‘(i) IN
GENERAL.—If an applicable
voluntary early retirement incentive plan—
‘‘(I) makes payments or supple-
ments as an early retirement benefit, a
retirement-type subsidy, or a benefit
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described in the last sentence of section
411(a)(9), and
‘‘(II) such payments or supple-
ments are made in coordination with a
defined benefit plan which is described
in section 401(a) and includes a trust
exempt from tax under section 501(a)
and which is maintained by an eligible
employer 
described 
in 
paragraph
(1)(A) or by an education association
described in clause (ii)(II),
such applicable plan shall be treated for
purposes of subparagraph (A)(i) as a bona
fide severance pay plan with respect to such
payments or supplements to the extent such
payments or supplements could otherwise
have been provided under such defined ben-
efit plan (determined as if section 411 ap-
plied to such defined benefit plan).
‘‘(ii) APPLICABLE
VOLUNTARY
EARLY
RETIREMENT
INCENTIVE
PLAN.—For pur-
poses of this subparagraph, the term ‘appli-
cable voluntary early retirement incentive
plan’ means a voluntary early retirement
incentive plan maintained by—
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‘‘(I) a local educational agency
(as defined in section 9101 of the Ele-
mentary and Secondary Education Act
of 1965 (20 U.S.C. 7801)), or
‘‘(II) an education association
which principally represents employees
of 1 or more agencies described in sub-
clause (I) and which is described in
section 501(c) (5) or (6) and exempt
from tax under section 501(a).’’
(2) 
AGE
DISCRIMINATION
IN
EMPLOYMENT
ACT.—Section 4(l)(1) of the Age Discrimination in
Employment Act of 1967 (29 U.S.C. 623(l)(1)) is
amended—
(A) by inserting ‘‘(A)’’ after ‘‘(1)’’,
(B) by redesignating subparagraphs (A)
and (B) as clauses (i) and (ii), respectively,
(C) by redesignating clauses (i) and (ii) of
subparagraph (B) (as in effect before the amend-
ments made by subparagraph (B)) as subclauses
(I) and (II), respectively, and
(D) by adding at the end the following:
‘‘(B) A voluntary early retirement incentive plan
that—
‘‘(i) is maintained by—
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‘‘(I) a local educational agency (as de-
fined in section 9101 of the Elementary and
Secondary Education Act of 1965 (20
U.S.C. 7801), or
‘‘(II) an education association which
principally represents employees of 1 or
more agencies described in subclause (I) and
which is described in section 501(c) (5) or
(6) of the Internal Revenue Code of 1986
and exempt from taxation under section
501(a) of such Code, and
‘‘(ii) makes payments or supplements de-
scribed in subclauses (I) and (II) of subpara-
graph (A)(ii) in coordination with a defined
benefit plan (as so defined) maintained by an el-
igible employer described in section 457(e)(1)(A)
of such Code or by an education association de-
scribed in clause (i)(II),
shall be treated solely for purposes of subparagraph
(A)(ii) as if it were a part of the defined benefit plan
with respect to such payments or supplements. Pay-
ments or supplements under such a voluntary early
retirement incentive plan shall not constitute sever-
ance pay for purposes of section 4(l)(2) of the Age
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Discrimination in Employment Act (29 U.S.C.
623(l)(2)).’’.
(b) EMPLOYMENT RETENTION PLANS.—
(1) IN GENERAL.—Section 457(f)(2) of the Inter-
nal Revenue Code of 1986 (relating to exceptions) is
amended by striking ‘‘and’’ at the end of subpara-
graph (D), by striking the period at the end of sub-
paragraph (E) and inserting ‘‘, and’’, and by adding
at the end the following:
‘‘(F) that portion of any applicable employ-
ment retention plan described in paragraph (4)
with respect to any participant.’’
(2) DEFINITIONS AND RULES RELATING TO EM-
PLOYMENT RETENTION PLANS.—Section 457(f) of such
Code is amended by adding at the end the following
new paragraph:
‘‘(4) EMPLOYMENT RETENTION PLANS.—For pur-
poses of paragraph (2)(F)—
‘‘(A) IN GENERAL.—The portion of an ap-
plicable employment retention plan described in
this paragraph with respect to any participant
is that portion of the plan which provides bene-
fits payable to the participant not in excess of
twice the applicable dollar limit determined
under subsection (e)(15).
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‘‘(B) OTHER RULES.—
‘‘(i) LIMITATION.—Paragraph (2)(F)
shall only apply to the portion of the plan
described in subparagraph (A) for years
preceding the year in which such portion is
paid or otherwise made available to the
participant.
‘‘(ii) TREATMENT.—A plan shall not
be treated for purposes of this title as pro-
viding for the deferral of compensation for
any year with respect to the portion of the
plan described in subparagraph (A).
‘‘(C) APPLICABLE EMPLOYMENT RETENTION
PLAN.—The term ‘applicable employment reten-
tion plan’ means an employment retention plan
maintained by—
‘‘(i) a local educational agency (as de-
fined in section 9101 of the Elementary and
Secondary Education Act of 1965 (20
U.S.C. 7801), or
‘‘(ii) an education association which
principally represents employees of 1 or
more agencies described in clause (i) and
which is described in section 501(c) (5) or
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(6) and exempt from taxation under section
501(a).
‘‘(D) EMPLOYMENT RETENTION PLAN.—The
term ‘employment retention plan’ means a plan
to pay, upon termination of employment, com-
pensation to an employee of a local educational
agency or education association described in sub-
paragraph (C) for purposes of—
‘‘(i) retaining the services of the em-
ployee, or
‘‘(ii) rewarding such employee for the
employee’s service with 1 or more such
agencies or associations.’’.
(c) COORDINATION WITH ERISA.—Section 3(2)(B) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1002(2)(B)) is amended by adding at the end the
following: ‘‘An applicable voluntary early retirement incen-
tive plan (as defined in section 457(e)(11)(D)(ii) of the In-
ternal Revenue Code of 1986) making payments or supple-
ments described in section 457(e)(11)(D)(i) of such Code,
and an applicable employment retention plan (as defined
in section 457(f)(4)(C) of such Code) making payments of
benefits described in section 457(f)(4)(A) of such Code, shall,
for purposes of this title, be treated as a welfare plan (and
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not a pension plan) with respect to such payments and sup-
plements.’’
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this Act shall take effect on the date of the enactment
of this Act.
(2) TAX AMENDMENTS.—The amendments made
by subsections (a)(1) and (b) shall apply to taxable
years ending after the date of the enactment of this
Act.
(3) ERISA 
AMENDMENTS.—The amendment
made by subsection (c) shall apply to plan years end-
ing after the date of the enactment of this Act.
(4) CONSTRUCTION.—Nothing in the amend-
ments made by this section shall alter or affect the
construction of the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act of 1974, or
the Age Discrimination in Employment Act of 1967
as applied to any plan, arrangement, or conduct to
which such amendments do not apply.
SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSA-
TION AS A RESULT OF PENSION ROLLOVERS.
(a) IN GENERAL.—Section 3304(a) of the Internal
Revenue Code of 1986 (relating to requirements for State
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unemployment laws) is amended by adding at the end the
following new flush sentence:
‘‘Compensation shall not be reduced under paragraph (15)
for any pension, retirement or retired pay, annuity, or
similar payment which is not includible in gross income
of the individual for the taxable year in which paid because
it was part of a rollover distribution.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to weeks beginning on or after the date
of the enactment of this Act.
SEC. 1106. WITHHOLDING ON DISTRIBUTIONS FROM GOV-
ERNMENTAL SECTION 457 PLANS.
(a) IN GENERAL.—Section 641(f) of the Economic
Growth and Tax Relief Reconciliation Act of 2001 is
amended by adding at the end the following new paragraph:
‘‘(4) TRANSITION RULE FOR CERTAIN GOVERN-
MENTAL PLANS.—In the case of distributions from an
eligible deferred compensation plan of an employer
described in section 457(e)(1)(A) of the Internal Rev-
enue Code of 1986 which are made after December 31,
2001, and which are part of a series of distributions
which—
‘‘(A) began before January 1, 2002, and
‘‘(B) are payable for 10 years or less, the
Internal Revenue Code of 1986 may be applied
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to such distributions without regard to the
amendments made by subsection (a)(1)(D).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect as if included in the provisions
of section 641 of the Economic Growth and Tax Relief Rec-
onciliation Act of 2001.
SEC. 1107. TREATMENT OF DEFINED BENEFIT PLAN AS GOV-
ERNMENTAL PLAN.
(a) IN GENERAL.—For purposes of the Internal Rev-
enue Code of 1986 and the Employee Retirement Income
Security Act of 1974, an eligible defined benefit plan shall
be treated as a governmental plan (within the meaning of
section 414(d) of such Code and section 3(32) of such Act).
(b) ELIGIBLE DEFINED BENEFIT PLAN.—For pur-
poses of this section, an eligible defined benefit plan is a
defined benefit plan maintained by a nonprofit corporation
which was—
(1) incorporated on September 16, 1998, under
a State nonprofit corporation statute; and
(2) organized for the express purpose of sup-
porting the missions and goals of a public corpora-
tion which—
(A) was created by a State statute effective
on July 1, 1995;
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(B) is a governmental entity under State
law; and
(C) is a member of the nonprofit corpora-
tion.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to any year beginning before, on, or after
the date of the enactment of this Act.
SEC. 1108. INCREASING PARTICIPATION IN CASH OR DE-
FERRED PLANS THROUGH AUTOMATIC CON-
TRIBUTION ARRANGEMENTS.
(a) IN GENERAL.—Section 401(k) of the Internal Rev-
enue Code of 1986 (relating to cash or deferred arrange-
ment) is amended by adding at the end the following new
paragraph:
‘‘(13) NONDISCRIMINATION REQUIREMENTS FOR
AUTOMATIC CONTRIBUTION TRUSTS.—
‘‘(A) IN GENERAL.—A cash or deferred ar-
rangement shall be treated as meeting the re-
quirements of paragraph (3)(A)(ii) if such ar-
rangement constitutes an automatic contribution
trust.
‘‘(B) AUTOMATIC CONTRIBUTION TRUST.—
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, the term ‘automatic con-
tribution trust’ means an arrangement—
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‘‘(I) except as provided in clauses
(ii) and (iii), under which each em-
ployee eligible to participate in the ar-
rangement is treated as having elected
to have the employer make elective con-
tributions in an amount equal to the
applicable percentage of the employee’s
compensation, and
‘‘(II) which meets the require-
ments of subparagraphs (C), (D), (E),
and (F).
‘‘(ii) EXCEPTION
FOR
EXISTING
EM-
PLOYEES.—In the case of any employee—
‘‘(I) who was eligible to partici-
pate in the arrangement (or a prede-
cessor arrangement) immediately before
the first date on which the arrange-
ment is an automatic contribution
trust, and
‘‘(II) whose rate of contribution
immediately before such first date was
less than the applicable percentage for
the employee,
clause (i)(I) shall not apply to such em-
ployee until the date which is 1 year after
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such first date (or such earlier date as the
employee may elect).
