1.Short
title; amendment of 1986 Code; table of contents
(a)This Act may be cited as the Savings Competitiveness Act of
2006
.
(b)Except as otherwise expressly provided, whenever in
this Act an amendment or repeal is expressed in terms of an amendment to, or
repeal of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
(c)The table of contents of this Act is as follows:
Sec. 1. Short title; amendment
of 1986 Code; table of contents.
TITLE I—Employee access to retirement savings programs at
work
Sec. 101. Employees not covered by qualified retirement plans
or arrangements entitled to participate in payroll retirement savings programs
at work.
Sec. 102. Credit for small employers maintaining payroll
retirement savings arrangements.
Sec. 103. Establishment of Secure Retirement
Accounts.
TITLE II—Federal matching of certain retirement
contributions
Sec. 201. Refundable credit to provide a Federal match for
retirement contributions of certain taxpayers.
TITLE III—Other provisions to increase retirement
savings
Sec. 301. Young Savers Accounts.
Sec. 302. Increasing participation in cash or deferred plans
through automatic contribution arrangements.
Sec. 303. Treatment of investment of assets by plan where
participant fails to exercise investment election.
Sec. 304. Credit for qualified pension plan contributions of
small employers.
Sec. 305. Account funds disregarded for purposes of certain
means-tested Federal programs.
Sec. 306. Direct payment of tax refunds to individual
retirement plans.
TITLE IV—Simplification provisions
Sec. 401. Exception from required distributions where aggregate
retirement savings less than $50,000.
Sec. 402. Allowance of additional nonelective contributions to
simple plans.
Sec. 403. Extension of certain exceptions from tax on early
distributions to plans other than individual retirement plans.
Sec. 404. Elimination of higher penalty on certain simple plan
distributions.
Sec. 405. Simple plan portability.
Sec. 406. Allow direct rollovers from retirement plans to Roth
IRAS.
Sec. 407. Coordination of ordering rules for distributions from
Roth IRAs and designated Roth accounts.
TITLE V—Pay-go provisions
Sec. 501. Pay-as-you-go point of order in the
Senate.
TITLE VI—Administrative provisions
Sec. 601. Provisions relating to plan amendments.
<enum>I</enum><header>Employee access
to retirement savings programs at work</header>
<section id="id2453B75C7DB54EE6A597170132329AE8"><enum>101.</enum><header>Employees not
covered by qualified retirement plans or arrangements entitled to participate
in payroll retirement savings programs at work</header>
<subsection id="id38DB933B1C7B432EB7B06B37611DC07E"><enum>(a)</enum><header>In
general</header><text>Subpart A of part I of subchapter A of chapter 1
(relating to pension, profit-sharing, stock bonus plans, etc.) is amended by
inserting after section 408A the following new section:</text>
<quoted-block display-inline="no-display-inline" id="idB554EA2138354DC1B3620AD5A904E6AD" style="OLC">
<section id="id395B958FEC204945A4C16F5E0AD6F58D"><enum>408B.</enum><header>Right to
payroll retirement savings programs at work</header>
<subsection id="idF3421EE635A24E79ABD4E5D5D261DA04"><enum>(a)</enum><header>Requirement to
provide payroll program</header><text>Each employer (other than a small
employer described in subsection (e)) shall provide to each applicable employee
of the employer for any calendar year the opportunity to participate in a
payroll retirement savings arrangement which meets the requirements of this
section.</text>
</subsection><subsection id="id3D16DE79232846099EC8A1AA34345B30"><enum>(b)</enum><header>Payroll
retirement savings arrangement</header><text>For purposes of this
section—</text>
<paragraph id="idD99F8ECAE73D4E08A4EF7589203EB062"><enum>(1)</enum><header>In
general</header><text>The term <term>payroll retirement savings
arrangement</term> means a written arrangement of an employer—</text>
<subparagraph id="id5A18475F54CE4499A66F9879837D6BAD"><enum>(A)</enum><text>under which an
applicable employee eligible to participate in the arrangement may elect to
contribute to an individual retirement plan established by or on behalf of the
employee by having the employer make direct deposit payments to the plan by
payroll deduction, and</text>
</subparagraph><subparagraph id="idF33E4AC22F5449748F33D9EC7F1D8DCA"><enum>(B)</enum><text>which meets the
requirements of paragraph (2).</text>
</subparagraph></paragraph><paragraph id="id58C107EC446C42F38732081690F5DB44"><enum>(2)</enum><header>Administrative
requirements</header><text>The requirements of this paragraph are met with
respect to any payroll retirement savings arrangement if—</text>
<subparagraph id="id805243AA74EE48B8886250A72A92AB7D"><enum>(A)</enum><text>the employer must
make the payments elected under paragraph (1)(A)(i) not later than the close of
the 30-day period following the last day of the month in which the payroll
deduction occurs,</text>
</subparagraph><subparagraph id="idE398CE33580F4901A0A027D6BE4C2E13"><enum>(B)</enum><text>subject to a
requirement for reasonable notice, an employee may elect to terminate
participation in the arrangement at any time during the year, except that if an
employee so terminates, the arrangement may provide that the employee may not
elect to resume participation until the beginning of the next year,</text>
</subparagraph><subparagraph id="idFD608127B79D410BBB02681D5CAFC3B3"><enum>(C)</enum><text>each employee
eligible to participate may elect, during the 60-day period before the
beginning of any year (and the 60-day period before the first day the employee
is eligible to participate), to participate in the arrangement, or to modify
the amounts subject to the arrangement, for such year,</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id1F23D40348A246D9B4703C94500B2722"><enum>(D)</enum><text>immediately
before the period for which an election described in paragraph (1)(A) may be
made, the employer provides a notice to each employee of the employee’s
opportunity to make the election and the maximum amount which may be
contributed to an individual retirement plan on an annual basis, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id613D04B821674AE2A340B1DD99DEC5F3"><enum>(E)</enum><text>subject to
subsection (f), the arrangement provides that an employee may elect to have
contributions made to any individual retirement plan specified by the
employee.</text>
</subparagraph></paragraph></subsection><subsection id="idCCFD7FC3C1B54955BBF68FEE3105B8AC"><enum>(c)</enum><header>Applicable
employee</header><text>For purposes of this section—</text>
<paragraph id="idCA00C016954949179C691D27FAFBBD86"><enum>(1)</enum><header>In
general</header><text>The term <term>applicable employee</term> means, with
respect to any calendar year, any employee—</text>
<subparagraph id="idCC3DB6ECDB2D45499C9AC36477265281"><enum>(A)</enum><text>who did not
benefit (within the meaning of section 410(b)) under a qualified plan or
arrangement maintained by the employer for service during the preceding
calendar year, and</text>
</subparagraph><subparagraph id="idEC69206BD430467489188AC496219E4C"><enum>(B)</enum><text>with respect to
whom it is reasonable to expect that the employee will not so benefit during
the calendar year under such a qualified plan or arrangement.</text>
</subparagraph></paragraph><paragraph id="idFCC43F6950BC47F49F3AEFD9D2AAE3D4"><enum>(2)</enum><header>Excludable
employees</header><text>An employer may elect to exclude from treatment as
applicable employees under subparagraph (A)—</text>
<subparagraph id="id7F2CADA4989F41A6B18D760B2CE3E48A"><enum>(A)</enum><text>employees
described in section 410(b)(3),</text>
</subparagraph><subparagraph id="id6CE4FCFEEB4D45D29BC7604DAC1EC977"><enum>(B)</enum><text>employees who
have not attained the age of 18 before the beginning of the calendar
year,</text>
</subparagraph><subparagraph id="id507B76B488B741A9ADDBCA393B5D7BA0"><enum>(C)</enum><text>employees who
have not completed at least 3 months of service with the employer,</text>
</subparagraph><subparagraph id="id396AE4920D7446A9B50378222762D00E"><enum>(D)</enum><text>employees who are
reasonably expected to receive less than $5,000 of compensation from the
employer during the calendar year, and</text>
</subparagraph><subparagraph id="id688ACFA18C634E6A9E71512A83942D40"><enum>(E)</enum><text>employees who
will be eligible to participate in a qualified cash or deferred arrangement (as
defined in section 401(k)(2)) of the employer upon the completion of a year of
service requirement which, under the arrangement, is not more than 500
hours.</text>
</subparagraph></paragraph><paragraph id="id1EFECFC953BD4D7DB0D51615FE623671"><enum>(3)</enum><header>Qualified plan
or arrangement</header><text>The term <term>qualified plan or
arrangement</term> means a plan, contract, pension, or trust described in
section 219(g)(5).</text>
</paragraph><paragraph id="idB961F9F5B2F74A3A988F0102547C4D7D"><enum>(4)</enum><header>Exception for
employees of governments and churches</header><text>The term <term>applicable
employee</term> shall not include an employee of—</text>
<subparagraph id="id1AB54B635AF64545B180B88D09CF27FF"><enum>(A)</enum><text>a government or
entity described in section 414(d), or</text>
</subparagraph><subparagraph id="idA13B3D0835CA4F999E02641777E55F35"><enum>(B)</enum><text>a church or a
convention or association of churches which is exempt from tax under section
501, including any employee described in section 414(e)(3)(B).</text>
</subparagraph></paragraph></subsection><subsection id="idA641E0D59BAF44D1A469135D8F75C317"><enum>(d)</enum><header>Payroll savings
contributions treated like other contributions to individual retirement
plans</header>
<paragraph id="id91DE8510C642494E91BA97FEFD8471B3"><enum>(1)</enum><header>Tax treatment
unaffected</header><text>The fact that a contribution to an individual
retirement plan is made on behalf of an employee under a payroll retirement
savings arrangement instead of being made directly by the employee shall not
affect the deductibility or other tax treatment of the contribution or of other
amounts under this title.</text>
</paragraph><paragraph id="id6DE0A9F7D4B64312A29CCD29D08E3F42"><enum>(2)</enum><header>Payroll savings
contributions taken into account</header><text>Any contribution made on behalf
of an employee under a payroll retirement savings arrangement shall be taken
into account in applying the limitations on contributions to individual
retirement plans and the other provisions of this title applicable to
individual retirement plans as if the contribution had been made directly by
the employee.</text>
</paragraph></subsection><subsection id="id7331555BDF014AB1832874A2C4E09979"><enum>(e)</enum><header>Exception for
certain small employers</header>
<paragraph id="idE5EDD812E16844A8824D59D6E5842C1A"><enum>(1)</enum><header>In
general</header><text>The requirements of this section shall not apply for any
calendar year to an employer which had not more than 4 employees who received
at least $5,000 of compensation from the employer for the preceding calendar
year.</text>
</paragraph><paragraph id="id535E8C40644841CCB6D7D87466DB1182"><enum>(2)</enum><header>Operating
rules</header><text>In determining the number of employees for purposes of this
subsection—</text>
<subparagraph id="idB4096519DD1F493FB4FBEFA709DC2DF8"><enum>(A)</enum><text>any rule
applicable in determining the number of employees for purposes of section
408(p)(2)(C) shall be applicable under this subsection, and</text>
</subparagraph><subparagraph id="id47F4F449A6DF46FE92CB4A73A3846D1D"><enum>(B)</enum><text>all members of
the same family (within the meaning of section 318(a)(1)) shall be treated as 1
individual.</text>
</subparagraph></paragraph></subsection><subsection id="id00F242AF99FC4324A6D82B25F1288EF5"><enum>(f)</enum><header>Use of
designated financial institution</header><text>An employer shall not be treated
as failing to satisfy the requirements of this section or any other provision
of this title merely because the employer makes all contributions (or all
contributions on behalf of employees who do not specify an individual
retirement plan, trustee, or issuer to receive the contributions) to Secure
Retirement Accounts, or other arrangements specified in regulations prescribed
by the Secretary, of a designated trustee or issuer. The preceding sentence
shall not apply unless each participant is notified in writing that the
participant’s balance may be transferred without cost or penalty to another
individual retirement plan in accordance with subsection (b)(1)(A).</text>
</subsection><subsection id="id88D15F3E48D349C29BAFC43550F8776E"><enum>(g)</enum><header>Coordination
with automatic enrollment provisions</header>
<paragraph id="id8E38AD3B8ECB4ED1B908E25B2226AD45"><enum>(1)</enum><header>In
general</header><text>A payroll retirement savings arrangement may provide that
contributions under the arrangement will be made pursuant to an automatic
contribution arrangement but only if the arrangement meets the requirements
applicable to an eligible automatic contribution arrangement under section
414(w). The Secretary may modify such requirements to the extent necessary to
carry out the purposes of this section.</text>
</paragraph><paragraph id="id9792D4A2CBE542A5B1ECF300EED4B3EA"><enum>(2)</enum><header>Default
investments</header><text>If an employee does not make an investment election
under an automatic contribution arrangement described in paragraph (1)—</text>
<subparagraph id="idAF8E780B252247D8849F59A8AF5773AA"><enum>(A)</enum><text>the contributions
shall be transferred to a Secure Retirement Account or other arrangement
specified in regulations prescribed by the Secretary, and</text>
</subparagraph><subparagraph id="idFFFE47905C6244E7B01B1993F2775DFB"><enum>(B)</enum><text>such
contributions (and any earnings thereon) shall be invested in accordance with
the regulations prescribed under section 404(c)(4) of the Employee Retirement
Income Security Act of 1974.</text>
</subparagraph></paragraph></subsection><subsection id="id2ECA885F8FCE4FBB9831F94552C38A35"><enum>(h)</enum><header>Model
notice</header><text>The Secretary shall provide a model notice, written in a
manner calculated to be understandable to the average worker, that employers
may use—</text>
<paragraph id="id9135FD7822254DD1933710BD9528E3F0"><enum>(1)</enum><text>to notify
employees of the requirement under this section for the employer to provide
certain employees with the opportunity to participate in a payroll retirement
savings arrangement, and</text>
</paragraph><paragraph id="id9CC73F25309A4429803DD60392330ADF"><enum>(2)</enum><text>to satisfy the
requirements of subsections (b)(2)(D) and
(f).</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idE054922B86F64E56A180463D53583B93"><enum>(b)</enum><header>Preemption of
conflicting State regulations</header><text>Section 514(e)(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1144(e)(1)), as added by
section 302, is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="idF47F824218004E06946737F72556194F" style="OLC">
<paragraph id="idD9C79FA90636481B8241A595C565F99B"><enum>(1)</enum><header>In
general</header><text>Notwithstanding any other provision of this section, any
law of a State shall be superseded if it would directly or indirectly prohibit
or restrict—</text>
<subparagraph id="id714044820836471EBA20840A8330B8AC"><enum>(A)</enum><text>the inclusion in
any plan of an eligible automatic contribution arrangement, or</text>
</subparagraph><subparagraph id="id5D20BE7F2A484EF199D1C7FF09DB9CC3"><enum>(B)</enum><text>the establishment
or operation of a payroll retirement savings arrangement meeting the
requirements of section 408B of the Internal Revenue Code of 1986 (and the
inclusion in such arrangement of an eligible automatic contribution
arrangement).</text>
</subparagraph><continuation-text continuation-text-level="paragraph">This
subsection shall apply to a plan or arrangement without regard to whether this
title applies to such plan or
arrangement.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idA1E846CFEA6943C2A0F3BA04C4E96CED"><enum>(c)</enum><header>Provisions to
ensure adequate notice of availability of payroll retirement savings
arrangements and investment guidelines</header>
<paragraph id="idF22059DA6D5D4726AF9168EAD147EC3C"><enum>(1)</enum><header>Employer-provided
notice</header>
<subparagraph id="idE09CBBF70D844F748C636C4D8F5B8321"><enum>(A)</enum><header>W-4
statements</header><text>Section 3402(f) (relating to withholding exemptions)
is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id5ACC35997ACD4E72998144486A217994" style="OLC">
<paragraph id="id21D3087981044764B769915E0A11D246"><enum>(8)</enum><header>Inclusion of
payroll savings notice</header><text>An employer shall include with any
withholding exemption certificate provided to an employee under this subsection
the model notice described in section 408B(h) and notice of the availability
of, and methods of acquiring, the model form prepared by the Secretary of Labor
with respect to basic investment
guidelines.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="id08C8EF97FCCB4D738ACF8A4213B4AF13"><enum>(B)</enum><header>Posting at
worksite</header><text>Each employer required to maintain a payroll retirement
savings arrangement under section 408B of the Internal Revenue Code of 1986
shall, in addition to any other requirement, post the following notices within
the principal places of employment of any applicable employees which are
customarily used for employer notices to employees with regard to employment
