116 
‘‘(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 
section do not apply (without regard to 
this subsection), and 
‘‘(ii) which is not a plan described in 
paragraphs (2) through (11) of section 
4021(b), and 
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan— 
‘‘(i) has missing participants, and 
‘‘(ii) has not provided for the transfer 
of assets to pay the benefits of all missing 
participants to another pension plan (with-
in the meaning of section 3(2)). 
‘‘(5) 
CERTAIN
PROVISIONS
NOT
TO 
APPLY.—Subsections (a)(1) and (a)(3) shall not 
apply to a plan described in paragraph (4). 
‘‘(e) UNCLAIMED BENEFITS.— 
‘‘(1) TRANSFER TO CORPORATION.—The plan 
administrator of a plan described in paragraph (6)
117 
may elect to transfer unclaimed benefits to the cor-
poration. 
‘‘(2) INFORMATION
TO
THE
CORPORATION.— 
The corporation may impose such conditions on 
transfers of unclaimed benefits to the corporation as 
the corporation determines are necessary to facilitate 
administration of this subsection and are not incon-
sistent with the purposes of this subsection. Such 
conditions may include requirements that the trans-
ferring plan provide to the corporation specified in-
formation and documentation. 
‘‘(3) PAYMENT TO THE CORPORATION.—With 
respect to any participant, any transfer of an un-
claimed benefit to the corporation shall— 
‘‘(A) in the case of a defined benefit plan, 
be a transfer of the participant’s designated 
benefit, or 
‘‘(B) in the case of an individual account 
plan, be a transfer of the participant’s vested 
account balance under the plan. 
‘‘(4) PAYMENT BY THE CORPORATION.—Subject 
to such reasonable restrictions as may be prescribed 
in regulations of the corporation (relating to invest-
ment limitations and otherwise)—
118 
‘‘(A) unclaimed benefits of a participant or 
beneficiary which are transferred to the cor-
poration pursuant to this subsection shall be 
distributed by the corporation to the participant 
or beneficiary not later than upon application 
filed by the participant or beneficiary with the 
corporation in such form and manner as may 
be prescribed in regulations of the corporation, 
and 
‘‘(B) such benefits shall— 
‘‘(i) in the case of an individual ac-
count plan, be paid in a single sum (plus 
interest) or in such other form as is speci-
fied in regulations of the corporation, or 
‘‘(ii) in the case of a defined benefit 
plan, be paid— 
‘‘(I) in an amount based on the 
designated benefit and the assump-
tions prescribed by the corporation at 
the time that the corporation received 
the benefit, and 
‘‘(II) in a form determined under 
regulations of the corporation. 
‘‘(5) NOTICE.—Any transfer of unclaimed bene-
fits of a participant or beneficiary to the corporation
119 
pursuant to this subsection may occur only after 
reasonable advance notice of such transfer is pro-
vided by the plan administrator to the participant or 
beneficiary. The plan administrator shall also pro-
vide to the participant or beneficiary notice of any 
such transfer not later than 30 days after the date 
of the transfer. Notice mailed to the last known ad-
dress of the participant or beneficiary shall be treat-
ed as a notice to the participant or beneficiary for 
purposes of this paragraph. Any such notice shall in-
clude information regarding procedures for obtaining 
the distribution of benefits from the corporation in 
accordance with paragraph (4). 
‘‘(6) PLANS DESCRIBED.—A plan is described 
in this paragraph if the plan is a pension plan (with-
in the meaning of section 3(2)— 
‘‘(A)(i) which has neither terminated nor is 
in the process of terminating, or 
‘‘(ii) in the case of an unclaimed benefit to 
which section 401(a)(31)(B) of the Internal 
Revenue Code of 1986 applies (other than an 
unclaimed benefit of a missing participant), 
which has terminated or is in the process of ter-
minating, and
120 
‘‘(B) which is not a plan described in para-
graphs (2) through (11) of section 4021(b). 
‘‘(7) CERTAIN PROVISIONS NOT TO APPLY.— 
Subsections (a)(1) and (a)(3) shall not apply to a 
plan described in paragraph (6).’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
4021(b) of such Act (29 U.S.C. 1321(b)(1)) is 
amended by striking ‘‘This’’ and inserting ‘‘Except 
to the extent provided in subsections (d) and (e) of 
section 4050, this’’. 
