741
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 or more ...........................................................................................
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.—
742
(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-
rived from employer contributions determined under 
the following table:
The nonforfeitable 
‘‘ Years of service: 
percentage is: 
3 .........................................................................................................
4 .........................................................................................................
5 .........................................................................................................
6 .........................................................................................................
7 or more ...........................................................................................
100.
‘‘(B)(i) In the case of an individual account 
plan, a plan satisfies the requirements of this para-
graph if it satisfies the requirements of clause (ii) or 
(iii).
743
‘‘(ii) A plan satisfies 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 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-
rived from employer contributions determined under 
the following table:
The nonforfeitable 
‘‘ Years of service: 
percentage is: 
2 .........................................................................................................
3 .........................................................................................................
4 .........................................................................................................
5 .........................................................................................................
6 or more ...........................................................................................
100.’’.
(2) 
CONFORMING
AMENDMENT.—Section 
203(a) of such Act is amended by striking para-
graph (4). 
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (4), the amendments made by this 
section shall apply to contributions for plan years 
beginning after December 31, 2006. 
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to one or 
more collective bargaining agreements between em-
ployee representatives and one or more employers
744
ratified before the date of the enactment of this Act, 
the amendments made by this section shall not apply 
to contributions on behalf of employees covered by 
any such agreement for plan years beginning before 
the earlier of—
(A) the later of—
(i) the date on which the last of such 
collective bargaining agreements termi-
nates (determined without regard to any 
extension thereof on or after such date of 
the enactment); or 
(ii) January 1, 2007; or 
(B) January 1, 2009. 
(3) SERVICE REQUIRED.—With respect to any 
plan, the amendments made by this section shall not 
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any 
plan year to which the amendments made by this 
section apply. 
(4) SPECIAL
RULE
FOR
STOCK
OWNERSHIP 
PLANS.—Notwithstanding paragraph (1) or (2), in 
the case of an employee stock ownership plan (as de-
fined in section 4975(e)(7) of the Internal Revenue 
Code of 1986) which had outstanding on September 
26, 2005, a loan incurred for the purpose of acquir-
745
ing qualifying employer securities (as defined in sec-
tion 4975(e)(8) of such Code), the amendments 
made by this section shall not apply to any plan year 
beginning before the earlier of—
(A) the date on which the loan is fully re-
paid, or 
(B) the date on which the loan was, as of 
September 26, 2005, scheduled to be fully re-
paid. 
SEC. 905. 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 (as amended by this Act) is amend-