COMPARISON OF THE TAX AND PENSION PROVISIONS OF H.R. 3108,

AS PASSED BY THE HOUSE AND THE SENATE

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

March 5, 2004

JCX-17-04
i

CONTENTS

Page

INTRODUCTION ...................................................................................................................................................................................... 1

I. COMPARISON OF PROVISIONS ........................................................................................................................................................ 2

A. Findings; Sense of Congress; Sense of the Senate (sec. 2 of the House bill and sec. 8 of the Senate amendment)....................... 2

B. Temporary Replacement of 30-Year Treasury Rate (sec. 3 of the House bill, sec. 2 of the Senate amendment, 

secs. 404 and 412 of the Code, and secs. 302 and 4006 of ERISA)............................................................................................... 2

C. Interest Rate Used in Applying the Section 415 Limits to Benefits Subject to the Minimum Value Rules (sec. 2(a)(4) of the

Senate amendment and sec. 415 of the Code) ................................................................................................................................ 3

D. Election of Alternative Deficit Reduction Contribution (sec. 3 of the Senate amendment, sec. 412(l) of the Code, and

sec. 302(d) of ERISA) .................................................................................................................................................................... 4

E. Multiemployer Plan Funding Notices (sec. 4 of the Senate amendment and secs. 104(d) and 502 of ERISA)............................. 7

F. Amortization Hiatus for Net Experience Losses in Multiemployer Plans (sec. 5 of the Senate amendment, 

sec. 412(b)(7) of the Code, and sec. 302(b)(7) of ERISA)............................................................................................................. 9

G. Two-Year Extension of Transition Rule to Pension Funding Requirements for Interstate Bus Company (sec. 6 of the 

Senate amendment and sec. 769(c) of the Retirement Protection Act of 1994 (as added by section 1508 of the Taxpayer 

Relief Act of 1997))...................................................................................................................................................................... 11

H. Procedures Applicable to Disputes Involving Multiemployer Plan Withdrawal Liability (sec. 7 of the Senate amendment 

and sec. 4221 of ERISA) .............................................................................................................................................................. 12

I. Extension of Transfers of Excess Pension Assets to Retiree Health Accounts (sec. 9 of the Senate amendment, 

sec. 420 of the Code, and secs. 101, 403, and 408 of ERISA) ..................................................................................................... 13

J. Modification of Exemption from Tax for Small Property and Casualty Insurance Companies (sec. 10 of the Senate 

amendment and secs. 501(c)(15) and 831(b) of the Code)........................................................................................................... 13

K. Definition of Insurance Company for Section 831 (sec. 11 of the Senate amendment and sec. 831(c) of the Code).................. 14
1

INTRODUCTION

H.R. 3108, the “Pension Funding Equity Act of 2003,” was passed by the House of Representatives on October 8, 2003. On 

January 28, 2004, the Senate passed an amendment to H.R. 3108, the “Pension Stability Act.” (In addition, H.R. 3521, the “Tax 

Relief Extension Act,” as passed by the House on November 20, 2003, contains provisions similar to those in H.R. 3108.) This 

document, 1 prepared by the staff of the Joint Committee on Taxation, provides a comparison of the tax and pension provisions of H.R. 

3108, as passed by the House and the Senate.2 (References to relevant provisions in H.R. 3521, as passed by the House, are also 

included.) This document includes a summary comparison of the provisions in the bills and may not reflect all technical differences.

 

1

 This document may be cited as follows: Joint Committee on Taxation, Comparison of the Tax and Pension Provisions of 

H.R. 3108, as passed by the House and the Senate (JCX-17-04), March 5, 2004.

2

 In addition to the provisions described herein, section 12 of H.R. 3108, as passed by the Senate, repeals section 105 of the 

Miscellaneous Appropriations and Offsets Act, 2004, i.e., Division H of the Consolidated Appropriations Act, 2004, Pub. L. No. 108-

199, relating to the use of funds made available under that Act to implement measures to reduce overfishing and promote rebuilding of 

certain fish stock.
2

I. COMPARISON OF PROVISIONS

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

A. Findings; Sense of 

Congress; Sense of the Senate 

(sec. 2 of the House bill and 

sec. 8 of the Senate 

amendment)

No provision. Makes various findings with 

respect to interest rates used for 

pension plan purposes and 

provides that it is the sense of 

the Congress that the Congress 

should work to promptly 

implement a permanent 

replacement for the interest rate 

used for pension purposes and 

comprehensive pension funding 

reforms.

