    [109th Congress Public Law 280]
    [From the U.S. Government Publishing Office]

    [DOCID: f:publ280.109]

    [[Page 779]]

                         PENSION PROTECTION ACT OF 2006

    [[Page 120 STAT. 780]]

    Public Law 109-280
    109th Congress

                                     An Act

         To provide economic security for all Americans, and for other
                 purposes. <<NOTE: Aug. 17, 2006 -  [H.R. 4]>>

        Be it enacted by the Senate and House of Representatives of the
    United States of America in Congress
    assembled, <<NOTE: Pension Protection Act of 2006.>>

    SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

        (a) Short Title.--This <<NOTE: 29 USC 1001 note.>> Act may be cited
    as the ``Pension Protection Act of 2006''.

        (b) Table of Contents.--The table of contents for this Act (other
    than so much of title XIV as follows section 1401) is as follows:

    Sec. 1. Short title and table of contents.

      TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
                                  PENSION PLANS

      Subtitle A--Amendments to Employee Retirement Income Security Act of
                                      1974

    Sec. 101. Minimum funding standards.
    Sec. 102. Funding rules for single-employer defined benefit pension
               plans.
    Sec. 103. Benefit limitations under single-employer plans.
    Sec. 104. Special rules for multiple employer plans of certain
               cooperatives.
    Sec. 105. Temporary relief for certain PBGC settlement plans.
    Sec. 106. Special rules for plans of certain government contractors.
    Sec. 107. Technical and conforming amendments.

             Subtitle B--Amendments to Internal Revenue Code of 1986

    Sec. 111. Minimum funding standards.
    Sec. 112. Funding rules for single-employer defined benefit pension
               plans.
    Sec. 113. Benefit limitations under single-employer plans.
    Sec. 114. Technical and conforming amendments.
    Sec. 115. Modification of transition rule to pension funding
               requirements.
    Sec. 116. Restrictions on funding of nonqualified deferred compensation
               plans by employers maintaining underfunded or terminated
               single-employer plans.

      TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND
                               RELATED PROVISIONS

      Subtitle A--Amendments to Employee Retirement Income Security Act of
                                      1974

    Sec. 201. Funding rules for multiemployer defined benefit plans.
    Sec. 202. Additional funding rules for multiemployer plans in endangered
               or critical status.
    Sec. 203. Measures to forestall insolvency of multiemployer plans.
    Sec. 204. Withdrawal liability reforms.
    Sec. 205. Prohibition on retaliation against employers exercising their
               rights to
               petition the Federal Government.
    Sec. 206. Special rule for certain benefits funded under an agreement
               approved by the Pension Benefit Guaranty Corporation.

             Subtitle B--Amendments to Internal Revenue Code of 1986

    Sec. 211. Funding rules for multiemployer defined benefit plans.
    Sec. 212. Additional funding rules for multiemployer plans in endangered
               or critical status.

    [[Page 120 STAT. 781]]

    Sec. 213. Measures to forestall insolvency of multiemployer plans.
    Sec. 214. Exemption from excise taxes for certain multiemployer pension
               plans.

                 Subtitle C--Sunset of Additional Funding Rules

    Sec. 221. Sunset of additional funding rules.

                      TITLE III--INTEREST RATE ASSUMPTIONS

    Sec. 301. Extension of replacement of 30-year Treasury rates.
    Sec. 302. Interest rate assumption for determination of lump sum
               distributions.
    Sec. 303. Interest rate assumption for applying benefit limitations to
               lump sum distributions.

                 TITLE IV--PBGC GUARANTEE AND RELATED PROVISIONS

    Sec. 401. PBGC premiums.
    Sec. 402. Special funding rules for certain plans maintained by
               commercial airlines.
    Sec. 403. Limitation on PBGC guarantee of shutdown and other benefits.
    Sec. 404. Rules relating to bankruptcy of employer.
    Sec. 405. PBGC premiums for small plans.
    Sec. 406. Authorization for PBGC to pay interest on premium overpayment
               refunds.
    Sec. 407. Rules for substantial owner benefits in terminated plans.
    Sec. 408. Acceleration of PBGC computation of benefits attributable to
               recoveries from employers.
    Sec. 409. Treatment of certain plans where cessation or change in
               membership of a controlled group.
    Sec. 410. Missing participants.
    Sec. 411. Director of the Pension Benefit Guaranty Corporation.
    Sec. 412. Inclusion of information in the PBGC annual report.

                               TITLE V--DISCLOSURE

    Sec. 501. Defined benefit plan funding notice.
    Sec. 502. Access to multiemployer pension plan information.
    Sec. 503. Additional annual reporting requirements.
    Sec. 504. Electronic display of annual report information.
    Sec. 505. Section 4010 filings with the PBGC.
    Sec. 506. Disclosure of termination information to plan participants.
    Sec. 507. Notice of freedom to divest employer securities.
    Sec. 508. Periodic pension benefit statements.
    Sec. 509. Notice to participants or beneficiaries of blackout periods.

      TITLE VI--INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY
                                      RULES

                          Subtitle A--Investment Advice

    Sec. 601. Prohibited transaction exemption for provision of investment
               advice.

                       Subtitle B--Prohibited Transactions

    Sec. 611. Prohibited transaction rules relating to financial
               investments.
    Sec. 612. Correction period for certain transactions involving
               securities and commodities.

                      Subtitle C--Fiduciary and Other Rules

    Sec. 621. Inapplicability of relief from fiduciary liability during
               suspension of ability of participant or beneficiary to direct
               investments.
    Sec. 622. Increase in maximum bond amount.
    Sec. 623. Increase in penalties for coercive interference with exercise
               of ERISA rights.
    Sec. 624. Treatment of investment of assets by plan where participant
               fails to exercise investment election.
    Sec. 625. Clarification of fiduciary rules.

                      TITLE VII--BENEFIT ACCRUAL STANDARDS

    Sec. 701. Benefit accrual standards.
    Sec. 702. Regulations relating to mergers and acquisitions.

                 TITLE VIII--PENSION RELATED REVENUE PROVISIONS

                        Subtitle A--Deduction Limitations

    Sec. 801. Increase in deduction limit for single-employer plans.
    Sec. 802. Deduction limits for multiemployer plans.

    [[Page 120 STAT. 782]]

    Sec. 803. Updating deduction rules for combination of plans.

              Subtitle B--Certain Pension Provisions Made Permanent

    Sec. 811. Pensions and individual retirement arrangement provisions of
               Economic Growth and Tax Relief Reconciliation Act of 2001
               made permanent.
    Sec. 812. Saver's credit.

    Subtitle C--Improvements in Portability, Distribution, and Contribution
                                      Rules

    Sec. 821. Clarifications regarding purchase of permissive service
               credit.
    Sec. 822. Allow rollover of after-tax amounts in annuity contracts.
    Sec. 823. Clarification of minimum distribution rules for governmental
               plans.
    Sec. 824. Allow direct rollovers from retirement plans to Roth IRAs.
    Sec. 825. Eligibility for participation in retirement plans.
    Sec. 826. Modifications of rules governing hardships and unforseen
               financial emergencies.
    Sec. 827. Penalty-free withdrawals from retirement plans for individuals
               called to active duty for at least 179 days.
    Sec. 828. Waiver of 10 percent early withdrawal penalty tax on certain
               distributions of pension plans for public safety employees.
    Sec. 829. Allow rollovers by nonspouse beneficiaries of certain
               retirement plan distributions.
    Sec. 830. Direct payment of tax refunds to individual retirement plans.
    Sec. 831. Allowance of additional IRA payments in certain bankruptcy
               cases.
    Sec. 832. Determination of average compensation for section 415 limits.
    Sec. 833. Inflation indexing of gross income limitations on certain
               retirement savings incentives.

                     Subtitle D--Health and Medical Benefits

    Sec. 841. Use of excess pension assets for future retiree health
               benefits and collectively bargained retiree health benefits.
    Sec. 842. Transfer of excess pension assets to multiemployer health
               plan.
    Sec. 843. Allowance of reserve for medical benefits of plans sponsored
               by bona fide associations.
    Sec. 844. Treatment of annuity and life insurance contracts with a long-
               term care insurance feature.
    Sec. 845. Distributions from governmental retirement plans for health
               and long-term care insurance for public safety officers.

                Subtitle E--United States Tax Court Modernization

    Sec. 851. Cost-of-living adjustments for Tax Court judicial survivor
               annuities.
    Sec. 852. Cost of life insurance coverage for Tax Court judges age 65 or
               over.
    Sec. 853. Participation of Tax Court judges in the Thrift Savings Plan.
    Sec. 854. Annuities to surviving spouses and dependent children of
               special trial judges of the Tax Court.
    Sec. 855. Jurisdiction of Tax Court over collection due process cases.
    Sec. 856. Provisions for recall.
    Sec. 857. Authority for special trial judges to hear and decide certain
               employment status cases.
    Sec. 858. Confirmation of authority of Tax Court to apply doctrine of
               equitable recoupment.
    Sec. 859. Tax Court filing fee in all cases commenced by filing
               petition.
    Sec. 860. Expanded use of Tax Court practice fee for pro se taxpayers.

                          Subtitle F--Other Provisions

    Sec. 861. Extension to all governmental plans of current moratorium on
               application of certain nondiscrimination rules applicable to
               State and local plans.
    Sec. 862. Elimination of aggregate limit for usage of excess funds from
               black lung disability trusts.
    Sec. 863. Treatment of death benefits from corporate-owned life
               insurance.
    Sec. 864. Treatment of test room supervisors and proctors who assist in
               the administration of college entrance and placement exams.
    Sec. 865. Grandfather rule for church plans which self-annuitize.
    Sec. 866. Exemption for income from leveraged real estate held by church
               plans.
    Sec. 867. Church plan rule.
    Sec. 868. Gratuitous transfer for benefits of employees.

    TITLE IX--INCREASE IN PENSION PLAN DIVERSIFICATION AND PARTICIPATION AND
                            OTHER PENSION PROVISIONS

    Sec. 901. Defined contribution plans required to provide employees with
               freedom to invest their plan assets.

    [[Page 120 STAT. 783]]

    Sec. 902. Increasing participation through automatic contribution
               arrangements.
    Sec. 903. Treatment of eligible combined defined benefit plans and
               qualified cash or deferred arrangements.
    Sec. 904. Faster vesting of employer nonelective contributions.
    Sec. 905. Distributions during working retirement.
    Sec. 906. Treatment of certain pension plans of Indian tribal
               governments.

           TITLE X--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

    Sec. 1001. Regulations on time and order of issuance of domestic
               relations orders.
    Sec. 1002. Entitlement of divorced spouses to railroad retirement
               annuities independent of actual entitlement of employee.
    Sec. 1003. Extension of tier II railroad retirement benefits to
               surviving former spouses pursuant to divorce agreements.
    Sec. 1004. Requirement for additional survivor annuity option.

                       TITLE XI--ADMINISTRATIVE PROVISIONS

    Sec. 1101. Employee plans compliance resolution system.
    Sec. 1102. Notice and consent period regarding distributions.
    Sec. 1103. Reporting simplification.
    Sec. 1104. Voluntary early retirement incentive and employment retention
               plans maintained by local educational agencies and other
               entities.
    Sec. 1105. No reduction in unemployment compensation as a result of
               pension rollovers.
    Sec. 1106. Revocation of election relating to treatment as multiemployer
               plan.
    Sec. 1107. Provisions relating to plan amendments.

             TITLE XII--PROVISIONS RELATING TO EXEMPT ORGANIZATIONS

                    Subtitle A--Charitable Giving Incentives

    Sec. 1201. Tax-free distributions from individual retirement plans for
               charitable purposes.
    Sec. 1202. Extension of modification of charitable deduction for
               contributions of food inventory.
    Sec. 1203. Basis adjustment to stock of S corporation contributing
               property.
    Sec. 1204. Extension of modification of charitable deduction for
               contributions of book inventory.
    Sec. 1205. Modification of tax treatment of certain payments to
               controlling exempt organizations.
    Sec. 1206. Encouragement of contributions of capital gain real property
               made for conservation purposes.
    Sec. 1207. Excise taxes exemption for blood collector organizations.

                   Subtitle B--Reforming Exempt Organizations

                             Part 1--General Reforms

    Sec. 1211. Reporting on certain acquisitions of interests in insurance
               contracts in which certain exempt organizations hold an
               interest.
    Sec. 1212. Increase in penalty excise taxes relating to public
               charities, social welfare organizations, and private
               foundations.
    Sec. 1213. Reform of charitable contributions of certain easements in
               registered historic districts and reduced deduction for
               portion of qualified conservation contribution attributable
               to rehabilitation credit.
    Sec. 1214. Charitable contributions of taxidermy property.
    Sec. 1215. Recapture of tax benefit for charitable contributions of
               exempt use property not used for an exempt use.
    Sec. 1216. Limitation of deduction for charitable contributions of
               clothing and household items.
    Sec. 1217. Modification of recordkeeping requirements for certain
               charitable contributions.
    Sec. 1218. Contributions of fractional interests in tangible personal
               property.
    Sec. 1219. Provisions relating to substantial and gross overstatements
               of valuations.
    Sec. 1220. Additional standards for credit counseling organizations.
    Sec. 1221. Expansion of the base of tax on private foundation net
               investment income.
    Sec. 1222. Definition of convention or association of churches.
    Sec. 1223. Notification requirement for entities not currently required
               to file.
    Sec. 1224. Disclosure to State officials relating to exempt
               organizations.
    Sec. 1225. Public disclosure of information relating to unrelated
               business income tax returns.
    Sec. 1226. Study on donor advised funds and supporting organizations.

    [[Page 120 STAT. 784]]

             Part 2--Improved Accountability of Donor Advised Funds

    Sec. 1231. Excise taxes relating to donor advised funds.
    Sec. 1232. Excess benefit transactions involving donor advised funds and
               sponsoring organizations.
    Sec. 1233. Excess business holdings of donor advised funds.
    Sec. 1234. Treatment of charitable contribution deductions to donor
               advised funds.
    Sec. 1235. Returns of, and applications for recognition by, sponsoring
               organizations.

           Part 3--Improved Accountability of Supporting Organizations

    Sec. 1241. Requirements for supporting organizations.
    Sec. 1242. Excess benefit transactions involving supporting
               organizations.
    Sec. 1243. Excess business holdings of supporting organizations.
    Sec. 1244. Treatment of amounts paid to supporting organizations by
               private foundations.
    Sec. 1245. Returns of supporting organizations.

                          TITLE XIII--OTHER PROVISIONS

    Sec. 1301. Technical corrections relating to mine safety.
    Sec. 1302. Going-to-the-sun road.
    Sec. 1303. Exception to the local furnishing requirement of the tax-
               exempt bond rules.
    Sec. 1304. Qualified tuition programs.

                          TITLE XIV--TARIFF PROVISIONS

    Sec. 1401. Short title; table of contents.

      TITLE I--REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT
                                  PENSION PLANS

      Subtitle A--Amendments to Employee Retirement Income Security Act of
                                      1974

    SEC. 101. MINIMUM FUNDING STANDARDS.

        (a) Repeal of Existing Funding Rules.--Sections 302 through 308 of
    the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082
    through 1086) are repealed.
        (b) New Minimum Funding Standards.--Part 3 of subtitle B of title I
    of such Act (as amended by subsection (a)) is amended by inserting after
    section 301 the following new section:

    ``SEC. 302. <<NOTE: 29 USC 1082.>> MINIMUM FUNDING STANDARDS.

        ``(a) Requirement To Meet Minimum Funding Standard.--
                ``(1) In general.--A plan to which this part applies shall
            satisfy the minimum funding standard applicable to the plan for
            any plan year.
                ``(2) Minimum funding standard.--For purposes of paragraph
            (1), a plan shall be treated as satisfying the minimum funding
            standard for a plan year if--
                        ``(A) in the case of a defined benefit plan which is
                    a single-employer plan, the employer makes contributions
                    to or under the plan for the plan year which, in the
                    aggregate, are not less than the minimum required
                    contribution determined under section 303 for the plan
                    for the plan year,
                        ``(B) in the case of a money purchase plan which is
                    a single-employer plan, the employer makes contributions
                    to or under the plan for the plan year which are
                    required under the terms of the plan, and

    [[Page 120 STAT. 785]]

                        ``(C) in the case of a multiemployer plan, the
                    employers make contributions to or under the plan for
                    any plan year which, in the aggregate, are sufficient to
                    ensure that the plan does not have an accumulated
                    funding deficiency under section 304 as of the end of
                    the plan year.

        ``(b) Liability for Contributions.--
                ``(1) In general.--Except as provided in paragraph (2), the
            amount of any contribution required by this section (including
            any required installments under paragraphs (3) and (4) of
            section 303(j)) shall be paid by the employer responsible for
            making contributions to or under the plan.
                ``(2) Joint and several liability where employer member of
            controlled group.--If the employer referred to in paragraph (1)
            is a member of a controlled group, each member of such group
            shall be jointly and severally liable for payment of such
            contributions.

        ``(c) Variance From Minimum Funding Standards.--
                ``(1) Waiver in case of business hardship.--
                        ``(A) In general.--If--
                              ``(i) an employer is (or in the case of a
                          multiemployer plan, 10 percent or more of the
                          number of employers contributing to or under the
                          plan is) unable to satisfy the minimum funding
                          standard for a plan year without temporary
                          substantial business hardship (substantial
                          business hardship in the case of a multiemployer
                          plan), and
                              ``(ii) application of the standard would be
                          adverse to the interests of plan participants in
                          the aggregate,
                    the Secretary of the Treasury may, subject to
                    subparagraph (C), waive the requirements of subsection
                    (a) for such year with respect to all or any portion of
                    the minimum funding standard. The Secretary of the
                    Treasury shall not waive the minimum funding standard
                    with respect to a plan for more than 3 of any 15 (5 of
                    any 15 in the case of a multiemployer plan) consecutive
                    plan years.
                        ``(B) Effects of waiver.--If a waiver is granted
                    under subparagraph (A) for any plan year--
                              ``(i) in the case of a single-employer plan,
                          the minimum required contribution under section
                          303 for the plan year shall be reduced by the
                          amount of the waived funding deficiency and such
                          amount shall be amortized as required under
                          section 303(e), and
                              ``(ii) in the case of a multiemployer plan,
                          the funding standard account shall be credited
                          under section 304(b)(3)(C) with the amount of the
                          waived funding deficiency and such amount shall be
                          amortized as required under section 304(b)(2)(C).
                        ``(C) Waiver of amortized portion not allowed.--The
                    Secretary of the Treasury may not waive under
                    subparagraph (A) any portion of the minimum funding
                    standard under subsection (a) for a plan year which is
                    attributable to any waived funding deficiency for any
                    preceding plan year.
                ``(2) Determination of business hardship.--For purposes of
            this subsection, the factors taken into account in determining
            temporary substantial business hardship (substantial business

    [[Page 120 STAT. 786]]

            hardship in the case of a multiemployer plan) shall include (but
            shall not be limited to) whether or not--
                        ``(A) the employer is operating at an economic loss,
                        ``(B) there is substantial unemployment or
                    underemployment in the trade or business and in the
                    industry concerned,
                        ``(C) the sales and profits of the industry
                    concerned are depressed or declining, and
                        ``(D) it is reasonable to expect that the plan will
                    be continued only if the waiver is granted.
                ``(3) Waived funding deficiency.--For purposes of this part,
            the term `waived funding deficiency' means the portion of the
            minimum funding standard under subsection (a) (determined
            without regard to the waiver) for a plan year waived by the
            Secretary of the Treasury and not satisfied by employer
            contributions.
                ``(4) Security for waivers for single-employer plans,
            consultations.--
                        ``(A) Security may be required.--
                              ``(i) In general.--Except as provided in
                          subparagraph (C), the Secretary of the Treasury
                          may require an employer maintaining a defined
                          benefit plan which is a single-employer plan
                          (within the meaning of section 4001(a)(15)) to
                          provide security to such plan as a condition for
                          granting or modifying a waiver under paragraph
                          (1).
                              ``(ii) Special rules.--Any security provided
                          under clause (i) may be perfected and enforced
                          only by the Pension Benefit Guaranty Corporation,
                          or at the direction of the Corporation, by a
                          contributing sponsor (within the meaning of
                          section 4001(a)(13)), or a member of such
                          sponsor's controlled group (within the meaning of
                          section 4001(a)(14)).
                        ``(B) Consultation with the pension benefit guaranty
                    corporation.--Except as provided in subparagraph (C),
                    the Secretary of the Treasury shall, before granting or
                    modifying a waiver under this subsection with respect to
                    a plan described in subparagraph (A)(i)--
                              ``(i) provide the Pension Benefit Guaranty
                          Corporation with--
                                        ``(I) <<NOTE: Notice.>> notice of
                                    the completed application for any waiver
                                    or modification, and
                                        ``(II) <<NOTE: Deadline.>> an
                                    opportunity to comment on such
                                    application within 30 days after receipt
                                    of such notice, and
                              ``(ii) consider--
                                        ``(I) any comments of the
                                    Corporation under clause (i)(II), and
                                        ``(II) any views of any employee
                                    organization (within the meaning of
                                    section 3(4)) representing participants
                                    in the plan which are submitted in
                                    writing to the Secretary of the Treasury
                                    in connection with such application.
                    Information provided to the Corporation under this
                    subparagraph shall be considered tax return information
                    and subject to the safeguarding and reporting
                    requirements of section 6103(p) of the Internal Revenue
                    Code of 1986.

    [[Page 120 STAT. 787]]

                        ``(C) Exception for certain waivers.--
                              ``(i) In general.--The preceding provisions of
                          this paragraph shall not apply to any plan with
                          respect to which the sum of--
                                        ``(I) the aggregate unpaid minimum
                                    required contributions for the plan year
                                    and all preceding plan years, and
                                        ``(II) the present value of all
                                    waiver amortization installments
                                    determined for the plan year and
                                    succeeding plan years under section
                                    303(e)(2),
                          is less than $1,000,000.
                              ``(ii) Treatment of waivers for which
                          applications are pending.--The amount described in
                          clause (i)(I) shall include any increase in such
                          amount which would result if all applications for
                          waivers of the minimum funding standard under this
                          subsection which are pending with respect to such
                          plan were denied.
                              ``(iii) Unpaid minimum required
                          contribution.--For purposes of this subparagraph--
                                        ``(I) In general.--The term `unpaid
                                    minimum required contribution' means,
                                    with respect to any plan year, any
                                    minimum required contribution under
                                    section 303 for the plan year which is
                                    not paid on or before the due date (as
                                    determined under section 303(j)(1)) for
                                    the plan year.
                                        ``(II) Ordering rule.--For purposes
                                    of subclause (I), any payment to or
                                    under a plan for any plan year shall be
                                    allocated first to unpaid minimum
                                    required contributions for all preceding
                                    plan years on a first-in, first-out
                                    basis and then to the minimum required
                                    contribution under section 303 for the
                                    plan year.
                ``(5) Special rules for single-employer plans.--
                        ``(A) Application must be submitted before date 2\1/
                    2\ months after close of year.--
                    In <<NOTE: Deadline.>> the case of a single-employer
                    plan, no waiver may be granted under this subsection
                    with respect to any plan for any plan year unless an
                    application therefor is submitted to the Secretary of
                    the Treasury not later than the 15th day of the 3rd
                    month beginning after the close of such plan year.
                        ``(B) Special rule if employer is member of
                    controlled group.--In the case of a single-employer
                    plan, if an employer is a member of a controlled group,
                    the temporary substantial business hardship requirements
                    of paragraph (1) shall be treated as met only if such
                    requirements are met--
                              ``(i) with respect to such employer, and
                              ``(ii) with respect to the controlled group of
                          which such employer is a member (determined by
                          treating all members of such group as a single
                          employer).
                    The Secretary of the Treasury may provide that an
                    analysis of a trade or business or industry of a member
                    need not be conducted if such Secretary determines such
                    analysis is not necessary because the taking into
                    account of such member would not significantly affect
                    the determination under this paragraph.
                ``(6) Advance notice.--

    [[Page 120 STAT. 788]]

                        ``(A) In general.--The Secretary of the Treasury
                    shall, before granting a waiver under this subsection,
                    require each applicant to provide evidence satisfactory
                    to such Secretary that the applicant has provided notice
                    of the filing of the application for such waiver to each
                    affected party (as defined in section 4001(a)(21)). Such
                    notice shall include a description of the extent to
                    which the plan is funded for benefits which are
                    guaranteed under title IV and for benefit liabilities.
                        ``(B) Consideration of relevant information.--The
                    Secretary of the Treasury shall consider any relevant
                    information provided by a person to whom notice was
                    given under subparagraph (A).
                ``(7) Restriction on plan amendments.--
                        ``(A) In general.--No amendment of a plan which
                    increases the liabilities of the plan by reason of any
                    increase in benefits, any change in the accrual of
                    benefits, or any change in the rate at which benefits
                    become nonforfeitable under the plan shall be adopted if
                    a waiver under this subsection or an extension of time
                    under section 304(d) is in effect with respect to the
                    plan, or if a plan amendment described in subsection
                    (d)(2) has been made at any time in the preceding 12
                    months (24 months in the case of a multiemployer plan).
                    If a plan is amended in violation of the preceding
                    sentence, any such waiver, or extension of time, shall
                    not apply to any plan year ending on or after the date
                    on which such amendment is adopted.
                        ``(B) Exception.--Subparagraph (A) shall not apply
                    to any plan amendment which--
                              ``(i) the Secretary of the Treasury determines
                          to be reasonable and which provides for only de
                          minimis increases in the liabilities of the plan,
                              ``(ii) only repeals an amendment described in
                          subsection (d)(2), or
                              ``(iii) is required as a condition of
                          qualification under part I of subchapter D of
                          chapter 1 of the Internal Revenue Code of 1986.
                ``(8) Cross reference.--For corresponding duties of the
            Secretary of the Treasury with regard to implementation of the
            Internal Revenue Code of 1986, see section 412(c) of such Code.

        ``(d) Miscellaneous Rules.--
                ``(1) Change in method or year.--If the funding method, the
            valuation date, or a plan year for a plan is changed, the change
            shall take effect only if approved by the Secretary of the
            Treasury.
                ``(2) Certain retroactive plan amendments.--For purposes of
            this section, any amendment applying to a plan year which--
                        ``(A) <<NOTE: Deadlines.>> is adopted after the
                    close of such plan year but no later than 2\1/2\ months
                    after the close of the plan year (or, in the case of a
                    multiemployer plan, no later than 2 years after the
                    close of such plan year),
                        ``(B) does not reduce the accrued benefit of any
                    participant determined as of the beginning of the first
                    plan year to which the amendment applies, and

    [[Page 120 STAT. 789]]

                        ``(C) does not reduce the accrued benefit of any
                    participant determined as of the time of adoption except
                    to the extent required by the circumstances,
            shall, at the election of the plan administrator, be deemed to
            have been made on the first day of such plan year. No amendment
            described in this paragraph which reduces the accrued benefits
            of any participant shall take effect unless the plan
            administrator files a notice with the Secretary of the Treasury
            notifying him of such amendment and such Secretary has approved
            such amendment, or within 90 days after the date on which such
            notice was filed, failed to disapprove such amendment. No
            amendment described in this subsection shall be approved by the
            Secretary of the Treasury unless such Secretary determines that
            such amendment is necessary because of a temporary substantial
            business hardship (as determined under subsection (c)(2)) or a
            substantial business hardship (as so determined) in the case of
            a multiemployer plan and that a waiver under subsection (c) (or,
            in the case of a multiemployer plan, any extension of the
            amortization period under section 304(d)) is unavailable or
            inadequate.
                ``(3) Controlled group.--For purposes of this section, the
            term `controlled group' means any group treated as a single
            employer under subsection (b), (c), (m), or (o) of section 414
            of the Internal Revenue Code of 1986.''.

        (c) Clerical Amendment.--The table of contents in section 1 of such
    Act is amended by striking the items relating to sections 302 through
    308 and inserting the following new item:

    ``Sec. 302. Minimum funding standards.''.

        (d) Effective Date.--The <<NOTE: 29 USC 1082 note.>> amendments made
    by this section shall apply to plan years beginning after 2007.

    SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION
                PLANS.

        (a) In General.--Part 3 of subtitle B of title I of the Employee
    Retirement Income Security Act of 1974 (as amended by section 101 of
    this Act) is amended by inserting after section 302 the following new
    section:

    ``SEC. 303. <<NOTE: 29 USC 1083.>> MINIMUM FUNDING STANDARDS FOR SINGLE-
                EMPLOYER DEFINED BENEFIT PENSION PLANS.

        ``(a) Minimum Required Contribution.--For purposes of this section
    and section 302(a)(2)(A), except as provided in subsection (f), the term
    `minimum required contribution' means, with respect to any plan year of
    a single-employer plan--
                ``(1) in any case in which the value of plan assets of the
            plan (as reduced under subsection (f)(4)(B)) is less than the
            funding target of the plan for the plan year, the sum of--
                        ``(A) the target normal cost of the plan for the
                    plan year,
                        ``(B) the shortfall amortization charge (if any) for
                    the plan for the plan year determined under subsection
                    (c), and
                        ``(C) the waiver amortization charge (if any) for
                    the plan for the plan year as determined under
                    subsection (e); or
                ``(2) in any case in which the value of plan assets of the
            plan (as reduced under subsection (f)(4)(B)) equals or exceeds

    [[Page 120 STAT. 790]]

            the funding target of the plan for the plan year, the target
            normal cost of the plan for the plan year reduced (but not below
            zero) by such excess.

        ``(b) Target Normal Cost.--For purposes of this section, except as
    provided in subsection (i)(2) with respect to plans in at-risk status,
    the term `target normal cost' means, for any plan year, the present
    value of all benefits which are expected to accrue or to be earned under
    the plan during the plan year. For purposes of this subsection, if any
    benefit attributable to services performed in a preceding plan year is
    increased by reason of any increase in compensation during the current
    plan year, the increase in such benefit shall be treated as having
    accrued during the current plan year.
        ``(c) Shortfall Amortization Charge.--
                ``(1) In general.--For purposes of this section, the
            shortfall amortization charge for a plan for any plan year is
            the aggregate total (not less than zero) of the shortfall
            amortization installments for such plan year with respect to the
            shortfall amortization bases for such plan year and each of the
            6 preceding plan years.
                ``(2) Shortfall amortization installment.--For purposes of
            paragraph (1)--
                        ``(A) Determination.--The shortfall amortization
                    installments are the amounts necessary to amortize the
                    shortfall amortization base of the plan for any plan
                    year in level annual installments over the 7-plan-year
                    period beginning with such plan year.
                        ``(B) Shortfall installment.--The shortfall
                    amortization installment for any plan year in the 7-
                    plan-year period under subparagraph (A) with respect to
                    any shortfall amortization base is the annual
                    installment determined under subparagraph (A) for that
                    year for that base.
                        ``(C) Segment rates.--In determining any shortfall
                    amortization installment under this paragraph, the plan
                    sponsor shall use the segment rates determined under
                    subparagraph (C) of subsection (h)(2), applied under
                    rules similar to the rules of subparagraph (B) of
                    subsection (h)(2).
                ``(3) Shortfall amortization base.--For purposes of this
            section, the shortfall amortization base of a plan for a plan
            year is--
                        ``(A) the funding shortfall of such plan for such
                    plan year, minus
                        ``(B) the present value (determined using the
                    segment rates determined under subparagraph (C) of
                    subsection (h)(2), applied under rules similar to the
                    rules of subparagraph (B) of subsection (h)(2)) of the
                    aggregate total of the shortfall amortization
                    installments and waiver amortization installments which
                    have been determined for such plan year and any
                    succeeding plan year with respect to the shortfall
                    amortization bases and waiver amortization bases of the
                    plan for any plan year preceding such plan year.
                ``(4) Funding shortfall.--For purposes of this section, the
            funding shortfall of a plan for any plan year is the excess (if
            any) of--
                        ``(A) the funding target of the plan for the plan
                    year, over

    [[Page 120 STAT. 791]]

                        ``(B) the value of plan assets of the plan (as
                    reduced under subsection (f)(4)(B)) for the plan year
                    which are held by the plan on the valuation date.
                ``(5) Exemption from new shortfall amortization base.--
                        ``(A) In general.--In any case in which the value of
                    plan assets of the plan (as reduced under subsection
                    (f)(4)(A)) is equal to or greater than the funding
                    target of the plan for the plan year, the shortfall
                    amortization base of the plan for such plan year shall
                    be zero.
                        ``(B) Transition rule.--
                              ``(i) In general.--Except as provided in
                          clauses (iii) and (iv), in the case of plan years
                          beginning after 2007 and before 2011, only the
                          applicable percentage of the funding target shall
                          be taken into account under paragraph (3)(A) in
                          determining the funding shortfall for the plan
                          year for purposes of subparagraph (A).
                              ``(ii) Applicable percentage.--For purposes of
                          subparagraph (A), the applicable percentage shall
                          be determined in accordance with the following
                          table:

                  ``In the case ofThe applicable............................
        year
                    beginning in cpercentage is.............................
        year:
                            2008......................................   92
                            2009......................................   94
                            2010......................................   96.

                              ``(iii) Limitation.--Clause (i) shall not
                          apply with respect to any plan year after 2008
                          unless the shortfall amortization base for each of
                          the preceding years beginning after 2007 was zero
                          (determined after application of this
                          subparagraph).
                              ``(iv) Transition relief not available for new
                          or deficit reduction plans.--Clause (i) shall not
                          apply to a plan--
                                        ``(I) which was not in effect for a
                                    plan year beginning in 2007, or
                                        ``(II) which was in effect for a
                                    plan year beginning in 2007 and which
                                    was subject to section 302(d) (as in
                                    effect for plan years beginning in
                                    2007), determined after the application
                                    of paragraphs (6) and (9) thereof.
                ``(6) Early deemed amortization upon attainment of funding
            target.--In any case in which the funding shortfall of a plan
            for a plan year is zero, for purposes of determining the
            shortfall amortization charge for such plan year and succeeding
            plan years, the shortfall amortization bases for all preceding
            plan years (and all shortfall amortization installments
            determined with respect to such bases) shall be reduced to zero.

        ``(d) Rules Relating to Funding Target.--For purposes of this
    section--
                ``(1) Funding target.--Except as provided in subsection
            (i)(1) with respect to plans in at-risk status, the funding
            target of a plan for a plan year is the present value of all
            benefits accrued or earned under the plan as of the beginning of
            the plan year.

    [[Page 120 STAT. 792]]

                ``(2) Funding target attainment percentage.--The `funding
            target attainment percentage' of a plan for a plan year is the
            ratio (expressed as a percentage) which--
                        ``(A) the value of plan assets for the plan year (as
                    reduced under subsection (f)(4)(B)), bears to
                        ``(B) the funding target of the plan for the plan
                    year (determined without regard to subsection (i)(1)).

        ``(e) Waiver Amortization Charge.--
                ``(1) Determination of waiver amortization charge.--The
            waiver amortization charge (if any) for a plan for any plan year
            is the aggregate total of the waiver amortization installments
            for such plan year with respect to the waiver amortization bases
            for each of the 5 preceding plan years.
                ``(2) Waiver amortization installment.--For purposes of
            paragraph (1)--
                        ``(A) Determination.--The waiver amortization
                    installments are the amounts necessary to amortize the
                    waiver amortization base of the plan for any plan year
                    in level annual installments over a period of 5 plan
                    years beginning with the succeeding plan year.
                        ``(B) Waiver installment.--The waiver amortization
                    installment for any plan year in the 5-year period under
                    subparagraph (A) with respect to any waiver amortization
                    base is the annual installment determined under
                    subparagraph (A) for that year for that base.
                ``(3) Interest rate.--In determining any waiver amortization
            installment under this subsection, the plan sponsor shall use
            the segment rates determined under subparagraph (C) of
            subsection (h)(2), applied under rules similar to the rules of
            subparagraph (B) of subsection (h)(2).
                ``(4) Waiver amortization base.--The waiver amortization
            base of a plan for a plan year is the amount of the waived
            funding deficiency (if any) for such plan year under section
            302(c).
                ``(5) Early deemed amortization upon attainment of funding
            target.--In any case in which the funding shortfall of a plan
            for a plan year is zero, for purposes of determining the waiver
            amortization charge for such plan year and succeeding plan
            years, the waiver amortization bases for all preceding plan
            years (and all waiver amortization installments determined with
            respect to such bases) shall be reduced to zero.

        ``(f) Reduction of Minimum Required Contribution by Prefunding
    Balance and Funding Standard Carryover Balance.--
                ``(1) Election to maintain balances.--
                        ``(A) Prefunding balance.--The plan sponsor of a
                    single-employer plan may elect to maintain a prefunding
                    balance.
                        ``(B) Funding standard carryover balance.--
                              ``(i) In general.--In the case of a single-
                          employer plan described in clause (ii), the plan
                          sponsor may elect to maintain a funding standard
                          carryover balance, until such balance is reduced
                          to zero.
                              ``(ii) Plans maintaining funding standard
                          account in 2007.--A plan is described in this
                          clause if the plan--

    [[Page 120 STAT. 793]]

                                        ``(I) was in effect for a plan year
                                    beginning in 2007, and
                                        ``(II) had a positive balance in the
                                    funding standard account under section
                                    302(b) as in effect for such plan year
                                    and determined as of the end of such
                                    plan year.
                ``(2) Application of balances.--A prefunding balance and a
            funding standard carryover balance maintained pursuant to this
            paragraph--
                        ``(A) shall be available for crediting against the
                    minimum required contribution, pursuant to an election
                    under paragraph (3),
                        ``(B) shall be applied as a reduction in the amount
                    treated as the value of plan assets for purposes of this
                    section, to the extent provided in paragraph (4), and
                        ``(C) may be reduced at any time, pursuant to an
                    election under paragraph (5).
                ``(3) Election to apply balances against minimum required
            contribution.--
                        ``(A) In general.--Except as provided in
                    subparagraphs (B) and (C), in the case of any plan year
                    in which the plan sponsor elects to credit against the
                    minimum required contribution for the current plan year
                    all or a portion of the prefunding balance or the
                    funding standard carryover balance for the current plan
                    year (not in excess of such minimum required
                    contribution), the minimum required contribution for the
                    plan year shall be reduced as of the first day of the
                    plan year by the amount so credited by the plan sponsor.
                    For purposes of the preceding sentence, the minimum
                    required contribution shall be determined after taking
                    into account any waiver under section 302(c).
                        ``(B) Coordination with funding standard carryover
                    balance.--To the extent that any plan has a funding
                    standard carryover balance greater than zero, no amount
                    of the prefunding balance of such plan may be credited
                    under this paragraph in reducing the minimum required
                    contribution.
                        ``(C) Limitation for underfunded plans.--The
                    preceding provisions of this paragraph shall not apply
                    for any plan year if the ratio (expressed as a
                    percentage) which--
                              ``(i) the value of plan assets for the
                          preceding plan year (as reduced under paragraph
                          (4)(C)), bears to
                              ``(ii) the funding target of the plan for the
                          preceding plan year (determined without regard to
                          subsection (i)(1)),
                    is less than 80 percent. In the case of plan years
                    beginning in 2008, the ratio under this subparagraph may
                    be determined using such methods of estimation as the
                    Secretary of the Treasury may prescribe.
                ``(4) Effect of balances on amounts treated as value of plan
            assets.--In the case of any plan maintaining a prefunding
            balance or a funding standard carryover balance pursuant to this
            subsection, the amount treated as the value of plan assets shall
            be deemed to be such amount, reduced as provided in the
            following subparagraphs:

    [[Page 120 STAT. 794]]

                        ``(A) Applicability of shortfall amortization
                    base.--For purposes of subsection (c)(5), the value of
                    plan assets is deemed to be such amount, reduced by the
                    amount of the prefunding balance, but only if an
                    election under paragraph (2) applying any portion of the
                    prefunding balance in reducing the minimum required
                    contribution is in effect for the plan year.
                        ``(B) Determination of excess assets, funding
                    shortfall, and funding target attainment percentage.--
                              ``(i) In general.--For purposes of subsections
                          (a), (c)(4)(B), and (d)(2)(A), the value of plan
                          assets is deemed to be such amount, reduced by the
                          amount of the prefunding balance and the funding
                          standard carryover balance.
                              ``(ii) Special rule for certain binding
                          agreements with pbgc.--For purposes of subsection
                          (c)(4)(B), the value of plan assets shall not be
                          deemed to be reduced for a plan year by the amount
                          of the specified balance if, with respect to such
                          balance, there is in effect for a plan year a
                          binding written agreement with the Pension Benefit
                          Guaranty Corporation which provides that such
                          balance is not available to reduce the minimum
                          required contribution for the plan year. For
                          purposes of the preceding sentence, the term
                          `specified balance' means the prefunding balance
                          or the funding standard carryover balance, as the
                          case may be.
                        ``(C) Availability of balances in plan year for
                    crediting against minimum required contribution.--For
                    purposes of paragraph (3)(C)(i) of this subsection, the
                    value of plan assets is deemed to be such amount,
                    reduced by the amount of the prefunding balance.
                ``(5) Election to reduce balance prior to determinations of
            value of plan assets and crediting against minimum required
            contribution.--
                        ``(A) In general.--The plan sponsor may elect to
                    reduce by any amount the balance of the prefunding
                    balance and the funding standard carryover balance for
                    any plan year (but not below zero). Such reduction shall
                    be effective prior to any determination of the value of
                    plan assets for such plan year under this section and
                    application of the balance in reducing the minimum
                    required contribution for such plan for such plan year
                    pursuant to an election under paragraph (2).
                        ``(B) Coordination between prefunding balance and
                    funding standard carryover balance.--To the extent that
                    any plan has a funding standard carryover balance
                    greater than zero, no election may be made under
                    subparagraph (A) with respect to the prefunding balance.
                ``(6) Prefunding balance.--
                        ``(A) In general.--A prefunding balance maintained
                    by a plan shall consist of a beginning balance of zero,
                    increased and decreased to the extent provided in
                    subparagraphs (B) and (C), and adjusted further as
                    provided in paragraph (8).
                        ``(B) Increases.--

    [[Page 120 STAT. 795]]

                              ``(i) In general.--As of the first day of each
                          plan year beginning after 2008, the prefunding
                          balance of a plan shall be increased by the amount
                          elected by the plan sponsor for the plan year.
                          Such amount shall not exceed the excess (if any)
                          of--
                                        ``(I) the aggregate total of
                                    employer contributions to the plan for
                                    the preceding plan year, over--
                                        ``(II) the minimum required
                                    contribution for such preceding plan
                                    year.
                              ``(ii) Adjustments for interest.--Any excess
                          contributions under clause (i) shall be properly
                          adjusted for interest accruing for the periods
                          between the first day of the current plan year and
                          the dates on which the excess contributions were
                          made, determined by using the effective interest
                          rate for the preceding plan year and by treating
                          contributions as being first used to satisfy the
                          minimum required contribution.
                              ``(iii) Certain contributions necessary to
                          avoid benefit limitations disregarded.--The excess
                          described in clause (i) with respect to any
                          preceding plan year shall be reduced (but not
                          below zero) by the amount of contributions an
                          employer would be required to make under paragraph
                          (1), (2), or (4) of section 206(g) to avoid a
                          benefit limitation which would otherwise be
                          imposed under such paragraph for the preceding
                          plan year. Any contribution which may be taken
                          into account in satisfying the requirements of
                          more than 1 of such paragraphs shall be taken into
                          account only once for purposes of this clause.
                        ``(C) Decrease.--The prefunding balance of a plan
                    shall be decreased (but not below zero) by--
                              ``(i) as of the first day of each plan year
                          after 2008, the amount of such balance credited
                          under paragraph (2) (if any) in reducing the
                          minimum required contribution of the plan for the
                          preceding plan year, and
                              ``(ii) as of the time specified in paragraph
                          (5)(A), any reduction in such balance elected
                          under paragraph (5).
                ``(7) Funding standard carryover balance.--
                        ``(A) In general.--A funding standard carryover
                    balance maintained by a plan shall consist of a
                    beginning balance determined under subparagraph (B),
                    decreased to the extent provided in subparagraph (C),
                    and adjusted further as provided in paragraph (8).
                        ``(B) Beginning balance.--The beginning balance of
                    the funding standard carryover balance shall be the
                    positive balance described in paragraph (1)(B)(ii)(II).
                        ``(C) Decreases.--The funding standard carryover
                    balance of a plan shall be decreased (but not below
                    zero) by--
                              ``(i) as of the first day of each plan year
                          after 2008, the amount of such balance credited
                          under paragraph (2) (if any) in reducing the
                          minimum required contribution of the plan for the
                          preceding plan year, and

    [[Page 120 STAT. 796]]

                              ``(ii) as of the time specified in paragraph
                          (5)(A), any reduction in such balance elected
                          under paragraph (5).
                ``(8) Adjustments <<NOTE: Regulations.>> for investment
            experience.--In determining the prefunding balance or the
            funding standard carryover balance of a plan as of the first day
            of the plan year, the plan sponsor shall, in accordance with
            regulations prescribed by the Secretary of the Treasury, adjust
            such balance to reflect the rate of return on plan assets for
            the preceding plan year. Notwithstanding subsection (g)(3), such
            rate of return shall be determined on the basis of fair market
            value and shall properly take into account, in accordance with
            such regulations, all contributions, distributions, and other
            plan payments made during such period.
                ``(9) Elections.--Elections <<NOTE: Regulations.>> under
            this subsection shall be made at such times, and in such form
            and manner, as shall be prescribed in regulations of the
            Secretary of the Treasury.

        ``(g) Valuation of Plan Assets and Liabilities.--
                ``(1) Timing of determinations.--Except as otherwise
            provided under this subsection, all determinations under this
            section for a plan year shall be made as of the valuation date
            of the plan for such plan year.
                ``(2) Valuation date.--For purposes of this section--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), the valuation date of a plan for any
                    plan year shall be the first day of the plan year.
                        ``(B) Exception for small plans.--If, on each day
                    during the preceding plan year, a plan had 100 or fewer
                    participants, the plan may designate any day during the
                    plan year as its valuation date for such plan year and
                    succeeding plan years. For purposes of this
                    subparagraph, all defined benefit plans which are
                    single-employer plans and are maintained by the same
                    employer (or any member of such employer's controlled
                    group) shall be treated as 1 plan, but only participants
                    with respect to such employer or member shall be taken
                    into account.
                        ``(C) Application of certain rules in determination
                    of plan size.--For purposes of this paragraph--
                              ``(i) Plans not in existence in preceding
                          year.--In the case of the first plan year of any
                          plan, subparagraph (B) shall apply to such plan by
                          taking into account the number of participants
                          that the plan is reasonably expected to have on
                          days during such first plan year.
                              ``(ii) Predecessors.--Any reference in
                          subparagraph (B) to an employer shall include a
                          reference to any predecessor of such employer.
                ``(3) Determination of value of plan assets.--For purposes
            of this section--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), the value of plan assets shall be the
                    fair market value of the assets.
                        ``(B) Averaging allowed.--A plan may determine the
                    value of plan assets on the basis of the averaging of
                    fair market values, but only if such method--
                              ``(i) is permitted under regulations
                          prescribed by the Secretary of the Treasury,

    [[Page 120 STAT. 797]]

                              ``(ii) does not provide for averaging of such
                          values over more than the period beginning on the
                          last day of the 25th month preceding the month in
                          which the valuation date occurs and ending on the
                          valuation date (or a similar period in the case of
                          a valuation date which is not the 1st day of a
                          month), and
                              ``(iii) does not result in a determination of
                          the value of plan assets which, at any time, is
                          lower than 90 percent or greater than 110 percent
                          of the fair market value of such assets at such
                          time.
                    Any such averaging shall be adjusted for contributions
                    and distributions (as provided by the Secretary of the
                    Treasury).
                ``(4) Accounting for contribution receipts.--For purposes of
            determining the value of assets under paragraph (3)--
                        ``(A) Prior year contributions.--If--
                              ``(i) an employer makes any contribution to
                          the plan after the valuation date for the plan
                          year in which the contribution is made, and
                              ``(ii) the contribution is for a preceding
                          plan year,
                    the contribution shall be taken into account as an asset
                    of the plan as of the valuation date, except that in the
                    case of any plan year beginning after 2008, only the
                    present value (determined as of the valuation date) of
                    such contribution may be taken into account. For
                    purposes of the preceding sentence, present value shall
                    be determined using the effective interest rate for the
                    preceding plan year to which the contribution is
                    properly allocable.
                        ``(B) Special rule for current year contributions
                    made before valuation date.--If any contributions for
                    any plan year are made to or under the plan during the
                    plan year but before the valuation date for the plan
                    year, the assets of the plan as of the valuation date
                    shall not include--
                              ``(i) such contributions, and
                              ``(ii) interest on such contributions for the
                          period between the date of the contributions and
                          the valuation date, determined by using the
                          effective interest rate for the plan year.

        ``(h) Actuarial Assumptions and Methods.--
                ``(1) In general.--Subject to this subsection, the
            determination of any present value or other computation under
            this section shall be made on the basis of actuarial assumptions
            and methods--
                        ``(A) each of which is reasonable (taking into
                    account the experience of the plan and reasonable
                    expectations), and
                        ``(B) which, in combination, offer the actuary's
                    best estimate of anticipated experience under the plan.
                ``(2) Interest rates.--
                        ``(A) Effective interest rate.--For purposes of this
                    section, the term `effective interest rate' means, with
                    respect to any plan for any plan year, the single rate
                    of interest which, if used to determine the present
                    value of the plan's accrued or earned benefits referred
                    to in subsection (d)(1), would result in an amount equal
                    to the funding target of the plan for such plan year.

    [[Page 120 STAT. 798]]

                        ``(B) Interest rates for determining funding
                    target.--For purposes of determining the funding target
                    and normal cost of a plan for any plan year, the
                    interest rate used in determining the present value of
                    the benefits of the plan shall be--
                              ``(i) in the case of benefits reasonably
                          determined to be payable during the 5-year period
                          beginning on the first day of the plan year, the
                          first segment rate with respect to the applicable
                          month,
                              ``(ii) in the case of benefits reasonably
                          determined to be payable during the 15-year period
                          beginning at the end of the period described in
                          clause (i), the second segment rate with respect
                          to the applicable month, and
                              ``(iii) in the case of benefits reasonably
                          determined to be payable after the period
                          described in clause (ii), the third segment rate
                          with respect to the applicable month.
                        ``(C) Segment rates.--For purposes of this para-
                    graph--
                              ``(i) First segment rate.--The term `first
                          segment rate' means, with respect to any month,
                          the single rate of interest which shall be
                          determined by the Secretary of the Treasury for
                          such month on the basis of the corporate bond
                          yield curve for such month, taking into account
                          only that portion of such yield curve which is
                          based on bonds maturing during the 5-year period
                          commencing with such month.
                              ``(ii) Second segment rate.--The term `second
                          segment rate' means, with respect to any month,
                          the single rate of interest which shall be
                          determined by the Secretary of the Treasury for
                          such month on the basis of the corporate bond
                          yield curve for such month, taking into account
                          only that portion of such yield curve which is
                          based on bonds maturing during the 15-year period
                          beginning at the end of the period described in
                          clause (i).
                              ``(iii) Third segment rate.--The term `third
                          segment rate' means, with respect to any month,
                          the single rate of interest which shall be
                          determined by the Secretary of the Treasury for
                          such month on the basis of the corporate bond
                          yield curve for such month, taking into account
                          only that portion of such yield curve which is
                          based on bonds maturing during periods beginning
                          after the period described in clause (ii).
                        ``(D) Corporate bond yield curve.--For purposes of
                    this paragraph--
                              ``(i) In general.--The term `corporate bond
                          yield curve' means, with respect to any month, a
                          yield curve which is prescribed by the Secretary
                          of the Treasury for such month and which reflects
                          the average, for the 24-month period ending with
                          the month preceding such month, of monthly yields
                          on investment grade corporate bonds with varying
                          maturities and that are in the top 3 quality
                          levels available.

    [[Page 120 STAT. 799]]

                              ``(ii) Election to use yield curve.--Solely
                          for purposes of determining the minimum required
                          contribution under this section, the plan sponsor
                          may, in lieu of the segment rates determined under
                          subparagraph (C), elect to use interest rates
                          under the corporate bond yield curve. For purposes
                          of the preceding sentence such curve shall be
                          determined without regard to the 24-month
                          averaging described in clause (i). Such election,
                          once made, may be revoked only with the consent of
                          the Secretary of the Treasury.
                        ``(E) Applicable month.--For purposes of this
                    paragraph, the term `applicable month' means, with
                    respect to any plan for any plan year, the month which
                    includes the valuation date of such plan for such plan
                    year or, at the election of the plan sponsor, any of the
                    4 months which precede such month. Any election made
                    under this subparagraph shall apply to the plan year for
                    which the election is made and all succeeding plan
                    years, unless the election is revoked with the consent
                    of the Secretary of the Treasury.
                        ``(F) Publication requirements.--The Secretary of
                    the Treasury shall publish for each month the corporate
                    bond yield curve (and the corporate bond yield curve
                    reflecting the modification described in section
                    205(g)(3)(B)(iii)(I)) for such month and each of the
                    rates determined under subparagraph (B) for such month.
                    The Secretary of the Treasury shall also publish a
                    description of the methodology used to determine such
                    yield curve and such rates which is sufficiently
                    detailed to enable plans to make reasonable projections
                    regarding the yield curve and such rates for future
                    months based on the plan's projection of future interest
                    rates.
                        ``(G) Transition rule.--
                              ``(i) In general.--Notwithstanding the
                          preceding provisions of this paragraph, for plan
                          years beginning in 2008 or 2009, the first,
                          second, or third segment rate for a plan with
                          respect to any month shall be equal to the sum
                          of--
                                        ``(I) the product of such rate for
                                    such month determined without regard to
                                    this subparagraph, multiplied by the
                                    applicable percentage, and
                                        ``(II) the product of the rate
                                    determined under the rules of section
                                    302(b)(5)(B)(ii)(II) (as in effect for
                                    plan years beginning in 2007),
                                    multiplied by a percentage equal to 100
                                    percent minus the applicable percentage.
                              ``(ii) Applicable percentage.--For purposes of
                          clause (i), the applicable percentage is 33\1/3\
                          percent for plan years beginning in 2008 and 66\2/
                          3\ percent for plan years beginning in 2009.
                              ``(iii) New plans ineligible.--Clause (i)
                          shall not apply to any plan if the first plan year
                          of the plan begins after December 31, 2007.
                              ``(iv) Election.--The plan sponsor may elect
                          not to have this subparagraph apply. Such
                          election, once made, may be revoked only with the
                          consent of the Secretary of the Treasury.

    [[Page 120 STAT. 800]]

                ``(3) Mortality tables.--
                        ``(A) In general.--Except <<NOTE: Regulations.>> as
                    provided in subparagraph (C) or (D), the Secretary of
                    the Treasury shall by regulation prescribe mortality
                    tables to be used in determining any present value or
                    making any computation under this section. Such tables
                    shall be based on the actual experience of pension plans
                    and projected trends in such experience. In prescribing
                    such tables, the Secretary of the Treasury shall take
                    into account results of available independent studies of
                    mortality of individuals covered by pension plans.
                        ``(B) Periodic revision.--The Secretary of the
                    Treasury shall (at least every 10 years) make revisions
                    in any table in effect under subparagraph (A) to reflect
                    the actual experience of pension plans and projected
                    trends in such experience.
                        ``(C) Substitute mortality table.--
                              ``(i) In general.--Upon request by the plan
                          sponsor and approval by the Secretary of the
                          Treasury, a mortality table which meets the
                          requirements of clause (iii) shall be used in
                          determining any present value or making any
                          computation under this section during the period
                          of consecutive plan years (not to exceed 10)
                          specified in the request.
                              ``(ii) Early termination of period.--
                          Notwithstanding clause (i), a mortality table
                          described in clause (i) shall cease to be in
                          effect as of the earliest of--
                                        ``(I) the date on which there is a
                                    significant change in the participants
                                    in the plan by reason of a plan spinoff
                                    or merger or otherwise, or
                                        ``(II) the date on which the plan
                                    actuary determines that such table does
                                    not meet the requirements of clause
                                    (iii).
                              ``(iii) Requirements.--A mortality table meets
                          the requirements of this clause if--
                                        ``(I) there is a sufficient number
                                    of plan participants, and the pension
                                    plans have been maintained for a
                                    sufficient period of time, to have
                                    credible information necessary for
                                    purposes of subclause (II), and
                                        ``(II) such table reflects the
                                    actual experience of the pension plans
                                    maintained by the sponsor and projected
                                    trends in general mortality experience.
                              ``(iv) All plans in controlled group must use
                          separate table.--Except as provided by the
                          Secretary of the Treasury, a plan sponsor may not
                          use a mortality table under this subparagraph for
                          any plan maintained by the plan sponsor unless--
                                        ``(I) a separate mortality table is
                                    established and used under this
                                    subparagraph for each other plan
                                    maintained by the plan sponsor and if
                                    the plan sponsor is a member of a
                                    controlled group, each member of the
                                    controlled group, and
                                        ``(II) the requirements of clause
                                    (iii) are met separately with respect to
                                    the table so established for each such
                                    plan, determined by only taking into
                                    account the participants of such plan,
                                    the

    [[Page 120 STAT. 801]]

                                    time such plan has been in existence,
                                    and the actual experience of such plan.
                              ``(v) Deadline for submission and disposition
                          of application.--
                                        ``(I) Submission.--The plan sponsor
                                    shall submit a mortality table to the
                                    Secretary of the Treasury for approval
                                    under this subparagraph at least 7
                                    months before the 1st day of the period
                                    described in clause (i).
                                        ``(II) Disposition.--Any mortality
                                    table submitted to the Secretary of the
                                    Treasury for approval under this
                                    subparagraph shall be treated as in
                                    effect as of the 1st day of the period
                                    described in clause (i) unless the
                                    Secretary of the Treasury, during the
                                    180-day period beginning on the date of
                                    such submission, disapproves of such
                                    table and provides the reasons that such
                                    table fails to meet the requirements of
                                    clause (iii). The 180-day period shall
                                    be extended upon mutual agreement of the
                                    Secretary of the Treasury and the plan
                                    sponsor.
                        ``(D) Separate mortality tables for the disabled.--
                    Notwithstanding subparagraph (A)--
                              ``(i) In general.--The Secretary of the
                          Treasury shall establish mortality tables which
                          may be used (in lieu of the tables under
                          subparagraph (A)) under this subsection for
                          individuals who are entitled to benefits under the
                          plan on account of disability. The Secretary of
                          the Treasury shall establish separate tables for
                          individuals whose disabilities occur in plan years
                          beginning before January 1, 1995, and for
                          individuals whose disabilities occur in plan years
                          beginning on or after such date.
                              ``(ii) Special rule for disabilities occurring
                          after 1994.--In the case
                          of <<NOTE: Applicability.>> disabilities occurring
                          in plan years beginning after December 31, 1994,
                          the tables under clause (i) shall apply only with
                          respect to individuals described in such subclause
                          who are disabled within the meaning of title II of
                          the Social Security Act and the regulations
                          thereunder.
                              ``(iii) Periodic revision.--The Secretary of
                          the Treasury shall (at least every 10 years) make
                          revisions in any table in effect under clause (i)
                          to reflect the actual experience of pension plans
                          and projected trends in such experience.
                ``(4) Probability of benefit payments in the form of lump
            sums or other optional forms.--For purposes of determining any
            present value or making any computation under this section,
            there shall be taken into account--
                        ``(A) the probability that future benefit payments
                    under the plan will be made in the form of optional
                    forms of benefits provided under the plan (including
                    lump sum distributions, determined on the basis of the
                    plan's experience and other related assumptions), and
                        ``(B) any difference in the present value of such
                    future benefit payments resulting from the use of
                    actuarial assumptions, in determining benefit payments
                    in any such

    [[Page 120 STAT. 802]]

                    optional form of benefits, which are different from
                    those specified in this subsection.
                ``(5) Approval of large changes in actuarial assumptions.--
                        ``(A) In general.--No actuarial assumption used to
                    determine the funding target for a plan to which this
                    paragraph applies may be changed without the approval of
                    the Secretary of the Treasury.
                        ``(B) Plans to which paragraph applies.--This
                    paragraph shall apply to a plan only if--
                              ``(i) the plan is a single-employer plan to
                          which title IV applies,
                              ``(ii) the aggregate unfunded vested benefits
                          as of the close of the preceding plan year (as
                          determined under section 4006(a)(3)(E)(iii)) of
                          such plan and all other plans maintained by the
                          contributing sponsors (as defined in section
                          4001(a)(13)) and members of such sponsors'
                          controlled groups (as defined in section
                          4001(a)(14)) which are covered by title IV
                          (disregarding plans with no unfunded vested
                          benefits) exceed $50,000,000, and
                              ``(iii) the change in assumptions (determined
                          after taking into account any changes in interest
                          rate and mortality table) results in a decrease in
                          the funding shortfall of the plan for the current
                          plan year that exceeds $50,000,000, or that
                          exceeds $5,000,000 and that is 5 percent or more
                          of the funding target of the plan before such
                          change.

        ``(i) Special Rules for At-Risk Plans.--
                ``(1) Funding target for plans in at-risk status.--
                        ``(A) In general.--In the case of a plan which is in
                    at-risk status for a plan year, the funding target of
                    the plan for the plan year shall be equal to the sum
                    of--
                              ``(i) the present value of all benefits
                          accrued or earned under the plan as of the
                          beginning of the plan year, as determined by using
                          the additional actuarial assumptions described in
                          subparagraph (B), and
                              ``(ii) in the case of a plan which also has
                          been in at-risk status for at least 2 of the 4
                          preceding plan years, a loading factor determined
                          under subparagraph (C).
                        ``(B) Additional actuarial assumptions.--The
                    actuarial assumptions described in this subparagraph are
                    as follows:
                              ``(i) All employees who are not otherwise
                          assumed to retire as of the valuation date but who
                          will be eligible to elect benefits during the plan
                          year and the 10 succeeding plan years shall be
                          assumed to retire at the earliest retirement date
                          under the plan but not before the end of the plan
                          year for which the at-risk funding target and at-
                          risk target normal cost are being determined.
                              ``(ii) All employees shall be assumed to elect
                          the retirement benefit available under the plan at
                          the assumed retirement age (determined after
                          application of clause (i)) which would result in
                          the highest present value of benefits.

    [[Page 120 STAT. 803]]

                        ``(C) Loading factor.--The loading factor applied
                    with respect to a plan under this paragraph for any plan
                    year is the sum of--
                              ``(i) $700, times the number of participants
                          in the plan, plus
                              ``(ii) 4 percent of the funding target
                          (determined without regard to this paragraph) of
                          the plan for the plan year.
                ``(2) Target normal cost of at-risk plans.--In the case of a
            plan which is in at-risk status for a plan year, the target
            normal cost of the plan for such plan year shall be equal to the
            sum of--
                        ``(A) the present value of all benefits which are
                    expected to accrue or be earned under the plan during
                    the plan year, determined using the additional actuarial
                    assumptions described in paragraph (1)(B), plus
                        ``(B) in the case of a plan which also has been in
                    at-risk status for at least 2 of the 4 preceding plan
                    years, a loading factor equal to 4 percent of the target
                    normal cost (determined without regard to this
                    paragraph) of the plan for the plan year.
                ``(3) Minimum amount.--In no event shall--
                        ``(A) the at-risk funding target be less than the
                    funding target, as determined without regard to this
                    subsection, or
                        ``(B) the at-risk target normal cost be less than
                    the target normal cost, as determined without regard to
                    this subsection.
                ``(4) Determination of at-risk status.--For purposes of this
            subsection--
                        ``(A) In general.--A plan is in at-risk status for a
                    plan year if--
                              ``(i) the funding target attainment percentage
                          for the preceding plan year (determined under this
                          section without regard to this subsection) is less
                          than 80 percent, and
                              ``(ii) the funding target attainment
                          percentage for the preceding plan year (determined
                          under this section by using the additional
                          actuarial assumptions described in paragraph
                          (1)(B) in computing the funding target) is less
                          than 70 percent.
                        ``(B) Transition rule.--
                    In <<NOTE: Applicability.>> the case of plan years
                    beginning in 2008, 2009, and 2010, subparagraph (A)(i)
                    shall be applied by substituting the following
                    percentages for `80 percent':
                              ``(i) 65 percent in the case of 2008.
                              ``(ii) 70 percent in the case of 2009.
                              ``(iii) 75 percent in the case of 2010.
                    In the case of plan years beginning in 2008, the funding
                    target attainment percentage for the preceding plan year
                    under subparagraph (A)(ii) may be determined using such
                    methods of estimation as the Secretary of the Treasury
                    may provide.
                        ``(C) Special rule for employees offered early
                    retirement in 2006.--
                              ``(i) In general.--For purposes of
                          subparagraph (A)(ii), the additional actuarial
                          assumptions described

    [[Page 120 STAT. 804]]

                          in paragraph (1)(B) shall not be taken into
                          account with respect to any employee if--
                                        ``(I) such employee is employed by a
                                    specified automobile manufacturer,
                                        ``(II) <<NOTE: Deadline.>> such
                                    employee is offered a substantial amount
                                    of additional cash compensation,
                                    substantially enhanced retirement
                                    benefits under the plan, or materially
                                    reduced employment duties on the
                                    condition that by a specified date (not
                                    later than December 31, 2010) the
                                    employee retires (as defined under the
                                    terms of the plan),
                                        ``(III) <<NOTE: Deadline.>> such
                                    offer is made during 2006 and pursuant
                                    to a bona fide retirement incentive
                                    program and requires, by the terms of
                                    the offer, that such offer can be
                                    accepted not later than a specified date
                                    (not later than December 31, 2006), and
                                        ``(IV) such employee does not elect
                                    to accept such offer before the
                                    specified date on which the offer
                                    expires.
                              ``(ii) Specified automobile manufacturer.--For
                          purposes of clause (i), the term `specified
                          automobile manufacturer' means--
                                        ``(I) any manufacturer of
                                    automobiles, and
                                        ``(II) any manufacturer of
                                    automobile parts which supplies such
                                    parts directly to a manufacturer of
                                    automobiles and which, after a
                                    transaction or series of transactions
                                    ending in 1999, ceased to be a member of
                                    a controlled group which included such
                                    manufacturer of automobiles.
                ``(5) Transition between applicable funding targets and
            between applicable target normal costs.--
                        ``(A) In general.--In any case in which a plan which
                    is in at-risk status for a plan year has been in such
                    status for a consecutive period of fewer than 5 plan
                    years, the applicable amount of the funding target and
                    of the target normal cost shall be, in lieu of the
                    amount determined without regard to this paragraph, the
                    sum of--
                              ``(i) the amount determined under this section
                          without regard to this subsection, plus
                              ``(ii) the transition percentage for such plan
                          year of the excess of the amount determined under
                          this subsection (without regard to this paragraph)
                          over the amount determined under this section
                          without regard to this subsection.
                        ``(B) Transition percentage.--For purposes of
                    subparagraph (A), the transition percentage shall be
                    determined in accordance with the following table:

                ``If the consecuti..........................................
        of
                  years (includingThe transition............................
        year)
                the plan is in at-percentage is--...........................
        status is--
                          1...........................................   20
                          2...........................................   40
                          3...........................................   60
                          4...........................................   80.

    [[Page 120 STAT. 805]]

                        ``(C) Years before effective date.--For purposes of
                    this paragraph, plan years beginning before 2008 shall
                    not be taken into account.
                ``(6) Small plan exception.--If, on each day during the
            preceding plan year, a plan had 500 or fewer participants, the
            plan shall not be treated as in at-risk status for the plan
            year. <<NOTE: Applicability.>> For purposes of this paragraph,
            all defined benefit plans (other than multiemployer plans)
            maintained by the same employer (or any member of such
            employer's controlled group) shall be treated as 1 plan, but
            only participants with respect to such employer or member shall
            be taken into account and the rules of subsection (g)(2)(C)
            shall apply.

        ``(j) Payment of Minimum Required Contributions.--
                ``(1) In general.--For purposes of this section, the due
            date for any payment of any minimum required contribution for
            any plan year shall be 8\1/2\ months after the close of the plan
            year.
                ``(2) Interest.--Any payment required under paragraph (1)
            for a plan year that is made on a date other than the valuation
            date for such plan year shall be adjusted for interest accruing
            for the period between the valuation date and the payment date,
            at the effective rate of interest for the plan for such plan
            year.
                ``(3) Accelerated quarterly contribution schedule for
            underfunded plans.--
                        ``(A) Failure to timely make required installment.--
                    In any case in which the plan has a funding shortfall
                    for the preceding plan year, the employer maintaining
                    the plan shall make the required installments under this
                    paragraph and if the employer fails to pay the full
                    amount of a required installment for the plan year, then
                    the amount of interest charged under paragraph (2) on
                    the underpayment for the period of underpayment shall be
                    determined by using a rate of interest equal to the rate
                    otherwise used under paragraph (2) plus 5 percentage
                    points.
                        ``(B) Amount of underpayment, period of
                    underpayment.--For purposes of subparagraph (A)--
                              ``(i) Amount.--The amount of the underpayment
                          shall be the excess of--
                                        ``(I) the required installment, over
                                        ``(II) the amount (if any) of the
                                    installment contributed to or under the
                                    plan on or before the due date for the
                                    installment.
                              ``(ii) Period of underpayment.--The period for
                          which any interest is charged under this paragraph
                          with respect to any portion of the underpayment
                          shall run from the due date for the installment to
                          the date on which such portion is contributed to
                          or under the plan.
                              ``(iii) Order of crediting contributions.--For
                          purposes of clause (i)(II), contributions shall be
                          credited against unpaid required installments in
                          the order in which such installments are required
                          to be paid.
                        ``(C) Number of required installments; due dates.--
                    For purposes of this paragraph--
                              ``(i) Payable in 4 installments.--There shall
                          be 4 required installments for each plan year.

    [[Page 120 STAT. 806]]

                              ``(ii) Time for payment of installments.--The
                          due dates for required installments are set forth
                          in the following table:

    ``In the case of the following
     required installment:
                                        The due date is:
      1st.............................  April 15
      2nd.............................  July 15
      3rd.............................  October 15
      4th.............................  January 15 of the  following year.

                        ``(D) Amount of required installment.--For purposes
                    of this paragraph--
                              ``(i) In general.--The amount of any required
                          installment shall be 25 percent of the required
                          annual payment.
                              ``(ii) Required annual payment.--For purposes
                          of clause (i), the term `required annual payment'
                          means the lesser of--
                                        ``(I) 90 percent of the minimum
                                    required contribution (determined
                                    without regard to this subsection) to
                                    the plan for the plan year under this
                                    section, or
                                        ``(II) 100 percent of the minimum
                                    required contribution (determined
                                    without regard to this subsection or to
                                    any waiver under section 302(c)) to the
                                    plan for the preceding plan year.
                          Subclause (II) shall not apply if the preceding
                          plan year referred to in such clause was not a
                          year of 12 months.
                        ``(E) Fiscal years and short years.--
                              ``(i) Fiscal years.--In applying this
                          paragraph to a plan year beginning on any date
                          other than January 1, there shall be substituted
                          for the months specified in this paragraph, the
                          months which correspond thereto.
                              ``(ii) Short plan year.--This subparagraph
                          shall be applied to plan years of less than 12
                          months in accordance with regulations prescribed
                          by the Secretary of the Treasury.
                ``(4) Liquidity requirement in connection with quarterly
            contributions.--
                        ``(A) In general.--A plan to which this paragraph
                    applies shall be treated as failing to pay the full
                    amount of any required installment under paragraph (3)
                    to the extent that the value of the liquid assets paid
                    in such installment is less than the liquidity shortfall
                    (whether or not such liquidity shortfall exceeds the
                    amount of such installment required to be paid but for
                    this paragraph).
                        ``(B) Plans to which paragraph applies.--This
                    paragraph shall apply to a plan (other than a plan
                    described in subsection (g)(2)(B)) which--
                              ``(i) is required to pay installments under
                          paragraph (3) for a plan year, and
                              ``(ii) has a liquidity shortfall for any
                          quarter during such plan year.

    [[Page 120 STAT. 807]]

                        ``(C) Period of underpayment.--For purposes of
                    paragraph (3)(A), any portion of an installment that is
                    treated as not paid under subparagraph (A) shall
                    continue to be treated as unpaid until the close of the
                    quarter in which the due date for such installment
                    occurs.
                        ``(D) Limitation on increase.--If the amount of any
                    required installment is increased by reason of
                    subparagraph (A), in no event shall such increase exceed
                    the amount which, when added to prior installments for
                    the plan year, is necessary to increase the funding
                    target attainment percentage of the plan for the plan
                    year (taking into account the expected increase in
                    funding target due to benefits accruing or earned during
                    the plan year) to 100 percent.
                        ``(E) Definitions.--For purposes of this paragraph--
                              ``(i) Liquidity shortfall.--The term
                          `liquidity shortfall' means, with respect to any
                          required installment, an amount equal to the
                          excess (as of the last day of the quarter for
                          which such installment is made) of--
                                        ``(I) the base amount with respect
                                    to such quarter, over
                                        ``(II) the value (as of such last
                                    day) of the plan's liquid assets.
                              ``(ii) Base amount.--
                                        ``(I) In general.--The term `base
                                    amount' means, with respect to any
                                    quarter, an amount equal to 3 times the
                                    sum of the adjusted disbursements from
                                    the plan for the 12 months ending on the
                                    last day of such quarter.
                                        ``(II) Special rule.--If the amount
                                    determined under subclause (I) exceeds
                                    an amount equal to 2 times the sum of
                                    the adjusted disbursements from the plan
                                    for the 36 months ending on the last day
                                    of the quarter and an enrolled actuary
                                    certifies to the satisfaction of the
                                    Secretary of the Treasury that such
                                    excess is the result of nonrecurring
                                    circumstances, the base amount with
                                    respect to such quarter shall be
                                    determined without regard to amounts
                                    related to those nonrecurring
                                    circumstances.
                              ``(iii) Disbursements from the plan.--The term
                          `disbursements from the plan' means all
                          disbursements from the trust, including purchases
                          of annuities, payments of single sums and other
                          benefits, and administrative expenses.
                              ``(iv) Adjusted disbursements.--The term
                          `adjusted disbursements' means disbursements from
                          the plan reduced by the product of--
                                        ``(I) the plan's funding target
                                    attainment percentage for the plan year,
                                    and
                                        ``(II) the sum of the purchases of
                                    annuities, payments of single sums, and
                                    such other disbursements as the
                                    Secretary of the Treasury shall provide
                                    in regulations.
                              ``(v) Liquid assets.--The term `liquid assets'
                          means cash, marketable securities, and such other

    [[Page 120 STAT. 808]]

                          assets as specified by the Secretary of the
                          Treasury in regulations.
                              ``(vi) Quarter.--The term `quarter' means,
                          with respect to any required installment, the 3-
                          month period preceding the month in which the due
                          date for such installment occurs.
                        ``(F) Regulations.--The Secretary of the Treasury
                    may prescribe such regulations as are necessary to carry
                    out this paragraph.

        ``(k) Imposition of Lien Where Failure to Make Required
    Contributions.--
                ``(1) In general.--In the case of a plan to which this
            subsection applies (as provided under paragraph (2)), if--
                        ``(A) any person fails to make a contribution
                    payment required by section 302 and this section before
                    the due date for such payment, and
                        ``(B) the unpaid balance of such payment (including
                    interest), when added to the aggregate unpaid balance of
                    all preceding such payments for which payment was not
                    made before the due date (including interest), exceeds
                    $1,000,000,
            then there shall be a lien in favor of the plan in the amount
            determined under paragraph (3) upon all property and rights to
            property, whether real or personal, belonging to such person and
            any other person who is a member of the same controlled group of
            which such person is a member.
                ``(2) Plans to which subsection applies.--This subsection
            shall apply to a single-employer plan covered under section 4021
            for any plan year for which the funding target attainment
            percentage (as defined in subsection (d)(2)) of such plan is
            less than 100 percent.
                ``(3) Amount of lien.--For purposes of paragraph (1), the
            amount of the lien shall be equal to the aggregate unpaid
            balance of contribution payments required under this section and
            section 302 for which payment has not been made before the due
            date.
                ``(4) Notice of failure; lien.--
                        ``(A) Notice of failure.--
                    A <<NOTE: Deadline.>> person committing a failure
                    described in paragraph (1) shall notify the Pension
                    Benefit Guaranty Corporation of such failure within 10
                    days of the due date for the required contribution
                    payment.
                        ``(B) Period of lien.--The lien imposed by paragraph
                    (1) shall arise on the due date for the required
                    contribution payment and shall continue until the last
                    day of the first plan year in which the plan ceases to
                    be described in paragraph (1)(B). Such lien shall
                    continue to run without regard to whether such plan
                    continues to be described in paragraph (2) during the
                    period referred to in the preceding sentence.
                        ``(C) Certain rules to apply.--Any amount with
                    respect to which a lien is imposed under paragraph (1)
                    shall be treated as taxes due and owing the United
                    States and rules similar to the rules of subsections
                    (c), (d), and (e) of section 4068 shall apply with
                    respect to a lien imposed by subsection (a) and the
                    amount with respect to such lien.

    [[Page 120 STAT. 809]]

                ``(5) Enforcement.--Any lien created under paragraph (1) may
            be perfected and enforced only by the Pension Benefit Guaranty
            Corporation, or at the direction of the Pension Benefit Guaranty
            Corporation, by the contributing sponsor (or any member of the
            controlled group of the contributing sponsor).
                ``(6) Definitions.--For purposes of this subsection--
                        ``(A) Contribution payment.--The term `contribution
                    payment' means, in connection with a plan, a
                    contribution payment required to be made to the plan,
                    including any required installment under paragraphs (3)
                    and (4) of subsection (j).
                        ``(B) Due date; required installment.--The terms
                    `due date' and `required installment' have the meanings
                    given such terms by subsection (j), except that in the
                    case of a payment other than a required installment, the
                    due date shall be the date such payment is required to
                    be made under section 303.
                        ``(C) Controlled group.--The term `controlled group'
                    means any group treated as a single employer under
                    subsections (b), (c), (m), and (o) of section 414 of the
                    Internal Revenue Code of 1986.

        ``(l) Qualified Transfers to Health Benefit Accounts.--In the case
    of a qualified transfer (as defined in section 420 of the Internal
    Revenue Code of 1986), any assets so transferred shall not, for purposes
    of this section, be treated as assets in the plan.''.
        (b) Clerical Amendment.--The table of sections in section 1 of such
    Act (as amended by section 101) is amended by inserting after the item
    relating to section 302 the following new item:

    ``Sec. 303. Minimum funding standards for single-employer defined
               benefit pension plans.''.

        (c) Effective Date.--The <<NOTE: 29 USC 1083 note.>> amendments made
    by this section shall apply with respect to plan years beginning after
    2007.

    SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

        (a) Funding-Based Limits on Benefits and Benefit Accruals Under
    Single-Employer Plans.--Section 206 of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1056) is amended by adding at the end
    the following new subsection:
        ``(g) Funding-Based Limits on Benefits and Benefit Accruals Under
    Single-Employer Plans.--
                ``(1) Funding-based limitation on shutdown benefits and
            other unpredictable contingent event benefits under single-
            employer plans.--
                        ``(A) In general.--If a participant of a defined
                    benefit plan which is a single-employer plan is entitled
                    to an unpredictable contingent event benefit payable
                    with respect to any event occurring during any plan
                    year, the plan shall provide that such benefit may not
                    be provided if the adjusted funding target attainment
                    percentage for such plan year--
                              ``(i) is less than 60 percent, or
                              ``(ii) would be less than 60 percent taking
                          into account such occurrence.
                        ``(B) Exemption.--Subparagraph (A) <<NOTE: Effective
                    date.>> shall cease to apply with respect to any plan
                    year, effective as of the first day of the plan year,
                    upon payment by the plan

    [[Page 120 STAT. 810]]

                    sponsor of a contribution (in addition to any minimum
                    required contribution under section 303) equal to--
                              ``(i) in the case of subparagraph (A)(i), the
                          amount of the increase in the funding target of
                          the plan (under section 303) for the plan year
                          attributable to the occurrence referred to in
                          subparagraph (A), and
                              ``(ii) in the case of subparagraph (A)(ii),
                          the amount sufficient to result in a funding
                          target attainment percentage of 60 percent.
                        ``(C) Unpredictable contingent event.--For purposes
                    of this paragraph, the term `unpredictable contingent
                    event benefit' means any benefit payable solely by
                    reason of--
                              ``(i) a plant shutdown (or similar event, as
                          determined by the Secretary of the Treasury), or
                              ``(ii) an event other than the attainment of
                          any age, performance of any service, receipt or
                          derivation of any compensation, or occurrence of
                          death or disability.
                ``(2) Limitations on plan amendments increasing liability
            for benefits.--
                        ``(A) In general.--No amendment to a defined benefit
                    plan which is a single-employer plan which has the
                    effect of increasing liabilities of the plan by reason
                    of increases in benefits, establishment of new benefits,
                    changing the rate of benefit accrual, or changing the
                    rate at which benefits become nonforfeitable may take
                    effect during any plan year if the adjusted funding
                    target attainment percentage for such plan year is--
                              ``(i) less than 80 percent, or
                              ``(ii) would be less than 80 percent taking
                          into account such amendment.
                        ``(B) Exemption.--Subparagraph (A) <<NOTE: Effective
                    date.>> shall cease to apply with respect to any plan
                    year, effective as of the first day of the plan year (or
                    if later, the effective date of the amendment), upon
                    payment by the plan sponsor of a contribution (in
                    addition to any minimum required contribution under
                    section 303) equal to--
                              ``(i) in the case of subparagraph (A)(i), the
                          amount of the increase in the funding target of
                          the plan (under section 303) for the plan year
                          attributable to the amendment, and
                              ``(ii) in the case of subparagraph (A)(ii),
                          the amount sufficient to result in an adjusted
                          funding target attainment percentage of 80
                          percent.
                        ``(C) Exception for certain benefit increases.--
                    Subparagraph (A) shall not apply to any amendment which
                    provides for an increase in benefits under a formula
                    which is not based on a participant's compensation, but
                    only if the rate of such increase is not in excess of
                    the contemporaneous rate of increase in average wages of
                    participants covered by the amendment.
                ``(3) Limitations on accelerated benefit distributions.--
                        ``(A) Funding percentage less than 60 percent.--A
                    defined benefit plan which is a single-employer plan
                    shall provide that, in any case in which the plan's
                    adjusted

    [[Page 120 STAT. 811]]

                    funding target attainment percentage for a plan year is
                    less than 60 percent, the plan may not pay any
                    prohibited payment after the valuation date for the plan
                    year.
                        ``(B) Bankruptcy.--
                    A <<NOTE: Certification.>> defined benefit plan which is
                    a single-employer plan shall provide that, during any
                    period in which the plan sponsor is a debtor in a case
                    under title 11, United States Code, or similar Federal
                    or State law, the plan may not pay any prohibited
                    payment. The preceding sentence shall not apply on or
                    after the date on which the enrolled actuary of the plan
                    certifies that the adjusted funding target attainment
                    percentage of such plan is not less than 100 percent.
                        ``(C) Limited payment if percentage at least 60
                    percent but less than 80 percent.--
                              ``(i) In general.--A defined benefit plan
                          which is a single-employer plan shall provide
                          that, in any case in which the plan's adjusted
                          funding target attainment percentage for a plan
                          year is 60 percent or greater but less than 80
                          percent, the plan may not pay any prohibited
                          payment after the valuation date for the plan year
                          to the extent the amount of the payment exceeds
                          the lesser of--
                                        ``(I) 50 percent of the amount of
                                    the payment which could be made without
                                    regard to this subsection, or
                                        ``(II) the present value (determined
                                    under guidance prescribed by the Pension
                                    Benefit Guaranty Corporation, using the
                                    interest and mortality assumptions under
                                    section 205(g)) of the maximum guarantee
                                    with respect to the participant under
                                    section 4022.
                              ``(ii) One-time application.--
                                        ``(I) In general.--The plan shall
                                    also provide that only 1 prohibited
                                    payment meeting the requirements of
                                    clause (i) may be made with respect to
                                    any participant during any period of
                                    consecutive plan years to which the
                                    limitations under either subparagraph
                                    (A) or (B) or this subparagraph applies.
                                        ``(II) Treatment of beneficiaries.--
                                    For purposes of this clause, a
                                    participant and any beneficiary on his
                                    behalf (including an alternate payee, as
                                    defined in section 206(d)(3)(K)) shall
                                    be treated as 1 participant. If the
                                    accrued benefit of a participant is
                                    allocated to such an alternate payee and
                                    1 or more other persons, the amount
                                    under clause (i) shall be allocated
                                    among such persons in the same manner as
                                    the accrued benefit is allocated unless
                                    the qualified domestic relations order
                                    (as defined in section 206(d)(3)(B)(i))
                                    provides otherwise.
                        ``(D) Exception.--This paragraph shall not apply to
                    any plan for any plan year if the terms of such plan (as
                    in effect for the period beginning on September 1, 2005,
                    and ending with such plan year) provide for no benefit
                    accruals with respect to any participant during such
                    period.

    [[Page 120 STAT. 812]]

                        ``(E) Prohibited payment.--For purpose of this
                    paragraph, the term `prohibited payment' means--
                              ``(i) any payment, in excess of the monthly
                          amount paid under a single life annuity (plus any
                          social security supplements described in the last
                          sentence of section 204(b)(1)(G)), to a
                          participant or beneficiary whose annuity starting
                          date (as defined in section 205(h)(2)) occurs
                          during any period a limitation under subparagraph
                          (A) or (B) is in effect,
                              ``(ii) any payment for the purchase of an
                          irrevocable commitment from an insurer to pay
                          benefits, and
                              ``(iii) <<NOTE: Regulations.>> any other
                          payment specified by the Secretary of the Treasury
                          by regulations.
                ``(4) Limitation on benefit accruals for plans with severe
            funding shortfalls.--
                        ``(A) In general.--A defined benefit plan which is a
                    single-employer plan shall provide that, in any case in
                    which the plan's adjusted funding target attainment
                    percentage for a plan year is less than 60 percent,
                    benefit accruals under the plan shall cease as of the
                    valuation date for the plan year.
                        ``(B) Exemption.--Subparagraph (A) <<NOTE: Effective
                    date.>> shall cease to apply with respect to any plan
                    year, effective as of the first day of the plan year,
                    upon payment by the plan sponsor of a contribution (in
                    addition to any minimum required contribution under
                    section 303) equal to the amount sufficient to result in
                    an adjusted funding target attainment percentage of 60
                    percent.
                ``(5) Rules relating to contributions required to avoid
            benefit limitations.--
                        ``(A) Security may be provided.--
                              ``(i) In general.--For purposes of this
                          subsection, the adjusted funding target attainment
                          percentage shall be determined by treating as an
                          asset of the plan any security provided by a plan
                          sponsor in a form meeting the requirements of
                          clause (ii).
                              ``(ii) Form of security.--The security
                          required under clause (i) shall consist of--
                                        ``(I) a bond issued by a corporate
                                    surety company that is an acceptable
                                    surety for purposes of section 412 of
                                    this Act,
                                        ``(II) cash, or United States
                                    obligations which mature in 3 years or
                                    less, held in escrow by a bank or
                                    similar financial institution, or
                                        ``(III) such other form of security
                                    as is satisfactory to the Secretary of
                                    the Treasury and the parties involved.
                              ``(iii) Enforcement.--Any security provided
                          under clause (i) may be perfected and enforced at
                          any time after the earlier of--
                                        ``(I) the date on which the plan
                                    terminates,
                                        ``(II) if there is a failure to make
                                    a payment of the minimum required
                                    contribution for any plan year beginning
                                    after the security is provided, the due
                                    date for the payment under section
                                    303(j), or

    [[Page 120 STAT. 813]]

                                        ``(III) if the adjusted funding
                                    target attainment percentage is less
                                    than 60 percent for a consecutive period
                                    of 7 years, the valuation date for the
                                    last year in the period.
                              ``(iv) Release of security.--The security
                          shall be released (and any amounts thereunder
                          shall be refunded together with any interest
                          accrued thereon) at such time as the Secretary of
                          the Treasury may prescribe in regulations,
                          including regulations for partial releases of the
                          security by reason of increases in the funding
                          target attainment percentage.
                        ``(B) Prefunding balance or funding standard
                    carryover balance may not be used.--No prefunding
                    balance or funding standard carryover balance under
                    section 303(f) may be used under paragraph (1), (2), or
                    (4) to satisfy any payment an employer may make under
                    any such paragraph to avoid or terminate the application
                    of any limitation under such paragraph.
                        ``(C) Deemed reduction of funding balances.--
                              ``(i) In general.--Subject to clause (iii), in
                          any case in which a benefit limitation under
                          paragraph (1), (2), (3), or (4) would (but for
                          this subparagraph and determined without regard to
                          paragraph (1)(B), (2)(B), or (4)(B)) apply to such
                          plan for the plan year, the plan sponsor of such
                          plan shall be treated for purposes of this Act as
                          having made an election under section 303(f) to
                          reduce the prefunding balance or funding standard
                          carryover balance by such amount as is necessary
                          for such benefit limitation to not apply to the
                          plan for such plan year.
                              ``(ii) Exception for insufficient funding
                          balances.--Clause (i) shall not apply with respect
                          to a benefit limitation for any plan year if the
                          application of clause (i) would not result in the
                          benefit limitation not applying for such plan
                          year.
                              ``(iii) Restrictions of certain rules to
                          collectively bargained plans.--
                          With <<NOTE: Applicability.>> respect to any
                          benefit limitation under paragraph (1), (2), or
                          (4), clause (i) shall only apply in the case of a
                          plan maintained pursuant to 1 or more collective
                          bargaining agreements between employee
                          representatives and 1 or more employers.
                ``(6) New plans.--Paragraphs (1), (2), and (4) shall not
            apply to a plan for the first 5 plan years of the plan. For
            purposes of this paragraph, the reference in this paragraph to a
            plan shall include a reference to any predecessor plan.
                ``(7) Presumed underfunding for purposes of benefit
            limitations.--
                        ``(A) Presumption
                    of <<NOTE: Certification.>> continued underfunding.--In
                    any case in which a benefit limitation under paragraph
                    (1), (2), (3), or (4) has been applied to a plan with
                    respect to the plan year preceding the current plan
                    year, the adjusted funding target attainment percentage
                    of the plan for the current plan year shall be presumed
                    to be equal to the adjusted funding target attainment
                    percentage of the plan for the preceding plan year until
                    the enrolled actuary of the plan certifies the actual
                    adjusted funding

    [[Page 120 STAT. 814]]

                    target attainment percentage of the plan for the current
                    plan year.
                        ``(B) Presumption of underfunding after 10th
                    month.--In any case in which no certification of the
                    adjusted funding target attainment percentage for the
                    current plan year is made with respect to the plan
                    before the first day of the 10th month of such year, for
                    purposes of paragraphs (1), (2), (3), and (4), such
                    first day shall be deemed, for purposes of such
                    paragraph, to be the valuation date of the plan for the
                    current plan year and the plan's adjusted funding target
                    attainment percentage shall be conclusively presumed to
                    be less than 60 percent as of such first day.
                        ``(C) Presumption of underfunding after 4th month
                    for nearly underfunded plans.--In any case in which--
                              ``(i) a benefit limitation under paragraph
                          (1), (2), (3), or (4) did not apply to a plan with
                          respect to the plan year preceding the current
                          plan year, but the adjusted funding target
                          attainment percentage of the plan for such
                          preceding plan year was not more than 10
                          percentage points greater than the percentage
                          which would have caused such paragraph to apply to
                          the plan with respect to such preceding plan year,
                          and
                              ``(ii) as of the first day of the 4th month of
                          the current plan year, the enrolled actuary of the
                          plan has not certified the actual adjusted funding
                          target attainment percentage of the plan for the
                          current plan year,
                    until the enrolled actuary so certifies, such first day
                    shall be deemed, for purposes of such paragraph, to be
                    the valuation date of the plan for the current plan year
                    and the adjusted funding target attainment percentage of
                    the plan as of such first day shall, for purposes of
                    such paragraph, be presumed to be equal to 10 percentage
                    points less than the adjusted funding target attainment
                    percentage of the plan for such preceding plan year.
                ``(8) Treatment of plan as of close of prohibited or
            cessation period.--For purposes of applying this part--
                        ``(A) Operation of <<NOTE: Effective date.>> plan
                    after period.--Unless the plan provides otherwise,
                    payments and accruals will resume effective as of the
                    day following the close of the period for which any
                    limitation of payment or accrual of benefits under
                    paragraph (3) or (4) applies.
                        ``(B) Treatment of affected benefits.--Nothing in
                    this paragraph shall be construed as affecting the
                    plan's treatment of benefits which would have been paid
                    or accrued but for this subsection.
                ``(9) Terms relating to funding target attainment
            percentage.--For purposes of this subsection--
                        ``(A) In general.--The term `funding target
                    attainment percentage' has the same meaning given such
                    term by section 303(d)(2).
                        ``(B) Adjusted funding target attainment
                    percentage.--The term `adjusted funding target
                    attainment

    [[Page 120 STAT. 815]]

                    percentage' means the funding target attainment
                    percentage which is determined under subparagraph (A) by
                    increasing each of the amounts under subparagraphs (A)
                    and (B) of section 303(d)(2) by the aggregate amount of
                    purchases of annuities for employees other than highly
                    compensated employees (as defined in section 414(q) of
                    the Internal Revenue Code of 1986) which were made by
                    the plan during the preceding 2 plan years.
                        ``(C) Application to plans which are fully funded
                    without regard to reductions for funding balances.--
                              ``(i) In general.--In the case of a plan for
                          any plan year, if the funding target attainment
                          percentage is 100 percent or more (determined
                          without regard to this subparagraph and without
                          regard to the reduction in the value of assets
                          under section 303(f)(4)), the funding target
                          attainment percentage for purposes of
                          subparagraphs (A) and (B) shall be determined
                          without regard to such reduction.
                              ``(ii) Transition rule.--Clause (i) shall be
                          applied to plan years beginning after 2007 and
                          before 2011 by substituting for `100 percent' the
                          applicable percentage determined in accordance
                          with the following table:

                    ``In the case The applicable............................
        year
                      beginning inpercentage is.............................
        year:
                              2008....................................   92
                              2009....................................   94
                              2010....................................   96.

                              ``(iii) Limitation.--Clause (ii) shall not
                          apply with respect to any plan year after 2008
                          unless the funding target attainment percentage
                          (determined without regard to this subparagraph)
                          of the plan for each preceding plan year after
                          2007 was not less than the applicable percentage
                          with respect to such preceding plan year
                          determined under clause (ii).
                ``(10) Special rule for 2008.--For purposes of this
            subsection, in the case of plan years beginning in 2008, the
            funding target attainment percentage for the preceding plan year
            may be determined using such methods of estimation as the
            Secretary of the Treasury may provide.''.

        (b) Notice Requirement.--
                (1) In general.--Section 101 of such Act (29 U.S.C. 1021) is
            amended--
                        (A) by redesignating subsection (j) as subsection
                    (k); and
                        (B) by inserting after subsection (i) the following
                    new subsection:

        ``(j) Notice of Funding-Based Limitation on Certain Forms of
    Distribution.--The plan <<NOTE: Deadline.>> administrator of a single-
    employer plan shall provide a written notice to plan participants and
    beneficiaries within 30 days--
                ``(1) after the plan has become subject to a restriction
            described in paragraph (1) or (3) of section 206(g)),
                ``(2) in the case of a plan to which section 206(g)(4)
            applies, after the valuation date for the plan year described in
            section 206(g)(4)(B) for which the plan's adjusted funding
            target attainment percentage for the plan year is less than 60
            percent

    [[Page 120 STAT. 816]]

            (or, if earlier, the date such percentage is deemed to be less
            than 60 percent under section 206(g)(7)), and
                ``(3) at such other time as may be determined by the
            Secretary of the Treasury.

    The notice required to be provided under this subsection shall be in
    writing, except that such notice may be in electronic or other form to
    the extent that such form is reasonably accessible to the recipient.''.
                (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
            1132(c)(4)) is amended by striking ``section 302(b)(7)(F)(iv)''
            and inserting ``section 101(j) or 302(b)(7)(F)(iv)''.

        (c) Effective <<NOTE: 29 USC 1021 note.>> Dates.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2007.
                (2) Collective bargaining exception.--In the case of a plan
            maintained pursuant to 1 or more collective bargaining
            agreements between employee representatives and 1 or more
            employers ratified before January 1, 2008, the amendments made
            by this section shall not apply to plan years beginning before
            the earlier of--
                        (A) the later of--
                              (i) the date on which the last collective
                          bargaining agreement relating to the plan
                          terminates (determined without regard to any
                          extension thereof agreed to after the date of the
                          enactment of this Act), or
                              (ii) the first day of the first plan year to
                          which the amendments made by this subsection would
                          (but for this subparagraph) apply, or
                        (B) January 1, 2010.
            For purposes of subparagraph (A)(i), any plan amendment made
            pursuant to a collective bargaining agreement relating to the
            plan which amends the plan solely to conform to any requirement
            added by this section shall not be treated as a termination of
            such collective bargaining agreement.

    SEC. 104. <<NOTE: 26 USC 401 note.>> SPECIAL RULES FOR MULTIPLE EMPLOYER
                PLANS OF CERTAIN COOPERATIVES.

        (a) General Rule.--Except as provided in this section, if a plan in
    existence on July 26, 2005, was an eligible cooperative plan for its
    plan year which includes such date, the amendments made by this subtitle
    and subtitle B shall not apply to plan years beginning before the
    earlier of--
                (1) the first plan year for which the plan ceases to be an
            eligible cooperative plan, or
                (2) January 1, 2017.

        (b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee
    Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the
    Internal Revenue Code of 1986 (as in effect before the amendments made
    by this subtitle and subtitle B) to an eligible cooperative plan for
    plan years beginning after December 31, 2007, and before the first plan
    year to which such amendments apply, the third segment rate determined
    under section 303(h)(2)(C)(iii) of such Act and section
    430(h)(2)(C)(iii) of such Code (as added by such amendments) shall be
    used in lieu of the interest rate otherwise used.
        (c) Eligible Cooperative Plan Defined.--For purposes of this
    section, a plan shall be treated as an eligible cooperative

    [[Page 120 STAT. 817]]

    plan for a plan year if the plan is maintained by more than 1 employer
    and at least 85 percent of the employers are--
                (1) rural cooperatives (as defined in section 401(k)(7)(B)
            of such Code without regard to clause (iv) thereof), or
                (2) organizations which are--
                        (A) cooperative organizations described in section
                    1381(a) of such Code which are more than 50-percent
                    owned by agricultural producers or by cooperatives owned
                    by agricultural producers, or
                        (B) more than 50-percent owned, or controlled by,
                    one or more cooperative organizations described in
                    subparagraph (A).

    A plan shall also be treated as an eligible cooperative plan for any
    plan year for which it is described in section 210(a) of the Employee
    Retirement Income Security Act of 1974 and is maintained by a rural
    telephone cooperative association described in section 3(40)(B)(v) of
    such Act.

    SEC. 105. <<NOTE: 26 USC 401 note.>> TEMPORARY RELIEF FOR CERTAIN PBGC
                SETTLEMENT PLANS.

        (a) General Rule.--Except as provided in this section, if a plan in
    existence on July 26, 2005, was a PBGC settlement plan as of such date,
    the amendments made by this subtitle and subtitle B shall not apply to
    plan years beginning before January 1, 2014.
        (b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee
    Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the
    Internal Revenue Code of 1986 (as in effect before the amendments made
    by this subtitle and subtitle B), to a PBGC settlement plan for plan
    years beginning after December 31, 2007, and before January 1, 2014, the
    third segment rate determined under section 303(h)(2)(C)(iii) of such
    Act and section 430(h)(2)(C)(iii) of such Code (as added by such
    amendments) shall be used in lieu of the interest rate otherwise used.
        (c) PBGC Settlement Plan.--For purposes of this section, the term
    ``PBGC settlement plan'' means a defined benefit plan (other than a
    multiemployer plan) to which section 302 of such Act and section 412 of
    such Code apply and--
                (1) which was sponsored by an employer which was in
            bankruptcy, giving rise to a claim by the Pension Benefit
            Guaranty Corporation of not greater than $150,000,000, and the
            sponsorship of which was assumed by another employer that was
            not a member of the same controlled group as the bankrupt
            sponsor and the claim of the Pension Benefit Guaranty
            Corporation was settled or withdrawn in connection with the
            assumption of the sponsorship, or
                (2) which, by agreement with the Pension Benefit Guaranty
            Corporation, was spun off from a plan subsequently terminated by
            such Corporation under section 4042 of the Employee Retirement
            Income Security Act of 1974.

    SEC. 106. <<NOTE: 26 USC 401 note.>> SPECIAL RULES FOR PLANS OF CERTAIN
                GOVERNMENT CONTRACTORS.

        (a) General Rule.--Except as provided in this section, if a plan is
    an eligible government contractor plan, this subtitle and subtitle B
    shall not apply to plan years beginning before the earliest of--
                (1) the first plan year for which the plan ceases to be an
            eligible government contractor plan,

    [[Page 120 STAT. 818]]

                (2) the effective date of the Cost Accounting Standards
            Pension Harmonization Rule, or
                (3) January 1, 2011.

        (b) Interest Rate.--In applying section 302(b)(5)(B) of the Employee
    Retirement Income Security Act of 1974 and section 412(b)(5)(B) of the
    Internal Revenue Code of 1986 (as in effect before the amendments made
    by this subtitle and subtitle B) to an eligible government contractor
    plan for plan years beginning after December 31, 2007, and before the
    first plan year to which such amendments apply, the third segment rate
    determined under section 303(h)(2)(C)(iii) of such Act and section
    430(h)(2)(C)(iii) of such Code (as added by such amendments) shall be
    used in lieu of the interest rate otherwise used.
        (c) Eligible Government Contractor Plan Defined.--For purposes of
    this section, a plan shall be treated as an eligible government
    contractor plan if it is maintained by a corporation or a member of the
    same affiliated group (as defined by section 1504(a) of the Internal
    Revenue Code of 1986), whose primary source of revenue is derived from
    business performed under contracts with the United States that are
    subject to the Federal Acquisition Regulations (chapter 1 of title 48,
    CFR) and that are also subject to the Defense Federal Acquisition
    Regulation Supplement (chapter 2 of title 48, CFR), and whose revenue
    derived from such business in the previous fiscal year exceeded
    $5,000,000,000, and whose pension plan costs that are assignable under
    those contracts are subject to sections 412 and 413 of the Cost
    Accounting Standards (48 CFR 9904.412 and 9904.413).
        (d) Cost Accounting Standards Pension Harmonization Rule.--The Cost
    Accounting <<NOTE: Deadline.>> Standards Board shall review and revise
    sections 412 and 413 of the Cost Accounting Standards (48 CFR 9904.412
    and 9904.413) to harmonize the minimum required contribution under the
    Employee Retirement Income Security Act of 1974 of eligible government
    contractor plans and government reimbursable pension plan costs not
    later than January 1, 2010. Any final rule adopted by the Cost
    Accounting Standards Board shall be deemed the Cost Accounting Standards
    Pension Harmonization Rule.

    SEC. 107. TECHNICAL AND CONFORMING AMENDMENTS.

        (a) Miscellaneous Amendments to Title I.--Subtitle B of title I of
    such Act (29 U.S.C. 1021 et seq.) is amended--
                (1) in section 101(d)(3), by <<NOTE: 29 USC 1021.>> striking
            ``section 302(e)'' and inserting ``section 303(j)'';
                (2) in section 103(d)(8)(B), by <<NOTE: 29 USC
            1023.>> striking ``the requirements of section 302(c)(3)'' and
            inserting ``the applicable requirements of sections 303(h) and
            304(c)(3)'';
                (3) in section 103(d), by striking paragraph (11) and
            inserting the following:
                ``(11) If the current value of the assets of the plan is
            less than 70 percent of--
                        ``(A) in the case of a single-employer plan, the
                    funding target (as defined in section 303(d)(1)) of the
                    plan, or
                        ``(B) in the case of a multiemployer plan, the
                    current liability (as defined in section 304(c)(6)(D))
                    under the plan,
            the percentage which such value is of the amount described in
            subparagraph (A) or (B).'';

    [[Page 120 STAT. 819]]

                (4) in section 203(a)(3)(C), by <<NOTE: 29 USC
            1053.>> striking ``section 302(c)(8)'' and inserting ``section
            302(d)(2)'';
                (5) in section 204(g)(1), by <<NOTE: 29 USC 1054.>> striking
            ``section 302(c)(8)'' and inserting ``section 302(d)(2)'';
                (6) in section 204(i)(2)(B), by striking ``section
            302(c)(8)'' and inserting ``section 302(d)(2)'';
                (7) in section 204(i)(3), by striking ``funded current
            liability percentage (within the meaning of section 302(d)(8) of
            this Act)'' and inserting ``funding target attainment percentage
            (as defined in section 303(d)(2))'';
                (8) in section 204(i)(4), by striking ``section
            302(c)(11)(A), without regard to section 302(c)(11)(B)'' and
            inserting ``section 302(b)(1), without regard to section
            302(b)(2)'';
                (9) in section 206(e)(1), by <<NOTE: 29 USC 1056.>> striking
            ``section 302(d)'' and inserting ``section 303(j)(4)'', and by
            striking ``section 302(e)(5)'' and inserting ``section
            303(j)(4)(E)(i)'';
                (10) in section 206(e)(3), by striking ``section 302(e) by
            reason of paragraph (5)(A) thereof'' and inserting ``section
            303(j)(3) by reason of section 303(j)(4)(A)''; and
                (11) in sections 101(e)(3), 403(c)(1), <<NOTE: 29 USC 1021,
            1103, 1108.>> and 408(b)(13), by striking ``American Jobs
            Creation Act of 2004'' and inserting ``Pension Protection Act of
            2006''.

        (b) Miscellaneous Amendments to Title IV.--Title IV of such Act is
    amended--
                (1) in section 4001(a)(13) (29 U.S.C. 1301(a)(13)), by
            striking ``302(c)(11)(A)'' and inserting ``302(b)(1)'', by
            striking ``412(c)(11)(A)'' and inserting ``412(b)(1)'', by
            striking ``302(c)(11)(B)'' and inserting ``302(b)(2)'', and by
            striking ``412(c)(11)(B)'' and inserting ``412(b)(2)'';
                (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), by
            striking ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A)
            and (B)'', and by striking ``412(n)(1)(A) and (B)'' and
            inserting ``430(k)(1)(A) and (B)'';
                (3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)), by
            striking ``302(f)(1)(A) and (B)'' and inserting ``303(k)(1)(A)
            and (B)'', and by striking ``412(n)(1)(A) and (B)'' and
            inserting ``430(k)(1)(A) and (B)'';
                (4) in section 4062(c) (29 U.S.C. 1362(c)), by striking
            paragraphs (1), (2), and (3) and inserting the following:
                ``(1) the sum of the shortfall amortization charge (within
            the meaning of section 303(c)(1) of this Act and 430(d)(1) of
            the Internal Revenue Code of 1986) with respect to the plan (if
            any) for the plan year in which the termination date occurs,
            plus the aggregate total of shortfall amortization installments
            (if any) determined for succeeding plan years under section
            303(c)(2) of this Act and section 430(d)(2) of such Code (which,
            for purposes of this subparagraph, shall include any increase in
            such sum which would result if all applications for waivers of
            the minimum funding standard under section 302(c) of this Act
            and section 412(c) of such Code which are pending with respect
            to such plan were denied and if no additional contributions
            (other than those already made by the termination date) were
            made for the plan year in which the termination date occurs or
            for any previous plan year), and
                ``(2) the sum of the waiver amortization charge (within the
            meaning of section 303(e)(1) of this Act and 430(e)(1) of the
            Internal Revenue Code of 1986) with respect to the plan

    [[Page 120 STAT. 820]]

            (if any) for the plan year in which the termination date occurs,
            plus the aggregate total of waiver amortization installments (if
            any) determined for succeeding plan years under section
            303(e)(2) of this Act and section 430(e)(2) of such Code,'';
                (5) in section 4071 (29 U.S.C. 1371), by striking
            ``302(f)(4)'' and inserting ``303(k)(4)'';
                (6) in section 4243(a)(1)(B) (29 U.S.C. 1423(a)(1)(B)), by
            striking ``302(a)'' and inserting ``304(a)'', and, in clause
            (i), by striking ``302(a)'' and inserting ``304(a)'';
                (7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), by
            striking ``303(a)'' and inserting ``302(c)'';
                (8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), by
            striking ``303(c)'' and inserting ``302(c)(3)''; and
                (9) in section 4243(g) (29 U.S.C. 1423(g)), by striking
            ``302(c)(3)'' and inserting ``304(c)(3)''.

        (c) Amendments to <<NOTE: 29 USC 1001 note.>> Reorganization Plan
    No. 4 of 1978.--Section 106(b)(ii) of Reorganization Plan No. 4 of 1978
    (ratified and affirmed as law by Public Law 98-532 (98 Stat. 2705)) is
    amended by striking ``302(c)(8)'' and inserting ``302(d)(2)'', by
    striking ``304(a) and (b)(2)(A)'' and inserting ``304(d)(1), (d)(2), and
    (e)(2)(A)'', and by striking ``412(c)(8), (e), and (f)(2)(A)'' and
    inserting ``412(c)(2) and 431(d)(1), (d)(2), and (e)(2)(A)''.

        (d) Repeal of Expired Authority for Temporary Variances.--Section
    207 of such Act (29 U.S.C. 1057) is repealed.
        (e) Effective Date.--The <<NOTE: 29 USC 1021 note.>> amendments made
    by this section shall apply to plan years beginning after 2007.

             Subtitle B--Amendments to Internal Revenue Code of 1986

    SEC. 111. MINIMUM FUNDING STANDARDS.

        (a) New Minimum Funding Standards.--Section 412 of the Internal
    Revenue <<NOTE: 26 USC 412.>> Code of 1986 (relating to minimum funding
    standards) is amended to read as follows:

    ``SEC. 412. MINIMUM FUNDING STANDARDS.

        ``(a) Requirement to Meet Minimum Funding Standard.--
                ``(1) In general.--A plan to which this section applies
            shall satisfy the minimum funding standard applicable to the
            plan for any plan year.
                ``(2) Minimum funding standard.--For purposes of paragraph
            (1), a plan shall be treated as satisfying the minimum funding
            standard for a plan year if--
                        ``(A) in the case of a defined benefit plan which is
                    not a multiemployer plan, the employer makes
                    contributions to or under the plan for the plan year
                    which, in the aggregate, are not less than the minimum
                    required contribution determined under section 430 for
                    the plan for the plan year,
                        ``(B) in the case of a money purchase plan which is
                    not a multiemployer plan, the employer makes
                    contributions to or under the plan for the plan year
                    which are required under the terms of the plan, and
                        ``(C) in the case of a multiemployer plan, the
                    employers make contributions to or under the plan for
                    any plan year which, in the aggregate, are sufficient to
                    ensure that the

    [[Page 120 STAT. 821]]

                    plan does not have an accumulated funding deficiency
                    under section 431 as of the end of the plan year.

        ``(b) Liability for Contributions.--
                ``(1) In general.--Except as provided in paragraph (2), the
            amount of any contribution required by this section (including
            any required installments under paragraphs (3) and (4) of
            section 430(j)) shall be paid by the employer responsible for
            making contributions to or under the plan.
                ``(2) Joint and several liability where employer member of
            controlled group.--If the employer referred to in paragraph (1)
            is a member of a controlled group, each member of such group
            shall be jointly and severally liable for payment of such
            contributions.

        ``(c) Variance From Minimum Funding Standards.--
                ``(1) Waiver in case of business hardship.--
                        ``(A) In general.--If--
                              ``(i) an employer is (or in the case of a
                          multiemployer plan, 10 percent or more of the
                          number of employers contributing to or under the
                          plan is) unable to satisfy the minimum funding
                          standard for a plan year without temporary
                          substantial business hardship (substantial
                          business hardship in the case of a multiemployer
                          plan), and
                              ``(ii) application of the standard would be
                          adverse to the interests of plan participants in
                          the aggregate,
                    the Secretary may, subject to subparagraph (C), waive
                    the requirements of subsection (a) for such year with
                    respect to all or any portion of the minimum funding
                    standard. The Secretary shall not waive the minimum
                    funding standard with respect to a plan for more than 3
                    of any 15 (5 of any 15 in the case of a multiemployer
                    plan) consecutive plan years
                        ``(B) Effects of waiver.--If a waiver is granted
                    under subparagraph (A) for any plan year--
                              ``(i) in the case of a defined benefit plan
                          which is not a multiemployer plan, the minimum
                          required contribution under section 430 for the
                          plan year shall be reduced by the amount of the
                          waived funding deficiency and such amount shall be
                          amortized as required under section 430(e), and
                              ``(ii) in the case of a multiemployer plan,
                          the funding standard account shall be credited
                          under section 431(b)(3)(C) with the amount of the
                          waived funding deficiency and such amount shall be
                          amortized as required under section 431(b)(2)(C).
                        ``(C) Waiver of amortized portion not allowed.--The
                    Secretary may not waive under subparagraph (A) any
                    portion of the minimum funding standard under subsection
                    (a) for a plan year which is attributable to any waived
                    funding deficiency for any preceding plan year.
                ``(2) Determination of business hardship.--For purposes of
            this subsection, the factors taken into account in determining
            temporary substantial business hardship (substantial business
            hardship in the case of a multiemployer plan) shall include (but
            shall not be limited to) whether or not--
                        ``(A) the employer is operating at an economic loss,

    [[Page 120 STAT. 822]]

                        ``(B) there is substantial unemployment or
                    underemployment in the trade or business and in the
                    industry concerned,
                        ``(C) the sales and profits of the industry
                    concerned are depressed or declining, and
                        ``(D) it is reasonable to expect that the plan will
                    be continued only if the waiver is granted.
                ``(3) Waived funding deficiency.--For purposes of this
            section and part III of this subchapter, the term `waived
            funding deficiency' means the portion of the minimum funding
            standard under subsection (a) (determined without regard to the
            waiver) for a plan year waived by the Secretary and not
            satisfied by employer contributions.
                ``(4) Security for waivers for single-employer plans,
            consultations.--
                        ``(A) Security may be required.--
                              ``(i) In general.--Except as provided in
                          subparagraph (C), the Secretary may require an
                          employer maintaining a defined benefit plan which
                          is a single-employer plan (within the meaning of
                          section 4001(a)(15) of the Employee Retirement
                          Income Security Act of 1974) to provide security
                          to such plan as a condition for granting or
                          modifying a waiver under paragraph (1).
                              ``(ii) Special rules.--Any security provided
                          under clause (i) may be perfected and enforced
                          only by the Pension Benefit Guaranty Corporation,
                          or at the direction of the Corporation, by a
                          contributing sponsor (within the meaning of
                          section 4001(a)(13) of the Employee Retirement
                          Income Security Act of 1974), or a member of such
                          sponsor's controlled group (within the meaning of
                          section 4001(a)(14) of such Act).
                        ``(B) Consultation with the pension benefit guaranty
                    corporation.--Except as provided in subparagraph (C),
                    the Secretary shall, before granting or modifying a
                    waiver under this subsection with respect to a plan
                    described in subparagraph (A)(i)--
                              ``(i) provide the Pension Benefit Guaranty
                          Corporation with--
                                        ``(I) <<NOTE: Notice.>> notice of
                                    the completed application for any waiver
                                    or modification, and
                                        ``(II) <<NOTE: Deadline.>> an
                                    opportunity to comment on such
                                    application within 30 days after receipt
                                    of such notice, and
                              ``(ii) consider--
                                        ``(I) any comments of the
                                    Corporation under clause (i)(II), and
                                        ``(II) any views of any employee
                                    organization (within the meaning of
                                    section 3(4) of the Employee Retirement
                                    Income Security Act of 1974)
                                    representing participants in the plan
                                    which are submitted in writing to the
                                    Secretary in connection with such
                                    application.
                    Information provided to the Corporation under this
                    subparagraph shall be considered tax return information
                    and subject to the safeguarding and reporting
                    requirements of section 6103(p).

    [[Page 120 STAT. 823]]

                        ``(C) Exception for certain waivers.--
                              ``(i) In general.--The preceding provisions of
                          this paragraph shall not apply to any plan with
                          respect to which the sum of--
                                        ``(I) the aggregate unpaid minimum
                                    required contributions (within the
                                    meaning of section 4971(c)(4)) for the
                                    plan year and all preceding plan years,
                                    and
                                        ``(II) the present value of all
                                    waiver amortization installments
                                    determined for the plan year and
                                    succeeding plan years under section
                                    430(e)(2),
                          is less than $1,000,000.
                              ``(ii) Treatment of waivers for which
                          applications are pending.--The amount described in
                          clause (i)(I) shall include any increase in such
                          amount which would result if all applications for
                          waivers of the minimum funding standard under this
                          subsection which are pending with respect to such
                          plan were denied.
                ``(5) Special rules for single-employer plans.--
                        ``(A) Application must be submitted before date 2\1/
                    2\ months after close of year.--In
                    the <<NOTE: Deadline.>> case of a defined benefit plan
                    which is not a multiemployer plan, no waiver may be
                    granted under this subsection with respect to any plan
                    for any plan year unless an application therefor is
                    submitted to the Secretary not later than the 15th day
                    of the 3rd month beginning after the close of such plan
                    year.
                        ``(B) Special rule if employer is member of
                    controlled group.--In the case of a defined benefit plan
                    which is not a multiemployer plan, if an employer is a
                    member of a controlled group, the temporary substantial
                    business hardship requirements of paragraph (1) shall be
                    treated as met only if such requirements are met--
                              ``(i) with respect to such employer, and
                              ``(ii) with respect to the controlled group of
                          which such employer is a member (determined by
                          treating all members of such group as a single
                          employer).
                    The Secretary may provide that an analysis of a trade or
                    business or industry of a member need not be conducted
                    if the Secretary determines such analysis is not
                    necessary because the taking into account of such member
                    would not significantly affect the determination under
                    this paragraph.
                ``(6) Advance notice.--
                        ``(A) In general.--The Secretary shall, before
                    granting a waiver under this subsection, require each
                    applicant to provide evidence satisfactory to the
                    Secretary that the applicant has provided notice of the
                    filing of the application for such waiver to each
                    affected party (as defined in section 4001(a)(21) of the
                    Employee Retirement Income Security Act of 1974). Such
                    notice shall include a description of the extent to
                    which the plan is funded for benefits which are
                    guaranteed under title IV of the Employee Retirement
                    Income Security Act of 1974 and for benefit liabilities.
                        ``(B) Consideration of relevant information.--The
                    Secretary shall consider any relevant information
                    provided

    [[Page 120 STAT. 824]]

                    by a person to whom notice was given under subparagraph
                    (A).
                ``(7) Restriction on plan amendments.--
                        ``(A) In general.--No amendment of a plan which
                    increases the liabilities of the plan by reason of any
                    increase in benefits, any change in the accrual of
                    benefits, or any change in the rate at which benefits
                    become nonforfeitable under the plan shall be adopted if
                    a waiver under this subsection or an extension of time
                    under section 431(d) is in effect with respect to the
                    plan, or if a plan amendment described in subsection
                    (d)(2) has been made at any time in the preceding 12
                    months (24 months in the case of a multiemployer plan).
                    If a plan is amended in violation of the preceding
                    sentence, any such waiver, or extension of time, shall
                    not apply to any plan year ending on or after the date
                    on which such amendment is adopted.
                        ``(B) Exception.--Subparagraph (A) shall not apply
                    to any plan amendment which--
                              ``(i) the Secretary determines to be
                          reasonable and which provides for only de minimis
                          increases in the liabilities of the plan,
                              ``(ii) only repeals an amendment described in
                          subsection (d)(2), or
                              ``(iii) is required as a condition of
                          qualification under part I of subchapter D, of
                          chapter 1.

        ``(d) Miscellaneous Rules.--
                ``(1) Change in method or year.--If the funding method, the
            valuation date, or a plan year for a plan is changed, the change
            shall take effect only if approved by the Secretary.
                ``(2) Certain retroactive plan amendments.--For purposes of
            this section, any amendment applying to a plan year which--
                        ``(A) is <<NOTE: Deadline.>> adopted after the close
                    of such plan year but no later than 2\1/2\ months after
                    the close of the plan year (or, in the case of a
                    multiemployer plan, no later than 2 years after the
                    close of such plan year),
                        ``(B) does not reduce the accrued benefit of any
                    participant determined as of the beginning of the first
                    plan year to which the amendment applies, and
                        ``(C) does not reduce the accrued benefit of any
                    participant determined as of the time of adoption except
                    to the extent required by the circumstances,
            shall, at the election of the plan administrator, be deemed to
            have been made on the <<NOTE: Notices. Deadline.>> first day of
            such plan year. No amendment described in this paragraph which
            reduces the accrued benefits of any participant shall take
            effect unless the plan administrator files a notice with the
            Secretary notifying him of such amendment and the Secretary has
            approved such amendment, or within 90 days after the date on
            which such notice was filed, failed to disapprove such
            amendment. No amendment described in this subsection shall be
            approved by the Secretary unless the Secretary determines that
            such amendment is necessary because of a temporary substantial
            business hardship (as determined under subsection (c)(2)) or a
            substantial business hardship (as so determined) in the case of
            a multiemployer plan and that a waiver under subsection

    [[Page 120 STAT. 825]]

            (c) (or, in the case of a multiemployer plan, any extension of
            the amortization period under section 431(d)) is unavailable or
            inadequate.
                ``(3) Controlled group.--For purposes of this section, the
            term `controlled group' means any group treated as a single
            employer under subsection (b), (c), (m), or (o) of section 414.

        ``(e) Plans to Which Section Applies.--
                ``(1) In general.--Except as provided in paragraphs (2) and
            (4), this section applies to a plan if, for any plan year
            beginning on or after the effective date of this section for
            such plan under the Employee Retirement Income Security Act of
            1974--
                        ``(A) such plan included a trust which qualified (or
                    was determined by the Secretary to have qualified) under
                    section 401(a), or
                        ``(B) such plan satisfied (or was determined by the
                    Secretary to have satisfied) the requirements of section
                    403(a).
                ``(2) Exceptions.--This section shall not apply to--
                        ``(A) any profit-sharing or stock bonus plan,
                        ``(B) any insurance contract plan described in
                    paragraph (3),
                        ``(C) any governmental plan (within the meaning of
                    section 414(d)),
                        ``(D) any church plan (within the meaning of section
                    414(e)) with respect to which the election provided by
                    section 410(d) has not been made,
                        ``(E) any plan which has not, at any time after
                    September 2, 1974, provided for employer contributions,
                    or
                        ``(F) any plan established and maintained by a
                    society, order, or association described in section
                    501(c)(8) or (9), if no part of the contributions to or
                    under such plan are made by employers of participants in
                    such plan.
            No plan described in subparagraph (C), (D), or (F) shall be
            treated as a qualified plan for purposes of section 401(a)
            unless such plan meets the requirements of section 401(a)(7) as
            in effect on September 1, 1974.
                ``(3) Certain insurance contract plans.--A plan is described
            in this paragraph if--
                        ``(A) the plan is funded exclusively by the purchase
                    of individual insurance contracts,
                        ``(B) such contracts provide for level annual
                    premium payments to be paid extending not later than the
                    retirement age for each individual participating in the
                    plan, and commencing with the date the individual became
                    a participant in the plan (or, in the case of an
                    increase in benefits, commencing at the time such
                    increase becomes effective),
                        ``(C) benefits provided by the plan are equal to the
                    benefits provided under each contract at normal
                    retirement age under the plan and are guaranteed by an
                    insurance carrier (licensed under the laws of a State to
                    do business with the plan) to the extent premiums have
                    been paid,
                        ``(D) premiums payable for the plan year, and all
                    prior plan years, under such contracts have been paid
                    before lapse or there is reinstatement of the policy,

    [[Page 120 STAT. 826]]

                        ``(E) no rights under such contracts have been
                    subject to a security interest at any time during the
                    plan year, and
                        ``(F) no policy loans are outstanding at any time
                    during the plan year.
            A plan funded exclusively by the purchase of group insurance
            contracts which is determined under regulations prescribed by
            the Secretary to have the same characteristics as contracts
            described in the preceding sentence shall be treated as a plan
            described in this paragraph.
                ``(4) Certain <<NOTE: Applicability.>> terminated
            multiemployer plans.--This section applies with respect to a
            terminated multiemployer plan to which section 4021 of the
            Employee Retirement Income Security Act of 1974 applies until
            the last day of the plan year in which the plan terminates
            (within the meaning of section 4041A(a)(2) of such Act).''.

        (b) Effective Date.--The <<NOTE: 26 USC 412 note.>> amendments made
    by this section shall apply to plan years beginning after December 31,
    2007.

    SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION
                PLANS.

        (a) In General.--Subchapter D of chapter 1 of the Internal Revenue
    Code of 1986 (relating to deferred compensation, etc.) is amended by
    adding at the end the following new part:

       ``PART III--MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER DEFINED
                              BENEFIT PENSION PLANS

    ``SEC. 430. <<NOTE: 26 USC 430.>> MINIMUM FUNDING STANDARDS FOR SINGLE-
                EMPLOYER DEFINED BENEFIT PENSION PLANS.

        ``(a) Minimum Required Contribution.--For purposes of this section
    and section 412(a)(2)(A), except as provided in subsection (f), the term
    `minimum required contribution' means, with respect to any plan year of
    a defined benefit plan which is not a multiemployer plan--
                ``(1) in any case in which the value of plan assets of the
            plan (as reduced under subsection (f)(4)(B)) is less than the
            funding target of the plan for the plan year, the sum of--
                        ``(A) the target normal cost of the plan for the
                    plan year,
                        ``(B) the shortfall amortization charge (if any) for
                    the plan for the plan year determined under subsection
                    (c), and
                        ``(C) the waiver amortization charge (if any) for
                    the plan for the plan year as determined under
                    subsection (e);
                ``(2) in any case in which the value of plan assets of the
            plan (as reduced under subsection (f)(4)(B)) equals or exceeds
            the funding target of the plan for the plan year, the target
            normal cost of the plan for the plan year reduced (but not below
            zero) by such excess.

