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205(g)(3)(A)(ii)(II)’ 
for 
‘section 
302(b)(5)(B)(ii)(II)’, and 
‘‘(III) the applicable percentage under sec-
tion 303(h)(2)(G) were determined in accord-
ance with the following table: 
‘‘In the case of plan years beginning in: The applicable 
percentage is:
2007 ..............................................................
20 percent
2008 ..............................................................
40 percent
2009 ..............................................................
60 percent
2010 ..............................................................
80 percent.’’. 
(b) AMENDMENT TO INTERNAL REVENUE CODE OF 
1986.—Paragraph (3) of section 417(e) of the Internal 
Revenue Code of 1986 is amended to read as follows: 
‘‘(3) DETERMINATION OF PRESENT VALUE.— 
‘‘(A) IN GENERAL.—For purposes of para-
graphs (1) and (2), the present value shall not 
be less than the present value calculated by 
using the applicable mortality table and the ap-
plicable interest rate. 
‘‘(B) APPLICABLE
MORTALITY
TABLE.— 
For purposes of subparagraph (A), the term 
‘applicable mortality table’ means a mortality 
table, modified as appropriate by the Secretary, 
based on the mortality table specified for the 
plan year under section 430(h)(3).
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‘‘(C) APPLICABLE
INTEREST
RATE.—For 
purposes of subparagraph (A), the term ‘appli-
cable interest rate’ means the adjusted first, 
second, and third segment rates applied under 
rules 
similar 
to 
the 
rules 
of 
section 
430(h)(2)(C) for the month before the date of 
the distribution or such other time as the Sec-
retary may by regulations prescribe. 
‘‘(D) APPLICABLE SEGMENT RATES.—For 
purposes of subparagraph (C), the adjusted 
first, second, and third segment rates are the 
first, second, and third segment rates which 
would 
be 
determined 
under 
section 
430(h)(2)(C) if— 
‘‘(i) section 430(h)(2)(D)(i) were ap-
plied by substituting ‘the yields’ for ‘a 3- 
year weighted average of yields’, 
‘‘(ii) section 430(h)(2)(G)(i)(II) were 
applied 
by 
substituting 
‘section 
417(e)(3)(A)(ii)(II)’ 
for 
‘section 
412(b)(5)(B)(ii)(II)’, and 
‘‘(iii) the applicable percentage under 
section 430(h)(2)(G) were determined in 
accordance with the following table:
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‘‘In the case of plan years beginning in: 
The applicable 
percentage is:
2007 .......................................................................
20 percent
2008 .......................................................................
40 percent
2009 .......................................................................
60 percent
2010 .......................................................................
80 percent.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2006. 
SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING 
BENEFIT LIMITATIONS TO LUMP SUM DIS-
TRIBUTIONS. 
(a) 
IN
GENERAL.—Clause 
(ii) 
of 
section 
415(b)(2)(E) of the Internal Revenue Code of 1986 is 
amended to read as follows: 
‘‘(ii) For purposes of adjusting any 
benefit under subparagraph (B) for any 
form 
of 
benefit 
subject 
to 
section 
417(e)(3), the interest rate assumption 
shall not be less than the greater of— 
‘‘(I) 5.5 percent, 
‘‘(II) the rate that provides a 
benefit of not more than 105 percent 
of the benefit that would be provided 
if the applicable interest rate (as de-
fined in section 417(e)(3)) were the 
interest rate assumption, or
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‘‘(III) the rate specified under 
the plan.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to distributions made in years 
beginning after December 31, 2005. 
SEC. 304. DISTRIBUTIONS DURING WORKING RETIREMENT. 
(a) AMENDMENT TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Subparagraph (A) of 
section 3(2) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1002(2)) is amended by adding 
at the end the following new sentence: ‘‘A distribution 
from a plan, fund, or program shall not be treated as 
made in a form other than retirement income or as a dis-
tribution prior to termination of covered employment sole-
ly because such distribution is made to an employee who 
has attained age 62 and who is not separated from em-
ployment at the time of such distribution.’’. 
(b) AMENDMENT TO THE INTERNAL REVENUE CODE 
OF 1986.—Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 is amended by inserting after para-
graph (34) the following new paragraph: 
‘‘(35) DISTRIBUTIONS
DURING
WORKING
RE-
TIREMENT.—A trust forming part of a pension plan 
shall not be treated as failing to constitute a quali-
fied trust under this section solely because a dis-
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tribution is made from such trust to an employee 
who has attained age 62 and who is not separated 
from employment at the time of such distribution.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions in plan years be-
ginning after December 31, 2005. 
SEC. 305. OTHER AMENDMENTS RELATING TO PROHIBITED 
TRANSACTIONS. 
(a) DEFINITION
OF AMOUNT INVOLVED.—Section 
502(i) of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1132(i)) is amended to read as follows: 
‘‘(i)(1) In the case of a transaction prohibited by sec-
tion 406 by a party in interest with respect to a plan to 
which this part applies, the Secretary may assess a civil 
penalty against such party in interest. Except as provided 
in paragraph (2), the amount of such penalty may not ex-
ceed 5 percent of the amount involved in each such trans-
action for each year or part thereof during which the pro-
hibited transaction continues. 
‘‘(2) If the transaction is not corrected (in such man-
ner as the Secretary shall prescribe in regulations) within 
90 days after notice from the Secretary (or such longer 
period as the Secretary may permit), such penalty may 
be in an amount not more than 100 percent of the amount 
involved.