COMPARISON OF THE PROVISIONS OF 

H.R. 2830, THE “PENSION PROTECTION ACT OF 2005,” 

AS PASSED BY THE HOUSE OF REPRESENTATIVES 

ON DECEMBER 15, 2005, AND 

H.R. 2830, THE “PENSION SECURITY AND TRANSPARENCY ACT OF 2

AS PASSED BY THE SENATE ON MARCH 3, 2006 

Prepared by the Staff of the 

JOINT COMMITTEE ON TAXATION 

March 8, 2006 

JCX-13-06
i

CONTENTS 

INTRODUCTION .....................................................................................................................................................I. FUNDING AND RELATED PROVISIONS FOR SINGLE-EMPLOYER DEFINED BENEFIT PENSION PL

A. Funding Rules for Single-Employer Plans (secs. 101-102, 104, 111-112, and 114 of the House bill and secs. 

104, 111-112, and 115 of the Senate amendment)............................................................................................1. Minimum required contribution - in general ..............................................................................................2. Definition of target normal cost..................................................................................................................3. Definition of funding shortfall and funding target......................................................................................4. Definition of shortfall amortization charge and shortfall amortization base ..............................................

5. Waiver amortization charge........................................................................................................................6. Effect of no funding shortfall......................................................................................................................7. Interest rate used to determine present value..............................................................................................8. Mortality table used to determine present value.........................................................................................9. At-risk rules ................................................................................................................................................10. Valuation date .............................................................................................................................................11. Value of plan assets ....................................................................................................................................12. Credit balances............................................................................................................................................13. Quarterly contribution requirements...........................................................................................................14. Effective date ..............................................................................................................................................

B. Extension of Long-Term Corporate Bond Rate to 2006 (sec. 301 of House bill and sec. 121 of Senate amendC. Modification of Transition Rule for Certain Plans (sec. 121 of the House bill and sec. 304 of the Senate ameD. Special Rules for Multiple Employer Plans of Certain Cooperatives (sec. 105 of the Senate amendment) .....E. Temporary Relief for Certain Rescued Plans (sec. 106 of the Senate amendment)...........................................F. Benefit Limitations under Single-Employer Plans (secs. 103 and 113 of the House bill and secs. 103, 113 an

Senate amendment)...........................................................................................................................................1. Shutdown and other unpredictable contingent event benefits ......................................................................2. Benefit increases ...........................................................................................................................................3. Certain types of distributions........................................................................................................................4. Additional benefit accruals ...........................................................................................................................
 

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5. Use of credit balance in determining funded status......................................................................................6. Special rules for collectively bargained plans ..............................................................................................7. Additional rules relating to contributions to avoid limitations .....................................................................8. Notice requirement........................................................................................................................................9. Presumptions as to funded status ..................................................................................................................10. Treatment of plan after benefit limitation ends..........................................................................................11. Effective date ..............................................................................................................................................

G. Restrictions on Funding of Nonqualified Deferred Compensation Plan (sec. 122 of the House bill and sec. 3

Senate amendment)...........................................................................................................................................

II. FUNDING AND RELATED PROVISIONS FOR MULTIEMPLOYER DEFINED BENEFIT PENSION PL

A. General Funding Rules for Multiemployer Plans (secs. 201 and 211 of the House bill and secs. 201 and 21

amendment)....................................................................................................................................................1. Amortization periods .................................................................................................................................2. Extensions of amortization periods............................................................................................................3. Interest rate applicable to funding waivers and extensions of amortization periods .................................4. Controlled group liability for required contributions.................................................................................5. Actuarial assumptions................................................................................................................................6. Shortfall funding method ...........................................................................................................................7. Effective date .............................................................................................................................................

B. Additional Funding Rules for Multiemployer Plans in Endangered or Critical Status (secs. 202 and 212 of 

secs. 202 and 212 of Senate Amendment).....................................................................................................1. In general ...................................................................................................................................................2. Annual certification of status; notice; annual reports ................................................................................3. Rules for plans in endangered status..........................................................................................................4. Rules for plans in critical status.................................................................................................................5. Application of excise tax to plans in critical status....................................................................................6. Additional rules..........................................................................................................................................7. Effective date .............................................................................................................................................

C. Measures to Forestall Insolvency of Multiemployer Plans (secs. 203 and 213 of the House bill and sec. 20

amendment)....................................................................................................................................................

D. Withdrawal Liability Reforms (sec. 204 of the House bill and sec. 205 of the Senate amendment) ............

1. Repeal of limitation on withdrawal liability in certain cases....................................................................
 

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2. Repeal of limitation of withdrawal liability to 20 annual payments.........................................................3. Withdrawal liability continues if work contracted out .............................................................................4. Repeal of special rule for long and short haul trucking industry...............................................................5. Application of forgiveness rule to plans primarily covering employees in building and construction ....

E. Removal of Restrictions with respect to Procedures Applicable to Disputes Involving Withdrawal Liabilit

House bill)......................................................................................................................................................

F. Special Rule for Certain Benefits Funded under an Agreement Approved by the PBGC (sec. 204 of the SeG. Sunset of Multiemployer Plan Funding Provisions (sec. 216 of the Senate amendment).............................H. Transfer of Excess Pension Assets to Multiemployer Health Plans (sec. 222 of the Senate amendment)....

III. OTHER PROVISIONS.......................................................................................................................................

A. Interest Rate Assumption for Determination of Lump-Sum Distributions (sec. 302 of the House bill and s

Senate amendment)........................................................................................................................................

B. Interest Rate Assumption for Applying Benefit Limitations to Lump-Sum Distributions (sec. 303 of the H

sec. 302 of the Senate amendment)................................................................................................................

C. Distributions During Working Retirement (sec. 304 of the House bill) .........................................................D. Other Amendments Relating to Prohibited Transactions (sec. 305 of the House bill and sec. 1341 of the S

1. Definition of amount involved.................................................................................................................2. Exemption for block trading ....................................................................................................................3. Bonding relief ..........................................................................................................................................4. Exemption for electronic communication network or financial markets trading system ........................5. Conforming ERISA’s prohibited transaction provision to the Federal Employee Retirement System A6. Relief for foreign exchange transactions .................................................................................................7. Definition of plan asset vehicle................................................................................................................8. Cross trades study ....................................................................................................................................9. GAO study ...............................................................................................................................................10. Effective date ...........................................................................................................................................

E. Correction Period for Certain Transactions Involving Securities and Commodities (sec. 306 of the House b

sec. 1341(e) of the Senate Amendment)........................................................................................................

F. Recovery by Reimbursement or Subrogation with Respect to Provided Benefits (sec. 307 of the House billG. Exercise of Control Over Plan Assets in Connection with Qualified Changes in Investment Options and In

of Relief from Fiduciary Liability During Suspension of Ability of Participant or Beneficiary to Direct In(sec. 308 of the House bill and sec. 706 of the Senate amendment)..............................................................
 

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H. Clarification of Fiduciary Rules (sec. 309 of the House bill and sec. 1110 of the Senate amendment).........I. GAO Pension Funding Report (sec. 310 of the House bill) .............................................................................

IV. IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS ..........................................................................

A. Increases in PBGC Premiums (sec. 401 of the House bill and secs. 121 and 401 of the Senate amendment

1. Flat-rate premiums.....................................................................................................................................2. Variable-rate premiums .............................................................................................................................3. Termination premiums...............................................................................................................................

B. Alternative Funding Agreements (sec. 402 of the Senate amendment).........................................................C. Special Funding Rules for Plans Maintained by Commercial Airlines (sec. 403 of the Senate amendment) D. Limitation on PBGC Guarantee of Shutdown and Other Benefits (sec. 404 of the Senate amendment)......E. Rules Relating to Bankruptcy of the Employer (sec. 405 of the Senate amendment) ...................................F. Flat-Rate Premiums for New Plans of Small Employers (sec. 406 of the Senate amendment).....................G. Variable-Rate Premiums for Small and New Plans (sec. 407 of the Senate amendment)..............................H. Authorization for PBGC to Pay Interest on Premium Overpayment Refunds (sec. 408 of the Senate amend

I. Rules for Substantial Owner Benefits in Terminated Plans (sec. 409 of the Senate amendment)..................J. Acceleration of PBGC Computation of Benefits Attributable to Recoveries from Employers (sec. 410 of th

amendment)....................................................................................................................................................

K. Treatment of Certain Plans Where There is a Cessation or Change in Membership of a Controlled Group 

Senate amendment)........................................................................................................................................

L. Effect of Title (sec. 412 of the Senate amendment) .......................................................................................M. Age Requirement for Airline Pilots (sec. 413 of the Senate amendment) .....................................................

V. DISCLOSURE.....................................................................................................................................................

A. Defined Benefit Plan Funding (or “90-day”) Notices (sec. 501 of the House bill and sec. 501 of the SenatB. Additional Disclosure Requirements (sec. 502 of the House bill and secs. 502-504 of the Senate amendmeC. Section 4010 Filings with the PBGC (sec. 503 of the House bill and sec. 505 of the Senate amendment) ..D. Disclosure of Termination Information to Plan Participants (sec. 506 of the Senate amendment)...............E. Benefit Suspension Notice (sec. 507 of the Senate amendment) ...................................................................F. Study and Report by GAO (sec. 508 of the Senate amendment) ...................................................................

VI. INVESTMENT ADVICE (secs. 601-602 of the House bill and sec. 802 Of The Senate amendment).............
 

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VII. BENEFIT ACCRUAL STANDARDS; CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT P

A. Prohibition on the Reduction in the Rate of Benefit Accrual on Account of Age (sec. 701(a)(1) and (b)(1) 

and sec. 601(a) of the Senate amendment) ....................................................................................................

B. Rules for Converted Plans (secs. 601(b) and 602 of the Senate amendment) ...............................................C. Calculating Minimum Lump-Sum Distributions Under Hybrid Plans (secs. 701(a)(2) and 701(b)(2) of the 

sec. 601(c) of the Senate amendment) ...........................................................................................................

D. Effective Date ................................................................................................................................................

VIII. DEDUCTION LIMITATIONS........................................................................................................................

A. Deduction Limits for Contributions to Single-Employer Defined Benefit Plans (sec. 801 of the House bill 

and 122 of the Senate amendment)................................................................................................................

B. Deduction Limits for Contributions to Multiemployer Defined Benefit Plans (sec. 801 of the House bill an

221 of the Senate amendment).......................................................................................................................

C. Overall Limit on Contributions to Defined Benefit and Defined Contribution Plans (secs. 801-802 of the H

secs. 114, 123 and 221 of the Senate amendment) ........................................................................................

IX. ENHANCED RETIREMENT SAVINGS AND DEFINED CONTRIBUTION PLANS .................................

A. Pension and IRA Provisions of EGTRRA made Permanent (sec. 901 of the House bill).............................

B. Saver’s Credit Made Permanent (sec. 902 of the House bill) ........................................................................C. Increasing Participation Through Automatic Enrollment (sec. 903 of the House bill and secs. 1108-1109 o

amendment)....................................................................................................................................................1. In general .................................................................................................................................................2. Amount of elective contributions.............................................................................................................3. Nondiscrimination requirements..............................................................................................................4. Vesting and distribution requirements for matching and nonelective contributions ...............................5. Erroneous automatic elective contributions.............................................................................................6. Fiduciary rules applicable to default investments of individual account plans .......................................7. Preemption of State law...........................................................................................................................8. Effective date ...........................................................................................................................................