(c) ESCHEAT LAWS SUPERSEDED.—Section 514(b) 
of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1144 (b) (as amended by this Act) is further 
amended— 
(1) by redesignating paragraph (10) as para-
graph (11), and 
(2) by inserting after paragraph (9) the fol-
lowing new paragraph: 
‘‘(10) Any escheat or similar law of any State 
shall be superseded to the extent inconsistent with 
any transfer or other treatment of unclaimed bene-
fits (as defined in section 4050(b)(3)) permitted 
under the Internal Revenue Code of 1986.’’. 
(d) EFFECTIVE DATES AND RELATED RULES.—
121 
(1) IN GENERAL.—The amendments made by 
subsections (a) and (b) shall apply to years begin-
ning after December 31, 2006. 
(2) REGULATIONS.—The Pension Benefit Guar-
anty Corporation shall issue regulations necessary to 
carry out the amendments made by subsection (b) 
not later than December 31, 2006. 
(3) 
ESCHEAT
LAWS
SUPERSEDED.—The 
amendment made by subsection (c) shall apply as of 
the date of enactment of this Act. 
SEC. 504. ALLOW DIRECT ROLLOVERS FROM RETIREMENT 
PLANS TO ROTH IRA. 
(a) IN GENERAL.—Subsection (e) of section 408A of 
the Internal Revenue Code of 1986 (defining qualified roll-
over contribution) is amended to read as follows: 
‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For 
purposes of this section, the term ‘qualified rollover con-
tribution’ means a rollover contribution— 
‘‘(1) to 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
122 
‘‘(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 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 ‘‘indi-
vidual retirement plan’’ and inserting ‘‘eligible
123 
retirement 
plan 
(as 
defined 
by 
section 
402(c)(8)(B))’’, 
(C) in subparagraph (D) by striking ‘‘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. 505. REFORM EXCISE TAX ON EXCESS CONTRIBU-
TIONS. 
(a) EXPANSION OF CORRECTIVE DISTRIBUTION PE-
RIOD.—Subsection (f) of section 4979 of the Internal Rev-
enue Code of 1986 is amended— 
(1) in paragraph (1) by striking ‘‘21⁄2 months’’ 
and inserting ‘‘6 months’’, and 
(2) in the heading by striking ‘‘21⁄2 MONTHS’’ 
and inserting ‘‘6 MONTHS’’. 
(b) YEAR OF INCLUSION.—Paragraph (2) of section 
4972(f) of such Code is amended to read as follows:
124 
‘‘(2) YEAR OF INCLUSION.—Any amount dis-
tributed as provided in paragraph (1) shall be treat-
ed as earned and received by the recipient in his tax-
able year in which such distributions were made.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2005. 
SEC. 506. INTERMEDIATE SANCTIONS FOR INADVERTENT 
FAILURES. 
(a) IN GENERAL.—Section 401(a) of the Internal 
Revenue Code of 1986 (relating to qualified pension, prof-
it-sharing, and stock bonus plans) is amended by inserting 
after paragraph (34) the following: 
‘‘(35) PROTECTION
FROM
DISQUALIFICATION 
UPON TIMELY CORRECTION OR PAYMENT OF FINE.— 
A trust shall not fail to constitute a qualified trust 
under this section if the plan of which such trust is 
a part has made good faith efforts to meet the re-
quirements of this section, has inadvertently failed 
to satisfy 1 or more of such requirements, and ei-
ther— 
‘‘(A) substantially corrects (to the extent 
possible) such failure before the date the plan 
becomes subject to a plan examination for the
125 
applicable year (as determined under rules pre-
scribed by the Secretary), or 
‘‘(B) substantially corrects (to the extent 
possible) such failure on or after such date. 
If the plan satisfies the requirement under subpara-
graph (B), the Secretary may require the sponsoring 
employer to make a payment to the Secretary in an 
amount that does not exceed an amount that bears 
a reasonable relationship to the severity of the plan’s 
failure to satisfy the requirements of this section.’’. 
(b) APPLICATION TO CASH OR DEFERRED ARRANGE-
MENTS.—Section 401(k) of such Code is amended by in-
serting after paragraph (13) the following new paragraph: 
‘‘(14) PROTECTION FROM DISQUALIFICATION.— 
Rules similar to the rules set forth in section 
401(a)(35) shall apply for purposes of determining 
whether a cash or deferred arrangement is a quali-
fied cash or deferred arrangement.’’. 
(c) APPLICATION TO SECTION 403(b) ANNUITY CON-
TRACTS.—Section 403(b) of such Code is amended by in-
serting after paragraph (12) the following: 
‘‘(13) CORRECTION OF ERRORS.—For purposes 
of determining whether the exclusion from gross in-
come under paragraph (1) is applicable to an em-
ployee for any taxable year, rules similar to the rules
126 
set forth in section 401(a)(35) shall apply to any an-
nuity contract purchased under this subsection or 
any plan established to meet the requirements of 
this subsection.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of enactment of 
this Act. 