and employee benefit matters:</text>
<clause id="idFAB137693BE84948BA0FFD7F8D5B84AD"><enum>(i)</enum><text>The
model notice described in section 408B(h) of such Code (in such form and manner
as the Secretary may prescribe).</text>
</clause><clause id="idAD8FB25A7D8347BCA0C661975F934622"><enum>(ii)</enum><text>Notice of the
availability of, and methods of acquiring, the model form prepared by the
Secretary of Labor with respect to basic investment guidelines.</text>
</clause></subparagraph></paragraph><paragraph id="idDBD828A620C446EAA4512E163BC54E7F"><enum>(2)</enum><header>Inclusion in
social security notices</header><text>Section 1143 of the Social Security Act
(42 U.S.C. 1320b-13) is amended by adding at the end the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id3C23E8FAF4224C44B88696C6891B4398" style="OLC">
<subsection id="idB98CE55FFC9440529B15E4BDBFCA1D99"><enum>(e)</enum><header>Notice of
payroll savings programs</header><text>The Commissioner shall include with each
social security account statement required to be provided under this section
the notice described in section
408B(h).</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idE2201F2C866E4EEE9F1F51AAEAF91FE5"><enum>(3)</enum><header>IRA
notices</header><text>Section 408(i) (relating to reports) is amended by adding
at the end the following new sentence: <quote>Any report furnished under
paragraph (2) to an individual shall include the notice of the availability of,
and methods of acquiring, the model form prepared by the Secretary of Labor
with respect to basic investment guidelines.</quote>.</text>
</paragraph></subsection><subsection id="id5F376E2957974D4EB5EB6AF689B32577"><enum>(d)</enum><header>Development of
model form establishing basic investment guidelines</header>
<paragraph id="idA428421751144F20B057A256DC244D59"><enum>(1)</enum><header>In
general</header><text>The Secretary of Labor shall, in consultation with the
Secretary of Treasury, develop a model form containing basic guidelines for
investing for retirement. Except as otherwise provided by the Secretary, such
guidelines shall include—</text>
<subparagraph id="id95598A5261A14CC3B9D71A5864FB593B"><enum>(A)</enum><text>information on
the benefits of diversification,</text>
</subparagraph><subparagraph id="id66680B14C0574A3888F5ED880FB6A6E8"><enum>(B)</enum><text>information on
the essential differences, in terms of risk and return, of pension plan
investments, including stocks, bonds, mutual funds, and money market
investments,</text>
</subparagraph><subparagraph id="idE641F55300AD4ED4890400C6F09F4BCC"><enum>(C)</enum><text>information on
how an individual’s pension plan investment allocations may differ depending on
the individual’s age and years to retirement and on other factors determined by
the Secretary of Labor,</text>
</subparagraph><subparagraph id="idCF5804A3BD7D42AB81C224C50360F5A3"><enum>(D)</enum><text>sources of
information where individuals may learn more about pension rights, individual
investing, and investment advice, and</text>
</subparagraph><subparagraph id="id242DEEDC9A994D9EB335636E86C54542"><enum>(E)</enum><text>such other
information related to individual investing as the Secretary of Labor
determines appropriate.</text>
</subparagraph></paragraph><paragraph id="idBEC913134EC042A6BD0E3B8C9BF618E6"><enum>(2)</enum><header>Calculation
information</header><text>The model form under paragraph (1) shall include
addresses for Internet sites and worksheets which a participant or beneficiary
may use to calculate—</text>
<subparagraph id="id5DE4E015E9F54CA1A5263C22A5762011"><enum>(A)</enum><text>the retirement
age value of the participant’s or beneficiary’s nonforfeitable pension benefits
under the plan (expressed as an annuity amount and determined by reference to
varied historical annual rates of return and annuity interest rates),
and</text>
</subparagraph><subparagraph id="id867DA47FF0024449870F8A60C7B4554A"><enum>(B)</enum><text>other important
amounts relating to retirement savings, including the amount which a
participant or beneficiary would be required to save annually to provide a
retirement income equal to various percentages of their current salary
(adjusted for expected growth prior to retirement).</text>
</subparagraph></paragraph><paragraph id="id94266F1BED414575838063BFEF037ED3"><enum>(3)</enum><header>Public
comment</header><text>The Secretary of Labor shall provide at least 90 days for
public comment on a proposed form before publishing final notice of the model
form.</text>
</paragraph><paragraph id="idF554A286312B4DB4BACC2167CDDF48EE"><enum>(4)</enum><header>Rules relating
to form and statement</header><text>The model form under paragraph (1)—</text>
<subparagraph id="id9AD7D61FDCAA4352B4B82527BBC8E110"><enum>(A)</enum><text>shall be written
in a manner calculated to be understood by the average plan participant,
and</text>
</subparagraph><subparagraph id="id8C52D31DB0DA4EEE892BB58C300CD744"><enum>(B)</enum><text>may be delivered
in written, electronic, or other appropriate manner to the extent such manner
would ensure that the form is reasonably accessible to participants and
beneficiaries.</text>
</subparagraph></paragraph></subsection><subsection id="id894AED8E6302419CB3E3C98BC8AFA044"><enum>(e)</enum><header>Penalty for
failure to provide access to payroll savings arrangements</header><text>Chapter
43 (relating to qualified pension, etc., plans) is amended by adding at the end
the following new section:</text>
<quoted-block display-inline="no-display-inline" id="id9D8AD3C3624C4CF897D9DCCF0C264AE0" style="OLC">
<section id="id1CDDFB0259104DCFA736FDEF9405106B"><enum>4980H.</enum><header>Requirements
for employers to provide employees access to payroll retirement savings
arrangements</header>
<subsection id="id939E1FD603684026853315FA6FE3338C"><enum>(a)</enum><header>General
rule</header><text>There is hereby imposed a tax on any failure by an employer
to meet the requirements of subsection (d) for a calendar year.</text>
</subsection><subsection id="idE821CD47578D4CB88737CFCB74E6FEFE"><enum>(b)</enum><header>Amount</header>
<paragraph id="id511E7FAF5F804EA88FCCEE98FA2AD76E"><enum>(1)</enum><header>In
general</header><text>The amount of the tax imposed by subsection (a) on any
failure for any calendar year shall be $100 with respect to each employee to
whom such failure relates.</text>
</paragraph><paragraph id="id286AA34037C9444A9CA26CB10CDDB64A"><enum>(2)</enum><header>Tax not to
apply where failure not discovered and reasonable diligence
exercised</header><text>No tax shall be imposed by subsection (a) on any
failure during any period for which it is established to the satisfaction of
the Secretary that any employer subject to liability for the tax did not know
that the failure existed and exercised reasonable diligence to meet the
requirements of subsection (d). In no event shall the tax be impaired with
respect to any failure that ends before the expiration of 90 days after the
employer has responded or has had a reasonable opportunity to respond to a
request for confirmation of compliance under subsection (c).</text>
</paragraph><paragraph id="id1340C45D65724FE0864EDAE54D282638"><enum>(3)</enum><header>Tax not to
apply to failures corrected within 30 days</header><text>No tax shall be
imposed by subsection (a) on any failure if—</text>
<subparagraph id="id2C246677E808406D889C982D167C1064"><enum>(A)</enum><text>the employer
subject to liability for the tax under subsection (a) exercised reasonable
diligence to meet the requirements of subsection (d), and</text>
</subparagraph><subparagraph id="id9ADEDD1A564C4C48A5ABC8C3899643FF"><enum>(B)</enum><text>the employer
provides the payroll retirement savings arrangement described in section 408B
to each employee eligible to participate in the arrangement by the end of the
30-day period beginning on the first date the employer knew, or exercising
reasonable diligence would have known, that such failure existed.</text>
</subparagraph></paragraph><paragraph id="id7FF1E28E2BFA4B3B9F30AAA182DFAED8"><enum>(4)</enum><header>Waiver by
Secretary</header><text>In the case of a failure which is due to reasonable
cause and not to willful neglect, the Secretary may waive part or all of the
tax imposed by subsection (a) to the extent that the payment of such tax would
be excessive or otherwise inequitable relative to the failure involved.</text>
</paragraph></subsection><subsection id="id1F0A0002012A4AD7AF6B164D3714B8DA"><enum>(c)</enum><header>Procedures for
notice</header><text>Not later than 6 months after the date of the enactment of
this section, the Secretary shall prescribe and implement procedures for
obtaining from employers confirmation that such employers are in compliance
with the requirements of subsection (d). The Secretary, in the Secretary’s
discretion, may prescribe that the confirmation shall be obtained on an annual
or less frequent basis, and may use for this purpose the annual report or
quarterly report for employment taxes, or such other means as the Secretary may
deem advisable.</text>
</subsection><subsection id="idB14E86CC61FF47CAB33E8459CAE5ABDB"><enum>(d)</enum><header>Requirement to
provide employee access to payroll retirement savings
arrangements</header><text>The requirements of this subsection are met if the
employer meets the requirements of section
408B.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id68D81CAF31CB4A2BAC05EF60B4FFD933"><enum>(f)</enum><header>Coordination
with ERISA fiduciary duties</header><text>Section 404(c)(2) of such Act (29
U.S.C. 1104(c)(2)) is amended—</text>
<paragraph id="id8F4CB0BD847340739FC7E12802D57DDE"><enum>(1)</enum><text>by inserting
<quote>or an individual retirement plan established pursuant to a payroll
retirement savings arrangement required under section 408B of such Code</quote>
after <quote>1986</quote>, and</text>
</paragraph><paragraph id="idF4ABEA05C0A04E639B282820B97976E7"><enum>(2)</enum><text>by inserting
<quote>or individual retirement plan established pursuant to a payroll
retirement savings arrangement required under section 408B of such Code</quote>
after <quote>simple retirement account</quote> each place it appears in
subparagraph (B) or (C).</text>
</paragraph></subsection><subsection id="id87D9BB7AC56D4259AF906ACA1E039271"><enum>(g)</enum><header>Modification of
top-heavy rules</header><text>Section 416(i) (relating to definitions) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idD1BBA43C19FB4942993A0BD6A317039C" style="OLC">
<paragraph id="idC9439F071767423EB6A749134AA2EE5C"><enum>(7)</enum><header>Treatment of
certain employees under cash or deferred arrangements</header><text>If
employees are eligible to participate in a qualified cash or deferred
arrangement (as defined in section 401(k)(2)) of the employer during any year
upon completion of a year of service requirement, which under the arrangement,
is not more than 500 hours, the employer may elect to exclude from the
application of this section all such employees who do not meet the age and
service requirements of section
410(a)(1)(A).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id405A3EDA1CCC42E88E887A0F94A3C7FC"><enum>(h)</enum><header>Conforming
amendments</header>
<paragraph id="id228CC88E9A824D4E93AD982D1C515FC5"><enum>(1)</enum><text>The table of
sections for subpart A of part I of subchapter A of chapter 1 is amended by
inserting after the item relating to section 408A the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="id187E2688BB6A414EA60A34A46FB0C9AB" style="OLC">
<toc>
<toc-entry idref="id8FF1994FAB1A4CC48AB96F5CD5208B50" level="section">Sec. 408B. Right to payroll retirement savings programs at
work.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID90D183B61BC44317B1FD46631E376539"><enum>(2)</enum><text>The table of
sections for chapter 43 is amended by adding at the end the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="IDA868C8F0DA6B432ABC59403585F653C8" style="USC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 4980H. Requirements for employers to
provide employees access to payroll retirement savings
arrangements.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id1D90EB2304054CD6A617CC5AB00E9AB7"><enum>(i)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to calendar
years beginning after December 31, 2007.</text>
</subsection></section><section id="id65A864CA330844D7886C8E5CAD82FC14"><enum>102.</enum><header>Credit for
small employers maintaining payroll retirement savings arrangements</header>
<subsection id="id977BC04B07F949FBB4D22AA39473FB76"><enum>(a)</enum><header>In
general</header><text>Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits) is amended by adding at the end the
following new section:</text>
<quoted-block display-inline="no-display-inline" id="idFAE1FFDBFA1547969C798B400EA17418" style="OLC">
<section id="id4538345DFF084E0CA99842EB7B0CFFDA"><enum>45N.</enum><header>Small employer
payroll retirement savings arrangement costs</header>
<subsection id="id4F71443A1FB64B9FA08F6BA7F3462562"><enum>(a)</enum><header>General
rule</header><text>For purposes of section 38, in the case of an eligible
employer maintaining a payroll retirement savings arrangement meeting the
requirements of section 408B (without regard to whether or not the employer is
required to maintain the arrangement), the small employer payroll retirement
savings arrangement cost credit determined under this section for any taxable
year is the amount determined under subsection (b).</text>
</subsection><subsection id="id49F026158BBB439795556901BBB3B36C"><enum>(b)</enum><header>Amount of
credit</header>
<paragraph id="idC4E8A9FA59364F408E9900569BA3B9B3"><enum>(1)</enum><header>In
general</header><text>The amount of the credit determined under this section
for any taxable year with respect to an eligible employer shall be equal to the
lesser of—</text>
<subparagraph id="id0025F5037E24438688DD7C507EBDB7B9"><enum>(A)</enum><text>$25 multiplied by
the number of applicable employees (within the meaning of section 408B(c)) for
whom contributions are made under the payroll retirement savings arrangement
referred to in subsection (a) for the calendar year in which the taxable year
begins, or</text>
</subparagraph><subparagraph id="idEF0C8196CA544D37A6D7EF9FCFC84896"><enum>(B)</enum><text>$250.</text>
</subparagraph></paragraph><paragraph id="id1E5F9B9948054331BC7EA6302AD7B094"><enum>(2)</enum><header>Duration of
credit</header>
<subparagraph id="idE8CF25CE506B4B698F559A219D6EF52A"><enum>(A)</enum><header>In
general</header><text>No credit shall be determined under this section for any
taxable year other than the first taxable year which begins in the first
calendar year in which the eligible employer maintains a payroll retirement
savings arrangement meeting the requirements of section 408B.</text>
</subparagraph><subparagraph id="id864C76CE26424B78A8326E585F8B5A23"><enum>(B)</enum><header>Exception for
automatic contribution arrangements</header>
<clause id="id51B6E4969CC841E89A0E7BF57C53D041"><enum>(i)</enum><header>In
general</header><text>Subparagraph (A) shall not apply to any taxable year
beginning in a calendar year if the payroll retirement savings arrangement
includes an eligible automatic contribution arrangement meeting the
requirements of section 408B(g) at all times during the calendar year.</text>
</clause><clause id="id9B31202E2DA24FB48310E57D9D6102B5"><enum>(ii)</enum><header>Limitation</header><text>This
subparagraph shall only apply to 2 taxable years. The taxpayer shall elect the
applicable taxable years and such election, once made, shall be
irrevocable.</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="id4D81BA01D5984980AE7DA403EBFD5738"><enum>(3)</enum><header>Coordination
with small employer startup credit</header><text>No credit shall be allowed
under this section for any taxable year if a credit is determined under section
45E for the taxable year.</text>
</paragraph></subsection><subsection id="id814178B52C7A4BCF883DF58AC5D877DB"><enum>(c)</enum><header>Eligible
employer</header><text>For purposes of this section, the term <term>eligible
employer</term> means, with respect to any calendar year in which the taxable
year begins, an employer which maintains a payroll retirement savings
arrangement meeting the requirements of section 408B and which, on each day
during the preceding calendar year, had no more than 25
employees.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idF053E9A5B6354A05B6E0D161CFCFA4AC"><enum>(b)</enum><header>Credit allowed
as part of general business credit</header><text>Section 38(b) (defining
current year business credit) is amended by striking <quote>and</quote> at the
end of paragraph (29), by striking the period at the end of paragraph (30) and
inserting <quote>, and</quote>, and by adding at the end the following new
paragraph:</text>
<quoted-block id="idC36EE58BAE3F43EFA80FA9F98CA5ADBF">
<paragraph id="id774E31567A8A4194B33CEDC81C9CCD61"><enum>(31)</enum><text>in the case of
an eligible employer (as defined in section 45N(c)) maintaining a payroll
retirement savings arrangement meeting the requirements of section 408B, the
small employer payroll retirement savings arrangement cost credit determined
under section 45N(a).</text>
</paragraph><after-quoted-block></after-quoted-block></quoted-block>
</subsection><subsection id="id45E11F3314F24858A7808E7D89DEB2AF"><enum>(c)</enum><header>Clerical
amendment</header><text>The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="id299708B83D724CB89B585D2D119A1F93" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 45N. Small employer payroll
retirement savings arrangement costs.</toc-entry>
</toc>
<after-quoted-block>.