D. Penalty-Free Withdrawals for Individuals Called to Active Duty for at least 179 Days (sec. 904 of the Hous
 

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E. Waiver of 10-Percent Early Withdrawal Tax on Certain Distributions for Public Safety Employees (sec. 9

House bill and sec. 1004 of the Senate amendment) .....................................................................................

F. Combat Zone Compensation Taken Into Account for Purposes of IRA Contributions (sec. 906 of the HouG. Direct Payment of Tax Refunds to IRAs (sec. 907 of the House bill)...........................................................H. IRA Eligibility for the Disabled (sec. 908 of the House bill) ........................................................................I. Allow Rollovers by Nonspouse Beneficiaries of Certain Retirement Plan Distributions (sec. 909 of the Ho

sec. 1005 of the Senate amendment)..............................................................................................................

X. PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY ..............................................................

A. Treatment of Annuity or Life Insurance Contracts with a Long-Term Care Insurance Feature (sec. 1001 o

B. Disposition of Unused Amounts in Health and Dependent Care FSAs (sec. 1002 of the House bill) ..........C. Distributions from Government Retirement Plans for Health and Long-Term Care Insurance for Public Sa

(sec. 1003 of the House bill)..........................................................................................................................

XI. GENERAL PROVISIONS: Provisions Relating to Plan Amendments (sec. 1101 of the House bill and sec. Senate amendment)....................................................................................................................................................XII. DIVERSIFICATION RIGHTS AND other PARTICIPANT PROTECTIONS UNDER DEFINED CONTRI

A. Defined Contribution Plans Required to Provide Employees with Freedom to Invest Their Plan Assets (se

Senate amendment)........................................................................................................................................

B. Notice of Freedom to Divest Employer Securities or Real Property (secs. 702 and 805 of the Senate amenC. Periodic Pension Benefit Statements (sec. 703 of the Senate amendment) ...................................................

D. Notice to Participants or Beneficiaries of Blackout Periods (sec. 704 of the Senate amendment) ...............

E. Allowance of, and Credit for, Additional IRA Payments in Certain Bankruptcy Cases (sec. 705 of the SenF. Increase in Maximum Bond Amount (sec. 707 of the Senate amendment) ...................................................

XIII. INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS ..............................................................

A. Defined Contribution Plans to Provide Adequate Investment Education to Participants (sec. 801 of the SeB. Treatment of Qualified Retirement Planning Services (sec. 803 of the Senate amendment) ........................C. Increase in Penalties for Coercive Interference with Exercise of ERISA Rights (sec. 804 of the Senate am
 

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XIV. PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION........................................................

A. Regulations on Time and Order of Issuance of Domestic Relations Orders (sec. 901 of the Senate amendmB. Entitlement of Divorced Spouses to Railroad Retirement Annuities Independent of Actual Entitlement of 

(sec. 902 of the Senate amendment) ..............................................................................................................

C. Extension of Tier II Railroad Retirement Benefits to Surviving Former Spouses Pursuant to Divorce Agre

(sec. 903 of the Senate amendment) ..............................................................................................................

D. Requirement for Additional Survivor Annuity Option (sec. 904 of Senate amendment)..............................

XV. IMPROVEMENTS IN PORTABILITY...........................................................................................................

A. Clarifications Regarding Purchase of Permissive Service Credit (sec. 1001 of the Senate amendment)......B. Rollover of After-Tax Amounts (sec. 1002 of the Senate amendment).........................................................C. Clarification of Minimum Distribution Rules for Governmental Plans (sec. 1003 of the Senate amendmenD. Faster Vesting of Employer Nonelective Contributions (sec. 1006 of the Senate amendment)....................E. Allow Direct Rollovers from Retirement Plans to Roth IRAs (sec. 1007 of the Senate amendment)...........F. Elimination of Higher Penalty on Certain Simple Plan Distributions and Simple Plan Portability (secs. 100

Senate amendment)........................................................................................................................................

G. Eligibility for Participation in Retirement Plans (sec. 1010 of the Senate amendment) ...............................H. Transfers to the PBGC (sec. 1011 of the Senate amendment).......................................................................I. Missing Participants (sec. 1012 of the Senate amendment) ............................................................................J. Modifications of Rules Governing Hardships and Unforeseen Financial Emergencies (sec. 1013 of the Sen

XVI. ADMINISTRATIVE PROVISIONS...............................................................................................................

A. Employee Plans Compliance Resolution System (sec. 1101 of the Senate amendment)..............................B. Notice and Consent Period Regarding Distributions (sec. 1102 of the Senate amendment).........................C. Reporting Simplification (sec. 1103 of the Senate amendment)....................................................................D. Voluntary Early Retirement Incentive and Employment Retention Plans Maintained by Local Educationa

Other Entities (sec. 1104 of the Senate amendment).....................................................................................

E. No Reduction in Unemployment Compensation as a Result of Pension Rollovers (sec. 1105 of the Senate F. Withholding on Distributions from Governmental Section 457 Plans (sec. 1106 of the Senate amendment)G. Treatment of Defined Benefit Plan as Governmental Plan (sec. 1107 of the Senate amendment) ...............
 

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XVII. UNITED STATES TAX COURT MODERNIZATION ...............................................................................

A. Judges of the Tax Court (secs. 1200-1207 and 1213 of the Senate amendment) ..........................................B. Special Trial Judges of the Tax Court (secs. 1208-1213 of the Senate amendment).....................................

XVIII. OTHER PROVISIONS.................................................................................................................................

A. Authority of Secretary of Labor, Secretary of Treasury, and Pension Benefit Guaranty Corporation to Pos

Deadlines (sec. 1302 of the Senate amendment) ...........................................................................................

B. Governmental Pension Plan Equalization......................................................................................................

1. Definition of governmental plan (sec. 1311 of the Senate amendment)...................................................2. Extension to all governmental plans of current moratorium on application of certain nondiscrimination 

applicable to State and local governmental plans (sec. 1312 of the Senate amendment)........................

3. Clarification that tribal governments are subject to same defined benefit plan rules and regulations app

and other local governments, their police and firefighters (sec. 1313 of the Senate amendment) ..........

4. Effective date (sec. 1314 of the Senate amendment)................................................................................

C. Miscellaneous Provisions................................................................................................................................

1. Transfer of excess funds from Black Lung disability trusts to United Mine Workers of America Comb

Fund (sec. 1321 of the Senate amendment).............................................................................................

2. Treatment of death benefits from company-owned life insurance (“COLI”) (sec. 1322 of the Senate am

D. Health and Medical Benefits..........................................................................................................................

1. Ability to use excess pension assets for future retiree health benefits (sec. 1331 of the Senate amendm2. Addition of special rules for funding of collectively bargained retiree health benefits (sec. 1332 of the 

amendment)..............................................................................................................................................

3. Allowance of reserve for medical benefits of plans sponsored by bona fide associations (sec. 1333 of t

amendment)..............................................................................................................................................

E. Cash or Deferred Arrangements.....................................................................................................................

1. Treatment of eligible combined defined benefit plans and qualified cash or deferred arrangements (sec

Senate amendment)..................................................................................................................................

2. State and local governments eligible to maintain section 401(k) plans (sec. 1337 of the Senate amendm

F. Excess Contributions (sec. 1339 of the Senate amendment)..........................................................................G. Other Provisions.............................................................................................................................................

1. Federal task force on older workers (sec. 1342 of the Senate amendment) .............................................2. Technical correction to Saver Act (sec. 1343 of the Senate amendment) ................................................
1

INTRODUCTION 

This document,1 prepared by the staff of the Joint Committee on Taxation, presents, in side-by-side forma

the provisions of H.R. 2830, the “Pension Protection Act of 2005,” as passed by the House of Representatives on 

and H.R. 2830, the “Pension Security and Transparency Act of 2005,” as passed by the Senate on March 3, 2006includes a summary comparison of the provisions in the bills and does not reflect all the technical detail and diffe

provisions.

1 This document may be cited as follows: Joint Committee on Taxation, Comparison of the Provisions of H.R. 283

Protection Act of 2005,” as Passed by the House of Representatives on December 15, 2005, and H.R. 2830, the “Pension S

Transparency Act of 2005,” as Passed by the Senate on March 3, 2006 (JCX-13-06), March 8, 2006. 
2 

Provision Present Law House Bill 

I. FUNDING AND RELATED PROVISIONS FOR SINGLEEMPLOYER DEFINED BENEFIT PENSION PLANS A. Funding Rules for SingleEmployer Plans (secs. 101-102, 104, 111-112, and 114 of the House bill and secs. 101-102, 104, 111-112, and 115 of the Senate amendment) 1. Minimum required contribution - in general 

The minimum required contribution is the amount needed to balance cumulative charges (e.g., for normal cost and to amortize past service liabilities, losses, and funding waivers) and credits (e.g., to amortize decreases in past service liabilities and gains) to the funding standard account. In addition, for singleemployer plans covering more than 100 participants and, in general, having a funded current liability percentage of less than 90%, an additional deficit reduction contribution (“DRC”) may be required, consisting of the sum of: (1) the expected increase in current liability for benefits accruing in the current year; and (2) a percentage of unfunded current liability. 

Eliminates the funding standard account rules. The minimum required contribution generally consists of the sum of: (1) target normal cost; (2) any shortfall amortization charge (based on the amount needed to amortize any funding shortfall for a year over 7 years); and (3) any waiver amortization charge (based on the amount needed to amortize any funding waiver for a year over 5 years). Special actuarial assumptions apply in the case of plans in at-risk status. 

Same a
3 

Provision Present Law House Bill 

2. Definition of target normal cost No provision. Target normal cost is the present 

value of benefits expected to accrue or be earned in the current year. 

Same a

3. Definition of funding shortfall and funding target 

No provision. Funding shortfall.−A plan’s funding 

shortfall for a year is the excess of the plan’s funding target for the year over the value of plan assets, reduced by any credit balances. The funding shortfall for a year is generally amortized over 7 years. Funding target.−A plan’s funding 

target for a year is the present value of all liabilities to participants and beneficiaries for the year. 

Fundin

bill, exfundinplan’s and 20In the cthan 10for 20098% reFundin

House presenor earnyear. 

4. Definition of shortfall amortization charge and shortfall amortization base 

In determining charges to the funding standard account of a single-employer plan, the amortization period for past service liabilities is 30 years and for losses is generally 5 or 10 years, depending on the nature of the loss. The IRS may grant an extension of the applicable amortization period if it determines that certain requirements are met. The portion of the DRC for a year that is attributable to unfunded current liability ranges from 18% to 

Shortfall amortization charge.−The 

shortfall amortization charge for a year is the sum of the annual installments needed to amortize over 7 years the shortfall amortization bases for the current year and the 6 preceding years (to the extent preceding years are subject to the new rules, i.e., years after 2006). Extensions of amortization periods are no longer available to singleemployer plans. 