SEC. 507. CLARIFICATION OF SUBSTANTIALLY EQUAL PERI-
ODIC PAYMENT RULE. 
(a) IN GENERAL.—Paragraph (4) of section 72(t) of 
the Internal Revenue Code of 1986 (relating to change 
in substantially equal payments) is amended by inserting 
at the end the following new subparagraphs: 
‘‘(C) 
ROLLOVERS
TO
SUBSEQUENT 
PLAN.—If— 
‘‘(i) payments satisfying paragraph 
(2)(A)(iv) are being made from a qualified 
retirement plan, 
‘‘(ii) a transfer or a rollover from the 
qualified retirement plan is made to an-
other qualified retirement plan of all or a 
portion of the taxpayer’s benefit under the 
transferor plan, and 
‘‘(iii) distributions from the transferor 
and transferee plans would in combination
127 
continue to satisfy paragraph (2)(A)(iv) if 
made only from the transferor plan, 
such transfer or rollover shall not be treated as 
a modification under subparagraph (A)(ii) and 
compliance with paragraph (2)(A)(iv) shall be 
determined on the basis of the combined dis-
tributions described in clause (iii). 
‘‘(D) INTEREST RATE.—Any reasonable in-
terest rate may be used in determining whether 
payments are substantially equal under para-
graph (2)(A)(iv).’’. 
(b) EFFECTIVE DATES.— 
(1) ROLLOVERS.—Section 72(t)(4)(C) of the 
Internal Revenue Code of 1986, as added by sub-
section (a), shall apply to transfers and rollovers 
after the date of enactment of this Act. 
(2) INTEREST
RATE.—Section 72(t)(4)(D) of 
such Code, as so added, shall apply to series of pay-
ments commencing on or after the date of enactment 
of this Act. 
SEC. 508. CLARIFICATION OF TREATMENT OF DISTRIBU-
TIONS OF ANNUITY CONTRACTS. 
(a) IN GENERAL.—Clause (i) of section 402(e)(4)(D) 
of the Internal Revenue Code of 1986 is amended by add-
ing after ‘‘section 401(c)(1).’’ the following: ‘‘A distribu-
128 
tion of an annuity contract from a trust or annuity plan 
referred to in the first sentence of this clause may be 
treated as a part of a lump sum distribution.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect as if included in section 
1401(b)(1) of the Small Business Job Protection Act of 
1996. 
SEC. 509. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO 
EXCESSIVE EMPLOYEE REMUNERATION PAID 
BY CORPORATION AFTER DECLARATION OF 
BANKRUPTCY. 
(a) IN GENERAL.—Section 4999 of the Internal Rev-
enue Code of 1986 (relating to golden parachute pay-
ments) is amended by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b) the fol-
lowing new subsection: 
‘‘(c) TAX ON EXCESSIVE EMPLOYEE REMUNERATION 
IN THE CASE OF BANKRUPTCY.— 
‘‘(1) IN GENERAL.—There is hereby imposed a 
tax on any person who is a covered employee equal 
to 50 percent of any payment of excessive employee 
remuneration from a corporation which becomes a 
debtor in a title 11 or similar case (as defined in 
section 368(a)(3)(A) of this title, but not including 
a case under chapter 12 of title 11, United States
129 
Code). The tax imposed under subsection (a) shall 
not apply to the extent that a tax is imposed under 
this subsection. 
‘‘(2) SPECIAL RULES RELATING TO EXCESSIVE 
EMPLOYEE REMUNERATION.—For purposes of this 
subsection— 
‘‘(A) EXCESS EMPLOYEE REMUNERATION 
DEFINED.—The term ‘excess employee remu-
neration’ means remuneration paid directly or 
indirectly to a covered employee during the 
bankruptcy period— 
‘‘(i) for which a deduction is not al-
lowed under chapter 1 by reason of the ap-
plication of section 162(m) or would not be 
allowed if section 162(m) applied to the 
covered employee at the time of payment, 
or 
‘‘(ii) in the case of remuneration to a 
covered employee of a corporation that is 
not a publicly held corporation described in 
section 
162(m)(2), 
that 
exceeds 
$1,000,000, other than remuneration that 
meets requirements similar to the stand-
ards for performance-based compensation 
under section 162(m)(4)(C).
