604 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions after December 31, 
2007. 
SEC. 825. ELIGIBILITY FOR PARTICIPATION IN RETIRE-
MENT PLANS. 
An individual shall not be precluded from partici-
pating in an eligible deferred compensation plan by reason 
of having received a distribution under section 457(e)(9) 
of the Internal Revenue Code of 1986, as in effect prior 
to the enactment of the Small Business Job Protection 
Act of 1996. 
SEC. 826. MODIFICATIONS OF RULES GOVERNING HARD-
SHIPS AND UNFORSEEN FINANCIAL EMER-
GENCIES. 
Within 180 days after the date of the enactment of 
this Act, the Secretary of the Treasury shall modify the 
rules for determining whether a participant has had a 
hardship for purposes of section 401(k)(2)(B)(i)(IV) of 
the Internal Revenue Code of 1986 to provide that if an 
event (including the occurrence of a medical expense) 
would constitute a hardship under the plan if it occurred 
with respect to the participant’s spouse or dependent (as 
defined in section 152 of such Code), such event shall, to 
the extent permitted under a plan, constitute a hardship 
if it occurs with respect to a person who is a beneficiary 
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under the plan with respect to the participant. The Sec-
retary of the Treasury shall issue similar rules for pur-
poses of determining whether a participant has had— 
(1) a hardship for purposes of section 
403(b)(11)(B) of such Code; or 
(2) an unforeseen financial emergency for pur-
poses 
of 
sections 
409A(a)(2)(A)(vi), 
409A(a)(2)(B)(ii), and 457(d)(1)(A)(iii) of such 
Code. 
SEC. 827. PENALTY-FREE WITHDRAWALS FROM RETIRE-
MENT PLANS FOR INDIVIDUALS CALLED TO 
ACTIVE DUTY FOR AT LEAST 179 DAYS. 
(a) IN GENERAL.—Paragraph (2) of section 72(t) of 
the Internal Revenue Code of 1986 (relating to 10-percent 
additional tax on early distributions from qualified retire-
ment plans) is amended by adding at the end the following 
new subparagraph: 
‘‘(G) DISTRIBUTIONS FROM RETIREMENT 
PLANS
TO
INDIVIDUALS
CALLED
TO
ACTIVE 
DUTY.— 
‘‘(i) IN GENERAL.—Any qualified re-
servist distribution. 
‘‘(ii) AMOUNT DISTRIBUTED MAY BE 
REPAID.—Any individual who receives a 
qualified reservist distribution may, at any 
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time during the 2-year period beginning on 
the day after the end of the active duty pe-
riod, make one or more contributions to an 
individual retirement plan of such indi-
vidual in an aggregate amount not to ex-
ceed the amount of such distribution. The 
dollar limitations otherwise applicable to 
contributions to individual retirement plans 
shall not apply to any contribution made 
pursuant to the preceding sentence. No de-
duction shall be allowed for any contribu-
tion pursuant to this clause. 
‘‘(iii) QUALIFIED
RESERVIST
DIS-
TRIBUTION.—For purposes of this sub-
paragraph, the term ‘qualified reservist 
distribution’ means any distribution to an 
individual if— 
‘‘(I) such distribution is from an 
individual retirement plan, or from 
amounts attributable to employer con-
tributions made pursuant to elective 
deferrals described in subparagraph 
(A) or (C) of section 402(g)(3) or sec-
tion 501(c)(18)(D)(iii), 
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‘‘(II) such individual was (by rea-
son of being a member of a reserve 
component (as defined in section 101 
of title 37, United States Code)) or-
dered or called to active duty for a pe-
riod in excess of 179 days or for an 
indefinite period, and 
‘‘(III) such distribution is made 
during the period beginning on the 
date of such order or call and ending 
at the close of the active duty period. 
‘‘(iv) 
APPLICATION
OF
SUBPARA-
GRAPH.—This subparagraph applies to in-
dividuals ordered or called to active duty 
after September 11, 2001, and before De-
cember 31, 2007. In no event shall the 2- 
year period referred to in clause (ii) end 
before the date which is 2 years after the 
date of the enactment of this subpara-
graph.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 401(k)(2)(B)(i) of such Code is 
amended by striking ‘‘or’’ at the end of subclause 
(III), by striking ‘‘and’’ at the end of subclause (IV) 
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and inserting ‘‘or’’, and by inserting after subclause 
(IV) the following new subclause: 
‘‘(V) in the case of a qualified re-
servist distribution (as defined in sec-
tion 72(t)(2)(G)(iii)), the date on 
which a period referred to in sub-
clause (III) of such section begins, 
and’’. 
