SEC. 12. SAFE HARBOR CASH BALANCE FORMULA TO 
DEEMED TO MEET REQUIREMENTS OF SEC-
TIONS 401(a)(4) AND 411(B)(1). 
(a) AMENDMENTS TO INTERNAL REVENUE CODE OF 
1986.— 
(1) LIMITATION
ON
CASH
BALANCE
FOR-
MULA.—Subparagraph (B) of section 414(x)(2) of 
the Internal Revenue Code of 1986 (relating to ben-
efit requirements) is amended by adding at the end 
the following new clause: 
‘‘(v) LIMITATIONS ON MODIFIED CASH 
BALANCE FORMULA.—In the case of a de-
fined benefit plan under which a partici-
pant over age 30 receives a pay credit for 
the year which is greater than the min-
imum percentage of compensation for such 
participant under the table described in 
clause (iii), such plan shall be treated as 
meeting the requirements of such clause 
only if— 
‘‘(I) the ratio which such pay 
credit (expressed as a percentage of 
compensation) bears to the pay credit 
(expressed as a percentage of com-
pensation) for the immediately pre-
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ceding age bracket under the plan for 
the year, is no greater than 
‘‘(II) the ratio which the min-
imum percentage for such participant 
under such table bears to the min-
imum percentage for the immediately 
preceding age bracket under such 
table.’’. 
(2) NONDISCRIMINATION
AND
BENEFIT
RE-
QUIREMENTS.—Subagragraph (B) of section 414(x) 
of such Code is amended by adding at the end the 
following new clause: 
‘‘(iii) 
SATISFACTION
OF
NON-
DISCRIMINATION AND BENEFIT REQUIRE-
MENTS FOR DEFINED BENEFIT PLANS.—A 
defined benefit plan forming part of a safe 
harbor eligible combined plan shall be 
treated as meeting the requirements of sec-
tions 401(a)(4) and 411(b)(1)(B) if the re-
quirements of paragraph (2)(B)(iii) are 
met with respect to such arrangement.’’. 
(b) AMENDMENTS TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.— 
(1) LIMITATION
ON
CASH
BALANCE
FOR-
MULA.—Section 210(e)(2)(B) of the Employee Re-
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tirement Income Security Act of 1974 (29 U.S.C. 
1060(e)(2)(B)) is amended by adding at the end the 
following new clause: 
‘‘(v) LIMITATIONS ON MODIFIED CASH 
BALANCE FORMULA.—In the case of a de-
fined benefit plan under which a partici-
pant over age 30 receives a pay credit for 
the year which is greater than the min-
imum percentage of compensation for such 
participant under the table described in 
clause (iii), such plan shall be treated as 
meeting the requirements of such clause 
only if— 
‘‘(I) the ratio which such pay 
credit (expressed as a percentage of 
compensation) bears to the pay credit 
(expressed as a percentage of com-
pensation) for the immediately pre-
ceding age bracket under the plan for 
the year, is no greater than 
‘‘(II) the ratio which the min-
imum percentage for such participant 
under such table bears to the min-
imum percentage for the immediately 
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preceding age bracket under such 
table.’’. 
(2) NONDISCRIMINATION
AND
BENEFIT
RE-
QUIREMENTS.—Section 210(e)(1) of such Act (29 
U.S.C. 1060(e)(1)) is amended by adding at the end 
the following new subparagraph: 
‘‘(ii) 
SATISFACTION
OF
NON-
DISCRIMINATION AND BENEFIT REQUIRE-
MENTS FOR DEFINED BENEFIT PLANS.—A 
defined benefit plan forming part of a safe 
harbor eligible combined plan shall be 
treated as meeting the requirements of sec-
tion 204(b)(1)(B) if the requirements of 
paragraph (2)(B)(iii) are met with respect 
to such arrangement.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2009. 
SEC. 13. SINGLE PARTICIPANT COMBINED PLANS. 
(a) AMENDMENT TO INTERNAL REVENUE CODE OF 
1986.—The last sentence of section 414(x)(2)(A) of the 
Internal Revenue Code of 1986 is amended by inserting 
before the period at the end the following: ‘‘and by sub-
stituting ‘1’ for ‘2’ each place it appears. For purposes 
of the preceding sentence, a self-employed individual de-
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scribed in section 401(c)(1) shall be treated as an em-
ployee, and an employee who is a nonresident alien indi-
vidual who receives no earned income (within the meaning 
of section 911(d)(2)) from the employer which constitutes 
income from sources within the United States (within the 
meaning of section 861(a)(3)) shall not be treated as an 
employee.’’ 