130 
‘‘(B) Such term shall not include— 
‘‘(i) remuneration that, on the date 
immediately prior to the beginning of the 
bankruptcy period, was payable to the cov-
ered employee under a binding obligation 
and not subject to a substantial risk of for-
feiture, 
‘‘(ii) remuneration attributable to con-
tributions to or benefits from an excess re-
tirement plan to the extent that such plan 
is maintained solely for the purpose of pro-
viding benefits to employees in excess of 
the limitations imposed by 1 or more of 
sections 401(a)(17), 401(k), 401(m), and 
415, 
‘‘(iii) contributions to or benefits from 
a qualified employer plan (as defined in 
section 132(m)), or 
‘‘(iv) any payment that is avoided or 
approved by a bankruptcy trustee. 
‘‘(C) BANKRUPTCY
PERIOD.—The term 
‘bankruptcy period’ means any time during the 
period beginning 2 years before the date on 
which the corporation becomes a debtor de-
scribed in paragraph (1) and ending on the
131 
date such corporation ceases to be such a debt-
or. 
‘‘(D) COVERED
EMPLOYEE.—The term 
‘covered employee’— 
‘‘(i) has the meaning given such term 
by section 162(m)(3), except that such 
term shall include an individual who is not 
a 
covered 
employee 
under 
section 
162(m)(3) for the taxable year in which 
such remuneration is paid but who pre-
viously was a covered employee within the 
meaning of section 162(m)(3) during the 
bankruptcy period, and 
‘‘(ii) with respect to an employee of a 
corporation that is not subject to section 
162(m), includes any employee of such cor-
poration who would be subject to the re-
quirement 
described 
in 
section 
162(m)(3)(B) (as modified by this para-
graph) if such corporation were a publicly 
held corporation (as defined in section 
162(m)(2)). 
‘‘(E) 100 PERCENT TAX FOR GROSS UP 
PAYMENTS.—Subsection (b) shall be applied by 
substituting ‘100 percent’ for ‘50 percent’ to
132 
the extent that any payment is made during the 
bankruptcy period that is contingent upon a tax 
being imposed under this section. 
‘‘(F) CHANGE
IN
OWNERSHIP
CONTIN-
GENCY NOT TO APPLY.—Subsection (b) shall be 
applied without regard to clause (i) of section 
280G(b)(2)(A).’’. 
(b) EFFECTIVE DATE.—The amendment made this 
section shall apply to payments received after the date of 
the enactment of this Act with respect to any title 11 or 
similar case (as defined in section 4999(c) of the Internal 
Revenue Code of 1986) commenced after such date. 
SEC. 510. DIFFERENTIAL PAY. 
(a) INCOME TAX WITHHOLDING.—Section 3401 of 
the Internal Revenue Code of 1986 (relating to defini-
tions) is amended by adding at the end the following new 
subsection: 
‘‘(i) DIFFERENTIAL WAGE PAYMENTS TO ACTIVE 
DUTY MEMBERS OF THE UNIFORMED SERVICES.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), any differential way payment shall be treated as 
a payment of wages by an employer to an employee. 
‘‘(2) DIFFERENTIAL
WAGE
PAYMENTS.—For 
purposes of paragraph (1), the term ‘differential way 
payment’ means any payment which—
133 
‘‘(A) is made by an employer to an indi-
vidual with respect to any period during which 
the individual is performing service in the uni-
formed services while on active duty for a pe-
riod of more than 30 days, and 
‘‘(B) represents all or a portion of the 
wages the individual would have received from 
the employer if the individual were performing 
service for the employer.’’. 
(b) RETIREMENT PLANS.— 
(1) IN GENERAL.—Section 414(u) of the Inter-
nal Revenue Code of 1986 (relating to special rules 
relating to veterans’ reemployment rights under 
USERRA) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(11) TREATMENT
OF
DIFFERENTIAL
WAGE 
PAYMENTS.— 
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, for purposes of applying this 
title to a plan to which this subsection ap-
plies— 
‘‘(i) an individual receiving a differen-
tial wage payment shall be treated as an 
employee of the employer making the pay-
ment,
134 
‘‘(ii) the differential wage payment 
shall be treated as compensation, and 
‘‘(iii) the plan shall not be treated as 
failing to meet the requirements of any 
provision described in paragraph (1)(C) by 
reason of the treatment described in 
clauses (i) and (ii). 
‘‘(B) 
SPECIAL
RULE
FOR
DISTRIBU-
TIONS.— 
‘‘(i) IN
GENERAL.—Notwithstanding 
subparagraph (A)(i), for purposes of sub-
section (w)(1)(D), an individual shall be 
treated as having been severed from em-
ployment during any period the individual 
is performing service in the uniformed 
services described in section 3401(i)(2)(A). 