        ``(b) Target Normal Cost.--For purposes of this section, except as
    provided in subsection (i)(2) with respect to plans in at-risk status,
    the term `target normal cost' means, for any plan year, the present
    value of all benefits which are expected to accrue

    [[Page 120 STAT. 827]]

    or to be earned under the plan during the plan year. For purposes of
    this subsection, if any benefit attributable to services performed in a
    preceding plan year is increased by reason of any increase in
    compensation during the current plan year, the increase in such benefit
    shall be treated as having accrued during the current plan year.
        ``(c) Shortfall Amortization Charge.--
                ``(1) In general.--For purposes of this section, the
            shortfall amortization charge for a plan for any plan year is
            the aggregate total (not less than zero) of the shortfall
            amortization installments for such plan year with respect to the
            shortfall amortization bases for such plan year and each of the
            6 preceding plan years.
                ``(2) Shortfall amortization installment.--For purposes of
            paragraph (1)--
                        ``(A) Determination.--The shortfall amortization
                    installments are the amounts necessary to amortize the
                    shortfall amortization base of the plan for any plan
                    year in level annual installments over the 7-plan-year
                    period beginning with such plan year.
                        ``(B) Shortfall installment.--The shortfall
                    amortization installment for any plan year in the 7-
                    plan-year period under subparagraph (A) with respect to
                    any shortfall amortization base is the annual
                    installment determined under subparagraph (A) for that
                    year for that base.
                        ``(C) Segment rates.--In determining any shortfall
                    amortization installment under this paragraph, the plan
                    sponsor shall use the segment rates determined under
                    subparagraph (C) of subsection (h)(2), applied under
                    rules similar to the rules of subparagraph (B) of
                    subsection (h)(2).
                ``(3) Shortfall amortization base.--For purposes of this
            section, the shortfall amortization base of a plan for a plan
            year is--
                        ``(A) the funding shortfall of such plan for such
                    plan year, minus
                        ``(B) the present value (determined using the
                    segment rates determined under subparagraph (C) of
                    subsection (h)(2), applied under rules similar to the
                    rules of subparagraph (B) of subsection (h)(2)) of the
                    aggregate total of the shortfall amortization
                    installments and waiver amortization installments which
                    have been determined for such plan year and any
                    succeeding plan year with respect to the shortfall
                    amortization bases and waiver amortization bases of the
                    plan for any plan year preceding such plan year.
                ``(4) Funding shortfall.--For purposes of this section, the
            funding shortfall of a plan for any plan year is the excess (if
            any) of--
                        ``(A) the funding target of the plan for the plan
                    year, over
                        ``(B) the value of plan assets of the plan (as
                    reduced under subsection (f)(4)(B)) for the plan year
                    which are held by the plan on the valuation date.
                ``(5) Exemption from new shortfall amortization base.--
                        ``(A) In general.--In any case in which the value of
                    plan assets of the plan (as reduced under subsection

    [[Page 120 STAT. 828]]

                    (f)(4)(A)) is equal to or greater than the funding
                    target of the plan for the plan year, the shortfall
                    amortization base of the plan for such plan year shall
                    be zero.
                        ``(B) Transition rule.--
                              ``(i) In general.--Except as provided in
                          clauses (iii) and (iv), in the case of plan years
                          beginning after 2007 and before 2011, only the
                          applicable percentage of the funding target shall
                          be taken into account under paragraph (3)(A) in
                          determining the funding shortfall for the plan
                          year for purposes of subparagraph (A).
                              ``(ii) Applicable percentage.--For purposes of
                          subparagraph (A), the applicable percentage shall
                          be determined in accordance with the following
                          table:

                    ``In the case The applicable............................
        year
                      beginning inpercentage is.............................
        year:
                              2008....................................   92
                              2009....................................   94
                              2010....................................   96.

                              ``(iii) Limitation.--Clause (i) shall not
                          apply with respect to any plan year after 2008
                          unless the shortfall amortization base for each of
                          the preceding years beginning after 2007 was zero
                          (determined after application of this
                          subparagraph).
                              ``(iv) Transition relief not available for new
                          or deficit reduction plans.--Clause (i) shall not
                          apply to a plan--
                                        ``(I) which was not in effect for a
                                    plan year beginning in 2007, or
                                        ``(II) which was in effect for a
                                    plan year beginning in 2007 and which
                                    was subject to section 412(l) (as in
                                    effect for plan years beginning in
                                    2007), determined after the application
                                    of paragraphs (6) and (9) thereof.
                ``(6) Early deemed amortization upon attainment of funding
            target.--In any case in which the funding shortfall of a plan
            for a plan year is zero, for purposes of determining the
            shortfall amortization charge for such plan year and succeeding
            plan years, the shortfall amortization bases for all preceding
            plan years (and all shortfall amortization installments
            determined with respect to such bases) shall be reduced to zero.

        ``(d) Rules Relating to Funding Target.--For purposes of this
    section--
                ``(1) Funding target.--Except as provided in subsection
            (i)(1) with respect to plans in at-risk status, the funding
            target of a plan for a plan year is the present value of all
            benefits accrued or earned under the plan as of the beginning of
            the plan year.
                ``(2) Funding target attainment percentage.--The `funding
            target attainment percentage' of a plan for a plan year is the
            ratio (expressed as a percentage) which--
                        ``(A) the value of plan assets for the plan year (as
                    reduced under subsection (f)(4)(B)), bears to
                        ``(B) the funding target of the plan for the plan
                    year (determined without regard to subsection (i)(1)).

        ``(e) Waiver Amortization Charge.--

    [[Page 120 STAT. 829]]

                ``(1) Determination of waiver amortization charge.--The
            waiver amortization charge (if any) for a plan for any plan year
            is the aggregate total of the waiver amortization installments
            for such plan year with respect to the waiver amortization bases
            for each of the 5 preceding plan years.
                ``(2) Waiver amortization installment.--For purposes of
            paragraph (1)--
                        ``(A) Determination.--The waiver amortization
                    installments are the amounts necessary to amortize the
                    waiver amortization base of the plan for any plan year
                    in level annual installments over a period of 5 plan
                    years beginning with the succeeding plan year.
                        ``(B) Waiver installment.--The waiver amortization
                    installment for any plan year in the 5-year period under
                    subparagraph (A) with respect to any waiver amortization
                    base is the annual installment determined under
                    subparagraph (A) for that year for that base.
                ``(3) Interest rate.--In determining any waiver amortization
            installment under this subsection, the plan sponsor shall use
            the segment rates determined under subparagraph (C) of
            subsection (h)(2), applied under rules similar to the rules of
            subparagraph (B) of subsection (h)(2).
                ``(4) Waiver amortization base.--The waiver amortization
            base of a plan for a plan year is the amount of the waived
            funding deficiency (if any) for such plan year under section
            412(c).
                ``(5) Early deemed amortization upon attainment of funding
            target.--In any case in which the funding shortfall of a plan
            for a plan year is zero, for purposes of determining the waiver
            amortization charge for such plan year and succeeding plan
            years, the waiver amortization bases for all preceding plan
            years (and all waiver amortization installments determined with
            respect to such bases) shall be reduced to zero.

        ``(f) Reduction of Minimum Required Contribution by Prefunding
    Balance and Funding Standard Carryover Balance.--
                ``(1) Election to maintain balances.--
                        ``(A) Prefunding balance.--The plan sponsor of a
                    defined benefit plan which is not a multiemployer plan
                    may elect to maintain a prefunding balance.
                        ``(B) Funding standard carryover balance.--
                              ``(i) In general.--In the case of a defined
                          benefit plan (other than a multiemployer plan)
                          described in clause (ii), the plan sponsor may
                          elect to maintain a funding standard carryover
                          balance, until such balance is reduced to zero.
                              ``(ii) Plans maintaining funding standard
                          account in 2007.--A plan is described in this
                          clause if the plan--
                                        ``(I) was in effect for a plan year
                                    beginning in 2007, and
                                        ``(II) had a positive balance in the
                                    funding standard account under section
                                    412(b) as in effect for such plan year
                                    and determined as of the end of such
                                    plan year.

    [[Page 120 STAT. 830]]

                ``(2) Application of balances.--A prefunding balance and a
            funding standard carryover balance maintained pursuant to this
            paragraph--
                        ``(A) shall be available for crediting against the
                    minimum required contribution, pursuant to an election
                    under paragraph (3),
                        ``(B) shall be applied as a reduction in the amount
                    treated as the value of plan assets for purposes of this
                    section, to the extent provided in paragraph (4), and
                        ``(C) may be reduced at any time, pursuant to an
                    election under paragraph (5).
                ``(3) Election to apply balances against minimum required
            contribution.--
                        ``(A) In general.--Except as provided in
                    subparagraphs (B) and (C), in the case of any plan year
                    in which the plan sponsor elects to credit against the
                    minimum required contribution for the current plan year
                    all or a portion of the prefunding balance or the
                    funding standard carryover balance for the current plan
                    year (not in excess of such minimum required
                    contribution), the minimum required contribution for the
                    plan year shall be reduced as of the first day of the
                    plan year by the amount so credited by the plan sponsor
                    as of the first day of the plan year. For purposes of
                    the preceding sentence, the minimum required
                    contribution shall be determined after taking into
                    account any waiver under section 412(c).
                        ``(B) Coordination with funding standard carryover
                    balance.--To the extent that any plan has a funding
                    standard carryover balance greater than zero, no amount
                    of the prefunding balance of such plan may be credited
                    under this paragraph in reducing the minimum required
                    contribution.
                        ``(C) Limitation for underfunded plans.--The
                    preceding provisions of this paragraph shall not apply
                    for any plan year if the ratio (expressed as a
                    percentage) which--
                              ``(i) the value of plan assets for the
                          preceding plan year (as reduced under paragraph
                          (4)(C)), bears to
                              ``(ii) the funding target of the plan for the
                          preceding plan year (determined without regard to
                          subsection (i)(1)),
                    is less than 80 percent. In the case of plan years
                    beginning in 2008, the ratio under this subparagraph may
                    be determined using such methods of estimation as the
                    Secretary may prescribe.
                ``(4) Effect of balances on amounts treated as value of plan
            assets.--In the case of any plan maintaining a prefunding
            balance or a funding standard carryover balance pursuant to this
            subsection, the amount treated as the value of plan assets shall
            be deemed to be such amount, reduced as provided in the
            following subparagraphs:
                        ``(A) Applicability of shortfall amortization
                    base.--For purposes of subsection (c)(5), the value of
                    plan assets is deemed to be such amount, reduced by the
                    amount of the prefunding balance, but only if an
                    election under

    [[Page 120 STAT. 831]]

                    paragraph (2) applying any portion of the prefunding
                    balance in reducing the minimum required contribution is
                    in effect for the plan year.
                        ``(B) Determination of excess assets, funding
                    shortfall, and funding target attainment percentage.--
                              ``(i) In general.--For purposes of subsections
                          (a), (c)(4)(B), and (d)(2)(A), the value of plan
                          assets is deemed to be such amount, reduced by the
                          amount of the prefunding balance and the funding
                          standard carryover balance.
                              ``(ii) Special rule for certain binding
                          agreements with pbgc.--For purposes of subsection
                          (c)(4)(B), the value of plan assets shall not be
                          deemed to be reduced for a plan year by the amount
                          of the specified balance if, with respect to such
                          balance, there is in effect for a plan year a
                          binding written agreement with the Pension Benefit
                          Guaranty Corporation which provides that such
                          balance is not available to reduce the minimum
                          required contribution for the plan year. For
                          purposes of the preceding sentence, the term
                          `specified balance' means the prefunding balance
                          or the funding standard carryover balance, as the
                          case may be.
                        ``(C) Availability of balances in plan year for
                    crediting against minimum required contribution.--For
                    purposes of paragraph (3)(C)(i) of this subsection, the
                    value of plan assets is deemed to be such amount,
                    reduced by the amount of the prefunding balance.
                ``(5) Election to reduce balance prior to determinations of
            value of plan assets and crediting against minimum required
            contribution.--
                        ``(A) In general.--The plan sponsor may elect to
                    reduce by any amount the balance of the prefunding
                    balance and the funding standard carryover balance for
                    any plan year (but not below zero). <<NOTE: Effective
                    date.>> Such reduction shall be effective prior to any
                    determination of the value of plan assets for such plan
                    year under this section and application of the balance
                    in reducing the minimum required contribution for such
                    plan for such plan year pursuant to an election under
                    paragraph (2).
                        ``(B) Coordination between prefunding balance and
                    funding standard carryover balance.--To the extent that
                    any plan has a funding standard carryover balance
                    greater than zero, no election may be made under
                    subparagraph (A) with respect to the prefunding balance.
                ``(6) Prefunding balance.--
                        ``(A) In general.--A prefunding balance maintained
                    by a plan shall consist of a beginning balance of zero,
                    increased and decreased to the extent provided in
                    subparagraphs (B) and (C), and adjusted further as
                    provided in paragraph (8).
                        ``(B) Increases.--
                              ``(i) In general.--As of the <<NOTE: Effective
                          date.>> first day of each plan year beginning
                          after 2008, the prefunding balance of a plan shall
                          be increased by the amount elected by

    [[Page 120 STAT. 832]]

                          the plan sponsor for the plan year. Such amount
                          shall not exceed the excess (if any) of--
                                        ``(I) the aggregate total of
                                    employer contributions to the plan for
                                    the preceding plan year, over--
                                        ``(II) the minimum required
                                    contribution for such preceding plan
                                    year.
                              ``(ii) Adjustments for interest.--Any excess
                          contributions under clause (i) shall be properly
                          adjusted for interest accruing for the periods
                          between the first day of the current plan year and
                          the dates on which the excess contributions were
                          made, determined by using the effective interest
                          rate for the preceding plan year and by treating
                          contributions as being first used to satisfy the
                          minimum required contribution.
                              ``(iii) Certain contributions necessary to
                          avoid benefit limitations disregarded.--The excess
                          described in clause (i) with respect to any
                          preceding plan year shall be reduced (but not
                          below zero) by the amount of contributions an
                          employer would be required to make under paragraph
                          (1), (2), or (4) of section 206(g) to avoid a
                          benefit limitation which would otherwise be
                          imposed under such paragraph for the preceding
                          plan year. Any contribution which may be taken
                          into account in satisfying the requirements of
                          more than 1 of such paragraphs shall be taken into
                          account only once for purposes of this clause.
                        ``(C) Decreases.--The prefunding balance of a plan
                    shall be decreased (but not below zero) by the sum of--
                              ``(i) as of the first day of each plan year
                          after 2008, the amount of such balance credited
                          under paragraph (2) (if any) in reducing the
                          minimum required contribution of the plan for the
                          preceding plan year, and
                              ``(ii) as of the time specified in paragraph
                          (5)(A), any reduction in such balance elected
                          under paragraph (5).
                ``(7) Funding standard carryover balance.--
                        ``(A) In general.--A funding standard carryover
                    balance maintained by a plan shall consist of a
                    beginning balance determined under subparagraph (B),
                    decreased to the extent provided in subparagraph (C),
                    and adjusted further as provided in paragraph (8).
                        ``(B) Beginning balance.--The beginning balance of
                    the funding standard carryover balance shall be the
                    positive balance described in paragraph (1)(B)(ii)(II).
                        ``(C) Decreases.--The funding standard carryover
                    balance of a plan shall be decreased (but not below
                    zero) by--
                              ``(i) as of the first day of each plan year
                          after 2008, the amount of such balance credited
                          under paragraph (2) (if any) in reducing the
                          minimum required contribution of the plan for the
                          preceding plan year, and
                              ``(ii) as of the time specified in paragraph
                          (5)(A), any reduction in such balance elected
                          under paragraph (5).

    [[Page 120 STAT. 833]]

                ``(8) Adjustments for investment experience.--In determining
            the prefunding balance or the funding standard carryover balance
            of a plan as of the first day of the plan year, the plan sponsor
            shall, in accordance with regulations prescribed by the
            Secretary of the Treasury, adjust such balance to reflect the
            rate of return on plan assets for the preceding plan year.
            Notwithstanding subsection (g)(3), such rate of return shall be
            determined on the basis of fair market value and shall properly
            take into account, in accordance with such regulations, all
            contributions, distributions, and other plan payments made
            during such period.
                ``(9) Elections.--Elections <<NOTE: Regulations.>> under
            this subsection shall be made at such times, and in such form
            and manner, as shall be prescribed in regulations of the
            Secretary.

        ``(g) Valuation of Plan Assets and Liabilities.--
                ``(1) Timing of determinations.--Except
            as <<NOTE: Deadline.>> otherwise provided under this subsection,
            all determinations under this section for a plan year shall be
            made as of the valuation date of the plan for such plan year.
                ``(2) Valuation date.--For purposes of this section--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), the valuation date of a plan for any
                    plan year shall be the first day of the plan year.
                        ``(B) Exception for small plans.--If, on each day
                    during the preceding plan year, a plan had 100 or fewer
                    participants, the plan may designate any day during the
                    plan year as its valuation date for such plan year and
                    succeeding plan years. For purposes of this
                    subparagraph, all defined benefit plans (other than
                    multiemployer plans) maintained by the same employer (or
                    any member of such employer's controlled group) shall be
                    treated as 1 plan, but only participants with respect to
                    such employer or member shall be taken into account.
                        ``(C) Application of certain rules in determination
                    of plan size.--For purposes of this paragraph--
                              ``(i) Plans not in existence in preceding
                          year.--In the case of the first plan year of any
                          plan, subparagraph (B) shall apply to such plan by
                          taking into account the number of participants
                          that the plan is reasonably expected to have on
                          days during such first plan year.
                              ``(ii) Predecessors.--Any reference in
                          subparagraph (B) to an employer shall include a
                          reference to any predecessor of such employer.
                ``(3) Determination of value of plan assets.--For purposes
            of this section--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), the value of plan assets shall be the
                    fair market value of the assets.
                        ``(B) Averaging allowed.--A plan may determine the
                    value of plan assets on the basis of the averaging of
                    fair market values, but only if such method--
                              ``(i) is permitted under regulations
                          prescribed by the Secretary,
                              ``(ii) does not provide for averaging of such
                          values over more than the period beginning on the
                          last day of the 25th month preceding the month in
                          which the

    [[Page 120 STAT. 834]]

                          valuation date occurs and ending on the valuation
                          date (or a similar period in the case of a
                          valuation date which is not the 1st day of a
                          month), and
                              ``(iii) does not result in a determination of
                          the value of plan assets which, at any time, is
                          lower than 90 percent or greater than 110 percent
                          of the fair market value of such assets at such
                          time.
                    Any such averaging shall be adjusted for contributions
                    and distributions (as provided by the Secretary).
                ``(4) Accounting for contribution receipts.--For purposes of
            determining the value of assets under paragraph (3)--
                        ``(A) Prior year contributions.--If--
                              ``(i) an employer makes any contribution to
                          the plan after the valuation date for the plan
                          year in which the contribution is made, and
                              ``(ii) the contribution is for a preceding
                          plan year,
                    the contribution shall be taken into account as an asset
                    of the plan as of the valuation date, except that in the
                    case of any plan year beginning after 2008, only the
                    present value (determined as of the valuation date) of
                    such contribution may be taken into account. For
                    purposes of the preceding sentence, present value shall
                    be determined using the effective interest rate for the
                    preceding plan year to which the contribution is
                    properly allocable.
                        ``(B) Special rule for current year contributions
                    made before valuation date.--If any contributions for
                    any plan year are made to or under the plan during the
                    plan year but before the valuation date for the plan
                    year, the assets of the plan as of the valuation date
                    shall not include--
                              ``(i) such contributions, and
                              ``(ii) interest on such contributions for the
                          period between the date of the contributions and
                          the valuation date, determined by using the
                          effective interest rate for the plan year.

        ``(h) Actuarial Assumptions and Methods.--
                ``(1) In general.--Subject to this subsection, the
            determination of any present value or other computation under
            this section shall be made on the basis of actuarial assumptions
            and methods--
                        ``(A) each of which is reasonable (taking into
                    account the experience of the plan and reasonable
                    expectations), and
                        ``(B) which, in combination, offer the actuary's
                    best estimate of anticipated experience under the plan.
                ``(2) Interest rates.--
                        ``(A) Effective interest rate.--For purposes of this
                    section, the term `effective interest rate' means, with
                    respect to any plan for any plan year, the single rate
                    of interest which, if used to determine the present
                    value of the plan's accrued or earned benefits referred
                    to in subsection (d)(1), would result in an amount equal
                    to the funding target of the plan for such plan year.
                        ``(B) Interest rates for determining funding
                    target.--For purposes of determining the funding target
                    of

    [[Page 120 STAT. 835]]

                    a plan for any plan year, the interest rate used in
                    determining the present value of the liabilities of the
                    plan shall be--
                              ``(i) in the case of benefits reasonably
                          determined to be payable during the 5-year period
                          beginning on the first day of the plan year, the
                          first segment rate with respect to the applicable
                          month,
                              ``(ii) in the case of benefits reasonably
                          determined to be payable during the 15-year period
                          beginning at the end of the period described in
                          clause (i), the second segment rate with respect
                          to the applicable month, and
                              ``(iii) in the case of benefits reasonably
                          determined to be payable after the period
                          described in clause (ii), the third segment rate
                          with respect to the applicable month.
                        ``(C) Segment rates.--For purposes of this para-
                    graph--
                              ``(i) First segment rate.--The term `first
                          segment rate' means, with respect to any month,
                          the single rate of interest which shall be
                          determined by the Secretary for such month on the
                          basis of the corporate bond yield curve for such
                          month, taking into account only that portion of
                          such yield curve which is based on bonds maturing
                          during the 5-year period commencing with such
                          month.
                              ``(ii) Second segment rate.--The term `second
                          segment rate' means, with respect to any month,
                          the single rate of interest which shall be
                          determined by the Secretary for such month on the
                          basis of the corporate bond yield curve for such
                          month, taking into account only that portion of
                          such yield curve which is based on bonds maturing
                          during the 15-year period beginning at the end of
                          the period described in clause (i).
                              ``(iii) Third segment rate.--The term `third
                          segment rate' means, with respect to any month,
                          the single rate of interest which shall be
                          determined by the Secretary for such month on the
                          basis of the corporate bond yield curve for such
                          month, taking into account only that portion of
                          such yield curve which is based on bonds maturing
                          during periods beginning after the period
                          described in clause (ii).
                        ``(D) Corporate bond yield curve.--For purposes of
                    this paragraph--
                              ``(i) In general.--The term `corporate bond
                          yield curve' means, with respect to any month, a
                          yield curve which is prescribed by the Secretary
                          for such month and which reflects the average, for
                          the 24-month period ending with the month
                          preceding such month, of monthly yields on
                          investment grade corporate bonds with varying
                          maturities and that are in the top 3 quality
                          levels available.
                              ``(ii) Election to use yield curve.--Solely
                          for purposes of determining the minimum required
                          contribution under this section, the plan sponsor
                          may,

    [[Page 120 STAT. 836]]

                          in lieu of the segment rates determined under
                          subparagraph (C), elect to use interest rates
                          under the corporate bond yield curve. For purposes
                          of the preceding sentence such curve shall be
                          determined without regard to the 24-month
                          averaging described in clause (i). Such election,
                          once made, may be revoked only with the consent of
                          the Secretary.
                        ``(E) Applicable month.--For purposes of this
                    paragraph, the term `applicable month' means, with
                    respect to any plan for any plan year, the month which
                    includes the valuation date of such plan for such plan
                    year or, at the election of the plan sponsor, any of the
                    4 months which precede such month. Any election made
                    under this subparagraph shall apply to the plan year for
                    which the election is made and all succeeding plan
                    years, unless the election is revoked with the consent
                    of the Secretary.
                        ``(F) Publication requirements.--The Secretary shall
                    publish for each month the corporate bond yield curve
                    (and the corporate bond yield curve reflecting the
                    modification described in section 417(e)(3)(D)(i)) for
                    such month and each of the rates determined under
                    subparagraph (B) for such month. The Secretary shall
                    also publish a description of the methodology used to
                    determine such yield curve and such rates which is
                    sufficiently detailed to enable plans to make reasonable
                    projections regarding the yield curve and such rates for
                    future months based on the plan's projection of future
                    interest rates.
                        ``(G) Transition rule.--
                              ``(i) In general.--Notwithstanding the
                          preceding provisions of this paragraph, for plan
                          years beginning in 2008 or 2009, the first,
                          second, or third segment rate for a plan with
                          respect to any month shall be equal to the sum
                          of--
                                        ``(I) the product of such rate for
                                    such month determined without regard to
                                    this subparagraph, multiplied by the
                                    applicable percentage, and
                                        ``(II) the product of the rate
                                    determined under the rules of section
                                    412(b)(5)(B)(ii)(II) (as in effect for
                                    plan years beginning in 2007),
                                    multiplied by a percentage equal to 100
                                    percent minus the applicable percentage.
                              ``(ii) Applicable percentage.--For purposes of
                          clause (i), the applicable percentage is 33\1/3\
                          percent for plan years beginning in 2008 and 66\2/
                          3\ percent for plan years beginning in 2009.
                              ``(iii) New plans ineligible.--Clause (i)
                          shall not apply to any plan if the first plan year
                          of the plan begins after December 31, 2007.
                              ``(iv) Election.--The plan sponsor may elect
                          not to have this subparagraph apply. Such
                          election, once made, may be revoked only with the
                          consent of the Secretary.
                ``(3) Mortality tables.--
                        ``(A) In general.--Except
                    as <<NOTE: Regulations.>> provided in subparagraph (C)
                    or (D), the Secretary shall by regulation prescribe
                    mortality tables to be used in determining any present
                    value or making any computation under this section. Such
                    tables

    [[Page 120 STAT. 837]]

                    shall be based on the actual experience of pension plans
                    and projected trends in such experience. In prescribing
                    such tables, the Secretary shall take into account
                    results of available independent studies of mortality of
                    individuals covered by pension plans.
                        ``(B) Periodic revision.--The Secretary shall (at
                    least every 10 years) make revisions in any table in
                    effect under subparagraph (A) to reflect the actual
                    experience of pension plans and projected trends in such
                    experience.
                        ``(C) Substitute mortality table.--
                              ``(i) In general.--Upon request by the plan
                          sponsor and approval by the Secretary, a mortality
                          table which meets the requirements of clause (iii)
                          shall be used in determining any present value or
                          making any computation under this section during
                          the period of consecutive plan years (not to
                          exceed 10) specified in the request.
                              ``(ii) Early termination of period.--
                          Notwithstanding clause (i), a mortality table
                          described in clause (i) shall cease to be in
                          effect as of the earliest of--
                                        ``(I) the date on which there is a
                                    significant change in the participants
                                    in the plan by reason of a plan spinoff
                                    or merger or otherwise, or
                                        ``(II) the date on which the plan
                                    actuary determines that such table does
                                    not meet the requirements of clause
                                    (iii).
                              ``(iii) Requirements.--A mortality table meets
                          the requirements of this clause if--
                                        ``(I) there is a sufficient number
                                    of plan participants, and the pension
                                    plans have been maintained for a
                                    sufficient period of time, to have
                                    credible information necessary for
                                    purposes of subclause (II), and
                                        ``(II) such table reflects the
                                    actual experience of the pension plans
                                    maintained by the sponsor and projected
                                    trends in general mortality experience.
                              ``(iv) All plans in controlled group must use
                          separate table.--Except as provided by the
                          Secretary, a plan sponsor may not use a mortality
                          table under this subparagraph for any plan
                          maintained by the plan sponsor unless--
                                        ``(I) a separate mortality table is
                                    established and used under this
                                    subparagraph for each other plan
                                    maintained by the plan sponsor and if
                                    the plan sponsor is a member of a
                                    controlled group, each member of the
                                    controlled group, and
                                        ``(II) the requirements of clause
                                    (iii) are met separately with respect to
                                    the table so established for each such
                                    plan, determined by only taking into
                                    account the participants of such plan,
                                    the time such plan has been in
                                    existence, and the actual experience of
                                    such plan.
                              ``(v) Deadline for submission and disposition
                          of application.--
                                        ``(I) Submission.--The plan sponsor
                                    shall submit a mortality table to the
                                    Secretary for

    [[Page 120 STAT. 838]]

                                    approval under this subparagraph at
                                    least 7 months before the 1st day of the
                                    period described in clause (i).
                                        ``(II) Disposition.--Any mortality
                                    table submitted to the Secretary for
                                    approval under this subparagraph shall
                                    be treated as in effect as of the 1st
                                    day of the period described in clause
                                    (i) unless the Secretary, during the
                                    180-day period beginning on the date of
                                    such submission, disapproves of such
                                    table and provides the reasons that such
                                    table fails to meet the requirements of
                                    clause (iii). <<NOTE: Extension.>> The
                                    180-day period shall be extended upon
                                    mutual agreement of the Secretary and
                                    the plan sponsor.
                        ``(D) Separate mortality tables for the disabled.--
                    Notwithstanding subparagraph (A)--
                              ``(i) In general.--The Secretary shall
                          establish mortality tables which may be used (in
                          lieu of the tables under subparagraph (A)) under
                          this subsection for individuals who are entitled
                          to benefits under the plan on account of
                          disability. The Secretary shall establish separate
                          tables for individuals whose disabilities occur in
                          plan years beginning before January 1, 1995, and
                          for individuals whose disabilities occur in plan
                          years beginning on or after such date.
                              ``(ii) Special rule for disabilities occurring
                          after 1994.--In the case
                          of <<NOTE: Applicability.>> disabilities occurring
                          in plan years beginning after December 31, 1994,
                          the tables under clause (i) shall apply only with
                          respect to individuals described in such subclause
                          who are disabled within the meaning of title II of
                          the Social Security Act and the regulations
                          thereunder.
                              ``(iii) Periodic revision.--The Secretary
                          shall (at least every 10 years) make revisions in
                          any table in effect under clause (i) to reflect
                          the actual experience of pension plans and
                          projected trends in such experience.
                ``(4) Probability of benefit payments in the form of lump
            sums or other optional forms.--For purposes of determining any
            present value or making any computation under this section,
            there shall be taken into account--
                        ``(A) the probability that future benefit payments
                    under the plan will be made in the form of optional
                    forms of benefits provided under the plan (including
                    lump sum distributions, determined on the basis of the
                    plan's experience and other related assumptions), and
                        ``(B) any difference in the present value of such
                    future benefit payments resulting from the use of
                    actuarial assumptions, in determining benefit payments
                    in any such optional form of benefits, which are
                    different from those specified in this subsection.
                ``(5) Approval of large changes in actuarial assumptions.--
                        ``(A) In general.--No actuarial assumption used to
                    determine the funding target for a plan to which this
                    paragraph applies may be changed without the approval of
                    the Secretary.

    [[Page 120 STAT. 839]]

                        ``(B) Plans to which paragraph applies.--This
                    paragraph shall apply to a plan only if--
                              ``(i) the plan is a defined benefit plan
                          (other than a multiemployer plan) to which title
                          IV of the Employee Retirement Income Security Act
                          of 1974 applies,
                              ``(ii) the aggregate unfunded vested benefits
                          as of the close of the preceding plan year (as
                          determined under section 4006(a)(3)(E)(iii) of the
                          Employee Retirement Income Security Act of 1974)
                          of such plan and all other plans maintained by the
                          contributing sponsors (as defined in section
                          4001(a)(13) of such Act) and members of such
                          sponsors' controlled groups (as defined in section
                          4001(a)(14) of such Act) which are covered by
                          title IV (disregarding plans with no unfunded
                          vested benefits) exceed $50,000,000, and
                              ``(iii) the change in assumptions (determined
                          after taking into account any changes in interest
                          rate and mortality table) results in a decrease in
                          the funding shortfall of the plan for the current
                          plan year that exceeds $50,000,000, or that
                          exceeds $5,000,000 and that is 5 percent or more
                          of the funding target of the plan before such
                          change.

        ``(i) Special Rules for At-Risk Plans.--
                ``(1) Funding target for plans in at-risk status.--
                        ``(A) In general.--In the case of a plan which is in
                    at-risk status for a plan year, the funding target of
                    the plan for the plan year shall be equal to the sum
                    of--
                              ``(i) the present value of all benefits
                          accrued or earned under the plan as of the
                          beginning of the plan year, as determined by using
                          the additional actuarial assumptions described in
                          subparagraph (B), and
                              ``(ii) in the case of a plan which also has
                          been in at-risk status for at least 2 of the 4
                          preceding plan years, a loading factor determined
                          under subparagraph (C).
                        ``(B) Additional actuarial assumptions.--The
                    actuarial assumptions described in this subparagraph are
                    as follows:
                              ``(i) All employees who are not otherwise
                          assumed to retire as of the valuation date but who
                          will be eligible to elect benefits during the plan
                          year and the 10 succeeding plan years shall be
                          assumed to retire at the earliest retirement date
                          under the plan but not before the end of the plan
                          year for which the at-risk funding target and at-
                          risk target normal cost are being determined.
                              ``(ii) All employees shall be assumed to elect
                          the retirement benefit available under the plan at
                          the assumed retirement age (determined after
                          application of clause (i)) which would result in
                          the highest present value of benefits.
                        ``(C) Loading factor.--The loading factor applied
                    with respect to a plan under this paragraph for any plan
                    year is the sum of--
                              ``(i) $700, times the number of participants
                          in the plan, plus

    [[Page 120 STAT. 840]]

                              ``(ii) 4 percent of the funding target
                          (determined without regard to this paragraph) of
                          the plan for the plan year.
                ``(2) Target normal cost of at-risk plans.--In the case of a
            plan which is in at-risk status for a plan year, the target
            normal cost of the plan for such plan year shall be equal to the
            sum of--
                        ``(A) the present value of all benefits which are
                    expected to accrue or be earned under the plan during
                    the plan year, determined using the additional actuarial
                    assumptions described in paragraph (1)(B), plus
                        ``(B) in the case of a plan which also has been in
                    at-risk status for at least 2 of the 4 preceding plan
                    years, a loading factor equal to 4 percent of the target
                    normal cost (determined without regard to this
                    paragraph) of the plan for the plan year.
                ``(3) Minimum amount.--In no event shall--
                        ``(A) the at-risk funding target be less than the
                    funding target, as determined without regard to this
                    subsection, or
                        ``(B) the at-risk target normal cost be less than
                    the target normal cost, as determined without regard to
                    this subsection.
                ``(4) Determination of at-risk status.--For purposes of this
            subsection--
                        ``(A) In general.--A plan is in at-risk status for a
                    plan year if--
                              ``(i) the funding target attainment percentage
                          for the preceding plan year (determined under this
                          section without regard to this subsection) is less
                          than 80 percent, and
                              ``(ii) the funding target attainment
                          percentage for the preceding plan year (determined
                          under this section by using the additional
                          actuarial assumptions described in paragraph
                          (1)(B) in computing the funding target) is less
                          than 70 percent.
                        ``(B) Transition rule.--In
                    the <<NOTE: Applicability.>> case of plan years
                    beginning in 2008, 2009, and 2010, subparagraph (A)(i)
                    shall be applied by substituting the following
                    percentages for `80 percent':
                              ``(i) 65 percent in the case of 2008.
                              ``(ii) 70 percent in the case of 2009.
                              ``(iii) 75 percent in the case of 2010.
                    In the case of plan years beginning in 2008, the funding
                    target attainment percentage for the preceding plan year
                    under subparagraph (A)(ii) may be determined using such
                    methods of estimation as the Secretary may provide.
                        ``(C) Special rule for employees offered early
                    retirement in 2006.--
                              ``(i) In general.--For purposes of
                          subparagraph (A)(ii), the additional actuarial
                          assumptions described in paragraph (1)(B) shall
                          not be taken into account with respect to any
                          employee if--
                                        ``(I) such employee is employed by a
                                    specified automobile manufacturer,

    [[Page 120 STAT. 841]]

                                        ``(II) <<NOTE: Deadline.>> such
                                    employee is offered a substantial amount
                                    of additional cash compensation,
                                    substantially enhanced retirement
                                    benefits under the plan, or materially
                                    reduced employment duties on the
                                    condition that by a specified date (not
                                    later than December 31, 2010) the
                                    employee retires (as defined under the
                                    terms of the plan),
                                        ``(III) <<NOTE: Deadline.>> such
                                    offer is made during 2006 and pursuant
                                    to a bona fide retirement incentive
                                    program and requires, by the terms of
                                    the offer, that such offer can be
                                    accepted not later than a specified date
                                    (not later than December 31, 2006), and
                                        ``(IV) such employee does not elect
                                    to accept such offer before the
                                    specified date on which the offer
                                    expires.
                              ``(ii) Specified automobile manufacturer.--For
                          purposes of clause (i), the term `specified
                          automobile manufacturer' means--
                                        ``(I) any manufacturer of
                                    automobiles, and
                                        ``(II) any manufacturer of
                                    automobile parts which supplies such
                                    parts directly to a manufacturer of
                                    automobiles and which, after a
                                    transaction or series of transactions
                                    ending in 1999, ceased to be a member of
                                    a controlled group which included such
                                    manufacturer of automobiles.
                ``(5) Transition between applicable funding targets and
            between applicable target normal costs.--
                        ``(A) In general.--In any case in which a plan which
                    is in at-risk status for a plan year has been in such
                    status for a consecutive period of fewer than 5 plan
                    years, the applicable amount of the funding target and
                    of the target normal cost shall be, in lieu of the
                    amount determined without regard to this paragraph, the
                    sum of--
                              ``(i) the amount determined under this section
                          without regard to this subsection, plus
                              ``(ii) the transition percentage for such plan
                          year of the excess of the amount determined under
                          this subsection (without regard to this paragraph)
                          over the amount determined under this section
                          without regard to this subsection.
                        ``(B) Transition percentage.--For purposes of
                    subparagraph (A), the transition percentage shall be
                    determined in accordance with the following table:

                ``If the consecuti .........................................
        of
                  years (includingThe transition............................
        year)
                  the plan is in apercentage is--...........................
        status is--
                          1...........................................   20
                          2...........................................   40
                          3...........................................   60
                          4...........................................   80.

                        ``(C) Years before effective date.--For purposes of
                    this paragraph, plan years beginning before 2008 shall
                    not be taken into account.
                ``(6) Small plan exception.--If, on each day during the
            preceding plan year, a plan had 500 or fewer participants, the
            plan shall not be treated as in at-risk status for the plan

    [[Page 120 STAT. 842]]

            year. For <<NOTE: Applicability.>> purposes of this paragraph,
            all defined benefit plans (other than multiemployer plans)
            maintained by the same employer (or any member of such
            employer's controlled group) shall be treated as 1 plan, but
            only participants with respect to such employer or member shall
            be taken into account and the rules of subsection (g)(2)(C)
            shall apply.

        ``(j) Payment of Minimum Required Contributions.--
                ``(1) In general.--For purposes of this section, the due
            date for any payment of any minimum required contribution for
            any plan year shall be 8\1/2\ months after the close of the plan
            year.
                ``(2) Interest.--Any payment required under paragraph (1)
            for a plan year that is made on a date other than the valuation
            date for such plan year shall be adjusted for interest accruing
            for the period between the valuation date and the payment date,
            at the effective rate of interest for the plan for such plan
            year.
                ``(3) Accelerated quarterly contribution schedule for
            underfunded plans.--
                        ``(A) Failure to timely make required installment.--
                    In any case in which the plan has a funding shortfall
                    for the preceding plan year, the employer maintaining
                    the plan shall make the required installments under this
                    paragraph and if the employer fails to pay the full
                    amount of a required installment for the plan year, then
                    the amount of interest charged under paragraph (2) on
                    the underpayment for the period of underpayment shall be
                    determined by using a rate of interest equal to the rate
                    otherwise used under paragraph (2) plus 5 percentage
                    points.
                        ``(B) Amount of underpayment, period of
                    underpayment.--For purposes of subparagraph (A)--
                              ``(i) Amount.--The amount of the underpayment
                          shall be the excess of--
                                        ``(I) the required installment, over
                                        ``(II) the amount (if any) of the
                                    installment contributed to or under the
                                    plan on or before the due date for the
                                    installment.
                              ``(ii) Period of underpayment.--The period for
                          which any interest is charged under this paragraph
                          with respect to any portion of the underpayment
                          shall run from the due date for the installment to
                          the date on which such portion is contributed to
                          or under the plan.
                              ``(iii) Order of crediting contributions.--For
                          purposes of clause (i)(II), contributions shall be
                          credited against unpaid required installments in
                          the order in which such installments are required
                          to be paid.
                        ``(C) Number of required installments; due dates.--
                    For purposes of this paragraph--
                              ``(i) Payable in 4 installments.--There shall
                          be 4 required installments for each plan year.
                              ``(ii) Time for payment of installments.--The
                          due dates for required installments are set forth
                          in the following table:

    [[Page 120 STAT. 843]]

    ``In the case of the following      The due date is:
     required installment:
      1st.............................  April 15
      2nd.............................  July 15
      3rd.............................  October 15
      4th.............................  January 15 of the  following year.

                        ``(D) Amount of required installment.--For purposes
                    of this paragraph--
                              ``(i) In general.--The amount of any required
                          installment shall be 25 percent of the required
                          annual payment.
                              ``(ii) Required annual payment.--For purposes
                          of clause (i), the term `required annual payment'
                          means the lesser of--
                                        ``(I) 90 percent of the minimum
                                    required contribution (determined
                                    without regard to this subsection) to
                                    the plan for the plan year under this
                                    section, or
                                        ``(II) 100 percent of the minimum
                                    required contribution (determined
                                    without regard to this subsection or to
                                    any waiver under section 302(c)) to the
                                    plan for the preceding plan year.
                          Subclause (II) shall not apply if the preceding
                          plan year referred to in such clause was not a
                          year of 12 months.
                        ``(E) Fiscal years and short years.--
                              ``(i) Fiscal years.--In applying this
                          paragraph to a plan year beginning on any date
                          other than January 1, there shall be substituted
                          for the months specified in this paragraph, the
                          months which correspond thereto.
                              ``(ii) Short plan year.--This subparagraph
                          shall be applied to plan years of less than 12
                          months in accordance with regulations prescribed
                          by the Secretary.
                ``(4) Liquidity requirement in connection with quarterly
            contributions.--
                        ``(A) In general.--A plan to which this paragraph
                    applies shall be treated as failing to pay the full
                    amount of any required installment under paragraph (3)
                    to the extent that the value of the liquid assets paid
                    in such installment is less than the liquidity shortfall
                    (whether or not such liquidity shortfall exceeds the
                    amount of such installment required to be paid but for
                    this paragraph).
                        ``(B) Plans to which paragraph applies.--This
                    paragraph shall apply to a plan (other than a plan
                    described in subsection (g)(2)(B)) which--
                              ``(i) is required to pay installments under
                          paragraph (3) for a plan year, and
                              ``(ii) has a liquidity shortfall for any
                          quarter during such plan year.
                        ``(C) Period of underpayment.--For purposes of
                    paragraph (3)(A), any portion of an installment that is
                    treated as not paid under subparagraph (A) shall
                    continue to be

    [[Page 120 STAT. 844]]

                    treated as unpaid until the close of the quarter in
                    which the due date for such installment occurs.
                        ``(D) Limitation on increase.--If the amount of any
                    required installment is increased by reason of
                    subparagraph (A), in no event shall such increase exceed
                    the amount which, when added to prior installments for
                    the plan year, is necessary to increase the funding
                    target attainment percentage of the plan for the plan
                    year (taking into account the expected increase in
                    funding target due to benefits accruing or earned during
                    the plan year) to 100 percent.
                        ``(E) Definitions.--For purposes of this paragraph--
                              ``(i) Liquidity shortfall.--The term
                          `liquidity shortfall' means, with respect to any
                          required installment, an amount equal to the
                          excess (as of the last day of the quarter for
                          which such installment is made) of--
                                        ``(I) the base amount with respect
                                    to such quarter, over
                                        ``(II) the value (as of such last
                                    day) of the plan's liquid assets.
                              ``(ii) Base amount.--
                                        ``(I) In general.--The term `base
                                    amount' means, with respect to any
                                    quarter, an amount equal to 3 times the
                                    sum of the adjusted disbursements from
                                    the plan for the 12 months ending on the
                                    last day of such quarter.
                                        ``(II) Special rule.--If the amount
                                    determined under subclause (I) exceeds
                                    an amount equal to 2 times the sum of
                                    the adjusted disbursements from the plan
                                    for the 36 months ending on the last day
                                    of the quarter and an enrolled actuary
                                    certifies to the satisfaction of the
                                    Secretary that such excess is the result
                                    of nonrecurring circumstances, the base
                                    amount with respect to such quarter
                                    shall be determined without regard to
                                    amounts related to those nonrecurring
                                    circumstances.
                              ``(iii) Disbursements from the plan.--The term
                          `disbursements from the plan' means all
                          disbursements from the trust, including purchases
                          of annuities, payments of single sums and other
                          benefits, and administrative expenses.
                              ``(iv) Adjusted disbursements.--The term
                          `adjusted disbursements' means disbursements from
                          the plan reduced by the product of--
                                        ``(I) the plan's funding target
                                    attainment percentage for the plan year,
                                    and
                                        ``(II) <<NOTE: Regulations.>> the
                                    sum of the purchases of annuities,
                                    payments of single sums, and such other
                                    disbursements as the Secretary shall
                                    provide in regulations.
                              ``(v) Liquid assets.--
                          The <<NOTE: Regulations.>> term `liquid assets'
                          means cash, marketable securities, and such other
                          assets as specified by the Secretary in
                          regulations.
                              ``(vi) Quarter.--The term `quarter' means,
                          with respect to any required installment, the 3-
                          month period

    [[Page 120 STAT. 845]]

                          preceding the month in which the due date for such
                          installment occurs.
                        ``(F) Regulations.--The Secretary may prescribe such
                    regulations as are necessary to carry out this
                    paragraph.

        ``(k) Imposition of Lien Where Failure to Make Required
    Contributions.--
                ``(1) In general.--In the case of a plan to which this
            subsection applies, if--
                        ``(A) any person fails to make a contribution
                    payment required by section 412 and this section before
                    the due date for such payment, and
                        ``(B) the unpaid balance of such payment (including
                    interest), when added to the aggregate unpaid balance of
                    all preceding such payments for which payment was not
                    made before the due date (including interest), exceeds
                    $1,000,000,
            then there shall be a lien in favor of the plan in the amount
            determined under paragraph (3) upon all property and rights to
            property, whether real or personal, belonging to such person and
            any other person who is a member of the same controlled group of
            which such person is a member.
                ``(2) Plans to which subsection applies.--This subsection
            shall apply to a defined benefit plan (other than a
            multiemployer plan) covered under section 4021 of the Employee
            Retirement Income Security Act of 1974 for any plan year for
            which the funding target attainment percentage (as defined in
            subsection (d)(2)) of such plan is less than 100 percent.
                ``(3) Amount of lien.--For purposes of paragraph (1), the
            amount of the lien shall be equal to the aggregate unpaid
            balance of contribution payments required under this section and
            section 412 for which payment has not been made before the due
            date.
                ``(4) Notice of failure; lien.--
                        ``(A) Notice of failure.--
                    A <<NOTE: Deadline.>> person committing a failure
                    described in paragraph (1) shall notify the Pension
                    Benefit Guaranty Corporation of such failure within 10
                    days of the due date for the required contribution
                    payment.
                        ``(B) Period of lien.--The lien imposed by paragraph
                    (1) shall arise on the due date for the required
                    contribution payment and shall continue until the last
                    day of the first plan year in which the plan ceases to
                    be described in paragraph (1)(B). Such lien shall
                    continue to run without regard to whether such plan
                    continues to be described in paragraph (2) during the
                    period referred to in the preceding sentence.
                        ``(C) Certain rules to apply.--Any amount with
                    respect to which a lien is imposed under paragraph (1)
                    shall be treated as taxes due and owing the United
                    States and rules similar to the rules of subsections
                    (c), (d), and (e) of section 4068 of the Employee
                    Retirement Income Security Act of 1974 shall apply with
                    respect to a lien imposed by subsection (a) and the
                    amount with respect to such lien.
                ``(5) Enforcement.--Any lien created under paragraph (1) may
            be perfected and enforced only by the Pension Benefit Guaranty
            Corporation, or at the direction of the Pension Benefit

    [[Page 120 STAT. 846]]

            Guaranty Corporation, by the contributing sponsor (or any member
            of the controlled group of the contributing sponsor).
                ``(6) Definitions.--For purposes of this subsection--
                        ``(A) Contribution payment.--The term `contribution
                    payment' means, in connection with a plan, a
                    contribution payment required to be made to the plan,
                    including any required installment under paragraphs (3)
                    and (4) of subsection (j).
                        ``(B) Due date; required installment.--The terms
                    `due date' and `required installment' have the meanings
                    given such terms by subsection (j), except that in the
                    case of a payment other than a required installment, the
                    due date shall be the date such payment is required to
                    be made under section 430.
                        ``(C) Controlled group.--The term `controlled group'
                    means any group treated as a single employer under
                    subsections (b), (c), (m), and (o) of section 414.

        ``(l) Qualified Transfers to Health Benefit Accounts.--In the case
    of a qualified transfer (as defined in section 420), any assets so
    transferred shall not, for purposes of this section, be treated as
    assets in the plan.''.
        (b) Effective Date.--The <<NOTE: 26 USC 430 note.>> amendments made
    by this section shall apply with respect to plan years beginning after
    December 31, 2007.

    SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER PLANS.

        (a) Prohibition of Shutdown Benefits and Other Unpredictable
    Contingent Event Benefits Under Single-Employer Plans.--
                (1) In general.--Part III of subchapter D of chapter 1 of
            the Internal Revenue Code of 1986 <<NOTE: 26 USC prec.
            430.>> (relating to deferred compensation, etc.) is amended--
                        (A) by striking the heading and inserting the
                    following:

      ``PART III--RULES RELATING TO MINIMUM FUNDING STANDARDS AND BENEFIT
                                   LIMITATIONS

            ``subpart a. minimum funding standards for pension plans.

          ``subpart b. benefit limitations under single-employer plans.

            ``Subpart A--Minimum Funding Standards for Pension Plans

    ``Sec. 430. Minimum funding standards for single-employer defined
               benefit pension plans.'',

                    and
                        (B) by adding at the end the following new subpart:

    [[Page 120 STAT. 847]]

          ``Subpart B--Benefit Limitations Under Single-Employer Plans

    ``Sec. 436. Funding-based limitation on shutdown benefits and other
               unpredictable contingent event benefits under single-employer
               plans.

    ``SEC. 436. <<NOTE: 26 USC 436.>> FUNDING-BASED LIMITS ON BENEFITS AND
                BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER PLANS.

        ``(a) General Rule.--For purposes of section 401(a)(29), a defined
    benefit plan which is a single-employer plan shall be treated as meeting
    the requirements of this section if the plan meets the requirements of
    subsections (b), (c), (d), and (e).
        ``(b) Funding-Based Limitation on Shutdown Benefits and Other
    Unpredictable Contingent Event Benefits Under Single-Employer Plans.--
                ``(1) In general.--If a participant of a defined benefit
            plan which is a single-employer plan is entitled to an
            unpredictable contingent event benefit payable with respect to
            any event occurring during any plan year, the plan shall provide
            that such benefit may not be provided if the adjusted funding
            target attainment percentage for such plan year--
                        ``(A) is less than 60 percent, or
                        ``(B) would be less than 60 percent taking into
                    account such occurrence.
                ``(2) Exemption.--Paragraph (1) <<NOTE: Effective
            date.>> shall cease to apply with respect to any plan year,
            effective as of the first day of the plan year, upon payment by
            the plan sponsor of a contribution (in addition to any minimum
            required contribution under section 303) equal to--
                        ``(A) in the case of paragraph (1)(A), the amount of
                    the increase in the funding target of the plan (under
                    section 430) for the plan year attributable to the
                    occurrence referred to in paragraph (1), and
                        ``(B) in the case of paragraph (1)(B), the amount
                    sufficient to result in a funding target attainment
                    percentage of 60 percent.
                ``(3) Unpredictable contingent event.--For purposes of this
            subsection, the term `unpredictable contingent event benefit'
            means any benefit payable solely by reason of--
                        ``(A) a plant shutdown (or similar event, as
                    determined by the Secretary), or
                        ``(B) any event other than the attainment of any
                    age, performance of any service, receipt or derivation
                    of any compensation, or occurrence of death or
                    disability.

        ``(c) Limitations on Plan Amendments Increasing Liability for
    Benefits.--
                ``(1) In general.--No amendment to a defined benefit plan
            which is a single-employer plan which has the effect of
            increasing liabilities of the plan by reason of increases in
            benefits, establishment of new benefits, changing the rate of
            benefit accrual, or changing the rate at which benefits become
            nonforfeitable may take effect during any plan year if the
            adjusted funding target attainment percentage for such plan year
            is--
                        ``(A) less than 80 percent, or
                        ``(B) would be less than 80 percent taking into
                    account such amendment.

    [[Page 120 STAT. 848]]

                ``(2) Exemption.--Paragraph <<NOTE: Effective date.>> (1)
            shall cease to apply with respect to any plan year, effective as
            of the first day of the plan year (or if later, the effective
            date of the amendment), upon payment by the plan sponsor of a
            contribution (in addition to any minimum required contribution
            under section 430) equal to--
                        ``(A) in the case of paragraph (1)(A), the amount of
                    the increase in the funding target of the plan (under
                    section 430) for the plan year attributable to the
                    amendment, and
                        ``(B) in the case of paragraph (1)(B), the amount
                    sufficient to result in an adjusted funding target
                    attainment percentage of 80 percent.
                ``(3) Exception for certain benefit increases.--Paragraph
            (1) shall not apply to any amendment which provides for an
            increase in benefits under a formula which is not based on a
            participant's compensation, but only if the rate of such
            increase is not in excess of the contemporaneous rate of
            increase in average wages of participants covered by the
            amendment.

        ``(d) Limitations on Accelerated Benefit Distributions.--
                ``(1) Funding percentage less than 60 percent.--A defined
            benefit plan which is a single-employer plan shall provide that,
            in any case in which the plan's adjusted funding target
            attainment percentage for a plan year is less than 60 percent,
            the plan may not pay any prohibited payment after the valuation
            date for the plan year.
                ``(2) Bankruptcy.--A defined benefit plan which is a single-
            employer plan shall provide that, during any period in which the
            plan sponsor is a debtor in a case under title 11, United States
            Code, or similar Federal or State law, the plan may not pay any
            prohibited payment. <<NOTE: Effective date.>> The preceding
            sentence shall not apply on or after the date on which the
            enrolled actuary of the plan certifies that the adjusted funding
            target attainment percentage of such plan is not less than 100
            percent.
                ``(3) Limited payment if percentage at least 60 percent but
            less than 80 percent.--
                        ``(A) In general.--A defined benefit plan which is a
                    single-employer plan shall provide that, in any case in
                    which the plan's adjusted funding target attainment
                    percentage for a plan year is 60 percent or greater but
                    less than 80 percent, the plan may not pay any
                    prohibited payment after the valuation date for the plan
                    year to the extent the amount of the payment exceeds the
                    lesser of--
                              ``(i) 50 percent of the amount of the payment
                          which could be made without regard to this
                          section, or
                              ``(ii) the present value (determined under
                          guidance prescribed by the Pension Benefit
                          Guaranty Corporation, using the interest and
                          mortality assumptions under section 417(e)) of the
                          maximum guarantee with respect to the participant
                          under section 4022 of the Employee Retirement
                          Income Security Act of 1974.
                        ``(B) One-time application.--
                              ``(i) In general.--The plan shall also provide
                          that only 1 prohibited payment meeting the
                          requirements of subparagraph (A) may be made with
                          respect to any participant during any period of
                          consecutive plan

    [[Page 120 STAT. 849]]

                          years to which the limitations under either
                          paragraph (1) or (2) or this paragraph applies.
                              ``(ii) Treatment of beneficiaries.--For
                          purposes of this subparagraph, a participant and
                          any beneficiary on his behalf (including an
                          alternate payee, as defined in section 414(p)(8))
                          shall be treated as 1 participant. If the accrued
                          benefit of a participant is allocated to such an
                          alternate payee and 1 or more other persons, the
                          amount under subparagraph (A) shall be allocated
                          among such persons in the same manner as the
                          accrued benefit is allocated unless the qualified
                          domestic relations order (as defined in section
                          414(p)(1)(A)) provides otherwise.
                ``(4) Exception.--This subsection shall not apply to any
            plan for any plan year if the terms of such plan (as in effect
            for the period beginning on September 1, 2005, and ending with
            such plan year) provide for no benefit accruals with respect to
            any participant during such period.
                ``(5) Prohibited payment.--For purpose of this subsection,
            the term `prohibited payment' means--
                        ``(A) any payment, in excess of the monthly amount
                    paid under a single life annuity (plus any social
                    security supplements described in the last sentence of
                    section 411(a)(9)), to a participant or beneficiary
                    whose annuity starting date (as defined in section
                    417(f)(2)) occurs during any period a limitation under
                    paragraph (1) or (2) is in effect,
                        ``(B) any payment for the purchase of an irrevocable
                    commitment from an insurer to pay benefits, and
                        ``(C) any other payment specified by the Secretary
                    by regulations.

        ``(e) Limitation on <<NOTE: Effective dates.>> Benefit Accruals for
    Plans With Severe Funding Shortfalls.--
                ``(1) In general.--A defined benefit plan which is a single-
            employer plan shall provide that, in any case in which the
            plan's adjusted funding target attainment percentage for a plan
            year is less than 60 percent, benefit accruals under the plan
            shall cease as of the valuation date for the plan year.
                ``(2) Exemption.--Paragraph (1) shall cease to apply with
            respect to any plan year, effective as of the first day of the
            plan year, upon payment by the plan sponsor of a contribution
            (in addition to any minimum required contribution under section
            430) equal to the amount sufficient to result in an adjusted
            funding target attainment percentage of 60 percent.

        ``(f) Rules Relating to Contributions Required to Avoid Benefit
    Limitations.--
                ``(1) Security may be provided.--
                        ``(A) In general.--For purposes of this section, the
                    adjusted funding target attainment percentage shall be
                    determined by treating as an asset of the plan any
                    security provided by a plan sponsor in a form meeting
                    the requirements of subparagraph (B).
                        ``(B) Form of security.--The security required under
                    subparagraph (A) shall consist of--
                              ``(i) a bond issued by a corporate surety
                          company that is an acceptable surety for purposes
                          of section

    [[Page 120 STAT. 850]]

                          412 of the Employee Retirement Income Security Act
                          of 1974,
                              ``(ii) cash, or United States obligations
                          which mature in 3 years or less, held in escrow by
                          a bank or similar financial institution, or
                              ``(iii) such other form of security as is
                          satisfactory to the Secretary and the parties
                          involved.
                        ``(C) Enforcement.--Any security provided under
                    subparagraph (A) may be perfected and enforced at any
                    time after the earlier of--
                              ``(i) the date on which the plan terminates,
                              ``(ii) if there is a failure to make a payment
                          of the minimum required contribution for any plan
                          year beginning after the security is provided, the
                          due date for the payment under section 430(j), or
                              ``(iii) if the adjusted funding target
                          attainment percentage is less than 60 percent for
                          a consecutive period of 7 years, the valuation
                          date for the last year in the period.
                        ``(D) Release of security.--
                    The <<NOTE: Regulations.>> security shall be released
                    (and any amounts thereunder shall be refunded together
                    with any interest accrued thereon) at such time as the
                    Secretary may prescribe in regulations, including
                    regulations for partial releases of the security by
                    reason of increases in the funding target attainment
                    percentage.
                ``(2) Prefunding balance or funding standard carryover
            balance may not be used.--No prefunding balance under section
            430(f) or funding standard carryover balance may be used under
            subsection (b), (c), or (e) to satisfy any payment an employer
            may make under any such subsection to avoid or terminate the
            application of any limitation under such subsection.
                ``(3) Deemed reduction of funding balances.--
                        ``(A) In general.--Subject to subparagraph (C), in
                    any case in which a benefit limitation under subsection
                    (b), (c), (d), or (e) would (but for this subparagraph
                    and determined without regard to subsection (b)(2),
                    (c)(2), or (e)(2)) apply to such plan for the plan year,
                    the plan sponsor of such plan shall be treated for
                    purposes of this title as having made an election under
                    section 430(f) to reduce the prefunding balance or
                    funding standard carryover balance by such amount as is
                    necessary for such benefit limitation to not apply to
                    the plan for such plan year.
                        ``(B) Exception for insufficient funding balances.--
                    Subparagraph (A) shall not apply with respect to a
                    benefit limitation for any plan year if the application
                    of subparagraph (A) would not result in the benefit
                    limitation not applying for such plan year.
                        ``(C) Restrictions of certain rules to collectively
                    bargained plans.--With respect to any benefit limitation
                    under subsection (b), (c), or (e), subparagraph (A)
                    shall only apply in the case of a plan maintained
                    pursuant to 1 or more collective bargaining agreements
                    between employee representatives and 1 or more
                    employers.

        ``(g) New Plans.--Subsections (b), (c), and (e) shall not apply to a
    plan for the first 5 plan years of the plan. For purposes

    [[Page 120 STAT. 851]]

    of this subsection, the reference in this subsection to a plan shall
    include a reference to any predecessor plan.
        ``(h) Presumed <<NOTE: Certification.>> Underfunding for Purposes of
    Benefit Limitations.--
                ``(1) Presumption of continued underfunding.--In any case in
            which a benefit limitation under subsection (b), (c), (d), or
            (e) has been applied to a plan with respect to the plan year
            preceding the current plan year, the adjusted funding target
            attainment percentage of the plan for the current plan year
            shall be presumed to be equal to the adjusted funding target
            attainment percentage of the plan for the preceding plan year
            until the enrolled actuary of the plan certifies the actual
            adjusted funding target attainment percentage of the plan for
            the current plan year.
                ``(2) Presumption of underfunding after 10th month.--In any
            case in which no certification of the adjusted funding target
            attainment percentage for the current plan year is made with
            respect to the plan before the first day of the 10th month of
            such year, for purposes of subsections (b), (c), (d), and (e),
            such first day shall be deemed, for purposes of such subsection,
            to be the valuation date of the plan for the current plan year
            and the plan's adjusted funding target attainment percentage
            shall be conclusively presumed to be less than 60 percent as of
            such first day.
                ``(3) Presumption of underfunding after 4th month for nearly
            underfunded plans.--In any case in which--
                        ``(A) a benefit limitation under subsection (b),
                    (c), (d), or (e) did not apply to a plan with respect to
                    the plan year preceding the current plan year, but the
                    adjusted funding target attainment percentage of the
                    plan for such preceding plan year was not more than 10
                    percentage points greater than the percentage which
                    would have caused such subsection to apply to the plan
                    with respect to such preceding plan year, and
                        ``(B) as of the first day of the 4th month of the
                    current plan year, the enrolled actuary of the plan has
                    not certified the actual adjusted funding target
                    attainment percentage of the plan for the current plan
                    year,
            until the enrolled actuary so certifies, such first day shall be
            deemed, for purposes of such subsection, to be the valuation
            date of the plan for the current plan year and the adjusted
            funding target attainment percentage of the plan as of such
            first day shall, for purposes of such subsection, be presumed to
            be equal to 10 percentage points less than the adjusted funding
            target attainment percentage of the plan for such preceding plan
            year.

        ``(i) Treatment of Plan as of Close of Prohibited or Cessation
    Period.--For purposes of applying this title--
                ``(1) Operation of <<NOTE: Effective date.>> plan after
            period.--Unless the plan provides otherwise, payments and
            accruals will resume effective as of the day following the close
            of the period for which any limitation of payment or accrual of
            benefits under subsection (d) or (e) applies.
                ``(2) Treatment of affected benefits.--Nothing in this
            subsection shall be construed as affecting the plan's treatment
            of benefits which would have been paid or accrued but for this
            section.

    [[Page 120 STAT. 852]]

        ``(j) Terms Relating to Funding Target Attainment Percentage.--For
    purposes of this section--
                ``(1) In general.--The term `funding target attainment
            percentage' has the same meaning given such term by section
            430(d)(2).
                ``(2) Adjusted funding target attainment percentage.--The
            term `adjusted funding target attainment percentage' means the
            funding target attainment percentage which is determined under
            paragraph (1) by increasing each of the amounts under
            subparagraphs (A) and (B) of section 430(d)(2) by the aggregate
            amount of purchases of annuities for employees other than highly
            compensated employees (as defined in section 414(q)) which were
            made by the plan during the preceding 2 plan years.
                ``(3) Application to plans which are fully funded without
            regard to reductions for funding balances.--
                        ``(A) In general.--In the case of a plan for any
                    plan year, if the funding target attainment percentage
                    is 100 percent or more (determined without regard to
                    this paragraph and without regard to the reduction in
                    the value of assets under section 430(f)(4)(A)), the
                    funding target attainment percentage for purposes of
                    paragraph (1) shall be determined without regard to such
                    reduction.
                        ``(B) Transition <<NOTE: Applicability.>> rule.--
                    Subparagraph (A) shall be applied to plan years
                    beginning after 2007 and before 2011 by substituting for
                    `100 percent' the applicable percentage determined in
                    accordance with the following table:

              ``In the case of a pThe applicable............................
                beginning in calenpercentage is.............................
                        2008..........................................   92
                        2009..........................................   94
                        2010..........................................   96.

                        ``(C) Limitation.--Subparagraph (B) shall not apply
                    with respect to any plan year after 2008 unless the
                    funding target attainment percentage (determined without
                    regard to this paragraph) of the plan for each preceding
                    plan year after 2007 was not less than the applicable
                    percentage with respect to such preceding plan year
                    determined under subparagraph (B).

        ``(k) Special Rule for 2008.--For purposes of this section, in the
    case of plan years beginning in 2008, the funding target attainment
    percentage for the preceding plan year may be determined using such
    methods of estimation as the Secretary may provide.''.
                (2) Clerical amendment.--The table of parts for subchapter D
            of chapter 1 of the Internal Revenue Code of 1986 is
            amended <<NOTE: 26 USC prec. 401.>> by adding at the end the
            following new item:

      ``Part III--Rules Relating to Minimum Funding Standards and Benefit
                                 Limitations''.

        (b) Effective <<NOTE: 26 USC 436 note.>> Date.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2007.
                (2) Collective bargaining exception.--In the case of a plan
            maintained pursuant to 1 or more collective bargaining
            agreements between employee representatives and 1 or more
            employers ratified before January 1, 2008, the amendments

    [[Page 120 STAT. 853]]

            made by this section shall not apply to plan years beginning
            before the earlier of--
                        (A) the later of--
                              (i) the date on which the last collective
                          bargaining agreement relating to the plan
                          terminates (determined without regard to any
                          extension thereof agreed to after the date of the
                          enactment of this Act), or
                              (ii) the first day of the first plan year to
                          which the amendments made by this subsection would
                          (but for this subparagraph) apply, or
                        (B) January 1, 2010.
            For purposes of subparagraph (A)(i), any plan amendment made
            pursuant to a collective bargaining agreement relating to the
            plan which amends the plan solely to conform to any requirement
            added by this section shall not be treated as a termination of
            such collective bargaining agreement.

    SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.

        (a) Amendments Related to Qualification Requirements.--
                (1) Section 401(a)(29) of the Internal Revenue Code of 1986
            is <<NOTE: 26 USC 401.>> amended to read as follows:
                ``(29) Benefit limitations on plans in at-risk status.--In
            the case of a defined benefit plan (other than a multiemployer
            plan) to which the requirements of section 412 apply, the trust
            of which the plan is a part shall not constitute a qualified
            trust under this subsection unless the plan meets the
            requirements of section 436.''.
                (2) Section 401(a)(32) of such Code is amended--
                        (A) in subparagraph (A), by striking ``412(m)(5)''
                    each place it appears and inserting ``section
                    430(j)(4)'', and
                        (B) in subparagraph (C), by striking ``section
                    412(m)'' and inserting ``section 430(j)''.
                (3) Section 401(a)(33) of such Code is amended--
                        (A) in subparagraph (B)(i), by striking ``funded
                    current liability percentage (within the meaning of
                    section 412(l)(8))'' and inserting ``funding target
                    attainment percentage (as defined in section
                    430(d)(2))'',
                        (B) in subparagraph (B)(iii), by striking
                    ``subsection 412(c)(8)'' and inserting ``section
                    412(c)(2)'', and
                        (C) in subparagraph (D), by striking ``section
                    412(c)(11) (without regard to subparagraph (B)
                    thereof)'' and inserting ``section 412(b)(2) (without
                    regard to subparagraph (B) thereof)''.

        (b) Vesting Rules.--Section 411 of such Code is amended--
                (1) by striking ``section 412(c)(8)'' in subsection
            (a)(3)(C) and inserting ``section 412(c)(2)'',
                (2) in subsection (b)(1)(F)--
                        (A) by striking ``paragraphs (2) and (3) of section
                    412(i)'' in clause (ii) and inserting ``subparagraphs
                    (B) and (C) of section 412(e)(3)'', and
                        (B) by striking ``paragraphs (4), (5), and (6) of
                    section 412(i)'' and inserting ``subparagraphs (D), (E),
                    and (F) of section 412(e)(3)'', and
                (3) by striking ``section 412(c)(8)'' in subsection
            (d)(6)(A) and inserting ``section 412(e)(2)''.

        (c) Mergers and Consolidations of Plans.--Subclause (I) of section
    414(l)(2)(B)(i) of such Code is amended to read as follows:

    [[Page 120 STAT. 854]]

                                        ``(I) the amount determined under
                                    section 431(c)(6)(A)(i) in the case of a
                                    multiemployer plan (and the sum of the
                                    funding shortfall and target normal cost
                                    determined under section 430 in the case
                                    of any other plan), over''.

        (d) Transfer of Excess Pension Assets to Retiree Health Accounts.--
                (1) Section 420(e)(2) of such <<NOTE: 26 USC 420.>> Code is
            amended to read as follows:
                ``(2) Excess pension assets.--The term `excess pension
            assets' means the excess (if any) of--
                        ``(A) the lesser of--
                              ``(i) the fair market value of the plan's
                          assets (reduced by the prefunding balance and
                          funding standard carryover balance determined
                          under section 430(f)), or
                              ``(ii) the value of plan assets as determined
                          under section 430(g)(3) after reduction under
                          section 430(f), over
                        ``(B) 125 percent of the sum of the funding
                    shortfall and the target normal cost determined under
                    section 430 for such plan year.''.
                (2) Section 420(e)(4) of such Code is amended to read as
            follows:
                ``(4) Coordination with section 430.--In the case of a
            qualified transfer, any assets so transferred shall not, for
            purposes of this section and section 430, be treated as assets
            in the plan.''.

        (e) Excise Taxes.--
                (1) In general.--Subsections (a) and (b) of section 4971 of
            such Code are amended to read as follows:

        ``(a) Initial Tax.--If at any time during any taxable year an
    employer maintains a plan to which section 412 applies, there is hereby
    imposed for the taxable year a tax equal to--
                ``(1) in the case of a single-employer plan, 10 percent of
            the aggregate unpaid minimum required contributions for all plan
            years remaining unpaid as of the end of any plan year ending
            with or within the taxable year, and
                ``(2) in the case of a multiemployer plan, 5 percent of the
            accumulated funding deficiency determined under section 431 as
            of the end of any plan year ending with or within the taxable
            year.

        ``(b) Additional Tax.--If--
                ``(1) a tax is imposed under subsection (a)(1) on any unpaid
            required minimum contribution and such amount remains unpaid as
            of the close of the taxable period, or
                ``(2) a tax is imposed under subsection (a)(2) on any
            accumulated funding deficiency and the accumulated funding
            deficiency is not corrected within the taxable period,

    there is hereby imposed a tax equal to 100 percent of the unpaid minimum
    required contribution or accumulated funding deficiency, whichever is
    applicable, to the extent not so paid or corrected.''.
                (2) Section 4971(c) of such Code is amended--
                        (A) by striking ``the last two sentences of section
                    412(a)'' in paragraph (1) and inserting ``section 431'',
                    and
                        (B) by adding at the end the following new
                    paragraph:
                ``(4) Unpaid minimum required contribution.--

    [[Page 120 STAT. 855]]

                        ``(A) In general.--The term `unpaid minimum required
                    contribution' means, with respect to any plan year, any
                    minimum required contribution under section 430 for the
                    plan year which is not paid on or before the due date
                    (as determined under section 430(j)(1)) for the plan
                    year.
                        ``(B) Ordering rule.--Any payment to or under a plan
                    for any plan year shall be allocated first to unpaid
                    minimum required contributions for all preceding plan
                    years on a first-in, first-out basis and then to the
                    minimum required contribution under section 430 for the
                    plan year.''.
                (3) Section 4971(e)(1) of such <<NOTE: 26 USC 4971.>> Code
            is amended by striking ``section 412(b)(3)(A)'' and inserting
            ``section 412(a)(1)(A)''.
                (4) Section 4971(f)(1) of such Code is amended--
                        (A) by striking ``section 412(m)(5)'' and inserting
                    ``section 430(j)(4)'', and
                        (B) by striking ``section 412(m)'' and inserting
                    ``section 430(j)''.
                (5) Section 4972(c)(7) of such Code is amended by striking
            ``except to the extent that such contributions exceed the full-
            funding limitation (as defined in section 412(c)(7), determined
            without regard to subparagraph (A)(i)(I) thereof)'' and
            inserting ``except, in the case of a multiemployer plan, to the
            extent that such contributions exceed the full-funding
            limitation (as defined in section 431(c)(6))''.

        (f) Reporting Requirements.--Section 6059(b) of such Code is
    amended--
                (1) by striking ``the accumulated funding deficiency (as
            defined in section 412(a))'' in paragraph (2) and inserting
            ``the minimum required contribution determined under section
            430, or the accumulated funding deficiency determined under
            section 431,'', and
                (2) by striking paragraph (3)(B) and inserting:
                        ``(B) the requirements for reasonable actuarial
                    assumptions under section 430(h)(1) or 431(c)(3),
                    whichever are applicable, have been complied with.''.

    SEC. 115. <<NOTE: 26 USC 430 note.>> MODIFICATION OF TRANSITION RULE TO
                PENSION FUNDING REQUIREMENTS.

        (a) In General.--In the <<NOTE: Applicability. Effective
    date.>> case of a plan that--
                (1) was not required to pay a variable rate premium for the
            plan year beginning in 1996,
                (2) has not, in any plan year beginning after 1995, merged
            with another plan (other than a plan sponsored by an employer
            that was in 1996 within the controlled group of the plan
            sponsor), and
                (3) is sponsored by a company that is engaged primarily in
            the interurban or interstate passenger bus service,

    the rules described in subsection (b) shall apply for any plan year
    beginning after December 31, 2007.
        (b) Modified Rules.--The rules described in this subsection are as
    follows:
                (1) For purposes of section 430(j)(3) of the Internal
            Revenue Code of 1986 and section 303(j)(3) of the Employee
            Retirement Income Security Act of 1974, the plan shall be
            treated as not having a funding shortfall for any plan year.
                (2) For purposes of--

    [[Page 120 STAT. 856]]

                        (A) determining unfunded vested benefits under
                    section 4006(a)(3)(E)(iii) of such Act, and
                        (B) determining any present value or making any
                    computation under section 412 of such Code or section
                    302 of such Act,
            the mortality table shall be the mortality table used by the
            plan.
                (3) Section 430(c)(5)(B) of such Code and section
            303(c)(5)(B) of such Act (relating to phase-in of funding target
            for exemption from new shortfall amortization base) shall each
            be applied by substituting ``2012'' for ``2011'' therein and by
            substituting for the table therein the following:

                                                                     The
             ``In the case of a plan year        beginning in    applicable
                          calendar year:                         percentage
                                                                    is:

                2008..........................................    90 percent
                2009..........................................    92 percent
                2010..........................................    94 percent
                2011..........................................   96 percent.

        (c) Definitions.--Any term used in this section which is also used
    in section 430 of such Code or section 303 of such Act shall have the
    meaning provided such term in such section. If the same term has a
    different meaning in such Code and such Act, such term shall, for
    purposes of this section, have the meaning provided by such Code when
    applied with respect to such Code and the meaning provided by such Act
    when applied with respect to such Act.
        (d) Special Rule for 2006 and 2007.--
                (1) In general.--Section 769(c)(3) of the Retirement
            Protection Act of 1994, as added by section 201 of the Pension
            Funding Equity Act of 2004, is amended <<NOTE: 26 USC 412
            note.>> by striking ``and 2005'' and inserting ``, 2005, 2006,
            and 2007''.
                (2) Effective date.--The <<NOTE: 26 USC 412
            note.>> amendment made by paragraph (1) shall apply to plan
            years beginning after December 31, 2005.

        (e) Conforming Amendment.--
                (1) Section 769 of the Retirement Protection Act of 1994 is
            amended by striking subsection (c).
                (2) The <<NOTE: Effective date. 26 USC 412 note.>> amendment
            made by paragraph (1) shall take effect on December 31, 2007,
            and shall apply to plan years beginning after such date.

    SEC. 116. RESTRICTIONS ON FUNDING OF NONQUALIFIED DEFERRED COMPENSATION
                PLANS BY EMPLOYERS MAINTAINING UNDERFUNDED OR TERMINATED
                SINGLE-EMPLOYER PLANS.

        (a) Amendments of Internal Revenue Code.--Subsection (b) of section
    409A of the Internal Revenue Code <<NOTE: 26 USC 409A.>> of 1986
    (providing rules relating to funding) is amended by redesignating
    paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by
    inserting after paragraph (2) the following new paragraph:
                ``(3) Treatment of employer's defined benefit plan during
            restricted period.--
                        ``(A) In general.--If--
                              ``(i) during any restricted period with
                          respect to a single-employer defined benefit plan,
                          assets are set

    [[Page 120 STAT. 857]]

                          aside or reserved (directly or indirectly) in a
                          trust (or other arrangement as determined by the
                          Secretary) or transferred to such a trust or other
                          arrangement for purposes of paying deferred
                          compensation of an applicable covered employee
                          under a nonqualified deferred compensation plan of
                          the plan sponsor or member of a controlled group
                          which includes the plan sponsor, or
                              ``(ii) a nonqualified deferred compensation
                          plan of the plan sponsor or member of a controlled
                          group which includes the plan sponsor provides
                          that assets will become restricted to the
                          provision of benefits under the plan in connection
                          with such restricted period (or other similar
                          financial measure determined by the Secretary)
                          with respect to the defined benefit plan, or
                          assets are so restricted,
                    such assets shall, for purposes of section 83, be
                    treated as property transferred in connection with the
                    performance of services whether or not such assets are
                    available to satisfy claims of general creditors. Clause
                    (i) shall not apply with respect to any assets which are
                    so set aside before the restricted period with respect
                    to the defined benefit plan.
                        ``(B) Restricted period.--For purposes of this
                    section, the term `restricted period' means, with
                    respect to any plan described in subparagraph (A)--
                              ``(i) any period during which the plan is in
                          at-risk status (as defined in section 430(i));
                              ``(ii) any period the plan sponsor is a debtor
                          in a case under title 11, United States Code, or
                          similar Federal or State law, and
                              ``(iii) the 12-month period beginning on the
                          date which is 6 months before the termination date
                          of the plan if, as of the termination date, the
                          plan is not sufficient for benefit liabilities
                          (within the meaning of section 4041 of the
                          Employee Retirement Income Security Act of 1974).
                        ``(C) Special rule for payment of taxes on deferred
                    compensation included in income.--If an employer
                    provides directly or indirectly for the payment of any
                    Federal, State, or local income taxes with respect to
                    any compensation required to be included in gross income
                    by reason of this paragraph--
                              ``(i) interest shall be imposed under
                          subsection (a)(1)(B)(i)(I) on the amount of such
                          payment in the same manner as if such payment was
                          part of the deferred compensation to which it
                          relates,
                              ``(ii) such payment shall be taken into
                          account in determining the amount of the
                          additional tax under subsection (a)(1)(B)(i)(II)
                          in the same manner as if such payment was part of
                          the deferred compensation to which it relates, and
                              ``(iii) no deduction shall be allowed under
                          this title with respect to such payment.
                        ``(D) Other definitions.--For purposes of this sec-
                    tion--

    [[Page 120 STAT. 858]]

                              ``(i) Applicable covered employee.--The term
                          `applicable covered employee' means any--
                                        ``(I) covered employee of a plan
                                    sponsor,
                                        ``(II) covered employee of a member
                                    of a controlled group which includes the
                                    plan sponsor, and
                                        ``(III) former employee who was a
                                    covered employee at the time of
                                    termination of employment with the plan
                                    sponsor or a member of a controlled
                                    group which includes the plan sponsor.
                              ``(ii) Covered employee.--The term `covered
                          employee' means an individual described in section
                          162(m)(3) or an individual subject to the
                          requirements of section 16(a) of the Securities
                          Exchange Act of 1934.''.

        (b) Conforming Amendments.--Paragraphs (4) and (5) of section
    409A(b) of such Code, as redesignated by subsection (a) of this
    subsection, are each amended by striking ``paragraph (1) or (2)'' each
    place it appears and inserting ``paragraph (1), (2), or (3)''.
        (c) Effective Date.--The <<NOTE: 26 USC 409A note.>> amendments made
    by this section shall apply to transfers or other reservation of assets
    after the date of the enactment of this Act.

      TITLE II--FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND
                               RELATED PROVISIONS

      Subtitle A--Amendments to Employee Retirement Income Security Act of
                                      1974

    SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS.

        (a) In General.--Part 3 of subtitle B of title I of the Employee
    Retirement Income Security Act of 1974 (as amended by this Act) is
    amended by inserting after section 303 the following new section:

               ``MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER PLANS

        ``Sec. 304. (a) In General.--For <<NOTE: 29 USC 1084.>> purposes of
    section 302, the accumulated funding deficiency of a multiemployer plan
    for any plan year is--
                ``(1) except as provided in paragraph (2), the amount,
            determined as of the end of the plan year, equal to the excess
            (if any) of the total charges to the funding standard account of
            the plan for all plan years (beginning with the first plan year
            for which this part applies to the plan) over the total credits
            to such account for such years, and
                ``(2) if the multiemployer plan is in reorganization for any
            plan year, the accumulated funding deficiency of the plan
            determined under section 4243.

        ``(b) Funding Standard Account.--
                ``(1) Account required.--Each multiemployer plan to which
            this part applies shall establish and maintain a funding

    [[Page 120 STAT. 859]]

            standard account. Such account shall be credited and charged
            solely as provided in this section.
                ``(2) Charges to account.--For a plan year, the funding
            standard account shall be charged with the sum of--
                        ``(A) the normal cost of the plan for the plan year,
                        ``(B) the amounts necessary to amortize in equal
                    annual installments (until fully amortized)--
                              ``(i) in the case of a plan which comes into
                          existence on or after January 1, 2008, the
                          unfunded past service liability under the plan on
                          the first day of the first plan year to which this
                          section applies, over a period of 15 plan years,
                              ``(ii) separately, with respect to each plan
                          year, the net increase (if any) in unfunded past
                          service liability under the plan arising from plan
                          amendments adopted in such year, over a period of
                          15 plan years,
                              ``(iii) separately, with respect to each plan
                          year, the net experience loss (if any) under the
                          plan, over a period of 15 plan years, and
                              ``(iv) separately, with respect to each plan
                          year, the net loss (if any) resulting from changes
                          in actuarial assumptions used under the plan, over
                          a period of 15 plan years,
                        ``(C) the amount necessary to amortize each waived
                    funding deficiency (within the meaning of section
                    302(c)(3)) for each prior plan year in equal annual
                    installments (until fully amortized) over a period of 15
                    plan years,
                        ``(D) the amount necessary to amortize in equal
                    annual installments (until fully amortized) over a
                    period of 5 plan years any amount credited to the
                    funding standard account under section 302(b)(3)(D) (as
                    in effect on the day before the date of the enactment of
                    the Pension Protection Act of 2006), and
                        ``(E) the amount necessary to amortize in equal
                    annual installments (until fully amortized) over a
                    period of 20 years the contributions which would be
                    required to be made under the plan but for the
                    provisions of section 302(c)(7)(A)(i)(I) (as in effect
                    on the day before the date of the enactment of the
                    Pension Protection Act of 2006).
                ``(3) Credits to account.--For a plan year, the funding
            standard account shall be credited with the sum of--
                        ``(A) the amount considered contributed by the
                    employer to or under the plan for the plan year,
                        ``(B) the amount necessary to amortize in equal
                    annual installments (until fully amortized)--
                              ``(i) separately, with respect to each plan
                          year, the net decrease (if any) in unfunded past
                          service liability under the plan arising from plan
                          amendments adopted in such year, over a period of
                          15 plan years,
                              ``(ii) separately, with respect to each plan
                          year, the net experience gain (if any) under the
                          plan, over a period of 15 plan years, and
                              ``(iii) separately, with respect to each plan
                          year, the net gain (if any) resulting from changes
                          in actuarial assumptions used under the plan, over
                          a period of 15 plan years,

    [[Page 120 STAT. 860]]

                        ``(C) the amount of the waived funding deficiency
                    (within the meaning of section 302(c)(3)) for the plan
                    year, and
                        ``(D) in the case of a plan year for which the
                    accumulated funding deficiency is determined under the
                    funding standard account if such plan year follows a
                    plan year for which such deficiency was determined under
                    the alternative minimum funding standard under section
                    305 (as in effect on the day before the date of the
                    enactment of the Pension Protection Act of 2006), the
                    excess (if any) of any debit balance in the funding
                    standard account (determined without regard to this
                    subparagraph) over any debit balance in the alternative
                    minimum funding standard account.
                ``(4) Special rule for amounts first amortized in plan years
            before 2008.--In the case of any amount amortized under section
            302(b) (as in effect on the day before the date of the enactment
            of the Pension Protection Act of 2006) over any period beginning
            with a plan year beginning before 2008, in lieu of the
            amortization described in paragraphs (2)(B) and (3)(B), such
            amount shall continue to be amortized under such section as so
            in effect.
                ``(5) Combining and offsetting amounts to be amortized.--
            Under regulations <<NOTE: Regulations.>> prescribed by the
            Secretary of the Treasury, amounts required to be amortized
            under paragraph (2) or paragraph (3), as the case may be--
                        ``(A) may be combined into one amount under such
                    paragraph to be amortized over a period determined on
                    the basis of the remaining amortization period for all
                    items entering into such combined amount, and
                        ``(B) may be offset against amounts required to be
                    amortized under the other such paragraph, with the
                    resulting amount to be amortized over a period
                    determined on the basis of the remaining amortization
                    periods for all items entering into whichever of the two
                    amounts being offset is the greater.
                ``(6) Interest.--The <<NOTE: Regulations.>> funding standard
            account (and items therein) shall be charged or credited (as
            determined under regulations prescribed by the Secretary of the
            Treasury) with interest at the appropriate rate consistent with
            the rate or rates of interest used under the plan to determine
            costs.
                ``(7) Special rules relating to charges and credits to
            funding standard account.--For purposes of this part--
                        ``(A) Withdrawal liability.--Any amount received by
                    a multiemployer plan in payment of all or part of an
                    employer's withdrawal liability under part 1 of subtitle
                    E of title IV shall be considered an amount contributed
                    by the employer to or under the plan. The Secretary of
                    the Treasury may prescribe by regulation additional
                    charges and credits to a multiemployer plan's funding
                    standard account to the extent necessary to prevent
                    withdrawal liability payments from being unduly
                    reflected as advance funding for plan liabilities.
                        ``(B) Adjustments when a multiemployer plan leaves
                    reorganization.--If a multiemployer plan is not in
                    reorganization in the plan year but was in
                    reorganization in the immediately preceding plan year,
                    any balance in

    [[Page 120 STAT. 861]]

                    the funding standard account at the close of such
                    immediately preceding plan year--
                              ``(i) shall be eliminated by an offsetting
                          credit or charge (as the case may be), but
                              ``(ii) shall be taken into account in
                          subsequent plan years by being amortized in equal
                          annual installments (until fully amortized) over
                          30 plan years.
                    The preceding sentence shall not apply to the extent of
                    any accumulated funding deficiency under section 4243(a)
                    as of the end of the last plan year that the plan was in
                    reorganization.
                        ``(C) Plan payments to supplemental program or
                    withdrawal liability payment fund.--Any amount paid by a
                    plan during a plan year to the Pension Benefit Guaranty
                    Corporation pursuant to section 4222 of this Act or to a
                    fund exempt under section 501(c)(22) of the Internal
                    Revenue Code of 1986 pursuant to section 4223 of this
                    Act shall reduce the amount of contributions considered
                    received by the plan for the plan year.
                        ``(D) Interim <<NOTE: Regulations.>> withdrawal
                    liability payments.--Any amount paid by an employer
                    pending a final determination of the employer's
                    withdrawal liability under part 1 of subtitle E of title
                    IV and subsequently refunded to the employer by the plan
                    shall be charged to the funding standard account in
                    accordance with regulations prescribed by the Secretary
                    of the Treasury.
                        ``(E) Election for deferral of charge for portion of
                    net experience loss.--If an election is in effect under
                    section 302(b)(7)(F) (as in effect on the day before the
                    date of the enactment of the Pension Protection Act of
                    2006) for any plan year, the funding standard account
                    shall be charged in the plan year to which the portion
                    of the net experience loss deferred by such election was
                    deferred with the amount so deferred (and paragraph
                    (2)(B)(iii) shall not apply to the amount so charged).
                        ``(F) Financial assistance.--Any amount of any
                    financial assistance from the Pension Benefit Guaranty
                    Corporation to any plan, and any repayment of such
                    amount, shall be taken into account under this section
                    and section 302 in such manner as is determined by the
                    Secretary of the Treasury.
                        ``(G) Short-term benefits.--To the extent that any
                    plan amendment increases the unfunded past service
                    liability under the plan by reason of an increase in
                    benefits which are not payable as a life annuity but are
                    payable under the terms of the plan for a period that
                    does not exceed 14 years from the effective date of the
                    amendment, paragraph (2)(B)(ii) shall be applied
                    separately with respect to such increase in unfunded
                    past service liability by substituting the number of
                    years of the period during which such benefits are
                    payable for `15'.

        ``(c) Additional Rules.--
                ``(1) Determinations to be made under funding method.--For
            purposes of this part, normal costs, accrued liability, past
            service liabilities, and experience gains and losses shall be
            determined under the funding method used to determine costs
            under the plan.

    [[Page 120 STAT. 862]]

                ``(2) Valuation of assets.--
                        ``(A) In general.--
                    For <<NOTE: Regulations.>> purposes of this part, the
                    value of the plan's assets shall be determined on the
                    basis of any reasonable actuarial method of valuation
                    which takes into account fair market value and which is
                    permitted under regulations prescribed by the Secretary
                    of the Treasury.
                        ``(B) Election with respect to bonds.--The value of
                    a bond or other evidence of indebtedness which is not in
                    default as to principal or interest may, at the election
                    of the plan administrator, be determined on an amortized
                    basis running from initial cost at purchase to par value
                    at maturity or earliest call
                    date. <<NOTE: Applicability. Regulations.>> Any election
                    under this subparagraph shall be made at such time and
                    in such manner as the Secretary of the Treasury shall by
                    regulations provide, shall apply to all such evidences
                    of indebtedness, and may be revoked only with the
                    consent of such Secretary.
                ``(3) Actuarial assumptions must be reasonable.--For
            purposes of this section, all costs, liabilities, rates of
            interest, and other factors under the plan shall be determined
            on the basis of actuarial assumptions and methods--
                        ``(A) each of which is reasonable (taking into
                    account the experience of the plan and reasonable
                    expectations), and
                        ``(B) which, in combination, offer the actuary's
                    best estimate of anticipated experience under the plan.
                ``(4) Treatment of certain changes as experience gain or
            loss.--For purposes of this section, if--
                        ``(A) a change in benefits under the Social Security
                    Act or in other retirement benefits created under
                    Federal or State law, or
                        ``(B) a change in the definition of the term `wages'
                    under section 3121 of the Internal Revenue Code of 1986,
                    or a change in the amount of such wages taken into
                    account under regulations prescribed for purposes of
                    section 401(a)(5) of such Code,
            results in an increase or decrease in accrued liability under a
            plan, such increase or decrease shall be treated as an
            experience loss or gain.
                ``(5) Full funding.--If, as of the close of a plan year, a
            plan would (without regard to this paragraph) have an
            accumulated funding deficiency in excess of the full funding
            limitation--
                        ``(A) the funding standard account shall be credited
                    with the amount of such excess, and
                        ``(B) all amounts described in subparagraphs (B),
                    (C), and (D) of subsection (b) (2) and subparagraph (B)
                    of subsection (b)(3) which are required to be amortized
                    shall be considered fully amortized for purposes of such
                    subparagraphs.
                ``(6) Full-funding limitation.--
                        ``(A) In general.--For purposes of paragraph (5),
                    the term `full-funding limitation' means the excess (if
                    any) of--
                              ``(i) the accrued liability (including normal
                          cost) under the plan (determined under the entry
                          age normal funding method if such accrued
                          liability cannot be

    [[Page 120 STAT. 863]]

                          directly calculated under the funding method used
                          for the plan), over
                              ``(ii) the lesser of--
                                        ``(I) the fair market value of the
                                    plan's assets, or
                                        ``(II) the value of such assets
                                    determined under paragraph (2).
                        ``(B) Minimum amount.--
                              ``(i) In general.--In no event shall the full-
                          funding limitation determined under subparagraph
                          (A) be less than the excess (if any) of--
                                        ``(I) 90 percent of the current
                                    liability of the plan (including the
                                    expected increase in current liability
                                    due to benefits accruing during the plan
                                    year), over
                                        ``(II) the value of the plan's
                                    assets determined under paragraph (2).
                              ``(ii) Assets.--For purposes of clause (i),
                          assets shall not be reduced by any credit balance
                          in the funding standard account.
                        ``(C) Full funding limitation.--For purposes of this
                    paragraph, unless otherwise provided by the plan, the
                    accrued liability under a multiemployer plan shall not
                    include benefits which are not nonforfeitable under the
                    plan after the termination of the plan (taking into
                    consideration section 411(d)(3) of the Internal Revenue
                    Code of 1986).
                        ``(D) Current liability.--For purposes of this para-
                    graph--
                              ``(i) In general.--The term `current
                          liability' means all liabilities to employees and
                          their beneficiaries under the plan.
                              ``(ii) Treatment of unpredictable contingent
                          event benefits.--For purposes of clause (i), any
                          benefit contingent on an event other than--
                                        ``(I) age, service, compensation,
                                    death, or disability, or
                                        ``(II) an event which is reasonably
                                    and reliably predictable (as determined
                                    by the Secretary of the Treasury),
                          shall not be taken into account until the event on
                          which the benefit is contingent occurs.
                              ``(iii) Interest rate used.--The rate of
                          interest used to determine current liability under
                          this paragraph shall be the rate of interest
                          determined under subparagraph (E).
                              ``(iv) Mortality tables.--
                                        ``(I) Commissioners' standard
                                    table.--In the case of plan years
                                    beginning before the first plan year to
                                    which the first tables prescribed under
                                    subclause (II) apply, the mortality
                                    table used in determining current
                                    liability under this paragraph shall be
                                    the table prescribed by the Secretary of
                                    the Treasury which is based on the
                                    prevailing commissioners' standard table
                                    (described in section 807(d)(5)(A) of
                                    the Internal Revenue Code of 1986)

    [[Page 120 STAT. 864]]

                                    used to determine reserves for group
                                    annuity contracts issued on January 1,
                                    1993.
                                        ``(II) Secretarial authority.--The
                                    Secretary of the Treasury may by
                                    regulation prescribe for plan years
                                    beginning after December 31, 1999,
                                    mortality tables to be used in
                                    determining current liability under this
                                    subsection. Such tables shall be based
                                    upon the actual experience of pension
                                    plans and projected trends in such
                                    experience. In prescribing such tables,
                                    such Secretary shall take into account
                                    results of available independent studies
                                    of mortality of individuals covered by
                                    pension plans.
                              ``(v) Separate mortality tables for the
                          disabled.--Notwithstanding clause (iv)--
                                        ``(I) In general.--The Secretary of
                                    the Treasury shall establish mortality
                                    tables which may be used (in lieu of the
                                    tables under clause (iv)) to determine
                                    current liability under this subsection
                                    for individuals who are entitled to
                                    benefits under the plan on account of
                                    disability. Such Secretary shall
                                    establish separate tables for
                                    individuals whose disabilities occur in
                                    plan years beginning before January 1,
                                    1995, and for individuals whose
                                    disabilities occur in plan years
                                    beginning on or after such date.
                                        ``(II)
                                    Special <<NOTE: Applicability.>> rule
                                    for disabilities occurring after 1994.--
                                    In the case of disabilities occurring in
                                    plan years beginning after December 31,
                                    1994, the tables under subclause (I)
                                    shall apply only with respect to
                                    individuals described in such subclause
                                    who are disabled within the meaning of
                                    title II of the Social Security Act and
                                    the regulations thereunder.
                              ``(vi) Periodic review.--
                          The <<NOTE: Regulations.>> Secretary of the
                          Treasury shall periodically (at least every 5
                          years) review any tables in effect under this
                          subparagraph and shall, to the extent such
                          Secretary determines necessary, by regulation
                          update the tables to reflect the actual experience
                          of pension plans and projected trends in such
                          experience.
                        ``(E) Required change of interest rate.--For
                    purposes of determining a plan's current liability for
                    purposes of this paragraph--
                              ``(i) In general.--If any rate of interest
                          used under the plan under subsection (b)(6) to
                          determine cost is not within the permissible
                          range, the plan shall establish a new rate of
                          interest within the permissible range.
                              ``(ii) Permissible range.--For purposes of
                          this subparagraph--
                                        ``(I) In general.--Except as
                                    provided in subclause (II), the term
                                    `permissible range' means a rate of
                                    interest which is not more than 5
                                    percent above, and not more than 10
                                    percent below, the weighted average of
                                    the rates of interest on 30-year
                                    Treasury securities during the 4-year
                                    period

    [[Page 120 STAT. 865]]

                                    ending on the last day before the
                                    beginning of the plan year.
                                        ``(II) Secretarial authority.--If
                                    the Secretary of the Treasury finds that
                                    the lowest rate of interest permissible
                                    under subclause (I) is unreasonably
                                    high, such Secretary may prescribe a
                                    lower rate of interest, except that such
                                    rate may not be less than 80 percent of
                                    the average rate determined under such
                                    subclause.
                              ``(iii) Assumptions.--Notwithstanding
                          paragraph (3)(A), the interest rate used under the
                          plan shall be--
                                        ``(I) determined without taking into
                                    account the experience of the plan and
                                    reasonable expectations, but
                                        ``(II) consistent with the
                                    assumptions which reflect the purchase
                                    rates which would be used by insurance
                                    companies to satisfy the liabilities
                                    under the plan.
                ``(7) Annual valuation.--
                        ``(A) In general.--
                    For <<NOTE: Regulations.>> purposes of this section, a
                    determination of experience gains and losses and a
                    valuation of the plan's liability shall be made not less
                    frequently than once every year, except that such
                    determination shall be made more frequently to the
                    extent required in particular cases under regulations
                    prescribed by the Secretary of the Treasury.
                        ``(B) Valuation date.--
                              ``(i) Current year.--Except
                          as <<NOTE: Deadline.>> provided in clause (ii),
                          the valuation referred to in subparagraph (A)
                          shall be made as of a date within the plan year to
                          which the valuation refers or within one month
                          prior to the beginning of such year.
                              ``(ii) Use of prior year valuation.--The
                          valuation referred to in subparagraph (A) may be
                          made as of a date within the plan year prior to
                          the year to which the valuation refers if, as of
                          such date, the value of the assets of the plan are
                          not less than 100 percent of the plan's current
                          liability (as defined in paragraph (6)(D) without
                          regard to clause (iv) thereof).
                              ``(iii) Adjustments.--Information under clause
                          (ii) shall, in accordance with regulations, be
                          actuarially adjusted to reflect significant
                          differences in participants.
                              ``(iv) Limitation.--A change in funding method
                          to use a prior year valuation, as provided in
                          clause (ii), may not be made unless as of the
                          valuation date within the prior plan year, the
                          value of the assets of the plan are not less than
                          125 percent of the plan's current liability (as
                          defined in paragraph (6)(D) without regard to
                          clause (iv) thereof).
                ``(8) Time when certain contributions deemed made.--For
            purposes of this section, any contributions for a plan year made
            by an employer after the last day of such plan year, but not
            later than two and one-half months after such day, shall be
            deemed to have been made on such last day. For purposes of this
            subparagraph, such two and one-half month

    [[Page 120 STAT. 866]]

            period may be <<NOTE: Regulations.>> extended for not more than
            six months under regulations prescribed by the Secretary of the
            Treasury.

        ``(d) Extension of Amortization Periods for Multiemployer Plans.--
                ``(1) Automatic extension upon application by certain
            plans.--
                        ``(A) In general.--If the plan sponsor of a
                    multiemployer plan--
                              ``(i) submits to the Secretary of the Treasury
                          an application for an extension of the period of
                          years required to amortize any unfunded liability
                          described in any clause of subsection (b)(2)(B) or
                          described in subsection (b)(4), and
                              ``(ii) includes with the application a
                          certification by the plan's actuary described in
                          subparagraph (B),
                    the Secretary of the Treasury shall extend the
                    amortization period for the period of time (not in
                    excess of 5 years) specified in the application. Such
                    extension shall be in addition to any extension under
                    paragraph (2).
                        ``(B) Criteria.--A certification with respect to a
                    multiemployer plan is described in this subparagraph if
                    the plan's actuary certifies that, based on reasonable
                    assump- tions--
                              ``(i) absent the extension under subparagraph
                          (A), the plan would have an accumulated funding
                          deficiency in the current plan year or any of the
                          9 succeeding plan years,
                              ``(ii) the plan sponsor has adopted a plan to
                          improve the plan's funding status,
                              ``(iii) the plan is projected to have
                          sufficient assets to timely pay expected benefits
                          and anticipated expenditures over the amortization
                          period as extended, and
                              ``(iv) the
                          notice <<NOTE: Notification.>> required under
                          paragraph (3)(A) has been provided.
                        ``(C) Termination.--The preceding provisions of this
                    paragraph shall not apply with respect to any
                    application submitted after December 31, 2014.
                ``(2) Alternative extension.--
                        ``(A) In general.--If the plan sponsor of a
                    multiemployer plan submits to the Secretary of the
                    Treasury an application for an extension of the period
                    of years required to amortize any unfunded liability
                    described in any clause of subsection (b)(2)(B) or
                    described in subsection (b)(4), the Secretary of the
                    Treasury may extend the amortization period for a period
                    of time (not in excess of 10 years reduced by the number
                    of years of any extension under paragraph (1) with
                    respect to such unfunded liability) if the Secretary of
                    the Treasury makes the determination described in
                    subparagraph (B). Such extension shall be in addition to
                    any extension under paragraph (1).
                        ``(B) Determination.--The Secretary of the Treasury
                    may grant an extension under subparagraph (A) if such
                    Secretary determines that--
                              ``(i) such extension would carry out the
                          purposes of this Act and would provide adequate
                          protection for

    [[Page 120 STAT. 867]]

                          participants under the plan and their
                          beneficiaries, and
                              ``(ii) the failure to permit such extension
                          would--
                                        ``(I) result in a substantial risk
                                    to the voluntary continuation of the
                                    plan, or a substantial curtailment of
                                    pension benefit levels or employee
                                    compensation, and
                                        ``(II) be adverse to the interests
                                    of plan participants in the aggregate.
                        ``(C) Action
                    by <<NOTE: Deadline. Notification.>> secretary of the
                    treasury.--The Secretary of the Treasury shall act upon
                    any application for an extension under this paragraph
                    within 180 days of the submission of such application.
                    If such Secretary rejects the application for an
                    extension under this paragraph, such Secretary shall
                    provide notice to the plan detailing the specific
                    reasons for the rejection, including references to the
                    criteria set forth above.
                ``(3) Advance notice.--
                        ``(A) In general.--The Secretary of the Treasury
                    shall, before granting an extension under this
                    subsection, require each applicant to provide evidence
                    satisfactory to such Secretary that the applicant has
                    provided notice of the filing of the application for
                    such extension to each affected party (as defined in
                    section 4001(a)(21)) with respect to the affected plan.
                    Such notice shall include a description of the extent to
                    which the plan is funded for benefits which are
                    guaranteed under title IV and for benefit liabilities.
                        ``(B) Consideration of relevant information.--The
                    Secretary of the Treasury shall consider any relevant
                    information provided by a person to whom notice was
                    given under paragraph (1).''.

        (b) Shortfall <<NOTE: 29 USC 1084 note.>> Funding Method.--
                (1) In general.--A multiemployer plan meeting the criteria
            of paragraph (2) may adopt, use, or cease using, the shortfall
            funding method and such adoption, use, or cessation of use of
            such method, shall be deemed approved by the Secretary of the
            Treasury under section 302(d)(1) of the Employee Retirement
            Income Security Act of 1974 and section 412(d)(1) of the
            Internal Revenue Code of 1986.
                (2) Criteria.--A multiemployer pension plan meets the
            criteria of this clause if--
                        (A) the plan has not used the shortfall funding
                    method during the 5-year period ending on the day before
                    the date the plan is to use the method under paragraph
                    (1); and
                        (B) the plan is not operating under an amortization
                    period extension under section 304(d) of such Act and
                    did not operate under such an extension during such 5-
                    year period.
                (3) Shortfall funding method defined.--For purposes of this
            subsection, the term ``shortfall funding method'' means the
            shortfall funding method described in Treasury Regulations
            section 1.412(c)(1)-2 (26 CFR 1.412(c)(1)-2).
                (4) Benefit restrictions to apply.--The benefit restrictions
            under section 302(c)(7) of such Act and section 412(c)(7) of
            such Code shall apply during any period a multiemployer

    [[Page 120 STAT. 868]]

            plan is on the shortfall funding method pursuant to this
            subsection.
                (5) Use of shortfall method not to preclude other options.--
            Nothing in this subsection shall be construed to affect a
            multiemployer plan's ability to adopt the shortfall funding
            method with the Secretary's permission under otherwise
            applicable regulations or to affect a multiemployer plan's right
            to change funding methods, with or without the Secretary's
            consent, as provided in applicable rules and regulations.

        (c) Conforming Amendments.--
                (1) Section 301 of the Employee Retirement Income Security
            Act of 1974 (29 U.S.C. 1081) is amended by striking subsection
            (d).
                (2) The table of contents in section 1 of such Act (as
            amended by this Act) is amended by inserting after the item
            relating to section 303 the following new item:

    ``Sec. 304. Minimum funding standards for multiemployer plans.''.

        (d) Effective <<NOTE: 29 USC 1081 note.>> Date.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after 2007.
                (2) Special rule for certain amortization extensions.--If
            the Secretary of the <<NOTE: Applicability.>> Treasury grants an
            extension under section 304 of the Employee Retirement Income
            Security Act of 1974 and section 412(e) of the Internal Revenue
            Code of 1986 with respect to any application filed with the
            Secretary of the Treasury on or before June 30, 2005, the
            extension (and any modification thereof) shall be applied and
            administered under the rules of such sections as in effect
            before the enactment of this Act, including the use of the rate
            of interest determined under section 6621(b) of such Code.

    SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED
                OR CRITICAL STATUS.

        (a) In General.--Part 3 of subtitle B of title I of the Employee
    Retirement Income Security Act of 1974 (as amended by the preceding
    provisions of this Act) is amended by inserting after section 304 the
    following new section:

    ``ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED STATUS
                               OR CRITICAL STATUS

        ``Sec. 305. (a) General Rule.--For <<NOTE: 29 USC 1085.>> purposes
    of this part, in the case of a multiemployer plan in effect on July 16,
    2006--
                ``(1) if the plan is in endangered status--
                        ``(A) the plan sponsor shall adopt and implement a
                    funding improvement plan in accordance with the
                    requirements of subsection (c), and
                        ``(B) the <<NOTE: Applicability.>> requirements of
                    subsection (d) shall apply during the funding plan
                    adoption period and the funding improvement period, and
                ``(2) if the plan is in critical status--
                        ``(A) the plan sponsor shall adopt and implement a
                    rehabilitation plan in accordance with the requirements
                    of subsection (e), and
                        ``(B) the <<NOTE: Applicability.>> requirements of
                    subsection (f) shall apply during the rehabilitation
                    plan adoption period and the rehabilitation period.

    [[Page 120 STAT. 869]]

        ``(b) Determination of Endangered and Critical Status.--For purposes
    of this section--
                ``(1) Endangered status.--A multiemployer plan is in
            endangered status for a plan year if, as determined by the plan
            actuary under paragraph (3), the plan is not in critical status
            for the plan year and, as of the beginning of the plan year,
            either--
                        ``(A) the plan's funded percentage for such plan
                    year is less than 80 percent, or
                        ``(B) the plan has an accumulated funding deficiency
                    for such plan year, or is projected to have such an
                    accumulated funding deficiency for any of the 6
                    succeeding plan years, taking into account any extension
                    of amortization periods under section 304(d).
            For purposes of this section, a plan shall be treated as in
            seriously endangered status for a plan year if the plan is
            described in both subparagraphs (A) and (B).
                ``(2) Critical status.--A multiemployer plan is in critical
            status for a plan year if, as determined by the plan actuary
            under paragraph (3), the plan is described in 1 or more of the
            following subparagraphs as of the beginning of the plan year:
                        ``(A) A plan is described in this subparagraph if--
                              ``(i) the funded percentage of the plan is
                          less than 65 percent, and
                              ``(ii) the sum of--
                                        ``(I) the fair market value of plan
                                    assets, plus
                                        ``(II) the present value of the
                                    reasonably anticipated employer
                                    contributions for the current plan year
                                    and each of the 6 succeeding plan years,
                                    assuming that the terms of all
                                    collective bargaining agreements
                                    pursuant to which the plan is maintained
                                    for the current plan year continue in
                                    effect for succeeding plan years,
                          is less than the present value of all
                          nonforfeitable benefits projected to be payable
                          under the plan during the current plan year and
                          each of the 6 succeeding plan years (plus
                          administrative expenses for such plan years).
                        ``(B) A plan is described in this subparagraph if--
                              ``(i) the plan has an accumulated funding
                          deficiency for the current plan year, not taking
                          into account any extension of amortization periods
                          under section 304(d), or
                              ``(ii) the plan is projected to have an
                          accumulated funding deficiency for any of the 3
                          succeeding plan years (4 succeeding plan years if
                          the funded percentage of the plan is 65 percent or
                          less), not taking into account any extension of
                          amortization periods under section 304(d).
                        ``(C) A plan is described in this subparagraph if--
                              ``(i)(I) the plan's normal cost for the
                          current plan year, plus interest (determined at
                          the rate used for determining costs under the
                          plan) for the current plan year on the amount of
                          unfunded benefit liabilities under the plan as of
                          the last date of the preceding plan year, exceeds

    [[Page 120 STAT. 870]]

                              ``(II) the present value of the reasonably
                          anticipated employer and employee contributions
                          for the current plan year,
                              ``(ii) the present value, as of the beginning
                          of the current plan year, of nonforfeitable
                          benefits of inactive participants is greater than
                          the present value of nonforfeitable benefits of
                          active participants, and
                              ``(iii) the plan has an accumulated funding
                          deficiency for the current plan year, or is
                          projected to have such a deficiency for any of the
                          4 succeeding plan years, not taking into account
                          any extension of amortization periods under
                          section 304(d).
                        ``(D) A plan is described in this subparagraph if
                    the sum of--
                              ``(i) the fair market value of plan assets,
                          plus
                              ``(ii) the present value of the reasonably
                          anticipated employer contributions for the current
                          plan year and each of the 4 succeeding plan years,
                          assuming that the terms of all collective
                          bargaining agreements pursuant to which the plan
                          is maintained for the current plan year continue
                          in effect for succeeding plan years,
                    is less than the present value of all benefits projected
                    to be payable under the plan during the current plan
                    year and each of the 4 succeeding plan years (plus
                    administrative expenses for such plan years).
                ``(3) Annual certification by plan actuary.--
                        ``(A) In general.--Not <<NOTE: Deadline.>> later
                    than the 90th day of each plan year of a multiemployer
                    plan, the plan actuary shall certify to the Secretary of
                    the Treasury and to the plan sponsor--
                              ``(i) whether or not the plan is in endangered
                          status for such plan year and whether or not the
                          plan is or will be in critical status for such
                          plan year, and
                              ``(ii) in the case of a plan which is in a
                          funding improvement or rehabilitation period,
                          whether or not the plan is making the scheduled
                          progress in meeting the requirements of its
                          funding improvement or rehabilitation plan.
                        ``(B) Actuarial projections of assets and
                    liabilities.--
                              ``(i) In general.--In making the
                          determinations and projections under this
                          subsection, the plan actuary shall make
                          projections required for the current and
                          succeeding plan years of the current value of the
                          assets of the plan and the present value of all
                          liabilities to participants and beneficiaries
                          under the plan for the current plan year as of the
                          beginning of such year. The actuary's projections
                          shall be based on reasonable actuarial estimates,
                          assumptions, and methods that, except as provided
                          in clause (iii), offer the actuary's best estimate
                          of anticipated experience under the plan. The
                          projected present value of liabilities as of the
                          beginning of such year shall be determined based
                          on the most recent of either--

    [[Page 120 STAT. 871]]

                                        ``(I) the actuarial statement
                                    required under section 103(d) with
                                    respect to the most recently filed
                                    annual report, or
                                        ``(II) the actuarial valuation for
                                    the preceding plan year.
                              ``(ii) Determinations of future
                          contributions.--Any actuarial projection of plan
                          assets shall assume--
                                        ``(I) reasonably anticipated
                                    employer contributions for the current
                                    and succeeding plan years, assuming that
                                    the terms of the one or more collective
                                    bargaining agreements pursuant to which
                                    the plan is maintained for the current
                                    plan year continue in effect for
                                    succeeding plan years, or
                                        ``(II) that employer contributions
                                    for the most recent plan year will
                                    continue indefinitely, but only if the
                                    plan actuary determines there have been
                                    no significant demographic changes that
                                    would make such assumption unreasonable.
                              ``(iii) Projected industry activity.--Any
                          projection of activity in the industry or
                          industries covered by the plan, including future
                          covered employment and contribution levels, shall
                          be based on information provided by the plan
                          sponsor, which shall act reasonably and in good
                          faith.
                        ``(C) Penalty for failure to secure timely actuarial
                    certification.--Any <<NOTE: Reports.>> failure of the
                    plan's actuary to certify the plan's status under this
                    subsection by the date specified in subparagraph (A)
                    shall be treated for purposes of section 502(c)(2) as a
                    failure or refusal by the plan administrator to file the
                    annual report required to be filed with the Secretary
                    under section 101(b)(4).
                        ``(D) Notice.--
                              ``(i) In general.--In <<NOTE: Deadline.>> any
                          case in which it is certified under subparagraph
                          (A) that a multiemployer plan is or will be in
                          endangered or critical status for a plan year, the
                          plan sponsor shall, not later than 30 days after
                          the date of the certification, provide
                          notification of the endangered or critical status
                          to the participants and beneficiaries, the
                          bargaining parties, the Pension Benefit Guaranty
                          Corporation, and the Secretary.
                              ``(ii) Plans in critical status.--If it is
                          certified under subparagraph (A) that a
                          multiemployer plan is or will be in critical
                          status, the plan sponsor shall include in the
                          notice under clause (i) an explanation of the
                          possibility that--
                                        ``(I) adjustable benefits (as
                                    defined in subsection (e)(8)) may be
                                    reduced, and
                                        ``(II) such reductions may apply to
                                    participants and beneficiaries whose
                                    benefit commencement date is on or after
                                    the date such notice is provided for the
                                    first plan year in which the plan is in
                                    critical status.
                              ``(iii) Model notice.--The Secretary shall
                          prescribe a model notice that a multiemployer plan
                          may use to satisfy the requirements under clause
                          (ii).

    [[Page 120 STAT. 872]]

        ``(c) Funding Improvement Plan Must Be Adopted for Multiemployer
    Plans in Endangered Status.--
                ``(1) In general.--In any <<NOTE: Deadlines.>> case in which
            a multiemployer plan is in endangered status for a plan year,
            the plan sponsor, in accordance with this subsection--
                        ``(A) shall adopt a funding improvement plan not
                    later than 240 days following the required date for the
                    actuarial certification of endangered status under
                    subsection (b)(3)(A), and
                        ``(B) within 30 days after the adoption of the
                    funding improvement plan--
                              ``(i) shall provide to the bargaining parties
                          1 or more schedules showing revised benefit
                          structures, revised contribution structures, or
                          both, which, if adopted, may reasonably be
                          expected to enable the multiemployer plan to meet
                          the applicable benchmarks in accordance with the
                          funding improvement plan, including--
                                        ``(I) one proposal for reductions in
                                    the amount of future benefit accruals
                                    necessary to achieve the applicable
                                    benchmarks, assuming no amendments
                                    increasing contributions under the plan
                                    (other than amendments increasing
                                    contributions necessary to achieve the
                                    applicable benchmarks after amendments
                                    have reduced future benefit accruals to
                                    the maximum extent permitted by law),
                                    and
                                        ``(II) one proposal for increases in
                                    contributions under the plan necessary
                                    to achieve the applicable benchmarks,
                                    assuming no amendments reducing future
                                    benefit accruals under the plan, and
                              ``(ii) may, if the plan sponsor deems
                          appropriate, prepare and provide the bargaining
                          parties with additional information relating to
                          contribution rates or benefit reductions,
                          alternative schedules, or other information
                          relevant to achieving the applicable benchmarks in
                          accordance with the funding improvement plan.
                    For purposes of this section, the term `applicable
                    benchmarks' means the requirements applicable to the
                    multiemployer plan under paragraph (3) (as modified by
                    paragraph (5)).
                ``(2) Exception for years after process begins.--Paragraph
            (1) shall not apply to a plan year if such year is in a funding
            plan adoption period or funding improvement period by reason of
            the plan being in endangered status for a preceding plan year.
            For purposes of this section, such preceding plan year shall be
            the initial determination year with respect to the funding
            improvement plan to which it relates.
                ``(3) Funding improvement plan.--For purposes of this
            section--
                        ``(A) In general.--A funding improvement plan is a
                    plan which consists of the actions, including options or
                    a range of options to be proposed to the bargaining
                    parties, formulated to provide, based on reasonably
                    anticipated experience and reasonable actuarial
                    assumptions, for the attainment by the plan during the
                    funding improvement period of the following
                    requirements:

    [[Page 120 STAT. 873]]

                              ``(i) Increase in plan's funding percentage.--
                          The plan's funded percentage as of the close of
                          the funding improvement period equals or exceeds a
                          percentage equal to the sum of--
                                        ``(I) such percentage as of the
                                    beginning of such period, plus
                                        ``(II) 33 percent of the difference
                                    between 100 percent and the percentage
                                    under subclause (I).
                              ``(ii) Avoidance of accumulated funding
                          deficiencies.--No accumulated funding deficiency
                          for any plan year during the funding improvement
                          period (taking into account any extension of
                          amortization periods under section 304(d)).
                        ``(B) Seriously <<NOTE: Applicability.>> endangered
                    plans.--In the case of a plan in seriously endangered
                    status, except as provided in paragraph (5),
                    subparagraph (A)(i)(II) shall be applied by substituting
                    `20 percent' for `33 percent'.
                ``(4) Funding improvement period.--For purposes of this
            section--
                        ``(A) In general.--The funding improvement period
                    for any funding improvement plan adopted pursuant to
                    this subsection is the 10-year period beginning on the
                    first day of the first plan year of the multiemployer
                    plan beginning after the earlier of--
                              ``(i) the second anniversary of the date of
                          the adoption of the funding improvement plan, or
                              ``(ii) the expiration of the collective
                          bargaining agreements in effect on the due date
                          for the actuarial certification of endangered
                          status for the initial determination year under
                          subsection (b)(3)(A) and covering, as of such due
                          date, at least 75 percent of the active
                          participants in such multiemployer plan.
                        ``(B) Seriously <<NOTE: Applicability.>> endangered
                    plans.--In the case of a plan in seriously endangered
                    status, except as provided in paragraph (5),
                    subparagraph (A) shall be applied by substituting `15-
                    year period' for `10-year period'.
                        ``(C) Coordination with changes in status.--
                              ``(i) Plans no longer in endangered status.--
                          If the plan's actuary certifies under subsection
                          (b)(3)(A) for a plan year in any funding plan
                          adoption period or funding improvement period that
                          the plan is no longer in endangered status and is
                          not in critical status, the funding plan adoption
                          period or funding improvement period, whichever is
                          applicable, shall end as of the close of the
                          preceding plan year.
                              ``(ii) Plans in critical status.--If the
                          plan's actuary certifies under subsection
                          (b)(3)(A) for a plan year in any funding plan
                          adoption period or funding improvement period that
                          the plan is in critical status, the funding plan
                          adoption period or funding improvement period,
                          whichever is applicable, shall end as of the close
                          of the plan year preceding the first plan year in
                          the rehabilitation period with respect to such
                          status.
                        ``(D) Plans in endangered status at end of period.--
                    If the plan's actuary certifies under subsection
                    (b)(3)(A) for the first plan year following the close of
                    the

    [[Page 120 STAT. 874]]

                    period described in subparagraph (A) that the plan is in
                    endangered status, the provisions of this subsection and
                    subsection (d) shall be applied as if such first plan
                    year were an initial determination year, except that the
                    plan may not be amended in a manner inconsistent with
                    the funding improvement plan in effect for the preceding
                    plan year until a new funding improvement plan is
                    adopted.
                ``(5) Special rules for seriously endangered plans more than
            70 percent funded.--
                        ``(A) In general.--If the funded percentage of a
                    plan in seriously endangered status was more than 70
                    percent as of the beginning of the initial determination
                    year--

                          ``(i) <<NOTE: Applicability. Deadline.>> paragraphs
                           (3)(B) and (4)(B) shall apply only if the plan's
                          actuary certifies, within 30 days after the
                          certification under subsection (b)(3)(A) for the
                          initial determination year, that, based on the
                          terms of the plan and the collective bargaining
                          agreements in effect at the time of such
                          certification, the plan is not projected to meet
                          the requirements of paragraph (3)(A) (without
                          regard to paragraphs (3)(B) and (4)(B)), and
                              ``(ii) if there is a certification under
                          clause (i), the plan may, in formulating its
                          funding improvement plan, only take into account
                          the rules of paragraph (3)(B) and (4)(B) for plan
                          years in the funding improvement period beginning
                          on or before the date on which the last of the
                          collective bargaining agreements described in
                          paragraph (4)(A)(ii) expires.
                        ``(B) Special rule after expiration of agreements.--
                    Notwithstanding subparagraph (A)(ii), if, for any plan
                    year ending after the date described in subparagraph
                    (A)(ii), the plan actuary certifies (at the time of the
                    annual certification under subsection (b)(3)(A) for such
                    plan year) that, based on the terms of the plan and
                    collective bargaining agreements in effect at the time
                    of that annual certification, the plan is not projected
                    to be able to meet the requirements of paragraph (3)(A)
                    (without regard to paragraphs (3)(B) and (4)(B)),
                    paragraphs (3)(B) and (4)(B) shall continue to apply for
                    such year.
                ``(6) Updates to funding improvement plan and schedules.--
                        ``(A) Funding improvement plan.--The plan sponsor
                    shall annually update the funding improvement plan and
                    shall file the update with the plan's annual report
                    under section 104.
                        ``(B) Schedules.--The plan sponsor shall annually
                    update any schedule of contribution rates provided under
                    this subsection to reflect the experience of the plan.
                        ``(C) Duration of schedule.--A schedule of
                    contribution rates provided by the plan sponsor and
                    relied upon by bargaining parties in negotiating a
                    collective bargaining agreement shall remain in effect
                    for the duration of that collective bargaining
                    agreement.
                ``(7) Imposition of default schedule where failure to adopt
            funding improvement plan.--
                        ``(A) In general.--If--

    [[Page 120 STAT. 875]]

                              ``(i) a collective bargaining agreement
                          providing for contributions under a multiemployer
                          plan that was in effect at the time the plan
                          entered endangered status expires, and
                              ``(ii) after receiving one or more schedules
                          from the plan sponsor under paragraph (1)(B), the
                          bargaining parties with respect to such agreement
                          fail to agree on changes to contribution or
                          benefit schedules necessary to meet the applicable
                          benchmarks in accordance with the funding
                          improvement plan,
                    the plan sponsor shall implement the schedule described
                    in paragraph (1)(B)(i)(I) beginning on the date
                    specified in subparagraph (B).
                        ``(B) Date of implementation.--The date specified in
                    this subparagraph is the earlier of the date--
                              ``(i) on which the Secretary certifies that
                          the parties are at an impasse, or
                              ``(ii) which is 180 days after the date on
                          which the collective bargaining agreement
                          described in subparagraph (A) expires.
                ``(8) Funding plan adoption period.--For purposes of this
            section, the term `funding plan adoption period' means the
            period beginning on the date of the certification under
            subsection (b)(3)(A) for the initial determination year and
            ending on the day before the first day of the funding
            improvement period.

        ``(d) Rules for Operation of Plan During Adoption and Improvement
    Periods.--
                ``(1) Special rules for plan adoption period.--During the
            funding plan adoption period--
                        ``(A) the plan sponsor may not accept a collective
                    bargaining agreement or participation agreement with
                    respect to the multiemployer plan that provides for--
                              ``(i) a reduction in the level of
                          contributions for any participants,
                              ``(ii) a suspension of contributions with
                          respect to any period of service, or
                              ``(iii) any new direct or indirect exclusion
                          of younger or newly hired employees from plan
                          participation,
                        ``(B) no amendment of the plan which increases the
                    liabilities of the plan by reason of any increase in
                    benefits, any change in the accrual of benefits, or any
                    change in the rate at which benefits become
                    nonforfeitable under the plan may be adopted unless the
                    amendment is required as a condition of qualification
                    under part I of subchapter D of chapter 1 of the
                    Internal Revenue Code of 1986 or to comply with other
                    applicable law, and
                        ``(C) in the case of a plan in seriously endangered
                    status, the plan sponsor shall take all reasonable
                    actions which are consistent with the terms of the plan
                    and applicable law and which are expected, based on
                    reasonable assumptions, to achieve--
                              ``(i) an increase in the plan's funded
                          percentage, and
                              ``(ii) postponement of an accumulated funding
                          deficiency for at least 1 additional plan year.

    [[Page 120 STAT. 876]]

            Actions under subparagraph (C) include applications for
            extensions of amortization periods under section 304(d), use of
            the shortfall funding method in making funding standard account
            computations, amendments to the plan's benefit structure,
            reductions in future benefit accruals, and other reasonable
            actions consistent with the terms of the plan and applicable
            law.
                ``(2) Compliance with funding improvement plan.--
                        ``(A) In general.--A plan may not be amended after
                    the date of the adoption of a funding improvement plan
                    so as to be inconsistent with the funding improvement
                    plan.
                        ``(B) No reduction in contributions.--A plan sponsor
                    may not during any funding improvement period accept a
                    collective bargaining agreement or participation
                    agreement with respect to the multiemployer plan that
                    provides for--
                              ``(i) a reduction in the level of
                          contributions for any participants,
                              ``(ii) a suspension of contributions with
                          respect to any period of service, or
                              ``(iii) any new direct or indirect exclusion
                          of younger or newly hired employees from plan
                          participation.
                        ``(C) Special rules for benefit increases.--A plan
                    may not be amended after the date of the adoption of a
                    funding improvement plan so as to increase benefits,
                    including future benefit accruals, unless the plan
                    actuary certifies that the benefit increase is
                    consistent with the funding improvement plan and is paid
                    for out of contributions not required by the funding
                    improvement plan to meet the applicable benchmark in
                    accordance with the schedule contemplated in the funding
                    improvement plan.

        ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans in
    Critical Status.--
                ``(1) In general.--In <<NOTE: Deadlines.>> any case in which
            a multiemployer plan is in critical status for a plan year, the
            plan sponsor, in accordance with this subsection--
                        ``(A) shall adopt a rehabilitation plan not later
                    than 240 days following the required date for the
                    actuarial certification of critical status under
                    subsection (b)(3)(A), and
                        ``(B) within 30 days after the adoption of the
                    rehabilitation plan--
                              ``(i) shall provide to the bargaining parties
                          1 or more schedules showing revised benefit
                          structures, revised contribution structures, or
                          both, which, if adopted, may reasonably be
                          expected to enable the multiemployer plan to
                          emerge from critical status in accordance with the
                          rehabilitation plan, and
                              ``(ii) may, if the plan sponsor deems
                          appropriate, prepare and provide the bargaining
                          parties with additional information relating to
                          contribution rates or benefit reductions,
                          alternative schedules, or other information
                          relevant to emerging from critical status in
                          accordance with the rehabilitation plan.
            The schedule or schedules described in subparagraph (B)(i) shall
            reflect reductions in future benefit accruals and adjustable

    [[Page 120 STAT. 877]]

            benefits, and increases in contributions, that the plan sponsor
            determines are reasonably necessary to emerge from critical
            status. One schedule shall be designated as the default schedule
            and such schedule shall assume that there are no increases in
            contributions under the plan other than the increases necessary
            to emerge from critical status after future benefit accruals and
            other benefits (other than benefits the reduction or elimination
            of which are not permitted under section 204(g)) have been
            reduced to the maximum extent permitted by law.
                ``(2) Exception for years after process begins.--Paragraph
            (1) shall not apply to a plan year if such year is in a
            rehabilitation plan adoption period or rehabilitation period by
            reason of the plan being in critical status for a preceding plan
            year. For purposes of this section, such preceding plan year
            shall be the initial critical year with respect to the
            rehabilitation plan to which it relates.
                ``(3) Rehabilitation plan.--For purposes of this section--
                        ``(A) In general.--A rehabilitation plan is a plan
                    which consists of--
                              ``(i) actions, including options or a range of
                          options to be proposed to the bargaining parties,
                          formulated, based on reasonably anticipated
                          experience and reasonable actuarial assumptions,
                          to enable the plan to cease to be in critical
                          status by the end of the rehabilitation period and
                          may include reductions in plan expenditures
                          (including plan mergers and consolidations),
                          reductions in future benefit accruals or increases
                          in contributions, if agreed to by the bargaining
                          parties, or any combination of such actions, or
                              ``(ii) if the plan sponsor determines that,
                          based on reasonable actuarial assumptions and upon
                          exhaustion of all reasonable measures, the plan
                          can not reasonably be expected to emerge from
                          critical status by the end of the rehabilitation
                          period, reasonable measures to emerge from
                          critical status at a later time or to forestall
                          possible insolvency (within the meaning of section
                          4245).
                    A <<NOTE: Standards.>> rehabilitation plan must provide
                    annual standards for meeting the requirements of such
                    rehabilitation plan. Such plan shall also include the
                    schedules required to be provided under paragraph
                    (1)(B)(i) and if clause (ii) applies, shall set forth
                    the alternatives considered, explain why the plan is not
                    reasonably expected to emerge from critical status by
                    the end of the rehabilitation period, and specify when,
                    if ever, the plan is expected to emerge from critical
                    status in accordance with the rehabilitation plan.
                        ``(B) Updates to rehabilitation plan and
                    schedules.--
                              ``(i) Rehabilitation plan.--The plan sponsor
                          shall annually update the rehabilitation plan and
                          shall file the update with the plan's annual
                          report under section 104.
                              ``(ii) Schedules.--The plan sponsor shall
                          annually update any schedule of contribution rates
                          provided under this subsection to reflect the
                          experience of the plan.

    [[Page 120 STAT. 878]]

                              ``(iii) Duration of schedule.--A schedule of
                          contribution rates provided by the plan sponsor
                          and relied upon by bargaining parties in
                          negotiating a collective bargaining agreement
                          shall remain in effect for the duration of that
                          collective bargaining agreement.
                        ``(C) Imposition of default schedule where failure
                    to adopt rehabilitation plan.--
                              ``(i) In general.--If--
                                        ``(I) a collective bargaining
                                    agreement providing for contributions
                                    under a multiemployer plan that was in
                                    effect at the time the plan entered
                                    critical status expires, and
                                        ``(II) after receiving one or more
                                    schedules from the plan sponsor under
                                    paragraph (1)(B), the bargaining parties
                                    with respect to such agreement fail to
                                    adopt a contribution or benefit
                                    schedules with terms consistent with the
                                    rehabilitation plan and the schedule
                                    from the plan sponsor under paragraph
                                    (1)(B)(i),
                          the plan sponsor shall implement the default
                          schedule described in the last sentence of
                          paragraph (1) beginning on the date specified in
                          clause (ii).
                              ``(ii) Date of implementation.--The date
                          specified in this clause is the earlier of the
                          date--
                                        ``(I) on which the Secretary
                                    certifies that the parties are at an
                                    impasse, or
                                        ``(II) which is 180 days after the
                                    date on which the collective bargaining
                                    agreement described in clause (i)
                                    expires.
                ``(4) Rehabilitation period.--For purposes of this sec-
            tion--
                        ``(A) In general.--The rehabilitation period for a
                    plan in critical status is the 10-year period beginning
                    on the first day of the first plan year of the
                    multiemployer plan following the earlier of--
                              ``(i) the second anniversary of the date of
                          the adoption of the rehabilitation plan, or
                              ``(ii) the expiration of the collective
                          bargaining agreements in effect on the date of the
                          due date for the actuarial certification of
                          critical status for the initial critical year
                          under subsection (a)(1) and covering, as of such
                          date at least 75 percent of the active
                          participants in such multiemployer plan.
                    If a plan emerges from critical status as provided under
                    subparagraph (B) before the end of such 10-year period,
                    the rehabilitation period shall end with the plan year
                    preceding the plan year for which the determination
                    under subparagraph (B) is made.
                        ``(B) Emergence.--A plan in critical status shall
                    remain in such status until a plan year for which the
                    plan actuary certifies, in accordance with subsection
                    (b)(3)(A), that the plan is not projected to have an
                    accumulated funding deficiency for the plan year or any
                    of the 9 succeeding plan years, without regard to the
                    use of the shortfall method and taking into account any
                    extension of amortization periods under section 304(d).

    [[Page 120 STAT. 879]]

                ``(5) Rehabilitation plan adoption period.--For purposes of
            this section, the term `rehabilitation plan adoption period'
            means the period beginning on the date of the certification
            under subsection (b)(3)(A) for the initial critical year and
            ending on the day before the first day of the rehabilitation
            period.
                ``(6) Limitation on reduction in rates of future accruals.--
            Any reduction in the rate of future accruals under the default
            schedule described in paragraph (1)(B)(i) shall not reduce the
            rate of future accruals below--
                        ``(A) a monthly benefit (payable as a single life
                    annuity commencing at the participant's normal
                    retirement age) equal to 1 percent of the contributions
                    required to be made with respect to a participant, or
                    the equivalent standard accrual rate for a participant
                    or group of participants under the collective bargaining
                    agreements in effect as of the first day of the initial
                    critical year, or
                        ``(B) if lower, the accrual rate under the plan on
                    such first day.
            The equivalent standard accrual rate shall be determined by the
            plan sponsor based on the standard or average contribution base
            units which the plan sponsor determines to be representative for
            active participants and such other factors as the plan sponsor
            determines to be relevant. Nothing in this paragraph shall be
            construed as limiting the ability of the plan sponsor to prepare
            and provide the bargaining parties with alternative schedules to
            the default schedule that established lower or higher accrual
            and contribution rates than the rates otherwise described in
            this paragraph.
                ``(7) Automatic employer surcharge.--
                        ``(A) Imposition of surcharge.--Each employer
                    otherwise obligated to make contributions for the
                    initial critical year shall be obligated to pay to the
                    plan for such year a surcharge equal to 5 percent of the
                    contributions otherwise required under the applicable
                    collective bargaining agreement (or other agreement
                    pursuant to which the employer contributes). For each
                    succeeding plan year in which the plan is in critical
                    status for a consecutive period of years beginning with
                    the initial critical year, the surcharge shall be 10
                    percent of the contributions otherwise so required.
                        ``(B) Enforcement of surcharge.--The surcharges
                    under subparagraph (A) shall be due and payable on the
                    same schedule as the contributions on which the
                    surcharges are based. Any failure to make a surcharge
                    payment shall be treated as a delinquent contribution
                    under section 515 and shall be enforceable as such.
                        ``(C) Surcharge to terminate upon collective
                    bargaining agreement renegotiation.--The surcharge under
                    this paragraph shall cease to be effective with respect
                    to employees covered by a collective bargaining
                    agreement (or other agreement pursuant to which the
                    employer contributes), beginning on the effective date
                    of a collective bargaining agreement (or other such
                    agreement) that includes terms consistent with a
                    schedule presented by the plan sponsor under paragraph
                    (1)(B)(i), as modified under subparagraph (B) of
                    paragraph (3).

    [[Page 120 STAT. 880]]

                        ``(D) Surcharge not to apply until employer receives
                    notice.--The surcharge under this paragraph shall not
                    apply to an employer until 30 days after the employer
                    has been notified by the plan sponsor that the plan is
                    in critical status and that the surcharge is in effect.
                        ``(E) Surcharge not to generate increased benefit
                    accruals.--Notwithstanding any provision of a plan to
                    the contrary, the amount of any surcharge under this
                    paragraph shall not be the basis for any benefit accrual
                    under the plan.
                ``(8) Benefit adjustments.--
                        ``(A) Adjustable benefits.--
                              ``(i) In general.--Notwithstanding section
                          204(g), the plan sponsor shall, subject to the
                          notice requirements in subparagraph (C), make any
                          reductions to adjustable benefits which the plan
                          sponsor deems appropriate, based upon the outcome
                          of collective bargaining over the schedule or
                          schedules provided under paragraph (1)(B)(i).
                              ``(ii) Exception for retirees.--Except in the
                          case of adjustable benefits described in clause
                          (iv)(III), the plan sponsor of a plan in critical
                          status shall not reduce adjustable benefits of any
                          participant or beneficiary whose benefit
                          commencement date is before the date on which the
                          plan provides notice to the participant or
                          beneficiary under subsection (b)(3)(D) for the
                          initial critical year.
                              ``(iii) Plan sponsor flexibility.--The plan
                          sponsor shall include in the schedules provided to
                          the bargaining parties an allowance for funding
                          the benefits of participants with respect to whom
                          contributions are not currently required to be
                          made, and shall reduce their benefits to the
                          extent permitted under this title and considered
                          appropriate by the plan sponsor based on the
                          plan's then current overall funding status.
                              ``(iv) Adjustable benefit defined.--For
                          purposes of this paragraph, the term `adjustable
                          benefit' means--
                                        ``(I) benefits, rights, and features
                                    under the plan, including post-
                                    retirement death benefits, 60-month
                                    guarantees, disability benefits not yet
                                    in pay status, and similar benefits,
                                        ``(II) any early retirement benefit
                                    or retirement-type subsidy (within the
                                    meaning of section 204(g)(2)(A)) and any
                                    benefit payment option (other than the
                                    qualified joint and survivor annuity),
                                    and
                                        ``(III) benefit increases that would
                                    not be eligible for a guarantee under
                                    section 4022A on the first day of
                                    initial critical year because the
                                    increases were adopted (or, if later,
                                    took effect) less than 60 months before
                                    such first day.
                        ``(B) Normal retirement benefits protected.--Except
                    as provided in subparagraph (A)(iv)(III), nothing in
                    this paragraph shall be construed to permit a plan

    [[Page 120 STAT. 881]]

                    to reduce the level of a participant's accrued benefit
                    payable at normal retirement age.
                        ``(C) Notice requirements.--
                              ``(i) In general.--
                          No <<NOTE: Deadline.>> reduction may be made to
                          adjustable benefits under subparagraph (A) unless
                          notice of such reduction has been given at least
                          30 days before the general effective date of such
                          reduction for all participants and beneficiaries
                          to--
                                        ``(I) plan participants and
                                    beneficiaries,
                                        ``(II) each employer who has an
                                    obligation to contribute (within the
                                    meaning of section 4212(a)) under the
                                    plan, and
                                        ``(III) each employee organization
                                    which, for purposes of collective
                                    bargaining, represents plan participants
                                    employed by such an employer.
                              ``(ii) Content of notice.--The notice under
                          clause (i) shall contain--
                                        ``(I) sufficient information to
                                    enable participants and beneficiaries to
                                    understand the effect of any reduction
                                    on their benefits, including an estimate
                                    (on an annual or monthly basis) of any
                                    affected adjustable benefit that a
                                    participant or beneficiary would
                                    otherwise have been eligible for as of
                                    the general effective date described in
                                    clause (i), and
                                        ``(II) information as to the rights
                                    and remedies of plan participants and
                                    beneficiaries as well as how to contact
                                    the Department of Labor for further
                                    information and assistance where
                                    appropriate.
                              ``(iii) Form and manner.--Any notice under
                          clause (i)--
                                        ``(I) <<NOTE: Regulations.>> shall
                                    be provided in a form and manner
                                    prescribed in regulations of the
                                    Secretary,
                                        ``(II) shall be written in a manner
                                    so as to be understood by the average
                                    plan participant, and
                                        ``(III) may be provided in written,
                                    electronic, or other appropriate form to
                                    the extent such form is reasonably
                                    accessible to persons to whom the notice
                                    is required to be provided.
                          The <<NOTE: Regulations.>> Secretary shall in the
                          regulations prescribed under subclause (I)
                          establish a model notice that a plan sponsor may
                          use to meet the requirements of this subparagraph.
                ``(9) Adjustments disregarded in withdrawal liability
            determination.--
                        ``(A) Benefit reductions.--Any benefit reductions
                    under this subsection shall be disregarded in
                    determining a plan's unfunded vested benefits for
                    purposes of determining an employer's withdrawal
                    liability under section 4201.
                        ``(B) Surcharges.--Any surcharges under paragraph
                    (7) shall be disregarded in determining an employer's
                    withdrawal liability under section 4211, except for
                    purposes of determining the unfunded vested benefits
                    attributable to an employer under section 4211(c)(4) or
                    a comparable method approved under section 4211(c)(5).

    [[Page 120 STAT. 882]]

                        ``(C) Simplified calculations.--The Pension Benefit
                    Guaranty Corporation shall prescribe simplified methods
                    for the application of this paragraph in determining
                    withdrawal liability.

        ``(f) Rules for Operation of Plan During Adoption and Rehabilitation
    Period.--
                ``(1) Compliance with rehabilitation plan.--
                        ``(A) In general.--A plan may not be amended after
                    the date of the adoption of a rehabilitation plan under
                    subsection (e) so as to be inconsistent with the
                    rehabilitation plan.
                        ``(B) Special rules for benefit increases.--A plan
                    may not be amended after the date of the adoption of a
                    rehabilitation plan under subsection (e) so as to
                    increase benefits, including future benefit accruals,
                    unless the plan actuary certifies that such increase is
                    paid for out of additional contributions not
                    contemplated by the rehabilitation plan, and, after
                    taking into account the benefit increase, the
                    multiemployer plan still is reasonably expected to
                    emerge from critical status by the end of the
                    rehabilitation period on the schedule contemplated in
                    the rehabilitation plan.
                ``(2) Restriction on lump sums and similar benefits.--
                        ``(A) In general.--Effective <<NOTE: Effective
                    date.>> on the date the notice of certification of the
                    plan's critical status for the initial critical year
                    under subsection (b)(3)(D) is sent, and notwithstanding
                    section 204(g), the plan shall not pay--
                              ``(i) any payment, in excess of the monthly
                          amount paid under a single life annuity (plus any
                          social security supplements described in the last
                          sentence of section 204(b)(1)(G)),
                              ``(ii) any payment for the purchase of an
                          irrevocable commitment from an insurer to pay
                          benefits, and
                              ``(iii) any other payment specified by the
                          Secretary of the Treasury by regulations.
                        ``(B) Exception.--Subparagraph (A) shall not apply
                    to a benefit which under section 203(e) may be
                    immediately distributed without the consent of the
                    participant or to any makeup payment in the case of a
                    retroactive annuity starting date or any similar payment
                    of benefits owed with respect to a prior period.
                ``(3) Adjustments disregarded in withdrawal liability
            determination.--Any benefit reductions under this subsection
            shall be disregarded in determining a plan's unfunded vested
            benefits for purposes of determining an employer's withdrawal
            liability under section 4201.
                ``(4) Special rules for plan adoption period.--During the
            rehabilitation plan adoption period--
                        ``(A) the plan sponsor may not accept a collective
                    bargaining agreement or participation agreement with
                    respect to the multiemployer plan that provides for--
                              ``(i) a reduction in the level of
                          contributions for any participants,
                              ``(ii) a suspension of contributions with
                          respect to any period of service, or

    [[Page 120 STAT. 883]]

                              ``(iii) any new direct or indirect exclusion
                          of younger or newly hired employees from plan
                          participation, and
                        ``(B) no amendment of the plan which increases the
                    liabilities of the plan by reason of any increase in
                    benefits, any change in the accrual of benefits, or any
                    change in the rate at which benefits become
                    nonforfeitable under the plan may be adopted unless the
                    amendment is required as a condition of qualification
                    under part I of subchapter D of chapter 1 of the
                    Internal Revenue Code of 1986 or to comply with other
                    applicable law.

        ``(g) Expedited Resolution of Plan Sponsor Decisions.--If, within 60
    days of the due date for adoption of a funding improvement plan or a
    rehabilitation plan under subsection (e), the plan sponsor of a plan in
    endangered status or a plan in critical status has not agreed on a
    funding improvement plan or rehabilitation plan, then any member of the
    board or group that constitutes the plan sponsor may require that the
    plan sponsor enter into an expedited dispute resolution procedure for
    the development and adoption of a funding improvement plan or
    rehabilitation plan.
        ``(h) Nonbargained Participation.--
                ``(1) Both bargained and nonbargained employee-
            participants.--In the case of an employer that contributes to a
            multiemployer plan with respect to both employees who are
            covered by one or more collective bargaining agreements and
            employees who are not so covered, if the plan is in endangered
            status or in critical status, benefits of and contributions for
            the nonbargained employees, including surcharges on those
            contributions, shall be determined as if those nonbargained
            employees were covered under the first to expire of the
            employer's collective bargaining agreements in effect when the
            plan entered endangered or critical status.
                ``(2) Nonbargained employees only.--In the case of an
            employer that contributes to a multiemployer plan only with
            respect to employees who are not covered by a collective
            bargaining agreement, this section shall be applied as if the
            employer were the bargaining party, and its participation
            agreement with the plan were a collective bargaining agreement
            with a term ending on the first day of the plan year beginning
            after the employer is provided the schedule or schedules
            described in subsections (c) and (e).

        ``(i) Definitions; Actuarial Method.--For purposes of this section--
                ``(1) Bargaining party.--The term `bargaining party' means--
                        ``(A)(i) except as provided in clause (ii), an
                    employer who has an obligation to contribute under the
                    plan; or
                        ``(ii) in the case of a plan described under section
                    404(c) of the Internal Revenue Code of 1986, or a
                    continuation of such a plan, the association of
                    employers that is the employer settlor of the plan; and
                        ``(B) an employee organization which, for purposes
                    of collective bargaining, represents plan participants
                    employed by an employer who has an obligation to
                    contribute under the plan.
                ``(2) Funded percentage.--The term `funded percentage' means
            the percentage equal to a fraction--

    [[Page 120 STAT. 884]]

                        ``(A) the numerator of which is the value of the
                    plan's assets, as determined under section 304(c)(2),
                    and
                        ``(B) the denominator of which is the accrued
                    liability of the plan, determined using actuarial
                    assumptions described in section 304(c)(3).
                ``(3) Accumulated funding deficiency.--The term `accumulated
            funding deficiency' has the meaning given such term in section
            304(a).
                ``(4) Active participant.--The term `active participant'
            means, in connection with a multiemployer plan, a participant
            who is in covered service under the plan.
                ``(5) Inactive participant.--The term `inactive participant'
            means, in connection with a multiemployer plan, a participant,
            or the beneficiary or alternate payee of a participant, who--
                        ``(A) is not in covered service under the plan, and
                        ``(B) is in pay status under the plan or has a
                    nonforfeitable right to benefits under the plan.
                ``(6) Pay status.--A person is in pay status under a
            multiemployer plan if--
                        ``(A) at any time during the current plan year, such
                    person is a participant or beneficiary under the plan
                    and is paid an early, late, normal, or disability
                    retirement benefit under the plan (or a death benefit
                    under the plan related to a retirement benefit), or
                        ``(B) to the extent provided in regulations of the
                    Secretary of the Treasury, such person is entitled to
                    such a benefit under the plan.
                ``(7) Obligation to contribute.--The term `obligation to
            contribute' has the meaning given such term under section
            4212(a).
                ``(8) Actuarial method.--Notwithstanding any other provision
            of this section, the actuary's determinations with respect to a
            plan's normal cost, actuarial accrued liability, and
            improvements in a plan's funded percentage under this section
            shall be based upon the unit credit funding method (whether or
            not that method is used for the plan's actuarial valuation).
                ``(9) Plan sponsor.--In the case of a plan described under
            section 404(c) of the Internal Revenue Code of 1986, or a
            continuation of such a plan, the term `plan sponsor' means the
            bargaining parties described under paragraph (1).
                ``(10) Benefit commencement date.--The term `benefit
            commencement date' means the annuity starting date (or in the
            case of a retroactive annuity starting date, the date on which
            benefit payments begin).''.

        (b) Enforcement.--Section 502 of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1132) is amended--
                (1) in subsection (a)(6) by striking ``(6), or (7)'' and
            inserting ``(6), (7), or (8)'';
                (2) by redesignating subsection (c)(8) as subsection (c)(9);
            and
                (3) by inserting after subsection (c)(7) the following new
            paragraph:
                ``(8) The Secretary may assess against any plan sponsor of a
            multiemployer plan a civil penalty of not more than $1,100 per
            day--
                        ``(A) for each violation by such sponsor of the
                    requirement under section 305 to adopt by the deadline
                    established

    [[Page 120 STAT. 885]]

                    in that section a funding improvement plan or
                    rehabilitation plan with respect to a multiemployer
                    which is in endangered or critical status, or
                        ``(B) in the case of a plan in endangered status
                    which is not in seriously endangered status, for failure
                    by the plan to meet the applicable benchmarks under
                    section 305 by the end of the funding improvement period
                    with respect to the plan.''.

        (c) Cause of Action To Compel Adoption or Implementation of Funding
    Improvement or Rehabilitation Plan.--Section 502(a) of the Employee
    Retirement Income Security Act of <<NOTE: 29 USC 1132.>> 1974 is amended
    by striking ``or'' at the end of paragraph (8), by striking the period
    at the end of paragraph (9) and inserting ``; or'' and by adding at the
    end the following:
                ``(10) in the case of a multiemployer plan that has been
            certified by the actuary to be in endangered or critical status
            under section 305, if the plan sponsor--
                        ``(A) has not adopted a funding improvement or
                    rehabilitation plan under that section by the deadline
                    established in such section, or
                        ``(B) fails to update or comply with the terms of
                    the funding improvement or rehabilitation plan in
                    accordance with the requirements of such section,
            by an employer that has an obligation to contribute with respect
            to the multiemployer plan or an employee organization that
            represents active participants in the multiemployer plan, for an
            order compelling the plan sponsor to adopt a funding improvement
            or rehabilitation plan or to update or comply with the terms of
            the funding improvement or rehabilitation plan in accordance
            with the requirements of such section and the funding
            improvement or rehabilitation plan.''.

        (d) No Additional Contributions Required.--Section 302(b) of the
    Employee Retirement Income Security Act of 1974, as amended by this
    Act, <<NOTE: 29 USC 1082.>> is amended by adding at the end the
    following new paragraph:
                ``(3) Multiemployer plans in critical status.--Paragraph (1)
            shall not apply in the case of a multiemployer plan for any plan
            year in which the plan is in critical status pursuant to section
            305. This paragraph shall only apply if the plan adopts a
            rehabilitation plan in accordance with section 305(e) and
            complies with the terms of such rehabilitation plan (and any
            updates or modifications of the plan).''.

        (e) Conforming Amendment.--The table of contents in section 1 of
    such Act (as amended by the preceding provisions of this Act) is amended
    by inserting after the item relating to section 304 the following new
    item:

    ``Sec. 305. Additional funding rules for multiemployer plans in
               endangered status or critical status.''.

        (f) <<NOTE: 29 USC 1082 note.>> Effective Dates.--
                (1) In general.--The amendments made by this section shall
            apply with respect to plan years beginning after 2007.
                (2) Special rule for certain notices.--In any case in which
            a plan's actuary certifies that it is reasonably expected that a
            multiemployer plan will be in critical status under section
            305(b)(3) of the Employee Retirement Income Security Act of
            1974, as added by this section, with respect to the first plan
            year beginning after 2007, the notice required under

    [[Page 120 STAT. 886]]

            subparagraph (D) of such section may be provided at any time
            after the date of enactment, so long as it is provided on or
            before the last date for providing the notice under such
            subparagraph.
                (3) Special rule for certain restored benefits.--In the case
            of a multiemployer plan--
                        (A) with respect to which benefits were reduced
                    pursuant to a plan amendment adopted on or after January
                    1, 2002, and before June 30, 2005, and
                        (B) which, pursuant to the plan document, the trust
                    agreement, or a formal written communication from the
                    plan sponsor to participants provided before June 30,
                    2005, provided for the restoration of such benefits,
            the amendments made by this section shall not apply to such
            benefit restorations to the extent that any restriction on the
            providing or accrual of such benefits would otherwise apply by
            reason of such amendments.

    SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

        (a) Advance Determination of Impending Insolvency Over 5 Years.--
    Section 4245(d)(1) of the Employee Retirement Income Security Act of
    1974 (29 U.S.C. 1426(d)(1)) is amended--
                (1) by striking ``3 plan years'' the second place it appears
            and inserting ``5 plan years''; and
                (2) by adding at the end the following new sentence: ``If
            the plan sponsor makes such a determination that the plan will
            be insolvent in any of the next 5 plan years, the plan sponsor
            shall make the comparison under this paragraph at least annually
            until the plan sponsor makes a determination that the plan will
            not be insolvent in any of the next 5 plan years.''.

        (b) <<NOTE: 29 USC 1426 note.>> Effective Date.--The amendments made
    by this section shall apply with respect to determinations made in plan
    years beginning after 2007.

    SEC. 204. WITHDRAWAL LIABILITY REFORMS.

        (a) Update of Rules Relating to Limitations on Withdrawal
    Liability.--
                (1) Increase in limits.--Section 4225(a)(2) of such Act (29
            U.S.C. 1405(a)(2)) is amended by striking the table contained
            therein and inserting the following new table:

    ------------------------------------------------------------------------
     ``If the liquidation or distribution
     value of the employer after the sale           The portion is--
               or exchange is--
    ------------------------------------------------------------------------
    Not more than $5,000,000.............  30 percent of the amount.
    More than $5,000,000, but not more     $1,500,000, plus 35 percent of
     than $10,000,000.                      the amount in excess of
                                            $5,000,000.
    More than $10,000,000, but not more    $3,250,000, plus 40 percent of
     than $15,000,000.                      the amount in excess of
                                            $10,000,000.
    More than $15,000,000, but not more    $5,250,000, plus 45 percent of
     than $17,500,000.                      the amount in excess of
                                            $15,000,000.
    More than $17,500,000, but not more    $6,375,000, plus 50 percent of
     than $20,000,000.                      the amount in excess of
                                            $17,500,000.

    [[Page 120 STAT. 887]]

    More than $20,000,000, but not more    $7,625,000, plus 60 percent of
     than $22,500,000.                      the amount in excess of
                                            $20,000,000.
    More than $22,500,000, but not more    $9,125,000, plus 70 percent of
     than $25,000,000.                      the amount in excess of
                                            $22,500,000.
    More than $25,000,000................  $10,875,000, plus 80 percent of
                                            the amount in excess of
                                            $25,000,000.''.
    ------------------------------------------------------------------------

                (2) Plans using attributable method.--Section 4225(a)(1)(B)
            of such Act (29 U.S.C. 1405(a)(1)(B)) is amended to read as
            follows:
                        ``(B) in the case of a plan using the attributable
                    method of allocating withdrawal liability, the unfunded
                    vested benefits attributable to employees of the
                    employer.''.
                (3) <<NOTE: 29 USC 1405 note.>> Effective date.--The
            amendments made by this subsection shall apply to sales
            occurring on or after January 1, 2007.

        (b) Withdrawal Liability Continues if Work Contracted Out.--
                (1) In general.--Clause (i) of section 4205(b)(2)(A) of such
            Act (29 U.S.C. 1385(b)(2)(A)) is amended by inserting ``or to an
            entity or entities owned or controlled by the employer'' after
            ``to another location''.
                (2) <<NOTE: 29 USC 1385 note.>> Effective date.--The
            amendment made by this subsection shall apply with respect to
            work transferred on or after the date of the enactment of this
            Act.

        (c) Application of Rules to Plans Primarily Covering Employees in
    the Building and Construction Industry.--
                (1) In general.--Section 4210(b) of such Act (29 U.S.C.
            1390(b)) is amended--
                        (A) by striking paragraph (1); and
                        (B) by redesignating paragraphs (2) through (4) as
                    paragraphs (1) through (3), respectively.
                (2) Fresh start option.--Section 4211(c)(5) of such Act (29
            U.S.C. 1391(c)(5)) is amended by adding at the end the following
            new subparagraph:
                        ``(E) Fresh start option.--Notwithstanding paragraph
                    (1), a plan may be amended to provide that the
                    withdrawal liability method described in subsection (b)
                    shall be applied by substituting the plan year which is
                    specified in the amendment and for which the plan has no
                    unfunded vested benefits for the plan year ending before
                    September 26, 1980.''.
                (3) <<NOTE: 29 USC 1390 note.>> Effective date.--The
            amendments made by this subsection shall apply with respect to
            plan withdrawals occurring on or after January 1, 2007.

        (d) Procedures Applicable to Disputes Involving Pension Plan
    Withdrawal Liability.--
                (1) In general.--Section 4221 of the Employee Retirement
            Income Security Act of 1974 (29 U.S.C. 1401) is amended by
            adding at the end the following:

        ``(g) Procedures Applicable to Certain Disputes.--
                ``(1) In general.--If--
                        ``(A) a plan sponsor of a plan determines that--

    [[Page 120 STAT. 888]]

                              ``(i) a complete or partial withdrawal of an
                          employer has occurred, or
                              ``(ii) an employer is liable for withdrawal
                          liability payments with respect to such complete
                          or partial withdrawal, and
                        ``(B) such determination is based in whole or in
                    part on a finding by the plan sponsor under section
                    4212(c) that a principal purpose of any transaction
                    which occurred after December 31, 1998, and at least 5
                    years (2 years in the case of a small employer) before
                    the date of the complete or partial withdrawal was to
                    evade or avoid withdrawal liability under this subtitle,
            then the person against which the withdrawal liability is
            assessed based solely on the application of section 4212(c) may
            elect to use the special rule under paragraph (2) in applying
            subsection (d) of this section and section 4219(c) to such
            person.
                ``(2) Special rule.--Notwithstanding subsection (d) and
            section 4219(c), if an electing person contests the plan
            sponsor's determination with respect to withdrawal liability
            payments under paragraph (1) through an arbitration proceeding
            pursuant to subsection (a), through an action brought in a court
            of competent jurisdiction for review of such an arbitration
            decision, or as otherwise permitted by law, the electing person
            shall not be obligated to make the withdrawal liability payments
            until a final decision in the arbitration proceeding, or in
            court, upholds the plan sponsor's determination, but only if the
            electing person--
                        ``(A) provides notice to the plan sponsor of its
                    election to apply the special rule in this paragraph
                    within 90 days after the plan sponsor notifies the
                    electing person of its liability by reason of the
                    application of section 4212(c); and
                        ``(B) if a final decision in the arbitration
                    proceeding, or in court, of the withdrawal liability
                    dispute has not been rendered within 12 months from the
                    date of such notice, the electing person provides to the
                    plan, effective as of the first day following the 12-
                    month period, a bond issued by a corporate surety
                    company that is an acceptable surety for purposes of
                    section 412 of this Act, or an amount held in escrow by
                    a bank or similar financial institution satisfactory to
                    the plan, in an amount equal to the sum of the
                    withdrawal liability payments that would otherwise be
                    due under subsection (d) and section 4219(c) for the 12-
                    month period beginning with the first anniversary of
                    such notice. Such bond or escrow shall remain in effect
                    until there is a final decision in the arbitration
                    proceeding, or in court, of the withdrawal liability
                    dispute, at which time such bond or escrow shall be paid
                    to the plan if such final decision upholds the plan
                    sponsor's determination.
                ``(3) Definition of small employer.--For purposes of this
            subsection--
                        ``(A) In general.--The term `small employer' means
                    any employer which, for the calendar year in which the
                    transaction referred to in paragraph (1)(B) occurred and
                    for each of the 3 preceding years, on average--
                              ``(i) employs not more than 500 employees, and

    [[Page 120 STAT. 889]]

                              ``(ii) is required to make contributions to
                          the plan for not more than 250 employees.
                        ``(B) Controlled group.--Any group treated as a
                    single employer under subsection (b)(1) of section 4001,
                    without regard to any transaction that was a basis for
                    the plan's finding under section 4212, shall be treated
                    as a single employer for purposes of this subparagraph.
                ``(4) Additional security pending resolution of dispute.--If
            a withdrawal liability dispute to which this subsection applies
            is not concluded by 12 months after the electing person posts
            the bond or escrow described in paragraph (2), the electing
            person shall, at the start of each succeeding 12-month period,
            provide an additional bond or amount held in escrow equal to the
            sum of the withdrawal liability payments that would otherwise be
            payable to the plan during that period.
                ``(5) The liability of the party furnishing a bond or escrow
            under this subsection shall be reduced, upon the payment of the
            bond or escrow to the plan, by the amount thereof.''.
                (2) <<NOTE: 29 USC 1401 note.>> Effective date.--The
            amendments made by this subsection shall apply to any person
            that receives a notification under section 4219(b)(1) of the
            Employee Retirement Income Security Act of 1974 on or after the
            date of enactment of this Act with respect to a transaction that
            occurred after December 31, 1998.

    SEC. 205. PROHIBITION ON RETALIATION AGAINST EMPLOYERS EXERCISING THEIR
                RIGHTS TO PETITION THE FEDERAL GOVERNMENT.

        Section 510 of the Employee Retirement Income Security Act of 1974
    (29 U.S.C. 1140) is amended by inserting before the last sentence
    thereof the following new sentence: ``In the case of a multiemployer
    plan, it shall be unlawful for the plan sponsor or any other person to
    discriminate against any contributing employer for exercising rights
    under this Act or for giving information or testifying in any inquiry or
    proceeding relating to this Act before Congress.''.

    SEC. 206. <<NOTE: 26 USC 412 note.>> SPECIAL RULE FOR CERTAIN BENEFITS
                FUNDED UNDER AN AGREEMENT APPROVED BY THE PENSION BENEFIT
                GUARANTY CORPORATION.

        In the case of a multiemployer plan that is a party to an agreement
    that was approved by the Pension Benefit Guaranty Corporation prior to
    June 30, 2005, and that--
                (1) increases benefits, and
                (2) provides for special withdrawal liability rules under
            section 4203(f) of the Employee Retirement Income Security Act
            of 1974 (29 U.S.C. 1383),

    the amendments made by sections 201, 202, 211, and 212 of this Act shall
    not apply to the benefit increases under any plan amendment adopted
    prior to June 30, 2005, that are funded pursuant to such agreement if
    the plan is funded in compliance with such agreement (and any amendments
    thereto).

    [[Page 120 STAT. 890]]

             Subtitle B--Amendments to Internal Revenue Code of 1986

    SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS.

        (a) In General.--Subpart A of part III of subchapter D of chapter 1
    of the Internal Revenue Code of 1986 (as added by this Act) is amended
    by inserting after section 430 the following new section:

    ``SEC. 431. <<NOTE: 26 USC 431.>> MINIMUM FUNDING STANDARDS FOR
                MULTIEMPLOYER PLANS.

        ``(a) In General.--For purposes of section 412, the accumulated
    funding deficiency of a multiemployer plan for any plan year is--
                ``(1) except as provided in paragraph (2), the amount,
            determined as of the end of the plan year, equal to the excess
            (if any) of the total charges to the funding standard account of
            the plan for all plan years (beginning with the first plan year
            for which this part applies to the plan) over the total credits
            to such account for such years, and
                ``(2) if the multiemployer plan is in reorganization for any
            plan year, the accumulated funding deficiency of the plan
            determined under section 4243 of the Employee Retirement Income
            Security Act of 1974.

        ``(b) Funding Standard Account.--
                ``(1) Account required.--Each multiemployer plan to which
            this part applies shall establish and maintain a funding
            standard account. Such account shall be credited and charged
            solely as provided in this section.
                ``(2) Charges to account.--For a plan year, the funding
            standard account shall be charged with the sum of--
                        ``(A) the normal cost of the plan for the plan year,
                        ``(B) the amounts necessary to amortize in equal
                    annual installments (until fully amortized)--
                              ``(i) in the case of a plan which comes into
                          existence on or after January 1, 2008, the
                          unfunded past service liability under the plan on
                          the first day of the first plan year to which this
                          section applies, over a period of 15 plan years,
                              ``(ii) separately, with respect to each plan
                          year, the net increase (if any) in unfunded past
                          service liability under the plan arising from plan
                          amendments adopted in such year, over a period of
                          15 plan years,
                              ``(iii) separately, with respect to each plan
                          year, the net experience loss (if any) under the
                          plan, over a period of 15 plan years, and
                              ``(iv) separately, with respect to each plan
                          year, the net loss (if any) resulting from changes
                          in actuarial assumptions used under the plan, over
                          a period of 15 plan years,
                        ``(C) the amount necessary to amortize each waived
                    funding deficiency (within the meaning of section
                    412(c)(3)) for each prior plan year in equal annual
                    installments (until fully amortized) over a period of 15
                    plan years,
                        ``(D) the amount necessary to amortize in equal
                    annual installments (until fully amortized) over a
                    period of 5 plan

    [[Page 120 STAT. 891]]

                    years any amount credited to the funding standard
                    account under section 412(b)(3)(D) (as in effect on the
                    day before the date of the enactment of the Pension
                    Protection Act of 2006), and
                        ``(E) the amount necessary to amortize in equal
                    annual installments (until fully amortized) over a
                    period of 20 years the contributions which would be
                    required to be made under the plan but for the
                    provisions of section 412(c)(7)(A)(i)(I) (as in effect
                    on the day before the date of the enactment of the
                    Pension Protection Act of 2006).
                ``(3) Credits to account.--For a plan year, the funding
            standard account shall be credited with the sum of--
                        ``(A) the amount considered contributed by the
                    employer to or under the plan for the plan year,
                        ``(B) the amount necessary to amortize in equal
                    annual installments (until fully amortized)--
                              ``(i) separately, with respect to each plan
                          year, the net decrease (if any) in unfunded past
                          service liability under the plan arising from plan
                          amendments adopted in such year, over a period of
                          15 plan years,
                              ``(ii) separately, with respect to each plan
                          year, the net experience gain (if any) under the
                          plan, over a period of 15 plan years, and
                              ``(iii) separately, with respect to each plan
                          year, the net gain (if any) resulting from changes
                          in actuarial assumptions used under the plan, over
                          a period of 15 plan years,
                        ``(C) the amount of the waived funding deficiency
                    (within the meaning of section 412(c)(3)) for the plan
                    year, and
                        ``(D) in the case of a plan year for which the
                    accumulated funding deficiency is determined under the
                    funding standard account if such plan year follows a
                    plan year for which such deficiency was determined under
                    the alternative minimum funding standard under section
                    412(g) (as in effect on the day before the date of the
                    enactment of the Pension Protection Act of 2006), the
                    excess (if any) of any debit balance in the funding
                    standard account (determined without regard to this
                    subparagraph) over any debit balance in the alternative
                    minimum funding standard account.
                ``(4) Special rule for amounts first amortized in plan years
            before 2008.--In the case of any amount amortized under section
            412(b) (as in effect on the day before the date of the enactment
            of the Pension Protection Act of 2006) over any period beginning
            with a plan year beginning before 2008 in lieu of the
            amortization described in paragraphs (2)(B) and (3)(B), such
            amount shall continue to be amortized under such section as so
            in effect.
                ``(5) Combining and offsetting amounts to be amortized.--
            Under <<NOTE: Regulations.>> regulations prescribed by the
            Secretary, amounts required to be amortized under paragraph (2)
            or paragraph (3), as the case may be--
                        ``(A) may be combined into one amount under such
                    paragraph to be amortized over a period determined on
                    the basis of the remaining amortization period for all
                    items entering into such combined amount, and

    [[Page 120 STAT. 892]]

                        ``(B) may be offset against amounts required to be
                    amortized under the other such paragraph, with the
                    resulting amount to be amortized over a period
                    determined on the basis of the remaining amortization
                    periods for all items entering into whichever of the two
                    amounts being offset is the greater.
                ``(6) Interest.--The funding standard account (and items
            therein) shall be charged or credited (as determined under
            regulations prescribed by the Secretary of the Treasury) with
            interest at the appropriate rate consistent with the rate or
            rates of interest used under the plan to determine costs.
                ``(7) Special rules relating to charges and credits to
            funding standard account.--For purposes of this part--
                        ``(A) Withdrawal liability.--Any amount received by
                    a multiemployer plan in payment of all or part of an
                    employer's withdrawal liability under part 1 of subtitle
                    E of title IV of the Employee Retirement Income Security
                    Act of 1974 shall be considered an amount contributed by
                    the employer to or under the plan. The Secretary may
                    prescribe by regulation additional charges and credits
                    to a multiemployer plan's funding standard account to
                    the extent necessary to prevent withdrawal liability
                    payments from being unduly reflected as advance funding
                    for plan liabilities.
                        ``(B) Adjustments when a multiemployer plan leaves
                    reorganization.--If a multiemployer plan is not in
                    reorganization in the plan year but was in
                    reorganization in the immediately preceding plan year,
                    any balance in the funding standard account at the close
                    of such immediately preceding plan year--
                              ``(i) shall be eliminated by an offsetting
                          credit or charge (as the case may be), but
                              ``(ii) shall be taken into account in
                          subsequent plan years by being amortized in equal
                          annual installments (until fully amortized) over
                          30 plan years.
                    The preceding sentence shall not apply to the extent of
                    any accumulated funding deficiency under section 4243(a)
                    of such Act as of the end of the last plan year that the
                    plan was in reorganization.
                        ``(C) Plan payments to supplemental program or
                    withdrawal liability payment fund.--Any amount paid by a
                    plan during a plan year to the Pension Benefit Guaranty
                    Corporation pursuant to section 4222 of such Act or to a
                    fund exempt under section 501(c)(22) pursuant to section
                    4223 of such Act shall reduce the amount of
                    contributions considered received by the plan for the
                    plan year.
                        ``(D) <<NOTE: Regulations.>> Interim withdrawal
                    liability payments.--Any amount paid by an employer
                    pending a final determination of the employer's
                    withdrawal liability under part 1 of subtitle E of title
                    IV of such Act and subsequently refunded to the employer
                    by the plan shall be charged to the funding standard
                    account in accordance with regulations prescribed by the
                    Secretary.
                        ``(E) Election for deferral of charge for portion of
                    net experience loss.--If an election is in effect under
                    section 412(b)(7)(F) (as in effect on the day before the

    [[Page 120 STAT. 893]]

                    date of the enactment of the Pension Protection Act of
                    2006) for any plan year, the funding standard account
                    shall be charged in the plan year to which the portion
                    of the net experience loss deferred by such election was
                    deferred with the amount so deferred (and paragraph
                    (2)(B)(iii) shall not apply to the amount so charged).
                        ``(F) Financial assistance.--Any amount of any
                    financial assistance from the Pension Benefit Guaranty
                    Corporation to any plan, and any repayment of such
                    amount, shall be taken into account under this section
                    and section 412 in such manner as is determined by the
                    Secretary.
                        ``(G) Short-term benefits.--
                    To <<NOTE: Applicability.>> the extent that any plan
                    amendment increases the unfunded past service liability
                    under the plan by reason of an increase in benefits
                    which are not payable as a life annuity but are payable
                    under the terms of the plan for a period that does not
                    exceed 14 years from the effective date of the
                    amendment, paragraph (2)(B)(ii) shall be applied
                    separately with respect to such increase in unfunded
                    past service liability by substituting the number of
                    years of the period during which such benefits are
                    payable for `15'.

        ``(c) Additional Rules.--
                ``(1) Determinations to be made under funding method.--For
            purposes of this part, normal costs, accrued liability, past
            service liabilities, and experience gains and losses shall be
            determined under the funding method used to determine costs
            under the plan. I22    ``(2) Valuation of assets.--
                        ``(A) In general.--
                    For <<NOTE: Regulations.>> purposes of this part, the
                    value of the plan's assets shall be determined on the
                    basis of any reasonable actuarial method of valuation
                    which takes into account fair market value and which is
                    permitted under regulations prescribed by the Secretary.
                        ``(B) Election with respect to bonds.--
                    The <<NOTE: Regulations. Applicability.>> value of a
                    bond or other evidence of indebtedness which is not in
                    default as to principal or interest may, at the election
                    of the plan administrator, be determined on an amortized
                    basis running from initial cost at purchase to par value
                    at maturity or earliest call date. Any election under
                    this subparagraph shall be made at such time and in such
                    manner as the Secretary shall by regulations provide,
                    shall apply to all such evidences of indebtedness, and
                    may be revoked only with the consent of the Secretary.
                ``(3) Actuarial assumptions must be reasonable.--For
            purposes of this section, all costs, liabilities, rates of
            interest, and other factors under the plan shall be determined
            on the basis of actuarial assumptions and methods--
                        ``(A) each of which is reasonable (taking into
                    account the experience of the plan and reasonable
                    expectations), and
                        ``(B) which, in combination, offer the actuary's
                    best estimate of anticipated experience under the plan.
                ``(4) Treatment of certain changes as experience gain or
            loss.--For purposes of this section, if--
                        ``(A) a change in benefits under the Social Security
                    Act or in other retirement benefits created under
                    Federal or State law, or

    [[Page 120 STAT. 894]]

                        ``(B) a change in the definition of the term `wages'
                    under section 3121, or a change in the amount of such
                    wages taken into account under regulations prescribed
                    for purposes of section 401(a)(5),
            results in an increase or decrease in accrued liability under a
            plan, such increase or decrease shall be treated as an
            experience loss or gain.
                ``(5) Full funding.--If, as of the close of a plan year, a
            plan would (without regard to this paragraph) have an
            accumulated funding deficiency in excess of the full funding
            limitation--
                        ``(A) the funding standard account shall be credited
                    with the amount of such excess, and
                        ``(B) all amounts described in subparagraphs (B),
                    (C), and (D) of subsection (b)(2) and subparagraph (B)
                    of subsection (b)(3) which are required to be amortized
                    shall be considered fully amortized for purposes of such
                    subparagraphs.
                ``(6) Full-funding limitation.--
                        ``(A) In general.--For purposes of paragraph (5),
                    the term `full-funding limitation' means the excess (if
                    any) of--
                              ``(i) the accrued liability (including normal
                          cost) under the plan (determined under the entry
                          age normal funding method if such accrued
                          liability cannot be directly calculated under the
                          funding method used for the plan), over
                              ``(ii) the lesser of--
                                        ``(I) the fair market value of the
                                    plan's assets, or
                                        ``(II) the value of such assets
                                    determined under paragraph (2).
                        ``(B) Minimum amount.--
                              ``(i) In general.--In no event shall the full-
                          funding limitation determined under subparagraph
                          (A) be less than the excess (if any) of--
                                        ``(I) 90 percent of the current
                                    liability of the plan (including the
                                    expected increase in current liability
                                    due to benefits accruing during the plan
                                    year), over
                                        ``(II) the value of the plan's
                                    assets determined under paragraph (2).
                              ``(ii) Assets.--For purposes of clause (i),
                          assets shall not be reduced by any credit balance
                          in the funding standard account.
                        ``(C) Full funding limitation.--For purposes of this
                    paragraph, unless otherwise provided by the plan, the
                    accrued liability under a multiemployer plan shall not
                    include benefits which are not nonforfeitable under the
                    plan after the termination of the plan (taking into
                    consideration section 411(d)(3)).
                        ``(D) Current liability.--For purposes of this para-
                    graph--
                              ``(i) In general.--The term `current
                          liability' means all liabilities to employees and
                          their beneficiaries under the plan.

    [[Page 120 STAT. 895]]

                              ``(ii) Treatment of unpredictable contingent
                          event benefits.--For purposes of clause (i), any
                          benefit contingent on an event other than--
                                        ``(I) age, service, compensation,
                                    death, or disability, or
                                        ``(II) an event which is reasonably
                                    and reliably predictable (as determined
                                    by the Secretary),
                          shall not be taken into account until the event on
                          which the benefit is contingent occurs.
                              ``(iii) Interest rate used.--The rate of
                          interest used to determine current liability under
                          this paragraph shall be the rate of interest
                          determined under subparagraph (E).
                              ``(iv) Mortality tables.--
                                        ``(I) Commissioners' standard
                                    table.--In the case of plan years
                                    beginning before the first plan year to
                                    which the first tables prescribed under
                                    subclause (II) apply, the mortality
                                    table used in determining current
                                    liability under this paragraph shall be
                                    the table prescribed by the Secretary
                                    which is based on the prevailing
                                    commissioners' standard table (described
                                    in section 807(d)(5)(A)) used to
                                    determine reserves for group annuity
                                    contracts issued on January 1, 1993.
                                        ``(II) Secretarial authority.--The
                                    Secretary may by regulation prescribe
                                    for plan years beginning after December
                                    31, 1999, mortality tables to be used in
                                    determining current liability under this
                                    subsection. Such tables shall be based
                                    upon the actual experience of pension
                                    plans and projected trends in such
                                    experience. In prescribing such tables,
                                    the Secretary shall take into account
                                    results of available independent studies
                                    of mortality of individuals covered by
                                    pension plans.
                              ``(v) Separate mortality tables for the
                          disabled.--Notwithstanding clause (iv)--
                                        ``(I) In general.--The Secretary
                                    shall establish mortality tables which
                                    may be used (in lieu of the tables under
                                    clause (iv)) to determine current
                                    liability under this subsection for
                                    individuals who are entitled to benefits
                                    under the plan on account of disability.
                                    The Secretary shall establish separate
                                    tables for individuals whose
                                    disabilities occur in plan years
                                    beginning before January 1, 1995, and
                                    for individuals whose disabilities occur
                                    in plan years beginning on or after such
                                    date.
                                        ``(II) Special rule for disabilities
                                    occurring after 1994.--
                                    In <<NOTE: Applicability.>> the case of
                                    disabilities occurring in plan years
                                    beginning after December 31, 1994, the
                                    tables under subclause (I) shall apply
                                    only with respect to individuals
                                    described in such subclause who are
                                    disabled within the meaning of title II
                                    of the Social Security Act and the
                                    regulations thereunder.
                              ``(vi) Periodic review.--
                          The <<NOTE: Regulations.>> Secretary shall
                          periodically (at least every 5 years) review any
                          tables in effect under this subparagraph and
                          shall, to the

    [[Page 120 STAT. 896]]

                          extent such Secretary determines necessary, by
                          regulation update the tables to reflect the actual
                          experience of pension plans and projected trends
                          in such experience.
                        ``(E) Required change of interest rate.--For
                    purposes of determining a plan's current liability for
                    purposes of this paragraph--
                              ``(i) In general.--If any rate of interest
                          used under the plan under subsection (b)(6) to
                          determine cost is not within the permissible
                          range, the plan shall establish a new rate of
                          interest within the permissible range.
                              ``(ii) Permissible range.--For purposes of
                          this subparagraph--
                                        ``(I) In general.--Except as
                                    provided in subclause (II), the term
                                    `permissible range' means a rate of
                                    interest which is not more than 5
                                    percent above, and not more than 10
                                    percent below, the weighted average of
                                    the rates of interest on 30-year
                                    Treasury securities during the 4-year
                                    period ending on the last day before the
                                    beginning of the plan year.
                                        ``(II) Secretarial authority.--If
                                    the Secretary finds that the lowest rate
                                    of interest permissible under subclause
                                    (I) is unreasonably high, the Secretary
                                    may prescribe a lower rate of interest,
                                    except that such rate may not be less
                                    than 80 percent of the average rate
                                    determined under such subclause.
                              ``(iii) Assumptions.--Notwithstanding
                          paragraph (3)(A), the interest rate used under the
                          plan shall be--
                                        ``(I) determined without taking into
                                    account the experience of the plan and
                                    reasonable expectations, but
                                        ``(II) consistent with the
                                    assumptions which reflect the purchase
                                    rates which would be used by insurance
                                    companies to satisfy the liabilities
                                    under the plan.
                ``(7) Annual valuation.--
                        ``(A) In general.--
                    For <<NOTE: Regulations.>> purposes of this section, a
                    determination of experience gains and losses and a
                    valuation of the plan's liability shall be made not less
                    frequently than once every year, except that such
                    determination shall be made more frequently to the
                    extent required in particular cases under regulations
                    prescribed by the Secretary.
                        ``(B) Valuation date.--
                              ``(i) Current year.--Except as provided in
                          clause (ii), the valuation referred to in
                          subparagraph (A) shall be made as of a date within
                          the plan year to which the valuation refers or
                          within one month prior to the beginning of such
                          year.
                              ``(ii) Use of prior year valuation.--The
                          valuation referred to in subparagraph (A) may be
                          made as of a date within the plan year prior to
                          the year to which the valuation refers if, as of
                          such date, the value of the assets of the plan are
                          not less than 100

    [[Page 120 STAT. 897]]

                          percent of the plan's current liability (as
                          defined in paragraph (6)(D) without regard to
                          clause (iv) thereof).
                              ``(iii) Adjustments.--Information under clause
                          (ii) shall, in accordance with regulations, be
                          actuarially adjusted to reflect significant
                          differences in participants.
                              ``(iv) Limitation.--A change in funding method
                          to use a prior year valuation, as provided in
                          clause (ii), may not be made unless as of the
                          valuation date within the prior plan year, the
                          value of the assets of the plan are not less than
                          125 percent of the plan's current liability (as
                          defined in paragraph (6)(D) without regard to
                          clause (iv) thereof).
                ``(8) Time when certain contributions deemed made.--
            For <<NOTE: Deadline.>> purposes of this section, any
            contributions for a plan year made by an employer after the last
            day of such plan year, but not later than two and one-half
            months after such day, shall be deemed to have been made on such
            last day. For purposes of this subparagraph, such two and one-
            half month period may be extended for not more than six months
            under regulations prescribed by the Secretary.

        ``(d) Extension of Amortization Periods for Multiemployer Plans.--
                ``(1) Automatic extension upon application by certain
            plans.--
                        ``(A) In general.--If the plan sponsor of a
                    multiemployer plan--
                              ``(i) submits to the Secretary an application
                          for an extension of the period of years required
                          to amortize any unfunded liability described in
                          any clause of subsection (b)(2)(B) or described in
                          subsection (b)(4), and
                              ``(ii) includes with the application a
                          certification by the plan's actuary described in
                          subparagraph (B),
                    the Secretary shall extend the amortization period for
                    the period of time (not in excess of 5 years) specified
                    in the application. Such extension shall be in addition
                    to any extension under paragraph (2).
                        ``(B) Criteria.--
                    A <<NOTE: Certification.>> certification with respect to
                    a multiemployer plan is described in this subparagraph
                    if the plan's actuary certifies that, based on
                    reasonable assump- tions--
                              ``(i) absent the extension under subparagraph
                          (A), the plan would have an accumulated funding
                          deficiency in the current plan year or any of the
                          9 succeeding plan years,
                              ``(ii) the plan sponsor has adopted a plan to
                          improve the plan's funding status,
                              ``(iii) the plan is projected to have
                          sufficient assets to timely pay expected benefits
                          and anticipated expenditures over the amortization
                          period as extended, and
                              ``(iv) the notice required under paragraph
                          (3)(A) has been provided.
                        ``(C) Termination.--The preceding provisions of this
                    paragraph shall not apply with respect to any
                    application submitted after December 31, 2014.
                ``(2) Alternative extension.--

    [[Page 120 STAT. 898]]

                        ``(A) In general.--If the plan sponsor of a
                    multiemployer plan submits to the Secretary an
                    application for an extension of the period of years
                    required to amortize any unfunded liability described in
                    any clause of subsection (b)(2)(B) or described in
                    subsection (b)(4), the Secretary may extend the
                    amortization period for a period of time (not in excess
                    of 10 years reduced by the number of years of any
                    extension under paragraph (1) with respect to such
                    unfunded liability) if the Secretary makes the
                    determination described in subparagraph (B). Such
                    extension shall be in addition to any extension under
                    paragraph (1).
                        ``(B) Determination.--The Secretary may grant an
                    extension under subparagraph (A) if the Secretary
                    determines that--
                              ``(i) such extension would carry out the
                          purposes of this Act and would provide adequate
                          protection for participants under the plan and
                          their beneficiaries, and
                              ``(ii) the failure to permit such extension
                          would--
                                        ``(I) result in a substantial risk
                                    to the voluntary continuation of the
                                    plan, or a substantial curtailment of
                                    pension benefit levels or employee
                                    compensation, and
                                        ``(II) be adverse to the interests
                                    of plan participants in the aggregate.
                        ``(C) Action by secretary.--
                    The <<NOTE: Deadline.>> Secretary shall act upon any
                    application for an extension under this paragraph within
                    180 days of the submission of such application. If the
                    Secretary rejects the application for an extension under
                    this paragraph, the Secretary shall provide notice to
                    the plan detailing the specific reasons for the
                    rejection, including references to the criteria set
                    forth above.
                ``(3) Advance notice.--
                        ``(A) In general.--The Secretary shall, before
                    granting an extension under this subsection, require
                    each applicant to provide evidence satisfactory to such
                    Secretary that the applicant has provided notice of the
                    filing of the application for such extension to each
                    affected party (as defined in section 4001(a)(21) of the
                    Employee Retirement Income Security Act of 1974) with
                    respect to the affected plan. Such notice shall include
                    a description of the extent to which the plan is funded
                    for benefits which are guaranteed under title IV of such
                    Act and for benefit liabilities.
                        ``(B) Consideration of relevant information.--The
                    Secretary shall consider any relevant information
                    provided by a person to whom notice was given under
                    paragraph (1).''.

        (b) <<NOTE: 26 USC 431 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after 2007.
                (2) Special rule for certain amortization extensions.--
            If <<NOTE: Deadline. Applicability.>> the Secretary of the
            Treasury grants an extension under section 304 of the Employee
            Retirement Income Security Act of 1974 and section 412(e) of the
            Internal Revenue Code of 1986 with respect to any application
            filed with the Secretary of the Treasury on or before June 30,
            2005, the extension

    [[Page 120 STAT. 899]]

            (and any modification thereof) shall be applied and administered
            under the rules of such sections as in effect before the
            enactment of this Act, including the use of the rate of interest
            determined under section 6621(b) of such Code.

    SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER PLANS IN ENDANGERED
                OR CRITICAL STATUS.

        (a) In General.--Subpart A of part III of subchapter D of chapter 1
    of the Internal Revenue Code of 1986 (as amended by this Act) is amended
    by inserting after section 431 the following new section:

    ``SEC. 432. <<NOTE: 26 USC 432.>> ADDITIONAL FUNDING RULES FOR
                MULTIEMPLOYER PLANS IN ENDANGERED STATUS OR CRITICAL STATUS.

        ``(a) General Rule.--For purposes of this part, in the case of a
    multiemployer plan in effect on July 16, 2006--
                ``(1) if the plan is in endangered status--
                        ``(A) the plan sponsor shall adopt and implement a
                    funding improvement plan in accordance with the
                    requirements of subsection (c), and
                        ``(B) <<NOTE: Applicability.>> the requirements of
                    subsection (d) shall apply during the funding plan
                    adoption period and the funding improvement period, and
                ``(2) if the plan is in critical status--
                        ``(A) the plan sponsor shall adopt and implement a
                    rehabilitation plan in accordance with the requirements
                    of subsection (e), and
                        ``(B) <<NOTE: Applicability.>> the requirements of
                    subsection (f) shall apply during the rehabilitation
                    plan adoption period and the rehabilitation period.

        ``(b) Determination of Endangered and Critical Status.--For purposes
    of this section--
                ``(1) Endangered status.--A multiemployer plan is in
            endangered status for a plan year if, as determined by the plan
            actuary under paragraph (3), the plan is not in critical status
            for the plan year and, as of the beginning of the plan year,
            either--
                        ``(A) the plan's funded percentage for such plan
                    year is less than 80 percent, or
                        ``(B) the plan has an accumulated funding deficiency
                    for such plan year, or is projected to have such an
                    accumulated funding deficiency for any of the 6
                    succeeding plan years, taking into account any extension
                    of amortization periods under section 431(d).
            For purposes of this section, a plan shall be treated as in
            seriously endangered status for a plan year if the plan is
            described in both subparagraphs (A) and (B).
                ``(2) Critical status.--A multiemployer plan is in critical
            status for a plan year if, as determined by the plan actuary
            under paragraph (3), the plan is described in 1 or more of the
            following subparagraphs as of the beginning of the plan year:
                        ``(A) A plan is described in this subparagraph if--
                              ``(i) the funded percentage of the plan is
                          less than 65 percent, and
                              ``(ii) the sum of--
                                        ``(I) the fair market value of plan
                                    assets, plus

    [[Page 120 STAT. 900]]

                                        ``(II) the present value of the
                                    reasonably anticipated employer
                                    contributions for the current plan year
                                    and each of the 6 succeeding plan years,
                                    assuming that the terms of all
                                    collective bargaining agreements
                                    pursuant to which the plan is maintained
                                    for the current plan year continue in
                                    effect for succeeding plan years,
                          is less than the present value of all
                          nonforfeitable benefits projected to be payable
                          under the plan during the current plan year and
                          each of the 6 succeeding plan years (plus
                          administrative expenses for such plan years).
                        ``(B) A plan is described in this subparagraph if--
                              ``(i) the plan has an accumulated funding
                          deficiency for the current plan year, not taking
                          into account any extension of amortization periods
                          under section 431(d), or
                              ``(ii) the plan is projected to have an
                          accumulated funding deficiency for any of the 3
                          succeeding plan years (4 succeeding plan years if
                          the funded percentage of the plan is 65 percent or
                          less), not taking into account any extension of
                          amortization periods under section 431(d).
                        ``(C) A plan is described in this subparagraph if--
                              ``(i)(I) the plan's normal cost for the
                          current plan year, plus interest (determined at
                          the rate used for determining costs under the
                          plan) for the current plan year on the amount of
                          unfunded benefit liabilities under the plan as of
                          the last date of the preceding plan year, exceeds
                              ``(II) the present value of the reasonably
                          anticipated employer and employee contributions
                          for the current plan year,
                              ``(ii) the present value, as of the beginning
                          of the current plan year, of nonforfeitable
                          benefits of inactive participants is greater than
                          the present value of nonforfeitable benefits of
                          active participants, and
                              ``(iii) the plan has an accumulated funding
                          deficiency for the current plan year, or is
                          projected to have such a deficiency for any of the
                          4 succeeding plan years, not taking into account
                          any extension of amortization periods under
                          section 431(d).
                        ``(D) A plan is described in this subparagraph if
                    the sum of--
                              ``(i) the fair market value of plan assets,
                          plus
                              ``(ii) the present value of the reasonably
                          anticipated employer contributions for the current
                          plan year and each of the 4 succeeding plan years,
                          assuming that the terms of all collective
                          bargaining agreements pursuant to which the plan
                          is maintained for the current plan year continue
                          in effect for succeeding plan years,
                    is less than the present value of all benefits projected
                    to be payable under the plan during the current plan
                    year and each of the 4 succeeding plan years (plus
                    administrative expenses for such plan years).
                ``(3) Annual certification by plan actuary.--

    [[Page 120 STAT. 901]]

                        ``(A) In general.--Not <<NOTE: Deadline.>> later
                    than the 90th day of each plan year of a multiemployer
                    plan, the plan actuary shall certify to the Secretary
                    and to the plan sponsor--
                              ``(i) whether or not the plan is in endangered
                          status for such plan year and whether or not the
                          plan is or will be in critical status for such
                          plan year, and
                              ``(ii) in the case of a plan which is in a
                          funding improvement or rehabilitation period,
                          whether or not the plan is making the scheduled
                          progress in meeting the requirements of its
                          funding improvement or rehabilitation plan.
                        ``(B) Actuarial projections of assets and
                    liabilities.--
                              ``(i) In general.--In making the
                          determinations and projections under this
                          subsection, the plan actuary shall make
                          projections required for the current and
                          succeeding plan years of the current value of the
                          assets of the plan and the present value of all
                          liabilities to participants and beneficiaries
                          under the plan for the current plan year as of the
                          beginning of such year. The actuary's projections
                          shall be based on reasonable actuarial estimates,
                          assumptions, and methods that, except as provided
                          in clause (iii), offer the actuary's best estimate
                          of anticipated experience under the plan. The
                          projected present value of liabilities as of the
                          beginning of such year shall be determined based
                          on the most recent of either--
                                        ``(I) the actuarial statement
                                    required under section 103(d) of the
                                    Employee Retirement Income Security Act
                                    of 1974 with respect to the most
                                    recently filed annual report, or
                                        ``(II) the actuarial valuation for
                                    the preceding plan year.
                              ``(ii) Determinations of future
                          contributions.--Any actuarial projection of plan
                          assets shall assume--
                                        ``(I) reasonably anticipated
                                    employer contributions for the current
                                    and succeeding plan years, assuming that
                                    the terms of the one or more collective
                                    bargaining agreements pursuant to which
                                    the plan is maintained for the current
                                    plan year continue in effect for
                                    succeeding plan years, or
                                        ``(II) that employer contributions
                                    for the most recent plan year will
                                    continue indefinitely, but only if the
                                    plan actuary determines there have been
                                    no significant demographic changes that
                                    would make such assumption unreasonable.
                              ``(iii) Projected industry activity.--Any
                          projection of activity in the industry or
                          industries covered by the plan, including future
                          covered employment and contribution levels, shall
                          be based on information provided by the plan
                          sponsor, which shall act reasonably and in good
                          faith.
                        ``(C) Penalty for failure to secure timely actuarial
                    certification.--Any failure of the plan's actuary to
                    certify the plan's status under this subsection by the
                    date specified in subparagraph (A) shall be treated for

    [[Page 120 STAT. 902]]

                    purposes of section 502(c)(2) of the Employee Retirement
                    Income Security Act of 1974 as a failure or refusal by
                    the plan administrator to file the annual report
                    required to be filed with the Secretary under section
                    101(b)(4) of such Act.
                        ``(D) Notice.--
                              ``(i) In general.--In <<NOTE: Deadline.>> any
                          case in which it is certified under subparagraph
                          (A) that a multiemployer plan is or will be in
                          endangered or critical status for a plan year, the
                          plan sponsor shall, not later than 30 days after
                          the date of the certification, provide
                          notification of the endangered or critical status
                          to the participants and beneficiaries, the
                          bargaining parties, the Pension Benefit Guaranty
                          Corporation, and the Secretary of Labor.
                              ``(ii) Plans in critical status.--If it is
                          certified under subparagraph (A) that a
                          multiemployer plan is or will be in critical
                          status, the plan sponsor shall include in the
                          notice under clause (i) an explanation of the
                          possibility that--
                                        ``(I) adjustable benefits (as
                                    defined in subsection (e)(8)) may be
                                    reduced, and
                                        ``(II) such reductions may apply to
                                    participants and beneficiaries whose
                                    benefit commencement date is on or after
                                    the date such notice is provided for the
                                    first plan year in which the plan is in
                                    critical status.
                              ``(iii) Model notice.--The Secretary of Labor
                          shall prescribe a model notice that a
                          multiemployer plan may use to satisfy the
                          requirements under clause (ii).

        ``(c) Funding Improvement Plan Must Be Adopted for Multiemployer
    Plans in Endangered Status.--
                ``(1) <<NOTE: Deadlines.>> In general.--In any case in which
            a multiemployer plan is in endangered status for a plan year,
            the plan sponsor, in accordance with this subsection--
                        ``(A) shall adopt a funding improvement plan not
                    later than 240 days following the required date for the
                    actuarial certification of endangered status under
                    subsection (b)(3)(A), and
                        ``(B) within 30 days after the adoption of the
                    funding improvement plan--
                              ``(i) shall provide to the bargaining parties
                          1 or more schedules showing revised benefit
                          structures, revised contribution structures, or
                          both, which, if adopted, may reasonably be
                          expected to enable the multiemployer plan to meet
                          the applicable benchmarks in accordance with the
                          funding improvement plan, including--
                                        ``(I) one proposal for reductions in
                                    the amount of future benefit accruals
                                    necessary to achieve the applicable
                                    benchmarks, assuming no amendments
                                    increasing contributions under the plan
                                    (other than amendments increasing
                                    contributions necessary to achieve the
                                    applicable benchmarks after amendments
                                    have reduced future benefit accruals to
                                    the maximum extent permitted by law),
                                    and

    [[Page 120 STAT. 903]]

                                        ``(II) one proposal for increases in
                                    contributions under the plan necessary
                                    to achieve the applicable benchmarks,
                                    assuming no amendments reducing future
                                    benefit accruals under the plan, and
                              ``(ii) may, if the plan sponsor deems
                          appropriate, prepare and provide the bargaining
                          parties with additional information relating to
                          contribution rates or benefit reductions,
                          alternative schedules, or other information
                          relevant to achieving the applicable benchmarks in
                          accordance with the funding improvement plan.
                    For purposes of this section, the term `applicable
                    benchmarks' means the requirements applicable to the
                    multiemployer plan under paragraph (3) (as modified by
                    paragraph (5)).
                ``(2) Exception for years after process begins.--Paragraph
            (1) shall not apply to a plan year if such year is in a funding
            plan adoption period or funding improvement period by reason of
            the plan being in endangered status for a preceding plan year.
            For purposes of this section, such preceding plan year shall be
            the initial determination year with respect to the funding
            improvement plan to which it relates.
                ``(3) Funding improvement plan.--For purposes of this
            section--
                        ``(A) In general.--A funding improvement plan is a
                    plan which consists of the actions, including options or
                    a range of options to be proposed to the bargaining
                    parties, formulated to provide, based on reasonably
                    anticipated experience and reasonable actuarial
                    assumptions, for the attainment by the plan during the
                    funding improvement period of the following
                    requirements:
                              ``(i) Increase in plan's funding percentage.--
                          The plan's funded percentage as of the close of
                          the funding improvement period equals or exceeds a
                          percentage equal to the sum of--
                                        ``(I) such percentage as of the
                                    beginning of such period, plus
                                        ``(II) 33 percent of the difference
                                    between 100 percent and the percentage
                                    under subclause (I).
                              ``(ii) Avoidance of accumulated funding
                          deficiencies.--No accumulated funding deficiency
                          for any plan year during the funding improvement
                          period (taking into account any extension of
                          amortization periods under section 304(d)).
                        ``(B) Seriously endangered plans.--In the case of a
                    plan in seriously endangered status, except as provided
                    in paragraph (5), subparagraph (A)(i)(II) shall be
                    applied by substituting `20 percent' for `33 percent'.
                ``(4) Funding improvement period.--For purposes of this
            section--
                        ``(A) In general.--The funding improvement period
                    for any funding improvement plan adopted pursuant to
                    this subsection is the 10-year period beginning on the
                    first day of the first plan year of the multiemployer
                    plan beginning after the earlier of--
                              ``(i) the second anniversary of the date of
                          the adoption of the funding improvement plan, or

    [[Page 120 STAT. 904]]

                              ``(ii) <<NOTE: Expiration date.>> the
                          expiration of the collective bargaining agreements
                          in effect on the due date for the actuarial
                          certification of endangered status for the initial
                          determination year under subsection (b)(3)(A) and
                          covering, as of such due date, at least 75 percent
                          of the active participants in such multiemployer
                          plan.
                        ``(B) <<NOTE: Applicability.>> Seriously endangered
                    plans.--In the case of a plan in seriously endangered
                    status, except as provided in paragraph (5),
                    subparagraph (A) shall be applied by substituting `15-
                    year period' for `10-year period'.
                        ``(C) <<NOTE: Termination dates.>> Coordination with
                    changes in status.--
                              ``(i) Plans no longer in endangered status.--
                          If the plan's actuary certifies under subsection
                          (b)(3)(A) for a plan year in any funding plan
                          adoption period or funding improvement period that
                          the plan is no longer in endangered status and is
                          not in critical status, the funding plan adoption
                          period or funding improvement period, whichever is
                          applicable, shall end as of the close of the
                          preceding plan year.
                              ``(ii) Plans in critical status.--If the
                          plan's actuary certifies under subsection
                          (b)(3)(A) for a plan year in any funding plan
                          adoption period or funding improvement period that
                          the plan is in critical status, the funding plan
                          adoption period or funding improvement period,
                          whichever is applicable, shall end as of the close
                          of the plan year preceding the first plan year in
                          the rehabilitation period with respect to such
                          status.
                        ``(D) Plans in endangered status at end of period.--
                    If the plan's actuary certifies under subsection
                    (b)(3)(A) for the first plan year following the close of
                    the period described in subparagraph (A) that the plan
                    is in endangered status, the provisions of this
                    subsection and subsection (d) shall be applied as if
                    such first plan year were an initial determination year,
                    except that the plan may not be amended in a manner
                    inconsistent with the funding improvement plan in effect
                    for the preceding plan year until a new funding
                    improvement plan is adopted.
                ``(5) Special rules for seriously endangered plans more than
            70 percent funded.--
                        ``(A) In general.--If the funded percentage of a
                    plan in seriously endangered status was more than 70
                    percent as of the beginning of the initial determination
                    year--
                              ``(i) paragraphs (3)(B) and (4)(B) shall apply
                          only if the plan's actuary certifies, within 30
                          days after the certification under subsection
                          (b)(3)(A) for the initial determination year,
                          that, based on the terms of the plan and the
                          collective bargaining agreements in effect at the
                          time of such certification, the plan is not
                          projected to meet the requirements of paragraph
                          (3)(A) (without regard to paragraphs (3)(B) and
                          (4)(B)), and
                              ``(ii) if there is a certification under
                          clause (i), the plan may, in formulating its
                          funding improvement plan, only take into account
                          the rules of paragraph (3)(B) and (4)(B) for plan
                          years in the funding improvement period beginning
                          on or before the date on which

    [[Page 120 STAT. 905]]

                          the last of the collective bargaining agreements
                          described in paragraph (4)(A)(ii) expires.
                        ``(B) Special rule after expiration of agreements.--
                    Notwithstanding subparagraph (A)(ii), if, for any plan
                    year ending after the date described in subparagraph
                    (A)(ii), the plan actuary certifies (at the time of the
                    annual certification under subsection (b)(3)(A) for such
                    plan year) that, based on the terms of the plan and
                    collective bargaining agreements in effect at the time
                    of that annual certification, the plan is not projected
                    to be able to meet the requirements of paragraph (3)(A)
                    (without regard to paragraphs (3)(B) and (4)(B)),
                    paragraphs (3)(B) and (4)(B) shall continue to apply for
                    such year.
                ``(6) Updates to funding improvement plans and schedules.--
                        ``(A) Funding improvement plan.--The plan sponsor
                    shall annually update the funding improvement plan and
                    shall file the update with the plan's annual report
                    under section 104 of the Employee Retirement Income
                    Security Act of 1974.
                        ``(B) Schedules.--The plan sponsor shall annually
                    update any schedule of contribution rates provided under
                    this subsection to reflect the experience of the plan.
                        ``(C) Duration of schedule.--A schedule of
                    contribution rates provided by the plan sponsor and
                    relied upon by bargaining parties in negotiating a
                    collective bargaining agreement shall remain in effect
                    for the duration of that collective bargaining
                    agreement.
                ``(7) Imposition of default schedule where failure to adopt
            funding improvement plan.--
                        ``(A) In general.--If--
                              ``(i) a collective bargaining agreement
                          providing for contributions under a multiemployer
                          plan that was in effect at the time the plan
                          entered endangered status expires, and
                              ``(ii) after receiving one or more schedules
                          from the plan sponsor under paragraph (1)(B), the
                          bargaining parties with respect to such agreement
                          fail to agree on changes to contribution or
                          benefit schedules necessary to meet the applicable
                          benchmarks in accordance with the funding
                          improvement plan,
                    the plan sponsor shall implement the schedule described
                    in paragraph (1)(B)(i)(I) beginning on the date
                    specified in subparagraph (B).
                        ``(B) Date of implementation.--The date specified in
                    this subparagraph is the earlier of the date--
                              ``(i) on which the Secretary of Labor
                          certifies that the parties are at an impasse, or
                              ``(ii) which is 180 days after the date on
                          which the collective bargaining agreement
                          described in subparagraph (A) expires.
                ``(8) Funding plan adoption period.--For purposes of this
            section, the term `funding plan adoption period' means the
            period beginning on the date of the certification under
            subsection (b)(3)(A) for the initial determination year and
            ending on the day before the first day of the funding
            improvement period.

    [[Page 120 STAT. 906]]

        ``(d) Rules for Operation of Plan During Adoption and Improvement
    Periods.--
                ``(1) Special rules for plan adoption period.--During the
            funding plan adoption period--
                        ``(A) the plan sponsor may not accept a collective
                    bargaining agreement or participation agreement with
                    respect to the multiemployer plan that provides for--
                              ``(i) a reduction in the level of
                          contributions for any participants,
                              ``(ii) a suspension of contributions with
                          respect to any period of service, or
                              ``(iii) any new direct or indirect exclusion
                          of younger or newly hired employees from plan
                          participation,
                        ``(B) no amendment of the plan which increases the
                    liabilities of the plan by reason of any increase in
                    benefits, any change in the accrual of benefits, or any
                    change in the rate at which benefits become
                    nonforfeitable under the plan may be adopted unless the
                    amendment is required as a condition of qualification
                    under part I of subchapter D of chapter 1 or to comply
                    with other applicable law, and
                        ``(C) in the case of a plan in seriously endangered
                    status, the plan sponsor shall take all reasonable
                    actions which are consistent with the terms of the plan
                    and applicable law and which are expected, based on
                    reasonable assumptions, to achieve--
                              ``(i) an increase in the plan's funded
                          percentage, and
                              ``(ii) postponement of an accumulated funding
                          deficiency for at least 1 additional plan year.
            Actions under subparagraph (C) include applications for
            extensions of amortization periods under section 431(d), use of
            the shortfall funding method in making funding standard account
            computations, amendments to the plan's benefit structure,
            reductions in future benefit accruals, and other reasonable
            actions consistent with the terms of the plan and applicable
            law.
                ``(2) Compliance with funding improvement plan.--
                        ``(A) In general.--A plan may not be amended after
                    the date of the adoption of a funding improvement plan
                    so as to be inconsistent with the funding improvement
                    plan.
                        ``(B) No reduction in contributions.--A plan sponsor
                    may not during any funding improvement period accept a
                    collective bargaining agreement or participation
                    agreement with respect to the multiemployer plan that
                    provides for--
                              ``(i) a reduction in the level of
                          contributions for any participants,
                              ``(ii) a suspension of contributions with
                          respect to any period of service, or
                              ``(iii) any new direct or indirect exclusion
                          of younger or newly hired employees from plan
                          participation.
                        ``(C) Special rules for benefit increases.--A plan
                    may not be amended after the date of the adoption of

    [[Page 120 STAT. 907]]

                    a funding improvement plan so as to increase benefits,
                    including future benefit accruals, unless the plan
                    actuary certifies that the benefit increase is
                    consistent with the funding improvement plan and is paid
                    for out of contributions not required by the funding
                    improvement plan to meet the applicable benchmark in
                    accordance with the schedule contemplated in the funding
                    improvement plan.

        ``(e) Rehabilitation Plan Must Be Adopted for Multiemployer Plans in
    Critical Status.--
                ``(1) <<NOTE: Deadlines.>> In general.--In any case in which
            a multiemployer plan is in critical status for a plan year, the
            plan sponsor, in accordance with this subsection--
                        ``(A) shall adopt a rehabilitation plan not later
                    than 240 days following the required date for the
                    actuarial certification of critical status under
                    subsection (b)(3)(A), and
                        ``(B) within 30 days after the adoption of the
                    rehabilitation plan--
                              ``(i) shall provide to the bargaining parties
                          1 or more schedules showing revised benefit
                          structures, revised contribution structures, or
                          both, which, if adopted, may reasonably be
                          expected to enable the multiemployer plan to
                          emerge from critical status in accordance with the
                          rehabilitation plan, and
                              ``(ii) may, if the plan sponsor deems
                          appropriate, prepare and provide the bargaining
                          parties with additional information relating to
                          contribution rates or benefit reductions,
                          alternative schedules, or other information
                          relevant to emerging from critical status in
                          accordance with the rehabilitation plan.
            The schedule or schedules described in subparagraph (B)(i) shall
            reflect reductions in future benefit accruals and adjustable
            benefits, and increases in contributions, that the plan sponsor
            determines are reasonably necessary to emerge from critical
            status. One schedule shall be designated as the default schedule
            and such schedule shall assume that there are no increases in
            contributions under the plan other than the increases necessary
            to emerge from critical status after future benefit accruals and
            other benefits (other than benefits the reduction or elimination
            of which are not permitted under section 411(d)(6)) have been
            reduced to the maximum extent permitted by law.
                ``(2) Exception for years after process begins.--Paragraph
            (1) shall not apply to a plan year if such year is in a
            rehabilitation plan adoption period or rehabilitation period by
            reason of the plan being in critical status for a preceding plan
            year. For purposes of this section, such preceding plan year
            shall be the initial critical year with respect to the
            rehabilitation plan to which it relates.
                ``(3) Rehabilitation plan.--For purposes of this section--
                        ``(A) In general.--A rehabilitation plan is a plan
                    which consists of--
                              ``(i) actions, including options or a range of
                          options to be proposed to the bargaining parties,
                          formulated, based on reasonably anticipated
                          experience and reasonable actuarial assumptions,
                          to enable the plan to cease to be in critical
                          status by the end of the rehabilitation period and
                          may include reductions in plan expenditures

    [[Page 120 STAT. 908]]

                          (including plan mergers and consolidations),
                          reductions in future benefit accruals or increases
                          in contributions, if agreed to by the bargaining
                          parties, or any combination of such actions, or
                              ``(ii) if the plan sponsor determines that,
                          based on reasonable actuarial assumptions and upon
                          exhaustion of all reasonable measures, the plan
                          can not reasonably be expected to emerge from
                          critical status by the end of the rehabilitation
                          period, reasonable measures to emerge from
                          critical status at a later time or to forestall
                          possible insolvency (within the meaning of section
                          4245 of the Employee Retirement Income Security
                          Act of 1974).
                    A rehabilitation plan must provide annual standards for
                    meeting the requirements of such rehabilitation plan.
                    Such plan shall also include the schedules required to
                    be provided under paragraph (1)(B)(i) and if clause (ii)
                    applies, shall set forth the alternatives considered,
                    explain why the plan is not reasonably expected to
                    emerge from critical status by the end of the
                    rehabilitation period, and specify when, if ever, the
                    plan is expected to emerge from critical status in
                    accordance with the rehabilitation plan.
                        ``(B) Updates to rehabilitation plan and
                    schedules.--
                              ``(i) Rehabilitation plan.--The plan sponsor
                          shall annually update the rehabilitation plan and
                          shall file the update with the plan's annual
                          report under section 104 of the Employee
                          Retirement Income Security Act of 1974.
                              ``(ii) Schedules.--The plan sponsor shall
                          annually update any schedule of contribution rates
                          provided under this subsection to reflect the
                          experience of the plan.
                              ``(iii) Duration of schedule.--A schedule of
                          contribution rates provided by the plan sponsor
                          and relied upon by bargaining parties in
                          negotiating a collective bargaining agreement
                          shall remain in effect for the duration of that
                          collective bargaining agreement.
                        ``(C) Imposition of default schedule where failure
                    to adopt rehabilitation plan.--
                              ``(i) In general.--If--
                                        ``(I) a collective bargaining
                                    agreement providing for contributions
                                    under a multiemployer plan that was in
                                    effect at the time the plan entered
                                    critical status expires, and
                                        ``(II) after receiving one or more
                                    schedules from the plan sponsor under
                                    paragraph (1)(B), the bargaining parties
                                    with respect to such agreement fail to
                                    adopt a contribution or benefit
                                    schedules with terms consistent with the
                                    rehabilitation plan and the schedule
                                    from the plan sponsor under paragraph
                                    (1)(B)(i),
                          the plan sponsor shall implement the default
                          schedule described in the last sentence of
                          paragraph (1) beginning on the date specified in
                          clause (ii).
                              ``(ii) Date of implementation.--The date
                          specified in this clause is the earlier of the
                          date--

    [[Page 120 STAT. 909]]

                                        ``(I) on which the Secretary of
                                    Labor certifies that the parties are at
                                    an impasse, or
                                        ``(II) which is 180 days after the
                                    date on which the collective bargaining
                                    agreement described in clause (i)
                                    expires.
                ``(4) Rehabilitation period.--For purposes of this sec-
            tion--
                        ``(A) In general.--The rehabilitation period for a
                    plan in critical status is the 10-year period beginning
                    on the first day of the first plan year of the
                    multiemployer plan following the earlier of--
                              ``(i) the second anniversary of the date of
                          the adoption of the rehabilitation plan, or
                              ``(ii) the expiration of the collective
                          bargaining agreements in effect on the date of the
                          due date for the actuarial certification of
                          critical status for the initial critical year
                          under subsection (a)(1) and covering, as of such
                          date at least 75 percent of the active
                          participants in such multiemployer plan.
                    If a plan emerges from critical status as provided under
                    subparagraph (B) before the end of such 10-year period,
                    the rehabilitation period shall end with the plan year
                    preceding the plan year for which the determination
                    under subparagraph (B) is made.
                        ``(B) Emergence.--A plan in critical status shall
                    remain in such status until a plan year for which the
                    plan actuary certifies, in accordance with subsection
                    (b)(3)(A), that the plan is not projected to have an
                    accumulated funding deficiency for the plan year or any
                    of the 9 succeeding plan years, without regard to the
                    use of the shortfall method and taking into account any
                    extension of amortization periods under section 431(d).
                ``(5) Rehabilitation plan adoption period.--For purposes of
            this section, the term `rehabilitation plan adoption period'
            means the period beginning on the date of the certification
            under subsection (b)(3)(A) for the initial critical year and
            ending on the day before the first day of the rehabilitation
            period.
                ``(6) Limitation on reduction in rates of future accruals.--
            Any reduction in the rate of future accruals under the default
            schedule described in paragraph (1)(B)(i) shall not reduce the
            rate of future accruals below--
                        ``(A) a monthly benefit (payable as a single life
                    annuity commencing at the participant's normal
                    retirement age) equal to 1 percent of the contributions
                    required to be made with respect to a participant, or
                    the equivalent standard accrual rate for a participant
                    or group of participants under the collective bargaining
                    agreements in effect as of the first day of the initial
                    critical year, or
                        ``(B) if lower, the accrual rate under the plan on
                    such first day.
            The equivalent standard accrual rate shall be determined by the
            plan sponsor based on the standard or average contribution base
            units which the plan sponsor determines to be representative for
            active participants and such other factors as the plan sponsor
            determines to be relevant. Nothing in this paragraph shall be
            construed as limiting the ability of the plan sponsor to prepare
            and provide the bargaining parties with alternative

    [[Page 120 STAT. 910]]

            schedules to the default schedule that established lower or
            higher accrual and contribution rates than the rates otherwise
            described in this paragraph.
                ``(7) Automatic employer surcharge.--
                        ``(A) Imposition of surcharge.--Each employer
                    otherwise obligated to make a contribution for the
                    initial critical year shall be obligated to pay to the
                    plan for such year a surcharge equal to 5 percent of the
                    contribution otherwise required under the applicable
                    collective bargaining agreement (or other agreement
                    pursuant to which the employer contributes). For each
                    succeeding plan year in which the plan is in critical
                    status for a consecutive period of years beginning with
                    the initial critical year, the surcharge shall be 10
                    percent of the contribution otherwise so required.
                        ``(B) Enforcement of surcharge.--The surcharges
                    under subparagraph (A) shall be due and payable on the
                    same schedule as the contributions on which the
                    surcharges are based. Any failure to make a surcharge
                    payment shall be treated as a delinquent contribution
                    under section 515 of the Employee Retirement Income
                    Security Act of 1974 and shall be enforceable as such.
                        ``(C) Surcharge to terminate upon collective
                    bargaining agreement renegotiation.--
                    The <<NOTE: Termination date.>> surcharge under this
                    paragraph shall cease to be effective with respect to
                    employees covered by a collective bargaining agreement
                    (or other agreement pursuant to which the employer
                    contributes), beginning on the effective date of a
                    collective bargaining agreement (or other such
                    agreement) that includes terms consistent with a
                    schedule presented by the plan sponsor under paragraph
                    (1)(B)(i), as modified under subparagraph (B) of
                    paragraph (3).
                        ``(D) Surcharge not to apply until employer receives
                    notice.--The <<NOTE: Effective date.>> surcharge under
                    this paragraph shall not apply to an employer until 30
                    days after the employer has been notified by the plan
                    sponsor that the plan is in critical status and that the
                    surcharge is in effect.
                        ``(E) Surcharge not to generate increased benefit
                    accruals.--Notwithstanding any provision of a plan to
                    the contrary, the amount of any surcharge under this
                    paragraph shall not be the basis for any benefit accrual
                    under the plan.
                ``(8) Benefit adjustments.--
                        ``(A) Adjustable benefits.--
                              ``(i) In general.--Notwithstanding section
                          204(g), the plan sponsor shall, subject to the
                          notice requirement under subparagraph (C), make
                          any reductions to adjustable benefits which the
                          plan sponsor deems appropriate, based upon the
                          outcome of collective bargaining over the schedule
                          or schedules provided under paragraph (1)(B)(i).
                              ``(ii) Exception for retirees.--Except in the
                          case of adjustable benefits described in clause
                          (iv)(III), the plan sponsor of a plan in critical
                          status shall not reduce adjustable benefits of any
                          participant or beneficiary whose benefit
                          commencement date is before the date on which the
                          plan provides notice to the participant

    [[Page 120 STAT. 911]]

                          or beneficiary under subsection (b)(3)(D) for the
                          initial critical year.
                              ``(iii) Plan sponsor flexibility.--The plan
                          sponsor shall include in the schedules provided to
                          the bargaining parties an allowance for funding
                          the benefits of participants with respect to whom
                          contributions are not currently required to be
                          made, and shall reduce their benefits to the
                          extent permitted under this title and considered
                          appropriate by the plan sponsor based on the
                          plan's then current overall funding status.
                              ``(iv) Adjustable benefit defined.--For
                          purposes of this paragraph, the term `adjustable
                          benefit' means--
                                        ``(I) benefits, rights, and features
                                    under the plan, including post-
                                    retirement death benefits, 60-month
                                    guarantees, disability benefits not yet
                                    in pay status, and similar benefits,
                                        ``(II) any early retirement benefit
                                    or retirement-type subsidy (within the
                                    meaning of section 411(d)(6)(B)(i)) and
                                    any benefit payment option (other than
                                    the qualified joint and survivor
                                    annuity), and
                                        ``(III) benefit increases that would
                                    not be eligible for a guarantee under
                                    section 4022A of the Employee Retirement
                                    Income Security Act of 1974 on the first
                                    day of initial critical year because the
                                    increases were adopted (or, if later,
                                    took effect) less than 60 months before
                                    such first day.
                        ``(B) Normal retirement benefits protected.--Except
                    as provided in subparagraph (A)(iv)(III), nothing in
                    this paragraph shall be construed to permit a plan to
                    reduce the level of a participant's accrued benefit
                    payable at normal retirement age.
                        ``(C) Notice requirements.--
                              ``(i) In general.--No reduction may be made to
                          adjustable benefits under subparagraph (A) unless
                          notice of such reduction has been given at least
                          30 days before the general effective date of such
                          reduction for all participants and beneficiaries
                          to--
                                        ``(I) plan participants and
                                    beneficiaries,
                                        ``(II) each employer who has an
                                    obligation to contribute (within the
                                    meaning of section 4212(a)) under the
                                    plan, and
                                        ``(III) each employee organization
                                    which, for purposes of collective
                                    bargaining, represents plan participants
                                    employed by such an employer.
                              ``(ii) Content of notice.--The notice under
                          clause (i) shall contain--
                                        ``(I) sufficient information to
                                    enable participants and beneficiaries to
                                    understand the effect of any reduction
                                    on their benefits, including an estimate
                                    (on an annual or monthly basis) of any
                                    affected adjustable benefit that a
                                    participant or beneficiary would
                                    otherwise have been eligible for as of
                                    the general effective date described in
                                    clause (i), and

    [[Page 120 STAT. 912]]

                                        ``(II) information as to the rights
                                    and remedies of plan participants and
                                    beneficiaries as well as how to contact
                                    the Department of Labor for further
                                    information and assistance where
                                    appropriate.
                              ``(iii) Form and manner.--Any notice under
                          clause (i)--
                                        ``(I) shall be provided in a form
                                    and manner prescribed in regulations of
                                    the Secretary of Labor,
                                        ``(II) shall be written in a manner
                                    so as to be understood by the average
                                    plan participant, and
                                        ``(III) may be provided in written,
                                    electronic, or other appropriate form to
                                    the extent such form is reasonably
                                    accessible to persons to whom the notice
                                    is required to be provided.
                          The Secretary of Labor shall in the regulations
                          prescribed under subclause (I) establish a model
                          notice that a plan sponsor may use to meet the
                          requirements of this subparagraph.
                ``(9) Adjustments disregarded in withdrawal liability
            determination.--
                        ``(A) Benefit reductions.--Any benefit reductions
                    under this subsection shall be disregarded in
                    determining a plan's unfunded vested benefits for
                    purposes of determining an employer's withdrawal
                    liability under section 4201 of the Employee Retirement
                    Income Security Act of 1974.
                        ``(B) Surcharges.--Any surcharges under paragraph
                    (7) shall be disregarded in determining an employer's
                    withdrawal liability under section 4211 of such Act,
                    except for purposes of determining the unfunded vested
                    benefits attributable to an employer under section
                    4211(c)(4) of such Act or a comparable method approved
                    under section 4211(c)(5) of such Act.
                        ``(C) Simplified calculations.--
                    The <<NOTE: Applicability.>> Pension Benefit Guaranty
                    Corporation shall prescribe simplified methods for the
                    application of this paragraph in determining withdrawal
                    liability.

        ``(f) Rules for Operation of Plan During Adoption and Rehabilitation
    Period.--
                ``(1) Compliance with rehabilitation plan.--
                        ``(A) In general.--A plan may not be amended after
                    the date of the adoption of a rehabilitation plan under
                    subsection (e) so as to be inconsistent with the
                    rehabilitation plan.
                        ``(B) Special rules for benefit increases.--A plan
                    may not be amended after the date of the adoption of a
                    rehabilitation plan under subsection (e) so as to
                    increase benefits, including future benefit accruals,
                    unless the plan actuary certifies that such increase is
                    paid for out of additional contributions not
                    contemplated by the rehabilitation plan, and, after
                    taking into account the benefit increase, the
                    multiemployer plan still is reasonably expected to
                    emerge from critical status by the end of the
                    rehabilitation period on the schedule contemplated in
                    the rehabilitation plan.
                ``(2) Restriction on lump sums and similar benefits.--

    [[Page 120 STAT. 913]]

                        ``(A) In general.--Effective <<NOTE: Effective
                    date.>> on the date the notice of certification of the
                    plan's critical status for the initial critical year
                    under subsection (b)(3)(D) is sent, and notwithstanding
                    section 411(d)(6), the plan shall not pay--
                              ``(i) any payment, in excess of the monthly
                          amount paid under a single life annuity (plus any
                          social security supplements described in the last
                          sentence of section 411(b)(1)(A)),
                              ``(ii) any payment for the purchase of an
                          irrevocable commitment from an insurer to pay
                          benefits, and
                              ``(iii) any other payment specified by the
                          Secretary by regulations.
                        ``(B) Exception.--Subparagraph (A) shall not apply
                    to a benefit which under section 411(a)(11) may be
                    immediately distributed without the consent of the
                    participant or to any makeup payment in the case of a
                    retroactive annuity starting date or any similar payment
                    of benefits owed with respect to a prior period.
                ``(3) Adjustments disregarded in withdrawal liability
            determination.--Any benefit reductions under this subsection
            shall be disregarded in determining a plan's unfunded vested
            benefits for purposes of determining an employer's withdrawal
            liability under section 4201 of the Employee Retirement Income
            Security Act of 1974.
                ``(4) Special rules for plan adoption period.--During the
            rehabilitation plan adoption period--
                        ``(A) the plan sponsor may not accept a collective
                    bargaining agreement or participation agreement with
                    respect to the multiemployer plan that provides for--
                              ``(i) a reduction in the level of
                          contributions for any participants,
                              ``(ii) a suspension of contributions with
                          respect to any period of service, or
                              ``(iii) any new direct or indirect exclusion
                          of younger or newly hired employees from plan
                          participation, and
                        ``(B) no amendment of the plan which increases the
                    liabilities of the plan by reason of any increase in
                    benefits, any change in the accrual of benefits, or any
                    change in the rate at which benefits become
                    nonforfeitable under the plan may be adopted unless the
                    amendment is required as a condition of qualification
                    under part I of subchapter D of chapter 1 or to comply
                    with other applicable law.

        ``(g) Expedited Resolution of Plan Sponsor Decisions.--
    If, <<NOTE: Deadline.>> within 60 days of the due date for adoption of a
    funding improvement plan or a rehabilitation plan under subsection (e),
    the plan sponsor of a plan in endangered status or a plan in critical
    status has not agreed on a funding improvement plan or rehabilitation
    plan, then any member of the board or group that constitutes the plan
    sponsor may require that the plan sponsor enter into an expedited
    dispute resolution procedure for the development and adoption of a
    funding improvement plan or rehabilitation plan.

        ``(h) Nonbargained Participation.--
                ``(1) Both bargained and nonbargained employee-
            participants.--In the case of an employer that contributes to a
            multiemployer plan with respect to both employees who are
            covered by one or more collective bargaining agreements

    [[Page 120 STAT. 914]]

            and employees who are not so covered, if the plan is in
            endangered status or in critical status, benefits of and
            contributions for the nonbargained employees, including
            surcharges on those contributions, shall be determined as if
            those nonbargained employees were covered under the first to
            expire of the employer's collective bargaining agreements in
            effect when the plan entered endangered or critical status.
                ``(2) Nonbargained employees only.--In the case of an
            employer that contributes to a multiemployer plan only with
            respect to employees who are not covered by a collective
            bargaining agreement, this section shall be applied as if the
            employer were the bargaining party, and its participation
            agreement with the plan were a collective bargaining agreement
            with a term ending on the first day of the plan year beginning
            after the employer is provided the schedule or schedules
            described in subsections (c) and (e).

        ``(i) Definitions; Actuarial Method.--For purposes of this section--
                ``(1) Bargaining party.--The term `bargaining party' means--
                        ``(A)(i) except as provided in clause (ii), an
                    employer who has an obligation to contribute under the
                    plan; or
                        ``(ii) in the case of a plan described under section
                    404(c), or a continuation of such a plan, the
                    association of employers that is the employer settlor of
                    the plan; and
                        ``(B) an employee organization which, for purposes
                    of collective bargaining, represents plan participants
                    employed by an employer who has an obligation to
                    contribute under the plan.
                ``(2) Funded percentage.--The term `funded percentage' means
            the percentage equal to a fraction--
                        ``(A) the numerator of which is the value of the
                    plan's assets, as determined under section 431(c)(2),
                    and
                        ``(B) the denominator of which is the accrued
                    liability of the plan, determined using actuarial
                    assumptions described in section 431(c)(3).
                ``(3) Accumulated funding deficiency.--The term `accumulated
            funding deficiency' has the meaning given such term in section
            412(a).
                ``(4) Active participant.--The term `active participant'
            means, in connection with a multiemployer plan, a participant
            who is in covered service under the plan.
                ``(5) Inactive participant.--The term `inactive participant'
            means, in connection with a multiemployer plan, a participant,
            or the beneficiary or alternate payee of a participant, who--
                        ``(A) is not in covered service under the plan, and
                        ``(B) is in pay status under the plan or has a
                    nonforfeitable right to benefits under the plan.
                ``(6) Pay status.--A person is in pay status under a
            multiemployer plan if--
                        ``(A) at any time during the current plan year, such
                    person is a participant or beneficiary under the plan
                    and is paid an early, late, normal, or disability
                    retirement benefit under the plan (or a death benefit
                    under the plan related to a retirement benefit), or

    [[Page 120 STAT. 915]]

                        ``(B) to the extent provided in regulations of the
                    Secretary, such person is entitled to such a benefit
                    under the plan.
                ``(7) Obligation to contribute.--The term `obligation to
            contribute' has the meaning given such term under section
            4212(a) of the Employee Retirement Income Security Act of 1974.
                ``(8) Actuarial method.--Notwithstanding any other provision
            of this section, the actuary's determinations with respect to a
            plan's normal cost, actuarial accrued liability, and
            improvements in a plan's funded percentage under this section
            shall be based upon the unit credit funding method (whether or
            not that method is used for the plan's actuarial valuation).
                ``(9) Plan sponsor.--In the case of a plan described under
            section 404(c), or a continuation of such a plan, the term `plan
            sponsor' means the bargaining parties described under paragraph
            (1).
                ``(10) Benefit commencement date.--The term `benefit
            commencement date' means the annuity starting date (or in the
            case of a retroactive annuity starting date, the date on which
            benefit payments begin).''

        (b) Excise Taxes on Failures Relating to Multiemployer Plans in
    Endangered or Critical Status.--
                (1) In general.--Section 4971 of the Internal Revenue Code
            of 1986 <<NOTE: 26 USC 4971.>> is amended by redesignating
            subsection (g) as subsection (h) and by inserting after
            subsection (f) the following:

        ``(g) Multiemployer Plans in Endangered or Critical Status.--
                ``(1) In general.--Except as provided in this subsection--
                        ``(A) no tax shall be imposed under this section for
                    a taxable year with respect to a multiemployer plan if,
                    for the plan years ending with or within the taxable
                    year, the plan is in critical status pursuant to section
                    432, and
                        ``(B) any tax imposed under this subsection for a
                    taxable year with respect to a multiemployer plan if,
                    for the plan years ending with or within the taxable
                    year, the plan is in endangered status pursuant to
                    section 432 shall be in addition to any other tax
                    imposed by this section.
                ``(2) Failure to comply with funding improvement or
            rehabilitation plan.--
                        ``(A) In general.--If any funding improvement plan
                    or rehabilitation plan in effect under section 432 with
                    respect to a multiemployer plan requires an employer to
                    make a contribution to the plan, there is hereby imposed
                    a tax on each failure of the employer to make the
                    required contribution within the time required under
                    such plan.
                        ``(B) Amount of tax.--The amount of the tax imposed
                    by subparagraph (A) shall be equal to the amount of the
                    required contribution the employer failed to make in a
                    timely manner.
                        ``(C) Liability for tax.--The tax imposed by
                    subparagraph (A) shall be paid by the employer
                    responsible for contributing to or under the
                    rehabilitation plan which fails to make the
                    contribution.
                ``(3) Failure to meet requirements for plans in endangered
            or critical status.--If--

    [[Page 120 STAT. 916]]

                        ``(A) a plan which is in seriously endangered status
                    fails to meet the applicable benchmarks by the end of
                    the funding improvement period, or
                        ``(B) a plan which is in critical status either--
                              ``(i) fails to meet the requirements of
                          section 432(e) by the end of the rehabilitation
                          period, or
                              ``(ii) has received a certification under
                          section 432(b)(3)(A)(ii) for 3 consecutive plan
                          years that the plan is not making the scheduled
                          progress in meeting its requirements under the
                          rehabilitation plan,
                    the plan shall be treated as having an accumulated
                    funding deficiency for purposes of this section for the
                    last plan year in such funding improvement,
                    rehabilitation, or 3-consecutive year period (and each
                    succeeding plan year until such benchmarks or
                    requirements are met) in an amount equal to the greater
                    of the amount of the contributions necessary to meet
                    such benchmarks or requirements or the amount of such
                    accumulated funding deficiency without regard to this
                    paragraph.
                ``(4) Failure to adopt rehabilitation plan.--
                        ``(A) In general.--In the case of a multiemployer
                    plan which is in critical status, there is hereby
                    imposed a tax on the failure of such plan to adopt a
                    rehabilitation plan within the time prescribed under
                    section 432.
                        ``(B) Amount of tax.--The amount of the tax imposed
                    under subparagraph (A) with respect to any plan sponsor
                    for any taxable year shall be the greater of--
                              ``(i) the amount of tax imposed under
                          subsection (a) for the taxable year (determined
                          without regard to this subsection), or
                              ``(ii) the amount equal to $1,100 multiplied
                          by the number of days during the taxable year
                          which are included in the period beginning on the
                          first day of the 240-day period described in
                          section 432(e)(1)(A) and ending on the day on
                          which the rehabilitation plan is adopted.
                        ``(C) Liability for tax.--
                              ``(i) In general.--The tax imposed by
                          subparagraph (A) shall be paid by each plan
                          sponsor.
                              ``(ii) Plan sponsor.--For purposes of clause
                          (i), the term `plan sponsor' in the case of a
                          multiemployer plan means the association,
                          committee, joint board of trustees, or other
                          similar group of representatives of the parties
                          who establish or maintain the plan.
                ``(5) Waiver.--In the case of a failure described in
            paragraph (2) or (3) which is due to reasonable cause and not to
            willful neglect, the Secretary may waive part or all of the tax
            imposed by this subsection. For purposes of this paragraph,
            reasonable cause includes unanticipated and material market
            fluctuations, the loss of a significant contributing employer,
            or other factors to the extent that the payment of tax under
            this subsection with respect to the failure would be excessive
            or otherwise inequitable relative to the failure involved.
                ``(6) Terms used in section 432.--For purposes of this
            subsection, any term used in this subsection which is also used
            in section 432 shall have the meaning given such term by section
            432.''.

    [[Page 120 STAT. 917]]

                (2) Controlled groups.--Section 4971(c)(2) <<NOTE: 26 USC
            4971.>> of such Code is amended--
                        (A) by striking ``In the case of a plan other than a
                    multiemployer plan, if the'' and inserting ``If an'',
                    and
                        (B) by striking ``or (f)'' and inserting ``(f), or
                    (g)''.

        (c) No Additional Contribution Required.--Section 412(b) of the
    Internal Revenue Code of 1986, <<NOTE: 26 USC 412.>> as amended by this
    Act, is amended by adding at the end the following new paragraph:
                ``(3) Multiemployer plans in critical status.--Paragraph (1)
            shall not apply in the case of a multiemployer plan for any plan
            year in which the plan is in critical status pursuant to section
            432. This paragraph shall only apply if the plan adopts a
            rehabilitation plan in accordance with section 432(e) and
            complies with such rehabilitation plan (and any modifications of
            the plan).''.

        (d) Clerical Amendment.--The table of sections for subpart A of part
    III of subchapter D of chapter 1 of such Code is amended by adding at
    the end the following new item:

    ``Sec. 432. Additional funding rules for multiemployer plans in
               endangered status or critical status.''.

        (e) <<NOTE: 26 USC 412 note.>> Effective Dates.--
                (1) In general.--The amendments made by this section shall
            apply with respect to plan years beginning after 2007.
                (2) Special rule for certain notices.--In any case in which
            a plan's actuary certifies that it is reasonably expected that a
            multiemployer plan will be in critical status under section
            305(b)(3) of the Employee Retirement Income Security Act of
            1974, as added by this section, with respect to the first plan
            year beginning after 2007, the notice required under
            subparagraph (D) of such section may be provided at any time
            after the date of enactment, so long as it is provided on or
            before the last date for providing the notice under such
            subparagraph.
                (3) Special rule for certain restored benefits.--In the case
            of a multiemployer plan--
                        (A) with respect to which benefits were reduced
                    pursuant to a plan amendment adopted on or after January
                    1, 2002, and before June 30, 2005, and
                        (B) which, pursuant to the plan document, the trust
                    agreement, or a formal written communication from the
                    plan sponsor to participants provided before June 30,
                    2005, provided for the restoration of such benefits,
            the amendments made by this section shall not apply to such
            benefit restorations to the extent that any restriction on the
            providing or accrual of such benefits would otherwise apply by
            reason of such amendments.

    SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MULTIEMPLOYER PLANS.

        (a) Advance Determination of Impending Insolvency Over 5 Years.--
    Section 418E(d)(1) of the Internal Revenue Code of 1986 is amended--
                (1) by striking ``3 plan years'' the second place it appears
            and inserting ``5 plan years''; and
                (2) by adding at the end the following new sentence: ``If
            the plan sponsor makes such a determination that the plan will
            be insolvent in any of the next 5 plan years, the plan

    [[Page 120 STAT. 918]]

            sponsor shall make the comparison under this paragraph at least
            annually until the plan sponsor makes a determination that the
            plan will not be insolvent in any of the next 5 plan years.''.

        (b) <<NOTE: 26 USC 418E note.>> Effective Date.--The amendments made
    by this section shall apply with respect to the determinations made in
    plan years beginning after 2007.

    SEC. 214. <<NOTE: 26 USC 4971 note.>> EXEMPTION FROM EXCISE TAXES FOR
                CERTAIN MULTIEMPLOYER PENSION PLANS.

        (a) In General.--Notwithstanding any other provision of law, no tax
    shall be imposed under subsection (a) or (b) of section 4971 of the
    Internal Revenue Code of 1986 with respect to any accumulated funding
    deficiency of a plan described in subsection (b) of this section for any
    taxable year beginning before the earlier of--
                (1) the taxable year in which the plan sponsor adopts a
            rehabilitation plan under section 305(e) of the Employee
            Retirement Income Security Act of 1974 and section 432(e) of
            such Code (as added by this Act); or
                (2) the taxable year that contains January 1, 2009.

        (b) Plan Described.--A plan described under this subsection is a
    multiemployer pension plan--
                (1) with less than 100 participants;
                (2) with respect to which the contributing employers
            participated in a Federal fishery capacity reduction program;
                (3) with respect to which employers under the plan
            participated in the Northeast Fisheries Assistance Program; and
                (4) with respect to which the annual normal cost is less
            than $100,000 and the plan is experiencing a funding deficiency
            on the date of enactment of this Act.

                 Subtitle C--Sunset of Additional Funding Rules

    SEC. 221. SUNSET OF ADDITIONAL FUNDING RULES.

        (a) Report.--Not later than December 31, 2011, the Secretary of
    Labor, the Secretary of the Treasury, and the Executive Director of the
    Pension Benefit Guaranty Corporation shall conduct a study of the effect
    of the amendments made by this subtitle on the operation and funding
    status of multiemployer plans and shall report the results of such
    study, including any recommendations for legislation, to the Congress.
        (b) Matters Included in Study.--The study required under subsection
    (a) shall include--
                (1) the effect of funding difficulties, funding rules in
            effect before the date of the enactment of this Act, and the
            amendments made by this subtitle on small businesses
            participating in multiemployer plans,
                (2) the effect on the financial status of small employers
            of--
                        (A) funding targets set in funding improvement and
                    rehabilitation plans and associated contribution
                    increases,
                        (B) funding deficiencies,
                        (C) excise taxes,
                        (D) withdrawal liability,

    [[Page 120 STAT. 919]]

                        (E) the possibility of alternative schedules and
                    procedures for financially troubled employers, and
                        (F) other aspects of the multiemployer system, and
                (3) the role of the multiemployer pension plan system in
            helping small employers to offer pension benefits.

        (c) <<NOTE: 26 USC 412 note.>> Sunset.--
                (1) In general.--Except as provided in this subsection,
            notwithstanding any other provision of this Act, the provisions
            of, and the amendments made by, sections 201(b), 202, and 212
            shall not apply to plan years beginning after December 31, 2014.
                (2) Funding improvement and rehabilitation plans.--If a plan
            is operating under a funding improvement or rehabilitation plan
            under section 305 of such Act or 432 of such Code for its last
            year beginning before January 1, 2015, such plan shall continue
            to operate under such funding improvement or rehabilitation plan
            during any period after December 31, 2014, such funding
            improvement or rehabilitation plan is in effect and all
            provisions of such Act or Code relating to the operation of such
            funding improvement or rehabilitation plan shall continue in
            effect during such period.

                      TITLE III--INTEREST RATE ASSUMPTIONS

    SEC. 301. EXTENSION OF REPLACEMENT OF 30-YEAR TREASURY RATES.

        (a) Amendments of ERISA.--
                (1) Determination of range.--Subclause (II) of section
            302(b)(5)(B)(ii) of the Employee Retirement Income Security Act
            of 1974 <<NOTE: 29 USC 1082.>> is amended--
                        (A) by striking ``2006'' and inserting ``2008'', and
                        (B) by striking ``and 2005'' in the heading and
                    inserting ``, 2005, 2006, and 2007''.
                (2) Determination of current liability.--Subclause (IV) of
            section 302(d)(7)(C)(i) of such Act is amended--
                        (A) by striking ``or 2005'' and inserting ``, 2005,
                    2006, or 2007'', and
                        (B) by striking ``and 2005'' in the heading and
                    inserting ``, 2005, 2006, and 2007''.
                (3) PBGC premium rate.--Subclause (V) of section
            4006(a)(3)(E)(iii) of such Act <<NOTE: 29 USC 1306.>> is amended
            by striking ``2006'' and inserting ``2008''.

        (b) Amendments of Internal Revenue Code.--
                (1) Determination of range.--Subclause (II) of section
            412(b)(5)(B)(ii) of the Internal Revenue Code of 1986 <<NOTE: 26
            USC 412.>> is amended--
                        (A) by striking ``2006'' and inserting ``2008'', and
                        (B) by striking ``and 2005'' in the heading and
                    inserting ``, 2005, 2006, and 2007''.
                (2) Determination of current liability.--Subclause (IV) of
            section 412(l)(7)(C)(i) of such Code is amended--
                        (A) by striking ``or 2005'' and inserting ``, 2005,
                    2006, or 2007'', and
                        (B) by striking ``and 2005'' in the heading and
                    inserting ``, 2005, 2006, and 2007''.

    [[Page 120 STAT. 920]]

        (c) Plan Amendments.--Clause (ii) of section 101(c)(2)(A) of the
    Pension Funding Equity Act of 2004 <<NOTE: 29 USC 1082.>> is amended by
    striking ``2006'' and inserting ``2008''.

    SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINATION OF LUMP SUM
                DISTRIBUTIONS.

        (a) Amendment to Employee Retirement Income Security Act of 1974.--
    Paragraph (3) of section 205(g) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1055(g)(3)) is amended to read as
    follows:
        ``(3)(A) For purposes of paragraphs (1) and (2), the present value
    shall not be less than the present value calculated by using the
    applicable mortality table and the applicable interest rate.
        ``(B) For purposes of subparagraph (A)--
                ``(i) The term `applicable mortality table' means a
            mortality table, modified as appropriate by the Secretary of the
            Treasury, based on the mortality table specified for the plan
            year under subparagraph (A) of section 303(h)(3) (without regard
            to subparagraph (C) or (D) of such section).
                ``(ii) The term `applicable interest rate' means the
            adjusted first, second, and third segment rates applied under
            rules similar to the rules of section 303(h)(2)(C) for the month
            before the date of the distribution or such other time as the
            Secretary of the Treasury may by regulations prescribe.
                ``(iii) For purposes of clause (ii), the adjusted first,
            second, and third segment rates are the first, second, and third
            segment rates which would be determined under section
            303(h)(2)(C) if--
                        ``(I) section 303(h)(2)(D) were applied by
                    substituting the average yields for the month described
                    in clause (ii) for the average yields for the 24-month
                    period described in such section,
                        ``(II) section 303(h)(2)(G)(i)(II) were applied by
                    substituting `section 205(g)(3)(B)(iii)(II)' for
                    `section 302(b)(5)(B)(ii)(II)', and
                        ``(III) the applicable percentage under section
                    303(h)(2)(G) were determined in accordance with the
                    following table:

      ``In  the  case  of  plan  years  The applicable  percentage is:
      beginning in:

      2008............................      20 percent
      2009............................      40 percent
      2010............................      60 percent
      2011............................      80 percent.''.

        (b) Amendment to Internal Revenue Code of 1986.--Paragraph (3) of
    section 417(e) of the Internal Revenue Code of <<NOTE: 26 USC
    417.>> 1986 is amended to read as follows:
                ``(3) Determination of present value.--
                        ``(A) In general.--For purposes of paragraphs (1)
                    and (2), the present value shall not be less than the
                    present value calculated by using the applicable
                    mortality table and the applicable interest rate.
                        ``(B) Applicable mortality table.--For purposes of
                    subparagraph (A), the term `applicable mortality table'
                    means a mortality table, modified as appropriate by the

    [[Page 120 STAT. 921]]

                    Secretary, based on the mortality table specified for
                    the plan year under subparagraph (A) of section
                    430(h)(3) (without regard to subparagraph (C) or (D) of
                    such section).
                        ``(C) Applicable interest rate.--For purposes of
                    subparagraph (A), the term `applicable interest rate'
                    means the adjusted first, second, and third segment
                    rates applied under rules similar to the rules of
                    section 430(h)(2)(C) for the month before the date of
                    the distribution or such other time as the Secretary may
                    by regulations prescribe.
                        ``(D) Applicable segment rates.--For purposes of
                    subparagraph (C), the adjusted first, second, and third
                    segment rates are the first, second, and third segment
                    rates which would be determined under section
                    430(h)(2)(C) if--
                              ``(i) section 430(h)(2)(D) were applied by
                          substituting the average yields for the month
                          described in clause (ii) for the average yields
                          for the 24-month period described in such section,
                              ``(ii) section 430(h)(2)(G)(i)(II) were
                          applied by substituting `section
                          417(e)(3)(A)(ii)(II)' for `section
                          412(b)(5)(B)(ii)(II)', and
                              ``(iii) the applicable percentage under
                          section 430(h)(2)(G) were determined in accordance
                          with the following table:

      ``In  the  case  of  plan  years  The applicable  percentage is:
      beginning in:

      2008............................      20 percent
      2009............................      40 percent
      2010............................      60 percent
      2011............................      80 percent.''.

        (c) <<NOTE: 26 USC 417 note.>> Effective Date.--The amendments made
    by this section shall apply with respect to plan years beginning after
    December 31, 2007.

    SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING BENEFIT LIMITATIONS TO
                LUMP SUM DISTRIBUTIONS.

        (a) In General.--Clause (ii) of section 415(b)(2)(E) of the Internal
    Revenue Code of 1986 <<NOTE: 26 USC 415.>> is amended to read as
    follows:
                              ``(ii) For purposes of adjusting any benefit
                          under subparagraph (B) for any form of benefit
                          subject to section 417(e)(3), the interest rate
                          assumption shall not be less than the greatest
                          of--
                                        ``(I) 5.5 percent,
                                        ``(II) the rate that provides a
                                    benefit of not more than 105 percent of
                                    the benefit that would be provided if
                                    the applicable interest rate (as defined
                                    in section 417(e)(3)) were the interest
                                    rate assumption, or
                                        ``(III) the rate specified under the
                                    plan.''.

        (b) <<NOTE: 26 USC 415 note.>> Effective Date.--The amendment made
    by subsection (a) shall apply to distributions made in years beginning
    after December 31, 2005.

    [[Page 120 STAT. 922]]

                 TITLE IV--PBGC GUARANTEE AND RELATED PROVISIONS

    SEC. 401. PBGC PREMIUMS.

        (a) Variable-Rate Premiums.--
                (1) Conforming amendments related to funding rules for
            single-employer plans.--Section 4006(a)(3)(E) of the Employee
            Retirement Income and Security Act of 1974 (29 U.S.C.
            1306(a)(3)(E)) is amended by striking clauses (iii) and (iv) and
            inserting the following:

        ``(iii) For purposes of clause (ii), the term `unfunded vested
    benefits' means, for a plan year, the excess (if any) of--
                ``(I) the funding target of the plan as determined under
            section 303(d) for the plan year by only taking into account
            vested benefits and by using the interest rate described in
            clause (iv), over
                ``(II) the fair market value of plan assets for the plan
            year which are held by the plan on the valuation date.

        ``(iv) The interest rate used in valuing benefits for purposes of
    subclause (I) of clause (iii) shall be equal to the first, second, or
    third segment rate for the month preceding the month in which the plan
    year begins, which would be determined under section 303(h)(2)(C) if
    section 303(h)(2)(D) were applied by using the monthly yields for the
    month preceding the month in which the plan year begins on investment
    grade corporate bonds with varying maturities and in the top 3 quality
    levels rather than the average of such yields for a 24-month period.''.
                (2) <<NOTE: 29 USC 1306 note.>> Effective date.--The
            amendments made by paragraph (1) shall apply with respect to
            plan years beginning after 2007.

        (b) Termination Premiums.--
                (1) Repeal of sunset provision.--Subparagraph (E) of section
            4006(a)(7) of such Act is repealed.
                (2) Technical correction.--
                        (A) In general.--Section 4006(a)(7)(C)(ii) of such
                    Act is amended by striking ``subparagraph (B)(i)(I)''
                    and inserting ``subparagraph (B)''.
                        (B) <<NOTE: 29 USC 1306 note.>> Effective date.--The
                    amendment made by this paragraph shall take effect as if
                    included in the provision of the Deficit Reduction Act
                    of 2005 to which it relates.

    SEC. 402. <<NOTE: 26 USC 430 note.>> SPECIAL FUNDING RULES FOR CERTAIN
                PLANS MAINTAINED BY COMMERCIAL AIRLINES.

        (a) In General.--The plan sponsor of an eligible plan may elect to
    either--
                (1) have the rules of subsection (b) apply, or
                (2) have section 303 of the Employee Retirement Income
            Security Act of 1974 and section 430 of the Internal Revenue
            Code of 1986 applied to its first taxable year beginning in 2008
            by amortizing the shortfall amortization base for such taxable
            year over a period of 10 plan years (rather than 7 plan years)
            beginning with such plan year.

        (b) Alternative Funding Schedule.--
                (1) In general.--If an election is made under subsection
            (a)(1) to have this subsection apply to an eligible plan and the
            requirements of paragraphs (2) and (3) are met with respect to
            the plan--

    [[Page 120 STAT. 923]]

                        (A) in the case of any applicable plan year
                    beginning before January 1, 2008, the plan shall not
                    have an accumulated funding deficiency for purposes of
                    section 302 of the Employee Retirement Income Security
                    Act of 1974 and sections 412 and 4971 of the Internal
                    Revenue Code of 1986 if contributions to the plan for
                    the plan year are not less than the minimum required
                    contribution determined under subsection (e) for the
                    plan for the plan year, and
                        (B) in the case of any applicable plan year
                    beginning on or after January 1, 2008, the minimum
                    required contribution determined under sections 303 of
                    such Act and 430 of such Code shall, for purposes of
                    sections 302 and 303 of such Act and sections 412, 430,
                    and 4971 of such Code, be equal to the minimum required
                    contribution determined under subsection (e) for the
                    plan for the plan year.
                (2) Accrual restrictions.--
                        (A) In general.--The requirements of this paragraph
                    are met if, effective as of the first day of the first
                    applicable plan year and at all times thereafter while
                    an election under this section is in effect, the plan
                    provides that--
                              (i) the accrued benefit, any death or
                          disability benefit, and any social security
                          supplement described in the last sentence of
                          section 411(a)(9) of such Code and section
                          204(b)(1)(G) of such Act, of each participant are
                          frozen at the amount of such benefit or supplement
                          immediately before such first day, and
                              (ii) all other benefits under the plan are
                          eliminated,
                    but only to the extent the freezing or elimination of
                    such benefits would have been permitted under section
                    411(d)(6) of such Code and section 204(g) of such Act if
                    they had been implemented by a plan amendment adopted
                    immediately before such first day.
                        (B) Increases in section 415 limits.--If a plan
                    provides that an accrued benefit of a participant which
                    has been subject to any limitation under section 415 of
                    such Code will be increased if such limitation is
                    increased, the plan shall not be treated as meeting the
                    requirements of this section unless, effective as of the
                    first day of the first applicable plan year (or, if
                    later, the date of the enactment of this Act) and at all
                    times thereafter while an election under this section is
                    in effect, the plan provides that any such increase
                    shall not take effect. A plan shall not fail to meet the
                    requirements of section 411(d)(6) of such Code and
                    section 204(g) of such Act solely because the plan is
                    amended to meet the requirements of this subparagraph.
                (3) Restriction on applicable benefit increases.--
                        (A) In general.--The requirements of this paragraph
                    are met if no applicable benefit increase takes effect
                    at any time during the period beginning on July 26,
                    2005, and ending on the day before the first day of the
                    first applicable plan year.
                        (B) Applicable benefit increase.--For purposes of
                    this paragraph, the term ``applicable benefit increase''
                    means, with respect to any plan year, any increase in

    [[Page 120 STAT. 924]]

                    liabilities of the plan by plan amendment (or otherwise
                    provided in regulations provided by the Secretary)
                    which, but for this paragraph, would occur during the
                    plan year by reason of--
                              (i) any increase in benefits,
                              (ii) any change in the accrual of benefits, or
                              (iii) any change in the rate at which benefits
                          become nonforfeitable under the plan.
                (4) Exception for imputed disability service.--Paragraphs
            (2) and (3) shall not apply to any accrual or increase with
            respect to imputed service provided to a participant during any
            period of the participant's disability occurring on or after the
            effective date of the plan amendment providing the restrictions
            under paragraph (2) (or on or after July 26, 2005, in the case
            of the restrictions under paragraph (3)) if the partici- pant--
                        (A) was receiving disability benefits as of such
                    date, or
                        (B) was receiving sick pay and subsequently
                    determined to be eligible for disability benefits as of
                    such date.

        (c) Definitions.--For purposes of this section--
                (1) Eligible plan.--The term ``eligible plan'' means a
            defined benefit plan (other than a multiemployer plan) to which
            sections 302 of such Act and 412 of such Code applies which is
            sponsored by an employer--
                        (A) which is a commercial airline passenger airline,
                    or
                        (B) the principal business of which is providing
                    catering services to a commercial passenger airline.
                (2) Applicable plan year.--The term ``applicable plan year''
            means each plan year to which the election under subsection
            (a)(1) applies under subsection (d)(1)(A).

        (d) Elections and Related Terms.--
                (1) <<NOTE: Deadlines.>> Years for which election made.--
                        (A) Alternative funding schedule.--If an election
                    under subsection (a)(1) was made with respect to an
                    eligible plan, the plan sponsor may select either a plan
                    year beginning in 2006 or a plan year beginning in 2007
                    as the first plan year to which such election applies.
                    The election shall apply to such plan year and all
                    subsequent years. The election shall be made--
                              (i) not later than December 31, 2006, in the
                          case of an election for a plan year beginning in
                          2006, or
                              (ii) not later than December 31, 2007, in the
                          case of an election for a plan year beginning in
                          2007.
                        (B) 10 year amortization.--An election under
                    subsection (a)(2) shall be made not later than December
                    31, 2007.
                        (C) Election of new plan year for alternative
                    funding schedule.--In the case of an election under
                    subsection (a)(1), the plan sponsor may specify a new
                    plan year in such election and the plan year of the plan
                    may be changed to such new plan year without the
                    approval of the Secretary of the Treasury.
                (2) Manner of election.--A plan sponsor shall make any
            election under subsection (a) in such manner as the Secretary

    [[Page 120 STAT. 925]]

            of the Treasury may prescribe. Such election, once made, may be
            revoked only with the consent of such Secretary.

        (e) Minimum Required Contribution.--In the case of an eligible plan
    with respect to which an election is made under subsection (a)(1)--
                (1) In general.--In the case of any applicable plan year
            during the amortization period, the minimum required
            contribution shall be the amount necessary to amortize the
            unfunded liability of the plan, determined as of the first day
            of the plan year, in equal annual installments (until fully
            amortized) over the remainder of the amortization period. Such
            amount shall be separately determined for each applicable plan
            year.
                (2) Years after amortization period.--In the case of any
            plan year beginning after the end of the amortization period,
            section 302(a)(2)(A) of such Act and section 412(a)(2)(A) of
            such Code shall apply to such plan, but the prefunding balance
            and funding standard carryover balance as of the first day of
            the first of such years under section 303(f) of such Act and
            section 430(f) of such Code shall be zero.
                (3) Definitions.--For purposes of this section--
                        (A) Unfunded liability.--The term ``unfunded
                    liability'' means the unfunded accrued liability under
                    the plan, determined under the unit credit funding
                    method.
                        (B) Amortization period.--The term ``amortization
                    period'' means the 17-plan year period beginning with
                    the first applicable plan year.
                (4) Other rules.--In determining the minimum required
            contribution and amortization amount under this subsection--
                        (A) <<NOTE: Applicability.>> the provisions of
                    section 302(c)(3) of such Act and section 412(c)(3) of
                    such Code, as in effect before the date of enactment of
                    this section, shall apply,
                        (B) a rate of interest of 8.85 percent shall be used
                    for all calculations requiring an interest rate, and
                        (C) the value of plan assets shall be equal to their
                    fair market value.
                (5) Special rule for certain plan spinoffs.--For purposes of
            subsection (b), if, with respect to any eligible plan to which
            this subsection applies--
                        (A) any applicable plan year includes the date of
                    the enactment of this Act,
                        (B) a plan was spun off from the eligible plan
                    during the plan year but before such date of enactment,
            the minimum required contribution under paragraph (1) for the
            eligible plan for such applicable plan year shall be an
            aggregate amount determined as if the plans were a single plan
            for that plan year (based on the full 12-month plan year in
            effect prior to the spin-off). The employer shall designate the
            allocation of such aggregate amount between such plans for the
            applicable plan year.