</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id7EB8D8194B4E46838B7B7E285CEDA88F"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2007.</text>
</subsection></section><section id="id8D99E8160D074269934F57AFBF55389E"><enum>103.</enum><header>Establishment
of Secure Retirement Accounts</header>
<subsection id="idFF6F7C9921A741CF9B66AE7842C1F554"><enum>(a)</enum><header>In
general</header><text>Subpart A of part I of subchapter A of chapter 1
(relating to pension, profit-sharing, stock bonus plans, etc.), as amended by
section 101, is amended by inserting after section 408B the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="id5C92D96E69CE4899B78B453BEB67922B" style="OLC">
<section id="id8FF1994FAB1A4CC48AB96F5CD5208B50"><enum>408C.</enum><header>Secure
retirement accounts</header>
<subsection id="idBF75AEA8AC1D417F90C54FAEEFD33837"><enum>(a)</enum><header>General
rule</header><text>A Secure Retirement Account shall be treated for purposes of
this title in the same manner as an individual retirement plan. A Secure
Retirement Account may also be treated as a Roth IRA for purposes of this title
if it meets the requirements of section 408A.</text>
</subsection><subsection id="id41C77156429E4938B702704852BF9136"><enum>(b)</enum><header>Secure
Retirement Account</header><text>For purposes of this section, the term
<term>Secure Retirement Account</term> means an individual retirement plan (as
defined in section 7701(a)(37)) which meets the investment and fee requirements
under the regulations under subsection (c).</text>
</subsection><subsection id="idFF5EAB697716426AAF9BDE12BFF0CE11"><enum>(c)</enum><header>Investment and
fee requirements</header>
<paragraph id="id434C8FEA92804746861F1238D27BB130"><enum>(1)</enum><header>In
general</header><text>The Secretary, in consultation with the Secretary of
Labor, shall, not later than 1 year after the date of the enactment of this
section, prescribe regulations which set forth the requirements of this
subsection which an individual retirement plan must meet in order to be treated
as a Secure Retirement Account.</text>
</paragraph><paragraph id="id8721022EE0314D288231960887A1EEF9"><enum>(2)</enum><header>Investment
options</header><text>The regulations under paragraph (1) shall provide that a
Secure Retirement Account shall allow the individual on whose behalf the
individual retirement plan is established to invest contributions to, and
earnings of, the plan in all of the following investment options:</text>
<subparagraph id="idADB47B59F644414DA58BF04AA015BC86"><enum>(A)</enum><text>Options which are
similar to all investment options which are available (at the time the plan is
established) to a participant in the Thrift Savings Fund established under
subchapter III of chapter 84 of title 5, United States Code.</text>
</subparagraph><subparagraph id="id0D910ECC8DEC4716968D0565267CF97A"><enum>(B)</enum><text>Any other
investment option specified in the regulations.</text>
</subparagraph></paragraph><paragraph id="idD6D40545A5134073BB776271DD625107"><enum>(3)</enum><header>Investment
fees</header>
<subparagraph id="idB6D4E5C68C644CEB94405486BBE545CB"><enum>(A)</enum><header>In
general</header><text>The regulations under paragraph (1) shall provide that a
Secure Retirement Account shall not charge any investment fees which, in the
aggregate, are not reasonable (as determined under such regulations).</text>
</subparagraph><subparagraph id="id99A448EF5B9B4B4797AFD46A992BB598"><enum>(B)</enum><header>Investment
fees</header><text>For purposes of this paragraph, the term <term>investment
fees</term> includes any fee, commission, asset management fee, compensation
for services, or any other charge or fee specified in the regulations under
paragraph (1) which is imposed with respect to the Secure Retirement
Account.</text>
</subparagraph></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id5E658A1B681741FD9372137743A5EA96"><enum>(b)</enum><header>Mandatory
transfers</header><text>Section 401(a)(31)(B) is amended—</text>
<paragraph id="id8B6361231B044576BA7AEF0A419FEF3F"><enum>(1)</enum><text>by striking
<quote>an individual retirement plan</quote> and inserting <quote>a Secure
Retirement Account under section 408C, or such other arrangement prescribed by
the Secretary in regulations,</quote>, and</text>
</paragraph><paragraph id="id55EBC084C6774327B178FAE80995D4B4"><enum>(2)</enum><text>by adding at the
end the following new sentence: <quote>Any amount so transferred (and any
earnings thereon) shall be invested in accordance with the regulations
prescribed under section 404(c)(4) of the Employee Retirement Income Security
Act of 1974.</quote></text>
</paragraph></subsection><subsection id="ID9EAA8ACDDAEA4BCBA1F4EE48ACB47BB8"><enum>(c)</enum><header>Clerical
amendment</header><text>The table of sections for subpart A of part I of
subchapter A of chapter 1 is amended by inserting after the item relating to
section 408B the following new item:</text>
<quoted-block display-inline="no-display-inline" id="idF872B7A61FFF4FE58880B60D9F9736C6" style="OLC">
<toc>
<toc-entry idref="id8FF1994FAB1A4CC48AB96F5CD5208B50" level="section">Sec. 408C. Secure retirement
accounts.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID9736BD155EC547AFB41F9CC43C299500"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to calendar
years beginning on or after the date on which final regulations described in
section 408C(c) of the Internal Revenue Code of 1986 (as added by this Act) are
issued.</text>
</subsection></section><enum>II</enum><header>Federal matching
of certain retirement contributions</header>
<section id="id40F17469A0C24B1BAC0F2B436FE052CD"><enum>201.</enum><header>Refundable
credit to provide a Federal match for retirement contributions of certain
taxpayers</header>
<subsection id="id533270F36E4847419C4D27D73D0AFE00"><enum>(a)</enum><header>Allowance of
credit</header><text>Subpart C of part IV of subchapter A of chapter 1
(relating to refundable credits) is amended by redesignating section 36 as
section 37 and by inserting after section 35 the following new section:</text>
<quoted-block display-inline="no-display-inline" id="id97D900E84C264AF68383239B988BDFB7" style="OLC">
<section id="idDDD8326EF784411C904B3B98162DFAAD"><enum>36.</enum><header>Matching
contributions for certain retirement savings contributions</header>
<subsection id="id524EAB9AAAB641F6B78A9D39ADABC32C"><enum>(a)</enum><header>Allowance of
credit</header><text>In the case of an eligible individual, there shall be
allowed as a credit against the tax imposed by this subtitle for the taxable
year an amount equal to the retirement savings credit amount.</text>
</subsection><subsection id="idBB6533B27C7E4366AFFA34EB5EF41398"><enum>(b)</enum><header>Retirement
savings credit amount</header><text>For purposes of this section—</text>
<paragraph id="idBEADFBEBD45D4BE3B6A70393873B62C6"><enum>(1)</enum><header>In
general</header><text>The term <term>retirement savings credit amount</term>
means an amount equal to 50 percent of so much of the qualified retirement
savings contributions of the eligible individual for the taxable year as does
not exceed the applicable contribution amount.</text>
</paragraph><paragraph id="id86254C6E944548DA9AF0056FD55CD920"><enum>(2)</enum><header>Minimum
contributions required</header><text>The retirement savings credit amount shall
be zero if the qualified retirement savings contributions of the eligible
individual for the taxable year do not exceed $200.</text>
</paragraph></subsection><subsection id="id29C91DD1A9EA4537BBE2959E71FAD930"><enum>(c)</enum><header>Applicable
contribution amount</header><text>For purposes of this section—</text>
<paragraph id="id59BE5B3235374FB5A244FBE5B3A64253"><enum>(1)</enum><header>In
general</header><text>The term <term>applicable contribution amount</term>
means $2,000.</text>
</paragraph><paragraph id="id7949FF34678E42B4844A6127A925733A"><enum>(2)</enum><header>Cost-of-living
adjustment</header><text>In the case of any taxable year beginning in a
calendar year after 2007, the $2,000 dollar amount under paragraph (1) shall be
increased by an amount equal to such dollar amount multiplied by the cost of
living adjustment determined under section 1(f)(3) for the calendar year in
which the taxable year begins, determined by substituting <quote>2006</quote>
for <quote>1992</quote> in subparagraph (B) thereof. If any amount so increased
is not a multiple of $50, the amount shall be rounded to the next lower
multiple of $50.</text>
</paragraph><paragraph id="id75CA86FDAE824CA58E0FFBC247F7ACB7"><enum>(3)</enum><header>Adjusted gross
income limitation</header>
<subparagraph id="id49EE632AE4CE4614BB64218A1D74A269"><enum>(A)</enum><header>In
general</header><text>If the taxpayer's adjusted gross income for any taxable
year exceeds the threshold amount, the applicable contribution amount for the
taxpayer for the taxable year (determined without regard to this paragraph)
shall be reduced by an amount equal to the amount which bears the same ratio to
such applicable contribution amount as such excess bears to $10,000 in the case
of a joint return, $7,500 in the case of the head of a household, and $5,000 in
the case of any other taxpayer.</text>
</subparagraph><subparagraph id="idFF21C5F070954C3D8653327886C61FB5"><enum>(B)</enum><header>Threshold
amount</header><text>For purposes of this paragraph, the term <term>threshold
amount</term> means—</text>
<clause id="id77978BBE63564AA09817B3ADAEB3B6C7"><enum>(i)</enum><text>$50,000 in the
case of a joint return,</text>
</clause><clause id="id156EFBC8D0D74A8A9B9ED7AFBB62B283"><enum>(ii)</enum><text>$37,500 in the
case of a head of household,</text>
</clause><clause id="id8674F119E46446BEBAC991CF0CF77B11"><enum>(iii)</enum><text>zero in the
case of a married individual filing a separate return, and</text>
</clause><clause id="id0776D8CC18D3416EAE165E71A95B4943"><enum>(iv)</enum><text>$25,000 in the
case of any other taxpayer.</text>
</clause><continuation-text continuation-text-level="subparagraph">The
rules of section 219(g)(4) shall apply for purposes of this paragraph.</continuation-text></subparagraph><subparagraph id="id19891FD4DCD94E7A8C3DA019E92427B3"><enum>(C)</enum><header>Cost-of-living
adjustment</header><text>In the case of any taxable year beginning in a
calendar year after 2007—</text>
<clause id="idFDA0055E0EEA4FBDA43261C7D608B9E0"><enum>(i)</enum><text>the $50,000
dollar amount under subparagraph (B)(i) shall—</text>
<subclause id="id334EAA056AB946A3AD852406FCD1A667"><enum>(I)</enum><text>be increased by
an amount equal to such dollar amount multiplied by the cost of living
adjustment determined under section 1(f)(3) for the calendar year in which the
taxable year begins, determined by substituting <quote>2006</quote> for
<quote>1992</quote> in subparagraph (B) thereof, and</text>
</subclause><subclause id="id1E3FCD88B52441AFB00D582A69BB8D1E"><enum>(II)</enum><text>after such
increase be rounded as provided in section 32(j)(2)(B),</text>
</subclause></clause><clause id="id26469F43826848329B0D3EE67BD0EEEC"><enum>(ii)</enum><text>the amount under
subparagraph (B)(ii) shall be increased to an amount equal to 75 percent of the
amount in effect under subparagraph (B)(i) for the taxable year after the
increase under clause (i), and</text>
</clause><clause id="idEFCEFB0606D7404F9BACC8587254C49B"><enum>(iii)</enum><text>the amount
under subparagraph (B)(iv) shall be increased to an amount equal to 50 percent
of the amount in effect under subparagraph (B)(i) for the taxable year after
the increase under clause (i).</text>
</clause></subparagraph></paragraph></subsection><subsection id="id7930A81131E948C78C87333A7528A5C0"><enum>(d)</enum><header>Eligible
individual</header><text>For purposes of this section—</text>
<paragraph id="id49BEFC11D1E248028B926AE774CA19FD"><enum>(1)</enum><header>In
general</header><text>The term <term>eligible individual</term> means any
individual if such individual has attained the age of 18 as of the close of the
taxable year.</text>
</paragraph><paragraph id="id9249CA0BA87E49BEA53DFE3A686ADC72"><enum>(2)</enum><header>Dependents and
full-time students not eligible</header><text>The term <term>eligible
individual</term> shall not include—</text>
<subparagraph id="idDBB1B25B67444B438041195B749D50F2"><enum>(A)</enum><text>any individual
with respect to whom a deduction under section 151 is allowed to another
taxpayer for a taxable year beginning in the calendar year in which such
individual's taxable year begins, and</text>
</subparagraph><subparagraph id="idA6CABBC8C6C94A8FB841C6D8D4F69905"><enum>(B)</enum><text>any individual
who is a student (as defined in section 152(f)(2)).</text>
</subparagraph></paragraph></subsection><subsection id="id24FA4CFCD9624A4AA0C8915C6230445F"><enum>(e)</enum><header>Qualified
retirement savings contributions</header><text>For purposes of this
section—</text>
<paragraph id="id8E4FAE6DEFBF4870875CDDC1CD9E7514"><enum>(1)</enum><header>In
general</header><text>The term <term>qualified retirement savings
contributions</term> means, with respect to any taxable year, the sum
of—</text>
<subparagraph id="id5F3B305738274BDC93F7D31989E56578"><enum>(A)</enum><text>the amount of the
qualified retirement contributions (as defined in section 219(e)) made by or on
behalf of the eligible individual,</text>
</subparagraph><subparagraph id="idB6F9E62ACB2D4AECBBEE885F91919148"><enum>(B)</enum><text>the amount
of—</text>
<clause id="idF3973914F8324938BD46FD3972E79837"><enum>(i)</enum><text>any elective
deferrals (as defined in section 402(g)(3)) of such individual, and</text>
</clause><clause id="id6E4BA6D96F64441FB99D7E0E9D4506D6"><enum>(ii)</enum><text>any elective
deferral of compensation by such individual under an eligible deferred
compensation plan (as defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A), and</text>
</clause></subparagraph><subparagraph id="id7748F5E4F5FB48CC98D92FB9E1D7A95E"><enum>(C)</enum><text>the amount of
voluntary employee contributions by such individual to any qualified retirement
plan (as defined in section 4974(c)).</text>
</subparagraph></paragraph><paragraph id="idB7B80354AD8347C89EA3BF4032FEC64A"><enum>(2)</enum><header>Reduction for
certain distributions</header>
<subparagraph id="id7EB615FE3524498D9979328D4834BA3E"><enum>(A)</enum><header>In
general</header><text>The qualified retirement savings contributions determined
under paragraph (1) shall be reduced (but not below zero) by the aggregate
distributions received by the individual during the testing period from any
entity of a type to which contributions under paragraph (1) may be made. The
preceding sentence shall not apply to the portion of any distribution which is
not includible in gross income by reason of a trustee-to-trustee transfer or a
rollover distribution.</text>
</subparagraph><subparagraph id="id928C8B62A91846D4941E99F9074D8488"><enum>(B)</enum><header>Testing
period</header><text>For purposes of subparagraph (A), the testing period, with
respect to a taxable year, is the period which includes—</text>
<clause id="id3B279A90D9454DE2A8EA78F5D6125E6C"><enum>(i)</enum><text>such taxable
year,</text>
</clause><clause id="id99218ECA5725474186DB5229B429C9DA"><enum>(ii)</enum><text>the 2 preceding
taxable years, and</text>
</clause><clause id="idBC3C2330F72A42F19517441BAF793F2E"><enum>(iii)</enum><text>the period
after such taxable year and before the due date (including extensions) for
filing the return of tax for such taxable year.</text>
</clause></subparagraph><subparagraph id="idF24161E34AEE4F90A147ED9A7100849A"><enum>(C)</enum><header>Excepted
distributions</header><text>There shall not be taken into account under
subparagraph (A)—</text>
<clause id="id292124EAB1154C08A0C356B0381B9825"><enum>(i)</enum><text>any distribution
referred to in section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 404(k), or
408(d)(4), and</text>
</clause><clause id="id9A7B5FB72E0C46F787F477474EE35F8C"><enum>(ii)</enum><text>any distribution
to which section 408A(d)(3) applies.</text>
</clause></subparagraph><subparagraph id="id690B6BBEA5A446ECBC34AFABF36E8852"><enum>(D)</enum><header>Treatment of
distributions received by spouse of individual</header><text>For purposes of