(2) Section 403(b)(7)(A)(ii) of such Code is 
amended by inserting ‘‘(unless such amount is a dis-
tribution to which section 72(t)(2)(G) applies)’’ after 
‘‘distributee’’. 
(3) Section 403(b)(11) of such Code is amend-
ed by striking ‘‘or’’ at the end of subparagraph (A), 
by striking the period at the end of subparagraph 
(B) and inserting ‘‘, or’’, and by inserting after sub-
paragraph (B) the following new subparagraph: 
‘‘(C) for distributions to which section 
72(t)(2)(G) applies.’’. 
(c) EFFECTIVE DATE; WAIVER OF LIMITATIONS.— 
(1) EFFECTIVE DATE.—The amendment made 
by this section shall apply to distributions after Sep-
tember 11, 2001. 
(2) WAIVER
OF
LIMITATIONS.—If refund or 
credit of any overpayment of tax resulting from the 
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amendments made by this section is prevented at 
any time before the close of the 1-year period begin-
ning on the date of the enactment of this Act by the 
operation of any law or rule of law (including res ju-
dicata), such refund or credit may nevertheless be 
made or allowed if claim therefor is filed before the 
close of such period. 
SEC. 828. WAIVER OF 10 PERCENT EARLY WITHDRAWAL 
PENALTY TAX ON CERTAIN DISTRIBUTIONS 
OF PENSION PLANS FOR PUBLIC SAFETY EM-
PLOYEES. 
(a) IN GENERAL.—Section 72(t) of the Internal Rev-
enue Code of 1986 (relating to subsection not to apply 
to certain distributions) is amended by adding at the end 
the following new paragraph: 
‘‘(10) DISTRIBUTIONS
TO
QUALIFIED
PUBLIC 
SAFETY EMPLOYEES IN GOVERNMENTAL PLANS.— 
‘‘(A) IN GENERAL.—In the case of a dis-
tribution to a qualified public safety employee 
from a governmental plan (within the meaning 
of section 414(d)) which is a defined benefit 
plan, paragraph (2)(A)(v) shall be applied by 
substituting ‘age 50’ for ‘age 55’. 
‘‘(B) QUALIFIED
PUBLIC
SAFETY
EM-
PLOYEE.—For purposes of this paragraph, the 
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term ‘qualified public safety employee’ means 
any employee of a State or political subdivision 
of a State who provides police protection, fire-
fighting services, or emergency medical services 
for any area within the jurisdiction of such 
State or political subdivision.’’ 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distributions after the date of 
the enactment of this Act. 
SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENE-
FICIARIES OF CERTAIN RETIREMENT PLAN 
DISTRIBUTIONS. 
(a) IN GENERAL.— 
(1) QUALIFIED PLANS.—Section 402(c) of the 
Internal Revenue Code of 1986 (relating to rollovers 
from exempt trusts) is amended by adding at the 
end the following new paragraph: 
‘‘(11) DISTRIBUTIONS
TO
INHERITED
INDI-
VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE-
FICIARY.— 
‘‘(A) IN GENERAL.—If, with respect to any 
portion of a distribution from an eligible retire-
ment plan of a deceased employee, a direct 
trustee-to-trustee transfer is made to an indi-
vidual retirement plan described in clause (i) or 
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(ii) of paragraph (8)(B) established for the pur-
poses of receiving the distribution on behalf of 
an individual who is a designated beneficiary 
(as defined by section 401(a)(9)(E)) of the em-
ployee and who is not the surviving spouse of 
the employee— 
‘‘(i) the transfer shall be treated as an 
eligible rollover distribution for purposes of 
this subsection, 
‘‘(ii) the individual retirement plan 
shall be treated as an inherited individual 
retirement account or individual retirement 
annuity (within the meaning of section 
408(d)(3)(C)) for purposes of this title, 
and 
‘‘(iii) section 401(a)(9)(B) (other than 
clause (iv) thereof) shall apply to such 
plan. 
‘‘(B) CERTAIN TRUSTS TREATED AS BENE-
FICIARIES.—For purposes of this paragraph, to 
the extent provided in rules prescribed by the 
Secretary, a trust maintained for the benefit of 
one or more designated beneficiaries shall be 
treated in the same manner as a trust des-
ignated beneficiary.’’. 
