Page:United States Statutes at Large Volume 120.djvu/1007

 120 STAT. 976

PUBLIC LAW 109–280—AUG. 17, 2006 ‘‘(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 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.’’. (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.—

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