determining distributions received by an individual under subparagraph (A) for
any taxable year, any distribution received by the spouse of such individual
shall be treated as received by such individual if such individual and spouse
file a joint return for such taxable year and for the taxable year during which
the spouse receives the distribution.</text>
</subparagraph></paragraph></subsection><subsection id="idAD4CAAFEB5374C4C9B251D14EF837B13"><enum>(f)</enum><header>Other
definitions and rules</header>
<paragraph id="idAE6F9E1E901E490CB10D59AAC9C0FBC3"><enum>(1)</enum><header>Adjusted gross
income</header><text>For purposes of this section, adjusted gross income shall
be determined without regard to sections 911, 931, and 933.</text>
</paragraph><paragraph id="idB87F039300894B4D84A2176C4DF88B44"><enum>(2)</enum><header>Investment in
the contract</header><text>Notwithstanding any other provision of law—</text>
<subparagraph id="idEDF9BE4CCB7545768F4AC5878672C8D0"><enum>(A)</enum><text>a qualified
retirement savings contribution shall not fail to be included in determining
the investment in the contract for purposes of section 72 by reason of the
credit under this section, and</text>
</subparagraph><subparagraph id="idFF50BEB943ED488F9D4A9280A65E6887"><enum>(B)</enum><text>any deposit under
subsection (g) shall be included in determining investment in the contract for
purposes of section 72.</text>
</subparagraph></paragraph></subsection><subsection id="id08E1E13AA83F47B79394B5033A505540"><enum>(g)</enum><header>Credit may only
be deposited in roth retirement savings account</header>
<paragraph id="id3D260827A06645459A90260FE0764794"><enum>(1)</enum><header>In
general</header><text>The credit allowed under this section—</text>
<subparagraph id="idD3FD662501D7423EBAA87C56DCF9B00A"><enum>(A)</enum><text>shall not be
treated as a credit allowed under this part, but</text>
</subparagraph><subparagraph id="idE36B7CC7518B4E45B81DA04CF8689112"><enum>(B)</enum><text>shall be treated
as an overpayment of tax under section 6401(b)(3) which may, in accordance with
section 6402(l), only be transferred to—</text>
<clause id="idC905154EECCB4C7FB93F657D1461DEFE"><enum>(i)</enum><text>a
Roth IRA, or</text>
</clause><clause id="id10AF61C4DDE74864B8A2DF1D5EBE0629"><enum>(ii)</enum><text>a designated
Roth account which is within any other plan or arrangement to which qualified
retirement savings contributions may be made.</text>
</clause></subparagraph><continuation-text continuation-text-level="paragraph">Any amount
so transferred on behalf of an individual (and any earnings thereon) shall be
nonforfeitable.</continuation-text></paragraph><paragraph id="id5C9D260392444C15BB688267FA9EB68F"><enum>(2)</enum><header>Coordination
with limitations and other contributions</header><text>If there is any transfer
to a plan or account under paragraph (1) by reason of a credit under this
section, the rules of subparagraphs (A) and (C) of section 414(u)(1) shall
apply with respect to the transfer.</text>
</paragraph></subsection><subsection id="id2AB364C0F3144236AB838D5069CA4A9E"><enum>(h)</enum><header>Recapture of
credit</header>
<paragraph id="id52DD7BBCBEDD4699B60A60FAECCEB84D"><enum>(1)</enum><header>Addition to
tax</header><text>If, during the 5-taxable year period beginning with the
taxable year for which a transfer is made under section 6402(l), a taxpayer
receives a distribution or payment out of a plan or account described in clause
(i) or (ii) of subsection (g)(1)(B), then, notwithstanding section 72, the
taxpayer's tax under this chapter for the taxable year in which the
distribution or payment is received shall be increased by the amount described
in paragraph (2). This subsection shall not apply to a payment or distribution
unless an additional tax would be imposed under section 72(t) with respect to
the payment or distribution if it were includible in gross income.</text>
</paragraph><paragraph id="id83954BB98464442C9E3C97E1AD6EF8B1"><enum>(2)</enum><header>Amount of
tax</header><text>The amount of the tax under paragraph (1) shall be equal to
the amount transferred under section 6402(l) with respect to the amount so paid
or distributed, reduced by any portion of the amount so transferred with
respect to which this subsection previously applied during the taxable year or
any preceding taxable year.</text>
</paragraph><paragraph id="id40420B209F8E4973851F5250CBCF779E"><enum>(3)</enum><header>Operating
rules</header><text>For purposes of determining under paragraph (1)(B) whether
an amount was transferred under section 6402(l) with respect to a distribution
or payment, the following rules shall apply:</text>
<subparagraph id="idE2D6A504CA074EE68713EA7D1F0F1EDA"><enum>(A)</enum><header>FIFO
rule</header><text>Distributions or payments shall be treated as made from
contributions (and earning thereon) in the order in which the contributions
were made, beginning with the least recent taxable year.</text>
</subparagraph><subparagraph id="idEA896A5CCDC7405490E0353729521FBB"><enum>(B)</enum><header>Unmatched
contributions counted first</header><text>If contributions were made in excess
of the applicable amount for any taxable year, distributions or payments shall
be treated as made first from contributions (and any earnings thereon) with
respect to which no transfer was made under section
6402(l).</text>
</subparagraph></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id88537C677FE145029A0893528849DAE3"><enum>(b)</enum><header>Credit for
matching contributions treated as overpayment of tax</header><text>Subsection
(b) of section 6401 (relating to amounts treated as overpayments) is amended by
adding at the end the following new paragraph:</text>
<quoted-block id="idAD52BE9E8691405E99B740689FB7769B">
<paragraph id="idC27C7E1D80244B0A8A7B39239460307D"><enum>(3)</enum><header>Special rule
for credit for matching contributions under section 36</header><text>Subject to
the provisions of section 6402(l), the amount of any credit allowed under
section 36 (relating to matching credit for retirement contributions) for any
taxable year shall be considered an
overpayment.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id0F3C43C1A4284EBCB35A07E8BCC01E46"><enum>(c)</enum><header>Transfer of
credit amount to retirement accounts</header>
<paragraph id="id902B4A7107604824B21770718E13B9D9"><enum>(1)</enum><header>In
general</header><text>Section 6402 (relating to authority to make credits or
refunds) is amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id60701AD359624478A6F3AFBDE9A93E01" style="OLC">
<subsection id="idC25F74E4CA5A41DFB1E01FC0A4B09E6A"><enum>(l)</enum><header>Overpayments
attributable to matching retirement credit</header>
<paragraph id="idAC57EB88FEF648CC8CECA3A2EEB65AED"><enum>(1)</enum><header>In
general</header><text>In the case of any overpayment described in section
6401(b)(3), the Secretary shall transfer an amount equal to the amount of such
overpayment to the account designated under paragraph (2) by the individual
entitled to the overpayment.</text>
</paragraph><paragraph id="idD3F29D38BAED47D6AFBAA1740E4DFDD0"><enum>(2)</enum><header>Designation of
account</header><text>An eligible individual (as defined in section 36(d))
shall file a designation including the information described in paragraph (3)
along with the return of the individual for the taxable year of the overpayment
(or if no return is required to be filed, on a form prescribed by the
Secretary) not later than the later of—</text>
<subparagraph id="id4C2EBD0F0C2C42E1B48AECA402E1B08F"><enum>(A)</enum><text>the due date
(including extensions) for filing such return (if applicable), or</text>
</subparagraph><subparagraph id="id7846DE57B7AF4C71A7744472780398A2"><enum>(B)</enum><text>the 15th day of
April following the close of the taxable year.</text>
</subparagraph></paragraph><paragraph id="idE5C0E51FAEDE40BA8061A2EB3D922D7D"><enum>(3)</enum><header>Required
information</header><text>For purposes of paragraph (2), the information
described in this paragraph is—</text>
<subparagraph id="idBC943A11878249D691315D795CD67594"><enum>(A)</enum><text>the designation
of the Roth IRA or designated Roth account described in section 36(g)(1)(B) to
which the transfer is to be made,</text>
</subparagraph><subparagraph id="idC82C91D94ED54F6A96DA79F7CE6F29FF"><enum>(B)</enum><text>such information
as the Secretary may require to enable electronic transfer of the overpayment
amount to such IRA or account, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id9052FABC7B884B83AC42700158547922"><enum>(C)</enum><text>the amount of
qualified retirement savings contributions (as defined in section 36(e)) for
the taxable year with respect to the
individual.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id430BADC2FBBE47E593D209014D46DD78"><enum>(d)</enum><header>Reporting
requirements</header><text>Section 6047 (relating to information relating to
certain trusts and annuity plans) is amended by redesignating subsection (g) as
subsection (h) and by inserting after subsection (f) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="idB51B4D0D612245C9A7ABD7B09812A0AD" style="OLC">
<subsection id="idEFBBFFBCC52A4AF48001DB7C8F1650F7"><enum>(g)</enum><header>Matching
contributions</header><text>The Secretary shall require the trustee of each
plan or account to which overpayments are transferred under section 6402(l) to
make such returns and reports regarding such transfers to the Secretary,
participants, and beneficiaries of the plan, and such other persons as the
Secretary may
prescribe.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id16FE7D8DBCD846D58268F26E0559CB41"><enum>(e)</enum><header>Conforming
amendments</header>
<paragraph id="idB23D53BC5E4F458FAD597CFB9626597F"><enum>(1)</enum><text>Section
1324(b)(2) of title 31, United States Code, is amended by striking
<quote>or</quote> before <quote>enacted</quote> and by inserting before the
period at the end <quote>, or enacted by the <short-title>Savings Competitiveness Act of
2006</short-title></quote>.</text>
</paragraph><paragraph id="id8B123259A38F41B0AB4BA6F830BC5617"><enum>(2)</enum><text>The table of
sections for subpart C of part IV of subchapter A of chapter 1 is amended by
redesignating the item relating to section 36 as the item relating to section
37 and by inserting after the item relating to section 35 the following new
item:</text>
<toc>
<toc-entry level="section"><quote>Sec. 36. Matching contributions for
certain retirement savings contributions.</quote>.</toc-entry>
</toc>
</paragraph><paragraph id="id778E105983C34593ACCA85B0B2B63154"><enum>(3)</enum><text>Section 6402(a)
is amended by striking <quote>In the case</quote> and inserting <quote>Except
as provided in subsection (l), in the case</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id22D28D9DE6594BB9ACCC03A56C8053B3"><enum>(f)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2006.</text>
</subsection></section><enum>III</enum><header>Other
provisions to increase retirement savings</header>
<section id="id10AA8912FBDC4136ADD9EAD3E1B58ADD"><enum>301.</enum><header>Young Savers
Accounts</header>
<subsection commented="no" display-inline="no-display-inline" id="id5C73CAC479524DD09687D61DFC1EFE30"><enum>(a)</enum><header>In
general</header><text>Section 408A (relating to Roth IRAs) is amended by adding
at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id94A6D1562F9844E9A4B31B86705F3D92" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="id5CFEB8E2E08646879060398A78C5B17C"><enum>(g)</enum><header>Young Savers
Accounts</header>
<paragraph commented="no" display-inline="no-display-inline" id="id8DC55DFD391A4722B2F4E63635C96DEF"><enum>(1)</enum><header>In
general</header><text>Except as provided in this subsection, a young savers
account shall be treated in the same manner as a Roth IRA.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idA14B95DF219646ACA1B65D443A3F0101"><enum>(2)</enum><header>Young savers
account</header><text>For purposes of this subsection, the term <term>young
savers account</term> means, with respect to any taxable year, a Roth IRA which
is established and maintained on behalf of an individual who has not attained
the age of 18 before the close of the taxable year.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id7DCBCE0EB6894F5698E2B408AEAA538D"><enum>(3)</enum><header>Contribution
limits</header><text>In the case of any contributions for any taxable year to 1
or more young savers accounts established and maintained on behalf of an
individual, each of the following contribution limits for the taxable year
shall be increased as follows:</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id5DF5428D1CD542C7AECBD4FC9B1B6913"><enum>(A)</enum><text>The contribution
limit applicable to the individual under subsection (c)(2) shall be increased
by the aggregate amount of qualified parental contributions to such accounts
for the taxable year.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id2BBFD06705B84748A266D759587C0CD5"><enum>(B)</enum><text>The contribution
limits applicable to the young savers accounts under subsection (a)(1) or
(b)(2)(B) of section 408, whichever is appropriate, shall be increased by the
dollar amount in effect under section 219(b)(1)(A) for the taxable year.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id1B950C8379B3430BAEA6AA6E6BCB62BE"><enum>(4)</enum><header>Qualified
parental contributions</header><text>For purposes of this subsection—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id84F252DF3F954A6189DD6CAD8D4ABFF4"><enum>(A)</enum><header>In
general</header><text>The term <term>qualified parental contribution</term>
means, with respect to any taxable year, a contribution by an individual to a
young savers account established and maintained on behalf of an individual
who—</text>
<clause commented="no" display-inline="no-display-inline" id="id137A8053C8654AD8A72167405AB6D6A6"><enum>(i)</enum><text>is the child of
the individual making the contribution, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idEAD86CC0AE1340EF9BFF7240D175C63A"><enum>(ii)</enum><text>with respect to
whom a deduction for an additional exemption is allowable for the taxable year
under section 151(c) to the individual making the contribution.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id97BCB000FF1547C5AA852315D6C5EEE2"><enum>(B)</enum><header>Dollar
limitations</header>
<clause commented="no" display-inline="no-display-inline" id="idEAFBFD245A4E477A9EAB9429B951FCA4"><enum>(i)</enum><header>In
general</header><text>The aggregate amount of qualified parental contributions
which may be made for any taxable year on behalf of an individual shall not
exceed the dollar amount in effect under section 219(b)(1)(A) for the taxable
year.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="id31B1F3FD593A48108DA1124A2C42C1AA"><enum>(ii)</enum><header>Limit on each
parent</header><text>The aggregate amount of qualified parental contributions
which an individual may make for any taxable year on behalf of 1 or more of the
individual's children shall not exceed the contribution limit applicable to the
individual under subsection (c)(2) for the taxable year, reduced by any
contributions made by or on behalf of the individual to any Roth IRA
established and maintained on behalf of the individual.</text>
</clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id5F9167E868944B1AB292158C1AB1C4F5"><enum>(5)</enum><header>Coordination
with matching credit for retirement savings contributions</header><text>Any
qualified parental contributions made by an eligible individual (as defined in
section 36(d)) shall be treated as qualified retirement savings contributions
for purposes of section
36.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idBD93604509B349A2B6BE13A2090D7A94"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2006.</text>
</subsection></section><section id="ID0806EE38C77D431DBE737FDE1C155A35"><enum>302.</enum><header>Increasing
participation in cash or deferred plans through automatic contribution
arrangements</header>
<subsection id="IDF290E64782ED4EB18526F716C73223DE"><enum>(a)</enum><header>In
General</header><text>Section 401(k) (relating to cash or deferred arrangement)
