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ing to section 210 and inserting the following
new item:
‘‘Sec. 210. Multiple employer plans and other special rules’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2008.
SEC. 1337. STATE AND LOCAL GOVERNMENTS ELIGIBLE TO
MAINTAIN SECTION 401(k) PLANS.
(a) IN GENERAL.—Clause (ii) of section 401(k)(4)(B)
of the Internal Revenue Code of 1986 (relating to govern-
ments ineligible) is amended to read as follows:
‘‘(ii) 
GOVERNMENTS
ELIGIBLE.—A
State or local government or political sub-
division thereof, or any agency or instru-
mentality thereof, may include a qualified
cash or deferred arrangement as part of a
plan maintained by it.’’
(b) COORDINATION WITH SECTION 457 LIMITS.—Sec-
tion 402(g) of the Internal Revenue Code of 1986 is amend-
ed by adding at the end the following:
‘‘(9) COORDINATION OF SECTION 457 LIMITS FOR
STATE AND LOCAL GOVERNMENTAL PLANS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), in the case of an individual
who is a participant in 1 or more qualified cash
or deferred arrangements maintained by a gov-
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ernmental 
entity 
described 
in 
section
401(k)(4)(B)(ii), the amount excludable from
gross income under paragraph (1) with respect
to the individual for any taxable year with re-
spect to elective deferrals under such arrange-
ments shall be reduced by the aggregate amounts
deferred under section 457 with respect to the in-
dividual for the taxable year under 1 or more el-
igible deferred compensation plans (as defined in
section 457(b)) maintained by an employer de-
scribed in section 457(e)(1)(A).
‘‘(B) SPECIAL RULE FOR PRE-1986 GRAND-
FATHERED PLANS.—Subparagraph (A) shall not
apply to any qualified cash or deferred arrange-
ment maintained by a governmental entity de-
scribed in section 401(k)(4)(B)(ii) if the arrange-
ment (or any predecessor) was adopted by the
entity before May 6, 1986, or treated as so
adopted under section 1116(f)(2)(B) of the Tax
Reform Act of 1986.’’
(c) EFFECTIVE DATES.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2005.
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PART III—EXCESS CONTRIBUTIONS
SEC. 1339. EXCESS CONTRIBUTIONS.
(a) EXPANSION OF CORRECTIVE DISTRIBUTION PE-
RIOD FOR AUTOMATIC CONTRIBUTION ARRANGEMENTS.—
Subsection (f) of section 4979 of the Internal Revenue Code
of 1986 is amended—
(1) by and inserting ‘‘(6 months in the case of
an excess contribution or excess aggregate contribu-
tion to an eligible automatic contribution arrange-
ment (as defined in section 414(w)(3)))’’ after ‘‘21⁄2
months’’ in paragraph (1), and
(2) by striking ‘‘21⁄2 MONTHS OF’’ in the heading
and inserting ‘‘SPECIFIED PERIOD AFTER’’.
(b) YEAR OF INCLUSION.—Paragraph (2) of section
4979(f) of such Code is amended to read as follows:
‘‘(2) YEAR OF INCLUSION.—Any amount distrib-
uted as provided in paragraph (1) shall be treated as
earned and received by the recipient in the recipient’s
taxable year in which such distributions were made.’’.
(c) SIMPLIFICATION OF ALLOCABLE EARNINGS.—
(1) SECTION 4979.—Subsection (f) of section 4979
of such Code is amended—
(A) by adding ‘‘through the end of the plan
year for which the contribution was made’’ after
‘‘thereto’’ in paragraph (1), and
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(B) by adding ‘‘through the end of the plan
year for which the contributions were made’’
after ‘‘thereto’’ in paragraph (2)(B).
(2) SECTION 401(k) AND 401(M).—
(A) Clause (i) of section 401(k)(8)(A) is
amended by adding ‘‘through the end of such
year’’ after ‘‘such contributions’’.
(B) Subparagraph (A) of section 401(m)(6)
of such Code is amended by adding ‘‘through the
end of such year’’ after ‘‘to such contributions’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2005.
PART IV—OTHER PROVISIONS
SEC. 
1341. 
AMENDMENTS 
RELATING 
TO 
PROHIBITED
TRANSACTIONS.
(a) EXEMPTION FOR BLOCK TRADING.—
(1) IN
GENERAL.—Section 408(b) of the Em-
ployee Retirement Income Security Act (29 U.S.C.
