746
ed by inserting after paragraph (35) the following new 
paragraph: 
‘‘(36) 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 the plan 
provides that a distribution may be 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, 2006. 
SEC. 906. TREATMENT OF CERTAIN PENSION PLANS OF IN-
DIAN TRIBAL GOVERNMENTS. 
(a) DEFINITION OF GOVERNMENT PLAN TO INCLUDE 
CERTAIN PENSION PLANS OF INDIAN TRIBAL GOVERN-
MENTS.—
(1) AMENDMENT TO INTERNAL REVENUE CODE 
OF 1986.—Section 414(d) of the Internal Revenue 
Code of 1986 (defining governmental plan) is 
amended by adding at the end the following: ‘‘The 
term ‘governmental plan’ includes a plan which is 
established and maintained by an Indian tribal gov-
ernment (as defined in section 7701(a)(40)), a sub-
747
division of an Indian tribal government (determined 
in accordance with section 7871(d)), or an agency or 
instrumentality of either, and all of the participants 
of which are employees of such entity substantially 
all of whose services as such an employee are in the 
performance of essential governmental functions but 
not in the performance of commercial activities 
(whether or not an essential government function).’’. 
(2) AMENDMENT TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—
(A) Section 3(32) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 
1002(32)) is amended by adding at the end the 
following: ‘‘The term ‘governmental plan’ in-
cludes a plan which is established and main-
tained by an Indian tribal government (as de-
fined in section 7701(a)(40) of the Internal 
Revenue Code of 1986), a subdivision of an In-
dian tribal government (determined in accord-
ance with section 7871(d) of such Code), or an 
agency or instrumentality of either, and all of 
the participants of which are employees of such 
entity substantially all of whose services as such 
an employee are in the performance of essential 
governmental functions but not in the perform-
748
ance of commercial activities (whether or not an 
essential government function)’’. 
(B) Section 4021(b)(2) of such Act is 
amended by adding at the end the following: 
‘‘or which is described in the last sentence of 
section 3(32)’’. 
(b) CLARIFICATION THAT TRIBAL GOVERNMENTS 
ARE SUBJECT TO THE SAME PENSION PLAN RULES AND 
REGULATIONS APPLIED TO STATE AND OTHER LOCAL 
GOVERNMENTS
AND
THEIR
POLICE
AND
FIRE-
FIGHTERS.—
(1) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.—
(A) POLICE
AND
FIREFIGHTERS.—Sub-
paragraph (H) section 415(b)(2) of the Internal 
Revenue Code of 1986 (defining participant) is 
amended—
(i) in clause (i), by striking ‘‘State or 
political subdivision’’ and inserting ‘‘State, 
Indian tribal government (as defined in 
section 7701(a)(40)), or any political sub-
division’’; and 
(ii) in clause (ii)(I), by striking ‘‘State 
or political subdivision’’ each place it ap-
pears and inserting ‘‘State, Indian tribal
749
government (as so defined), or any political 
subdivision’’. 
(B) STATE
AND
LOCAL
GOVERNMENT 
PLANS.—
(i) IN GENERAL.—Subparagraph (A) 
of section 415(b)(10) of such Code (relat-
ing to limitation to equal accrued benefit) 
is amended by inserting ‘‘or a govern-
mental plan described in the last sentence 
of section 414(d) (relating to plans of In-
dian tribal governments),’’ after ‘‘fore-
going,’’. 
(ii) CONFORMING AMENDMENT.—The 
heading of paragraph (1) of section 415(b) 
of such Code is amended by striking ‘‘SPE-
CIAL RULE FOR STATE AND’’ and inserting 
‘‘SPECIAL RULE FOR STATE, INDIAN TRIB-
AL, AND’’. 
(C) GOVERNMENT
PICK
UP
CONTRIBU-
TIONS.—Paragraph (2) of section 414(h) of 
such Code (relating to designation by units of 
government) is amended by inserting ‘‘or a gov-
ernmental plan described in the last sentence of 
section 414(d) (relating to plans of Indian trib-
al governments),’’ after ‘‘foregoing,’’.
750
(2) 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—
(A) in paragraph (12), by striking ‘‘or’’ at 
the end; 
(B) in paragraph (13), by striking ‘‘plan.’’ 
and inserting ‘‘plan; or’’; and 
(C) by adding at the end the following: 
‘‘(14) established and maintained by an Indian 
tribal government (as defined in section 7701(a)(40) 
of the Internal Revenue Code of 1986), a subdivision 
of an Indian tribal government (determined in ac-
cordance with section 7871(d) of such Code), or an 
agency or instrumentality of either, and all of the 
participants of which are employees of such entity 
substantially all of whose services as such an em-
ployee are in the performance of essential govern-
mental functions but not in the performance of com-
mercial activities (whether or not an essential gov-
ernment function).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any year beginning on or after 
the date of the enactment of this Act.
751
TITLE 
X—PROVISIONS 
RELAT-
ING TO SPOUSAL PENSION 
PROTECTION 
SEC. 