Effective date.–Date of 

enactment.

Makes various findings with 

respect to the private pension 

system and the PBGC and 

provides that it is the sense of 

the Senate that the Senate 

Committees on Finance and 

Health, Education, Labor, and 

Pensions should conduct 

hearings on the status of 

multiemployer pension plans 

and should work to develop 

permanent measures to 

strengthen the integrity of the 

private pension system.

Effective date.–Date of 

enactment.

B. Temporary Replacement 

of 30-Year Treasury Rate 

(sec. 3 of the House bill, sec. 2 

of the Senate amendment, 

secs. 404 and 412 of the Code, 

and secs. 302 and 4006 of 

ERISA)

The interest rate on 30-year 

Treasury obligations is used for 

several purposes related to 

defined benefit pension plans, 

including in determining:

• current liability for funding 

and deduction rules, and

For plan years beginning in 

2004 and 2005, replaces the 30-

year Treasury rate with the 

rates of interest on amounts 

conservatively invested in longterm corporate bonds. Such 

rates are to be determined by 

the Treasury Secretary based 

on one or more indices selected 

periodically by the Secretary. 

Same as House bill, except 

that:

• employers may elect to 

apply present-law rules in 

determining the maximum 

deductible amount for 

contributions to defined 

benefit pension plans; and 
3

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

• unfunded vested benefits for 

purposes of PBGC variable 

rate premiums.

Effective date.–Generally, 

years beginning after December 

31, 2003.

(H.R. 3521 as passed by the 

House includes a similar 

provision, which replaces the 

30-year Treasury rate with the 

rates of interest on amounts 

invested conservatively in longterm investment grade 

corporate bonds.)

• the Treasury Secretary is to 

determine long-term 

corporate bond rates based 

on two or more indices that 

are in the top two quality 

levels available reflecting 

average maturities of 20 

years or more.

Effective date.–Generally, plan 

years beginning after December 

31, 2003.

C. Interest Rate Used in 

Applying the Section 415 

Limits to Benefits Subject to 

the Minimum Value Rules 

(sec. 2(a)(4) of the Senate 

amendment and

sec. 415 of the Code)

The interest rate on 30-year 

Treasury obligations must be 

used in determining the 

minimum value of certain 

optional forms of benefit 

payable under a defined benefit 

pension plan, such as a lump 

sum. In addition, limits apply 

to the amount of benefits 

payable under a defined benefit 

pension plan. In applying the 

limits to benefits subject to the 

minimum value rule, the 

interest rate must generally be 

not less than the greater of: (1) 

the 30-year Treasury rate, and 

(2) the plan rate.

No provision. For plan years beginning in 

2004 and 2005, in applying the 

limits on benefits payable 

under defined benefit pension 

plans to benefits subject to the 

minimum value rules, the 

interest rate must generally be 

not less than the greater of: (1) 

5.5 percent, and (2) the plan 

rate. Under a transition rule for 

participants receiving 

distributions in 2004, the 

provision does not reduce the 

amount of benefits payable 

below the amount determined 

using the rate in effect as of the 

last day of the last plan year 

beginning before 2004.
4

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

Effective date.–Generally, plan 

years beginning after December 

31, 2003.

D. Election of Alternative 

Deficit Reduction 

Contribution (sec. 3 of the 

Senate amendment, 

sec. 412(l) of the Code, and 

sec. 302(d) of ERISA)

Minimum funding 

requirements apply to defined 

benefit pension plans. In the 

case of a single-employer plan, 

an additional contribution 

(referred to as the “deficit 

reduction contribution”) is 

generally required if a plan’s 

funded current liability 

percentage is less than 90 

percent.

No provision. (However, 

H.R. 3521 as passed by the 

House provides for a reduced 

deficit reduction contribution 

for plan years beginning after 

December 27, 2003, and before 

December 28, 2005, in the case 

of plans maintained by 

commercial passenger airlines. 

For each year, the reduced 

contribution is 20 percent of the 

otherwise required additional 

contribution.) 