‘‘(iii) ELECTION OUT.—Each employee
eligible to participate in the arrangement
may specifically elect not to have contribu-
tions made under clause (i), and such
clause shall cease to apply to compensation
paid on or after the effective date of the elec-
tion.
‘‘(iv) APPLICABLE PERCENTAGE.—For
purposes of this subparagraph—
‘‘(I) IN GENERAL.—The term ‘ap-
plicable percentage’ means, with re-
spect to any employee, the uniform
percentage (not less than 3 percent) de-
termined under the arrangement. In
the case of an employee who was eligi-
ble to participate in the arrangement
(or a predecessor arrangement) imme-
diately before the first date on which
the arrangement is an automatic con-
tribution trust, the initial applicable
percentage shall in no event be less
than the percentage in effect with re-
spect to the employee under the ar-
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rangement immediately before the em-
ployee first begins participation in the
automatic contribution trust.
‘‘(II) 
INCREASE
IN
PERCENT-
AGE.—In the case of the second plan
year beginning after the first date on
which the election under clause (i)(I) is
in effect with respect to the employee
and any succeeding plan year, the ap-
plicable percentage shall be a percent-
age (not greater than 10 percent or
such higher uniform percentage deter-
mined under the arrangement) equal to
the sum of the applicable percentage
for the employee as of the close of the
preceding plan year plus 1 percentage
point (or such higher percentage speci-
fied by the plan). A plan may elect to
provide that, in lieu of any increase
under the preceding sentence, the in-
crease in the applicable percentage re-
quired under this subclause shall occur
after each increase in compensation an
employee receives on or after the first
day of such second plan year and that
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the applicable percentage after each
such increase in compensation shall be
equal to the applicable percentage for
the employee immediately before such
increase in compensation plus 1 per-
centage point (or such higher percent-
age specified by the plan).
‘‘(C) MATCHING
OR
NONELECTIVE
CON-
TRIBUTIONS.—
‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if, under the
arrangement, the employer—
‘‘(I) makes matching contribu-
tions on behalf of each employee who is
not a highly compensated employee in
an amount equal to 50 percent of the
elective contributions of the employee to
the extent such elective contributions do
not exceed 7 percent of compensation;
or
‘‘(II) is required, without regard
to whether the employee makes an elec-
tive contribution or employee contribu-
tion, to make a contribution to a de-
fined contribution plan on behalf of
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each employee who is not a highly
compensated employee and who is eli-
gible to participate in the arrangement
in an amount equal to at least 3 per-
cent of the employee’s compensation,
The rules of clauses (ii) and (iii) of para-
graph (12)(B) shall apply for purposes of
subclause (I). The rules of paragraph
(12)(E)(ii) shall apply for purposes of sub-
clauses (I) and (II).
‘‘(ii) OTHER PLANS.—An arrangement
shall be treated as meeting the requirements
under clause (i) if any other plan main-
tained by the employer meets such require-
ments with respect to employees eligible
under the arrangement.
‘‘(D) NOTICE REQUIREMENTS.—
‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if the require-
ments of clauses (ii) and (iii) are met.
‘‘(ii) REASONABLE
PERIOD
TO
MAKE
ELECTION.—The requirements of this clause
are met if each employee to whom subpara-
graph (B)(i) applies—
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‘‘(I) receives a notice explaining
the employee’s right under the arrange-
ment to elect not to have elective con-
tributions made on the employee’s be-
half, and how contributions made
under the arrangement will be invested
in the absence of any investment elec-
tion by the employee, and
‘‘(II) has a reasonable period of
time after receipt of such notice and
before the first elective contribution is
made to make such election.
‘‘(iii) ANNUAL NOTICE OF RIGHTS AND
OBLIGATIONS.—The requirements of this
clause are met if each employee eligible to
participate in the arrangement is, within a
reasonable period before any year (or if the
plan elects to change the applicable percent-
age after any increase in compensation, be-
fore the increase), given notice of the em-
ployee’s rights and obligations under the ar-
rangement.
The requirements of clauses (i) and (ii) of para-
graph (12)(D) shall be met with respect to the
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notices described in clauses (ii) and (iii) of this
subparagraph.
‘‘(E) PARTICIPATION, WITHDRAWAL, AND
VESTING REQUIREMENTS.—The requirements of
this subparagraph are met if—
‘‘(i) the arrangement requires that each
employee eligible to participate in the ar-
rangement (determined without regard to
any minimum service requirement other-
wise applicable under section 410(a) or the
plan) commences participation in the ar-
rangement no later than the 1st day of the
1st calendar quarter beginning after the
date on which employee first becomes so eli-
gible,
‘‘(ii) the withdrawal requirements of
paragraph (2)(B) are met with respect to
all 
employer 
contributions 
(including
matching and elective contributions) taken
into account in determining whether the ar-
rangement meets the requirements of sub-
paragraph (C), and
‘‘(iii) the arrangement requires that an
employee’s right to the accrued benefit de-
rived from employer contributions described
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in clause (ii) (other than elective contribu-
tions) is nonforfeitable after the employee
has completed at least 2 years of service.
‘‘(F) CERTAIN WITHDRAWALS MUST BE AL-
LOWED.—Notwithstanding any other provision
of this subsection, the requirements of this sub-
paragraph are met if the arrangement allows
employees to elect to make permissible with-
drawals in accordance with section 414(w).’’
(b) MATCHING CONTRIBUTIONS.—Section 401(m) of
the Internal Revenue Code of 1986 (relating to non-
discrimination test for matching contributions and em-
ployee contributions) is amended by redesignating para-
graph (12) as paragraph (13) and by inserting after para-
graph (11) the following new paragraph:
‘‘(12) ALTERNATE METHOD FOR AUTOMATIC CON-
TRIBUTION
TRUSTS.—A defined contribution plan
shall be treated as meeting the requirements of para-
graph (2) with respect to matching contributions if
the plan—
‘‘(A) meets the contribution requirements of
subparagraphs (B)(i) and (C) of subsection
(k)(13);
‘‘(B) meets the notice requirements of sub-
paragraph (D) of subsection (k)(13); and
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‘‘(C) meets the requirements of paragraph
(11)(B) (ii) and (iii).’’.
(c) EXCLUSION FROM DEFINITION
OF TOP-HEAVY
PLANS.—
(1) ELECTIVE CONTRIBUTION RULE.—Clause (i)
of section 416(g)(4)(H) of the Internal Revenue Code
of 1986 is amended by inserting ‘‘or 401(k)(13)’’ after
‘‘section 401(k)(12)’’.
(2) MATCHING
CONTRIBUTION
RULE.—Clause
(ii) of section 416(g)(4)(H) of such Code is amended
by 
inserting 
‘‘or 
401(m)(12)’’ 
after 
‘‘section
401(m)(11)’’.
(d) SECTION 403(b) CONTRACTS.—Paragraph (11) of
section 401(m) of the Internal Revenue Code of 1986 is
amended by adding at the end the following:
‘‘(C) SECTION 403(b) CONTRACTS.—An an-
nuity contract under section 403(b) shall be
treated as meeting the requirements of paragraph
(2) with respect to matching contributions if
such contract meets requirements similar to the
requirements under subparagraph (A).’’.
(e) PREEMPTION OF CONFLICTING STATE REGULA-
TION.—Section 514 of the Employee Retirement Income Se-
curity of 1974 (29 U.S.C. 1144) is amended by inserting
at the end the following new subsection:
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‘‘(e) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this section, any law of a State shall be
superseded if it would directly or indirectly prohibit
or restrict the inclusion in any plan of an eligible
automatic contribution arrangement.
‘‘(2) ELIGIBLE
AUTOMATIC
CONTRIBUTION
AR-
RANGEMENT.—For purposes of this subsection, the
term ‘eligible automatic contribution arrangement’
means an arrangement—
‘‘(A) under which a participant may elect
to have the employer make payments as con-
tributions under the plan on behalf of the partic-
ipant, or to the participant directly in cash,
‘‘(B) under which the participant is treated
as having elected to have the employer make such
contributions in an amount equal to a uniform
percentage of compensation provided under the
plan until the participant specifically elects not
to have such contributions made (or specifically
elects to have such contributions made at a dif-
ferent percentage),
‘‘(C) under which contributions described in
subparagraph (B) are invested in accordance
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with regulations prescribed by the Secretary
under section 404(c)(4), and
‘‘(D) which meets the requirements of para-
graph (3).
‘‘(3) NOTICE REQUIREMENTS.—
‘‘(A) IN GENERAL.—The administrator of
an individual account plan shall, within a rea-
sonable period before each plan year, give to each
employee to whom an arrangement described in
paragraph (2) applies for such plan year notice
of the employee’s rights and obligations under
the arrangement which—
‘‘(i) is sufficiently accurate and com-
prehensive to apprise the employee of such
rights and obligations, and
‘‘(ii) is written in a manner calculated
to be understood by the average employee to
whom the arrangement applies.
‘‘(B) TIME AND FORM OF NOTICE.—A notice
shall not be treated as meeting the requirements
of subparagraph (A) with respect to an employee
unless—
‘‘(i) the notice includes a notice ex-
plaining the employee’s right under the ar-
rangement to elect not to have elective con-
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tributions made on the employee’s behalf (or
to elect to have such contributions made at
a different percentage),
‘‘(ii) the employee has a reasonable pe-
riod of time after receipt of the notice de-
scribed in clause (i) and before the first elec-
tive contribution is made to make such elec-
tion, and
‘‘(iii) the notice explains how contribu-
tions made under the arrangement will be
invested in the absence of any investment
election by the employee.’’.
(f) TREATMENT OF WITHDRAWALS OF CONTRIBUTIONS
DURING FIRST 60 DAYS.—Section 414 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the
following new subsection:
‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS
FROM ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGE-
MENTS.—
‘‘(1) IN GENERAL.—If an eligible automatic con-
tribution arrangement allows an employee to elect to
make permissible withdrawals—
‘‘(A) the amount of any such withdrawal
shall be includible in the gross income of the em-
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ployee for the taxable year of the employee in
which the distribution is made,
‘‘(B) no tax shall be imposed under section
72(t) with respect to the distribution, and
‘‘(C) the arrangement shall not be treated as
violating any restriction on distributions under
this title solely by reason of allowing the with-
drawal.
In the case of any distribution to an employee by rea-
son of an election under this paragraph, employer
matching contributions shall be forfeited or subject to
such other treatment as the Secretary may prescribe.
‘‘(2) PERMISSIBLE WITHDRAWAL.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘permissible
withdrawal’ means any withdrawal from an eli-
gible automatic contribution arrangement meet-
ing the requirements of this paragraph which—
‘‘(i) is made pursuant to an election by
an employee, and
‘‘(ii) consists of elective contributions
described in paragraph (3)(B) (and earn-
ings attributable thereto).
‘‘(B) TIME FOR MAKING ELECTION.—Sub-
paragraph (A) shall not apply to an election by
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an employee unless the election is made no later
than the date which is 60 days after the date of
the first elective contribution with respect to the
employee under the arrangement.