        (f) Special Rules for Certain Balances and Waivers.--In the case of
    an eligible plan with respect to which an election is made under
    subsection (a)(1)--
                (1) Funding standard account and credit balances.--Any
            charge or credit in the funding standard account under section
            302 of such Act or section 412 of such Code, and any prefunding
            balance or funding standard carryover balance

    [[Page 120 STAT. 926]]

            under section 303 of such Act or section 430 of such Code, as of
            the day before the first day of the first applicable plan year,
            shall be reduced to zero.
                (2) Waived funding deficiencies.--Any waived funding
            deficiency under sections 302 and 303 of such Act or section 412
            of such Code, as in effect before the date of enactment of this
            section, shall be deemed satisfied as of the first day of the
            first applicable plan year and the amount of such waived funding
            deficiency shall be taken into account in determining the plan's
            unfunded liability under subsection (e)(3)(A). In the case of a
            plan amendment adopted to satisfy the requirements of subsection
            (b)(2), the plan shall not be deemed to violate section 304(b)
            of such Act or section 412(f) of such Code, as so in effect, by
            reason of such amendment or any increase in benefits provided to
            such plan's participants under a separate plan that is a defined
            contribution plan or a multiemployer plan.

        (g) Other Rules for Plans Making Election Under This Section.--
                (1) Successor plans to certain plans.--If--
                        (A) an election under paragraph (1) or (2) of
                    subsection (a) is in effect with respect to any eligible
                    plan, and
                        (B) the eligible plan is maintained by an employer
                    that establishes or maintains 1 or more other defined
                    benefit plans (other than any multiemployer plan), and
                    such other plans in combination provide benefit accruals
                    to any substantial number of successor employees,
            the Secretary of the Treasury may, in the Secretary's
            discretion, determine that any trust of which any other such
            plan is a part does not constitute a qualified trust under
            section 401(a) of the Internal Revenue Code of 1986 unless all
            benefit obligations of the eligible plan have been satisfied.
            For purposes of this paragraph, the term ``successor employee''
            means any employee who is or was covered by the eligible plan
            and any employees who perform substantially the same type of
            work with respect to the same business operations as an employee
            covered by such eligible plan.
                (2) Special rules for terminations.--
                        (A) PBGC liability limited.--Section 4022 of the
                    Employee Retirement Income Security Act of 1974, as
                    amended by this Act, <<NOTE: 29 USC 1322.>> is amended
                    by adding at the end the following new subsection:

        ``(h) Special Rule for Plans Electing Certain Funding
    Requirements.--If any plan makes an election under section 402(a)(1) of
    the Pension Protection Act of 2006 and is terminated effective before
    the end of the 10-year period beginning on the first day of the first
    applicable plan year--
                ``(1) this section shall be applied--
                        ``(A) by treating the first day of the first
                    applicable plan year as the termination date of the
                    plan, and
                        ``(B) by determining the amount of guaranteed
                    benefits on the basis of plan assets and liabilities as
                    of such assumed termination date, and
                ``(2) notwithstanding section 4044(a), plan assets shall
            first be allocated to pay the amount, if any, by which--
                        ``(A) the amount of guaranteed benefits under this
                    section (determined without regard to paragraph (1) and
                    on

    [[Page 120 STAT. 927]]

                    the basis of plan assets and liabilities as of the
                    actual date of plan termination), exceeds
                        ``(B) the amount determined under paragraph (1).''.
                        (B) Termination premium.--In applying section
                    4006(a)(7)(A) of the Employee Retirement Income Security
                    Act of 1974 to an eligible plan during any period in
                    which an election under subsection (a)(1) is in effect--
                              (i) ``$2,500'' shall be substituted for
                          ``$1,250'' in such section if such plan terminates
                          during the 5-year period beginning on the first
                          day of the first applicable plan year with respect
                          to such plan, and
                              (ii) <<NOTE: Applicability.>> such section
                          shall be applied without regard to subparagraph
                          (B) of section 8101(d)(2) of the Deficit Reduction
                          Act of 2005 (relating to special rule for plans
                          terminated in bankruptcy).
                    The substitution described in clause (i) shall not apply
                    with respect to any plan if the Secretary of Labor
                    determines that such plan terminated as a result of
                    extraordinary circumstances such as a terrorist attack
                    or other similar event.
                (3) Limitation on deductions under certain plans.--Section
            404(a)(7)(C)(iv) of the Internal Revenue Code of 1986, as added
            by this Act, shall not apply with respect to any taxable year of
            a plan sponsor of an eligible plan if any applicable plan year
            with respect to such plan ends with or within such taxable year.
                (4) Notice.--In <<NOTE: Deadline.>> the case of a plan
            amendment adopted in order to comply with this section, any
            notice required under section 204(h) of such Act or section
            4980F(e) of such Code shall be provided within 15 days of the
            effective date of such plan amendment. This subsection shall not
            apply to any plan unless such plan is maintained pursuant to one
            or more collective bargaining agreements between employee
            representatives and 1 or more employers.

        (h) Exclusion of Certain Employees From Minimum Coverage
    Requirements.--
                (1) In general.--Section 410(b)(3) of such Code <<NOTE: 26
            USC 410.>> is amended by striking the last sentence and
            inserting the following: ``For purposes of subparagraph (B),
            management pilots who are not represented in accordance with
            title II of the Railway Labor Act shall be treated as covered by
            a collective bargaining agreement described in such subparagraph
            if the management pilots manage the flight operations of air
            pilots who are so represented and the management pilots are,
            pursuant to the terms of the agreement, included in the group of
            employees benefitting under the trust described in such
            subparagraph. Subparagraph (B) shall not apply in the case of a
            plan which provides contributions or benefits for employees
            whose principal duties are not customarily performed aboard an
            aircraft in flight (other than management pilots described in
            the preceding sentence).''
                (2) Effective date.--The amendment made by this subsection
            shall apply to years beginning before, on, or after the date of
            the enactment of this Act.

        (i) Extension of Special Rule for Additional Funding Requirements.--
    In the case of an employer which is a commercial passenger airline,
    section 302(d)(12) of the Employee Retirement Income Security Act of
    1974 and section 412(l)(12) of the Internal

    [[Page 120 STAT. 928]]

    Revenue Code of 1986, as in effect before the date of the enactment of
    this Act, shall each be applied--
                (1) by substituting ``December 28, 2007'' for ``December 28,
            2005'' in subparagraph (D)(i) thereof, and
                (2) without regard to subparagraph (D)(ii).

        (j) Effective Date.--Except as otherwise provided in this section,
    the provisions of and amendments made by this section shall apply to
    plan years ending after the date of the enactment of this Act.

    SEC. 403. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN AND OTHER BENEFITS.

        (a) In General.--Section 4022(b) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1322(b)) is amended by adding at the end
    the following:
                ``(8) If an unpredictable contingent event benefit (as
            defined in section 206(g)(1)) is payable by reason of the
            occurrence of any event, this section shall be applied as if a
            plan amendment had been adopted on the date such event
            occurred.''.

        (b) <<NOTE: 29 USC 1322 note.>> Effective Date.--The amendment made
    by this section shall apply to benefits that become payable as a result
    of an event which occurs after July 26, 2005.

    SEC. 404. RULES RELATING TO BANKRUPTCY OF EMPLOYER.

        (a) Guarantee.--Section 4022 of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1322) is amended by adding at the end
    the following:
        ``(g) Bankruptcy Filing Substituted for Termination Date.--If a
    contributing sponsor of a plan has filed or has had filed against such
    person a petition seeking liquidation or reorganization in a case under
    title 11, United States Code, or under any similar Federal law or law of
    a State or political subdivision, and the case has not been dismissed as
    of the termination date of the plan, then this section shall be applied
    by treating the date such petition was filed as the termination date of
    the plan.''.
        (b) Allocation of Assets Among Priority Groups in Bankruptcy
    Proceedings.--Section 4044 of the Employee Retirement Income Security
    Act of 1974 (29 U.S.C. 1344) is amended by adding at the end the
    following:
        ``(e) Bankruptcy Filing Substituted for Termination Date.--If a
    contributing sponsor of a plan has filed or has had filed against such
    person a petition seeking liquidation or reorganization in a case under
    title 11, United States Code, or under any similar Federal law or law of
    a State or political subdivision, and the case has not been dismissed as
    of the termination date of the plan, then subsection (a)(3) shall be
    applied by treating the date such petition was filed as the termination
    date of the plan.''.
        (c) <<NOTE: 29 USC 1322 note.>> Effective Date.--The amendments made
    this section shall apply with respect to proceedings initiated under
    title 11, United States Code, or under any similar Federal law or law of
    a State or political subdivision, on or after the date that is 30 days
    after the date of enactment of this Act.

    SEC. 405. PBGC PREMIUMS FOR SMALL PLANS.

        (a) Small Plans.--Paragraph (3) of section 4006(a) of the Employee
    Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)) is amended--

    [[Page 120 STAT. 929]]

                (1) by striking ``The additional'' in subparagraph (E)(i)
            and inserting ``Except as provided in subparagraph (H), the
            additional'', and
                (2) by inserting after subparagraph (G) the following new
            subparagraph:

        ``(H)(i) In the case of an employer who has 25 or fewer employees on
    the first day of the plan year, the additional premium determined under
    subparagraph (E) for each participant shall not exceed $5 multiplied by
    the number of participants in the plan as of the close of the preceding
    plan year.
        ``(ii) For purposes of clause (i), whether an employer has 25 or
    fewer employees on the first day of the plan year is determined by
    taking into consideration all of the employees of all members of the
    contributing sponsor's controlled group. In the case of a plan
    maintained by two or more contributing sponsors, the employees of all
    contributing sponsors and their controlled groups shall be aggregated
    for purposes of determining whether the 25-or-fewer-employees limitation
    has been satisfied.''
        (b) <<NOTE: 29 USC 1306 note.>> Effective Dates.--The amendment made
    by this section shall apply to plan years beginning after December 31,
    2006.

    SEC. 406. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT
                REFUNDS.

        (a) In General.--Section 4007(b) of the Employment Retirement Income
    Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
                (1) by striking ``(b)'' and inserting ``(b)(1)'', and
                (2) by inserting at the end the following new paragraph:

        ``(2) <<NOTE: Regulations.>> The corporation is authorized to pay,
    subject to regulations prescribed by the corporation, interest on the
    amount of any overpayment of premium refunded to a designated payor.
    Interest under this paragraph shall be calculated at the same rate and
    in the same manner as interest is calculated for underpayments under
    paragraph (1).''

        (b) <<NOTE: 29 USC 1307 note.>> Effective Date.--The amendments made
    by subsection (a) shall apply to interest accruing for periods beginning
    not earlier than the date of the enactment of this Act.

    SEC. 407. RULES FOR SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

        (a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of
    the Employee Retirement Income Security Act of 1974 (29 U.S.C.
    1322(b)(5)) is amended to read as follows:
        ``(5)(A) For purposes of this paragraph, the term `majority owner'
    means an individual who, at any time during the 60-month period ending
    on the date the determination is being made--
                ``(i) owns the entire interest in an unincorporated trade or
            business,
                ``(ii) in the case of a partnership, is a partner who owns,
            directly or indirectly, 50 percent or more of either the capital
            interest or the profits interest in such partnership, or
                ``(iii) in the case of a corporation, owns, directly or
            indirectly, 50 percent or more in value of either the voting
            stock of that corporation or all the stock of that corporation.

    For purposes of clause (iii), the constructive ownership rules of
    section 1563(e) of the Internal Revenue Code of 1986 (other than
    paragraph (3)(C) thereof) shall apply, including the application of such
    rules under section 414(c) of such Code.

    [[Page 120 STAT. 930]]

        ``(B) In the case of a participant who is a majority owner, the
    amount of benefits guaranteed under this section shall equal the product
    of--
                ``(i) a fraction (not to exceed 1) the numerator of which is
            the number of years from the later of the effective date or the
            adoption date of the plan to the termination date, and the
            denominator of which is 10, and
                ``(ii) the amount of benefits that would be guaranteed under
            this section if the participant were not a majority owner.''

        (b) Modification of Allocation of Assets.--
                (1) Section 4044(a)(4)(B) of the Employee Retirement Income
            Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by
            striking ``section 4022(b)(5)'' and inserting ``section
            4022(b)(5)(B)''.
                (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is
            amended--
                        (A) by striking ``(5)'' in paragraph (2) and
                    inserting ``(4), (5),'', and
                        (B) by redesignating paragraphs (3) through (6) as
                    paragraphs (4) through (7), respectively, and by
                    inserting after paragraph (2) the following new
                    paragraph:
                ``(3) If assets available for allocation under paragraph (4)
            of subsection (a) are insufficient to satisfy in full the
            benefits of all individuals who are described in that paragraph,
            the assets shall be allocated first to benefits described in
            subparagraph (A) of that paragraph. Any remaining assets shall
            then be allocated to benefits described in subparagraph (B) of
            that paragraph. If assets allocated to such subparagraph (B) are
            insufficient to satisfy in full the benefits described in that
            subparagraph, the assets shall be allocated pro rata among
            individuals on the basis of the present value (as of the
            termination date) of their respective benefits described in that
            subparagraph.''.

        (c) Conforming Amendments.--
                (1) Section 4021 of the Employee Retirement Income Security
            Act of 1974 (29 U.S.C. 1321) is amended--
                        (A) in subsection (b)(9), by striking ``as defined
                    in section 4022(b)(6)'', and
                        (B) by adding at the end the following new
                    subsection:

        ``(d) For purposes of subsection (b)(9), the term `substantial
    owner' means an individual who, at any time during the 60-month period
    ending on the date the determination is being made--
                ``(1) owns the entire interest in an unincorporated trade or
            business,
                ``(2) in the case of a partnership, is a partner who owns,
            directly or indirectly, more than 10 percent of either the
            capital interest or the profits interest in such partnership, or
                ``(3) in the case of a corporation, owns, directly or
            indirectly, more than 10 percent in value of either the voting
            stock of that corporation or all the stock of that corporation.

    For purposes of paragraph (3), the constructive ownership rules of
    section 1563(e) of the Internal Revenue Code of 1986 (other than
    paragraph (3)(C) thereof) shall apply, including the application of such
    rules under section 414(c) of such Code.''.
                (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is
            amended by striking ``section 4022(b)(6)'' and inserting
            ``section 4021(d)''.

    [[Page 120 STAT. 931]]

        (d) <<NOTE: 29 USC 1321 note.>> Effective Dates.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to plan termi-
            nations--
                        (A) under section 4041(c) of the Employee Retirement
                    Income Security Act of 1974 (29 U.S.C. 1341(c)) with
                    respect to which notices of intent to terminate are
                    provided under section 4041(a)(2) of such Act (29 U.S.C.
                    1341(a)(2)) after December 31, 2005, and
                        (B) under section 4042 of such Act (29 U.S.C. 1342)
                    with respect to which notices of determination are
                    provided under such section after such date.
                (2) Conforming amendments.--The <<NOTE: Effective
            date.>> amendments made by subsection (c) shall take effect on
            January 1, 2006.

    SEC. 408. ACCELERATION OF PBGC COMPUTATION OF BENEFITS ATTRIBUTABLE TO
                RECOVERIES FROM EMPLOYERS.

        (a) Modification of Average Recovery Percentage of Outstanding
    Amount of Benefit Liabilities Payable by Corporation to Participants and
    Beneficiaries.--Section 4022(c)(3)(B)(ii) of the Employee Retirement
    Income Security Act of 1974 (29 U.S.C. 1322(c)(3)(B)(ii)) is amended to
    read as follows:
                              ``(ii) notices of intent to terminate were
                          provided (or in the case of a termination by the
                          corporation, a notice of determination under
                          section 4042 was issued) during the 5-Federal
                          fiscal year period ending with the third fiscal
                          year preceding the fiscal year in which occurs the
                          date of the notice of intent to terminate (or the
                          notice of determination under section 4042) with
                          respect to the plan termination for which the
                          recovery ratio is being determined.''

        (b) Valuation of Section 4062(c) Liability for Determining Amounts
    Payable by Corporation to Participants and Beneficiaries.--
                (1) Single-employer plan benefits guaranteed.--Section
            4022(c)(3)(A) of the Employee Retirement Income Security Act of
            1974 <<NOTE: 29 USC 1322.>>  (29 U.S.C. 13) is amended to read
            as follows:
                        ``(A) In general.--Except as provided in
                    subparagraph (C), the term `recovery ratio' means the
                    ratio which--
                              ``(i) the sum of the values of all recoveries
                          under section 4062, 4063, or 4064, determined by
                          the corporation in connection with plan
                          terminations described under subparagraph (B),
                          bears to
                              ``(ii) the sum of all unfunded benefit
                          liabilities under such plans as of the termination
                          date in connection with any such prior
                          termination.''.
                (2) Allocation of assets.--Section 4044 of the Employee
            Retirement Income Security Act of 1974 <<NOTE: 29 USC 1344.>>
            (29 U.S.C. 1362) is amended by adding at the end the following
            new subsection:

        ``(e) Valuation of Section 4062(c) Liability for Determining Amounts
    Payable by Corporation to Participants and Beneficiaries.--
                ``(1) In general.--In the case of a terminated plan, the
            value of the recovery of liability under section 4062(c)
            allocable as a plan asset under this section for purposes of
            determining the amount of benefits payable by the corporation
            shall be determined by multiplying--

    [[Page 120 STAT. 932]]

                        ``(A) the amount of liability under section 4062(c)
                    as of the termination date of the plan, by
                        ``(B) the applicable section 4062(c) recovery ratio.
                ``(2) Section 4062(c) recovery ratio.--For purposes of this
            subsection--
                        ``(A) In general.--Except as provided in
                    subparagraph (C), the term `section 4062(c) recovery
                    ratio' means the ratio which--
                              ``(i) the sum of the values of all recoveries
                          under section 4062(c) determined by the
                          corporation in connection with plan terminations
                          described under subparagraph (B), bears to
                              ``(ii) the sum of all the amounts of liability
                          under section 4062(c) with respect to such plans
                          as of the termination date in connection with any
                          such prior termination.
                        ``(B) Prior terminations.--A plan termination
                    described in this subparagraph is a termination with
                    respect to which--
                              ``(i) the value of recoveries under section
                          4062(c) have been determined by the corporation,
                          and
                              ``(ii) notices of intent to terminate were
                          provided (or in the case of a termination by the
                          corporation, a notice of determination under
                          section 4042 was issued) during the 5-Federal
                          fiscal year period ending with the third fiscal
                          year preceding the fiscal year in which occurs the
                          date of the notice of intent to terminate (or the
                          notice of determination under section 4042) with
                          respect to the plan termination for which the
                          recovery ratio is being determined.
                        ``(C) Exception.--In the case of a terminated plan
                    with respect to which the outstanding amount of benefit
                    liabilities exceeds $20,000,000, the term `section
                    4062(c) recovery ratio' means, with respect to the
                    termination of such plan, the ratio of--
                              ``(i) the value of the recoveries on behalf of
                          the plan under section 4062(c), to
                              ``(ii) the amount of the liability owed under
                          section 4062(c) as of the date of plan termination
                          to the trustee appointed under section 4042 (b) or
                          (c).
                ``(3) Subsection not to apply.--This subsection shall not
            apply with respect to the determination of--
                        ``(A) whether the amount of outstanding benefit
                    liabilities exceeds $20,000,000, or
                        ``(B) the amount of any liability under section 4062
                    to the corporation or the trustee appointed under
                    section 4042 (b) or (c).
                ``(4) Determinations.--Determinations under this subsection
            shall be made by the corporation. Such determinations shall be
            binding unless shown by clear and convincing evidence to be
            unreasonable.''.

        (c) <<NOTE: 29 USC 1322 note.>> Effective Date.--The amendments made
    by this section shall apply for any termination for which notices of
    intent to terminate are provided (or in the case of a termination by the
    corporation, a notice of determination under section 4042 under the
    Employee Retirement Income Security Act of 1974 is issued) on or after

    [[Page 120 STAT. 933]]

    the date which is 30 days after the date of enactment of this section.

    SEC. 409. TREATMENT OF CERTAIN PLANS WHERE CESSATION OR CHANGE IN
                MEMBERSHIP OF A CONTROLLED GROUP.

        (a) In General.--Section 4041(b) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1341(b)) is amended by adding at the end
    the following new paragraph:
                ``(5) Special rule for certain plans where cessation or
            change in membership of a controlled group.--
                        ``(A) In general.--Except as provided in
                    subparagraph (B), if--
                              ``(i) there is transaction or series of
                          transactions which result in a person ceasing to
                          be a member of a controlled group, and
                              ``(ii) such person immediately before the
                          transaction or series of transactions maintained a
                          single-employer plan which is a defined benefit
                          plan which is fully funded,
                    then the interest rate used in determining whether the
                    plan is sufficient for benefit liabilities or to
                    otherwise assess plan liabilities for purposes of this
                    subsection or section 4042(a)(4) shall be not less than
                    the interest rate used in determining whether the plan
                    is fully funded.
                        ``(B) Limitations.--Subparagraph (A) shall not apply
                    to any transaction or series of transactions unless--
                              ``(i) any employer maintaining the plan
                          immediately before or after such transaction or
                          series of transactions--
                                        ``(I) has an outstanding senior
                                    unsecured debt instrument which is rated
                                    investment grade by each of the
                                    nationally recognized statistical rating
                                    organizations for corporate bonds that
                                    has issued a credit rating for such
                                    instrument, or
                                        ``(II) if no such debt instrument of
                                    such employer has been rated by such an
                                    organization but 1 or more of such
                                    organizations has made an issuer credit
                                    rating for such employer, all such
                                    organizations which have so rated the
                                    employer have rated such employer
                                    investment grade, and
                              ``(ii) the employer maintaining the plan after
                          the transaction or series of transactions employs
                          at least 20 percent of the employees located in
                          the United States who were employed by such
                          employer immediately before the transaction or
                          series of transactions.
                        ``(C) Fully funded.--For purposes of subparagraph
                    (A), a plan shall be treated as fully funded with
                    respect to any transaction or series of transactions
                    if--
                              ``(i) in the case of a transaction or series
                          of transactions which occur in a plan year
                          beginning before January 1, 2008, the funded
                          current liability percentage determined under
                          section 302(d) for the plan year is at least 100
                          percent, and
                              ``(ii) in the case of a transaction or series
                          of transactions which occur in a plan year
                          beginning on or

    [[Page 120 STAT. 934]]

                          after such date, the funding target attainment
                          percentage determined under section 303 is, as of
                          the valuation date for such plan year, at least
                          100 percent.
                        ``(D) 2 year limitation.--Subparagraph (A) shall not
                    apply to any transaction or series of transactions if
                    the plan referred to in subparagraph (A)(ii) is
                    terminated under section 4041(c) or 4042 after the close
                    of the 2-year period beginning on the date on which the
                    first such transaction occurs.''.

        (b) <<NOTE: 29 USC 1341 note.>> Effective Date.--The amendments made
    by this section shall apply to any transaction or series of transactions
    occurring on and after the date of the enactment of this Act.

    SEC. 410. MISSING PARTICIPANTS.

        (a) In General.--Section 4050 of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating
    subsection (c) as subsection (e) and by inserting after subsection (b)
    the following new subsections:
        ``(c) Multiemployer Plans.--The <<NOTE: Regulations.>> corporation
    shall prescribe rules similar to the rules in subsection (a) for
    multiemployer plans covered by this title that terminate under section
    4041A.

        ``(d) Plans Not Otherwise Subject to Title.--
                ``(1) Transfer to corporation.--The plan administrator of a
            plan described in paragraph (4) may elect to transfer a missing
            participant's benefits to the corporation upon termination of
            the plan.
                ``(2) Information to the corporation.--To the extent
            provided in regulations, the plan administrator of a plan
            described in paragraph (4) shall, upon termination of the plan,
            provide the corporation information with respect to benefits of
            a missing participant if the plan transfers such benefits--
                        ``(A) to the corporation, or
                        ``(B) to an entity other than the corporation or a
                    plan described in paragraph (4)(B)(ii).
                ``(3) Payment by the corporation.--If benefits of a missing
            participant were transferred to the corporation under paragraph
            (1), the corporation shall, upon location of the participant or
            beneficiary, pay to the participant or beneficiary the amount
            transferred (or the appropriate survivor benefit) either--
                        ``(A) in a single sum (plus interest), or
                        ``(B) in such other form as is specified in
                    regulations of the corporation.
                ``(4) Plans described.--A plan is described in this
            paragraph if--
                        ``(A) the plan is a pension plan (within the meaning
                    of section 3(2))--
                              ``(i) to which the provisions of this section
                          do not apply (without regard to this subsection),
                          and
                              ``(ii) which is not a plan described in
                          paragraphs (2) through (11) of section 4021(b),
                          and
                        ``(B) at the time the assets are to be distributed
                    upon termination, the plan--
                              ``(i) has missing participants, and
                              ``(ii) has not provided for the transfer of
                          assets to pay the benefits of all missing
                          participants to

    [[Page 120 STAT. 935]]

                          another pension plan (within the meaning of
                          section 3(2)).
                ``(5) Certain provisions not to apply.--Subsections (a)(1)
            and (a)(3) shall not apply to a plan described in paragraph
            (4).''.

        (b) Conforming Amendments.--Section 206(f) of such Act (29 U.S.C.
    1056(f)) is amended--
                (1) by striking ``title IV'' and inserting ``section 4050'';
            and
                (2) by striking ``the plan shall provide that,''.

        (c) Effective Date.--The <<NOTE: Regulations. 29 USC 1056
    note.>> amendments made by this section shall apply to distributions
    made after final regulations implementing subsections (c) and (d) of
    section 4050 of the Employee Retirement Income Security Act of 1974 (as
    added by subsection (a)), respectively, are prescribed.

    SEC. 411. DIRECTOR OF THE PENSION BENEFIT GUARANTY CORPORATION.

        (a) In General.--Title IV of the Employee Retirement Income Security
    Act of 1974 (29 U.S.C. 1301 et seq.) is amended--
                (1) by striking the second sentence of section
            4002(a) <<NOTE: 29 USC 1302.>> and inserting the following: ``In
            carrying out its functions under this title, the corporation
            shall be administered by a Director, who shall be appointed by
            the President, by and with the advice and consent of the Senate,
            and who shall act in accordance with the policies established by
            the board.''; and
                (2) in section 4003(b), <<NOTE: 29 USC 1303.>> by--
                        (A) striking ``under this title, any member'' and
                    inserting ``under this title, the Director, any
                    member''; and
                        (B) striking ``designated by the chairman'' and
                    inserting ``designated by the Director or chairman''.

        (b) Compensation of Director.--Section 5314 of title 5, United
    States Code, is amended by adding at the end the following new item:
            ``Director, Pension Benefit Guaranty Corporation.''.

        (c) Jurisdiction of Nomination.--
                (1) In general.--The Committee on Finance of the Senate and
            the Committee on Health, Education, Labor, and Pensions of the
            Senate shall have joint jurisdiction over the nomination of a
            person nominated by the President to fill the position of
            Director of the Pension Benefit Guaranty Corporation under
            section 4002 of the Employee Retirement Income Security Act of
            1974 (29 U.S.C. 1302) (as amended by this Act), and if one
            committee votes to order reported such a nomination, the other
            shall report within 30 calendar days, or be automatically
            discharged.
                (2) Rulemaking of the senate.--This subsection is enacted by
            Congress--
                        (A) as an exercise of rulemaking power of the
                    Senate, and as such it is deemed a part of the rules of
                    the Senate, but applicable only with respect to the
                    procedure to be followed in the Senate in the case of a
                    nomination described in such sentence, and it supersedes
                    other rules only to the extent that it is inconsistent
                    with such rules; and
                        (B) with full recognition of the constitutional
                    right of the Senate to change the rules (so far as
                    relating to the procedure of the Senate) at any time, in
                    the same

    [[Page 120 STAT. 936]]

                    manner and to the same extent as in the case of any
                    other rule of the Senate.

        (d) <<NOTE: Termination date. 29 USC 1302 note.>> Transition.--The
    term of the individual serving as Executive Director of the Pension
    Benefit Guaranty Corporation on the date of enactment of this Act shall
    expire on such date of enactment. Such individual, or any other
    individual, may serve as interim Director of such Corporation until an
    individual is appointed as Director of such Corporation under section
    4002 of the Employee Retirement Income Security Act of 1974 (29 U.S.C.
    1302) (as amended by this Act).

    SEC. 412. INCLUSION OF INFORMATION IN THE PBGC ANNUAL REPORT.

        Section 4008 of the Employee Retirement Income Security Act of 1974
    (29 U.S.C. 1308) is amended by--
                (1) striking ``As soon as practicable'' and inserting ``(a)
            As soon as practicable''; and
                (2) adding at the end the following:

        ``(b) The report under subsection (a) shall include--
                ``(1) a summary of the Pension Insurance Modeling System
            microsimulation model, including the specific simulation
            parameters, specific initial values, temporal parameters, and
            policy parameters used to calculate the financial statements for
            the corporation;
                ``(2) a comparison of--
                        ``(A) the average return on investments earned with
                    respect to assets invested by the corporation for the
                    year to which the report relates; and
                        ``(B) an amount equal to 60 percent of the average
                    return on investment for such year in the Standard &
                    Poor's 500 Index, plus 40 percent of the average return
                    on investment for such year in the Lehman Aggregate Bond
                    Index (or in a similar fixed income index); and
                ``(3) a statement regarding the deficit or surplus for such
            year that the corporation would have had if the corporation had
            earned the return described in paragraph (2)(B) with respect to
            assets invested by the corporation.''.

                               TITLE V--DISCLOSURE

    SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.

        (a) In General.--Section 101(f) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1021(f)) is amended to read as follows:
        ``(f) Defined Benefit Plan Funding Notices.--
                ``(1) In general.--The administrator of a defined benefit
            plan to which title IV applies shall for each plan year provide
            a plan funding notice to the Pension Benefit Guaranty
            Corporation, to each plan participant and beneficiary, to each
            labor organization representing such participants or
            beneficiaries, and, in the case of a multiemployer plan, to each
            employer that has an obligation to contribute to the plan.
                ``(2) Information contained in notices.--
                        ``(A) Identifying information.--Each notice required
                    under paragraph (1) shall contain identifying
                    information, including the name of the plan, the address
                    and phone number of the plan administrator and the
                    plan's principal

    [[Page 120 STAT. 937]]

                    administrative officer, each plan sponsor's employer
                    identification number, and the plan number of the plan.
                        ``(B) Specific information.--A plan funding notice
                    under paragraph (1) shall include--
                              ``(i)(I) in the case of a single-employer
                          plan, a statement as to whether the plan's funding
                          target attainment percentage (as defined in
                          section 303(d)(2)) for the plan year to which the
                          notice relates, and for the 2 preceding plan
                          years, is at least 100 percent (and, if not, the
                          actual percentages), or
                              ``(II) in the case of a multiemployer plan, a
                          statement as to whether the plan's funded
                          percentage (as defined in section 305(i)) for the
                          plan year to which the notice relates, and for the
                          2 preceding plan years, is at least 100 percent
                          (and, if not, the actual percentages),
                              ``(ii)(I) in the case of a single-employer
                          plan, a statement of--
                                        ``(aa) the total assets (separately
                                    stating the prefunding balance and the
                                    funding standard carryover balance) and
                                    liabilities of the plan, determined in
                                    the same manner as under section 303,
                                    for the plan year for which the latest
                                    annual report filed under section 104(a)
                                    was filed and for the 2 preceding plan
                                    years, as reported in the annual report
                                    for each such plan year, and
                                        ``(bb) the value of the plan's
                                    assets and liabilities for the plan year
                                    to which the notice relates as of the
                                    last day of the plan year to which the
                                    notice relates determined using the
                                    asset valuation under subclause (II) of
                                    section 4006(a)(3)(E)(iii) and the
                                    interest rate under section
                                    4006(a)(3)(E)(iv), and
                              ``(II) in the case of a multiemployer plan, a
                          statement of the value of the plan's assets and
                          liabilities for the plan year to which the notice
                          relates as the last day of such plan year and the
                          preceding 2 plan years,
                              ``(iii) a statement of the number of
                          participants who are--
                                        ``(I) retired or separated from
                                    service and are receiving benefits,
                                        ``(II) retired or separated
                                    participants entitled to future
                                    benefits, and
                                        ``(III) active participants under
                                    the plan,
                              ``(iv) a statement setting forth the funding
                          policy of the plan and the asset allocation of
                          investments under the plan (expressed as
                          percentages of total assets) as of the end of the
                          plan year to which the notice relates,
                              ``(v) in the case of a multiemployer plan,
                          whether the plan was in critical or endangered
                          status under section 305 for such plan year and,
                          if so--
                                        ``(I) a statement describing how a
                                    person may obtain a copy of the plan's
                                    funding improvement or rehabilitation
                                    plan, as appropriate, adopted under
                                    section 305 and the actuarial and
                                    financial

    [[Page 120 STAT. 938]]

                                    data that demonstrate any action taken
                                    by the plan toward fiscal improvement,
                                    and
                                        ``(II) a summary of any funding
                                    improvement plan, rehabilitation plan,
                                    or modification thereof adopted under
                                    section 305 during the plan year to
                                    which the notice relates,
                              ``(vi) in the case of any plan amendment,
                          scheduled benefit increase or reduction, or other
                          known event taking effect in the current plan year
                          and having a material effect on plan liabilities
                          or assets for the year (as defined in regulations
                          by the Secretary), an explanation of the
                          amendment, schedule increase or reduction, or
                          event, and a projection to the end of such plan
                          year of the effect of the amendment, scheduled
                          increase or reduction, or event on plan
                          liabilities,
                              ``(vii)(I) in the case of a single-employer
                          plan, a summary of the rules governing termination
                          of single-employer plans under subtitle C of title
                          IV, or
                              ``(II) in the case of a multiemployer plan, a
                          summary of the rules governing reorganization or
                          insolvency, including the limitations on benefit
                          payments,
                              ``(viii) a general description of the benefits
                          under the plan which are eligible to be guaranteed
                          by the Pension Benefit Guaranty Corporation, along
                          with an explanation of the limitations on the
                          guarantee and the circumstances under which such
                          limitations apply,
                              ``(ix) a statement that a person may obtain a
                          copy of the annual report of the plan filed under
                          section 104(a) upon request, through the Internet
                          website of the Department of Labor, or through an
                          Intranet website maintained by the applicable plan
                          sponsor (or plan administrator on behalf of the
                          plan sponsor), and
                              ``(x) if applicable, a statement that each
                          contributing sponsor, and each member of the
                          contributing sponsor's controlled group, of the
                          single-employer plan was required to provide the
                          information under section 4010 for the plan year
                          to which the notice relates.
                        ``(C) Other information.--Each notice under
                    paragraph (1) shall include--
                              ``(i) <<NOTE: Reports.>> in the case of a
                          multiemployer plan, a statement that the plan
                          administrator shall provide, upon written request,
                          to any labor organization representing plan
                          participants and beneficiaries and any employer
                          that has an obligation to contribute to the plan,
                          a copy of the annual report filed with the
                          Secretary under section 104(a), and
                              ``(ii) any additional information which the
                          plan administrator elects to include to the extent
                          not inconsistent with regulations prescribed by
                          the Secretary.
                ``(3) Time for providing notice.--
                        ``(A) In general.--Any notice under paragraph (1)
                    shall be provided not later than 120 days after the end
                    of the plan year to which the notice relates.
                        ``(B) Exception for small plans.--In the case of a
                    small plan (as such term is used under section
                    303(g)(2)(B)) any notice under paragraph (1) shall be
                    provided upon filing of the annual report under section
                    104(a).

    [[Page 120 STAT. 939]]

                ``(4) Form and manner.--Any notice under paragraph (1)--
                        ``(A) <<NOTE: Regulations.>> shall be provided in a
                    form and manner prescribed in regulations of the
                    Secretary,
                        ``(B) shall be written in a manner so as to be
                    understood by the average plan participant, and
                        ``(C) may be provided in written, electronic, or
                    other appropriate form to the extent such form is
                    reasonably accessible to persons to whom the notice is
                    required to be provided.''.

        (b) Repeal of Notice to Participants of Funding Status.--
                (1) In general.--Title IV of such Act (29 U.S.C. 1301 et
            seq.) is amended by striking section <<NOTE: 29 USC
            1311.>> 4011.
                (2) Clerical amendment.--Section 1 of such Act is amended in
            the table of contents by striking the item relating to section
            4011.

        (c) <<NOTE: Deadline. 29 USC 1021 note.>> Model Notice.--Not later
    than 1 year after the date of the enactment of this Act, the Secretary
    of Labor shall publish a model version of the notice required by section
    101(f) of the Employee Retirement Income Security Act of 1974. The
    Secretary of Labor may promulgate any interim final rules as the
    Secretary determines appropriate to carry out the provisions of this
    subsection.

        (d) <<NOTE: 29 USC 1021 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2007, except
            that the amendment made by subsection (b) shall apply to plan
            years beginning after December 31, 2006.
                (2) Transition rule.--Any requirement under section 101(f)
            of the Employee Retirement Income Security Act of 1974 (as
            amended by this section) to report the funding target attainment
            percentage or funded percentage of a plan with respect to any
            plan year beginning before January 1, 2008, shall be treated as
            met if the plan reports--
                        (A) in the case of a plan year beginning in 2006,
                    the funded current liability percentage (as defined in
                    section 302(d)(8) of such Act) of the plan for such plan
                    year, and
                        (B) in the case of a plan year beginning in 2007,
                    the funding target attainment percentage or funded
                    percentage as determined using such methods of
                    estimation as the Secretary of the Treasury may provide.

    SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN INFORMATION.

        (a) Financial Information With Respect to Multiemployer Plans.--
                (1) In general.--Section 101 of the Employee Retirement
            Income Security Act of 1974 (29 U.S.C. 1021), as amended by
            section 103, is amended--
                        (A) by redesignating subsection (k) as subsection
                    (l); and
                        (B) by inserting after subsection (j) the following
                    new subsection:

        ``(k) Multiemployer Plan Information Made Available on Request.--
                ``(1) <<NOTE: Reports.>> In general.--Each administrator of
            a multiemployer plan shall, upon written request, furnish to any
            plan participant

    [[Page 120 STAT. 940]]

            or beneficiary, employee representative, or any employer that
            has an obligation to contribute to the plan--
                        ``(A) a copy of any periodic actuarial report
                    (including any sensitivity testing) received by the plan
                    for any plan year which has been in the plan's
                    possession for at least 30 days,
                        ``(B) a copy of any quarterly, semi-annual, or
                    annual financial report prepared for the plan by any
                    plan investment manager or advisor or other fiduciary
                    which has been in the plan's possession for at least 30
                    days, and
                        ``(C) a copy of any application filed with the
                    Secretary of the Treasury requesting an extension under
                    section 304 of this Act or section 431(d) of the
                    Internal Revenue Code of 1986 and the determination of
                    such Secretary pursuant to such application.
                ``(2) Compliance.--Information required to be provided under
            paragraph (1)--
                        ``(A) <<NOTE: Deadline. Regulations.>> shall be
                    provided to the requesting participant, beneficiary, or
                    employer within 30 days after the request in a form and
                    manner prescribed in regulations of the Secretary,
                        ``(B) may be provided in written, electronic, or
                    other appropriate form to the extent such form is
                    reasonably accessible to persons to whom the information
                    is required to be provided, and
                        ``(C) shall not--
                              ``(i) include any individually identifiable
                          information regarding any plan participant,
                          beneficiary, employee, fiduciary, or contributing
                          employer, or
                              ``(ii) reveal any proprietary information
                          regarding the plan, any contributing employer, or
                          entity providing services to the plan.
                ``(3) Limitations.--In no case shall a participant,
            beneficiary, or employer be entitled under this subsection to
            receive more than one copy of any report or application
            described in paragraph (1) during any one 12-month period. The
            administrator may make a reasonable charge to cover copying,
            mailing, and other costs of furnishing copies of information
            pursuant to paragraph (1). The Secretary may by regulations
            prescribe the maximum amount which will constitute a reasonable
            charge under the preceding sentence.''.
                (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
            1132(c)(4)) is amended by striking ``section 101(j)'' and
            inserting ``subsection (j) or (k) of section 101''.
                (3) <<NOTE: 29 USC 1021 note.>> Regulations.--The Secretary
            shall prescribe regulations under section 101(k)(2) of the
            Employee Retirement Income Security Act of 1974 (as added by
            paragraph (1)) not later than 1 year after the date of the
            enactment of this Act.

        (b) Notice of Potential Withdrawal Liability to Multiemployer
    Plans.--
                (1) In general.--Section 101 of such Act (as amended by
            subsection (a)) <<NOTE: 29 USC 1021.>> is amended--
                        (A) by redesignating subsection (l) as subsection
                    (m); and
                        (B) by inserting after subsection (k) the following
                    new subsection:

        ``(l) Notice of Potential Withdrawal Liability.--

    [[Page 120 STAT. 941]]

                ``(1) In general.--The plan sponsor or administrator of a
            multiemployer plan shall, upon written request, furnish to any
            employer who has an obligation to contribute to the plan a
            notice of--
                        ``(A) the estimated amount which would be the amount
                    of such employer's withdrawal liability under part 1 of
                    subtitle E of title IV if such employer withdrew on the
                    last day of the plan year preceding the date of the
                    request, and
                        ``(B) an explanation of how such estimated liability
                    amount was determined, including the actuarial
                    assumptions and methods used to determine the value of
                    the plan liabilities and assets, the data regarding
                    employer contributions, unfunded vested benefits, annual
                    changes in the plan's unfunded vested benefits, and the
                    application of any relevant limitations on the estimated
                    withdrawal liability.
            For purposes of subparagraph (B), the term `employer
            contribution' means, in connection with a participant, a
            contribution made by an employer as an employer of such
            participant.
                ``(2) Compliance.--Any notice required to be provided under
            paragraph (1)--
                        ``(A) <<NOTE: Regulations.>> shall be provided in a
                    form and manner prescribed in regulations of the
                    Secretary to the requesting employer within--
                              ``(i) <<NOTE: Deadline.>> 180 days after the
                          request, or
                              ``(ii) subject to regulations of the
                          Secretary, such longer time as may be necessary in
                          the case of a plan that determines withdrawal
                          liability based on any method described under
                          paragraph (4) or (5) of section 4211(c); and
                        ``(B) may be provided in written, electronic, or
                    other appropriate form to the extent such form is
                    reasonably accessible to employers to whom the
                    information is required to be provided.
                ``(3) Limitations.--In no case shall an employer be entitled
            under this subsection to receive more than one notice described
            in paragraph (1) during any one 12-month period. The person
            required to provide such notice may make a reasonable charge to
            cover copying, mailing, and other costs of furnishing such
            notice pursuant to paragraph (1). The Secretary may by
            regulations prescribe the maximum amount which will constitute a
            reasonable charge under the preceding sentence.''.
                (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
            1132(c)(4)) is amended by striking ``section 101(j) or (k)'' and
            inserting ``subsection (j), (k), or (l) of section 101''.

        (c) Notice of Amendment Reducing Future Accruals.--
                (1) Amendment of erisa.--Section 204(h)(1) of such Act (29
            U.S.C. 1054(h)(1)) is amended by inserting at the end before the
            period the following: ``and to each employer who has an
            obligation to contribute to the plan''.
                (2) Amendment of internal revenue code.--Section 4980F(e)(1)
            of such Code <<NOTE: 26 USC 4980F.>> is amended by adding at the
            end before the period the following: ``and to each employer who
            has an obligation to contribute to the plan''.

        (d) <<NOTE: 26 USC 4980F note.>> Effective Date.--The amendments
    made by this section shall apply to plan years beginning after December
    31, 2007.

    [[Page 120 STAT. 942]]

    SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIREMENTS.

        (a) Additional Annual Reporting Requirements With Respect to Defined
    Benefit Plans.--
                (1) In general.--Section 103 of the Employee Retirement
            Income Security Act of 1974 (29 U.S.C. 1023) is amended--
                        (A) in subsection (a)(1)(B), by striking
                    ``subsections (d) and (e)'' and inserting ``subsections
                    (d), (e), and (f)''; and
                        (B) by adding at the end the following new
                    subsection:

        ``(f) Additional Information With Respect to Defined Benefit
    Plans.--
                ``(1) Liabilities under 2 or more plans.--
                        ``(A) In general.--In any case in which any
                    liabilities to participants or their beneficiaries under
                    a defined benefit plan as of the end of a plan year
                    consist (in whole or in part) of liabilities to such
                    participants and beneficiaries under 2 or more pension
                    plans as of immediately before such plan year, an annual
                    report under this section for such plan year shall
                    include the funded percentage of each of such 2 or more
                    pension plans as of the last day of such plan year and
                    the funded percentage of the plan with respect to which
                    the annual report is filed as of the last day of such
                    plan year.
                        ``(B) Funded percentage.--For purposes of this
                    paragraph, the term `funded percentage'--
                              ``(i) in the case of a single-employer plan,
                          means the funding target attainment percentage, as
                          defined in section 303(d)(2), and
                              ``(ii) in the case of a multiemployer plan,
                          has the meaning given such term in section
                          305(i)(2).
                ``(2) Additional information for multiemployer plans.--With
            respect to any defined benefit plan which is a multiemployer
            plan, an annual report under this section for a plan year shall
            include, in addition to the information required under paragraph
            (1), the following, as of the end of the plan year to which the
            report relates:
                        ``(A) The number of employers obligated to
                    contribute to the plan.
                        ``(B) A list of the employers that contributed more
                    than 5 percent of the total contributions to the plan
                    during such plan year.
                        ``(C) The number of participants under the plan on
                    whose behalf no contributions were made by an employer
                    as an employer of the participant for such plan year and
                    for each of the 2 preceding plan years.
                        ``(D) The ratios of--
                              ``(i) the number of participants under the
                          plan on whose behalf no employer had an obligation
                          to make an employer contribution during the plan
                          year, to
                              ``(ii) the number of participants under the
                          plan on whose behalf no employer had an obligation
                          to make an employer contribution during each of
                          the 2 preceding plan years.
                        ``(E) Whether the plan received an amortization
                    extension under section 304(d) of this Act or section
                    431(d) of the Internal Revenue Code of 1986 for such
                    plan year

    [[Page 120 STAT. 943]]

                    and, if so, the amount of the difference between the
                    minimum required contribution for the year and the
                    minimum required contribution which would have been
                    required without regard to the extension, and the period
                    of such extension.
                        ``(F) Whether the plan used the shortfall funding
                    method (as such term is used in section 305) for such
                    plan year and, if so, the amount of the difference
                    between the minimum required contribution for the year
                    and the minimum required contribution which would have
                    been required without regard to the use of such method,
                    and the period of use of such method.
                        ``(G) Whether the plan was in critical or endangered
                    status under section 305 for such plan year, and if so,
                    a summary of any funding improvement or rehabilitation
                    plan (or modification thereto) adopted during the plan
                    year, and the funded percentage of the plan.
                        ``(H) The number of employers that withdrew from the
                    plan during the preceding plan year and the aggregate
                    amount of withdrawal liability assessed, or estimated to
                    be assessed, against such withdrawn employers.
                        ``(I) In the case of a multiemployer plan that has
                    merged with another plan or to which assets and
                    liabilities have been transferred, the actuarial
                    valuation of the assets and liabilities of each affected
                    plan during the year preceding the effective date of the
                    merger or transfer, based upon the most recent data
                    available as of the day before the first day of the plan
                    year, or other valuation method performed under
                    standards and procedures as the Secretary may prescribe
                    by regulation.''.
                (2) <<NOTE: Deadline. 29 USC 1023 note.>> Guidance by
            secretary of labor.--Not later than 1 year after the date of
            enactment of this Act, the Secretary of Labor shall publish
            guidance to assist multiemployer defined benefit plans to--
                        (A) identify and enumerate plan participants for
                    whom there is no employer with an obligation to make an
                    employer contribution under the plan; and
                        (B) report such information under section
                    103(f)(2)(D) of the Employee Retirement Income Security
                    Act of 1974 (as added by this section).

        (b) Additional Information in Annual Actuarial Statement Regarding
    Plan Retirement Projections.--Section 103(d) of such Act (29 U.S.C.
    1023(d)) is amended--
                (1) by redesignating paragraphs (12) and (13) as paragraphs
            (13) and (14), respectively; and
                (2) by inserting after paragraph (11) the following new
            paragraph:
                ``(12) A statement explaining the actuarial assumptions and
            methods used in projecting future retirements and forms of
            benefit distributions under the plan.''.

        (c) Repeal of Summary Annual Report Requirement for Defined Benefit
    Plans.--
                (1) In general.--Section 104(b)(3) of such Act (29 U.S.C.
            1024(b)(3)) is amended by inserting ``(other than an
            administrator of a defined benefit plan to which the
            requirements of section 103(f) applies)'' after ``the
            administrators''.

    [[Page 120 STAT. 944]]

                (2) Conforming amendment.--Section 101(a)(2) of such Act (29
            U.S.C. 1021(a)(2)) is amended by inserting ``subsection (f)
            and'' before ``sections 104(b)(3) and 105(a) and (c)''.

        (d) Furnishing Summary Plan Information to Employers and Employee
    Representatives of Multiemployer Plans.--Section 104 of such Act (29
    U.S.C. 1024) is amended--
                (1) in the header, by striking ``participants'' and
            inserting ``participants and certain employers'';
                (2) by redesignating subsection (d) as subsection (e); and
                (3) by inserting after subsection (c) the following:

        ``(d) Furnishing Summary Plan Information to Employers and Employee
    Representatives of Multiemployer Plans.--
                ``(1) In general.--With <<NOTE: Deadline.>> respect to a
            multiemployer plan subject to this section, within 30 days after
            the due date under subsection (a)(1) for the filing of the
            annual report for the fiscal year of the plan, the
            administrators shall furnish to each employee organization and
            to each employer with an obligation to contribute to the plan a
            report that contains--
                        ``(A) a description of the contribution schedules
                    and benefit formulas under the plan, and any
                    modification to such schedules and formulas, during such
                    plan year;
                        ``(B) the number of employers obligated to
                    contribute to the plan;
                        ``(C) a list of the employers that contributed more
                    than 5 percent of the total contributions to the plan
                    during such plan year;
                        ``(D) the number of participants under the plan on
                    whose behalf no contributions were made by an employer
                    as an employer of the participant for such plan year and
                    for each of the 2 preceding plan years;
                        ``(E) whether the plan was in critical or endangered
                    status under section 305 for such plan year and, if so,
                    include--
                              ``(i) a list of the actions taken by the plan
                          to improve its funding status; and
                              ``(ii) a statement describing how a person may
                          obtain a copy of the plan's improvement or
                          rehabilitation plan, as applicable, adopted under
                          section 305 and the actuarial and financial data
                          that demonstrate any action taken by the plan
                          toward fiscal improvement;
                        ``(F) the number of employers that withdrew from the
                    plan during the preceding plan year and the aggregate
                    amount of withdrawal liability assessed, or estimated to
                    be assessed, against such withdrawn employers, as
                    reported on the annual report for the plan year to which
                    the report under this subsection relates;
                        ``(G) in the case of a multiemployer plan that has
                    merged with another plan or to which assets and
                    liabilities have been transferred, the actuarial
                    valuation of the assets and liabilities of each affected
                    plan during the year preceding the effective date of the
                    merger or transfer, based upon the most recent data
                    available as of the day before the first day of the plan
                    year, or other valuation method performed under
                    standards and procedures as the Secretary may prescribe
                    by regulation;
                        ``(H) a description as to whether the plan--

    [[Page 120 STAT. 945]]

                              ``(i) sought or received an amortization
                          extension under section 304(d) of this Act or
                          section 431(d) of the Internal Revenue Code of
                          1986 for such plan year; or
                              ``(ii) used the shortfall funding method (as
                          such term is used in section 305) for such plan
                          year; and
                        ``(I) <<NOTE: Notification.>> notification of the
                    right under this section of the recipient to a copy of
                    the annual report filed with the Secretary under
                    subsection (a), summary plan description, summary of any
                    material modification of the plan, upon written request,
                    but that--
                              ``(i) in no case shall a recipient be entitled
                          to receive more than one copy of any such document
                          described during any one 12-month period; and
                              ``(ii) the administrator may make a reasonable
                          charge to cover copying, mailing, and other costs
                          of furnishing copies of information pursuant to
                          this subparagraph.
                ``(2) Effect of subsection.--Nothing in this subsection
            waives any other provision under this title requiring plan
            administrators to provide, upon request, information to
            employers that have an obligation to contribute under the
            plan.''.

        (e) <<NOTE: Deadline. 29 USC 1021 note.>> Model Form.--Not later
    than 1 year after the date of the enactment of this Act, the Secretary
    of Labor shall publish a model form for providing the statements,
    schedules, and other material required to be provided under section
    101(f) of the Employee Retirement Income Security Act of 1974, as
    amended by this section. The Secretary of Labor may promulgate any
    interim final rules as the Secretary determines appropriate to carry out
    the provisions of this subsection.

        (f) <<NOTE: 29 USC 1021 note.>> Effective Date.--The amendments made
    by this section shall apply to plan years beginning after December 31,
    2007.

    SEC. 504. ELECTRONIC DISPLAY OF ANNUAL REPORT INFORMATION.

        (a) Electronic Display of Information.--Section 104(b) of such Act
    (29 U.S.C. 1024(b)) is amended by adding at the end the following:
        ``(5) Identification and basic plan information and actuarial
    information included in the annual report for any plan year shall be
    filed with the Secretary in an electronic format which accommodates
    display on the Internet, in accordance with regulations which shall be
    prescribed by the Secretary. The Secretary shall provide for display of
    such information included in the annual report, within 90 days after the
    date of the filing of the annual report, on an Internet website
    maintained by the Secretary and other appropriate
    media. <<NOTE: Regulations.>> Such information shall also be displayed
    on any Intranet website maintained by the plan sponsor (or by the plan
    administrator on behalf of the plan sponsor) for the purpose of
    communicating with employees and not the public, in accordance with
    regulations which shall be prescribed by the Secretary.''.

        (b) <<NOTE: 29 USC 1024 note.>> Effective Date.--The amendment made
    by this section shall apply to plan years beginning after December 31,
    2007.

    [[Page 120 STAT. 946]]

    SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.

        (a) Change in Criteria for Persons Required To Provide Information
    to PBGC.--Section 4010(b) of the Employee Retirement Income Security Act
    of 1974 (29 U.S.C. 1310(b)) is amended by striking paragraph (1) and
    inserting the following:
                ``(1) the funding target attainment percentage (as defined
            in subsection (d)) at the end of the preceding plan year of a
            plan maintained by the contributing sponsor or any member of its
            controlled group is less than 80 percent;''.

        (b) Additional Information Required.--Section 4010 of the Employee
    Retirement Income Security Act of 1974 (29 U.S.C. 1310) is amended by
    adding at the end the following new subsection:
        ``(d) Additional Information Required.--
                ``(1) In general.--The information submitted to the
            corporation under subsection (a) shall include--
                        ``(A) the amount of benefit liabilities under the
                    plan determined using the assumptions used by the
                    corporation in determining liabilities;
                        ``(B) the funding target of the plan determined as
                    if the plan has been in at-risk status for at least 5
                    plan years; and
                        ``(C) the funding target attainment percentage of
                    the plan.
                ``(2) Definitions.--For purposes of this subsection:
                        ``(A) Funding target.--The term `funding target' has
                    the meaning provided under section 303(d)(1).
                        ``(B) Funding target attainment percentage.--The
                    term `funding target attainment percentage' has the
                    meaning provided under section 302(d)(2).
                        ``(C) At-risk status.--The term `at-risk status' has
                    the meaning provided in section 303(i)(4).

        ``(e) Notice to Congress.--The corporation shall, on an annual
    basis, submit to the Committee on Health, Education, Labor, and Pensions
    and the Committee on Finance of the Senate and the Committee on
    Education and the Workforce and the Committee on Ways and Means of the
    House of Representatives, a summary report in the aggregate of the
    information submitted to the corporation under this section.''.
        (c) <<NOTE: 29 USC 1310 note.>> Effective Date.--The amendments made
    by this section shall apply with respect to years beginning after 2007.

    SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO PLAN PARTICIPANTS.

        (a) Distress Terminations.--
                (1) In general.--Section 4041(c)(2) of the Employee
            Retirement Income Security Act of 1974 (29 U.S.C. 1341(c)(2)) is
            amended by adding at the end the following:
                        ``(D) Disclosure of termination information.--
                              ``(i) In general.--A plan administrator that
                          has filed a notice of intent to terminate under
                          subsection (a)(2) shall provide to an affected
                          party any information provided to the corporation
                          under subsection (a)(2) not later than 15 days
                          after--
                                        ``(I) receipt of a request from the
                                    affected party for the information; or
                                        ``(II) the provision of new
                                    information to the corporation relating
                                    to a previous request.

    [[Page 120 STAT. 947]]

                              ``(ii) Confidentiality.--
                                        ``(I) In general.--The plan
                                    administrator shall not provide
                                    information under clause (i) in a form
                                    that includes any information that may
                                    directly or indirectly be associated
                                    with, or otherwise identify, an
                                    individual participant or beneficiary.
                                        ``(II) Limitation.--A court may
                                    limit disclosure under this subparagraph
                                    of confidential information described in
                                    section 552(b) of title 5, United States
                                    Code, to any authorized representative
                                    of the participants or beneficiaries
                                    that agrees to ensure the
                                    confidentiality of such information.
                              ``(iii) Form and manner of information;
                          charges.--
                                        ``(I) Form and manner.--The
                                    corporation may prescribe the form and
                                    manner of the provision of information
                                    under this subparagraph, which shall
                                    include delivery in written, electronic,
                                    or other appropriate form to the extent
                                    that such form is reasonably accessible
                                    to individuals to whom the information
                                    is required to be provided.
                                        ``(II) Reasonable charges.--A plan
                                    administrator may charge a reasonable
                                    fee for any information provided under
                                    this subparagraph in other than
                                    electronic form.
                              ``(iv) Authorized representative.--For
                          purposes of this subparagraph, the term
                          `authorized representative' means any employee
                          organization representing participants in the
                          pension plan.''.
                (2) Conforming amendment.--Section 4041(c)(1) of the
            Employee Retirement Income Security Act of 1974 (29 U.S.C.
            1341(c)(1)) is amended in subparagraph (C) by striking
            ``subparagraph (B)'' and inserting ``subparagraphs (B) and
            (D)''.

        (b) Involuntary Terminations.--
                (1) In general.--Section 4042(c) of the Employee Retirement
            Income Security Act of 1974 (29 U.S.C. 1342(c)) is amended by--
                        (A) striking ``(c) If the'' and inserting ``(c)(1)
                    If the'';
                        (B) redesignating paragraph (3) as paragraph (2);
                    and
                        (C) adding at the end the following:
                ``(3) Disclosure of termination information.--
                        ``(A) In general.--
                              ``(i) Information from plan sponsor or
                          administrator.--A plan sponsor or plan
                          administrator of a single-employer plan that has
                          received a notice from the corporation of a
                          determination that the plan should be terminated
                          under this section shall provide to an affected
                          party any information provided to the corporation
                          in connection with the plan termination.
                              ``(ii) Information from corporation.--The
                          corporation shall provide a copy of the
                          administrative record, including the trusteeship
                          decision record of a termination of a plan
                          described under clause (i).

    [[Page 120 STAT. 948]]

                        ``(B) <<NOTE: Deadline.>> Timing of disclosure.--The
                    plan sponsor, plan administrator, or the corporation, as
                    applicable, shall provide the information described in
                    subparagraph (A) not later than 15 days after--
                              ``(i) receipt of a request from an affected
                          party for such information; or
                              ``(ii) in the case of information described
                          under subparagraph (A)(i), the provision of any
                          new information to the corporation relating to a
                          previous request by an affected party.
                        ``(C) Confidentiality.--
                              ``(i) In general.--The plan administrator and
                          plan sponsor shall not provide information under
                          subparagraph (A)(i) in a form which includes any
                          information that may directly or indirectly be
                          associated with, or otherwise identify, an
                          individual participant or beneficiary.
                              ``(ii) Limitation.--A court may limit
                          disclosure under this paragraph of confidential
                          information described in section 552(b) of title
                          5, United States Code, to authorized
                          representatives (within the meaning of section
                          4041(c)(2)(D)(iv)) of the participants or
                          beneficiaries that agree to ensure the
                          confidentiality of such information.
                        ``(D) Form and manner of information; charges.--
                              ``(i) Form and manner.--The corporation may
                          prescribe the form and manner of the provision of
                          information under this paragraph, which shall
                          include delivery in written, electronic, or other
                          appropriate form to the extent that such form is
                          reasonably accessible to individuals to whom the
                          information is required to be provided.
                              ``(ii) Reasonable charges.--A plan sponsor may
                          charge a reasonable fee for any information
                          provided under this paragraph in other than
                          electronic form.''.

        (c) <<NOTE: 29 USC 1341 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to any plan termination under title IV of the Employee
            Retirement Income Security Act of 1974 (29 U.S.C. 1301 et seq.)
            with respect to which the notice of intent to terminate (or in
            the case of a termination by the Pension Benefit Guaranty
            Corporation, a notice of determination under section 4042 of
            such Act (29 U.S.C. 1342)) occurs after the date of enactment of
            this Act.
                (2) Transition rule.--If notice under section 4041(c)(2)(D)
            or 4042(c)(3) of the Employee Retirement Income Security Act of
            1974 (as added by this section) would otherwise be required to
            be provided before the 90th day after the date of the enactment
            of this Act, such notice shall not be required to be provided
            until such 90th day.

    SEC. 507. NOTICE OF FREEDOM TO DIVEST EMPLOYER SECURITIES.

        (a) In General.--Section 101 of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1021), as amended by this Act, is
    amended by redesignating subsection (m) as subsection (n) and by
    inserting after subsection (l) the following:

    [[Page 120 STAT. 949]]

        ``(m) <<NOTE: Deadline.>> Notice of Right To Divest.--Not later than
    30 days before the first date on which an applicable individual of an
    applicable individual account plan is eligible to exercise the right
    under section 204(j) to direct the proceeds from the divestment of
    employer securities with respect to any type of contribution, the
    administrator shall provide to such individual a notice--
                ``(1) setting forth such right under such section, and
                ``(2) describing the importance of diversifying the
            investment of retirement account assets.

    The notice required by this subsection shall be written in a manner
    calculated to be understood by the average plan participant and may be
    delivered in written, electronic, or other appropriate form to the
    extent that such form is reasonably accessible to the recipient.''.
        (b) Penalties.--Section 502(c)(7) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1132(c)(7)) is amended by striking
    ``section 101(i)'' and inserting ``subsection (i) or (m) of section
    101''.
        (c) <<NOTE: Deadline. 29 USC 1021 note.>> Model Notice.--The
    Secretary of the Treasury shall, within 180 days after the date of the
    enactment of this subsection, prescribe a model notice for purposes of
    satisfying the requirements of the amendments made by this section.

        (d) <<NOTE: 29 USC 1021 note.>> Effective Dates.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2006.
                (2) Transition rule.--If notice under section 101(m) of the
            Employee Retirement Income Security Act of 1974 (as added by
            this section) would otherwise be required to be provided before
            the 90th day after the date of the enactment of this Act, such
            notice shall not be required to be provided until such 90th day.

    SEC. 508. PERIODIC PENSION BENEFIT STATEMENTS.

        (a) Amendments of ERISA.--
                (1) In general.--Section 105(a) of the Employee Retirement
            Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended to
            read as follows:

        ``(a) Requirements To Provide Pension Benefit Statements.--
                ``(1) Requirements.--
                        ``(A) Individual account plan.--The administrator of
                    an individual account plan (other than a one-participant
                    retirement plan described in section 101(i)(8)(B)) shall
                    furnish a pension benefit statement--
                              ``(i) at least once each calendar quarter to a
                          participant or beneficiary who has the right to
                          direct the investment of assets in his or her
                          account under the plan,
                              ``(ii) at least once each calendar year to a
                          participant or beneficiary who has his or her own
                          account under the plan but does not have the right
                          to direct the investment of assets in that
                          account, and
                              ``(iii) upon written request to a plan
                          beneficiary not described in clause (i) or (ii).

    [[Page 120 STAT. 950]]

                        ``(B) Defined benefit plan.--The administrator of a
                    defined benefit plan (other than a one-participant
                    retirement plan described in section 101(i)(8)(B)) shall
                    furnish a pension benefit statement--
                              ``(i) at least once every 3 years to each
                          participant with a nonforfeitable accrued benefit
                          and who is employed by the employer maintaining
                          the plan at the time the statement is to be
                          furnished, and
                              ``(ii) to a participant or beneficiary of the
                          plan upon written request.
                    Information furnished under clause (i) to a participant
                    may be based on reasonable estimates determined under
                    regulations prescribed by the Secretary, in consultation
                    with the Pension Benefit Guaranty Corporation.
                ``(2) Statements.--
                        ``(A) In general.--A pension benefit statement under
                    paragraph (1)--
                              ``(i) shall indicate, on the basis of the
                          latest available information--
                                        ``(I) the total benefits accrued,
                                    and
                                        ``(II) the nonforfeitable pension
                                    benefits, if any, which have accrued, or
                                    the earliest date on which benefits will
                                    become nonforfeitable,
                              ``(ii) shall include an explanation of any
                          permitted disparity under section 401(l) of the
                          Internal Revenue Code of 1986 or any floor-offset
                          arrangement that may be applied in determining any
                          accrued benefits described in clause (i),
                              ``(iii) shall be written in a manner
                          calculated to be understood by the average plan
                          participant, and
                              ``(iv) may be delivered in written,
                          electronic, or other appropriate form to the
                          extent such form is reasonably accessible to the
                          participant or beneficiary.
                        ``(B) Additional information.--In the case of an
                    individual account plan, any pension benefit statement
                    under clause (i) or (ii) of paragraph (1)(A) shall
                    include--
                              ``(i) the value of each investment to which
                          assets in the individual account have been
                          allocated, determined as of the most recent
                          valuation date under the plan, including the value
                          of any assets held in the form of employer
                          securities, without regard to whether such
                          securities were contributed by the plan sponsor or
                          acquired at the direction of the plan or of the
                          participant or beneficiary, and
                              ``(ii) in the case of a pension benefit
                          statement under paragraph (1)(A)(i)--
                                        ``(I) an explanation of any
                                    limitations or restrictions on any right
                                    of the participant or beneficiary under
                                    the plan to direct an investment,
                                        ``(II) an explanation, written in a
                                    manner calculated to be understood by
                                    the average plan participant, of the
                                    importance, for the long-term retirement
                                    security of participants and
                                    beneficiaries, of a well-balanced and
                                    diversified investment portfolio,
                                    including a statement of the risk that
                                    holding more than 20 percent of a
                                    portfolio

    [[Page 120 STAT. 951]]

                                    in the security of one entity (such as
                                    employer securities) may not be
                                    adequately diversified, and
                                        ``(III) <<NOTE: Notices.>> a notice
                                    directing the participant or beneficiary
                                    to the Internet website of the
                                    Department of Labor for sources of
                                    information on individual investing and
                                    diversification.
                        ``(C) Alternative notice.--The requirements of
                    subparagraph (A)(i)(II) are met if, at least annually
                    and in accordance with requirements of the Secretary,
                    the plan--
                              ``(i) updates the information described in
                          such paragraph which is provided in the pension
                          benefit statement, or
                              ``(ii) provides in a separate statement such
                          information as is necessary to enable a
                          participant or beneficiary to determine their
                          nonforfeitable vested benefits.
                ``(3) Defined benefit plans.--
                        ``(A) Alternative notice.--In the case of a defined
                    benefit plan, the requirements of paragraph (1)(B)(i)
                    shall be treated as met with respect to a participant if
                    at least once each year the administrator provides to
                    the participant notice of the availability of the
                    pension benefit statement and the ways in which the
                    participant may obtain such statement. Such notice may
                    be delivered in written, electronic, or other
                    appropriate form to the extent such form is reasonably
                    accessible to the participant.
                        ``(B) Years in which no benefits accrue.--The
                    Secretary may provide that years in which no employee or
                    former employee benefits (within the meaning of section
                    410(b) of the Internal Revenue Code of 1986) under the
                    plan need not be taken into account in determining the
                    3-year period under paragraph (1)(B)(i).''.
                (2) Conforming amendments.--
                        (A) Section 105 of the Employee Retirement Income
                    Security Act of 1974 (29 U.S.C. 1025) is amended by
                    striking subsection (d).
                        (B) Section 105(b) of such Act (29 U.S.C. 1025(b))
                    is amended to read as follows:

        ``(b) Limitation on Number of Statements.--In no case shall a
    participant or beneficiary of a plan be entitled to more than 1
    statement described in subparagraph (A)(iii) or (B)(ii) of subsection
    (a)(1), whichever is applicable, in any 12-month period.''.
                        (C) Section 502(c)(1) of such Act (29 U.S.C.
                    1132(c)(1)) is amended by striking ``or section 101(f)''
                    and inserting ``section 101(f), or section 105(a)''.

        (b) <<NOTE: 29 USC 1025 note. Deadline.>> Model Statements.--
                (1) In general.--The Secretary of Labor shall, within 1 year
            after the date of the enactment of this section, develop 1 or
            more model benefit statements that are written in a manner
            calculated to be understood by the average plan participant and
            that may be used by plan administrators in complying with the
            requirements of section 105 of the Employee Retirement Income
            Security Act of 1974.
                (2) Interim final rules.--The Secretary of Labor may
            promulgate any interim final rules as the Secretary determines
            appropriate to carry out the provisions of this subsection.

    [[Page 120 STAT. 952]]

        (c) <<NOTE: 29 USC 1025 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2006.
                (2) Special rule for collectively bargained agreements.--In
            the case of a plan maintained pursuant to 1 or more collective
            bargaining agreements between employee representatives and 1 or
            more employers ratified on or before the date of the enactment
            of this Act, paragraph (1) shall be applied to benefits pursuant
            to, and individuals covered by, any such agreement by
            substituting for ``December 31, 2006'' the earlier of--
                        (A) the later of--
                              (i) December 31, 2007, or
                              (ii) the date on which the last of such
                          collective bargaining agreements terminates
                          (determined without regard to any extension
                          thereof after such date of enactment), or
                        (B) December 31, 2008.

    SEC. 509. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF BLACKOUT PERIODS.

        (a) In General.--Section 101(i)(8)(B) of the Employee Retirement
    Income Security Act of 1974 (29 U.S.C. 1021(i)(8)(B)) is amended by
    striking clauses (i) through (iv), by redesignating clause (v) as clause
    (ii), and by inserting before clause (ii), as so redesignated, the
    following new clause:
                              ``(i) on the first day of the plan year--
                                        ``(I) covered only one individual
                                    (or the individual and the individual's
                                    spouse) and the individual (or the
                                    individual and the individual's spouse)
                                    owned 100 percent of the plan sponsor
                                    (whether or not incorporated), or
                                        ``(II) covered only one or more
                                    partners (or partners and their spouses)
                                    in the plan sponsor, and''.

        (b) <<NOTE: 29 USC 1021 note.>> Effective Date.--The amendments made
    by this subsection shall take effect as if included in the provisions of
    section 306 of Public Law 107-204 (116 Stat. 745 et seq.).

      TITLE VI--INVESTMENT ADVICE, PROHIBITED TRANSACTIONS, AND FIDUCIARY
                                      RULES

                          Subtitle A--Investment Advice

    SEC. 601. PROHIBITED TRANSACTION EXEMPTION FOR PROVISION OF INVESTMENT
                ADVICE.

        (a) Amendments to the Employee Retirement Income Security Act of
    1974.--
                (1) Exemption from prohibited transactions.--Section 408(b)
            of the Employee Retirement Income Security Act of 1974 (29
            U.S.C. 1108(b)) is amended by adding at the end the following
            new paragraph:

    [[Page 120 STAT. 953]]

                ``(14) Any transaction in connection with the provision of
            investment advice described in section 3(21)(A)(ii) to a
            participant or beneficiary of an individual account plan that
            permits such participant or beneficiary to direct the investment
            of assets in their individual account, if--
                        ``(A) the transaction is--
                              ``(i) the provision of the investment advice
                          to the participant or beneficiary of the plan with
                          respect to a security or other property available
                          as an investment under the plan,
                              ``(ii) the acquisition, holding, or sale of a
                          security or other property available as an
                          investment under the plan pursuant to the
                          investment advice, or
                              ``(iii) the direct or indirect receipt of fees
                          or other compensation by the fiduciary adviser or
                          an affiliate thereof (or any employee, agent, or
                          registered representative of the fiduciary adviser
                          or affiliate) in connection with the provision of
                          the advice or in connection with an acquisition,
                          holding, or sale of a security or other property
                          available as an investment under the plan pursuant
                          to the investment advice; and
                        ``(B) the requirements of subsection (g) are met.''.
                (2) Requirements.--Section 408 of such Act <<NOTE: 29 USC
            1108.>> is amended further by adding at the end the following
            new subsection:

        ``(g) Provision of Investment Advice to Participant and
    Beneficiaries.--
                ``(1) In general.--The prohibitions provided in section 406
            shall not apply to transactions described in subsection (b)(14)
            if the investment advice provided by a fiduciary adviser is
            provided under an eligible investment advice arrangement.
                ``(2) Eligible investment advice arrangement.--For purposes
            of this subsection, the term `eligible investment advice
            arrangement' means an arrangement--
                        ``(A) which either--
                              ``(i) provides that any fees (including any
                          commission or other compensation) received by the
                          fiduciary adviser for investment advice or with
                          respect to the sale, holding, or acquisition of
                          any security or other property for purposes of
                          investment of plan assets do not vary depending on
                          the basis of any investment option selected, or
                              ``(ii) uses a computer model under an
                          investment advice program meeting the requirements
                          of paragraph (3) in connection with the provision
                          of investment advice by a fiduciary adviser to a
                          participant or beneficiary, and
                        ``(B) with respect to which the requirements of
                    paragraph (4), (5), (6), (7), (8), and (9) are met.
                ``(3) Investment advice program using computer model.--
                        ``(A) In general.--An investment advice program
                    meets the requirements of this paragraph if the
                    requirements of subparagraphs (B), (C), and (D) are met.
                        ``(B) Computer model.--The requirements of this
                    subparagraph are met if the investment advice provided

    [[Page 120 STAT. 954]]

                    under the investment advice program is provided pursuant
                    to a computer model that--
                              ``(i) applies generally accepted investment
                          theories that take into account the historic
                          returns of different asset classes over defined
                          periods of time,
                              ``(ii) utilizes relevant information about the
                          participant, which may include age, life
                          expectancy, retirement age, risk tolerance, other
                          assets or sources of income, and preferences as to
                          certain types of investments,
                              ``(iii) utilizes prescribed objective criteria
                          to provide asset allocation portfolios comprised
                          of investment options available under the plan,
                              ``(iv) operates in a manner that is not biased
                          in favor of investments offered by the fiduciary
                          adviser or a person with a material affiliation or
                          contractual relationship with the fiduciary
                          adviser, and
                              ``(v) takes into account all investment
                          options under the plan in specifying how a
                          participant's account balance should be invested
                          and is not inappropriately weighted with respect
                          to any investment option.
                        ``(C) Certification.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met with respect to any
                          investment advice program if an eligible
                          investment expert certifies, prior to the
                          utilization of the computer model and in
                          accordance with rules prescribed by the Secretary,
                          that the computer model meets the requirements of
                          subparagraph (B).
                              ``(ii) Renewal of certifications.--If, as
                          determined under regulations prescribed by the
                          Secretary, there are material modifications to a
                          computer model, the requirements of this
                          subparagraph are met only if a certification
                          described in clause (i) is obtained with respect
                          to the computer model as so modified.
                              ``(iii) Eligible investment expert.--The term
                          `eligible investment expert' means any person--
                                        ``(I) which meets such requirements
                                    as the Secretary may provide, and
                                        ``(II) does not bear any material
                                    affiliation or contractual relationship
                                    with any investment adviser or a related
                                    person thereof (or any employee, agent,
                                    or registered representative of the
                                    investment adviser or related person).
                        ``(D) Exclusivity of recommendation.--The
                    requirements of this subparagraph are met with respect
                    to any investment advice program if--
                              ``(i) the only investment advice provided
                          under the program is the advice generated by the
                          computer model described in subparagraph (B), and
                              ``(ii) any transaction described in subsection
                          (b)(14)(B)(ii) occurs solely at the direction of
                          the participant or beneficiary.
                    Nothing in the preceding sentence shall preclude the
                    participant or beneficiary from requesting investment
                    advice other than that described in subparagraph (A),
                    but

    [[Page 120 STAT. 955]]

                    only if such request has not been solicited by any
                    person connected with carrying out the arrangement.
                ``(4) Express authorization by separate fiduciary.--The
            requirements of this paragraph are met with respect to an
            arrangement if the arrangement is expressly authorized by a plan
            fiduciary other than the person offering the investment advice
            program, any person providing investment options under the plan,
            or any affiliate of either.
                ``(5) Annual audit.--The requirements of this paragraph are
            met if an independent auditor, who has appropriate technical
            training or experience and proficiency and so represents in
            writing--
                        ``(A) conducts an annual audit of the arrangement
                    for compliance with the requirements of this subsection,
                    and
                        ``(B) <<NOTE: Reports.>> following completion of the
                    annual audit, issues a written report to the fiduciary
                    who authorized use of the arrangement which presents its
                    specific findings regarding compliance of the
                    arrangement with the requirements of this subsection.
            For purposes of this paragraph, an auditor is considered
            independent if it is not related to the person offering the
            arrangement to the plan and is not related to any person
            providing investment options under the plan.
                ``(6) Disclosure.--The requirements of this paragraph are
            met if--
                        ``(A) the fiduciary adviser provides to a
                    participant or a beneficiary before the initial
                    provision of the investment advice with regard to any
                    security or other property offered as an investment
                    option, a written notification (which may consist of
                    notification by means of electronic communication)--
                              ``(i) of the role of any party that has a
                          material affiliation or contractual relationship
                          with the financial adviser in the development of
                          the investment advice program and in the selection
                          of investment options available under the plan,
                              ``(ii) of the past performance and historical
                          rates of return of the investment options
                          available under the plan,
                              ``(iii) of all fees or other compensation
                          relating to the advice that the fiduciary adviser
                          or any affiliate thereof is to receive (including
                          compensation provided by any third party) in
                          connection with the provision of the advice or in
                          connection with the sale, acquisition, or holding
                          of the security or other property,
                              ``(iv) of any material affiliation or
                          contractual relationship of the fiduciary adviser
                          or affiliates thereof in the security or other
                          property,
                              ``(v) the manner, and under what
                          circumstances, any participant or beneficiary
                          information provided under the arrangement will be
                          used or disclosed,
                              ``(vi) of the types of services provided by
                          the fiduciary adviser in connection with the
                          provision of investment advice by the fiduciary
                          adviser,
                              ``(vii) that the adviser is acting as a
                          fiduciary of the plan in connection with the
                          provision of the advice, and

    [[Page 120 STAT. 956]]

                              ``(viii) that a recipient of the advice may
                          separately arrange for the provision of advice by
                          another adviser, that could have no material
                          affiliation with and receive no fees or other
                          compensation in connection with the security or
                          other property, and
                        ``(B) at all times during the provision of advisory
                    services to the participant or beneficiary, the
                    fiduciary adviser--
                              ``(i) maintains the information described in
                          subparagraph (A) in accurate form and in the
                          manner described in paragraph (8),
                              ``(ii) provides, without charge, accurate
                          information to the recipient of the advice no less
                          frequently than annually,
                              ``(iii) provides, without charge, accurate
                          information to the recipient of the advice upon
                          request of the recipient, and
                              ``(iv) provides, without charge, accurate
                          information to the recipient of the advice
                          concerning any material change to the information
                          required to be provided to the recipient of the
                          advice at a time reasonably contemporaneous to the
                          change in information.
                ``(7) Other conditions.--The requirements of this paragraph
            are met if--
                        ``(A) the fiduciary adviser provides appropriate
                    disclosure, in connection with the sale, acquisition, or
                    holding of the security or other property, in accordance
                    with all applicable securities laws,
                        ``(B) the sale, acquisition, or holding occurs
                    solely at the direction of the recipient of the advice,
                        ``(C) the compensation received by the fiduciary
                    adviser and affiliates thereof in connection with the
                    sale, acquisition, or holding of the security or other
                    property is reasonable, and
                        ``(D) the terms of the sale, acquisition, or holding
                    of the security or other property are at least as
                    favorable to the plan as an arm's length transaction
                    would be.
                ``(8) Standards for presentation of information.--
                        ``(A) In general.--The requirements of this
                    paragraph are met if the notification required to be
                    provided to participants and beneficiaries under
                    paragraph (6)(A) is written in a clear and conspicuous
                    manner and in a manner calculated to be understood by
                    the average plan participant and is sufficiently
                    accurate and comprehensive to reasonably apprise such
                    participants and beneficiaries of the information
                    required to be provided in the notification.
                        ``(B) Model form for disclosure of fees and other
                    compensation.--The Secretary shall issue a model form
                    for the disclosure of fees and other compensation
                    required in paragraph (6)(A)(iii) which meets the
                    requirements of subparagraph (A).
                ``(9) Maintenance for 6 years of evidence of compliance.--
            The requirements of this paragraph are met if a fiduciary
            adviser who has provided advice referred to in paragraph (1)
            maintains, for a period of not less than 6 years after the
            provision of the advice, any records necessary for determining
            whether the requirements of the preceding provisions of this

    [[Page 120 STAT. 957]]

            subsection and of subsection (b)(14) have been met. A
            transaction prohibited under section 406 shall not be considered
            to have occurred solely because the records are lost or
            destroyed prior to the end of the 6-year period due to
            circumstances beyond the control of the fiduciary adviser.
                ``(10) Exemption for plan sponsor and certain other
            fiduciaries.--
                        ``(A) In general.--Subject to subparagraph (B), a
                    plan sponsor or other person who is a fiduciary (other
                    than a fiduciary adviser) shall not be treated as
                    failing to meet the requirements of this part solely by
                    reason of the provision of investment advice referred to
                    in section 3(21)(A)(ii) (or solely by reason of
                    contracting for or otherwise arranging for the provision
                    of the advice), if--
                              ``(i) the advice is provided by a fiduciary
                          adviser pursuant to an eligible investment advice
                          arrangement between the plan sponsor or other
                          fiduciary and the fiduciary adviser for the
                          provision by the fiduciary adviser of investment
                          advice referred to in such section,
                              ``(ii) the terms of the eligible investment
                          advice arrangement require compliance by the
                          fiduciary adviser with the requirements of this
                          subsection, and
                              ``(iii) the terms of the eligible investment
                          advice arrangement include a written
                          acknowledgment by the fiduciary adviser that the
                          fiduciary adviser is a fiduciary of the plan with
                          respect to the provision of the advice.
                        ``(B) Continued duty of prudent selection of adviser
                    and periodic review.--Nothing in subparagraph (A) shall
                    be construed to exempt a plan sponsor or other person
                    who is a fiduciary from any requirement of this part for
                    the prudent selection and periodic review of a fiduciary
                    adviser with whom the plan sponsor or other person
                    enters into an eligible investment advice arrangement
                    for the provision of investment advice referred to in
                    section 3(21)(A)(ii). The plan sponsor or other person
                    who is a fiduciary has no duty under this part to
                    monitor the specific investment advice given by the
                    fiduciary adviser to any particular recipient of the
                    advice.
                        ``(C) Availability of plan assets for payment for
                    advice.--Nothing in this part shall be construed to
                    preclude the use of plan assets to pay for reasonable
                    expenses in providing investment advice referred to in
                    section 3(21)(A)(ii).
                ``(11) Definitions.--For purposes of this subsection and
            subsection (b)(14)--
                        ``(A) Fiduciary adviser.--The term `fiduciary
                    adviser' means, with respect to a plan, a person who is
                    a fiduciary of the plan by reason of the provision of
                    investment advice referred to in section 3(21)(A)(ii) by
                    the person to the participant or beneficiary of the plan
                    and who is--
                              ``(i) registered as an investment adviser
                          under the Investment Advisers Act of 1940 (15
                          U.S.C. 80b-1 et seq.) or under the laws of the
                          State in which the fiduciary maintains its
                          principal office and place of business,

    [[Page 120 STAT. 958]]

                              ``(ii) a bank or similar financial institution
                          referred to in section 408(b)(4) or a savings
                          association (as defined in section 3(b)(1) of the
                          Federal Deposit Insurance Act (12 U.S.C.
                          1813(b)(1)), but only if the advice is provided
                          through a trust department of the bank or similar
                          financial institution or savings association which
                          is subject to periodic examination and review by
                          Federal or State banking authorities,
                              ``(iii) an insurance company qualified to do
                          business under the laws of a State,
                              ``(iv) a person registered as a broker or
                          dealer under the Securities Exchange Act of 1934
                          (15 U.S.C. 78a et seq.),
                              ``(v) an affiliate of a person described in
                          any of clauses (i) through (iv), or
                              ``(vi) an employee, agent, or registered
                          representative of a person described in clauses
                          (i) through (v) who satisfies the requirements of
                          applicable insurance, banking, and securities laws
                          relating to the provision of the advice.
                    For purposes of this part, a person who develops the
                    computer model described in paragraph (3)(B) or markets
                    the investment advice program or computer model shall be
                    treated as a person who is a fiduciary of the plan by
                    reason of the provision of investment advice referred to
                    in section 3(21)(A)(ii) to the participant or
                    beneficiary and shall be treated as a fiduciary adviser
                    for purposes of this subsection and subsection (b)(14),
                    except that the Secretary may prescribe rules under
                    which only 1 fiduciary adviser may elect to be treated
                    as a fiduciary with respect to the plan.
                        ``(B) Affiliate.--The term `affiliate' of another
                    entity means an affiliated person of the entity (as
                    defined in section 2(a)(3) of the Investment Company Act
                    of 1940 (15 U.S.C. 80a-2(a)(3))).
                        ``(C) Registered representative.--The term
                    `registered representative' of another entity means a
                    person described in section 3(a)(18) of the Securities
                    Exchange Act of 1934 (15 U.S.C. 78c(a)(18))
                    (substituting the entity for the broker or dealer
                    referred to in such section) or a person described in
                    section 202(a)(17) of the Investment Advisers Act of
                    1940 (15 U.S.C. 80b-2(a)(17)) (substituting the entity
                    for the investment adviser referred to in such
                    section).''.
                (3) <<NOTE: 29 USC 1108 note.>> Effective date.--The
            amendments made by this subsection shall apply with respect to
            advice referred to in section 3(21)(A)(ii) of the Employee
            Retirement Income Security Act of 1974 provided after December
            31, 2006.

        (b) Amendments to Internal Revenue Code of 1986.--
                (1) Exemption from prohibited transactions.--Subsection (d)
            of section 4975 of the Internal Revenue Code of 1986 <<NOTE: 26
            USC 4975.>> (relating to exemption from tax on prohibited
            transactions) is amended--
                        (A) in paragraph (15), by striking ``or'' at the
                    end;
                        (B) in paragraph (16), by striking the period at the
                    end and inserting ``;or''; and
                        (C) by adding at the end the following new
                    paragraph:

    [[Page 120 STAT. 959]]

                ``(17) Any transaction in connection with the provision of
            investment advice described in subsection (e)(3)(B) to a
            participant or beneficiary in a plan and that permits such
            participant or beneficiary to direct the investment of plan
            assets in an individual account, if--
                        ``(A) the transaction is--
                              ``(i) the provision of the investment advice
                          to the participant or beneficiary of the plan with
                          respect to a security or other property available
                          as an investment under the plan,
                              ``(ii) the acquisition, holding, or sale of a
                          security or other property available as an
                          investment under the plan pursuant to the
                          investment advice, or
                              ``(iii) the direct or indirect receipt of fees
                          or other compensation by the fiduciary adviser or
                          an affiliate thereof (or any employee, agent, or
                          registered representative of the fiduciary adviser
                          or affiliate) in connection with the provision of
                          the advice or in connection with an acquisition,
                          holding, or sale of a security or other property
                          available as an investment under the plan pursuant
                          to the investment advice; and
                        ``(B) the requirements of subsection (f)(8) are
                    met.''.
                (2) Requirements.--Subsection (f) of such <<NOTE: 26 USC
            4975.>> section 4975 (relating to other definitions and special
            rules) is amended by adding at the end the following new
            paragraph:
                ``(8) Provision of investment advice to participant and
            beneficiaries.-- I24    ``(A) In general.--The prohibitions
            provided in subsection (c) shall not apply to transactions
            described in subsection (b)(14) if the investment advice
            provided by a fiduciary adviser is provided under an eligible
            investment advice arrangement.
                        ``(B) Eligible investment advice arrangement.--For
                    purposes of this paragraph, the term `eligible
                    investment advice arrangement' means an arrangement--
                              ``(i) which either--
                                        ``(I) provides that any fees
                                    (including any commission or other
                                    compensation) received by the fiduciary
                                    adviser for investment advice or with
                                    respect to the sale, holding, or
                                    acquisition of any security or other
                                    property for purposes of investment of
                                    plan assets do not vary depending on the
                                    basis of any investment option selected,
                                    or
                                        ``(II) uses a computer model under
                                    an investment advice program meeting the
                                    requirements of subparagraph (C) in
                                    connection with the provision of
                                    investment advice by a fiduciary adviser
                                    to a participant or beneficiary, and
                              ``(ii) with respect to which the requirements
                          of subparagraphs (D), (E), (F), (G), (H), and (I)
                          are met.
                        ``(C) Investment advice program using computer
                    model.--
                              ``(i) In general.--An investment advice
                          program meets the requirements of this
                          subparagraph if the requirements of clauses (ii),
                          (iii), and (iv) are met.
                              ``(ii) Computer model.--The requirements of
                          this clause are met if the investment advice
                          provided under

    [[Page 120 STAT. 960]]

                          the investment advice program is provided pursuant
                          to a computer model that--
                                        ``(I) applies generally accepted
                                    investment theories that take into
                                    account the historic returns of
                                    different asset classes over defined
                                    periods of time,
                                        ``(II) utilizes relevant information
                                    about the participant, which may include
                                    age, life expectancy, retirement age,
                                    risk tolerance, other assets or sources
                                    of income, and preferences as to certain
                                    types of investments,
                                        ``(III) utilizes prescribed
                                    objective criteria to provide asset
                                    allocation portfolios comprised of
                                    investment options available under the
                                    plan,
                                        ``(IV) operates in a manner that is
                                    not biased in favor of investments
                                    offered by the fiduciary adviser or a
                                    person with a material affiliation or
                                    contractual relationship with the
                                    fiduciary adviser, and
                                        ``(V) takes into account all
                                    investment options under the plan in
                                    specifying how a participant's account
                                    balance should be invested and is not
                                    inappropriately weighted with respect to
                                    any investment option.
                              ``(iii) Certification.--
                                        ``(I) In general.--The requirements
                                    of this clause are met with respect to
                                    any investment advice program if an
                                    eligible investment expert certifies,
                                    prior to the utilization of the computer
                                    model and in accordance with rules
                                    prescribed by the Secretary of Labor,
                                    that the computer model meets the
                                    requirements of clause (ii).
                                        ``(II) Renewal of certifications.--
                                    If, as determined under regulations
                                    prescribed by the Secretary of Labor,
                                    there are material modifications to a
                                    computer model, the requirements of this
                                    clause are met only if a certification
                                    described in subclause (I) is obtained
                                    with respect to the computer model as so
                                    modified.
                                        ``(III) Eligible investment
                                    expert.--The term `eligible investment
                                    expert' means any person which meets
                                    such requirements as the Secretary of
                                    Labor may provide and which does not
                                    bear any material affiliation or
                                    contractual relationship with any
                                    investment adviser or a related person
                                    thereof (or any employee, agent, or
                                    registered representative of the
                                    investment adviser or related person).
                              ``(iv) Exclusivity of recommendation.--The
                          requirements of this clause are met with respect
                          to any investment advice program if--
                                        ``(I) the only investment advice
                                    provided under the program is the advice
                                    generated by the computer model
                                    described in clause (ii), and
                                        ``(II) any transaction described in
                                    subsection (b)(14)(B)(ii) occurs solely
                                    at the direction of the participant or
                                    beneficiary.

    [[Page 120 STAT. 961]]

                          Nothing in the preceding sentence shall preclude
                          the participant or beneficiary from requesting
                          investment advice other than that described in
                          clause (i), but only if such request has not been
                          solicited by any person connected with carrying
                          out the arrangement.
                        ``(D) Express authorization by separate fiduciary.--
                    The requirements of this subparagraph are met with
                    respect to an arrangement if the arrangement is
                    expressly authorized by a plan fiduciary other than the
                    person offering the investment advice program, any
                    person providing investment options under the plan, or
                    any affiliate of either.
                        ``(E) Audits.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if an independent auditor,
                          who has appropriate technical training or
                          experience and proficiency and so represents in
                          writing--
                                        ``(I) conducts an annual audit of
                                    the arrangement for compliance with the
                                    requirements of this paragraph, and
                                        ``(II) <<NOTE: Reports.>> following
                                    completion of the annual audit, issues a
                                    written report to the fiduciary who
                                    authorized use of the arrangement which
                                    presents its specific findings regarding
                                    compliance of the arrangement with the
                                    requirements of this paragraph.
                              ``(ii) Special rule for individual retirement
                          and similar plans.--In the case of a plan
                          described in subparagraphs (B) through (F) (and so
                          much of subparagraph (G) as relates to such
                          subparagraphs) of subsection (e)(1), in lieu of
                          the requirements of clause (i), audits of the
                          arrangement shall be conducted at such times and
                          in such manner as the Secretary of Labor may
                          prescribe.
                              ``(iii) Independent auditor.--For purposes of
                          this subparagraph, an auditor is considered
                          independent if it is not related to the person
                          offering the arrangement to the plan and is not
                          related to any person providing investment options
                          under the plan.
                        ``(F) Disclosure.--The requirements of this
                    subparagraph are met if--
                              ``(i) the fiduciary adviser provides to a
                          participant or a beneficiary before the initial
                          provision of the investment advice with regard to
                          any security or other property offered as an
                          investment option, a written notification (which
                          may consist of notification by means of electronic
                          communication)--
                                        ``(I) of the role of any party that
                                    has a material affiliation or
                                    contractual relationship with the
                                    financial adviser in the development of
                                    the investment advice program and in the
                                    selection of investment options
                                    available under the plan,
                                        ``(II) of the past performance and
                                    historical rates of return of the
                                    investment options available under the
                                    plan,
                                        ``(III) of all fees or other
                                    compensation relating to the advice that
                                    the fiduciary adviser or any

    [[Page 120 STAT. 962]]

                                    affiliate thereof is to receive
                                    (including compensation provided by any
                                    third party) in connection with the
                                    provision of the advice or in connection
                                    with the sale, acquisition, or holding
                                    of the security or other property,
                                        ``(IV) of any material affiliation
                                    or contractual relationship of the
                                    fiduciary adviser or affiliates thereof
                                    in the security or other property,
                                        ``(V) the manner, and under what
                                    circumstances, any participant or
                                    beneficiary information provided under
                                    the arrangement will be used or
                                    disclosed,
                                        ``(VI) of the types of services
                                    provided by the fiduciary adviser in
                                    connection with the provision of
                                    investment advice by the fiduciary
                                    adviser,
                                        ``(VII) that the adviser is acting
                                    as a fiduciary of the plan in connection
                                    with the provision of the advice, and
                                        ``(VIII) that a recipient of the
                                    advice may separately arrange for the
                                    provision of advice by another adviser,
                                    that could have no material affiliation
                                    with and receive no fees or other
                                    compensation in connection with the
                                    security or other property, and
                              ``(ii) at all times during the provision of
                          advisory services to the participant or
                          beneficiary, the fiduciary adviser--
                                        ``(I) maintains the information
                                    described in clause (i) in accurate form
                                    and in the manner described in
                                    subparagraph (H),
                                        ``(II) provides, without charge,
                                    accurate information to the recipient of
                                    the advice no less frequently than
                                    annually,
                                        ``(III) provides, without charge,
                                    accurate information to the recipient of
                                    the advice upon request of the
                                    recipient, and
                                        ``(IV) provides, without charge,
                                    accurate information to the recipient of
                                    the advice concerning any material
                                    change to the information required to be
                                    provided to the recipient of the advice
                                    at a time reasonably contemporaneous to
                                    the change in information.
                        ``(G) Other conditions.--The requirements of this
                    subparagraph are met if--
                              ``(i) the fiduciary adviser provides
                          appropriate disclosure, in connection with the
                          sale, acquisition, or holding of the security or
                          other property, in accordance with all applicable
                          securities laws,
                              ``(ii) the sale, acquisition, or holding
                          occurs solely at the direction of the recipient of
                          the advice,
                              ``(iii) the compensation received by the
                          fiduciary adviser and affiliates thereof in
                          connection with the sale, acquisition, or holding
                          of the security or other property is reasonable,
                          and

    [[Page 120 STAT. 963]]

                              ``(iv) the terms of the sale, acquisition, or
                          holding of the security or other property are at
                          least as favorable to the plan as an arm's length
                          transaction would be.
                        ``(H) Standards for presentation of information.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if the notification required
                          to be provided to participants and beneficiaries
                          under subparagraph (F)(i) is written in a clear
                          and conspicuous manner and in a manner calculated
                          to be understood by the average plan participant
                          and is sufficiently accurate and comprehensive to
                          reasonably apprise such participants and
                          beneficiaries of the information required to be
                          provided in the notification.
                              ``(ii) Model form for disclosure of fees and
                          other compensation.--The Secretary of Labor shall
                          issue a model form for the disclosure of fees and
                          other compensation required in subparagraph
                          (F)(i)(III) which meets the requirements of clause
                          (i).
                        ``(I) Maintenance for 6 years of evidence of
                    compliance.--The requirements of this subparagraph are
                    met if a fiduciary adviser who has provided advice
                    referred to in subparagraph (A) maintains, for a period
                    of not less than 6 years after the provision of the
                    advice, any records necessary for determining whether
                    the requirements of the preceding provisions of this
                    paragraph and of subsection (d)(17) have been met. A
                    transaction prohibited under section 406 shall not be
                    considered to have occurred solely because the records
                    are lost or destroyed prior to the end of the 6-year
                    period due to circumstances beyond the control of the
                    fiduciary adviser.
                        ``(J) Definitions.--For purposes of this paragraph
                    and subsection (d)(17)--
                              ``(i) Fiduciary adviser.--The term `fiduciary
                          adviser' means, with respect to a plan, a person
                          who is a fiduciary of the plan by reason of the
                          provision of investment advice by the person to
                          the participant or beneficiary of the plan and who
                          is--
                                        ``(I) registered as an investment
                                    adviser under the Investment Advisers
                                    Act of 1940 (15 U.S.C. 80b-1 et seq.) or
                                    under the laws of the State in which the
                                    fiduciary maintains its principal office
                                    and place of business,
                                        ``(II) a bank or similar financial
                                    institution referred to in section
                                    408(b)(4) or a savings association (as
                                    defined in section 3(b)(1) of the
                                    Federal Deposit Insurance Act (12 U.S.C.
                                    1813(b)(1)), but only if the advice is
                                    provided through a trust department of
                                    the bank or similar financial
                                    institution or savings association which
                                    is subject to periodic examination and
                                    review by Federal or State banking
                                    authorities,
                                        ``(III) an insurance company
                                    qualified to do business under the laws
                                    of a State,
                                        ``(IV) a person registered as a
                                    broker or dealer under the Securities
                                    Exchange Act of 1934 (15 U.S.C. 78a et
                                    seq.),

    [[Page 120 STAT. 964]]

                                        ``(V) an affiliate of a person
                                    described in any of subclauses (I)
                                    through (IV), or
                                        ``(VI) an employee, agent, or
                                    registered representative of a person
                                    described in subclauses (I) through (V)
                                    who satisfies the requirements of
                                    applicable insurance, banking, and
                                    securities laws relating to the
                                    provision of the advice.
                          For purposes of this title, a person who develops
                          the computer model described in subparagraph
                          (C)(ii) or markets the investment advice program
                          or computer model shall be treated as a person who
                          is a fiduciary of the plan by reason of the
                          provision of investment advice referred to in
                          subsection (e)(3)(B) to the participant or
                          beneficiary and shall be treated as a fiduciary
                          adviser for purposes of this paragraph and
                          subsection (d)(17), except that the Secretary of
                          Labor may prescribe rules under which only 1
                          fiduciary adviser may elect to be treated as a
                          fiduciary with respect to the plan.
                              ``(ii) Affiliate.--The term `affiliate' of
                          another entity means an affiliated person of the
                          entity (as defined in section 2(a)(3) of the
                          Investment Company Act of 1940 (15 U.S.C. 80a-
                          2(a)(3))).
                              ``(iii) Registered representative.--The term
                          `registered representative' of another entity
                          means a person described in section 3(a)(18) of
                          the Securities Exchange Act of 1934 (15 U.S.C.
                          78c(a)(18)) (substituting the entity for the
                          broker or dealer referred to in such section) or a
                          person described in section 202(a)(17) of the
                          Investment Advisers Act of 1940 (15 U.S.C. 80b-
                          2(a)(17)) (substituting the entity for the
                          investment adviser referred to in such
                          section).''.
                (3) <<NOTE: 26 USC 4975 note.>> Determination of feasibility
            of application of computer model investment advice programs for
            individual retirement and similar plans.--
                        (A) Solicitation of information.--As soon as
                    practicable after the date of the enactment of this Act,
                    the Secretary of Labor, in consultation with the
                    Secretary of the Treasury, shall--
                              (i) solicit information as to the feasibility
                          of the application of computer model investment
                          advice programs for plans described in
                          subparagraphs (B) through (F) (and so much of
                          subparagraph (G) as relates to such subparagraphs)
                          of section 4975(e)(1) of the Internal Revenue Code
                          of 1986, including soliciting information from--
                                        (I) at least the top 50 trustees of
                                    such plans, determined on the basis of
                                    assets held by such trustees, and
                                        (II) other persons offering computer
                                    model investment advice programs based
                                    on nonproprietary products, and
                              (ii) shall on the basis of such information
                          make the determination under subparagraph (B).
                    The information solicited by the Secretary of Labor
                    under clause (i) from persons described in subclauses
                    (I) and (II) of clause (i) shall include information on
                    computer

    [[Page 120 STAT. 965]]

                    modeling capabilities of such persons with respect to
                    the current year and preceding year, including such
                    capabilities for investment accounts maintained by such
                    persons.
                        (B) Determination of feasibility.--The Secretary of
                    Labor, in consultation with the Secretary of the
                    Treasury, shall, on the basis of information received
                    under subparagraph (A), determine whether there is any
                    computer model investment advice program which may be
                    utilized by a plan described in subparagraph (A)(i) to
                    provide investment advice to the account beneficiary of
                    the plan which--
                              (i) utilizes relevant information about the
                          account beneficiary, which may include age, life
                          expectancy, retirement age, risk tolerance, other
                          assets or sources of income, and preferences as to
                          certain types of investments,
                              (ii) takes into account the full range of
                          investments, including equities and bonds, in
                          determining the options for the investment
                          portfolio of the account beneficiary, and
                              (iii) allows the account beneficiary, in
                          directing the investment of assets, sufficient
                          flexibility in obtaining advice to evaluate and
                          select investment options.
                    The <<NOTE: Reports. Deadline.>> Secretary of Labor
                    shall report the results of such determination to the
                    committees of Congress referred to in subparagraph
                    (D)(ii) not later than December 31, 2007.
                        (C) Application of computer model investment advice
                    program.--
                              (i) Certification required for use of computer
                          model.--
                                        (I) Restriction on use.--Subclause
                                    (II) of section 4975(f)(8)(B)(i) of the
                                    Internal Revenue Code of 1986 shall not
                                    apply to a plan described in
                                    subparagraph (A)(i).
                                        (II) Restriction lifted if model
                                    certified.--If the Secretary of Labor
                                    determines under subparagraph (B) or (D)
                                    that there is a computer model
                                    investment advice program described in
                                    subparagraph (B), subclause (I) shall
                                    cease to apply as of the date of such
                                    determination.
                              (ii) Class exemption if no initial
                          certification by secretary.--If the Secretary of
                          Labor determines under subparagraph (B) that there
                          is no computer model investment advice program
                          described in subparagraph (B), the Secretary of
                          Labor shall grant a class exemption from treatment
                          as a prohibited transaction under section 4975(c)
                          of the Internal Revenue Code of 1986 to any
                          transaction described in section 4975(d)(17)(A) of
                          such Code with respect to plans described in
                          subparagraph (A)(i), subject to such conditions as
                          set forth in such exemption as are in the
                          interests of the plan and its account beneficiary
                          and protective of the rights of the account
                          beneficiary and as are necessary to--

    [[Page 120 STAT. 966]]

                                        (I) ensure the requirements of
                                    sections 4975(d)(17) and 4975(f)(8)
                                    (other than subparagraph (C) thereof) of
                                    the Internal Revenue Code of 1986 are
                                    met, and
                                        (II) ensure the investment advice
                                    provided under the investment advice
                                    program utilizes prescribed objective
                                    criteria to provide asset allocation
                                    portfolios comprised of securities or
                                    other property available as investments
                                    under the plan.
                          If <<NOTE: Deadline.>> the Secretary of Labor
                          solicits any information under subparagraph (A)
                          from a person and such person does not provide
                          such information within 60 days after the
                          solicitation, then, unless such failure was due to
                          reasonable cause and not wilful neglect, such
                          person shall not be entitled to utilize the class
                          exemption under this clause.
                        (D) Subsequent determination.--
                              (i) In general.--If the Secretary of Labor
                          initially makes a determination described in
                          subparagraph (C)(ii), the Secretary may
                          subsequently determine that there is a computer
                          model investment advice program described in
                          subparagraph (B). If the Secretary makes such
                          subsequent determination, then the class exemption
                          described in subparagraph (C)(ii) shall cease to
                          apply after the later of--
                                        (I) the date which is 2 years after
                                    such subsequent determination, or
                                        (II) the date which is 3 years after
                                    the first date on which such exemption
                                    took effect.
                              (ii) Requests for determination.--
                          Any <<NOTE: Deadlines.>> person may request the
                          Secretary of Labor to make a determination under
                          this subparagraph with respect to any computer
                          model investment advice program, and the Secretary
                          of Labor shall make a determination with respect
                          to such request within 90 days. If the Secretary
                          of Labor makes a determination that such program
                          is not described in subparagraph (B), the
                          Secretary shall, within 10 days of such
                          determination, notify the Committee on Ways and
                          Means and the Committee on Education and the
                          Workforce of the House of Representatives and the
                          Committee on Finance and the Committee on Health,
                          Education, Labor, and Pensions of the Senate of
                          such determination and the reasons for such
                          determination.
                        (E) Effective date.--The provisions of this
                    paragraph shall take effect on the date of the enactment
                    of this Act.
                (4) <<NOTE: 26 USC 4975 note.>> Effective date.--Except as
            provided in this subsection, the amendments made by this
            subsection shall apply with respect to advice referred to in
            section 4975(c)(3)(B) of the Internal Revenue Code of 1986
            provided after December 31, 2006.

        (c) <<NOTE: 26 USC 4975 note.>> Coordination With Existing
    Exemptions.--Any exemption under section 408(b) of the Employee
    Retirement Income Security Act of 1974 and section 4975(d) of the
    Internal Revenue Code of 1986 provided by the amendments made by this
    section shall

    [[Page 120 STAT. 967]]

    not in any manner alter existing individual or class exemptions,
    provided by statute or administrative action.

                       Subtitle B--Prohibited Transactions

    SEC. 611. PROHIBITED TRANSACTION RULES RELATING TO FINANCIAL
                INVESTMENTS.

        (a) Exemption for Block Trading.--
                (1) Amendments to employee retirement income security act of
            1974.--Section 408(b) of such Act (29 U.S.C. 1108(b)), as
            amended by section 601, is amended by adding at the end the
            following new paragraph:
                ``(15)(A) Any transaction involving the purchase or sale of
            securities, or other property (as determined by the Secretary),
            between a plan and a party in interest (other than a fiduciary
            described in section 3(21)(A)) with respect to a plan if--
                        ``(i) the transaction involves a block trade,
                        ``(ii) at the time of the transaction, the interest
                    of the plan (together with the interests of any other
                    plans maintained by the same plan sponsor), does not
                    exceed 10 percent of the aggregate size of the block
                    trade,
                        ``(iii) the terms of the transaction, including the
                    price, are at least as favorable to the plan as an arm's
                    length transaction, and
                        ``(iv) the compensation associated with the purchase
                    and sale is not greater than the compensation associated
                    with an arm's length transaction with an unrelated
                    party.
                ``(B) For purposes of this paragraph, the term `block trade'
            means any trade of at least 10,000 shares or with a market value
            of at least $200,000 which will be allocated across two or more
            unrelated client accounts of a fiduciary.''.
                (2) Amendments to internal revenue code of 1986.--
                        (A) In general.--Subsection (d) of section 4975 of
                    the Internal Revenue Code of 1986 (relating to
                    exemptions), as amended by section 601, is amended by
                    striking ``or'' at the end of paragraph (16), by
                    striking the period at the end of paragraph (17) and
                    inserting ``, or'', and by adding at the end the
                    following new paragraph:
                ``(18) any transaction involving the purchase or sale of
            securities, or other property (as determined by the Secretary of
            Labor), between a plan and a party in interest (other than a
            fiduciary described in subsection (e)(3)(B)) with respect to a
            plan if--
                        ``(A) the transaction involves a block trade,
                        ``(B) at the time of the transaction, the interest
                    of the plan (together with the interests of any other
                    plans maintained by the same plan sponsor), does not
                    exceed 10 percent of the aggregate size of the block
                    trade,
                        ``(C) the terms of the transaction, including the
                    price, are at least as favorable to the plan as an arm's
                    length transaction, and
                        ``(D) the compensation associated with the purchase
                    and sale is not greater than the compensation associated
                    with an arm's length transaction with an unrelated
                    party.''.
                        (B) Special rule relating to block trade.--
                    Subsection (f) of section 4975 of such Code (relating to
                    other

    [[Page 120 STAT. 968]]

                    definitions and special rules), as amended by section
                    601, is amended by adding at the end the following new
                    paragraph:
                ``(9) Block trade.--The term `block trade' means any trade
            of at least 10,000 shares or with a market value of at least
            $200,000 which will be allocated across two or more unrelated
            client accounts of a fiduciary.''.

        (b) Bonding Relief.--Section 412(a) of such Act (29 U.S.C. 1112(a))
    is amended--
                (1) by redesignating paragraph (2) as paragraph (3),
                (2) by striking ``and'' at the end of paragraph (1), and
                (3) by inserting after paragraph (1) the following new
            paragraph:
                ``(2) no bond shall be required of any entity which is
            registered as a broker or a dealer under section 15(b) of the
            Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) if the broker
            or dealer is subject to the fidelity bond requirements of a
            self-regulatory organization (within the meaning of section
            3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).''.

        (c) Exemption for Electronic Communication Network.--
                (1) Amendments to employee retirement income security act of
            1974.--Section 408(b) of such Act, as amended by subsection
            (a), <<NOTE: 29 USC 1108.>> is amended by adding at the end the
            following:
                ``(16) Any transaction involving the purchase or sale of
            securities, or other property (as determined by the Secretary),
            between a plan and a party in interest if--
                        ``(A) the transaction is executed through an
                    electronic communication network, alternative trading
                    system, or similar execution system or trading venue
                    subject to regulation and oversight by--
                              ``(i) the applicable Federal regulating
                          entity, or
                              ``(ii) such foreign regulatory entity as the
                          Secretary may determine by regulation,
                        ``(B) either--
                              ``(i) the transaction is effected pursuant to
                          rules designed to match purchases and sales at the
                          best price available through the execution system
                          in accordance with applicable rules of the
                          Securities and Exchange Commission or other
                          relevant governmental authority, or
                              ``(ii) neither the execution system nor the
                          parties to the transaction take into account the
                          identity of the parties in the execution of
                          trades,
                        ``(C) the price and compensation associated with the
                    purchase and sale are not greater than the price and
                    compensation associated with an arm's length transaction
                    with an unrelated party,
                        ``(D) if the party in interest has an ownership
                    interest in the system or venue described in
                    subparagraph (A), the system or venue has been
                    authorized by the plan sponsor or other independent
                    fiduciary for transactions described in this paragraph,
                    and
                        ``(E) <<NOTE: Deadline. Notice.>> not less than 30
                    days prior to the initial transaction described in this
                    paragraph executed through any system or venue described
                    in subparagraph (A), a plan fiduciary is provided
                    written or electronic notice of the

    [[Page 120 STAT. 969]]

                    execution of such transaction through such system or
                    venue.''.
                (2) Amendments to internal revenue code of 1986.--Subsection
            (d) of section 4975 of the Internal Revenue Code of 1986
            (relating to exemptions), as amended by subsection (a), is
            amended by striking ``or'' at the end of paragraph (17), by
            striking the period at the end of paragraph (18) and inserting
            ``, or'', and by adding at the end the following new paragraph:
                ``(19) any transaction involving the purchase or sale of
            securities, or other property (as determined by the Secretary of
            Labor), between a plan and a party in interest if--
                        ``(A) the transaction is executed through an
                    electronic communication network, alternative trading
                    system, or similar execution system or trading venue
                    subject to regulation and oversight by--
                              ``(i) the applicable Federal regulating
                          entity, or
                              ``(ii) such foreign regulatory entity as the
                          Secretary of Labor may determine by regulation,
                        ``(B) either--
                              ``(i) the transaction is effected pursuant to
                          rules designed to match purchases and sales at the
                          best price available through the execution system
                          in accordance with applicable rules of the
                          Securities and Exchange Commission or other
                          relevant governmental authority, or
                              ``(ii) neither the execution system nor the
                          parties to the transaction take into account the
                          identity of the parties in the execution of
                          trades,
                        ``(C) the price and compensation associated with the
                    purchase and sale are not greater than the price and
                    compensation associated with an arm's length transaction
                    with an unrelated party,
                        ``(D) if the party in interest has an ownership
                    interest in the system or venue described in
                    subparagraph (A), the system or venue has been
                    authorized by the plan sponsor or other independent
                    fiduciary for transactions described in this paragraph,
                    and
                        ``(E) <<NOTE: Deadline. Notice.>> not less than 30
                    days prior to the initial transaction described in this
                    paragraph executed through any system or venue described
                    in subparagraph (A), a plan fiduciary is provided
                    written or electronic notice of the execution of such
                    transaction through such system or venue.''.

        (d) Exemption for Service Providers.--
                (1) Amendments to employee retirement income security act of
            1974.--Section 408(b) of such Act <<NOTE: 29 USC 1108.>>  (29
            U.S.C. 1106), as amended by subsection (c), is amended by adding
            at the end the following new paragraph:
                ``(17)(A) Transactions described in subparagraphs (A), (B),
            and (D) of section 406(a)(1) between a plan and a person that is
            a party in interest other than a fiduciary (or an affiliate) who
            has or exercises any discretionary authority or control with
            respect to the investment of the plan assets involved in the
            transaction or renders investment advice (within the meaning of
            section 3(21)(A)(ii)) with respect to those assets, solely by
            reason of providing services to the plan or solely by reason of
            a relationship to such a service provider described

    [[Page 120 STAT. 970]]

            in subparagraph (F), (G), (H), or (I) of section 3(14), or both,
            but only if in connection with such transaction the plan
            receives no less, nor pays no more, than adequate consideration.
                ``(B) For purposes of this paragraph, the term `adequate
            consideration' means--
                              ``(i) in the case of a security for which
                          there is a generally recognized market--
                                        ``(I) the price of the security
                                    prevailing on a national securities
                                    exchange which is registered under
                                    section 6 of the Securities Exchange Act
                                    of 1934, taking into account factors
                                    such as the size of the transaction and
                                    marketability of the security, or
                                        ``(II) if the security is not traded
                                    on such a national securities exchange,
                                    a price not less favorable to the plan
                                    than the offering price for the security
                                    as established by the current bid and
                                    asked prices quoted by persons
                                    independent of the issuer and of the
                                    party in interest, taking into account
                                    factors such as the size of the
                                    transaction and marketability of the
                                    security, and
                              ``(ii) in the case of an asset other than a
                          security for which there is a generally recognized
                          market, the fair market value of the asset as
                          determined in good faith by a fiduciary or
                          fiduciaries in accordance with regulations
                          prescribed by the Secretary.''.
                (2) Amendment to internal revenue code of 1986.--
                        (A) In general.--Subsection (d) of section 4975 of
                    the Internal Revenue Code of 1986 (relating to
                    exemptions), as amended by subsection (c), is amended by
                    striking ``or'' at the end of paragraph (18), by
                    striking the period at the end of paragraph (19) and
                    inserting ``, or'', and by adding at the end the
                    following new paragraph:
                ``(20) transactions described in subparagraphs (A), (B), and
            (D) of subsection (c)(1) between a plan and a person that is a
            party in interest other than a fiduciary (or an affiliate) who
            has or exercises any discretionary authority or control with
            respect to the investment of the plan assets involved in the
            transaction or renders investment advice (within the meaning of
            subsection (e)(3)(B)) with respect to those assets, solely by
            reason of providing services to the plan or solely by reason of
            a relationship to such a service provider described in
            subparagraph (F), (G), (H), or (I) of subsection (e)(2), or
            both, but only if in connection with such transaction the plan
            receives no less, nor pays no more, than adequate
            consideration.''.
                        (B) Special rule relating to service providers.--
                    Subsection (f) of section 4975 of such Code (relating to
                    other definitions and special rules), as amended by
                    subsection (a), is amended by adding at the end the
                    following new paragraph:
                ``(10) Adequate consideration.--The term `adequate
            consideration' means--
                        ``(A) in the case of a security for which there is a
                    generally recognized market--
                              ``(i) the price of the security prevailing on
                          a national securities exchange which is registered
                          under

    [[Page 120 STAT. 971]]

                          section 6 of the Securities Exchange Act of 1934,
                          taking into account factors such as the size of
                          the transaction and marketability of the security,
                          or
                              ``(ii) if the security is not traded on such a
                          national securities exchange, a price not less
                          favorable to the plan than the offering price for
                          the security as established by the current bid and
                          asked prices quoted by persons independent of the
                          issuer and of the party in interest, taking into
                          account factors such as the size of the
                          transaction and marketability of the security, and
                        ``(B) in the case of an asset other than a security
                    for which there is a generally recognized market, the
                    fair market value of the asset as determined in good
                    faith by a fiduciary or fiduciaries in accordance with
                    regulations prescribed by the Secretary of Labor.''.

        (e) Relief for Foreign Exchange Transactions.--
                (1) Amendments to employee retirement income security act of
            1974.--Section 408(b) of such Act (29 U.S.C. 1108(b)), as
            amended by subsection (d), is amended by adding at the end the
            following new paragraph:
                ``(18) Foreign exchange transactions.--Any foreign exchange
            transactions, between a bank or broker-dealer (or any affiliate
            of either), and a plan (as defined in section 3(3)) with respect
            to which such bank or broker-dealer (or affiliate) is a trustee,
            custodian, fiduciary, or other party in interest, if--
                        ``(A) the transaction is in connection with the
                    purchase, holding, or sale of securities or other
                    investment assets (other than a foreign exchange
                    transaction unrelated to any other investment in
                    securities or other investment assets),
                        ``(B) at the time the foreign exchange transaction
                    is entered into, the terms of the transaction are not
                    less favorable to the plan than the terms generally
                    available in comparable arm's length foreign exchange
                    transactions between unrelated parties, or the terms
                    afforded by the bank or broker-dealer (or any affiliate
                    of either) in comparable arm's-length foreign exchange
                    transactions involving unrelated parties,
                        ``(C) the exchange rate used by such bank or broker-
                    dealer (or affiliate) for a particular foreign exchange
                    transaction does not deviate by more or less than 3
                    percent from the interbank bid and asked rates for
                    transactions of comparable size and maturity at the time
                    of the transaction as displayed on an independent
                    service that reports rates of exchange in the foreign
                    currency market for such currency, and
                        ``(D) the bank or broker-dealer (or any affiliate of
                    either) does not have investment discretion, or provide
                    investment advice, with respect to the transaction.''.
                (2) Amendment to internal revenue code of 1986.--Subsection
            (d) of section 4975 of the Internal Revenue Code of 1986
            (relating to exemptions), as amended by subsection (d), is
            amended by striking ``or'' at the end of paragraph (19), by
            striking the period at the end of paragraph (20) and inserting
            ``, or'', and by adding at the end the following new paragraph:

    [[Page 120 STAT. 972]]

                ``(21) any foreign exchange transactions, between a bank or
            broker-dealer (or any affiliate of either) and a plan (as
            defined in this section) with respect to which such bank or
            broker-dealer (or affiliate) is a trustee, custodian, fiduciary,
            or other party in interest person, if--
                        ``(A) the transaction is in connection with the
                    purchase, holding, or sale of securities or other
                    investment assets (other than a foreign exchange
                    transaction unrelated to any other investment in
                    securities or other investment assets),
                        ``(B) at the time the foreign exchange transaction
                    is entered into, the terms of the transaction are not
                    less favorable to the plan than the terms generally
                    available in comparable arm's length foreign exchange
                    transactions between unrelated parties, or the terms
                    afforded by the bank or broker-dealer (or any affiliate
                    of either) in comparable arm's-length foreign exchange
                    transactions involving unrelated parties,
                        ``(C) the exchange rate used by such bank or broker-
                    dealer (or affiliate) for a particular foreign exchange
                    transaction does not deviate by more or less than 3
                    percent from the interbank bid and asked rates for
                    transactions of comparable size and maturity at the time
                    of the transaction as displayed on an independent
                    service that reports rates of exchange in the foreign
                    currency market for such currency, and
                        ``(D) the bank or broker-dealer (or any affiliate of
                    either) does not have investment discretion, or provide
                    investment advice, with respect to the transaction.''.

        (f) Definition of Plan Asset Vehicle.--Section 3 of such Act (29
    U.S.C. 1002) is amended by adding at the end the following new
    paragraph:
        ``(42) the term `plan assets' means plan assets as defined by such
    regulations as the Secretary may prescribe, except that under such
    regulations the assets of any entity shall not be treated as plan assets
    if, immediately after the most recent acquisition of any equity interest
    in the entity, less than 25 percent of the total value of each class of
    equity interest in the entity is held by benefit plan investors. For
    purposes of determinations pursuant to this paragraph, the value of any
    equity interest held by a person (other than such a benefit plan
    investor) who has discretionary authority or control with respect to the
    assets of the entity or any person who provides investment advice for a
    fee (direct or indirect) with respect to such assets, or any affiliate
    of such a person, shall be disregarded for purposes of calculating the
    25 percent threshold. An entity shall be considered to hold plan assets
    only to the extent of the percentage of the equity interest held by
    benefit plan investors. For purposes of this paragraph, the term
    `benefit plan investor' means an employee benefit plan subject to part
    4, any plan to which section 4975 of the Internal Revenue Code of 1986
    applies, and any entity whose underlying assets include plan assets by
    reason of a plan's investment in such entity.''.
        (g) Exemption for Cross Trading.--
                (1) Amendments to employee retirement income security act of
            1974.--Section 408(b) of such Act (29 U.S.C. 1108(b)), as
            amended by subsection (e), is amended by adding at the end the
            following new paragraph:

    [[Page 120 STAT. 973]]

                ``(19) Cross trading.--Any transaction described in sections
            406(a)(1)(A) and 406(b)(2) involving the purchase and sale of a
            security between a plan and any other account managed by the
            same investment manager, if--
                        ``(A) the transaction is a purchase or sale, for no
                    consideration other than cash payment against prompt
                    delivery of a security for which market quotations are
                    readily available,
                        ``(B) the transaction is effected at the independent
                    current market price of the security (within the meaning
                    of section 270.17a-7(b) of title 17, Code of Federal
                    Regulations),
                        ``(C) no brokerage commission, fee (except for
                    customary transfer fees, the fact of which is disclosed
                    pursuant to subparagraph (D)), or other remuneration is
                    paid in connection with the transaction,
                        ``(D) a fiduciary (other than the investment manager
                    engaging in the cross-trades or any affiliate) for each
                    plan participating in the transaction authorizes in
                    advance of any cross-trades (in a document that is
                    separate from any other written agreement of the
                    parties) the investment manager to engage in cross
                    trades at the investment manager's discretion, after
                    such fiduciary has received disclosure regarding the
                    conditions under which cross trades may take place (but
                    only if such disclosure is separate from any other
                    agreement or disclosure involving the asset management
                    relationship), including the written policies and
                    procedures of the investment manager described in
                    subparagraph (H),
                        ``(E) each plan participating in the transaction has
                    assets of at least $100,000,000, except that if the
                    assets of a plan are invested in a master trust
                    containing the assets of plans maintained by employers
                    in the same controlled group (as defined in section
                    407(d)(7)), the master trust has assets of at least
                    $100,000,000,
                        ``(F) the investment manager provides to the plan
                    fiduciary who authorized cross trading under
                    subparagraph (D) a quarterly report detailing all cross
                    trades executed by the investment manager in which the
                    plan participated during such quarter, including the
                    following information, as applicable: (i) the identity
                    of each security bought or sold; (ii) the number of
                    shares or units traded; (iii) the parties involved in
                    the cross-trade; and (iv) trade price and the method
                    used to establish the trade price,
                        ``(G) the investment manager does not base its fee
                    schedule on the plan's consent to cross trading, and no
                    other service (other than the investment opportunities
                    and cost savings available through a cross trade) is
                    conditioned on the plan's consent to cross trading,
                        ``(H) the investment manager has adopted, and cross-
                    trades are effected in accordance with, written cross-
                    trading policies and procedures that are fair and
                    equitable to all accounts participating in the cross-
                    trading program, and that include a description of the
                    manager's pricing policies and procedures, and the
                    manager's policies and procedures for allocating cross
                    trades in an objective manner among accounts
                    participating in the cross-trading program, and

    [[Page 120 STAT. 974]]

                        ``(I) <<NOTE: Reports. Deadline.>> the investment
                    manager has designated an individual responsible for
                    periodically reviewing such purchases and sales to
                    ensure compliance with the written policies and
                    procedures described in subparagraph (H), and following
                    such review, the individual shall issue an annual
                    written report no later than 90 days following the
                    period to which it relates signed under penalty of
                    perjury to the plan fiduciary who authorized cross
                    trading under subparagraph (D) describing the steps
                    performed during the course of the review, the level of
                    compliance, and any specific instances of non-
                    compliance.
            The <<NOTE: Notification.>> written report under subparagraph
            (I) shall also notify the plan fiduciary of the plan's right to
            terminate participation in the investment manager's cross-
            trading program at any time.''.
                (2) Amendments of internal revenue code of 1986.--Subsection
            (d) of section 4975 of the Internal Revenue Code of 1986
            (relating to exemptions), as amended by subsection (e), is
            amended by striking ``or'' at the end of paragraph (20), by
            striking the period at the end of paragraph (21) and inserting
            ``, or'', and by adding at the end the following new paragraph:
                ``(22) any transaction described in subsection (c)(1)(A)
            involving the purchase and sale of a security between a plan and
            any other account managed by the same investment manager, if--
                        ``(A) the transaction is a purchase or sale, for no
                    consideration other than cash payment against prompt
                    delivery of a security for which market quotations are
                    readily available,
                        ``(B) the transaction is effected at the independent
                    current market price of the security (within the meaning
                    of section 270.17a-7(b) of title 17, Code of Federal
                    Regulations),
                        ``(C) no brokerage commission, fee (except for
                    customary transfer fees, the fact of which is disclosed
                    pursuant to subparagraph (D)), or other remuneration is
                    paid in connection with the transaction,
                        ``(D) a fiduciary (other than the investment manager
                    engaging in the cross-trades or any affiliate) for each
                    plan participating in the transaction authorizes in
                    advance of any cross-trades (in a document that is
                    separate from any other written agreement of the
                    parties) the investment manager to engage in cross
                    trades at the investment manager's discretion, after
                    such fiduciary has received disclosure regarding the
                    conditions under which cross trades may take place (but
                    only if such disclosure is separate from any other
                    agreement or disclosure involving the asset management
                    relationship), including the written policies and
                    procedures of the investment manager described in
                    subparagraph (H),
                        ``(E) each plan participating in the transaction has
                    assets of at least $100,000,000, except that if the
                    assets of a plan are invested in a master trust
                    containing the assets of plans maintained by employers
                    in the same controlled group (as defined in section
                    407(d)(7) of the Employee Retirement Income Security Act
                    of 1974), the master trust has assets of at least
                    $100,000,000,

    [[Page 120 STAT. 975]]

                        ``(F) the investment manager provides to the plan
                    fiduciary who authorized cross trading under
                    subparagraph (D) a quarterly report detailing all cross
                    trades executed by the investment manager in which the
                    plan participated during such quarter, including the
                    following information, as applicable: (i) the identity
                    of each security bought or sold; (ii) the number of
                    shares or units traded; (iii) the parties involved in
                    the cross-trade; and (iv) trade price and the method
                    used to establish the trade price,
                        ``(G) the investment manager does not base its fee
                    schedule on the plan's consent to cross trading, and no
                    other service (other than the investment opportunities
                    and cost savings available through a cross trade) is
                    conditioned on the plan's consent to cross trading,
                        ``(H) the investment manager has adopted, and cross-
                    trades are effected in accordance with, written cross-
                    trading policies and procedures that are fair and
                    equitable to all accounts participating in the cross-
                    trading program, and that include a description of the
                    manager's pricing policies and procedures, and the
                    manager's policies and procedures for allocating cross
                    trades in an objective manner among accounts
                    participating in the cross-trading program, and
                        ``(I) <<NOTE: Reports. Deadline.>> the investment
                    manager has designated an individual responsible for
                    periodically reviewing such purchases and sales to
                    ensure compliance with the written policies and
                    procedures described in subparagraph (H), and following
                    such review, the individual shall issue an annual
                    written report no later than 90 days following the
                    period to which it relates signed under penalty of
                    perjury to the plan fiduciary who authorized cross
                    trading under subparagraph (D) describing the steps
                    performed during the course of the review, the level of
                    compliance, and any specific instances of non-
                    compliance.
            The <<NOTE: Notification.>>  written report shall also notify
            the plan fiduciary of the plan's right to terminate
            participation in the investment manager's cross-trading program
            at any time.''.
                (3) Regulations.--No <<NOTE: Deadline. 29 USC 1108 note.>>
            later than 180 days after the date of the enactment of this Act,
            the Secretary of Labor, after consultation with the Securities
            and Exchange Commission, shall issue regulations regarding the
            content of policies and procedures required to be adopted by an
            investment manager under section 408(b)(19) of the Employee
            Retirement Income Security Act of 1974.