is amended by adding at the end the following new paragraph:</text>
<quoted-block id="IDE352DAE3381948A19E1FCEA21678C6E3" style="OLC">
<paragraph id="ID3C239E7F43CD4C2AA51AF3DAE85BE247"><enum>(13)</enum><header>Nondiscrimination
requirements for automatic contribution trusts</header>
<subparagraph id="ID33AB48CE12FA452DBD6796396EC5C538"><enum>(A)</enum><header>In
general</header><text>A cash or deferred arrangement shall be treated as
meeting the requirements of paragraph (3)(A)(ii) if such arrangement
constitutes an automatic contribution trust.</text>
</subparagraph><subparagraph id="ID269084266A124EB3A87988E9BF8D2962"><enum>(B)</enum><header>Automatic
contribution trust</header>
<clause id="ID74E80C2ED9E749278A38C2D3132D7AF8"><enum>(i)</enum><header>In
general</header><text>For purposes of this paragraph, the term <term>automatic
contribution trust</term> means an arrangement—</text>
<subclause id="IDBB32A6E7F4D448EE95986400CA6E8F51"><enum>(I)</enum><text>except as
provided in clauses (ii) and (iii), under which each employee eligible to
participate in the arrangement is treated as having elected to have the
employer make elective contributions in an amount equal to the applicable
percentage of the employee’s compensation, and</text>
</subclause><subclause id="IDE687A91F3E8B480BBA6DA1318939189A"><enum>(II)</enum><text>which meets the
requirements of subparagraphs (C), (D), (E), and (F).</text>
</subclause></clause><clause id="IDEBB8A28E04F4438CB57F202B26E4F3EF"><enum>(ii)</enum><header>Exception for
existing employees</header><text>In the case of any employee—</text>
<subclause id="IDC51ACCA7235E405F91120663C01375AB"><enum>(I)</enum><text>who was eligible
to participate in the arrangement (or a predecessor arrangement) immediately
before the first date on which the arrangement is an automatic contribution
trust, and</text>
</subclause><subclause id="ID79AD22CB22AA4794B37075B3B2422138"><enum>(II)</enum><text>whose rate of
contribution immediately before such first date was less than the applicable
percentage for the employee,</text>
</subclause><continuation-text continuation-text-level="clause">clause (i)(I)
shall not apply to such employee until the date which is 1 year after such
first date (or such earlier date as the employer may elect).</continuation-text></clause><clause id="IDA7F150D463F54EEF8D17342083D25FFA"><enum>(iii)</enum><header>Election
out</header><text>Each employee eligible to participate in the arrangement may
specifically elect not to have contributions made under clause (i), and such
clause shall cease to apply to compensation paid on or after the effective date
of the election.</text>
</clause><clause id="IDE24DFA7AEC5643D7869F4345149CD65B"><enum>(iv)</enum><header>Applicable
percentage</header><text>For purposes of this subparagraph—</text>
<subclause id="ID972CBE35F3B441B0BB53284986EAA123"><enum>(I)</enum><header>In
general</header><text>The term <term>applicable percentage</term> means, with
respect to any employee, the uniform percentage (not less than 3 percent)
determined under the arrangement. In the case of an employee who was eligible
to participate in the arrangement (or a predecessor arrangement) immediately
before the first date on which the arrangement is an automatic contribution
trust, the initial applicable percentage shall in no event be less than the
percentage in effect with respect to the employee under the arrangement
immediately before the employee first begins participation in the automatic
contribution trust.</text>
</subclause><subclause id="IDE47084177B7A4EA5950B569411076D69"><enum>(II)</enum><header>Increase in
percentage</header><text>In the case of the second plan year beginning after
the first date on which the election under clause (i)(I) is in effect with
respect to the employee and any succeeding plan year, the applicable percentage
shall be a percentage (not greater than 10 percent or such higher uniform
percentage determined under the arrangement) equal to the sum of the applicable
percentage for the employee as of the close of the preceding plan year plus 1
percentage point (or such higher percentage specified by the plan). A plan may
elect to provide that, in lieu of any increase under the preceding sentence,
the increase in the applicable percentage required under this subclause shall
occur after each increase in compensation an employee receives on or after the
first day of such second plan year and that the applicable percentage after
each such increase in compensation shall be equal to the applicable percentage
for the employee immediately before such increase in compensation plus 1
percentage point (or such higher percentage specified by the plan).</text>
</subclause></clause></subparagraph><subparagraph id="IDB449AAFAD5C74561B6E3F47F1071E148"><enum>(C)</enum><header>Matching or
nonelective contributions</header>
<clause id="IDA8B505313EC640B29192E6C0D5B478E2"><enum>(i)</enum><header>In
general</header><text>The requirements of this subparagraph are met if, under
the arrangement, the employer—</text>
<subclause id="IDB1D73BAEA15C4BDC84A80B9F5D21D5BC"><enum>(I)</enum><text>makes matching
contributions on behalf of each employee who is not a highly compensated
employee in an amount equal to 50 percent of the elective contributions of the
employee to the extent such elective contributions do not exceed 7 percent of
compensation; or</text>
</subclause><subclause id="IDC36DDFF152C549B5865B0D5E51E9D442"><enum>(II)</enum><text>is required,
without regard to whether the employee makes an elective contribution or
employee contribution, to make a contribution to a defined contribution plan on
behalf of each employee who is not a highly compensated employee and who is
eligible to participate in the arrangement in an amount equal to at least 3
percent of the employee’s compensation,</text>
</subclause><continuation-text continuation-text-level="clause">The rules of
clauses (ii) and (iii) of paragraph (12)(B) shall apply for purposes of
subclause (I). The rules of paragraph (12)(E)(ii) shall apply for purposes of
subclauses (I) and (II).</continuation-text></clause><clause id="ID09747089698045C5ACC552AE4066E7B0"><enum>(ii)</enum><header>Other
plans</header><text>An arrangement shall be treated as meeting the requirements
under clause (i) if any other plan maintained by the employer meets such
requirements with respect to employees eligible under the arrangement.</text>
</clause></subparagraph><subparagraph id="ID5D62B1047A994EBBB078AC725AE3D547"><enum>(D)</enum><header>Notice
requirements</header>
<clause id="ID611C9360146146F0A3F15014EEE61927"><enum>(i)</enum><header>In
general</header><text>The requirements of this subparagraph are met if the
requirements of clauses (ii) and (iii) are met.</text>
</clause><clause id="IDA5F4194C2D7F44AF8688FE39257F58C6"><enum>(ii)</enum><header>Reasonable
period to make election</header><text>The requirements of this clause are met
if each employee to whom subparagraph (B)(i) applies—</text>
<subclause id="IDA48D57AC831E40FDA7767E3E710571CC"><enum>(I)</enum><text>receives a notice
explaining the employee’s right under the arrangement to elect not to have
elective contributions made on the employee’s behalf, and how contributions
made under the arrangement will be invested in the absence of any investment
election by the employee, and</text>
</subclause><subclause id="IDE970E02726A343CB9E6D183D70C86814"><enum>(II)</enum><text>has a reasonable
period of time after receipt of such notice and before the first elective
contribution is made to make such election.</text>
</subclause></clause><clause id="ID624D7DCAE6A241CCB2F2293E9849D9DB"><enum>(iii)</enum><header>Annual notice
of rights and obligations</header><text>The requirements of this clause are met
if each employee eligible to participate in the arrangement is, within a
reasonable period before any year (or if the plan elects to change the
applicable percentage after any increase in compensation, before the increase),
given notice of the employee’s rights and obligations under the
arrangement.</text>
</clause><continuation-text continuation-text-level="subparagraph">The
requirements of clauses (i) and (ii) of paragraph (12)(D) shall be met with
respect to the notices described in clauses (ii) and (iii) of this
subparagraph.</continuation-text></subparagraph><subparagraph id="IDDA0475DA9AD34AFDAB0895DA07AB6E9A"><enum>(E)</enum><header>Participation,
withdrawal, and vesting requirements</header><text>The requirements of this
subparagraph are met if—</text>
<clause id="IDDD597A463FC046FFBAE8248E4C59EE53"><enum>(i)</enum><text>the arrangement
requires that each employee eligible to participate in the arrangement
(determined without regard to any minimum service requirement otherwise
applicable under section 410(a) or the plan) commences participation in the
arrangement no later than the 1st day of the 1st calendar quarter beginning
after the date on which employee first becomes so eligible,</text>
</clause><clause id="ID554E7F1851884F0CAA7BCCF093F74EBE"><enum>(ii)</enum><text>the withdrawal
requirements of paragraph (2)(B) are met with respect to all employer
contributions (including matching and elective contributions) taken into
account in determining whether the arrangement meets the requirements of
subparagraph (C), and</text>
</clause><clause id="ID5E29F67D8C254804B947FD0839D51961"><enum>(iii)</enum><text>the arrangement
requires that an employee’s right to the accrued benefit derived from employer
contributions described in clause (ii) (other than elective contributions) is
nonforfeitable after the employee has completed at least 2 years of
service.</text>
</clause></subparagraph><subparagraph id="IDDCC6A2C2B6084342BABD21DDA2A2E1E6"><enum>(F)</enum><header>Certain
withdrawals must be allowed</header><text>Notwithstanding any other provision
of this subsection, the requirements of this subparagraph are met if the
arrangement allows employees to elect to make permissible withdrawals in
accordance with section 414(w).</text>
</subparagraph></paragraph><after-quoted-block></after-quoted-block></quoted-block>
</subsection><subsection id="ID38CCC6E8537A4358A49EF67A1D417F7A"><enum>(b)</enum><header>Matching
Contributions</header><text>Section 401(m) (relating to nondiscrimination test
for matching contributions and employee contributions) is amended by
redesignating paragraph (12) as paragraph (13) and by inserting after paragraph
(11) the following new paragraph:</text>
<quoted-block id="ID2ABACC6696184C3CAA4B25AF8D288D74" style="OLC">
<paragraph id="IDEAEDADE76AE542EE8FE9CB784DCB61AD"><enum>(12)</enum><header>Alternate
method for automatic contribution trusts</header><text>A defined contribution
plan shall be treated as meeting the requirements of paragraph (2) with respect
to matching contributions if the plan—</text>
<subparagraph id="ID2400A87635C34147B83F1688427D290F"><enum>(A)</enum><text>meets the
contribution requirements of subparagraphs (B)(i) and (C) of subsection
(k)(13);</text>
</subparagraph><subparagraph id="IDCBBD02AC28FC4C51A1E5984EDB9FD170"><enum>(B)</enum><text>meets the notice
requirements of subparagraph (D) of subsection (k)(13); and</text>
</subparagraph><subparagraph id="IDD6C9F03443224F4AA6CF018D4E421C0D"><enum>(C)</enum><text>meets the
requirements of paragraph (11)(B) (ii) and
(iii).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID26BC5E6EB1C74C59A742EC1B7AD005C2"><enum>(c)</enum><header>Exclusion From
Definition of Top-Heavy Plans</header>
<paragraph id="ID6BF7CB56CA804DCE917C0BF7B17A41B0"><enum>(1)</enum><header>Elective
contribution rule</header><text>Clause (i) of section 416(g)(4)(H) is amended
by inserting <quote>or 401(k)(13)</quote> after <quote>section
401(k)(12)</quote>.</text>
</paragraph><paragraph id="IDCDE073FEA9B04AA1B40BC724C60F68EE"><enum>(2)</enum><header>Matching
contribution rule</header><text>Clause (ii) of section 416(g)(4)(H) is amended
by inserting <quote>or 401(m)(12)</quote> after <quote>section
401(m)(11)</quote>.</text>
</paragraph></subsection><subsection id="ID441AC89CEFC14F229DEECDE74962BABB"><enum>(d)</enum><header>Section
<enum-in-header>403(b)</enum-in-header> contracts</header><text>Paragraph (11)
of section 401(m) is amended by adding at the end the following:</text>
<quoted-block id="IDE5A615DA51DC4DE9A0DEFEEDBFD0FC6C" style="OLC">
<subparagraph id="IDBF944F331F0F47B39F7EE39113A151CE"><enum>(C)</enum><header>Section
<enum-in-header>403(b)</enum-in-header> contracts</header><text>An annuity
contract under section 403(b) shall be treated as meeting the requirements of
paragraph (2) with respect to matching contributions if such contract meets
requirements similar to the requirements under subparagraph
(A).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID8E60D589B1B542C9BFACBBBC487D6C10"><enum>(e)</enum><header>Preemption of
Conflicting State Regulation</header><text>Section 514 of the Employee
Retirement Income Security of 1974 (29 U.S.C. 1144) is amended by inserting at
the end the following new subsection:</text>
<quoted-block id="ID400696A686CE48D3AC57E20020FE9E78" style="OLC">
<subsection id="ID5ADF12E9578844368988C54F0944C800"><enum>(e)</enum><header>Automatic
Contribution Arrangements</header>
<paragraph id="IDB4A934C7349E417596009F2DBEA0A460"><enum>(1)</enum><header>In
general</header><text>Notwithstanding any other provision of this section, any
law of a State shall be superseded if it would directly or indirectly prohibit
or restrict the inclusion in any plan of an eligible automatic contribution
arrangement.</text>
</paragraph><paragraph id="ID7BCB9C00CDEA45358864A681A4FBE0CC"><enum>(2)</enum><header>Eligible
automatic contribution arrangement</header><text>For purposes of this
subsection, the term <term>eligible automatic contribution arrangement</term>
means an arrangement—</text>
<subparagraph id="IDA5FFB406C5C645BD849061548311BAD4"><enum>(A)</enum><text>under which a
participant may elect to have the employer make payments as contributions under
the plan on behalf of the participant, or to the participant directly in
cash,</text>
</subparagraph><subparagraph id="IDACC9F282BD944330B3F437752DC35BF7"><enum>(B)</enum><text>under which the
participant is treated as having elected to have the employer make such
contributions in an amount equal to a uniform percentage of compensation
provided under the plan until the participant specifically elects not to have
such contributions made (or specifically elects to have such contributions made
at a different percentage),</text>
</subparagraph><subparagraph id="ID2A674C73166547089D28F9FFA3105D8B"><enum>(C)</enum><text>under which
contributions described in subparagraph (B) are invested in accordance with
regulations prescribed by the Secretary under section 404(c)(4), and</text>
</subparagraph><subparagraph id="ID819A49D1E12A43B9A8876FC4EEEEDF38"><enum>(D)</enum><text>which meets the
requirements of paragraph (3).</text>
</subparagraph></paragraph><paragraph id="ID31CAE371ABC34C6B8418194BB9180554"><enum>(3)</enum><header>Notice
requirements</header>
<subparagraph id="ID63DC931B743645BDAFB4104F94871C6A"><enum>(A)</enum><header>In
general</header><text>The administrator of an individual account plan shall,
within a reasonable period before each plan year, give to each employee to whom
an arrangement described in paragraph (2) applies for such plan year notice of
the employee’s rights and obligations under the arrangement which—</text>
<clause id="ID26E8BFE0C22C4B01B2F633338E7BD763"><enum>(i)</enum><text>is sufficiently
accurate and comprehensive to apprise the employee of such rights and
obligations, and</text>
</clause><clause id="IDA4570D424F1A42DBACEB4DC3AF120B28"><enum>(ii)</enum><text>is written in a
manner calculated to be understood by the average employee to whom the
arrangement applies.</text>
</clause></subparagraph><subparagraph id="ID7449634C916343A099C06498A1647BE8"><enum>(B)</enum><header>Time and form
of notice</header><text>A notice shall not be treated as meeting the
requirements of subparagraph (A) with respect to an employee unless—</text>
<clause id="ID380497C3B6644A9BA80CAABD5B6685B5"><enum>(i)</enum><text>the notice
includes a notice explaining the employee’s right under the arrangement to
