To provide special funding requirements for certain pension plans maintained by commercial passenger air carriers.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Air Line Pension Act of 2003''.

SEC. 2. MODIFICATION OF FUNDING REQUIREMENTS FOR CERTAIN PLANS.

    (a) Funding Rules for Certain Plans.--
            (1) In general.--Notwithstanding any provision of the 
        Internal Revenue Code of 1986 or the Employee Retirement Income 
        Security Act of 1974 to the contrary, the provisions of 
        subsections (b), (c), and (d) shall apply for any plan year 
        beginning after December 27, 2002, in the case of a defined 
        benefit plan--
                    (A) that is established and maintained by a 
                commercial passenger air carrier; and
                    (B) that has a funded percentage of less than 80 
                percent as of January 1, 2003.
            (2) Funded percentage.--For purposes of this section, the 
        term ``funded percentage'' means the quotient (expressed as a 
        percentage) derived by dividing--
                    (A) the market value of plan assets as of January 
                1, 2003 (excluding receivable contributions), by
                    (B) the current liability of the plan as of January 
                1, 2003.
            (3) Interest rate.--In determining current liability for 
        purposes of paragraph (2), the assumed interest rate shall be 
        6.65 percent.
            (4) Estimation of current liability.--If the valuation date 
        for the plan is not January 1, 2003, the current liability as 
        of January 1, 2003, shall be estimated based on generally 
        accepted actuarial principles and practices.
    (b) Moratorium on Deficit Reduction Contribution.--
            (1) In general.--In applying section 412(l)(9)(A) of such 
        Code and section 302(d)(9)(A) of such Act with respect to a 
        plan described in subsection (a)(1), the funded current 
        liability percentage of the plan shall be treated as not less 
        than 90 percent for plan years beginning after December 27, 
        2002 and before December 27, 2007.
            (2) Termination of moratorium in certain cases.--If the 
        funded current liability percentage of the plan, without 
        application of paragraph (1), is 90 percent or greater during 
        any plan year beginning after December 27, 2002 and before 
        December 27, 2007, paragraph (1) shall cease to apply to the 
        plan for plan years beginning with or after such plan year.
            (3) Extension of amortization periods.--For plan years for 
        which paragraph (1) applies in the case of the plan, net 
        experience gains and net experience losses shall be amortized 
        under sections 412(b)(2)(B)(iv) and 412(b)(3)(B)(ii) of such 
        Code (respectively) and sections 302(b)(2)(B)(iv) and 
        302(b)(3)(B)(ii) of such Act (respectively), over a period of 
        15 plan years.
            (4) Option to combine or to offset amortization bases.--For 
        the first plan year for which paragraph (1) applies with 
        respect to the plan, amounts required to be amortized under 
        paragraphs (2) and (3) of section 412(b) of such Code and 
        paragraphs (2) and (3) of section 302(b) of such Act may be 
        combined into one amount under such sections, and may be offset 
        against other amounts required to be amortized under such 
        sections, with the resulting amount in either case to be 
        amortized over a period of 15 plan years.
    (c) Amortization of 2008 Unfunded Current Liability.--
            (1) In general.--In such form and manner as the Secretary 
        of the Treasury may prescribe, the sponsor of a plan described 
        in subsection (a)(1) may make a one-time, irrevocable election 
        with the Secretary of the Treasury to amortize the unfunded 
        current liability for the first plan year beginning after 
        December 27, 2007, on an interest-only basis for the first 5 
        plan years (beginning with such first plan year) and thereafter 
        in equal annual installments over a period of 15 plan years 
        (beginning with the first plan year after December 27, 2012).
            (2) Determination of 2008 unfunded current liability in 
        calculating deficit reduction contribution after moratorium 
        ends.--If the plan sponsor makes an election under paragraph 
        (1) with respect to the plan, the unfunded current liability of 
        the plan for the first plan year after December 27, 2007, shall 
        be calculated as follows:
                    (A) such unfunded current liability shall equal the 
                unfunded current liability as of the first day of such 
                first plan year, and
                    (B) such unfunded current liability shall be 
                calculated using the actuarial value of assets as of 
                the first day of such first plan year.
            (3) Use of 2008 unfunded current liability in calculating 
        deficit reduction after moratorium ends.--If the plan sponsor 
        makes an election under paragraph (1) with respect to the plan, 
        the plan's unfunded old liability, for purposes of section 
        412(l) of such Code and section 302(l) of such Act, shall be 
        deemed equal to the unfunded current liability calculated under 
        paragraph (2) for the first plan year after December 27, 2007, 
        and the plan's unfunded old liability amount for any plan year, 
        for purposes of section 412(l) of such Code and section 302(l) 
        of such Act, shall be the amount necessary to amortize the 
        unfunded old liability under the plan as described in paragraph 
        (1).
            (4) Cessation of modifications.--If the funded current 
        liability percentage of the plan, determined without regard to 
        this section, is 90 percent or greater for any plan year after 
        December 27, 2002, this subsection shall cease to apply to the 
        plan for plan years beginning with or after such plan year.
    (d) Recognition of Waiver in Deficit Reduction Contribution.--For 
any plan described in subsection (a)(1), the amount referred to in 
clause (ii) of section 412(l)(8)(A) of such Code and section 
302(d)(8)(A) of such Act shall be deemed to be an amount equal to the 
sum of--
            (1) the value of the plan's assets determined under section 
        412(c)(2) of such Code and section 302(c)(2) of such Act, and
            (2) the unamortized portion of any waived funding 
        deficiency.