        (h) <<NOTE: 26 USC 4975 note.>> Effective Dates.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to transactions
            occurring after the date of the enactment of this Act.
                (2) Bonding rule.--The amendments made by subsection (b)
            shall apply to plan years beginning after such date.

    SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS INVOLVING
                SECURITIES AND COMMODITIES.

        (a) Amendment of Employee Retirement Income Security Act of 1974.--
    Section 408(b) of the Employee Retirement Income Security Act of 1974
    (29 U.S.C. 1108(b)), as amended by sections 601 and 611, is further
    amended by adding at the end the following new paragraph:

    [[Page 120 STAT. 976]]

                ``(20)(A) Except as provided in subparagraphs (B) and (C), a
            transaction described in section 406(a) in connection with the
            acquisition, holding, or disposition of any security or
            commodity, if the transaction is corrected before the end of the
            correction period.
                ``(B) Subparagraph (A) does not apply to any transaction
            between a plan and a plan sponsor or its affiliates that
            involves the acquisition or sale of an employer security (as
            defined in section 407(d)(1)) or the acquisition, sale, or lease
            of employer real property (as defined in section 407(d)(2)).
                ``(C) In the case of any fiduciary or other party in
            interest (or any other person knowingly participating in such
            transaction), subparagraph (A) does not apply to any transaction
            if, at the time the transaction occurs, such fiduciary or party
            in interest (or other person) knew (or reasonably should have
            known) that the transaction would (without regard to this
            paragraph) constitute a violation of section 406(a).
                ``(D) For purposes of this paragraph, the term `correction
            period' means, in connection with a fiduciary or party in
            interest (or other person knowingly participating in the
            transaction), the 14-day period beginning on the date on which
            such fiduciary or party in interest (or other person) discovers,
            or reasonably should have discovered, that the transaction would
            (without regard to this paragraph) constitute a violation of
            section 406(a).
                ``(E) For purposes of this paragraph--
                        ``(i) The term `security' has the meaning given such
                    term by section 475(c)(2) of the Internal Revenue Code
                    of 1986 (without regard to subparagraph (F)(iii) and the
                    last sentence thereof).
                        ``(ii) The term `commodity' has the meaning given
                    such term by section 475(e)(2) of such Code (without
                    regard to subparagraph (D)(iii) thereof).
                        ``(iii) The term `correct' means, with respect to a
                    trans- action--
                              ``(I) to undo the transaction to the extent
                          possible and in any case to make good to the plan
                          or affected account any losses resulting from the
                          transaction, and
                              ``(II) to restore to the plan or affected
                          account any profits made through the use of assets
                          of the plan.''.

        (b) Amendment of Internal Revenue Code of 1986.--
                (1) In general.--Subsection (d) of section 4975 of the
            Internal Revenue Code of 1986 (relating to exemptions), as
            amended by sections 601 and 611, is amended by striking ``or''
            at the end of paragraph (21), by striking the period at the end
            of paragraph (22) and inserting ``, or'', and by adding at the
            end the following new paragraph:
                ``(23) except as provided in subsection (f)(11), a
            transaction described in subparagraph (A), (B), (C), or (D) of
            subsection (c)(1) in connection with the acquisition, holding,
            or disposition of any security or commodity, if the transaction
            is corrected before the end of the correction period.''.
                (2) Special rules relating to correction period.--Subsection
            (f) of section 4975 of such Code (relating to other definitions
            and special rules), as amended by sections 601 and 611, is
            amended by adding at the end the following new paragraph:
                ``(11) Correction period.--

    [[Page 120 STAT. 977]]

                        ``(A) In general.--For purposes of subsection
                    (d)(23), the term `correction period' means the 14-day
                    period beginning on the date on which the disqualified
                    person discovers, or reasonably should have discovered,
                    that the transaction would (without regard to this
                    paragraph and subsection (d)(23)) constitute a
                    prohibited transaction.
                        ``(B) Exceptions.--
                              ``(i) Employer securities.--Subsection (d)(23)
                          does not apply to any transaction between a plan
                          and a plan sponsor or its affiliates that involves
                          the acquisition or sale of an employer security
                          (as defined in section 407(d)(1)) or the
                          acquisition, sale, or lease of employer real
                          property (as defined in section 407(d)(2)).
                              ``(ii) Knowing prohibited transaction.--In the
                          case of any disqualified person, subsection
                          (d)(23) does not apply to a transaction if, at the
                          time the transaction is entered into, the
                          disqualified person knew (or reasonably should
                          have known) that the transaction would (without
                          regard to this paragraph) constitute a prohibited
                          transaction.
                        ``(C) Abatement of tax where there is a
                    correction.--If a transaction is not treated as a
                    prohibited transaction by reason of subsection (d)(23),
                    then no tax under subsections (a) and (b) shall be
                    assessed with respect to such transaction, and if
                    assessed the assessment shall be abated, and if
                    collected shall be credited or refunded as an
                    overpayment.
                        ``(D) Definitions.--For purposes of this paragraph
                    and subsection (d)(23)--
                              ``(i) Security.--The term `security' has the
                          meaning given such term by section 475(c)(2)
                          (without regard to subparagraph (F)(iii) and the
                          last sentence thereof).
                              ``(ii) Commodity.--The term `commodity' has
                          the meaning given such term by section 475(e)(2)
                          (without regard to subparagraph (D)(iii) thereof).
                              ``(iii) Correct.--The term `correct' means,
                          with respect to a transaction--
                                        ``(I) to undo the transaction to the
                                    extent possible and in any case to make
                                    good to the plan or affected account any
                                    losses resulting from the transaction,
                                    and
                                        ``(II) to restore to the plan or
                                    affected account any profits made
                                    through the use of assets of the
                                    plan.''.

        (c) <<NOTE: 26 USC 4975 note.>> Effective Date.--The amendments made
    by this section shall apply to any transaction which the fiduciary or
    disqualified person discovers, or reasonably should have discovered,
    after the date of the enactment of this Act constitutes a prohibited
    transaction.

    [[Page 120 STAT. 978]]

                      Subtitle C--Fiduciary and Other Rules

    SEC. 621. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LIABILITY DURING
                SUSPENSION OF ABILITY OF PARTICIPANT OR BENEFICIARY TO
                DIRECT INVESTMENTS.

        (a) In General.--Section 404(c) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1104(c)) is amended--
                (1) in paragraph (1)--
                        (A) by redesignating subparagraphs (A) and (B) as
                    clauses (i) and (ii), respectively, and by inserting
                    ``(A)'' after ``(c)(1)'',
                        (B) in subparagraph (A)(ii) (as redesignated by
                    paragraph (1)), by inserting before the period the
                    following: ``, except that this clause shall not apply
                    in connection with such participant or beneficiary for
                    any blackout period during which the ability of such
                    participant or beneficiary to direct the investment of
                    the assets in his or her account is suspended by a plan
                    sponsor or fiduciary'', and
                        (C) by adding at the end the following new
                    subparagraphs:

        ``(B) If a person referred to in subparagraph (A)(ii) meets the
    requirements of this title in connection with authorizing and
    implementing the blackout period, any person who is otherwise a
    fiduciary shall not be liable under this title for any loss occurring
    during such period.
        ``(C) For purposes of this paragraph, the term `blackout period' has
    the meaning given such term by section 101(i)(7).''; and
                (2) by adding at the end the following:
                ``(4)(A) In any case in which a qualified change in
            investment options occurs in connection with an individual
            account plan, a participant or beneficiary shall not be treated
            for purposes of paragraph (1) as not exercising control over the
            assets in his account in connection with such change if the
            requirements of subparagraph (C) are met in connection with such
            change.
                ``(B) For purposes of subparagraph (A), the term `qualified
            change in investment options' means, in connection with an
            individual account plan, a change in the investment options
            offered to the participant or beneficiary under the terms of the
            plan, under which--
                        ``(i) the account of the participant or beneficiary
                    is reallocated among one or more remaining or new
                    investment options which are offered in lieu of one or
                    more investment options offered immediately prior to the
                    effective date of the change, and
                        ``(ii) the stated characteristics of the remaining
                    or new investment options provided under clause (i),
                    including characteristics relating to risk and rate of
                    return, are, as of immediately after the change,
                    reasonably similar to those of the existing investment
                    options as of immediately before the change.
                ``(C) The requirements of this subparagraph are met in
            connection with a qualified change in investment options if--
                        ``(i) at least 30 days and no more than 60 days
                    prior to the effective date of the change, the plan
                    administrator furnishes written notice of the change to
                    the participants

    [[Page 120 STAT. 979]]

                    and beneficiaries, including information comparing the
                    existing and new investment options and an explanation
                    that, in the absence of affirmative investment
                    instructions from the participant or beneficiary to the
                    contrary, the account of the participant or beneficiary
                    will be invested in the manner described in subparagraph
                    (B),
                        ``(ii) the participant or beneficiary has not
                    provided to the plan administrator, in advance of the
                    effective date of the change, affirmative investment
                    instructions contrary to the change, and
                        ``(iii) the investments under the plan of the
                    participant or beneficiary as in effect immediately
                    prior to the effective date of the change were the
                    product of the exercise by such participant or
                    beneficiary of control over the assets of the account
                    within the meaning of paragraph (1).''.

        (b) <<NOTE: 29 USC 1104 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2007.
                (2) <<NOTE: Applicability.>> Special rule for collectively
            bargained agreements.--In the case of a plan maintained pursuant
            to 1 or more collective bargaining agreements between employee
            representatives and 1 or more employers ratified on or before
            the date of the enactment of this Act, paragraph (1) shall be
            applied to benefits pursuant to, and individuals covered by, any
            such agreement by substituting for ``December 31, 2007'' the
            earlier of--
                        (A) the later of--
                              (i) December 31, 2008, or
                              (ii) the date on which the last of such
                          collective bargaining agreements terminates
                          (determined without regard to any extension
                          thereof after such date of enactment), or
                        (B) December 31, 2009.

    SEC. 622. INCREASE IN MAXIMUM BOND AMOUNT.

        (a) In General.--Section 412(a) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1112), as amended by section 611(b), is
    amended by adding at the end the following: ``In the case of a plan that
    holds employer securities (within the meaning of section 407(d)(1)),
    this subsection shall be applied by substituting `$1,000,000' for
    `$500,000' each place it appears.''.
        (b) <<NOTE: 29 USC 1112 note.>> Effective Date.--The amendment made
    by this section shall apply to plan years beginning after December 31,
    2007.

    SEC. 623. INCREASE IN PENALTIES FOR COERCIVE INTERFERENCE WITH EXERCISE
                OF ERISA RIGHTS.

        (a) In General.--Section 511 of the Employment Retirement Income
    Security Act of 1974 (29 U.S.C. 1141) is amended--
                (1) by striking ``$10,000'' and inserting ``$100,000'', and
                (2) by striking ``one year'' and inserting ``10 years''.

        (b) <<NOTE: 29 USC 1141 note.>> Effective Date.--The amendments made
    by this section shall apply to violations occurring on and after the
    date of the enactment of this Act.

    [[Page 120 STAT. 980]]

    SEC. 624. TREATMENT OF INVESTMENT OF ASSETS BY PLAN WHERE PARTICIPANT
                FAILS TO EXERCISE INVESTMENT ELECTION.

        (a) In General.--Section 404(c) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C. 1104(c)), as amended by section 622, is
    amended by adding at the end the following new paragraph:
                ``(5) Default investment arrangements.--
                        ``(A) In general.--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 or long-term capital appreciation, or a
                    blend of both.
                        ``(B) Notice requirements.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if each participant--
                                        ``(I) 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
                                        ``(II) has a reasonable period of
                                    time after receipt of such notice and
                                    before the beginning of the plan year to
                                    make such designation.
                              ``(ii) Form of notice.--
                          The <<NOTE: Applicability.>> requirements of
                          clauses (i) and (ii) of section 401(k)(12)(D) of
                          the Internal Revenue Code of 1986 shall apply with
                          respect to the notices described in this
                          subparagraph.''.

        (b) <<NOTE: 29 USC 1104 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2006.
                (2) Regulations.--Final <<NOTE: Deadline.>> regulations
            under section 404(c)(5)(A) of the Employee Retirement Income
            Security Act of 1974 (as added by this section) shall be issued
            no later than 6 months after the date of the enactment of this
            Act.

    SEC. 625. <<NOTE: 29 USC 1104 note. Deadline.>> CLARIFICATION OF
                FIDUCIARY RULES.

        (a) In General.--Not later than 1 year after the date of the
    enactment of this Act, the Secretary of Labor shall issue final
    regulations clarifying that the selection of an annuity contract as an
    optional form of distribution from an individual account plan to a
    participant or beneficiary--
                (1) is not subject to the safest available annuity standard
            under Interpretive Bulletin 95-1 (29 CFR 2509.95-1), and
                (2) is subject to all otherwise applicable fiduciary
            standards.

        (b) Effective Date.--This section shall take effect on the date of
    enactment of this Act.

    [[Page 120 STAT. 981]]

                      TITLE VII--BENEFIT ACCRUAL STANDARDS

    SEC. 701. BENEFIT ACCRUAL STANDARDS.

        (a) Amendments to the Employee Retirement Income Security Act of
    1974.--
                (1) Rules relating to reduction in rate of benefit
            accrual.--Section 204(b) of the Employee Retirement Income
            Security Act of 1974 (29 U.S.C. 1054(b)) is amended by adding at
            the end the following new paragraph:
                ``(5) Special rules relating to age.--
                        ``(A) Comparison to similarly situated younger
                    individual.--
                              ``(i) In general.--A plan shall not be treated
                          as failing to meet the requirements of paragraph
                          (1)(H)(i) if a participant's accrued benefit, as
                          determined as of any date under the terms of the
                          plan, would be equal to or greater than that of
                          any similarly situated, younger individual who is
                          or could be a participant.
                              ``(ii) Similarly situated.--For purposes of
                          this subparagraph, a participant is similarly
                          situated to any other individual if such
                          participant is identical to such other individual
                          in every respect (including period of service,
                          compensation, position, date of hire, work
                          history, and any other respect) except for age.
                              ``(iii) Disregard of subsidized early
                          retirement benefits.--In determining the accrued
                          benefit as of any date for purposes of this
                          clause, the subsidized portion of any early
                          retirement benefit or retirement-type subsidy
                          shall be disregarded.
                              ``(iv) Accrued benefit.--For purposes of this
                          subparagraph, the accrued benefit may, under the
                          terms of the plan, be expressed as an annuity
                          payable at normal retirement age, the balance of a
                          hypothetical account, or the current value of the
                          accumulated percentage of the employee's final
                          average compensation.
                        ``(B) Applicable defined benefit plans.--
                              ``(i) Interest credits.--
                                        ``(I) In general.--An applicable
                                    defined benefit plan shall be treated as
                                    failing to meet the requirements of
                                    paragraph (1)(H) unless the terms of the
                                    plan provide that any interest credit
                                    (or an equivalent amount) for any plan
                                    year shall be at a rate which is not
                                    greater than a market rate of return. A
                                    plan shall not be treated as failing to
                                    meet the requirements of this subclause
                                    merely because the plan provides for a
                                    reasonable minimum guaranteed rate of
                                    return or for a rate of return that is
                                    equal to the greater of a fixed or
                                    variable rate of return.
                                        ``(II) Preservation of capital.--An
                                    interest credit (or an equivalent
                                    amount) of less than zero shall in no
                                    event result in the account balance or
                                    similar amount being less than the
                                    aggregate amount of contributions
                                    credited to the account.

    [[Page 120 STAT. 982]]

                                        ``(III) Market rate of return.--The
                                    Secretary of the Treasury may provide by
                                    regulation for rules governing the
                                    calculation of a market rate of return
                                    for purposes of subclause (I) and for
                                    permissible methods of crediting
                                    interest to the account (including fixed
                                    or variable interest rates) resulting in
                                    effective rates of return meeting the
                                    requirements of subclause (I).
                              ``(ii) Special rule for plan conversions.--If,
                          after June 29, 2005, an applicable plan amendment
                          is adopted, the plan shall be treated as failing
                          to meet the requirements of paragraph (1)(H)
                          unless the requirements of clause (iii) are met
                          with respect to each individual who was a
                          participant in the plan immediately before the
                          adoption of the amendment.
                              ``(iii) Rate of benefit accrual.--Subject to
                          clause (iv), the requirements of this clause are
                          met with respect to any participant if the accrued
                          benefit of the participant under the terms of the
                          plan as in effect after the amendment is not less
                          than the sum of--
                                        ``(I) the participant's accrued
                                    benefit for years of service before the
                                    effective date of the amendment,
                                    determined under the terms of the plan
                                    as in effect before the amendment, plus
                                        ``(II) the participant's accrued
                                    benefit for years of service after the
                                    effective date of the amendment,
                                    determined under the terms of the plan
                                    as in effect after the amendment.
                              ``(iv) Special rules for early retirement
                          subsidies.--For purposes of clause (iii)(I), the
                          plan shall credit the accumulation account or
                          similar amount with the amount of any early
                          retirement benefit or retirement-type subsidy for
                          the plan year in which the participant retires if,
                          as of such time, the participant has met the age,
                          years of service, and other requirements under the
                          plan for entitlement to such benefit or subsidy.
                              ``(v) Applicable plan amendment.--For purposes
                          of this subparagraph--
                                        ``(I) In general.--The term
                                    `applicable plan amendment' means an
                                    amendment to a defined benefit plan
                                    which has the effect of converting the
                                    plan to an applicable defined benefit
                                    plan.
                                        ``(II) Special rule for coordinated
                                    benefits.--If the benefits of 2 or more
                                    defined benefit plans established or
                                    maintained by an employer are
                                    coordinated in such a manner as to have
                                    the effect of the adoption of an
                                    amendment described in subclause (I),
                                    the sponsor of the defined benefit plan
                                    or plans providing for such coordination
                                    shall be treated as having adopted such
                                    a plan amendment as of the date such
                                    coordination begins.
                                        ``(III) Multiple amendments.--
                                    The <<NOTE: Regulations.>> Secretary of
                                    the Treasury shall issue regulations to
                                    prevent the avoidance of the purposes of
                                    this subparagraph

    [[Page 120 STAT. 983]]

                                    through the use of 2 or more plan
                                    amendments rather than a single
                                    amendment.
                                        ``(IV) Applicable defined benefit
                                    plan.--For purposes of this
                                    subparagraph, the term `applicable
                                    defined benefit plan' has the meaning
                                    given such term by section 203(f)(3).
                              ``(vi) Termination requirements.--An
                          applicable defined benefit plan shall not be
                          treated as meeting the requirements of clause (i)
                          unless the plan provides that, upon the
                          termination of the plan--
                                        ``(I) if the interest credit rate
                                    (or an equivalent amount) under the plan
                                    is a variable rate, the rate of interest
                                    used to determine accrued benefits under
                                    the plan shall be equal to the average
                                    of the rates of interest used under the
                                    plan during the 5-year period ending on
                                    the termination date, and
                                        ``(II) the interest rate and
                                    mortality table used to determine the
                                    amount of any benefit under the plan
                                    payable in the form of an annuity
                                    payable at normal retirement age shall
                                    be the rate and table specified under
                                    the plan for such purpose as of the
                                    termination date, except that if such
                                    interest rate is a variable rate, the
                                    interest rate shall be determined under
                                    the rules of subclause (I).
                        ``(C) Certain offsets permitted.--A plan shall not
                    be treated as failing to meet the requirements of
                    paragraph (1)(H)(i) solely because the plan provides
                    offsets against benefits under the plan to the extent
                    such offsets are allowable in applying the requirements
                    of section 401(a) of the Internal Revenue Code of 1986.
                        ``(D) Permitted disparities in plan contributions or
                    benefits.--A plan shall not be treated as failing to
                    meet the requirements of paragraph (1)(H) solely because
                    the plan provides a disparity in contributions or
                    benefits with respect to which the requirements of
                    section 401(l) of the Internal Revenue Code of 1986 are
                    met.
                        ``(E) Indexing permitted.--
                              ``(i) In general.--A plan shall not be treated
                          as failing to meet the requirements of paragraph
                          (1)(H) solely because the plan provides for
                          indexing of accrued benefits under the plan.
                              ``(ii) Protection against loss.--Except in the
                          case of any benefit provided in the form of a
                          variable annuity, clause (i) shall not apply with
                          respect to any indexing which results in an
                          accrued benefit less than the accrued benefit
                          determined without regard to such indexing.
                              ``(iii) Indexing.--For purposes of this
                          subparagraph, the term `indexing' means, in
                          connection with an accrued benefit, the periodic
                          adjustment of the accrued benefit by means of the
                          application of a recognized investment index or
                          methodology.
                        ``(F) Early retirement benefit or retirement-type
                    subsidy.--For purposes of this paragraph, the terms
                    `early

    [[Page 120 STAT. 984]]

                    retirement benefit' and `retirement-type subsidy' have
                    the meaning given such terms in subsection (g)(2)(A).
                        ``(G) Benefit accrued to date.--For purposes of this
                    paragraph, any reference to the accrued benefit shall be
                    a reference to such benefit accrued to date.''.
                (2) Determinations of accrued benefit as balance of benefit
            account or equivalent amounts.--Section 203 of such Act (29
            U.S.C. 1053) is amended by adding at the end the following new
            subsection:

        ``(f) Special Rules for Plans Computing Accrued Benefits by
    Reference to Hypothetical Account Balance or Equivalent Amounts.--
                ``(1) In general.--An applicable defined benefit plan shall
            not be treated as failing to meet--
                        ``(A) subject to paragraph (2), the requirements of
                    subsection (a)(2), or
                        ``(B) the requirements of section 204(c) or section
                    205(g) with respect to contributions other than employee
                    contributions,
            solely because the present value of the accrued benefit (or any
            portion thereof) of any participant is, under the terms of the
            plan, equal to the amount expressed as the balance in the
            hypothetical account described in paragraph (3) or as an
            accumulated percentage of the participant's final average
            compensation.
                ``(2) 3-year vesting.--In the case of an applicable defined
            benefit plan, such plan shall be treated as meeting the
            requirements of subsection (a)(2) only if an employee who has
            completed at least 3 years of service has a nonforfeitable right
            to 100 percent of the employee's accrued benefit derived from
            employer contributions.
                ``(3) Applicable defined benefit plan and related rules.--
            For purposes of this subsection--
                        ``(A) In general.--The term `applicable defined
                    benefit plan' means a defined benefit plan under which
                    the accrued benefit (or any portion thereof) is
                    calculated as the balance of a hypothetical account
                    maintained for the participant or as an accumulated
                    percentage of the participant's final average
                    compensation.
                        ``(B) Regulations to include similar plans.--The
                    Secretary of the Treasury shall issue regulations which
                    include in the definition of an applicable defined
                    benefit plan any defined benefit plan (or any portion of
                    such a plan) which has an effect similar to an
                    applicable defined benefit plan.''.

        (b) Amendments to the Internal Revenue Code of 1986.--
                (1) Rules relating to reduction in rate of benefit
            accrual.--Subsection (b) of section 411 of the Internal Revenue
            Code of 1986 <<NOTE: 26 USC 411.>> is amended by adding at the
            end the following new paragraph:
                ``(5) Special rules relating to age.--
                        ``(A) Comparison to similarly situated younger
                    individual.--
                              ``(i) In general.--A plan shall not be treated
                          as failing to meet the requirements of paragraph
                          (1)(H)(i) if a participant's accrued benefit, as
                          determined as of any date under the terms of the
                          plan, would be

    [[Page 120 STAT. 985]]

                          equal to or greater than that of any similarly
                          situated, younger individual who is or could be a
                          participant.
                              ``(ii) Similarly situated.--For purposes of
                          this subparagraph, a participant is similarly
                          situated to any other individual if such
                          participant is identical to such other individual
                          in every respect (including period of service,
                          compensation, position, date of hire, work
                          history, and any other respect) except for age.
                              ``(iii) Disregard of subsidized early
                          retirement benefits.--In determining the accrued
                          benefit as of any date for purposes of this
                          clause, the subsidized portion of any early
                          retirement benefit or retirement-type subsidy
                          shall be disregarded.
                              ``(iv) Accrued benefit.--For purposes of this
                          subparagraph, the accrued benefit may, under the
                          terms of the plan, be expressed as an annuity
                          payable at normal retirement age, the balance of a
                          hypothetical account, or the current value of the
                          accumulated percentage of the employee's final
                          average compensation.
                        ``(B) Applicable defined benefit plans.--
                              ``(i) Interest credits.--
                                        ``(I) In general.--An applicable
                                    defined benefit plan shall be treated as
                                    failing to meet the requirements of
                                    paragraph (1)(H) unless the terms of the
                                    plan provide that any interest credit
                                    (or an equivalent amount) for any plan
                                    year shall be at a rate which is not
                                    greater than a market rate of return. A
                                    plan shall not be treated as failing to
                                    meet the requirements of this subclause
                                    merely because the plan provides for a
                                    reasonable minimum guaranteed rate of
                                    return or for a rate of return that is
                                    equal to the greater of a fixed or
                                    variable rate of return.
                                        ``(II) Preservation of capital.--An
                                    interest credit (or an equivalent
                                    amount) of less than zero shall in no
                                    event result in the account balance or
                                    similar amount being less than the
                                    aggregate amount of contributions
                                    credited to the account.
                                        ``(III) Market rate of return.--The
                                    Secretary may provide by regulation for
                                    rules governing the calculation of a
                                    market rate of return for purposes of
                                    subclause (I) and for permissible
                                    methods of crediting interest to the
                                    account (including fixed or variable
                                    interest rates) resulting in effective
                                    rates of return meeting the requirements
                                    of subclause (I).
                              ``(ii) Special rule for plan conversions.--If,
                          after June 29, 2005, an applicable plan amendment
                          is adopted, the plan shall be treated as failing
                          to meet the requirements of paragraph (1)(H)
                          unless the requirements of clause (iii) are met
                          with respect to each individual who was a
                          participant in the plan immediately before the
                          adoption of the amendment.
                              ``(iii) Rate of benefit accrual.--Subject to
                          clause (iv), the requirements of this clause are
                          met with respect to any participant if the accrued
                          benefit of

    [[Page 120 STAT. 986]]

                          the participant under the terms of the plan as in
                          effect after the amendment is not less than the
                          sum of--
                                        ``(I) the participant's accrued
                                    benefit for years of service before the
                                    effective date of the amendment,
                                    determined under the terms of the plan
                                    as in effect before the amendment, plus
                                        ``(II) the participant's accrued
                                    benefit for years of service after the
                                    effective date of the amendment,
                                    determined under the terms of the plan
                                    as in effect after the amendment.
                              ``(iv) Special rules for early retirement
                          subsidies.--For purposes of clause (iii)(I), the
                          plan shall credit the accumulation account or
                          similar amount with the amount of any early
                          retirement benefit or retirement-type subsidy for
                          the plan year in which the participant retires if,
                          as of such time, the participant has met the age,
                          years of service, and other requirements under the
                          plan for entitlement to such benefit or subsidy.
                              ``(v) Applicable plan amendment.--For purposes
                          of this subparagraph--
                                        ``(I) In general.--The term
                                    `applicable plan amendment' means an
                                    amendment to a defined benefit plan
                                    which has the effect of converting the
                                    plan to an applicable defined benefit
                                    plan.
                                        ``(II) Special rule for coordinated
                                    benefits.--If the benefits of 2 or more
                                    defined benefit plans established or
                                    maintained by an employer are
                                    coordinated in such a manner as to have
                                    the effect of the adoption of an
                                    amendment described in subclause (I),
                                    the sponsor of the defined benefit plan
                                    or plans providing for such coordination
                                    shall be treated as having adopted such
                                    a plan amendment as of the date such
                                    coordination begins.
                                        ``(III) Multiple amendments.--
                                    The <<NOTE: Regulations.>> Secretary
                                    shall issue regulations to prevent the
                                    avoidance of the purposes of this
                                    subparagraph through the use of 2 or
                                    more plan amendments rather than a
                                    single amendment.
                                        ``(IV) Applicable defined benefit
                                    plan.--For purposes of this
                                    subparagraph, the term `applicable
                                    defined benefit plan' has the meaning
                                    given such term by section 411(a)(13).
                              ``(vi) Termination requirements.--An
                          applicable defined benefit plan shall not be
                          treated as meeting the requirements of clause (i)
                          unless the plan provides that, upon the
                          termination of the plan--
                                        ``(I) if the interest credit rate
                                    (or an equivalent amount) under the plan
                                    is a variable rate, the rate of interest
                                    used to determine accrued benefits under
                                    the plan shall be equal to the average
                                    of the rates of interest used under the
                                    plan during the 5-year period ending on
                                    the termination date, and
                                        ``(II) the interest rate and
                                    mortality table used to determine the
                                    amount of any benefit under the

    [[Page 120 STAT. 987]]

                                    plan payable in the form of an annuity
                                    payable at normal retirement age shall
                                    be the rate and table specified under
                                    the plan for such purpose as of the
                                    termination date, except that if such
                                    interest rate is a variable rate, the
                                    interest rate shall be determined under
                                    the rules of subclause (I).
                        ``(C) Certain offsets permitted.--A plan shall not
                    be treated as failing to meet the requirements of
                    paragraph (1)(H)(i) solely because the plan provides
                    offsets against benefits under the plan to the extent
                    such offsets are allowable in applying the requirements
                    of section 401(a).
                        ``(D) Permitted disparities in plan contributions or
                    benefits.--A plan shall not be treated as failing to
                    meet the requirements of paragraph (1)(H) solely because
                    the plan provides a disparity in contributions or
                    benefits with respect to which the requirements of
                    section 401(l) are met.
                        ``(E) Indexing permitted.--
                              ``(i) In general.--A plan shall not be treated
                          as failing to meet the requirements of paragraph
                          (1)(H) solely because the plan provides for
                          indexing of accrued benefits under the plan.
                              ``(ii) Protection against loss.--Except in the
                          case of any benefit provided in the form of a
                          variable annuity, clause (i) shall not apply with
                          respect to any indexing which results in an
                          accrued benefit less than the accrued benefit
                          determined without regard to such indexing.
                              ``(iii) Indexing.--For purposes of this
                          subparagraph, the term `indexing' means, in
                          connection with an accrued benefit, the periodic
                          adjustment of the accrued benefit by means of the
                          application of a recognized investment index or
                          methodology.
                        ``(F) Early retirement benefit or retirement-type
                    subsidy.--For purposes of this paragraph, the terms
                    `early retirement benefit' and `retirement-type subsidy'
                    have the meaning given such terms in subsection
                    (d)(6)(B)(i).
                        ``(G) Benefit accrued to date.--For purposes of this
                    paragraph, any reference to the accrued benefit shall be
                    a reference to such benefit accrued to date.''.
                (2) Determinations of accrued benefit as balance of benefit
            account or equivalent amounts.--Subsection (a) of section 411 of
            such Code is amended by adding at the end the following new
            paragraph:
                ``(13) Special rules for plans computing accrued benefits by
            reference to hypothetical account balance or equivalent
            amounts.--
                        ``(A) In general.--An applicable defined benefit
                    plan shall not be treated as failing to meet--
                              ``(i) subject to paragraph (2), the
                          requirements of subsection (a)(2), or
                              ``(ii) the requirements of subsection (c) or
                          section 417(e) with respect to contributions other
                          than employee contributions,
                    solely because the present value of the accrued benefit
                    (or any portion thereof) of any participant is, under
                    the

    [[Page 120 STAT. 988]]

                    terms of the plan, equal to the amount expressed as the
                    balance in the hypothetical account described in
                    paragraph (3) or as an accumulated percentage of the
                    participant's final average compensation.
                        ``(B) 3-year vesting.--In the case of an applicable
                    defined benefit plan, such plan shall be treated as
                    meeting the requirements of subsection (a)(2) only if an
                    employee who has completed at least 3 years of service
                    has a nonforfeitable right to 100 percent of the
                    employee's accrued benefit derived from employer
                    contributions.
                        ``(C) Applicable defined benefit plan and related
                    rules.--For purposes of this subsection--
                              ``(i) In general.--The term `applicable
                          defined benefit plan' means a defined benefit plan
                          under which the accrued benefit (or any portion
                          thereof) is calculated as the balance of a
                          hypothetical account maintained for the
                          participant or as an accumulated percentage of the
                          participant's final average compensation.
                              ``(ii) Regulations to include similar plans.--
                          The Secretary shall issue regulations which
                          include in the definition of an applicable defined
                          benefit plan any defined benefit plan (or any
                          portion of such a plan) which has an effect
                          similar to an applicable defined benefit plan.''.

        (c) Amendments to Age Discrimination in Employment Act.--Section
    4(i) of the Age Discrimination in Employment Act of 1967 (29 U.S.C.
    623(i)) is amended by adding at the end the following new paragraph:
                ``(10) Special rules relating to age.--
                        ``(A) Comparison to similarly situated younger
                    individual.--
                              ``(i) In general.--A plan shall not be treated
                          as failing to meet the requirements of paragraph
                          (1) if a participant's accrued benefit, as
                          determined as of any date under the terms of the
                          plan, would be equal to or greater than that of
                          any similarly situated, younger individual who is
                          or could be a participant.
                              ``(ii) Similarly situated.--For purposes of
                          this subparagraph, a participant is similarly
                          situated to any other individual if such
                          participant is identical to such other individual
                          in every respect (including period of service,
                          compensation, position, date of hire, work
                          history, and any other respect) except for age.
                              ``(iii) Disregard of subsidized early
                          retirement benefits.--In determining the accrued
                          benefit as of any date for purposes of this
                          clause, the subsidized portion of any early
                          retirement benefit or retirement-type subsidy
                          shall be disregarded.
                              ``(iv) Accrued benefit.--For purposes of this
                          subparagraph, the accrued benefit may, under the
                          terms of the plan, be expressed as an annuity
                          payable at normal retirement age, the balance of a
                          hypothetical account, or the current value of the
                          accumulated percentage of the employee's final
                          average compensation.
                        ``(B) Applicable defined benefit plans.--

    [[Page 120 STAT. 989]]

                              ``(i) Interest credits.--
                                        ``(I) In general.--An applicable
                                    defined benefit plan shall be treated as
                                    failing to meet the requirements of
                                    paragraph (1) unless the terms of the
                                    plan provide that any interest credit
                                    (or an equivalent amount) for any plan
                                    year shall be at a rate which is not
                                    greater than a market rate of return. A
                                    plan shall not be treated as failing to
                                    meet the requirements of this subclause
                                    merely because the plan provides for a
                                    reasonable minimum guaranteed rate of
                                    return or for a rate of return that is
                                    equal to the greater of a fixed or
                                    variable rate of return.
                                        ``(II) Preservation of capital.--An
                                    interest credit (or an equivalent
                                    amount) of less than zero shall in no
                                    event result in the account balance or
                                    similar amount being less than the
                                    aggregate amount of contributions
                                    credited to the account.
                                        ``(III) Market rate of return.--The
                                    Secretary of the Treasury may provide by
                                    regulation for rules governing the
                                    calculation of a market rate of return
                                    for purposes of subclause (I) and for
                                    permissible methods of crediting
                                    interest to the account (including fixed
                                    or variable interest rates) resulting in
                                    effective rates of return meeting the
                                    requirements of subclause (I).
                              ``(ii) Special rule for plan conversions.--If,
                          after June 29, 2005, an applicable plan amendment
                          is adopted, the plan shall be treated as failing
                          to meet the requirements of paragraph (1)(H)
                          unless the requirements of clause (iii) are met
                          with respect to each individual who was a
                          participant in the plan immediately before the
                          adoption of the amendment.
                              ``(iii) Rate of benefit accrual.--Subject to
                          clause (iv), the requirements of this clause are
                          met with respect to any participant if the accrued
                          benefit of the participant under the terms of the
                          plan as in effect after the amendment is not less
                          than the sum of--
                                        ``(I) the participant's accrued
                                    benefit for years of service before the
                                    effective date of the amendment,
                                    determined under the terms of the plan
                                    as in effect before the amendment, plus
                                        ``(II) the participant's accrued
                                    benefit for years of service after the
                                    effective date of the amendment,
                                    determined under the terms of the plan
                                    as in effect after the amendment.
                              ``(iv) Special rules for early retirement
                          subsidies.--For purposes of clause (iii)(I), the
                          plan shall credit the accumulation account or
                          similar amount with the amount of any early
                          retirement benefit or retirement-type subsidy for
                          the plan year in which the participant retires if,
                          as of such time, the participant has met the age,
                          years of service, and other requirements under the
                          plan for entitlement to such benefit or subsidy.

    [[Page 120 STAT. 990]]

                              ``(v) Applicable plan amendment.--For purposes
                          of this subparagraph--
                                        ``(I) In general.--The term
                                    `applicable plan amendment' means an
                                    amendment to a defined benefit plan
                                    which has the effect of converting the
                                    plan to an applicable defined benefit
                                    plan.
                                        ``(II) Special rule for coordinated
                                    benefits.--If the benefits of 2 or more
                                    defined benefit plans established or
                                    maintained by an employer are
                                    coordinated in such a manner as to have
                                    the effect of the adoption of an
                                    amendment described in subclause (I),
                                    the sponsor of the defined benefit plan
                                    or plans providing for such coordination
                                    shall be treated as having adopted such
                                    a plan amendment as of the date such
                                    coordination begins.
                                        ``(III) Multiple amendments.--
                                    The <<NOTE: Regulations.>> Secretary of
                                    the Treasury shall issue regulations to
                                    prevent the avoidance of the purposes of
                                    this subparagraph through the use of 2
                                    or more plan amendments rather than a
                                    single amendment.
                                        ``(IV) Applicable defined benefit
                                    plan.--For purposes of this
                                    subparagraph, the term `applicable
                                    defined benefit plan' has the meaning
                                    given such term by section 203(f)(3) of
                                    the Employee Retirement Income Security
                                    Act of 1974.
                              ``(vi) Termination requirements.--An
                          applicable defined benefit plan shall not be
                          treated as meeting the requirements of clause (i)
                          unless the plan provides that, upon the
                          termination of the plan--
                                        ``(I) if the interest credit rate
                                    (or an equivalent amount) under the plan
                                    is a variable rate, the rate of interest
                                    used to determine accrued benefits under
                                    the plan shall be equal to the average
                                    of the rates of interest used under the
                                    plan during the 5-year period ending on
                                    the termination date, and
                                        ``(II) the interest rate and
                                    mortality table used to determine the
                                    amount of any benefit under the plan
                                    payable in the form of an annuity
                                    payable at normal retirement age shall
                                    be the rate and table specified under
                                    the plan for such purpose as of the
                                    termination date, except that if such
                                    interest rate is a variable rate, the
                                    interest rate shall be determined under
                                    the rules of subclause (I).
                        ``(C) Certain offsets permitted.--A plan shall not
                    be treated as failing to meet the requirements of
                    paragraph (1) solely because the plan provides offsets
                    against benefits under the plan to the extent such
                    offsets are allowable in applying the requirements of
                    section 401(a) of the Internal Revenue Code of 1986.
                        ``(D) Permitted disparities in plan contributions or
                    benefits.--A plan shall not be treated as failing to
                    meet the requirements of paragraph (1) solely because
                    the plan provides a disparity in contributions or
                    benefits with respect to which the requirements of
                    section 401(l) of the Internal Revenue Code of 1986 are
                    met.

    [[Page 120 STAT. 991]]

                        ``(E) Indexing permitted.--
                              ``(i) In general.--A plan shall not be treated
                          as failing to meet the requirements of paragraph
                          (1) solely because the plan provides for indexing
                          of accrued benefits under the plan.
                              ``(ii) Protection against loss.--Except in the
                          case of any benefit provided in the form of a
                          variable annuity, clause (i) shall not apply with
                          respect to any indexing which results in an
                          accrued benefit less than the accrued benefit
                          determined without regard to such indexing.
                              ``(iii) Indexing.--For purposes of this
                          subparagraph, the term `indexing' means, in
                          connection with an accrued benefit, the periodic
                          adjustment of the accrued benefit by means of the
                          application of a recognized investment index or
                          methodology.
                        ``(F) Early retirement benefit or retirement-type
                    subsidy.--For purposes of this paragraph, the terms
                    `early retirement benefit' and `retirement-type subsidy'
                    have the meaning given such terms in section
                    203(g)(2)(A) of the Employee Retirement Income Security
                    Act of 1974.
                        ``(G) Benefit accrued to date.--For purposes of this
                    paragraph, any reference to the accrued benefit shall be
                    a reference to such benefit accrued to date.''.

        (d) <<NOTE: 26 USC 411 note.>> No Inference.--Nothing in the
    amendments made by this section shall be construed to create an
    inference with respect to--
                (1) the treatment of applicable defined benefit plans or
            conversions to applicable defined benefit plans under sections
            204(b)(1)(H) of the Employee Retirement Income Security Act of
            1974, 4(i)(1) of the Age Discrimination in Employment Act of
            1967, and 411(b)(1)(H) of the Internal Revenue Code of 1986, as
            in effect before such amendments, or
                (2) the determination of whether an applicable defined
            benefit plan fails to meet the requirements of sections
            203(a)(2), 204(c), or 204(g) of the Employee Retirement Income
            Security Act of 1974 or sections 411(a)(2), 411(c), or 417(e) of
            such Code, as in effect before such amendments, solely because
            the present value of the accrued benefit (or any portion
            thereof) of any participant is, under the terms of the plan,
            equal to the amount expressed as the balance in a hypothetical
            account or as an accumulated percentage of the participant's
            final average compensation.

    For purposes of this subsection, the term ``applicable defined benefit
    plan'' has the meaning given such term by section 203(f)(3) of the
    Employee Retirement Income Security Act of 1974 and section
    411(a)(13)(C) of such Code, as in effect after such amendments.
        (e) <<NOTE: Applicability. 26 USC 411 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            apply to periods beginning on or after June 29, 2005.
                (2) Present value of accrued benefit.--The amendments made
            by subsections (a)(2) and (b)(2) shall apply to distributions
            made after the date of the enactment of this Act.
                (3) Vesting and interest credit requirements.--In the case
            of a plan in existence on June 29, 2005, the requirements of
            clause (i) of section 411(b)(5)(B) of the Internal Revenue Code
            of 1986, clause (i) of section 204(b)(5)(B) of the Employee

    [[Page 120 STAT. 992]]

            Retirement Income Security Act of 1974, and clause (i) of
            section 4(i)(10)(B) of the Age Discrimination in Employment Act
            of 1967 (as added by this Act) and the requirements of 203(f)(2)
            of the Employee Retirement Income Security Act of 1974 and
            section 411(a)(13)(B) of the Internal Revenue Code of 1986 (as
            so added) shall, for purposes of applying the amendments made by
            subsections (a) and (b), apply to years beginning after December
            31, 2007, unless the plan sponsor elects the application of such
            requirements for any period after June 29, 2005, and before the
            first year beginning after December 31, 2007.
                (4) Special rule for collectively bargained plans.--In the
            case of a plan maintained pursuant to 1 or more collective
            bargaining agreements between employee representatives and 1 or
            more employers ratified on or before the date of the enactment
            of this Act, the requirements described in paragraph (3) shall,
            for purposes of applying the amendments made by subsections (a)
            and (b), not apply to plan years beginning before--
                        (A) the earlier of--
                              (i) the date on which the last of such
                          collective bargaining agreements terminates
                          (determined without regard to any extension
                          thereof on or after such date of enactment), or
                              (ii) January 1, 2008, or
                        (B) January 1, 2010.
                (5) Conversions.--The requirements of clause (ii) of section
            411(b)(5)(B) of the Internal Revenue Code of 1986, clause (ii)
            of section 204(b)(5)(B) of the Employee Retirement Income
            Security Act of 1974, and clause (ii) of section 4(i)(10)(B) of
            the Age Discrimination in Employment Act of 1967 (as added by
            this Act), shall apply to plan amendments adopted after, and
            taking effect after, June 29, 2005, except that the plan sponsor
            may elect to have such amendments apply to plan amendments
            adopted before, and taking effect after, such date.

    SEC. 702. <<NOTE: Deadline. 26 USC 411 note.>> REGULATIONS RELATING TO
                MERGERS AND ACQUISITIONS.

        The Secretary of the Treasury or his delegate shall, not later than
    12 months after the date of the enactment of this Act, prescribe
    regulations for the application of the amendments made by, and the
    provisions of, this title in cases where the conversion of a plan to an
    applicable defined benefit plan is made with respect to a group of
    employees who become employees by reason of a merger, acquisition, or
    similar transaction.

                 TITLE VIII--PENSION RELATED REVENUE PROVISIONS

                        Subtitle A--Deduction Limitations

    SEC. 801. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EMPLOYER PLANS.

        (a) In General.--Section 404 of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 404.>> (relating to deduction for contributions of
    an employer

    [[Page 120 STAT. 993]]

    to an employees' trust or annuity plan and compensation under a deferred
    payment plan) is amended--
                (1) in subsection (a)(1)(A), by inserting ``in the case of a
            defined benefit plan other than a multiemployer plan, in an
            amount determined under subsection (o), and in the case of any
            other plan'' after ``section 501(a),'', and
                (2) by inserting at the end the following new subsection:

        ``(o) Deduction Limit for Single-Employer Plans.--For purposes of
    subsection (a)(1)(A)--
                ``(1) In general.--In the case of a defined benefit plan to
            which subsection (a)(1)(A) applies (other than a multiemployer
            plan), the amount determined under this subsection for any
            taxable year shall be equal to the greater of--
                        ``(A) the sum of the amounts determined under
                    paragraph (2) with respect to each plan year ending with
                    or within the taxable year, or
                        ``(B) the sum of the minimum required contributions
                    under section 430 for such plan years.
                ``(2) Determination of amount.--
                        ``(A) In general.--The amount determined under this
                    paragraph for any plan year shall be equal to the excess
                    (if any) of--
                              ``(i) the sum of--
                                        ``(I) the funding target for the
                                    plan year,
                                        ``(II) the target normal cost for
                                    the plan year, and
                                        ``(III) the cushion amount for the
                                    plan year, over
                              ``(ii) the value (determined under section
                          430(g)(2)) of the assets of the plan which are
                          held by the plan as of the valuation date for the
                          plan year.
                        ``(B) Special rule for certain employers.--If
                    section 430(i) does not apply to a plan for a plan year,
                    the amount determined under subparagraph (A)(i) for the
                    plan year shall in no event be less than the sum of--
                              ``(i) the funding target for the plan year
                          (determined as if section 430(i) applied to the
                          plan), plus
                              ``(ii) the target normal cost for the plan
                          year (as so determined).
                ``(3) Cushion amount.--For purposes of paragraph
            (2)(A)(i)(III)--
                        ``(A) In general.--The cushion amount for any plan
                    year is the sum of--
                              ``(i) 50 percent of the funding target for the
                          plan year, and
                              ``(ii) the amount by which the funding target
                          for the plan year would increase if the plan were
                          to take into account--
                                        ``(I) increases in compensation
                                    which are expected to occur in
                                    succeeding plan years, or
                                        ``(II) if the plan does not base
                                    benefits for service to date on
                                    compensation, increases in benefits
                                    which are expected to occur in
                                    succeeding plan years (determined on the
                                    basis of the average annual increase in
                                    benefits over the 6 immediately
                                    preceding plan years).
                        ``(B) Limitations.--

    [[Page 120 STAT. 994]]

                              ``(i) In general.--
                          In <<NOTE: Applicability.>> making the computation
                          under subparagraph (A)(ii), the plan's actuary
                          shall assume that the limitations under subsection
                          (l) and section 415(b) shall apply.
                              ``(ii) Expected increases.--In the case of a
                          plan year during which a plan is covered under
                          section 4021 of the Employee Retirement Income
                          Security Act of 1974, the plan's actuary may,
                          notwithstanding subsection (l), take into account
                          increases in the limitations which are expected to
                          occur in succeeding plan years.
                ``(4) Special rules for plans with 100 or fewer
            participants.--
                        ``(A) In general.--For purposes of determining the
                    amount under paragraph (3) for any plan year, in the
                    case of a plan which has 100 or fewer participants for
                    the plan year, the liability of the plan attributable to
                    benefit increases for highly compensated employees (as
                    defined in section 414(q)) resulting from a plan
                    amendment which is made or becomes effective, whichever
                    is later, within the last 2 years shall not be taken
                    into account in determining the target liability.
                        ``(B) Rule for determining number of participants.--
                    For purposes of determining the number of plan
                    participants, all defined benefit plans maintained by
                    the same employer (or any member of such employer's
                    controlled group (within the meaning of section
                    412(f)(4))) shall be treated as one plan, but only
                    participants of such member or employer shall be taken
                    into account.
                ``(5) Special rule for terminating plans.--In the case of a
            plan which, subject to section 4041 of the Employee Retirement
            Income Security Act of 1974, terminates during the plan year,
            the amount determined under paragraph (2) shall in no event be
            less than the amount required to make the plan sufficient for
            benefit liabilities (within the meaning of section 4041(d) of
            such Act).
                ``(6) Actuarial assumptions.--Any computation under this
            subsection for any plan year shall use the same actuarial
            assumptions which are used for the plan year under section 430.
                ``(7) Definitions.--Any term used in this subsection which
            is also used in section 430 shall have the same meaning given
            such term by section 430.''.

        (b) Exception From Limitation on Deduction Where Combination of
    Defined Contribution and Defined Benefit Plans.--Section 404(a)(7)(C) of
    such Code, as amended by this Act, <<NOTE: 26 USC 404.>> is amended by
    adding at the end the following new clause:
                              ``(iv) Guaranteed plans.--In applying this
                          paragraph, any single-employer plan covered under
                          section 4021 of the Employee Retirement Income
                          Security Act of 1974 shall not be taken into
                          account.''.

        (c) Technical and Conforming Amendments.--
                (1) The last sentence of section 404(a)(1)(A) of such Code
            is amended by striking ``section 412'' each place it appears and
            inserting ``section 431''.
                (2) Section 404(a)(1)(B) of such Code is amended--

    [[Page 120 STAT. 995]]

                        (A) by striking ``In the case of a plan'' and
                    inserting ``In the case of a multiemployer plan'',
                        (B) by striking ``section 412(c)(7)'' each place it
                    appears and inserting ``section 431(c)(6)'',
                        (C) by striking ``section 412(c)(7)(B)'' and
                    inserting ``section 431(c)(6)(A)(ii)'',
                        (D) by striking ``section 412(c)(7)(A)'' and
                    inserting ``section 431(c)(6)(A)(i)'', and
                        (E) by striking ``section 412'' and inserting
                    ``section 431''.
                (3) Section 404(a)(7) of such Code, as amended by this
            Act, <<NOTE: 26 USC 404.>> is amended--
                        (A) by adding at the end of subparagraph (A) the
                    following new sentence: ``In the case of a defined
                    benefit plan which is a single employer plan, the amount
                    necessary to satisfy the minimum funding standard
                    provided by section 412 shall not be less than the
                    plan's funding shortfall determined under section
                    430.'', and
                        (B) by striking subparagraph (D) and inserting:
                        ``(D) Insurance contract plans.--For purposes of
                    this paragraph, a plan described in section 412(e)(3)
                    shall be treated as a defined benefit plan.''.
                (4) Section 404A(g)(3)(A) of such Code is amended by
            striking ``paragraphs (3) and (7) of section 412(c)'' and
            inserting ``paragraphs (3) and (6) of section 431(c)''.

        (d) Special Rule for 2006 and 2007.--
                (1) In general.--Clause <<NOTE: Applicability.>> (i) of
            section 404(a)(1)(D) of the Internal Revenue Code of 1986
            (relating to special rule in case of certain plans) is amended
            by striking ``section 412(l)'' and inserting ``section
            412(l)(8)(A), except that section 412(l)(8)(A) shall be applied
            for purposes of this clause by substituting `150 percent (140
            percent in the case of a multiemployer plan) of current
            liability' for `the current liability' in clause (i).''.
                (2) Conforming amendment.--Section 404(a)(1) of the Internal
            Revenue Code of 1986 is amended by striking subparagraph (F).

        (e) <<NOTE: 26 USC 404 note.>> Effective Dates.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to years beginning
            after December 31, 2007.
                (2) Special rules.--The amendments made by subsection (d)
            shall apply to years beginning after December 31, 2005.

    SEC. 802. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.

        (a) Increase in Deduction.--Section 404(a)(1)(D) of the Internal
    Revenue Code of 1986, as amended by this Act, is amended to read as
    follows:
                        ``(D) Amount determined on basis of unfunded current
                    liability.--In the case of a defined benefit plan which
                    is a multiemployer plan, except as provided in
                    regulations, the maximum amount deductible under the
                    limitations of this paragraph shall not be less than the
                    excess (if any) of--
                              ``(i) 140 percent of the current liability of
                          the plan determined under section 431(c)(6)(C),
                          over

    [[Page 120 STAT. 996]]

                              ``(ii) the value of the plan's assets
                          determined under section 431(c)(2).''.

        (b) <<NOTE: 26 USC 404 note.>> Effective Date.--The amendment made
    by subsection (a) shall apply to years beginning after December 31,
    2007.

    SEC. 803. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.

        (a) In General.--Subparagraph (C) of section 404(a)(7) of the
    Internal Revenue Code of 1986 <<NOTE: 26 USC 404.>> (relating to
    limitation on deductions where combination of defined contribution plan
    and defined benefit plan) is amended by adding after clause (ii) the
    following new clause:
                              ``(iii) Limitation.--In the case of employer
                          contributions to 1 or more defined contribution
                          plans, this paragraph shall only apply to the
                          extent that such contributions exceed 6 percent of
                          the compensation otherwise paid or accrued during
                          the taxable year to the beneficiaries under such
                          plans. For purposes of this clause, amounts
                          carried over from preceding taxable years under
                          subparagraph (B) shall be treated as employer
                          contributions to 1 or more defined contributions
                          to the extent attributable to employer
                          contributions to such plans in such preceding
                          taxable years.''.

        (b) Exception From Limitation on Deduction Where Combination of
    Defined Contribution and Defined Benefit Plans.--Section 404(a)(7)(C) of
    such Code, as amended by this Act, is amended by adding at the end the
    following new clause:
                              ``(v) Multiemployer plans.--In applying this
                          paragraph, any multiemployer plan shall not be
                          taken into account.''.

        (c) Conforming Amendment.--Subparagraph (A) of section 4972(c)(6) of
    such Code (relating to nondeductible contributions) is amended to read
    as follows:
                        ``(A) so much of the contributions to 1 or more
                    defined contribution plans which are not deductible when
                    contributed solely because of section 404(a)(7) as does
                    not exceed the amount of contributions described in
                    section 401(m)(4)(A), or''.

        (d) <<NOTE: 26 USC 404 note.>> Effective Date.--The amendments made
    by this section shall apply to contributions for taxable years beginning
    after December 31, 2005.

              Subtitle B--Certain Pension Provisions Made Permanent

    SEC. 811. <<NOTE: 26 USC 1 note.>> PENSIONS AND INDIVIDUAL RETIREMENT
                ARRANGEMENT PROVISIONS OF ECONOMIC GROWTH AND TAX RELIEF
                RECONCILIATION ACT OF 2001 MADE PERMANENT.

        Title IX of the Economic Growth and Tax Relief Reconciliation Act of
    2001 shall not apply to the provisions of, and amendments made by,
    subtitles A through F of title VI of such Act (relating to pension and
    individual retirement arrangement provisions).

    [[Page 120 STAT. 997]]

    SEC. 812. SAVER'S CREDIT.

        Section 25B of the Internal Revenue Code of 1986 <<NOTE: 26 USC
    25B.>> (relating to elective deferrals and IRA contributions by certain
    individuals) is amended by striking subsection (h).

    Subtitle C--Improvements in Portability, Distribution, and Contribution
                                      Rules

    SEC. 821. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE SERVICE
                CREDIT.

        (a) In General.--Section 415(n) of the Internal Revenue Code of 1986
    (relating to special rules for the purchase of permissive service
    credit) is amended--
                (1) by striking ``an employee'' in paragraph (1) and
            inserting ``a participant'', and
                (2) by adding at the end of paragraph (3)(A) the following
            new flush sentence:
                    ``Such term may include service credit for periods for
                    which there is no performance of service, and,
                    notwithstanding clause (ii), may include service
                    credited in order to provide an increased benefit for
                    service credit which a participant is receiving under
                    the plan.''.

        (b) Special Rules for Trustee-to-Trustee Transfers.--Section
    415(n)(3) of such Code is amended by adding at the end the following new
    subparagraph:
                        ``(D) Special rules for trustee-to-trustee
                    transfers.--In the case of a trustee-to-trustee transfer
                    to which section 403(b)(13)(A) or 457(e)(17)(A) applies
                    (without regard to whether the transfer is made between
                    plans maintained by the same employer)--
                              ``(i) the limitations of subparagraph (B)
                          shall not apply in determining whether the
                          transfer is for the purchase of permissive service
                          credit, and
                              ``(ii) <<NOTE: Applicability.>> the
                          distribution rules applicable under this title to
                          the defined benefit governmental plan to which any
                          amounts are so transferred shall apply to such
                          amounts and any benefits attributable to such
                          amounts.''.

        (c) Nonqualified Service.--Section 415(n)(3) of such Code is
    amended--
                (1) by striking ``permissive service credit attributable to
            nonqualified service'' each place it appears in subparagraph (B)
            and inserting ``nonqualified service credit'',
                (2) by striking so much of subparagraph (C) as precedes
            clause (i) and inserting:
                        ``(C) Nonqualified service credit.--For purposes of
                    subparagraph (B), the term `nonqualified service credit'
                    means permissive service credit other than that allowed
                    with respect to--'', and
                (3) by striking ``elementary or secondary education (through
            grade 12), as determined under State law'' in subparagraph
            (C)(ii) and inserting ``elementary or secondary education
            (through grade 12), or a comparable level of education, as
            determined under the applicable law of the jurisdiction in which
            the service was performed''.

    [[Page 120 STAT. 998]]

        (d) <<NOTE: 26 USC 415 note.>> Effective Dates.--
                (1) In general.--The amendments made by subsections (a) and
            (c) shall take effect as if included in the amendments made by
            section 1526 of the Taxpayer Relief Act of 1997.
                (2) Subsection (b).--The amendments made by subsection (b)
            shall take effect as if included in the amendments made by
            section 647 of the Economic Growth and Tax Relief Reconciliation
            Act of 2001.

    SEC. 822. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY CONTRACTS.

        (a) In General.--Subparagraph (A) of section <<NOTE: 26 USC
    402.>> 402(c)(2) (relating to the maximum amount which may be rolled
    over) is amended--
                (1) by striking ``which is part of a plan which is a defined
            contribution plan and which agrees to separately account'' and
            inserting ``or to an annuity contract described in section
            403(b) and such trust or contract provides for separate
            accounting''; and
                (2) by inserting ``(and earnings thereon)'' after ``so
            transferred''.

        (b) <<NOTE: 26 USC 402 note.>> Effective Date.--The amendment made
    by subsection (a) shall apply to taxable years beginning after December
    31, 2006.

    SEC. 823. <<NOTE: Regulations.>> CLARIFICATION OF MINIMUM DISTRIBUTION
                RULES FOR GOVERNMENTAL PLANS.

        The Secretary of the Treasury shall issue regulations under which a
    governmental plan (as defined in section 414(d) of the Internal Revenue
    Code of 1986) shall, for all years to which section 401(a)(9) of such
    Code applies to such plan, be treated as having complied with such
    section 401(a)(9) if such plan complies with a reasonable good faith
    interpretation of such section 401(a)(9).

    SEC. 824. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO ROTH IRAS.

        (a) In General.--Subsection (e) of section 408A of the Internal
    Revenue Code of 1986 (defining qualified rollover contribution) is
    amended to read as follows:
        ``(e) Qualified Rollover Contribution.--For purposes of this
    section, the term `qualified rollover contribution' means a rollover
    contribution--
                ``(1) to a Roth IRA from another such account,
                ``(2) from an eligible retirement plan, but only if--
                        ``(A) in the case of an individual retirement plan,
                    such rollover contribution meets the requirements of
                    section 408(d)(3), and
                        ``(B) 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.

    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.''.
        (b) Conforming Amendments.--
                (1) <<NOTE: 26 USC 408A and note.>> Section 408A(c)(3)(B) of
            such Code, as in effect before the Tax Increase Prevention and
            Reconciliation Act of 2005, is amended--

    [[Page 120 STAT. 999]]

                        (A) in the text by striking ``individual retirement
                    plan'' and inserting ``an eligible retirement plan (as
                    defined by section 402(c)(8)(B))'', and
                        (B) in the heading by striking ``IRA'' the first
                    place it appears and inserting ``eligible retirement
                    plan''.
                (2) Section 408A(d)(3) of such Code <<NOTE: 26 USC
            408A.>> is amended--
                        (A) in subparagraph (A), by striking ``section
                    408(d)(3)'' inserting ``sections 402(c), 403(b)(8),
                    408(d)(3), and 457(e)(16)'',
                        (B) in subparagraph (B), by striking ``individual
                    retirement plan'' and inserting ``eligible retirement
                    plan (as defined by section 402(c)(8)(B))'',
                        (C) in subparagraph (D), by inserting ``or 6047''
                    after ``408(i)'',
                        (D) in subparagraph (D), by striking ``or both'' and
                    inserting ``persons subject to section 6047(d)(1), or
                    all of the foregoing persons'', and
                        (E) in the heading, by striking ``IRA'' the first
                    place it appears and inserting ``eligible retirement
                    plan''.

        (c) <<NOTE: 26 USC 408A note.>> Effective Date.--The amendments made
    by this section shall apply to distributions after December 31, 2007.

    SEC. 825. <<NOTE: 26 USC 457 note.>> ELIGIBILITY FOR PARTICIPATION IN
                RETIREMENT PLANS.

        An individual shall not be precluded from participating in an
    eligible deferred compensation plan by reason of having received a
    distribution under section 457(e)(9) of the Internal Revenue Code of
    1986, as in effect prior to the enactment of the Small Business Job
    Protection Act of 1996.

    SEC. 826. <<NOTE: 26 USC 401 note.>> MODIFICATIONS OF RULES GOVERNING
                HARDSHIPS AND UNFORSEEN FINANCIAL EMERGENCIES.

        Within <<NOTE: Deadline.>> 180 days after the date of the enactment
    of this Act, the Secretary of the Treasury shall modify the rules for
    determining whether a participant has had a hardship for purposes of
    section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to
    provide that if an event (including the occurrence of a medical expense)
    would constitute a hardship under the plan if it occurred with respect
    to the participant's spouse or dependent (as defined in section 152 of
    such Code), such event shall, to the extent permitted under a plan,
    constitute a hardship if it occurs with respect to a person who is a
    beneficiary under the plan with respect to the participant. The
    Secretary of the Treasury shall issue similar rules for purposes of
    determining whether a participant has had--
                (1) a hardship for purposes of section 403(b)(11)(B) of such
            Code; or
                (2) an unforeseen financial emergency for purposes of
            sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii), and
            457(d)(1)(A)(iii) of such Code.

    SEC. 827. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR INDIVIDUALS
                CALLED TO ACTIVE DUTY FOR AT LEAST 179 DAYS.

        (a) In General.--Paragraph (2) of section 72(t) of the Internal
    Revenue Code of 1986 (relating to 10-percent additional tax on early
    distributions from qualified retirement plans) is amended by adding at
    the end the following new subparagraph:
                        ``(G) Distributions from retirement plans to
                    individuals called to active duty.--

    [[Page 120 STAT. 1000]]

                              ``(i) In general.--Any qualified reservist
                          distribution.
                              ``(ii) Amount distributed may be repaid.--Any
                          individual who receives a qualified reservist
                          distribution may, at any time during the 2-year
                          period beginning on the day after the end of the
                          active duty period, make one or more contributions
                          to an individual retirement plan of such
                          individual in an aggregate amount not to exceed
                          the amount of such distribution. The dollar
                          limitations otherwise applicable to contributions
                          to individual retirement plans shall not apply to
                          any contribution made pursuant to the preceding
                          sentence. No deduction shall be allowed for any
                          contribution pursuant to this clause.
                              ``(iii) Qualified reservist distribution.--For
                          purposes of this subparagraph, the term `qualified
                          reservist distribution' means any distribution to
                          an individual if--
                                        ``(I) such distribution is from an
                                    individual retirement plan, or from
                                    amounts attributable to employer
                                    contributions made pursuant to elective
                                    deferrals described in subparagraph (A)
                                    or (C) of section 402(g)(3) or section
                                    501(c)(18)(D)(iii),
                                        ``(II) such individual was (by
                                    reason of being a member of a reserve
                                    component (as defined in section 101 of
                                    title 37, United States Code)) ordered
                                    or called to active duty for a period in
                                    excess of 179 days or for an indefinite
                                    period, and
                                        ``(III) such distribution is made
                                    during the period beginning on the date
                                    of such order or call and ending at the
                                    close of the active duty period.
                              ``(iv) Application of subparagraph.--This
                          subparagraph applies to individuals ordered or
                          called to active duty after September 11, 2001,
                          and before December 31, 2007. In no event shall
                          the 2-year period referred to in clause (ii) end
                          before the date which is 2 years after the date of
                          the enactment of this subparagraph.''.

        (b) Conforming Amendments.--
                (1) Section 401(k)(2)(B)(i) of such Code <<NOTE: 26 USC
            401.>> is amended by striking ``or'' at the end of subclause
            (III), by striking ``and'' at the end of subclause (IV) and
            inserting ``or'', and by inserting after subclause (IV) the
            following new subclause:
                                        ``(V) in the case of a qualified
                                    reservist distribution (as defined in
                                    section 72(t)(2)(G)(iii)), the date on
                                    which a period referred to in subclause
                                    (III) of such section begins, and''.
                (2) Section 403(b)(7)(A)(ii) of such Code is amended by
            inserting ``(unless such amount is a distribution to which
            section 72(t)(2)(G) applies)'' after ``distributee''.
                (3) Section 403(b)(11) of such Code is amended by striking
            ``or'' at the end of subparagraph (A), by striking the period at
            the end of subparagraph (B) and inserting ``, or'', and by
            inserting after subparagraph (B) the following new subparagraph:

    [[Page 120 STAT. 1001]]

                        ``(C) for distributions to which section 72(t)(2)(G)
                    applies.''.

        (c) <<NOTE: 26 USC 72 note.>> Effective Date; Waiver of
    Limitations.--
                (1) Effective date.--The amendment made by this section
            shall apply to distributions after September 11, 2001.
                (2) Waiver of limitations.--If refund or credit of any
            overpayment of tax resulting from the amendments made by this
            section is prevented at any time before the close of the 1-year
            period beginning on the date of the enactment of this Act by the
            operation of any law or rule of law (including res judicata),
            such refund or credit may nevertheless be made or allowed if
            claim therefor is filed before the close of such period.

    SEC. 828. WAIVER OF 10 PERCENT EARLY WITHDRAWAL PENALTY TAX ON CERTAIN
                DISTRIBUTIONS OF PENSION PLANS FOR PUBLIC SAFETY EMPLOYEES.

        (a) In General.--Section 72(t) of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 72.>> (relating to subsection not to apply to
    certain distributions) is amended by adding at the end the following new
    paragraph:
                ``(10) Distributions to qualified public safety employees in
            governmental plans.--
                        ``(A) In general.--In the case of a distribution to
                    a qualified public safety employee from a governmental
                    plan (within the meaning of section 414(d)) which is a
                    defined benefit plan, paragraph (2)(A)(v) shall be
                    applied by substituting `age 50' for `age 55'.
                        ``(B) Qualified public safety employee.--For
                    purposes of this paragraph, the term `qualified public
                    safety employee' means any employee of a State or
                    political subdivision of a State who provides police
                    protection, firefighting services, or emergency medical
                    services for any area within the jurisdiction of such
                    State or political subdivision.''.

        (b) <<NOTE: 26 USC 72 note.>> Effective Date.--The amendment made by
    this section shall apply to distributions after the date of the
    enactment of this Act.

    SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF CERTAIN
                RETIREMENT PLAN DISTRIBUTIONS.

        (a) In General.--
                (1) Qualified plans.--Section 402(c) of the Internal Revenue
            Code of 1986 (relating to rollovers from exempt trusts) is
            amended by adding at the end the following new paragraph:
                ``(11) Distributions to inherited individual retirement plan
            of nonspouse beneficiary.--
                        ``(A) In general.--If, with respect to any portion
                    of a distribution from an eligible retirement plan of a
                    deceased employee, a direct trustee-to-trustee transfer
                    is made to an individual retirement plan described in
                    clause (i) or (ii) of paragraph (8)(B) established for
                    the purposes of receiving the distribution on behalf of
                    an individual who is a designated beneficiary (as
                    defined by section 401(a)(9)(E)) of the employee and who
                    is not the surviving spouse of the employee--
                              ``(i) the transfer shall be treated as an
                          eligible rollover distribution for purposes of
                          this subsection,

    [[Page 120 STAT. 1002]]

                              ``(ii) the individual retirement plan shall be
                          treated as an inherited individual retirement
                          account or individual retirement annuity (within
                          the meaning of section 408(d)(3)(C)) for purposes
                          of this title, and
                              ``(iii) <<NOTE: Applicability.>> section
                          401(a)(9)(B) (other than clause (iv) thereof)
                          shall apply to such plan.
                        ``(B) Certain trusts treated as beneficiaries.--For
                    purposes of this paragraph, to the extent provided in
                    rules prescribed by the Secretary, a trust maintained
                    for the benefit of one or more designated beneficiaries
                    shall be treated in the same manner as a trust
                    designated beneficiary.''.
                (2) Section 403(a) plans.--Subparagraph (B) of section
            403(a)(4) of such Code <<NOTE: 26 USC 403.>> (relating to
            rollover amounts) is amended by inserting ``and (11)'' after
            ``(7)''.
                (3) Section 403(b) plans.--Subparagraph (B) of section
            403(b)(8) of such Code (relating to rollover amounts) is amended
            by striking ``and (9)'' and inserting ``, (9), and (11)''.
                (4) Section 457 plans.--Subparagraph (B) of section
            457(e)(16) of such Code (relating to rollover amounts) is
            amended by striking ``and (9)'' and inserting ``, (9), and
            (11)''.

        (b) <<NOTE: 26 USC 402 note.>> Effective Date.--The amendments made
    by this section shall apply to distributions after December 31, 2006.

    SEC. 830. <<NOTE: 26 USC 408 note.>> DIRECT PAYMENT OF TAX REFUNDS TO
                INDIVIDUAL RETIREMENT PLANS.

        (a) In General.--The Secretary of the Treasury (or the Secretary's
    delegate) shall make available a form (or modify existing forms) for use
    by individuals to direct that a portion of any refund of overpayment of
    tax imposed by chapter 1 of the Internal Revenue Code of 1986 be paid
    directly to an individual retirement plan (as defined in section
    7701(a)(37) of such Code) of such individual.
        (b) Effective Date.--The form required by subsection (a) shall be
    made available for taxable years beginning after December 31, 2006.

    SEC. 831. ALLOWANCE OF ADDITIONAL IRA PAYMENTS IN CERTAIN BANKRUPTCY
                CASES.

        (a) Allowance of Contributions.--Section 219(b)(5) of the Internal
    Revenue Code of 1986 (relating to deductible amount) is amended by
    redesignating subparagraph (C) as subparagraph (D) and by inserting
    after subparagraph (B) the following new subparagraph:
                        ``(C) Catchup contributions for certain
                    individuals.--
                              ``(i) In general.--In the case of an
                          applicable individual who elects to make a
                          qualified retirement contribution in addition to
                          the deductible amount determined under
                          subparagraph (A)--
                                        ``(I) the deductible amount for any
                                    taxable year shall be increased by an
                                    amount equal to 3 times the applicable
                                    amount determined under subparagraph (B)
                                    for such taxable year, and
                                        ``(II) subparagraph (B) shall not
                                    apply.
                              ``(ii) Applicable individual.--For purposes of
                          this subparagraph, the term `applicable
                          individual' means, with respect to any taxable
                          year, any individual who was a qualified
                          participant in a qualified cash or

    [[Page 120 STAT. 1003]]

                          deferred arrangement (as defined in section
                          401(k)) of an employer described in clause (iii)
                          under which the employer matched at least 50
                          percent of the employee's contributions to such
                          arrangement with stock of such employer.
                              ``(iii) Employer described.--An employer is
                          described in this clause if, in any taxable year
                          preceding the taxable year described in clause
                          (ii)--
                                        ``(I) such employer (or any
                                    controlling corporation of such
                                    employer) was a debtor in a case under
                                    title 11 of the United States Code, or
                                    similar Federal or State law, and
                                        ``(II) such employer (or any other
                                    person) was subject to an indictment or
                                    conviction resulting from business
                                    transactions related to such case.
                              ``(iv) Qualified participant.--For purposes of
                          clause (ii), the term `qualified participant'
                          means any applicable individual who was a
                          participant in the cash or deferred arrangement
                          described in such clause on the date that is 6
                          months before the filing of the case described in
                          clause (iii).
                              ``(v) Termination.--This subparagraph shall
                          not apply to taxable years beginning after
                          December 31, 2009.''.

        (b) <<NOTE: 26 USC 219 note.>> Effective Date.--The amendments made
    by this section shall apply to taxable years beginning after December
    31, 2006.

    SEC. 832. DETERMINATION OF AVERAGE COMPENSATION FOR SECTION 415 LIMITS.

        (a) In General.--Section 415(b)(3) of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 415.>> is amended by striking ``both was an active
    participant in the plan and''.

        (b) <<NOTE: 26 USC 415 note.>> Effective Date.--The amendment made
    by this section shall apply to years beginning after December 31, 2005.

    SEC. 833. INFLATION INDEXING OF GROSS INCOME LIMITATIONS ON CERTAIN
                RETIREMENT SAVINGS INCENTIVES.

        (a) Saver's Credit.--Subsection (b) of section 25B of the Internal
    Revenue Code of 1986 is amended to read as follows:
        ``(b) Applicable Percentage.--For purposes of this section--
                ``(1) Joint returns.--In the case of a joint return, the
            applicable percentage is--
                        ``(A) if the adjusted gross income of the taxpayer
                    is not over $30,000, 50 percent,
                        ``(B) if the adjusted gross income of the taxpayer
                    is over $30,000 but not over $32,500, 20 percent,
                        ``(C) if the adjusted gross income of the taxpayer
                    is over $32,500 but not over $50,000, 10 percent, and
                        ``(D) if the adjusted gross income of the taxpayer
                    is over $50,000, zero percent.
                ``(2) Other returns.--In the case of--
                        ``(A) a head of household, the applicable percentage
                    shall be determined under paragraph (1) except that such
                    paragraph shall be applied by substituting for each
                    dollar amount therein (as adjusted under paragraph (3))
                    a dollar amount equal to 75 percent of such dollar
                    amount, and

    [[Page 120 STAT. 1004]]

                        ``(B) <<NOTE: Applicability.>> any taxpayer not
                    described in paragraph (1) or subparagraph (A), the
                    applicable percentage shall be determined under
                    paragraph (1) except that such paragraph shall be
                    applied by substituting for each dollar amount therein
                    (as adjusted under paragraph (3)) a dollar amount equal
                    to 50 percent of such dollar amount.
                ``(3) Inflation adjustment.--In the case of any taxable year
            beginning in a calendar year after 2006, each of the dollar
            amounts in paragraph (1) shall be increased by an amount equal
            to--
                        ``(A) such dollar amount, multiplied by
                        ``(B) the cost-of-living adjustment determined under
                    section 1(f)(3) for the calendar year in which the
                    taxable year begins, determined by substituting
                    `calendar year 2005' for `calendar year 1992' in
                    subparagraph (B) thereof.
            Any increase determined under the preceding sentence shall be
            rounded to the nearest multiple of $500.''.

        (b) Deduction of Retirement Contributions for Active Participants.--
    Section 219(g) of such Code <<NOTE: 26 USC 219.>> is amended by adding
    at the end the following new paragraph:
                ``(8) Inflation adjustment.--In the case of any taxable year
            beginning in a calendar year after 2006, the dollar amount in
            the last row of the table contained in paragraph (3)(B)(i), the
            dollar amount in the last row of the table contained in
            paragraph (3)(B)(ii), and the dollar amount contained in
            paragraph (7)(A), shall each be increased by an amount equal
            to--
                        ``(A) such dollar amount, multiplied by
                        ``(B) the cost-of-living adjustment determined under
                    section 1(f)(3) for the calendar year in which the
                    taxable year begins, determined by substituting
                    `calendar year 2005' for `calendar year 1992' in
                    subparagraph (B) thereof.
            Any increase determined under the preceding sentence shall be
            rounded to the nearest multiple of $1,000.''.

        (c) Contribution Limitation for Roth IRAs.--Section 408A(c)(3) of
    such Code is amended by adding at the end the following new
    subparagraph:
                        ``(C) Inflation adjustment.--In the case of any
                    taxable year beginning in a calendar year after 2006,
                    the dollar amounts in subclauses (I) and (II) of
                    subparagraph (C)(ii) shall each be increased by an
                    amount equal to--
                              ``(i) such dollar amount, multiplied by
                              ``(ii) the cost-of-living adjustment
                          determined under section 1(f)(3) for the calendar
                          year in which the taxable year begins, determined
                          by substituting `calendar year 2005' for `calendar
                          year 1992' in subparagraph (B) thereof.
                    Any increase determined under the preceding sentence
                    shall be rounded to the nearest multiple of $1,000.''.

        (d) <<NOTE: 26 USC 25B note.>> Effective Date.--The amendments made
    by this section shall apply to taxable years beginning after 2006.

    [[Page 120 STAT. 1005]]

                     Subtitle D--Health and Medical Benefits

    SEC. 841. USE OF EXCESS PENSION ASSETS FOR FUTURE RETIREE HEALTH
                BENEFITS AND COLLECTIVELY BARGAINED RETIREE HEALTH BENEFITS.

        (a) In General.--Section 420 of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 420.>> (relating to transfers of excess pension
    assets to retiree health accounts) is amended by adding at the end the
    following new subsection:

        ``(f) Qualified Transfers To Cover Future Retiree Health Costs and
    Collectively Bargained Retiree Health Benefits.--
                ``(1) In general.--An employer maintaining a defined benefit
            plan (other than a multiemployer plan) may, in lieu of a
            qualified transfer, elect for any taxable year to have the plan
            make--
                        ``(A) a qualified future transfer, or
                        ``(B) a collectively bargained transfer.
            Except as provided in this subsection, a qualified future
            transfer and a collectively bargained transfer shall be treated
            for purposes of this title and the Employee Retirement Income
            Security Act of 1974 as if it were a qualified transfer.
                ``(2) Qualified future and collectively bargained
            transfers.--For purposes of this subsection--
                        ``(A) In general.--The terms `qualified future
                    transfer' and `collectively bargained transfer' mean a
                    transfer which meets all of the requirements for a
                    qualified transfer, except that--
                              ``(i) the determination of excess pension
                          assets shall be made under subparagraph (B),
                              ``(ii) the limitation on the amount
                          transferred shall be determined under subparagraph
                          (C),
                              ``(iii) the minimum cost requirements of
                          subsection (c)(3) shall be modified as provided
                          under subparagraph (D), and
                              ``(iv) in the case of a collectively bargained
                          transfer, the requirements of subparagraph (E)
                          shall be met with respect to the transfer.
                        ``(B) Excess pension assets.--
                              ``(i) In general.--In determining excess
                          pension assets for purposes of this subsection,
                          subsection (e)(2) shall be applied by substituting
                          `120 percent' for `125 percent'.
                              ``(ii) Requirement to maintain funded
                          status.--If, as of any valuation date of any plan
                          year in the transfer period, the amount determined
                          under subsection (e)(2)(B) (after application of
                          clause (i)) exceeds the amount determined under
                          subsection (e)(2)(A), either--
                                        ``(I) the employer maintaining the
                                    plan shall make contributions to the
                                    plan in an amount not less than the
                                    amount required to reduce such excess to
                                    zero as of such date, or
                                        ``(II) there is transferred from the
                                    health benefits account to the plan an
                                    amount not less than the amount required
                                    to reduce such excess to zero as of such
                                    date.

    [[Page 120 STAT. 1006]]

                        ``(C) Limitation on amount transferred.--
                    Notwithstanding subsection (b)(3), the amount of the
                    excess pension assets which may be transferred--
                              ``(i) in the case of a qualified future
                          transfer shall be equal to the sum of--
                                        ``(I) if the transfer period
                                    includes the taxable year of the
                                    transfer, the amount determined under
                                    subsection (b)(3) for such taxable year,
                                    plus
                                        ``(II) in the case of all other
                                    taxable years in the transfer period,
                                    the sum of the qualified current retiree
                                    health liabilities which the plan
                                    reasonably estimates, in accordance with
                                    guidance issued by the Secretary, will
                                    be incurred for each of such years, and
                              ``(ii) in the case of a collectively bargained
                          transfer, shall not exceed the amount which is
                          reasonably estimated, in accordance with the
                          provisions of the collective bargaining agreement
                          and generally accepted accounting principles, to
                          be the amount the employer maintaining the plan
                          will pay (whether directly or through
                          reimbursement) out of such account during the
                          collectively bargained cost maintenance period for
                          collectively bargained retiree health liabilities.
                        ``(D) Minimum cost requirements.--
                              ``(i) In general.--The requirements of
                          subsection (c)(3) shall be treated as met if--
                                        ``(I) in the case of a qualified
                                    future transfer, each group health plan
                                    or arrangement under which applicable
                                    health benefits are provided provides
                                    applicable health benefits during the
                                    period beginning with the first year of
                                    the transfer period and ending with the
                                    last day of the 4th year following the
                                    transfer period such that the annual
                                    average amount of such the applicable
                                    employer cost during such period is not
                                    less than the applicable employer cost
                                    determined under subsection (c)(3)(A)
                                    with respect to the transfer, and
                                        ``(II) in the case of a collectively
                                    bargained transfer, each collectively
                                    bargained group health plan under which
                                    collectively bargained health benefits
                                    are provided provides that the
                                    collectively bargained employer cost for
                                    each taxable year during the
                                    collectively bargained cost maintenance
                                    period shall not be less than the amount
                                    specified by the collective bargaining
                                    agreement.
                              ``(ii) Election to maintain benefits for
                          future transfers.--An employer may elect, in lieu
                          of the requirements of clause (i)(I), to meet the
                          requirements of subsection (c)(3) by meeting the
                          requirements of such subsection (as in effect
                          before the amendments made by section 535 of the
                          Tax Relief Extension Act of 1999) for each of the
                          years described in the period under clause (i)(I).
                              ``(iii) Collectively bargained employer
                          cost.--For purposes of this subparagraph, the term
                          `collectively bargained employer cost' means the
                          average cost

    [[Page 120 STAT. 1007]]

                          per covered individual of providing collectively
                          bargained retiree health benefits as determined in
                          accordance with the applicable collective
                          bargaining agreement. Such agreement may provide
                          for an appropriate reduction in the collectively
                          bargained employer cost to take into account any
                          portion of the collectively bargained retiree
                          health benefits that is provided or financed by a
                          government program or other source.
                        ``(E) Special rules for collectively bargained
                    transfers.--
                              ``(i) In general.--A collectively bargained
                          transfer shall only include a transfer which--
                                        ``(I) is made in accordance with a
                                    collective bargaining agreement,
                                        ``(II) before the transfer, the
                                    employer designates, in a written notice
                                    delivered to each employee organization
                                    that is a party to the collective
                                    bargaining agreement, as a collectively
                                    bargained transfer in accordance with
                                    this section, and
                                        ``(III) involves a plan maintained
                                    by an employer which, in its taxable
                                    year ending in 2005, provided health
                                    benefits or coverage to retirees and
                                    their spouses and dependents under all
                                    of the benefit plans maintained by the
                                    employer, but only if the aggregate cost
                                    (including administrative expenses) of
                                    such benefits or coverage which would
                                    have been allowable as a deduction to
                                    the employer (if such benefits or
                                    coverage had been provided directly by
                                    the employer and the employer used the
                                    cash receipts and disbursements method
                                    of accounting) is at least 5 percent of
                                    the gross receipts of the employer
                                    (determined in accordance with the last
                                    sentence of subsection
                                    (c)(2)(E)(ii)(II)) for such taxable
                                    year, or a plan maintained by a
                                    successor to such employer.
                              ``(ii) Use of assets.--Any assets transferred
                          to a health benefits account in a collectively
                          bargained transfer (and any income allocable
                          thereto) shall be used only to pay collectively
                          bargained retiree health liabilities (other than
                          liabilities of key employees not taken into
                          account under paragraph (6)(B)(iii)) for the
                          taxable year of the transfer or for any subsequent
                          taxable year during the collectively bargained
                          cost maintenance period (whether directly or
                          through reimbursement).
                ``(3) Coordination with other transfers.--In applying
            subsection (b)(3) to any subsequent transfer during a taxable
            year in a transfer period or collectively bargained cost
            maintenance period, qualified current retiree health liabilities
            shall be reduced by any such liabilities taken into account with
            respect to the qualified future transfer or collectively
            bargained transfer to which such period relates.
                ``(4) Special deduction rules for collectively bargained
            transfers.--In the case of a collectively bargained transfer--

    [[Page 120 STAT. 1008]]

                        ``(A) the limitation under subsection (d)(1)(C)
                    shall not apply, and
                        ``(B) notwithstanding subsection (d)(2), an employer
                    may contribute an amount to a health benefits account or
                    welfare benefit fund (as defined in section 419(e)(1))
                    with respect to collectively bargained retiree health
                    liabilities for which transferred assets are required to
                    be used under subsection (c)(1)(B), and the
                    deductibility of any such contribution shall be governed
                    by the limits applicable to the deductibility of
                    contributions to a welfare benefit fund under a
                    collective bargaining agreement (as determined under
                    section 419A(f)(5)(A)) without regard to whether such
                    contributions are made to a health benefits account or
                    welfare benefit fund and without regard to the
                    provisions of section 404 or the other provisions of
                    this section.
            The <<NOTE: Rules.>> Secretary shall provide rules to ensure
            that the application of this paragraph does not result in a
            deduction being allowed more than once for the same contribution
            or for 2 or more contributions or expenditures relating to the
            same collectively bargained retiree health liabilities.
                ``(5) Transfer period.--For purposes of this subsection, the
            term `transfer period' means, with respect to any transfer, a
            period of consecutive taxable years (not less than 2) specified
            in the election under paragraph (1) which begins and ends during
            the 10-taxable-year period beginning with the taxable year of
            the transfer.
                ``(6) Terms relating to collectively bargained transfers.--
            For purposes of this subsection--
                        ``(A) Collectively bargained cost maintenance
                    period.--The term `collectively bargained cost
                    maintenance period' means, with respect to each covered
                    retiree and his covered spouse and dependents, the
                    shorter of--
                              ``(i) the remaining lifetime of such covered
                          retiree and his covered spouse and dependents, or
                              ``(ii) the period of coverage provided by the
                          collectively bargained health plan (determined as
                          of the date of the collectively bargained
                          transfer) with respect to such covered retiree and
                          his covered spouse and dependents.
                        ``(B) Collectively bargained retiree health
                    liabilities.--
                              ``(i) In general.--The term `collectively
                          bargained retiree health liabilities' means the
                          present value, as of the beginning of a taxable
                          year and determined in accordance with the
                          applicable collective bargaining agreement, of all
                          collectively bargained health benefits (including
                          administrative expenses) for such taxable year and
                          all subsequent taxable years during the
                          collectively bargained cost maintenance period.
                              ``(ii) Reduction for amounts previously set
                          aside.--The amount determined under clause (i)
                          shall be reduced by the value (as of the close of
                          the plan year preceding the year of the
                          collectively bargained transfer) of the assets in
                          all health benefits accounts or welfare benefit
                          funds (as defined in section 419(e)(1))

    [[Page 120 STAT. 1009]]

                          set aside to pay for the collectively bargained
                          retiree health liabilities.
                              ``(iii) Key employees excluded.--If an
                          employee is a key employee (within the meaning of
                          section 416(I)(1)) with respect to any plan year
                          ending in a taxable year, such employee shall not
                          be taken into account in computing collectively
                          bargained retiree health liabilities for such
                          taxable year or in calculating collectively
                          bargained employer cost under subsection
                          (c)(3)(C).
                        ``(C) Collectively bargained health benefits.--The
                    term `collectively bargained health benefits' means
                    health benefits or coverage which are provided to--
                              ``(i) retired employees who, immediately
                          before the collectively bargained transfer, are
                          entitled to receive such benefits upon retirement
                          and who are entitled to pension benefits under the
                          plan, and their spouses and dependents, and
                              ``(ii) if specified by the provisions of the
                          collective bargaining agreement governing the
                          collectively bargained transfer, active employees
                          who, following their retirement, are entitled to
                          receive such benefits and who are entitled to
                          pension benefits under the plan, and their spouses
                          and dependents.
                        ``(D) Collectively bargained health plan.--The term
                    `collectively bargained health plan' means a group
                    health plan or arrangement for retired employees and
                    their spouses and dependents that is maintained pursuant
                    to 1 or more collective bargaining agreements.''.

        (b) <<NOTE: 26 USC 420 note.>> Effective Date.--The amendments made
    by this section shall apply to transfers after the date of the enactment
    of this Act.

    SEC. 842. TRANSFER OF EXCESS PENSION ASSETS TO MULTIEMPLOYER HEALTH
                PLAN.

        (a) In General.--Section 420 of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 420.>> is amended--
                (1) by striking ``(other than a multiemployer plan)'' in
            subsection (a), and
                (2) by adding at the end of subsection (e) the following new
            paragraph:
                ``(5) Application to multiemployer plans.--In the case of a
            multiemployer plan, this section shall be applied to any such
            plan--
                        ``(A) by treating any reference in this section to
                    an employer as a reference to all employers maintaining
                    the plan (or, if appropriate, the plan sponsor), and
                        ``(B) in accordance with such modifications of this
                    section (and the provisions of this title relating to
                    this section) as the Secretary determines appropriate to
                    reflect the fact the plan is not maintained by a single
                    employer.''.

        (b) <<NOTE: 26 USC 420 note.>> Effective Date.--The amendment made
    by this section shall apply to transfers made in taxable years beginning
    after December 31, 2006.

    [[Page 120 STAT. 1010]]

    SEC. 843. ALLOWANCE OF RESERVE FOR MEDICAL BENEFITS OF PLANS SPONSORED
                BY BONA FIDE ASSOCIATIONS.

        (a) In General.--Section 419A(c) of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 419A.>> (relating to account limit) is amended by
    adding at the end the following new paragraph:
                ``(6) Additional reserve for medical benefits of bona fide
            association plans.--
                        ``(A) In general.--An applicable account limit for
                    any taxable year may include a reserve in an amount not
                    to exceed 35 percent of the sum of--
                              ``(i) the qualified direct costs, and
                              ``(ii) the change in claims incurred but
                          unpaid,
                    for such taxable year with respect to medical benefits
                    (other than post-retirement medical benefits).
                        ``(B) Applicable account limit.--For purposes of
                    this subsection, the term `applicable account limit'
                    means an account limit for a qualified asset account
                    with respect to medical benefits provided through a plan
                    maintained by a bona fide association (as defined in
                    section 2791(d)(3) of the Public Health Service Act (42
                    U.S.C. 300gg-91(d)(3)).''.

        (b) <<NOTE: 26 USC 419A note.>> Effective Date.--The amendment made
    by this section shall apply to taxable years beginning after December
    31, 2006.

    SEC. 844. TREATMENT OF ANNUITY AND LIFE INSURANCE CONTRACTS WITH A LONG-
                TERM CARE INSURANCE FEATURE.

        (a) Exclusion From Gross Income.--Subsection (e) of section 72 of
    the Internal Revenue Code of 1986 (relating to amounts not received as
    annuities) is amended by redesignating paragraph (11) as paragraph (12)
    and by inserting after paragraph (10) the following new paragraph:
                ``(11) Special rules for certain combination contracts
            providing long-term care insurance.--Notwithstanding paragraphs
            (2), (5)(C), and (10), in the case of any charge against the
            cash value of an annuity contract or the cash surrender value of
            a life insurance contract made as payment for coverage under a
            qualified long-term care insurance contract which is part of or
            a rider on such annuity or life insurance contract--
                        ``(A) the investment in the contract shall be
                    reduced (but not below zero) by such charge, and
                        ``(B) such charge shall not be includible in gross
                    income.''.

        (b) Tax-Free Exchanges Among Certain Insurance Policies.--
                (1) Annuity contracts can include qualified long-term care
            insurance riders.--Paragraph (2) of section 1035(b) of such Code
            is amended by adding at the end the following new sentence:
            ``For purposes of the preceding sentence, a contract shall not
            fail to be treated as an annuity contract solely because a
            qualified long-term care insurance contract is a part of or a
            rider on such contract.''.
                (2) Life insurance contracts can include qualified long-term
            care insurance riders.--Paragraph (3) of section 1035(b) of such
            Code is amended by adding at the end the following new sentence:
            ``For purposes of the preceding sentence, a contract shall not
            fail to be treated as a life insurance

    [[Page 120 STAT. 1011]]

            contract solely because a qualified long-term care insurance
            contract is a part of or a rider on such contract.''.
                (3) Expansion of tax-free exchanges of life insurance,
            endowment, and annuity contracts for long-term care contracts.--
            Subsection (a) of section 1035 of such <<NOTE: 26 USC
            1035.>> Code (relating to certain exchanges of insurance
            policies) is amended--
                        (A) in paragraph (1) by inserting ``or for a
                    qualified long-term care insurance contract'' before the
                    semicolon at the end,
                        (B) in paragraph (2) by inserting ``, or (C) for a
                    qualified long-term care insurance contract'' before the
                    semicolon at the end, and
                        (C) in paragraph (3) by inserting ``or for a
                    qualified long-term care insurance contract'' before the
                    period at the end.
                (4) Tax-free exchanges of qualified long-term care insurance
            contract.--Subsection (a) of section 1035 of such Code (relating
            to certain exchanges of insurance policies) is amended by
            striking ``or'' at the end of paragraph (2), by striking the
            period at the end of paragraph (3) and inserting ``; or'', and
            by inserting after paragraph (3) the following new paragraph:
                ``(4) a qualified long-term care insurance contract for a
            qualified long-term care insurance contract.''.

        (c) Treatment of Coverage Provided as Part of a Life Insurance or
    Annuity Contract.--Subsection (e) of section 7702B of such Code
    (relating to treatment of qualified long-term care insurance) is amended
    to read as follows:
        ``(e) <<NOTE: Regulations.>> Treatment of Coverage Provided as Part
    of a Life Insurance or Annuity Contract.--Except as otherwise provided
    in regulations prescribed by the Secretary, in the case of any long-term
    care insurance coverage (whether or not qualified) provided by a rider
    on or as part of a life insurance contract or an annuity contract--
                ``(1) In general.--This <<NOTE: Applicability.>> title shall
            apply as if the portion of the contract providing such coverage
            is a separate contract.
                ``(2) Denial of deduction under section 213.--No deduction
            shall be allowed under section 213(a) for any payment made for
            coverage under a qualified long-term care insurance contract if
            such payment is made as a charge against the cash surrender
            value of a life insurance contract or the cash value of an
            annuity contract.
                ``(3) Portion defined.--For purposes of this subsection, the
            term `portion' means only the terms and benefits under a life
            insurance contract or annuity contract that are in addition to
            the terms and benefits under the contract without regard to
            long-term care insurance coverage.
                ``(4) Annuity contracts to which paragraph (1) does not
            apply.--For purposes of this subsection, none of the following
            shall be treated as an annuity contract:
                        ``(A) A trust described in section 401(a) which is
                    exempt from tax under section 501(a).
                        ``(B) A contract--
                              ``(i) purchased by a trust described in
                          subparagraph (A),

    [[Page 120 STAT. 1012]]

                              ``(ii) purchased as part of a plan described
                          in section 403(a),
                              ``(iii) described in section 403(b),
                              ``(iv) provided for employees of a life
                          insurance company under a plan described in
                          section 818(a)(3), or
                              ``(v) from an individual retirement account or
                          an individual retirement annuity.
                        ``(C) A contract purchased by an employer for the
                    benefit of the employee (or the employee's spouse).
            Any dividend described in section 404(k) which is received by a
            participant or beneficiary shall, for purposes of this
            paragraph, be treated as paid under a separate contract to which
            subparagraph (B)(i) applies.''.

        (d) Information Reporting.--
                (1) Subpart B of part III of subchapter A of chapter 61 of
            such Code (relating to information concerning transactions with
            other persons) is amended by adding at the end the following new
            section:

    ``SEC. 6050U. <<NOTE: 26 USC 6050U.>> CHARGES OR PAYMENTS FOR QUALIFIED
                LONG-TERM CARE INSURANCE CONTRACTS UNDER COMBINED
                ARRANGEMENTS.

        ``(a) <<NOTE: Regulations.>> Requirement of Reporting.--Any person
    who makes a charge against the cash value of an annuity contract, or the
    cash surrender value of a life insurance contract, which is excludible
    from gross income under section 72(e)(11) shall make a return, according
    to the forms or regulations prescribed by the Secretary, setting forth--
                ``(1) the amount of the aggregate of such charges against
            each such contract for the calendar year,
                ``(2) the amount of the reduction in the investment in each
            such contract by reason of such charges, and
                ``(3) the name, address, and TIN of the individual who is
            the holder of each such contract.

        ``(b) Statements To Be Furnished to Persons With Respect to Whom
    Information Is Required.--Every person required to make a return under
    subsection (a) shall furnish to each individual whose name is required
    to be set forth in such return a written statement showing--
                ``(1) the name, address, and phone number of the information
            contact of the person making the payments, and
                ``(2) the information required to be shown on the return
            with respect to such individual.

    The <<NOTE: Deadline.>> written statement required under the preceding
    sentence shall be furnished to the individual on or before January 31 of
    the year following the calendar year for which the return under
    subsection (a) was required to be made.''.
                (2) Penalty for failure to file.--
                        (A) Return.--Subparagraph (B) of section 6724(d)(1)
                    of such Code <<NOTE: 26 USC 6724.>> is amended by
                    striking ``or'' at the end of clause (xvii), by striking
                    ``and'' at the end of clause (xviii) and inserting
                    ``or'', and by adding at the end the following new
                    clause:
                              ``(xix) section 6050U (relating to charges or
                          payments for qualified long-term care insurance
                          contracts under combined arrangements), and''.

    [[Page 120 STAT. 1013]]

                        (B) Statement.--Paragraph (2) of section 6724(d) of
                    such Code <<NOTE: 26 USC 6724.>> is amended by striking
                    ``or'' at the end of subparagraph (AA), by striking the
                    period at the end of subparagraph (BB), and by inserting
                    after subparagraph (BB) the following new subparagraph:
                        ``(CC) section 6050U (relating to charges or
                    payments for qualified long-term care insurance
                    contracts under combined arrangements).''.
                (3) Clerical amendment.--The table of sections for subpart B
            of part III of subchapter A of such chapter 61 of such Code is
            amended by adding at the end the following new item:

    ``Sec. 6050U. Charges or payments for qualified long-term care insurance
               contracts under combined arrangements.''.

        (e) Treatment of Policy Acquisition Expenses.--Subsection (e) of
    section 848 of such Code (relating to classification of contracts) is
    amended by adding at the end the following new paragraph:
                ``(6) Treatment of certain qualified long-term care
            insurance contract arrangements.--An annuity or life insurance
            contract which includes a qualified long-term care insurance
            contract as a part of or a rider on such annuity or life
            insurance contract shall be treated as a specified insurance
            contract not described in subparagraph (A) or (B) of subsection
            (c)(1).''.

        (f) Technical Amendment.--Paragraph (1) of section 7702B(e) of such
    Code (as in effect before amendment by subsection (c)) is amended by
    striking ``section'' and inserting ``title''.
        (g) <<NOTE: Applicability. 26 USC 72 note.>> Effective Dates.--
                (1) In general.--Except as otherwise provided in this
            subsection, the amendments made by this section shall apply to
            contracts issued after December 31, 1996, but only with respect
            to taxable years beginning after December 31, 2009.
                (2) Tax-free exchanges.--The amendments made by subsection
            (b) shall apply with respect to exchanges occurring after
            December 31, 2009.
                (3) Information reporting.--The amendments made by
            subsection (d) shall apply to charges made after December 31,
            2009.
                (4) Policy acquisition expenses.--The amendment made by
            subsection (e) shall apply to specified policy acquisition
            expenses determined for taxable years beginning after December
            31, 2009.
                (5) Technical amendment.--The amendment made by subsection
            (f) shall take effect as if included in section 321(a) of the
            Health Insurance Portability and Accountability Act of 1996.

    SEC. 845. DISTRIBUTIONS FROM GOVERNMENTAL RETIREMENT PLANS FOR HEALTH
                AND LONG-TERM CARE INSURANCE FOR PUBLIC SAFETY OFFICERS.

        (a) In General.--Section 402 of the Internal Revenue Code of 1986
    (relating to taxability of beneficiary of employees' trust) is amended
    by adding at the end the following new subsection:
        ``(l) Distributions From Governmental Plans for Health and Long-Term
    Care Insurance.--
                ``(1) In general.--In the case of an employee who is an
            eligible retired public safety officer who makes the election

    [[Page 120 STAT. 1014]]

            described in paragraph (6) with respect to any taxable year of
            such employee, gross income of such employee for such taxable
            year does not include any distribution from an eligible
            retirement plan to the extent that the aggregate amount of such
            distributions does not exceed the amount paid by such employee
            for qualified health insurance premiums of the employee, his
            spouse, or dependents (as defined in section 152) for such
            taxable year.
                ``(2) Limitation.--The amount which may be excluded from
            gross income for the taxable year by reason of paragraph (1)
            shall not exceed $3,000.
                ``(3) Distributions must otherwise be includible.--
                        ``(A) In general.--An amount shall be treated as a
                    distribution for purposes of paragraph (1) only to the
                    extent that such amount would be includible in gross
                    income without regard to paragraph (1).
                        ``(B) Application of section 72.--Notwithstanding
                    section 72, in determining the extent to which an amount
                    is treated as a distribution for purposes of
                    subparagraph (A), the aggregate amounts distributed from
                    an eligible retirement plan in a taxable year (up to the
                    amount excluded under paragraph (1)) shall be treated as
                    includible in gross income (without regard to
                    subparagraph (A)) to the extent that such amount does
                    not exceed the aggregate amount which would have been so
                    includible if all amounts distributed from all eligible
                    retirement plans were treated as 1 contract for purposes
                    of determining the inclusion of such distribution under
                    section 72. Proper adjustments shall be made in applying
                    section 72 to other distributions in such taxable year
                    and subsequent taxable years.
                ``(4) Definitions.--For purposes of this subsection--
                        ``(A) Eligible retirement plan.--For purposes of
                    paragraph (1), the term `eligible retirement plan' means
                    a governmental plan (within the meaning of section
                    414(d)) which is described in clause (iii), (iv), (v),
                    or (vi) of subsection (c)(8)(B).
                        ``(B) Eligible retired public safety officer.--The
                    term `eligible retired public safety officer' means an
                    individual who, by reason of disability or attainment of
                    normal retirement age, is separated from service as a
                    public safety officer with the employer who maintains
                    the eligible retirement plan from which distributions
                    subject to paragraph (1) are made.
                        ``(C) Public safety officer.--The term `public
                    safety officer' shall have the same meaning given such
                    term by section 1204(9)(A) of the Omnibus Crime Control
                    and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(A)).
                        ``(D) Qualified health insurance premiums.--The term
                    `qualified health insurance premiums' means premiums for
                    coverage for the eligible retired public safety officer,
                    his spouse, and dependents, by an accident or health
                    insurance plan or qualified long-term care insurance
                    contract (as defined in section 7702B(b)).
                ``(5) Special rules.--For purposes of this subsection--
                        ``(A) Direct payment to insurer required.--Paragraph
                    (1) shall only apply to a distribution if payment of the
                    premiums is made directly to the provider of the

    [[Page 120 STAT. 1015]]

                    accident or health insurance plan or qualified long-term
                    care insurance contract by deduction from a distribution
                    from the eligible retirement plan.
                        ``(B) Related plans treated as 1.--All eligible
                    retirement plans of an employer shall be treated as a
                    single plan.
                ``(6) Election described.--
                        ``(A) In general.--For purposes of paragraph (1), an
                    election is described in this paragraph if the election
                    is made by an employee after separation from service
                    with respect to amounts not distributed from an eligible
                    retirement plan to have amounts from such plan
                    distributed in order to pay for qualified health
                    insurance premiums.
                        ``(B) Special rule.--A plan shall not be treated as
                    violating the requirements of section 401, or as
                    engaging in a prohibited transaction for purposes of
                    section 503(b), merely because it provides for an
                    election with respect to amounts that are otherwise
                    distributable under the plan or merely because of a
                    distribution made pursuant to an election described in
                    subparagraph (A).
                ``(7) Coordination with medical expense deduction.--The
            amounts excluded from gross income under paragraph (1) shall not
            be taken into account under section 213.
                ``(8) Coordination with deduction for health insurance costs
            of self-employed individuals.--The amounts excluded from gross
            income under paragraph (1) shall not be taken into account under
            section 162(l).''.

        (b) Conforming Amendments.--
                (1) Section 403(a) of such Code <<NOTE: 26 USC
            403.>> (relating to taxability of beneficiary under a qualified
            annuity plan) is amended by inserting after paragraph (1) the
            following new paragraph:
                ``(2) Special rule for health and long-term care
            insurance.--To the extent provided in section 402(l), paragraph
            (1) shall not apply to the amount distributed under the contract
            which is otherwise includible in gross income under this
            subsection.''.
                (2) Section 403(b) of such Code (relating to taxability of
            beneficiary under annuity purchased by section 501(c)(3)
            organization or public school) is amended by inserting after
            paragraph (1) the following new paragraph:
                ``(2) Special rule for health and long-term care
            insurance.--To the extent provided in section 402(l), paragraph
            (1) shall not apply to the amount distributed under the contract
            which is otherwise includible in gross income under this
            subsection.''.
                (3) Section 457(a) of such Code (relating to year of
            inclusion in gross income) is amended by adding at the end the
            following new paragraph:
                ``(3) Special rule for health and long-term care
            insurance.--In the case of a plan of an eligible employer
            described in subsection (e)(1)(A), to the extent provided in
            section 402(l), paragraph (1) shall not apply to amounts
            otherwise includible in gross income under this subsection.''.

        (c) <<NOTE: 26 USC 402 note.>> Effective Date.--The amendments made
    by this section shall apply to distributions in taxable years beginning
    after December 31, 2006.

    [[Page 120 STAT. 1016]]

                Subtitle E--United States Tax Court Modernization

    SEC. 851. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL SURVIVOR
                ANNUITIES.

        (a) In General.--Subsection (s) of section 7448 of the Internal
    Revenue Code of 1986 <<NOTE: 26 USC 7448.>> (relating to annuities to
    surviving spouses and dependent children of judges) is amended to read
    as follows:

        ``(s) Increases in Survivor Annuities.--Each time that an increase
    is made under section 8340(b) of title 5, United States Code, in
    annuities payable under subchapter III of chapter 83 of that title, each
    annuity payable from the survivors annuity fund under this section shall
    be increased at the same time by the same percentage by which annuities
    are increased under such section 8340(b).''.
        (b) <<NOTE: 26 USC 7448 note.>> Effective Date.--The amendment made
    by this section shall apply with respect to increases made under section
    8340(b) of title 5, United States Code, in annuities payable under
    subchapter III of chapter 83 of that title, taking effect after the date
    of the enactment of this Act.

    SEC. 852. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES AGE 65 OR
                OVER.

        Section 7472 of the Internal Revenue Code of 1986 (relating to
    expenditures) is amended by inserting after the first sentence the
    following new sentence: ``Notwithstanding any other provision of law,
    the Tax Court is authorized to pay on behalf of its judges, age 65 or
    over, any increase in the cost of Federal Employees' Group Life
    Insurance imposed after the date of the enactment of the Pension
    Protection Act of 2006, including any expenses generated by such
    payments, as authorized by the chief judge in a manner consistent with
    such payments authorized by the Judicial Conference of the United States
    pursuant to section 604(a)(5) of title 28, United States Code.''.

    SEC. 853. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT SAVINGS PLAN.

        (a) In General.--Section 7447 of the Internal Revenue Code of 1986
    (relating to retirement of judges) is amended by adding at the end the
    following new subsection:
        ``(j) Thrift Savings Plan.--
                ``(1) Election to contribute.--
                        ``(A) In general.--A judge of the Tax Court may
                    elect to contribute to the Thrift Savings Fund
                    established by section 8437 of title 5, United States
                    Code.
                        ``(B) Period of election.--An election may be made
                    under this paragraph only during a period provided under
                    section 8432(b) of title 5, United States Code, for
                    individuals subject to chapter 84 of such title.
                ``(2) Applicability of title 5 provisions.--Except as
            otherwise provided in this subsection, the provisions of
            subchapters III and VII of chapter 84 of title 5, United States
            Code, shall apply with respect to a judge who makes an election
            under paragraph (1).
                ``(3) Special rules.--

    [[Page 120 STAT. 1017]]

                        ``(A) Amount contributed.--The amount contributed by
                    a judge to the Thrift Savings Fund in any pay period
                    shall not exceed the maximum percentage of such judge's
                    basic pay for such period as allowable under section
                    8440f of title 5, United States Code. Basic pay does not
                    include any retired pay paid pursuant to this section.
                        ``(B) Contributions for benefit of judge.--No
                    contributions may be made for the benefit of a judge
                    under section 8432(c) of title 5, United States Code.
                        ``(C) Applicability of section 8433(b) of title 5
                    whether or not judge retires.--Section 8433(b) of title
                    5, United States Code, applies with respect to a judge
                    who makes an election under paragraph (1) and who
                    either--
                              ``(i) retires under subsection (b), or
                              ``(ii) ceases to serve as a judge of the Tax
                          Court but does not retire under subsection (b).
                    Retirement under subsection (b) is a separation from
                    service for purposes of subchapters III and VII of
                    chapter 84 of that title.
                        ``(D) Applicability of section 8351(b)(5) of title
                    5.--The provisions of section 8351(b)(5) of title 5,
                    United States Code, shall apply with respect to a judge
                    who makes an election under paragraph (1).
                        ``(E) <<NOTE: Regulations.>> Exception.--
                    Notwithstanding subparagraph (C), if any judge retires
                    under this section, or resigns without having met the
                    age and service requirements set forth under subsection
                    (b)(2), and such judge's nonforfeitable account balance
                    is less than an amount that the Executive Director of
                    the Federal Retirement Thrift Investment Board
                    prescribes by regulation, the Executive Director shall
                    pay the nonforfeitable account balance to the
                    participant in a single payment.''.

        (b) <<NOTE: 26 USC 7447 note.>> Effective Date.--The amendment made
    by this section shall take effect on the date of the enactment of this
    Act, except that United States Tax Court judges may only begin to
    participate in the Thrift Savings Plan at the next open season beginning
    after such date.

    SEC. 854. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT CHILDREN OF
                SPECIAL TRIAL JUDGES OF THE TAX COURT.

        (a) Definitions.--Section 7448(a) of the Internal Revenue Code of
    1986 (relating to definitions), as amended by this Act, is amended by
    redesignating paragraphs (5), (6), (7), and (8) as paragraphs (7), (8),
    (9), and (10), respectively, and by inserting after paragraph (4) the
    following new paragraphs:
                ``(5) The term `special trial judge' means a judicial
            officer appointed pursuant to section 7443A, including any
            individual receiving an annuity under chapter 83 or 84 of title
            5, United States Code, whether or not performing judicial duties
            under section 7443B.
                ``(6) The term `special trial judge's salary' means the
            salary of a special trial judge received under section 7443A(d),
            any amount received as an annuity under chapter 83 or 84 of
            title 5, United States Code, and compensation received under
            section 7443B.''.

    [[Page 120 STAT. 1018]]

        (b) Election.--Subsection (b) of section 7448 of such <<NOTE: 26 USC
    7448.>> Code (relating to annuities to surviving spouses and dependent
    children of judges) is amended--
                (1) by striking the subsection heading and inserting the
            following:

        ``(b) Election.--
                ``(1) Judges.--'',
                (2) by moving the text 2 ems to the right, and
                (3) by adding at the end the following new paragraph:
                ``(2) Special trial judges.--Any special trial judge may by
            written election filed with the chief judge bring himself or
            herself within the purview of this
            section. <<NOTE: Deadline.>> Such election shall be filed not
            later than the later of 6 months after--
                        ``(A) 6 months after the date of the enactment of
                    this paragraph,
                        ``(B) the date the judge takes office, or
                        ``(C) the date the judge marries.''.

        (c) Conforming Amendments.--
                (1) The heading of section 7448 of such Code is amended by
            inserting ``and special trial judges'' after ``judges''.
                (2) The item relating to section 7448 in the table of
            sections for part I of subchapter C of chapter 76 of such Code
            is amended by inserting ``and special trial judges'' after
            ``judges''.
                (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n),
            and (u) of section 7448 of such Code, as amended by this Act,
            are each amended--
                        (A) by inserting ``or special trial judge'' after
                    ``judge'' each place it appears other than in the phrase
                    ``chief judge'', and
                        (B) by inserting ``or special trial judge's'' after
                    ``judge's'' each place it appears.
                (4) Section 7448(c) of such Code is amended--
                        (A) in paragraph (1), by striking ``Tax Court
                    judges'' and inserting ``Tax Court judicial officers'',
                    and
                        (B) in paragraph (2)--
                              (i) in subparagraph (A), by inserting ``and
                          section 7443A(d)'' after ``(a)(4)'', and
                              (ii) in subparagraph (B), by striking
                          ``subsection (a)(4)'' and inserting ``subsection
                          (a)(4) and (a)(6)''.
                (5) Section 7448(j)(1) of such Code is amended--
                        (A) in subparagraph (A), by striking ``service or
                    retired'' and inserting ``service, retired'', and by
                    inserting ``, or receiving any annuity under chapter 83
                    or 84 of title 5, United States Code,'' after ``section
                    7447'', and
                        (B) in the last sentence, by striking ``subsections
                    (a) (6) and (7)'' and inserting ``paragraphs (8) and (9)
                    of subsection (a)''.
                (6) Section 7448(m)(1) of such Code, as amended by this Act,
            is amended by inserting ``or any annuity under chapter 83 or 84
            of title 5, United States Code'' after ``7447(d)''.
                (7) Section 7448(n) of such Code is amended by inserting
            ``his years of service pursuant to any appointment under section
            7443A,'' after ``of the Tax Court,''.
                (8) Section 3121(b)(5)(E) of such Code is amended by
            inserting ``or special trial judge'' before ``of the United
            States Tax Court''.

    [[Page 120 STAT. 1019]]

                (9) Section 210(a)(5)(E) of the Social Security
            Act <<NOTE: 42 USC 410.>> is amended by inserting ``or special
            trial judge'' before ``of the United States Tax Court''.

    SEC. 855. JURISDICTION OF TAX COURT OVER COLLECTION DUE PROCESS CASES.

        (a) In General.--Paragraph (1) of section 6330(d) of the Internal
    Revenue Code of 1986 (relating to proceeding after hearing) is amended
    to read as follows:
                ``(1) Judicial review of determination.--
            The <<NOTE: Deadline.>> person may, within 30 days of a
            determination under this section, appeal such determination to
            the Tax Court (and the Tax Court shall have jurisdiction with
            respect to such matter).''.

        (b) Effective Date.--The amendment made by this section shall apply
    to determinations made after the date which is 60 days after the date of
    the enactment of this Act.

    SEC. 856. PROVISIONS FOR RECALL.

        (a) In General.--Part I of subchapter C of chapter 76 of the
    Internal Revenue Code of 1986 is amended by inserting after section
    7443A the following new section:

    ``SEC. 7443B. <<NOTE: 26 USC 7443B.>> RECALL OF SPECIAL TRIAL JUDGES OF
                THE TAX COURT.

        ``(a) Recalling of Retired Special Trial Judges.--Any individual who
    has retired pursuant to the applicable provisions of title 5, United
    States Code, upon reaching the age and service requirements established
    therein, may at or after retirement be called upon by the chief judge of
    the Tax Court to perform such judicial duties with the Tax Court as may
    be requested of such individual for any period or periods specified by
    the chief judge; except that in the case of any such individual--
                ``(1) the aggregate of such periods in any 1 calendar year
            shall not (without such individual's consent) exceed 90 calendar
            days, and
                ``(2) such individual shall be relieved of performing such
            duties during any period in which illness or disability
            precludes the performance of such duties.

    Any act, or failure to act, by an individual performing judicial duties
    pursuant to this subsection shall have the same force and effect as if
    it were the act (or failure to act) of a special trial judge of the Tax
    Court.
        ``(b) Compensation.--For the year in which a period of recall
    occurs, the special trial judge shall receive, in addition to the
    annuity provided under the applicable provisions of title 5, United
    States Code, an amount equal to the difference between that annuity and
    the current salary of the office to which the special trial judge is
    recalled.
        ``(c) Rulemaking Authority.--The provisions of this section may be
    implemented under such rules as may be promulgated by the Tax Court.''.
        (b) Conforming Amendment.--The table of sections for part I of
    subchapter C of chapter 76 of such Code is amended by inserting after
    the item relating to section 7443A the following new item:

    ``Sec. 7443B. Recall of special trial judges of the Tax Court.''.

    [[Page 120 STAT. 1020]]

    SEC. 857. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND DECIDE CERTAIN
                EMPLOYMENT STATUS CASES.

        (a) In General.--Section 7443A(b) of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 7443A.>> (relating to proceedings which may be
    assigned to special trial judges) is amended by striking ``and'' at the
    end of paragraph (4), by redesignating paragraph (5) as paragraph (6),
    and by inserting after paragraph (4) the following new paragraph:
                ``(5) any proceeding under section 7436(c), and''.

        (b) Conforming Amendment.--Section 7443A(c) of such Code is amended
    by striking ``or (4)'' and inserting ``(4), or (5)''.
        (c) <<NOTE: 26 USC 7443A.>> Effective Date.--The amendments made by
    this section shall apply to any proceeding under section 7436(c) of the
    Internal Revenue Code of 1986 with respect to which a decision has not
    become final (as determined under section 7481 of such Code) before the
    date of the enactment of this Act.

    SEC. 858. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY DOCTRINE OF
                EQUITABLE RECOUPMENT.

        (a) Confirmation of Authority of Tax Court To Apply Doctrine of
    Equitable Recoupment.--Section 6214(b) of the Internal Revenue Code of
    1986 (relating to jurisdiction over other years and quarters) is amended
    by adding at the end the following new sentence: ``Notwithstanding the
    preceding sentence, the Tax Court may apply the doctrine of equitable
    recoupment to the same extent that it is available in civil tax cases
    before the district courts of the United States and the United States
    Court of Federal Claims.''.
        (b) <<NOTE: 26 USC 6214 note.>> Effective Date.--The amendment made
    by this section shall apply to any action or proceeding in the United
    States Tax Court with respect to which a decision has not become final
    (as determined under section 7481 of the Internal Revenue Code of 1986)
    as of the date of the enactment of this Act.

    SEC. 859. TAX COURT FILING FEE IN ALL CASES COMMENCED BY FILING
                PETITION.

        (a) In General.--Section 7451 of the Internal Revenue Code of 1986
    (relating to fee for filing a Tax Court petition) is amended by striking
    all that follows ``petition'' and inserting a period.
        (b) <<NOTE: 26 USC 7451 note.>> Effective Date.--The amendment made
    by this section shall take effect on the date of the enactment of this
    Act.

    SEC. 860. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO SE TAXPAYERS.

        (a) In General.--Section 7475(b) of the Internal Revenue Code of
    1986 (relating to use of fees) is amended by inserting before the period
    at the end ``and to provide services to pro se taxpayers''.
        (b) <<NOTE: 26 USC 7475 note.>> Effective Date.--The amendment made
    by this section shall take effect on the date of the enactment of this
    Act.

                          Subtitle F--Other Provisions

    SEC. 861. EXTENSION TO ALL GOVERNMENTAL PLANS OF CURRENT MORATORIUM ON
                APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE TO
                STATE AND LOCAL PLANS.

        (a) In General.--

    [[Page 120 STAT. 1021]]

                (1) Subparagraph (G) of section 401(a)(5) and subparagraph
            (G) of section 401(a)(26) of the Internal Revenue Code
            of <<NOTE: 26 USC 401.>> 1986 are each amended by striking
            ``section 414(d))'' and all that follows and inserting ``section
            414(d)).''.
                (2) Subparagraph (G) of section 401(k)(3) of such Code and
            paragraph (2) of section 1505(d) of the Taxpayer Relief Act of
            1997 (Public Law 105-34; 111 Stat. 1063) <<NOTE: 26 USC 401 and
            note.>> are each amended by striking ``maintained by a State or
            local government or political subdivision thereof (or agency or
            instrumentality thereof)''.

        (b) Conforming Amendments.--
                (1) The heading of subparagraph (G) of section 401(a)(5) of
            the Internal Revenue Code of 1986 is amended by striking ``State
            and local governmental'' and inserting ``Governmental''.
                (2) The heading of subparagraph (G) of section 401(a)(26) of
            such Code is amended by striking ``Exception for state and
            local'' and inserting ``Exception for''.
                (3) Section 401(k)(3)(G) of such Code is amended by
            inserting ``Governmental plan.--'' after ``(G)''.

        (c) Effective Date.--The amendments made by this section shall apply
    to any year beginning after the date of the enactment of this Act.

    SEC. 862. ELIMINATION OF AGGREGATE LIMIT FOR USAGE OF EXCESS FUNDS FROM
                BLACK LUNG DISABILITY TRUSTS.

        (a) In General.--So much of section 501(c)(21)(C) of the Internal
    Revenue Code of 1986 (relating to black lung disability trusts) as
    precedes the last sentence is amended to read as follows:
                        ``(C) Payments described in subparagraph (A)(i)(IV)
                    may be made from such trust during a taxable year only
                    to the extent that the aggregate amount of such payments
                    during such taxable year does not exceed the excess (if
                    any), as of the close of the preceding taxable year,
                    of--
                              ``(i) the fair market value of the assets of
                          the trust, over
                              ``(ii) 110 percent of the present value of the
                          liability described in subparagraph (A)(i)(I) of
                          such person.''.

        (b) <<NOTE: 26 USC 501 note.>> Effective Date.--The amendments made
    by this section shall apply to taxable years beginning after December
    31, 2006.

    SEC. 863. TREATMENT OF DEATH BENEFITS FROM CORPORATE-OWNED LIFE
                INSURANCE.