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(2) SECTION
403(a) 
PLANS.—Subparagraph 
(B) of section 403(a)(4) of such Code (relating to 
rollover amounts) is amended by inserting ‘‘and 
(11)’’ after ‘‘(7)’’. 
(3) SECTION
403(b) PLANS.—Subparagraph 
(B) of section 403(b)(8) of such Code (relating to 
rollover amounts) is amended by striking ‘‘and (9)’’ 
and inserting ‘‘, (9), and (11)’’. 
(4) SECTION 457 PLANS.—Subparagraph (B) 
of section 457(e)(16) of such Code (relating to roll-
over amounts) is amended by striking ‘‘and (9)’’ and 
inserting ‘‘, (9), and (11)’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions after December 31, 
2006. 
SEC. 830. DIRECT PAYMENT OF TAX REFUNDS TO INDI-
VIDUAL RETIREMENT PLANS. 
(a) IN GENERAL.—The Secretary of the Treasury (or 
the Secretary’s delegate) shall make available a form (or 
modify existing forms) for use by individuals to direct that 
a portion of any refund of overpayment of tax imposed 
by chapter 1 of the Internal Revenue Code of 1986 be 
paid directly to an individual retirement plan (as defined 
in section 7701(a)(37) of such Code) of such individual. 
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(b) EFFECTIVE DATE.—The form required by sub-
section (a) shall be made available for taxable years begin-
ning after December 31, 2006. 
SEC. 831. ALLOWANCE OF ADDITIONAL IRA PAYMENTS IN 
CERTAIN BANKRUPTCY CASES. 
(a) 
ALLOWANCE
OF
CONTRIBUTIONS.—Section 
219(b)(5) of the Internal Revenue Code of 1986 (relating 
to deductible amount) is amended by redesignating sub-
paragraph (C) as subparagraph (D) and by inserting after 
subparagraph (B) the following new subparagraph: 
‘‘(C) CATCHUP CONTRIBUTIONS FOR CER-
TAIN INDIVIDUALS.— 
‘‘(i) IN GENERAL.—In the case of an 
applicable individual who elects to make a 
qualified retirement contribution in addi-
tion to the deductible amount determined 
under subparagraph (A)— 
‘‘(I) the deductible amount for 
any taxable year shall be increased by 
an amount equal to 3 times the appli-
cable amount determined under sub-
paragraph (B) for such taxable year, 
and 
‘‘(II) subparagraph (B) shall not 
apply. 
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‘‘(ii) APPLICABLE
INDIVIDUAL.—For 
purposes of this subparagraph, the term 
‘applicable individual’ means, with respect 
to any taxable year, any individual who 
was a qualified participant in a qualified 
cash or deferred arrangement (as defined 
in section 401(k)) of an employer described 
in clause (iii) under which the employer 
matched at least 50 percent of the employ-
ee’s contributions to such arrangement 
with stock of such employer. 
‘‘(iii) 
EMPLOYER
DESCRIBED.—An 
employer is described in this clause if, in 
any taxable year preceding the taxable year 
described in clause (ii)— 
‘‘(I) such employer (or any con-
trolling corporation of such employer) 
was a debtor in a case under title 11 
of the United States Code, or similar 
Federal or State law, and 
‘‘(II) such employer (or any other 
person) was subject to an indictment 
or conviction resulting from business 
transactions related to such case. 
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‘‘(iv) QUALIFIED PARTICIPANT.—For 
purposes of clause (ii), the term ‘qualified 
participant’ means any applicable indi-
vidual who was a participant in the cash or 
deferred arrangement described in such 
clause on the date that is 6 months before 
the filing of the case described in clause 
(iii). 
‘‘(v) TERMINATION.—This subpara-
graph shall not apply to taxable years be-
ginning after December 31, 2009.’’ 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 832. DETERMINATION OF AVERAGE COMPENSATION 
FOR SECTION 415 LIMITS. 
(a) IN GENERAL.—Section 415(b)(3) of the Internal 
Revenue Code of 1986 is amended by striking ‘‘both was 
an active participant in the plan and’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to years beginning after December 
31, 2005. 
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SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITA-
TIONS ON CERTAIN RETIREMENT SAVINGS 
INCENTIVES. 