‘‘(C) AMOUNT OF DISTRIBUTION.—Subpara-
graph (A) shall not apply to any election by an
employee unless the amount of any distribution
by reason of the election is equal to the amount
of elective contributions made with respect to the
first payroll period to which the eligible auto-
matic contribution arrangement applies to the
employee and any succeeding payroll period be-
ginning before the effective date of the election
(and earnings attributable thereto).
‘‘(3) ELIGIBLE
AUTOMATIC
CONTRIBUTION
AR-
RANGEMENT.—For purposes of this subsection, the
term ‘eligible automatic contribution arrangement’
means an arrangement—
‘‘(A) under which a participant may elect
to have the employer make payments as con-
tributions under the plan on behalf of the partic-
ipant, or to the participant directly in cash,
‘‘(B) under which the participant is treated
as having elected to have the employer make such
contributions in an amount equal to a uniform
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percentage of compensation provided under the
plan until the participant specifically elects not
to have such contributions made (or specifically
elects to have such contributions made at a dif-
ferent percentage),
‘‘(C) under which contributions described in
subparagraph (B) are invested in accordance
with regulations prescribed by the Secretary of
Labor under section 404(c)(4) of the Employee
Retirement Income Security Act of 1974, and
‘‘(D) which meets the requirements of para-
graph (4).
‘‘(4) NOTICE REQUIREMENTS.—
‘‘(A) IN GENERAL.—The administrator of a
plan containing an arrangement described in
paragraph (3) shall, within a reasonable period
before each plan year, give to each employee to
whom an arrangement described in paragraph
(3) applies for such plan year notice of the em-
ployee’s rights and obligations under the ar-
rangement which—
‘‘(i) is sufficiently accurate and com-
prehensive to apprise the employee of such
rights and obligations, and
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‘‘(ii) is written in a manner calculated
to be understood by the average employee to
whom the arrangement applies.
‘‘(B) TIME AND FORM OF NOTICE.—A notice
shall not be treated as meeting the requirements
of subparagraph (A) with respect to an employee
unless—
‘‘(i) the notice includes a notice ex-
plaining the employee’s right under the ar-
rangement to elect not to have elective con-
tributions made on the employee’s behalf (or
to elect to have such contributions made at
a different percentage),
‘‘(ii) the employee has a reasonable pe-
riod of time after receipt of the notice de-
scribed in clause (i) and before the first elec-
tive contribution is made to make such elec-
tion, and
‘‘(iii) the notice explains how contribu-
tions made under the arrangement will be
invested in the absence of any investment
election by the employee.’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section shall
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apply to plan years beginning after December 31,
2005.
(2) SECTION 403(b) CONTRACTS.—The amend-
ments made by subsection (d) shall apply to years
ending after the date of the enactment of this Act.
SEC. 1109. TREATMENT OF INVESTMENT OF ASSETS BY
PLAN WHERE PARTICIPANT FAILS TO EXER-
CISE INVESTMENT ELECTION.
(a) IN GENERAL.—Section 404(c) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1104(c))
is amended by adding at the end the following new para-
graph:
‘‘(4) DEFAULT INVESTMENT ARRANGEMENTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), a participant in an individual ac-
count plan meeting the notice requirements of
subparagraph (B) shall be treated as exercising
control over the assets in the account with re-
spect to the amount of contributions and earn-
ings which, in the absence of an investment elec-
tion by the participant, are invested by the plan
in accordance with regulations prescribed by the
Secretary. The regulations under this subpara-
graph shall provide guidance on the appropriate-
ness of designating default investments that in-
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clude a mix of asset classes consistent with cap-
ital preservation, long-term capital appreciation,
or a blend of both.
‘‘(B) NOTICE REQUIREMENTS.—
‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if each
participant—
‘‘(I) receives, within a reasonable
period of time before each plan year, a
notice explaining the employee’s right
under the plan to designate how con-
tributions and earnings will be in-
vested and explaining how, in the ab-
sence of any investment election by the
participant, such contributions and
earnings will be invested, and
‘‘(II) has a reasonable period of
time after receipt of such notice and
before the beginning of the plan year to
make such designation.
‘‘(ii) FORM OF NOTICE.—The require-
ments of clauses (i) and (ii) of section
401(k)(12)(D) of the Internal Revenue Code
of 1986 shall be met with respect to the no-
tices described in this subparagraph.’’.
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(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to plan years beginning after
December 31, 2005.
(2) REGULATIONS.—Final regulations under sec-
tion 404(c)(4)(A) of the Employee Retirement Income
Security Act of 1974 (as added by this section) shall
be issued no later than 6 months after the date of the
enactment of this Act.
SEC. 1110. CLARIFICATION OF FIDUCIARY RULES.
(a) IN GENERAL.—Not later than 1 year after the date
of the enactment of this Act, the Secretary of Labor shall
issue final regulations clarifying that the selection of an
annuity contract as an optional form of distribution from
an individual account plan to a participant or
beneficiary—
(1) is not subject to the safest available annuity
standard under Interpretive Bulletin 95–1 (29 C.F.R.
2509.95–1), and
(2) is subject to all otherwise applicable fidu-
ciary standards.
(b) EFFECTIVE DATE.—This section shall take effect
on the date of enactment of this Act.
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TITLE XII—UNITED STATES TAX
COURT MODERNIZATION
SEC. 1200. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this title an amendment or repeal is expressed in terms of
an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or
other provision of the Internal Revenue Code of 1986.
SEC. 1201. ANNUITIES FOR SURVIVORS OF TAX COURT
JUDGES WHO ARE ASSASSINATED.
(a) ELIGIBILITY IN CASE OF DEATH BY ASSASSINA-
TION.—Subsection (h) of section 7448 (relating to annuities
to surviving spouses and dependent children of judges) is
amended to read as follows:
‘‘(h) ENTITLEMENT TO ANNUITY.—
‘‘(1) IN GENERAL.—
‘‘(A) ANNUITY TO SURVIVING SPOUSE.—If a
judge described in paragraph (2) is survived by
a surviving spouse but not by a dependent child,
there shall be paid to such surviving spouse an
annuity beginning with the day of the death of
the judge or following the surviving spouse’s at-
tainment of the age of 50 years, whichever is the
later, in an amount computed as provided in
subsection (m).
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‘‘(B) ANNUITY TO CHILD.—If such a judge
is survived by a surviving spouse and a depend-
ent child or children, there shall be paid to such
surviving spouse an immediate annuity in an
amount computed as provided in subsection (m),
and there shall also be paid to or on behalf of
each such child an immediate annuity equal to
the lesser of—
‘‘(i) 10 percent of the average annual
salary of such judge (determined in accord-
ance with subsection (m)), or
‘‘(ii) 20 percent of such average annual
salary, divided by the number of such chil-
dren.
‘‘(C) ANNUITY
TO
SURVIVING
DEPENDENT
CHILDREN.—If such a judge leaves no surviving
spouse but leaves a surviving dependent child or
children, there shall be paid to or on behalf of
each such child an immediate annuity equal to
the lesser of—
‘‘(i) 20 percent of the average annual
salary of such judge (determined in accord-
ance with subsection (m)), or
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‘‘(ii) 40 percent of such average annual
salary, divided by the number of such chil-
dren.
‘‘(2) COVERED JUDGES.—Paragraph (1) applies
to any judge electing under subsection (b)—
‘‘(A) who dies while a judge after having
rendered at least 5 years of civilian service com-
puted as prescribed in subsection (n), for the last
5 years of which the salary deductions provided
for by subsection (c)(1) or the deposits required
by subsection (d) have actually been made or the
salary deductions required by the civil service re-
tirement laws have actually been made, or
‘‘(B) who dies by assassination after having
rendered less than 5 years of civilian service
computed as prescribed in subsection (n) if, for
the period of such service, the salary deductions
provided for by subsection (c)(1) or the deposits
required by subsection (d) have actually been
made.
‘‘(3) TERMINATION OF ANNUITY.—
‘‘(A) IN
THE
CASE
OF
A
SURVIVING
SPOUSE.—The annuity payable to a surviving
spouse under this subsection shall be terminable
upon such surviving spouse’s death or such sur-
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viving spouse’s remarriage before attaining age
55.
‘‘(B) IN THE CASE OF A CHILD.—The annu-
ity payable to a child under this subsection shall
be terminable upon (i) the child attaining the
age of 18 years, (ii) the child’s marriage, or (iii)
the child’s death, whichever first occurs, except
that if such child is incapable of self-support by
reason of mental or physical disability the
child’s annuity shall be terminable only upon
death, marriage, or recovery from such dis-
ability.
‘‘(C) IN THE CASE OF A DEPENDENT CHILD
AFTER DEATH OF SURVIVING SPOUSE.—In case
of the death of a surviving spouse of a judge
leaving a dependent child or children of the
judge surviving such spouse, the annuity of such
child or children shall be recomputed and paid
as provided in paragraph (1)(C).
‘‘(D) RECOMPUTATION.—In any case in
which the annuity of a dependent child is termi-
nated under this subsection, the annuities of any
remaining dependent child or children, based
upon the service of the same judge, shall be re-
computed and paid as though the child whose
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annuity was so terminated had not survived
such judge.
‘‘(4) 
SPECIAL
RULE
FOR
ASSASSINATED
JUDGES.—In the case of a survivor or survivors of a
judge described in paragraph (2)(B), there shall be
deducted from the annuities otherwise payable under
this section an amount equal to—
‘‘(A) the amount of salary deductions pro-
vided for by subsection (c)(1) that would have
been made if such deductions had been made for
5 years of civilian service computed as pre-
scribed in subsection (n) before the judge’s death,
reduced by
‘‘(B) the amount of such salary deductions
that were actually made before the date of the
judge’s death.’.’
(b) DEFINITION OF ASSASSINATION.—Section 7448(a)
(relating to definitions) is amended by adding at the end
the following new paragraph:
‘‘(8) The terms ‘assassinated’ and ‘assassination’
mean the killing of a judge that is motivated by the
performance by that judge of his or her official du-
ties.’’.
(c) DETERMINATION OF ASSASSINATION.—Subsection
(i) of section 7448 is amended—
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(1) by striking the subsection heading and in-
serting the following:
‘‘(i) DETERMINATIONS BY CHIEF JUDGE.—
‘‘(1) DEPENDENCY AND DISABILITY.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new para-
graph:
‘‘(2) ASSASSINATION.—The chief judge shall de-
termine whether the killing of a judge was an assas-
sination, subject to review only by the Tax Court. The
head of any Federal agency that investigates the kill-
ing of a judge shall provide information to the chief
judge that would assist the chief judge in making such
a determination.’’.
(d) COMPUTATION OF ANNUITIES.—Subsection (m) of
section 7448 is amended—
(1) by striking the subsection heading and in-
serting the following:
‘‘(m) COMPUTATION OF ANNUITIES.—
‘‘(1) IN GENERAL.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new para-
graph:
‘‘(2) ASSASSINATED JUDGES.—In the case of a
judge who is assassinated and who has served less
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than 3 years, the annuity of the surviving spouse of
such judge shall be based upon the average annual
salary received by such judge for judicial service.’’.