        (a) In General.--Section 101 of the Internal Revenue Code of 1986
    (relating to certain death benefits) is amended by adding at the end the
    following new subsection:
        ``(j) Treatment of Certain Employer-Owned Life Insurance
    Contracts.--
                ``(1) General rule.--In the case of an employer-owned life
            insurance contract, the amount excluded from gross income of an
            applicable policyholder by reason of paragraph (1) of subsection
            (a) shall not exceed an amount equal to the sum of the premiums
            and other amounts paid by the policyholder for the contract.
                ``(2) Exceptions.--In the case of an employer-owned life
            insurance contract with respect to which the notice and consent
            requirements of paragraph (4) are met, paragraph (1) shall not
            apply to any of the following:

    [[Page 120 STAT. 1022]]

                        ``(A) Exceptions based on insured's status.--Any
                    amount received by reason of the death of an insured
                    who, with respect to an applicable policyholder--
                              ``(i) was an employee at any time during the
                          12-month period before the insured's death, or
                              ``(ii) is, at the time the contract is
                          issued--
                                        ``(I) a director,
                                        ``(II) a highly compensated employee
                                    within the meaning of section 414(q)
                                    (without regard to paragraph (1)(B)(ii)
                                    thereof), or
                                        ``(III) a highly compensated
                                    individual within the meaning of section
                                    105(h)(5), except that `35 percent'
                                    shall be substituted for `25 percent' in
                                    subparagraph (C) thereof.
                        ``(B) Exception for amounts paid to insured's
                    heirs.--Any amount received by reason of the death of an
                    insured to the extent--
                              ``(i) the amount is paid to a member of the
                          family (within the meaning of section 267(c)(4))
                          of the insured, any individual who is the
                          designated beneficiary of the insured under the
                          contract (other than the applicable policyholder),
                          a trust established for the benefit of any such
                          member of the family or designated beneficiary, or
                          the estate of the insured, or
                              ``(ii) the amount is used to purchase an
                          equity (or capital or profits) interest in the
                          applicable policyholder from any person described
                          in clause (i).
                ``(3) Employer-owned life insurance contract.--
                        ``(A) In general.--For purposes of this subsection,
                    the term `employer-owned life insurance contract' means
                    a life insurance contract which--
                              ``(i) is owned by a person engaged in a trade
                          or business and under which such person (or a
                          related person described in subparagraph (B)(ii))
                          is directly or indirectly a beneficiary under the
                          contract, and
                              ``(ii) covers the life of an insured who is an
                          employee with respect to the trade or business of
                          the applicable policyholder on the date the
                          contract is issued.
                    For purposes of the preceding sentence, if coverage for
                    each insured under a master contract is treated as a
                    separate contract for purposes of sections 817(h), 7702,
                    and 7702A, coverage for each such insured shall be
                    treated as a separate contract.
                        ``(B) Applicable policyholder.--For purposes of this
                    subsection--
                              ``(i) In general.--The term `applicable
                          policyholder' means, with respect to any employer-
                          owned life insurance contract, the person
                          described in subparagraph (A)(i) which owns the
                          contract.
                              ``(ii) Related persons.--The term `applicable
                          policyholder' includes any person which--
                                        ``(I) bears a relationship to the
                                    person described in clause (i) which is
                                    specified in section 267(b) or
                                    707(b)(1), or
                                        ``(II) is engaged in trades or
                                    businesses with such person which are
                                    under common control

    [[Page 120 STAT. 1023]]

                                    (within the meaning of subsection (a) or
                                    (b) of section 52).
                ``(4) Notice and consent requirements.--The notice and
            consent requirements of this paragraph are met if, before the
            issuance of the contract, the employee--
                        ``(A) is notified in writing that the applicable
                    policyholder intends to insure the employee's life and
                    the maximum face amount for which the employee could be
                    insured at the time the contract was issued,
                        ``(B) provides written consent to being insured
                    under the contract and that such coverage may continue
                    after the insured terminates employment, and
                        ``(C) is informed in writing that an applicable
                    policyholder will be a beneficiary of any proceeds
                    payable upon the death of the employee.
                ``(5) Definitions.--For purposes of this subsection--
                        ``(A) Employee.--The term `employee' includes an
                    officer, director, and highly compensated employee
                    (within the meaning of section 414(q)).
                        ``(B) Insured.--The term `insured' means, with
                    respect to an employer-owned life insurance contract, an
                    individual covered by the contract who is a United
                    States citizen or resident. In the case of a contract
                    covering the joint lives of 2 individuals, references to
                    an insured include both of the individuals.''.

        (b) Reporting Requirements.--Subpart A of part III of subchapter A
    of chapter 61 of the Internal Revenue Code of 1986 (relating to
    information concerning persons subject to special provisions) is amended
    by inserting after section 6039H the following new section:

    ``SEC. 6039I. <<NOTE: 26 USC 6039I.>> RETURNS AND RECORDS WITH RESPECT
                TO EMPLOYER-OWNED LIFE INSURANCE CONTRACTS.

        ``(a) <<NOTE: Regulations.>> In General.--Every applicable
    policyholder owning 1 or more employer-owned life insurance contracts
    issued after the date of the enactment of this section shall file a
    return (at such time and in such manner as the Secretary shall by
    regulations prescribe) showing for each year such contracts are owned--
                ``(1) the number of employees of the applicable policyholder
            at the end of the year,
                ``(2) the number of such employees insured under such
            contracts at the end of the year,
                ``(3) the total amount of insurance in force at the end of
            the year under such contracts,
                ``(4) the name, address, and taxpayer identification number
            of the applicable policyholder and the type of business in which
            the policyholder is engaged, and
                ``(5) that the applicable policyholder has a valid consent
            for each insured employee (or, if all such consents are not
            obtained, the number of insured employees for whom such consent
            was not obtained).

        ``(b) Recordkeeping Requirement.--Each applicable policyholder
    owning 1 or more employer-owned life insurance contracts during any year
    shall keep such records as may be necessary for purposes of determining
    whether the requirements of this section and section 101(j) are met.

    [[Page 120 STAT. 1024]]

        ``(c) Definitions.--Any term used in this section which is used in
    section 101(j) shall have the same meaning given such term by section
    101(j).''.
        (c) Conforming Amendments.--
                (1) Paragraph (1) of section 101(a) of the Internal Revenue
            Code of 1986 <<NOTE: 26 USC 101.>> is amended by striking ``and
            subsection (f)'' and inserting ``subsection (f), and subsection
            (j)''.
                (2) The table of sections for subpart A of part III of
            subchapter A of chapter 61 of such Code is amended by inserting
            after the item relating to section 6039H the following new item:

    ``Sec. 6039I. Returns and records with respect to employer-owned life
               insurance contracts.''.

        (d) <<NOTE: Applicability. 26 USC 101 note.>> Effective Date.--The
    amendments made by this section shall apply to life insurance contracts
    issued after the date of the enactment of this Act, except for a
    contract issued after such date pursuant to an exchange described in
    section 1035 of the Internal Revenue Code of 1986 for a contract issued
    on or prior to that date. For purposes of the preceding sentence, any
    material increase in the death benefit or other material change shall
    cause the contract to be treated as a new contract except that, in the
    case of a master contract (within the meaning of section 264(f)(4)(E) of
    such Code), the addition of covered lives shall be treated as a new
    contract only with respect to such additional covered lives.

    SEC. 864. TREATMENT OF TEST ROOM SUPERVISORS AND PROCTORS WHO ASSIST IN
                THE ADMINISTRATION OF COLLEGE ENTRANCE AND PLACEMENT EXAMS.

        (a) In General.--Section 530 of the Revenue Reconciliation Act of
    1978 <<NOTE: 26 USC 3401 note.>> is amended by adding at the end the
    following new subsection:

        ``(f) Treatment of Test Room Supervisors and Proctors Who Assist in
    the Administration of College Entrance and Placement Exams.--
                ``(1) <<NOTE: Applicability.>> In general.--In the case of
            an individual described in paragraph (2) who is providing
            services as a test proctor or room supervisor by assisting in
            the administration of college entrance or placement
            examinations, this section shall be applied to such services
            performed after December 31, 2006 (and remuneration paid for
            such services) without regard to subsection (a)(3) thereof.
                ``(2) Applicability.--An individual is described in this
            paragraph if the individual--
                        ``(A) is providing the services described in
                    subsection (a) to an organization described in section
                    501(c), and exempt from tax under section 501(a), of the
                    Internal Revenue Code of 1986, and
                        ``(B) is not otherwise treated as an employee of
                    such organization for purposes of subtitle C of such
                    Code (relating to employment taxes).''.

        (b) <<NOTE: 26 USC 3401 note.>> Effective Date.--The amendment made
    by this section shall apply to remuneration for services performed after
    December 31, 2006.

    [[Page 120 STAT. 1025]]

    SEC. 865. <<NOTE: 26 USC 401 note.>> GRANDFATHER RULE FOR CHURCH PLANS
                WHICH SELF-ANNUITIZE.

        (a) In General.--In the case of any plan year ending after the date
    of the enactment of this Act, annuity payments provided with respect to
    any account maintained for a participant or beneficiary under a
    qualified church plan shall not fail to satisfy the requirements of
    section 401(a)(9) of the Internal Revenue Code of 1986 merely because
    the payments are not made under an annuity contract purchased from an
    insurance company if such payments would not fail such requirements if
    provided with respect to a retirement income account described in
    section 403(b)(9) of such Code.
        (b) Qualified Church Plan.--For purposes of this section, the term
    ``qualified church plan'' means any money purchase pension plan
    described in section 401(a) of such Code which--
                (1) is a church plan (as defined in section 414(e) of such
            Code) with respect to which the election provided by section
            410(d) of such Code has not been made, and
                (2) was in existence on April 17, 2002.

    SEC. 866. EXEMPTION FOR INCOME FROM LEVERAGED REAL ESTATE HELD BY CHURCH
                PLANS.

        (a) In General.--Section 514(c)(9)(C) of the Internal Revenue Code
    of 1986 <<NOTE: 26 USC 514.>> is amended by striking ``or'' after clause
    (ii), by striking the period at the end of clause (iii) and inserting
    ``; or'', and by inserting after clause (iii) the following:
                              ``(iv) a retirement income account described
                          in section 403(b)(9).''.

        (b) <<NOTE: 26 USC 514 note.>> Effective Date.--The amendment made
    by subsection (a) shall apply to taxable years beginning on or after the
    date of enactment of this Act.

    SEC. 867. CHURCH PLAN RULE.

        (a) In General.--Paragraph (11) of section 415(b) of the Internal
    Revenue Code of 1986 is amended by adding at the end the following:
    ``Subparagraph (B) of paragraph (1) shall not apply to a plan maintained
    by an organization described in section 3121(w)(3)(A) except with
    respect to highly compensated benefits. For purposes of this paragraph,
    the term `highly compensated benefits' means any benefits accrued for an
    employee in any year on or after the first year in which such employee
    is a highly compensated employee (as defined in section 414(q)) of the
    organization described in section 3121(w)(3)(A). For purposes of
    applying paragraph (1)(B) to highly compensated benefits, all benefits
    of the employee otherwise taken into account (without regard to this
    paragraph) shall be taken into account.''.
        (b) <<NOTE: 26 USC 415 note.>> Effective Date.--The amendment made
    by this section shall apply to years beginning after December 31, 2006.

    SEC. 868. GRATUITOUS TRANSFER FOR BENEFITS OF EMPLOYEES.

        (a) In General.--Subparagraph (E) of section 664(g)(3) of the
    Internal Revenue Code of 1986 is amended by inserting ``(determined on
    the basis of fair market value of securities when allocated to
    participants)'' after ``paragraph (7)''.
        (b) <<NOTE: 26 USC 664 note.>> Effective Date.--The amendment made
    by this section shall take effect on the date of the enactment of this
    Act.

    [[Page 120 STAT. 1026]]

    TITLE IX--INCREASE IN PENSION PLAN DIVERSIFICATION AND PARTICIPATION AND
                            OTHER PENSION PROVISIONS

    SEC. 901. DEFINED CONTRIBUTION PLANS REQUIRED TO PROVIDE EMPLOYEES WITH
                FREEDOM TO INVEST THEIR PLAN ASSETS.

        (a) Amendments of Internal Revenue Code.--
                (1) Qualification requirement.--Section 401(a) of the
            Internal Revenue Code of 1986 <<NOTE: 26 USC 401.>> (relating to
            qualified pension, profit-sharing, and stock bonus plans) is
            amended by inserting after paragraph (34) the following new
            paragraph:
                ``(35) Diversification requirements for certain defined
            contribution plans.--
                        ``(A) In general.--A trust which is part of an
                    applicable defined contribution plan shall not be
                    treated as a qualified trust unless the plan meets the
                    diversification requirements of subparagraphs (B), (C),
                    and (D).
                        ``(B) Employee contributions and elective deferrals
                    invested in employer securities.--In the case of the
                    portion of an applicable individual's account
                    attributable to employee contributions and elective
                    deferrals which is invested in employer securities, a
                    plan meets the requirements of this subparagraph if the
                    applicable individual may elect to direct the plan to
                    divest any such securities and to reinvest an equivalent
                    amount in other investment options meeting the
                    requirements of subparagraph (D).
                        ``(C) Employer contributions invested in employer
                    securities.--In the case of the portion of the account
                    attributable to employer contributions other than
                    elective deferrals which is invested in employer
                    securities, a plan meets the requirements of this
                    subparagraph if each applicable individual who--
                              ``(i) is a participant who has completed at
                          least 3 years of service, or
                              ``(ii) is a beneficiary of a participant
                          described in clause (i) or of a deceased
                          participant,
                    may elect to direct the plan to divest any such
                    securities and to reinvest an equivalent amount in other
                    investment options meeting the requirements of
                    subparagraph (D).
                        ``(D) Investment options.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if the plan offers not less
                          than 3 investment options, other than employer
                          securities, to which an applicable individual may
                          direct the proceeds from the divestment of
                          employer securities pursuant to this paragraph,
                          each of which is diversified and has materially
                          different risk and return characteristics.
                              ``(ii) Treatment of certain restrictions and
                          conditions.--

    [[Page 120 STAT. 1027]]

                                        ``(I) Time for making investment
                                    choices.--A plan shall not be treated as
                                    failing to meet the requirements of this
                                    subparagraph merely because the plan
                                    limits the time for divestment and
                                    reinvestment to periodic, reasonable
                                    opportunities occurring no less
                                    frequently than quarterly.
                                        ``(II) Certain restrictions and
                                    conditions not allowed.--Except as
                                    provided in regulations, a plan shall
                                    not meet the requirements of this
                                    subparagraph if the plan imposes
                                    restrictions or conditions with respect
                                    to the investment of employer securities
                                    which are not imposed on the investment
                                    of other assets of the plan. This
                                    subclause shall not apply to any
                                    restrictions or conditions imposed by
                                    reason of the application of securities
                                    laws.
                        ``(E) Applicable defined contribution plan.--For
                    purposes of this paragraph--
                              ``(i) In general.--The term `applicable
                          defined contribution plan' means any defined
                          contribution plan which holds any publicly traded
                          employer securities.
                              ``(ii) Exception for certain esops.--Such term
                          does not include an employee stock ownership plan
                          if--
                                        ``(I) there are no contributions to
                                    such plan (or earnings thereunder) which
                                    are held within such plan and are
                                    subject to subsection (k) or (m), and
                                        ``(II) such plan is a separate plan
                                    for purposes of section 414(l) with
                                    respect to any other defined benefit
                                    plan or defined contribution plan
                                    maintained by the same employer or
                                    employers.
                              ``(iii) Exception for one participant plans.--
                          Such term does not include a one-participant
                          retirement plan.
                              ``(iv) One-participant retirement plan.--For
                          purposes of clause (iii), the term `one-
                          participant retirement plan' means a retirement
                          plan that--
                                        ``(I) on the first day of the plan
                                    year covered only one individual (or the
                                    individual and the individual's spouse)
                                    and the individual owned 100 percent of
                                    the plan sponsor (whether or not
                                    incorporated), or covered only one or
                                    more partners (or partners and their
                                    spouses) in the plan sponsor,
                                        ``(II) meets the minimum coverage
                                    requirements of section 410(b) without
                                    being combined with any other plan of
                                    the business that covers the employees
                                    of the business,
                                        ``(III) does not provide benefits to
                                    anyone except the individual (and the
                                    individual's spouse) or the partners
                                    (and their spouses),
                                        ``(IV) does not cover a business
                                    that is a member of an affiliated
                                    service group, a controlled group of
                                    corporations, or a group of businesses
                                    under common control, and

    [[Page 120 STAT. 1028]]

                                        ``(V) does not cover a business that
                                    uses the services of leased employees
                                    (within the meaning of section 414(n)).
                          For purposes of this clause, the term `partner'
                          includes a 2-percent shareholder (as defined in
                          section 1372(b)) of an S corporation.
                        ``(F) Certain plans treated as holding publicly
                    traded employer securities.--
                              ``(i) In general.--Except as provided in
                          regulations or in clause (ii), a plan holding
                          employer securities which are not publicly traded
                          employer securities shall be treated as holding
                          publicly traded employer securities if any
                          employer corporation, or any member of a
                          controlled group of corporations which includes
                          such employer corporation, has issued a class of
                          stock which is a publicly traded employer
                          security.
                              ``(ii) Exception for certain controlled groups
                          with publicly traded securities.--Clause (i) shall
                          not apply to a plan if--
                                        ``(I) no employer corporation, or
                                    parent corporation of an employer
                                    corporation, has issued any publicly
                                    traded employer security, and
                                        ``(II) no employer corporation, or
                                    parent corporation of an employer
                                    corporation, has issued any special
                                    class of stock which grants particular
                                    rights to, or bears particular risks
                                    for, the holder or issuer with respect
                                    to any corporation described in clause
                                    (i) which has issued any publicly traded
                                    employer security.
                              ``(iii) Definitions.--For purposes of this
                          subparagraph, the term--
                                        ``(I) `controlled group of
                                    corporations' has the meaning given such
                                    term by section 1563(a), except that `50
                                    percent' shall be substituted for `80
                                    percent' each place it appears,
                                        ``(II) `employer corporation' means
                                    a corporation which is an employer
                                    maintaining the plan, and
                                        ``(III) `parent corporation' has the
                                    meaning given such term by section
                                    424(e).
                        ``(G) Other definitions.--For purposes of this para-
                    graph--
                              ``(i) Applicable individual.--The term
                          `applicable individual' means--
                                        ``(I) any participant in the plan,
                                    and
                                        ``(II) any beneficiary who has an
                                    account under the plan with respect to
                                    which the beneficiary is entitled to
                                    exercise the rights of a participant.
                              ``(ii) Elective deferral.--The term `elective
                          deferral' means an employer contribution described
                          in section 402(g)(3)(A).
                              ``(iii) Employer security.--The term `employer
                          security' has the meaning given such term by
                          section 407(d)(1) of the Employee Retirement
                          Income Security Act of 1974.

    [[Page 120 STAT. 1029]]

                              ``(iv) Employee stock ownership plan.--The
                          term `employee stock ownership plan' has the
                          meaning given such term by section 4975(e)(7).
                              ``(v) Publicly traded employer securities.--
                          The term `publicly traded employer securities'
                          means employer securities which are readily
                          tradable on an established securities market.
                              ``(vi) Year of service.--The term `year of
                          service' has the meaning given such term by
                          section 411(a)(5).
                        ``(H) Transition rule for securities attributable to
                    employer contributions.--
                              ``(i) Rules phased in over 3 years.--
                                        ``(I) <<NOTE: Applicability.>> In
                                    general.--In the case of the portion of
                                    an account to which subparagraph (C)
                                    applies and which consists of employer
                                    securities acquired in a plan year
                                    beginning before January 1, 2007,
                                    subparagraph (C) shall only apply to the
                                    applicable percentage of such
                                    securities. This subparagraph shall be
                                    applied separately with respect to each
                                    class of securities.
                                        ``(II) Exception for certain
                                    participants aged 55 or over.--Subclause
                                    (I) shall not apply to an applicable
                                    individual who is a participant who has
                                    attained age 55 and completed at least 3
                                    years of service before the first plan
                                    year beginning after December 31, 2005.
                              ``(ii) Applicable percentage.--For purposes of
                          clause (i), the applicable percentage shall be
                          determined as follows:

                  ``Plan year to wThe applicable............................
                    subparagraph (percentage is:............................
        applies:

                          1st.........................................   33
                          2d..........................................   66
                          3d and following...........................100.''.

                (2) Conforming amendments.--
                        (A) Section 401(a)(28)(B) of such Code <<NOTE: 26
                    USC 401.>> (relating to additional requirements relating
                    to employee stock ownership plans) is amended by adding
                    at the end the following new clause:
                              ``(v) Exception.--This subparagraph shall not
                          apply to an applicable defined contribution plan
                          (as defined in paragraph (35)(E)).''.
                        (B) Section 409(h)(7) of such Code is amended by
                    inserting ``or subparagraph (B) or (C) of section
                    401(a)(35)'' before the period at the end.
                        (C) Section 4980(c)(3)(A) of such Code is amended by
                    striking ``if--'' and all that follows and inserting
                    ``if the requirements of subparagraphs (B), (C), and (D)
                    are met.''.

        (b) Amendments of ERISA.--
                (1) In general.--Section 204 of the Employee Retirement
            Income Security Act of 1974 (29 U.S.C. 1054) is amended by
            redesignating subsection (j) as subsection (k) and by inserting
            after subsection (i) the following new subsection:

        ``(j) Diversification Requirements for Certain Individual Account
    Plans.--

    [[Page 120 STAT. 1030]]

                ``(1) In general.--An applicable individual account plan
            shall meet the diversification requirements of paragraphs (2),
            (3), and (4).
                ``(2) Employee contributions and elective deferrals invested
            in employer securities.--In the case of the portion of an
            applicable individual's account attributable to employee
            contributions and elective deferrals which is invested in
            employer securities, a plan meets the requirements of this
            paragraph if the applicable individual may elect to direct the
            plan to divest any such securities and to reinvest an equivalent
            amount in other investment options meeting the requirements of
            paragraph (4).
                ``(3) Employer contributions invested in employer
            securities.--In the case of the portion of the account
            attributable to employer contributions other than elective
            deferrals which is invested in employer securities, a plan meets
            the requirements of this paragraph if each applicable individual
            who--
                        ``(A) is a participant who has completed at least 3
                    years of service, or
                        ``(B) is a beneficiary of a participant described in
                    subparagraph (A) or of a deceased participant,
            may elect to direct the plan to divest any such securities and
            to reinvest an equivalent amount in other investment options
            meeting the requirements of paragraph (4).
                ``(4) Investment options.--
                        ``(A) In general.--The requirements of this
                    paragraph are met if the plan offers not less than 3
                    investment options, other than employer securities, to
                    which an applicable individual may direct the proceeds
                    from the divestment of employer securities pursuant to
                    this subsection, each of which is diversified and has
                    materially different risk and return characteristics.
                        ``(B) Treatment of certain restrictions and
                    conditions.--
                              ``(i) Time for making investment choices.--A
                          plan shall not be treated as failing to meet the
                          requirements of this paragraph merely because the
                          plan limits the time for divestment and
                          reinvestment to periodic, reasonable opportunities
                          occurring no less frequently than quarterly.
                              ``(ii) Certain restrictions and conditions not
                          allowed.--Except as provided in regulations, a
                          plan shall not meet the requirements of this
                          paragraph if the plan imposes restrictions or
                          conditions with respect to the investment of
                          employer securities which are not imposed on the
                          investment of other assets of the plan. This
                          subparagraph shall not apply to any restrictions
                          or conditions imposed by reason of the application
                          of securities laws.
                ``(5) Applicable individual account plan.--For purposes of
            this subsection--
                        ``(A) In general.--The term `applicable individual
                    account plan' means any individual account plan (as
                    defined in section 3(34)) which holds any publicly
                    traded employer securities.

    [[Page 120 STAT. 1031]]

                        ``(B) Exception for certain esops.--Such term does
                    not include an employee stock ownership plan if--
                              ``(i) there are no contributions to such plan
                          (or earnings thereunder) which are held within
                          such plan and are subject to subsection (k) or (m)
                          of section 401 of the Internal Revenue Code of
                          1986, and
                              ``(ii) such plan is a separate plan (for
                          purposes of section 414(l) of such Code) with
                          respect to any other defined benefit plan or
                          individual account plan maintained by the same
                          employer or employers.
                        ``(C) Exception for one participant plans.--Such
                    term shall not include a one-participant retirement plan
                    (as defined in section 101(i)(8)(B)).
                        ``(D) Certain plans treated as holding publicly
                    traded employer securities.--
                              ``(i) In general.--Except as provided in
                          regulations or in clause (ii), a plan holding
                          employer securities which are not publicly traded
                          employer securities shall be treated as holding
                          publicly traded employer securities if any
                          employer corporation, or any member of a
                          controlled group of corporations which includes
                          such employer corporation, has issued a class of
                          stock which is a publicly traded employer
                          security.
                              ``(ii) Exception for certain controlled groups
                          with publicly traded securities.--Clause (i) shall
                          not apply to a plan if--
                                        ``(I) no employer corporation, or
                                    parent corporation of an employer
                                    corporation, has issued any publicly
                                    traded employer security, and
                                        ``(II) no employer corporation, or
                                    parent corporation of an employer
                                    corporation, has issued any special
                                    class of stock which grants particular
                                    rights to, or bears particular risks
                                    for, the holder or issuer with respect
                                    to any corporation described in clause
                                    (i) which has issued any publicly traded
                                    employer security.
                              ``(iii) Definitions.--For purposes of this
                          subparagraph, the term--
                                        ``(I) `controlled group of
                                    corporations' has the meaning given such
                                    term by section 1563(a) of the Internal
                                    Revenue Code of 1986, except that `50
                                    percent' shall be substituted for `80
                                    percent' each place it appears,
                                        ``(II) `employer corporation' means
                                    a corporation which is an employer
                                    maintaining the plan, and
                                        ``(III) `parent corporation' has the
                                    meaning given such term by section
                                    424(e) of such Code.
                ``(6) Other definitions.--For purposes of this paragraph--
                        ``(A) Applicable individual.--The term `applicable
                    individual' means--
                              ``(i) any participant in the plan, and
                              ``(ii) any beneficiary who has an account
                          under the plan with respect to which the
                          beneficiary is entitled to exercise the rights of
                          a participant.

    [[Page 120 STAT. 1032]]

                        ``(B) Elective deferral.--The term `elective
                    deferral' means an employer contribution described in
                    section 402(g)(3)(A) of the Internal Revenue Code of
                    1986.
                        ``(C) Employer security.--The term `employer
                    security' has the meaning given such term by section
                    407(d)(1).
                        ``(D) Employee stock ownership plan.--The term
                    `employee stock ownership plan' has the meaning given
                    such term by section 4975(e)(7) of such Code.
                        ``(E) Publicly traded employer securities.--The term
                    `publicly traded employer securities' means employer
                    securities which are readily tradable on an established
                    securities market.
                        ``(F) Year of service.--The term `year of service'
                    has the meaning given such term by section 203(b)(2).
                ``(7) Transition rule for securities attributable to
            employer contributions.--
                        ``(A) Rules phased in over 3 years.--
                              ``(i) <<NOTE: Applicability.>> In general.--In
                          the case of the portion of an account to which
                          paragraph (3) applies and which consists of
                          employer securities acquired in a plan year
                          beginning before January 1, 2007, paragraph (3)
                          shall only apply to the applicable percentage of
                          such securities. This subparagraph shall be
                          applied separately with respect to each class of
                          securities.
                              ``(ii) Exception for certain participants aged
                          55 or over.--Clause (i) shall not apply to an
                          applicable individual who is a participant who has
                          attained age 55 and completed at least 3 years of
                          service before the first plan year beginning after
                          December 31, 2005.
                        ``(B) Applicable percentage.--For purposes of
                    subparagraph (A), the applicable percentage shall be
                    determined as follows:

              ``Plan year to whichThe applicable............................
                paragraph (3) applpercentage is:............................

                      1st.............................................   33
                      2d..............................................   66
                      3d.............................................100.''.

                (2) Conforming amendment.--Section 407(b)(3) of such Act (29
            U.S.C. 1107(b)(3)) is amended by adding at the end the
            following:
                ``(D) For diversification requirements for qualifying
            employer securities held in certain individual account plans,
            see section 204(j).''.

        (c) <<NOTE: 26 USC 401 note.>> Effective Dates.--
                (1) In general.--Except as provided in paragraphs (2) and
            (3), the amendments made by this section shall apply to plan
            years beginning after December 31, 2006.
                (2) <<NOTE: Applicability.>> Special rule for collectively
            bargained agreements.--In the case of a plan maintained pursuant
            to 1 or more collective bargaining agreements between employee
            representatives and 1 or more employers ratified on or before
            the date of the enactment of this Act, paragraph (1) shall be
            applied to benefits pursuant to, and individuals covered by, any
            such agreement by substituting for ``December 31, 2006'' the
            earlier of--
                        (A) the later of--

    [[Page 120 STAT. 1033]]

                              (i) December 31, 2007, or
                              (ii) the date on which the last of such
                          collective bargaining agreements terminates
                          (determined without regard to any extension
                          thereof after such date of enactment), or
                        (B) December 31, 2008.
                (3) Special rule for certain employer securities held in an
            esop.--
                        (A) In general.--In the case of employer securities
                    to which this paragraph applies, the amendments made by
                    this section shall apply to plan years beginning after
                    the earlier of--
                              (i) December 31, 2007, or
                              (ii) the first date on which the fair market
                          value of such securities exceeds the guaranteed
                          minimum value described in subparagraph (B)(ii).
                        (B) Applicable securities.--This paragraph shall
                    apply to employer securities which are attributable to
                    employer contributions other than elective deferrals,
                    and which, on September 17, 2003--
                              (i) consist of preferred stock, and
                              (ii) are within an employee stock ownership
                          plan (as defined in section 4975(e)(7) of the
                          Internal Revenue Code of 1986), the terms of which
                          provide that the value of the securities cannot be
                          less than the guaranteed minimum value specified
                          by the plan on such date.
                        (C) Coordination with transition rule.--In applying
                    section 401(a)(35)(H) of the Internal Revenue Code of
                    1986 and section 204(j)(7) of the Employee Retirement
                    Income Security Act of 1974 (as added by this section)
                    to employer securities to which this paragraph applies,
                    the applicable percentage shall be determined without
                    regard to this paragraph.

    SEC. 902. INCREASING PARTICIPATION THROUGH AUTOMATIC CONTRIBUTION
                ARRANGEMENTS.

        (a) In General.--Section 401(k) of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 401.>> (relating to cash or deferred arrangement) is
    amended by adding at the end the following new paragraph:
                ``(13) Alternative method for automatic contribution
            arrangements to meet nondiscrimination requirements.--
                        ``(A) In general.--A qualified automatic
                    contribution arrangement shall be treated as meeting the
                    requirements of paragraph (3)(A)(ii).
                        ``(B) Qualified automatic contribution
                    arrangement.--For purposes of this paragraph, the term
                    `qualified automatic contribution arrangement' means any
                    cash or deferred arrangement which meets the
                    requirements of subparagraphs (C) through (E).
                        ``(C) Automatic deferral.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if, under the arrangement,
                          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 a qualified percentage of
                          compensation.

    [[Page 120 STAT. 1034]]

                              ``(ii) Election out.--The election treated as
                          having been made under clause (i) shall cease to
                          apply with respect to any employee if such
                          employee makes an affirmative election--
                                        ``(I) to not have such contributions
                                    made, or
                                        ``(II) to make elective
                                    contributions at a level specified in
                                    such affirmative election.
                              ``(iii) Qualified percentage.--For purposes of
                          this subparagraph, the term `qualified percentage'
                          means, with respect to any employee, any
                          percentage determined under the arrangement if
                          such percentage is applied uniformly, does not
                          exceed 10 percent, and is at least--
                                        ``(I) 3 percent during the period
                                    ending on the last day of the first plan
                                    year which begins after the date on
                                    which the first elective contribution
                                    described in clause (i) is made with
                                    respect to such employee,
                                        ``(II) 4 percent during the first
                                    plan year following the plan year
                                    described in subclause (I),
                                        ``(III) 5 percent during the second
                                    plan year following the plan year
                                    described in subclause (I), and
                                        ``(IV) 6 percent during any
                                    subsequent plan year.
                              ``(iv) Automatic deferral for current
                          employees not required.--Clause (i) may be applied
                          without taking into account any employee who--
                                        ``(I) was eligible to participate in
                                    the arrangement (or a predecessor
                                    arrangement) immediately before the date
                                    on which such arrangement becomes a
                                    qualified automatic contribution
                                    arrangement (determined after
                                    application of this clause), and
                                        ``(II) had an election in effect on
                                    such date either to participate in the
                                    arrangement or to not participate in the
                                    arrangement.
                        ``(D) Matching or nonelective contributions.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if, under the arrangement,
                          the employer--
                                        ``(I) makes matching contributions
                                    on behalf of each employee who is not a
                                    highly compensated employee in an amount
                                    equal to the sum of 100 percent of the
                                    elective contributions of the employee
                                    to the extent that such contributions do
                                    not exceed 1 percent of compensation
                                    plus 50 percent of so much of such
                                    compensation as exceeds 1 percent but
                                    does not exceed 6 percent of
                                    compensation, or
                                        ``(II) 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

    [[Page 120 STAT. 1035]]

                                    arrangement in an amount equal to at
                                    least 3 percent of the employee's
                                    compensation.
                              ``(ii) Application of rules for matching
                          contributions.--The rules of clauses (ii) and
                          (iii) of paragraph (12)(B) shall apply for
                          purposes of clause (i)(I).
                              ``(iii) Withdrawal and vesting restrictions.--
                          An arrangement shall not be treated as meeting the
                          requirements of clause (i) unless, with respect to
                          employer contributions (including matching
                          contributions) taken into account in determining
                          whether the requirements of clause (i) are met--
                                        ``(I) any employee who has completed
                                    at least 2 years of service (within the
                                    meaning of section 411(a)) has a
                                    nonforfeitable right to 100 percent of
                                    the employee's accrued benefit derived
                                    from such employer contributions, and
                                        ``(II) the requirements of
                                    subparagraph (B) of paragraph (2) are
                                    met with respect to all such employer
                                    contributions.
                              ``(iv) Application of certain other rules.--
                          The rules of subparagraphs (E)(ii) and (F) of
                          paragraph (12) shall apply for purposes of
                          subclauses (I) and (II) of clause (i).
                        ``(E) Notice requirements.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if, within a reasonable
                          period before each plan year, each employee
                          eligible to participate in the arrangement for
                          such year receives written notice of the
                          employee's rights and obligations under the
                          arrangement which--
                                        ``(I) is sufficiently accurate and
                                    comprehensive to apprise the employee of
                                    such rights and obligations, and
                                        ``(II) is written in a manner
                                    calculated to be understood by the
                                    average employee to whom the arrangement
                                    applies.
                              ``(ii) Timing and content requirements.--A
                          notice shall not be treated as meeting the
                          requirements of clause (i) with respect to an
                          employee unless--
                                        ``(I) the notice explains 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),
                                        ``(II) in the case of an arrangement
                                    under which the employee may elect among
                                    2 or more investment options, the notice
                                    explains how contributions made under
                                    the arrangement will be invested in the
                                    absence of any investment election by
                                    the employee, and
                                        ``(III) the employee has a
                                    reasonable period of time after receipt
                                    of the notice described in subclauses
                                    (I) and (II) and before the first
                                    elective contribution is made to make
                                    either such election.''.

        (b) Matching Contributions.--Section 401(m) of such <<NOTE: 26 USC
    401.>> Code (relating to nondiscrimination test for matching
    contributions and employee contributions) is amended by redesignating
    paragraph

    [[Page 120 STAT. 1036]]

    (12) as paragraph (13) and by inserting after paragraph (11) the
    following new paragraph:
                ``(12) Alternative method for automatic contribution
            arrangements.--A defined contribution plan shall be treated as
            meeting the requirements of paragraph (2) with respect to
            matching contributions if the plan--
                        ``(A) is a qualified automatic contribution
                    arrangement (as defined in subsection (k)(13)), and
                        ``(B) meets the requirements of paragraph
                    (11)(B).''.

        (c) Exclusion From Definition of Top-Heavy Plans.--
                (1) Elective contribution rule.--Clause (i) of section
            416(g)(4)(H) of such Code <<NOTE: 26 USC 416.>> is amended by
            inserting ``or 401(k)(13)'' after ``section 401(k)(12)''.
                (2) Matching contribution rule.--Clause (ii) of section
            416(g)(4)(H) of such Code is amended by inserting ``or
            401(m)(12)'' after ``section 401(m)(11)''.

        (d) Treatment of Withdrawals of Contributions During First 90
    Days.--
                (1) In general.--Section 414 of the Internal Revenue Code of
            1986 is amended by adding at the end the following new
            subsection:

        ``(w) Special Rules for Certain Withdrawals From Eligible Automatic
    Contribution Arrangements.--
                ``(1) In general.--If an eligible automatic contribution
            arrangement allows an employee to elect to make permissible
            withdrawals--
                        ``(A) 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,
                        ``(B) no tax shall be imposed under section 72(t)
                    with respect to the distribution, and
                        ``(C) the arrangement shall not be treated as
                    violating any restriction on distributions under this
                    title solely by reason of allowing the withdrawal.
            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.
                ``(2) Permissible withdrawal.--For purposes of this sub-
            section--
                        ``(A) In general.--The term `permissible withdrawal'
                    means any withdrawal from an eligible automatic
                    contribution arrangement meeting the requirements of
                    this paragraph which--
                              ``(i) is made pursuant to an election by an
                          employee, and
                              ``(ii) consists of elective contributions
                          described in paragraph (3)(B) (and earnings
                          attributable thereto).
                        ``(B) Time for making election.--Subparagraph (A)
                    shall not apply to an election by an employee unless the
                    election is made no later than the date which is 90 days
                    after the date of the first elective contribution with
                    respect to the employee under the arrangement.
                        ``(C) Amount of distribution.--Subparagraph (A)
                    shall not apply to any election by an employee unless
                    the amount of any distribution by reason of the election

    [[Page 120 STAT. 1037]]

                    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).
                ``(3) Eligible automatic contribution arrangement.--For
            purposes of this subsection, the term `eligible automatic
            contribution arrangement' means an arrangement under an
            applicable employer plan--
                        ``(A) 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,
                        ``(B) 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),
                        ``(C) under which, in the absence of an investment
                    election by the participant, contributions described in
                    subparagraph (B) are invested in accordance with
                    regulations prescribed by the Secretary of Labor under
                    section 404(c)(5) of the Employee Retirement Income
                    Security Act of 1974, and
                        ``(D) which meets the requirements of paragraph (4).
                ``(4) Notice requirements.--
                        ``(A) In general.--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--
                              ``(i) is sufficiently accurate and
                          comprehensive to apprise the employee of such
                          rights and obligations, and
                              ``(ii) is written in a manner calculated to be
                          understood by the average employee to whom the
                          arrangement applies.
                        ``(B) Time and form of notice.--A notice shall not
                    be treated as meeting the requirements of subparagraph
                    (A) with respect to an employee unless--
                              ``(i) the notice includes an explanation of
                          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),
                              ``(ii) 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
                              ``(iii) the notice explains how contributions
                          made under the arrangement will be invested in the
                          absence of any investment election by the
                          employee.

    [[Page 120 STAT. 1038]]

                ``(5) Applicable employer plan.--For purposes of this
            subsection, the term `applicable employer plan' means--
                        ``(A) an employees' trust described in section
                    401(a) which is exempt from tax under section 501(a),
                        ``(B) a plan under which amounts are contributed by
                    an individual's employer for an annuity contract
                    described in section 403(b), and
                        ``(C) an eligible deferred compensation plan
                    described in section 457(b) which is maintained by an
                    eligible employer described in section 457(e)(1)(A).
                ``(6) Special rule.--A withdrawal described in paragraph (1)
            (subject to the limitation of paragraph (2)(C)) shall not be
            taken into account for purposes of section 401(k)(3).''.
                (2) Vesting conforming amendments.--
                        (A) Section 411(a)(3)(G) of such Code <<NOTE: 26 USC
                    411.>> is amended by inserting ``an erroneous automatic
                    contribution under section 414(w),'' after
                    ``402(g)(2)(A),''.
                        (B) The heading of section 411(a)(3)(G) of such Code
                    is amended by inserting ``or erroneous automatic
                    contribution'' before the period.
                        (C) Section 401(k)(8)(E) of such Code is amended by
                    inserting ``an erroneous automatic contribution under
                    section 414(w),'' after ``402(g)(2)(A),''.
                        (D) The heading of section 401(k)(8)(E) of such Code
                    is amended by inserting ``or erroneous automatic
                    contribution'' before the period.
                        (E) Section 203(a)(3)(F) of the Employee Retirement
                    Income Security Act of 1974 (29 U.S.C. 1053(a)(3)(F)) is
                    amended by inserting ``an erroneous automatic
                    contribution under section 414(w) of such Code,'' after
                    ``402(g)(2)(A) of such Code,''.

        (e) Excess Contributions.--
                (1) Expansion of corrective distribution period for
            automatic contribution arrangements.--Subsection (f) of section
            4979 of the Internal Revenue Code of 1986 is amended--
                        (A) by inserting ``(6 months in the case of an
                    excess contribution or excess aggregate contribution to
                    an eligible automatic contribution arrangement (as
                    defined in section 414(w)(3)))'' after ``2\1/2\ months''
                    in paragraph (1), and
                        (B) by striking ``2\1/2\ Months of'' in the heading
                    and inserting ``Specified Period After''.
                (2) Year of inclusion.--Paragraph (2) of section 4979(f) of
            such Code is amended to read as follows:
                ``(2) Year of inclusion.--Any amount distributed as provided
            in paragraph (1) shall be treated as earned and received by the
            recipient in the recipient's taxable year in which such
            distributions were made.''.
                (3) Simplification of allocable earnings.--
                        (A) Section 4979.--Paragraph (1) of section 4979(f)
                    of such Code is amended by adding ``through the end of
                    the plan year for which the contribution was made''
                    after ``thereto''.
                        (B) Section 401(k) and 401(m).--
                              (i) Clause (i) of section 401(k)(8)(A) of such
                          Code is amended by adding ``through the end of
                          such year'' after ``such contributions''.

    [[Page 120 STAT. 1039]]

                              (ii) Subparagraph (A) of section 401(m)(6) of
                          such Code <<NOTE: 26 USC 401.>> is amended by
                          adding ``through the end of such year'' after ``to
                          such contributions''.

        (f) Preemption of Conflicting State Regulation.--
                (1) In general.--Section 514 of the Employee Retirement
            Income Security Act of 1974 (29 U.S.C. 1144) is amended by
            adding at the end the following new subsection:

        ``(e)(1) Notwithstanding any other provision of this section, this
    title shall supersede any law of a State which would directly or
    indirectly prohibit or restrict the inclusion in any plan of an
    automatic contribution arrangement. The Secretary may prescribe
    regulations which would establish minimum standards that such an
    arrangement would be required to satisfy in order for this subsection to
    apply in the case of such arrangement.
        ``(2) For purposes of this subsection, the term `automatic
    contribution arrangement' means an arrangement--
                ``(A) under which a participant may elect to have the plan
            sponsor make payments as contributions under the plan on behalf
            of the participant, or to the participant directly in cash,
                ``(B) under which a participant is treated as having elected
            to have the plan sponsor 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), and
                ``(C) under which such contributions are invested in
            accordance with regulations prescribed by the Secretary under
            section 404(c)(5).

        ``(3)(A) The plan administrator of an automatic contribution
    arrangement shall, within a reasonable period before such plan year,
    provide to each participant to whom the arrangement applies for such
    plan year notice of the participant's rights and obligations under the
    arrangement which--
                ``(i) is sufficiently accurate and comprehensive to apprise
            the participant of such rights and obligations, and
                ``(ii) is written in a manner calculated to be understood by
            the average participant to whom the arrangement applies.

        ``(B) A notice shall not be treated as meeting the requirements of
    subparagraph (A) with respect to a participant unless--
                ``(i) the notice includes an explanation of the
            participant's right under the arrangement not to have elective
            contributions made on the participant's behalf (or to elect to
            have such contributions made at a different percentage),
                ``(ii) the participant 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
                ``(iii) the notice explains how contributions made under the
            arrangement will be invested in the absence of any investment
            election by the participant.''.
                (2) Enforcement.--Section 502(c)(4) of such Act (29 U.S.C.
            1132(c)(4)) is amended by striking ``or section
            302(b)(7)(F)(vi)'' inserting ``, section 302(b)(7)(F)(vi), or
            section 514(e)(3)''.

        (g) <<NOTE: 26 USC 401 note.>> Effective Date.--The amendments made
    by this section shall apply to plan years beginning after December 31,
    2007, except that the amendments made by subsection (f) shall take
    effect on the date of the enactment of this Act.

    [[Page 120 STAT. 1040]]

    SEC. 903. TREATMENT OF ELIGIBLE COMBINED DEFINED BENEFIT PLANS AND
                QUALIFIED CASH OR DEFERRED ARRANGEMENTS.

        (a) Amendments of Internal Revenue Code.--Section 414 of the
    Internal Revenue Code of 1986, as amended by this <<NOTE: 26 USC
    414.>> Act, is amended by adding at the end the following new
    subsection:

        ``(x) Special Rules for Eligible Combined Defined Benefit Plans and
    Qualified Cash or Deferred Arrangements.--
                ``(1) <<NOTE: Applicability.>> General rule.--Except as
            provided in this subsection, the requirements of this title
            shall be applied to any defined benefit plan or applicable
            defined contribution plan which are part of an eligible combined
            plan in the same manner as if each such plan were not a part of
            the eligible combined plan.
                ``(2) Eligible combined plan.--For purposes of this sub-
            section--
                        ``(A) In general.--The term `eligible combined plan'
                    means a plan--
                              ``(i) which is maintained by an employer
                          which, at the time the plan is established, is a
                          small employer,
                              ``(ii) which consists of a defined benefit
                          plan and an applicable defined contribution plan,
                              ``(iii) the assets of which are held in a
                          single trust forming part of the plan and are
                          clearly identified and allocated to the defined
                          benefit plan and the applicable defined
                          contribution plan to the extent necessary for the
                          separate application of this title under paragraph
                          (1), and
                              ``(iv) with respect to which the benefit,
                          contribution, vesting, and nondiscrimination
                          requirements of subparagraphs (B), (C), (D), (E),
                          and (F) are met.
                    For purposes of this subparagraph, the term `small
                    employer' has the meaning given such term by section
                    4980D(d)(2), except that such section shall be applied
                    by substituting `500' for `50' each place it appears.
                        ``(B) Benefit requirements.--
                              ``(i) In general.--The benefit requirements of
                          this subparagraph are met with respect to the
                          defined benefit plan forming part of the eligible
                          combined plan if the accrued benefit of each
                          participant derived from employer contributions,
                          when expressed as an annual retirement benefit, is
                          not less than the applicable percentage of the
                          participant's final average pay. For purposes of
                          this clause, final average pay shall be determined
                          using the period of consecutive years (not
                          exceeding 5) during which the participant had the
                          greatest aggregate compensation from the employer.
                              ``(ii) Applicable percentage.--For purposes of
                          clause (i), the applicable percentage is the
                          lesser of--
                                        ``(I) 1 percent multiplied by the
                                    number of years of service with the
                                    employer, or
                                        ``(II) 20 percent.
                              ``(iii) Special rule for applicable defined
                          benefit plans.--If the defined benefit plan under
                          clause (i) is an applicable defined benefit plan
                          as defined in section 411(a)(13)(B) which meets
                          the interest credit requirements of section
                          411(b)(5)(B)(i), the plan shall

    [[Page 120 STAT. 1041]]

                          be treated as meeting the requirements of clause
                          (i) with respect to any plan year if each
                          participant receives a pay credit for the year
                          which is not less than the percentage of
                          compensation determined in accordance with the
                          following table:

                  ``If the partici .........................................
        as of the
                    beginning of t The percentage is--......................
        is--

                          30 or less..................................    2
                          Over 30 but less than 40....................    4
                          40 or over but less than 50.................    6
                          50 or over..................................    8.

                              ``(iv) Years of service.--For purposes of this
                          subparagraph, years of service shall be determined
                          under the rules of paragraphs (4), (5), and (6) of
                          section 411(a), except that the plan may not
                          disregard any year of service because of a
                          participant making, or failing to make, any
                          elective deferral with respect to the qualified
                          cash or deferred arrangement to which subparagraph
                          (C) applies.
                        ``(C) Contribution requirements.--
                              ``(i) In general.--The contribution
                          requirements of this subparagraph with respect to
                          any applicable defined contribution plan forming
                          part of an eligible combined plan are met if--
                                        ``(I) the qualified cash or deferred
                                    arrangement included in such plan
                                    constitutes an automatic contribution
                                    arrangement, and
                                        ``(II) the employer is required to
                                    make matching contributions on behalf of
                                    each employee eligible to participate in
                                    the arrangement in an amount equal to 50
                                    percent of the elective contributions of
                                    the employee to the extent such elective
                                    contributions do not exceed 4 percent of
                                    compensation.
                          Rules <<NOTE: Applicability.>> similar to the
                          rules of clauses (ii) and (iii) of section
                          401(k)(12)(B) shall apply for purposes of this
                          clause.
                              ``(ii) Nonelective contributions.--An
                          applicable defined contribution plan shall not be
                          treated as failing to meet the requirements of
                          clause (i) because the employer makes nonelective
                          contributions under the plan but such
                          contributions shall not be taken into account in
                          determining whether the requirements of clause
                          (i)(II) are met.
                        ``(D) Vesting requirements.--The vesting
                    requirements of this subparagraph are met if--
                              ``(i) in the case of a defined benefit plan
                          forming part of an eligible combined plan an
                          employee who has completed at least 3 years of
                          service has a nonforfeitable right to 100 percent
                          of the employee's accrued benefit under the plan
                          derived from employer contributions, and
                              ``(ii) in the case of an applicable defined
                          contribution plan forming part of eligible
                          combined plan--
                                        ``(I) an employee has a
                                    nonforfeitable right to any matching
                                    contribution made under the

    [[Page 120 STAT. 1042]]

                                    qualified cash or deferred arrangement
                                    included in such plan by an employer
                                    with respect to any elective
                                    contribution, including matching
                                    contributions in excess of the
                                    contributions required under
                                    subparagraph (C)(i)(II), and
                                        ``(II) an employee who has completed
                                    at least 3 years of service has a
                                    nonforfeitable right to 100 percent of
                                    the employee's accrued benefit derived
                                    under the arrangement from nonelective
                                    contributions of the employer.
                          For <<NOTE: Applicability.>> purposes of this
                          subparagraph, the rules of section 411 shall apply
                          to the extent not inconsistent with this
                          subparagraph.
                        ``(E) Uniform provision of contributions and
                    benefits.--In the case of a defined benefit plan or
                    applicable defined contribution plan forming part of an
                    eligible combined plan, the requirements of this
                    subparagraph are met if all contributions and benefits
                    under each such plan, and all rights and features under
                    each such plan, must be provided uniformly to all
                    participants.
                        ``(F) Requirements must be met without taking into
                    account social security and similar contributions and
                    benefits or other plans.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if the requirements of
                          clauses (ii) and (iii) are met.
                              ``(ii) Social security and similar
                          contributions.--The requirements of this clause
                          are met if--
                                        ``(I) the requirements of
                                    subparagraphs (B) and (C) are met
                                    without regard to section 401(l), and
                                        ``(II) the requirements of sections
                                    401(a)(4) and 410(b) are met with
                                    respect to both the applicable defined
                                    contribution plan and defined benefit
                                    plan forming part of an eligible
                                    combined plan without regard to section
                                    401(l).
                              ``(iii) Other plans and arrangements.--The
                          requirements of this clause are met if the
                          applicable defined contribution plan and defined
                          benefit plan forming part of an eligible combined
                          plan meet the requirements of sections 401(a)(4)
                          and 410(b) without being combined with any other
                          plan.
                ``(3) Nondiscrimination requirements for qualified cash or
            deferred arrangement.--
                        ``(A) In general.--A qualified cash or deferred
                    arrangement which is included in an applicable defined
                    contribution plan forming part of an eligible combined
                    plan shall be treated as meeting the requirements of
                    section 401(k)(3)(A)(ii) if the requirements of
                    paragraph (2)(C) are met with respect to such
                    arrangement.
                        ``(B) Matching contributions.--In applying section
                    401(m)(11) to any matching contribution with respect to
                    a contribution to which paragraph (2)(C) applies, the
                    contribution requirement of paragraph (2)(C) and the
                    notice requirements of paragraph (5)(B) shall be
                    substituted for the requirements otherwise applicable
                    under clauses (i) and (ii) of section 401(m)(11)(A).

    [[Page 120 STAT. 1043]]

                ``(4) Satisfaction of top-heavy rules.--A defined benefit
            plan and applicable defined contribution plan forming part of an
            eligible combined plan for any plan year shall be treated as
            meeting the requirements of section 416 for the plan year.
                ``(5) Automatic contribution arrangement.--For purposes of
            this subsection--
                        ``(A) In general.--A qualified cash or deferred
                    arrangement shall be treated as an automatic
                    contribution arrangement if the arrangement--
                              ``(i) provides that 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 4 percent of
                          the employee's compensation unless the employee
                          specifically elects not to have such contributions
                          made or to have such contributions made at a
                          different rate, and
                              ``(ii) meets the notice requirements under
                          subparagraph (B).
                        ``(B) Notice requirements.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if the requirements of
                          clauses (ii) and (iii) are met.
                              ``(ii) Reasonable period to make election.--
                          The requirements of this clause are met if each
                          employee to whom subparagraph (A)(i) applies--
                                        ``(I) receives 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 have the
                                    contributions made at a different rate,
                                    and
                                        ``(II) has a reasonable period of
                                    time after receipt of such notice and
                                    before the first elective contribution
                                    is made to make such election.
                              ``(iii) Annual notice of rights and
                          obligations.--The requirements of this clause are
                          met if each employee eligible to participate in
                          the arrangement is, within a reasonable period
                          before any year, given notice of the employee's
                          rights and obligations under the arrangement.
                    The requirements of clauses (i) and (ii) of section
                    401(k)(12)(D) shall be met with respect to the notices
                    described in clauses (ii) and (iii) of this
                    subparagraph.
                ``(6) Coordination with other requirements.--
                        ``(A) Treatment of separate plans.--Section 414(k)
                    shall not apply to an eligible combined plan.
                        ``(B) Reporting.--An eligible combined plan shall be
                    treated as a single plan for purposes of sections 6058
                    and 6059.
                ``(7) Applicable defined contribution plan.--For purposes of
            this subsection--
                        ``(A) In general.--The term `applicable defined
                    contribution plan' means a defined contribution plan
                    which includes a qualified cash or deferred arrangement.
                        ``(B) Qualified cash or deferred arrangement.--The
                    term `qualified cash or deferred arrangement' has the
                    meaning given such term by section 401(k)(2).''.

    [[Page 120 STAT. 1044]]

        (b) Amendments to the Employee Retirement Income Security Act of
    1974.--
                (1) In general.--Section 210 of the Employee Retirement
            Income Security Act of 1974 <<NOTE: 29 USC 1060.>> is amended by
            adding at the end the following new subsection:

        ``(e) Special Rules for Eligible Combined Defined Benefit Plans and
    Qualified Cash or Deferred Arrangements.--
                ``(1) <<NOTE: Applicability.>> General rule.--Except as
            provided in this subsection, this Act shall be applied to any
            defined benefit plan or applicable individual account plan which
            are part of an eligible combined plan in the same manner as if
            each such plan were not a part of the eligible combined plan.
                ``(2) Eligible combined plan.--For purposes of this sub-
            section--
                        ``(A) In general.--The term `eligible combined plan'
                    means a plan--
                              ``(i) which is maintained by an employer
                          which, at the time the plan is established, is a
                          small employer,
                              ``(ii) which consists of a defined benefit
                          plan and an applicable individual account plan
                          each of which qualifies under section 401(a) of
                          the Internal Revenue Code of 1986,
                              ``(iii) the assets of which are held in a
                          single trust forming part of the plan and are
                          clearly identified and allocated to the defined
                          benefit plan and the applicable individual account
                          plan to the extent necessary for the separate
                          application of this Act under paragraph (1), and
                              ``(iv) with respect to which the benefit,
                          contribution, vesting, and nondiscrimination
                          requirements of subparagraphs (B), (C), (D), (E),
                          and (F) are met.
                    For <<NOTE: Applicability.>> purposes of this
                    subparagraph, the term `small employer' has the meaning
                    given such term by section 4980D(d)(2) of the Internal
                    Revenue Code of 1986, except that such section shall be
                    applied by substituting `500' for `50' each place it
                    appears.
                        ``(B) Benefit requirements.--
                              ``(i) In general.--The benefit requirements of
                          this subparagraph are met with respect to the
                          defined benefit plan forming part of the eligible
                          combined plan if the accrued benefit of each
                          participant derived from employer contributions,
                          when expressed as an annual retirement benefit, is
                          not less than the applicable percentage of the
                          participant's final average pay. For purposes of
                          this clause, final average pay shall be determined
                          using the period of consecutive years (not
                          exceeding 5) during which the participant had the
                          greatest aggregate compensation from the employer.
                              ``(ii) Applicable percentage.--For purposes of
                          clause (i), the applicable percentage is the
                          lesser of--
                                        ``(I) 1 percent multiplied by the
                                    number of years of service with the
                                    employer, or
                                        ``(II) 20 percent.
                              ``(iii) Special rule for applicable defined
                          benefit plans.--If the defined benefit plan under
                          clause (i) is an applicable defined benefit plan
                          as defined in section 203(f)(3)(B) which meets the
                          interest credit

    [[Page 120 STAT. 1045]]

                          requirements of section 204(b)(5)(B)(i), the plan
                          shall be treated as meeting the requirements of
                          clause (i) with respect to any plan year if each
                          participant receives pay credit for the year which
                          is not less than the percentage of compensation
                          determined in accordance with the following table:

                  ``If the partici .........................................
        as of the
                    beginning of tThe percentage is--.......................
        is--

                          30 or less..................................    2
                          Over 30 but less than 40....................    4
                          40 or over but less than 50.................    6
                          50 or over..................................    8.

                              ``(iv) Years of service.--For purposes of this
                          subparagraph, years of service shall be determined
                          under the rules of paragraphs (1), (2), and (3) of
                          section 203(b), except that the plan may not
                          disregard any year of service because of a
                          participant making, or failing to make, any
                          elective deferral with respect to the qualified
                          cash or deferred arrangement to which subparagraph
                          (C) applies.
                        ``(C) Contribution requirements.--
                              ``(i) In general.--The contribution
                          requirements of this subparagraph with respect to
                          any applicable individual account plan forming
                          part of an eligible combined plan are met if--
                                        ``(I) the qualified cash or deferred
                                    arrangement included in such plan
                                    constitutes an automatic contribution
                                    arrangement, and
                                        ``(II) the employer is required to
                                    make matching contributions on behalf of
                                    each employee eligible to participate in
                                    the arrangement in an amount equal to 50
                                    percent of the elective contributions of
                                    the employee to the extent such elective
                                    contributions do not exceed 4 percent of
                                    compensation.
                          Rules <<NOTE: Applicability.>> similar to the
                          rules of clauses (ii) and (iii) of section
                          401(k)(12)(B) of the Internal Revenue Code of 1986
                          shall apply for purposes of this clause.
                              ``(ii) Nonelective contributions.--An
                          applicable individual account plan shall not be
                          treated as failing to meet the requirements of
                          clause (i) because the employer makes nonelective
                          contributions under the plan but such
                          contributions shall not be taken into account in
                          determining whether the requirements of clause
                          (i)(II) are met.
                        ``(D) Vesting requirements.--The vesting
                    requirements of this subparagraph are met if--
                              ``(i) in the case of a defined benefit plan
                          forming part of an eligible combined plan an
                          employee who has completed at least 3 years of
                          service has a nonforfeitable right to 100 percent
                          of the employee's accrued benefit under the plan
                          derived from employer contributions, and
                              ``(ii) in the case of an applicable individual
                          account plan forming part of eligible combined
                          plan--

    [[Page 120 STAT. 1046]]

                                        ``(I) an employee has a
                                    nonforfeitable right to any matching
                                    contribution made under the qualified
                                    cash or deferred arrangement included in
                                    such plan by an employer with respect to
                                    any elective contribution, including
                                    matching contributions in excess of the
                                    contributions required under
                                    subparagraph (C)(i)(II), and
                                        ``(II) an employee who has completed
                                    at least 3 years of service has a
                                    nonforfeitable right to 100 percent of
                                    the employee's accrued benefit derived
                                    under the arrangement from nonelective
                                    contributions of the employer.
                          For <<NOTE: Applicability.>> purposes of this
                          subparagraph, the rules of section 203 shall apply
                          to the extent not inconsistent with this
                          subparagraph.
                        ``(E) Uniform provision of contributions and
                    benefits.--In the case of a defined benefit plan or
                    applicable individual account plan forming part of an
                    eligible combined plan, the requirements of this
                    subparagraph are met if all contributions and benefits
                    under each such plan, and all rights and features under
                    each such plan, must be provided uniformly to all
                    participants.
                        ``(F) Requirements must be met without taking into
                    account social security and similar contributions and
                    benefits or other plans.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if the requirements of
                          clauses (ii) and (iii) are met.
                              ``(ii) Social security and similar
                          contributions.--The requirements of this clause
                          are met if--
                                        ``(I) the requirements of
                                    subparagraphs (B) and (C) are met
                                    without regard to section 401(l) of the
                                    Internal Revenue Code of 1986, and
                                        ``(II) the requirements of sections
                                    401(a)(4) and 410(b) of the Internal
                                    Revenue Code of 1986 are met with
                                    respect to both the applicable defined
                                    contribution plan and defined benefit
                                    plan forming part of an eligible
                                    combined plan without regard to section
                                    401(l) of the Internal Revenue Code of
                                    1986.
                              ``(iii) Other plans and arrangements.--The
                          requirements of this clause are met if the
                          applicable defined contribution plan and defined
                          benefit plan forming part of an eligible combined
                          plan meet the requirements of sections 401(a)(4)
                          and 410(b) of the Internal Revenue Code of 1986
                          without being combined with any other plan.
                ``(3) Nondiscrimination requirements for qualified cash or
            deferred arrangement.--
                        ``(A) In general.--A qualified cash or deferred
                    arrangement which is included in an applicable
                    individual account plan forming part of an eligible
                    combined plan shall be treated as meeting the
                    requirements of section 401(k)(3)(A)(ii) of the Internal
                    Revenue Code of 1986 if the requirements of paragraph
                    (2) are met with respect to such arrangement.

    [[Page 120 STAT. 1047]]

                        ``(B) Matching contributions.--In applying section
                    401(m)(11) of such Code to any matching contribution
                    with respect to a contribution to which paragraph (2)(C)
                    applies, the contribution requirement of paragraph
                    (2)(C) and the notice requirements of paragraph (5)(B)
                    shall be substituted for the requirements otherwise
                    applicable under clauses (i) and (ii) of section
                    401(m)(11)(A) of such Code.
                ``(4) Automatic contribution arrangement.--For purposes of
            this subsection--
                        ``(A) In general.--A qualified cash or deferred
                    arrangement shall be treated as an automatic
                    contribution arrangement if the arrangement--
                              ``(i) provides that 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 4 percent of
                          the employee's compensation unless the employee
                          specifically elects not to have such contributions
                          made or to have such contributions made at a
                          different rate, and
                              ``(ii) meets the notice requirements under
                          subparagraph (B).
                        ``(B) Notice requirements.--
                              ``(i) In general.--The requirements of this
                          subparagraph are met if the requirements of
                          clauses (ii) and (iii) are met.
                              ``(ii) Reasonable period to make election.--
                          The requirements of this clause are met if each
                          employee to whom subparagraph (A)(i) applies--
                                        ``(I) receives 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 have the
                                    contributions made at a different rate,
                                    and
                                        ``(II) has a reasonable period of
                                    time after receipt of such notice and
                                    before the first elective contribution
                                    is made to make such election.
                              ``(iii) Annual notice of rights and
                          obligations.--The requirements of this clause are
                          met if each employee eligible to participate in
                          the arrangement is, within a reasonable period
                          before any year, given notice of the employee's
                          rights and obligations under the arrangement.
                    The requirements of this subparagraph shall not be
                    treated as met unless the requirements of clauses (i)
                    and (ii) of section 401(k)(12)(D) of the Internal
                    Revenue Code of 1986 are met with respect to the notices
                    described in clauses (ii) and (iii) of this
                    subparagraph.
                ``(5) Coordination with other requirements.--
                        ``(A) Treatment of separate plans.--The except
                    clause in section 3(35) shall not apply to an eligible
                    combined plan.
                        ``(B) Reporting.--An eligible combined plan shall be
                    treated as a single plan for purposes of section 103.
                ``(6) Applicable individual account plan.--For purposes of
            this subsection--

    [[Page 120 STAT. 1048]]

                        ``(A) In general.--The term `applicable individual
                    account plan' means an individual account plan which
                    includes a qualified cash or deferred arrangement.
                        ``(B) Qualified cash or deferred arrangement.--The
                    term `qualified cash or deferred arrangement' has the
                    meaning given such term by section 401(k)(2) of the
                    Internal Revenue Code of 1986.''.
                (2) Conforming changes.--
                        (A) The heading for section 210 of such
                    Act <<NOTE: 29 USC 1060.>> is amended to read as
                    follows:

    ``SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPECIAL RULES.''.

                        (B) The table of contents in section 1 of such Act
                    is amended by striking the item relating to section 210
                    and inserting the following new item:

    ``Sec. 210. Multiple employer plans and other special rules.''.

        (c) <<NOTE: 26 USC 414 note.>> Effective Date.--The amendments made
    by this section shall apply to plan years beginning after December 31,
    2009.

    SEC. 904. FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS.

        (a) Amendments to the Internal Revenue Code of 1986.--
                (1) In general.--Paragraph (2) of section 411(a) of the
            Internal Revenue Code of 1986 <<NOTE: 26 USC 411.>> (relating to
            employer contributions) is amended to read as follows:
                ``(2) Employer contributions.--
                        ``(A) Defined benefit plans.--
                              ``(i) In general.--In the case of a defined
                          benefit plan, a plan satisfies the requirements of
                          this paragraph if it satisfies the requirements of
                          clause (ii) or (iii).
                              ``(ii) 5-year vesting.--A plan satisfies the
                          requirements of this clause if an employee who has
                          completed at least 5 years of service has a
                          nonforfeitable right to 100 percent of the
                          employee's accrued benefit derived from employer
                          contributions.
                              ``(iii) 3 to 7 year vesting.--A plan satisfies
                          the requirements of this clause if an employee has
                          a nonforfeitable right to a percentage of the
                          employee's accrued benefit derived from employer
                          contributions determined under the following
                          table:

                  ``Years of serviThe nonforfeitable........................
                                  percentage is:............................

                          3...........................................   20
                          4...........................................   40
                          5...........................................   60
                          6...........................................   80
                          7 or more...................................  100.

                        ``(B) Defined contribution plans.--
                              ``(i) In general.--In the case of a defined
                          contribution plan, a plan satisfies the
                          requirements of this paragraph if it satisfies the
                          requirements of clause (ii) or (iii).
                              ``(ii) 3-year vesting.--A plan satisfies the
                          requirements of this clause if an employee who has
                          completed at least 3 years of service has a
                          nonforfeitable right

    [[Page 120 STAT. 1049]]

                          to 100 percent of the employee's accrued benefit
                          derived from employer contributions.
                              ``(iii) 2 to 6 year vesting.--A plan satisfies
                          the requirements of this clause if an employee has
                          a nonforfeitable right to a percentage of the
                          employee's accrued benefit derived from employer
                          contributions determined under the following
                          table:

                  ``Years of serviThe nonforfeitable .......................
                                   percentage is:...........................

                          2...........................................   20
                          3...........................................   40
                          4...........................................   60
                          5...........................................   80
                          6 or more..................................100.''.

                (2) Conforming amendment.--Section 411(a) of such Code
            (relating to general rule for minimum vesting standards) is
            amended by striking paragraph (12).

        (b) Amendments to the Employee Retirement Income Security Act of
    1974.--
                (1) In general.--Paragraph (2) of section 203(a) of the
            Employee Retirement Income Security Act of 1974 (29 U.S.C.
            1053(a)(2)) is amended to read as follows:
                ``(2)(A)(i) In the case of a defined benefit plan, a plan
            satisfies the requirements of this paragraph if it satisfies the
            requirements of clause (ii) or (iii).
                ``(ii) A plan satisfies the requirements of this clause if
            an employee who has completed at least 5 years of service has a
            nonforfeitable right to 100 percent of the employee's accrued
            benefit derived from employer contributions.
                ``(iii) A plan satisfies the requirements of this clause if
            an employee has a nonforfeitable right to a percentage of the
            employee's accrued benefit derived from employer contributions
            determined under the following table:

                  ``Years of servi The nonforfeitable.......................
                                   percentage is:...........................

                          3...........................................   20
                          4...........................................   40
                          5...........................................   60
                          6...........................................   80
                          7 or more...................................  100.

                ``(B)(i) In the case of an individual account plan, a plan
            satisfies the requirements of this paragraph if it satisfies the
            requirements of clause (ii) or (iii).
                ``(ii) A plan satisfies the requirements of this clause if
            an employee who has completed at least 3 years of service has a
            nonforfeitable right to 100 percent of the employee's accrued
            benefit derived from employer contributions.
                ``(iii) A plan satisfies the requirements of this clause if
            an employee has a nonforfeitable right to a percentage of the
            employee's accrued benefit derived from employer contributions
            determined under the following table:

                  ``Years of serviThe nonforfeitable .......................
                                   percentage is:...........................

                          2...........................................   20
                          3...........................................   40
                          4...........................................   60

    [[Page 120 STAT. 1050]]

                          5...........................................   80
                          6 or more..................................100.''.

                (2) Conforming amendment.--Section 203(a) of such Act is
            amended by striking paragraph (4).

        (c) <<NOTE: 26 USC 411 note.>> Effective Dates.--
                (1) In general.--Except as provided in paragraphs (2) and
            (4), the amendments made by this section shall apply to
            contributions for plan years beginning after December 31, 2006.
                (2) Collective bargaining agreements.--In the case of a plan
            maintained pursuant to one or more collective bargaining
            agreements between employee representatives and one or more
            employers ratified before the date of the enactment of this Act,
            the amendments made by this section shall not apply to
            contributions on behalf of employees covered by any such
            agreement for plan years beginning before the earlier of--
                        (A) the later of--
                              (i) the date on which the last of such
                          collective bargaining agreements terminates
                          (determined without regard to any extension
                          thereof on or after such date of the enactment);
                          or
                              (ii) January 1, 2007; or
                        (B) January 1, 2009.
                (3) Service required.--With respect to any plan, the
            amendments made by this section shall not apply to any employee
            before the date that such employee has 1 hour of service under
            such plan in any plan year to which the amendments made by this
            section apply.
                (4) Special rule for stock ownership plans.--Notwithstanding
            paragraph (1) or (2), in the case of an employee stock ownership
            plan (as defined in section 4975(e)(7) of the Internal Revenue
            Code of 1986) which had outstanding on September 26, 2005, a
            loan incurred for the purpose of acquiring qualifying employer
            securities (as defined in section 4975(e)(8) of such Code), the
            amendments made by this section shall not apply to any plan year
            beginning before the earlier of--
                        (A) the date on which the loan is fully repaid, or
                        (B) the date on which the loan was, as of September
                    26, 2005, scheduled to be fully repaid.

    SEC. 905. DISTRIBUTIONS DURING WORKING RETIREMENT.

        (a) Amendment to the Employee Retirement Income Security Act of
    1974.--Subparagraph (A) of section 3(2) of the Employee Retirement
    Income Security Act of 1974 (29 U.S.C. 1002(2)) is amended by adding at
    the end the following new sentence: ``A distribution from a plan, fund,
    or program shall not be treated as made in a form other than retirement
    income or as a distribution prior to termination of covered employment
    solely because such distribution is made to an employee who has attained
    age 62 and who is not separated from employment at the time of such
    distribution.''.
        (b) Amendment to the Internal Revenue Code of 1986.--Subsection (a)
    of section 401 of the Internal Revenue Code of 1986 <<NOTE: 26 USC
    401.>> (as amended by this Act) is amended by inserting after paragraph
    (35) the following new paragraph:

    [[Page 120 STAT. 1051]]

                ``(36) Distributions during working retirement.--A trust
            forming part of a pension plan shall not be treated as failing
            to constitute a qualified trust under this section solely
            because the plan provides that a distribution may be made from
            such trust to an employee who has attained age 62 and who is not
            separated from employment at the time of such distribution.''.

        (c) <<NOTE: 26 USC 401 note.>> Effective Date.--The amendments made
    by this section shall apply to distributions in plan years beginning
    after December 31, 2006.

    SEC. 906. TREATMENT OF CERTAIN PENSION PLANS OF INDIAN TRIBAL
                GOVERNMENTS.

        (a) Definition of Government Plan to Include Certain Pension Plans
    of Indian Tribal Governments.--
                (1) Amendment to internal revenue code of 1986.--Section
            414(d) of the Internal Revenue Code of 1986 <<NOTE: 26 USC
            414.>> (defining governmental plan) is amended by adding at the
            end the following: ``The term `governmental plan' includes a
            plan which is established and maintained by an Indian tribal
            government (as defined in section 7701(a)(40)), a subdivision of
            an Indian tribal government (determined in accordance with
            section 7871(d)), or an agency or instrumentality of either, and
            all of the participants of which are employees of such entity
            substantially all of whose services as such an employee are in
            the performance of essential governmental functions but not in
            the performance of commercial activities (whether or not an
            essential government function).''.
                (2) Amendment to employee retirement income security act of
            1974.--
                        (A) Section 3(32) of the Employee Retirement Income
                    Security Act of 1974 (29 U.S.C. 1002(32)) is amended by
                    adding at the end the following: ``The term
                    `governmental plan' includes a plan which is established
                    and maintained by an Indian tribal government (as
                    defined in section 7701(a)(40) of the Internal Revenue
                    Code of 1986), a subdivision of an Indian tribal
                    government (determined in accordance with section
                    7871(d) of such Code), or an agency or instrumentality
                    of either, and all of the participants of which are
                    employees of such entity substantially all of whose
                    services as such an employee are in the performance of
                    essential governmental functions but not in the
                    performance of commercial activities (whether or not an
                    essential government function)''.
                        (B) Section 4021(b)(2) of such Act <<NOTE: 29 USC
                    1321.>> is amended by adding at the end the following:
                    ``or which is described in the last sentence of section
                    3(32)''.

        (b) Clarification That Tribal Governments Are Subject to the Same
    Pension Plan Rules and Regulations Applied to State and Other Local
    Governments and Their Police and Firefighters.--
                (1) Amendments to internal revenue code of 1986.--
                        (A) Police and firefighters.--Subparagraph (H)
                    section 415(b)(2) of the Internal Revenue Code
                    of <<NOTE: 26 USC 415.>> 1986 (defining participant) is
                    amended--

    [[Page 120 STAT. 1052]]

                              (i) in clause (i), by striking ``State or
                          political subdivision'' and inserting ``State,
                          Indian tribal government (as defined in section
                          7701(a)(40)), or any political subdivision''; and
                              (ii) in clause (ii)(I), by striking ``State or
                          political subdivision'' each place it appears and
                          inserting ``State, Indian tribal government (as so
                          defined), or any political subdivision''.
                        (B) State and local government plans.--
                              (i) In general.--Subparagraph (A) of section
                          415(b)(10) of such Code <<NOTE: 26 USC
                          415.>> (relating to limitation to equal accrued
                          benefit) is amended by inserting ``or a
                          governmental plan described in the last sentence
                          of section 414(d) (relating to plans of Indian
                          tribal governments),'' after ``foregoing,''.
                              (ii) Conforming amendment.--The heading of
                          paragraph (1) of section 415(b) of such Code is
                          amended by striking ``Special rule for state and''
                          and inserting ``Special rule for state, indian
                          tribal, and''.
                        (C) Government pick up contributions.--Paragraph (2)
                    of section 414(h) of such Code (relating to designation
                    by units of government) is amended by inserting ``or a
                    governmental plan described in the last sentence of
                    section 414(d) (relating to plans of Indian tribal
                    governments),'' after ``foregoing,''.
                (2) Amendments to employee retirement income security act of
            1974.--Section 4021(b) of the Employee Retirement Income
            Security Act of 1974 (29 U.S.C. 1321(b)) is amended--
                        (A) in paragraph (12), by striking ``or'' at the
                    end;
                        (B) in paragraph (13), by striking ``plan.'' and
                    inserting ``plan; or''; and
                        (C) by adding at the end the following:
                ``(14) established and maintained by an Indian tribal
            government (as defined in section 7701(a)(40) of the Internal
            Revenue Code of 1986), a subdivision of an Indian tribal
            government (determined in accordance with section 7871(d) of
            such Code), or an agency or instrumentality of either, and all
            of the participants of which are employees of such entity
            substantially all of whose services as such an employee are in
            the performance of essential governmental functions but not in
            the performance of commercial activities (whether or not an
            essential government function).''.

        (c) <<NOTE: 26 USC 414 note.>> Effective Date.--The amendments made
    by this section shall apply to any year beginning on or after the date
    of the enactment of this Act.

           TITLE X--PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION

    SEC. 1001. REGULATIONS ON TIME AND ORDER OF ISSUANCE OF DOMESTIC
                RELATIONS ORDERS.

        Not <<NOTE: Deadline.>> later than 1 year after the date of the
    enactment of this Act, the Secretary of Labor shall issue regulations
    under section 206(d)(3) of the Employee Retirement Security Act of 1974
    and

    [[Page 120 STAT. 1053]]

    section 414(p) of the Internal Revenue Code of 1986 which clarify that--
                (1) a domestic relations order otherwise meeting the
            requirements to be a qualified domestic relations order,
            including the requirements of section 206(d)(3)(D) of such Act
            and section 414(p)(3) of such Code, shall not fail to be treated
            as a qualified domestic relations order solely because--
                        (A) the order is issued after, or revises, another
                    domestic relations order or qualified domestic relations
                    order; or
                        (B) of the time at which it is issued; and
                (2) any order described in paragraph (1) shall be subject to
            the same requirements and protections which apply to qualified
            domestic relations orders, including the provisions of section
            206(d)(3)(H) of such Act and section 414(p)(7) of such Code.

    SEC. 1002. ENTITLEMENT OF DIVORCED SPOUSES TO RAILROAD RETIREMENT
                ANNUITIES INDEPENDENT OF ACTUAL ENTITLEMENT OF EMPLOYEE.

        (a) In General.--Section 2 of the Railroad Retirement Act of 1974
    (45 U.S.C. 231a) is amended--
                (1) in subsection (c)(4)(i), by striking ``(A) is entitled
            to an annuity under subsection (a)(1) and (B)''; and
                (2) in subsection (e)(5), by striking ``or divorced wife''
            the second place it appears.

        (b) <<NOTE: 45 USC 231a note.>> Effective Date.--The amendments made
    by this section shall take effect 1 year after the date of the enactment
    of this Act.

    SEC. 1003. EXTENSION OF TIER II RAILROAD RETIREMENT BENEFITS TO
                SURVIVING FORMER SPOUSES PURSUANT TO DIVORCE AGREEMENTS.

        (a) In General.--Section 5 of the Railroad Retirement Act of 1974
    (45 U.S.C. 231d) is amended by adding at the end the following:
        ``(d) Notwithstanding any other provision of law, the payment of any
    portion of an annuity computed under section 3(b) to a surviving former
    spouse in accordance with a court decree of divorce, annulment, or legal
    separation or the terms of any court-approved property settlement
    incident to any such court decree shall not be terminated upon the death
    of the individual who performed the service with respect to which such
    annuity is so computed unless such termination is otherwise required by
    the terms of such court decree.''.
        (b) <<NOTE: 45 USC 231d note.>> Effective Date.--The amendment made
    by this section shall take effect 1 year after the date of the enactment
    of this Act.

    SEC. 1004. REQUIREMENT FOR ADDITIONAL SURVIVOR ANNUITY OPTION.

        (a) Amendments to Internal Revenue Code.--
                (1) Election of survivor annuity.--Section 417(a)(1)(A) of
            the Internal Revenue Code of 1986 <<NOTE: 26 USC 417.>> is
            amended--
                        (A) in clause (i), by striking ``, and'' and
                    inserting a comma;
                        (B) by redesignating clause (ii) as clause (iii);
                    and
                        (C) by inserting after clause (i) the following:

    [[Page 120 STAT. 1054]]

                        ``(ii) if the participant elects a waiver under
                    clause (i), may elect the qualified optional survivor
                    annuity at any time during the applicable election
                    period, and''.
                (2) Definition.--Section 417 of such Code <<NOTE: 26 USC
            417.>> is amended by adding at the end the following:

        ``(g) Definition of Qualified Optional Survivor Annuity.--
                ``(1) In general.--For purposes of this section, the term
            `qualified optional survivor annuity' means an annuity--
                        ``(A) for the life of the participant with a
                    survivor annuity for the life of the spouse which is
                    equal to the applicable percentage of the amount of the
                    annuity which is payable during the joint lives of the
                    participant and the spouse, and
                        ``(B) which is the actuarial equivalent of a single
                    annuity for the life of the participant.
            Such term also includes any annuity in a form having the effect
            of an annuity described in the preceding sentence.
                ``(2) Applicable percentage.--
                        ``(A) In general.--For purposes of paragraph (1), if
                    the survivor annuity percentage--
                              ``(i) is less than 75 percent, the applicable
                          percentage is 75 percent, and
                              ``(ii) is greater than or equal to 75 percent,
                          the applicable percentage is 50 percent.
                        ``(B) Survivor annuity percentage.--For purposes of
                    subparagraph (A), the term `survivor annuity percentage'
                    means the percentage which the survivor annuity under
                    the plan's qualified joint and survivor annuity bears to
                    the annuity payable during the joint lives of the
                    participant and the spouse.''.
                (3) Notice.--Section 417(a)(3)(A)(i) of such Code is amended
            by inserting ``and of the qualified optional survivor annuity''
            after ``annuity''.

        (b) Amendments to ERISA.--
                (1) Election of survivor annuity.--Section 205(c)(1)(A) of
            the Employee Retirement Income Security Act of 1974 (29 U.S.C.
            1055(c)(1)(A)) is amended--
                        (A) in clause (i), by striking ``, and'' and
                    inserting a comma;
                        (B) by redesignating clause (ii) as clause (iii);
                    and
                        (C) by inserting after clause (i) the following:
                        ``(ii) if the participant elects a waiver under
                    clause (i), may elect the qualified optional survivor
                    annuity at any time during the applicable election
                    period, and''.
                (2) Definition.--Section 205(d) of such Act (29 U.S.C.
            1055(d)) is amended--
                        (A) by inserting ``(1)'' after ``(d)'';
                        (B) by redesignating paragraphs (1) and (2) as
                    subparagraphs (A) and (B), respectively; and
                        (C) by adding at the end the following:

        ``(2)(A) For purposes of this section, the term `qualified optional
    survivor annuity' means an annuity--
                ``(i) for the life of the participant with a survivor
            annuity for the life of the spouse which is equal to the
            applicable percentage of the amount of the annuity which is
            payable during the joint lives of the participant and the
            spouse, and

    [[Page 120 STAT. 1055]]

                ``(ii) which is the actuarial equivalent of a single annuity
            for the life of the participant.

    Such term also includes any annuity in a form having the effect of an
    annuity described in the preceding sentence.
        ``(B)(i) For purposes of subparagraph (A), if the survivor annuity
    percentage--
                ``(I) is less than 75 percent, the applicable percentage is
            75 percent, and
                ``(II) is greater than or equal to 75 percent, the
            applicable percentage is 50 percent.

        ``(ii) For purposes of clause (i), the term `survivor annuity
    percentage' means the percentage which the survivor annuity under the
    plan's qualified joint and survivor annuity bears to the annuity payable
    during the joint lives of the participant and the spouse.''.
                (3) Notice.--Section 205(c)(3)(A)(i) of such Act (29 U.S.C.
            1055(c)(3)(A)(i)) is amended by inserting ``and of the qualified
            optional survivor annuity'' after ``annuity''.

        (c) <<NOTE: 26 USC 417 note.>> Effective Dates.--
                (1) In general.--The amendments made by this section shall
            apply to plan years beginning after December 31, 2007.
                (2) Special rule for collectively bargained plans.--In the
            case of a plan maintained pursuant to 1 or more collective
            bargaining agreements between employee representatives and 1 or
            more employers ratified on or before the date of the enactment
            of this Act, the amendments made by this section shall not apply
            to plan years beginning before the earlier of--
                        (A) the later of--
                              (i) January 1, 2008, or
                              (ii) the date on which the last collective
                          bargaining agreement related to the plan
                          terminates (determined without regard to any
                          extension thereof after the date of enactment of
                          this Act), or
                        (B) January 1, 2009.

                       TITLE XI--ADMINISTRATIVE PROVISIONS

    SEC. 1101. <<NOTE: Establishment. 29 USC 1202a.>> EMPLOYEE PLANS
                COMPLIANCE RESOLUTION SYSTEM.

        (a) In General.--The Secretary of the Treasury shall have full
    authority to establish and implement the Employee Plans Compliance
    Resolution System (or any successor program) and any other employee
    plans correction policies, including the authority to waive income,
    excise, or other taxes to ensure that any tax, penalty, or sanction is
    not excessive and bears a reasonable relationship to the nature, extent,
    and severity of the failure.
        (b) Improvements.--The Secretary of the Treasury shall continue to
    update and improve the Employee Plans Compliance Resolution System (or
    any successor program), giving special attention to--
                (1) increasing the awareness and knowledge of small
            employers concerning the availability and use of the program;
                (2) taking into account special concerns and circumstances
            that small employers face with respect to compliance and
            correction of compliance failures;

    [[Page 120 STAT. 1056]]

                (3) extending the duration of the self-correction period
            under the Self-Correction Program for significant compliance
            failures;
                (4) expanding the availability to correct insignificant
            compliance failures under the Self-Correction Program during
            audit; and
                (5) assuring that any tax, penalty, or sanction that is
            imposed by reason of a compliance failure is not excessive and
            bears a reasonable relationship to the nature, extent, and
            severity of the failure.

    SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

        (a) Expansion of Period.--
                (1) Amendment of internal revenue code.--
                        (A) In general.--Section 417(a)(6)(A) of the
                    Internal Revenue Code of 1986 <<NOTE: 26 USC 417.>> is
                    amended by striking ``90-day'' and inserting ``180-
                    day''.
                        (B) Modification of regulations.--The Secretary of
                    the Treasury shall modify the regulations under sections
                    402(f), 411(a)(11), and 417 of the Internal Revenue Code
                    of 1986 by substituting ``180 days'' for ``90 days''
                    each place it appears in Treasury Regulations sections
                    1.402(f)-1, 1.411(a)-11(c), and 1.417(e)-1(b).
                (2) Amendment of erisa.--
                        (A) In general.--Section 205(c)(7)(A) of the
                    Employee Retirement Income Security Act of 1974 (29
                    U.S.C. 1055(c)(7)(A)) is amended by striking ``90-day''
                    and inserting ``180-day''.
                        (B) Modification of regulations.--The Secretary of
                    the Treasury shall modify the regulations under part 2
                    of subtitle B of title I of the Employee Retirement
                    Income Security Act of 1974 relating to sections 203(e)
                    and 205 of such Act by substituting ``180 days'' for
                    ``90 days'' each place it appears.
                (3) <<NOTE: 26 USC 417 note.>> Effective date.--The
            amendments and modifications made or required by this subsection
            shall apply to years beginning after December 31, 2006.

        (b) <<NOTE: 26 USC 417 note.>> Notification of Right To Defer.--
                (1) In general.--The Secretary of the Treasury shall modify
            the regulations under section 411(a)(11) of the Internal Revenue
            Code of 1986 and under section 205 of the Employee Retirement
            Income Security Act of 1974 to provide that the description of a
            participant's right, if any, to defer receipt of a distribution
            shall also describe the consequences of failing to defer such
            receipt.
                (2) Effective date.--
                        (A) In general.--The modifications required by
                    paragraph (1) shall apply to years beginning after
                    December 31, 2006.
                        (B) <<NOTE: Deadline.>> Reasonable notice.--A plan
                    shall not be treated as failing to meet the requirements
                    of section 411(a)(11) of such Code or section 205 of
                    such Act with respect to any description of consequences
                    described in paragraph (1) made within 90 days after the
                    Secretary of the Treasury issues the modifications
                    required by paragraph (1) if the

    [[Page 120 STAT. 1057]]

                    plan administrator makes a reasonable attempt to comply
                    with such requirements.

    SEC. 1103. <<NOTE: 26 USC 6058 note.>> REPORTING SIMPLIFICATION.

        (a) Simplified Annual Filing Requirement for Owners and Their
    Spouses.--
                (1) In general.--The Secretary of the Treasury shall modify
            the requirements for filing annual returns with respect to one-
            participant retirement plans to ensure that such plans with
            assets of $250,000 or less as of the close of the plan year need
            not file a return for that year.
                (2) One-participant retirement plan defined.--For purposes
            of this subsection, the term ``one-participant retirement plan''
            means a retirement plan with respect to which the following
            requirements are met:
                        (A) on the first day of the plan year--
                              (i) the plan covered only one individual (or
                          the individual and the individual's spouse) and
                          the individual owned 100 percent of the plan
                          sponsor (whether or not incorporated), or
                              (ii) the plan covered only one or more
                          partners (or partners and their spouses) in the
                          plan sponsor;
                        (B) the plan meets the minimum coverage requirements
                    of section 410(b) of the Internal Revenue Code of 1986
                    without being combined with any other plan of the
                    business that covers the employees of the business;
                        (C) the plan does not provide benefits to anyone
                    except the individual (and the individual's spouse) or
                    the partners (and their spouses);
                        (D) the plan does not cover a business that is a
                    member of an affiliated service group, a controlled
                    group of corporations, or a group of businesses under
                    common control; and
                        (E) the plan does not cover a business that uses the
                    services of leased employees (within the meaning of
                    section 414(n) of such Code).
            For purposes of this paragraph, the term ``partner'' includes a
            2-percent shareholder (as defined in section 1372(b) of such
            Code) of an S corporation.
                (3) Other definitions.--Terms used in paragraph (2) which
            are also used in section 414 of the Internal Revenue Code of
            1986 shall have the respective meanings given such terms by such
            section.
                (4) Effective date.--The provisions of this subsection shall
            apply to plan years beginning on or after January 1, 2007.

        (b) Simplified Annual Filing Requirement for Plans With Fewer Than
    25 Participants.--In the case of plan years beginning after December 31,
    2006, the Secretary of the Treasury and the Secretary of Labor shall
    provide for the filing of a simplified annual return for any retirement
    plan which covers less than 25 participants on the first day of a plan
    year and which meets the requirements described in subparagraphs (B),
    (D), and (E) of subsection (a)(2).

    [[Page 120 STAT. 1058]]

    SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE AND EMPLOYMENT RETENTION
                PLANS MAINTAINED BY LOCAL EDUCATIONAL AGENCIES AND OTHER
                ENTITIES.

        (a) Voluntary Early Retirement Incentive Plans.--
                (1) Treatment as plan providing severance pay.--Section
            457(e)(11) of the Internal Revenue Code of 1986 <<NOTE: 26 USC
            457.>> (relating to certain plans excluded) is amended by adding
            at the end the following new subparagraph:
                        ``(D) Certain voluntary early retirement incentive
                    plans.--
                              ``(i) In general.--If an applicable voluntary
                          early retirement incentive plan--
                                        ``(I) makes payments or supplements
                                    as an early retirement benefit, a
                                    retirement-type subsidy, or a benefit
                                    described in the last sentence of
                                    section 411(a)(9), and
                                        ``(II) such payments or supplements
                                    are made in coordination with a defined
                                    benefit plan which is described in
                                    section 401(a) and includes a trust
                                    exempt from tax under section 501(a) and
                                    which is maintained by an eligible
                                    employer described in paragraph (1)(A)
                                    or by an education association described
                                    in clause (ii)(II),
                          such applicable plan shall be treated for purposes
                          of subparagraph (A)(i) as a bona fide severance
                          pay plan with respect to such payments or
                          supplements to the extent such payments or
                          supplements could otherwise have been provided
                          under such defined benefit plan (determined as if
                          section 411 applied to such defined benefit plan).
                              ``(ii) Applicable voluntary early retirement
                          incentive plan.--For purposes of this
                          subparagraph, the term `applicable voluntary early
                          retirement incentive plan' means a voluntary early
                          retirement incentive plan maintained by--
                                        ``(I) a local educational agency (as
                                    defined in section 9101 of the
                                    Elementary and Secondary Education Act
                                    of 1965 (20 U.S.C. 7801)), or
                                        ``(II) an education association
                                    which principally represents employees
                                    of 1 or more agencies described in
                                    subclause (I) and which is described in
                                    section 501(c) (5) or (6) and exempt
                                    from tax under section 501(a).''.
                (2) Age discrimination in employment act.--Section 4(l)(1)
            of the Age Discrimination in Employment Act of 1967 (29 U.S.C.
            623(l)(1)) is amended--
                        (A) by inserting ``(A)'' after ``(1)'',
                        (B) by redesignating subparagraphs (A) and (B) as
                    clauses (i) and (ii), respectively,
                        (C) by redesignating clauses (i) and (ii) of
                    subparagraph (B) (as in effect before the amendments
                    made by subparagraph (B)) as subclauses (I) and (II),
                    respectively, and
                        (D) by adding at the end the following:
                ``(B) A voluntary early retirement incentive plan that--
                        ``(i) is maintained by--

    [[Page 120 STAT. 1059]]

                              ``(I) a local educational agency (as defined
                          in section 9101 of the Elementary and Secondary
                          Education Act of 1965 (20 U.S.C. 7801), or
                              ``(II) an education association which
                          principally represents employees of 1 or more
                          agencies described in subclause (I) and which is
                          described in section 501(c) (5) or (6) of the
                          Internal Revenue Code of 1986 and exempt from
                          taxation under section 501(a) of such Code, and
                        ``(ii) makes payments or supplements described in
                    subclauses (I) and (II) of subparagraph (A)(ii) in
                    coordination with a defined benefit plan (as so defined)
                    maintained by an eligible employer described in section
                    457(e)(1)(A) of such Code or by an education association
                    described in clause (i)(II),
            shall be treated solely for purposes of subparagraph (A)(ii) as
            if it were a part of the defined benefit plan with respect to
            such payments or supplements. Payments or supplements under such
            a voluntary early retirement incentive plan shall not constitute
            severance pay for purposes of paragraph (2).''.

        (b) Employment Retention Plans.--
                (1) In general.--Section 457(f)(2) of the Internal Revenue
            Code of 1986 <<NOTE: 26 USC 457.>> (relating to exceptions) is
            amended by striking ``and'' at the end of subparagraph (D), by
            striking the period at the end of subparagraph (E) and inserting
            ``, and'', and by adding at the end the following:
                        ``(F) that portion of any applicable employment
                    retention plan described in paragraph (4) with respect
                    to any participant.''.
                (2) Definitions and rules relating to employment retention
            plans.--Section 457(f) of such Code is amended by adding at the
            end the following new paragraph:
                ``(4) Employment retention plans.--For purposes of paragraph
            (2)(F)--
                        ``(A) In general.--The portion of an applicable
                    employment retention plan described in this paragraph
                    with respect to any participant is that portion of the
                    plan which provides benefits payable to the participant
                    not in excess of twice the applicable dollar limit
                    determined under subsection (e)(15).
                        ``(B) Other rules.--
                              ``(i) <<NOTE: Applicability.>> Limitation.--
                          Paragraph (2)(F) shall only apply to the portion
                          of the plan described in subparagraph (A) for
                          years preceding the year in which such portion is
                          paid or otherwise made available to the
                          participant.
                              ``(ii) Treatment.--A plan shall not be treated
                          for purposes of this title as providing for the
                          deferral of compensation for any year with respect
                          to the portion of the plan described in
                          subparagraph (A).
                        ``(C) Applicable employment retention plan.--The
                    term `applicable employment retention plan' means an
                    employment retention plan maintained by--
                              ``(i) a local educational agency (as defined
                          in section 9101 of the Elementary and Secondary
                          Education Act of 1965 (20 U.S.C. 7801), or
                              ``(ii) an education association which
                          principally represents employees of 1 or more
                          agencies described in

    [[Page 120 STAT. 1060]]

                          clause (i) and which is described in section
                          501(c) (5) or (6) and exempt from taxation under
                          section 501(a).
                        ``(D) Employment retention plan.--The term
                    `employment retention plan' means a plan to pay, upon
                    termination of employment, compensation to an employee
                    of a local educational agency or education association
                    described in subparagraph (C) for purposes of--
                              ``(i) retaining the services of the employee,
                          or
                              ``(ii) rewarding such employee for the
                          employee's service with 1 or more such agencies or
                          associations.''.

        (c) Coordination With ERISA.--Section 3(2)(B) of the Employee
    Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)(B)) is amended
    by adding at the end the following: ``An applicable voluntary early
    retirement incentive plan (as defined in section 457(e)(11)(D)(ii) of
    the Internal Revenue Code of 1986) making payments or supplements
    described in section 457(e)(11)(D)(i) of such Code, and an applicable
    employment retention plan (as defined in section 457(f)(4)(C) of such
    Code) making payments of benefits described in section 457(f)(4)(A) of
    such Code, shall, for purposes of this title, be treated as a welfare
    plan (and not a pension plan) with respect to such payments and
    supplements.''.
        (d) <<NOTE: 26 USC 457 note.>> Effective Dates.--
                (1) In general.--The amendments made by this Act shall take
            effect on the date of the enactment of this Act.
                (2) Tax amendments.--The amendments made by subsections
            (a)(1) and (b) shall apply to taxable years ending after the
            date of the enactment of this Act.
                (3) ERISA amendments.--The amendment made by subsection (c)
            shall apply to plan years ending after the date of the enactment
            of this Act.
                (4) Construction.--Nothing in the amendments made by this
            section shall alter or affect the construction of the Internal
            Revenue Code of 1986, the Employee Retirement Income Security
            Act of 1974, or the Age Discrimination in Employment Act of 1967
            as applied to any plan, arrangement, or conduct to which such
            amendments do not apply.

    SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSATION AS A RESULT OF
                PENSION ROLLOVERS.

        (a) In General.--Section 3304(a) of the Internal Revenue Code of
    1986 <<NOTE: 26 USC 3304.>> (relating to requirements for State
    unemployment laws) is amended by adding at the end the following new
    flush sentence:

    ``Compensation shall not be reduced under paragraph (15) for any
    pension, retirement or retired pay, annuity, or similar payment which is
    not includible in gross income of the individual for the taxable year in
    which paid because it was part of a rollover distribution.''.
        (b) <<NOTE: 26 USC 3304 note.>> Effective Date.--The amendment made
    by this section shall apply to weeks beginning on or after the date of
    the enactment of this Act.

    SEC. 1106. REVOCATION OF ELECTION RELATING TO TREATMENT AS MULTIEMPLOYER
                PLAN.

        (a) Amendment to ERISA.--Section 3(37) of the Employee Retirement
    Income Security Act of 1974 <<NOTE: 29 USC 1002.>> is amended by adding
    at the end the following new subparagraph (G):

    [[Page 120 STAT. 1061]]

                ``(G)(i) <<NOTE: Deadline.>> Within 1 year after the
            enactment of the Pension Protection Act of 2006--
                        ``(I) an election under subparagraph (E) may be
                    revoked, pursuant to procedures prescribed by the
                    Pension Benefit Guaranty Corporation, if, for each of
                    the 3 plan years prior to the date of the enactment of
                    that Act, the plan would have been a multiemployer plan
                    but for the election under subparagraph (E), and
                        ``(II) a plan that meets the criteria in clauses (i)
                    and (ii) of subparagraph (A) of this paragraph or that
                    is described in clause (vi) may, pursuant to procedures
                    prescribed by the Pension Benefit Guaranty Corporation,
                    elect to be a multiemployer plan, if--
                              ``(aa) for each of the 3 plan years
                          immediately before the date of the enactment of
                          the Pension Protection Act of 2006, the plan has
                          met those criteria or is so described,
                              ``(bb) substantially all of the plan's
                          employer contributions for each of those plan
                          years were made or required to be made by
                          organizations that were exempt from tax under
                          section 501 of the Internal Revenue Code of 1986,
                          and
                              ``(cc) the plan was established prior to
                          September 2, 1974.
                ``(ii) <<NOTE: Effective date.>> An election under this
            paragraph shall be effective for all purposes under this Act and
            under the Internal Revenue Code of 1986, starting with the first
            plan year ending after the date of the enactment of the Pension
            Protection Act of 2006.
                ``(iii) Once made, an election under this paragraph shall be
            irrevocable, except that a plan described in subclause (i)(II)
            shall cease to be a multiemployer plan as of the plan year
            beginning immediately after the first plan year for which the
            majority of its employer contributions were made or required to
            be made by organizations that were not exempt from tax under
            section 501 of the Internal Revenue Code of 1986.
                ``(iv) The fact that a plan makes an election under clause
            (i)(II) does not imply that the plan was not a multiemployer
            plan prior to the date of the election or would not be a
            multiemployer plan without regard to the election.
                ``(v)(I) <<NOTE: Deadlines. Notices.>> No later than 30 days
            before an election is made under this paragraph, the plan
            administrator shall provide notice of the pending election to
            each plan participant and beneficiary, each labor organization
            representing such participants or beneficiaries, and each
            employer that has an obligation to contribute to the plan,
            describing the principal differences between the guarantee
            programs under title IV and the benefit restrictions under this
            title for single employer and multiemployer plans, along with
            such other information as the plan administrator chooses to
            include.
                ``(II) Within 180 days after the date of enactment of the
            Pension Protection Act of 2006, the Secretary shall prescribe a
            model notice under this subparagraph.
                ``(III) A plan administrator's failure to provide the notice
            required under this subparagraph shall be treated for purposes

    [[Page 120 STAT. 1062]]

            of section 502(c)(2) as a failure or refusal by the plan
            administrator to file the annual report required to be filed
            with the Secretary under section 101(b)(4).
                ``(vi) A plan is described in this clause if it is a plan--
                        ``(I) that was established in Chicago, Illinois, on
                    August 12, 1881; and
                        ``(II) sponsored by an organization described in
                    section 501(c)(5) of the Internal Revenue Code of 1986
                    and exempt from tax under section 501(a) of such
                    Code.''.

        (b) Amendment to Internal Revenue Code.--Subsection (f) of section
    414 of the Internal Revenue Code of 1986 <<NOTE: 26 USC 414.>> is
    amended by adding at the end the following new paragraph (6):
                ``(6) Election with regard to multiemployer status.--
                        ``(A) <<NOTE: Deadline.>> Within 1 year after the
                    enactment of the Pension Protection Act of 2006--
                              ``(i) An election under paragraph (5) may be
                          revoked, pursuant to procedures prescribed by the
                          Pension Benefit Guaranty Corporation, if, for each
                          of the 3 plan years prior to the date of the
                          enactment of that Act, the plan would have been a
                          multiemployer plan but for the election under
                          paragraph (5), and
                              ``(ii) a plan that meets the criteria in
                          subparagraph (A) and (B) of paragraph (1) of this
                          subsection or that is described in subparagraph
                          (E) may, pursuant to procedures prescribed by the
                          Pension Benefit Guaranty Corporation, elect to be
                          a multiemployer plan, if--
                                        ``(I) for each of the 3 plan years
                                    immediately before the date of enactment
                                    of the Pension Protection Act of 2006,
                                    the plan has met those criteria or is so
                                    described,
                                        ``(II) substantially all of the
                                    plan's employer contributions for each
                                    of those plan years were made or
                                    required to be made by organizations
                                    that were exempt from tax under section
                                    501, and
                                        ``(III) the plan was established
                                    prior to September 2, 1974.
                        ``(B) <<NOTE: Effective date.>> An election under
                    this paragraph shall be effective for all purposes under
                    this Act and under the Employee Retirement Income
                    Security Act of 1974, starting with the first plan year
                    ending after the date of the enactment of the Pension
                    Protection Act of 2006.
                        ``(C) Once made, an election under this paragraph
                    shall be irrevocable, except that a plan described in
                    subparagraph (A)(ii) shall cease to be a multiemployer
                    plan as of the plan year beginning immediately after the
                    first plan year for which the majority of its employer
                    contributions were made or required to be made by
                    organizations that were not exempt from tax under
                    section 501.
                        ``(D) The fact that a plan makes an election under
                    subparagraph (A)(ii) does not imply that the plan was
                    not a multiemployer plan prior to the date of the
                    election or would not be a multiemployer plan without
                    regard to the election.
                        ``(E) A plan is described in this subparagraph if it
                    is a plan--
                              ``(i) that was established in Chicago,
                          Illinois, on August 12, 1881; and

    [[Page 120 STAT. 1063]]

                              ``(ii) sponsored by an organization described
                          in section 501(c)(5) and exempt from tax under
                          section 501(a).''.

    SEC. 1107. <<NOTE: 26 USC 411 note.>> PROVISIONS RELATING TO PLAN
                AMENDMENTS.

        (a) In General.--If this section applies to any pension plan or
    contract amendment--
                (1) such pension 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
                (2) except as provided by the Secretary of the Treasury,
            such pension 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 Employee Retirement Income Security Act of
            1974 by reason of such amendment.

        (b) Amendments to Which Section Applies.--
                (1) In general.--This section shall apply to any amendment
            to any pension plan or annuity contract which is made--
                        (A) 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
                        (B) <<NOTE: Effective date.>> on or before the last
                    day of the first plan year beginning on or after January
                    1, 2009.
            In the case of a governmental plan (as defined in section 414(d)
            of the Internal Revenue Code of 1986), this paragraph shall be
            applied by substituting ``2011'' for ``2009''.
                (2) Conditions.--This section shall not apply to any
            amendment unless--
                        (A) during the period--
                              (i) 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
                              (ii) ending on the date described in paragraph
                          (1)(B) (or, if earlier, the date the plan or
                          contract amendment is adopted), the plan or
                          contract is operated as if such plan or contract
                          amendment were in effect; and
                        (B) such plan or contract amendment applies
                    retroactively for such period.

             TITLE XII--PROVISIONS RELATING TO EXEMPT ORGANIZATIONS

                    Subtitle A--Charitable Giving Incentives

    SEC. 1201. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS FOR
                CHARITABLE PURPOSES.

        (a) In General.--Subsection (d) of section 408 <<NOTE: 26 USC
    408.>> (relating to individual retirement accounts) is amended by adding
    at the end the following new paragraph:
                ``(8) Distributions for charitable purposes.--

    [[Page 120 STAT. 1064]]

                        ``(A) In general.--So much of the aggregate amount
                    of qualified charitable distributions with respect to a
                    taxpayer made during any taxable year which does not
                    exceed $100,000 shall not be includible in gross income
                    of such taxpayer for such taxable year.
                        ``(B) Qualified charitable distribution.--For
                    purposes of this paragraph, the term `qualified
                    charitable distribution' means any distribution from an
                    individual retirement plan (other than a plan described
                    in subsection (k) or (p))--
                              ``(i) which is made directly by the trustee to
                          an organization described in section 170(b)(1)(A)
                          (other than any organization described in section
                          509(a)(3) or any fund or account described in
                          section 4966(d)(2)), and
                              ``(ii) which is made on or after the date that
                          the individual for whose benefit the plan is
                          maintained has attained age 70\1/2\.
                    A distribution shall be treated as a qualified
                    charitable distribution only to the extent that the
                    distribution would be includible in gross income without
                    regard to subparagraph (A).
                        ``(C) Contributions must be otherwise deductible.--
                    For purposes of this paragraph, a distribution to an
                    organization described in subparagraph (B)(i) shall be
                    treated as a qualified charitable distribution only if a
                    deduction for the entire distribution would be allowable
                    under section 170 (determined without regard to
                    subsection (b) thereof and this paragraph).
                        ``(D) Application of section 72.--Notwithstanding
                    section 72, in determining the extent to which a
                    distribution is a qualified charitable distribution, the
                    entire amount of the distribution shall be treated as
                    includible in gross income without regard to
                    subparagraph (A) to the extent that such amount does not
                    exceed the aggregate amount which would have been so
                    includible if all amounts distributed from all
                    individual retirement plans were treated as 1 contract
                    under paragraph (2)(A) for purposes of determining the
                    inclusion of such distribution under section 72. Proper
                    adjustments shall be made in applying section 72 to
                    other distributions in such taxable year and subsequent
                    taxable years.
                        ``(E) Denial of deduction.--Qualified charitable
                    distributions which are not includible in gross income
                    pursuant to subparagraph (A) shall not be taken into
                    account in determining the deduction under section 170.
                        ``(F) Termination.--This paragraph shall not apply
                    to distributions made in taxable years beginning after
                    December 31, 2007.''.

        (b) Modifications Relating to Information Returns by Certain
    Trusts.--
                (1) Returns.--Section 6034 <<NOTE: 26 USC 6034.>> (relating
            to returns by trusts described in section 4947(a)(2) or claiming
            charitable deductions under section 642(c)) is amended to read
            as follows:

    [[Page 120 STAT. 1065]]

    ``SEC. 6034. RETURNS BY CERTAIN TRUSTS.

        ``(a) Split-Interest Trusts.--Every trust described in section
    4947(a)(2) shall furnish such information with respect to the taxable
    year as the Secretary may by forms or regulations require.
        ``(b) Trusts Claiming Certain Charitable Deductions.--
                ``(1) In general.--Every trust not required to file a return
            under subsection (a) but claiming a deduction under section
            642(c) for the taxable year shall furnish such information with
            respect to such taxable year as the Secretary may by forms or
            regulations prescribe, including--
                        ``(A) the amount of the deduction taken under
                    section 642(c) within such year,
                        ``(B) the amount paid out within such year which
                    represents amounts for which deductions under section
                    642(c) have been taken in prior years,
                        ``(C) the amount for which such deductions have been
                    taken in prior years but which has not been paid out at
                    the beginning of such year,
                        ``(D) the amount paid out of principal in the
                    current and prior years for the purposes described in
                    section 642(c),
                        ``(E) the total income of the trust within such year
                    and the expenses attributable thereto, and
                        ``(F) a balance sheet showing the assets,
                    liabilities, and net worth of the trust as of the
                    beginning of such year.
                ``(2) Exceptions.--Paragraph (1) shall not apply to a trust
            for any taxable year if--
                        ``(A) all the net income for such year, determined
                    under the applicable principles of the law of trusts, is
                    required to be distributed currently to the
                    beneficiaries, or
                        ``(B) the trust is described in section
                    4947(a)(1).''.
                (2) Increase in penalty relating to filing of information
            return by split-interest trusts.--Paragraph (2) of section
            6652(c) <<NOTE: 26 USC 6652.>> (relating to returns by exempt
            organizations and by certain trusts) is amended by adding at the
            end the following new subparagraph:
                        ``(C) <<NOTE: Applicability.>> Split-interest
                    trusts.--In the case of a trust which is required to
                    file a return under section 6034(a), subparagraphs (A)
                    and (B) of this paragraph shall not apply and paragraph
                    (1) shall apply in the same manner as if such return
                    were required under section 6033, except that--
                              ``(i) the 5 percent limitation in the second
                          sentence of paragraph (1)(A) shall not apply,
                              ``(ii) in the case of any trust with gross
                          income in excess of $250,000, the first sentence
                          of paragraph (1)(A) shall be applied by
                          substituting `$100' for `$20', and the second
                          sentence thereof shall be applied by substituting
                          `$50,000' for `$10,000', and
                              ``(iii) the third sentence of paragraph (1)(A)
                          shall be disregarded.
                    In addition to any penalty imposed on the trust pursuant
                    to this subparagraph, if the person required to file
                    such return knowingly fails to file the return, such
                    penalty shall also be imposed on such person who shall
                    be personally liable for such penalty.''.

    [[Page 120 STAT. 1066]]

                (3) Confidentiality of noncharitable beneficiaries.--
            Subsection (b) of section 6104 <<NOTE: 26 USC 6104.>> (relating
            to inspection of annual information returns) is amended by
            adding at the end the following new sentence: ``In the case of a
            trust which is required to file a return under section 6034(a),
            this subsection shall not apply to information regarding
            beneficiaries which are not organizations described in section
            170(c).''.
                (4) Clerical amendment.--The item in the table of sections
            for subpart A of part III of subchapter A of chapter 61 relating
            to section 6034 is amended to read as follows:

    ``Sec. 6034. Returns by certain trusts.''.

        (c) Effective Dates.--
                (1) <<NOTE: 26 USC 408 note.>> Subsection (a).--The
            amendment made by subsection (a) shall apply to distributions
            made in taxable years beginning after December 31, 2005.
                (2) <<NOTE: 26 USC 6034 note.>> Subsection (b).--The
            amendments made by subsection (b) shall apply to returns for
            taxable years beginning after December 31, 2006.

    SEC. 1202. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION FOR
                CONTRIBUTIONS OF FOOD INVENTORY.

        (a) In General.--Section 170(e)(3)(C)(iv) (relating to termination)
    is amended by striking ``2005'' and inserting ``2007''.
        (b) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendment made
    by this section shall apply to contributions made after December 31,
    2005.

    SEC. 1203. BASIS ADJUSTMENT TO STOCK OF S CORPORATION CONTRIBUTING
                PROPERTY.

        (a) In General.--Paragraph (2) of section 1367(a) (relating to
    adjustments to basis of stock of shareholders, etc.) is amended by
    adding at the end the following new flush sentence:
            ``The decrease under subparagraph (B) by reason of a charitable
            contribution (as defined in section 170(c)) of property shall be
            the amount equal to the shareholder's pro rata share of the
            adjusted basis of such property. The preceding sentence shall
            not apply to contributions made in taxable years beginning after
            December 31, 2007.''.

        (b) <<NOTE: 26 USC 1367 note.>> Effective Date.--The amendment made
    by this section shall apply to contributions made in taxable years
    beginning after December 31, 2005.

    SEC. 1204. EXTENSION OF MODIFICATION OF CHARITABLE DEDUCTION FOR
                CONTRIBUTIONS OF BOOK INVENTORY.

        (a) In General.--Section 170(e)(3)(D)(iv) (relating to termination)
    is amended by striking ``2005'' and inserting ``2007''.
        (b) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendment made
    by this section shall apply to contributions made after December 31,
    2005.

    SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS TO
                CONTROLLING EXEMPT ORGANIZATIONS.

        (a) In General.--Paragraph (13) of section 512(b) (relating to
    special rules for certain amounts received from controlled entities) is
    amended by redesignating subparagraph (E) as subparagraph (F) and by
    inserting after subparagraph (D) the following new subparagraph:
                        ``(E) Paragraph to apply only to certain excess
                    payments.--

    [[Page 120 STAT. 1067]]

                              ``(i) <<NOTE: Applicability.>> In general.--
                          Subparagraph (A) shall apply only to the portion
                          of a qualifying specified payment received or
                          accrued by the controlling organization that
                          exceeds the amount which would have been paid or
                          accrued if such payment met the requirements
                          prescribed under section 482.
                              ``(ii) Addition to tax for valuation
                          misstatements.--The tax imposed by this chapter on
                          the controlling organization shall be increased by
                          an amount equal to 20 percent of the larger of--
                                        ``(I) such excess determined without
                                    regard to any amendment or supplement to
                                    a return of tax, or
                                        ``(II) such excess determined with
                                    regard to all such amendments and
                                    supplements.
                              ``(iii) Qualifying specified payment.--The
                          term `qualifying specified payment' means a
                          specified payment which is made pursuant to--
                                        ``(I) a binding written contract in
                                    effect on the date of the enactment of
                                    this subparagraph, or
                                        ``(II) a contract which is a
                                    renewal, under substantially similar
                                    terms, of a contract described in
                                    subclause (I).
                              ``(iv) Termination.--This subparagraph shall
                          not apply to payments received or accrued after
                          December 31, 2007.''.

        (b) Reporting.--
                (1) In general.--Section 6033 <<NOTE: 26 USC
            6033.>> (relating to returns by exempt organizations) is amended
            by redesignating subsection (h) as subsection (i) and by
            inserting after subsection (g) the following new subsection:

        ``(h) Controlling Organizations.--Each controlling organization
    (within the meaning of section 512(b)(13)) which is subject to the
    requirements of subsection (a) shall include on the return required
    under subsection (a)--
                ``(1) any interest, annuities, royalties, or rents received
            from each controlled entity (within the meaning of section
            512(b)(13)),
                ``(2) any loans made to each such controlled entity, and
                ``(3) any transfers of funds between such controlling
            organization and each such controlled entity.''.
                (2) Report to congress.--Not later than January 1, 2009, the
            Secretary of the Treasury shall submit to the Committee on
            Finance of the Senate and the Committee on Ways and Means of the
            House of Representatives a report on the effectiveness of the
            Internal Revenue Service in administering the amendments made by
            subsection (a) and on the extent to which payments by controlled
            entities (within the meaning of section 512(b)(13) of the
            Internal Revenue Code of 1986) to controlling organizations
            (within the meaning of section 512(b)(13) of such Code) meet the
            requirements under section 482 of such Code. Such report shall
            include the results of any audit of any controlling organization
            or controlled entity and recommendations relating to the tax
            treatment of payments from controlled entities to controlling
            organizations.

        (c) Effective Date.--

    [[Page 120 STAT. 1068]]

                (1) <<NOTE: 26 USC 512 note.>> Subsection (a).--The
            amendments made by subsection (a) shall apply to payments
            received or accrued after December 31, 2005.
                (2) <<NOTE: 26 USC 6033 note.>> Subsection (b).--The
            amendments made by subsection (b) shall apply to returns the due
            date (determined without regard to extensions) of which is after
            the date of the enactment of this Act.

    SEC. 1206. ENCOURAGEMENT OF CONTRIBUTIONS OF CAPITAL GAIN REAL PROPERTY
                MADE FOR CONSERVATION PURPOSES.

        (a) In General.--
                (1) Individuals.--Paragraph (1) of section 170(b) <<NOTE: 26
            USC 170.>> (relating to percentage limitations) is amended by
            redesignating subparagraphs (E) and (F) as subparagraphs (F) and
            (G), respectively, and by inserting after subparagraph (D) the
            following new subparagraph:
                        ``(E) Contributions of qualified conservation
                    contributions.--
                              ``(i) In general.--Any qualified conservation
                          contribution (as defined in subsection (h)(1))
                          shall be allowed to the extent the aggregate of
                          such contributions does not exceed the excess of
                          50 percent of the taxpayer's contribution base
                          over the amount of all other charitable
                          contributions allowable under this paragraph.
                              ``(ii) Carryover.--If the aggregate amount of
                          contributions described in clause (i) exceeds the
                          limitation of clause (i), such excess shall be
                          treated (in a manner consistent with the rules of
                          subsection (d)(1)) as a charitable contribution to
                          which clause (i) applies in each of the 15
                          succeeding years in order of time.
                              ``(iii) <<NOTE: Applicability.>> Coordination
                          with other subparagraphs.--For purposes of
                          applying this subsection and subsection (d)(1),
                          contributions described in clause (i) shall not be
                          treated as described in subparagraph (A), (B),
                          (C), or (D) and such subparagraphs shall apply
                          without regard to such contributions.
                              ``(iv) <<NOTE: Applicability.>> Special rule
                          for contribution of property used in agriculture
                          or livestock production.--
                                        ``(I) In general.--If the individual
                                    is a qualified farmer or rancher for the
                                    taxable year for which the contribution
                                    is made, clause (i) shall be applied by
                                    substituting `100 percent' for `50
                                    percent'.
                                        ``(II) Exception.--Subclause (I)
                                    shall not apply to any contribution of
                                    property made after the date of the
                                    enactment of this subparagraph which is
                                    used in agriculture or livestock
                                    production (or available for such
                                    production) unless such contribution is
                                    subject to a restriction that such
                                    property remain available for such
                                    production. This subparagraph shall be
                                    applied separately with respect to
                                    property to which subclause (I) does not
                                    apply by reason of the preceding
                                    sentence prior to its application to
                                    property to which subclause (I) does
                                    apply.

    [[Page 120 STAT. 1069]]

                              ``(v) Definition.--For purposes of clause
                          (iv), the term `qualified farmer or rancher' means
                          a taxpayer whose gross income from the trade or
                          business of farming (within the meaning of section
                          2032A(e)(5)) is greater than 50 percent of the
                          taxpayer's gross income for the taxable year.
                              ``(vi) Termination.--This subparagraph shall
                          not apply to any contribution made in taxable
                          years beginning after December 31, 2007.''.
                (2) Corporations.--Paragraph (2) of section
            170(b) <<NOTE: 26 USC 170.>> is amended to read as follows:
                ``(2) Corporations.--In the case of a corporation--
                        ``(A) In general.--The total deductions under
                    subsection (a) for any taxable year (other than for
                    contributions to which subparagraph (B) applies) shall
                    not exceed 10 percent of the taxpayer's taxable income.
                        ``(B) Qualified conservation contributions by
                    certain corporate farmers and ranchers.--
                              ``(i) In general.--Any qualified conservation
                          contribution (as defined in subsection (h)(1))--
                                        ``(I) which is made by a corporation
                                    which, for the taxable year during which
                                    the contribution is made, is a qualified
                                    farmer or rancher (as defined in
                                    paragraph (1)(E)(v)) and the stock of
                                    which is not readily tradable on an
                                    established securities market at any
                                    time during such year, and
                                        ``(II) which, in the case of
                                    contributions made after the date of the
                                    enactment of this subparagraph, is a
                                    contribution of property which is used
                                    in agriculture or livestock production
                                    (or available for such production) and
                                    which is subject to a restriction that
                                    such property remain available for such
                                    production,
                          shall be allowed to the extent the aggregate of
                          such contributions does not exceed the excess of
                          the taxpayer's taxable income over the amount of
                          charitable contributions allowable under
                          subparagraph (A).
                              ``(ii) <<NOTE: Applicability.>> Carryover.--If
                          the aggregate amount of contributions described in
                          clause (i) exceeds the limitation of clause (i),
                          such excess shall be treated (in a manner
                          consistent with the rules of subsection (d)(2)) as
                          a charitable contribution to which clause (i)
                          applies in each of the 15 succeeding years in
                          order of time.
                              ``(iii) Termination.--This subparagraph shall
                          not apply to any contribution made in taxable
                          years beginning after December 31, 2007.
                        ``(C) Taxable income.--For purposes of this
                    paragraph, taxable income shall be computed without
                    regard to--
                              ``(i) this section,
                              ``(ii) part VIII (except section 248),
                              ``(iii) any net operating loss carryback to
                          the taxable year under section 172,
                              ``(iv) section 199, and
                              ``(v) any capital loss carryback to the
                          taxable year under section 1212(a)(1).''.

        (b) Conforming Amendments.--

    [[Page 120 STAT. 1070]]

                (1) Paragraph (2) of section 170(d) <<NOTE: 26 USC 170.>> is
            amended by striking ``subsection (b)(2)'' each place it appears
            and inserting ``subsection (b)(2)(A)''.
                (2) Section 545(b)(2) is amended by striking ``and (D)'' and
            inserting ``(D), and (E)''.

        (c) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendments made
    by this section shall apply to contributions made in taxable years
    beginning after December 31, 2005.

    SEC. 1207. EXCISE TAXES EXEMPTION FOR BLOOD COLLECTOR ORGANIZATIONS.

        (a) Exemption From Imposition of Special Fuels Tax.--Section 4041(g)
    (relating to other exemptions) is amended by striking ``and'' at the end
    of paragraph (3), by striking the period in paragraph (4) and inserting
    ``; and'', and by inserting after paragraph (4) the following new
    paragraph:
                ``(5) with respect to the sale of any liquid to a qualified
            blood collector organization (as defined in section 7701(a)(49))
            for such organization's exclusive use in the collection,
            storage, or transportation of blood.''.

        (b) Exemption From Manufacturers Excise Tax.--
                (1) In general.--Section 4221(a) (relating to certain tax-
            free sales) is amended by striking ``or'' at the end of
            paragraph (4), by adding ``or'' at the end of paragraph (5), and
            by inserting after paragraph (5) the following new paragraph:
                ``(6) to a qualified blood collector organization (as
            defined in section 7701(a)(49)) for such organization's
            exclusive use in the collection, storage, or transportation of
            blood,''.
                (2) No exemption with respect to vaccines and recreational
            equipment.--Section 4221(a) is amended by adding at the end the
            following new sentence: ``In the case of taxes imposed by
            subchapter C or D, paragraph (6) shall not apply.''.
                (3) Conforming amendments.--
                        (A) The second sentence of section 4221(a) is
                    amended by striking ``Paragraphs (4) and (5)'' and
                    inserting ``Paragraphs (4), (5), and (6)''.
                        (B) Section 6421(c) is amended by striking ``or
                    (5)'' and inserting ``(5), or (6)''.

        (c) Exemption From Communication Excise Tax.--
                (1) In general.--Section 4253 (relating to exemptions) is
            amended by redesignating subsection (k) as subsection (l) and
            inserting after subsection (j) the following new subsection:

        ``(k) <<NOTE: Regulations.>> Exemption for Qualified Blood Collector
    Organizations.--Under regulations provided by the Secretary, no tax
    shall be imposed under section 4251 on any amount paid by a qualified
    blood collector organization (as defined in section 7701(a)(49)) for
    services or facilities furnished to such organization.''.
                (2) Conforming amendment.--Section 4253(l), as redesignated
            by paragraph (1), is amended by striking ``or (j)'' and
            inserting ``(j), or (k)''.

        (d) Exemption From Tax on Heavy Vehicles.--Section 4483 is amended
    by redesignating subsection (h) as subsection (i) and by inserting after
    subsection (g) the following new subsection:
        ``(h) Exemption for Vehicles Used in Blood Collection.--
                ``(1) In general.--No tax shall be imposed by section 4481
            on the use of any qualified blood collector vehicle by a
            qualified blood collector organization.

    [[Page 120 STAT. 1071]]

                ``(2) Qualified blood collector vehicle.--For purposes of
            this subsection, the term `qualified blood collector vehicle'
            means a vehicle at least 80 percent of the use of which during
            the prior taxable period was by a qualified blood collector
            organization in the collection, storage, or transportation of
            blood.
                ``(3) Special rule for vehicles first placed in service in a
            taxable period.--In the case of a vehicle first placed in
            service in a taxable period, a vehicle shall be treated as a
            qualified blood collector vehicle for such taxable period if
            such qualified blood collector organization certifies to the
            Secretary that the organization reasonably expects at least 80
            percent of the use of such vehicle by the organization during
            such taxable period will be in the collection, storage, or
            transportation of blood.
                ``(4) Qualified blood collector organization.--The term
            `qualified blood collector organization' has the meaning given
            such term by section 7701(a)(49).''.

        (e) Credit or Refund for Certain Taxes on Sales and Services.--
                (1) Deemed overpayment.--
                        (A) In general.--Section 6416(b)(2) <<NOTE: 26 USC
                    6416.>> is amended by redesignating subparagraphs (E)
                    and (F) as subparagraphs (F) and (G), respectively, and
                    by inserting after subparagraph (D) the following new
                    subparagraph:
                        ``(E) sold to a qualified blood collector
                    organization (as defined in section 7701(a)(49)) for
                    such organization's exclusive use in the collection,
                    storage, or transportation of blood;''.
                        (B) No credit or refund for vaccines or recreational
                    equipment.--Section 6416(b)(2) is amended by adding at
                    the end the following new sentence: ``In the case of
                    taxes imposed by subchapter C or D of chapter 32,
                    subparagraph (E) shall not apply.''.
                        (C) Conforming amendments.--Section 6416(b)(2) is
                    amended--
                              (i) by striking ``Subparagraphs (C) and (D)''
                          in the second sentence and inserting
                          ``Subparagraphs (C), (D), and (E)''.
                              (ii) by striking ``(B), (C), and (D)'' and
                          inserting ``(B), (C), (D), and (E)''.
                (2) Sales of tires.--Section 6416(b)(4)(B) is amended by
            striking ``or'' at the end of clause (i), by striking the period
            at the end of clause (ii) and inserting ``, or'', and by adding
            after clause (ii) the following:
                              ``(iii) sold to a qualified blood collector
                          organization for its exclusive use in connection
                          with a vehicle the organization certifies will be
                          primarily used in the collection, storage, or
                          transportation of blood.''.

        (f) Definition of Qualified Blood Collector Organization.--Section
    7701(a) is amended by inserting at the end the following new paragraph:
                ``(49) Qualified blood collector organization.--The term
            `qualified blood collector organization' means an organization
            which is--
                        ``(A) described in section 501(c)(3) and exempt from
                    tax under section 501(a),

    [[Page 120 STAT. 1072]]

                        ``(B) primarily engaged in the activity of the
                    collection of human blood,
                        ``(C) registered with the Secretary for purposes of
                    excise tax exemptions, and
                        ``(D) registered by the Food and Drug Administration
                    to collect blood.''.