An employer may elect a

reduced deficit reduction 

contribution for two plan years 

beginning after December 27, 

2003, and before December 28, 

2005, if: (1) a deficit reduction 

contribution was not required 

for 2000; and (2) the employer 

is a commercial passenger 

airline, primarily engaged in 

the production or manufacture 

of a steel mill product, or the 

mining or processing of iron 

ore, or an organization 

described in section 501(c)(5) 

of the Internal Revenue Code 

and which established the plan 

in question on June 30, 1955.

Other employers may apply to 

the Treasury Secretary for the 

same relief; the Treasury 

Secretary may deny relief if, 

within 90 days, he determines 

that there is a reasonable 

likelihood that the employer 

will be unable to make future 

required contributions in a 

timely manner.
5

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

The reduced deficit reduction 

contribution for plan years to 

which the provision applies is 

the greater of: (1) 20 percent 

(40 percent in years beginning 

after December 27, 2004) of 

the otherwise required 

additional contribution, and (2) 

the amount by which the 

expected increase in current 

liability due to benefits 

accruing during the plan year 

exceeds the contribution 

required under the regular 

minimum funding rules.

No plan amendments 

increasing benefits can be 

adopted during a year to which the funding relief applies, 

unless the amendment: (1) does 

not reduce the plan’s projected 

funded current liability for the 

year below 75 percent; 

(2) increases benefits under a 

formula not based on 

compensation at a rate not 

exceeding a contemporaneous 

increase in wages; (3) is 

required by a collective 

bargaining agreement in effect 
6

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

on the date of enactment; (4) is 

determined by the Secretary of 

Labor to be reasonable and 

provides for only de minimis 

increases in plan liabilities; or 

(5) is required as a condition of 

qualified retirement plan status.

If the funding relief applies, 

plan participants and 

beneficiaries must be provided 

with notice that includes: 

(1) the due date of the reduced 

contribution; (2) the amount of 

the reduction; (3) a description 

of benefits eligible for 

guarantee by the PBGC; and 

(4) an explanation of the limits 

on the PBGC benefit guarantee. 

The PBGC must be provided 

with notice that includes: 

(1) the due date of the reduced 

contribution; (2) the amount of 

the reduction; (3) the number of 

years to be needed to restore 

the plan to full funding; and 

(4) information comparing the 

amount by which the plan is 

underfunded with the 

capitalization of the employer.
7

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

An election of the funding 

relief for a plan does not 

invalidate obligations under a 

collective bargaining 

agreement. 

Effective date.–Date of 

enactment.

E. Multiemployer Plan 

Funding Notices (sec. 4 of the 

Senate amendment and secs. 

104(d) and 502 of ERISA)

Administrators of singleemployer defined benefit 

pension plans generally are 

required to provide participants 

and beneficiaries with certain 

information about the funded 

status of the plan, including: (1) 

information about the plan’s 

funded current liability 

percentage; and (2) a statement 

of the plan’s assets and 

liabilities aggregated by 

categories and valued at their 

current value. These 

requirements do not apply to 

multiemployer plans.

No provision. Requires administrators of 

defined benefit pension plans 

which are multiemployer plans 

to provide an annual funding 

notice to each participant and 

beneficiary, each labor 

organization representing such 

participants and beneficiaries, 

and each employer which is 

obligated to contribute under 

the plan. 

The notice must include: 

(1) certain identifying 

information about the plan; 

(2) information about the plan’s 

funded current liability 

percentage; (3) a statement of 

the value of the plan’s assets, 

the amount of benefit 

payments, and the ratio of the 

assets to the payments for the 

plan year; (4) a summary of the 
8

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

rules governing insolvent 

multiemployer plans; 

(5) information about the 

PGBC guarantee of benefits 

under the plan; and (6) any 

additional information which 

the plan administrator elects to 

include to the extent it is not 

inconsistent with regulations 

prescribed by the Secretary of 

Labor.

The notice must be provided no 

later than two months after the 

deadline for filing the plan’s 

annual report. 

The plan administrator is 

subject to a civil penalty of up 

to $100 per day for each failure 

to provide notice.