‘‘(ii) LIMITATION.—If an individual 
elects to receive a distribution by reason of 
clause (i), the plan shall provide that the 
individual may not make an elective defer-
ral or employee contribution during the 6- 
month period beginning on the date of the 
distribution. 
‘‘(C) 
NONDISCRIMINATION
REQUIRE-
MENT.—Subparagraph (A)(iii) shall apply only
135 
if all employees of an employer (as determined 
under subsections (b), (c), (m), and (o)) per-
forming service in the uniformed services de-
scribed in section 3401(i)(2)(A) are entitled to 
receive differential wage payments on reason-
ably equivalent terms and, if eligible to partici-
pate in a plan maintained by the employer, to 
have contributions made to such plan based on 
the payments on reasonably equivalent terms. 
For purposes of applying this subparagraph, 
the provisions of paragraphs (3), (4), and (5) of 
section 410(b) shall apply. 
‘‘(D) DIFFERENTIAL
WAGE
PAYMENT.— 
For purposes of this paragraph, the term ‘dif-
ferential wage payment’ has the meaning given 
such term by section 3401(i)(2).’’. 
(2) CONFORMING AMENDMENT.—The heading 
for section 414(u) of such Code is amended by in-
serting ‘‘and to Differential Wage Payments to 
Members on Active Duty’’ after ‘‘USERRA’’. 
(c) DIFFERENTIAL WAGE PAYMENTS TREATED AS 
COMPENSATION FOR INDIVIDUAL RETIREMENT PLANS.— 
Section 219(f)(1) of the Internal Revenue Code of 1986 
(defining compensation) is amended by adding at the end 
the following new sentence: ‘‘The term ‘compensation’ in-
136 
cludes any differential wage payments (as defined in sec-
tion 3401(i)(2)).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to years beginning after December 
31, 2005. 
SEC. 511. EXCESS BENEFIT PLANS. 
(a) IN GENERAL.—Section 3(36) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1002(36)) is amended to read as follows: 
‘‘(36) The term ‘excess benefit plan’ means a 
plan, without regard to whether such plan is funded, 
maintained by an employer solely for the purpose of 
providing benefits to employees in excess of any limi-
tation 
imposed 
by 
section 
401(a)(17), 
401(k)(3)(A)(ii), 401(m)(2), or 415 of the Internal 
Revenue Code of 1986. To the extent that a sepa-
rable part of a plan (as determined by the Secretary 
of Labor) maintained by an employer is maintained 
for such purpose, that part shall be treated as a sep-
arate plan which is an excess benefit plan.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to plan years beginning after De-
cember 31, 2005.
137 
SEC. 512. TAX TREATMENT OF EMPLOYEE CONTRIBUTIONS 
TO 
CONTRIBUTORY 
DEFINED 
BENEFIT 
PLANS. 
(a) AMENDMENT TO THE INTERNAL REVENUE CODE 
OF 1986.—Subsection (e) of section 402 of the Internal 
Revenue Code of 1986 (relating to other rules applicable 
to exempt trusts) is amended by adding at the end the 
following new paragraph: 
‘‘(8) MANDATORY
EMPLOYEE
CONTRIBUTIONS 
TO DEFINED BENEFIT PLANS.— 
‘‘(A) IN GENERAL.—Qualified mandatory 
employee contributions shall not be includible in 
gross income for the taxable year of such con-
tribution. 
‘‘(B) QUALIFIED
MANDATORY
EMPLOYEE 
CONTRIBUTIONS.—For purposes of subpara-
graph (A), the term ‘qualified mandatory em-
ployee contributions’ means employee contribu-
tions made pursuant to the terms of a defined 
benefit plan described in subparagraph (C) in 
effect on January 1, 2003 (determined without 
regard to any plan amendment made after such 
date), which— 
‘‘(i) are mandatory contributions (as 
defined in section 411(c)(2)(C)), and
138 
‘‘(ii) do not exceed 2 percent of com-
pensation (within the meaning of section 
415(c)(3)). 
‘‘(C) 
DEFINED
BENEFIT
PLAN
DE-
SCRIBED.—For purposes of subparagraph (B), 
a defined benefit plan is described in this sub-
paragraph if such plan— 
‘‘(i) requires employee contributions 
as a condition of participation in such 
plan, 
‘‘(ii) allows an employee to make a 
one-time irrevocable election to participate 
in the plan, 
‘‘(iii) does not provide for employee 
contributions with respect to which a sepa-
rate account is maintained and treated as 
a defined contribution plan under section 
414(k), and 
‘‘(iv) is not a governmental plan 
(within the meaning of section 414(d)).’’. 