        (g) <<NOTE: 26 USC 4041 note.>> Effective Date.--
                (1) In general.--The amendments made by this section shall
            take effect on January 1, 2007.
                (2) Subsection (d).--The amendment made by subsection (d)
            shall apply to taxable periods beginning on or after July 1,
            2007.

                   Subtitle B--Reforming Exempt Organizations

                             PART 1--GENERAL REFORMS

    SEC. 1211. REPORTING ON CERTAIN ACQUISITIONS OF INTERESTS IN INSURANCE
                CONTRACTS IN WHICH CERTAIN EXEMPT ORGANIZATIONS HOLD AN
                INTEREST.

        (a) Reporting Requirements.--
                (1) In general.--Subpart B of part III of subchapter A of
            chapter 61 (relating to information concerning transactions with
            other persons), as amended by this Act, is amended by adding at
            the end the following new section:

    ``SEC. 6050V. <<NOTE: 26 USC 6050V.>> RETURNS RELATING TO APPLICABLE
                INSURANCE CONTRACTS IN WHICH CERTAIN EXEMPT ORGANIZATIONS
                HOLD INTERESTS.

        ``(a) In General.--Each applicable exempt organization which makes a
    reportable acquisition shall make the return described in subsection
    (c).
        ``(b) Time for Making Return.--Any applicable exempt organization
    required to make a return under subsection (a) shall file such return at
    such time as may be established by the Secretary.
        ``(c) Form and Manner of Returns.--A return is described in this
    subsection if such return--
                ``(1) is in such form as the Secretary prescribes,
                ``(2) contains the name, address, and taxpayer
            identification number of the applicable exempt organization and
            the issuer of the applicable insurance contract, and
                ``(3) contains such other information as the Secretary may
            prescribe.

        ``(d) Definitions.--For purposes of this section--
                ``(1) Reportable acquisition.--The term `reportable
            acquisition' means the acquisition by an applicable exempt
            organization of a direct or indirect interest in any applicable
            insurance contract in any case in which such acquisition is a
            part of a structured transaction involving a pool of such
            contracts.
                ``(2) Applicable insurance contract.--
                        ``(A) In general.--The term `applicable insurance
                    contract' means any life insurance, annuity, or
                    endowment contract with respect to which both an
                    applicable exempt organization and a person other than
                    an applicable exempt

    [[Page 120 STAT. 1073]]

                    organization have directly or indirectly held an
                    interest in the contract (whether or not at the same
                    time).
                        ``(B) Exceptions.--Such term shall not include a
                    life insurance, annuity, or endowment contract if--
                              ``(i) all persons directly or indirectly
                          holding any interest in the contract (other than
                          applicable exempt organizations) have an insurable
                          interest in the insured under the contract
                          independent of any interest of an applicable
                          exempt organization in the contract,
                              ``(ii) the sole interest in the contract of an
                          applicable exempt organization or each person
                          other than an applicable exempt organization is as
                          a named beneficiary, or
                              ``(iii) the sole interest in the contract of
                          each person other than an applicable exempt
                          organization is--
                                        ``(I) as a beneficiary of a trust
                                    holding an interest in the contract, but
                                    only if the person's designation as such
                                    beneficiary was made without
                                    consideration and solely on a purely
                                    gratuitous basis, or
                                        ``(II) as a trustee who holds an
                                    interest in the contract in a fiduciary
                                    capacity solely for the benefit of
                                    applicable exempt organizations or
                                    persons otherwise described in subclause
                                    (I) or clause (i) or (ii).
                ``(3) Applicable exempt organization.--The term `applicable
            exempt organization' means--
                        ``(A) an organization described in section 170(c),
                        ``(B) an organization described in section
                    168(h)(2)(A)(iv), or
                        ``(C) an organization not described in paragraph (1)
                    or (2) which is described in section 2055(a) or section
                    2522(a).

        ``(e) Termination.--This section shall not apply to reportable
    acquisitions occurring after the date which is 2 years after the date of
    the enactment of this section.''.
                (2) Conforming amendment.--The table of sections for subpart
            B of part III of subchapter A of chapter 61 is amended by adding
            at the end the following new item:

    ``Sec. 6050V. Returns relating to applicable insurance contracts in
               which certain exempt organizations hold interests.''.

        (b) Penalties.--
                (1) In general.--Subparagraph (B) of section 6724(d)(1), as
            amended by this Act, <<NOTE: 26 USC 6724.>> is amended by
            redesignating clauses (xiv) through (xix) as clauses (xv)
            through (xx) and by inserting after clause (xiii) the following
            new clause:
                              ``(xiv) section 6050V (relating to returns
                          relating to applicable insurance contracts in
                          which certain exempt organizations hold
                          interests),''.
                (2) Intentional disregard.--Section 6721(e)(2) is amended by
            striking ``or'' at the end of subparagraph (B), by striking
            ``and'' at the end of subparagraph (C) and inserting ``or'', and
            by adding at the end the following new subparagraph:
                        ``(D) in the case of a return required to be filed
                    under section 6050V, 10 percent of the value of the
                    benefit of any contract with respect to which
                    information is required to be included on the return,
                    and''.

    [[Page 120 STAT. 1074]]

        (c) Study.--
                (1) In general.--The Secretary of the Treasury shall
            undertake a study on--
                        (A) the use by tax exempt organizations of
                    applicable insurance contracts (as defined under section
                    6050V(d)(2) of the Internal Revenue Code of 1986, as
                    added by subsection (a)) for the purpose of sharing the
                    benefits of the organization's insurable interest in
                    individuals insured under such contracts with investors,
                    and
                        (B) whether such activities are consistent with the
                    tax exempt status of such organizations.
                (2) Report.--Not later than 30 months after the date of the
            enactment of this Act, the Secretary of the Treasury shall
            report on the study conducted under paragraph (1) to the
            Committee on Finance of the Senate and the Committee on Ways and
            Means of the House of Representatives.

        (d) <<NOTE: 26 USC 6050V.>> Effective Date.--The amendments made by
    this section shall apply to acquisitions of contracts after the date of
    enactment of this Act.

    SEC. 1212. INCREASE IN PENALTY EXCISE TAXES RELATING TO PUBLIC
                CHARITIES, SOCIAL WELFARE ORGANIZATIONS, AND PRIVATE
                FOUNDATIONS.

        (a) Taxes on Self-Dealing and Excess Benefit Transactions.--
                (1) In general.--Section 4941(a) <<NOTE: 26 USC
            4941.>> (relating to initial taxes) is amended--
                        (A) in paragraph (1), by striking ``5 percent'' and
                    inserting ``10 percent'', and
                        (B) in paragraph (2), by striking ``2\1/2\ percent''
                    and inserting ``5 percent''.
                (2) Increased limitation for managers on self-dealing.--
            Section 4941(c)(2) is amended by striking ``$10,000'' each place
            it appears in the text and heading thereof and inserting
            ``$20,000''.
                (3) Increased limitation for managers on excess benefit
            transactions.--Section 4958(d)(2) is amended by striking
            ``$10,000'' and inserting ``$20,000''.

        (b) Taxes on Failure to Distribute Income.--Section 4942(a)
    (relating to initial tax) is amended by striking ``15 percent'' and
    inserting ``30 percent''.
        (c) Taxes on Excess Business Holdings.--Section 4943(a)(1) (relating
    to imposition) is amended by striking ``5 percent'' and inserting ``10
    percent''.
        (d) Taxes on Investments Which Jeopardize Charitable Purpose.--
                (1) In general.--Section 4944(a) (relating to initial taxes)
            is amended by striking ``5 percent'' both places it appears and
            inserting ``10 percent''.
                (2) Increased limitation for managers.--Section 4944(d)(2)
            is amended--
                        (A) by striking ``$5,000,'' and inserting
                    ``$10,000,'', and
                        (B) by striking ``$10,000.'' and inserting
                    ``$20,000.''.

        (e) Taxes on Taxable Expenditures.--
                (1) In general.--Section 4945(a) (relating to initial taxes)
            is amended--

    [[Page 120 STAT. 1075]]

                        (A) in paragraph (1), by striking ``10 percent'' and
                    inserting ``20 percent'', and
                        (B) in paragraph (2), by striking ``2\1/2\ percent''
                    and inserting ``5 percent''.
                (2) Increased limitation for managers.--Section
            4945(c)(2) <<NOTE: 26 USC 4945.>> is amended--
                        (A) by striking ``$5,000,'' and inserting
                    ``$10,000,'', and
                        (B) by striking ``$10,000.'' and inserting
                    ``$20,000.''.

        (f) <<NOTE: 26 USC 4941 note.>> Effective Date.--The amendments made
    by this section shall apply to taxable years beginning after the date of
    the enactment of this Act.

    SEC. 1213. REFORM OF CHARITABLE CONTRIBUTIONS OF CERTAIN EASEMENTS IN
                REGISTERED HISTORIC DISTRICTS AND REDUCED DEDUCTION FOR
                PORTION OF QUALIFIED CONSERVATION CONTRIBUTION ATTRIBUTABLE
                TO REHABILITATION CREDIT.

        (a) Special Rules With Respect to Buildings in Registered Historic
    Districts.--
                (1) In general.--Paragraph (4) of section 170(h) (relating
            to definition of conservation purpose) is amended by
            redesignating subparagraph (B) as subparagraph (C) and by
            inserting after subparagraph (A) the following new subparagraph:
                        ``(B) Special rules with respect to buildings in
                    registered historic districts.--In the case of any
                    contribution of a qualified real property interest which
                    is a restriction with respect to the exterior of a
                    building described in subparagraph (C)(ii), such
                    contribution shall not be considered to be exclusively
                    for conservation purposes unless--
                              ``(i) such interest--
                                        ``(I) includes a restriction which
                                    preserves the entire exterior of the
                                    building (including the front, sides,
                                    rear, and height of the building), and
                                        ``(II) prohibits any change in the
                                    exterior of the building which is
                                    inconsistent with the historical
                                    character of such exterior,
                              ``(ii) the donor and donee enter into a
                          written agreement certifying, under penalty of
                          perjury, that the donee--
                                        ``(I) is a qualified organization
                                    (as defined in paragraph (3)) with a
                                    purpose of environmental protection,
                                    land conservation, open space
                                    preservation, or historic preservation,
                                    and
                                        ``(II) has the resources to manage
                                    and enforce the restriction and a
                                    commitment to do so, and
                              ``(iii) in the case of any contribution made
                          in a taxable year beginning after the date of the
                          enactment of this subparagraph, the taxpayer
                          includes with the taxpayer's return for the
                          taxable year of the contribu- tion--
                                        ``(I) a qualified appraisal (within
                                    the meaning of subsection (f)(11)(E)) of
                                    the qualified property interest,
                                        ``(II) photographs of the entire
                                    exterior of the building, and

    [[Page 120 STAT. 1076]]

                                        ``(III) a description of all
                                    restrictions on the development of the
                                    building.''.

        (b) Disallowance of Deduction for Structures and Land in Registered
    Historic Districts.--Subparagraph (C) of section 170(h)(4), <<NOTE: 26
    USC 170.>> as redesignated by subsection (a), is amended--
                (1) by striking ``any building, structure, or land area
            which'',
                (2) by inserting ``any building, structure, or land area
            which'' before ``is listed'' in clause (i), and
                (3) by inserting ``any building which'' before ``is
            located'' in clause (ii).

        (c) Filing Fee for Certain Contributions.--Subsection (f) of section
    170 (relating to disallowance of deduction in certain cases and special
    rules) is amended by adding at the end the following new paragraph:
                ``(13) Contributions of certain interests in buildings
            located in registered historic districts.--
                        ``(A) In general.--No deduction shall be allowed
                    with respect to any contribution described in
                    subparagraph (B) unless the taxpayer includes with the
                    return for the taxable year of the contribution a $500
                    filing fee.
                        ``(B) Contribution described.--A contribution is
                    described in this subparagraph if such contribution is a
                    qualified conservation contribution (as defined in
                    subsection (h)) which is a restriction with respect to
                    the exterior of a building described in subsection
                    (h)(4)(C)(ii) and for which a deduction is claimed in
                    excess of $10,000.
                        ``(C) Dedication of fee.--Any fee collected under
                    this paragraph shall be used for the enforcement of the
                    provisions of subsection (h).''.

        (d) Reduced Deduction for Portion of Qualified Conservation
    Contribution Attributable to the Rehabilitation Credit.--Subsection (f)
    of section 170, as amended by subsection (c), is amended by adding at
    the end the following new paragraph:
                ``(14) Reduction for amounts attributable to rehabilitation
            credit.--In the case of any qualified conservation contribution
            (as defined in subsection (h)), the amount of the deduction
            allowed under this section shall be reduced by an amount which
            bears the same ratio to the fair market value of the
            contribution as--
                        ``(A) the sum of the credits allowed to the taxpayer
                    under section 47 for the 5 preceding taxable years with
                    respect to any building which is a part of such
                    contribution, bears to
                        ``(B) the fair market value of the building on the
                    date of the contribution.''.

        (e) <<NOTE: 26 USC 170 note.>> Effective Dates.--
                (1) Special rules for buildings in registered historic
            districts.--The amendments made by subsection (a) shall apply to
            contributions made after July 25, 2006.
                (2) Disallowance of deduction for structures and land;
            reduction for rehabilitation credit.--The amendments made by
            subsections (b) and (d) shall apply to contributions made after
            the date of the enactment of this Act.
                (3) Filing fee.--The amendment made by subsection (c) shall
            apply to contributions made 180 days after the date of the
            enactment of this Act.

    [[Page 120 STAT. 1077]]

    SEC. 1214. CHARITABLE CONTRIBUTIONS OF TAXIDERMY PROPERTY.

        (a) Denial of Long-Term Capital Gain.--Subparagraph (B) of section
    170(e)(1) <<NOTE: 26 USC 170.>> is amended by striking ``or'' at the end
    of clause (ii), by inserting ``or'' at the end of clause (iii), and by
    inserting after clause (iii) the following new clause:
                              ``(iv) of any taxidermy property which is
                          contributed by the person who prepared, stuffed,
                          or mounted the property or by any person who paid
                          or incurred the cost of such preparation,
                          stuffing, or mounting,''.

        (b) Treatment of Basis.--Subsection (f) of section 170, as amended
    by this Act, is amended by adding at the end the following new
    paragraph:
                ``(15) Special rule for taxidermy property.--
                        ``(A) Basis.--For purposes of this section and
                    notwithstanding section 1012, in the case of a
                    charitable contribution of taxidermy property which is
                    made by the person who prepared, stuffed, or mounted the
                    property or by any person who paid or incurred the cost
                    of such preparation, stuffing, or mounting, only the
                    cost of the preparing, stuffing, or mounting shall be
                    included in the basis of such property.
                        ``(B) Taxidermy property.--For purposes of this
                    section, the term `taxidermy property' means any work of
                    art which--
                              ``(i) is the reproduction or preservation of
                          an animal, in whole or in part,
                              ``(ii) is prepared, stuffed, or mounted for
                          purposes of recreating one or more characteristics
                          of such animal, and
                              ``(iii) contains a part of the body of the
                          dead animal.''.

        (c) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendment made
    by this section shall apply to contributions made after July 25, 2006.

    SEC. 1215. RECAPTURE OF TAX BENEFIT FOR CHARITABLE CONTRIBUTIONS OF
                EXEMPT USE PROPERTY NOT USED FOR AN EXEMPT USE.

        (a) Recapture of Deduction on Certain Sales of Exempt Use
    Property.--
                (1) In general.--Clause (i) of section 170(e)(1)(B) (related
            to certain contributions of ordinary income and capital gain
            property) is amended to read as follows:
                              ``(i) of tangible personal property--
                                        ``(I) if the use by the donee is
                                    unrelated to the purpose or function
                                    constituting the basis for its exemption
                                    under section 501 (or, in the case of a
                                    governmental unit, to any purpose or
                                    function described in subsection (c)),
                                    or
                                        ``(II) which is applicable property
                                    (as defined in paragraph (7)(C)) which
                                    is sold, exchanged, or otherwise
                                    disposed of by the donee before the last
                                    day of the taxable year in which the
                                    contribution was made and with respect
                                    to which the donee has not made a
                                    certification in accordance with
                                    paragraph (7)(D),''.

    [[Page 120 STAT. 1078]]

                (2) Dispositions after close of taxable year.--Section
            170(e) <<NOTE: 26 USC 170.>> is amended by adding at the end the
            following new paragraph:
                ``(7) Recapture of deduction on certain dispositions of
            exempt use property.--
                        ``(A) In general.--In the case of an applicable
                    disposition of applicable property, there shall be
                    included in the income of the donor of such property for
                    the taxable year of such donor in which the applicable
                    disposition occurs an amount equal to the excess (if
                    any) of--
                              ``(i) the amount of the deduction allowed to
                          the donor under this section with respect to such
                          property, over
                              ``(ii) the donor's basis in such property at
                          the time such property was contributed.
                        ``(B) Applicable disposition.--For purposes of this
                    paragraph, the term `applicable disposition' means any
                    sale, exchange, or other disposition by the donee of
                    applicable property--
                              ``(i) after the last day of the taxable year
                          of the donor in which such property was
                          contributed, and
                              ``(ii) before the last day of the 3-year
                          period beginning on the date of the contribution
                          of such property,
                    unless the donee makes a certification in accordance
                    with subparagraph (D).
                        ``(C) Applicable property.--For purposes of this
                    paragraph, the term `applicable property' means
                    charitable deduction property (as defined in section
                    6050L(a)(2)(A))--
                              ``(i) which is tangible personal property the
                          use of which is identified by the donee as related
                          to the purpose or function constituting the basis
                          of the donee's exemption under section 501, and
                              ``(ii) for which a deduction in excess of the
                          donor's basis is allowed.
                        ``(D) Certification.--A certification meets the
                    requirements of this subparagraph if it is a written
                    statement which is signed under penalty of perjury by an
                    officer of the donee organization and--
                              ``(i) which--
                                        ``(I) certifies that the use of the
                                    property by the donee was related to the
                                    purpose or function constituting the
                                    basis for the donee's exemption under
                                    section 501, and
                                        ``(II) describes how the property
                                    was used and how such use furthered such
                                    purpose or function, or
                              ``(ii) which--
                                        ``(I) states the intended use of the
                                    property by the donee at the time of the
                                    contribution, and
                                        ``(II) certifies that such intended
                                    use has become impossible or infeasible
                                    to implement.''.

        (b) Reporting Requirements.--Paragraph (1) of section 6050L(a)
    (relating to returns relating to certain dispositions of donated
    property) is amended--
                (1) by striking ``2 years'' and inserting ``3 years'', and

    [[Page 120 STAT. 1079]]

                (2) by striking ``and'' at the end of subparagraph (D), by
            striking the period at the end of subparagraph (E) and inserting
            a comma, and by inserting at the end the following:
                        ``(F) a description of the donee's use of the
                    property, and
                        ``(G) a statement indicating whether the use of the
                    property was related to the purpose or function
                    constituting the basis for the donee's exemption under
                    section 501.
            In any case in which the donee indicates that the use of
            applicable property (as defined in section 170(e)(7)(C)) was
            related to the purpose or function constituting the basis for
            the exemption of the donee under section 501 under subparagraph
            (G), the donee shall include with the return the certification
            described in section 170(e)(7)(D) if such certification is made
            under section 170(e)(7).''.

        (c) Penalty.--
                (1) In general.--Part I of subchapter B of chapter 68
            (relating to assessable penalties) is amended by inserting after
            section 6720A the following new section:

    ``SEC. 6720B. <<NOTE: 26 USC 6720B.>> FRAUDULENT IDENTIFICATION OF
                EXEMPT USE PROPERTY.

        ``In addition to any criminal penalty provided by law, any person
    who identifies applicable property (as defined in section 170(e)(7)(C))
    as having a use which is related to a purpose or function constituting
    the basis for the donee's exemption under section 501 and who knows that
    such property is not intended for such a use shall pay a penalty of
    $10,000.''.
                (2) Clerical amendment.--The table of sections for part I of
            subchapter B of chapter 68 is amended by adding after the item
            relating to section 6720A the following new item:

    ``Sec. 6720B. Fraudulent identification of exempt use property.''.

        (d) Effective Date.--
                (1) <<NOTE: 26 USC 170 note.>> Recapture.--The amendments
            made by subsection (a) shall apply to contributions after
            September 1, 2006.
                (2) <<NOTE: 26 USC 6050L.>> Reporting.--The amendments made
            by subsection (b) shall apply to returns filed after September
            1, 2006.
                (3) <<NOTE: 26 USC 6720B note.>> Penalty.--The amendments
            made by subsection (c) shall apply to identifications made after
            the date of the enactment of this Act.

    SEC. 1216. LIMITATION OF DEDUCTION FOR CHARITABLE CONTRIBUTIONS OF
                CLOTHING AND HOUSEHOLD ITEMS.

        (a) In General.--Subsection (f) of section 170, as amended by this
    Act, <<NOTE: 26 USC 170.>> is amended by adding at the end the following
    new paragraph:
                ``(16) Contributions of clothing and household items.--
                        ``(A) In general.--In the case of an individual,
                    partnership, or corporation, no deduction shall be
                    allowed under subsection (a) for any contribution of
                    clothing or a household item unless such clothing or
                    household item is in good used condition or better.
                        ``(B) Items of minimal value.--Notwithstanding
                    subparagraph (A), the Secretary may by regulation deny a
                    deduction under subsection (a) for any contribution of

    [[Page 120 STAT. 1080]]

                    clothing or a household item which has minimal monetary
                    value.
                        ``(C) Exception for certain property.--Subparagraphs
                    (A) and (B) shall not apply to any contribution of a
                    single item of clothing or a household item for which a
                    deduction of more than $500 is claimed if the taxpayer
                    includes with the taxpayer's return a qualified
                    appraisal with respect to the property.
                        ``(D) Household items.--For purposes of this para-
                    graph--
                              ``(i) In general.--The term `household items'
                          includes furniture, furnishings, electronics,
                          appliances, linens, and other similar items.
                              ``(ii) Excluded items.--Such term does not
                          include--
                                        ``(I) food,
                                        ``(II) paintings, antiques, and
                                    other objects of art,
                                        ``(III) jewelry and gems, and
                                        ``(IV) collections.
                        ``(E) Special rule for pass-thru entities.--In the
                    case of a partnership or S corporation, this paragraph
                    shall be applied at the entity level, except that the
                    deduction shall be denied at the partner or shareholder
                    level.''.

        (b) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendment made
    by this section shall apply to contributions made after the date of
    enactment of this Act.

    SEC. 1217. MODIFICATION OF RECORDKEEPING REQUIREMENTS FOR CERTAIN
                CHARITABLE CONTRIBUTIONS.

        (a) Recordkeeping Requirement.--Subsection (f) of section 170, as
    amended by this Act, <<NOTE: 26 USC 170.>> is amended by adding at the
    end the following new paragraph:
                ``(17) Recordkeeping.--No deduction shall be allowed under
            subsection (a) for any contribution of a cash, check, or other
            monetary gift unless the donor maintains as a record of such
            contribution a bank record or a written communication from the
            donee showing the name of the donee organization, the date of
            the contribution, and the amount of the contribution.''.

        (b) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendment made
    by this section shall apply to contributions made in taxable years
    beginning after the date of the enactment of this Act.

    SEC. 1218. CONTRIBUTIONS OF FRACTIONAL INTERESTS IN TANGIBLE PERSONAL
                PROPERTY.

        (a) Income Tax.--Section 170 (relating to charitable, etc.,
    contributions and gifts) is amended by redesignating subsection (o) as
    subsection (p) and by inserting after subsection (n) the following new
    subsection:
        ``(o) Special Rules for Fractional Gifts.--
                ``(1) Denial of deduction in certain cases.--
                        ``(A) In general.--No deduction shall be allowed for
                    a contribution of an undivided portion of a taxpayer's
                    entire interest in tangible personal property unless all
                    interest in the property is held immediately before such
                    contribution by--
                              ``(i) the taxpayer, or

    [[Page 120 STAT. 1081]]

                              ``(ii) the taxpayer and the donee.
                        ``(B) Exceptions.--The Secretary may, by regulation,
                    provide for exceptions to subparagraph (A) in cases
                    where all persons who hold an interest in the property
                    make proportional contributions of an undivided portion
                    of the entire interest held by such persons.
                ``(2) Valuation of subsequent gifts.--In the case of any
            additional contribution, the fair market value of such
            contribution shall be determined by using the lesser of--
                        ``(A) the fair market value of the property at the
                    time of the initial fractional contribution, or
                        ``(B) the fair market value of the property at the
                    time of the additional contribution.
                ``(3) Recapture of deduction in certain cases; addition to
            tax.--
                        ``(A) Recapture.--The Secretary shall provide for
                    the recapture of the amount of any deduction allowed
                    under this section (plus interest) with respect to any
                    contribution of an undivided portion of a taxpayer's
                    entire interest in tangible personal property--
                              ``(i) in any case in which the donor does not
                          contribute all of the remaining interest in such
                          property to the donee (or, if such donee is no
                          longer in existence, to any person described in
                          section 170(c)) before the earlier of--
                                        ``(I) the date that is 10 years
                                    after the date of the initial fractional
                                    contribution, or
                                        ``(II) the date of the death of the
                                    donor, and
                              ``(ii) in any case in which the donee has not,
                          during the period beginning on the date of the
                          initial fractional contribution and ending on the
                          date described in clause (i)--
                                        ``(I) had substantial physical
                                    possession of the property, and
                                        ``(II) used the property in a use
                                    which is related to a purpose or
                                    function constituting the basis for the
                                    organizations' exemption under section
                                    501.
                        ``(B) Addition to tax.--The tax imposed under this
                    chapter for any taxable year for which there is a
                    recapture under subparagraph (A) shall be increased by
                    10 percent of the amount so recaptured.
                ``(4) Definitions.--For purposes of this subsection--
                        ``(A) Additional contribution.--The term `additional
                    contribution' means any charitable contribution by the
                    taxpayer of any interest in property with respect to
                    which the taxpayer has previously made an initial
                    fractional contribution.
                        ``(B) Initial fractional contribution.--The term
                    `initial fractional contribution' means, with respect to
                    any taxpayer, the first charitable contribution of an
                    undivided portion of the taxpayer's entire interest in
                    any tangible personal property.''.

        (b) Estate Tax.--Section 2055 <<NOTE: 26 USC 2055.>> (relating to
    transfers for public, charitable, and religious uses) is amended by
    redesignating subsection (g) as subsection (h) and by inserting after
    subsection (f) the following new subsection:

    [[Page 120 STAT. 1082]]

        ``(g) Valuation of Subsequent Gifts.--
                ``(1) In general.--In the case of any additional
            contribution, the fair market value of such contribution shall
            be determined by using the lesser of--
                        ``(A) the fair market value of the property at the
                    time of the initial fractional contribution, or
                        ``(B) the fair market value of the property at the
                    time of the additional contribution.
                ``(2) Definitions.--For purposes of this paragraph--
                        ``(A) Additional contribution.--The term `additional
                    contribution' means a bequest, legacy, devise, or
                    transfer described in subsection (a) of any interest in
                    a property with respect to which the decedent had
                    previously made an initial fractional contribution.
                        ``(B) Initial fractional contribution.--The term
                    `initial fractional contribution' means, with respect to
                    any decedent, any charitable contribution of an
                    undivided portion of the decedent's entire interest in
                    any tangible personal property for which a deduction was
                    allowed under section 170.''.

        (c) Gift Tax.--Section 2522 <<NOTE: 26 USC 2522.>> (relating to
    charitable and similar gifts) is amended by redesignating subsection (e)
    as subsection (f) and by inserting after subsection (d) the following
    new subsection:

        ``(e) Special Rules for Fractional Gifts.--
                ``(1) Denial of deduction in certain cases.--
                        ``(A) In general.--No deduction shall be allowed for
                    a contribution of an undivided portion of a taxpayer's
                    entire interest in tangible personal property unless all
                    interest in the property is held immediately before such
                    contribution by--
                              ``(i) the taxpayer, or
                              ``(ii) the taxpayer and the donee.
                        ``(B) Exceptions.--The Secretary may, by regulation,
                    provide for exceptions to subparagraph (A) in cases
                    where all persons who hold an interest in the property
                    make proportional contributions of an undivided portion
                    of the entire interest held by such persons.
                ``(2) Valuation of subsequent gifts.--In the case of any
            additional contribution, the fair market value of such
            contribution shall be determined by using the lesser of--
                        ``(A) the fair market value of the property at the
                    time of the initial fractional contribution, or
                        ``(B) the fair market value of the property at the
                    time of the additional contribution.
                ``(3) Recapture of deduction in certain cases; addition to
            tax.--
                        ``(A) In general.--The Secretary shall provide for
                    the recapture of an amount equal to any deduction
                    allowed under this section (plus interest) with respect
                    to any contribution of an undivided portion of a
                    taxpayer's entire interest in tangible personal
                    property--
                              ``(i) in any case in which the donor does not
                          contribute all of the remaining interest in such
                          property to the donee (or, if such donee is no
                          longer in existence, to any person described in
                          section 170(c)) before the earlier of--

    [[Page 120 STAT. 1083]]

                                        ``(I) the date that is 10 years
                                    after the date of the initial fractional
                                    contribution, or
                                        ``(II) the date of the death of the
                                    donor, and
                              ``(ii) in any case in which the donee has not,
                          during the period beginning on the date of the
                          initial fractional contribution and ending on the
                          date described in clause (i)--
                                        ``(I) had substantial physical
                                    possession of the property, and
                                        ``(II) used the property in a use
                                    which is related to a purpose or
                                    function constituting the basis for the
                                    organizations' exemption under section
                                    501.
                        ``(B) Addition to tax.--The tax imposed under this
                    chapter for any taxable year for which there is a
                    recapture under subparagraph (A) shall be increased by
                    10 percent of the amount so recaptured.
                ``(4) Definitions.--For purposes of this subsection--
                        ``(A) Additional contribution.--The term `additional
                    contribution' means any gift for which a deduction is
                    allowed under subsection (a) or (b) of any interest in a
                    property with respect to which the donor has previously
                    made an initial fractional contribution.
                        ``(B) Initial fractional contribution.--The term
                    `initial fractional contribution' means, with respect to
                    any donor, the first gift of an undivided portion of the
                    donor's entire interest in any tangible personal
                    property for which a deduction is allowed under
                    subsection (a) or (b).''.

        (d) <<NOTE: 26 USC 170 note.>> Effective Date.--The amendments made
    by this section shall apply to contributions, bequests, and gifts made
    after the date of the enactment of this Act.

    SEC. 1219. PROVISIONS RELATING TO SUBSTANTIAL AND GROSS OVERSTATEMENTS
                OF VALUATIONS.

        (a) Modification of Thresholds for Substantial and Gross Valuation
    Misstatements.--
                (1) Substantial valuation misstatement.--
                        (A) Income taxes.--Subparagraph (A) of section
                    6662(e)(1) <<NOTE: 26 USC 6662.>> (relating to
                    substantial valuation misstatement under chapter 1) is
                    amended by striking ``200 percent'' and inserting ``150
                    percent''.
                        (B) Estate and gift taxes.--Paragraph (1) of section
                    6662(g) is amended by striking ``50 percent'' and
                    inserting ``65 percent''.
                (2) Gross valuation misstatement.--
                        (A) Income taxes.--Clauses (i) and (ii) of section
                    6662(h)(2)(A) (relating to increase in penalty in case
                    of gross valuation misstatements) are amended to read as
                    follows:
                              ``(i) in paragraph (1)(A), `200 percent' for
                          `150 percent',
                              ``(ii) in paragraph (1)(B)(i)--
                                        ``(I) `400 percent' for `200
                                    percent', and
                                        ``(II) `25 percent' for `50
                                    percent', and''.
                        (B) Estate and gift taxes.--Subparagraph (C) of
                    section 6662(h)(2) is amended by striking `` `25
                    percent' for `50 percent' '' and inserting `` `40
                    percent' for `65 percent' ''.

    [[Page 120 STAT. 1084]]

                (3) Elimination of reasonable cause exception for gross
            misstatements.--Section 6664(c)(2) <<NOTE: 26 USC
            6664.>> (relating to reasonable cause exception for
            underpayments) is amended by striking ``paragraph (1) shall not
            apply unless'' and inserting ``paragraph (1) shall not apply.
            The preceding sentence shall not apply to a substantial
            valuation overstatement under chapter 1 if''.

        (b) Penalty on Appraisers Whose Appraisals Result in Substantial or
    Gross Valuation Misstatements.--
                (1) In general.--Part I of subchapter B of chapter 68
            (relating to assessable penalties) is amended by inserting after
            section 6695 the following new section:

    ``SEC. 6695A. <<NOTE: 26 USC 6695A.>> SUBSTANTIAL AND GROSS VALUATION
                MISSTATEMENTS ATTRIBUTABLE TO INCORRECT APPRAISALS.

        ``(a) Imposition of Penalty.--If--
                ``(1) a person prepares an appraisal of the value of
            property and such person knows, or reasonably should have known,
            that the appraisal would be used in connection with a return or
            a claim for refund, and
                ``(2) the claimed value of the property on a return or claim
            for refund which is based on such appraisal results in a
            substantial valuation misstatement under chapter 1 (within the
            meaning of section 6662(e)), or a gross valuation misstatement
            (within the meaning of section 6662(h)), with respect to such
            property, then such person shall pay a penalty in the amount
            determined under subsection (b).

        ``(b) Amount of Penalty.--The amount of the penalty imposed under
    subsection (a) on any person with respect to an appraisal shall be equal
    to the lesser of--
                ``(1) the greater of--
                        ``(A) 10 percent of the amount of the underpayment
                    (as defined in section 6664(a)) attributable to the
                    misstatement described in subsection (a)(2), or
                        ``(B) $1,000, or
                ``(2) 125 percent of the gross income received by the person
            described in subsection (a)(1) from the preparation of the
            appraisal.

        ``(c) Exception.--No penalty shall be imposed under subsection (a)
    if the person establishes to the satisfaction of the Secretary that the
    value established in the appraisal was more likely than not the proper
    value.''.
                (2) Rules applicable to penalty.--Section 6696 (relating to
            rules applicable with respect to sections 6694 and 6695) is
            amended--
                        (A) by striking ``6694 and 6695'' each place it
                    appears in the text and heading thereof and inserting
                    ``6694, 6695, and 6695A'', and
                        (B) by striking ``6694 or 6695'' each place it
                    appears in the text and inserting ``6694, 6695, or
                    6695A''.
                (3) Conforming amendment.--The table of sections for part I
            of subchapter B of chapter 68 is amended by striking the item
            relating to section 6696 and inserting the following new items:

    ``Sec. 6695A. Substantial and gross valuation misstatements attributable
               to incorrect appraisals.
    ``Sec. 6696. Rules applicable with respect to sections 6694, 6695, and
               6695A.''.

        (c) Qualified Appraisers and Appraisals.--

    [[Page 120 STAT. 1085]]

                (1) In general.--Subparagraph <<NOTE: 26 USC 170.>> (E) of
            section 170(f)(11) is amended to read as follows:
                        ``(E) Qualified appraisal and appraiser.--For
                    purposes of this paragraph--
                              ``(i) Qualified appraisal.--The term
                          `qualified appraisal' means, with respect to any
                          property, an appraisal of such property which--
                                        ``(I) is treated for purposes of
                                    this paragraph as a qualified appraisal
                                    under regulations or other guidance
                                    prescribed by the Secretary, and
                                        ``(II) is conducted by a qualified
                                    appraiser in accordance with generally
                                    accepted appraisal standards and any
                                    regulations or other guidance prescribed
                                    under subclause (I).
                              ``(ii) Qualified appraiser.--Except as
                          provided in clause (iii), the term `qualified
                          appraiser' means an individual who--
                                        ``(I) <<NOTE: Regulations.>> has
                                    earned an appraisal designation from a
                                    recognized professional appraiser
                                    organization or has otherwise met
                                    minimum education and experience
                                    requirements set forth in regulations
                                    prescribed by the Secretary,
                                        ``(II) regularly performs appraisals
                                    for which the individual receives
                                    compensation, and
                                        ``(III) meets such other
                                    requirements as may be prescribed by the
                                    Secretary in regulations or other
                                    guidance.
                              ``(iii) Specific appraisals.--An individual
                          shall not be treated as a qualified appraiser with
                          respect to any specific appraisal unless--
                                        ``(I) the individual demonstrates
                                    verifiable education and experience in
                                    valuing the type of property subject to
                                    the appraisal, and
                                        ``(II) the individual has not been
                                    prohibited from practicing before the
                                    Internal Revenue Service by the
                                    Secretary under section 330(c) of title
                                    31, United States Code, at any time
                                    during the 3-year period ending on the
                                    date of the appraisal.''.
                (2) Reasonable cause exception.--Subparagraphs (B) and (C)
            of section 6664(c)(3) are amended to read as follows:
                        ``(B) Qualified appraisal.--The term `qualified
                    appraisal' has the meaning given such term by section
                    170(f)(11)(E)(i).
                        ``(C) Qualified appraiser.--The term `qualified
                    appraiser' has the meaning given such term by section
                    170(f)(11)(E)(ii).''.

        (d) Disciplinary Actions Against Appraisers.--Section 330(c) of
    title 31, United States Code, is amended by striking ``with respect to
    whom a penalty has been assessed under section 6701(a) of the Internal
    Revenue Code of 1986''.
        (e) <<NOTE: Applicability. 26 USC 170 note.>> Effective Dates.--
                (1) Misstatement penalties.--Except as provided in paragraph
            (3), the amendments made by subsection (a) shall apply to
            returns filed after the date of the enactment of this Act.
                (2) Appraiser provisions.--Except as provided in paragraph
            (3), the amendments made by subsections (b), (c), and

    [[Page 120 STAT. 1086]]

            (d) shall apply to appraisals prepared with respect to returns
            or submissions filed after the date of the enactment of this
            Act.
                (3) Special rule for certain easements.--In the case of a
            contribution of a qualified real property interest which is a
            restriction with respect to the exterior of a building described
            in section 170(h)(4)(C)(ii) of the Internal Revenue Code of
            1986, and an appraisal with respect to the contribution, the
            amendments made by subsections (a) and (b) shall apply to
            returns filed after July 25, 2006.

    SEC. 1220. ADDITIONAL STANDARDS FOR CREDIT COUNSELING ORGANIZATIONS.

        (a) In General.--Section 501 <<NOTE: 26 USC 501.>> (relating to
    exemption from tax on corporations, certain trusts, etc.) is amended by
    redesignating subsection (q) as subsection (r) and by inserting after
    subsection (p) the following new subsection:

        ``(q) Special Rules for Credit Counseling Organizations.--
                ``(1) In general.--An organization with respect to which the
            provision of credit counseling services is a substantial purpose
            shall not be exempt from tax under subsection (a) unless such
            organization is described in paragraph (3) or (4) of subsection
            (c) and such organization is organized and operated in
            accordance with the following requirements:
                        ``(A) The organization--
                              ``(i) provides credit counseling services
                          tailored to the specific needs and circumstances
                          of consumers,
                              ``(ii) makes no loans to debtors (other than
                          loans with no fees or interest) and does not
                          negotiate the making of loans on behalf of
                          debtors,
                              ``(iii) provides services for the purpose of
                          improving a consumer's credit record, credit
                          history, or credit rating only to the extent that
                          such services are incidental to providing credit
                          counseling services, and
                              ``(iv) does not charge any separately stated
                          fee for services for the purpose of improving any
                          consumer's credit record, credit history, or
                          credit rating.
                        ``(B) The organization does not refuse to provide
                    credit counseling services to a consumer due to the
                    inability of the consumer to pay, the ineligibility of
                    the consumer for debt management plan enrollment, or the
                    unwillingness of the consumer to enroll in a debt
                    management plan.
                        ``(C) The organization establishes and implements a
                    fee policy which--
                              ``(i) requires that any fees charged to a
                          consumer for services are reasonable,
                              ``(ii) allows for the waiver of fees if the
                          consumer is unable to pay, and
                              ``(iii) except to the extent allowed by State
                          law, prohibits charging any fee based in whole or
                          in part on a percentage of the consumer's debt,
                          the consumer's payments to be made pursuant to a
                          debt management plan, or the projected or actual
                          savings to the consumer resulting from enrolling
                          in a debt management plan.
                        ``(D) At all times the organization has a board of
                    directors or other governing body--

    [[Page 120 STAT. 1087]]

                              ``(i) which is controlled by persons who
                          represent the broad interests of the public, such
                          as public officials acting in their capacities as
                          such, persons having special knowledge or
                          expertise in credit or financial education, and
                          community leaders,
                              ``(ii) not more than 20 percent of the voting
                          power of which is vested in persons who are
                          employed by the organization or who will benefit
                          financially, directly or indirectly, from the
                          organization's activities (other than through the
                          receipt of reasonable directors' fees or the
                          repayment of consumer debt to creditors other than
                          the credit counseling organization or its
                          affiliates), and
                              ``(iii) not more than 49 percent of the voting
                          power of which is vested in persons who are
                          employed by the organization or who will benefit
                          financially, directly or indirectly, from the
                          organization's activities (other than through the
                          receipt of reasonable directors' fees).
                        ``(E) The organization does not own more than 35
                    percent of--
                              ``(i) the total combined voting power of any
                          corporation (other than a corporation which is an
                          organization described in subsection (c)(3) and
                          exempt from tax under subsection (a)) which is in
                          the trade or business of lending money, repairing
                          credit, or providing debt management plan
                          services, payment processing, or similar services,
                              ``(ii) the profits interest of any partnership
                          (other than a partnership which is an organization
                          described in subsection (c)(3) and exempt from tax
                          under subsection (a)) which is in the trade or
                          business of lending money, repairing credit, or
                          providing debt management plan services, payment
                          processing, or similar services, and
                              ``(iii) the beneficial interest of any trust
                          or estate (other than a trust which is an
                          organization described in subsection (c)(3) and
                          exempt from tax under subsection (a)) which is in
                          the trade or business of lending money, repairing
                          credit, or providing debt management plan
                          services, payment processing, or similar services.
                        ``(F) The organization receives no amount for
                    providing referrals to others for debt management plan
                    services, and pays no amount to others for obtaining
                    referrals of consumers.
                ``(2) Additional requirements for organizations described in
            subsection (c)(3).--
                        ``(A) In general.--In addition to the requirements
                    under paragraph (1), an organization with respect to
                    which the provision of credit counseling services is a
                    substantial purpose and which is described in paragraph
                    (3) of subsection (c) shall not be exempt from tax under
                    subsection (a) unless such organization is organized and
                    operated in accordance with the following requirements:
                              ``(i) The organization does not solicit
                          contributions from consumers during the initial
                          counseling process or while the consumer is
                          receiving services from the organization.

    [[Page 120 STAT. 1088]]

                              ``(ii) The aggregate revenues of the
                          organization which are from payments of creditors
                          of consumers of the organization and which are
                          attributable to debt management plan services do
                          not exceed the applicable percentage of the total
                          revenues of the organization.
                        ``(B) Applicable percentage.--
                              ``(i) In general.--For purposes of
                          subparagraph (A)(ii), the applicable percentage is
                          50 percent.
                              ``(ii) Transition rule.--Notwithstanding
                          clause (i), in the case of an organization with
                          respect to which the provision of credit
                          counseling services is a substantial purpose and
                          which is described in paragraph (3) of subsection
                          (c) and exempt from tax under subsection (a) on
                          the date of the enactment of this subsection, the
                          applicable percentage is--
                                        ``(I) 80 percent for the first
                                    taxable year of such organization
                                    beginning after the date which is 1 year
                                    after the date of the enactment of this
                                    subsection, and
                                        ``(II) 70 percent for the second
                                    such taxable year beginning after such
                                    date, and
                                        ``(III) 60 percent for the third
                                    such taxable year beginning after such
                                    date.
                ``(3) Additional requirement for organizations described in
            subsection (c)(4).--In addition to the requirements under
            paragraph (1), an organization with respect to which the
            provision of credit counseling services is a substantial purpose
            and which is described in paragraph (4) of subsection (c) shall
            not be exempt from tax under subsection (a) unless such
            organization notifies the Secretary, in such manner as the
            Secretary may by regulations prescribe, that it is applying for
            recognition as a credit counseling organization.
                ``(4) Credit counseling services; debt management plan
            services.--For purposes of this subsection--
                        ``(A) Credit counseling services.--The term `credit
                    counseling services' means--
                              ``(i) the providing of educational information
                          to the general public on budgeting, personal
                          finance, financial literacy, saving and spending
                          practices, and the sound use of consumer credit,
                              ``(ii) the assisting of individuals and
                          families with financial problems by providing them
                          with counseling, or
                              ``(iii) a combination of the activities
                          described in clauses (i) and (ii).
                        ``(B) Debt management plan services.--The term `debt
                    management plan services' means services related to the
                    repayment, consolidation, or restructuring of a
                    consumer's debt, and includes the negotiation with
                    creditors of lower interest rates, the waiver or
                    reduction of fees, and the marketing and processing of
                    debt management plans.''.

        (b) Debt Management Plan Services Treated as an Unrelated
    Business.--Section 513 <<NOTE: 26 USC 513.>> (relating to unrelated
    trade or business) is amended by adding at the end the following:

        ``(j) Debt Management Plan Services.--The term `unrelated trade or
    business' includes the provision of debt management plan

    [[Page 120 STAT. 1089]]

    services (as defined in section 501(q)(4)(B)) by any organization other
    than an organization which meets the requirements of section 501(q).''.
        (c) <<NOTE: 26 USC 501 note.>> Effective Date.--
                (1) In general.--Except as provided in paragraph (2), the
            amendments made by this section shall apply to taxable years
            beginning after the date of the enactment of this Act.
                (2) Transition rule for existing organizations.--In the case
            of any organization described in paragraph (3) or (4) of section
            501(c) of the Internal Revenue Code of 1986 and with respect to
            which the provision of credit counseling services is a
            substantial purpose on the date of the enactment of this Act,
            the amendments made by this section shall apply to taxable years
            beginning after the date which is 1 year after the date of the
            enactment of this Act.

    SEC. 1221. EXPANSION OF THE BASE OF TAX ON PRIVATE FOUNDATION NET
                INVESTMENT INCOME.

        (a) Gross Investment Income.--
                (1) In general.--Paragraph (2) of section 4940(c) <<NOTE: 26
            USC 4940.>> (relating to gross investment income) is amended by
            adding at the end the following new sentence: ``Such term shall
            also include income from sources similar to those in the
            preceding sentence.''.
                (2) Conforming amendment.--Subsection (e) of section 509
            (relating to gross investment income) is amended by adding at
            the end the following new sentence: ``Such term shall also
            include income from sources similar to those in the preceding
            sentence.''.

        (b) Capital Gain Net Income.--Paragraph (4) of section 4940(c)
    (relating to capital gains and losses) is amended--
                (1) in subparagraph (A), by striking ``used for the
            production of interest, dividends, rents, and royalties'' and
            inserting ``used for the production of gross investment income
            (as defined in paragraph (2))'',
                (2) in subparagraph (C), by inserting ``or carrybacks''
            after ``carryovers'', and
                (3) by adding at the end the following new subparagraph:
                        ``(D) Except to the extent provided by regulation,
                    under rules similar to the rules of section 1031
                    (including the exception under subsection (a)(2)
                    thereof), no gain or loss shall be taken into account
                    with respect to any portion of property used for a
                    period of not less than 1 year for a purpose or function
                    constituting the basis of the private foundation's
                    exemption if the entire property is exchanged
                    immediately following such period solely for property of
                    like kind which is to be used primarily for a purpose or
                    function constituting the basis for such foundation's
                    exemption.''.

        (c) <<NOTE: 26 USC 509 note.>> Effective Date.--The amendments made
    by this section shall apply to taxable years beginning after the date of
    the enactment of this Act.

    SEC. 1222. DEFINITION OF CONVENTION OR ASSOCIATION OF CHURCHES.

        Section 7701 (relating to definitions) is amended by redesignating
    subsection (o) as subsection (p) and by inserting after subsection (n)
    the following new subsection:

    [[Page 120 STAT. 1090]]

        ``(o) Convention or Association of Churches.--For purposes of this
    title, any organization which is otherwise a convention or association
    of churches shall not fail to so qualify merely because the membership
    of such organization includes individuals as well as churches or because
    individuals have voting rights in such organization.''.

    SEC. 1223. NOTIFICATION REQUIREMENT FOR ENTITIES NOT CURRENTLY REQUIRED
                TO FILE.

        (a) In General.--Section 6033 <<NOTE: 26 USC 6033.>> (relating to
    returns by exempt organizations), as amended by this Act, is amended by
    redesignating subsection (i) as subsection (j) and by inserting after
    subsection (h) the following new subsection:

        ``(i) Additional Notification Requirements.--Any organization the
    gross receipts of which in any taxable year result in such organization
    being referred to in subsection (a)(3)(A)(ii) or (a)(3)(B)--
                ``(1) shall furnish annually, in electronic form, and at
            such time and in such manner as the Secretary may by regulations
            prescribe, information setting forth--
                        ``(A) the legal name of the organization,
                        ``(B) any name under which such organization
                    operates or does business,
                        ``(C) the organization's mailing address and
                    Internet web site address (if any),
                        ``(D) the organization's taxpayer identification
                    number,
                        ``(E) the name and address of a principal officer,
                    and
                        ``(F) evidence of the continuing basis for the
                    organization's exemption from the filing requirements
                    under subsection (a)(1), and
                ``(2) upon the termination of the existence of the
            organization, shall furnish notice of such termination.''.

        (b) Loss of Exempt Status for Failure To File Return or Notice.--
    Section 6033 (relating to returns by exempt organizations), as amended
    by subsection (a), is amended by redesignating subsection (j) as
    subsection (k) and by inserting after subsection (i) the following new
    subsection:
        ``(j) Loss of Exempt Status for Failure To File Return or Notice.--
                ``(1) <<NOTE: Revocation.>> In general.--If an organization
            described in subsection (a)(1) or (i) fails to file an annual
            return or notice required under either subsection for 3
            consecutive years, such organization's status as an organization
            exempt from tax under section 501(a) shall be considered revoked
            on and after the date set by the Secretary for the filing of the
            third annual return or
            notice. <<NOTE: Publication. Records.>> The Secretary shall
            publish and maintain a list of any organization the status of
            which is so revoked.
                ``(2) Application necessary for reinstatement.--Any
            organization the tax-exempt status of which is revoked under
            paragraph (1) must apply in order to obtain reinstatement of
            such status regardless of whether such organization was
            originally required to make such an application.
                ``(3) Retroactive reinstatement if reasonable cause shown
            for failure.--If, upon application for reinstatement of status
            as an organization exempt from tax under section 501(a), an
            organization described in paragraph (1) can show to the
            satisfaction of the Secretary evidence of reasonable cause

    [[Page 120 STAT. 1091]]

            for the failure described in such paragraph, the organization's
            exempt status may, in the discretion of the Secretary, be
            reinstated effective from the date of the revocation under such
            paragraph.''.

        (c) <<NOTE: 26 USC 7428.>> No Declaratory Judgment Relief.--Section
    7428(b) (relating to limitations) is amended by adding at the end the
    following new paragraph:
                ``(4) Nonapplication for certain revocations.--No action may
            be brought under this section with respect to any revocation of
            status described in section 6033(j)(1).''.

        (d) No Monetary Penalty for Failure To Notify.--Section 6652(c)(1)
    (relating to annual returns under section 6033 or 6012(a)(6)) is amended
    by adding at the end the following new subparagraph:
                        ``(E) No penalty for certain annual notices.--This
                    paragraph shall not apply with respect to any notice
                    required under section 6033(i).''.

        (e) <<NOTE: 26 USC 6033 note.>> Secretarial Outreach Requirements.--
                (1) Notice requirement.--The Secretary of the Treasury shall
            notify in a timely manner every organization described in
            section 6033(i) of the Internal Revenue Code of 1986 (as added
            by this section) of the requirement under such section 6033(i)
            and of the penalty established under section 6033(j) of such
            Code--
                        (A) by mail, in the case of any organization the
                    identity and address of which is included in the list of
                    exempt organizations maintained by the Secretary, and
                        (B) by Internet or other means of outreach, in the
                    case of any other organization.
                (2) <<NOTE: Public information.>> Loss of status penalty for
            failure to file return.--The Secretary of the Treasury shall
            publicize, in a timely manner in appropriate forms and
            instructions and through other appropriate means, the penalty
            established under section 6033(j) of such Code for the failure
            to file a return under subsection (a)(1) or (i) of section 6033
            of such Code.

        (f) Effective Date.--The <<NOTE: 26 USC 6033 note.>> amendments made
    by this section shall apply to notices and returns with respect to
    annual periods beginning after 2006.

    SEC. 1224. DISCLOSURE TO STATE OFFICIALS RELATING TO EXEMPT
                ORGANIZATIONS.

        (a) In General.--Subsection (c) of section 6104 is amended by
    striking paragraph (2) and inserting the following new paragraphs:
                ``(2) Disclosure of proposed actions related to charitable
            organizations.--
                        ``(A) Specific notifications.--In the case of an
                    organization to which paragraph (1) applies, the
                    Secretary may disclose to the appropriate State
                    officer--
                              ``(i) a notice of proposed refusal to
                          recognize such organization as an organization
                          described in section 501(c)(3) or a notice of
                          proposed revocation of such organization's
                          recognition as an organization exempt from
                          taxation,
                              ``(ii) the issuance of a letter of proposed
                          deficiency of tax imposed under section 507 or
                          chapter 41 or 42, and

    [[Page 120 STAT. 1092]]

                              ``(iii) the names, addresses, and taxpayer
                          identification numbers of organizations which have
                          applied for recognition as organizations described
                          in section 501(c)(3).
                        ``(B) Additional disclosures.--Returns and return
                    information of organizations with respect to which
                    information is disclosed under subparagraph (A) may be
                    made available for inspection by or disclosed to an
                    appropriate State officer.
                        ``(C) Procedures for disclosure.--Information may be
                    inspected or disclosed under subparagraph (A) or (B)
                    only--
                              ``(i) upon written request by an appropriate
                          State officer, and
                              ``(ii) for the purpose of, and only to the
                          extent necessary in, the administration of State
                          laws regulating such organizations.
                    Such information may only be inspected by or disclosed
                    to a person other than the appropriate State officer if
                    such person is an officer or employee of the State and
                    is designated by the appropriate State officer to
                    receive the returns or return information under this
                    paragraph on behalf of the appropriate State officer.
                        ``(D) Disclosures other than by request.--The
                    Secretary may make available for inspection or disclose
                    returns and return information of an organization to
                    which paragraph (1) applies to an appropriate State
                    officer of any State if the Secretary determines that
                    such returns or return information may constitute
                    evidence of noncompliance under the laws within the
                    jurisdiction of the appropriate State officer.
                ``(3) Disclosure with respect to certain other exempt
            organizations.--Upon written request by an appropriate State
            officer, the Secretary may make available for inspection or
            disclosure returns and return information of any organization
            described in section 501(c) (other than organizations described
            in paragraph (1) or (3) thereof) for the purpose of, and only to
            the extent necessary in, the administration of State laws
            regulating the solicitation or administration of the charitable
            funds or charitable assets of such organizations. Such
            information may only be inspected by or disclosed to a person
            other than the appropriate State officer if such person is an
            officer or employee of the State and is designated by the
            appropriate State officer to receive the returns or return
            information under this paragraph on behalf of the appropriate
            State officer.
                ``(4) Use in civil judicial and administrative
            proceedings.--Returns and return information disclosed pursuant
            to this subsection may be disclosed in civil administrative and
            civil judicial proceedings pertaining to the enforcement of
            State laws regulating such organizations in a manner prescribed
            by the Secretary similar to that for tax administration
            proceedings under section 6103(h)(4).
                ``(5) No disclosure if impairment.--Returns and return
            information shall not be disclosed under this subsection, or in
            any proceeding described in paragraph (4), to the extent that
            the Secretary determines that such disclosure would seriously
            impair Federal tax administration.

    [[Page 120 STAT. 1093]]

                ``(6) Definitions.--For purposes of this subsection--
                        ``(A) Return and return information.--The terms
                    `return' and `return information' have the respective
                    meanings given to such terms by section 6103(b).
                        ``(B) Appropriate state officer.--The term
                    `appropriate State officer' means--
                              ``(i) the State attorney general,
                              ``(ii) the State tax officer,
                              ``(iii) in the case of an organization to
                          which paragraph (1) applies, any other State
                          official charged with overseeing organizations of
                          the type described in section 501(c)(3), and
                              ``(iv) in the case of an organization to which
                          paragraph (3) applies, the head of an agency
                          designated by the State attorney general as having
                          primary responsibility for overseeing the
                          solicitation of funds for charitable purposes.''.

        (b) Conforming Amendments.--
                (1) Paragraph (2) of section 6103(a) <<NOTE: 26 USC
            6103.>> is amended by inserting ``or section 6104(c)'' after
            ``this section''.
                (2) Subparagraph (A) of section 6103(p)(3) is amended by
            inserting ``and section 6104(c)'' after ``section'' in the first
            sentence.
                (3) Paragraph (4) of section 6103(p) is amended--
                        (A) in the matter preceding subparagraph (A), by
                    inserting ``, any appropriate State officer (as defined
                    in section 6104(c)),'' before ``or any other person'',
                        (B) in subparagraph (F)(i), by inserting ``any
                    appropriate State officer (as defined in section
                    6104(c)),'' before ``or any other person'', and
                        (C) in the matter following subparagraph (F), by
                    inserting ``, an appropriate State officer (as defined
                    in section 6104(c)),'' after ``including an agency''
                    each place it appears.
                (4) The heading for paragraph (1) of section 6104(c) is
            amended by inserting ``for charitable organizations'' after
            ``rule''.
                (5) Paragraph (2) of section 7213(a) is amended by inserting
            ``or under section 6104(c)'' after ``6103''.
                (6) Paragraph (2) of section 7213A(a) is amended by
            inserting ``or under section 6104(c)'' after ``7213(a)(2)''.
                (7) Paragraph (2) of section 7431(a) is amended by inserting
            ``or in violation of section 6104(c)'' after ``6103''.

        (c) Effective Date.--The amendments made by this section shall take
    effect on the date of the enactment of this Act but shall not apply to
    requests made before such date.

    SEC. 1225. PUBLIC DISCLOSURE OF INFORMATION RELATING TO UNRELATED
                BUSINESS INCOME TAX RETURNS.

        (a) In General.--Subparagraph (A) of section 6104(d)(1) is amended
    by redesignating clauses (ii) and (iii) as clauses (iii) and (iv),
    respectively, and by inserting after clause (i) the following new
    clause:
                              ``(ii) any annual return filed under section
                          6011 which relates to any tax imposed by section
                          511 (relating to imposition of tax on unrelated
                          business income of charitable, etc.,
                          organizations) by such

    [[Page 120 STAT. 1094]]

                          organization, but only if such organization is
                          described in section 501(c)(3),''.

        (b) Effective Date.--The <<NOTE: 26 USC 6104 note.>> amendments made
    by this section shall apply to returns filed after the date of the
    enactment of this Act.

    SEC. 1226. STUDY ON DONOR ADVISED FUNDS AND SUPPORTING ORGANIZATIONS.

        (a) Study.--The Secretary of the Treasury shall undertake a study on
    the organization and operation of donor advised funds (as defined in
    section 4966(d)(2) of the Internal Revenue Code of 1986, as added by
    this Act) and of organizations described in section 509(a)(3) of such
    Code. The study shall specifically con- sider--
                (1) whether the deductions allowed for the income, gift, or
            estate taxes for charitable contributions to sponsoring
            organizations (as defined in section 4966(d)(1) of such Code, as
            added by this Act) of donor advised funds or to organizations
            described in section 509(a)(3) of such Code are appropriate in
            consideration of--
                        (A) the use of contributed assets (including the
                    type, extent, and timing of such use), or
                        (B) the use of the assets of such organizations for
                    the benefit of the person making the charitable
                    contribution (or a person related to such person),
                (2) whether donor advised funds should be required to
            distribute for charitable purposes a specified amount (whether
            based on the income or assets of the fund) in order to ensure
            that the sponsoring organization with respect to such donor
            advised fund is operating consistent with the purposes or
            functions constituting the basis for its exemption under section
            501, or its status as an organization described in section
            509(a), of such Code,
                (3) whether the retention by donors to organizations
            described in paragraph (1) of rights or privileges with respect
            to amounts transferred to such organizations (including advisory
            rights or privileges with respect to the making of grants or the
            investment of assets) is consistent with the treatment of such
            transfers as completed gifts that qualify for a deduction for
            income, gift, or estate taxes, and
                (4) whether the issues raised by paragraphs (1), (2), and
            (3) are also issues with respect to other forms of charities or
            charitable donations.

        (b) Report.--Not later than 1 year after the date of the enactment
    of this Act, the Secretary of the Treasury shall submit to the Committee
    on Finance of the Senate and the Committee on Ways and Means of the
    House of Representatives a report on the study conducted under
    subsection (a) and make such recommendations as the Secretary of the
    Treasury considers appropriate.

             PART 2--IMPROVED ACCOUNTABILITY OF DONOR ADVISED FUNDS

    SEC. 1231. EXCISE TAXES RELATING TO DONOR ADVISED FUNDS.

        (a) In General.--Chapter 42 (relating to private foundations and
    certain other tax-exempt organizations), as amended by the

    [[Page 120 STAT. 1095]]

    Tax Increase Prevention and Reconciliation Act of 2005, is amended by
    adding at the end the following new subchapter:

                       ``Subchapter G--Donor Advised Funds

    ``Sec. 4966. Taxes on taxable distributions.
    ``Sec. 4967. Taxes on prohibited benefits.

    ``SEC. 4966. <<NOTE: 26 USC 4966.>> TAXES ON TAXABLE DISTRIBUTIONS.

        ``(a) Imposition of Taxes.--
                ``(1) On the sponsoring organization.--There is hereby
            imposed on each taxable distribution a tax equal to 20 percent
            of the amount thereof. The tax imposed by this paragraph shall
            be paid by the sponsoring organization with respect to the donor
            advised fund.
                ``(2) On the fund management.--There is hereby imposed on
            the agreement of any fund manager to the making of a
            distribution, knowing that it is a taxable distribution, a tax
            equal to 5 percent of the amount thereof. The tax imposed by
            this paragraph shall be paid by any fund manager who agreed to
            the making of the distribution.

        ``(b) Special Rules.--For purposes of subsection (a)--
                ``(1) Joint and several liability.--If more than one person
            is liable under subsection (a)(2) with respect to the making of
            a taxable distribution, all such persons shall be jointly and
            severally liable under such paragraph with respect to such
            distribution.
                ``(2) Limit for management.--With respect to any one taxable
            distribution, the maximum amount of the tax imposed by
            subsection (a)(2) shall not exceed $10,000.

        ``(c) Taxable Distribution.--For purposes of this section--
                ``(1) In general.--The term `taxable distribution' means any
            distribution from a donor advised fund--
                        ``(A) to any natural person, or
                        ``(B) to any other person if--
                              ``(i) such distribution is for any purpose
                          other than one specified in section 170(c)(2)(B),
                          or
                              ``(ii) the sponsoring organization does not
                          exercise expenditure responsibility with respect
                          to such distribution in accordance with section
                          4945(h).
                ``(2) Exceptions.--Such term shall not include any
            distribution from a donor advised fund--
                        ``(A) to any organization described in section
                    170(b)(1)(A) (other than a disqualified supporting
                    organization),
                        ``(B) to the sponsoring organization of such donor
                    advised fund, or
                        ``(C) to any other donor advised fund.

        ``(d) Definitions.--For purposes of this subchapter--
                ``(1) Sponsoring organization.--The term `sponsoring
            organization' means any organization which--
                        ``(A) is described in section 170(c) (other than in
                    paragraph (1) thereof, and without regard to paragraph
                    (2)(A) thereof),
                        ``(B) is not a private foundation (as defined in
                    section 509(a)), and
                        ``(C) maintains 1 or more donor advised funds.
                ``(2) Donor advised fund.--

    [[Page 120 STAT. 1096]]

                        ``(A) In general.--Except as provided in
                    subparagraph (B) or (C), the term `donor advised fund'
                    means a fund or account--
                              ``(i) which is separately identified by
                          reference to contributions of a donor or donors,
                              ``(ii) which is owned and controlled by a
                          sponsoring organization, and
                              ``(iii) with respect to which a donor (or any
                          person appointed or designated by such donor) has,
                          or reasonably expects to have, advisory privileges
                          with respect to the distribution or investment of
                          amounts held in such fund or account by reason of
                          the donor's status as a donor.
                        ``(B) Exceptions.--The term `donor advised fund'
                    shall not include any fund or account--
                              ``(i) which makes distributions only to a
                          single identified organization or governmental
                          entity, or
                              ``(ii) with respect to which a person
                          described in subparagraph (A)(iii) advises as to
                          which individuals receive grants for travel,
                          study, or other similar purposes, if--
                                        ``(I) such person's advisory
                                    privileges are performed exclusively by
                                    such person in the person's capacity as
                                    a member of a committee all of the
                                    members of which are appointed by the
                                    sponsoring organization,
                                        ``(II) no combination of persons
                                    described in subparagraph (A)(iii) (or
                                    persons related to such persons)
                                    control, directly or indirectly, such
                                    committee, and
                                        ``(III) all grants from such fund or
                                    account are awarded on an objective and
                                    nondiscriminatory basis pursuant to a
                                    procedure approved in advance by the
                                    board of directors of the sponsoring
                                    organization, and such procedure is
                                    designed to ensure that all such grants
                                    meet the requirements of paragraph (1),
                                    (2), or (3) of section 4945(g).
                        ``(C) Secretarial authority.--The Secretary may
                    exempt a fund or account not described in subparagraph
                    (B) from treatment as a donor advised fund--
                              ``(i) if such fund or account is advised by a
                          committee not directly or indirectly controlled by
                          the donor or any person appointed or designated by
                          the donor for the purpose of advising with respect
                          to distributions from such fund (and any related
                          parties), or
                              ``(ii) if such fund benefits a single
                          identified charitable purpose.
                ``(3) Fund manager.--The term `fund manager' means, with
            respect to any sponsoring organization--
                        ``(A) an officer, director, or trustee of such
                    sponsoring organization (or an individual having powers
                    or responsibilities similar to those of officers,
                    directors, or trustees of the sponsoring organization),
                    and
                        ``(B) with respect to any act (or failure to act),
                    the employees of the sponsoring organization having
                    authority or responsibility with respect to such act (or
                    failure to act).

    [[Page 120 STAT. 1097]]

                ``(4) Disqualified supporting organization.--
                        ``(A) In general.--The term `disqualified supporting
                    organization' means, with respect to any distribution--
                              ``(i) any type III supporting organization (as
                          defined in section 4943(f)(5)(A)) which is not a
                          functionally integrated type III supporting
                          organization (as defined in section
                          4943(f)(5)(B)), and
                              ``(ii) any organization which is described in
                          subparagraph (B) or (C) if--
                                        ``(I) the donor or any person
                                    designated by the donor for the purpose
                                    of advising with respect to
                                    distributions from a donor advised fund
                                    (and any related parties) directly or
                                    indirectly controls a supported
                                    organization (as defined in section
                                    509(f)(3)) of such organization, or
                                        ``(II) <<NOTE: Regulations.>> the
                                    Secretary determines by regulations that
                                    a distribution to such organization
                                    otherwise is inappropriate.
                        ``(B) Type i and type ii supporting organizations.--
                    An organization is described in this subparagraph if the
                    organization meets the requirements of subparagraphs (A)
                    and (C) of section 509(a)(3) and is--
                              ``(i) operated, supervised, or controlled by
                          one or more organizations described in paragraph
                          (1) or (2) of section 509(a), or
                              ``(ii) supervised or controlled in connection
                          with one or more such organizations.
                        ``(C) Functionally integrated type iii supporting
                    organizations.--An organization is described in this
                    subparagraph if the organization is a functionally
                    integrated type III supporting organization (as defined
                    under section 4943(f)(5)(B)).

    ``SEC. 4967. <<NOTE: 26 USC 4967.>> TAXES ON PROHIBITED BENEFITS.

        ``(a) Imposition of Taxes.--
                ``(1) On the donor, donor advisor, or related person.--There
            is hereby imposed on the advice of any person described in
            subsection (d) to have a sponsoring organization make a
            distribution from a donor advised fund which results in such
            person or any other person described in subsection (d)
            receiving, directly or indirectly, a more than incidental
            benefit as a result of such distribution, a tax equal to 125
            percent of such benefit. The tax imposed by this paragraph shall
            be paid by any person described in subsection (d) who advises as
            to the distribution or who receives such a benefit as a result
            of the distribution.
                ``(2) On the fund management.--There is hereby imposed on
            the agreement of any fund manager to the making of a
            distribution, knowing that such distribution would confer a
            benefit described in paragraph (1), a tax equal to 10 percent of
            the amount of such benefit. The tax imposed by this paragraph
            shall be paid by any fund manager who agreed to the making of
            the distribution.

        ``(b) Exception.--No tax shall be imposed under this section with
    respect to any distribution if a tax has been imposed with respect to
    such distribution under section 4958.
        ``(c) Special Rules.--For purposes of subsection (a)--

    [[Page 120 STAT. 1098]]

                ``(1) Joint and several liability.--If more than one person
            is liable under paragraph (1) or (2) of subsection (a) with
            respect to a distribution described in subsection (a), all such
            persons shall be jointly and severally liable under such
            paragraph with respect to such distribution.
                ``(2) Limit for management.--With respect to any one
            distribution described in subsection (a), the maximum amount of
            the tax imposed by subsection (a)(2) shall not exceed $10,000.

        ``(d) Person Described.--A person is described in this subsection if
    such person is described in section 4958(f)(7) with respect to a donor
    advised fund.''.
        (b) Conforming Amendments.--
                (1) Section 4963 <<NOTE: 26 USC 4963.>> is amended by
            inserting ``4966, 4967,'' after ``4958,'' each place it appears
            in subsections (a) and (c).
                (2) The table of subchapters for chapter 42 is amended by
            adding at the end the following new item:

                     ``subchapter g--donor advised funds''.

        (c) <<NOTE: 26 USC 4963 note.>> Effective Date.--The amendments made
    by this section shall apply to taxable years beginning after the date of
    the enactment of this Act.

    SEC. 1232. EXCESS BENEFIT TRANSACTIONS INVOLVING DONOR ADVISED FUNDS AND
                SPONSORING ORGANIZATIONS.

        (a) Disqualified Persons.--
                (1) In general.--Paragraph (1) of section 4958(f) is amended
            by striking ``and'' at the end of subparagraph (B), by striking
            the period at the end of subparagraph (C) and inserting a comma,
            and by adding after subparagraph (C) the following new
            subparagraphs:
                        ``(D) which involves a donor advised fund (as
                    defined in section 4966(d)(2)), any person who is
                    described in paragraph (7) with respect to such donor
                    advised fund (as so defined), and
                        ``(E) which involves a sponsoring organization (as
                    defined in section 4966(d)(1)), any person who is
                    described in paragraph (8) with respect to such
                    sponsoring organization (as so defined).''.
                (2) Donors, donor advisors, and investment advisors treated
            as disqualified persons.--Section 4958(f) is amended by adding
            at the end the following new paragraphs:
                ``(7) Donors and donor advisors.--For purposes of paragraph
            (1)(E), a person is described in this paragraph if such person--
                        ``(A) is described in section 4966(d)(2)(A)(iii),
                        ``(B) is a member of the family of an individual
                    described in subparagraph (A), or
                        ``(C) is a 35-percent controlled entity (as defined
                    in paragraph (3) by substituting `persons described in
                    subparagraph (A) or (B) of paragraph (7)' for `persons
                    described in subparagraph (A) or (B) of paragraph (1)'
                    in subparagraph (A)(i) thereof).
                ``(8) Investment advisors.--For purposes of paragraph
            (1)(F)--
                        ``(A) In general.--A person is described in this
                    paragraph if such person--
                              ``(i) is an investment advisor,

    [[Page 120 STAT. 1099]]

                              ``(ii) is a member of the family of an
                          individual described in clause (i), or
                              ``(iii) is a 35-percent controlled entity (as
                          defined in paragraph (3) by substituting `persons
                          described in clause (i) or (ii) of paragraph
                          (8)(A)' for `persons described in subparagraph (A)
                          or (B) of paragraph (1)' in subparagraph (A)(i)
                          thereof).
                        ``(B) Investment advisor defined.--For purposes of
                    subparagraph (A), the term `investment advisor' means,
                    with respect to any sponsoring organization (as defined
                    in section 4966(d)(1)), any person (other than an
                    employee of such organization) compensated by such
                    organization for managing the investment of, or
                    providing investment advice with respect to, assets
                    maintained in donor advised funds (as defined in section
                    4966(d)(2)) owned by such organization.''.

        (b) Certain Transactions Treated as Excess Benefit Transactions.--
                (1) In general.--Section 4958(c) <<NOTE: 26 USC 4958.>> is
            amended by redesignating paragraph (2) as paragraph (3) and by
            inserting after paragraph (1) the following new paragraph:
                ``(2) Special rules for donor advised funds.--In the case of
            any donor advised fund (as defined in section 4966(d)(2))--
                        ``(A) the term `excess benefit transaction' includes
                    any grant, loan, compensation, or other similar payment
                    from such fund to a person described in subsection
                    (f)(7) with respect to such fund, and
                        ``(B) the term `excess benefit' includes, with
                    respect to any transaction described in subparagraph
                    (A), the amount of any such grant, loan, compensation,
                    or other similar payment.''.
                (2) Special rule for correction of transaction.--Section
            4958(f)(6) is amended by inserting ``, except that in the case
            of any correction of an excess benefit transaction described in
            subsection (c)(2), no amount repaid in a manner prescribed by
            the Secretary may be held in any donor advised fund'' after
            ``standards''.

        (c) Effective Date.--The <<NOTE: 26 USC 4958 note.>> amendments made
    by this section shall apply to transactions occurring after the date of
    the enactment of this Act.

    SEC. 1233. EXCESS BUSINESS HOLDINGS OF DONOR ADVISED FUNDS.

        (a) In General.--Section 4943 is amended by adding at the end the
    following new subsection:
        ``(e) Application of Tax to Donor Advised Funds.--
                ``(1) In general.--For purposes of this section, a donor
            advised fund (as defined in section 4966(d)(2)) shall be treated
            as a private foundation.
                ``(2) Disqualified person.--In applying this section to any
            donor advised fund (as so defined), the term `disqualified
            person' means, with respect to the donor advised fund, any
            person who is--
                        ``(A) described in section 4966(d)(2)(A)(iii),
                        ``(B) a member of the family of an individual
                    described in subparagraph (A), or

    [[Page 120 STAT. 1100]]

                        ``(C) a 35-percent controlled entity (as defined in
                    section 4958(f)(3) by substituting `persons described in
                    subparagraph (A) or (B) of section 4943(e)(2)' for
                    `persons described in subparagraph (A) or (B) of
                    paragraph (1)' in subparagraph (A)(i) thereof).
                ``(3) Present holdings.--For purposes of this subsection,
            rules similar to the rules of paragraphs (4), (5), and (6) of
            subsection (c) shall apply to donor advised funds (as so
            defined), except that--
                        ``(A) `the date of the enactment of this subsection'
                    shall be substituted for `May 26, 1969' each place it
                    appears in paragraphs (4), (5), and (6), and
                        ``(B) `January 1, 2007' shall be substituted for
                    `January 1, 1970' in paragraph (4)(E).''.

        (b) Effective Date.--The <<NOTE: 26 USC 4943 note.>> amendment made
    by this section shall apply to taxable years beginning after the date of
    the enactment of this Act.

    SEC. 1234. TREATMENT OF CHARITABLE CONTRIBUTION DEDUCTIONS TO DONOR
                ADVISED FUNDS.

        (a) Income.--Section 170(f) <<NOTE: 26 USC 170.>> (relating to
    disallowance of deduction in certain cases and special rules), as
    amended by this Act, is amended by adding at the end the following new
    paragraph:
                ``(18) Contributions to donor advised funds.--A deduction
            otherwise allowed under subsection (a) for any contribution to a
            donor advised fund (as defined in section 4966(d)(2)) shall only
            be allowed if--
                        ``(A) the sponsoring organization (as defined in
                    section 4966(d)(1)) with respect to such donor advised
                    fund is not--
                              ``(i) described in paragraph (3), (4), or (5)
                          of subsection (c), or
                              ``(ii) a type III supporting organization (as
                          defined in section 4943(f)(5)(A)) which is not a
                          functionally integrated type III supporting
                          organization (as defined in section
                          4943(f)(5)(B)), and
                        ``(B) the taxpayer obtains a contemporaneous written
                    acknowledgment (determined under rules similar to the
                    rules of paragraph (8)(C)) from the sponsoring
                    organization (as so defined) of such donor advised fund
                    that such organization has exclusive legal control over
                    the assets contributed.''.

        (b) Estate.--Section 2055(e) is amended by adding at the end the
    following new paragraph:
                ``(5) Contributions to donor advised funds.--A deduction
            otherwise allowed under subsection (a) for any contribution to a
            donor advised fund (as defined in section 4966(d)(2)) shall only
            be allowed if--
                        ``(A) the sponsoring organization (as defined in
                    section 4966(d)(1)) with respect to such donor advised
                    fund is not--
                              ``(i) described in paragraph (3) or (4) of
                          subsection (a), or
                              ``(ii) a type III supporting organization (as
                          defined in section 4943(f)(5)(A)) which is not a
                          functionally integrated type III supporting
                          organization (as defined in section
                          4943(f)(5)(B)), and
                        ``(B) the taxpayer obtains a contemporaneous written
                    acknowledgment (determined under rules similar to the

    [[Page 120 STAT. 1101]]

                    rules of section 170(f)(8)(C)) from the sponsoring
                    organization (as so defined) of such donor advised fund
                    that such organization has exclusive legal control over
                    the assets contributed.''.

        (c) Gift.--Section 2522(c) <<NOTE: 26 USC 2522.>> is amended by
    adding at the end the following new paragraph:
                ``(5) Contributions to donor advised funds.--A deduction
            otherwise allowed under subsection (a) for any contribution to a
            donor advised fund (as defined in section 4966(d)(2)) shall only
            be allowed if--
                        ``(A) the sponsoring organization (as defined in
                    section 4966(d)(1)) with respect to such donor advised
                    fund is not--
                              ``(i) described in paragraph (3) or (4) of
                          subsection (a), or
                              ``(ii) a type III supporting organization (as
                          defined in section 4943(f)(5)(A)) which is not a
                          functionally integrated type III supporting
                          organization (as defined in section
                          4943(f)(5)(B)), and
                        ``(B) the taxpayer obtains a contemporaneous written
                    acknowledgment (determined under rules similar to the
                    rules of section 170(f)(8)(C)) from the sponsoring
                    organization (as so defined) of such donor advised fund
                    that such organization has exclusive legal control over
                    the assets contributed.''.

        (d) Effective Date.--The <<NOTE: 26 USC 170 note.>> amendments made
    by this section shall apply to contributions made after the date which
    is 180 days after the date of the enactment of this Act.

    SEC. 1235. RETURNS OF, AND APPLICATIONS FOR RECOGNITION BY, SPONSORING
                ORGANIZATIONS.

        (a) Matters Included on Returns.--
                (1) In general.--Section 6033, as amended by this Act, is
            amended by redesignating subsection (k) as subsection (l) and by
            inserting after subsection (j) the following new subsection:

        ``(k) Additional Provisions Relating to Sponsoring Organizations.--
    Every organization described in section 4966(d)(1) shall, on the return
    required under subsection (a) for the taxable year--
                ``(1) list the total number of donor advised funds (as
            defined in section 4966(d)(2)) it owns at the end of such
            taxable year,
                ``(2) indicate the aggregate value of assets held in such
            funds at the end of such taxable year, and
                ``(3) indicate the aggregate contributions to and grants
            made from such funds during such taxable year.''.
                (2) <<NOTE: 26 USC 6033 note.>> Effective date.--The
            amendments made by this subsection shall apply to returns filed
            for taxable years ending after the date of the enactment of this
            Act.

        (b) Matters Included on Exempt Status Application.--
                (1) In general.--Section 508 is amended by adding at the end
            the following new subsection:

        ``(f) <<NOTE: Notification.>> Additional Provisions Relating to
    Sponsoring Organizations.--A sponsoring organization (as defined in
    section 4966(d)(1)) shall give notice to the Secretary (in such manner
    as the Secretary may provide) whether such organization maintains or
    intends to maintain donor advised funds (as defined in section

    [[Page 120 STAT. 1102]]

    4966(d)(2)) and the manner in which such organization plans to operate
    such funds.''.
                (2) Effective date.--The <<NOTE: 26 USC 508
            note.>> amendment made by this subsection shall apply to
            organizations applying for tax-exempt status after the date of
            the enactment of this Act.

           PART 3--IMPROVED ACCOUNTABILITY OF SUPPORTING ORGANIZATIONS

    SEC. 1241. REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.

        (a) Types of Supporting Organizations.--Subparagraph (B) of section
    509(a)(3) <<NOTE: 26 USC 509.>> is amended to read as follows:
                        ``(B) is--
                              ``(i) operated, supervised, or controlled by
                          one or more organizations described in paragraph
                          (1) or (2),
                              ``(ii) supervised or controlled in connection
                          with one or more such organizations, or
                              ``(iii) operated in connection with one or
                          more such organizations, and''.

        (b) Requirements for Supporting Organizations.--Section 509
    (relating to private foundation defined) is amended by adding at the end
    the following new subsection:
        ``(f) Requirements for Supporting Organizations.--
                ``(1) Type iii supporting organizations.--For purposes of
            subsection (a)(3)(B)(iii), an organization shall not be
            considered to be operated in connection with any organization
            described in paragraph (1) or (2) of subsection (a) unless such
            organization meets the following requirements:
                        ``(A) Responsiveness.--For each taxable year
                    beginning after the date of the enactment of this
                    subsection, the organization provides to each supported
                    organization such information as the Secretary may
                    require to ensure that such organization is responsive
                    to the needs or demands of the supported organization.
                        ``(B) Foreign supported organizations.--
                              ``(i) In general.--The organization is not
                          operated in connection with any supported
                          organization that is not organized in the United
                          States.
                              ``(ii) Transition rule for existing
                          organizations.--If the organization is operated in
                          connection with an organization that is not
                          organized in the United States on the date of the
                          enactment of this subsection, clause (i) shall not
                          apply until the first day of the third taxable
                          year of the organization beginning after the date
                          of the enactment of this subsection.
                ``(2) Organizations controlled by donors.--
                        ``(A) In general.--For purposes of subsection
                    (a)(3)(B), an organization shall not be considered to
                    be--
                              ``(i) operated, supervised, or controlled by
                          any organization described in paragraph (1) or (2)
                          of subsection (a), or
                              ``(ii) operated in connection with any
                          organization described in paragraph (1) or (2) of
                          subsection (a),
                    if such organization accepts any gift or contribution
                    from any person described in subparagraph (B).
                        ``(B) Person described.--A person is described in
                    this subparagraph if, with respect to a supported
                    organization

    [[Page 120 STAT. 1103]]

                    of an organization described in subparagraph (A), such
                    person is--
                              ``(i) a person (other than an organization
                          described in paragraph (1), (2), or (4) of section
                          509(a)) who directly or indirectly controls,
                          either alone or together with persons described in
                          clauses (ii) and (iii), the governing body of such
                          supported organization,
                              ``(ii) a member of the family (determined
                          under section 4958(f)(4)) of an individual
                          described in clause (i), or
                              ``(iii) a 35-percent controlled entity (as
                          defined in section 4958(f)(3) by substituting
                          `persons described in clause (i) or (ii) of
                          section 509(f)(2)(B)' for `persons described in
                          subparagraph (A) or (B) of paragraph (1)' in
                          subparagraph (A)(i) thereof).
                ``(3) Supported organization.--For purposes of this
            subsection, the term `supported organization' means, with
            respect to an organization described in subsection (a)(3), an
            organization described in paragraph (1) or (2) of subsection
            (a)--
                        ``(A) for whose benefit the organization described
                    in subsection (a)(3) is organized and operated, or
                        ``(B) with respect to which the organization
                    performs the functions of, or carries out the purposes
                    of.''.

        (c) <<NOTE: 26 USC 509 note.>> Charitable Trusts Which Are Type III
    Supporting Organizations.--For purposes of section 509(a)(3)(B)(iii) of
    the Internal Revenue Code of 1986, an organization which is a trust
    shall not be considered to be operated in connection with any
    organization described in paragraph (1) or (2) of section 509(a) of such
    Code solely because--
                (1) it is a charitable trust under State law,
                (2) the supported organization (as defined in section
            509(f)(3) of such Code) is a beneficiary of such trust, and
                (3) the supported organization (as so defined) has the power
            to enforce the trust and compel an accounting.

        (d) <<NOTE: 26 USC 509 note.>> Payout Requirements for Type III
    Supporting Organizations.--
                (1) <<NOTE: Regulations.>> In general.--The Secretary of the
            Treasury shall promulgate new regulations under section 509 of
            the Internal Revenue Code of 1986 on payments required by type
            III supporting organizations which are not functionally
            integrated type III supporting organizations. Such regulations
            shall require such organizations to make distributions of a
            percentage of either income or assets to supported organizations
            (as defined in section 509(f)(3) of such Code) in order to
            ensure that a significant amount is paid to such organizations.
                (2) Type iii supporting organization; functionally
            integrated type iii supporting organization.--For purposes of
            paragraph (1), the terms ``type III supporting organization''
            and ``functionally integrated type III supporting organization''
            have the meanings given such terms under subparagraphs (A) and
            (B) section 4943(f)(5) of the Internal Revenue Code of 1986 (as
            added by this Act), respectively.

        (e) <<NOTE: 26 USC 509 note.>> Effective Dates.--
                (1) In general.--The amendments made by subsections (a) and
            (b) shall take effect on the date of the enactment of this Act.

    [[Page 120 STAT. 1104]]

                (2) Charitable trusts which are type iii supporting
            organizations.--Subsection (c) shall take effect--
                        (A) in the case of trusts operated in connection
                    with an organization described in paragraph (1) or (2)
                    of section 509(a) of the Internal Revenue Code of 1986
                    on the date of the enactment of this Act, on the date
                    that is one year after the date of the enactment of this
                    Act, and
                        (B) in the case of any other trust, on the date of
                    the enactment of this Act.

    SEC. 1242. EXCESS BENEFIT TRANSACTIONS INVOLVING SUPPORTING
                ORGANIZATIONS.

        (a) Disqualified Persons.--Paragraph (1) of section 4958(f), as
    amended by this Act, <<NOTE: 26 USC 4958.>> is amended by redesignating
    subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively,
    and by adding after subparagraph (C) the following new subparagraph:
                        ``(D) any person who is described in subparagraph
                    (A), (B), or (C) with respect to an organization
                    described in section 509(a)(3) and organized and
                    operated exclusively for the benefit of, to perform the
                    functions of, or to carry out the purposes of the
                    applicable tax-exempt organization.''.

        (b) Certain Transactions Treated as Excess Benefit Transactions.--
    Section 4958(c), as amended by this Act, is amended by redesignating
    paragraph (3) as paragraph (4) and by inserting after paragraph (2) the
    following new paragraph:
                ``(3) Special rules for supporting organizations.--
                        ``(A) In general.--In the case of any organization
                    described in section 509(a)(3)--
                              ``(i) the term `excess benefit transaction'
                          includes--
                                        ``(I) any grant, loan, compensation,
                                    or other similar payment provided by
                                    such organization to a person described
                                    in subparagraph (B), and
                                        ``(II) any loan provided by such
                                    organization to a disqualified person
                                    (other than an organization described in
                                    paragraph (1), (2), or (4) of section
                                    509(a)), and
                              ``(ii) the term `excess benefit' includes,
                          with respect to any transaction described in
                          clause (i), the amount of any such grant, loan,
                          compensation, or other similar payment.
                        ``(B) Person described.--A person is described in
                    this subparagraph if such person is--
                              ``(i) a substantial contributor to such
                          organization,
                              ``(ii) a member of the family (determined
                          under section 4958(f)(4)) of an individual
                          described in clause (i), or
                              ``(iii) a 35-percent controlled entity (as
                          defined in section 4958(f)(3) by substituting
                          `persons described in clause (i) or (ii) of
                          section 4958(c)(3)(B)' for `persons described in
                          subparagraph (A) or (B) of paragraph (1)' in
                          subparagraph (A)(i) thereof).
                        ``(C) Substantial contributor.--For purposes of this
                    paragraph--
                              ``(i) In general.--The term `substantial
                          contributor' means any person who contributed or
                          bequeathed an aggregate amount of more than $5,000
                          to the

    [[Page 120 STAT. 1105]]

                          organization, if such amount is more than 2
                          percent of the total contributions and bequests
                          received by the organization before the close of
                          the taxable year of the organization in which the
                          contribution or bequest is received by the
                          organization from such person. In the case of a
                          trust, such term also means the creator of the
                          trust. Rules similar to the rules of subparagraphs
                          (B) and (C) of section 507(d)(2) shall apply for
                          purposes of this subparagraph.
                              ``(ii) Exception.--Such term shall not include
                          any organization described in paragraph (1), (2),
                          or (4) of section 509(a).''.

        (c) <<NOTE: 26 USC 4958 note.>> Effective Dates.--
                (1) Subsection (a).--The amendments made by subsection (a)
            shall apply to transactions occurring after the date of the
            enactment of this Act.
                (2) Subsection (b).--The amendments made by subsection (a)
            shall apply to transactions occurring after July 25, 2006.

    SEC. 1243. EXCESS BUSINESS HOLDINGS OF SUPPORTING ORGANIZATIONS.

        (a) In General.--Section 4943, as amended by this Act, <<NOTE: 26
    USC 4943.>> is amended by adding at the end the following new
    subsection:

        ``(f) Application of Tax to Supporting Organizations.--
                ``(1) In general.--For purposes of this section, an
            organization which is described in paragraph (3) shall be
            treated as a private foundation.
                ``(2) Exception.--The Secretary may exempt the excess
            business holdings of any organization from the application of
            this subsection if the Secretary determines that such holdings
            are consistent with the purpose or function constituting the
            basis for its exemption under section 501.
                ``(3) Organizations described.--An organization is described
            in this paragraph if such organization is--
                        ``(A) a type III supporting organization (other than
                    a functionally integrated type III supporting
                    organization), or
                        ``(B) an organization which meets the requirements
                    of subparagraphs (A) and (C) of section 509(a)(3) and
                    which is supervised or controlled in connection with one
                    or more organizations described in paragraph (1) or (2)
                    of section 509(a), but only if such organization accepts
                    any gift or contribution from any person described in
                    section 509(f)(2)(B).
                ``(4) Disqualified person.--
                        ``(A) In general.--In applying this section to any
                    organization described in paragraph (3), the term
                    `disqualified person' means, with respect to the
                    organization--
                              ``(i) any person who was, at any time during
                          the 5-year period ending on the date described in
                          subsection (a)(2)(A), in a position to exercise
                          substantial influence over the affairs of the
                          organization,
                              ``(ii) any member of the family (determined
                          under section 4958(f)(4)) of an individual
                          described in clause (i),
                              ``(iii) any 35-percent controlled entity (as
                          defined in section 4958(f)(3) by substituting
                          `persons described

    [[Page 120 STAT. 1106]]

                          in clause (i) or (ii) of section 4943(f)(4)(A)'
                          for `persons described in subparagraph (A) or (B)
                          of paragraph (1)' in subparagraph (A)(i) thereof),
                              ``(iv) any person described in section
                          4958(c)(3)(B), and
                              ``(v) any organization--
                                        ``(I) which is effectively
                                    controlled (directly or indirectly) by
                                    the same person or persons who control
                                    the organization in question, or
                                        ``(II) substantially all of the
                                    contributions to which were made
                                    (directly or indirectly) by the same
                                    person or persons described in
                                    subparagraph (B) or a member of the
                                    family (within the meaning of section
                                    4946(d)) of such a person.
                        ``(B) Persons described.--A person is described in
                    this subparagraph if such person is--
                              ``(i) a substantial contributor to the
                          organization (as defined in section
                          4958(c)(3)(C)),
                              ``(ii) an officer, director, or trustee of the
                          organization (or an individual having powers or
                          responsibilities similar to those of the officers,
                          directors, or trustees of the organization), or
                              ``(iii) an owner of more than 20 percent of--
                                        ``(I) the total combined voting
                                    power of a corporation,
                                        ``(II) the profits interest of a
                                    partnership, or
                                        ``(III) the beneficial interest of a
                                    trust or unincorporated enterprise,
                          which is a substantial contributor (as so defined)
                          to the organization.
                ``(5) Type iii supporting organization; functionally
            integrated type iii supporting organization.--For purposes of
            this subsection--
                        ``(A) Type iii supporting organization.--The term
                    `type III supporting organization' means an organization
                    which meets the requirements of subparagraphs (A) and
                    (C) of section 509(a)(3) and which is operated in
                    connection with one or more organizations described in
                    paragraph (1) or (2) of section 509(a).
                        ``(B) Functionally integrated type iii supporting
                    organization.--The term `functionally integrated type
                    III supporting organization' means a type III supporting
                    organization which is not required under regulations
                    established by the Secretary to make payments to
                    supported organizations (as defined under section
                    509(f)(3)) due to the activities of the organization
                    related to performing the functions of, or carrying out
                    the purposes of, such supported organizations.
                ``(6) Special rule for certain holdings of type iii
            supporting organizations.--For purposes of this subsection, the
            term `excess business holdings' shall not include any holdings
            of a type III supporting organization in any business enterprise
            if, as of November 18, 2005, the holdings were held (and at all
            times thereafter, are held) for the benefit of the community
            pursuant to the direction of a State attorney general or a State
            official with jurisdiction over such organization.

    [[Page 120 STAT. 1107]]

                ``(7) Present holdings.--For <<NOTE: Deadlines.>> purposes
            of this subsection, rules similar to the rules of paragraphs
            (4), (5), and (6) of subsection (c) shall apply to organizations
            described in section 509(a)(3), except that--
                        ``(A) `the date of the enactment of this subsection'
                    shall be substituted for `May 26, 1969' each place it
                    appears in paragraphs (4), (5), and (6), and
                        ``(B) `January 1, 2007' shall be substituted for
                    `January 1, 1970' in paragraph (4)(E).''.

        (b) Effective Date.--The <<NOTE: 26 USC 4943 note.>> amendment made
    by this section shall apply to taxable years beginning after the date of
    the enactment of this Act.

    SEC. 1244. TREATMENT OF AMOUNTS PAID TO SUPPORTING ORGANIZATIONS BY
                PRIVATE FOUNDATIONS.

        (a) Qualifying Distributions.--Paragraph (4) of section
    4942(g) <<NOTE: 26 USC 4942.>> is amended to read as follows:
                ``(4) Limitation on distributions by nonoperating private
            foundations to supporting organizations.--
                        ``(A) In general.--For purposes of this section, the
                    term `qualifying distribution' shall not include any
                    amount paid by a private foundation which is not an
                    operating foundation to--
                              ``(i) any type III supporting organization (as
                          defined in section 4943(f)(5)(A)) which is not a
                          functionally integrated type III supporting
                          organization (as defined in section
                          4943(f)(5)(B)), and
                              ``(ii) any organization which is described in
                          subparagraph (B) or (C) if--
                                        ``(I) a disqualified person of the
                                    private foundation directly or
                                    indirectly controls such organization or
                                    a supported organization (as defined in
                                    section 509(f)(3)) of such organization,
                                    or
                                        ``(II) <<NOTE: Regulations.>> the
                                    Secretary determines by regulations that
                                    a distribution to such organization
                                    otherwise is inappropriate.
                        ``(B) Type i and type ii supporting organizations.--
                    An organization is described in this subparagraph if the
                    organization meets the requirements of subparagraphs (A)
                    and (C) of section 509(a)(3) and is--
                              ``(i) operated, supervised, or controlled by
                          one or more organizations described in paragraph
                          (1) or (2) of section 509(a), or
                              ``(ii) supervised or controlled in connection
                          with one or more such organizations.
                        ``(C) Functionally integrated type iii supporting
                    organizations.--An organization is described in this
                    subparagraph if the organization is a functionally
                    integrated type III supporting organization (as defined
                    under section 4943(f)(5)(B)).''.

        (b) Taxable Expenditures.--Subparagraph (A) of section 4945(d)(4) is
    amended to read as follows:
                        ``(A) such organization--
                              ``(i) is described in paragraph (1) or (2) of
                          section 509(a),

    [[Page 120 STAT. 1108]]

                              ``(ii) is an organization described in section
                          509(a)(3) (other than an organization described in
                          clause (i) or (ii) of section 4942(g)(4)(A)), or
                              ``(iii) is an exempt operating foundation (as
                          defined in section 4940(d)(2)), or''.

        (c) Effective Date.--The <<NOTE: 26 USC 4942 note.>> amendments made
    by this section shall apply to distributions and expenditures after the
    date of the enactment of this Act.

    SEC. 1245. RETURNS OF SUPPORTING ORGANIZATIONS.

        (a) Requirement To File Return.--Subparagraph (B) of section
    6033(a)(3) <<NOTE: 26 USC 6033.>> is amended by inserting ``(other than
    an organization described in section 509(a)(3))'' after ``paragraph
    (1)''.

        (b) Matters Included on Returns.--Section 6033, as amended by this
    Act, is amended by redesignating subsection (l) as subsection (m) and by
    inserting after subsection (k) the following new subsection:
        ``(l) Additional Provisions Relating to Supporting Organizations.--
    Every organization described in section 509(a)(3) shall, on the return
    required under subsection (a)--
                ``(1) list the supported organizations (as defined in
            section 509(f)(3)) with respect to which such organization
            provides support,
                ``(2) indicate whether the organization meets the
            requirements of clause (i), (ii), or (iii) of section
            509(a)(3)(B), and
                ``(3) certify that the organization meets the requirements
            of section 509(a)(3)(C).''.

        (c) Effective Date.--The <<NOTE: 26 USC 6033 note.>> amendments made
    by this section shall apply to returns filed for taxable years ending
    after the date of the enactment of this Act.

                          TITLE XIII--OTHER PROVISIONS

    SEC. 1301. TECHNICAL CORRECTIONS RELATING TO MINE SAFETY.

        Section 110 of the Federal Mine Safety and Health Act of 1977 (30
    U.S.C. 820), as amended by the Mine Improvement and New Emergency
    Response Act of 2006 (Public Law 109-236), <<NOTE: Ante, p. 500.>> is
    amended--
                (1) by striking subsection (d); and
                (2) in subsection (a)--
                        (A) by striking ``(1)(1) The operator'' and
                    inserting ``(1) The operator'';
                        (B) in the paragraph (2) added by section 8(a)(1)(B)
                    of the Mine Improvement and New Emergency Response Act
                    of 2006 (Public Law 109-236)--
                              (i) by striking ``paragraph (1)'' and
                          inserting ``subsection (a)(1)''; and
                              (ii) by redesignating such paragraph as
                          subsection (d) and transferring such subsection so
                          as to appear after subsection (c); and
                (3) in subsection (b)--
                        (A) by striking ``Any operator'' and inserting ``(1)
                    Any operator''; and
                        (B) in the second sentence, as added by section
                    8(a)(2) of the Mine Improvement and New Emergency
                    Response

    [[Page 120 STAT. 1109]]

                    Act of 2006 (Public Law 109-236), by striking
                    ``Violations'' and inserting the following:

        ``(2) Violations''.

    SEC. 1302. GOING-TO-THE-SUN ROAD.

        (a) In General.--Section 1940 of the Safe, Accountable, Flexible,
    Efficient Transportation Equity Act: A Legacy for Users (119 Stat. 1511)
    is amended--
                (1) in subsection (a)--
                        (A) by striking paragraphs (1) and (2);
                        (B) by redesignating paragraphs (3) through (5) as
                    paragraphs (1) through (3), respectively; and
                        (C) by striking ``$10,000,000'' each place that it
                    appears and inserting ``$16,666,666''; and
                (2) by adding at the end the following:

        ``(c) Contract Authority.--Except as otherwise provided in this
    section, funds authorized to be appropriated under this section shall be
    available for obligation in the same manner as if the funds were
    apportioned under chapter 1 of title 23, United States Code.''.
        (b) Rescission.--Section 10212 of the Safe, Accountable, Flexible,
    Efficient Transportation Equity Act: A Legacy for Users (119 Stat.
    1937) <<NOTE: 23 USC 101 note.>> is amended by striking
    ``$8,543,000,000'' each place it appears and inserting
    ``$8,593,000,000''.

    SEC. 1303. EXCEPTION TO THE LOCAL FURNISHING REQUIREMENT OF THE TAX-
                EXEMPT BOND RULES.

        (a) Snettisham Hydroelectric Facility.--For purposes of determining
    whether any private activity bond issued before May 31, 2006, and used
    to finance the acquisition of the Snettisham hydroelectric facility is a
    qualified bond for purposes of section 142(a)(8) of the Internal Revenue
    Code of 1986, the electricity furnished by such facility to the City of
    Hoonah, Alaska, shall not be taken into account for purposes of section
    142(f)(1) of such Code.
        (b) Lake Dorothy Hydroelectric Facility.--For purposes of
    determining whether any private activity bond issued before May 31,
    2006, and used to finance the Lake Dorothy hydroelectric facility is a
    qualified bond for purposes of section 142(a)(8) of the Internal Revenue
    Code of 1986, the electricity furnished by such facility to the City of
    Hoonah, Alaska, shall not be taken into account for purposes of
    paragraphs (1) and (3) of section 142(f) of such Code.
        (c) Definitions.--For purposes of this section--
                (1) Lake dorothy hydroelectric facility.--The term ``Lake
            Dorothy hydroelectric facility'' means the hydroelectric
            facility located approximately 10 miles south of Juneau, Alaska,
            and commonly referred to as the ``Lake Dorothy project''.
                (2) Snettisham hydroelectric facility.--The term
            ``Snettisham hydroelectric facility'' means the hydroelectric
            project described in section 1804 of the Small Business Job
            Protection Act of 1996.

    SEC. 1304. <<NOTE: 26 USC 1 note.>> QUALIFIED TUITION PROGRAMS.

        (a) Permanent Extension of Modifications.--Section 901 of the
    Economic Growth and Tax Relief Reconciliation Act of 2001 (relating to
    sunset provisions) shall not apply to section 402 of such Act (relating
    to modifications to qualified tuition programs).

    [[Page 120 STAT. 1110]]

        (b) <<NOTE: 26 USC 529.>> Regulatory Authority To Prevent Abuse.--
    Section 529 (relating to qualified tuition programs) is amended by
    adding at the end the following new subsection:

        ``(f) Regulations.--Notwithstanding any other provision of this
    section, the Secretary shall prescribe such regulations as may be
    necessary or appropriate to carry out the purposes of this section and
    to prevent abuse of such purposes, including regulations under chapters
    11, 12, and 13 of this title.''.

    TITLE XIV--TARIFF <<NOTE: Miscellaneous Trade and Technical Corrections
    Act of 2006. 19 USC 1654 note.>> PROVISIONS

    SEC. 1401. SHORT TITLE; TABLE OF CONTENTS.

        (a) Short Title.--This title may be cited as the ``Miscellaneous
    Trade and Technical Corrections Act of 2006''.
        (b) Table of contents.--The table of contents of this title is as
    follows:

                          TITLE XIV--TARIFF PROVISIONS

    Sec. 1401. Short title; table of contents.
    Sec. 1402. Reference.

              Subtitle A--Temporary Duty Suspensions and Reductions

                 Chapter 1--New Duty Suspensions and Reductions

    Sec. 1411. Certain non-knit gloves designed for use by auto mechanics.
    Sec. 1412. Certain microphones for use in automotive interiors.
    Sec. 1413. Acrylic or modacrylic synthetic filament tow.
    Sec. 1414. Acrylic or modacrylic synthetic staple fibers, carded,
               combed, or otherwise processed for spinning.
    Sec. 1415. Nitrocellulose.
    Sec. 1416. Potassium sorbate.
    Sec. 1417. Sorbic acid.
    Sec. 1418. Certain capers.
    Sec. 1419. Certain pepperoncini prepared or preserved otherwise than by
               vinegar or acetic acid.
    Sec. 1420. Certain capers.
    Sec. 1421. Certain pepperoncini prepared or preserved by vinegar or
               acetic acid in concentrations at 0.5 percent or greater.
    Sec. 1422. Certain pepperoncini prepared or preserved otherwise than by
               vinegar or acetic acid in concentrations less than 0.5
               percent.
    Sec. 1423. Chloral.
    Sec. 1424. Imidacloprid technical (imidacloprid).
    Sec. 1425. Triadimefon.
    Sec. 1426. Polyethylene HE1878.
    Sec. 1427. Thiacloprid.
    Sec. 1428. Pyrimethanil.
    Sec. 1429. Foramsulfuron.
    Sec. 1430. Fenamidone.
    Sec. 1431. Cyclanilide technical.
    Sec. 1432. Para-benzoquinone.
    Sec. 1433. O-Anisidine.
    Sec. 1434. 2,4-Xylidine.
    Sec. 1435. Crotonaldehyde.
    Sec. 1436. Butanedioic acid, dimethyl ester, polymer with 4-hydroxy-
               2,2,6,6,-tetramethyl-1-piperidineethanol.
    Sec. 1437. Mixtures of CAS Nos. 106990-43-6 and 65447-77-0.
    Sec. 1438. MCPA.
    Sec. 1439. Bronate advanced.
    Sec. 1440. Bromoxynil octanoate tech.
    Sec. 1441. Bromoxynil meo.
    Sec. 1442. Hydraulic control units.
    Sec. 1443. Shield asy-steering gear.
    Sec. 1444. 2,4-Dichloroaniline.
    Sec. 1445. 2-Acetylbutyrolactone.
    Sec. 1446. Alkylketone.
    Sec. 1447. Cyfluthrin (baythroid).

    [[Page 120 STAT. 1111]]

    Sec. 1448. Beta-cyfluthrin.
    Sec. 1449. Cyclopropane-1,1-dicarboxylic acid, dimethyl ester.
    Sec. 1450. Spiroxamine.
    Sec. 1451. Spiromesifen.
    Sec. 1452. 4-Chlorobenzaldehyde.
    Sec. 1453. Oxadiazon.
    Sec. 1454. NAHP.
    Sec. 1455. Phosphorus thiochloride.
    Sec. 1456. Trifloxystrobin.
    Sec. 1457. Phosphoric acid, lanthanum salt, cerium terbium-doped.
    Sec. 1458. Lutetium oxide.
    Sec. 1459. ACM.
    Sec. 1460. Permethrin.
    Sec. 1461. Thidiazuron.
    Sec. 1462. Flutolanil.
    Sec. 1463. Resmethrin.
    Sec. 1464. Clothianidin.
    Sec. 1465. Certain master cylinder assembles.
    Sec. 1466. Certain transaxles.
    Sec. 1467. Converter asy.
    Sec. 1468. Module and bracket asy-power steering.
    Sec. 1469. Unit asy-battery hi volt.
    Sec. 1470. Certain articles of natural cork.
    Sec. 1471. Glyoxylic acid.
    Sec. 1472. Cyclopentanone.
    Sec. 1473. Mesotrione technical.
    Sec. 1474. Malonic acid-dinitrile 50% NMP.
    Sec. 1475. Formulations of NOA 446510.
    Sec. 1476. DEMBB distilled-ISO tank.
    Sec. 1477. Methylionone.
    Sec. 1478. Certain acrylic fiber tow.
    Sec. 1479. Certain acrylic fiber tow.
    Sec. 1480. MKH 6561 isocyanate.
    Sec. 1481. Endosulfan.
    Sec. 1482. Tetraconazole.
    Sec. 1483. M-alcohol.
    Sec. 1484. Certain machines for use in the assembly of motorcycle
               wheels.
    Sec. 1485. Deltamethrin.
    Sec. 1486. Palm fatty acid distillate.
    Sec. 1487. 4-Methoxy-2-methyldiphenylamine.
    Sec. 1488. 2-Methylhydroquinone.
    Sec. 1489. 1-Fluoro-2-nitrobenzene.
    Sec. 1490. Cosmetic bags with a flexible outer surface of reinforced or
               laminated polyvinyl chloride (PVC).
    Sec. 1491. Mixtures of methyl 4-iodo-2-[3-(4-methoxy-6-methyl-1,3,5-
               triazin-2-yl)ureidosulfonyl]benzoate, sodium salt
               (iodosulfuron methyl, sodium salt).
    Sec. 1492. Ethyl 4,5-dihydro-5,5-diphenyl-1,2-oxazole-3-carboxylate
               (isoxadifen-ethyl).
    Sec. 1493. (5-cyclopropyl-4-isoxazolyl)[2-(methylsulfonyl)-4-
               (trifluoromethyl)phenyl]methanone (isoxaflutole).
    Sec. 1494. Methyl 2-[(4,6-dimethoxypyrimidin-2-ylcarbamoyl)sulfamoyl]-a-
               (methanesulfonamido)-p-toluate (mesosulfuron-methyl) whether
               or not mixed with application adjuvants.
    Sec. 1495. Mixtures of foramsulfuron and iodosulfuron-methyl-sodium.
    Sec. 1496. Vulcuren UPKA 1988.
    Sec. 1497. Vullcanox 41010 NA/LG.
    Sec. 1498. Vulkazon AFS/LG.
    Sec. 1499. P-Anisaldehyde.
    Sec. 1500. 1,2-Pentanediol.
    Sec. 1501. Agrumex.
    Sec. 1502. Cohedur RL.
    Sec. 1503. Formulations of prosulfuron.
    Sec. 1504. Lewatit.
    Sec. 1505. Para-Chlorophenol.
    Sec. 1506. Cypermethrin.
    Sec. 1507. Ion-exchange resin powder.
    Sec. 1508. Ion-exchange resin powder.
    Sec. 1509. Desmodur E 14.
    Sec. 1510. Desmodur VP LS 2253.
    Sec. 1511. Desmodur R-E.
    Sec. 1512. Walocel MW 3000 PFV.

    [[Page 120 STAT. 1112]]

    Sec. 1513. TSME.
    Sec. 1514. Walocel VP-M 20660.
    Sec. 1515. Xama 2.
    Sec. 1516. Xama 7.
    Sec. 1517. Certain cases for toys.
    Sec. 1518. Certain cases for toys.
    Sec. 1519. Aniline 2.5-disulfonic acid.
    Sec. 1520. 1,4-benzenedicarboxylic acid, polymer with n,n'-bis(2-
               aminoethyl)-1,2-ethanediamine, cyclized, methosulfate.
    Sec. 1521. Sulfur blue 7.
    Sec. 1522. Formaldehyde, reaction products with 1,4-benzenediol and m-
               phenylenediamine, sulfurized.
    Sec. 1523. Isocyanatosulfonyl.
    Sec. 1524. Isocyanatosulfonyl.
    Sec. 1525. Gemifloxacin, gemifloxacin mesylate, and gemifloxacin
               mesylate sesquihydrate.
    Sec. 1526. Butralin.
    Sec. 1527. Spirodiclofen.
    Sec. 1528. Propamocarb HCL (PREVICUR).
    Sec. 1529. Desmodur IL.
    Sec. 1530. Chloroacetone.
    Sec. 1531. IPN (isophthalonitrile).
    Sec. 1532. NOA 446510 technical.
    Sec. 1533. Hexythiazox technical.
    Sec. 1534. Crelan (self-blocked cycloaliphatic polyuretdione).
    Sec. 1535. Aspirin.
    Sec. 1536. Desmodur BL XP 2468.
    Sec. 1537. Desmodur RF-E.
    Sec. 1538. Desmodur HL.
    Sec. 1539. D-Mannose.
    Sec. 1540. Certain camel hair.
    Sec. 1541. Waste of camel hair.
    Sec. 1542. Certain camel hair.
    Sec. 1543. Woven fabric of vicuna hair.
    Sec. 1544. Certain camel hair.
    Sec. 1545. Noils of camel hair.
    Sec. 1546. Chloroacetic acid, ethyl ester.
    Sec. 1547. Chloroacetic acid, sodium salt.
    Sec. 1548. Low expansion laboratory glass.
    Sec. 1549. Stoppers, lids, and other closures.
    Sec. 1550. Pigment yellow 213.
    Sec. 1551. Indoxacarb.
    Sec. 1552. Dimethyl carbonate.
    Sec. 1553. 5-Chloro-1-indanone (EK179).
    Sec. 1554. Mixtures of famoxadone and cymoxanil.
    Sec. 1555. Decanedioic acid, bis(2,2,6,6-tetramethyl-4-piperidinyl)
               ester.
    Sec. 1556. Acid blue 80.
    Sec. 1557. Pigment brown 25.
    Sec. 1558. Formulations of azoxystrobin.
    Sec. 1559. Formulations of pinoxaden/cloquintocet.
    Sec. 1560. Mixtures of difenoconazole/mefenoxam.
    Sec. 1561. Fludioxinil technical.
    Sec. 1562. Mixtures of clodinafop-propargyl.
    Sec. 1563. Avermectin b, 1,4"-deoxy-4"-methylamino-, (4"r)-, benzoate.
    Sec. 1564. Cloquintocet-mexyl.
    Sec. 1565. Metalaxyl-M technical.
    Sec. 1566. Cyproconazole technical.
    Sec. 1567. Pinoxaden technical.
    Sec. 1568. Mixtures of tralkoxydim.
    Sec. 1569. Certain chemicals.
    Sec. 1570. Mixtures of ( <plus-minus> )-(cis and trans)-1-[[2-(2,4-
               dichlorophenyl)-4-propyl-1,3-dioxolan-2-yl]-methyl]-1h-1,2,4-
               triazole.
    Sec. 1571. Paraquat dichloride.
    Sec. 1572. Certain basketballs.
    Sec. 1573. Certain leather basketballs.
    Sec. 1574. Certain rubber basketballs.
    Sec. 1575. Certain volleyballs.
    Sec. 1576. 4-Chloro-3-[[3-(4-methoxyphenyl)-1,3-dioxopropyl]-amino]-
               dodecyl ester.
    Sec. 1577. Linuron.
    Sec. 1578. N,N-Dimethylpiperidinium chloride (mepiquat chloride).
    Sec. 1579. Diuron.
    Sec. 1580. Formulated product Krovar I DF.

    [[Page 120 STAT. 1113]]

    Sec. 1581. Triasulfuron technical.
    Sec. 1582. Brodifacoum technical.
    Sec. 1583. Pymetrozine technical.
    Sec. 1584. Formulations of thiamethoxam, difenoconazole, fludioxinil,
               and mefenoxam.
    Sec. 1585. Trifloxysulfuron-sodium technical.
    Sec. 1586. 2 Benzylthio-3-ethyl sulfonyl pyridine.
    Sec. 1587. 2-Amino-4-methoxy-6-methyl-1,3,5-triazine.
    Sec. 1588. Formulated products containing mixtures of the active
               ingredient 2-chloro-n-[[(4-methoxy-6-methyl-1,3,5-triazin-
               2yl) amino]carbonyl] benzenesulfonamide and application
               adjuvants.
    Sec. 1589. 2-methyl-4-methoxy-6-methylamino-1,3,5-triazine.
    Sec. 1590. Mixtures of sodium-2-chloro-6-[(4,6 dimethoxypyrimidin-2-
               yl)thio]benzoate and application adjuvants (pyrithiobac-
               sodium).
    Sec. 1591. Certain decorative plates, decorative sculptures, decorative
               plaques, and architectural miniatures.
    Sec. 1592. Certain music boxes.
    Sec. 1593. 2-Methyl-4-chlorophenoxyacetic acid.
    Sec. 1594. Phenmedipham.
    Sec. 1595. Desmedipham.
    Sec. 1596. Certain footwear with open toes or heels.
    Sec. 1597. Certain work footwear.
    Sec. 1598. Certain refracting and reflecting telescopes.
    Sec. 1600. Certain work footwear.
    Sec. 1601. Certain footwear for men.
    Sec. 1602. Certain rubber or plastic footwear.
    Sec. 1604. Zinc dimethyldithiocarbamate.
    Sec. 1605. Certain liquid crystal device (LCD) panel assemblies.
    Sec. 1606. Certain watertube boilers and reactor vessel heads.

               Chapter 2--Existing Duty Suspensions and Reductions

    Sec. 1611. Extension of certain existing duty suspensions and
               reductions.

                       Subtitle B--Other Tariff Provisions

           Chapter 1--Liquidation Or Reliquidation of Certain Entries

    Sec. 1621. Certain tramway cars and associated spare parts.
    Sec. 1622. Reliquidation of certain entries of candles.
    Sec. 1623. Certain entries of roller chain.
    Sec. 1624. Certain entries of soundspa clock radios.

                       Chapter 2--Miscellaneous Provisions

    Sec. 1631. Vessel repair duties.
    Sec. 1632. Suspension of new shipper review provision.
    Sec. 1633. Extension and modification of duty suspension on wool
               products; wool research fund; wool duty refunds.
    Sec. 1634. Authorities relating to DR-CAFTA Agreement.
    Sec. 1635. Technical amendments to Customs modernization.

                           Subtitle C--Effective Date

    Sec. 1641. Effective date.

    SEC. 1402. REFERENCE.

        Except as otherwise expressly provided, whenever in this title an
    amendment or repeal is expressed in terms of an amendment to, or repeal
    of, a chapter, subchapter, note, additional U.S. note, heading,
    subheading, or other provision, the reference shall be considered to be
    made to a chapter, subchapter, note, additional U.S. note, heading,
    subheading, or other provision of the Harmonized Tariff Schedule of the
    United States (19 U.S.C. 3007).

    [[Page 120 STAT. 1114]]

              Subtitle A--Temporary Duty Suspensions and Reductions

                 CHAPTER 1--NEW DUTY SUSPENSIONS AND REDUCTIONS

    SEC. 1411. CERTAIN NON-KNIT GLOVES DESIGNED FOR USE BY AUTO MECHANICS.

        (a) In General.--Subchapter II of chapter 99 is amended by inserting
    in numerical sequence the following new headings:

    ``      9902.14.01      Mechanics' work     2.8%         No change        No change        On or before 12/
                             gloves, valued                                                     31/2009
                             not over $3.50
                             per pair
                             (provided for in
                             subheading
                             6216.00.58)......
            9902.14.02      Mechanics' work     2.8%         No change        No change        On or before 12/  ''.
                             gloves, valued                                                     31/2009
                             over $3.50 but
                             not over $3.70
                             per pair
                             (provided for in
                             subheading
                             6216.00.58)......
            9902.14.03      Mechanics' work     2.8%         No change        No change        On or before 12/  ''.
                             gloves, valued                                                     31/2009
                             over $3.70 but
                             not over $4.99
                             per pair
                             (provided for in
                             subheading
                             6216.00.58)......
            9902.14.04      Mechanics' work     2.8%         No change        No change        On or before 12/  ''.
                             gloves, valued                                                     31/2009
                             over $4.99 but
                             not over $7.72
                             per pair
                             (provided for in
                             subheading
                             6216.00.58)......
            9902.14.05      Mechanics' work     2.8%         No change        No change        On or before 12/  ''.
                             gloves, valued                                                     31/2009
                             over $7.72 per
                             pair (provided
                             for in subheading
                             6216.00.58)......

        (b) Amendment to U.S. Notes.--Subchapter II of chapter 99 is amended
    by adding at the end of the U.S. Notes to such subchapter the following
    new U.S. Note:
        ``18. For purposes of headings 9902.14.01, 9902.14.02, 9902.14.03,
    9902.14.04, and 9902.14.05, the term `mechanics' work gloves' means
    gloves, of man-made fibers, having synthetic leather palms and fingers;
    fourchettes of synthetic leather or of fabric of nylon or elastomeric
    yarn; backs comprising either one layer of knitted fabric of elastomeric
    yarn or three layers, with the outer layer of knitted fabric of
    elastomeric yarn, the center layer of foam and the inner layer of tricot
    fabric; the foregoing, whether or not including an thermoplastic rubber
    logo or pad on the back; and elastic wrist straps with molded
    thermoplastic rubber hook-and-loop enclosures.''.

    SEC. 1412. CERTAIN MICROPHONES FOR USE IN AUTOMOTIVE INTERIORS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1115]]

    ``      9902.10.17      Unidirectional      Free         No change        No change        On or before 12/  ''.
                             (cardioid)                                                         31/2009
                             electret
                             condenser
                             microphone
                             modules for use
                             in motor vehicles
                             provided for in
                             headings 8701
                             through 8705
                             (other than such
                             modules designed
                             for handheld,
                             microphone stand,
                             or lapel use),
                             the foregoing
                             each including
                             wire leads for
                             external
                             connection,
                             whether or not
                             including a multi-
                             pin board level
                             type connector
                             but not including
                             a battery
                             compartment;
                             having a typical
                             frequency
                             response of 250
                             Hertz through
                             7,000 Hertz with
                             no more than a 20
                             decibel deviation
                             in that frequency
                             range and an
                             electrostatic
                             discharge
                             immunity of 4,000
                             V (contact) and
                             8,000 V (air);
                             and capable of
                             operation and
                             storage in the
                             temperature range
                             of -40C through
                             85C and a
                             humidity of not
                             over 95 percent
                             (provided for in
                             subheading
                             8518.10.80)......

    SEC. 1413. ACRYLIC OR MODACRYLIC SYNTHETIC FILAMENT TOW.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.21       Synthetic          6.8%         No change        No change        On or before 12/  ''.
                             filament tow:                                                      31/2009
                             acrylic or
                             modacrylic
                             (provided for in
                             subheading
                             5501.30.00)......

    SEC. 1414. ACRYLIC OR MODACRYLIC SYNTHETIC STAPLE FIBERS, CARDED,
                COMBED, OR OTHERWISE PROCESSED FOR SPINNING.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.22       Synthetic staple   Free         No change        No change        On or before 12/  ''.
                             fibers, carded,                                                    31/2009
                             combed, or
                             otherwise
                             processed for
                             spinning: acrylic
                             or modacrylic
                             (provided for in
                             subheading
                             5506.30.00)......

    SEC. 1415. NITROCELLULOSE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.23      Cellulose nitrates  4.4%         No change        No change        On or before 12/  ''.
                             (nitrocellulose,                                                   31/2009
                             including
                             collodions) (CAS
                             9004-70-0)
                             (provided for in
                             subheading
                             3912.20.00)......

    SEC. 1416. POTASSIUM SORBATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1116]]

    ``      9902.10.24      Potassium sorbate   1.4%         No change        No change        On or before 12/  ''.
                             (CAS No. 24634-61-                                                 31/2009
                             5) (provided for
                             in subheading
                             2916.19.10)......

    SEC. 1417. SORBIC ACID.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.25      Sorbic acid (CAS    1.9%         No change        No change        On or before 12/  ''.
                             No. 110-44-1)                                                      31/2009
                             (provided for in
                             subheading
                             2916.19.20)......

    SEC. 1418. CERTAIN CAPERS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.26       Capers, prepared   Free         No change        No change        On or before 12/  ''.
                             or preserved by                                                    31/2009
                             vinegar other
                             than such goods
                             in immediate
                             containers each
                             holding 3.4 kg or
                             less (provided
                             for in subheading
                             2001.90.20)......

    SEC. 1419. CERTAIN PEPPERONCINI PREPARED OR PRESERVED OTHERWISE THAN BY
                VINEGAR OR ACETIC ACID.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.27       Pepperoncini,      Free         No change        No change        On or before 12/  ''.
                             prepared or                                                        31/2009
                             preserved
                             otherwise than by
                             vinegar, not
                             frozen (provided
                             for in subheading
                             2005.90.55)......

    SEC. 1420. CERTAIN CAPERS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.28       Capers, prepared   Free         No change        No change        On or before 12/  ''.
                             or preserved by                                                    31/2009
                             vinegar in
                             immediate
                             containers each
                             holding more than
                             3.4 kg (provided
                             for in subheading
                             2001.90.10)......

    SEC. 1421. CERTAIN PEPPERONCINI PREPARED OR PRESERVED BY VINEGAR OR
                ACETIC ACID IN CONCENTRATIONS AT 0.5 PERCENT OR GREATER.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.29       Pepperoncini,      2.2%         No change        No change        On or before 12/  ''.
                             prepared or                                                        31/2009
                             preserved by
                             vinegar (provided
                             for in subheading
                             2001.90.38)......

    [[Page 120 STAT. 1117]]

    SEC. 1422. CERTAIN PEPPERONCINI PREPARED OR PRESERVED OTHERWISE THAN BY
                VINEGAR OR ACETIC ACID IN CONCENTRATIONS LESS THAN 0.5
                PERCENT.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.30      Giardiniera,        Free         No change        No change        On or before 12/  ''.
                             prepared or                                                        31/2009
                             preserved
                             otherwise than by
                             vinegar, not
                             frozen (provided
                             for in subheading
                             2005.90.55)......

    SEC. 1423. CHLORAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.31      Trichloroacetaldeh  Free         No change        No change        On or before 12/  ''.
                             yde (CAS No. 75-                                                   31/2009
                             87-6) (provided
                             for in subheading
                             2913.00.50)......

    SEC. 1424. IMIDACLOPRID TECHNICAL (IMIDACLOPRID).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.32      1-[(6-Chloro-3-     Free         No change        No change        On or before 12/  ''.
                             pyrdinyl)methyl]-                                                  31/2009
                             N-nitro-2-
                             imidazolidinimine
                             (Imidacloprid)
                             (CAS No. 138261-
                             41-3) (provided
                             for in subheading
                             2933.39.27)......

    SEC. 1425. TRIADIMEFON.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.33      1-(4-               Free         No change        No change        On or before 12/  ''.
                             Chlorophenoxy)-3,                                                  31/2009
                             3-dimethyl-1-(1H-
                             1,2,4-triazol-1-
                             y1)-2-butanone
                             (CAS No. 43121-43-
                             3) (Triadimefon)
                             (provided for in
                             subheading
                             2933.99.22)......

    SEC. 1426. POLYETHYLENE HE1878.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.34      Polyethylene        3.6%         No change        No change        On or before 12/  ''.
                             HE1878 (CAS No.                                                    31/2009
                             25087-34-7), with
                             l-butene as
                             comonomer
                             (provided for in
                             subheading
                             3901.20.50)......

    SEC. 1427. THIACLOPRID.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1118]]

    ``      9902.10.35      (Z)-[3-[(6-chloro-  Free         No change        No change        On or before 12/  ''.
                             3-                                                                 31/2009
                             pyridinyl)methyl]-
                             2-
                             thiazolidinyliden
                             e]cyanamide
                             (thiacloprid)
                             (CAS No. 111988-
                             49-9) (provided
                             for in subheading
                             2934.10.10)......

    SEC. 1428. PYRIMETHANIL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.36      4,6-Dimethyl-N-     Free         No change        No change        On or before 12/  ''.
                             phenyl-2-                                                          31/2009
                             pyrimidinamine
                             (pyrimethanil)
                             (CAS No. 53112-28-
                             0) (provided for
                             in subheading
                             2933.59.15)......

    SEC. 1429. FORAMSULFURON.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.37      Foramsulfuron       2.6%         No change        No change        On or before 12/  ''.
                             (Benzamide, 2-                                                     31/2009
                             (((((4,6-
                             dimethoxy-2-
                             pyrimidinyl)amino
                             )
                             carbonyl)amino)su
                             lfonyl)-4-
                             (formylamino)-
                             N,N-dimethyl-,)
                             (CAS No. 173159-
                             57-4), in bulk or
                             put up in forms
                             or packaging for
                             retail sale
                             (provided for in
                             subheading
                             2935.00.75 or
                             3808.30.15)......

    SEC. 1430. FENAMIDONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.38      (5S)-3,5-Dihydro-5- Free         No change        No change        On or before 12/  ''.
                              methyl-2-                                                         31/2009
                             (methylthio)- 5-
                             phenyl-3-
                             (phenylamino)- 4H-
                             imidazol-4-one
                             (Fenamidone) (CAS
                             No. 161326-34-7)
                             (provided for in
                             subheading
                             2933.29.35)......