(e) OTHER BENEFITS.—Section 7448 is amended by
adding at the end the following:
‘‘(u) OTHER BENEFITS.—In the case of a judge who
is assassinated, an annuity shall be paid under this section
notwithstanding a survivor’s eligibility for or receipt of
benefits under chapter 81 of title 5, United States Code,
except that the annuity for which a surviving spouse is eli-
gible under this section shall be reduced to the extent that
the total benefits paid under this section and chapter 81
of that title for any year would exceed the current salary
for that year of the office of the judge.’’.
SEC. 1202. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT
JUDICIAL SURVIVOR ANNUITIES.
(a) IN GENERAL.—Subsection (s) of section 7448 (re-
lating to annuities to surviving spouses and dependent chil-
dren of judges) is amended to read as follows:
‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each time
that an increase is made under section 8340(b) of title 5,
United States Code, in annuities payable under subchapter
III of chapter 83 of that title, each annuity payable from
the survivors annuity fund under this section shall be in-
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creased at the same time by the same percentage by which
annuities are increased under such section 8340(b).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply with respect to increases made under
section 8340(b) of title 5, United States Code, in annuities
payable under subchapter III of chapter 83 of that title,
taking effect after the date of the enactment of this Act.
SEC. 1203. LIFE INSURANCE COVERAGE FOR TAX COURT
JUDGES.
(a) IN GENERAL.—Section 7447 (relating to retire-
ment of judges) is amended by adding at the end the fol-
lowing new subsection:
‘‘(j) LIFE INSURANCE COVERAGE.—For purposes of
chapter 87 of title 5, United States Code (relating to life
insurance), any individual who is serving as a judge of the
Tax Court or who is retired under this section is deemed
to be an employee who is continuing in active employ-
ment.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to any individual serving as a judge
of the United States Tax Court or to any retired judge of
the United States Tax Court on the date of the enactment
of this Act.
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SEC. 1204. COST OF LIFE INSURANCE COVERAGE FOR TAX
COURT JUDGES AGE 65 OR OVER.
Section 7472 (relating to expenditures) is amended by
inserting after the first sentence the following new sentence:
‘‘Notwithstanding any other provision of law, the Tax
Court is authorized to pay on behalf of its judges, age 65
or over, any increase in the cost of Federal Employees’
Group Life Insurance imposed after April 24, 1999, includ-
ing any expenses generated by such payments, as authorized
by the chief judge in a manner consistent with such pay-
ments authorized by the Judicial Conference of the United
States pursuant to section 604(a)(5) of title 28, United
States Code.’’
SEC. 1205. MODIFICATION OF TIMING OF LUMP-SUM PAY-
MENT OF JUDGES’ ACCRUED ANNUAL LEAVE.
(a) IN GENERAL.—Section 7443 (relating to member-
ship of the Tax Court) is amended by adding at the end
the following new subsection:
‘‘(h) LUMP-SUM PAYMENT OF JUDGES’ ACCRUED AN-
NUAL LEAVE.—Notwithstanding the provisions of sections
5551 and 6301 of title 5, United States Code, when an indi-
vidual subject to the leave system provided in chapter 63
of that title is appointed by the President to be a judge
of the Tax Court, the individual shall be entitled to receive,
upon appointment to the Tax Court, a lump-sum payment
from the Tax Court of the accumulated and accrued current
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annual leave standing to the individual’s credit as certified
by the agency from which the individual resigned.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to any judge of the United States Tax
Court who has an outstanding leave balance on the date
of the enactment of this Act and to any individual ap-
pointed by the President to serve as a judge of the United
States Tax Court after such date.
SEC. 1206. PARTICIPATION OF TAX COURT JUDGES IN THE
THRIFT SAVINGS PLAN.
(a) IN GENERAL.—Section 7447 (relating to retire-
ment of judges), as amended by this Act, is amended by
adding at the end the following new subsection:
‘‘(k) THRIFT SAVINGS PLAN.—
‘‘(1) ELECTION TO CONTRIBUTE.—
‘‘(A) IN
GENERAL.—A judge of the Tax
Court may elect to contribute to the Thrift Sav-
ings Fund established by section 8437 of title 5,
United States Code.
‘‘(B) PERIOD
OF
ELECTION.—An election
may be made under this paragraph only during
a period provided under section 8432(b) of title
5, United States Code, for individuals subject to
chapter 84 of such title.
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‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—
Except as otherwise provided in this subsection, the
provisions of subchapters III and VII of chapter 84
of title 5, United States Code, shall apply with re-
spect to a judge who makes an election under para-
graph (1).
‘‘(3) SPECIAL RULES.—
‘‘(A) AMOUNT CONTRIBUTED.—The amount
contributed by a judge to the Thrift Savings
Fund in any pay period shall not exceed the
maximum percentage of such judge’s basic pay
for such period as allowable under section 8440f
of title 5, United States Code. Basic pay does not
include any retired pay paid pursuant to this
section.
‘‘(B) CONTRIBUTIONS
FOR
BENEFIT
OF
JUDGE.—No contributions may be made for the
benefit of a judge under section 8432(c) of title
5, United States Code.
‘‘(C) APPLICABILITY OF SECTION 8433(b) OF
TITLE 5 WHETHER OR NOT JUDGE RETIRES.—
Section 8433(b) of title 5, United States Code,
applies with respect to a judge who makes an
election under paragraph (1) and who either—
‘‘(i) retires under subsection (b), or
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‘‘(ii) ceases to serve as a judge of the
Tax Court but does not retire under sub-
section (b).
Retirement under subsection (b) is a separation
from service for purposes of subchapters III and
VII of chapter 84 of that title.
‘‘(D) APPLICABILITY OF SECTION 8351(b)(5)
OF
TITLE
5.—The 
provisions 
of 
section
8351(b)(5) of title 5, United States Code, shall
apply with respect to a judge who makes an elec-
tion under paragraph (1).
‘‘(E) EXCEPTION.—Notwithstanding sub-
paragraph (C), if any judge retires under this
section, or resigns without having met the age
and service requirements set forth under sub-
section (b)(2), and such judge’s nonforfeitable ac-
count balance is less than an amount that the
Executive Director of the Office of Personnel
Management prescribes by regulation, the Execu-
tive Director shall pay the nonforfeitable account
balance to the participant in a single payment.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act, except that United States Tax Court judges may only
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begin to participate in the Thrift Savings Plan at the next
open season beginning after such date.
SEC. 1207. EXEMPTION OF TEACHING COMPENSATION OF
RETIRED JUDGES FROM LIMITATION ON OUT-
SIDE EARNED INCOME.
(a) IN GENERAL.—Section 7447 (relating to retire-
ment of judges), as amended by this Act, is amended by
adding at the end the following new subsection:
‘‘(l) 
TEACHING
COMPENSATION
OF
RETIRED
JUDGES.—For purposes of the limitation under section
501(a) of the Ethics in Government Act of 1978 (5 U.S.C.
App.), any compensation for teaching approved under sec-
tion 502(a)(5) of such Act shall not be treated as outside
earned income when received by a judge of the Tax Court
who has retired under subsection (b) for teaching performed
during any calendar year for which such a judge has met
the requirements of subsection (c), as certified by the chief
judge of the Tax Court.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to any individual serving as a retired
judge of the United States Tax Court on or after the date
of the enactment of this Act.
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SEC. 1208. GENERAL PROVISIONS RELATING TO MAG-
ISTRATE JUDGES OF THE TAX COURT.
(a) TITLE OF SPECIAL TRIAL JUDGE CHANGED TO
MAGISTRATE JUDGE OF THE TAX COURT.—The heading of
section 7443A is amended to read as follows:
‘‘SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.’’
(b) APPOINTMENT, TENURE, AND REMOVAL.—Sub-
section (a) of section 7443A is amended to read as follows:
‘‘(a) APPOINTMENT, TENURE, AND REMOVAL.—
‘‘(1) APPOINTMENT.—The chief judge may, from
time to time, appoint and reappoint magistrate
judges of the Tax Court for a term of 8 years. The
magistrate judges of the Tax Court shall proceed
under such rules as may be promulgated by the Tax
Court.
‘‘(2) REMOVAL.—Removal of a magistrate judge
of the Tax Court during the term for which he or she
is appointed shall be only for incompetency, mis-
conduct, neglect of duty, or physical or mental dis-
ability, but the office of a magistrate judge of the Tax
Court shall be terminated if the judges of the Tax
Court determine that the services performed by the
magistrate judge of the Tax Court are no longer need-
ed. Removal shall not occur unless a majority of all
the judges of the Tax Court concur in the order of re-
moval. Before any order of removal shall be entered,
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a full specification of the charges shall be furnished
to the magistrate judge of the Tax Court, and he or
she shall be accorded by the judges of the Tax Court
an opportunity to be heard on the charges.’’.
(c) SALARY.—Section 7443A(d) (relating to salary) is
amended by striking ‘‘90’’ and inserting ‘‘92’’.
(d) EXEMPTION
FROM
FEDERAL
LEAVE
PROVI-
SIONS.—Section 7443A is amended by adding at the end
the following new subsection:
‘‘(f) EXEMPTION
FROM
FEDERAL
LEAVE
PROVI-
SIONS.—
‘‘(1) IN GENERAL.—A magistrate judge of the
Tax Court appointed under this section shall be ex-
empt from the provisions of subchapter I of chapter
63 of title 5, United States Code.
‘‘(2) TREATMENT OF UNUSED LEAVE.—
‘‘(A) AFTER
SERVICE
AS
MAGISTRATE
JUDGE.—If an individual who is exempted
under paragraph (1) from the subchapter re-
ferred to in such paragraph was previously sub-
ject to such subchapter and, without a break in
service, again becomes subject to such subchapter
on completion of the individual’s service as a
magistrate judge, the unused annual leave and
sick leave standing to the individual’s credit
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when such individual was exempted from this
subchapter is deemed to have remained to the in-
dividual’s credit.
‘‘(B) COMPUTATION OF ANNUITY.—In com-
puting an annuity under section 8339 of title 5,
United States Code, the total service of an indi-
vidual specified in subparagraph (A) who retires
on an immediate annuity or dies leaving a sur-
vivor or survivors entitled to an annuity in-
cludes, without regard to the limitations imposed
by subsection (f) of such section 8339, the days
of unused sick leave standing to the individual’s
credit when such individual was exempted from
subchapter I of chapter 63 of title 5, United
States Code, except that these days will not be
counted in determining average pay or annuity
eligibility.
‘‘(C) LUMP SUM PAYMENT.—Any accumu-
lated and current accrued annual leave or vaca-
tion balances credited to a magistrate judge as of
the date of the enactment of this subsection shall
be paid in a lump sum at the time of separation
from service pursuant to the provisions and re-
strictions set forth in section 5551 of title 5,
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United States Code, and related provisions re-
ferred to in such section.’’.
