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tribution shall be governed by the limits applica-
ble to the deductibility of contributions to a wel-
fare benefit fund under a collective bargaining
agreement 
(as 
determined 
under 
section
419A(f)(5)(A)) without regard to whether such
contributions are made to a health benefits ac-
count or welfare benefit fund and without regard
to the provisions of section 404 or the other pro-
visions of this section. The Secretary shall pro-
vide rules to ensure that the application of this
section does not result in a deduction being al-
lowed more than once for the same contribution
or for 2 or more contributions or expenditures
relating to the same collectively bargained retiree
health liabilities.’’.
(d) DEFINITIONS.—Section 420(e) of the Internal Rev-
enue Code of 1986 (relating to definition and special rules)
is amended by adding at the end the following new para-
graphs:
‘‘(5) COLLECTIVELY
BARGAINED
TRANSFER.—
The term ‘collectively bargained transfer’ means a
transfer—
‘‘(A) of excess pension assets to a health
benefits account which is part of such plan in a
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taxable year beginning after December 31, 2005,
and
‘‘(B) which does not contravene any other
provision of law,
‘‘(C) with respect to which are met in con-
nection with the plan—
‘‘(i) the use requirements of subsection
(c)(1),
‘‘(ii) the vesting requirements of sub-
section (c)(2), and
‘‘(iii) the minimum cost requirements
of subsection (c)(3),
‘‘(D) which is made in accordance with a
collective bargaining agreement,
‘‘(E) which, before the transfer, the em-
ployer designates, in a written notice delivered to
each employee organization that is a party to the
collective bargaining agreement, as a collectively
bargained transfer in accordance with this sec-
tion, and
‘‘(F) which involves—
‘‘(i) a plan maintained by an em-
ployer which, in its taxable year ending in
2005, provided health benefits or coverage to
retirees and their spouses and dependents
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under all of the benefit plans maintained by
the employer, but only if the aggregate cost
(including administrative expenses) of such
benefits or coverage which would have been
allowable as a deduction to the employer (if
such benefits or coverage had been provided
directly by the employer and the employer
used the cash receipts and disbursements
method of accounting) is at least 5 percent
of the gross receipts of the employer (deter-
mined in accordance with the last sentence
of subsection (c)(2)(E)(ii)(II)) for such tax-
able year,
‘‘(ii) or a plan maintained by a suc-
cessor to such employer.
Such term shall not include a transfer after De-
cember 31, 2013.
‘‘(6) 
COLLECTIVELY
BARGAINED
RETIREE
HEALTH LIABILITIES.—
‘‘(A) IN GENERAL.—The term ‘collectively
bargained retiree health liabilities’ means the
present value, as of the beginning of a taxable
year and determined in accordance with the ap-
plicable collective bargaining agreement, of all
collectively bargained health benefits (including
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administrative expenses) for such taxable year
and all subsequent taxable years during the col-
lectively bargained cost maintenance period.
‘‘(B) 
REDUCTION
FOR
AMOUNTS
PRE-
VIOUSLY
SET
ASIDE.—The amount determined
under subparagraph (A) shall be reduced by the
value (as of the close of the plan year preceding
the year of the collectively bargained transfer) of
the assets in all health benefits accounts or wel-
fare benefit funds (as defined in section
419(e)(1)) set aside to pay for the collectively
bargained retiree health liabilities.
‘‘(C) KEY EMPLOYEES EXCLUDED.—If an
employee is a key employee (within the meaning
of section 416(I)(1)) with respect to any plan
year ending in a taxable year, such employee
shall not be taken into account in computing col-
lectively bargained retiree health liabilities for
such taxable year or in calculating collectively
bargained 
employer 
cost 
under 
subsection
(c)(3)(C).
‘‘(7) COLLECTIVELY BARGAINED HEALTH BENE-
FITS.—The term ‘collectively bargained health bene-
fits’ means health benefits or coverage which are pro-
vided to—
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‘‘(A) retired employees who, immediately be-
fore the collectively bargained transfer, are enti-
tled to receive such benefits upon retirement and
who are entitled to pension benefits under the
plan, and their spouses and dependents, and
‘‘(B) if specified by the provisions of the col-
lective bargaining agreement governing the col-
lectively bargained transfer, active employees
who, following their retirement, are entitled to
receive such benefits and who are entitled to pen-
sion benefits under the plan, and their spouses
and dependents.