elect not to have elective contributions made on the employee’s behalf (or to
elect to have such contributions made at a different percentage),</text>
</clause><clause id="ID0C2A5C4A5AFC4356B5DC410C435C5347"><enum>(ii)</enum><text>the employee has
a reasonable period of time after receipt of the notice described in clause (i)
and before the first elective contribution is made to make such election,
and</text>
</clause><clause id="IDB91E1B41FFC247F98FF742A4051B2DE4"><enum>(iii)</enum><text>the notice
explains how contributions made under the arrangement will be invested in the
absence of any investment election by the
employee.</text>
</clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDB878BC2EEE5F414FBEE8FD1E3BFFB567"><enum>(f)</enum><header>Treatment of
Withdrawals of Contributions During First 60 Days</header><text>Section 414 is
amended by adding at the end the following new subsection:</text>
<quoted-block id="ID431F6F0038464834AB10C56C8DAF9B9B" style="OLC">
<subsection id="ID839DF4A7FE9C4B46A87EC9FE72FB41B7"><enum>(w)</enum><header>Special Rules
for Certain Withdrawals From Eligible Automatic Contribution
Arrangements</header>
<paragraph id="IDE36853D6205C4E938E3ADD2CB3D4C0DB"><enum>(1)</enum><header>In
general</header><text>If an eligible automatic contribution arrangement allows
an employee to elect to make permissible withdrawals—</text>
<subparagraph id="ID221E184CA6CD4585A93950333E903ED2"><enum>(A)</enum><text>the amount of any
such withdrawal shall be includible in the gross income of the employee for the
taxable year of the employee in which the distribution is made,</text>
</subparagraph><subparagraph id="ID653299E24D13485B90E796A5777933C5"><enum>(B)</enum><text>no tax shall be
imposed under section 72(t) with respect to the distribution, and</text>
</subparagraph><subparagraph id="ID8C688F2E90F9441E9110B64B17AD27AF"><enum>(C)</enum><text>the arrangement
shall not be treated as violating any restriction on distributions under this
title solely by reason of allowing the withdrawal.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">In the
case of any distribution to an employee by reason of an election under this
paragraph, employer matching contributions shall be forfeited or subject to
such other treatment as the Secretary may prescribe.</continuation-text></paragraph><paragraph id="ID785C2B2B6A7545BAB53C2BC7D58F9EAB"><enum>(2)</enum><header>Permissible
withdrawal</header><text>For purposes of this subsection—</text>
<subparagraph id="ID5D88CEB4C40E442A9908DC02DEED89D9"><enum>(A)</enum><header>In
general</header><text>The term <term>permissible withdrawal</term> means any
withdrawal from an eligible automatic contribution arrangement meeting the
requirements of this paragraph which—</text>
<clause id="ID8F34C34989D746DCAE62F4AA0D3D9C43"><enum>(i)</enum><text>is made pursuant
to an election by an employee, and</text>
</clause><clause id="IDB094690AC39143B98A4F03D00A46F572"><enum>(ii)</enum><text>consists of
elective contributions described in paragraph (3)(B) (and earnings attributable
thereto).</text>
</clause></subparagraph><subparagraph id="ID301D862A71774308A7CF43A38E20EF7E"><enum>(B)</enum><header>Time for making
election</header><text>Subparagraph (A) shall not apply to an election by an
employee unless the election is made no later than the date which is 60 days
after the date of the first elective contribution with respect to the employee
under the arrangement.</text>
</subparagraph><subparagraph id="IDCCB5D81B0FB74BFF81DD32ACA61267A7"><enum>(C)</enum><header>Amount of
distribution</header><text>Subparagraph (A) shall not apply to any election by
an employee unless the amount of any distribution by reason of the election is
equal to the amount of elective contributions made with respect to the first
payroll period to which the eligible automatic contribution arrangement applies
to the employee and any succeeding payroll period beginning before the
effective date of the election (and earnings attributable thereto).</text>
</subparagraph></paragraph><paragraph id="ID920DCD81A93C4A6A8FECA386F5621A1B"><enum>(3)</enum><header>Eligible
automatic contribution arrangement</header><text>For purposes of this
subsection, the term <term>eligible automatic contribution arrangement</term>
means an arrangement—</text>
<subparagraph id="IDE5AD809D27AD4DD8A372CDFABCED38C2"><enum>(A)</enum><text>under which a
participant may elect to have the employer make payments as contributions under
the plan on behalf of the participant, or to the participant directly in
cash,</text>
</subparagraph><subparagraph id="IDA392B3FB036F4C519C54497E15764357"><enum>(B)</enum><text>under which the
participant is treated as having elected to have the employer make such
contributions in an amount equal to a uniform percentage of compensation
provided under the plan until the participant specifically elects not to have
such contributions made (or specifically elects to have such contributions made
at a different percentage),</text>
</subparagraph><subparagraph id="IDF79BB67E75CC403A865DE78FA42B22E1"><enum>(C)</enum><text>under which
contributions described in subparagraph (B) are invested in accordance with
regulations prescribed by the Secretary of Labor under section 404(c)(4) of the
<act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name>, and</text>
</subparagraph><subparagraph id="ID3A9DC4A8AB814260B9FCDA6BB968E00E"><enum>(D)</enum><text>which meets the
requirements of paragraph (4).</text>
</subparagraph></paragraph><paragraph id="IDD7AB305618FE46AFAF134CFE39C9A639"><enum>(4)</enum><header>Notice
requirements</header>
<subparagraph id="ID67A789823867466380008F59908F6996"><enum>(A)</enum><header>In
general</header><text>The administrator of a plan containing an arrangement
described in paragraph (3) shall, within a reasonable period before each plan
year, give to each employee to whom an arrangement described in paragraph (3)
applies for such plan year notice of the employee’s rights and obligations
under the arrangement which—</text>
<clause id="ID0D8A7AC823564E20A1F7AD6AD8EEE436"><enum>(i)</enum><text>is sufficiently
accurate and comprehensive to apprise the employee of such rights and
obligations, and</text>
</clause><clause id="ID5B217FCB585E4E68BBF3A2B51299D3D2"><enum>(ii)</enum><text>is written in a
manner calculated to be understood by the average employee to whom the
arrangement applies.</text>
</clause></subparagraph><subparagraph id="IDD896362F96A34A168191E99D5478CB32"><enum>(B)</enum><header>Time and form
of notice</header><text>A notice shall not be treated as meeting the
requirements of subparagraph (A) with respect to an employee unless—</text>
<clause id="IDA0F036DADEB049E78F9C28BC7FF2765B"><enum>(i)</enum><text>the notice
includes a notice explaining the employee’s right under the arrangement to
elect not to have elective contributions made on the employee’s behalf (or to
elect to have such contributions made at a different percentage),</text>
</clause><clause id="ID13F06B7D559249AEA45006B243250321"><enum>(ii)</enum><text>the employee has
a reasonable period of time after receipt of the notice described in clause (i)
and before the first elective contribution is made to make such election,
and</text>
</clause><clause id="ID5C89690D319F41BDB2894365F212AF08"><enum>(iii)</enum><text>the notice
explains how contributions made under the arrangement will be invested in the
absence of any investment election by the
employee.</text>
</clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID179F5B6673CA4591B6F9E6D740FF31FD"><enum>(g)</enum><header>Effective
Date</header>
<paragraph id="IDCFEFEBC13CE4451EB84B2736083CAFB2"><enum>(1)</enum><header>In
general</header><text>Except as provided by paragraph (2), the amendments made
by this section shall apply to plan years beginning after December 31,
2006.</text>
</paragraph><paragraph id="IDFCACDEDB5BBE414AAB6289B339469F89"><enum>(2)</enum><header>Section
<enum-in-header>403(b)</enum-in-header> contracts</header><text>The amendments
made by subsection (d) shall apply to years ending after the date of the
enactment of this Act.</text>
</paragraph></subsection></section><section id="ID2AD2B67739814D82841E35585914C366"><enum>303.</enum><header>Treatment of
investment of assets by plan where participant fails to exercise investment
election</header>
<subsection id="ID6757D739A20A440AA7A0F72C1FD9A217"><enum>(a)</enum><header>In
General</header><text>Section 404(c) of the <act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> (29 U.S.C. 1104(c)) is amended by adding at the end the
following new paragraph:</text>
<quoted-block act-name="Employee Retirement Income Security Act of 1974" id="ID74543AB5CEE34D5490CD5976E395C74B" style="OLC">
<paragraph id="ID037AD26150F540B5B0039220CA58E151"><enum>(4)</enum><header>Default
investment arrangements</header>
<subparagraph id="ID70C30EDE01F040FE971C8552524B3064"><enum>(A)</enum><header>In
general</header><text>For purposes of paragraph (1), a participant in an
individual account plan meeting the notice requirements of subparagraph (B)
shall be treated as exercising control over the assets in the account with
respect to the amount of contributions and earnings which, in the absence of an
investment election by the participant, are invested by the plan in accordance
with regulations prescribed by the Secretary. The regulations under this
subparagraph shall provide guidance on the appropriateness of designating
default investments that include a mix of asset classes consistent with capital
preservation, long-term capital appreciation, or a blend of both.</text>
</subparagraph><subparagraph id="IDCDCB0A3FE8D1425B8E86CD7EDB3D52C3"><enum>(B)</enum><header>Notice
requirements</header>
<clause id="IDDEAC4CC1386C4A26A557F6B660CFDE30"><enum>(i)</enum><header>In
general</header><text>The requirements of this subparagraph are met if each
participant—</text>
<subclause id="IDCC0BA68156EE47AD9C88F66C0A251D82"><enum>(I)</enum><text>receives, within
a reasonable period of time before each plan year, a notice explaining the
employee’s right under the plan to designate how contributions and earnings
will be invested and explaining how, in the absence of any investment election
by the participant, such contributions and earnings will be invested,
and</text>
</subclause><subclause id="ID078FCD1C99584B4EB2109085D2EEA19E"><enum>(II)</enum><text>has a reasonable
period of time after receipt of such notice and before the beginning of the
plan year to make such designation.</text>
</subclause></clause><clause id="ID1A983A1D3D9F49D3B00BA3F693C627F1"><enum>(ii)</enum><header>Form of
notice</header><text>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 described in this
subparagraph.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID24DDF034D5E244AD9B68073076A4A278"><enum>(b)</enum><header>Effective
Date</header>
<paragraph id="ID15D6A1E3666E4E7EB7CD4FC54AAF4226"><enum>(1)</enum><header>In
general</header><text>The amendments made by this section shall apply to plan
years beginning after December 31, 2006.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID4417DEA06F634B0CB363E153842592C4"><enum>(2)</enum><header>Regulations</header><text>Final
regulations under section 404(c)(4)(A) of the <act-name parsable-cite="ERISA">Employee Retirement Income Security Act of
1974</act-name> (as added by this section) shall be issued no later than 6
months after the date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="id119FB723035041FB9AA7FE71B04F3BAE"><enum>304.</enum><header>Credit for
qualified pension plan contributions of small employers</header>
<subsection id="ID36768EFF66534FF0B1DC1F8D3E725550"><enum>(a)</enum><header>In
general</header><text>Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits), as amended by this Act, is amended by
adding at the end the following new section:</text>
<quoted-block id="ID217D35DD60BA406BA1ACFA3D579F56AC">
<section id="IDA035D0C49CF24224834E4CD56D54BF12"><enum>45O.</enum><header>Small employer
pension plan contributions</header>
<subsection id="IDDE284401D23A4C6B009184936B8F2CDF"><enum>(a)</enum><header>General
rule</header><text>For purposes of section 38, in the case of an eligible
employer, the small employer pension plan contribution credit determined under
this section for any taxable year is an amount equal to 50 percent of the
amount which would (but for subsection (f)(1)) be allowed as a deduction under
section 404 for such taxable year for qualified employer contributions made to
any qualified retirement plan on behalf of any employee who is not a highly
compensated employee.</text>
</subsection><subsection id="ID3F3611B93F774D199565EFA731E6A6ED"><enum>(b)</enum><header>Credit limited
to 3 years</header><text>The credit allowable by this section shall be allowed
only with respect to the period of 3 taxable years beginning with the first
taxable year for which a credit is allowable with respect to a plan under this
section.</text>
</subsection><subsection id="IDA5C595B9625848328B4699195520CC62"><enum>(c)</enum><header>Qualified
employer contribution</header><text>For purposes of this section—</text>
<paragraph id="ID50B54A7A213A4A439DB1355900362207"><enum>(1)</enum><header>Defined
contribution plans</header><text>In the case of a defined contribution plan,
the term <term>qualified employer contribution</term> means the amount of
nonelective and matching contributions to the plan made by the employer on
behalf of any employee who is not a highly compensated employee to the extent
such amount does not exceed 3 percent of such employee’s compensation from the
employer for the year.</text>
</paragraph><paragraph id="ID871A74370C09467DBB792B29EFBD6246"><enum>(2)</enum><header>Defined benefit
plans</header><text>In the case of a defined benefit plan, the term
<term>qualified employer contribution</term> means the amount of employer
contributions to the plan made on behalf of any employee who is not a highly
compensated employee to the extent that the accrued benefit of such employee
derived from employer contributions for the year does not exceed the equivalent
(as determined under regulations prescribed by the Secretary and without regard
to section 401(l) or contributions and benefits under the
<act-name parsable-cite="SSA">Social Security Act</act-name>) of 3 percent of
such employee’s compensation from the employer for the year.</text>
</paragraph></subsection><subsection id="IDAA78417B891F43DDAFCA85FE00D2C634"><enum>(d)</enum><header>Qualified
retirement plan</header>
<paragraph id="IDE7BDB158C54D4624A7DFAEAE241BD0B7"><enum>(1)</enum><header>In
general</header><text>The term <term>qualified retirement plan</term> means any
plan described in section 401(a) which includes a trust exempt from tax under
section 501(a), or any plan described in section 408(k) or (p), if the plan
meets—</text>
<subparagraph id="ID2E5F5C10C44540AEA5FE005252F99B40"><enum>(A)</enum><text>the contribution
requirements of paragraph (2), and</text>
</subparagraph><subparagraph id="IDDF44DD72B3794C72B3B06F853383B9CF"><enum>(B)</enum><text>the distribution
requirements of paragraph (3).</text>
</subparagraph></paragraph><paragraph id="ID6F5E9CCAECA34F8286329C2B46B653FA"><enum>(2)</enum><header>Contribution
requirements</header>
<subparagraph id="IDCFB986CDE22D48568C03C321C7F0B929"><enum>(A)</enum><header>In
general</header><text>The requirements of this paragraph are met if, under the
plan—</text>
<clause id="ID450F9599DCA94025A466BD4761968699"><enum>(i)</enum><text>the employer is
required to make nonelective contributions of at least 1 percent of
compensation (or the equivalent thereof in the case of a defined benefit plan)
for each employee who is not a highly compensated employee who is eligible to
participate in the plan, and</text>
</clause><clause id="ID5972FE780F2142F081C9628FF827F0A5"><enum>(ii)</enum><text>allocations of
nonelective employer contributions, in the case of a defined contribution plan,
are either in equal dollar amounts for all employees covered by the plan or
bear a uniform relationship to the total compensation, of the employees covered
by the plan (and an equivalent requirement is met with respect to a defined
benefit plan).</text>
</clause></subparagraph><subparagraph id="IDF6B79CF9256F43438D9600BB82A3FC35"><enum>(B)</enum><header>Compensation