(e) CONFORMING AMENDMENTS.—
(1) The heading of subsection (b) of section
7443A is amended by striking ‘‘SPECIAL TRIAL
JUDGES’’ and inserting ‘‘Magistrate Judges of the
Tax Court’’.
(2) Section 7443A(b) is amended by striking
‘‘special trial judges of the court’’ and inserting
‘‘magistrate judges of the Tax Court’’.
(3) Subsections (c) and (d) of section 7443A are
amended by striking ‘‘special trial judge’’ and insert-
ing ‘‘magistrate judge of the Tax Court’’ each place
it appears.
(4) Section 7443A(e) is amended by striking
‘‘special trial judges’’ and inserting ‘‘magistrate
judges of the Tax Court’’.
(5) Section 7456(a) is amended by striking ‘‘spe-
cial trial judge’’ each place it appears and inserting
‘‘magistrate judge’’.
(6) Subsection (c) of section 7471 is amended—
(A) by striking the subsection heading and
inserting ‘‘MAGISTRATE JUDGES
OF
THE TAX
COURT.—’’, and
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(B) by striking ‘‘special trial judges’’ and
inserting ‘‘magistrate judges’’.
SEC. 1209. ANNUITIES TO SURVIVING SPOUSES AND DE-
PENDENT 
CHILDREN 
OF 
MAGISTRATE
JUDGES OF THE TAX COURT.
(a) DEFINITIONS.—Section 7448(a) (relating to defini-
tions), as amended by this Act, is amended by redesignating
paragraphs (5), (6), (7), and (8) as paragraphs (7), (8),
(9), and (10), respectively, and by inserting after para-
graph (4) the following new paragraphs:
‘‘(5) The term ‘magistrate judge’ means a judi-
cial officer appointed pursuant to section 7443A, in-
cluding any individual receiving an annuity under
section 7443B, or chapters 83 or 84, as the case may
be, of title 5, United States Code, whether or not per-
forming judicial duties under section 7443C.
‘‘(6) The term ‘magistrate judge’s salary’ means
the salary of a magistrate judge received under sec-
tion 7443A(d), any amount received as an annuity
under section 7443B, or chapters 83 or 84, as the case
may be, of title 5, United States Code, and compensa-
tion received under section 7443C.’’.
(b) ELECTION.—Subsection (b) of section 7448 (relat-
ing to annuities to surviving spouses and dependent chil-
dren of judges) is amended—
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(1) by striking the subsection heading and in-
serting the following:
‘‘(b) ELECTION.—
‘‘(1) JUDGES.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new para-
graph:
‘‘(2) MAGISTRATE
JUDGES.—Any magistrate
judge may by written election filed with the chief
judge bring himself or herself within the purview of
this section. Such election shall be filed not later than
the later of 6 months after—
‘‘(A) 6 months after the date of the enact-
ment of this paragraph,
‘‘(B) the date the judge takes office, or
‘‘(C) the date the judge marries.’’.
(c) CONFORMING AMENDMENTS.—
(1) The heading of section 7448 is amended by
inserting ‘‘AND
MAGISTRATE
JUDGES’’ after
‘‘JUDGES’’.
(2) The item relating to section 7448 in the table
of sections for part I of subchapter C of chapter 76
is amended by inserting ‘‘and magistrate judges’’
after ‘‘judges’’.
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(3) Subsections (c)(1), (d), (f), (g), (h), (j), (m),
(n), and (u) of section 7448, as amended by this Act,
are each amended—
(A) by inserting ‘‘or magistrate judge’’ after
‘‘judge’’ each place it appears other than in the
phrase ‘‘chief judge’’, and
(B) by inserting ‘‘or magistrate judge’s’’
after ‘‘judge’s’’ each place it appears.
(4) Section 7448(c) is amended—
(A) in paragraph (1), by striking ‘‘Tax
Court judges’’ and inserting ‘‘Tax Court judicial
officers’’,
(B) in paragraph (2)—
(i) in subparagraph (A), by inserting
‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’, and
(ii) in subparagraph (B), by striking
‘‘subsection (a)(4)’’ and inserting ‘‘sub-
sections (a)(4) and (a)(6)’’.
(5) Section 7448(g) is amended by inserting ‘‘or
section 7443B’’ after ‘‘section 7447’’ each place it ap-
pears, and by inserting ‘‘or an annuity’’ after ‘‘re-
tired pay’’.
(6) Section 7448(j)(1) is amended—
(A) in subparagraph (A), by striking ‘‘serv-
ice or retired’’ and inserting ‘‘service, retired’’,
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and by inserting ‘‘, or receiving any annuity
under section 7443B or chapters 83 or 84 of title
5, United States Code,’’ after ‘‘section 7447’’,
and
(B) in the last sentence, by striking ‘‘sub-
sections (a) (6) and (7)’’ and inserting ‘‘para-
graphs (8) and (9) of subsection (a)’’.
(7) Section 7448(m)(1), as amended by this Act,
is amended—
(A) by inserting ‘‘or any annuity under sec-
tion 7443B or chapters 83 or 84 of title 5,
United States Code’’ after ‘‘7447(d)’’, and
(B) by inserting ‘‘or 7443B(m)(1)(B) after
‘‘7447(f)(4)’’.
(8) Section 7448(n) is amended by inserting ‘‘his
years of service pursuant to any appointment under
section 7443A,’’ after ‘‘of the Tax Court,’’.
(9) Section 3121(b)(5)(E) is amended by insert-
ing ‘‘or magistrate judge’’ before ‘‘of the United States
Tax Court’’.
(10) Section 210(a)(5)(E) of the Social Security
Act is amended by inserting ‘‘or magistrate judge’’ be-
fore ‘‘of the United States Tax Court’’.
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SEC. 1210. RETIREMENT AND ANNUITY PROGRAM.
(a) RETIREMENT AND ANNUITY PROGRAM.—Part I of
subchapter C of chapter 76 is amended by inserting after
section 7443A the following new section:
‘‘SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF
THE TAX COURT.
‘‘(a) RETIREMENT BASED ON YEARS OF SERVICE.—
A magistrate judge of the Tax Court to whom this section
applies and who retires from office after attaining the age
of 65 years and serving at least 14 years, whether continu-
ously or otherwise, as such magistrate judge shall, subject
to subsection (f), be entitled to receive, during the remainder
of the magistrate judge’s lifetime, an annuity equal to the
salary being received at the time the magistrate judge leaves
office.
‘‘(b) RETIREMENT UPON FAILURE
OF REAPPOINT-
MENT.—A magistrate judge of the Tax Court to whom this
section applies who is not reappointed following the expira-
tion of the term of office of such magistrate judge and who
retires upon the completion of the term shall, subject to sub-
section (f), be entitled to receive, upon attaining the age
of 65 years and during the remainder of such magistrate
judge’s lifetime, an annuity equal to that portion of the sal-
ary being received at the time the magistrate judge leaves
office which the aggregate number of years of service, not
to exceed 14, bears to 14, if—
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‘‘(1) such magistrate judge has served at least 1
full term as a magistrate judge, and
‘‘(2) not earlier than 9 months before the date on
which the term of office of such magistrate judge ex-
pires, and not later than 6 months before such date,
such magistrate judge notified the chief judge of the
Tax Court in writing that such magistrate judge was
willing to accept reappointment to the position in
which such magistrate judge was serving.
‘‘(c) SERVICE OF AT LEAST 8 YEARS.—A magistrate
judge of the Tax Court to whom this section applies and
who retires after serving at least 8 years, whether continu-
ously or otherwise, as such a magistrate judge shall, subject
to subsection (f), be entitled to receive, upon attaining the
age of 65 years and during the remainder of the magistrate
judge’s lifetime, an annuity equal to that portion of the sal-
ary being received at the time the magistrate judge leaves
office which the aggregate number of years of service, not
to exceed 14, bears to 14. Such annuity shall be reduced
by 1⁄6 of 1 percent for each full month such magistrate judge
was under the age of 65 at the time the magistrate judge
left office, except that such reduction shall not exceed 20
percent.
‘‘(d) RETIREMENT
FOR DISABILITY.—A magistrate
judge of the Tax Court to whom this section applies, who
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has served at least 5 years, whether continuously or other-
wise, as such a magistrate judge and who retires or is re-
moved from office upon the sole ground of mental or phys-
ical disability shall, subject to subsection (f), be entitled to
receive, during the remainder of the magistrate judge’s life-
time, an annuity equal to 40 percent of the salary being
received at the time of retirement or removal or, in the case
of a magistrate judge who has served for at least 10 years,
an amount equal to that proportion of the salary being re-
ceived at the time of retirement or removal which the aggre-
gate number of years of service, not to exceed 14, bears to
14.
‘‘(e) COST-OF-LIVING ADJUSTMENTS.—A magistrate
judge of the Tax Court who is entitled to an annuity under
this section is also entitled to a cost-of-living adjustment
in such annuity, calculated and payable in the same man-
ner as adjustments under section 8340(b) of title 5, United
States Code, except that any such annuity, as increased
under this subsection, may not exceed the salary then pay-
able for the position from which the magistrate judge retired
or was removed.
‘‘(f) ELECTION; ANNUITY IN LIEU OF OTHER ANNU-
ITIES.—
‘‘(1) IN GENERAL.—A magistrate judge of the
Tax Court shall be entitled to an annuity under this
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section if the magistrate judge elects an annuity
under this section by notifying the chief judge of the
Tax Court not later than the later of—
‘‘(A) 5 years after the magistrate judge of
the Tax Court begins judicial service, or
‘‘(B) 5 years after the date of the enactment
of this subsection.
Such notice shall be given in accordance with proce-
dures prescribed by the Tax Court.
‘‘(2) ANNUITY IN LIEU OF OTHER ANNUITY.—A
magistrate judge who elects to receive an annuity
under this section shall not be entitled to receive—
‘‘(A) any annuity to which such magistrate
judge would otherwise have been entitled under
subchapter III of chapter 83, or under chapter
84 (except for subchapters III and VII), of title
5, United States Code, for service performed as
a magistrate or otherwise,
‘‘(B) an annuity or salary in senior status
or retirement under section 371 or 372 of title
28, United States Code,
‘‘(C) retired pay under section 7447, or
‘‘(D) retired pay under section 7296 of title
38, United States Code.
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‘‘(3) COORDINATION
WITH
TITLE
5.—A mag-
istrate judge of the Tax Court who elects to receive an
annuity under this section—
‘‘(A) shall not be subject to deductions and
contributions otherwise required by section
8334(a) of title 5, United States Code,
‘‘(B) shall be excluded from the operation of
chapter 84 (other than subchapters III and VII)
of such title 5, and
‘‘(C) is entitled to a lump-sum credit under
section 8342(a) or 8424 of such title 5, as the
case may be.
‘‘(g) CALCULATION OF SERVICE.—For purposes of cal-
culating an annuity under this section—
‘‘(1) service as a magistrate judge of the Tax
Court to whom this section applies may be credited,
and
‘‘(2) each month of service shall be credited as
1⁄12 of a year, and the fractional part of any month
shall not be credited.
