in accordance with any such law) shall be treated as a 
market rate of return for purposes of subclause (I) and 
a permissible method of crediting interest for purposes of 
meeting the requirements of subclause (I), except that this 
sentence shall only apply to a rate of return or method 
of crediting interest if such rate or method does not violate 
any other requirement of this Act.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect as if included in the provisions 
of the Pension Protection Act of 2006 to which such 
amendment relates. 
SEC. 204. TREATMENT OF CERTAIN REIMBURSEMENTS 
FROM GOVERNMENTAL PLANS FOR MEDICAL 
CARE. 
(a) IN GENERAL.—Section 105 of the 1986 Code (re-
lating to amounts received under accident and health 
plans) is amended by adding at the end the following new 
subsection: 
‘‘(j) SPECIAL RULE FOR CERTAIN GOVERNMENTAL 
PLANS.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(b), amounts paid (directly or indirectly) to the tax-
payer from an accident or health plan described in 
paragraph (2) shall not fail to be excluded from 
gross income solely because such plan, on or before 
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January 1, 2008, provides for reimbursements of 
health care expenses of a deceased plan participant’s 
beneficiary. 
‘‘(2) PLAN DESCRIBED.—An accident or health 
plan is described in this paragraph if such plan is 
funded by a medical trust that is established in con-
nection with a public retirement system and that— 
‘‘(A) has been authorized by a State legis-
lature, or 
‘‘(B) has received a favorable ruling from 
the Internal Revenue Service that the trust’s in-
come is not includible in gross income under 
section 115.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to payments before, on, or after 
the date of the enactment of this Act. 
SEC. 205. ROLLOVER OF AMOUNTS RECEIVED IN AIRLINE 
CARRIER BANKRUPTCY TO ROTH IRAS. 
(a) GENERAL RULE.—If a qualified airline employee 
receives any airline payment amount and transfers any 
portion of such amount to a Roth IRA within 180 days 
of receipt of such amount (or, if later, within 180 days 
of the date of the enactment of this Act), then such 
amount (to the extent so transferred) shall be treated as 
a qualified rollover contribution described in section 
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408A(e) of the Internal Revenue Code of 1986, and the 
limitations described in section 408A(c)(3) of such Code 
shall not apply to any such transfer. 
(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
(1) AIRLINE PAYMENT AMOUNT.— 
(A) IN GENERAL.—The term ‘‘airline pay-
ment amount’’ means any payment of any 
money or other property which is payable by a 
commercial passenger airline carrier to a quali-
fied airline employee— 
(i) under the approval of an order of 
a Federal bankruptcy court in a case filed 
after September 11, 2001, and before Jan-
uary 1, 2007, and 
(ii) in respect of the qualified airline 
employee’s interest in a bankruptcy claim 
against the carrier, any note of the carrier 
(or amount paid in lieu of a note being 
issued), or any other fixed obligation of the 
carrier to pay a lump sum amount. 
The amount of such payment shall be deter-
mined without regard to any requirement to de-
duct and withhold tax from such payment 
under sections 3102(a) and 3402(a). 
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(B) 
EXCEPTION.—An 
airline 
payment 
amount shall not include any amount payable 
on the basis of the carrier’s future earnings or 
profits. 
(2) QUALIFIED AIRLINE EMPLOYEE.—The term 
‘‘qualified airline employee’’ means an employee or 
former employee of a commercial passenger airline 
carrier who was a participant in a defined benefit 
plan maintained by the carrier which— 
(A) is a plan described in section 401(a) of 
the Internal Revenue Code of 1986 which in-
cludes a trust exempt from tax under section 
501(a) of such Code, and 
(B) was terminated or became subject to 
the restrictions contained in paragraphs (2) and 
(3) of section 402(b) of the Pension Protection 
Act of 2006. 
(3) REPORTING REQUIREMENTS.—If a commer-
cial passenger airline carrier pays 1 or more airline 
payment amounts, the carrier shall, within 90 days 
of such payment (or, if later, within 90 days of the 
date of the enactment of this Act), report— 
(A) to the Secretary of the Treasury, the 
names of the qualified airline employees to 
whom such amounts were paid, and 
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(B) to the Secretary and to such employ-
ees, the years and the amounts of the pay-
ments. 
Such reports shall be in such form, and contain such 
additional information, as the Secretary may pre-
scribe. 
(c) EFFECTIVE DATE.—This section shall apply to 
transfers made after the date of the enactment of this Act 
with respect to airline payment amounts paid before, on, 
or after such date. 
SEC. 206. MODIFICATION OF PENALTY FOR FAILURE TO 
FILE PARTNERSHIP RETURNS. 
Section 6698 of the 1986 Code is amended by adding 
at the end the following new subsection: 
‘‘(e) MODIFICATIONS.—In the case of any return re-
quired to be filed after December 31, 2008, the dollar 
amount in effect under subsection (b)(1) shall be increased 
by $4.’’. 
SEC. 207. MODIFICATION OF PENALTY FOR FAILURE TO 
FILE S CORPORATION RETURNS. 
Section 6699 of the 1986 Code is amended by adding 
at the end the following new subsection: 
‘‘(e) MODIFICATIONS.—In the case of any return re-
quired to be filed after December 31, 2008, the dollar 
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amount in effect under subsection (b)(1) shall be increased 
by $4.’’. 
Æ 
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