Effective date.–Plan years 

beginning after December 31, 

2004.
9

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

F. Amortization Hiatus for 

Net Experience Losses in 

Multiemployer Plans (sec. 5 

of the Senate amendment, 

sec. 412(b)(7) of the Code, 

and sec. 302(b)(7) of ERISA)

The amount of required 

contributions to a plan is 

determined on the basis of 

credits and charges to the 

plan’s funding standard 

account. If a multiemployer 

plan has a net experience loss 

for a plan year, the plan’s 

funding standard account is 

charged with the amount 

needed to amortize the net 

experience loss over 15 years.

No provision. A multiemployer plan may 

elect to suspend for up to three 

years (the “hiatus period”) the 

start of the 15-year 

amortization period of net 

experience losses occurring for 

two plan years (as elected by 

the plan) beginning after June 

30, 2002, and before July 1, 

2006.

If a plan elects to suspend the 

amortization period with 

respect to a net experience loss, 

the loss is treated as occurring 

in the year the amortization 

period begins for purposes of 

determining any charge to the

funding standard account or 

interest (so no interest on the 

net experience loss for the 

hiatus period is charged to the 

funding standard account or 

accrued to the amortization 

base). 

No plan amendments 

increasing benefits can take 

effect during the hiatus period 

unless: (1) the plan’s projected 

funded current liability for the 
10

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

year is at least 75 percent, 

(taking into account the 

amendment); (2) the plan’s 

actuary certifies that the benefit 

increase will be fully funded 

within certain periods; (3) the amendment is determined by 

the Secretary of Labor to be 

reasonable and provides for 

only de minimis increases in 

plan liabilities; or (4) the 

amendment is required as a 

condition of qualified 

retirement plan status.

If the amortization relief 

applies, plan participants and 

beneficiaries and labor 

organizations representing such 

participants and beneficiaries 

must be provided with notice 

that includes: (1) the amount of 

the net experience loss to be 

deferred and the period of 

deferral; and (2) the maximum 

guaranteed benefits payable by 

the PBGC if the plan terminates 

while underfunded.

Effective date

.–Date of 

enactment.
11

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

G. Two-Year Extension of 

Transition Rule to Pension 

Funding Requirements for 

Interstate Bus Company

(sec. 6 of the Senate 

amendment and sec. 769(c) of 

the Retirement Protection 

Act of 1994 (as added by 

section 1508 of the Taxpayer 

Relief Act of 1997))

Minimum funding 

requirements apply to defined 

benefit pension plans. In the 

case of a single-employer plan, 

an additional contribution 

(referred to as the “deficit 

reduction contribution”) is 

generally required if a plan’s 

funded current liability 

percentage is less than 90 

percent. Quarterly 

contributions are required for a 

plan year if a plan’s funded 

current liability percentage for 

the preceding plan year is less 

than 100 percent.

For 1996-2008, special deficit 

reduction contribution rules 

apply in the case of a plan that 

is maintained by a company 

engaged primarily in interurban 

or interstate passenger bus 

service and meets certain 

requirements. The plan’s 

funded current liability 

percentage is deemed to be at 

least 90 percent (so no deficit 

reduction contribution is 

required) if the plan’s actual 

funded current liability 

No provision. For plan years beginning in 

2004 and 2005, in the case of a 

plan maintained by a company 

engaged primarily in interurban 

or interstate passenger bus 

service--

• the plan’s funded current 

liability percentage is 

deemed to be at least 90 

percent for deficit reduction 

contribution purposes (so 

no deficit reduction 

contribution is required);

• the plan’s funded current 

liability percentage is 

deemed to be at least 100 

percent for quarterly 

contributions purposes (so 

quarterly contributions are 

not required); and

• the plan’s mortality table is 

used in determining the 

amount of unfunded vested 

benefits for PBGC variable 

rate premium purposes.
12

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

percentage is at least at certain 

specified levels or if certain 

specified contributions are 

made, or both.

Effective date.–Plan years 

beginning after December 31, 

2003. 

H. Procedures Applicable to 

Disputes Involving 

Multiemployer Plan 

Withdrawal Liability (sec. 7 

of the Senate amendment and 

sec. 4221 of ERISA)

An employer that withdraws 

from a multiemployer plan is 

generally liable for its share of 

unfunded vested benefits 

(“withdrawal liability”) as 

determined by the plan sponsor. 