‘‘(h) COVERED POSITIONS AND SERVICE.—This section
applies to any magistrate judge of the Tax Court or special
trial judge of the Tax Court appointed under this sub-
chapter, but only with respect to service as such a mag-
istrate judge or special trial judge after a date not earlier
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than 91⁄2 years before the date of the enactment of this sub-
section.
‘‘(i) PAYMENTS PURSUANT TO COURT ORDER.—
‘‘(1) IN GENERAL.—Payments under this section
which would otherwise be made to a magistrate judge
of the Tax Court based upon his or her service shall
be paid (in whole or in part) by the chief judge of the
Tax Court to another person if and to the extent ex-
pressly provided for in the terms of any court decree
of divorce, annulment, or legal separation, or the
terms of any court order or court-approved property
settlement agreement incident to any court decree of
divorce, annulment, or legal separation. Any payment
under this paragraph to a person bars recovery by
any other person.
‘‘(2) REQUIREMENTS FOR PAYMENT.—Paragraph
(1) shall apply only to payments made by the chief
judge of the Tax Court after the date of receipt by the
chief judge of written notice of such decree, order, or
agreement, and such additional information as the
chief judge may prescribe.
‘‘(3) COURT DEFINED.—For purposes of this sub-
section, the term ‘court’ means any court of any
State, the District of Columbia, the Commonwealth of
Puerto Rico, Guam, the Northern Mariana Islands, or
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the Virgin Islands, and any Indian tribal court or
courts of Indian offense.
‘‘(j) DEDUCTIONS, CONTRIBUTIONS, AND DEPOSITS.—
‘‘(1) DEDUCTIONS.—Beginning with the next
pay period after the chief judge of the Tax Court re-
ceives a notice under subsection (f) that a magistrate
judge of the Tax Court has elected an annuity under
this section, the chief judge shall deduct and withhold
1 percent of the salary of such magistrate judge.
Amounts shall be so deducted and withheld in a man-
ner determined by the chief judge. Amounts deducted
and withheld under this subsection shall be deposited
in the Treasury of the United States to the credit of
the Tax Court Judicial Officers’ Retirement Fund.
Deductions under this subsection from the salary of a
magistrate judge shall terminate upon the retirement
of the magistrate judge or upon completion of 14
years of service for which contributions under this
section have been made, whether continuously or oth-
erwise, as calculated under subsection (g), whichever
occurs first.
‘‘(2) CONSENT TO DEDUCTIONS; DISCHARGE OF
CLAIMS.—Each magistrate judge of the Tax Court
who makes an election under subsection (f) shall be
deemed to consent and agree to the deductions from
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salary which are made under paragraph (1). Pay-
ment of such salary less such deductions (and any de-
ductions made under section 7448) is a full and com-
plete discharge and acquittance of all claims and de-
mands for all services rendered by such magistrate
judge during the period covered by such payment, ex-
cept the right to those benefits to which the magistrate
judge is entitled under this section (and section 7448).
‘‘(k) DEPOSITS
FOR PRIOR SERVICE.—Each mag-
istrate judge of the Tax Court who makes an election under
subsection (f) may deposit, for service performed before such
election for which contributions may be made under this
section, an amount equal to 1 percent of the salary received
for that service. Credit for any period covered by that serv-
ice may not be allowed for purposes of an annuity under
this section until a deposit under this subsection has been
made for that period.
‘‘(l) 
INDIVIDUAL
RETIREMENT
RECORDS.—The
amounts deducted and withheld under subsection (j), and
the amounts deposited under subsection (k), shall be credited
to individual accounts in the name of each magistrate judge
of the Tax Court from whom such amounts are received,
for credit to the Tax Court Judicial Officers’ Retirement
Fund.
‘‘(m) ANNUITIES AFFECTED IN CERTAIN CASES.—
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‘‘(1) 1-YEAR FORFEITURE FOR FAILURE TO PER-
FORM JUDICIAL DUTIES.—Subject to paragraph (3),
any magistrate judge of the Tax Court who retires
under this section and who fails to perform judicial
duties required of such individual by section 7443C
shall forfeit all rights to an annuity under this sec-
tion for a 1-year period which begins on the 1st day
on which such individual fails to perform such duties.
‘‘(2) PERMANENT FORFEITURE OF RETIRED PAY
WHERE
CERTAIN
NON-GOVERNMENT
SERVICES
PER-
FORMED.—Subject to paragraph (3), any magistrate
judge of the Tax Court who retires under this section
and who thereafter performs (or supervises or directs
the performance of) legal or accounting services in the
field of Federal taxation for the individual’s client,
the individual’s employer, or any of such employer’s
clients, shall forfeit all rights to an annuity under
this section for all periods beginning on or after the
first day on which the individual performs (or super-
vises or directs the performance of) such services. The
preceding sentence shall not apply to any civil office
or employment under the Government of the United
States.
‘‘(3) FORFEITURES NOT TO APPLY WHERE INDI-
VIDUAL ELECTS TO FREEZE AMOUNT OF ANNUITY.—
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‘‘(A) IN GENERAL.—If a magistrate judge of
the Tax Court makes an election under this
paragraph—
‘‘(i) paragraphs (1) and (2) (and sec-
tion 7443C) shall not apply to such mag-
istrate judge beginning on the date such
election takes effect, and
‘‘(ii) the annuity payable under this
section to such magistrate judge, for periods
beginning on or after the date such election
takes effect, shall be equal to the annuity to
which such magistrate judge is entitled on
the day before such effective date.
‘‘(B) ELECTION REQUIREMENTS.—An elec-
tion under subparagraph (A)—
‘‘(i) may be made by a magistrate
judge of the Tax Court eligible for retire-
ment under this section, and
‘‘(ii) shall be filed with the chief judge
of the Tax Court.
Such an election, once it takes effect, shall be ir-
revocable.
‘‘(C) EFFECTIVE DATE OF ELECTION.—Any
election under subparagraph (A) shall take effect
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on the first day of the first month following the
month in which the election is made.
‘‘(4) ACCEPTING
OTHER
EMPLOYMENT.—Any
magistrate judge of the Tax Court who retires under
this section and thereafter accepts compensation for
civil office or employment under the United States
Government (other than for the performance of func-
tions as a magistrate judge of the Tax Court under
section 7443C) shall forfeit all rights to an annuity
under this section for the period for which such com-
pensation is received. For purposes of this paragraph,
the term ‘compensation’ includes retired pay or sal-
ary received in retired status.
‘‘(n) LUMP-SUM PAYMENTS.—
‘‘(1) ELIGIBILITY.—
‘‘(A) IN GENERAL.—Subject to paragraph
(2), an individual who serves as a magistrate
judge of the Tax Court and—
‘‘(i) who leaves office and is not re-
appointed as a magistrate judge of the Tax
Court for at least 31 consecutive days,
‘‘(ii) who files an application with the
chief judge of the Tax Court for payment of
a lump-sum credit,
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‘‘(iii) is not serving as a magistrate
judge of the Tax Court at the time of filing
of the application, and
‘‘(iv) will not become eligible to receive
an annuity under this section within 31
days after filing the application,
is entitled to be paid the lump-sum credit. Pay-
ment of the lump-sum credit voids all rights to
an annuity under this section based on the serv-
ice on which the lump-sum credit is based, until
that individual resumes office as a magistrate
judge of the Tax Court.
‘‘(B) PAYMENT TO SURVIVORS.—Lump-sum
benefits authorized by subparagraphs (C), (D),
and (E) of this paragraph shall be paid to the
person or persons surviving the magistrate judge
of the Tax Court and alive on the date title to
the payment arises, in the order of precedence set
forth in subsection (o) of section 376 of title 28,
United States Code, and in accordance with the
last 2 sentences of paragraph (1) of that sub-
section. For purposes of the preceding sentence,
the term ‘judicial official’ as used in subsection
(o) of such section 376 shall be deemed to mean
‘magistrate judge of the Tax Court’ and the
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terms ‘Administrative Office of the United States
Courts’ and ‘Director of the Administrative Of-
fice of the United States Courts’ shall be deemed
to mean ‘chief judge of the Tax Court’.
‘‘(C) PAYMENT UPON DEATH OF JUDGE BE-
FORE
RECEIPT
OF
ANNUITY.—If a magistrate
judge of the Tax Court dies before receiving an
annuity under this section, the lump-sum credit
shall be paid.
‘‘(D) PAYMENT OF ANNUITY REMAINDER.—
If all annuity rights under this section based on
the service of a deceased magistrate judge of the
Tax Court terminate before the total annuity
paid equals the lump-sum credit, the difference
shall be paid.
‘‘(E) PAYMENT
UPON
DEATH
OF
JUDGE
DURING RECEIPT OF ANNUITY.—If a magistrate
judge of the Tax Court who is receiving an an-
nuity under this section dies, any accrued annu-
ity benefits remaining unpaid shall be paid.
‘‘(F) PAYMENT
UPON
TERMINATION.—Any
accrued annuity benefits remaining unpaid on
the termination, except by death, of the annuity
of a magistrate judge of the Tax Court shall be
paid to that individual.
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‘‘(G) PAYMENT
UPON
ACCEPTING
OTHER
EMPLOYMENT.—Subject to paragraph (2), a
magistrate judge of the Tax Court who forfeits
rights to an annuity under subsection (m)(4) be-
fore the total annuity paid equals the lump-sum
credit shall be entitled to be paid the difference
if the magistrate judge of the Tax Court files an
application with the chief judge of the Tax Court
for payment of that difference. A payment under
this subparagraph voids all rights to an annuity
on which the payment is based.
‘‘(2) SPOUSES AND FORMER SPOUSES.—
‘‘(A) IN GENERAL.—Payment of the lump-
sum credit under paragraph (1)(A) or a pay-
ment under paragraph (1)(G)—
‘‘(i) may be made only if any current
spouse and any former spouse of the mag-
istrate judge of the Tax Court are notified
of the magistrate judge’s application, and
‘‘(ii) shall be subject to the terms of a
court decree of divorce, annulment, or legal
separation, or any court or court approved
property settlement agreement incident to
such decree, if—
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‘‘(I) the decree, order, or agree-
ment expressly relates to any portion
of the lump-sum credit or other pay-
ment involved, and
‘‘(II) payment of the lump-sum
credit or other payment would extin-
guish entitlement of the magistrate
judge’s spouse or former spouse to any
portion of an annuity under subsection
(i).
‘‘(B) 
NOTIFICATION.—Notification 
of 
a
spouse or former spouse under this paragraph
shall be made in accordance with such proce-
dures as the chief judge of the Tax Court shall
prescribe. The chief judge may provide under
such procedures that subparagraph (A)(i) may
be waived with respect to a spouse or former
spouse if the magistrate judge establishes to the
satisfaction of the chief judge that the where-
abouts of such spouse or former spouse cannot be
determined.
