Pension Fund Integrity Act of 2016

Summary: Pension Fund Integrity Act of 2016  This bill amends the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA) to require salary reductions for certain employees of systemically important multiemployer pension plans that are in critical or declining status and that reduce participant benefits.  When a benefit suspension is in effect, any compensation paid to employees of a plan that exceeds the amounts specified in this bill is a prohibited transaction that is subject to a tax to be paid by the plan sponsor.  If a plan is in endangered, critical, or critical and declining status, payments for lobbying and political expenses for any person other than an employee of the plan are prohibited transactions and subject to a tax to be paid by the plan sponsor. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Pension Fund Integrity Act of 
2016''.

SEC. 2. EXECUTIVE SALARIES.

    (a) Amendments to Internal Revenue Code of 1986.--
            (1) In general.--Subparagraph (C) of section 432(e)(9) of 
        the Internal Revenue Code of 1986 is amended by adding at the 
        end the following new clause:
                            ``(iii) In the case of a systemically 
                        important plan (as defined in subparagraph 
                        (H)(v)(III)), effective on the date the benefit 
                        suspension goes into effect, the annual 
                        compensation of each employee of the plan is 
                        reduced to the lesser of--
                                    ``(I) the annual compensation of 
                                the employee for the plan year in which 
                                the benefit suspension is approved 
                                under subparagraph (G) (determined as 
                                of the date of such approval), reduced 
                                by the reduction percentage of so much 
                                of such annual compensation as exceeds 
                                $100,000, or
                                    ``(II) the average annual 
                                compensation of the employee for the 3 
                                plan years immediately preceding the 
                                year in which the benefit suspension is 
                                approved under subparagraph (G), 
                                reduced by the reduction percentage of 
                                so much of such average annual 
                                compensation as exceeds $100,000,
                        and will not be increased (including by means 
                        of a bonus, performance-based compensation, or 
                        otherwise) as long as the benefit suspension 
                        remains in effect. For purposes of the 
                        preceding sentence, the term `reduction 
                        percentage' means the percentage determined by 
                        the Secretary and provided to the plan which is 
                        equal to the average percentage reduction in 
                        benefits applicable to the 50 participants and 
                        beneficiaries who receive the greatest 
                        reduction in benefits under the plan as a 
                        result of the suspension.''.
            (2) Tax on prohibited transactions.--
                    (A) In general.--Paragraph (1) of section 4975(c) 
                of such Code is amended--
                            (i) by striking ``or'' at the end of 
                        subparagraph (E),
                            (ii) by striking the period at the end of 
                        subparagraph (F) and inserting ``; or'', and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(G) notwithstanding subsection (d)(2), payment by 
                a systemically important plan (as defined in section 
                432(e)(9)(H)(v)(III)) of--
                            ``(i) any compensation (including a bonus 
                        or performance-based compensation) in excess of 
                        the amount determined under section 
                        432(e)(9)(C)(iii) to any employee of the plan 
                        with respect to which a benefit suspension is 
                        in effect under section 432(e)(9), or
                            ``(ii) in the case of any nonemployee who 
                        was an employee of the plan during any of the 3 
                        plan years immediately preceding the year in 
                        which the benefit suspension is approved under 
                        section 432(e)(9)(G), any compensation to such 
                        individual (as an independent contractor or 
                        otherwise and including any bonus or 
                        performance-based compensation) in excess of 
                        the amount that would be determined under 
                        section 432(e)(9)(C)(iii) if the individual 
                        were an employee at the time of payment of such 
                        compensation.''.
                    (B) Liability for tax.--Subsection (a) of section 
                4975 of such Code is amended by inserting before the 
                period the following: ``, except that any tax imposed 
                by this subsection by reason of subsection (c)(1)(G) 
                shall be paid by the plan sponsor''.
                    (C) Liability for additional taxes.--Subsection (b) 
                of section 4975 of such Code is amended by inserting 
                before the period the following: ``, except that any 
                tax imposed by this subsection by reason of subsection 
                (c)(1)(G) shall be paid by the plan sponsor''.
                    (D) Clerical amendments.--The headings of 
                subsections (a) and (b) of section 4975 of such Code 
                are each amended by striking ``on Disqualified 
                Person''.
    (b) Amendments to Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Subparagraph (C) of section 305(e)(9) of 
        the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1085(e)(9)(C)) is amended by adding at the end the following 
        new clause:
                            ``(iii) In the case of a systemically 
                        important plan (as defined in subparagraph 
                        (H)(v)(III)), effective on the date the benefit 
                        suspension goes into effect, the annual 
                        compensation of each employee of the plan is 
                        reduced to the lesser of--
                                    ``(I) the annual compensation of 
                                the employee for the plan year in which 
                                the benefit suspension is approved 
                                under subparagraph (G) (determined as 
                                of the date of such approval), reduced 
                                by the reduction percentage of so much 
                                of such annual compensation as exceeds 
                                $100,000, or
                                    ``(II) the average annual 
                                compensation of the employee for the 3 
                                plan years immediately preceding the 
                                year in which the benefit suspension is 
                                approved under subparagraph (G), 
                                reduced by the reduction percentage of 
                                so much of such average annual 
                                compensation as exceeds $100,000,
                        and will not be increased (including by means 
                        of a bonus, performance-based compensation, or 
                        otherwise) as long as the benefit suspension 
                        remains in effect. For purposes of the 
                        preceding sentence, the term `reduction 
                        percentage' means the percentage determined by 
                        the Secretary of the Treasury and provided to 
                        the plan which is equal to the average 
                        percentage reduction in benefits applicable to 
                        the 50 participants and beneficiaries who 
                        receive the greatest reduction in benefits 
                        under the plan as a result of the 
                        suspension.''.
            (2) Prohibited transactions.--Paragraph (1) of section 
        406(a) of such Act (29 U.S.C. 1106(a)(1)) is amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (D),
                    (B) by striking the period at the end of 
                subparagraph (E) and inserting ``; or'', and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(F) notwithstanding section 408(b)(2), payment by 
                a systemically important plan (as defined in section 
                305(e)(9)(H)(v)(III)) of--
                            ``(i) any compensation (including a bonus 
                        or performance-based compensation) in excess of 
                        the amount determined under section 
                        305(e)(9)(C)(iii) to any employee of the plan 
                        with respect to which a benefit suspension is 
                        in effect under section 305(e)(9), or
                            ``(ii) in the case of any nonemployee who 
                        was an employee of the plan during any of the 3 
                        plan years immediately preceding the year in 
                        which the benefit suspension is approved under 
                        section 305(e)(9)(G), any compensation to such 
                        individual (as an independent contractor or 
                        otherwise and including any bonus or 
                        performance-based compensation) in excess of 
                        the amount that would be determined under 
                        section 305(e)(9)(C)(iii) if the individual 
                        were an employee at the time of payment of such 
                        compensation.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by subsections (a)(1) 
        and (b)(1) shall apply to suspensions of benefits under section 
        432(e)(9)(G) of the Internal Revenue Code of 1986 and section 
        305(e)(9)(G) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1085(e)(9)(G)) which take effect after the date 
        of the enactment of this Act.
            (2) Prohibited transactions.--The amendments made by 
        subsections (a)(2), (b)(2), and (b)(3) shall apply to any 
        transaction made after the date of the enactment of this Act.