(b) WITHHOLDING.—Subsection (a) of section 3401 
of such Code (defining wages) is amended by striking ‘‘or’’ 
at the end of paragraph (20), by striking the period at 
the end of paragraph (21) and inserting ‘‘; or’’, and by
139 
inserting after paragraph (21) the following new para-
graph: 
‘‘(22) for any payment made to or for the ben-
efit of an employee if at the time of such payment 
it is reasonable to believe that the employee will be 
able to exclude such payment from income as a 
qualified mandatory employee contribution under 
section 402(e)(8).’’. 
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made in years be-
ginning after December 31, 2005. 
SEC. 513. PROTECTING OLDER, LONGER SERVICE PARTICI-
PANTS. 
(a) PROTECTION OF OLDER, LONGER SERVICE PAR-
TICIPANTS IN DEFINED BENEFIT PLANS.— 
(1) Not later than one year after the date of 
the enactment of this Act, the Secretary of the 
Treasury shall amend section 1.401(a)(4)–4 of the 
Treasury Regulations (as in effect on the date of the 
enactment of this Act) to permit a plan to provide 
benefits, rights, and features to a closed class of 
grandfathered participants, provided that such class 
of participants satisfies the requirements of such 
section as of the date that the class of participants 
was closed. Such section as amended shall ensure
140 
that participants who have been grandfathered 
under a former defined benefit plan formula may 
continue to receive all benefits, rights, and features 
under that formula, including early retirement bene-
fits. 
(2) Not later than one year after the date of 
the enactment of this Act, the Secretary of the 
Treasury 
shall 
amend 
section 
1.401(a)(4)– 
8(b)(1)(iii)(D) of the Treasury Regulations (as in ef-
fect on the date of the enactment of this Act) to per-
mit a defined contribution plan to provide make 
whole contributions to a closed class of participants 
whose defined benefit plan accruals have been re-
duced or eliminated, provided that such class of par-
ticipants satisfies section 410(b)(2)(A)(i) of the In-
ternal Revenue Code of 1986 as of the date that the 
class of participants was closed. 
(b) EFFECTIVE DATE.—This provisions of this sec-
tion shall take effect on the date of the enactment of this 
Act. 
SEC. 514. CLARIFICATION REGARDING ELECTIVE DEFER-
RALS. 
(a) IN GENERAL.—Not later than 6 months after the 
date of enactment of this Act, the Secretary of the Treas-
141 
ury shall issue rules clarifying that employees who have 
had a severance from employment may make— 
(1) elective deferrals described in section 
402(g)(3)(A), (B), or (C) of the Internal Revenue 
Code of 1986 (other than elective deferrals under 
section 401(k)(11) of such Code), 
(2) elective contributions under an eligible de-
ferred compensation plan described in section 457(b) 
of such Code, and 
(3) to the extent provided by the Secretary, 
elective deferrals described in section 402(g)(3)(D) 
or 401(k)(11) of such Code. 
Such rules shall only permit such contributions or defer-
rals with respect to payments of bona fide accumulated 
sick leave, accumulated vacation pay, severance, or back 
pay. The Secretary may apply such other conditions on 
such contributions or deferrals as are necessary or appro-
priate to carry out the purposes of this section. 
(b) TREATMENT OF DEFERRALS.—Except as other-
wise determined by the Secretary to be necessary to carry 
out the purposes of this section, the rules described in sub-
section (a) shall provide that the contributions or deferrals 
shall, for purposes of section 457 of such Code and sub-
chapter D of chapter 1 of subtitle A of such Code, be
142 
treated as contributions or deferrals made on behalf of ac-
tive employees, not on behalf of former employees. 
(c) EFFECTIVE DATE.—The provisions of this section 
shall take effect on the date of enactment of this Act. 
SEC. 515. REFORM OF THE MINIMUM PARTICIPATION RULE. 
(a) IN
GENERAL.—Subparagraph (I) of section 
401(a)(26) of the Internal Revenue Code of 1986 (relating 
to additional participation requirements) is amended by 
adding at the end the following: ‘‘Not later than December 
31, 2006, the Secretary shall issue final regulations under 
which this paragraph may be applied separately to bona 
fide separate subsidiaries or divisions.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall take effect on the date of enactment 
of this Act. 
SEC. 516. REPEAL OF OPTIONAL TREATMENT OF ELECTIVE 
DEFERRALS AS ROTH CONTRIBUTIONS. 