1108(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(14) BLOCK TRADING.—
‘‘(A) IN
GENERAL.—Any transaction in-
volving the purchase or sale of securities between
a plan and a party in interest (other than a fi-
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duciary who has investment discretion or control
with respect to the assets involved in the trans-
action or is providing investment advice as a fi-
duciary for purposes of this title to enter into the
transaction) with respect to a plan if—
‘‘(i) the transaction involves a block
trade,
‘‘(ii) at the time of the transaction, the
interest of the plan (together with the inter-
ests of any other plans maintained by the
same plan sponsor) does not exceed 10 per-
cent of the aggregate size of the block trade,
‘‘(iii) the terms of the transaction, in-
cluding the price, are at least as favorable
to the plan as an arm’s length transaction,
and
‘‘(iv) compensation associated with the
purchase and sale is not greater than an
arm’s length transaction with an unrelated
party.
‘‘(B) BLOCK TRADE.—For purposes of this
paragraph, the term ‘block trade’ includes any
trade of at least 10,000 shares or with a market
value of at least $200,000 which will be allocated
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across two or more unrelated client accounts of
a fiduciary.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 4975(d) of such Code is
amended—
(i) by striking ‘‘or’’ at the end of para-
graph (15),
(ii) by striking the period at the end of
paragraph (16)(F) and inserting ‘‘; or’’,
and
(iii) by adding at the end the following
new paragraph:
‘‘(17) any transaction involving the purchase or
sale of securities between a plan and a disqualified
person (other than a fiduciary who has investment
discretion or control over the transaction or is pro-
viding investment advice as a fiduciary for purposes
of title I of the Employee Retirement Income Security
Act to enter into the transaction) with respect to a
plan if—
‘‘(A) the transaction involves a block trade,
‘‘(B) at the time of the transaction, the in-
terest of the plan (together with the interests of
any other plans maintained by the same plan
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sponsor) does not exceed 10 percent of the aggre-
gate size of the block trade,
‘‘(C) the terms of the transaction, including
the price, are at least as favorable to the plan as
an arm’s length transaction, and
‘‘(D) compensation associated with the pur-
chase and sale is not greater than an arm’s
length transaction with an unrelated party.’’.
(B) Section 4975(e) of such Code is amend-
ed by adding at the end the following new para-
graph:
‘‘(11) BLOCK TRADE.—The term ‘block trade’ in-
cludes any trade of at least 10,000 shares or with a
market value of at least $200,000 which will be allo-
cated across two or more unrelated client accounts of
a fiduciary.’’.
(b) BONDING RELIEF.—Section 412(a) of such Act (29
U.S.C. 1112(a)) is amended—
(1) by redesignating paragraph (2) as para-
graph (3),
(2) by striking ‘‘and’’ at the end of paragraph
(1), and
(3) by inserting after paragraph (1) the fol-
lowing new paragraph:
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‘‘(2) no bond shall be required of any entity
which is registered as a broker or a dealer under sec-
tion 15(b) of the Securities Exchange Act of 1934 (15
U.S.C. 78o(b)) if the broker or dealer is subject to the
fidelity bond requirements of a self-regulatory organi-
zation (within the meaning of section 3(a)(26) of such
Act (15 U.S.C. 78c(a)(26)).’’.
(c) EXEMPTION FOR FINANCIAL MARKETS TRADING
SYSTEMS.—
(1) IN GENERAL.—Section 408(b) of such Act, as
amended by subsection (b)(1), is amended by adding
at the end the following new paragraph:
‘‘(15) FINANCIAL MARKETS TRADING SYSTEMS.—
Any transaction involving the purchase and sale of
securities between a plan and a fiduciary or a party
in interest if—
‘‘(A) the transaction is executed through—
‘‘(i) a national securities exchange or a
trading system owned by a national securi-
ties association registered with the Securi-
ties and Exchange Commission, regardless
of whether such fiduciary or party in inter-
est (or any affiliate of either) has an inter-
est in such exchange or trading system,
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‘‘(ii) an alternative trading system or
electronic communication network subject to
regulation and oversight by the Securities
and Exchange Commission, regardless of
whether such fiduciary or party in interest
(or any affiliate of either) has an interest in
such alternative trading system or electronic
communications network, or
‘‘(iii) any other trading system for se-
curities or other property approved by the
Secretary through regulatory or exemptive
relief,
‘‘(B) the price associated with the purchase
and sale is at least as favorable as an arm’s
length transaction with an unrelated party,
‘‘(C) the compensation associated with the
purchase and sale is not greater than an arm’s
length transaction with an unrelated party,
‘‘(D) in the event the fiduciary or party in
interest directing the transaction (or any affil-
iate of either) has an ownership interest in the
trading system (other than an exchange or trad-
ing system described in subparagraph (A)(i)),
the execution of transactions on such system is
annually authorized by a plan fiduciary,
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‘‘(E) the transaction is executed in accord-
ance with the nondiscretionary rules and proce-
dures adopted by such trading system to match
offsetting orders, and
‘‘(F) in the event the transaction is not exe-
cuted on an exchange or trading system de-
scribed in subparagraph (A)(i)—
‘‘(i) neither the trading system nor the
parties to the transaction take into account
the identity of the parties in the execution
of trades, and the parties to the transaction
do not actually know the identity of the
other at the time that the terms and price
of the transaction are agreed to, or
‘‘(ii) the transaction is effected pursu-
ant to rules designed to match purchases
and sales at the best price available through
the trading system.’’.