SEC. 3. PROHIBITION OF LOBBYING EXPENSES.

    (a) Amendments to Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (1) of section 4975(c) of the 
        Internal Revenue Code of 1986, as amended by section 1(a), is 
        amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (F),
                    (B) by striking the period at the end of 
                subparagraph (G) and inserting ``; or'', and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(H) payment by the plan of any amount for the 
                engagement of any person other than an employee of the 
                plan in connection with any activity described in 
                section 162(e)(1) during any period in which the plan 
                is in endangered status under section 432(b)(1), in 
                critical status under section 432(b)(2), or in critical 
                and declining status under section 432(b)(6).''.
            (2) Liability of plan sponsor.--Subsections (a) and (b) of 
        section 4975 of such Code, as amended by section 1(a), are each 
        amended by striking ``subsection (c)(1)(G)'' and inserting 
        ``subparagraph (G) or (H) of subsection (c)(1)''.
    (b) Amendments to Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Paragraph (1) of section 406(a) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1106(a)(1)), as amended by section 1(b), is amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (E),
                    (B) by striking the period at the end of 
                subparagraph (F) and inserting ``; or'', and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(G) payment by the plan of any amount for the 
                engagement of any person other than an employee of the 
                plan in connection with any activity described in 
                section 162(e)(1) of the Internal Revenue Code of 1986 
                during any period in which the plan is in endangered 
                status under section 305(b)(1), in critical status 
                under section 305(b)(2), or in critical and declining 
                status under section 305(b)(6).''.
            (2) Liability of plan sponsor.--Subsection (c) of section 
        409 of such Act (29 U.S.C. 1109(c)), as added by section 1(b), 
        is amended by striking ``4975(c)(1)(G)'' and inserting 
        ``subparagraph (G) or (H) of section 4975(c)(1)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions made after the date of the enactment of this Act.