(b) AMENDMENT TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—The last sentence of sec-
tion 210(e)(2)(A) of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1060(e)(2)(A)) is amended 
by inserting before the period at the end the following: 
‘‘and by substituting ‘1’ for ‘2’ each place it appears. For 
purposes of the preceding sentence, a self-employed indi-
vidual described in section 401(c)(1) of such Code shall 
be treated as an employee, and an employee who is a non-
resident alien individual who receives no earned income 
(within the meaning of section 911(d)(2) of such Code) 
from the employer which constitutes income from sources 
within the United States (within the meaning of section 
861(a)(3) of such Code) shall not be treated as an em-
ployee.’’ 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply as if included in the enactment 
of section 903 of the Pension Protection Act of 2006. 
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SEC. 14. MATCHING CONTRIBUTIONS PROVIDED THROUGH 
CASH BALANCE PLAN. 
(a) IN GENERAL.— 
(1) ADDITIONAL
ACCRUALS
UNDER
DEFINED 
BENEFIT PLAN FORMING PART OF ELIGIBLE COM-
BINED
PLAN
PROVIDED
AS
MATCHING
CONTRIBU-
TIONS.— 
(A) CERTAIN ARRANGEMENTS UNDER DE-
FINED BENEFIT PLAN SATISFY DEFINITELY DE-
TERMINABLE
BENEFIT
REQUIREMENT.—Sub-
section (a) of section 401 of the Internal Rev-
enue Code of 1986 is amended by inserting 
after paragraph (37) the following new para-
graph: 
‘‘(38) QUALIFIED MATCHING ACCRUAL UNDER 
ELIGIBLE COMBINED PLAN SATISFIES DEFINITELY 
DETERMINABLE
BENEFIT
REQUIREMENT.—A trust 
forming part of a defined benefit plan which forms 
part of an eligible combined plan (as defined in sec-
tion 414(x)) shall not be treated as failing to con-
stitute a qualified trust merely because such plan in-
cludes qualified matching accruals (as defined in 
subsection (m)(13)).’’. 
(B) 
MATCHING
ACCRUALS.—Subsection 
(m) of section 401 of such Code is amended by 
redesignating paragraph (13) as paragraph 
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thetical account balance, the amount of which is 
determined, in accordance with the matching 
accrual formula set forth in the plan, with ref-
erence to the amount of the elective deferrals 
made by the participant for the plan year to a 
qualified cash or deferred arrangement which is 
part of the eligible combined plan (as defined in 
section 414(x)). Matching accruals under the 
formula may vary with age or other employ-
ment-related factors. 
‘‘(C) COORDINATE WITH EMPLOYER CON-
TRIBUTIONS.—For purposes of paragraph (4), 
the term ‘employer contributions’ shall not in-
clude any amount contributed by an employer 
to a defined benefit plan for the purpose of 
funding any qualified matching accruals. 
‘‘(D) SAFE HARBOR FORMULA.—A quali-
fied matching accrual formula shall be deemed 
to satisfy subsection (a)(4) if it satisfies the re-
quirements of clauses (i) and (ii). 
‘‘(i) ELECTIVE
DEFERRALS
AT
OR 
ABOVE MAXIMUM MATCHABLE RATE.—For 
an employee who makes elective deferrals 
at or above the maximum matchable rate, 
the qualified matching benefit accrual for 
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the plan year is a hypothetical allocation 
under a cash balance plan that equals a 
percentage (not greater than 4 percent) of 
compensation 
(as 
defined 
in 
section 
414(s)). 
‘‘(ii) ELECTIVE
DEFERRALS
BELOW 
MAXIMUM
MATCHABLE
RATE.—For em-
ployees who make elective deferrals at a 
rate that is below the maximum matchable 
rate, the qualified matching benefit accrual 
for such plan year shall be prorated. The 
plan may prorate the qualified benefit ac-
crual on the basis of whole percentages, 
and the plan may require that an employ-
ee’s elective deferrals be stated as whole 
percentages. 