    SEC. 1431. CYCLANILIDE TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.39      1-(2,4-             Free         No change        No change        On or before 12/  ''.
                             Dichlorophenylami                                                  31/2009
                             nocarbonyl)cyclop
                             ropane-
                             carboxylic acid
                             (Cyclanilide)
                             (CAS No. 113136-
                             77-9) (provided
                             for in subheading
                             2924.29.47)......

    SEC. 1432. PARA-BENZOQUINONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1119]]

    ``      9902.10.40      1,4-Benzoquinone    Free         No change        No change        On or before 12/  ''.
                             (CAS No. 106-51-                                                   31/2009
                             4) (provided for
                             in subheading
                             2914.69.90)......

    SEC. 1433. O-ANISIDINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.41       o-Anisidine (CAS   Free         No change        No change        On or before 12/  ''.
                             No. 90-04-4)                                                       31/2009
                             (provided for in
                             subheading
                             2922.22.10)......

    SEC. 1434. 2,4-XYLIDINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.43       2,4-Xylidine (CAS  Free         No change        No change        On or before 12/  ''.
                             No. 95-68-1)                                                       31/2009
                             (provided for in
                             subheading
                             2921.49.10)......

    SEC. 1435. CROTONALDEHYDE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.44       Crotonaldehyde (2- Free         No change        No change        On or before 12/  ''.
                             butenaldehyde)                                                     31/2009
                             (CAS No. 4170-30-
                             3) (provided for
                             in subheading
                             2912.19.50)......

    SEC. 1436. BUTANEDIOIC ACID, DIMETHYL ESTER, POLYMER WITH 4-HYDROXY-
                2,2,6,6,-TETRAMETHYL-1-PIPERIDINEETHANOL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.47      Butanedioic acid,   Free         No change        No change        On or before 12/  ''.
                             dimethyl ester,                                                    31/2009
                             polymer with 4-
                             hydroxy-2,2,6,6,-
                             tetramethyl-1-
                             piperidineethanol
                             (CAS No. 65447-77-
                             0) (provided for
                             in subheading
                             3907.99.00)......

    SEC. 1437. MIXTURES OF CAS NOS. 106990-43-6 AND 65447-77-0.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1120]]

    ``      9902.10.48       1,3,5-Triazine-    Free         No change        No change        On or before 12/  ''.
                             2,4,6-triamine,                                                    31/2009
                             N,N-[1,2-
                             ethanediylbis[[[4
                             ,6-bis[butyl
                             (1,2,2,6,6-
                             pentamethyl-4-
                             piperidinyl)amino
                             ]-1,3,5-triazine-
                             2-yl]imino]-3,1-
                             propanediyl]]bis[
                             N,N-dibutyl-N,N-
                             bis(1,2,2,6,6-
                             pentamethyl-4-
                             piperidinyl)-
                             (CAS No. 106990-
                             43-6) and
                             Butanedioic acid,
                             dimethylester
                             polymer with 4-
                             hyroxy-2,2,6,6-
                             tetramethyl-1-
                             piperdine ethanol
                             (CAS No. 65447-77-
                             0) (Provided for
                             in subheading
                             3812.30.90)......

    SEC. 1438. MCPA.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.54      2-Ethylhexyl (4-    Free         No change        No change        On or before 12/  ''.
                             chloro-2-                                                          31/2009
                             methylphenoxy)ace
                             tate (CAS No.
                             29450-45-1)
                             (provided for in
                             subheading
                             2918.90.20)......

    SEC. 1439. BRONATE ADVANCED.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.55      Formulations of     2.8%         No change        No change        On or before 12/  ''.
                             2,6-dibromo-4-                                                     31/2009
                             cyanophenyl
                             octanoate (CAS
                             No. 1689-99-2),
                             2, 6-dibromo-4-
                             cyanophenyl
                             heptanoate (CAS
                             No. 56634-95-8),
                             and 2-ethylhexyl
                             (4-chloro-2-
                             methylphenoxy)ace
                             tate (CAS No.
                             29450-45-1)
                             (provided for in
                             subheading
                             3808.30.15)......

    SEC. 1440. BROMOXYNIL OCTANOATE TECH.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.56      2,6-dibromo-4-      Free         No change        No change        On or before 12/  ''.
                             cyanophenyl                                                        31/2009
                             octanoate (CAS
                             No. 1689-99-2)
                             (provided for in
                             subheading
                             2926.90.25)......

    SEC. 1441. BROMOXYNIL MEO.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1121]]

    ``      9902.10.57      2,6-Dibromo-4-      Free         No change        No change        On or before 12/  ''.
                             cyanophenyl                                                        31/2009
                             octanoate/
                             heptanoate (CAS
                             Nos. 1689-99-2
                             and 56634-95-8)
                             (provided for in
                             subheading
                             3808.30.15)......

    SEC. 1442. HYDRAULIC CONTROL UNITS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.62      Hydraulic control   Free         No change        No change        On or before 12/  ''.
                             units designed                                                     31/2009
                             for use in
                             braking systems
                             of hybrid motor
                             vehicles of
                             heading 8703
                             (provided for in
                             subheading
                             9032.89.60)......

    SEC. 1443. SHIELD ASY-STEERING GEAR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.63      Steering gear       Free         No change        No change        On or before 12/  ''.
                             assemblies for                                                     31/2009
                             single-pinion
                             constant-ratio
                             electronic power
                             assisted steering
                             systems rated at
                             80 amperes at
                             12V, the
                             foregoing
                             designed for use
                             in hybrid motor
                             vehicles of
                             heading 8703
                             (provided for in
                             subheading
                             8708.99.73)......

    SEC. 1444. 2,4-DICHLOROANILINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.64      2,4-                Free         No change        No change        On or before 12/  ''.
                             Dichloroaniline                                                    31/2009
                             (CAS No. 554-00-
                             7) (provided for
                             in subheading
                             2921.42.18)......

    SEC. 1445. 2-ACETYLBUTYROLACTONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.65      2-                  Free         No change        No change        On or before 12/  ''.
                             Acetylbutyrolacto                                                  31/2009
                             ne (CAS No. 517-
                             23-7) (provided
                             for in subheading
                             2932.29.50)......

    SEC. 1446. ALKYLKETONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.66      1-(4-Chlorophenyl)- Free         No change        No change        On or before 12/  ''.
                             4, 4-dimethyl-3-                                                   31/2009
                             pentanone (CAS
                             No. 66346-01-8)
                             (provided for in
                             subheading
                             2914.70.40)......

    [[Page 120 STAT. 1122]]

    SEC. 1447. CYFLUTHRIN (BAYTHROID).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.67      Cyano(4-fluoro-3-   3.5%         No change        No change        On or before 12/  ''.
                             phenoxyphenyl)met                                                  31/2009
                             hyl 3-(2,2-
                             dichloroethenyl)-
                             2,2-
                             dimethylcycloprop
                             anecarboxylate
                             (Cyfluthrin,
                             excluding b-
                             Cyfluthrin) (CAS
                             No. 68359-37-5)
                             (provided for in
                             subheading
                             2926.90.30)......

    SEC. 1448. BETA-CYFLUTHRIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.68      Reaction mixture    Free         No change        No change        On or before 12/  ''.
                             comprising the                                                     31/2009
                             enantiomeric pair
                             (R)-a-cyano-4-
                             fluoro-3-
                             phenoxybenzyl
                             (1S,3S)-3-(2,2-
                             dichlorovinyl)-2,
                             2-
                             dimethylcycloprop
                             anecarboxylate
                             and (S)-a-cyano-4-
                             fluoro-3-
                             phenoxybenzyl
                             (1R,3R)-3-(2,2-
                             dichlorovinyl)-2,
                             2-
                             dimethylcycloprop
                             anecarboxylate in
                             ratio 1:2 with
                             the enantiomeric
                             pair (R)-a-cyano-
                             4-fluoro-3-
                             phenoxybenzyl
                             (1S,3R)-3-(2,2-
                             dichlorovinyl)-2,
                             2-
                             dimethylcycloprop
                             anecarboxylate
                             and (S)-a-cyano-4-
                             fluoro-3-
                             phenoxybenzyl
                             (1R,3S)-3-(2,2-
                             dichlorovinyl)-2,
                             2-
                             dimethylcycloprop
                             anecarboxylate (b-
                             Cyfluthrin) (CAS
                             No. 68359-37-5)
                             (provided for in
                             subheading
                             2926.90.30)......

    SEC. 1449. CYCLOPROPANE-1,1-DICARBOXYLIC ACID, DIMETHYL ESTER.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.69      Cyclopropane-1,1-   1.8%         No change        No change        On or before 12/  ''.
                             dicarboxylic                                                       31/2009
                             acid, dimethyl
                             ester (CAS No.
                             6914-71-2)
                             (provided for in
                             subheading
                             2917.20.00)......

    SEC. 1450. SPIROXAMINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.70      8-(1,1-             Free         No change        No change        On or before 12/  ''.
                             Dimethylethyl)-N-                                                  31/2009
                             ethyl-N-propyl-
                             1,4-
                             dioxaspiro[4,5]de
                             cane-2-
                             methanamine (CAS
                             118134-30-8)
                             (provided for in
                             subheading
                             2932.99.90)......

    [[Page 120 STAT. 1123]]

    SEC. 1451. SPIROMESIFEN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.71      3,3-                Free         No change        No change        On or before 12/  ''.
                             Dimethylbutanoic                                                   31/2009
                             acid, 2-oxo-3-
                             (2,4,6-
                             trimethylphenyl)-
                             1-
                             oxaspiro[4.4]non-
                             3-en-yl ester
                             (CAS 283594-90-1)
                             (provided for in
                             subheading
                             2932.29.10)......

    SEC. 1452. 4-CHLOROBENZALDEHYDE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.72      4-                  Free         No change        No change        On or before 12/  ''.
                             Chlorobenzaldehyd                                                  31/2009
                             e (CAS No. 104-88-
                             1) (provided for
                             in subheading
                             2913.00.40)......

    SEC. 1453. OXADIAZON.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.73      5-tert-butyl-3-     Free         No change        No change        On or before 12/  ''.
                             (2,4-dichloro-5-                                                   31/2009
                             isopropoxyphenyl)
                             -1,3,4-oxadiazol-
                             2(3H)-one
                             (Oxadiazon) (CAS
                             No. 19666-30-9)
                             (provided for in
                             subheading
                             2934.99.11)......

    SEC. 1454. NAHP.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.74      2-(1,1-             Free         No change        No change        On or before 12/  ''.
                             Dimethylethyl)-5-                                                  31/2009
                             hydroxypyrimidine
                             , sodium salt
                             (CAS No. 146237-
                             62-9) (provided
                             for in subheading
                             2933.59.70)......

    SEC. 1455. PHOSPHORUS THIOCHLORIDE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.75      Phosphorus          Free         No change        No change        On or before 12/  ''.
                             Thiochloride (CAS                                                  31/2009
                             No. 3982-91-0)
                             (provided for in
                             subheading
                             2851.00.00)......

    SEC. 1456. TRIFLOXYSTROBIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1124]]

    ``      9902.10.76.     Methyl (E)-         2.4%         No change        No change        On or before 12/  ''.
                             methoxyimino-{(E)-                                                 31/2009
                             a-[1-(a,a,a-
                             trifluoro-m-
                             tolyl)ethylidenea
                             minooxy]-o-
                             tolyl}acetate
                             (Trifloxystrobin)
                             (CAS No. 141517-
                             21-7) (provided
                             for in subheading
                             2929.90.20)......

    SEC. 1457. PHOSPHORIC ACID, LANTHANUM SALT, CERIUM TERBIUM-DOPED.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.77       Phosphoric acid,   Free         No change        No change        On or before 12/  ''.
                             lanthanum salt,                                                    31/2009
                             cerium terbium-
                             doped (CAS No.
                             95823-34-0)
                             (provided for in
                             subheading
                             2846.90.80)......

    SEC. 1458. LUTETIUM OXIDE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.78       Lutetium oxide     Free         No change        No change        On or before 12/  ''.
                             (CAS No. 12032-20-                                                 31/2009
                             1) (provided for
                             in subheading
                             2846.90.80)......

    SEC. 1459. ACM.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.79       (3-Acetoxy-3-      0.7%         No change        No change        On or before 12/  ''.
                             cyanopropyl)                                                       31/2009
                             methylphosphinic
                             acid, butyl ester
                             (CAS No. 167004-
                             78-6) (provided
                             for in subheading
                             2931.00.90)......

    SEC. 1460. PERMETHRIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.80       (3-                Free         No change        No change        On or before 12/  ''.
                             Phenoxyphenyl)met                                                  31/2009
                             hyl 3-(2,2-
                             dichloroethenyl)-
                             2,2-
                             dimethylcycloprop
                             anecarboxylate
                             (Permethrin) (CAS
                             No. 52645-53-1)
                             (provided for in
                             subheading
                             2916.20.50)......

    SEC. 1461. THIDIAZURON.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1125]]

    ``      9902.10.81       N-Phenyl-N -       Free         No change        No change        On or before 12/  ''.
                             (1,2,3-thiadiazol-                                                 31/2009
                             5-yl)urea
                             (Thidiazuron) CAS
                             No. 51707-55-2),
                             whether or not
                             mixed with
                             application
                             adjuvants
                             (provided for in
                             subheading
                             2934.99.15 or
                             3808.30.15)......

    SEC. 1462. FLUTOLANIL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.82       N-[3-(1-           Free         No change        No change        On or before 12/  ''.
                             Methylethoxy)phen                                                  31/2009
                             yl]-2-
                             (trifluoromethyl)
                             benzamide
                             (Flutolanil) (CAS
                             No. 66332-96-5)
                             (provided for in
                             subheading
                             2924.29.47)......

    SEC. 1463. RESMETHRIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.83       [5-(Phenylmethyl)- Free         No change        No change        On or before 12/  ''.
                             3-furanyl]methyl                                                   31/2009
                             2,2-dimethyl-3-(2-
                             methyl-1-
                             propenyl)
                             cyclopropanecarbo
                             xylate
                             (Resmethrin) (CAS
                             No. 10453-86-8)
                             (provided for in
                             subheading
                             2932.19.10)......

    SEC. 1464. CLOTHIANIDIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.84       (E)-1-(2-Chloro-   5.4%         No change        No change        On or before 12/  ''.
                             1,3-thiazol-5-                                                     31/2009
                             ylmethyl)-3-
                             methyl-2-
                             nitroguanidine
                             (Clothianidin)
                             (CAS No. 210880-
                             92-5) (provided
                             for in subheading
                             2934.10.90)......

    SEC. 1465. CERTAIN MASTER CYLINDER ASSEMBLES.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.92      Master cylinder     Free         No change        No change        On or before 12/  ''.
                             assemblies for                                                     31/2009
                             braking systems,
                             not incorporating
                             a vacuum booster,
                             the foregoing
                             designed for use
                             in hybrid motor
                             vehicles of
                             heading 8703
                             (provided for in
                             subheading
                             8708.39.50)......

    SEC. 1466. CERTAIN TRANSAXLES.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1126]]

    ``      9902.10.93      Transaxles, each    1.5%         No change        No change        On or before 12/  ''.
                             incorporating an                                                   31/2009
                             integral
                             electronic
                             controller, the
                             foregoing
                             designed for use
                             in hybrid motor
                             vehicles of
                             heading 8703
                             (provided for in
                             subheading
                             8708.40.20)......

    SEC. 1467. CONVERTER ASY.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.94       Static converters  Free         No change        No change        On or before 12/  ''.
                             capable of                                                         31/2009
                             converting 300 V
                             direct current to
                             12 V direct
                             current, designed
                             for use in hybrid
                             motor vehicles of
                             heading 8703
                             (provided for in
                             subheading
                             8504.40.95)......

    SEC. 1468. MODULE AND BRACKET ASY-POWER STEERING.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.95      Controllers for     Free         No change        No change        On or before 12/  ''.
                             electronic power                                                   31/2009
                             assisted steering
                             systems, rated at
                             80 amperes at 12
                             V, designed for
                             use in hybrid
                             motor vehicles of
                             heading 8703
                             (provided for in
                             subheading
                             8537.10.90)......

    SEC. 1469. UNIT ASY-BATTERY HI VOLT.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.96      Nickel metal-       2.8%         No change        No change        On or before 12/  ''.
                             hydride storage                                                    31/2009
                             batteries,
                             exceeding 300 V,
                             the foregoing
                             designed for use
                             in hybrid motor
                             vehicles of
                             heading 8703
                             (provided for in
                             subheading
                             8507.80.80)......

    SEC. 1470. CERTAIN ARTICLES OF NATURAL CORK.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.10.99      Articles of         6%           No change        No change        On or before 12/  ''.
                             natural cork, not                                                  31/2009
                             elsewhere
                             specified or
                             included
                             (provided for in
                             subheading
                             4503.90.60)......

    SEC. 1471. GLYOXYLIC ACID.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1127]]

    ``      9902.11.01       Glyoxylic acid     1.6%         No change        No change        On or before 12/  ''.
                             (CAS No. 298-12-                                                   31/2009
                             4) (provided for
                             in subheading
                             2918.30.90)......

    SEC. 1472. CYCLOPENTANONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.02       Cyclopentanone     Free         No change        No change        On or before 12/  ''.
                             (CAS No. 120-92-                                                   31/2009
                             3) (provided for
                             in subheading
                             2914.29.50)......

    SEC. 1473. MESOTRIONE TECHNICAL.

        (a) Calendar Year 2006.--Subchapter II of chapter 99 is amended by
    inserting in numerical sequence the following new heading:

    ``      9902.11.03       2-[4-              6.04%        No change        No change        On or before 12/  ''.
                             (Methylsulfonyl)-                                                  31/2006
                             2-nitrobenzoyl]-
                             1,3-
                             cyclohexanedione
                             (Mesotrione) (CAS
                             No. 104206-82-8)
                             (provided for in
                             subheading
                             2930.90.10)......

        (b) Calendar Year 2007.--
                (1) In general.--Heading 9902.11.03, as added by subsection
            (a), is amended--
                        (A) by striking ``6.04%'' and inserting ``6.08%'';
                    and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2007''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2007.

        (c) Calendar Years 2008 and 2009.--
                (1) In general.--Heading 9902.11.03, as added by subsection
            (a) and amended by subsection (b), is further amended--
                        (A) by striking ``6.08%'' and inserting ``6.11%'';
                    and
                        (B) by striking ``12/31/2007'' and inserting ``12/
                    31/2009''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2008.

    SEC. 1474. MALONIC ACID-DINITRILE 50% NMP.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.04       50% solution of    Free         No change        No change        On or before 12/  ''.
                             malononitrile in                                                   31/2009
                             methyl-2-
                             pyrrolidone
                             solvent (CAS Nos.
                             109-77-3 and 872-
                             50-4) (provided
                             for in subheading
                             3824.90.9190)....

    SEC. 1475. FORMULATIONS OF NOA 446510.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1128]]

    ``      9902.11.05       Formulations of    Free         No change        No change        On or before 12/  ''.
                             NOA 446510 which                                                   31/2009
                             include NOA
                             446510 Technical,
                             2-(4-chloro-
                             phenyl)-N-[2-(3-
                             methoxy-4-prop-2-
                             ynyloxy-
                             phenyl)ethyl]-2-
                             prop-2-
                             ynyloxyacetamide
                             (CAS No. 374726-
                             62-2) (provided
                             for in subheading
                             3808.20.15)......

    SEC. 1476. DEMBB DISTILLED-ISO TANK.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.06      2-Bromo-1,3-        Free         No change        No change        On or before 12/  ''.
                             diethyl-5-                                                         31/2009
                             methylbenzene
                             (CAS No. 314084-
                             61-2) (DEMBB)
                             (provided for in
                             subheading
                             2903.69.80)......

    SEC. 1477. METHYLIONONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.10       3-Methyl-4-(2,6,6- Free         No change        No change        On or before 12/  ''.
                             trimethylcyclohex-                                                 31/2009
                             2-enyl)but-3-en-2-
                             one
                             (Methylionone)
                             (CAS No. 1335-46-
                             2) (provided for
                             in subheading
                             2914.23.00)......

    SEC. 1478. CERTAIN ACRYLIC FIBER TOW.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.11       Acrylic fiber tow  Free         No change        No change        On or before 12/  ''.
                             (polyacrylonitril                                                  31/2009
                             e tow) containing
                             by weight a
                             minimum of 92
                             percent
                             acrylonitrile,
                             not more than 0.1
                             percent zinc and
                             from 4 to 8
                             percent water,
                             imported in the
                             form of from 1 to
                             12 sub-bundles
                             crimped together,
                             each containing
                             24,000 filaments
                             (plus or minus
                             0.06 percent) and
                             with average
                             filament denier
                             of 1.5 decitex
                             (plus or minus
                             0.08 percent)
                             (provided for in
                             subheading
                             5501.30.00)......

    SEC. 1479. CERTAIN ACRYLIC FIBER TOW.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1129]]

    ``      9902.11.12       Acrylic fiber tow  Free         No change        No change        On or before 12/  ''.
                             (polyacrylonitril                                                  31/2009
                             e tow) containing
                             by weight a
                             minimum of 92
                             percent
                             acrylonitrile,
                             not more than 0.1
                             percent zinc and
                             from 2 to 8
                             percent water,
                             imported in the
                             form of 6 sub-
                             bundles crimped
                             together, each
                             containing 45,000
                             filaments (plus
                             or minus 0.06
                             percent) and with
                             average filament
                             denier of either
                             1.48 decitex
                             (plus or minus
                             0.08 percent) or
                             1.32 decitex
                             (plus or minus
                             0.09 percent)
                             (provided for in
                             subheading
                             5501.30.00)......

    SEC. 1480. MKH 6561 ISOCYANATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.13       2-(Carbomethoxy)   Free         No change        No change        On or before 12/  ''.
                             benzenesulfonyl                                                    31/2009
                             isocyanate (CAS
                             No. 74222-95-0)
                             (provided for in
                             subheading
                             2930.90.29)......

    SEC. 1481. ENDOSULFAN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.14      6,7,8,9,10,10-      Free         No change        No change        On or before 12/  ''.
                             Hexachlorohexahyd                                                  31/2009
                             romethano-2,4,3-
                             benzodioxathiepin-
                             3-oxide
                             (Endosulfan) (CAS
                             No. 115-29-7)
                             (provided for in
                             subheading
                             2920.90.50 or
                             3808.10.50)......

    SEC. 1482. TETRACONAZOLE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.15       1-[2-(2,4-         Free         No change        No change        On or before 12/  ''.
                             dichlorophenyl)-3-                                                 31/2009
                             (1,1,2,2-
                             tetrafluoroethoxy
                             )propyl]-1H-1,2,4-
                             triazole
                             (Tetraconazole)
                             (CAS No. 112281-
                             77-3) (provided
                             for in subheading
                             2933.99.22)......

    SEC. 1483. M-ALCOHOL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.16       2-(2,4-            1%           No change        No change        On or before 12/  ''.
                             Dichlorophenyl)-3-                                                 31/2009
                             (1H-1,2,4-triazol-
                             1-yl)propanol
                             (CAS No. 112281-
                             82-0) (provided
                             for in subheading
                             2933.99.82)......

    [[Page 120 STAT. 1130]]

    SEC. 1484. CERTAIN MACHINES FOR USE IN THE ASSEMBLY OF MOTORCYCLE
                WHEELS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.17      Wheel spoke         Free         No change        No change        On or before 12/  ''.
                             tightening                                                         31/2009
                             machines
                             (provided for in
                             subheading
                             8479.89.98), for
                             use with wheels
                             of vehicles of
                             heading 8711.....

    SEC. 1485. DELTAMETHRIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.26       (S)-a-Cyano-3-     Free         No change        No change        On or before 12/  ''.
                             phenoxybenzyl                                                      31/2009
                             (1R,3R)-3-(2,2-
                             dibromovinyl)-2,2-
                             dimethylcycloprop
                             anecarboxylate
                             (Deltamethrin)
                             (CAS No. 52918-63-
                             5) (provided for
                             in subheading
                             2926.90.30)......

    SEC. 1486. PALM FATTY ACID DISTILLATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.32      Monocarboxylic      1%           No change        No change        On or before 12/  ''.
                             fatty acids                                                        31/2009
                             derived from palm
                             oil (provided for
                             in subheading
                             3823.19.20)......

    SEC. 1487. 4-METHOXY-2-METHYLDIPHENYLAMINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.35      4-Methoxy-2-        1.1%         No change        No change        On or before 12/  ''.
                             methyldiphenylami                                                  31/2009
                             ne (CAS No. 41317-
                             15-1) (provided
                             for in subheading
                             2922.29.60)......

    SEC. 1488. 2-METHYLHYDROQUINONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.36       2-                 Free         No change        No change        On or before 12/  ''.
                             Methylhydroquinon                                                  31/2009
                             e (CAS No. 95-71-
                             6) (provided for
                             in subheading
                             2907.29.90)......

    SEC. 1489. 1-FLUORO-2-NITROBENZENE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1131]]

    ``      9902.11.37       1-Fluoro-2-        Free         No change        No change        On or before 12/  ''.
                             nitrobenzene (CAS                                                  31/2009
                             No. 1493-27-2)
                             (provided for in
                             subheading
                             2904.90.30)......

    SEC. 1490. COSMETIC BAGS WITH A FLEXIBLE OUTER SURFACE OF REINFORCED OR
                LAMINATED POLYVINYL CHLORIDE (PVC).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.43      Vanity cases that   13.3%        No change        No change        On or before 12/  ''.
                             are of a soft                                                      31/2009
                             sided
                             construction, of
                             reinforced or
                             laminated
                             polyvinyl
                             chloride
                             plastics, and are
                             of a kind
                             normally carried
                             in the pocket or
                             in the handbag
                             and used to
                             contain and apply
                             cosmetic
                             preparations
                             (provided for in
                             subheading
                             4202.12.20)......

    SEC. 1491. MIXTURES OF METHYL 4-IODO-2-[3-(4-METHOXY-6-METHYL-1,3,5-
                TRIAZIN-2-YL)UREIDOSULFONYL]BENZOATE, SODIUM SALT
                (IODOSULFURON METHYL, SODIUM SALT).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.44       Mixtures of        Free         No change        No change        On or before 12/  ''.
                             methyl 4-iodo-2-                                                   31/2009
                             [3-(4-methoxy-6-
                             methyl-1,3,5-
                             triazin-2-yl)
                             ureidosulfonyl]
                             benzoate, sodium
                             salt
                             (Iodosulfuron
                             methyl, sodium
                             salt) (CAS No.
                             144550-36-7) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.30.15)......

    SEC. 1492. ETHYL 4,5-DIHYDRO-5,5-DIPHENYL-1,2-OXAZOLE-3-CARBOXYLATE
                (ISOXADIFEN-ETHYL).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.45       Ethyl 4,5-dihydro- Free         No change        No change        On or before 12/  ''.
                             5,5-diphenyl-1,2-                                                  31/2009
                             oxazole-3-
                             carboxylate
                             (Isoxadifen-
                             ethyl) (CAS No.
                             163520-33-0)
                             (provided for in
                             subheading
                             2934.99.39)......

    SEC. 1493. (5-CYCLOPROPYL-4-ISOXAZOLYL)[2-(METHYLSULFONYL)-4-
                (TRIFLUOROMETHYL)PHENYL]METHANONE (ISOXAFLUTOLE).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1132]]

    ``      9902.11.46       (5-cyclopropyl-4-  4.8%         No change        No change        On or before 12/  ''.
                             isoxazolyl)[2-                                                     31/2009
                             (methylsulfonyl)-
                             4-
                             (trifluoromethyl)
                             phenyl]methanone
                             (Isoxaflutole)
                             (CAS No. 141112-
                             29-0) (provided
                             for in subheading
                             2934.99.15)......

    SEC. 1494. METHYL 2-[(4,6-DIMETHOXYPYRIMIDIN-2-YLCARBAMOYL)SULFAMOYL]-a-
                (METHANESULFONAMIDO)-P-TOLUATE (MESOSULFURON-METHYL) WHETHER
                OR NOT MIXED WITH APPLICATION ADJUVANTS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.48       Methyl 2-[(4,6-    Free         No change        No change        On or before 12/  ''.
                             dimethoxypyrimidi                                                  31/2009
                             n-2-
                             ylcarbamoyl)sulfa
                             moyl]-a-
                             (methanesulfonami
                             do)-p-toluate
                             (Mesosulfuron-
                             methyl) (CAS No.
                             208465-21-8)
                             whether or not
                             mixed with
                             application
                             adjuvants
                             (provided for in
                             subheading
                             2935.00.75 or
                             3808.30.15)......

    SEC. 1495. MIXTURES OF FORAMSULFURON AND IODOSULFURON-METHYL-SODIUM.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.49        Mixtures of N,N-    Free         No change       No change       On or before 12/  ''.
                              dimethyl-2[3-(4,6-                                                31/2009
                              dimethoxypyrimidin-
                              2-yl)
                              ureidosulfonyl]-4-
                              formylaminobenzami
                              de (Foramsulfuron)
                              (CAS No. 173159-57-
                              4), methyl 4-iodo-
                              2-[3-(4-methoxy-6-
                              methyl-1,3,5-
                              triazin-2-yl)
                              ureidosulfonyl]ben
                              zoate, sodium salt
                              (Iodosulfuron-
                              methyl-sodium)
                              (CAS No. 144550-36-
                              7) and application
                              adjuvants
                              (provided for in
                              subheading
                              3808.30.15).......

    SEC. 1496. VULCUREN UPKA 1988.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.54       1,6-Bis(N,N'-      Free         No change        No change        On or before 12/  ''.
                             dibenzylthiocarba                                                  31/2009
                             moyldithio)hexane
                             (CAS No. 151900-
                             44-6) (provided
                             for in subheading
                             2930.20.20)......

    SEC. 1497. VULLCANOX 41010 NA/LG.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1133]]

    ``      9902.11.55      N-Isopropyl-N'-     Free         No change        No change        On or before 12/  ''.
                             phenyl-p-                                                          31/2009
                             phenylenediamine
                             (CAS No. 101-72-
                             4) (provided for
                             in subheading
                             2921.51.50)......

    SEC. 1498. VULKAZON AFS/LG.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.56       Pentaerythritolbi  Free         No change        No change        On or before 12/  ''.
                             s(tetrahydrobenza                                                  31/2009
                             ldehyde acetal)
                             (CAS No. 6600-31-
                             3) (provided for
                             in subheading
                             2932.99.90)......

    SEC. 1499. P-ANISALDEHYDE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.57      P-Anisaldehyde      Free         No change        No change        On or before 12/  ''.
                             (CAS No. 123-11-                                                   31/2009
                             5) (Benzoldehyde,
                             4-methoxy-)
                             (provided for in
                             subheading
                             2912.49.10)......

    SEC. 1500. 1,2-PENTANEDIOL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.60       1,2-Pentanediol    Free         No change        No change        On or before 12/  ''.
                             (CAS No. 5343-92-                                                  31/2009
                             0) (provided for
                             in subheading
                             2905.39.90)......

    SEC. 1501. AGRUMEX.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following:

    ``      9902.11.62      o-tert-             Free         No change        No change        On or before 12/  ''.
                             Butylcyclohexyl                                                    31/2009
                             acetate, cis form
                             (CAS No. 20298-69-
                             9) (Agrumex)
                             (Cyclohexanol, 2-
                             (1,1-dimethyl-)
                             (provided for in
                             subheading
                             2915.39.45)......

    SEC. 1502. COHEDUR RL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.63       Mixtures of        Free         No change        No change        On or before 12/  ''.
                             resorcinol (CAS                                                    31/2009
                             No. 108-46-3),
                             hexamethylolmelam
                             ine ether (CAS
                             No. 3089-11-0)
                             and dibutyl
                             phthalate (CAS
                             No. 84-74-2)
                             (provided for in
                             subheading
                             3824.90.28)......

    SEC. 1503. FORMULATIONS OF PROSULFURON.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1134]]

    ``      9902.11.64       Mixtures of        Free         No change        No change        On or before 12/  ''.
                             Prosulfuron (1-(4-                                                 31/2009
                             methoxy-6-methyl-
                             1,3,5-triazin-2-
                             yl)-3-[2-(3,3,3-
                             trifluoropropyl)-
                             phenylsulfonyl]ur
                             ea ) (CAS No.
                             94125-34-5) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.30.15)......

    SEC. 1504. LEWATIT.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.71      Ion-exchange        Free         No change        No change        On or before 12/  ''.
                             resins (cationic                                                   31/2009
                             H form),
                             consisting of
                             copolymers of
                             acrylic acid and
                             diethylene glycol
                             divinyl ether
                             (CAS No. 359785-
                             58-3) (provided
                             for in subheading
                             3914.00.60)......

    SEC. 1505. PARA-CHLOROPHENOL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.72      para-Chlorophenol   Free         No change        No change        On or before 12/  ''.
                             (CAS No. 106-48-                                                   31/2009
                             9) (provided for
                             in subheading
                             2908.10.60)......

    SEC. 1506. CYPERMETHRIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.74      Cyano(3-            Free         No change        No change        On or before 12/  ''.
                             phenoxyphenyl)met                                                  31/2009
                             hyl 3-(2,2-
                             dichloroethenyl)-
                             2,2-
                             dimethylcycloprop
                             anecarboxylate
                             (Cypermethrin)
                             (CAS No. 52315-07-
                             8) (provided for
                             in subheading
                             2926.90.30)......

    SEC. 1507. ION-EXCHANGE RESIN POWDER.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.78       Ion-exchange       Free         No change        No change        On or before 12/  ''.
                             resin powder                                                       31/2009
                             comprised of a
                             copolymer of
                             methacrylic acid
                             cross-linked with
                             divinylbenzene,
                             in the hydrogen
                             ionic form, of a
                             nominal partical
                             size between
                             0.025mm and 0.150
                             mm, dried to less
                             than 5% moisture
                             (CAS No. 50602-21-
                             6)(provided for
                             in subheading
                             3914.00.60)......

    SEC. 1508. ION-EXCHANGE RESIN POWDER.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1135]]

    ``      9902.11.79       Ion-exchange       Free         No change        No change        On or before 12/  ''.
                             resin powder                                                       31/2009
                             comprised of a
                             copolymer of
                             methacrylic acid
                             cross-linked with
                             divinylbenzene,
                             in the potassium
                             ionic form, of a
                             nominal particle
                             size between
                             0.025mm and 0.150
                             mm, dried to less
                             than 10% moisture
                             (CAS No. 65405-55-
                             2) (provided for
                             in subheading
                             3914.00.60)......

    SEC. 1509. DESMODUR E 14.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.80      1,2,3-              Free         No change        No change        On or before 12/  ''.
                             Propanetriol,                                                      31/2009
                             polymer with 2,4-
                             diisocyanato-1-
                             methylbenzene, 2-
                             ethyl-2-
                             (hydroxymethyl)-1
                             ,3-propanediol,
                             methyloxirane and
                             oxirane (CAS No.
                             127821-00-5)
                             (provided for in
                             subheading
                             3909.50.50)......

    SEC. 1510. DESMODUR VP LS 2253.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.82      Hexane, 1,6-        Free         No change        No change        On or before 12/  ''.
                             diisocyanato-,                                                     31/2009
                             homopolymer, 3,5-
                             dimethyl-1H-
                             pyrazole-blocked
                             (CAS No. 163206-
                             31-3) (provided
                             for in subheading
                             3911.90.90)......

    SEC. 1511. DESMODUR R-E.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.83      4,4, 4-TT Desmodur  Free         No change        No change        On or before 12/  ''.
                             R-E in solvent                                                     31/2009
                             (CAS No. 2422-91-
                             5) in solvent
                             (provided for in
                             subheading
                             3824.90.28)......

    SEC. 1512. WALOCEL MW 3000 PFV.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.84      Methyl              Free         No change        No change        On or before 12/  ''.
                             hydroxyethyl                                                       31/2009
                             cellulose
                             products
                             containing 30% or
                             greater content
                             of 2-hydroxyethyl
                             methyl ether
                             cellulose
                             (``MHEC'' )
                             reaction products
                             with glyoxal (CAS
                             No. 68441-63-4)
                             (provided for in
                             subheading
                             3912.39.00)......

    SEC. 1513. TSME.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1136]]

    ``      9902.11.85      ortho/para-         Free         No change        No change        On or before 12/  ''.
                             Toluenesulfonic                                                    31/2009
                             acid, methyl
                             ester (TSME) (CAS
                             Nos. 23373-38-8
                             and 80-48-8)
                             (provided for in
                             subheading
                             2904.10.32)......

    SEC. 1514. WALOCEL VP-M 20660.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.86      Methyl              Free         No change        No change        On or before 12/  ''.
                             Hydroxyethyl                                                       31/2009
                             Cellulose with a
                             77% or greater
                             content of 2-
                             hydroxyethyl
                             methyl ether
                             cellulose (CAS
                             No. 9032-42-2)
                             (provided for in
                             subheading
                             3912.39.00)......

    SEC. 1515. XAMA 2.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.87      Trimethylopropane   Free         No change        No change        On or before 12/  ''.
                             tris(3-                                                            31/2009
                             aziridinylpropano
                             ate) (CAS No.
                             52234-82-9)
                             (provided for in
                             subheading
                             2933.99.97)......

    SEC. 1516. XAMA 7.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.88      Polyfunctional      Free         No change        No change        On or before 12/  ''.
                             aziridine (CAS                                                     31/2009
                             No. 57116-45-7)
                             (provided for in
                             subheading
                             2933.99.97)......

    SEC. 1517. CERTAIN CASES FOR TOYS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.90      Cases or            Free         No change        No change        On or before 12/  ''.
                             containers                                                         31/2009
                             (provided for in
                             subheading
                             4202.92.90 and
                             not including
                             goods described
                             in heading
                             9902.01.81),
                             specially shaped
                             or fitted for,
                             and with
                             labeling, logo or
                             other descriptive
                             information on
                             the exterior of
                             the case or
                             container
                             indicating its
                             intention to be
                             used for,
                             electronic
                             drawing toys or
                             electronic games
                             of heading 9503
                             or 9504..........

    SEC. 1518. CERTAIN CASES FOR TOYS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1137]]

    ``      9902.11.91      Cases or            Free         No change        No change        On or before 12/  ''.
                             containers                                                         31/2009
                             (provided for in
                             subheadings
                             4402.12.80 or
                             4202.92.90),
                             having one or
                             more molded
                             plastic holders,
                             clips or
                             fasteners, for
                             holding a doll or
                             dolls, whether or
                             not the case or
                             container is also
                             capable of
                             holding other
                             goods............

    SEC. 1519. ANILINE 2.5-DISULFONIC ACID.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.92      Aniline 2,5-        Free         No change        No change        On or before 12/  ''.
                             disulfonic acid                                                    31/2009
                             (CAS No. 98-44-2)
                             (1,4-
                             Benzenedisnlfonic
                             acid, 2-amino-)
                             (provided for in
                             subheading
                             2921.42.90)......

    SEC. 1520. 1,4-BENZENEDICARBOXYLIC ACID, POLYMER WITH N,N'-BIS(2-
                AMINOETHYL)-1,2-ETHANEDIAMINE, CYCLIZED, METHOSULFATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.93       1,4-               Free         No change        No change        On or before 12/  ''.
                             Benzenedicarboxyl                                                  31/2009
                             ic acid, polymer
                             With N,N-Bis(2-
                             aminoethyl)-1,2-
                             ethanediamine,
                             cyclized,
                             methosulfate (CAS
                             No. 68187-22-4)
                             (provided for in
                             subheading
                             3908.90.70)......

    SEC. 1521. SULFUR BLUE 7.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.94      4-[(4-Amino-3-      Free         No change        No change        On or before 12/  ''.
                             methylphenyl)amin                                                  31/2009
                             o]phenol,
                             reaction products
                             with sodium
                             sulfide (Sulfur
                             Blue 7) (CAS No.
                             1327-57-7)
                             (provided for in
                             subheading
                             3204.19.50)......

    SEC. 1522. FORMALDEHYDE, REACTION PRODUCTS WITH 1,4-BENZENEDIOL AND M-
                PHENYLENEDIAMINE, SULFURIZED.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.95       Formaldehyde,      Free         No change        No change        On or before 12/  ''.
                             reaction products                                                  31/2009
                             with 1,4-
                             benzenediol and m-
                             phenylenediamine,
                             sulfurized (CAS
                             No. 110392-46-6)
                             (provided for in
                             subheading
                             3204.19.50)......

    [[Page 120 STAT. 1138]]

    SEC. 1523. ISOCYANATOSULFONYL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.96      2-                  Free         No change        No change        On or before 12/  ''.
                             (Isocyanatosulfon                                                  31/2009
                             yl)benzoic acid,
                             ethyl ester (CAS
                             No. 77375-79-2)
                             (provided for in
                             subheading
                             2930.90.29)......

    SEC. 1524. ISOCYANATOSULFONYL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.97      2-                  Free         No change        No change        On or before 12/  ''.
                             (Isocyanatosulfon                                                  31/2009
                             yl)benzoic acid,
                             methyl ester (CAS
                             No. 74222-95-0)
                             (provided for in
                             subheading
                             2930.90.29)......

    SEC. 1525. GEMIFLOXACIN, GEMIFLOXACIN MESYLATE, AND GEMIFLOXACIN
                MESYLATE SESQUIHYDRATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.11.99      Gemifloxacin (CAS   Free         No change        No change        On or before 12/  ''.
                             No. 175463-14-6);                                                  31/2009
                             gemifloxacin
                             mesylate (CAS No.
                             210353-53-0 or
                             204519-65-3); and
                             gemifloxacin
                             mesylate
                             sesquihydrate
                             (CAS No. 210353-
                             56-3 ) (the
                             foregoing
                             provided for in
                             subheading
                             2933.99.46)......

    SEC. 1526. BUTRALIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.01      Butralin (CAS No.   Free         No change        No change        On or before 12/  ''.
                             33629-47-9)                                                        31/2009
                             (Benzenamine, 4-
                             (1,1-
                             dimethylethyl)-N-
                             (1-methylpropyl)-
                             2,6-dintro-)
                             (provided for in
                             subheading
                             2921.43.90)......

    SEC. 1527. SPIRODICLOFEN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.02      2,2-                Free         No change        No change        On or before 12/  ''.
                             Dimethylbutanoic                                                   31/2009
                             acid, 3-(2,4-
                             dichlorophenyl)-2-
                             oxo-1-
                             oxaspiro(4.5)dec-
                             3-en-4-yl ester
                             (Spirodiclofen)
                             (CAS No. 148477-
                             71-8) (provided
                             for in subheading
                             2932.29.10)......

    [[Page 120 STAT. 1139]]

    SEC. 1528. PROPAMOCARB HCL (PREVICUR).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.03      Mixtures of propyl  Free         No change        No change        On or before 12/  ''.
                             3-(dimethylamino)                                                  31/2009
                             propylcarbamate
                             monohydrochloride
                             (Propamocarb
                             hydrochloride)
                             (CAS No. 25606-41-
                             1) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.20.50)......

    SEC. 1529. DESMODUR IL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.04      Poly(toluene        Free         No change        No change        On or before 12/  ''.
                             diisocyanate)                                                      31/2009
                             (CAS No. 26006-20-
                             2) dissolved in
                             organic solvents
                             (provided for in
                             subheading
                             3911.90.45)......

    SEC. 1530. CHLOROACETONE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.05      1-Chloro-2-         Free         No change        No change        On or before 12/  ''.
                             propanone (CAS                                                     31/2009
                             No. 78-95-5)
                             (provided for in
                             subheading
                             2914.70.90)......

    SEC. 1531. IPN (ISOPHTHALONITRILE).

        (a) Calendar Year 2006.--Subchapter II of chapter 99 is amended by
    inserting in numerical sequence the following new heading:

    ``      9902.12.06      1,3-                3.04%        No change        No change        On or before 12/  ''.
                             Benzenedicarbonit                                                  31/2006
                             rile (CAS No. 626-
                             17-5) (provided
                             for in subheading
                             2926.90.48)......

        (b) Calendar Year 2007.--
                (1) In general.--Heading 9902.12.06, as added by subsection
            (a), is amended--
                        (A) by striking ``3.04%'' and inserting ``3.23%'';
                    and
                        (B) by striking ``On or before 12/31/2006'' and
                    inserting ``On or before 12/31/2007''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2007.

        (c) Calendar Years 2008 and 2009.--
                (1) In general.--Heading 9902.12.06, as added by subsection
            (a) and amended by subsection (b), is further amended--
                        (A) by striking ``3.23%'' and inserting ``3.4%'';
                    and
                        (B) by striking ``On or before 12/31/2007'' and
                    inserting ``On or before 12/31/2009''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2008.

    [[Page 120 STAT. 1140]]

    SEC. 1532. NOA 446510 TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.07      4-Chloro-N-[2-[3-   1.2%         No change        No change        On or before 12/  ''.
                             methoxy-4-(2-                                                      31/2009
                             propynyloxy)pheny
                             l]ethyl]-a-(2-
                             propynyloxy)benze
                             neacetamide
                             (Mandipropamid)
                             (CAS No. 374726-
                             62-2) (provided
                             for in subheading
                             2924.29.47)......

    SEC. 1533. HEXYTHIAZOX TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.08      trans-5-(4-         Free         No change        No change        On or before 12/  ''.
                             Chlorophenyl)-N-                                                   31/2009
                             cyclohexyl-4-
                             methyl-2-
                             oxothiazolidine-3-
                             carboxamide
                             (Hexythiazox
                             Technical) (CAS
                             No. 78587-05-0)
                             (provided for in
                             subheading
                             2934.10.10)......

    SEC. 1534. CRELAN (SELF-BLOCKED CYCLOALIPHATIC POLYURETDIONE).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.10      2-Oxepanone         Free         No change        No change        On or before 12/  ''.
                             polymer with 1,4-                                                  31/2009
                             butanediol and 5-
                             isocyanato-1-
                             (isocyanatomethyl
                             )-1,3,3-
                             trimethylcyclohex
                             ane, 2-ethyl-1-
                             hexanol-blocked
                             (CAS No. 189020-
                             69-7) (provided
                             for in subheading
                             3909.50.50)......

    SEC. 1535. ASPIRIN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.11      o-Acetylsalicylic   3.0%         No change        No change        On or before 12/  ''.
                             acid (aspirin)                                                     31/2009
                             (CAS No. 50-78-2)
                             (provided for in
                             subheading
                             2918.22.10)......

    SEC. 1536. DESMODUR BL XP 2468.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.12      Copolymer of        Free         No change        No change        On or before 12/  ''.
                             methyl ethyl                                                       31/2009
                             ketoxime and
                             toluenediisocyana
                             te (CAS No.
                             352462-03-4)
                             (provided for in
                             subheading
                             3911.90.45)......

    [[Page 120 STAT. 1141]]

    SEC. 1537. DESMODUR RF-E.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.17      Mixtures of tris(4- Free         No change        No change        On or before 12/  ''.
                             isocyanatophenyl)                                                  31/2009
                             thiophosphate
                             (CAS No. 4151-51-
                             3) and ethyl
                             acetate and
                             monochlorobenzene
                             as solvents
                             (provided for in
                             subheading
                             3824.90.28)......

    SEC. 1538. DESMODUR HL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.18      Benzene, 1,3-       Free         No change        No change        On or before 12/  ''.
                             diisocyanatomethy                                                  31/2009
                             l-, polymer with
                             1,6-
                             diisocyanatohexan
                             e (CAS No. 63368-
                             95-6) dissolved
                             in n-butyl
                             acetate (provided
                             for in subheading
                             3911.90.45)......

    SEC. 1539. D-MANNOSE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.19      D-Mannose (CAS No.  Free         No change        No change        On or before 12/  ''.
                             3458-28-4)                                                         31/2009
                             (provided for in
                             subheading
                             2940.00.60)......

    SEC. 1540. CERTAIN CAMEL HAIR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.20       Camel hair,        Free         No change        No change        On or before 12/  ''.
                             processed beyond                                                   31/2009
                             the degreased or
                             carbonized
                             condition
                             (provided for in
                             subheading
                             5102.19.90)......

    SEC. 1541. WASTE OF CAMEL HAIR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.21       Waste of camel     Free         No change        No change        On or before 12/  ''.
                             hair (provided                                                     31/2009
                             for in subheading
                             5103.20.00)......

    SEC. 1542. CERTAIN CAMEL HAIR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.22       Camel hair carded  Free         No change        No change        On or before 12/  ''.
                             or combed                                                          31/2009
                             (provided for in
                             subheading
                             5105.39.00)......

    [[Page 120 STAT. 1142]]

    SEC. 1543. WOVEN FABRIC OF VICUNA HAIR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.23       Woven fabrics      Free         No change        No change        On or before 12/  ''.
                             containing 85                                                      31/2009
                             percent or more
                             by weight of
                             vicuna hair
                             (provided for in
                             subheadings
                             5111.11.70,
                             5111.19.60,
                             5112.11.60, or
                             5112.19.95)......

    SEC. 1544. CERTAIN CAMEL HAIR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.24       Camel hair, not    Free         No change        No change        On or before 12/  ''.
                             processed in any                                                   31/2009
                             manner beyond the
                             degreased or
                             carbonized
                             condition
                             (provided for in
                             subheading
                             5102.19.20)......

    SEC. 1545. NOILS OF CAMEL HAIR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.25       Noils of camel     Free         No change        No change        On or before 12/  ''.
                             hair (provided                                                     31/2009
                             for in subheading
                             5103.10.00)......

    SEC. 1546. CHLOROACETIC ACID, ETHYL ESTER.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.33      Chloroacetic acid,  Free         No change        No change        On or before 12/  ''.
                             ethyl ester (CAS                                                   31/2009
                             No. 105-39-5)
                             (provided for in
                             subheading
                             2915.40.50)......

    SEC. 1547. CHLOROACETIC ACID, SODIUM SALT.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.34      Chloroacetic acid,  Free         No change        No change        On or before 12/  ''.
                             sodium salt (CAS                                                   31/2009
                             No. 3926-62-3)
                             (provided for in
                             subheading
                             2915.40.50)......

    SEC. 1548. LOW EXPANSION LABORATORY GLASS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1143]]

    ``      9902.12.39       Laboratory,        3.6%         No change        No change        On or before 12/  ''.
                             hygienic, or                                                       31/2009
                             pharmaceutical
                             glassware,
                             whether or not
                             graduated or
                             calibrated, of
                             low expansion
                             borosilicate
                             glass or alumino-
                             borosilicate
                             glass, having a
                             linear
                             coefficient of
                             expansion not
                             exceeding 3.3 x
                             10\7\ per Kelvin
                             within a
                             temperature range
                             of 0 to 300 C
                             (provided for in
                             subheading
                             7017.20.00)......

    SEC. 1549. STOPPERS, LIDS, AND OTHER CLOSURES.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.40       Stoppers, lids,    Free         No change        No change        On or before 12/  ''.
                             and other                                                          31/2009
                             closures of low
                             expansion
                             borosilicate
                             glass or alumino-
                             borosilicate
                             glass, having a
                             linear
                             coefficient of
                             expansion not
                             exceeding 3.3 x
                             10\7\ per Kelvin
                             within a
                             temperature range
                             of 0 to 300 C,
                             produced by
                             automatic machine
                             (provided for in
                             subheading
                             7010.20.20) or
                             produced by hand
                             (provided for in
                             subheading
                             7010.20.30)......

    SEC. 1550. PIGMENT YELLOW 213.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.41      1,4-                Free         No change        No change        On or before 12/  ''.
                             Benzenedicarboxyl                                                  31/2009
                             ic acid, 2-[[2-
                             oxo-1-[[1,2,3,4-
                             tetrahydro-7-
                             methoxy-2,3-
                             dioxo-6-
                             quinoxalinyl)
                             amino]carbonyl]
                             propyl]azo]-,
                             dimethyl ester
                             (Pigment Yellow
                             213) (CAS No.
                             220198-21-0)
                             (provided for in
                             subheading
                             3204.17.60)......

    SEC. 1551. INDOXACARB.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.42      (4aS) -7-Chloro-2,  Free         No change        No change        On or before 12/  ''.
                             5-dihydro-2-                                                       31/2009
                             [[(methoxycarbony
                             l)[4-
                             (trifluoromethoxy
                             ) phenyl] amino]
                             carbonyl]-indeno
                             [1,2-e][1,3,4]
                             oxadiazine-4a
                             (3H)-carboxylic
                             acid methyl ester
                             (CAS No. 173584-
                             44-6) (provided
                             for in subheading
                             2934.99.16)......

    SEC. 1552. DIMETHYL CARBONATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1144]]

    ``      9902.12.43      Dimethyl carbonate  Free         No change        No change        On or before 12/  ''.
                             (CAS No. 616-38-                                                   31/2009
                             6) (provided for
                             in subheading
                             2920.90.50)......

    SEC. 1553. 5-CHLORO-1-INDANONE (EK179).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.44      5-Chloro-1-         Free         No change        No change        On or before 12/  ''.
                             indanone (CAS No.                                                  31/2009
                             42348-86-7)
                             (provided for in
                             subheading
                             2914.39.90)......

    SEC. 1554. MIXTURES OF FAMOXADONE AND CYMOXANIL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.45      Mixtures of 5-      Free         No change        No change        On or before 12/  ''.
                             methyl-5-(4-                                                       31/2009
                             phenoxyphenyl)-3-
                             (phenylamino)-2,4-
                             oxazolidinedione]
                             (famoxadone) (CAS
                             No. 131807-57-3),
                             2-cyano-N-
                             [(ethylamino)carb
                             onyl]-2-
                             (methoxyimino)ace
                             tamide
                             (Cymoxanil) (CAS
                             No. 57966-95-7)
                             and application
                             adjuvants
                             (provided for in
                             subheading
                             3808.20.15)......

    SEC. 1555. DECANEDIOIC ACID, BIS(2,2,6,6-TETRAMETHYL-4-PIPERIDINYL)
                ESTER.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.47       Decanedioic acid,  Free         No change        No change        On or Before 12/  ''.
                             bis(2,2,6,6-                                                       31/2009
                             tetramethyl-4-
                             piperidinyl)
                             ester (CAS No.
                             52829-07-9)
                             (provided for in
                             subheading
                             2933.39.91)......

    SEC. 1556. ACID BLUE 80.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.49      Acid Blue 80 (CAS   Free         No change        No change        On or before 12/  ''.
                             No. 4474-24-2)                                                     31/2009
                             (provided for in
                             subheading
                             3204.12.50)......

    SEC. 1557. PIGMENT BROWN 25.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.50      Pigment Brown 25    Free         No change        No change        On or before 12/  ''.
                             (CAS No. 6992-11-                                                  31/2009
                             6) (provided for
                             in subheading
                             3204.17.04)......

    [[Page 120 STAT. 1145]]

    SEC. 1558. FORMULATIONS OF AZOXYSTROBIN.

        (a) Calendar Year 2006.--Subchapter II of chapter 99 is amended by
    inserting in numerical sequence the following new heading:

    ``      9902.12.51       Mixtures of        6.14%        No change        No change        On or before 12/  ''.
                             benzeneacetic                                                      31/2006
                             acid, (a E)- 2-
                             [[6-(2-
                             cyanophenoxy)-4-
                             pyrimidinyl]oxy]-
                             a-
                             (methoxymethylene
                             )-, methyl ester
                             (Azoxystrobin)
                             (CAS No. 131860-
                             33-8) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.20.15)......

        (b) Calendar Year 2007.--
                (1) In general.--Heading 9902.12.51, as added by subsection
            (a), is amended--
                        (A) by striking ``6.14%'' and inserting ``6.15%'';
                    and
                        (B) by striking ``On or before 12/31/2006'' and
                    inserting ``On or before 12/31/2007''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2007.

        (c) Calendar Years 2008 and 2009.--
                (1) In general.--Heading 9902.12.51, as added by subsection
            (a) and amended by subsection (b), is further amended--
                        (A) by striking ``6.15%'' and inserting ``6.17%'';
                    and
                        (B) by striking ``On or before 12/31/2007'' and
                    inserting ``On or before 12/31/2009''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2008.

    SEC. 1559. FORMULATIONS OF PINOXADEN/CLOQUINTOCET.

        (a) Calendar Years 2006 and 2007.--Subchapter II of chapter 99 is
    amended by inserting in numerical sequence the following new heading:

    ``      9902.12.52       Mixtures of 8(2,6- Free         No change        No change        On or before 12/  ''.
                             diethyl-p-tolyl)-                                                  31/2007
                             1,2,4,5-
                             tetrahydro-7-oxo-
                             7H-pyrazolo[[1,2-
                             d][1,4,5]
                             oxadiazepin-9-yl
                             2,2-
                             dimethylpropionat
                             e (Pinoxaden)
                             (CAS No. 243973-
                             20-8), acetic
                             acid, [5-chloro-8-
                             quinolinyl]oxy]-,
                             1-methylhexyl
                             ester
                             (Cloquintocet)
                             (CAS No. 99607-70-
                             2) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.30.15)......

        (b) Calendar Years 2008 and 2009.--
                (1) In general.--Heading 9902.12.52, as added by subsection
            (a), is further amended--
                        (A) by striking ``Free'' and inserting ``1.74%'';
                    and
                        (B) by striking ``On or before 12/31/2007'' and
                    inserting ``On or before 12/31/2009''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2008.

    [[Page 120 STAT. 1146]]

    SEC. 1560. MIXTURES OF DIFENOCONAZOLE/MEFENOXAM.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.53      Mixtures of 1H-     Free         No change        No change        On or before 12/  ''.
                             1,2,4-triazole, 1-                                                 31/2009
                             ((2-
                             chlorophenoxy)phe
                             nyl)-4-methyl-1,3-
                             dioxolan-2-
                             yl)methyl)-
                             (Difenoconazole)
                             (CAS No. 119446-
                             68-3), (R,S)-2-
                             ((2,6-
                             dimethylphenyl)
                             methoxyacetylamin
                             o) propionic
                             acid, methyl
                             ester (Mefenoxam)
                             (CAS Nos. 70630-
                             17-0, and 69516-
                             34-3) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.20.15)......

    SEC. 1561. FLUDIOXINIL TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.54       1H-Pyrrole-3-      1.6%         No change        No change        On or before 12/  ''.
                             carbonitrile, 4-                                                   31/2009
                             (2,2-difluoro-1,3-
                             benzodioxol-4-yl)-
                              (fludioxinil)
                             (CAS No. 131341-
                             86-1) (provided
                             for in subheading
                             2934.99.12)......

    SEC. 1562. MIXTURES OF CLODINAFOP-PROPARGYL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.55       Mixtures of        1.7%         No change        No change        On or before 12/  ''.
                             propionic acid, 2-                                                 31/2009
                             (4-((5-chloro-3-
                             fluoro-2-
                             pyridynyl)oxy)phe
                             noxy-2-propynyl
                             ester,
                             (clodinafop-
                             propargyl) (CAS
                             No. 105512-06-9)
                             (provided for in
                             subheading
                             3808.30.15)......

    SEC. 1563. AVERMECTIN B, 1,4"-DEOXY-4"-METHYLAMINO-, (4"R)-, BENZOATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.56      Avermectin B, 1,4"- Free         No change        No change        On or before 12/  ''.
                             deoxy-4"-                                                          31/2009
                             methylamino-,
                             (4"R)-, benzoate
                             (CAS No. 155569-
                             91-8) (provided
                             for in subheading
                             3824.90.91 or
                             2932.29.50)......

    SEC. 1564. CLOQUINTOCET-MEXYL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1147]]

    ``      9902.12.57       Acetic acid, 5-    Free         No change        No change        On or before 12/  ''.
                             chloro-8-                                                          31/2009
                             quinolinoxy-, 1-
                             methylhexyl ester
                             (Cloquintocet-
                             mexyl) (CAS No.
                             99607-70-2)
                             (provided for in
                             subheading
                             2933.49.30)......

    SEC. 1565. METALAXYL-M TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.58      (R,S)-2-((2,6-      Free         No change        No change        On or before 12/  ''.
                             Dimethylphenyl)                                                    31/2009
                             methoxyacetylamin
                             o) propionic
                             acid, methyl
                             ester (Metalaxyl-
                             M and L-
                             Metalaxylfenoxam)
                             (CAS Nos. 70630-
                             17-0 and 69516-34-
                             3) (provided for
                             in subheading
                             2924.29.47)......

    SEC. 1566. CYPROCONAZOLE TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.59      [a-(4-              Free         No change        No change        On or before 12/  ''.
                             Chlorophenyl)-a-                                                   31/2009
                             (1-
                             cyclopropylethyl)
                             -1H-1-1,2,4-
                             triazole-1-
                             ethanol
                             (Cyproconazole)
                             (CAS No. 94361-06-
                             5) (provided for
                             in subheading
                             2934.99.12)......

    SEC. 1567. PINOXADEN TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.60      8-(2,6-Diethyl-4-   1.8%         No change        No change        On or before 12/  ''.
                             methylphenyl)-1,2                                                  31/2009
                             ,4,5-tetrahydro-7-
                             oxo-7H-
                             pyrazolo[1,2-
                             d][1,4,5]oxadiaze
                             pin-9-yl 2,2-
                             dimethylpropanoat
                             e (Pinoxaden)
                             (CAS No. 243973-
                             20-8) (provided
                             for in subheading
                             2934.99.15)......

    SEC. 1568. MIXTURES OF TRALKOXYDIM.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.12.61       Mixtures of 2-[1-  Free         No change        No change        On or before 12/  ''.
                             (ethoxyimino)prop                                                  31/2009
                             yl]-3-hydroxy-5-
                             (2,4,6-
                             trimethylphenyl)-
                             2-cyclohexen-1-
                             one (Tralkoxydim)
                             (CAS No. 87820-88-
                             0) as the active
                             ingredient and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.30.15)......

    [[Page 120 STAT. 1148]]

    SEC. 1569. CERTAIN CHEMICALS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new headings:

    ``     9902.12.72        Mixtures of zinc    Free       No change        No change        On or before 12/   ...
                              dialkyldithiophos                                                31/2009
                              phate (CAS No.
                              6990-43-8) with
                              an elastomer
                              binder of
                              ethylene-
                              propylene-diene
                              monomer and ethyl
                              vinyl acetate,
                              dispersing agents
                              and silica
                              (provided for in
                              subheading
                              3812.10.50)......
           9902.12.73        Mixtures of         Free       No change        No change        On or before 12/   ...
                              dithiocarbamate,                                                 31/2009
                              thiazole, thiuram
                              and thiourea with
                              an elastomer
                              binder of
                              ethylene-
                              propylene-diene
                              monomer and ethyl
                              vinyl acetate,
                              and dispersing
                              agents (provided
                              for in subheading
                              3812.10.50)......
           9902.12.74        Mixtures of         Free       No change        No change        On or before 12/   ...
                              caprolactam                                                      31/2009
                              disulfide (CAS
                              No. 23847-08-7)
                              with an elastomer
                              binder of
                              ethylene-
                              propylene-diene
                              monomer and ethyl
                              vinyl acetate,
                              and dispersing
                              agents (provided
                              for in subheading
                              3812.10.50)......
           9902.12.75        Mixtures of N-(3,4- Free       No change        No change        On or before 12/   ...
                              dichloro-phenyl)-                                                31/2009
                              N,N-dimethylurea
                              (CAS No. 330-54-
                              1) with acrylate
                              rubber (provided
                              for in subheading
                              3812.10.50)......
           9902.12.76        Mixtures of zinc    Free       No change        No change        On or before 12/   ...
                              dicyanato diamine                                                31/2009
                              (CAS No. 122012-
                              52-6) with an
                              elastomer binder
                              of ethylene-
                              propylene-diene
                              monomer and ethyl
                              vinyl acetate,
                              and dispersing
                              agents (provided
                              for in subheading
                              3812.10.50)......
           9902.12.77        4,8-Dicyclohexyl -  Free       No change        No change        On or before 12/   ...
                              6-2,10-dimethyl -                                                31/2009
                              12H-dibenzo
                              [d,g][1,3,2]
                              dioxaphosphocin
                              (CAS No. 73912-21-
                              7) (provided for
                              in subheading
                              2920.90.50)......
           9902.12.78        Mixtures of         Free       No change        No change        On or before 12/   ...
                              benzenesulfonic                                                  31/2009
                              acid, dodecyl-,
                              with 2-
                              aminoethanol (CAS
                              No. 26836-07-7)
                              and Poly (oxy-1,2-
                              ethanediyl), a-[1-
                              oxo-9-
                              octadecenyl]-w-
                              hydroxy-, (9Z)
                              (CAS No. 9004-96-
                              0) (provided for
                              in subheading
                              3402.90.50)......

    [[Page 120 STAT. 1149]]

           9902.12.79        1,3- Dihydro-3,3-   Free       No change        No change        On or before 12/   ''.
                              bis (4-hydroxy-m-                                                31/2009
                              tolyl) -2H-indol-
                              2-one (CAS No.
                              47465-97-4)
                              (provided for in
                              subheading
                              2933.79.08)......

    SEC. 1570. MIXTURES OF ( <plus-minus> )-(CIS AND TRANS)-1-[[2-(2,4-
                DICHLOROPHENYL)-4-PROPYL-1,3-DIOXOLAN-2-YL]-METHYL]-1H-
                1,2,4-TRIAZOLE.

        (a) In General.--Subchapter II of chapter 99 is amended by inserting
    in numerical sequence the following new heading:

    ``      9902.12.80       Mixtures of (      1.1%         No change        No change        On or before 12/  ''.
                             <plus-minus> )-(c                                                  31/2009
                             is and trans)-1-
                             [[2-(2,4-
                             Dichlorophenyl)-4-
                             propyl-1,3-
                             dioxolan-2-yl]-
                             methyl]-1H-1,2,4-
                             triazole (CAS No.
                             60207-90-1) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.20.15)......

        (b) Conforming amendment.--Subchapter II of chapter 99 is amended by
    striking heading 9902.32.04.

    SEC. 1571. PARAQUAT DICHLORIDE.

        (a) In General.--Subchapter II of chapter 99 is amended by inserting
    in numerical sequence the following new heading:

    ``      9902.13.06      Paraquat            3.59%        No change        No change        On or before 12/  ''.
                             dichloride                                                         31/2006
                             (1,1'dimethyl-
                             4,4'-bipyridinium
                             dichloride) (CAS
                             No. 1910-42-5)
                             (provided for in
                             subheading
                             2933.39.23)......

        (b) Calendar Year 2007.--
                (1) In general.--Heading 9902.13.06, as added by subsection
            (a), is amended--
                        (A) by striking ``3.59%'' and inserting ``4.02%'';
                    and
                        (B) by striking ``On or before 12/31/2006'' and
                    inserting ``On or before 12/31/2007''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2007.

        (c) Calendar Years 2008 and 2009.--
                (1) In general.--Heading 9902.13.06, as added by subsection
            (a) and amended by subsection (b), is further amended--
                        (A) by striking ``4.02%'' and inserting ``4.41%'';
                    and
                        (B) by striking ``On or before 12/31/2007'' and
                    inserting ``On or before 12/31/2009''.
                (2) Effective date.--The amendments made by paragraph (1)
            shall take effect on January 1, 2008.

    SEC. 1572. CERTAIN BASKETBALLS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1150]]

    ``      9902.13.07      Basketballs,        0.9%         No change        No change        On or before 12/  ''.
                             having an                                                          31/2009
                             external surface
                             other than
                             leather, rubber,
                             or synthetic
                             (provided for in
                             subheading
                             9506.62.80)......

    SEC. 1573. CERTAIN LEATHER BASKETBALLS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.08       Leather            Free         No change        No change        On or before 12/  ''.
                             basketballs                                                        31/2009
                             (provided for in
                             subheading
                             9506.62.80)......

    SEC. 1574. CERTAIN RUBBER BASKETBALLS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.09       Rubber             1.5%         No change        No change        On or before 12/  ''.
                             basketballs                                                        31/2009
                             (provided for in
                             subheading
                             9506.62.80)......

    SEC. 1575. CERTAIN VOLLEYBALLS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.10       Volleyballs        Free         No change        No change        On or before 12/  ''.
                             (provided for in                                                   31/2009
                             subheading
                             9506.62.80)......

    SEC. 1576. 4-CHLORO-3-[[3-(4-METHOXYPHENYL)-1,3-DIOXOPROPYL]-AMINO]-
                DODECYL ESTER.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.11      4-Chloro-3-[[3-(4-  Free         No change        No change        On or before 12/  ''.
                             methoxyphenyl)-1,                                                  31/2009
                             3-dioxopropyl]-
                             amino]-dodecyl
                             ester (CAS No.
                             33942-96-0)
                             (provided for in
                             subheading
                             2924.29.71)......

    SEC. 1577. LINURON.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.24       3-(3,4-            Free         No change        No change        On or before 12/  ''.
                             Dichlorophenyl)-1-                                                 31/2009
                             methoxy-1-
                             methylurea (CAS
                             No. 330-55-2)
                             (Linuron)
                             (provided for in
                             subheading
                             2924.21.16)......

    SEC. 1578. N,N-DIMETHYLPIPERIDINIUM CHLORIDE (MEPIQUAT CHLORIDE).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1151]]

    ``      9902.13.25      N,N-                Free         No change        No change        On or before 12/  ''.
                             Dimethylpiperidin                                                  31/2009
                             ium chloride
                             (Mepiquat
                             chloride) (CAS
                             No. 24307-26-4)
                             (provided for in
                             subheading
                             2933.39.25)......

    SEC. 1579. DIURON.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.26       Formulations of 3- Free         No change        No change        On or before 12/  ''.
                             (3,4-                                                              31/2009
                             dichlorophenyl)-1
                             ,1-dimethylurea
                             (CAS No. 330-54-
                             1) (Diuron) and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.30.15)......

    SEC. 1580. FORMULATED PRODUCT KROVAR I DF.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.27      Formulations        2.5%         No change        No change        On or before 12/  ''.
                             containing 5-                                                      31/2009
                             bromo-3-sec-butyl-
                             6-methyluracil
                             (Bromacil) (CAS
                             No. 314-40-9), 3-
                             (3,4-
                             Dichlorophenyl)-1
                             ,1-dimethylurea
                             (Diuron) (CAS No.
                             330-54-1), and
                             application
                             adjuvants
                             (provided for in
                             subheading
                             3808.30.15)......

    SEC. 1581. TRIASULFURON TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.28      3-(6-Methoxy-4-     Free         No change        No change        On or before 12/  ''.
                             methyl-1,3,5-                                                      31/2009
                             triazin-2-yl)-1-
                             [2-(2-
                             chloroethoxy)
                             phenylsulfonyl]ur
                             ea (Triasulfuron)
                             (CAS No. 82097-50-
                             5) (provided for
                             in subheading
                             2935.00.75)......

    SEC. 1582. BRODIFACOUM TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.29      3-[3-(4'-           Free         No change        No change        On or before 12/  ''.
                             Bromo[1,1'-                                                        31/2009
                             biphenyl]-4-yl)-
                             1,2,3,4-
                             tetrahydro-1-
                             naphthalenyl]-4-
                             hydroxy-2H-1-
                             benzopyran- 2-one
                             (Brodifacoum)
                             (CAS No. 56073-10-
                             0) (provided for
                             in subheading
                             2932.29.10)......

    SEC. 1583. PYMETROZINE TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1152]]

    ``      9902.13.30      1,2,4-Triazin-      Free         No change        No change        On or before 12/  ''.
                             3(2H)-one, 4,5-                                                    31/2009
                             dihydro-6-methyl-
                             4-[(3-
                             pyridinylmethylen
                             e)amino]-
                             (Pymetrozine)
                             (CAS No. 123312-
                             89-0) (provided
                             for in subheading
                             2933.69.60)......

    SEC. 1584. FORMULATIONS OF THIAMETHOXAM, DIFENOCONAZOLE, FLUDIOXINIL,
                AND MEFENOXAM.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.31      Formulations of 3-  Free         No change        No change        On or before 12/  ''.
                             [(2-chloro-5-                                                      31/2009
                             thiazolyl)methyl]
                             tetrahydro-5-
                             methyl-N-nitro-
                             1,3,5-oxadiazin-4-
                             imine)
                             (Thiamethoxam)
                             (CAS No. 153719-
                             23-4 ); 1H-1,2,4-
                             triazole, 1-[[2-
                             [2-chloro-4-(4-
                             chlorophenoxy)phe
                             nyl]-4-methyl-
                             1,3-dioxolan-2-
                             yl]methyl]-
                             (Difenoconazole)
                             (CAS No. 119446-
                             68-3); 1H-Pyrrole-
                             3-carbonitrile, 4-
                             (2,2-difluoro-1,3-
                             benzodioxol-4-yl)-
                              (Fludioxinil)
                             (CAS No. 131341-
                             86-1); and (R,S)-
                             2-[(2,6-
                             dimethylphenylmet
                             hoxy)acetylamino]-
                             propionic acid
                             methyl ester
                             (Mefenoxam) (CAS
                             Nos. 70630-17-0
                             and 69516-34-3)
                             (provided for in
                             subheading
                             3808.20.15)......

    SEC. 1585. TRIFLOXYSULFURON-SODIUM TECHNICAL.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.32       N-[[(4,6-          Free         No change        No change        On or before 12/  ''.
                             Dimethoxy-2-                                                       31/2009
                             pyrimidinyl)amino
                             ]carbonyl]-3-
                             (2,2,2-
                             trifluoroethoxy)-
                             2-
                             pyridinesulfonami
                             de monosodium
                             salt (CAS No.
                             199119-58-9)
                             (trifloxysulfuron-
                             sodium) (provided
                             for in subheading
                             2935.00.75)......

    SEC. 1586. 2 BENZYLTHIO-3-ETHYL SULFONYL PYRIDINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.41      2-Benzylthio-3-     Free         No change        No change        On or before 12/  ''.
                             ethyl sulfonyl                                                     31/2009
                             pyridine (CAS No.
                             175729-82-5)
                             (provided for in
                             subheading
                             2933.39.61)......

    [[Page 120 STAT. 1153]]

    SEC. 1587. 2-AMINO-4-METHOXY-6-METHYL-1,3,5-TRIAZINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.42      2-Amino-4-methoxy-  Free         No change        No change        On or before 12/  ''.
                             6-methyl-1,3,5-                                                    31/2009
                             triazine (CAS No.
                             1668-54-8)
                             (provided for in
                             subheading
                             2933.69.60)......

    SEC. 1588. FORMULATED PRODUCTS CONTAINING MIXTURES OF THE ACTIVE
                INGREDIENT 2-CHLORO-N-[[(4-METHOXY-6-METHYL-1,3,5-TRIAZIN-
                2YL) AMINO]CARBONYL] BENZENESULFONAMIDE AND APPLICATION
                ADJUVANTS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.43      Formulated          Free         No change        No change        On or before 12/  ''.
                             products                                                           31/2009
                             containing
                             mixtures of the
                             active ingredient
                             2-chloro-N-[[(4-
                             methoxy-6-methyl-
                             1,3,5-triazin-
                             2yl)
                             amino]carbonyl]
                             benzenesulfonamid
                             e and application
                             adjuvants
                             (Chlorosulfuon)
                             (CAS No. 64902-72-
                             3) (provided for
                             in subheading
                             3808.30.15)......

    SEC. 1589. 2-METHYL-4-METHOXY-6-METHYLAMINO-1,3,5-TRIAZINE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.44      2-Methyl-4-methoxy- Free         No change        No change        On or before 12/  ''.
                             6-methylamino-                                                     31/2009
                             1,3,5-triazine
                             (CAS No. 5248-39-
                             5) (provided for
                             in subheading
                             2933.69.60)......

    SEC. 1590. MIXTURES OF SODIUM-2-CHLORO-6-[(4,6 DIMETHOXYPYRIMIDIN-2-
                YL)THIO]BENZOATE AND APPLICATION ADJUVANTS (PYRITHIOBAC-
                SODIUM).

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.45       Mixtures of        3.5%         No change        No change        On or before 12/  ''.
                             sodium-2-chloro-6-                                                 31/2009
                             [(4,6
                             dimethoxypyrimidi
                             n-2-
                             yl)thio]benzoate
                             (CAS No. 123343-
                             16-8) and
                             application
                             adjuvants
                             (Pyrithiobac-
                             sodium) (provided
                             for in subheading
                             3808.30.15)......

    SEC. 1591. CERTAIN DECORATIVE PLATES, DECORATIVE SCULPTURES, DECORATIVE
                PLAQUES, AND ARCHITECTURAL MINIATURES.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1154]]

    ``      9902.13.46      Decorative plates,  Free         No change        No change        On or before 12/  ''.
                             whether or not                                                     31/2009
                             with decorative
                             rim or attached
                             sculpture;
                             decorative
                             sculptures, each
                             with plate or
                             plaque attached,
                             and decorative
                             plaques each not
                             over 7.65 cm in
                             thickness;
                             architectural
                             miniatures,
                             whether or not
                             put up in sets;
                             all the foregoing
                             of resin
                             materials and
                             containing
                             agglomerated
                             stone, put up for
                             mail order retail
                             sale, whether for
                             wall or tabletop
                             display and each
                             weighing not over
                             1.36 kg together
                             with their retail
                             packaging
                             (provided for in
                             subheading
                             3926.40.00)......

    SEC. 1592. CERTAIN MUSIC BOXES.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.47      Music boxes with    Free         No change        No change        On or before 12/  ''.
                             mechanical                                                         31/2009
                             musical
                             movements,
                             presented in the
                             immediate
                             packaging for
                             shipment to the
                             ultimate
                             purchaser, and
                             each weighing not
                             over 6 kg
                             together with
                             retail packaging
                             (provided for in
                             subheading
                             9208.10.00)......

    SEC. 1593. 2-METHYL-4-CHLOROPHENOXYACETIC ACID.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.60       2-Methyl-4-        Free         No change        No change        On or before 12/  ''.
                             chlorophenoxyacet                                                  31/2009
                             ic acid (CAS No.
                             94-74-6)
                             (provided for in
                             subheading
                             2918.90.20)......

    SEC. 1594. PHENMEDIPHAM.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.76      3-                  Free         No change        No change        On or before 12/  ''.
                             Methylcarbonylami                                                  31/2009
                             nophenyl-3-methyl-
                             carbanilate
                             (Phenmedipham)
                             (CAS No. 13684-63-
                             4) in bulk or
                             mixed with
                             application
                             adjuvants
                             (provided for in
                             subheadings
                             2924.29.47 and
                             3808.30.15)......

    SEC. 1595. DESMEDIPHAM.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1155]]

    ``      9902.13.77      3-                  Free         No change        No change        On or before 12/  ''.
                             Ethoxycarbonylami                                                  31/2009
                             nophenyl-N-
                             phenylcarbamate
                             (Desmedipham)
                             (CAS No. 13684-56-
                             5) in bulk or
                             mixed with
                             application
                             adjuvants
                             (provided for in
                             subheadings
                             2924.29.43 and
                             3808.30.15)......

    SEC. 1596. CERTAIN FOOTWEAR WITH OPEN TOES OR HEELS.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.78      Footwear with       Free         No change        No change        On or before 12/  ''.
                             outer soles of                                                     31/2009
                             rubber or
                             plastics and
                             uppers of
                             vegetable fibers,
                             with open toes or
                             open heels, other
                             than house
                             slippers
                             (provided for in
                             subheading
                             6404.19.25)......

    SEC. 1597. CERTAIN WORK FOOTWEAR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.85      House slippers      Free         No change        No change        On or before 12/  ''.
                             with outer soles                                                   31/2009
                             of rubber,
                             plastics, leather
                             or composition
                             leather and
                             uppers of
                             leather, valued
                             not over $2.50/
                             pair (provided
                             for in subheading
                             6403.99.75);
                             Sports footwear;
                             tennis shoes,
                             basketball shoes,
                             gym shoes,
                             training shoes
                             and the like, all
                             the foregoing
                             with outer soles
                             of rubber or
                             plastics and
                             uppers of textile
                             materials for
                             women (provided
                             for in subheading
                             6404.11.20)......

    SEC. 1598. CERTAIN REFRACTING AND REFLECTING TELESCOPES.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.86      Refracting          Free         No change        No change        On or before 12/  ''.
                             telescopes with                                                    31/2009
                             50 mm or smaller
                             objective lenses
                             and reflecting
                             telescopes with
                             76 mm or smaller
                             mirrors, and
                             parts and
                             accessories
                             thereof (provided
                             for in subheading
                             9005.80.40 or
                             9005.90.80)......

    SEC. 1600. CERTAIN WORK FOOTWEAR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    [[Page 120 STAT. 1156]]

    ``      9902.13.90      Welt footwear with  Free         No change        No change        On or before 12/  ''.
                             outer soles of                                                     31/2009
                             rubber, plastics,
                             leather or
                             composition
                             leather and
                             uppers of
                             pigskin,
                             incorporating a
                             protective metal
                             toe-cap (provided
                             for in subheading
                             6403.40.30)......

    SEC. 1601. CERTAIN FOOTWEAR FOR MEN.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.91      Other footwear      4.5%         No change        No change        On or before 12/  ''.
                             with uppers of                                                     31/2009
                             vegetable fibers,
                             for men (provided
                             for in subheading
                             6405.20.30)......

    SEC. 1602. CERTAIN RUBBER OR PLASTIC FOOTWEAR.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.92      Other footwear      6.5%         No change        No change        On or before 12/  ''.
                             with uppers of                                                     31/2009
                             vegetable fibers,
                             other than such
                             footwear for men
                             or women
                             (provided for in
                             subheading
                             6405.20.30)......

    SEC. 1604. ZINC DIMETHYLDITHIOCARBAMATE.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.13.97      Zinc                Free         No change        No change        On or before 12/  ''.
                             dimethyldithiocar                                                  31/2009
                             bamate (Ziram)
                             (CAS No. 137-30-
                             4) (provided for
                             in subheading
                             3808.20.28)......

    SEC. 1605. CERTAIN LIQUID CRYSTAL DEVICE (LCD) PANEL ASSEMBLIES.

        Subchapter II of chapter 99 is amended by inserting in numerical
    sequence the following new heading:

    ``      9902.85.21      Liquid Crystal      Free         No change        No change        On or before 12/  ''.
                             Device (LCD)                                                       31/2009
                             panel assemblies
                             for use in LCD
                             direct view
                             televisions
                             (provided for in
                             subheading
                             9013.80.90)......

    SEC. 1606. CERTAIN WATERTUBE BOILERS AND REACTOR VESSEL HEADS.

        (a) Watertube Boilers.--Subchapter II of chapter 99 is amended by
    inserting in numerical sequence the following new heading:

    [[Page 120 STAT. 1157]]

    ``      9902.84.01      Watertube boilers   Free         No change        No change        On or before 12/  ''.
                             with a steam                                                       31/2010
                             production
                             exceeding 45 t
                             per hour, for use
                             in nuclear
                             facilities
                             entered after 12/
                             31/2008 and on or
                             before 12/31/2010
                             if the contract
                             for the purchase
                             of such watertube
                             boilers was
                             entered into on
                             or before 7/31/
                             2006 (provided
                             for in subheading
                             8402.11.00)......

        (b) Reactor Vessel Heads.--Subchapter II of chapter 99 is amended by
    inserting in numerical sequence the following new heading:

    ``      9902.84.04      Reactor vessel      Free         No change        No change        On or before 12/  ''.
                             heads and                                                          31/2010
                             pressurizers for
                             nuclear reactors
                             entered after 12/
                             31/2008 and on or
                             before 12/31/2010
                             if the contract
                             for the purchase
                             of such heads and
                             pressurizers was
                             entered into on
                             or before 7/31/
                             2006 (provided
                             for in subheading
                             8401.40.00)......

               CHAPTER 2--EXISTING DUTY SUSPENSIONS AND REDUCTIONS

    SEC. 1611. EXTENSION OF CERTAIN EXISTING DUTY SUSPENSIONS AND
                REDUCTIONS.

        (a) Existing Duty Suspensions and Reduction.--Each of the following
    headings is amended by striking the date in the effective period column
    and inserting ``12/31/2009'':
                (1) Heading 9902.39.08 (relating to ORGASOL polyamide
            powders).
                (2) Heading 9902.30.90 (relating to 3-amino-2'-(sulfato-
            ethyl sulfonyl) ethyl benzamide).
                (3) Heading 9902.32.91 (relating to MUB 738 INT).
                (4) Heading 9902.30.31 (relating to 5-amino-N-(2-
            hydroxyethyl)-2,3-xylenesulfonamide).
                (5) Heading 9902.01.83 (relating to Ethoprop).
                (6) Heading 9902.01.73 (relating to Fosetyl-Al).
                (7) Heading 9902.03.38 (relating to Flufenacet (FOE
            hydroxy)).
                (8) Heading 9902.02.02 (relating to Methidathion Technical).
                (9) Heading 9902.02.12 (relating to difenoconazole).
                (10) Heading 9902.02.09 (relating to Lambda-Cyhalothrin).
                (11) Heading 9902.02.08 (relating to cyprodinil).
                (12) Heading 9902.02.04 (relating to Wakil XL).
                (13) Heading 9902.02.06 (relating to Azoxystrobin
            Technical).
                (14) Heading 9902.02.05 (relating to mucochloric acid).
                (15) Heading 9902.03.06 (relating to high tenacity multiple
            (folded) or cabled yarn of viscose rayon).
                (16) Heading 9902.05.07 (relating to high tenacity single
            yarn of viscose rayon with a decitex equal to or greater than
            1,000).

    [[Page 120 STAT. 1158]]

                (17) Heading 9902.38.31 (relating to Vulkalent E/C).
                (18) Heading 9902.01.71 (relating to hexanedioic acid,
            polymer with 1,3-benzenedimethanamine).
                (19) Heading 9902.29.93 (relating to Trinexapac-ethyl).
                (20) Heading 9902.38.52 (relating to formulations of
            triasulfuron).
                (21) Heading 9902.39.30 (relating to certain ion-exchange
            resins).
                (22) Heading 9902.32.82 (relating to 2,6 Dichlorotoluene).
                (23) Heading 9902.02.33 (relating to Ion exchange resin
            comprising a compolymer of styrene crosslinked with
            ethenylbenzene, aminophosphonic acid sodium form).
                (24) Heading 9902.02.32 (relating toIon exchange resin
            comprising a copolymer of styrene crosslinked with
            divinylbenzene, iminodiacetic acid, sodium form)).
                (25) Heading 9902.01.78 (relating to certain bags for toys).
                (26) Heading 9902.01.81 (relating to cases for certain
            children's products).
                (27) Heading 9902.01.80 (relating to certain children's
            products).
                (28) Heading 9902.29.34 (relating to certain light absorbing
            photo dyes).
                (29) Heading 9902.85.04 (relating to certain R-core
            transformers).
                (30) Heading 9902.03.04 (relating to reduced vat blue 43).
                (31) Heading 9902.03.03 (relating to sulfur black 1).
                (32) Heading 9902.01.22 (relating to DMSIP).
                (33) Heading 9902.29.35 (relating to 2-
            (Methoxycarbonyl)benzylsulfonamide).
                (34) Heading 9902.02.52 (relating to Imidacloprid
            pesticides).
                (35) Heading 9902.38.15 (relating to Baytron C-R).
                (36) Heading 9902.29.87 (relating to 3,4-
            Ethylenedioxythiophene).
                (37) Heading 9902.01.90 (relating to certain filament
            yarns).
                (38) Heading 9902.01.91 (relating to certain filament
            yarns).
                (39) Heading 9902.71.08 (relating to certain semi-
            manufactured forms of gold).
                (40) Heading 9902.04.10 (relating to Crotonic Acid).
                (41) Heading 9902.04.09 (relating to 3,6,9-
            Trioxaundecanedioic acid).
                (42) Heading 9902.02.51 (relating to benzoic acid, 2-amino-
            4-[[(2,5-dichlorophenyl)amino]carbonyl]-, methyl ester).
                (43) Heading 9902.32.73 (relating to Solvent blue 124).
                (44) Heading 9902.32.55 (relating to Methyl thioglycolate
            (MTG)).
                (45) Heading 9902.01.48 (relating to Ethyl pyruvate).
                (46) Heading 9902.04.11 (relating to 1,3-
            Benzenedicarboxamide, N, N'-Bis (2,2,6,6-tetramethyl-4-
            piperidinyl)-).
                (47) Heading 9902.04.07 (relating to reaction products of
            phosphorus trichloride with 1,1'-biphenyl and 2,4-bis(1,1-
            dimethylethyl)phenol).
                (48) Heading 9902.04.05 (relating to preparations based on
            ethanediamide, N-(2-ethoxyphenyl)-N'-(4-isodecylphenyl)-).

    [[Page 120 STAT. 1159]]

                (49) Heading 9902.04.06 (relating to 1-Acetyl-4-(3-dodecyl-
            2,5-dioxo-1-pyrrolidinyl)-2,2,6,6-tetramethylpiperidine).
                (50) Heading 9902.04.12 (relating to 3-Dodecyl-1-(2,2,6,6-
            tetramethyl-4-piperidinyl)-2,5-pyrrolidinedione).
                (51) Heading 9902.29.70 (relating to
            Tetraacetylethylenediamine).
                (52) Heading 9902.34.01 (relating to sodium petroleum
            sulfonate).
                (53) Heading 9902.02.75 (relating to esters and sodium
            esters of parahydroxybenzoic acid).
                (54) Heading 9902.30.16 (relating to Diclofop methyl).
                (55) Heading 9902.33.61 (relating to ((3-
            ((Dimethylamino)carbonyl)-2-pyridinyl)sulfonyl) carbamic acid,
            phenyl ester).
                (56) Heading 9902.01.45 (relating to Esfenvalerate).
                (57) Heading 9902.05.01 (relating to Methyl 2-[[[[[4-
            (dimethylamino)-6- (2,2,2-trifluoroethoxy)-1,3,5-triazin-2-yl]-
            amino]carbonyl]amino]sulfonyl]-3-methylbenzoate and application
            adjuvants).
                (58) Heading 9902.01.44 (relating to Benzyl carbazate).
                (59) Heading 9902.05.14 (relating to Pyromellitic
            Dianhydride).
                (60) Heading 9902.05.13 (relating to 4,4'-Oxydiphthalic
            Anhydride).
                (61) Heading 9902.05.12 (relating to 4,4'-Oxydianiline).
                (62) Heading 9902.05.11 (relating to 3,3',4,4'-
            Biphenyltetracarboxylic Dianhydride).
                (63) Heading 9902.29.80 (relating to 1-[[2-(2,4-
            dichlorophenyl)-4-propyl-1,3-dioxolan-2-yl]-methyl]-1H-1,2,4-
            triazole).
                (64) Heading 9902.05.19 (relating to ethofumesate).
                (65) Heading 9902.02.60 (relating to Nemacur VL).
                (66) Heading 9902.03.77 (relating to thiophanate methyl).
                (67) Heading 9902.84.14 (relating to ceiling fans).

        (b) Other Modifications.--
                (1) 2-Chlorobenzyl chloride.--Heading 9902.01.56 is
            amended--
                        (A) by striking ``2903.69.70'' and inserting
                    ``2903.69.80''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (2) Triethylene glycol bis[3-(3-tert-butyl-4-hydroxy-5-
            methylphenyl)propionate] .--Heading 9902.01.88 is amended--
                        (A) by striking ``Free'' and inserting ``4.1%''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (3) Formulations of triasulfuron and dicamba.--Heading
            9902.38.21 is amended--
                        (A) in the article description column--
                              (i) by inserting ``(Triasulfuron)'' before
                          ``(CAS No. 82097-50-5)''; and
                              (ii) by inserting ``(Dicamba)'' before ``(CAS
                          No. 1918-00-9)''; and
                        (B) by striking ``12/31/2003'' and inserting ``12/
                    31/2009''.
                (4) 11-Aminoundecanoic acid.--Heading 9902.32.49 is
            amended--
                        (A) by striking ``Free'' and inserting ``2.3%''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.

    [[Page 120 STAT. 1160]]

                (5) PHBA.--Heading 9902.29.03 is amended--
                        (A) by striking ``Free'' and inserting ``3.1%''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (6) Acetamiprid Technical.--Heading 9902.03.92 is amended--
                        (A) by striking ``Free'' and inserting ``2.5%''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (7) Baytron and baytron p.--Heading 9902.39.15 is amended--
                        (A) by inserting ``, whether or not containing
                    binder resin and organic solvent'' before ``(CAS No.'';
                    and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (8) Iprodione.--Heading 9902.01.51 is amended--
                        (A) by striking ``4.1%'' and inserting ``2.0%''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (9) Ethanediamide, N-(2-ethoxyphenyl)-N'-(2-ethylphenyl)-
            ).--Heading 9902.04.13 is amended--
                        (A) by striking ``2924.29.76'' and inserting
                    ``2924.29.71''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (10) Thiamethoxam technical.--Heading 9902.03.11 is
            amended--
                        (A) by striking ``3.2%'' and inserting ``3.0%''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (11) 1,3-Bis(4-aminophenoxy)benzene (RODA).--Heading
            9902.05.15 is amended--
                        (A) by inserting ``(RODA)'' after ``benzene''; and
                        (B) by striking ``12/31/2006'' and inserting ``12/
                    31/2009''.
                (12) Mixtures of n-[[(4,6-dimethoxypyrimidin-2-
            yl)amino]carbonyl]-3-(ethylsulfonyl)-2-pyridinesulfonamide and
            application adjuvants.--Heading 9902.33.60 is amended--
                        (A) by striking the article description and
                    inserting the following: ``Mixtures of N-[[(4,6-
                    dimethoxypyrimidin-2-yl)amino]carbonyl]-3-
                    (ethylsulfonyl)-2-pyridinesulfonamide and application
                    adjuvants (CAS No. 122931-48-0) (provided for in
                    subheading 3808.30.15)''; and
                        (B) by striking ``12/31/2003'' and inserting ``12/
                    31/2009''.

                       Subtitle B--Other Tariff Provisions

           CHAPTER 1--LIQUIDATION OR RELIQUIDATION OF CERTAIN ENTRIES

    SEC. 1621. <<NOTE: Deadlines.>> CERTAIN TRAMWAY CARS AND ASSOCIATED
                SPARE PARTS.

        (a) <<NOTE: Czech Republic. Oregon.>> In General.--The Commissioner
    of the Bureau of Customs and Border Protection of the Department of
    Homeland Security shall admit free of duty 3 tramway cars (provided for
    in subheading 8603.10.00 of the Harmonized Tariff Schedule of the United
    States) manufactured in Ostrava, Czech Republic, for the use by the city
    of Portland, Oregon, and imported pursuant to a contract with the city
    of Portland, Oregon, and associated spare parts for such tramway cars
    (provided for in applicable subheadings of heading 8607 or other
    headings of the Harmonized Tariff Schedule of the United States)
    imported pursuant to such contract, the foregoing

    [[Page 120 STAT. 1161]]

    to be entered into the customs territory of the United States by not
    later than December 31, 2006.
        (b) Reliquidation; Refund of Amounts Owed.-- If the liquidation of
    the entry of any of the tramway cars or associated spare parts described
    in subsection (a) becomes final before the date of the enactment of this
    Act, the Commissioner of the Bureau of Customs and Border Protection,
    notwithstanding any other provision of law, shall--
                (1) within 15 days after such date, reliquidate the entry in
            accordance with the provisions of this section; and
                (2) at the time of such reliquidation, make the appropriate
            refund of any duty paid with respect to the entry.

    SEC. 1622. <<NOTE: Deadline.>> RELIQUIDATION OF CERTAIN ENTRIES OF
                CANDLES.

        (a) Reliquidation of Entries.--Notwithstanding sections 514 and 520
    of the Tariff Act of 1930 (19 U.S.C. 1514 and 1520) or any other
    provision of law, the Bureau of Customs and Border Protection shall, not
    later than 90 days after the date of the enactment of this Act--
                (1) reliquidate the entries listed in subsection (b) without
            assessment of antidumping duties or interest; and
                (2) refund any antidumping duties and interest which were
            previously paid on such entries.

        (b) Affected Entries.--The entries referred to in subsection (a) are
    the following:

                         Entry number                                    Date of entry                    Port

    110-3447557-3                                           03/18/00                                    Los Angeles
    110-3447591-2                                           03/19/00                                    Los Angeles
    110-3447595-3                                           03/19/00                                    Los Angeles
    110-1201638-1                                           03/21/00                                        Detroit
    110-1201639-9                                           03/21/00                                        Detroit
    110-1201640-7                                           03/21/00                                        Detroit
    110-3447613-4                                           03/21/00                                    Los Angeles
    110-1201697-7                                           03/23/00                                        Detroit
    110-1201695-1                                           03/23/00                                        Detroit
    110-1201696-9                                           03/23/00                                        Detroit
    110-1201756-1                                           03/27/00                                        Detroit
    110-1201757-9                                           03/27/00                                        Detroit
    110-1201758-7                                           03/27/00                                        Detroit
    110-1740905-2                                           03/30/00                                    Los Angeles
    110-1740943-3                                           03/30/00                                    Los Angeles
    110-1201845-2                                           03/31/00                                        Detroit
    110-1201813-0                                           04/03/00                                        Detroit
    110-1201814-8                                           04/03/00                                        Detroit
    110-1201815-5                                           04/03/00                                        Detroit
    110-1201875-9                                           04/04/00                                        Detroit
    110-1201868-4                                           04/04/00                                        Detroit
    110-1201858-5                                           04/04/00                                        Detroit
    110-3447959-1                                           04/11/00                                    Los Angeles
    110-3447958-3                                           04/11/00                                    Los Angeles
    110-3759536-9                                           04/12/00                                        Detroit
    110-3759561-7                                           04/12/00                                        Detroit
    110-3759542-7                                           04/12/00                                        Detroit
    110-3759540-1                                           04/12/00                                        Detroit
    110-3447977-3                                           04/12/00                                    Los Angeles
    110-3759539-3                                           04/12/00                                        Detroit
    110-3448045-8                                           04/14/00                                    Los Angeles
    110-3448046-6                                           04/14/00                                    Los Angeles
    110-3448110-0                                           04/20/00                                    Los Angeles
    110-3759670-6                                           04/25/00                                        Detroit
    110-3759673-0                                           04/25/00                                        Detroit
    110-3759669-8                                           04/25/00                                        Detroit
    110-3759667-2                                           04/25/00                                        Detroit

    [[Page 120 STAT. 1162]]

    110-3759671-4                                           04/25/00                                        Detroit
    110-3759668-0                                           04/25/00                                        Detroit
    110-3448241-3                                           04/27/00                                    Los Angeles
    110-3448247-0                                           04/27/00                                    Los Angeles
    110-3448276-9                                           04/28/00                                        Memphis
    110-3448274-4                                           04/28/00                                        Memphis
    110-3448282-7                                           05/04/00                                        Memphis
    101-4081779-1                                           05/07/00                                        Memphis
    101-4088945-1                                           05/23/00                                        Memphis
    101-4089954-3                                           05/23/00                                        Memphis
    101-4088960-0                                           05/23/00                                        Memphis
    101-4092192-4                                           05/25/00                                        Memphis
    101-4089312-3                                           05/26/00                                        Detroit
    101-4089942-7                                           05/26/00                                        Detroit
    101-4089893-2                                           05/26/00                                        Detroit
    101-4092221-1                                           05/26/00                                        Memphis
    101-4089697-7                                           05/26/00                                    Los Angeles
    101-4092215-3                                           05/26/00                                        Memphis
    101-4086053-6                                           05/26/00                                    Los Angeles
    101-4122700-8                                           07/27/00                                    Los Angeles
    101-4122707-3                                           07/27/00                                    Los Angeles
    101-4122712-3                                           07/27/00                                    Los Angeles
    101-4127147-7                                           08/03/00                                    Los Angeles
    101-4132485-4                                           08/09/00                                        Norfolk
    101-4129989-0                                           08/11/00                                        Detroit
    101-4130345-2                                           08/17/00                                        Detroit
    101-4129976-7                                           08/23/00                                        Detroit
    101-4149476-4                                           09/06/00                                    Los Angeles
    101-4149483-0                                           09/06/00                                    Los Angeles
    101-4149493-9                                           09/06/00                                    Los Angeles
    101-4148595-2                                           09/08/00                                        Detroit
    101-4153301-7                                           09/18/00                                        Detroit
    101-4154523-5                                           09/14/00                                    Los Angeles
    101-4153389-2                                           09/18/00                                        Detroit
    101-4157161-1                                           09/20/00                                        Norfolk
    101-4153333-0                                           09/21/00                                        Detroit
    101-4155542-4                                           09/26/00                                        Detroit
    101-4166291-5                                           10/07/00                                    Los Angeles
    101-4167325-0                                           10/09/00                                        Detroit
    101-4167363-1                                           10/12/00                                        Detroit
    101-4164567-0                                           10/13/00                                        Norfolk
    101-4168049-5                                           10/14/00                                    Los Angeles
    101-4172904-5                                           10/21/00                                    Los Angeles
    101-4175579-2                                           10/30/00                                    Los Angeles
    101-4183996-8                                           11/07/00                                        Detroit
    101-4183234-4                                           11/09/00                                        Detroit
    101-4183251-8                                           11/09/00                                        Detroit
    101-4183253-4                                           11/09/00                                        Detroit
    101-4183257-5                                           11/09/00                                        Detroit
    101-4183264-1                                           11/09/00                                        Detroit
    101-4183264-1                                           11/09/00                                        Detroit
    101-4184811-8                                           11/13/00                                    Los Angeles
    101-4184819-1                                           11/13/00                                    Los Angeles
    101-4189001-1                                           11/14/00                                          Tampa
    101-4185526-1                                           11/16/00                                        Detroit
    101-4185535-2                                           11/16/00                                        Detroit
    101-4186580-7                                           11/20/00                                        Detroit
    101-4189830-3                                           11/20/00                                        Detroit
    101-4189774-3                                           11/21/00                                        Detroit
    101-4191183-3                                           11/24/00                                    Los Angeles
    101-4191188-2                                           11/24/00                                    Los Angeles
    101-4191193-2                                           11/24/00                                    Los Angeles
    101-4194796-9                                           11/29/00                                        Detroit
    101-4194801-7                                           11/29/00                                        Detroit
    101-4196383-4                                           12/01/00                                    Los Angeles
    101-4196389-1                                           12/01/00                                    Los Angeles
    101-4199308-8                                           12/13/00                                        Detroit

    [[Page 120 STAT. 1163]]

    SEC. 1623. <<NOTE: Deadline.>> CERTAIN ENTRIES OF ROLLER CHAIN.

        (a) Liquidation or Reliquidation of Entries.--Notwithstanding
    sections 514 and 520 of the Tariff Act of 1930 (19 U.S.C. 1514 and 1520)
    or any other provision of law, the Bureau of Customs and Border
    Protection shall, not later than 90 days after the date of enactment of
    this Act, liquidate or reliquidate the entries listed in subsection (b)
    without assessment of interest and shall refund any interest which was
    previously paid.
        (b) Affected Entries.--The entries referred to in subsections (a)
    and (b) are the following:

                         Entry number                                    Date of entry                    Port

    858442975                                               08/21/85                                               Chicago
    868558147                                               01/28/86                                               Chicago
    868565499                                               03/14/86                                               Chicago
    858440922                                               07/31/85                                               Chicago
    868565499                                               03/14/86                                               Chicago
    868558147                                               01/28/86                                               Chicago
    858442975                                               08/21/85                                               Chicago
    858440922                                               07/31/85                                               Chicago
    847648353                                               06/18/84                                               Chicago
    858268324                                               01/04/85                                               Chicago
    858264302                                               11/08/84                                               Chicago
    858265107                                               11/19/84                                               Chicago
    847658150                                               07/18/84                                               Chicago
    847412877                                               05/09/84                                               Chicago
    837078386                                               03/21/83                                               Chicago
    837077691                                               02/07/83                                               Chicago
    837077701                                               02/07/83                                               Chicago
    826735834                                               01/13/82                                               Chicago
    826736309                                               01/18/82                                               Chicago
    821020081                                               02/12/82                                               Chicago
    821020052                                               02/17/82                                               Chicago
    821026768                                               04/13/82                                               Chicago
    827119569                                               06/18/82                                               Chicago
    837075114                                               10/06/82                                               Chicago
    826727088                                               10/14/81                                               Chicago
    837124777                                               05/19/83                                               Chicago
    847405240                                               11/28/83                                               Chicago
    837127606                                               08/18/83                                               Chicago
    837125132                                               06/08/83                                               Chicago
    847406100                                               12/22/83                                               Chicago
    847404034                                               11/02/83                                               Chicago
    837128090                                               09/07/83                                               Chicago
    837126762                                               08/05/83                                               Chicago
    837125569                                               06/22/83                                               Chicago
    837078991                                               04/12/83                                               Chicago
    837129222                                               10/03/83                                               Chicago
    847406414                                               12/29/83                                               Chicago
    847408014                                               01/31/84                                               Chicago
    868569204                                               07/03/86                                               Chicago
    868730813                                               08/14/86                                               Chicago

    SEC. 1624. <<NOTE: Deadline.>> CERTAIN ENTRIES OF SOUNDSPA CLOCK RADIOS.

        (a) In General.--Notwithstanding section 514 of the Tariff Act of
    1930 (19 U.S.C. 1514) or any other provision of law, the Bureau of
    Customs and Border Protection shall, not later than 90 days after the
    date of the enactment of this Act--
                (1) reliquidate each entry described in subsection (c)
            containing any merchandise which, on the date of original
            liquidation, was classified under subheading 8527.19.50 of the
            Harmonized Tariff Schedule of the United States; and
                (2) make such reliquidation at the rate of duty that would
            have been applicable to such merchandise if the merchandise

    [[Page 120 STAT. 1164]]

            had been liquidated under subheading 8527.19.10 of such Schedule
            on the date of entry of the merchandise.

        (b) Refund of Amounts Owed.--Any amounts owed by the United States
    under subsection (a) shall be refunded with interest.
        (c) Affected Entries.--The entries referred to in subsection (a) are
    as follows:

                                  Entry number

    110-1199345-7
    110-1199542-9
    110-1199558-5
    110-1201694-4
    110-3759754-8
    110-3759785-2
    101-4082299-9
    101-4088073-2
    101-4089053-3
    101-4120875-0
    101-4133671-8
    101-4138302-5
    101-4145092-3
    101-4148477-3
    101-4153108-6
    101-4159322-7
    101-4158601-5
    101-4163243-9
    101-4164448-3
    101-4168318-4
    101-4172197-6
    101-4172489-7
    101-4193123-7
    101-4264820-2
    101-4271724-7
    101-4277850-4
    101-4287672-0
    101-4301588-0
    101-4306238-7
    101-4306235-3
    101-6011727-0
    101-6012796-4
    101-6015492-7
    101-6021099-2
    101-6026903-0
    101-6024120-3
    101-6028079-7
    101-6027052-5
    101-6036728-9
    101-6048069-4
    101-6079830-1
    101-6082949-4
    101-6115954-5
    101-6119379-1
    101-6127048-2
    101-6150035-9
    101-6148556-9
    101-6172630-1
    101-6172406-6
    101-6186497-9
    101-4208407-7
    101-6035939-3

                       CHAPTER 2--MISCELLANEOUS PROVISIONS

    SEC. 1631. VESSEL REPAIR DUTIES.

        (a) Exemption.--Section 466(h) of the Tariff Act of 1930 (19 U.S.C.
    1466(h)) is amended by striking paragraph (4) and inserting the
    following:

    [[Page 120 STAT. 1165]]

                ``(4) the cost of equipment, repair parts, and materials
            that are installed on a vessel documented under the laws of the
            United States and engaged in the foreign or coasting trade, if
            the installation is done by members of the regular crew of such
            vessel while the vessel is on the high seas, in foreign waters,
            or in a foreign port, and does not involve foreign shipyard
            repairs by foreign labor.''.

        (b) Amendment to HTS.--The U.S. Notes to subchapter XVIII of chapter
    98 of the Harmonized Tariff Schedule of the United States are amended by
    amending U.S. Note 2 to read as follows:
        ``2. Notwithstanding the provisions of subheadings 9818.00.03
    through 9818.00.07, no duty shall apply to the cost of equipment, repair
    parts, and materials that are installed in a vessel documented under the
    laws of the United States and engaged in the foreign or coasting trade,
    if the installation is done by members of the regular crew of such
    vessel while the vessel is on the high seas, in foreign waters, or in a
    foreign port and does not involve foreign shipyard repairs by foreign
    labor. Declaration and entry shall not be required with respect to such
    installation, equipment, parts, and materials.''.
        (c) <<NOTE: 19 USC 1466 note.>> Effective Date.--The amendments made
    by this section apply to vessel equipment, repair parts, and materials
    installed on or after April 25, 2001.

    SEC. 1632. SUSPENSION OF NEW SHIPPER REVIEW PROVISION.

        (a) <<NOTE: 19 USC 1675 note.>> Suspension of the Availability of
    Bonds to New Shippers.--Clause (iii) of section 751(a)(2)(B) of the
    Tariff Act of 1930 (19 U.S.C. 1675(a)(2)(B)(iii)) shall not be effective
    during the period beginning on April 1, 2006, and ending on June 30,
    2009.

        (b) <<NOTE: Deadline.>> Report on the Impact of the Suspension.--Not
    later than December 31, 2008, the Secretary of the Treasury, in
    consultation with the Secretary of Commerce, the United States Trade
    Representative, and the Secretary of Homeland Security, shall submit to
    the Committee on Ways and Means of the House of Representatives and the
    Committee on Finance of the Senate a report containing--
                (1) recommendations on whether the suspension of section
            751(a)(2)(B)(iii) of the Tariff Act of 1930 should be extended
            beyond the date provided in subsection (a); and
                (2) an assessment of the effectiveness of any administrative
            measure that was implemented to address the difficulties that
            necessitated the suspension under subsection (a), including--
                        (A) any problem in the collection of antidumping
                    duties on imports from new shippers; and
                        (B) any burden imposed on legitimate trade and
                    commerce by the suspension of bonds to new shippers.

        (c) Report on Collection Problems and Analysis of Proposed
    Solutions.--
                (1) Report.--Not <<NOTE: Deadline.>> later than 180 days
            after the date of the enactment of this Act, the Secretary of
            the Treasury, in consultation with the Secretary of Homeland
            Security and the Secretary of Commerce, shall submit to the
            Committee on Ways and Means of the House of Representatives and
            the Committee on Finance of the Senate a report describing--
                        (A) any major problem experienced in the collection
                    of duties during the 4 most recent fiscal years for
                    which

    [[Page 120 STAT. 1166]]

                    data are available, including any fraudulent activity
                    intended to avoid payment of duties; and
                        (B) an estimate of the total amount of duties that
                    were uncollected during the most recent fiscal year for
                    which data are available, including, with respect to
                    each product, a description of why the duties were
                    uncollected.
                (2) Recommendations.--The report shall include--
                        (A) recommendations on any additional action needed
                    to address problems related to the collection of duties;
                    and
                        (B) for each recommendation--
                              (i) an analysis of how the recommendation
                          would address the specific problem; and
                              (ii) an assessment of the impact that
                          implementing the recommendation would have on
                          international trade and commerce (including any
                          additional costs imposed on United States
                          businesses).

    SEC. 1633. EXTENSION AND MODIFICATION OF DUTY SUSPENSION ON WOOL
                PRODUCTS; WOOL RESEARCH FUND; WOOL DUTY REFUNDS.

        (a) <<NOTE: Effective dates.>> Extension of Temporary Duty
    Reductions.--Each of the following headings of the Harmonized Tariff
    Schedule of the United States is amended by striking the date in the
    effective period column and inserting ``12/31/2009'':
                (1) Heading 9902.51.11 (relating to fabrics of worsted
            wool).
                (2) Heading 9902.51.13 (relating to yarn of combed wool).
                (3) Heading 9902.51.14 (relating to wool fiber, waste,
            garnetted stock, combed wool, or wool top).
                (4) Heading 9902.51.15 (relating to fabrics of combed wool).
                (5) Heading 9902.51.16 (relating to fabrics of combed wool).

        (b) Extension of Duty Refunds and Wool Research Trust Fund.--
                (1) In general.--Section 4002(c) of the Wool Suit and
            Textile Trade Extension Act of 2004 (Public Law 108-429; 118
            Stat. 2603 (7 U.S.C. 7101 note)) is amended--
                        (A) in paragraph (3)--
                              (i) by striking ``2 additional payments'' and
                          inserting ``annual additional payments''; and
                              (ii) by adding at the end the following:
                        ``(C) <<NOTE: Deadline.>> Each subsequent annual
                    payment to be made after January 1 of each subsequent
                    year, but on or before April 15 of such year through
                    calendar year 2010.''; and
                        (B) in paragraph (6)--
                              (i) <<NOTE: Grants. Extension.>> in
                          subparagraph (A), by striking ``through 2007'' and
                          inserting ``through 2009''; and
                              (ii) by adding at the end the following:
                        ``(C) <<NOTE: Grants.>> Eligible manufacturers.--
                    Only manufacturers who weave worsted wool fabric in the
                    United States shall be eligible for a grant under this
                    paragraph.''.
                (2) <<NOTE: Trust fund. Extension. 7 USC 7101
            note.>> Sunset.--Section 506(f) of the Trade and Development Act
            of 2000 (Public 106-200; 114 Stat. 303), as amended by section
            4002(c)(5) of the Wool Suit and Textile Trade Extension Act of
            2004 (Public 108-429; 118 Stat. 2603), is amended by striking
            ``2008'' and inserting ``2010''.

    [[Page 120 STAT. 1167]]

    SEC. 1634. AUTHORITIES RELATING TO DR-CAFTA AGREEMENT.

        (a) Authority to Implement Certain Amendments to DR-CAFTA Agreement
    With Nicaragua, El Salvador, Honduras, and Guatemala.--
                (1) Proclamation authority.--The President is authorized to
            proclaim modifications to the Harmonized Tariff Schedule of the
            United States as necessary to carry out amendments proposed by
            the United States and the CAFTA-DR countries to the Agreement,
            the terms of which are contained in the letters of understanding
            described in paragraph (2).
                (2) <<NOTE: Name listing.>> Letters of understanding.--The
            letters of understanding referred to in paragraph (1) are the
            following:
                        (A) The letter of March 24, 2006, from Nicaraguan
                    Vice Minister of Trade Julio Teran to United States
                    Special Textile Negotiator Scott Quesenberry.
                        (B) The letter of March 27, 2006, from United States
                    Special Textile Negotiator Scott Quesenberry to
                    Nicaraguan Vice Minister of Trade Julio Teran.
                        (C) The letter of January 27, 2006, from El
                    Salvadoran Vice Minister of Economy Eduardo Ayala to
                    United States Special Textile Negotiator Scott
                    Quesenberry.
                        (D) The letter of January 27, 2006, from United
                    States Special Textile Negotiator Scott Quesenberry to
                    El Salvadoran Vice Minister of Economy Eduardo Ayala.
                        (E) The letter of March 7, 2006, from Honduran Vice
                    Minister of Foreign Trade Jorge Rosa to United States
                    Special Textile Negotiator Scott Quesenberry.
                        (F) The letter of March 7, 2006, from United States
                    Special Textile Negotiator Scott Quesenberry to Honduran
                    Vice Minister of Foreign Trade Jorge Rosa.
                        (G) The letter of June 23, 2006, from Guatemalan
                    Minister of Economy Marcio Cuevas Quezada to United
                    States Special Textile Negotiator Scott Quesenberry.
                        (H) The letter of June 23, 2006, from United States
                    Special Textile Negotiator Scott Quesenberry to
                    Guatemalan Minister of Economy Marcio Cuevas Quezada.
                (3) Sunset.--The authority of the President to proclaim
            modifications pursuant to paragraph (1) expires on December 31,
            2007.

        (b) Authority to Implement Certain Amendments to DR-CAFTA Agreement
    With Costa Rica and the Dominican Republic.--
                (1) Proclamation authority.--The President is authorized to
            proclaim modifications to the Harmonized Tariff Schedule of the
            United States as necessary to carry out amendments proposed by
            the United States, Costa Rica, and the Dominican Republic to the
            Agreement, the terms of which are contained in the letters of
            understanding described in paragraph (2).
                (2) Letters of understanding.--
                        (A) In general.--The letters of understanding
                    referred to in paragraph (1) are letters of
                    understanding exchanged between the countries described
                    in paragraph (1) relating to the rules of origin for
                    articles containing pocket bag fabric described in
                    subparagraph (B).
                        (B) Pocket bag fabric described.--For purposes of
                    subparagraph (A), the term ``pocket bag fabric'' means

    [[Page 120 STAT. 1168]]

                    pocket bag fabric used in an apparel article
                    classifiable under chapter 61 or 62 of the Harmonized
                    Tariff Schedule of the United States that contains a
                    pocket or pockets.
                (3) Consultation and layover requirements.--Any modification
            proclaimed by the President pursuant to paragraph (1) shall be
            subject to the consultation and layover provisions of section
            104 of the Dominican Republic-Central America-United States Free
            Trade Agreement Implementation Act (Public Law 109-53; 19 U.S.C.
            4014).
                (4) Congressional disapproval.--
                        (A) In general.--Any modification proclaimed by the
                    President pursuant to paragraph (1) shall not be
                    effective if a joint resolution described in
                    subparagraph (B) is enacted into law.
                        (B) Joint resolution described.--For purposes of
                    subparagraph (A), the term ``joint resolution'' means a
                    joint resolution of Congress, the sole matter after the
                    resolving clause of which is as follows: ``That the
                    Congress disapproves the modification proclaimed by the
                    President contained in the report submitted to the
                    Committee on Finance of the Senate and the Committee on
                    Ways and Means of the House of Representatives pursuant
                    to section 104(2) of the Dominican Republic--Central
                    America--United States Free Trade Agreement
                    Implementation Act (Public Law 109-53; 19 U.S.C.
                    4014(2)) on __________.'', with the blank space being
                    filled with the appropriate date.
                (5) Sunset.--The authority of the President to proclaim
            modifications pursuant to paragraph (1) expires on December 31,
            2007.

        (c) Authority Relating to Nicaraguan Tariff Preference Level Under
    DR-CAFTA Agreement.--
                (1) Certificate of eligibility.--The Commissioner of Customs
            may require an importer to submit at the time the importer files
            a claim for preferential tariff treatment under Annex 3.28 of
            the Agreement a certificate of eligibility, properly completed
            and signed, or transmitted pursuant to an authorized electronic
            data interchange system, by an authorized official of the
            Government of Nicaragua for purposes of implementing the tariff
            preference level for Nicaragua provided in Annex 3.28 of the
            Agreement.
                (2) Enforcement of commitments.--The President is authorized
            to proclaim a reduction in the overall limit in the tariff
            preference level for Nicaragua provided in Annex 3.28 of the
            Agreement if the President determines that Nicaragua has failed
            to comply with a commitment under an agreement between the
            United States and Nicaragua with regard to the administration of
            such tariff preference level.
                (3) Effective date.--Paragraph (1) applies with respect to
            entries made on or after April 1, 2006.

        (d) Technical Correction Relating to Co-Production of Certain
    Textile and Apparel Goods.--Section 205(a)(2) of the Dominican Republic-
    Central America-United States Free Trade Agreement Implementation Act
    (19 U.S.C. 4034(a)(2)) is amended by inserting after ``with respect to
    that country'' the following: ``or any other CAFTA-DR country''.

    [[Page 120 STAT. 1169]]

        (e) Reporting Requirements on Certain Negotiations and Amendments to
    DR-CAFTA Agreement.--
                (1) In general.--Not <<NOTE: Deadline.>> later than 30 days
            after the date of the enactment of this Act, and at least
            quarterly thereafter, the United States Trade Representative
            shall submit to the appropriate congressional committees a
            report on the status of negotiations and amendments proposed by
            the United States, Nicaragua, El Salvador, Honduras, Guatemala,
            Costa Rica, and the Dominican Republic to the Agreement
            regarding any change to the rule of origin or alteration of the
            tariff treatment of socks described in paragraph (2) or any
            technical correction described in paragraph (3). In addition,
            the United States Trade Representative shall provide to the
            appropriate congressional committees copies of any amendments to
            be proposed by the United States before the amendments are
            offered and copies of any amendments received by the United
            States relating to such negotiations.
                (2) Socks described.--For purposes of paragraph (1), the
            term ``socks'' means articles classifiable under subheading
            6111.20.6050, 6111.30.5050, 6111.90.5050, 6115.91.00,
            6115.92.60, 6115.92.90, 6115.93.60, 6115.93.90, 6115.99.14, or
            6115.99.18 of the Harmonized Tariff Schedule of the United
            States.
                (3) Technical corrections described.--Technical corrections
            referred to in paragraph (1) are the following:
                        (A) Clarification of references to ``elastomeric
                    yarns'' contained in the notes, subheading notes,
                    additional U.S. notes, and statistical notes to chapters
                    50 to 63 (section XI) of the Harmonized Tariff Schedule
                    of the United States.
                        (B) Clarification of the ability to apply short
                    supply provisions to sewing thread, narrow elastics, and
                    visible linings.
                        (C) Treatment of women's and girls' woven sleep
                    bottoms under Annex 4.1 of the Agreement.
                        (D) Addition of a rule of origin for women's and
                    girls' woven sleep bottoms to reflect the rule of origin
                    provided for in subheading 6207.11.00 of the Harmonized
                    Tariff Schedule of the United States and contained in
                    Annex 4.1 of the Agreement.
                        (E) Provision of women's and girls' sleep bottoms
                    under Annex 4.1-A of the Agreement.
                (4) Definition.--In this subsection, the term ``appropriate
            congressional committees'' means the Committee on Ways and Means
            of the House of Representatives and the Committee on Finance of
            the Senate.
                (5) Sunset.--The requirements of paragraph (1) expire on the
            date on which any change is made to the rule of origin pursuant
            to article 3.25 of the Agreement for any good described in
            paragraph (2), or December 31, 2007, whichever occurs later.

        (f) Definitions.--In this section:
                (1) Agreement.--The term ``Agreement'' has the meaning given
            the term in section 3(1) of the Dominican Republic-Central
            America-United States Free Trade Agreement Implementation Act
            (Public Law 109-53; 19 U.S.C. 4002(1)).
                (2) CAFTA-DR country.--The term ``CAFTA-DR country'' has the
            meaning given the term in section 3(2) of the Dominican

    [[Page 120 STAT. 1170]]

            Republic-Central America-United States Free Trade Agreement
            Implementation Act (Public Law 109-53; 19 U.S.C. 4002(2)).

    SEC. 1635. TECHNICAL AMENDMENTS TO CUSTOMS MODERNIZATION.

        (a) Entry of Merchandise.--Section 484(a) of the Tariff Act of 1930
    (19 U.S.C. 1484(a)) is amended--
                (1) in paragraph (1), by amending subparagraph (A) to read
            as follows:
                        ``(A) make entry therefor by filing with the Bureau
                    of Customs and Border Protection such documentation or,
                    pursuant to an authorized electronic data interchange
                    system, such information as is necessary to enable the
                    Bureau of Customs and Border Protection to determine
                    whether the merchandise may be released from custody of
                    the Bureau of Customs and Border Protection;''; and
                (2) in paragraph (2)(A), in the second sentence, by
            inserting after ``covering'' the following: ``merchandise
            released under a special delivery permit pursuant to section
            448(b) and''.

        (b) Refunds and Errors.--Section 520(a) of the Tariff Act of 1930
    (19 U.S.C. 1520(a)) is amended--
                (1) in paragraph (1), by striking the semicolon at the end
            and inserting a period;
                (2) in paragraph (2), by striking ``; and'' at the end and
            inserting a period; and
                (3) in paragraph (4)--
                        (A) by inserting ``an importer of record declares
                    or'' before ``it is ascertained''; and
                        (B) by striking ``by reason of clerical error''.

        (c) Entry From Warehouse.--Section 557(a) of the Tariff Act of 1930
    (19 U.S.C. 1557(a)) is amended--
                (1) in paragraph (1)--
                        (A) in the second sentence, by inserting after ``the
                    date of importation'' the following: ``, or such longer
                    period of time as the Bureau of Customs and Border
                    Protection may at its discretion permit upon proper
                    request being filed and good cause shown''; and
                        (B) in subparagraph (A), by inserting after ``the
                    date of importation'' the following: ``or such longer
                    period of time as the Bureau of Customs and Border
                    Protection may at its discretion permit upon proper
                    request being filed and good cause shown''; and
                (2) in paragraph (2), by inserting after ``the date of
            importation'' the following: ``, or such longer period of time
            as the Bureau of Customs and Border Protection may at its
            discretion permit upon proper request being filed and good cause
            shown,''.

        (d) Abandoned Goods.--Section 559 of the Tariff Act of 1930 (19
    U.S.C. 1559) is amended by inserting after ``the date of importation''
    each place it appears the following: ``, or such longer period of time
    as the Bureau of Customs and Border Protection may at its discretion
    permit upon proper request being filed and good cause shown''.
        (e) Manipulation in Warehouse.--Section 562 of the Tariff Act of
    1930 (19 U.S.C. 1562) is amended--
                (1) <<NOTE: Regulations.>> by amending the first sentence to
            read as follows: ``Merchandise shall only be withdrawn from a
            bonded warehouse

    [[Page 120 STAT. 1171]]

            in such quantity and in such condition as the Secretary of the
            Treasury shall by regulation prescribe.''; and
                (2) in the second sentence, by striking ``All merchandise so
            withdrawn'' and all that follows through ``except that upon
            permission therefor'' and inserting ``Upon permission''.

        (f) Other Technical Amendments.--(1) Section 629(e) of the Tariff
    Act of 1930 (19 U.S.C. 1629(e)) is amended by striking ``insuring'' and
    inserting ``ensuring''.
        (2) Section 135(f)(2)(B) of the Trade Act of 1974, as amended by
    section 2004(i)(1) of the Miscellaneous Trade and Technical Corrections
    Act of 2004, is amended by striking ``their establishment'' and insert
    ``its establishment''.
        (3) Section 245(a) of the Trade Act of 1974 (19 U.S.C. 2317(a)) is
    amended by striking ``, other than subchapter D''.
        (4) Section 291(2) of the Trade Act of 1974 (19 U.S.C. 2401(2)) is
    amended--
                (A) by striking ``1001(5)'' and inserting ``1001(e)''; and
                (B) by striking ``1308(5)'' and inserting ``1308(e)''.

        (5) Section 13031(e)(6)(C)(i) of the Consolidated Omnibus Budget
    Reconciliation Act of 1985 (19 U.S.C. 58c(e)(6)(C)(i)) is amended by
    striking ``commonly know'' and inserting ``commonly known''.
        (6) Section 2107(a)(4) of the Bipartisan Trade Promotion Authority
    Act of 2002 (19 U.S.C. 3807(a)(4)) is amended--
                (A) by striking ``paragraph (2)(A)'' and inserting
            ``paragraphs (2)(A)''; and
                (B) by striking ``paragraph (2)(B)'' and inserting
            ``paragraphs (2)(B)''.

        (7) Section 514(c)(3) of the Tariff Act of 1930 (19 U.S.C.
    1514(c)(3)) is amended by moving the last 2 sentences 2 ems to the left
    as flush left text.

    [[Page 120 STAT. 1172]]

                           Subtitle C--Effective Date

    SEC. 1641. <<NOTE: 19 USC 58c note.>> EFFECTIVE DATE.

        Except as otherwise provided in this title, the amendments made by
    this title shall apply with respect to goods entered, or withdrawn from
    warehouse for consumption, on or after the 15th day after the date of
    the enactment of this Act.

        Approved August 17, 2006.

    LEGISLATIVE HISTORY--H.R. 4:
    ---------------------------------------------------------------------------

    CONGRESSIONAL RECORD, Vol. 152 (2006):
                July 28, considered and passed House.
                Aug. 3, considered and passed Senate.
    WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 42 (2006):
                Aug. 17, Presidential remarks.

                                      <all>