FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS.

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 (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 service:The nonforfeitablepercentage is: 320 440 560 680 7 or more100.“(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 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 service:The nonforfeitable percentage is: 220 340 460 580 6 or more100.”.(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 service: The nonforfeitable percentage is: 320 440 560 680 7 or more100.“(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 service:The nonforfeitable percentage is: 220 340 460120 STAT. 1050 580 6 or more100.”.(2) Conforming amendment.—Section 203(a) of such Act is amended by striking paragraph (4).(c) 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.