(a) SAVER’S CREDIT.—Subsection (b) of section 25B 
of the Internal Revenue Code of 1986 is amended to read 
as follows: 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
this section— 
‘‘(1) JOINT RETURNS.—In the case of a joint 
return, the applicable percentage is— 
‘‘(A) if the adjusted gross income of the 
taxpayer is not over $30,000, 50 percent, 
‘‘(B) if the adjusted gross income of the 
taxpayer is over $30,000 but not over $32,500, 
20 percent, 
‘‘(C) if the adjusted gross income of the 
taxpayer is over $32,500 but not over $50,000, 
10 percent, and 
‘‘(D) if the adjusted gross income of the 
taxpayer is over $50,000, zero percent. 
‘‘(2) OTHER RETURNS.—In the case of— 
‘‘(A) a head of household, the applicable 
percentage shall be determined under para-
graph (1) except that such paragraph shall be 
applied by substituting for each dollar amount 
therein (as adjusted under paragraph (3)) a 
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dollar amount equal to 75 percent of such dol-
lar amount, and 
‘‘(B) any taxpayer not described in para-
graph (1) or subparagraph (A), the applicable 
percentage shall be determined under para-
graph (1) except that such paragraph shall be 
applied by substituting for each dollar amount 
therein (as adjusted under paragraph (3)) a 
dollar amount equal to 50 percent of such dol-
lar amount. 
‘‘(3) INFLATION ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
2006, each of the dollar amount in paragraph (1) 
shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2005’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$500.’’. 
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(b) DEDUCTION OF RETIREMENT CONTRIBUTIONS 
FOR ACTIVE PARTICIPANTS.—Section 219(g) of such 
Code is amended by adding at the end the following new 
paragraph: 
‘‘(8) INFLATION ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
2006, the dollar amount in the last row of the table 
contained in paragraph (3)(B)(i), the dollar amount 
in the last row of the table contained in paragraph 
(3)(B)(ii), and the dollar amount contained in para-
graph (7)(A), shall each be increased by an amount 
equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2005’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$1,000.’’. 
(c) CONTRIBUTION LIMITATION FOR ROTH IRAS.— 
Section 408A(c)(3) of such Code is amended by adding 
at the end the following new subparagraph: 
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‘‘(C) INFLATION
ADJUSTMENT.—In the 
case of any taxable year beginning in a calendar 
year after 2006, the dollar amounts in sub-
clauses (I) and (II) of subparagraph (C)(ii) 
shall each be increased by an amount equal 
to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2005’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof. 
Any increase determined under the preceding 
sentence shall be rounded to the nearest mul-
tiple of $1,000.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
2006. 
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Subtitle D—Health and Medical 
Benefits 
SEC. 841. USE OF EXCESS PENSION ASSETS FOR FUTURE 
RETIREE HEALTH BENEFITS AND COLLEC-
TIVELY BARGAINED RETIREE HEALTH BENE-
FITS. 
(a) IN GENERAL.—Section 420 of the Internal Rev-
enue Code of 1986 (relating to transfers of excess pension 
assets to retiree health accounts) is amended by adding 
at the end the following new subsection: 
‘‘(f) QUALIFIED TRANSFERS TO COVER FUTURE RE-
TIREE HEALTH COSTS AND COLLECTIVELY BARGAINED 
RETIREE HEALTH BENEFITS.— 
‘‘(1) IN GENERAL.—An employer maintaining a 
defined benefit plan (other than a multiemployer 
plan) may, in lieu of a qualified transfer, elect for 
any taxable year to have the plan make— 
‘‘(A) a qualified future transfer, or 
‘‘(B) a collectively bargained transfer. 
Except as provided in this subsection, a qualified fu-
ture transfer and a collectively bargained transfer 
shall be treated for purposes of this title and the 
Employee Retirement Income Security Act of 1974 
as if it were a qualified transfer. 
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‘‘(2) QUALIFIED FUTURE AND COLLECTIVELY 
BARGAINED TRANSFERS.—For purposes of this sub-
section— 
‘‘(A) IN GENERAL.—The terms ‘qualified 
future transfer’ and ‘collectively bargained 
transfer’ mean a transfer which meets all of the 
requirements for a qualified transfer, except 
that— 
‘‘(i) the determination of excess pen-
sion assets shall be made under subpara-
graph (B), 
‘‘(ii) the limitation on the amount 
transferred shall be determined under sub-
paragraph (C), 
‘‘(iii) the minimum cost requirements 
of subsection (c)(3) shall be modified as 
provided under subparagraph (D), and 
‘‘(iv) in the case of a collectively bar-
gained transfer, the requirements of sub-
paragraph (E) shall be met with respect to 
the transfer. 