(a) IN GENERAL.—Section 402A of the Internal Rev-
enue Code of 1986 (relating to optional treatment of elec-
tive deferrals as Roth contributions) is hereby repealed 
and the table of sections for part I of subchapter D of 
chapter 1 of such Code is amended by striking the item 
relating to section 402A. 
(b) CONFORMING AMENDMENTS.—
143 
(1) Section 402(g)(1)(A) of such Code is 
amended by striking the last sentence. 
(2) Section 402(c)(8)(B) of such Code is 
amended by striking the last sentence. 
(3) Section 6051(a)(8) of such Code is amended 
by striking ‘‘, including the amount of designated 
Roth contributions (as defined in section 402A)’’. 
(4) Section 6047 of such Code is amended by 
striking subsection (f) and redesignating subsection 
(g) as subsection (f). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
TITLE VI—IMPROVEMENTS IN 
PENSION SECURITY 
SEC. 601. PERIODIC PENSION BENEFITS STATEMENTS. 
(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.— 
(1) REQUIREMENTS.— 
(A) IN GENERAL.—Section 105(a) of the 
Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1025(a)) is amended to read 
as follows: 
‘‘(a)(1)(A) The administrator of an individual ac-
count plan shall furnish a pension benefit statement—
144 
‘‘(i) to each plan participant at least annually, 
‘‘(ii) to each plan beneficiary upon written re-
quest, and 
‘‘(iii) in the case of an applicable individual ac-
count plan, to each individual who is a plan partici-
pant or beneficiary and who has a right to direct in-
vestments, at least quarterly. 
‘‘(B) The administrator of a defined benefit plan 
shall furnish a pension benefit statement— 
‘‘(i) at least once every 3 years to each partici-
pant with a nonforfeitable accrued benefit who is 
employed by the employer maintaining the plan at 
the time the statement is furnished to participants, 
and 
‘‘(ii) to a plan participant or plan beneficiary of 
the plan upon written request. 
Information furnished under clause (i) to a participant 
may be based on reasonable estimates determined under 
regulations prescribed by the Secretary, in consultation 
with the Pension Benefit Guaranty Corporation. 
‘‘(2) A pension benefit statement under paragraph 
(1)— 
‘‘(A) shall indicate, on the basis of the latest 
available information— 
‘‘(i) the total benefits accrued, and
145 
‘‘(ii) the nonforfeitable pension benefits, if 
any, which have accrued, or the earliest date on 
which benefits will become nonforfeitable, 
‘‘(B) shall be written in a manner calculated to 
be understood by the average plan participant, and 
‘‘(C) may be provided in written form or in 
electronic or other appropriate form to the extent 
that such form is reasonably accessible to the recipi-
ent. 
‘‘(3)(A) In the case of a defined benefit plan, the re-
quirements of paragraph (1)(B)(i) shall be treated as met 
with respect to a participant if the administrator, at least 
once each year, provides the participant with notice, at 
the participant’s last known address, of the availability of 
the pension benefit statement and the ways in which the 
participant may obtain such statement. Such notice shall 
be provided in written, electronic, or other appropriate 
form, and may be included with other communications to 
the participant if done in a manner reasonably designed 
to attract the attention of the participant. 
‘‘(B) The Secretary may provide that years in which 
no employee or former employee benefits (within the 
meaning of section 410(b) of the Internal Revenue Code 
of 1986) under the plan need not be taken into account
146 
in determining the 3-year period under paragraph 
(1)(B)(i).’’. 
(B) CONFORMING AMENDMENTS.— 
(i) Section 105 of the Employee Re-
tirement Income Security Act of 1974 (29 
U.S.C. 1025) is amended by striking sub-
section (d). 
(ii) Section 105(b) of such Act (29 
U.S.C. 1025(b)) is amended to read as fol-
lows: 
‘‘(b) In no case shall a participant or beneficiary of 
a plan be entitled to more than one statement described 
in clause (i) or (ii) of subsection (a)(1)(A) or clause (i) 
or (ii) of subsection (a)(1)(B), whichever is applicable, in 
any 12-month period. If such report is required under sub-
section (a) to be furnished at least quarterly, the require-
ments of the preceding sentence shall be applied with re-
spect to each quarter in lieu of the 12-month period.’’. 