1001. 
REGULATIONS 
ON 
TIME 
AND 
ORDER 
OF 
ISSUANCE OF DOMESTIC RELATIONS OR-
DERS. 
Not later than 1 year after the date of the enactment 
of this Act, the Secretary of Labor shall issue regulations 
under section 206(d)(3) of the Employee Retirement Secu-
rity Act of 1974 and section 414(p) of the Internal Rev-
enue Code of 1986 which clarify that—
(1) a domestic relations order otherwise meet-
ing the requirements to be a qualified domestic rela-
tions order, including the requirements of section 
206(d)(3)(D) of such Act and section 414(p)(3) of 
such Code, shall not fail to be treated as a qualified 
domestic relations order solely because—
(A) the order is issued after, or revises, an-
other domestic relations order or qualified do-
mestic relations order; or 
(B) of the time at which it is issued; and 
(2) any order described in paragraph (1) shall 
be subject to the same requirements and protections 
which apply to qualified domestic relations orders,
752
including the provisions of section 206(d)(3)(H) of 
such Act and section 414(p)(7) of such Code. 
SEC. 1002. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL-
ROAD 
RETIREMENT 
ANNUITIES 
INDE-
PENDENT OF ACTUAL ENTITLEMENT OF EM-
PLOYEE. 
(a) IN GENERAL.—Section 2 of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231a) is amended—
(1) in subsection (c)(4)(i), by striking ‘‘(A) is 
entitled to an annuity under subsection (a)(1) and 
(B)’’; and 
(2) in subsection (e)(5), by striking ‘‘or di-
vorced wife’’ the second place it appears. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect 1 year after the date of the 
enactment of this Act. 
SEC. 1003. EXTENSION OF TIER II RAILROAD RETIREMENT 
BENEFITS TO SURVIVING FORMER SPOUSES 
PURSUANT TO DIVORCE AGREEMENTS. 
(a) IN GENERAL.—Section 5 of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231d) is amended by adding 
at the end the following: 
‘‘(d) Notwithstanding any other provision of law, the 
payment of any portion of an annuity computed under sec-
tion 3(b) to a surviving former spouse in accordance with
753
a court decree of divorce, annulment, or legal separation 
or the terms of any court-approved property settlement 
incident to any such court decree shall not be terminated 
upon the death of the individual who performed the service 
with respect to which such annuity is so computed unless 
such termination is otherwise required by the terms of 
such court decree.’’
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect 1 year after the date of the 
enactment of this Act. 
SEC. 1004. REQUIREMENT FOR ADDITIONAL SURVIVOR AN-
NUITY OPTION. 
(a) AMENDMENTS TO INTERNAL REVENUE CODE.—
(1) ELECTION OF SURVIVOR ANNUITY.—Section 
417(a)(1)(A) of the Internal Revenue Code of 1986 
is amended—
(A) in clause (i), by striking ‘‘, and’’ and 
inserting a comma; 
(B) by redesignating clause (ii) as clause 
(iii); and 
(C) by inserting after clause (i) the fol-
lowing: 
‘‘(ii) if the participant elects a waiver 
under clause (i), may elect the qualified op-
754
tional survivor annuity at any time during the 
applicable election period, and’’. 
(2) DEFINITION.—Section 417 of such Code is 
amended by adding at the end the following: 
‘‘(g) DEFINITION
OF QUALIFIED OPTIONAL SUR-
VIVOR ANNUITY.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified optional survivor annuity’ 
means an annuity—
‘‘(A) for the life of the participant with a 
survivor annuity for the life of the spouse which 
is equal to the applicable percentage of the 
amount of the annuity which is payable during 
the joint lives of the participant and the spouse, 
and 
‘‘(B) which is the actuarial equivalent of a 
single annuity for the life of the participant. 
Such term also includes any annuity in a form hav-
ing the effect of an annuity described in the pre-
ceding sentence. 
‘‘(2) APPLICABLE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), if the survivor annuity percentage—
‘‘(i) is less than 75 percent, the appli-
cable percentage is 75 percent, and
755
‘‘(ii) is greater than or equal to 75 
percent, the applicable percentage is 50 
percent. 
‘‘(B) SURVIVOR ANNUITY PERCENTAGE.—
For purposes of subparagraph (A), the term 
‘survivor annuity percentage’ means the per-
centage which the survivor annuity under the 
plan’s qualified joint and survivor annuity bears 
to the annuity payable during the joint lives of 
the participant and the spouse.’’. 
(3) NOTICE.—Section 417(a)(3)(A)(i) of such 
Code is amended by inserting ‘‘and of the qualified 
optional survivor annuity’’ after ‘‘annuity’’. 