SEC. 3. RESTORATION OF CERTAIN PLANS TERMINATING IN 2003.

    (a) In General.--Notwithstanding any provision of the Internal 
Revenue Code of 1986 or the Employee Retirement Income Security Act of 
1974, the provisions of subsection (b) shall apply to any defined 
benefit plan--
            (1) that is maintained by a commercial passenger air 
        carrier,
            (2) that is maintained for the benefit of such carrier's 
        employees pursuant to a collective bargaining agreement, and
            (3) that terminated during the calendar year 2003.
    (b) Restoration of Plan.--Not later than December 31, 2003, the 
Pension Benefit Guaranty Corporation shall restore any plan described 
in paragraph (1) to the plan's pre-termination status and the control 
of the plan's assets and liabilities shall be transferred to the 
employer, unless the collective bargaining agreement provides that the 
plan should not be restored.
    (c) Exclusion of Expected Increase in Current Liability.--In 
applying section 412(l)(1)(A)(i) of such Code and section 
302(d)(1)(A)(i) of such Act with respect to a plan restored under 
subsection (b), any expected increase in current liability due to 
benefits accruing during each plan year as described in section 
412(1)(2)(C) of such Code and section 302(d)(2)(C) of such Act shall be 
excluded.
    (d) Amortization of Unfunded Amounts Under Restoration Payment 
Schedule.--
            (1) 2004 unfunded accrued liability.--
                    (A) In general.--In the case of a plan restored 
                under subsection (b)--
                            (i) the initial post-restoration valuation 
                        date for a plan described in subsection (a) 
                        shall be January 1, 2004,
                            (ii) the initial restoration amortization 
                        base for a plan described in subsection (a) 
                        shall be an amount equal to the excess of--
                                    (I) the accrued benefit liabilities 
                                returned by the Corporation, over
                                    (II) the market value of plan 
                                assets returned by the Corporation, and
                            (iii) the initial restoration amortization 
                        base shall be amortized in level annual 
                        installments over a period of 30 years after 
                        the initial post-restoration valuation date, 
                        and the funding standard account of the plan 
                        under section 412 of such Code and section 302 
                        of such Act shall be charged with such 
                        installments.
                    (B) Other special funding rules remain 
                applicable.--At the election of the plan sponsor, the 
                provisions of subsections (b), (c), and (d) of section 
                2 shall apply with respect to the plan.
            (2) Rules of special application.--In applying the 30-year 
        amortization described in paragraph (1)(A)--
                    (A) the assumed interest rate shall be the 
                valuation interest rate used to determine the accrued 
                liability under section 412(c) of such Code and section 
                302(c) of such Act,
                    (B) the actuarial value of assets as of the initial 
                post-restoration valuation date shall be reset to the 
                market value of assets with a 5-year phase-in of 
                unexpected investment gains or losses on a prospective 
                basis, and
                    (C) for plans using the frozen initial liability 
                (FIL) funding method in accordance with section 412(c) 
                of such Code and section 302(c) of such Act, the 
                initial unfunded liability used to determine normal 
                cost shall be reset to the initial restoration 
                amortization base.
    (e) Quarterly Contributions.--The requirements of section 412(m) of 
such Code and section 302(e) of such Act shall not apply to a plan 
restored under subsection (b) until the plan year beginning on the 
initial post-restoration valuation date. The required annual payment 
for that year shall be the lesser of--
            (1) the amount determined under section 412(m)(4)(B)(i) of 
        such Code and section 302(e)(4)(B)(i) of such Act, or
            (2) 100 percent of the amount required to be contributed 
        under the plan for the plan year beginning January 1, 2003 and 
        ending on the date of plan termination.
    (f) Resetting of Funding Standard Account Balances.--In the case of 
a plan restored under subsection (b), any accumulated funding 
deficiency or credit balance in the funding standard account under 
section 412 of such Code or section 302 of such Act shall be set equal 
to zero as of the initial post-restoration valuation date.