(2) INFORMATION
REQUIRED
FROM
APPLICA-
BLE INDIVIDUAL ACCOUNT PLANS.—Section 105 of 
such Act (as amended by paragraph (1)) is amended 
further by adding at the end the following new sub-
section: 
‘‘(d)(1) The statements required to be provided at 
least quarterly under subsection (a)(1)(A)(iii) in the case
147 
of applicable individual account plans shall include (to-
gether with the information required in subsection (a)) the 
following: 
‘‘(A) the value of each investment to which as-
sets in the individual account have been allocated, 
determined as of the most recent valuation date 
under the plan, including the value of any assets 
held in the form of employer securities, without re-
gard to whether such securities were contributed by 
the plan sponsor or acquired at the direction of the 
plan or of the participant or beneficiary, 
‘‘(B) an explanation, written in a manner cal-
culated to be understood by the average plan partici-
pant, of any limitations or restrictions on the right 
of the participant or beneficiary to direct an invest-
ment, and 
‘‘(C) an explanation, written in a manner cal-
culated to be understood by the average plan partici-
pant, of the importance, for the long-term retire-
ment security of participants and beneficiaries, of a 
well-balanced and diversified investment portfolio, 
including a discussion of the risk of holding more 
than 25 percent of a portfolio in the security of any 
one entity, such as employer securities.
148 
‘‘(2) The Secretary shall issue guidance and model 
notices which meet the requirements of this subsection.’’. 
(3) DEFINITION
OF
APPLICABLE
INDIVIDUAL 
ACCOUNT PLAN.—Section 3 of such Act (29 U.S.C. 
1002) is amended by adding at the end the following 
new paragraph: 
‘‘(42)(A) The term ‘applicable individual account 
plan’ means any individual account plan, except that such 
term does not include an employee stock ownership plan 
(within the meaning of section 4975(e)(7) of the Internal 
Revenue Code of 1986) unless there are any contributions 
to such plan (or earnings thereunder) held within such 
plan that are subject to subsection (k)(3) or (m)(2) of sec-
tion 401 of the Internal Revenue Code of 1986. Such term 
shall not include a one-participant retirement plan. 
‘‘(B) The term ‘one-participant retirement plan’ 
means a pension plan with respect to which the following 
requirements are met: 
‘‘(i) on the first day of the plan year— 
‘‘(I) the plan covered only one individual 
(or the individual and the individual’s spouse) 
and the individual owned 100 percent of the 
plan sponsor (whether or not incorporated), or
149 
‘‘(II) the plan covered only one or more 
partners (or partners and their spouses) in the 
plan sponsor; 
‘‘(ii) the plan meets the minimum coverage re-
quirements of section 410(b) of the Internal Rev-
enue Code of 1986 (as in effect on the date of the 
enactment of this paragraph) without being com-
bined with any other plan of the business that covers 
the employees of the business; 
‘‘(iii) the plan does not provide benefits to any-
one except the individual (and the individual’s 
spouse) or the partners (and their spouses); 
‘‘(iv) the plan does not cover a business that is 
a member of an affiliated service group, a controlled 
group of corporations, or a group of businesses 
under common control; and 
‘‘(v) the plan does not cover a business that 
leases employees.’’. 
(4) CIVIL PENALTIES FOR FAILURE TO PRO-
VIDE QUARTERLY BENEFIT STATEMENTS.—Section 
502 of such Act (29 U.S.C. 1132) is amended— 
(A) in subsection (a)(6), by striking ‘‘(6), 
or (7)’’ and inserting ‘‘(6), (7), or (8)’’; 
(B) by redesignating paragraph (8) of sub-
section (c) as paragraph (9); and
150 
(C) by inserting after paragraph (7) of 
subsection (c) the following new paragraph: 
‘‘(8) The Secretary may assess a civil penalty against 
any plan administrator of up to $1,000 a day for each 
day on which the plan administrator has failed to comply 
with the requirements of clause (iii) of section 
105(a)(1)(A) and has not corrected such failure by pro-
viding the required pension benefit statements to the af-
fected participants and beneficiaries.’’. 
(5) MODEL
STATEMENTS.—The Secretary of 
Labor shall, not later than 180 days after the date 
of the enactment of this Act, issue initial guidance 
and a model benefit statement, written in a manner 
calculated to be understood by the average plan par-
ticipant, that may be used by plan administrators in 
complying with the requirements of section 105 of 
the Employee Retirement Income Security Act of 
1974. Not later than 75 days after the date of the 
enactment of this Act, the Secretary shall promul-
gate interim final rules necessary to carry out the 
amendments made by this subsection. 
(b) AMENDMENTS
TO
THE INTERNAL REVENUE 
CODE OF 1986.— 
(1) PROVISION
OF
INVESTMENT
EDUCATION 
NOTICES
TO
PARTICIPANTS
IN
CERTAIN
PLANS.—