limitation</header><text>The compensation taken into account under subparagraph
(A) for any year shall not exceed the limitation in effect for such year under
section 401(a)(17).</text>
</subparagraph></paragraph><paragraph id="ID2F039B05DE6B4128AE867EC18672B166"><enum>(3)</enum><header>Distribution
requirements</header><text>In the case of a profit-sharing or stock bonus plan,
the requirements of this paragraph are met if, under the plan, qualified
employer contributions are distributable only as provided in section
401(k)(2)(B).</text>
</paragraph></subsection><subsection id="IDC2A51902099B45C1BA68DDBA3397AFD7"><enum>(e)</enum><header>Other
definitions</header><text>For purposes of this section—</text>
<paragraph id="IDF871180231194044AE78519927E190D3"><enum>(1)</enum><header>Eligible
employer</header>
<subparagraph id="ID6FC47D25AC984564BF9470D79199F844"><enum>(A)</enum><header>In
general</header><text>The term <term>eligible employer</term> means, with
respect to any year, an employer which has no more than 25 employees who
received at least $5,000 of compensation from the employer for the preceding
year. In determining the number of employees for purposes of this paragraph,
any rule applicable in determining the number of employees for purposes of
section 408(p)(2)(C) shall be applicable under ths paragraph.</text>
</subparagraph><subparagraph id="ID65AB5F7FB407498489873BCF2E239695"><enum>(B)</enum><header>Requirement for
new qualified employer plans</header><text>Such term shall not include an
employer if, during the 3-taxable year period immediately preceding the 1st
taxable year for which the credit under this section is otherwise allowable for
a qualified employer plan of the employer, the employer or any member of any
controlled group including the employer (or any predecessor of either)
established or maintained a qualified employer plan with respect to which
contributions were made, or benefits were accrued, for substantially the same
employees as are in the qualified employer plan.</text>
</subparagraph></paragraph><paragraph id="ID582D8F3069A64F5D9E5CBDCD3522FBDC"><enum>(2)</enum><header>Highly
compensated employee</header><text>The term <term>highly compensated
employee</term> has the meaning given such term by section 414(q) (determined
without regard to section 414(q)(1)(B)(ii)).</text>
</paragraph></subsection><subsection id="ID10725302A8FC4485825C7B8DBDD67300"><enum>(f)</enum><header>Special
rules</header>
<paragraph id="ID96B2C0FA167A4555004DF5AF8DA8455C"><enum>(1)</enum><header>Disallowance of
deduction</header><text>No deduction shall be allowed for that portion of the
qualified employer contributions paid or incurred for the taxable year which is
equal to the credit determined under subsection (a).</text>
</paragraph><paragraph id="ID8E1D959D68834D81A77F689F175CA9FB"><enum>(2)</enum><header>Election not to
claim credit</header><text>This section shall not apply to a taxpayer for any
taxable year if such taxpayer elects to have this section not apply for such
taxable year.</text>
</paragraph><paragraph id="ID03C4CC43E38D4F1E81B983F5473BE9CE"><enum>(3)</enum><header>Aggregation
rules</header><text>All persons treated as a single employer under subsection
(a) or (b) of section 52, or subsection (n) or (o) of section 414, shall be
treated as one person. All eligible employer plans shall be treated as 1
eligible employer plan.</text>
</paragraph></subsection><subsection id="ID8A7DEF4D1B684401AE5D4530E5D57565"><enum>(g)</enum><header>Recapture of
credit on forfeited contributions</header><text>If any accrued benefit which is
forfeitable by reason of subsection (d)(3) is forfeited, the employer’s tax
imposed by this chapter for the taxable year in which the forfeiture occurs
shall be increased by 35 percent of the employer contributions from which such
benefit is derived to the extent such contributions were taken into account in
determining the credit under this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDE1D3EC4C1B3C4E7B86A0D3934F10C29B"><enum>(b)</enum><header>Credit allowed
as part of general business credit</header><text>Section 38(b) (defining
current year business credit), as amended by this Act, is amended by striking
<quote>and</quote> at the end of paragraph (30), by striking the period at the
end of paragraph (31) and inserting <quote>, and</quote>, and by adding at the
end the following new paragraph:</text>
<quoted-block id="IDC7672F483CFC4A68A698F8A0A4DBAB28">
<paragraph id="ID70D6157F15B74CAFA70058F41E392C13"><enum>(32)</enum><text>in the case of
an eligible employer (as defined in section 45O(e)), the small employer pension
plan contribution credit determined under section
45O(a).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID6254F170C6314EBBB4B186338FC24716"><enum>(c)</enum><header>Conforming
amendments</header>
<paragraph id="ID071EAB068598459987E4F6AB573D5105"><enum>(1)</enum><text>Subsection (c) of
section 196 is amended by striking <quote>and</quote> at the end of paragraph
(12), by striking the period at the end of paragraph (13) and inserting
<quote>, and</quote>, and by adding at the end the following new
paragraph:</text>
<quoted-block id="ID509FEE324B964EAC96788C642B004625">
<paragraph id="IDF03B281AD15643609E234C8022BD0939"><enum>(14)</enum><text>the small
employer pension plan contribution credit determined under section
45O(a).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID6B4BC45DAF8F42AAB458C109C9A10291"><enum>(2)</enum><text>The table of
sections for subpart D of part IV of subchapter A of chapter 1, as amended by
this Act, is amended by adding at the end the following new item:</text>
<quoted-block id="IDCD8D0324FD4044E9B53D708BB1BEDD13" style="USC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 45O. Small employer pension plan
contributions.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDE41EF6C7C499448400489632B815A89E"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
contributions paid or incurred in taxable years beginning after December 31,
2006.</text>
</subsection></section><section id="ID214FFBADAE124186B8FB7001A0F1F66E"><enum>305.</enum><header>Account funds
disregarded for purposes of certain means-tested Federal programs</header><text display-inline="no-display-inline">Notwithstanding any other provision of
Federal law (other than the Internal Revenue Code of 1986) that requires
consideration of 1 or more financial circumstances of an individual for the
purpose of determining eligibility to receive, or the amount of, any assistance
or benefit authorized by—</text>
<paragraph id="id74CC4DED48C6401181B6B44E3DE80F4B"><enum>(1)</enum><text display-inline="yes-display-inline">the United States Housing Act of
1937,</text>
</paragraph><paragraph id="idFC1E2C1BD46F4998BF067DA3A6B7E8E6"><enum>(2)</enum><text display-inline="yes-display-inline">title V of the Housing Act of 1949,</text>
</paragraph><paragraph id="idD78C942C40DE414590BF8294C16B428D"><enum>(3)</enum><text display-inline="yes-display-inline">section 101 of the Housing and Urban
Development Act of 1965,</text>
</paragraph><paragraph id="id1EE56A39D691400493CC638DC5322125"><enum>(4)</enum><text display-inline="yes-display-inline">sections 221(d)(3), 235, and 236 of the
National Housing Act, and</text>
</paragraph><paragraph id="id1E1B2F58DF25400E8CDC4DFF59800417"><enum>(5)</enum><text display-inline="yes-display-inline">the Food Stamp Act of 1977,</text>
</paragraph><continuation-text continuation-text-level="section">any amount
(including earnings thereon) in any qualified retirement plan (as defined in
section 4974(c) of such Code), or any eligible deferred compensation plan (as
defined in section 457(b) of such Code) maintained by an employer described in
section 457(e)(1)(A) of such Code, of such individual shall be disregarded for
such purpose with respect to any period during which such individual has not
attained normal retirement age (as defined in section 216(l)(1) of the Social
Security Act).</continuation-text></section><section id="IDBF386B714D2F4D47827304848E4C2456"><enum>306.</enum><header>Direct payment
of tax refunds to individual retirement plans</header>
<subsection id="IDE7458CC19CBE43B1888456E345ADE9D7"><enum>(a)</enum><header>In
general</header><text>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, except that in the case of a joint return, the form or
forms shall provide that each spouse shall be entitled to designate an
individual retirement plan with respect to the payments attributable to the
spouse.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDABAD1D9DC30443DEB155970D9C8005CA"><enum>(b)</enum><header>Effective
date</header><text>The form required by subsection (a) shall be made available
for taxable years beginning after December 31, 2006.</text>
</subsection></section><enum>IV</enum><header>Simplification
provisions</header>
<section id="id521B75F34821428C88239B958BE32B01"><enum>401.</enum><header>Exception from
required distributions where aggregate retirement savings less than
$50,000</header>
<subsection id="id46F8233B7E7C42878CAC47B4A1E0CCA1"><enum>(a)</enum><header>In
general</header><text>Section 401(a)(9) (relating to required distributions) is
amended by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id2AD8429A2141418983F17EB9CB762D8E" style="OLC">
<subparagraph id="id3811E0BFBDE042D58350EB64ED5E6943"><enum>(H)</enum><header>Exception from
required distributions during life of employee where assets do not exceed
$50,000</header>
<clause id="id06F64AEEC51748F0952931D5FA04A6C2"><enum>(i)</enum><header>In
general</header><text>If, as of the close of any calendar year, the aggregate
balance to the credit of an individual in all applicable eligible retirement
plans and health savings accounts—</text>
<subclause id="id9A7D11E777FA435A8D744D00989F55CB"><enum>(I)</enum><text>does not exceed
$50,000, then the requirements of subparagraph (A) (and the requirements of any
provision of this title which incorporates the requirements of subparagraph (A)
by reference) shall not apply during the succeeding calendar year, or</text>
</subclause><subclause id="id4C64CEC711AF4E9E8D2F94E69AE5BDDF"><enum>(II)</enum><text>exceeds $50,000
but does not exceed $200,000, then such requirements shall apply during the
succeeding calendar year only to the excess.</text>
</subclause></clause><clause id="id5F812F64F3464410B2F449A33DE0D983"><enum>(ii)</enum><header>Applicable
eligible retirement plan</header><text>For purposes of this subparagraph, the
term <term>applicable eligible retirement plan</term> means an eligible
retirement plan (as defined in section 402(c)(8)(B)), except that in applying
such section—</text>
<subclause id="id659D06E6EBD040E5AF52A3A3A6608426"><enum>(I)</enum><text>only qualified
trusts which are part of a defined contribution plan shall be taken into
account under clause (iii), and</text>
</subclause><subclause id="idE5CD835A524F4ADEB04B69DEBEF737C9"><enum>(II)</enum><text>clause (iv)
shall be disregarded.</text>
</subclause></clause><clause id="id16E1EADE23C44508AB62828B8C3BF317"><enum>(iii)</enum><header>Special rule
for Roth and health savings accounts</header><text>For purposes of applying
clause (i) for any calendar year, each of the $50,000 and $200,000 amounts
shall be reduced by the aggregate balance to the credit of an individual in all
Roth IRAs, designated Roth accounts under section 402A, and health savings
accounts which was taken into account in computing the aggregate balance under
clause (i).</text>
</clause><clause id="idC500CFBE24AC4756AF7279ADC37C7F2F"><enum>(iv)</enum><header>Special rule
for annuity contracts</header><text>In determining the aggregate balance under
clause (i) for any calendar year, there shall not be taken into account the
value of any commercial annuity which was acquired by an applicable eligible
retirement plan and from which distributions are being made, but the
distributions shall be taken into account for purposes of this paragraph in the
same manner as the distributions are taken into account without regard to this
subparagraph.</text>
</clause><clause id="id93E8903001BB4A73B3E2513EFBFB139A"><enum>(v)</enum><header>Health savings
account</header><text>For purposes of this subparagraph, the term <term>health
savings account</term> has the meaning given such term by section
223(d).</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idAE87AE707B314383AB40C7B3E71994A6"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
distributions after December 31, 2006.</text>
</subsection></section><section id="id3284948B95544498B942833706D340AC"><enum>402.</enum><header>Allowance of
additional nonelective contributions to simple plans</header>
<subsection id="idFF91CD2B7EBA4E508525D55C28BA3820"><enum>(a)</enum><header>Simple
retirement accounts</header><text>Section 408(p)(2) (defining qualified salary
reduction arrangement) is amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id1AB96B3312364863B71696CCB1CE923D" style="OLC">
<subparagraph id="id203149340A5E4E84AFFF1049726904F8"><enum>(F)</enum><header>Additional
nonelective contributions</header><text>An employer shall not be treated as
failing to meet the requirements of subparagraph (A)(iii) or (B) for any year
if, in addition to any contributions described in either such subparagraph, the
employer elects to make nonelective contributions of a uniform percentage (not
greater than 10 percent) of compensation for each employee eligible to
participate in the arrangement and who has at least $5,000 of compensation from
the employer for the
year.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idC46D982A0F164DCBAE79081B90CF0EE8"><enum>(b)</enum><header>Simple cash or
deferred plans</header><text>Section 401(k)(11)(B) (relating to contribution
requirements) is amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id7B588C9D8CDF469B87871BD0F4ACE26D" style="OLC">
<clause id="id22002DE16C614AEA8A5547A513C50FEC"><enum>(iv)</enum><header>Additional
nonelective contributions</header><text>An employer shall not be treated as
failing to meet the requirements of clause (i)(II) or (ii) for any year if, in
addition to any contributions described in either such clause, the employer
elects to make nonelective contributions of a uniform percentage (not greater
than 10 percent) of compensation for each employee eligible to participate in
the arrangement and who has at least $5,000 of compensation from the employer
for the
year.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id2A53992E5BC2414FA5037D1DAFEB99AB"><enum>(c)</enum><header>Effective
dates</header><text>The amendments made by this section shall apply to years
beginning after December 31, 2006.</text>
</subsection></section><section id="idC95FD5024D6B418C866C39273FD48E35"><enum>403.</enum><header>Extension of
certain exceptions from tax on early distributions to plans other than
individual retirement plans</header>
<subsection id="id35BCF8BDC147438D84614685E4C4D952"><enum>(a)</enum><header>In
general</header><text>Subparagraphs (D), (E), and (F) of section 72(t)(2)
(relating to subsection not to apply to certain distributions) are each amended
by striking <quote>from an individual retirement plan</quote>.</text>
</subsection><subsection id="id089FB3F29C5D460BBD1E149FF9265279"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="idA191EAAB2DD34F6B81A8D537B8DE1E70"><enum>(1)</enum><text>The heading for
section 72(t)(2)(E) is amended by striking <quote><header-in-text level="subparagraph" style="OLC">from individual retirement
plans</header-in-text></quote>.</text>
</paragraph><paragraph id="idDDC16800A2B844C4995CB4DC153EC477"><enum>(2)</enum><text>The heading for
section 72(t)(2)(F) is amended by striking <quote><header-in-text level="subparagraph" style="OLC">from certain
plans</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="id1C5E4AB0AFBC41E5A659F9D6685EBFE4"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2006.</text>
</subsection></section><section id="ID7735EBFD766B4144B510C51F6BD343B8"><enum>404.</enum><header>Elimination of
higher penalty on certain simple plan distributions</header>
<subsection id="IDAB21DCA1240F42E7AF7A58BF2D98C1A3"><enum>(a)</enum><header>In
General</header><text>Subsection (t) of section 72 (relating to 10-percent