Shortfa

as Hou
4 

Provision Present Law House Bill 

30% of unfunded current liability, depending on the funded status of the plan. 

Shortfall amortization base.−The 

shortfall amortization base for a year is the excess of the plan’s funding shortfall for the year over the present value of any remaining annual installments attributable to shortfall amortization bases for preceding years. Under a special rule, no shortfall amortization base is required to be established for a year if the plan’s funding target does not exceed the value of plan assets, reduced for this purpose only by any prefunding balance and only if the employer elects to use the prefunding balance to reduce the required contribution for the year. In applying the special rule to certain plans that are not subject to the DRC rules for 2006, a percentage of the plan’s funding target applies for 2007-2010 (92, 94, 96, and 98% respectively). 

Shortfa

House does n

5. Waiver amortization charge The IRS may grant a funding waiver 

if it determines that certain requirements are met. The amount of a funding waiver is amortized over 5 years. 

The waiver amortization charge for a year is the sum of the annual installments needed to amortize over 5 years any funding waivers from the 5 preceding years. 

Same a
5 

Provision Present Law House Bill 

6. Effect of no funding shortfall No provision. If the value of plan assets, reduced by 

any credit balances, equals or exceeds the funding target for the year, all shortfall and waiver amortization bases are eliminated, and the required contribution is target normal cost reduced by any excess. 

Same a

7. Interest rate used to determine present value 

In determining current liability, present value is determined using an interest rate within a permissible range of the 4-year weighted average of interest rates on (1) investmentgrade long-term corporate bonds with a permissible range of 90-100% for 2004 and 2005, and (2) 30-year Treasury securities with a permissible range of 90-105% for years after 2005. 

Present value is determined using 3 segment rates (0-5 years; more than 5 and up to 20 years; and more than 20 years), based on the corresponding portion of a yield curve based on a 3-year weighted average (50%, 35%, and 15%) of interest rates on investment-grade corporate bonds. The use of the segment rates is phased in over 2007-2009, except for plans established after 2006. 

Same ayield caveraginvestmand (2) plans. 

8. Mortality table used to determine present value 

Present value is determined using the 1983 Group Annuity Mortality Table. Under proposed regulations, beginning in 2007, RP-2000 Mortality Tables are used with improvements in mortality (including future improvements) projected to the current year and with separate tables for annuitants and nonannuitants. Separate tables apply for disabled participants. 

In general.−Present value is generally 

determined using RP-2000 Mortality Tables with improvements in mortality projected to the current year (with the effect of the mortality change phased in over 5 years, except for plans established after 2006). 

In gene

determTables enactmmortalyears) least evplan exSeparaparticip
6 

Provision Present Law House Bill 

 Use of plan-specific table.−Subject to 

certain requirements and Treasury approval, a plan-specific mortality table may be used. A plan-specific table can be used for the next year if Treasury fails to act on a request within 180 days. 

Use of 

House to the rbill, thdata foprovidused by membegroup, Treasurequesthe em

9. At-risk rules (a) In general 

No provision. Additional assumptions and a loading 

factor apply in determining the funding target and target normal cost of a plan in at-risk status. A plan is in at-risk status if, for the preceding year, the value of plan assets, reduced by any credit balances, was less than 60% of the plan’s funding target (determined without regard to at-risk status). 

Additiodetermtarget nstatus. (1) the is finanof plan plan’s withou

(b) Definition of financially weak employer 

No provision. No provision. An em

as of eof at leending countin(a) the bonds by all rthe em
7 

Provision Present Law House Bill 

 employ

grade b(2) at l“deteriis the lAn emfinancigroup wdetermoutstangrade. bonds is treatthe ext

(c) At-risk actuarial assumptions and loading factors 

No provision. In determining present value, it is 

assumed that all participants elect benefits at such times and in such forms as result in the highest present value. A loading factor of 4% and $700 per participant applies in determining a plan’s funding target. A loading factor of 4% applies in determining target normal cost. 

In deteassumeparticipcurrent at the e(2) all the forpresenand at-no evedetermrisk rul
8 

Provision Present Law House Bill 

(d) Transition to at-risk funding target and at-risk normal cost 

No provision. If a plan is in at-risk status for fewer 

than 5 consecutive plan years, the plan’s funding target or target normal cost is the sum of: (1) funding target or target normal cost determined without regard to the at-risk rules, plus (2) the applicable transition percentage of the increase in funding target or target normal cost as a result of at-risk status. The transition percentage is 20, 40, 60, and 80 for the first, second, third, and fourth year (respectively) the plan is in at-risk status. 

Same athat yeinto acyears athe conat-risk percenimprovyear is credit iyear (bgrade)

(e) Exceptions to at-risk rules No provision. No provision. The at-

plan hafor the cooperperson obligatwith thfinanci

10. Valuation date A plan’s valuation date generally may 

be any day during the plan year. 

A plan’s valuation date must be the first day of the plan year, except any day during the plan year may be used for a small plan, defined as having 500 or fewer participants for the preceding year. 

Same ais definparticip
9 

Provision Present Law House Bill 

11. Value of plan assets The value of plan assets is determined 

on the basis of any reasonable actuarial valuation method that takes into account fair market value and is permitted under regulations. Average value of plan assets may be based on value for a period not to exceed the 5 most recent plan years, including the current year. Actuarial value must be not less than 80% and not more than 120% of fair market value. 

The value of plan assets is determined on the basis of any reasonable actuarial valuation method that takes into account fair market value and is permitted under regulations. The method may not provide for averaging of fair market values over more than the 36-month period ending with the month containing the plan’s valuation date. Actuarial value must be not less than 90% and not more than 110% of fair market value. 

The vafair mavalue odetermreasonprovidmarket permittnot promarket period the 12tvaluativaluati

12. Credit balances (a) In general A credit balance results if cumulative 

credits to the funding standard account exceed cumulative charges. A credit balance is reduced by charges to the funding standard account (unless a contribution is made to offset charges). A credit balance is credited with the plan’s assumed interest rate regardless of the investment performance of the plan assets. 

Two types of credit balances apply: (1) a funding standard carryover balance (“carryover” balance), based on any credit balance under the funding standard account for the last year before the new funding rules are effective, and (2) a prefunding balance, based on contributions that exceed required contributions under the new funding rules. (Any carryover balance must be used before a prefunding balance is used.) 

Same aprefunany crestandarbefore effectivexceed the new 
10 

Provision Present Law House Bill 

 A carryover or prefunding balance is 

reduced by any amount used to offset the required contribution for a year and adjusted (as provided in regulations) to reflect the investment performance of the plan assets for the preceding year. 

(b) Ability to use credit balance to reduce required contribution 

A credit balance automatically reduces any required contribution regardless of the plan’s funded status. 

General rule.−An employer chooses 

whether to use a credit balance to reduce a required contribution. Restriction on use.−A credit balance 

cannot be used to reduce the required contribution for a year if, for the preceding year, the value of plan assets (reduced by any prefunding balance) was less than 80% of the plan's funding target (determined without regard to at-risk status). 

Genera

Restric

precedassets prefunpercen(determstatus)of any the greor (2) 2contribbalancportion exceed

(c) Reduction of value of plan assets by credit balance in determining required contributions 

The value of plan assets is not reduced by any credit balance in determining whether a DRC is required (i.e., generally whether the plan’s funded current liability 

 Same a

prefunexceptthe PBapplies 
11 

Provision Present Law House Bill 

percentage is at least 90%). The value of plan assets is reduced by any credit balance in determining the amount of a required DRC. 

The value of plan assets is reduced by any carryover and prefunding balances in determining the plan’s funding shortfall and whether the value of plan assets exceeds the plan’s funding target (so that normal cost is reduced by any excess). The reduction does not apply if, pursuant to an agreement with the PBGC, a carryover or prefunding balance cannot be used to reduce required contributions. Under a special rule, in determining whether a shortfall amortization base must be established for the year, the value of plan assets is reduced only by any prefunding balance (i.e., not by any carryover balance) and only if the employer elects to use the prefunding balance to reduce the required contribution for the year. 

amortifor the 

(d) Reduction of value of plan assets by credit balance in determining funded status 

No provision. The value of plan assets is generally 

reduced by any carryover and prefunding balances in determining the plan’s funded status, such as for purposes of whether benefit limitations apply. 

The vareducedeterm
12 

Provision Present Law House Bill 

(e) Election to reduce credit balance to avoid reduction of value of plan assets 

No provision. An employer may elect to reduce any 

carryover balance or prefunding balance (after any carryover balance is exhausted), so that a corresponding reduction in the value of plan assets no longer applies. The amount by which the employer elects to reduce any carryover or prefunding balance is no longer available to reduce required contributions. 

No proassets iprefun

13. Quarterly contribution requirements 

Quarterly contributions are required if, for the preceding year, the plan’s funded current liability percentage was less than 100%. If a quarterly installment is not made, interest is charged at the greater of (1) 175% of the Federal mid-term rate, and (2) the plan’s assumed interest rate. 

Quarterly contributions are required if, for the preceding year, the plan had a funding shortfall. If a quarterly installment is not made, interest is charged at the greater of (1) 175% of the Federal mid-term rate, and (2) the plan’s effective rate of interest (i.e., the single rate of interest which, if used to determine the plan’s funding target, results in the same funding target as determined using the segment rates). 

Quarteif, for tplan (1participshortfaquarterintereseffectivpercen

14. Effective date Plan years beginning after 2006. Same a
13 

Provision Present Law House Bill 

B. Extension of Long-Term Corporate Bond Rate to 2006 (sec. 301 of House bill and sec. 121 of Senate amendment) 

In determining current liability, the interest rate used is a 4-year weighted average of interest rates on (1) investment-grade long-term corporate bonds for 2004 and 2005, and (2) 30-year Treasury securities for years after 2005. 

A 4-year weighted average of interest rates on investment-grade long-term corporate bonds is used in determining current liability for 2006. 

Same a

C. Modification of Transition Rule for Certain Plans (sec. 121 of the House bill and sec. 304 of the Senate amendment) 

Special rules apply to a plan sponsored by a company engaged primarily in interurban or interstate passenger bus service. For 2004 and 2005: (1) the plan is not subject to the DRC or quarterly contribution requirements, and (2) the plan’s mortality table is used in determining PBGC variable rate premiums. For years after 2005 and before 2010, the plan is not subject to the DRC requirements if the plan is funded at certain levels and certain contributions are made. 

Rule for 2006.−The special rules 

applicable for 2004 and 2005 apply for 2006. Years after 2006.−For years after 

2006: (1) the plan’s mortality table is used in determining required contributions and PBGC variable rate premiums, (2) a special phase-in of the plan’s funding target applies for purposes of whether a shortfall amortization base is required for 2007-2011, and (3) the plan is not subject to the quarterly contribution requirements. 