‘‘(8) 
COLLECTIVELY
BARGAINED
HEALTH
PLAN.—The term ‘collectively bargained health plan’
means a group health plan or arrangement for retired
employees and their spouses and dependents that is
maintained pursuant to 1 or more collective bar-
gaining agreements.’’.
(e) CONFORMING AMENDMENT.—The last sentence of
section 401(h) of the Internal Revenue Code of 1986 is
amended by inserting ‘‘(other than contributions with re-
spect to collectively bargained retiree health liabilities with-
in the meaning of section 420(e)(6))’’ after ‘‘medical bene-
fits’’.
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(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2004.
SEC. 1333. 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 amend-
ed by adding at the end the following new paragraph:
‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BENE-
FITS 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 ben-
efits).
‘‘(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
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benefits provided through a plan maintained by
a bona fide association (as defined in section
2791(d)(3) of the Public Health Service Act (42
U.S.C. 300gg–91(d)(3))’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years ending after December
31, 2005.
PART II—CASH OR DEFERRED ARRANGEMENTS
SEC. 1336. TREATMENT OF ELIGIBLE COMBINED DEFINED
BENEFIT PLANS AND QUALIFIED CASH OR DE-
FERRED ARRANGEMENTS.
(a) AMENDMENTS OF INTERNAL REVENUE CODE.—
Section 414 of the Internal Revenue Code of 1986, as
amended by this Act, is amended by adding at the end the
following new subsection:
‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DE-
FINED BENEFIT PLANS AND QUALIFIED CASH OR DE-
FERRED ARRANGEMENTS.—
‘‘(1) GENERAL
RULE.—Except as provided in
this subsection, the requirements of this title shall be
applied to any defined benefit plan or applicable de-
fined contribution plan which are part of an eligible
combined plan in the same manner as if each such
plan were not a part of the eligible combined plan.
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‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘eligible com-
bined plan’ means a plan—
‘‘(i) which is maintained by an em-
ployer which, at the time the plan is estab-
lished, is a small employer,
‘‘(ii) which consists of a defined benefit
plan and an applicable defined contribution
plan,
‘‘(iii) the assets of which are held in a
single trust forming part of the plan and
are clearly identified and allocated to the
defined benefit plan and the applicable de-
fined contribution plan to the extent nec-
essary for the separate application of this
title under paragraph (1), and
‘‘(iv) with respect to which the benefit,
contribution, vesting, and nondiscrimina-
tion requirements of subparagraphs (B),
(C), (D), (E), and (F) are met.
For purposes of this subparagraph, the term
‘small employer’ has the meaning given such
term by section 4980D(d)(2), except that such
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section shall be applied by substituting ‘500’ for
‘50’ each place it appears.
‘‘(B) BENEFIT REQUIREMENTS.—
‘‘(i) IN GENERAL.—The benefit require-
ments of this subparagraph are met with re-
spect to the defined benefit plan forming
part of the eligible combined plan if the ac-
crued benefit of each participant derived
from employer contributions, when ex-
pressed as an annual retirement benefit, is
not less than the applicable percentage of
the participant’s final average pay. For
purposes of this clause, final average pay
shall be determined using the period of con-
secutive years (not exceeding 5) during
which the participant had the greatest ag-
gregate compensation from the employer.
‘‘(ii) APPLICABLE PERCENTAGE.—For
purposes of clause (i), the applicable per-
centage is the lesser of—
‘‘(I) 1 percent multiplied by the
number of years of service with the em-
ployer, or
‘‘(II) 20 percent.
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‘‘(iii) SPECIAL RULE FOR CASH BAL-
ANCE PLANS.—If the defined benefit plan
under clause (i) is a qualified cash balance
plan (within the meaning of section
411(b)(5)), the plan shall be treated as
meeting the requirements of clause (i) with
respect to any plan year if each participant
receives pay credit for the year which is not
less than the percentage of compensation de-
termined in accordance with the following
table:
‘‘If the participant’s age as of the
beginning of the year is—
The percentage is—
30 or less .........................................................................................
Over 30 but less than 40 ...............................................................
40 or over but less than 50 ...........................................................
50 or over .......................................................................................
8.
‘‘(iv) YEARS
OF
SERVICE.—For pur-
poses of this subparagraph, years of service
shall be determined under the rules of para-
graphs (4), (5), and (6) of section 411(a),
except that the plan may not disregard any
year of service because of a participant
making, or failing to make, any elective de-
ferral with respect to the qualified cash or
deferred arrangement to which subpara-
graph (C) applies.
