EFTA00598262.pdf

Current Internal Revenue Code (Standard Federal version), PENSION PROTECTION ACT OF 2006 Act of August 17, 2006, M. 109-280, 120 Stat 780 (H.R. 4) Be it enacted"' ACT SEC. 1. SHORT TITLE, ETC. (a) SHORT TITLE.—This Act may be cited as the "Pension Protection Act of 2006". ACT SEC. 104. 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 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. ACT SEC. 105. 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 ©2011 Wolters Kluwer. All rights reserved. I of 14 7/28/2011 8:04 AM EFTA00598262 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. ACT SEC. 106. 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, (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, C.F.R.) and that are also subject to the Defense Federal Acquisition Regulation Supplement (Chapter 2 of Title 48, C.F.R.), 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 C.F.R. 9904.412 and 9904.413). (d) COST ACCOUNTING STANDARDS PENSION HARMONIZATION RULE.—The Cost Accounting Standards Board shall review and revise sections 412 and 413 of the Cost Accounting Standards (48 C.F.R. 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. ©2011 Wolters Kluwer. All rights reserved. 2 of 14 7/28/2011 8:04 AM EFTA00598263 A•• TITLE II-FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND RELATED PROVISIONS Subtitle A—Amendments to Employee Retirement Income Security Act of 1974 ACT SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS. A•A (b) SHORTFALL FUNDING METHOD.— (1) IN GENERAL.—A muftiemployer 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 muttiemployer 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 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. Subtitle C—Sunset of Additional Funding Rules ACT 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, ©2011 Wolters Kluwer. All rights reserved. 3 of 14 7/28/2011 8:04 AM EFTA00598264 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, (E) the possibility of alternatives 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. TITLE IV-PBGC GUARANTEE AND RELATED PROVISIONS •.* ACT SEC. 402. SPECIAL FUNDING RULES FOR CERTAIN PLANS MAINTAINED BY COMMERCIAL AIRLINES [as amended by E. 110-28, §§6614(a) and 6615(a), effective as if included in section 402 of the Pension Protection Act of 2006 (E. 109-280)]. (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 and by using, in determining the funding target for each of the 10 plan years during such period, an interest rate of 8.25 percent (rather than the segment rates calculated on the basis of the corporate bond yield curve). (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— (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. ©2011 Wolters Kluwer. All rights reserved. 4 of 14 7/28/2011 8:04 AM EFTA00598265 (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 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 participant— (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— O2011 Wolters Kluwer. All rights reserved. 5 of 14 7/28/2011 8:04 AM EFTA00598266 (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) 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 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) the provisions of section 302(c)(3) of such Act and section 412(c)(3) of such Code, as in effect before ©2011 Wolters Kluwer. All rights reserved. 6 of 14 7/28/2011 8:04 AM EFTA00598267 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 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. *•• (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 ©2011 Wolters Kluwer. All rights reserved. 7 of 14 7/28/2011 8:04 AM EFTA00598268 eligible plan if any applicable plan year with respect to such plan ends with or within such taxable year. (4) NOTICE.—In 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. **• (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(1)(12) of the Internal Revenue Code of 1986, as in effect before the date of the enactment of this Act, shall each be applied— (1) by substituting "January 1, 2008" 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. TITLE VIII-PENSION RELATED REVENUE PROVISIONS •** Subtitle B—Certain Pension Provisions Made Permanent ACT SEC. 811. 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). Subtitle C—Improvements in Portability, Distribution, and Contribution Rules .• ©2011 Wolters Kluwer. All rights reserved. 8 of 14 7/28/2011 8:04 AM EFTA00598269 ACT SEC. 826. MODIFICATIONS OF RULES GOVERNING HARDSHIPS AND UNFORSEEN FINANCIAL EMERGENCIES. Within 180 days after the date of the enactment of this Act, the Secretary of the Treasury shall modify the rules for determining whether a participant has had a hardship for purposes of section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide that if an event (including the occurrence of a medical expense) would constitute a hardship under the plan if it occurred with respect to the participant's spouse or dependent (as defined in section 152 of such Code), such event shall, to the extent permitted under a plan, constitute a hardship if it occurs with respect to a person who is a beneficiary 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. ACT SEC. 830. 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. Subtitle F—Other Provisions ©2011 Wolters Kluwer. AU rights reserved. 9 of 14 7/28/2011 8:04 AM EFTA00598270 ACT 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 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) 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) EFFECTIVE DATE.—The amendment made by this section shall apply to remuneration for services performed after December 31, 2006. •** ACT SEC. 1101. 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; (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. ACT SEC. 1103. REPORTING SIMPLIFICATION. (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR OWNERS AND THEIR SPOUSES.- O2011 Wolters Kluwer. All rights reserved. 10 414 7/28/2011 8:04 AM EFTA00598271 (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). ACT SEC. 1107. 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 02011 Wolters Kluwer. All rights reserved. II of 14 7/28/2011 8:04 AM EFTA00598272 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) 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 AA* ACT SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN PAYMENTS TO CONTROLLING EXEMPT ORGANIZATIONS. A•A (b) REPORTING.— (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. A•• Subtitle B—Reforming Exempt Organizations PART 1-GENERAL REFORMS ACT SEC. 1211. REPORTING ON CERTAIN ACQUISITIONS OF ©2011 Wolters Kluwer. All rights reserved. 12 of 14 7/28/2011 8:04 AM EFTA00598273 INTERESTS IN INSURANCE CONTRACTS IN WHICH CERTAIN EXEMPT ORGANIZATIONS HOLD AN INTEREST. (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. 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 consider— (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 ©2011 Wolters Kluwer. All rights reserved. 13414 7/28/2011 8:04 AM EFTA00598274 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. TITLE XIII-OTHER PROVISIONS •** ACT SEC. 1304. 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). **• ©2011 Wolters KILAver. All rights reserved. 14 of 14 7/28/2011 8:04 AM EFTA00598275