Rule fo

Years 

2006: (used in contribpremiuplan’s plan asprefunagreemprefunreduce 

D. Special Rules for Multiple Employer Plans of Certain Cooperatives (sec. 105 of the Senate amendment) 

No provision. No provision. Provid

the new premiuyears bspecial multipon July rural coorganiz
14 

Provision Present Law House Bill 

E. Temporary Relief for Certain Rescued Plans (sec. 106 of the Senate amendment) 

No provision. No provision. Provid

the new premiuyears bspecial “rescue26, 200A rescuan emprise to betweemillionwas asthe conPBGC 

F. Benefit Limitations under SingleEmployer Plans (secs. 103 and 113 of the House bill and secs. 103, 113 and 805 of the Senate amendment) 1. Shutdown and other unpredictable contingent event benefits 

A defined benefit plan may provide for unpredictable contingent event benefits, i.e., benefits that depend on contingencies other than age, service, compensation, death or disability, including benefits payable as a result of a plant shutdown. Unpredictable contingent event benefits are not 

Plant shutdown and other unpredictable contingent event benefits may not be provided under a plan if, for the plan year in which the event giving rise to the benefits occurs, the plan is less than 80% funded, or would be less than 80% funded taking into account the benefits, unless the employer, in 

No prosec. 40the PBshutdocontingover 5 event o
15 

Provision Present Law House Bill 

taken into account for deficit reduction contribution purposes until 

the event has occurred. Defined benefit plans are not permitted to provide “layoff” benefits (i.e., severance benefits), but may provide subsidized early retirement benefits, including early retirement window benefits. 

addition to any required contribution, contributes a certain amount as determined under the provision. The limitation does not apply for first 5 years of plan’s existence. 

2. Benefit increases A plan amendment increasing a plan’s 

current liability may not be adopted if the plan’s funded current liability percentage would be less than 60%, taking into account the amendment, unless security is provided. (Plan amendments increasing benefits are also generally prohibited while a funding waiver or amortization extension is in effect or the plan sponsor is involved in bankruptcy proceedings.) 

Limitation on benefit increases.−A 

plan amendment may not increase benefits if the plan is less than 80% funded, or would be less than 80% funded taking into account the benefit increase, unless the employer, in addition to any required contribution, contributes a certain amount as determined under the provision. The limitation does not apply for the first 5 years of a plan’s existence. (The provision does not change the prohibition on benefit increases while a funding waiver is in effect or a plan sponsor is involved in bankruptcy proceedings.) Benefit increase.−A benefit increase 

resulting from an increase in compensation or an increase in benefit rate under the plan is treated as having been made by a plan amendment. 

Limita

Same arequirethe plaAdjustby incrliabilit(such a2 preceBenefi

resultinincreasbenefit provisibased odoes n
16 

Provision Present Law House Bill 

 increas

increascontemparticip

3. Certain types of distributions In the case of a liquidity shortfall with 

respect to a plan, certain forms of distribution (such as lump-sums) are prohibited. 

Plans must provide that certain accelerated forms of distribution (such as lump-sums) will not be made if the plan is less than 80% funded. An exception applies if, as of June 29, 2005, and thereafter, the plan provides for no benefit accruals. (The present-law liquidity shortfall provision is retained.) 

Plans macceler(such anot be period the plathe prethe emrequirefor the succeeperiod, adjusteIn the cbased odistribulesser ootherw(2) the PBGC participgenerastarting additio(unless funded the end 
17 

Provision Present Law House Bill 

 consec

plan’s least 6sponsoliquidi

4. Additional benefit accruals No provision. Plans must provide that, if the plan is 

less than 60% funded as of the valuation date for the year, all benefit accruals under the plan must cease. The limitation does not apply for the first 5 years of a plan’s existence. 

Plans madjustepreced60%, aplan mand unthe plaleast 6apply ithat the requirebefore an amofunded does noa plan’

5. Use of credit balance in determining funded status 

No provision. In determining funded status, the 

value of plan assets is reduced by any credit balances unless the plan is 100% funded without applying the reduction. In the case of certain plans, in applying this rule for 2007-2010, the plan’s funded status must be 92, 94, 96, and 98% respectively. (Under the general credit balance rules, an employer may elect to reduce any 

The vareducedetermfor purThe prbalancadditioavoid a 
18 

Provision Present Law House Bill 

 credit balance, so that a 

corresponding reduction in the value of plan assets no longer applies, thus increasing the plan’s funded status.) 

6. Special rules for collectively bargained plans 

No provision. An employer is deemed to elect to 

reduce a portion of any credit balance to the extent such a reduction would raise the funded status of the plan to a level that would prevent a benefit limitation from applying. 

The beinsteadany reqcontribincreasstatus tlimitat

7. Additional rules relating to contributions to avoid limitations 

No provision. No provision. An em

instead contribAdditioavoid brequirepurpospurposbalancto avoiincreas

8. Notice requirement No provision. Subject to an ERISA penalty, a plan 

administrator generally must notify participants within 30 days if the limitation on forms of distribution applies. 

Same amust aon addand (2) given rnotice 
19 

Provision Present Law House Bill 

9. Presumptions as to funded status No provision. Limitation for preceding year.−If a 

plan was subject to a benefit limitation for the preceding year, the plan’s funded status is presumed to be the same for the current year (so the limitation continues to apply) until the plan actuary certifies the plan’s actual funded status. Actuarial certification delayed.–If the 

plan actuary fails to certify the plan’s funded status by the 10th month of the 

current year, the plan is presumed to be less than 60% funded. Presumed deterioration.−If a plan was 

funded for the preceding year at less than 10 percentage points above the level at which a benefit limitation applies and the plan’s actuary fails to certify the plan’s funded status by the 4th month of the current year, the 

plan’s funded status is presumed to be 10 percentage points lower than the preceding year (so benefit limitation applies). 

Limita

as Hourules aadjusteActuar

as Hourules aadjustePresum

provisi

10. Treatment of plan after benefit limitation ends 

No provision. If a limitation on certain forms of 

distribution or additional benefit accruals ceases to apply to a plan (unless it applied only because of presumed funded status), the plan may provide for the resumption of 

If a limdistribuaccruaforms accruathe pla
20 

Provision Present Law House Bill 

 such distribution forms or accruals 

only by adoption of a plan amendment, subject to the limitation on benefit increases under the provision. 

in the paffectinbenefitor accr

11. Effective date No provision. Plant shutdown benefits.−Generally 

effective for plant shutdowns and similar events occurring after 2006. Other benefit limitations.−Generally 

effective for plan years beginning after 2006, with a special rule for determining 2006 funded status for purposes of applying the presumption rules in 2007. Collectively bargained plans.−A 

delayed effective date applies to plans maintained pursuant collective bargaining agreements ratified before the date of enactment. In no event is provision effective later than 2009. 

Plant s

provisiSenate PBGC and othevent bevent oOther b

House (1) doefor 200(2) speare not limitatadditiobefore Collec

delayemaintabargain2007. effectiv
21 

Provision Present Law House Bill 

G. Restrictions on Funding of Nonqualified Deferred Compensation Plan (sec. 122 of the House bill and sec. 303 of the Senate amendment) 

Amounts deferred under a nonqualified deferred compensation plan for all taxable years are currently includible in gross income to the extent not subject to a substantial risk of forfeiture and not previously included in gross income, unless certain requirements are satisfied. Assets set aside for purposes of paying nonqualified deferred compensation are treated as property transferred in connection with the performance of services under Code section 83 at the time set aside if located outside of the United States, thus resulting in income inclusion. A transfer of property resulting in income inclusion also occurs with respect to compensation deferred under a nonqualified deferred compensation plan if the plan provides that upon a change in the employer’s financial health, assets will be restricted to the payment of nonqualified deferred compensation. If the preceding requirements are not satisfied, in addition to current income inclusion, interest applies at the underpayment rate plus 1 percentage point and the amount required to be included in income is subject to a 20% additional tax. 

If, during any period in which a defined benefit pension plan of an employer is in at-risk status, assets are set aside for purposes of paying deferred compensation, such transferred assets are treated as property transferred in connection with the performance of services. The rule does not apply in the case of assets that are set aside before the defined benefit pension plan is in atrisk status. If a nonqualified deferred compensation plan of an employer provides that assets will be restricted to the provision of benefits under the plan in connection with the at-risk status of any defined benefit pension plan of the employer, or assets are so restricted, such assets are treated as property transferred in connection with the performance of services. 

The present-law rules relating to income inclusion, interest rate, and the 20% additional tax apply. 

Same adeememerely provid(2) the restrictcovereprovisirequireprohibdeferrefiduciarestrictThe prdeferrewhen ta restriperiod the plaless thaplan in that the and (3) terminbeginnmonths the plaplan asbenefit Applicto coveand 4 hthe CE
22 

Provision Present Law House Bill 

Effective date.−Transfers or other 

reservations of assets after December 31, 2005. 

Effecti

reserva31, 200
23 

Provision Present Law House Bill 

II. FUNDING AND RELATED PROVISIONS FOR MULTIEMPLOYER DEFINED BENEFIT PENSION PLANS A. General Funding Rules for Multiemployer Plans (secs. 201 and 211 of the House bill and secs. 201 and 211 of the Senate amendment) 1. Amortization periods The minimum required contribution 

under the funding rules is the amount needed to balance cumulative charges (e.g., for normal cost and to amortize past service liabilities, losses, and funding waivers) and credits (e.g., to amortize decreases in past service liabilities and gains) to the funding standard account (or an alternative funding standard account). Amortization periods for multiemployer plans are generally (1) 30 years for past service liabilities, (2) 15 years for net experience gains and losses, (3) 30 years for gains and losses from changes in actuarial assumptions, and (4) 15 years for funding waivers. 

In the case of amortization bases established after the provision is effective, the amortization periods are changed to 15 years for (1) past service liabilities (or the period over which a benefit increase is payable, if shorter), and (2) gains and losses from changes in actuarial assumptions, so amortization periods for multiemployer plans are generally 15 years. The option of using an alternative funding standard account is eliminated. 

Same a
24 

Provision Present Law House Bill 

2. Extensions of amortization periods 

The IRS may extend for up to 10 years the amortization period for unfunded liabilities and losses if the IRS determines certain requirements are met. 

The IRS is required to extend for up to 5 years the amortization period for unfunded liabilities and losses if certain criteria are met. (The IRS may also extend an amortization period for up to 5 additional years if the IRS determines the present-law requirements are met.) 

Same aan actucriteria IRS to additioand to for a n

3. Interest rate applicable to funding waivers and extensions of amortization periods 

A plan’s funding standard account is generally charged or credited with interest at the rate used under the plan in determining costs (the “plan” rate). In the case of single-employer plans, the interest rate charged with respect to an extension of the amortization period is the greater of (1) 150% of the Federal mid-term rate and (2) the plan rate. The Federal short-term rate applies to funding waivers and extensions of amortization periods granted to multiemployer plans. 

The interest rate applicable to funding waivers and extensions of amortization periods is changed to the greater of (1) 150% of the Federal mid-term rate, or (2) the plan rate, with a grandfather for waivers or extensions pursuant to applications filed before June 30, 2005. 

The spfundinamortithat the grandfamortiapplica2005. 

