‘‘(2) APPLICABLE
RETIREMENT
PLAN.—For 
purposes of this subsection, the term ‘applicable re-
tirement plan’ means a plan that elects to accept de-
posits under this subsection and that is described in 
clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B) 
or in section 408A(b). 
‘‘(3) TREATMENT OF DIRECT PAYMENTS.—All 
amounts paid under this subsection shall be treated 
for purposes of this title as income attributable to a 
Roth IRA contribution in the case of a payment to 
an individual retirement plan.’’. 
(3) REGULATION AND PROMOTION.—Section 36 
of such Code, as amended and redesignated by this 
section, is amended by adding at the end the fol-
lowing new subsection: 
‘‘(h) REGULATION AND PROMOTION.—The Secretary 
may prescribe such regulations and other guidance as may 
be necessary or appropriate to carry out this section. The 
Secretary shall also take such steps as he determines nec-
essary and appropriate to increase public awareness of the 
credit provided under this section.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006.
SEC. 202. 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 (relat-
ing to employer contributions) is amended to read as 
follows: 
‘‘(2) EMPLOYER CONTRIBUTIONS.— 
‘‘(A) DEFINED BENEFIT PLANS.— 
‘‘(i) IN GENERAL.—In the case of a 
defined benefit plan, a plan satisfies the 
requirements of this paragraph if it satis-
fies the requirements of clause (ii) or (iii). 
‘‘(ii) 5-YEAR VESTING.—A plan satis-
fies the requirements of this clause if an 
employee who has completed at least 5 
years of service has a nonforfeitable right 
to 100 percent of the employee’s accrued 
benefit derived from employer contribu-
tions. 
‘‘(iii) 3 TO 7 YEAR VESTING.—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 contribu-
tions determined under the following table: 
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 
defined 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 
employee who has completed at least 3 
years of service has a nonforfeitable right 
to 100 percent of the employee’s accrued 
benefit derived from employer contribu-
tions. 
‘‘(iii) 2 TO 6 YEAR VESTING.—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 contribu-
tions determined under the following table:
The nonforfeitable 
‘‘Years of service 
percentage is: 
2 .........................................................................................................
3 .........................................................................................................
4 .........................................................................................................
5 .........................................................................................................
6 .........................................................................................................
100.’’. 
(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 
percent 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 de-