‘‘(iii) MAXIMUM MATCHABLE RATE.— 
For purposes of this subparagraph, the 
maximum matchable rate must be a speci-
fied percentage of compensation which 
does not exceed 4 percent. 
‘‘(iv) 
CASH
BALANCE
PLAN
DE-
FINED.—For purposes of clause (i), a cash 
balance plan is a defined benefit plan that 
defines an employee’s benefits by reference 
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to the employee’s hypothetical account. 
Such hypothetical account is determined by 
reference, first, to hypothetical contribu-
tion allocations, and, second, to hypo-
thetical interest credits (on an annual or 
more frequent basis). The right to future 
interest credits are determined without re-
gard to future service.’’. 
(C) EXCEPTION
TO
BENEFIT
CONTIN-
GENCY
RULE.—Subparagraph (A) of section 
401(k)(4) of such Code is amended by inserting 
‘‘or qualified matching accruals (as defined in 
subsection (m)(13)’’ after ‘‘section 401(m))’’. 
(D) FORFEITURES BY REASON OF EXCESS 
DEFERRAL.—Subparagraph 
(G) 
of 
section 
411(a)(3) of the Code is amended by adding at 
the end the following: ‘‘A rule similar to the 
rule of the preceding sentence shall apply with 
respect to qualified matching accruals (as de-
fined in section 401(m)(13)).’’ 
(E) ACCRUED
BENEFIT
REQUIREMENT 
WITH
RESPECT
TO
MATCHING
ACCRUALS.— 
Paragraph (1) of section 411(b) of such Code 
is amended by adding at the end the following 
new subparagraph: 
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‘‘(I) In the case of qualified matching ac-
cruals (as defined in section 401(m)(13)), the 
requirements for accrued benefits set forth in 
subparagraphs (A) through (H) of this sub-
section shall be applied on the basis of the rate 
of matching accruals available to participants, 
without regard to the actual elective deferrals 
made by participants.’’. 
(F) PARTICIPATION REQUIREMENTS WITH 
RESPECT
TO
QUALIFIED
MATCHING
ACCRU-
ALS.—Paragraph (26) of section 401(a) of such 
Code is amended by redesignating subpara-
graph (H) as subparagraph (I), and by insert-
ing after subparagraph (G) the following new 
subparagraph: 
‘‘(H) SPECIAL TESTING RULES FOR QUALI-
FIED MATCHING ACCRUALS.— 
‘‘(i) If an eligible combined plan (as 
defined in section 414(x)) includes quali-
fied matching accruals (as defined in sec-
tion 401(m)(13)), the rules in clauses (ii) 
and (iii) shall apply. 
‘‘(ii) QUALIFIED MATCHING ACCRUALS 
ONLY
BENEFIT
FORMULA.—If the only 
benefit formula in the defined benefit plan 
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forming a part of the eligible combined 
plan is a qualified matching accrual for-
mula, the requirements of this paragraph 
shall be applied by treating a participant’s 
annual benefit accrual as the maximum ac-
crual that was available to the participant 
for the plan year, regardless of whether the 
maximum matchable elective deferrals were 
actually made by the participant. If the 
qualified matching accrual formula applies 
to elective deferrals in excess of 6 percent 
of compensation, then the requirements of 
this paragraph must be applied by taking 
into account the actual matching accruals 
earned by participants for the plan year. 
‘‘(iii) MULTIPLE
FORMULAS.—If the 
defined benefit plan includes one or more 
benefit formulas in addition to a qualified 
matching accrual formula, the employer 
may elect to apply clause (ii) to the quali-
fied matching accrual formulas only if the 
requirements of this paragraph are satis-
fied separately with respect to the benefit 
accruals that are determined without re-
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gard to the qualified matching accrual for-
mula.’’. 
(G) REGULATIONS
FOR
MEETING
NON-
DISCRIMINATION REQUIREMENTS.— 
(i) IN
GENERAL.—The Secretary of 
the Treasury shall prescribe regulations on 
ways in which qualified matching accruals 
(as defined by section 401(m)(13) of the 
Internal Revenue Code of 1986, as added 
by this section) that do not satisfy the for-
mula 
requirements 
of 
section 
401(m)(13)(D) of such Code (as enacted 
by subsection (b) of this section) can sat-
isfy the nondiscrimination requirements of 
section 401(a)(4) of such Code. The regu-
lations may prescribe safe harbor formulas 
in addition to those prescribed by section 
401(m)(13)(D). 