additional tax on early distributions from qualified retirement plans) is
amended by striking paragraph (6) and redesignating paragraphs (7), (8), and
(9) as paragraphs (6), (7), and (8), respectively.</text>
</subsection><subsection id="ID52718B5F86334C54A8107F54BC0CFC4F"><enum>(b)</enum><header>Conforming
Amendments</header>
<paragraph id="ID5596F6F5C8C14D9E94A9A4F63DF37271"><enum>(1)</enum><text>Section
72(t)(2)(E) is amended by striking <quote>paragraph (7)</quote> and inserting
<quote>paragraph (6)</quote>.</text>
</paragraph><paragraph id="ID81E4D56B8C81409383A3EE28A8895D71"><enum>(2)</enum><text>Section
72(t)(2)(F) is amended by striking <quote>paragraph (8)</quote> and inserting
<quote>paragraph (7)</quote>.</text>
</paragraph><paragraph id="IDA62A1D6AD4274D72945743033399403B"><enum>(3)</enum><text>Section
408(d)(3)(G) is amended by striking <quote>applies</quote> and inserting
<quote>applied on the day before the date of the enactment of the
<short-title>Savings Competitiveness Act of
2006</short-title></quote>.</text>
</paragraph><paragraph id="IDEB8CC9E07EB5499DA73395955B05201E"><enum>(4)</enum><text>Section 457(a)(2)
is amended by striking <quote>section 72(t)(9)</quote> and inserting
<quote>section 72(t)(8)</quote>.</text>
</paragraph></subsection><subsection id="ID5B7981ACB7E2455B969217556BF0C70E"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to years
beginning after December 31, 2006.</text>
</subsection></section><section id="ID0EE88772E1794EF3A874B3D15E4040E1"><enum>405.</enum><header>Simple plan
portability</header>
<subsection id="ID4A1E453F5B654ECE839A2B8433943A2A"><enum>(a)</enum><header>Repeal of
Limitation</header><text>Paragraph (3) of section 408(d) (relating to rollover
contributions) is amended by striking subparagraph (G) and redesignating
subparagraphs (H) and (I) as subparagraphs (G) and (H), respectively.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDD099AEDB608C44AFBCB5A8F1854D8E46"><enum>(b)</enum><header>Effective
Date</header><text>The amendment made by this section shall apply to years
beginning after December 31, 2006.</text>
</subsection></section><section id="ID6AB0F1343A0E41FE898F778A58C5D524"><enum>406.</enum><header>Allow direct
rollovers from retirement plans to Roth IRAS</header>
<subsection id="ID01412DBD5329499FB3F31C318AC5D9F5"><enum>(a)</enum><header>In
General</header><text>Subsection (e) of section 408A (defining qualified
rollover contribution) is amended to read as follows:</text>
<quoted-block id="ID683F3D1261C6402E933861BA983B417B" style="OLC">
<subsection id="IDAC6F37A5242C4DCE977E2B1136929692"><enum>(e)</enum><header>Qualified
Rollover Contribution</header><text>For purposes of this section, the term
<term>qualified rollover contribution</term> means a rollover
contribution—</text>
<paragraph id="ID82FD64F23A77453B9C6EAB3990F59C1F"><enum>(1)</enum><text>to a Roth IRA
from another such account,</text>
</paragraph><paragraph id="ID8AE28926B0C8410C972B9F2A0B8009AC"><enum>(2)</enum><text>from an eligible
retirement plan, but only if—</text>
<subparagraph id="ID265E9FA8E547449BA6AF037BBD926BEC"><enum>(A)</enum><text>in the case of an
individual retirement plan, such rollover contribution meets the requirements
of section 408(d)(3), and</text>
</subparagraph><subparagraph id="IDA9DD4889E3784AC99BBCFF2B33C97311"><enum>(B)</enum><text>in the case of
any eligible retirement plan (as defined in section 402(c)(8)(B) other than
clauses (i) and (ii) thereof), such rollover contribution meets the
requirements of section 402(c), 403(b)(8), or 457(e)(16), as applicable.</text>
</subparagraph></paragraph><continuation-text continuation-text-level="subsection">For
purposes of section 408(d)(3)(B), there shall be disregarded any qualified
rollover contribution from an individual retirement plan (other than a Roth
IRA) to a Roth IRA.</continuation-text></subsection><after-quoted-block></after-quoted-block></quoted-block>
</subsection><subsection id="ID68D7506D0F4B4480B28093F8728DBCB7"><enum>(b)</enum><header>Conforming
Amendments</header>
<paragraph id="ID6215C222BA9348C89E836CE39C64E70C"><enum>(1)</enum><text>Section
408A(c)(3)(B) is amended—</text>
<subparagraph id="ID8208846A79C9486FBD2EEE9337E94AE2"><enum>(A)</enum><text>in the text by
striking <quote>individual retirement plan</quote> and inserting <quote>an
eligible retirement plan (as defined by section 402(c)(8)(B))</quote>,
and</text>
</subparagraph><subparagraph id="ID73E7B92B7B2D4F7B8A8C4615DCAF5F03"><enum>(B)</enum><text>in the heading by
striking <quote><header-in-text level="subparagraph">ira</header-in-text></quote> and inserting
<quote><header-in-text level="subparagraph">eligible retirement
plan</header-in-text></quote>.</text>
</subparagraph></paragraph><paragraph id="ID70002416CC49447896A03B694713A15F"><enum>(2)</enum><text>Section
408A(d)(3) is amended—</text>
<subparagraph id="ID691A0CF0D16041E58C30CE62B712E6BE"><enum>(A)</enum><text>in subparagraph
(A), by striking <quote>section 408(d)(3)</quote> inserting <quote>sections
402(c), 403(b)(8), 408(d)(3), and 457(e)(16)</quote>,</text>
</subparagraph><subparagraph id="ID3C797AEFCE184D6FB8424490EE3CE8ED"><enum>(B)</enum><text>in subparagraph
(B), by striking <quote>individual retirement plan</quote> and inserting
<quote>eligible retirement plan (as defined by section
402(c)(8)(B))</quote>,</text>
</subparagraph><subparagraph id="ID9E7C9A4F022644E4B68A3CBB26E69C29"><enum>(C)</enum><text>in subparagraph
(D), by inserting <quote>or 6047</quote> after <quote>408(i)</quote>,</text>
</subparagraph><subparagraph id="ID0F4E2EC9F07444709BF1C5BFD1C63CD8"><enum>(D)</enum><text>in subparagraph
(D), by striking <quote>or both</quote> and inserting <quote>persons subject to
section 6047(d)(1), or all of the foregoing persons</quote>, and</text>
</subparagraph><subparagraph id="ID2AC4F25E4916444B898054B3CE5222C4"><enum>(E)</enum><text>in the heading,
by striking <quote><header-in-text level="paragraph">ira</header-in-text></quote> and inserting
<quote><header-in-text level="paragraph">eligible retirement
plan</header-in-text></quote>.</text>
</subparagraph></paragraph></subsection><subsection id="IDC398A31B8546497E9233CF27F0403487"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to
distributions after December 31, 2006.</text>
</subsection></section><section id="idB2F2F2A30B7A46B5B6C50FA78DE11604"><enum>407.</enum><header>Coordination
of ordering rules for distributions from Roth IRAs and designated Roth
accounts</header>
<subsection id="idC751F9C7D9E8491BA2299D246960128E"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 402A(d) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idE014EAA13BE3408C8BE49B1240FEFE8D" style="OLC">
<paragraph id="id6F7B837052AF43CFBB83C4FCBB02CD86"><enum>(5)</enum><header>Ordering
rule</header><text>For purposes of applying this section, section 72, and
section 402 to any distribution from a designated Roth account, such
distribution shall be treated as made from contributions to the extent that the
amount of such distribution, when added to all previous distributions from the
designated Roth account, does not exceed the aggregate contributions to the
designated Roth
account.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id2CDE32FAF36646568C93034C035AA3E3"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
distributions after December 31, 2006.</text>
</subsection></section><enum>V</enum><header>Pay-go
provisions</header>
<section id="idD35BB932EFD84E42A1212A3372DB744B"><enum>501.</enum><header>Pay-as-you-go
point of order in the Senate</header>
<subsection id="ID9726ca6ccbdd4007bdebd7dc91870558"><enum>(a)</enum><header>Point of
order</header>
<paragraph id="ID451365d1f305411db698662874c7fe0f"><enum>(1)</enum><header>In
general</header><text>It shall not be in order in the Senate to consider any
direct spending or revenue legislation that would increase the on-budget
deficit or cause an on-budget deficit (as measured in paragraphs (5) and (6))
for any 1 of the 3 applicable time periods.</text>
</paragraph><paragraph id="ID2fc3aa39b8bc4bb3ac452acc9e9c7362"><enum>(2)</enum><header>Applicable time
periods</header><text>For purposes of this subsection, the term
<term>applicable time period</term> means any 1 of the 3 following
periods:</text>
<subparagraph id="ID29d4051053e5428b9082b9012354e59f"><enum>(A)</enum><text>The first year
covered by the most recently adopted concurrent resolution on the
budget.</text>
</subparagraph><subparagraph id="ID6607ecf5a31743979aed1f38045bd669"><enum>(B)</enum><text>The period of the
first 5 fiscal years covered by the most recently adopted concurrent resolution
on the budget.</text>
</subparagraph><subparagraph id="ID685656be52b849318a7abdf5ff6d9d8f"><enum>(C)</enum><text>The period of the
5 fiscal years following the first 5 fiscal years covered in the most recently
adopted concurrent resolution on the budget.</text>
</subparagraph></paragraph><paragraph id="IDd423062c59af422199ca175c9eadc59b"><enum>(3)</enum><header>Direct-spending
legislation</header><text>For purposes of this subsection and except as
provided in paragraph (4), the term <term>direct-spending legislation</term>
means any bill, joint resolution, amendment, motion, or conference report that
affects direct spending as that term is defined by, and interpreted for
purposes of, the Balanced Budget and Emergency Deficit Control Act of
1985.</text>
</paragraph><paragraph id="ID6b249df1cc9446839accbea1c4f5714f"><enum>(4)</enum><header>Exclusion</header><text>For
purposes of this subsection, the terms <term>direct-spending legislation</term>
and <term>revenue legislation</term> do not include—</text>
<subparagraph id="ID19736690484648d280f0dbf6782c8c6f"><enum>(A)</enum><text>any concurrent
resolution on the budget; or</text>
</subparagraph><subparagraph id="ID1520a0244a7245438cabfa3cf24eaf61"><enum>(B)</enum><text>any provision of
legislation that affects the full funding of, and continuation of, the deposit
insurance guarantee commitment in effect on the date of enactment of the Budget
Enforcement Act of 1990.</text>
</subparagraph></paragraph><paragraph id="ID927bc22778654bef8a2fa5bb67068d98"><enum>(5)</enum><header>Baseline</header><text>Estimates
prepared pursuant to this section shall—</text>
<subparagraph id="ID5197f463db7e42b29ce764d5afc03fb6"><enum>(A)</enum><text>use the baseline
surplus or deficit used for the most recently adopted concurrent resolution on
the budget; and</text>
</subparagraph><subparagraph id="ID07f6351555ef40dab89d6b7e82ee9e35"><enum>(B)</enum><text>be calculated
under the requirements of subsections (b) through (d) of section 257 of the
Balanced Budget and Emergency Deficit Control Act of 1985 for fiscal years
beyond those covered by that concurrent resolution on the budget.</text>
</subparagraph></paragraph><paragraph id="ID05a282891c754353a9c56045cf8daaa4"><enum>(6)</enum><header>Prior
surplus</header><text>If direct spending or revenue legislation increases the
on-budget deficit or causes an on-budget deficit when taken individually, it
must also increase the on-budget deficit or cause an on-budget deficit when
taken together with all direct spending and revenue legislation enacted since
the beginning of the calendar year not accounted for in the baseline under
paragraph (5)(A), except that direct spending or revenue effects resulting in
net deficit reduction enacted pursuant to reconciliation instructions since the
beginning of that same calendar year shall not be available.</text>
</paragraph></subsection><subsection id="ID38ade33db5884747a90c465d52107bd0"><enum>(b)</enum><header>Waiver</header><text>This
section may be waived or suspended in the Senate only by the affirmative vote
of <fraction>3/5</fraction> of the Members, duly chosen and sworn.</text>
</subsection><subsection id="ID1f4f8e44402f4e09a1a087c4a24a5c70"><enum>(c)</enum><header>Appeals</header><text>Appeals
in the Senate from the decisions of the Chair relating to any provision of this
section shall be limited to 1 hour, to be equally divided between, and
controlled by, the appellant and the manager of the bill or joint resolution,
as the case may be. An affirmative vote of <fraction>3/5</fraction> of the
Members of the Senate, duly chosen and sworn, shall be required to sustain an
appeal of the ruling of the Chair on a point of order raised under this
section.</text>
</subsection><subsection id="IDaaec7052bd084a99b5c70e9089bee4aa"><enum>(d)</enum><header>Determination
of budget levels</header><text>For purposes of this section, the levels of new
budget authority, outlays, and revenues for a fiscal year shall be determined
on the basis of estimates made by the Committee on the Budget of the
Senate.</text>
</subsection><subsection id="IDe0dbff3fcce34db2923470d04b83f72c"><enum>(e)</enum><header>Sunset</header><text>This
section shall expire on September 30, 2011.</text>
</subsection></section><enum>VI</enum><header>Administrative
provisions</header>
<section id="ID92E40388C60741E6982860A93A7DD6A6"><enum>601.</enum><header>Provisions
relating to plan amendments</header>
<subsection id="ID4A5A13B43CE84F06AB0553D80CE8E123"><enum>(a)</enum><header>In
General</header><text>If this section applies to any plan or contract
amendment—</text>
<paragraph id="IDB9C67A4BD14042CE856D6AACA668B192"><enum>(1)</enum><text>such plan or
contract shall be treated as being operated in accordance with the terms of the
plan during the period described in subsection (b)(2)(A), and</text>
</paragraph><paragraph id="IDA4B219CEAB7949528571DF5DDBC6B935"><enum>(2)</enum><text>except as
provided by the Secretary of the Treasury, such plan shall not fail to meet the
requirements of section 411(d)(6) of the Internal Revenue Code of 1986 and
section 204(g) of the <act-name parsable-cite="ERISA">Employee Retirement
Income Security Act of 1974</act-name> by reason of such amendment.</text>
</paragraph></subsection><subsection id="ID1CABAD1E4F58454081967A325D8A08D1"><enum>(b)</enum><header>Amendments to
Which Section Applies</header>
<paragraph id="ID83672ABDB7EC4AB1A999F914E8668A50"><enum>(1)</enum><header>In
general</header><text>This section shall apply to any amendment to any plan or
annuity contract which is made—</text>
<subparagraph id="ID465FB1AA66F74BFA88A432CEE53243B5"><enum>(A)</enum><text>pursuant to any
amendment made by this Act, or pursuant to any regulation issued by the
Secretary of the Treasury or the Secretary of Labor under this Act, and</text>
</subparagraph><subparagraph id="IDA4B005DDAAD3412C82C3F9F7B4E4ADF8"><enum>(B)</enum><text>on or before the
last day of the first plan year beginning on or after January 1, 2007, or such
later date as the Secretary of the Treasury may prescribe.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">In the case
of a governmental plan (as defined in section 414(d) of the Internal Revenue
Code of 1986), subparagraph (B) shall be applied by substituting the date which
is 2 years after the date otherwise applied under subparagraph (B).</continuation-text></paragraph><paragraph id="ID6D704D3AFFFA4844966167CAFDA44C30"><enum>(2)</enum><header>Conditions</header><text>This
section shall not apply to any amendment unless—</text>
<subparagraph id="IDD3BD9D71FCA9425F8BBDF1DEF48DBC62"><enum>(A)</enum><text>during the
period—</text>
<clause id="ID4808C81F87FF4A6D81735B88AB8836D9"><enum>(i)</enum><text>beginning on the
date the legislative or regulatory amendment described in paragraph (1)(A)
takes effect (or in the case of a plan or contract amendment not required by
such legislative or regulatory amendment, the effective date specified by the
plan), and</text>
</clause><clause id="ID10D3C5482EDC44BB8F0B010ED9456A61"><enum>(ii)</enum><text>ending on the
date described in paragraph (1)(B) (or, if earlier, the date the plan or
contract amendment is adopted),</text>
</clause><continuation-text continuation-text-level="subparagraph">the plan
or contract is operated as if such plan or contract amendment were in effect;
and</continuation-text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID71B134FC11564E84A05592C62F2CD88C"><enum>(B)</enum><text>such plan or
contract amendment applies retroactively for such period.</text>
</subparagraph></paragraph></subsection></section>