‘‘(B) EXCESS PENSION ASSETS.— 
‘‘(i) IN GENERAL.—In determining ex-
cess pension assets for purposes of this 
subsection, subsection (e)(2) shall be ap-
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plied by substituting ‘120 percent’ for ‘125 
percent’. 
‘‘(ii) REQUIREMENT
TO
MAINTAIN 
FUNDED STATUS.—If, as of any valuation 
date of any plan year in the transfer pe-
riod, the amount determined under sub-
section (e)(2)(B) (after application of 
clause (i)) exceeds the amount determined 
under subsection (e)(2)(A), either— 
‘‘(I) the employer maintaining 
the plan shall make contributions to 
the plan in an amount not less than 
the amount required to reduce such 
excess to zero as of such date, or 
‘‘(II) there is transferred from 
the health benefits account to the plan 
an amount not less than the amount 
required to reduce such excess to zero 
as of such date. 
‘‘(C) LIMITATION
ON
AMOUNT
TRANS-
FERRED.—Notwithstanding subsection (b)(3), 
the amount of the excess pension assets which 
may be transferred— 
‘‘(i) in the case of a qualified future 
transfer shall be equal to the sum of— 
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‘‘(I) if the transfer period in-
cludes the taxable year of the trans-
fer, the amount determined under 
subsection (b)(3) for such taxable 
year, plus 
‘‘(II) in the case of all other tax-
able years in the transfer period, the 
sum of the qualified current retiree 
health liabilities which the plan rea-
sonably estimates, in accordance with 
guidance issued by the Secretary, will 
be incurred for each of such years, 
and 
‘‘(ii) in the case of a collectively bar-
gained transfer, shall not exceed the 
amount which is reasonably estimated, in 
accordance with the provisions of the col-
lective bargaining agreement and generally 
accepted accounting principles, to be the 
amount the employer maintaining the plan 
will pay (whether directly or through reim-
bursement) out of such account during the 
collectively bargained cost maintenance pe-
riod for collectively bargained retiree 
health liabilities. 
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‘‘(D) MINIMUM COST REQUIREMENTS.— 
‘‘(i) IN GENERAL.—The requirements 
of subsection (c)(3) shall be treated as met 
if— 
‘‘(I) in the case of a qualified fu-
ture transfer, each group health plan 
or arrangement under which applica-
ble health benefits are provided pro-
vides applicable health benefits during 
the period beginning with the first 
year of the transfer period and ending 
with the last day of the 4th year fol-
lowing the transfer period such that 
the annual average amount of such 
the applicable employer cost during 
such period is not less than the appli-
cable employer cost determined under 
subsection (c)(3)(A) with respect to 
the transfer, and 
‘‘(II) in the case of a collectively 
bargained transfer, each collectively 
bargained group health plan under 
which collectively bargained health 
benefits are provided provides that the 
collectively bargained employer cost 
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for each taxable year during the col-
lectively bargained cost maintenance 
period shall not be less than the 
amount specified by the collective bar-
gaining agreement. 
‘‘(ii) ELECTION TO MAINTAIN BENE-
FITS FOR FUTURE TRANSFERS.—An em-
ployer may elect, in lieu of the require-
ments of clause (i)(I), to meet the require-
ments of subsection (c)(3) by meeting the 
requirements of such subsection (as in ef-
fect before the amendments made by sec-
tion 535 of the Tax Relief Extension Act 
of 1999) for each of the years described in 
the period under clause (i)(I). 
‘‘(iii) COLLECTIVELY BARGAINED EM-
PLOYER COST.—For purposes of this sub-
paragraph, the term ‘collectively bargained 
employer cost’ means the average cost per 
covered individual of providing collectively 
bargained retiree health benefits as deter-
mined in accordance with the applicable 
collective 
bargaining 
agreement. 
Such 
agreement may provide for an appropriate 
reduction in the collectively bargained em-
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ployer cost to take into account any por-
tion of the collectively bargained retiree 
health benefits that is provided or financed 
by a government program or other source. 