4. Controlled group liability for required contributions 

In the case of a single-employer plan, liability for minimum required contributions applies to all members of the employer’s controlled group. Controlled-group liability does not apply to contributions an employer is required to make to a multiemployer plan. 

Controlled group liability for minimum required contributions does not apply with respect to multiemployer plans (i.e., no change from present law). 

Liabilicontribmultiemmembegroup. 
25 

Provision Present Law House Bill 

5. Actuarial assumptions The actuarial assumptions and 

methods used in determining required contributions for multiemployer plans must (1) be reasonable in the aggregate (taking into account the plan’s experience and reasonable expectations), and (2) in combination, offer the actuary’s best estimate of anticipated plan experience. 

The reasonableness requirement for actuarial assumptions and methods used with respect to multiemployer plans is changed to require each assumption and method to be reasonable (taking into account the plan’s experience and reasonable expectations). 

Same a

6. Shortfall funding method A multiemployer plan may use the 

shortfall method, which adapts the plan’s otherwise applicable funding method by determining charges to the funding standard account on the basis of estimated units of service or production (such as hours worked under a collective bargaining agreement). Use of the shortfall method and changes to use of the shortfall method are generally subject to IRS approval. 

No provision. A mult

use, or method the IRS the shoprecedextensiwith rehas beeperiodbenefitwhile tThe prto affeshortfaright to otherw

7. Effective date Plan years beginning after December 

31, 2006. 

Same aDecemapplicaprovisi
26 

Provision Present Law House Bill 

B. Additional Funding Rules for Multiemployer Plans in Endangered or Critical Status (secs. 202 and 212 of House bill and secs. 202 and 212 of Senate Amendment) 1. In general Additional required contributions and 

benefit reductions may apply if a multiemployer plan is in reorganization status or is insolvent. A plan is in reorganization status for a year if the contribution needed to balance charges and credits to the funding standard account exceeds the plan’s “vested benefits charge” (generally the amount needed to amortize unfunded vested benefits over certain periods). A plan is generally insolvent if the plan’s available resources are not sufficient to pay benefits due for the year (or are expected not to be sufficient to pay benefits due in the next year). An excise tax applies if minimum required contributions are not made. 

Requires the adoption of and compliance with (1) a funding improvement plan in the case of a multiemployer plan in endangered status, and (2) a rehabilitation plan in the case of a multiemployer plan in critical status. Additional required contributions and benefit reductions apply to a plan in critical status in certain circumstances. For a plan in critical status, failure to make minimum required contributions under the otherwise applicable funding rules does not result in an excise tax, provided that a rehabilitation plan is adopted and followed. 

Same acase of additiobenefit employminimuunder tfundinrehabilfollow

2. Annual certification of status; notice; annual reports 

Certain information must be provided in an annual report with respect to a plan and a summary of the annual report must be provided to plan participants. Notices to certain parties are required in various circumstances. 

Annual certification.−Requires 

certification by a plan’s actuary by the 90th day of each plan year of 

whether the plan is in endangered or critical status; failure to certify causes the plan to be presumed in critical 

Annua

bill, exfundinplan, ascheduand (2) status i
27 

Provision Present Law House Bill 

 status and an ERISA penalty of up to 

$1,100 a day applies.

Notice.−Requires the plan sponsor of 

a plan in endangered or critical status to provide notice of such status to plan participants and beneficiaries, bargaining parties, the Secretaries of Treasury and Labor, and the PBGC.

Annual reports.−Requires a summary 

of a funding improvement or rehabilitation plan and an update of the plan’s funding percentage to be included in the plan’s annual report and the summary annual report. 

annual ERISA appliesNotice

Annua

updaterehabilthe upd

3. Rules for plans in endangered status 

No provision. Definition of endangered status.−A 

plan is in endangered status if (1) its funded percentage (i.e., the value of plan assets as a percentage of accrued liability) is less than 80%, or (2) the plan has an accumulated funding deficiency or is projected to in the next 6 years. 

Definit

status.−

term “sfor a phave) adeficie
28 

Provision Present Law House Bill 

 Information to be provided to 

bargaining parties.−Within 90 days of 

certification of a plan’s endangered status, the plan sponsor must provide the bargaining parties with options for revised benefit and contribution structures to enable the plan to meet requirements of the funding improvement plan, including (1) an option based on reductions in future benefit accruals and no contribution increases (except as needed to meet the requirements of the funding improvement plan after maximum permissible reductions in future benefit accruals), and (2) an option based on increased contributions and no reductions in future benefit accruals. Additional options must be provided at the request of an employer employing, or an employee organization representing, at least 5% of the plan’s active participants. The plan sponsor may also provide other appropriate information. Funding improvement plan.−The plan 

sponsor must adopt a funding improvement plan within 240 days of certification of endangered status. Under a general rule, a funding improvement plan must be expected, over the funding improvement period, 

Inform

bargain

the adoimprovplan in the plabargainrevised structuthe reqimprovoption benefit increasthe reqimprovreductiThe plaother aFundin

sponsoimprovthe deastatus. plans, House 
29 

Provision Present Law House Bill 

 to decrease the percentage by which 

the plan is underfunded by one-third and avoid an accumulated funding deficiency. Under a special rule, if the plan’s funded percentage is 70% or less (or between 70% and 80% and certain certifications are made), the percentage by which the plan is underfunded must decrease by onefifth over 15 years. Funding improvement period.−The 

funding improvement period is the 10-year period beginning on the earlier of (1) the date two years after the date the funding improvement plan is adopted, and (2) the first day of the first plan year beginning after the expiration of collective bargaining agreements that were in effect when the plan’s endangered status was certified and that cover at least 75% of the plan’s active participants. 

by whimust daccumube avoplan’s must blesser oplan’s beginnimprovspecial applies percen70% ancertificFundin

as Hourelevanagreemdeadlinand (2) leaves critical 
30 

Provision Present Law House Bill 

 Requirements pending approval of 

plan and during funding improvement period.−The plan sponsor must take 

reasonable actions necessary to increase the plan’s funded status and avoid a funding deficiency; the level of plan contributions and the scope of plan coverage may not be reduced; benefits may not be increased unless the plan actuary certifies the requirements of the funding improvement plan will still be met; and distribution amounts must be restricted. Penalty for failure to adopt a funding 

improvement plan.−The plan is 

deemed to be in critical status and an ERISA penalty of up to $1,100 a day applies. (The present-law excise tax also applies if the plan has an accumulated funding deficiency.) Failure to satisfy funding 

improvement plan requirements.−No 

provision. 

Requir

plan anperiod

also allplan thif paid does noand procontribPenalty 

improv

as a faithe plato $1,1presentthe pladeficieFailure 

improv

plan fathe funend of period, appliesamounincreasmeet thimprovaccumu
31 

Provision Present Law House Bill 

4. Rules for plans in critical status No provision. Definition of critical status.−A plan 

may be in critical status based on a combination of various factors, such as its funding percentage, an actual or projected accumulated funding deficiency, and the value of plan assets and expected future employer contributions compared with expected benefit payments. A plan is also presumed in critical status if plan certification or endangered plan requirements are not met. Additional contributions during 

critical status.−Additional 

contributions (referred to as a “surcharge”) are required in the amount of 10% (5% for the first year of critical status) of the contributions each employer is otherwise required to make under the collective bargaining agreement. Employers must be provided with advance notice of surcharges. Surcharges cannot be the basis for benefit accruals under the plan and are generally disregarded in determining an employer’s withdrawal liability. Surcharges cease to apply as of the date a collective bargaining agreement is renegotiated to include (1) a schedule of benefits and contributions pursuant to the rehabilitation plan, or (2) otherwise collectively bargained changes. 

Definit

House period assets contribexpectpresumapply. Additio

critical 
32 

Provision Present Law House Bill 

 Reductions to previously earned 

benefits.−The plan trustees may 

reduce or eliminate certain benefits and benefit options (other than accrued benefits payable at normal retirement age and certain annuity options), except for participants and beneficiaries in pay status for at least a year before the plan enters critical status. Appropriate benefit reductions may be made based on the outcome of collective bargaining over schedules of contribution increases and benefit reductions to achieve the rehabilitation plan standards (including benefits of participants with respect to whom contributions are not currently required, based on the plan’s overall funding status and future prospects). Benefit reductions are disregarded in determining an employer’s withdrawal liability. Information to be provided to 

bargaining parties.−Within 90 days of 

certification or presumption of a plan’s critical status, the plan sponsor must provide the bargaining parties with options for contribution increases and benefit reductions to meet the requirements of the rehabilitation plan, including (1) an option based on reductions in future benefit accruals and no contribution increases, and (2) the contribution 

Reduct

benefitInformbargain

the adothe plabargainrevised structuthe reqplan. Tdesign(1) main futu
33 

Provision Present Law House Bill 

 increases that would still be needed 

after maximum permissible reductions in future benefit accruals. Additional options must be provided at the request of an employer employing, or an employee organization representing, at least 5% of the plan’s active participants. Rehabilitation plan.−The plan sponsor 

must adopt a rehabilitation plan within 240 days of certification of critical status. A rehabilitation plan generally must (1) provide for measures agreed to by the bargaining parties (such as increased contributions and reduced future benefit accruals), so that, over the rehabilitation period, the plan ceases to be in critical status, or (2) if the plan sponsor determines that, with all reasonable measures, the plan would not cease to be in critical status by the end of the rehabilitation period, reasonable measures to forestall insolvency. The rehabilitation plan must provide annual standards for meeting the applicable requirements. 

benefitincreasreductialso prinformRehabi

bill, exwithin certifycase of cannot the end backgr(3) annand (4) schedubargaincollectconsistthe reh
34 

Provision Present Law House Bill 

 Rehabilitation period.−The 

rehabilitation period is the 10-year period beginning on the earlier of (1) the date two years after the date the rehabilitation plan is adopted, and (2) the first day of the first plan year beginning after the expiration of collective bargaining agreements that were in effect when the plan’s critical status was certified or presumed and that cover at least 75% of the plan’s active participants. Rules for reductions in future benefit 

accrual rates.−Reductions must be 

applied to active participants in proportion to the extent contribution increases apply to their employer; a limit applies on the rate to which benefit accruals can be reduced; restored benefit accrual rates may not be reduced. Requirements pending approval and 

during rehabilitation plan.−The level 

of plan contributions and scope of plan coverage may not be reduced; benefits may not be increased unless the plan actuary certifies the requirements of the rehabilitation plan will still be met; and distribution amounts must be restricted. Contribution and benefit accrual schedules may be updated (but not more often than every 3 years.) 

Rehabi

House collectdetermcertifyperiod status, critical certifiehave an deficiefollowRules faccrua

benefit similar differefor cerreductidetermwithdrRequir

during 

House increasincreas(2) conupdateevery 3 sponsothe rehon barg500 em
35 

Provision Present Law House Bill 

 Failure of employer to make 

contributions.−The plan sponsor may 

treat an employer’s failure to make contributions required under the rehabilitation plan as a withdrawal or partial withdrawal from the pension plan. Penalty for failure to adopt a 

rehabilitation plan.−Future benefit 

accruals must be reduced to the level needed for the plan to leave critical status without increased contributions, and an ERISA penalty of up to $1,100 a day applies. (An excise tax also applies as described below.) 