‘‘(C) RESOLUTION
OF
OR
MORE
OR-
DERS.—The chief judge shall prescribe proce-
dures under which this paragraph shall be ap-
plied in any case in which the chief judge re-
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ceives 2 or more orders or decrees described in
subparagraph (A).
‘‘(3) DEFINITION.—For purposes of this sub-
section, the term ‘lump-sum credit’ means the
unrefunded amount consisting of—
‘‘(A) retirement deductions made under this
section from the salary of a magistrate judge of
the Tax Court,
‘‘(B) amounts deposited under subsection
(k) by a magistrate judge of the Tax Court cov-
ering earlier service, and
‘‘(C) interest on the deductions and deposits
which, for any calendar year, shall be equal to
the overall average yield to the Tax Court Judi-
cial Officers’ Retirement Fund during the pre-
ceding fiscal year from all obligations purchased
by the Secretary during such fiscal year under
subsection (o); but does not include interest—
‘‘(i) if the service covered thereby ag-
gregates 1 year or less, or
‘‘(ii) for the fractional part of a month
in the total service.
‘‘(o) TAX COURT JUDICIAL OFFICERS’ RETIREMENT
FUND.—
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‘‘(1) ESTABLISHMENT.—There is established in
the Treasury a fund which shall be known as the ‘Tax
Court Judicial Officers’ Retirement Fund’. Amounts
in the Fund are authorized to be appropriated for the
payment of annuities, refunds, and other payments
under this section.
‘‘(2) INVESTMENT
OF
FUND.—The Secretary
shall invest, in interest bearing securities of the
United States, such currently available portions of the
Tax Court Judicial Officers’ Retirement Fund as are
not immediately required for payments from the
Fund. The income derived from these investments con-
stitutes a part of the Fund.
‘‘(3) UNFUNDED LIABILITY.—
‘‘(A) IN GENERAL.—There are authorized to
be appropriated to the Tax Court Judicial Offi-
cers’ Retirement Fund amounts required to re-
duce to zero the unfunded liability of the Fund.
‘‘(B) UNFUNDED LIABILITY.—For purposes
of subparagraph (A), the term ‘unfunded liabil-
ity’ means the estimated excess, determined on
an annual basis in accordance with the provi-
sions of section 9503 of title 31, United States
Code, of the present value of all benefits payable
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from the Tax Court Judicial Officers’ Retirement
Fund over the sum of—
‘‘(i) the present value of deductions to
be withheld under this section from the fu-
ture basic pay of magistrate judges of the
Tax Court, plus
‘‘(ii) the balance in the Fund as of the
date the unfunded liability is determined.
‘‘(p) PARTICIPATION IN THRIFT SAVINGS PLAN.—
‘‘(1) ELECTION TO CONTRIBUTE.—
‘‘(A) IN GENERAL.—A magistrate judge of
the Tax Court who elects to receive an annuity
under this section or under section 611 of the
Pension Security and Transparency Act of 2005
may elect to contribute an amount of such indi-
vidual’s basic pay to the Thrift Savings Fund es-
tablished by section 8437 of title 5, United States
Code.
‘‘(B) PERIOD
OF
ELECTION.—An election
may be made under this paragraph only during
a period provided under section 8432(b) of title
5, United States Code, for individuals subject to
chapter 84 of such title.
‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—
Except as otherwise provided in this subsection, the
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provisions of subchapters III and VII of chapter 84
of title 5, United States Code, shall apply with re-
spect to a magistrate judge who makes an election
under paragraph (1).
‘‘(3) SPECIAL RULES.—
‘‘(A) AMOUNT CONTRIBUTED.—The amount
contributed by a magistrate judge to the Thrift
Savings Fund in any pay period shall not ex-
ceed the maximum percentage of such judge’s
basic pay for such pay period as allowable under
section 8440f of title 5, United States Code.
‘‘(B) CONTRIBUTIONS
FOR
BENEFIT
OF
JUDGE.—No contributions may be made for the
benefit of a magistrate judge under section
8432(c) of title 5, United States Code.
‘‘(C) APPLICABILITY OF SECTION 8433(b) OF
TITLE
5.—Section 8433(b) of title 5, United
States Code, applies with respect to a magistrate
judge who makes an election under paragraph
(1) and—
‘‘(i) who retires entitled to an imme-
diate annuity under this section (including
a disability annuity under subsection (d) of
this section) or section 611 of the Pension
Security and Transparency Act of 2005,
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‘‘(ii) who retires before attaining age
65 but is entitled, upon attaining age 65, to
an annuity under this section or section
611 of the Pension Security and Trans-
parency Act of 2005, or
‘‘(iii) who retires before becoming enti-
tled to an immediate annuity, or an annu-
ity upon attaining age 65, under this sec-
tion or section 611 of the Pension Security
and Transparency Act of 2005.
‘‘(D) SEPARATION
FROM
SERVICE.—With
respect to a magistrate judge to whom this sub-
section applies, retirement under this section or
section 611 of the Pension Security and Trans-
parency Act of 2005 is a separation from service
for purposes of subchapters III and VII of chap-
ter 84 of title 5, United States Code.
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the terms ‘retirement’ and ‘retire’ include re-
moval from office under section 7443A(a)(2) on the
sole ground of mental or physical disability.
‘‘(5) OFFSET.—In the case of a magistrate judge
who receives a distribution from the Thrift Savings
Fund and who later receives an annuity under this
section, that annuity shall be offset by an amount
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equal to the amount which represents the Govern-
ment’s contribution to that person’s Thrift Savings
Account, without regard to earnings attributable to
that amount. Where such an offset would exceed 50
percent of the annuity to be received in the first year,
the offset may be divided equally over the first 2 years
in which that person receives the annuity.
‘‘(6) EXCEPTION.—Notwithstanding clauses (i)
and (ii) of paragraph (3)(C), if any magistrate judge
retires under circumstances making such magistrate
judge eligible to make an election under subsection (b)
of section 8433 of title 5, United States Code, and
such magistrate judge’s nonforfeitable account balance
is less than an amount that the Executive Director of
the Office of Personnel Management prescribes by reg-
ulation, the Executive Director shall pay the non-
forfeitable account balance to the participant in a
single payment.’’.
(b) CONFORMING AMENDMENT.—The table of sections
for part I of subchapter C of chapter 76 is amended by
inserting after the item relating to section 7443A the fol-
lowing new item:
‘‘Sec. 7443B. Retirement for magistrate judges of the Tax Court.’’.
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SEC. 1211. INCUMBENT MAGISTRATE JUDGES OF THE TAX
COURT.
(a) RETIREMENT ANNUITY UNDER TITLE 5 AND SEC-
TION 7443B OF THE INTERNAL REVENUE CODE OF 1986.—
A magistrate judge of the United States Tax Court in active
service on the date of the enactment of this Act shall, subject
to subsection (b), be entitled, in lieu of the annuity other-
wise provided under the amendments made by this title,
to—
(1) an annuity under subchapter III of chapter
83, or under chapter 84 (except for subchapters III
and VII), of title 5, United States Code, as the case
may be, for creditable service before the date on which
service would begin to be credited for purposes of
paragraph (2), and
(2) an annuity calculated under subsection (b)
or (c) and subsection (g) of section 7443B of the In-
ternal Revenue Code of 1986, as added by this Act,
for any service as a magistrate judge of the United
States Tax Court or special trial judge of the United
States Tax Court but only with respect to service as
such a magistrate judge or special trial judge after a
date not earlier than 91⁄2 years prior to the date of
the enactment of this Act (as specified in the election
pursuant to subsection (b)) for which deductions and
deposits are made under subsections (j) and (k) of
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such section 7443B, as applicable, without regard to
the minimum number of years of service as such a
magistrate judge of the United States Tax Court, ex-
cept that—
(A) in the case of a magistrate judge who
retired with less than 8 years of service, the an-
nuity under subsection (c) of such section 7443B
shall be equal to that proportion of the salary
being received at the time the magistrate judge
leaves office which the years of service bears to
14, subject to a reduction in accordance with
subsection (c) of such section 7443B if the mag-
istrate judge is under age 65 at the time he or
she leaves office, and
(B) the aggregate amount of the annuity
initially payable on retirement under this sub-
section may not exceed the rate of pay for the
magistrate judge which is in effect on the day be-
fore the retirement becomes effective.
(b) FILING OF NOTICE OF ELECTION.—A magistrate
judge of the United States Tax Court shall be entitled to
an annuity under this section only if the magistrate judge
files a notice of that election with the chief judge of the
United States Tax Court specifying the date on which serv-
ice would begin to be credited under section 7443B of the
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Internal Revenue Code of 1986, as added by this Act, in
lieu of chapter 83 or chapter 84 of title 5, United States
Code. Such notice shall be filed in accordance with such
procedures as the chief judge of the United States Tax Court
shall prescribe.
(c) LUMP-SUM CREDIT UNDER TITLE 5.—A mag-
istrate judge of the United States Tax Court who makes
an election under subsection (b) shall be entitled to a lump-
sum credit under section 8342 or 8424 of title 5, United
States Code, as the case may be, for any service which is
covered under section 7443B of the Internal Revenue Code
of 1986, as added by this Act, pursuant to that election,
and with respect to which any contributions were made by
the magistrate judge under the applicable provisions of title
5, United States Code.
(d) RECALL.—With respect to any magistrate judge of
the United States Tax Court receiving an annuity under
this section who is recalled to serve under section 7443C
of the Internal Revenue Code of 1986, as added by this
Act—
(1) the amount of compensation which such re-
called magistrate judge receives under such section
7443C shall be calculated on the basis of the annuity
received under this section, and
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(2) such recalled magistrate judge of the United
States Tax Court may serve as a reemployed annu-
itant to the extent otherwise permitted under title 5,
United States Code.
Section 7443B(m)(4) of the Internal Revenue Code of 1986,
as added by this Act, shall not apply with respect to service
as a reemployed annuitant described in paragraph (2).
SEC. 1212. PROVISIONS FOR RECALL.
(a) IN GENERAL.—Part I of subchapter C of chapter
76, as amended by this Act, is amended by inserting after
section 7443B the following new section:
‘‘SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX
COURT.
‘‘(a) 
RECALLING
OF
RETIRED
MAGISTRATE
JUDGES.—Any individual who has retired pursuant to sec-
tion 7443B or the applicable provisions of title 5, United
States Code, upon reaching the age and service require-
ments established therein, may at or after retirement be
called upon by the chief judge of the Tax Court to perform
such judicial duties with the Tax Court as may be requested
of such individual for any period or periods specified by
the chief judge; except that in the case of any such
individual—
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‘‘(1) the aggregate of such periods in any 1 cal-
endar year shall not (without such individual’s con-
sent) exceed 90 calendar days, and
‘‘(2) such individual shall be relieved of per-
forming such duties during any period in which ill-
ness or disability precludes the performance of such
duties.
Any act, or failure to act, by an individual performing ju-
dicial duties pursuant to this subsection shall have the same
force and effect as if it were the act (or failure to act) of
a magistrate judge of the Tax Court.