‘‘(E) SPECIAL RULES FOR COLLECTIVELY 
BARGAINED TRANSFERS.— 
‘‘(i) IN GENERAL.—A collectively bar-
gained transfer shall only include a trans-
fer which— 
‘‘(I) is made in accordance with a 
collective bargaining agreement, 
‘‘(II) before the transfer, the em-
ployer designates, in a written notice 
delivered to each employee organiza-
tion that is a party to the collective 
bargaining agreement, as a collectively 
bargained transfer in accordance with 
this section, and 
‘‘(III) involves a plan maintained 
by an employer which, in its taxable 
year ending in 2005, provided health 
benefits or coverage to retirees and 
their spouses and dependents under 
all of the benefit plans maintained by 
the employer, but only if the aggre-
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gate cost (including administrative ex-
penses) of such benefits or coverage 
which would have been allowable as a 
deduction to the employer (if such 
benefits or coverage had been pro-
vided directly by the employer and the 
employer used the cash receipts and 
disbursements method of accounting) 
is at least 5 percent of the gross re-
ceipts of the employer (determined in 
accordance with the last sentence of 
subsection (c)(2)(E)(ii)(II)) for such 
taxable year, or a plan maintained by 
a successor to such employer. 
‘‘(ii) USE
OF
ASSETS.—Any assets 
transferred to a health benefits account in 
a collectively bargained transfer (and any 
income allocable thereto) shall be used only 
to pay collectively bargained retiree health 
liabilities (other than liabilities of key em-
ployees not taken into account under para-
graph (6)(B)(iii)) for the taxable year of 
the transfer or for any subsequent taxable 
year during the collectively bargained cost 
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ccoleman on PROD1PC71 with BILLS
628 
maintenance period (whether directly or 
through reimbursement). 
‘‘(3) COORDINATION
WITH
OTHER
TRANS-
FERS.—In applying subsection (b)(3) to any subse-
quent transfer during a taxable year in a transfer 
period or collectively bargained cost maintenance pe-
riod, qualified current retiree health liabilities shall 
be reduced by any such liabilities taken into account 
with respect to the qualified future transfer or col-
lectively bargained transfer to which such period re-
lates. 
‘‘(4) SPECIAL DEDUCTION RULES FOR COLLEC-
TIVELY BARGAINED TRANSFERS.—In the case of a 
collectively bargained transfer— 
‘‘(A) 
the 
limitation 
under 
subsection 
(d)(1)(C) shall not apply, and 
‘‘(B) notwithstanding subsection (d)(2), an 
employer may contribute an amount to a health 
benefits account or welfare benefit fund (as de-
fined in section 419(e)(1)) with respect to col-
lectively bargained retiree health liabilities for 
which transferred assets are required to be used 
under subsection (c)(1)(B), and the deduct-
ibility of any such contribution shall be gov-
erned by the limits applicable to the deduct-
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629 
ibility of contributions to a welfare benefit fund 
under a collective bargaining agreement (as de-
termined under section 419A(f)(5)(A)) without 
regard to whether such contributions are made 
to a health benefits account or welfare benefit 
fund and without regard to the provisions of 
section 404 or the other provisions of this sec-
tion. 
The Secretary shall provide rules to ensure that the 
application of this paragraph does not result in a de-
duction being allowed more than once for the same 
contribution or for 2 or more contributions or ex-
penditures relating to the same collectively bar-
gained retiree health liabilities. 
‘‘(5) TRANSFER PERIOD.—For purposes of this 
subsection, the term ‘transfer period’ means, with 
respect to any transfer, a period of consecutive tax-
able years (not less than 2) specified in the election 
under paragraph (1) which begins and ends during 
the 10-taxable-year period beginning with the tax-
able year of the transfer. 
‘‘(6) TERMS RELATING TO COLLECTIVELY BAR-
GAINED
TRANSFERS.—For purposes of this sub-
section— 
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630 
‘‘(A) COLLECTIVELY
BARGAINED
COST 
MAINTENANCE PERIOD.—The term ‘collectively 
bargained cost maintenance period’ means, with 
respect to each covered retiree and his covered 
spouse and dependents, the shorter of— 
‘‘(i) the remaining lifetime of such 
covered retiree and his covered spouse and 
dependents, or 
‘‘(ii) the period of coverage provided 
by the collectively bargained health plan 
(determined as of the date of the collec-
tively bargained transfer) with respect to 
such covered retiree and his covered spouse 
and dependents. 