Failure 

contrib

Penalty 

rehabil

as a faithe plato $1,1presentthe pladeficie

5. Application of excise tax to plans in critical status 

If a multiemployer plan has an accumulated funding deficiency for a year, an excise tax of 5% generally applies, increasing to 100% if contributions sufficient to eliminate the funding deficiency are not made within a certain period. 

For a plan in critical status, the present-law excise tax is replaced with (1) in the case of a failure to adopt a rehabilitation plan, an excise tax on the plan sponsor of the greater of (a) the excise tax otherwise applicable to any accumulated funding deficiency, or (b) $1,100 times the number of days in the period beginning with the plan’s entry into critical status and ending with the adoption of a rehabilitation plan, and (2) in the case of a failure to make a contribution required under a rehabilitation plan, an excise tax on 

For a prehabilcompliliable frequirerules, atax doeleave crehabilschedurehabilyears, appliesamoun
36 

Provision Present Law House Bill 

 the employer in the amount of the 

missed contribution. 

leave caccumu

6. Additional rules No provision. No provision. An exp

cause osponsoapply fnot covagreemmethod calculaapply fsection 

7. Effective date Plan years beginning after 2005. Plan ye

subject sunset multiembill. 

C. Measures to Forestall Insolvency of Multiemployer Plans (secs. 203 and 213 of the House bill and sec. 203 of the Senate amendment) 

If a multiemployer plan is in reorganization status, the plan sponsor must determine at least every 3 years whether the value of plan assets exceeds 3 times the amount of benefit payments for the year. If the value of plan assets is below the required amount, the plan sponsor must determine whether the plan will be insolvent in the next 3 years. 

If the value of plan assets is below the required amount, the plan sponsor must determine whether the plan will be insolvent in the next 5 years. If the plan is expected to be insolvent in the next 5 years, the plan sponsor must make an annual determination of whether the value of plan assets exceeds 3 times the amount of benefit payments for the year. 

Same a
37 

Provision Present Law House Bill 

 Effective date.−Determinations made 

in plan years beginning after December 31, 2005. 

Effecti

in plan DecemDecemapplicaprovisi

D. Withdrawal Liability Reforms (sec. 204 of the House bill and sec. 205 of the Senate amendment) 1. Repeal of limitation on withdrawal liability in certain cases 

On withdrawal from a multiemployer plan, an employer (and any member of its controlled group) is generally liable for its share of unfunded vested benefits under the plan (referred to as “withdrawal liability”), as determined by the plan sponsor. Limits apply to withdrawal liability in the case of (1) a bona fide sale of all or substantially all of the employer’s assets in an arm’s length transaction to an unrelated party, and (2) an insolvent employer undergoing liquidation or dissolution. 

The limits on withdrawal liability are repealed in the case of (1) a bona fide sale of all or substantially all of the employer’s assets in an arm’s length transaction to an unrelated party, and (2) an insolvent employer undergoing liquidation or dissolution. Effective date.−Sales occurring on or 

after January 1, 2006. 

The limrepealeemploydissoluEffecti

except sunset multiembill. 
38 

Provision Present Law House Bill 

2. Repeal of limitation of withdrawal liability to 20 annual payments 

An employer’s withdrawal liability is generally paid in annual amounts over the period of years necessary to amortize the liability. However, if the amortization period exceeds 20 years, the employer’s liability is generally limited to the first 20 annual payments. 

The provision limiting an employer’s liability to 20 annual payments is repealed. Effective date.−Withdrawals 

occurring on or after January 1, 2006. 

No pro

3. Withdrawal liability continues if work contracted out 

Withdrawal liability applies in the case of an employer’s partial withdrawal from a multiemployer plan, including a partial cessation of the employer’s obligation to contribute to the plan. A partial cessation occurs if the employer permanently ceases to have an obligation under 1 or more (but not all) collective bargaining agreements, but (1) continues to perform in the jurisdiction of the bargaining agreement work of the type for which contributions were previously required, or (2) transfers such work to another location. 

A partial cessation also occurs if the employer permanently ceases to have an obligation under 1 or more (but not all) collective bargaining agreements, but transfers work of the type for which contributions were previously required to another party or parties. Effective date.−Work transferred on 

or after date of enactment. 

A partiemployan obliall) colbut tranwhich requireor contEffecti

except sunset multiembill. 

4. Repeal of special rule for long and short haul trucking industry 

Withdrawal liability applies in the case of an employer’s complete withdrawal from a multiemployer plan, which generally occurs if the employer permanently ceases (1) operations covered under the plan, 

The additional requirements for a complete withdrawal in the case of a plan of employers primarily engaged in the long and short haul trucking industry, the household goods moving industry, or the public warehousing industry are repealed. 

No pro
39 

Provision Present Law House Bill 

or (2) to have an obligation to contribute to the plan. However, in addition, in the case of a plan of employers primarily engaged in the long and short haul trucking industry, the household goods moving industry, or the public warehousing industry, either the PBGC must determine the plan has suffered substantial damage to its contribution base as a result of such cessation, or the employer must fail to provide a surety bond or escrow for 50% of its withdrawal liability. 

Effective date.−Cessations of 

obligations to contribute and of covered operations occurring on or after January 1, 2006. 

5. Application of forgiveness rule to plans primarily covering employees in building and construction 

Multiemployer plans may generally provide that employers who meet certain requirements (generally limiting the period and amount for which the employer was obligated to contribution to the plan) are not subject to withdrawal liability. However, this rule does not apply to plans primarily covering employees in the building and construction industry. 

The rule allowing plans to exempt certain employers from withdrawal liability is extended to plans primarily covering employees in the building and construction industry. Effective date.−Withdrawals 

occurring on or after January 1, 2006. 

Same aEffecti

except sunset multiembill. 

E. Removal of Restrictions with respect to Procedures Applicable to Disputes Involving Withdrawal Liability (sec. 205 of the House bill) 

In determining withdrawal liability, a plan sponsor may disregard a transaction if it finds the principal purpose of the transaction was to avoid or evade withdrawal liability. 

If a determination of withdrawal liability is based in whole or in part on a plan sponsor’s finding that a principal purpose of a transaction occurring at least 5 years (2 years in the case of a small employer) before 

No pro
40 

Provision Present Law House Bill 

In general, an employer (or controlled group member) must make withdrawal liability payments even if contesting the plan sponsor’s determination. However, in the case of withdrawal liability based on certain disregarded transactions occurring before January 1, 1999, withdrawal liability payments do not have to be made before a final decision upholding the plan sponsor’s determination. 

the employer’s withdrawal from the plan was to avoid or evade withdrawal liability and the liability is contested, withdrawal liability payments do not have to be made before a final decision upholding the plan sponsor’s determination. An employer is a small employer if (immediately before the transaction) the employer (including all members of its controlled group) employs not more than 500 employees and is required to make plan contributions for not more than 250 employees. Effective date.−Notifications of 

withdrawal liability on or after date of enactment. 

F. Special Rule for Certain Benefits Funded under an Agreement Approved by the PBGC (sec. 204 of the Senate amendment) 

No provision. No provision. In the c

that is approv30, 200requirefunded exceptmultiemunder tadditioendangplan is agreemthereto
41 

Provision Present Law House Bill 

 Effecti

but subsunset multiembill. 

G. Sunset of Multiemployer Plan Funding Provisions (sec. 216 of the Senate amendment) 

No provision. No provision. Directs 

SecretaDirectiDecemstudy omade tfundinunder tthereon legislaProvidto the mand withe bill years b2014, alaw for fundinrehabilin effeccontinu
42 

Provision Present Law House Bill 

H. Transfer of Excess Pension Assets to Multiemployer Health Plans (sec. 222 of the Senate amendment) 

Defined benefit plans may provide retiree medical benefits through separate accounts under such plans. In the case of a single-employer plan, if the value of plan assets exceeds the greater of (1) accrued liability, or (2) 125% of current liability, and certain other requirements are met, qualified transfers of excess pension assets may be made to such separate accounts, but not to exceed the amount expected to be paid for retiree medical benefits in the year of the transfer. Such transfers may not be made after December 31, 2013. Qualified transfers of excess pension assets under multiemployer plans are not permitted. 

No provision. Allows 

pension multiemJanuary betweeemployindustrprimarbuildinEffecti

taxable Decem
43 

Provision Present Law House Bill 

III. OTHER PROVISIONS A. Interest Rate Assumption for Determination of Lump-Sum Distributions (sec. 302 of the House bill and sec. 301 of the Senate amendment) 

A lump-sum benefit under a plan is generally the sum of the present values of the payments a participant would be expected to receive under an annuity commencing at normal retirement age. In determining the minimum value of certain optional forms of benefit, such as a lump sum, present value is calculated using (1) the annual rate of interest on 30-year Treasury securities for the month before distribution (or such other period as provided by regulations), and (2) a mortality table based on the 1994 Group Annuity Reserving Table (“94 GAR”), projected through 2002. 

Changes the interest rate used in determining minimum value to 3 segment rates (0-5 years; more than 5 and up to 20 years; and more than 20 years), based on the corresponding portion of a yield curve based on interest rates on investment-grade corporate bonds for the month before distribution (or such other period as provided by regulations), with a phase-in over 2007-2010. Changes the mortality table used in determining minimum value to a mortality table based on RP-2000 Mortality Tables, projected to the year of distribution. Effective date.−Plan years beginning 

after December 31, 2006. 

Changdeterminterescurve (on highbusinemonthsexpectplan, w(Does used in Effecti

B. Interest Rate Assumption for Applying Benefit Limitations to Lump-Sum Distributions (sec. 303 of the House bill and sec. 302 of the Senate amendment) 

A dollar limit applies under the Code to the benefits provided under a defined benefit pension plan. In applying the dollar limit to forms of benefit subject to the minimum value rules, the interest rate used must be not less than the greater of (1) the annual interest rate on 30-year Treasury securities (or 5.5% for 2004 and 2005), or (2) the interest rate specified in the plan. 

In applying the dollar limit to forms of benefit subject to the minimum value rules, the interest rate used must be not less than the greatest of (1) 5.5%, (2) the interest rate that provides a benefit of not more than 105% of the benefit provided if the interest rates used in determining minimum value were used, or (3) the interest rate specified in the plan. 

In applof benevalue rbe not (1) 5.5specifi
44 

Provision Present Law House Bill 

Effective date.−Distributions made in 

years beginning after December 31, 2005. 

Effecti

C. Distributions During Working Retirement (sec. 304 of the House bill) 

For purposes of ERISA, a pension plan is generally a plan that provides retirement income to employees or results in a deferral of income extending to the termination of covered employment or beyond. A qualified pension plan under the Code generally may not provide for distributions before the attainment of normal retirement age (commonly age 65) to participants who have not separated from employment; however, under proposed regulations, pension plans may permit participants who are at least age 59-1/2 and have reduced their work schedule by at least 20 percent to receive a pro rata portion of their benefits. 