SEC. 4. PBGC LIABILITY LIMITED.

    In the case of any plan--
            (1) which is described in section 2(a)(1), and which 
        terminates at a time when section 2(b)(1) applies to the plan, 
        or at a time when the unfunded current liability of the plan 
        for the first plan year after December 27, 2007, is being 
        amortized on an interest-only basis under section 2(c), or
            (2) which is described in section 3(a), which is restored 
        pursuant to section 3(b), and which subsequently terminates 
        with a date of plan termination prior to the end of the fifth 
        plan year beginning after December 27, 2007,
section 4022 of the Employee Retirement Income Security Act of 1974 
shall be applied as if the plan had been amended to provide that 
participants would receive no credit for benefit accrual purposes under 
the plan for service on and after the first day of the plan year 
beginning after the date of the enactment of this Act.

SEC. 5. EFFECTIVE DATE.

    The provisions of this Act shall apply to plan years beginning 
after December 27, 2002.

Summary: Air Line Pension Act of 2003 - Sets forth special funding requirements for certain pension plans maintained by commercial passenger air carriers (plans), notwithstanding any contrary provisions of the Internal Revenue Code or of the Employee Retirement Income Security Act of 1974 (ERISA). Provides for such plans, if they have a funded percentage of less than 80 percent as of January 1, 2003, the following: (1) modifications of funding rules, including funded percentage, assumed interest rate for determining current liability, and estimation of current liability. (2) a moratorium on the deficit reduction contribution, under specified conditions, (3) a one-time amortization of 2008 unfunded current liability. And (4) recognition of a waiver in the deficit reduction contribution. Provides for such plans, if they are maintained for benefit of the carrier's employees pursuant to a collective bargaining agreement and if they terminated during calendar year 2003, the following: (1) restoration by the Pension Benefit Guaranty Corporation (PBGC) to the plan's pre-termination status and transfer of control of plan assets and liabilities to the employer, unless the collective bargaining agreement provides that the plan should not be restored. (2) exclusion of any expected increase in current liability due to benefits accruing during each plan year, (3) amortization of unfunded amounts under the restoration payment schedule. (4) inapplicability of certain contribution requirements to a restored plan until a plan year beginning on the initial post-restoration valuation date, with modified required annual payments. And (5) resetting of funding standard account balances. Limits PBGC liability with respect to certain plans under this Act.