‘‘(C) CONTRIBUTION REQUIREMENTS.—
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‘‘(i) IN
GENERAL.—The contribution
requirements of this subparagraph with re-
spect to any applicable defined contribution
plan forming part of eligible combined plan
are met if—
‘‘(I) the qualified cash or deferred
arrangement included in such plan
constitutes an automatic contribution
arrangement, and
‘‘(II) the employer is required to
make matching contributions on behalf
of each employee eligible to participate
in the arrangement in an amount
equal to 50 percent of the elective con-
tributions of the employee to the extent
such elective contributions do not ex-
ceed 4 percent of compensation.
Rules similar to the rules of clauses (ii) and
(iii) of section 401(k)(12)(B) shall apply for
purposes of this clause.
‘‘(ii) NONELECTIVE CONTRIBUTIONS.—
An applicable defined contribution plan
shall not be treated as failing to meet the
requirements of clause (i) because the em-
ployer 
makes 
nonelective 
contributions
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under the plan but such contributions shall
not be taken into account in determining
whether the requirements of clause (i)(II)
are met.
‘‘(D) VESTING REQUIREMENTS.—The vest-
ing requirements of this subparagraph are met
if—
‘‘(i) in the case of a defined benefit
plan forming part of an eligible combined
plan an employee who has completed at
least 3 years of service has a nonforfeitable
right to 100 percent of the employee’s ac-
crued benefit under the plan derived from
employer contributions, and
‘‘(ii) in the case of an applicable de-
fined contribution plan forming part of eli-
gible combined plan—
‘‘(I) an employee has a nonforfeit-
able right to any matching contribu-
tion made under the qualified cash or
deferred arrangement included in such
plan by an employer with respect to
any elective contribution, including
matching contributions in excess of the
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contributions required under subpara-
graph (C)(i)(II), and
‘‘(II) an employee who has com-
pleted at least 3 years of service has a
nonforfeitable right to 100 percent of
the employee’s accrued benefit derived
under the arrangement from nonelec-
tive contributions of the employer.
For purposes of this subparagraph, the rules
of section 411 shall apply to the extent not
inconsistent with this subparagraph.
‘‘(E) UNIFORM PROVISION OF BENEFITS.—
In the case of a defined benefit plan or applica-
ble defined contribution plan forming part of an
eligible combined plan, the requirements of this
subparagraph are met if all benefits under each
such plan, and all rights and features under each
such plan, must be provided uniformly to all
participants.
‘‘(F) REQUIREMENTS MUST BE MET WITH-
OUT
TAKING
INTO
ACCOUNT
SOCIAL
SECURITY
AND SIMILAR CONTRIBUTIONS AND BENEFITS OR
OTHER PLANS.—
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‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if the require-
ments of clauses (ii) and (iii) are met.
‘‘(ii) SOCIAL SECURITY AND SIMILAR
CONTRIBUTIONS.—The requirements of this
clause are met if—
‘‘(I) the requirements of subpara-
graphs (B) and (C) are met without
regard to section 401(l), and
‘‘(II) the requirements of sections
401(a)(4) and 410(b) are met with re-
spect to both the applicable defined
contribution plan and defined benefit
plan forming part of an eligible com-
bined plan without regard to section
401(l).
‘‘(iii) OTHER
PLANS
AND
ARRANGE-
MENTS.—The requirements of this clause
are met if the applicable defined contribu-
tion plan and defined benefit plan forming
part of an eligible combined plan meet the
requirements of sections 401(a)(4) and
410(b) without being combined with any
other plan.
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‘‘(3) NONDISCRIMINATION
REQUIREMENTS
FOR
QUALIFIED CASH OR DEFERRED ARRANGEMENT.—
‘‘(A) IN GENERAL.—A qualified cash or de-
ferred arrangement which is included in an ap-
plicable defined contribution plan forming part
of an eligible combined plan shall be treated as
meeting 
the 
requirements 
of 
section
401(k)(3)(A)(ii) if the requirements of paragraph
(2)(C) are met with respect to such arrangement.
‘‘(B) MATCHING
CONTRIBUTIONS.—In ap-
plying section 401(m)(11) to any matching con-
tribution with respect to a contribution to which
paragraph (2)(C) applies, the contribution re-
quirement of paragraph (2)(C) and the notice re-
quirements of paragraph (5)(B) shall be sub-
stituted for the requirements otherwise applicable
under 
clauses 
(i) 
and 
(ii) 
of 
section
401(m)(11)(A).
‘‘(4) SATISFACTION
OF
TOP-HEAVY
RULES.—A
defined benefit plan and applicable defined contribu-
tion plan forming part of an eligible combined plan
for any plan year shall be treated as meeting the re-
quirements of section 416 for the plan year.