The plan sponsor’s assessment 

of withdrawal liability is 

presumed to be correct unless 

the employer shows by a 

preponderance of the evidence 

that the plan sponsor’s 

determination was 

unreasonable or clearly 

erroneous. The first payment 

of withdrawal liability 

determined by the plan sponsor 

is due no later than 60 days 

after demand, even if the 

employer contests 

determination of liability. 

Disputes between an employer 

and plan sponsor concerning 

withdrawal liability are 

generally resolved through 

arbitration. A plan sponsor 

may disregard a transaction in 

No provision. Applies a special rule if a 

transaction, which occurred 

before January 1, 1999, and at 

least five years before the date 

of withdrawal, is disregarded 

by a plan sponsor in 

determining withdrawal 

liability. In such case: (1) the 

determination by the plan 

sponsor that the transaction was 

to evade or avoid withdrawal 

liability is not presumed to be 

correct; (2) the plan sponsor 

has the burden to establish that 

a principal purpose of the 

transaction was to evade or 

avoid withdrawal liability; and 

(3) the employer is not 

obligated to make withdrawal 

liability payments until a final 

decision in the arbitration 

proceeding, or in court, upholds 

the plan sponsor’s 

determination.

Effective date.–Employers that 

receive a notification of 
13

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

order to assess withdrawal 

liability if the sponsor 

determines that a principal 

purpose of the transaction was 

to avoid or evade withdrawal 

liability.

withdrawal liability after 

October 31, 2003.

I. Extension of Transfers of 

Excess Pension Assets to 

Retiree Health Accounts 

(sec. 9 of the Senate 

amendment, sec. 420 of the 

Code, and secs. 101, 403, and 

408 of ERISA)

Qualified transfers of excess 

assets of a defined benefit 

pension plan to a separate 

account within the plan 

providing medical benefits to 

retired employees may be made 

before December 31, 2005, to 

fund retiree health benefits.

No provision. Allows qualified transfers of 

excess defined benefit pension 

plan assets though December 

31, 2013.

Effective date.–Date of 

enactment.

J. Modification of 

Exemption from Tax for 

Small Property and Casualty 

Insurance Companies (sec. 10 

of the Senate amendment and 

secs. 501(c)(15) and 831(b) of 

the Code)

A property and casualty 

insurance company is eligible 

to be exempt from Federal 

income tax if its net written 

premiums or direct written 

premiums (whichever is 

greater) for the taxable year do 

not exceed $350,000. A 

property and casualty insurance 

company may elect to be taxed 

only on taxable investment 

income if its net written 

premiums or direct written 

premiums (whichever is 

greater) for the taxable year 

exceed $350,000, but do not 

No provision. A property and casualty 

insurance company is eligible 

to be exempt from Federal 

income tax if (1) its gross 

receipts for the taxable year do 

not exceed $600,000, and (2) 

the premiums received for the 

taxable year are greater than 50 

percent of its gross receipts. A 

property and casualty insurance 

company may elect to be taxed 

only on taxable investment 

income if its net written 

premiums or direct written 

premiums (whichever is 

greater) do not exceed $1.2 
14

ITEM PRESENT LAW HOUSE BILL SENATE AMENDMENT

exceed $1.2 million. million (without regard to 

whether such premiums exceed 

$350,000).

Effective date.–Taxable years 

beginning after December 31, 

2003.

K. Definition of Insurance 

Company for Section 831 

(sec. 11 of the Senate 

amendment and sec. 831(c) of 

the Code)

Statutory rules for determining 

life insurance company taxable 

income defines the term 

“insurance company” to mean 

any company, more than half of 

the business of which during 

the taxable year is the issuing 

of insurance or annuity 

contracts or the reinsuring of 

risks underwritten by insurance 

companies. A Treasury 

regulation that is applied to 

property and casualty 

companies provides a 

somewhat similar definition of 

an “insurance company” based 

on the company’s “primary and 

predominant business activity.”

No provision. The definition of an insurance 

company for purposes of 

determining whether a 

company is a property and 

casualty insurance company is 

conformed to the statutory rules 

for life insurance companies 

(i.e., more than half of the 

business of the company during 

the taxable year is the issuing 

of insurance or annuity 

contracts or the reinsuring of 

risks underwritten by insurance 

companies).

Effective date.–Taxable years 

beginning after December 31, 

2003.