‘‘(B) COLLECTIVELY BARGAINED RETIREE 
HEALTH LIABILITIES.— 
‘‘(i) IN GENERAL.—The term ‘collec-
tively bargained retiree health liabilities’ 
means the present value, as of the begin-
ning of a taxable year and determined in 
accordance with the applicable collective 
bargaining agreement, of all collectively 
bargained health benefits (including ad-
ministrative expenses) for such taxable 
year and all subsequent taxable years dur-
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631 
ing the collectively bargained cost mainte-
nance period. 
‘‘(ii) REDUCTION FOR AMOUNTS PRE-
VIOUSLY SET ASIDE.—The amount deter-
mined under clause (i) shall be reduced by 
the value (as of the close of the plan year 
preceding the year of the collectively bar-
gained transfer) of the assets in all health 
benefits accounts or welfare benefit funds 
(as defined in section 419(e)(1)) set aside 
to pay for the collectively bargained retiree 
health liabilities. 
‘‘(iii) KEY EMPLOYEES EXCLUDED.— 
If an employee is a key employee (within 
the meaning of section 416(I)(1)) with re-
spect to any plan year ending in a taxable 
year, such employee shall not be taken into 
account in computing collectively bargained 
retiree health liabilities for such taxable 
year or in calculating collectively bargained 
employer cost under subsection (c)(3)(C). 
‘‘(C) COLLECTIVELY BARGAINED HEALTH 
BENEFITS.—The term ‘collectively bargained 
health benefits’ means health benefits or cov-
erage which are provided to— 
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‘‘(i) retired employees who, imme-
diately before the collectively bargained 
transfer, are entitled to receive such bene-
fits upon retirement and who are entitled 
to pension benefits under the plan, and 
their spouses and dependents, and 
‘‘(ii) if specified by the provisions of 
the collective bargaining agreement gov-
erning the collectively bargained transfer, 
active employees who, following their re-
tirement, are entitled to receive such bene-
fits and who are entitled to pension bene-
fits under the plan, and their spouses and 
dependents. 
‘‘(D) COLLECTIVELY BARGAINED HEALTH 
PLAN.—The term ‘collectively bargained health 
plan’ means a group health plan or arrange-
ment for retired employees and their spouses 
and dependents that is maintained pursuant to 
1 or more collective bargaining agreements.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transfers after the date of the 
enactment of this Act. 
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633 
SEC. 842. TRANSFER OF EXCESS PENSION ASSETS TO MUL-
TIEMPLOYER HEALTH PLAN. 
(a) IN GENERAL.—Section 420 of the Internal Rev-
enue Code of 1986 is amended— 
(1) by striking ‘‘(other than a multiemployer 
plan)’’ in subsection (a), and 
(2) by adding at the end of subsection (e) the 
following new paragraph: 
‘‘(5) 
APPLICATION
TO
MULTIEMPLOYER 
PLANS.—In the case of a multiemployer plan, this 
section shall be applied to any such plan— 
‘‘(A) by treating any reference in this sec-
tion to an employer as a reference to all em-
ployers maintaining the plan (or, if appropriate, 
the plan sponsor), and 
‘‘(B) in accordance with such modifications 
of this section (and the provisions of this title 
relating to this section) as the Secretary deter-
mines appropriate to reflect the fact the plan is 
not maintained by a single employer.’’ 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to transfers made in taxable years 
beginning after December 31, 2006. 
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634 
SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENE-
FITS OF PLANS SPONSORED BY BONA FIDE 
ASSOCIATIONS. 
(a) IN GENERAL.—Section 419A(c) of the Internal 
Revenue Code of 1986 (relating to account limit) is 
amended by adding at the end the following new para-
graph: 
‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BEN-
EFITS OF BONA FIDE ASSOCIATION PLANS.— 
‘‘(A) IN GENERAL.—An applicable account 
limit for any taxable year may include a reserve 
in an amount not to exceed 35 percent of the 
sum of— 
‘‘(i) the qualified direct costs, and 
‘‘(ii) the change in claims incurred 
but unpaid, 
for such taxable year with respect to medical 
benefits (other than post-retirement medical 
benefits). 
‘‘(B) APPLICABLE
ACCOUNT
LIMIT.—For 
purposes of this subsection, the term ‘applicable 
account limit’ means an account limit for a 
qualified asset account with respect to medical 
benefits provided through a plan maintained by 
a bona fide association (as defined in section 
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