A pension plan does not fail to provide retirement income under ERISA or to be a qualified plan under the Code solely because the plan permits distributions to an employee who has attained age 62 and has not separated from employment at the time of the distribution. Effective date.−Distributions in plan 

years beginning after December 31, 2005. 

No pro

D. Other Amendments Relating to Prohibited Transactions (sec. 305 of the House bill and sec. 1341 of the Senate amendment) 1. Definition of amount involved The Code and ERISA prohibit certain 

transactions between a plan and certain persons with respect to the plan, such as a plan fiduciary, a person providing services to the plan, 

Revises the definition of “amount involved” under ERISA so that, in the case of a prohibited transaction that is a principal transaction involving securities or commodities, the amount 

No pro
45 

Provision Present Law House Bill 

or an employer with employees covered by the plan. The Code imposes an excise tax on the amount involved in a prohibited transaction at a rate of 15%, increasing to 100% if the transaction is not corrected. Under ERISA, a civil penalty of 5% of the amount involved in a prohibited transaction may be imposed; this civil penalty does not apply to plans qualified under the Code. Also under ERISA, a civil penalty of 20% of the applicable recovery amount is imposed for a violation of ERISA fiduciary duties, but the penalty is reduced by any amount of excise tax paid (or other civil penalty with respect to the transaction). For purposes of these rules, the “amount involved” generally means the greater of (1) the amount of money and the fair market value of the other property given, or (2) the amount of money and the fair market value of other property received by the plan. 

involved means only the amount received by the disqualified person in excess of the amount such person would have received in an arm's length transaction with an unrelated party. The 5% ERISA civil penalty may be imposed with respect to prohibited transactions involving qualified plans. 

2. Exemption for block trading Present law does not provide a 

prohibited transaction exemption for block trades. 

Provides ERISA and Code prohibited transaction exemptions (except for certain fiduciaries providing investment advice) for a purchase or sale of securities involving a block trade if (1) the total interests of all plans of the same sponsor do not 

Same aapply twith cothe assalso retransacan arm
46 

Provision Present Law House Bill 

 exceed 10% of the block trade and (2) 

the terms of the transactions are at least as favorable to the plan as in an arm’s length transaction. A block trade is defined as any trade that will be allocated across 2 or more client accounts of a fiduciary. 

unrelattrade ashares least $2across accoun

3. Bonding relief ERISA generally requires a plan 

fiduciary and any person handling plan assets to be bonded, generally in an amount between $1,000 and $500,000. 

Provides an exception to the ERISA bonding requirement for certain persons (and certain affiliates) subject to regulation under the Securities Exchange Act or the Investment Advisors Act. 

Providbondinbrokerthe Secsubject of certaorganiz

4. Exemption for electronic communication network or financial markets trading system 

Present law does not provide a prohibited transaction exemption for transactions made through an electronic communication network or financial markets trading system, but such transactions may be permitted if the parties are not known to each other (a “blind” transaction). 

Provides an ERISA prohibited transaction exemption for transactions involving the purchase and sale of securities, or other property as provided in regulations, executed through certain trading systems regulated by a Federal agency or other government agency as permitted by the Secretary of Labor that do not take into account the identities of the parties to a transaction, if certain requirements are met. 

Same aprovidapplies exempsystem regulatthe Secregulat
47 

Provision Present Law House Bill 

5. Conforming ERISA’s prohibited transaction provision to the Federal Employee Retirement System Act (“FERSA”) 

Present law does not provide a general prohibited transaction exemption for transactions between plans and service providers based on whether adequate consideration is provided. 

Provides an ERISA prohibited transaction exemption for certain transactions (such as sales of property, loans, and transfers or use of plan assets) between a plan and a service provider, if made for adequate consideration as defined in the provision. 

No pro

6. Relief for foreign exchange transactions 

Present law does not provide a prohibited transaction exemption for foreign exchange transactions. 

Provides an ERISA prohibited transaction exemption for foreign exchange transactions between a bank or broker-dealer and a plan in connection with the sale or purchase of securities if the terms of the transaction are at least as favorable to the plan as in an arm’s length transaction between unrelated parties (or the terms in comparable arm’s length transactions between the bank or broker-dealer and an unrelated party) and the exchange rate is within a certain range. 

Same aprovidalso to the holor brokinvestminvestmtransac

7. Definition of plan asset vehicle Under ERISA regulations, applicable 

also for purposes of the prohibited transaction rules of the Code, when a plan holds a non-publicly-traded equity interest in an entity, the assets of the entity may be considered plan assets in certain circumstances unless 

Amends ERISA to define plan assets such that the assets of an entity are not treated as plan assets if less than 50% of the value of each class of equity interest in the entity (disregarding certain interests) is held by benefit plan investors, which is 

No pro
48 

Provision Present Law House Bill 

equity participation in the entity by benefit plan inventors is not significant. In general, such equity participation is significant if 25% or more of the value of any class of equity interest (disregarding certain interests) is held by benefit plan investors, defined as (1) employersponsored plans (including those exempt from ERISA, such as governmental plans), (2) other arrangements, such as IRAs, that are subject only to the prohibited transaction rules of the Code, and (3) any entity whose assets are plan assets by reason of a plan’s investment in the entity. 

defined as employer-sponsored plans 

subject to ERISA and plans subject to the prohibited transaction rules of the Code. 

8. Cross trades study No provision. No provision. Directs 

consulWorkinto condprohibactive Presidewithin enactm

9. GAO study No provision. No provision. Directs 

report Ways athe WoComm
49 

Provision Present Law House Bill 

 Educat

the effprovisireport date of is due enactm

10. Effective date Generally the date of enactment, 

except the provision relating to an exemption for electronic communication network transactions is effective 30 days after date of enactment. 

Transaenactm

E. Correction Period for Certain Transactions Involving Securities and Commodities (sec. 306 of the House bill and sec. 1341(e) of the Senate Amendment) 

For purposes of the prohibited transaction rules of the Code and ERISA, a transaction involving the sale of securities is considered to occur when the transaction is settled (that is, actual change in ownership of the securities). Present law does not provide a prohibited transaction exemption that is based solely on correction of the transaction. Under current practice, securities transactions are commonly settled 3 days after the agreement to sell is made, which provides time to correct mistakes prior to the transaction actually occurring. 

Amends ERISA and the Code to provide a prohibited transaction exemption for a transaction in connection with the acquisition, holding, or disposition of any security or commodity (subject to certain exceptions) if the transaction is corrected within a certain period, generally within 14 days of the date the fiduciary or other person discovers, or reasonably should have discovered, transaction was a prohibited transaction. 

Same ais requtransac
50 

Provision Present Law House Bill 

 Effective date.–Any transaction that a 

fiduciary or other person discovers, or reasonably should have discovered, after the date of enactment constitutes a prohibited transaction. 

Effecti

date of 

F. Recovery by Reimbursement or Subrogation with Respect to Provided Benefits (sec. 307 of the House bill) 

ERISA section 502(a)(3) provides a civil cause of action by a participant, beneficiary, or fiduciary to obtain appropriate equitable relief to enforce the terms of the plan. In some cases, the terms of a plan may require a plan beneficiary to reimburse the plan for an amount paid by the plan for medical care, if the amount is recovered from a third party. The Supreme Court has held that an action for equitable relief does not include an action to enforce such plan terms when the amount recovered from a third party is not held by the beneficiary. Great-West Life & Annuity Insurance Company v. Knudson, 534 U.S. 204 (2002). The ability of a plan to obtain reimbursement when the beneficiary holds the recovered amount is currently before the Supreme Court. Mid Atlantic Medical Services, LLC v. Sereboff, 407 F.3d 212 (4th Cir. 2005), cert. granted, 74 U.S.L.W. 3321 (U.S. Nov. 28, 2005) (No. 05-260). 

Provides that an action under ERISA section 502(a)(3) includes an action by a fiduciary for recovery of amounts on behalf of the plan enforcing plan terms that provide a right of recovery by reimbursement or subrogation with respect to benefits provided to or for a participant or beneficiary. Effective date.−January 1, 2006. 

No pro
51 

Provision Present Law House Bill 

G. Exercise of Control Over Plan Assets in Connection with Qualified Changes in Investment Options and Inapplicability of Relief from Fiduciary Liability During Suspension of Ability of Participant or Beneficiary to Direct Investments (sec. 308 of the House bill and sec. 706 of the Senate amendment) 

Defined contribution plans may permit participants to make investment decisions with respect to their accounts. ERISA fiduciary liability does not apply to investment decisions made by plan participants if participants exercise control over the investment of their individual accounts, as determined under ERISA regulations. In that case, a fiduciary may be responsible for the investment alternatives made available, but not for the specific investment decisions made by participants. The plan administrator of a defined contribution plan must provide participants with advance notice of a blackout period, which includes a period during which participants’ ability to direct investments is suspended for more than 3 consecutive business days. 

Blackout periods.−No provision. 

Changes in investment options.−A 

participant is not treated as not exercising control over the assets in his or her account if, in connection with a change in investment options offered under the plan, a participant’s account is reallocated to new investment options that have reasonably similar characteristics to the previous investment options chosen by the participant, provided 

Blacko

fiduciaexercisdoes nblackoparticipinvestma fiducresponimplemnot liabthe blaparticipinvestmperiodenactmconsulTreasuregulatincludifiduciablackodirect iChang

the casconnecinvestmplan, a exercishis or hperiod notice optionsaccoun
52 

Provision Present Law House Bill 

that (1) the plan administrator provides the participant advance notice and information about the change, and (2) the participant has not provided affirmative investment instructions contrary to the change. Effective date.−Changes in 

investment options taking effect on or after January 1, 2006. 

options particip(2) in tand if finvestmmanneEffecti

after Ddelayebargain

H. Clarification of Fiduciary Rules (sec. 309 of the House bill and sec. 1110 of the Senate amendment) 

ERISA imposes standards on the conduct of plan fiduciaries. Fiduciaries are personally liable for any losses to the plan due to a violation of fiduciary standards. An ERISA interpretive bulletin requires a fiduciary choosing an annuity provider for purposes of distributions from a plan (whether on separation or retirement of a participant or on termination of the plan) to take steps calculated to obtain the safest available annuity, based on the annuity provider’s claims paying ability and creditworthiness, unless under the circumstances it would be in the interest of participants to do otherwise. 

Directs the Secretary of Labor to issue final regulations within 1 year of enactment, clarifying that the selection of an annuity contract as an optional form of distribution from a defined contribution plan is (1) not subject to the safest available annuity requirement under the ERISA interpretive bulletin, and (2) subject to all otherwise applicable fiduciary standards. Effective date.−Date of enactment. 

Same aEffecti
53 

Provision Present Law House Bill 

I. GAO Pension Funding Report (sec. 310 of the House bill) 

No provision. Requires the Comptroller General to 

transmit a pension funding report to Congress not later than 1 year after date of enactment, including an analysis of (1) requiring a pension plan to insure a portion of the plan’s total investments, (2) requiring a pension plan to adhere to uniform solvency standards set by the PBGC, similar to those applied at the State level to the insurance industry, and (3) amortizing a single-employer defined benefit pension plan’s shortfall amortization base over various periods not exceeding 7 years. Effective date.−Date of enactment. 