(2) CONFORMING AMENDMENT.—Section 4975(d)
of such Code (as amended by subsection (b)(2)) is
amended—
(A) by striking ‘‘or’’ at the end of para-
graph (16),
(B) by striking the period at the end of
paragraph (17)(E) and inserting ‘‘; or’’, and
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(C) by adding at the end the following new
paragraph:
‘‘(18) any transaction involving the purchase
and sale of securities or other property between a
plan and a fiduciary or a disqualified person if—
‘‘(A) the transaction is executed through—
‘‘(i) a national securities exchange or a
trading system owned by a national securi-
ties association registered with the Securi-
ties and Exchange Commission, regardless
of whether such fiduciary or disqualified
person (or any affiliate of either) has an in-
terest in such exchange or trading system,
‘‘(ii) an alternative trading system or
electronic communication network subject to
regulation and oversight by the Securities
and Exchange Commission, regardless of
whether such fiduciary or disqualified per-
son (or any affiliate of either) has an inter-
est in such alternative trading system or
electronic communications network, or
‘‘(iii) any other trading system for se-
curities or other property approved by the
Secretary through regulatory or exemptive
relief,
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‘‘(B) the price associated with the purchase
and sale is at least as favorable as an arm’s
length transaction with an unrelated party,
‘‘(C) the compensation associated with the
purchase and sale is not greater than an arm’s
length transaction with an unrelated party,
‘‘(D) in the event the fiduciary or disquali-
fied person directing the transaction (or any af-
filiate of either) has an ownership interest in the
trading system (other than an exchange or trad-
ing system described in subparagraph (A)(i)),
the execution of transactions on such system is
annually authorized by a plan fiduciary,
‘‘(E) the transaction is executed in accord-
ance with the nondiscretionary rules and proce-
dures adopted by such trading system to match
offsetting orders, and
‘‘(F) in the event the transaction is not exe-
cuted on an exchange or trading system de-
scribed in subparagraph (A)(i)—
‘‘(i) neither the trading system nor the
parties to the transaction take into account
the identity of the parties in the execution
of trades, and the parties to the transaction
do not actually know the identity of the
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other at the time that the terms and price
of the transaction are agreed to, or
‘‘(ii) the transaction is effected pursu-
ant to rules designed to match purchases
and sales at the best price available through
the trading system.’’.
(d) RELIEF
FOR
FOREIGN
EXCHANGE
TRANS-
ACTIONS.—
(1) IN GENERAL.—Section 408(b) of such Act (29
U.S.C. 1108(b)), as amended by subsection (c)(1), is
amended by adding at the end the following new
paragraph:
‘‘(16) Any foreign exchange transactions, between
a bank or broker-dealer (or any affiliate of either),
and a plan or an individual retirement account
(within the meaning of section 408 of the Internal
Revenue Code of 1986) with respect to which such
bank or broker-dealer (or affiliate) is a trustee, custo-
dian, fiduciary, or other party in interest, if—
‘‘(A) the transaction is in connection with
the purchase, holding, or sale of securities,
‘‘(B) at the time the foreign exchange trans-
action is entered into, the terms of the trans-
action are not less favorable to the plan than the
terms generally available in comparable arm’s
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length foreign exchange transactions between un-
related parties, or the terms afforded by the bank
or broker-dealer (or any affiliate of either) in
comparable arm’s-length foreign exchange trans-
actions involving unrelated parties,
‘‘(C) the exchange rate used by such bank or
broker-dealer (or affiliate) for a particular for-
eign exchange transaction does not deviate by
more or less than 3 percent from the interbank
bid and asked rates at the time of the trans-
action as displayed on an independent service
that reports rates of exchange in the foreign cur-
rency market for such currency, and
‘‘(D) the bank or broker-dealer (or any affil-
iate of either) does not have investment discre-
tion, or provide investment advice, with respect
to the transaction.’’.