‘‘(b) COMPENSATION.—For the year in which a period
of recall occurs, the magistrate judge shall receive, in addi-
tion to the annuity provided under the provisions of section
7443B or under the applicable provisions of title 5, United
States Code, an amount equal to the difference between that
annuity and the current salary of the office to which the
magistrate judge is recalled. The annuity of the magistrate
judge who completes that period of service, who is not re-
called in a subsequent year, and who retired under section
7443B, shall be equal to the salary in effect at the end of
the year in which the period of recall occurred for the office
from which such individual retired.
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‘‘(c) RULEMAKING AUTHORITY.—The provisions of this
section may be implemented under such rules as may be
promulgated by the Tax Court.’’
(b) CONFORMING AMENDMENT.—The table of sections
for part I of subchapter C of chapter 76, as amended by
this Act, is amended by inserting after the item relating
to section 7443B the following new item:
‘‘Sec. 7443C. Recall of magistrate judges of the Tax Court.’’.
SEC. 1213. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this subtitle shall take effect on the date of the enactment
of this Act.
TITLE XIII—OTHER PROVISIONS
Subtitle A—Administrative
Provision
SEC. 1301. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
plan during the period described in subsection
(b)(2)(A), and
(2) except as provided by the Secretary of the
Treasury, such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 and section 204(g) of the Employee Re-
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tirement Income Security Act of 1974 by reason of
such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this Act or the Economic Growth and Tax Relief
Reconciliation Act of 2001, or pursuant to any
regulation issued by the Secretary of the Treas-
ury or the Secretary of Labor under such Acts,
and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2007, or such later date as the Secretary of the
Treasury may prescribe.
In the case of a governmental plan (as defined in sec-
tion 414(d) of the Internal Revenue Code of 1986),
subparagraph (B) shall be applied by substituting the
date which is 2 years after the date otherwise applied
under subparagraph (B).
(2) CONDITIONS.—This section shall not apply to
any amendment unless—
(A) during the period—
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(i) beginning on the date the legislative
or regulatory amendment described in para-
graph (1)(A) takes effect (or in the case of
a plan or contract amendment not required
by such legislative or regulatory amend-
ment, the effective date specified by the
plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date the
plan or contract amendment is adopted),
the plan or contract is operated as if such plan
or contract amendment were in effect; and
(B) such plan or contract amendment ap-
plies retroactively for such period.
SEC. 1302. AUTHORITY TO THE SECRETARY OF LABOR, SEC-
RETARY OF THE TREASURY, AND THE PEN-
SION BENEFIT GUARANTY CORPORATION TO
POSTPONE CERTAIN DEADLINES.
The Secretary of Labor, the Secretary of the Treasury,
and the Executive Director of the Pension Benefit Guaranty
Corporation shall exercise their authority under section 518
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1148) and section 7508A of the Internal Revenue
Code of 1986 to postpone certain deadlines by reason of the
Presidentially declared disaster areas in Louisiana, Mis-
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sissippi, Alabama, Texas, Florida, or elsewhere, due to the
effect of Hurricane Katrina, Rita, or Wilma. The Secre-
taries and the Executive Director of the Corporation shall
issue guidance as soon as is practicable to plan sponsors
and participants regarding extension of deadlines and rules
applicable to these extraordinary circumstances. Nothing in
this section shall be construed to relieve any plan sponsor
from any requirement to pay benefits or make contributions
under the plan of the sponsor.
Subtitle B—Governmental Pension
Plan Equalization
SEC. 1311. DEFINITION OF GOVERNMENTAL PLAN.
(a) AMENDMENT TO INTERNAL REVENUE CODE OF
1986.—Section 414(d) of the Internal Revenue Code of 1986
(definition of governmental plan) is amended by adding at
the end the following: ‘‘The term ‘governmental plan’ in-
cludes a plan established or maintained for its employees
by an Indian tribal government (as defined in section
7701(a)(40)), a subdivision of an Indian tribal government
(determined in accordance with section 7871(d)), an agency
instrumentality (or subdivision) of an Indian tribal govern-
ment, or an entity established under Federal, State, or trib-
al law which is wholly owned or controlled by any of the
foregoing.’’.
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(b) AMENDMENT TO EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974.—Section 3(32) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1002(32)) is amended by adding at the end the following:
‘‘The term ‘governmental plan’ includes a plan established
or maintained for its employees by an Indian tribal govern-
ment (as defined in section 7701(a)(40)), a subdivision of
an Indian tribal government (determined in accordance
with section 7871(d)), an agency instrumentality (or sub-
division) of an Indian tribal government, or an entity es-
tablished under Federal, State, or tribal law that is wholly
owned or controlled by any of the foregoing.’’.
SEC. 1312. EXTENSION TO ALL GOVERNMENTAL PLANS OF
CURRENT MORATORIUM ON APPLICATION OF
CERTAIN NONDISCRIMINATION RULES APPLI-
CABLE TO STATE AND LOCAL PLANS.
(a) IN GENERAL.—
(1) Subparagraph (G) of section 401(a)(5) and
subparagraph (G) of section 401(a)(26) of the Inter-
nal Revenue Code of 1986 are each amended by strik-
ing ‘‘section 414(d))’’ and all that follows and insert-
ing ‘‘section 414(d)).’’.
(2) Subparagraph (G) of section 401(k)(3) of
such Code and paragraph (2) of section 1505(d) of the
Taxpayer Relief Act of 1997 (Public Law 105–34;
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111 Stat. 1063) are each amended by striking ‘‘main-
tained by a State or local government or political
subdivision thereof (or agency or instrumentality
thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The heading of subparagraph (G) of section
401(a)(5) of the Internal Revenue Code of 1986 is
amended by striking ‘‘STATE AND LOCAL GOVERN-
MENTAL’’ and inserting ‘‘GOVERNMENTAL’’.
(2) The heading of subparagraph (G) of section
401(a)(26) of such Code is amended by striking ‘‘EX-
CEPTION FOR STATE AND LOCAL’’ and inserting ‘‘EX-
CEPTION FOR’’.
(3) Section 401(k)(3)(G) of such Code is amend-
ed by inserting ‘‘GOVERNMENTAL
PLAN.—’’ after
‘‘(G)’’.
SEC. 1313. CLARIFICATION THAT TRIBAL GOVERNMENTS
ARE SUBJECT TO THE SAME DEFINED BEN-
EFIT PLAN RULES AND REGULATIONS AP-
PLIED TO STATE AND OTHER LOCAL GOVERN-
MENTS, THEIR POLICE AND FIREFIGHTERS.
(a) AMENDMENTS TO INTERNAL REVENUE CODE OF
1986.—
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(1) POLICE AND FIREFIGHTERS.—Subparagraph
(H) section 415(b)(2) of the Internal Revenue Code of
1986 (defining participant) is amended—
(A) in clause (i), by striking ‘‘State or po-
litical subdivision’’ and inserting ‘‘State, Indian
tribal 
government 
(as 
defined 
in 
section
7701(a)(40)), or any political subdivision’’; and
(B) in clause (ii)(I), by striking ‘‘State or
political subdivision’’ each place it appears and
inserting ‘‘State, Indian tribal government (as so
defined), or any political subdivision’’.
(2) STATE AND LOCAL GOVERNMENT PLANS.—
(A) IN
GENERAL.—Subparagraph (A) of
section 415(b)(10) of such Code (relating to limi-
tation to equal accrued benefit) is amended—
(i) by inserting ‘‘, Indian tribal gov-
ernment 
(as 
defined 
in 
section
7701(a)(40)),’’ after ‘‘State’’;
(ii) by inserting ‘‘any’’ before ‘‘polit-
ical subdivision’’; and
(iii) by inserting ‘‘any of’’ before ‘‘the
foregoing’’.
(B) CONFORMING AMENDMENT.—The head-
ing of paragraph (1) of section 415(b) of such
Code is amended by striking ‘‘SPECIAL RULE
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FOR STATE AND’’ and inserting ‘‘SPECIAL RULE
FOR STATE, INDIAN TRIBAL, AND’’.
(3) GOVERNMENT
PICK
UP
CONTRIBUTIONS.—
Paragraph (2) of section 414(h) of such Code (relat-
ing to designation by units of government) is amend-
ed by striking ‘‘State or political subdivision’’ and
inserting ‘‘State, Indian tribal government (as de-
fined in section 7701(a)(40)), or any political sub-
division’’.
(b) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974.—Section 4021(b) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1321(b)) is amended—
(1) in paragraph (12), by striking ‘‘or’’ at the
end;
(2) in paragraph (13), by striking ‘‘plan.’’ and
inserting ‘‘plan; or’’; and
(3) by adding at the end the following:
‘‘(14) established and maintained for its employ-
ees by an Indian tribal government (as defined in sec-
tion 7701(a)(40) of the Internal Revenue Code of
1986), a subdivision of an Indian tribal government
(determined in accordance with section 7871(d) of
such Code), an agency or instrumentality of an In-
dian tribal government or subdivision thereof, or an
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entity established under Federal, State, or tribal law
that is wholly owned or controlled by any of the fore-
going.’’.
SEC. 1314. EFFECTIVE DATE.
The amendments made by this subtitle shall apply to
any year beginning before, on, or after the date of the enact-
ment of this Act.
Subtitle C—Miscellaneous
Provisions
SEC. 1321. TRANSFER OF EXCESS FUNDS FROM BLACK
LUNG DISABILITY TRUSTS TO UNITED MINE
WORKERS OF AMERICA COMBINED BENEFIT
FUND.
(a) IN GENERAL.—So much of section 501(c)(21)(C)
of the Internal Revenue Code of 1986 (relating to black lung
disability trusts) as precedes the last sentence is amended
to read as follows:
‘‘(C) Payments described in subparagraph
(A)(i)(IV) may be made from such trust during
a taxable year only to the extent that the aggre-
gate amount of such payments during such tax-
able year does not exceed the excess (if any), as
of the close of the preceding taxable year, of—
‘‘(i) the fair market value of the assets
of the trust, over
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‘‘(ii) 110 percent of the present value
of the liability described in subparagraph
(A)(i)(I) of such person.’’
(b) TRANSFER.—Section 9705 of such Code (relating
to transfer) is amended by adding at the end the following
new subsection:
‘‘(c) TRANSFER
FROM
BLACK
LUNG
DISABILITY
TRUSTS.—
‘‘(1) IN GENERAL.—The Secretary shall transfer
each fiscal year to the Fund from the general fund of
the Treasury an amount which the Secretary esti-
mates to be the additional amounts received in the
Treasury for that fiscal year by reason of the amend-
ment made by section 1321(a) of the Pension Security
and Transparency Act of 2005. The Secretary shall
adjust the amount transferred for any year to the ex-
tent necessary to correct errors in any estimate for
any prior year.
‘‘(2) USE OF FUNDS.—Any amount transferred
to the Combined Fund under paragraph (1) shall be
used to proportionately reduce the unassigned bene-
ficiary premium under section 9704(a)(3) of each as-
signed operator for any plan year beginning after De-
cember 31, 2002.’’.