‘‘(5) 
AUTOMATIC
CONTRIBUTION
ARRANGE-
MENT.—For purposes of this subsection—
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‘‘(A) IN GENERAL.—A qualified cash or de-
ferred arrangement shall be treated as an auto-
matic 
contribution 
arrangement 
if 
the
arrangement—
‘‘(i) provides that each employee eligi-
ble to participate in the arrangement is
treated as having elected to have the em-
ployer make elective contributions in an
amount equal to 4 percent of the employee’s
compensation unless the employee specifi-
cally elects not to have such contributions
made or to have such contributions made at
a different rate, and
‘‘(ii) meets the notice requirements
under subparagraph (B).
‘‘(B) NOTICE REQUIREMENTS.—
‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if the require-
ments of clauses (ii) and (iii) are met.
‘‘(ii) REASONABLE
PERIOD
TO
MAKE
ELECTION.—The requirements of this clause
are met if each employee to whom subpara-
graph (A)(i) applies—
‘‘(I) receives a notice explaining
the employee’s right under the arrange-
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ment to elect not to have elective con-
tributions made on the employee’s be-
half or to have the contributions made
at a different rate, and
‘‘(II) has a reasonable period of
time after receipt of such notice and
before the first elective contribution is
made to make such election.
‘‘(iii) ANNUAL NOTICE OF RIGHTS AND
OBLIGATIONS.—The requirements of this
clause are met if each employee eligible to
participate in the arrangement is, within a
reasonable period before any year, given no-
tice of the employee’s rights and obligations
under the arrangement.
The requirements of clauses (i) and (ii) of section
401(k)(12)(D) shall be met with respect to the
notices described in clauses (ii) and (iii) of this
subparagraph.
‘‘(6) COORDINATION
WITH
OTHER
REQUIRE-
MENTS.—
‘‘(A) TREATMENT OF SEPARATE PLANS.—
Section 414(k) shall not apply to an eligible
combined plan.
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‘‘(B) REPORTING.—An eligible combined
plan shall be treated as a single plan for pur-
poses of sections 6058 and 6059.
‘‘(7) 
APPLICABLE
DEFINED
CONTRIBUTION
PLAN.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘applicable
defined contribution plan’ means a defined con-
tribution plan which includes a qualified cash or
deferred arrangement.
‘‘(B) QUALIFIED CASH OR DEFERRED AR-
RANGEMENT.—The term ‘qualified cash or de-
ferred arrangement’ has the meaning given such
term by section 401(k)(2).’’.
(b) AMENDMENTS OF ERISA.—
(1) IN GENERAL.—Section 210 of the Employee
Retirement Income Security Act of 1974 is amended
by adding at the end the following new subsection:
‘‘(e) SPECIAL RULES FOR ELIGIBLE COMBINED DE-
FINED BENEFIT PLANS AND QUALIFIED CASH OR DE-
FERRED ARRANGEMENTS.—
‘‘(1) GENERAL
RULE.—Except as provided in
this subsection, this Act shall be applied to any de-
fined benefit plan or applicable individual account
plan which are part of an eligible combined plan in
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the same manner as if each such plan were not a part
of the eligible combined plan.
‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘eligible com-
bined plan’ means a plan—
‘‘(i) which, at the time the plan is es-
tablished, is maintained by a small em-
ployer,
‘‘(ii) which consists of a defined benefit
plan and an applicable individual account
plan each of which qualifies under section
401(a) of the Internal Revenue Code of
1986,
‘‘(iii) the assets of which are held in a
single trust forming part of the plan and
are clearly identified and allocated to the
defined benefit plan and the applicable in-
dividual account plan to the extent nec-
essary for the separate application of this
Act under paragraph (1), and
‘‘(iv) with respect to which the benefit,
contribution, vesting, and nondiscrimina-
tion requirements of subparagraphs (B),
(C), (D), (E), and (F) are met.
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For purposes of this subparagraph, the term
‘small employer’ has the meaning given such
term by section 4980D(d)(2), except that such
section shall be applied by substituting ‘500’ for
‘50’ each place it appears.
‘‘(B) BENEFIT REQUIREMENTS.—
‘‘(i) IN GENERAL.—The benefit require-
ments of this subparagraph are met with re-
spect to the defined benefit plan forming
part of the eligible combined plan if the ac-
crued benefit of each participant derived
from employer contributions, when ex-
pressed as an annual retirement benefit, is
not less than the applicable percentage of
the participant’s final average pay. For
purposes of this clause, final average pay
shall be determined using the period of con-
secutive years (not exceeding 5) during
which the participant had the greatest ag-
gregate compensation from the employer.