(ii) TEMPORARY AND FINAL FORM.— 
The Secretary shall prescribe the regula-
tions required by clause (i) in temporary 
form not later than 6 months after the ef-
fective date of this section and in final 
form not later than 18 months after the 
effective date of this section. 
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(H) PLAN
YEARS
BEGINNING
BEFORE 
ISSUANCE OF REGULATIONS.—For plan years 
beginning prior to the date the regulations de-
scribed in subsection (g) are issued in final 
form (and after the effective date of this sec-
tion), a plan’s qualified matching accrual for-
mula must satisfy a reasonable, good faith, in-
terpretation of section 401(a)(4) of such Code. 
(2) CASH
BALANCE
MATCHING
TO
SATISFY 
CONTRIBUTION
SAFE
HARBOR
FOR
COMBINED 
PLAN.—Subparagraph (C) of section 414(x)(2) of 
such Code is amended by adding at the end the fol-
lowing new clause: 
‘‘(iii) SPECIAL RULE FOR MATCHING 
PAY CREDITS.—If the defined benefit plan 
forming part of the eligible combined plan 
is an applicable defined benefit plan as de-
fined in section 411(a)(13)(B) which meets 
the interest credit requirements of section 
411(b)(5)(B)(i), the plan shall be treated 
as meeting the requirements of clause (i) if 
with respect to any plan year each partici-
pant receives a matching pay credit in an 
amount equal to 50 percent of so much of 
the pay credit otherwise received by the 
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participant as does not exceed 4 percent of 
compensation. A plan shall not fail to meet 
the requirements of sections 401(a)(4) and 
411(b)(1) merely because the plan provides 
matching pay credit as provided in this 
clause.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2009. 
SEC. 15. ESOP MAY FORM PART OF ELIGIBLE COMBINED 
PLAN. 
(a) AMENDMENT TO INTERNAL REVENUE CODE OF 
1986.—Paragraph (6) of section 414(x) of the Internal 
Revenue Code of 1986 (defining applicable defined con-
tribution plan), as amended by this Act) is amended by 
adding at the end the following new subparagraph: 
‘‘(C) ESOP.—An applicable defined con-
tribution plan forming part of an eligible com-
bined plan may include an employee stock own-
ership plan (as defined in section 4975(e)(7)).’’. 
(b) AMENDMENT TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—Section 210(e)(6) of the 
Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1060(e)(6)) is amended by adding at the end the 
following new subparagraph: 
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‘‘(C) ESOP.—An applicable individual ac-
count plan forming part of an eligible combined 
plan may include an employee stock ownership 
plan (as defined in section 4975(e)(7) of the In-
ternal Revenue Code of 1986).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2009. 
SEC. 16. SPECIAL FUNDING TARGET RULE FOR PLANS COM-
PUTING ACCRUED BENEFITS BY REFERENCE 
TO HYPOTHETICAL ACCOUNT BALANCE. 
(a) AMENDMENT
TO INTERNAL REVENUE CODE 
1986.—Paragraph (1) of section 436(j) of the Internal 
Revenue Code of 1986 (defining funding target attain-
ment percentage) is amended by adding at the end the 
following: ‘‘For purposes of the preceding sentence, in the 
case of a defined benefit plan under which the accrued 
benefit (or portion thereof) is expressed as the balance of 
a hypothetical account, the funding target with respect to 
such benefits shall be the lesser of— 
‘‘(A) the funding target with respect to 
such benefits determined under such section 
(without regard to this sentence), or 
‘‘(B) the aggregate balance of the hypo-
thetical accounts.’’. 
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(b) AMENDMENT TO EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974.—Section 206(g)(9)(A) of 
the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1056(g)(9)(A)) is amended by adding at the 
end the following: ‘‘For purposes of the preceding sen-
tence, in the case of a defined benefit plan under which 
the accrued benefit (or portion thereof) is expressed as 
the balance of a hypothetical account, the funding target 
with respect to such benefits shall be the lesser of— 
‘‘(i) the funding target with respect to 
such benefits determined under such sec-
tion (without regard to this sentence), or 
‘‘(ii) the aggregate balance of the hy-
pothetical accounts.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to plan years begin-
ning after December 31, 2008. 
Æ 
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