(b) AMENDMENTS TO ERISA.—
(1) ELECTION OF SURVIVOR ANNUITY.—Section 
205(c)(1)(A) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1055(c)(1)(A)) is 
amended—
(A) in clause (i), by striking ‘‘, and’’ and 
inserting a comma; 
(B) by redesignating clause (ii) as clause 
(iii); and 
(C) by inserting after clause (i) the fol-
lowing:
756
‘‘(ii) if the participant elects a waiver 
under clause (i), may elect the qualified op-
tional survivor annuity at any time during the 
applicable election period, and’’. 
(2) DEFINITION.—Section 205(d) of such Act 
(29 U.S.C. 1055(d)) is amended—
(A) by inserting ‘‘(1)’’ after ‘‘(d)’’; 
(B) by redesignating paragraphs (1) and 
(2) as subparagraphs (A) and (B), respectively; 
and 
(C) by adding at the end the following: 
‘‘(2)(A) For purposes of this section, the term ‘quali-
fied optional survivor annuity’ means an annuity—
‘‘(i) for the life of the participant with a sur-
vivor annuity for the life of the spouse which is 
equal to the applicable percentage of the amount of 
the annuity which is payable during the joint lives 
of the participant and the spouse, and 
‘‘(ii) which is the actuarial equivalent of a sin-
gle annuity for the life of the participant. 
Such term also includes any annuity in a form having the 
effect of an annuity described in the preceding sentence. 
‘‘(B)(i) For purposes of subparagraph (A), if the sur-
vivor annuity percentage—
757
‘‘(I) is less than 75 percent, the applicable per-
centage is 75 percent, and 
‘‘(II) is greater than or equal to 75 percent, the 
applicable percentage is 50 percent. 
‘‘(ii) For purposes of clause (i), the term ‘survivor 
annuity percentage’ means the percentage which the sur-
vivor annuity under the plan’s qualified joint and survivor 
annuity bears to the annuity payable during the joint lives 
of the participant and the spouse.’’. 
(3) NOTICE.—Section 205(c)(3)(A)(i) of such 
Act (29 U.S.C. 1055(c)(3)(A)(i)) is amended by in-
serting ‘‘and of the qualified optional survivor annu-
ity’’ after ‘‘annuity’’. 
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by 
this section shall apply to plan years beginning after 
December 31, 2007. 
(2) SPECIAL
RULE
FOR
COLLECTIVELY
BAR-
GAINED PLANS.—In the case of a plan maintained 
pursuant to 1 or more collective bargaining agree-
ments between employee representatives and 1 or 
more employers ratified on or before the date of the 
enactment of this Act, the amendments made by this 
section shall not apply to plan years beginning be-
fore the earlier of—
758
(A) the later of—
(i) January 1, 2008, or 
(ii) the date on which the last collec-
tive bargaining agreement related to the 
plan terminates (determined without re-
gard to any extension thereof after the 
date of enactment of this Act), or 
(B) January 1, 2009. 
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 
Employee Plans Compliance Resolution System (or any 
successor program) and any other employee plans correc-
tion policies, including the authority to waive income, ex-
cise, or other taxes to ensure that any tax, penalty, or 
sanction is not excessive and bears a reasonable relation-
ship 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 
Compliance Resolution System (or any successor pro-
gram), giving special attention to—
759
(1) increasing the awareness and knowledge of 
small employers concerning the availability and use 
of the program; 
(2) taking into account special concerns and 
circumstances 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-Correc-
tion 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.—
(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’’.
760
(B) MODIFICATION
OF
REGULATIONS.—
The Secretary of the Treasury shall modify the 
regulations under sections 402(f), 411(a)(11), 
and 417 of the Internal Revenue Code of 1986 
by substituting ‘‘180 days’’ for ‘‘90 days’’ each 
place it appears in Treasury Regulations sec-
tions 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 
regulations 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 
shall apply to years beginning after December 31, 
2006. 
(b) NOTIFICATION OF RIGHT TO DEFER.—
761
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section 
411(a)(11) of the Internal Revenue Code of 1986 
and under section 205 of the Employee Retirement 
Income Security Act of 1974 to provide that the de-
scription of a participant’s right, if any, to defer re-
ceipt of a distribution shall also describe the con-
sequences 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, 2006. 
(B) REASONABLE NOTICE.—A plan shall 
not be treated as failing to meet the require-
ments of section 411(a)(11) of such Code or 
section 205 of such Act with respect to any de-
scription of consequences described in para-
graph (1) made within 90 days after the Sec-
retary of the Treasury issues the modifications 
required by paragraph (1) if the plan adminis-
trator makes a reasonable attempt to comply 
with such requirements. 
SEC. 1103. REPORTING SIMPLIFICATION. 
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR 
OWNERS AND THEIR SPOUSES.—
762
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the requirements for filing annual 
returns 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 re-
quirements 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 
with any other plan of the business that covers 
the employees of the business;
763
(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 
controlled group of corporations, or a group of 
businesses 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 sec-
tion 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 re-
spective 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, 2007. 
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR 
PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the 
case of plan years beginning after December 31, 2006, the 
Secretary of the Treasury and the Secretary of Labor shall