‘‘(ii) APPLICABLE PERCENTAGE.—For
purposes of clause (i), the applicable per-
centage is the lesser of—
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‘‘(I) 1 percent multiplied by the
number of years of service with the em-
ployer, or
‘‘(II) 20 percent.
‘‘(iii) SPECIAL RULE FOR CASH BAL-
ANCE PLANS.—If the defined benefit plan
under clause (i) is a qualified cash balance
plan (within the meaning of section
204(b)(5)), the plan shall be treated as
meeting the requirements of clause (i) with
respect to any plan year if each participant
receives pay credit for the year which is not
less than the percentage of compensation de-
termined in accordance with the following
table:
‘‘If the participant’s age as of the
beginning of the year is—
The percentage is—
30 or less .........................................................................................
Over 30 but less than 40 ...............................................................
40 or over but less than 50 ...........................................................
50 or over .......................................................................................
8.
‘‘(iv) YEARS
OF
SERVICE.—For pur-
poses of this subparagraph, years of service
shall be determined under the rules of para-
graphs (1), (2), and (3) of section 203(b),
except that the plan may not disregard any
year of service because of a participant
making, or failing to make, any elective de-
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ferral with respect to the qualified cash or
deferred arrangement to which subpara-
graph (C) applies.
‘‘(C) CONTRIBUTION REQUIREMENTS.—
‘‘(i) IN
GENERAL.—The contribution
requirements of this subparagraph with re-
spect to any applicable individual account
plan forming part of eligible combined plan
are met if—
‘‘(I) the qualified cash or deferred
arrangement included in such plan
constitutes an automatic contribution
arrangement, and
‘‘(II) the employer is required to
make matching contributions on behalf
of each employee eligible to participate
in the arrangement in an amount
equal to 50 percent of the elective con-
tributions of the employee to the extent
such elective contributions do not ex-
ceed 4 percent of compensation.
Rules similar to the rules of clauses (ii) and
(iii) of section 401(k)(12)(B) of the Internal
Revenue Code of 1986 shall apply for pur-
poses of this clause.
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‘‘(ii) NONELECTIVE CONTRIBUTIONS.—
An applicable individual account plan shall
not be treated as failing to meet the require-
ments of clause (i) because the employer
makes nonelective contributions under the
plan but such contributions shall not be
taken into account in determining whether
the requirements of clause (i)(II) are met.
‘‘(D) VESTING REQUIREMENTS.—The vest-
ing requirements of this subparagraph are met
if—
‘‘(i) in the case of a defined benefit
plan forming part of an eligible combined
plan an employee who has completed at
least 3 years of service has a nonforfeitable
right to 100 percent of the employee’s ac-
crued benefit under the plan derived from
employer contributions, and
‘‘(ii) in the case of an applicable indi-
vidual account plan forming part of eligible
combined plan—
‘‘(I) an employee has a nonforfeit-
able right to any matching contribu-
tion made under the qualified cash or
deferred arrangement included in such
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plan by an employer with respect to
any elective contribution, including
matching contributions in excess of the
contributions required under subpara-
graph (C)(i)(II), and
‘‘(II) an employee who has com-
pleted at least 3 years of service has a
nonforfeitable right to 100 percent of
the employee’s accrued benefit derived
under the arrangement from nonelec-
tive contributions of the employer.
For purposes of this subparagraph, the rules
of section 203 shall apply to the extent not
inconsistent with this subparagraph.
‘‘(E) UNIFORM PROVISION OF BENEFITS.—
In the case of a defined benefit plan or applica-
ble individual account plan forming part of an
eligible combined plan, the requirements of this
subparagraph are met if all benefits under each
such plan, and all rights and features under each
such plan, must be provided uniformly to all
participants.
‘‘(F) REQUIREMENTS MUST BE MET WITH-
OUT
TAKING
INTO
ACCOUNT
SOCIAL
SECURITY
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AND SIMILAR CONTRIBUTIONS AND BENEFITS OR
OTHER PLANS.—
‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if the require-
ments of clauses (ii) and (iii) are met.