(2) CONFORMING AMENDMENT.—Section 4975(d)
of such Code, as amended by subsection (c)(2), is
amended—
(A) by striking ‘‘or’’ at the end of para-
graph (17)(E),
(B) by striking the period at the end of
paragraph (18)(F)(ii) and inserting ‘‘; or’’, and
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(C) by adding at the end the following new
paragraph:
‘‘(19) any foreign exchange transactions, between
a bank or broker-dealer (or any affiliate of either)
and a plan or an individual retirement account
(within the meaning of section 408) with respect to
which such bank or broker-dealer (or affiliate) is a
trustee, custodian, fiduciary, or disqualified person,
if—
‘‘(A) the transaction is in connection with
the purchase, holding, or sale of securities,
‘‘(B) at the time the foreign exchange trans-
action is entered into, the terms of the trans-
action are not less favorable to the plan than the
terms generally available in comparable arm’s
length foreign exchange transactions between un-
related parties, or the terms afforded by the bank
or broker-dealer (or any affiliate of either) in
comparable arm’s-length foreign exchange trans-
actions involving unrelated parties,
‘‘(C) the exchange rate used by such bank or
broker-dealer (or affiliate) for a particular for-
eign exchange transaction does not deviate by
more or less than 3 percent from the interbank
bid and asked rates at the time of the trans-
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action as displayed on an independent service
that reports rates of exchange in the foreign cur-
rency market for such currency, and
‘‘(D) the bank or broker-dealer (or any affil-
iate of either) does not have investment discre-
tion, or provide investment advice, with respect
to the transaction.’’.
(e) CORRECTION PERIOD FOR CERTAIN TRANSACTIONS
INVOLVING SECURITIES AND COMMODITIES.—
(1) IN GENERAL.—Section 408(b) of such Act (29
U.S.C. 1108(b)), as amended by subsection (d)(1), is
amended by adding at the end the following new
paragraph:
‘‘(17) CORRECTION PERIOD FOR CERTAIN TRANS-
ACTIONS
INVOLVING
SECURITIES
AND
COMMOD-
ITIES.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraphs (B) and (C), a transaction de-
scribed in section 406(a) in connection with the
acquisition, holding, or disposition of any secu-
rity or commodity, if the transaction is corrected
before the end of the correction period.
‘‘(B) EXCEPTION FOR EMPLOYER SECURI-
TIES AND REAL PROPERTY.—Subparagraph (A)
does not apply to any transaction between a
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plan and a plan sponsor or its affiliates that in-
volves the acquisition or sale of an employer se-
curity (as defined in section 407(d)(1)) or the
acquisition, sale, or lease of employer real prop-
erty (as defined in section 407(d)(2)).
‘‘(C) EXCEPTION
FOR
KNOWING
VIOLA-
TIONS.—In the case of any fiduciary or other
party in interest (or any other person knowingly
participating in such transaction), subpara-
graph (A) does not apply to any prohibited
transaction if, at the time such transaction oc-
curs, such fiduciary or party in interest (or
other person) knew that the transaction would
(without regard to this paragraph) constitute a
violation of section 406(a).
‘‘(D) CORRECTION PERIOD.—For purposes
of this paragraph, the term ‘correction period’
means the 14-day period beginning on the date
on which such transaction occurs.
‘‘(E) OTHER
DEFINITIONS.—For purposes
of this paragraph—
‘‘(i) the term ‘security’ has the mean-
ing given such term by section 475(c)(2) of
the Internal Revenue Code of 1986 (without
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regard to subparagraph (F)(iii) and the last
sentence thereof),
‘‘(ii) the term ‘commodity’ has the
meaning given such term by section
475(e)(2) of such Code (without regard to
subparagraph (D)(iii) thereof), and
‘‘(iii) the terms ‘correction’ and ‘cor-
rect’ mean, with respect to a transaction,
undoing the transaction to the extent pos-
sible, but in any case, making good to the
plan or affected account any losses resulting
from the transaction and restoring to the
plan or affected account any profits made
through use of the plan.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 4975(d) of such Code, as
amended by subsection (d)(2), is amended—
(i) by striking ‘‘or’’ at the end of para-
graph (18)(F)(2),
(ii) by striking the period at the end of
paragraph (19)(D) and inserting ‘‘; or’’,
and
(iii) by adding at the end the following
new paragraph: