597
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions for taxable years 
beginning after December 31, 2005. 
Subtitle B—Certain Pension 
Provisions Made Permanent 
SEC. 811. PENSIONS AND INDIVIDUAL RETIREMENT AR-
RANGEMENT 
PROVISIONS 
OF 
ECONOMIC 
GROWTH AND TAX RELIEF RECONCILIATION 
ACT OF 2001 MADE PERMANENT. 
Title IX of the Economic Growth and Tax Relief Rec-
onciliation Act of 2001 shall not apply to the provisions 
of, and amendments made by, subtitles A through F of 
title VI of such Act (relating to pension and individual 
retirement arrangement provisions). 
SEC. 812. SAVER’S CREDIT. 
Section 25B of the Internal Revenue Code of 1986 
(relating to elective deferrals and IRA contributions by 
certain individuals) is amended by striking subsection (h).
598
Subtitle C—Improvements in Port-
ability, Distribution, and Con-
tribution Rules 
SEC. 821. CLARIFICATIONS REGARDING PURCHASE OF PER-
MISSIVE SERVICE CREDIT. 
(a) IN GENERAL.—Section 415(n) of the Internal 
Revenue Code of 1986 (relating to special rules for the 
purchase of permissive service credit) is amended—
(1) by striking ‘‘an employee’’ in paragraph (1) 
and inserting ‘‘a participant’’, and 
(2) by adding at the end of paragraph (3)(A) 
the following new flush sentence: 
‘‘Such term may include service credit for peri-
ods for which there is no performance of serv-
ice, and, notwithstanding clause (ii), may in-
clude service credited in order to provide an in-
creased benefit for service credit which a partic-
ipant is receiving under the plan.’’. 
(b) SPECIAL
RULES
FOR
TRUSTEE-TO-TRUSTEE 
TRANSFERS.—Section 415(n)(3) of such Code is amended 
by adding at the end the following new subparagraph: 
‘‘(D) SPECIAL
RULES
FOR
TRUSTEE-TO-
TRUSTEE TRANSFERS.—In the case of a trust-
ee-to-trustee 
transfer 
to 
which 
section 
403(b)(13)(A) or 457(e)(17)(A) applies (with-
599
out regard to whether the transfer is made be-
tween plans maintained by the same em-
ployer)—
‘‘(i) the limitations of subparagraph 
(B) shall not apply in determining whether 
the transfer is for the purchase of permis-
sive service credit, and 
‘‘(ii) the distribution rules applicable 
under this title to the defined benefit gov-
ernmental plan to which any amounts are 
so transferred shall apply to such amounts 
and any benefits attributable to such 
amounts.’’. 
(c) NONQUALIFIED SERVICE.—Section 415(n)(3) of 
such Code is amended—
(1) by striking ‘‘permissive service credit attrib-
utable to nonqualified service’’ each place it appears 
in subparagraph (B) and inserting ‘‘nonqualified 
service credit’’, 
(2) by striking so much of subparagraph (C) as 
precedes clause (i) and inserting: 
‘‘(C) NONQUALIFIED
SERVICE
CREDIT.—
For purposes of subparagraph (B), the term 
‘nonqualified service credit’ means permissive
600
service credit other than that allowed with re-
spect to—’’, and 
(3) by striking ‘‘elementary or secondary edu-
cation (through grade 12), as determined under 
State law’’ in subparagraph (C)(ii) and inserting 
‘‘elementary or secondary education (through grade 
12), or a comparable level of education, as deter-
mined under the applicable law of the jurisdiction in 
which the service was performed’’. 
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by 
subsections (a) and (c) shall take effect as if in-
cluded in the amendments made by section 1526 of 
the Taxpayer Relief Act of 1997. 
(2) SUBSECTION (b).—The amendments made 
by subsection (b) shall take effect as if included in 
the amendments made by section 647 of the Eco-
nomic Growth and Tax Relief Reconciliation Act of 
2001. 
SEC. 822. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN 
ANNUITY CONTRACTS. 
(a) IN GENERAL.—Subparagraph (A) of section 
402(c)(2) (relating to the maximum amount which may 
be rolled over) is amended—
601
(1) by striking ‘‘which is part of a plan which 
is a defined contribution plan and which agrees to 
separately account’’ and inserting ‘‘or to an annuity 
contract described in section 403(b) and such trust 
or contract provides for separate accounting’’; and 
(2) by inserting ‘‘(and earnings thereon)’’ after 
‘‘so transferred’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 823. CLARIFICATION OF MINIMUM DISTRIBUTION 
RULES FOR GOVERNMENTAL PLANS. 
The Secretary of the Treasury shall issue regulations 
under which a governmental plan (as defined in section 
414(d) of the Internal Revenue Code of 1986) shall, for 
all years to which section 401(a)(9) of such Code applies 
to such plan, be treated as having complied with such sec-
tion 401(a)(9) if such plan complies with a reasonable 
good faith interpretation of such section 401(a)(9). 
SEC. 824. 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:
602
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 
purposes of this section, the term ‘qualified rollover con-
tribution’ means a rollover contribution—
‘‘(1) to a Roth IRA from another such account, 
‘‘(2) from an eligible retirement plan, but only 
if—
‘‘(A) in the case of an individual retire-
ment plan, such rollover contribution meets the 
requirements of section 408(d)(3), and 
‘‘(B) in the case of any eligible retirement 
plan (as defined in section 402(c)(8)(B) other 
than clauses (i) and (ii) thereof), such rollover 
contribution meets the requirements of section 
402(c), 403(b)(8), or 457(e)(16), as applicable. 
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, as in 
effect before the Tax Increase Prevention and Rec-
onciliation Act of 2005, is amended—
(A) in the text by striking ‘‘individual re-
tirement plan’’ and inserting ‘‘an eligible retire-
603
ment 
plan 
(as 
defined 
by 
section 
402(c)(8)(B))’’, and 
(B) in the heading by striking ‘‘IRA’’ the 
first place it appears and inserting ‘‘ELIGIBLE 
RETIREMENT PLAN’’. 
(2) Section 408A(d)(3) of such Code is amend-
ed—
(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 ‘‘in-
dividual 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’’ the 
first place it appears and inserting ‘‘ELIGIBLE 
RETIREMENT PLAN’’.
604
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions after December 31, 
2007. 
SEC. 825. 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. 826. 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 under a plan, constitute a hardship 
if it occurs with respect to a person who is a beneficiary
605
under the plan with respect to the participant. The Sec-
retary of the Treasury shall issue similar rules for pur-
poses of determining whether a participant 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. 
SEC. 827. PENALTY-FREE WITHDRAWALS FROM RETIRE-
MENT PLANS FOR INDIVIDUALS CALLED TO 
ACTIVE DUTY FOR AT LEAST 179 DAYS. 
(a) IN GENERAL.—Paragraph (2) of section 72(t) of 
the Internal Revenue Code of 1986 (relating to 10-percent 
additional tax on early distributions from qualified retire-
ment plans) is amended by adding at the end the following 
new subparagraph: 
‘‘(G) DISTRIBUTIONS FROM RETIREMENT 
PLANS
TO
INDIVIDUALS
CALLED
TO
ACTIVE 
DUTY.—
‘‘(i) IN GENERAL.—Any qualified re-
servist distribution. 
‘‘(ii) AMOUNT DISTRIBUTED MAY BE 
REPAID.—Any individual who receives a 
qualified reservist distribution may, at any
606
time during the 2-year period beginning on 
the day after the end of the active duty pe-
riod, make one or more contributions to an 
individual retirement plan of such indi-
vidual in an aggregate amount not to ex-
ceed the amount of such distribution. The 
dollar limitations otherwise applicable to 
contributions to individual retirement plans 
shall not apply to any contribution made 
pursuant to the preceding sentence. No de-
duction shall be allowed for any contribu-
tion pursuant to this clause. 
‘‘(iii) QUALIFIED
RESERVIST
DIS-
TRIBUTION.—For purposes of this sub-
paragraph, the term ‘qualified reservist 
distribution’ means any distribution to an 
individual if—
‘‘(I) such distribution is from an 
individual retirement plan, or from 
amounts attributable to employer con-
tributions made pursuant to elective 
deferrals described in subparagraph 
(A) or (C) of section 402(g)(3) or sec-
tion 501(c)(18)(D)(iii),