‘‘(ii) SOCIAL SECURITY AND SIMILAR
CONTRIBUTIONS.—The requirements of this
clause are met if—
‘‘(I) the requirements of subpara-
graphs (B) and (C) are met without
regard to section 401(l) of the Internal
Revenue Code of 1986, and
‘‘(II) the requirements of sections
401(a)(4) and 410(b) of the Internal
Revenue Code of 1986 are met with re-
spect to both the applicable defined
contribution plan and defined benefit
plan forming part of an eligible com-
bined plan without regard to section
401(l) of the Internal Revenue Code of
1986.
‘‘(iii) OTHER
PLANS
AND
ARRANGE-
MENTS.—The requirements of this clause
are met if the applicable defined contribu-
tion plan and defined benefit plan forming
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part of an eligible combined plan meet the
requirements of sections 401(a)(4) and
410(b) of the Internal Revenue Code of 1986
without being combined with any other
plan.
‘‘(3) NONDISCRIMINATION
REQUIREMENTS
FOR
QUALIFIED CASH OR DEFERRED ARRANGEMENT.—
‘‘(A) IN GENERAL.—A qualified cash or de-
ferred arrangement which is included in an ap-
plicable individual account plan forming part of
an eligible combined plan shall be treated as
meeting 
the 
requirements 
of 
section
401(k)(3)(A)(ii) of the Internal Revenue Code of
1986 if the requirements of subparagraph (C) are
met with respect to such arrangement.
‘‘(B) MATCHING
CONTRIBUTIONS.—In ap-
plying section 401(m)(11) of such Code to any
matching contribution with respect to a con-
tribution to which paragraph (2)(C) applies, the
contribution requirement of paragraph (2)(C)
and the notice requirements of paragraph (5)(B)
shall be substituted for the requirements other-
wise applicable under clauses (i) and (ii) of sec-
tion 401(m)(11)(A) of such Code.
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‘‘(4) 
AUTOMATIC
CONTRIBUTION
ARRANGE-
MENT.—For purposes of this subsection—
‘‘(A) IN GENERAL.—A qualified cash or de-
ferred arrangement shall be treated as an auto-
matic 
contribution 
arrangement 
if 
the
arrangement—
‘‘(i) provides that each employee eligi-
ble to participate in the arrangement is
treated as having elected to have the em-
ployer make elective contributions in an
amount equal to 4 percent of the employee’s
compensation unless the employee specifi-
cally elects not to have such contributions
made or to have such contributions made at
a different rate, and
‘‘(ii) meets the notice requirements
under subparagraph (B).
‘‘(B) NOTICE REQUIREMENTS.—
‘‘(i) IN
GENERAL.—The requirements
of this subparagraph are met if the require-
ments of clauses (ii) and (iii) are met.
‘‘(ii) REASONABLE
PERIOD
TO
MAKE
ELECTION.—The requirements of this clause
are met if each employee to whom subpara-
graph (A)(i) applies—
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‘‘(I) receives a notice explaining
the employee’s right under the arrange-
ment to elect not to have elective con-
tributions made on the employee’s be-
half or to have the contributions made
at a different rate, and
‘‘(II) has a reasonable period of
time after receipt of such notice and
before the first elective contribution is
made to make such election.
‘‘(iii) ANNUAL NOTICE OF RIGHTS AND
OBLIGATIONS.—The requirements of this
clause are met if each employee eligible to
participate in the arrangement is, within a
reasonable period before any year, given no-
tice of the employee’s rights and obligations
under the arrangement.
The requirements of clauses (i) and (ii) of section
401(k)(12)(D) of the Internal Revenue Code of
1986 shall be met with respect to the notices de-
scribed in clauses (ii) and (iii) of this subpara-
graph.
‘‘(5) COORDINATION
WITH
OTHER
REQUIRE-
MENTS.—
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‘‘(A) TREATMENT OF SEPARATE PLANS.—
Section 414(k) of the Internal Revenue Code of
1986 shall not apply to an eligible combined
plan.
‘‘(B) REPORTING.—An eligible combined
plan shall be treated as a single plan for pur-
poses of section 103.
‘‘(6) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—
For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘applicable
individual account plan’ means an individual
account plan which includes a qualified cash or
deferred arrangement.
‘‘(B) QUALIFIED CASH OR DEFERRED AR-
RANGEMENT.—The term ‘qualified cash or de-
ferred arrangement’ has the meaning given such
term by section 401(k)(2) of the Internal Rev-
enue Code of 1986.’’.
(2) CONFORMING CHANGES.—
(A) The heading for section 210 of such Act
is amended to read as follows:
‘‘SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPE-
CIAL RULES.’’.
(B) The table of contents in section 1 of
such Act is amended by striking the item relat-