No pro
54 

Provision Present Law House Bill 

IV. IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS A. Increases in PBGC Premiums (sec. 401 of the House bill and secs. 121 and 401 of the Senate amendment) 1. Flat-rate premiums Single-employer plans are subject to 

an annual flat-rate premium of $19 per participant for plan years beginning before 2006. Under the Deficit Reduction Act of 2005, Pub. L. No. 109-171, enacted after passage of H.R. 2830 and S.1783, for plan years beginning after 2005, the flatrate premium is increased to $30, with indexing after 2006 based on increases in average wages. 

In general, the flat-rate premium for single-employer plans is $21.20 in 2006, $23.40 in 2007, $25.60 in 2008, $27.80 in 2009 and, in 2010 and thereafter, $30 as adjusted after 2006 for increases in average wages. For plans with a funding target percentage of less than 80% for the preceding year, the premium is $22.67 in 2006, $26.33 in 2007 and, in 2008 and thereafter, $30 as adjusted after 2006 for increases in average wages. Effective date.−Plan years beginning 

after 2005. 

The flawith inincreasBeginnyears tto the Crecommflat-ratEffecti

2. Variable-rate premiums The variable-rate premium is $9 per 

$1,000 of unfunded vested benefits. A specified interest rate is used to determine the amount of unfunded vested benefits. For years beginning in 2004 and 2005, the specified rate is 85 percent of the long-term corporate bond rate. 

For 2006, the interest rate used in 2004 and 2005 continues to apply. Beginning in 2007, the determination of unfunded vested benefits is modified to reflect the changes to the funding rules under the bill. 

For 20Beginnpremiubenefitbenefitunfundreflect rules u
55 

Provision Present Law House Bill 

 Effective date.−Plan years beginning 

after 2005. 

Effecti

3. Termination premiums Under the Deficit Reduction Act of 

2005 Pub. L. No. 109-171, enacted after passage of H.R. 2830 and S.1783, a new premium generally applies in the case of certain plan terminations occurring after 2005 and before 2011. A premium of $1,250 per participant is imposed generally for the year of the termination and each of the following 2 years. The premium applies in the case of a plan termination by the PBGC or a distress termination due to reorganization in bankruptcy, the inability of the employer to pay its debts when due, or a determination that a termination is necessary to avoid unreasonably burdensome pension costs caused solely by a decline in the workforce. In the case of a termination due to reorganization, the liability for the premium does not arise until the employer is discharged from the reorganization proceeding. The premium does not apply with respect to a plan terminated during bankruptcy reorganization proceedings pursuant to a bankruptcy filing before October 18, 2005. 

In the case of certain plan terminations, a premium of $1,250 per participant is imposed generally for the year of the termination and each of the following 2 years. The premium applies in the case of a plan termination by the PBGC or a distress termination due to reorganization in bankruptcy, the inability of the employer to pay its debts when due, or a determination that a termination is necessary to avoid unreasonably burdensome pension costs caused solely by a decline in the workforce. In the case of a termination due to reorganization, the liability for the premium does not arise until the employer is discharged from the reorganization proceeding. Effective date.−Reorganization 

proceedings begun after October 26, 2005. 

No pro
56 

Provision Present Law House Bill 

B. Alternative Funding Agreements (sec. 402 of the Senate amendment) 

The IRS may grant a funding waiver with respect to a plan if it determines that certain requirements are met. In the case of a single-employer plan, no more than 3 funding waivers may be granted for any 15 consecutive years. 

No provision. The PB

Treasualternaplan sprequiretermindistreswithin other pand the distreswithin Secretasuch an requirebest inbeneficadditioperiod Restricmaintesubject agreememploysecuritEffecti
57 

Provision Present Law House Bill 

C. Special Funding Rules for Plans Maintained by Commercial Airlines (sec. 403 of the Senate amendment) 

Defined benefit plans maintained by commercial airlines are subject to the minimum funding rules. The minimum required contribution is the amount needed to balance cumulative charges (e.g., for normal cost and to amortize past service liabilities, losses, and funding waivers) and credits (e.g., to amortize decreases in past service liabilities and gains) to the funding standard account. Amortization periods for singleemployer plans are generally 5 or 10 years (30 years in the case of past service liabilities). In addition, for single-employer plans covering more than 100 participants and, in general, having a funded current liability percentage of less than 90%, an additional deficit reduction contribution (“DRC”) may be required, consisting of the sum of: (1) the expected increase in current liability for benefits accruing in the current year; and (2) a percentage of unfunded current liability, ranging from 18% to 30%, depending on the funded status of the plan. Special statutory interest rate and mortality assumptions apply in determining current liability. 

No provision. In the c

maintapassenotherwemployrequireneeded liability in geneno addbenefit accruaimmedusing cFor thidetermfundininteres(rather Under certain enactmis detersingle (1) allobetweecontribIf a plaelectioeffect, year foeffectivdate fothe amthe PB
58 

Provision Present Law House Bill 

Within limits, the PBGC guarantees benefits if a plan terminates without sufficient assets to pay all benefits due under the plan. The amount of benefits guaranteed by the PBGC is determined as of the date of plan termination. In applying the minimum coverage rules to a plan maintained pursuant to a collective bargaining agreement, participants who are not covered by the collective bargaining agreement are treated as covered under a separate plan. 

 plan th

benefit fundedinitiate respect electioalternamake pand, if ensure agreemCertain as coveagreemminimuEffecti

ending 

D. Limitation on PBGC Guarantee of Shutdown and Other Benefits (sec. 404 of the Senate amendment) 

In the case of a plan amendment that increases benefits and has been in effect for less than 5 years before plan termination, the amount of benefit increase covered by the PBGC guarantee is phased in by 20 percent per year. 

No provision. (However, under secs. 103 and 113 of the House bill, plant shutdown and other unpredictable contingent event benefits may not be provided if a plan is less than 80% funded, or would be less than 80% funded taking into account the benefits, unless the employer contributes a certain amount in addition to any required contribution.) 

If a benplant sany evany agreceipt compedeath oof the Pplan amdate thEffecti

payabloccurri
59 

Provision Present Law House Bill 

E. Rules Relating to Bankruptcy of the Employer (sec. 405 of the Senate amendment) 

The amount of guaranteed benefits payable by the PBGC (including application of the 5-year phase-in for plan amendments increasing benefits and the priority for allocating assets to six categories of benefits) is determined as of the date of plan termination. 

No provision. If a pla

sponsoaspects as the gapplicawell as assets tbenefitthe spoEffecti

proceedate th

F. Flat-Rate Premiums for New Plans of Small Employers (sec. 406 of the Senate amendment) 

New plans of small employers are subject to the same flat-rate premium (described above) as other plans. 

No provision. The fla

of empemployeach oeffect. Effecti

after 2

G. Variable-Rate Premiums for Small and New Plans (sec. 407 of the Senate amendment) 

Small and new plans are subject to the same variable-rate premium (described above) as other plans. 

No provision. The oth

premiusix-yeabenefit first yethereaf
60 

Provision Present Law House Bill 

 The pe

premiu25 or f$5 mulparticipEffecti

plans ieffectivfor smabeginn

H. Authorization for PBGC to Pay Interest on Premium Overpayment Refunds (sec. 408 of the Senate amendment) 

The PBGC charges interest on underpayments of premiums, but is not authorized to pay interest on overpayments. 

No provision. PBGC 

overpacalculainteresEffecti

beginnenactm

I. Rules for Substantial Owner Benefits in Terminated Plans (sec. 409 of the Senate amendment) 

In general, PBGC guaranteed benefits are phased in over 5 years from the date a plan (or plan amendment) is adopted. In the case of someone owning more than a 10-percent ownership interest in the employer (a “substantial owner”), the guarantee is phased in over 30 years. Special asset allocation rules also apply to substantial owners. 

No provision. The 5-

benefitwith leinteresowner interesphase imajorimore th5 years 
61 

Provision Present Law House Bill 

 genera

apply tnot maEffecti

with reprovidby the 

J. Acceleration of PBGC Computation of Benefits Attributable to Recoveries from Employers (sec. 410 of the Senate amendment) 

If an underfunded plan terminates, the employer is liable to the PBGC for unfunded liabilities and contributions owed to the plan. Any recoveries from employers for unfunded liabilities are allocated partly to the PBGC (to help cover guaranteed benefits) and to plan participants. The amount allocated to participants is based on a recovery ratio determined using PGBC actual recovery experience from plans terminating within the 5-fiscal year period before the year of the notice of intent to terminate. In the case of a very large plan (a plan for which participant losses exceed $20 million), actual recovery amounts for the plan are used. Amounts recovered for contributions owed to the plan are determined on a plan-specific basis (rather than on historical average recoveries) and are allocated to plan benefits in the same manner as other assets. 

No provision. The tim

recovemodifistarts 2 ratio is amounowed tPBGCsame fEffecti

which proceePBGC days af
62 

Provision Present Law House Bill 

K. Treatment of Certain Plans Where There is a Cessation or Change in Membership of a Controlled Group (sec. 411 of the Senate amendment) 

Generally, if a defined benefit plan is terminated, the employer must make additional contributions in the amount needed to assure that plan assets are sufficient to cover benefit liabilities under the plan. Benefit liabilities for this purpose are determined as the present value of all benefits due under the plan (referred to as “termination liability”). This present value is determined using interest and mortality assumptions prescribed by the PBGC. 

No provision. Subjec

statutofundindetermfully fuemploygroup mtransacand whterminEffecti

series oafter en

L. Effect of Title (sec. 412 of the Senate amendment) 

The Deficit Reduction Act of 2005 Pub. L. No. 109-171, enacted after passage of H.R. 2830 and S.1783, increases flat-rate premiums for single-employer and multiemployer plans for plan years beginning after 2005 and creates a new premium in the case of certain plan terminations after 2005. 

No provision. Provid

outlays PBGC treated decreato the Punder tfor fiscEffecti
63 

Provision Present Law House Bill 

M. Age Requirement for Airline Pilots (sec. 413 of the Senate amendment) 

The amount of benefits guaranteed by the PBGC under a single employer plan and the overall benefits guaranteed in the event an individual receives benefits from the PBGC due to more than one plan are limited to the actuarial equivalent of a life annuity beginning at age 65. 

No provision. If, at th

FAA rto sepaage 65benefitsubstitu(currenEffecti

or after 
64 

Provision Present Law House Bill 

V. DISCLOSURE A. Defined Benefit Plan Funding (or “90-day”) Notices (sec. 501 of the House bill and sec. 501 of the Senate amendment) 

The plan administrator of a multiemployer defined benefit pension plan must provide an annual funding notice to participants, certain beneficiaries, labor organizations representing such participants or beneficiaries, employers having an obligation to contribute under the plan, and the PBGC. The notice must include certain information, including information relating to the funded status of the plan. Notice must be provided within 9 months after the end of the plan year or, if an extension to file the plan’s annual report applies, within 2 months after the end of the extension. The administrator of a single-employer plan subject to PBGC variable-rate premiums must provide participants with notice of the plan’s funded status and the PBGC guarantee limit if a plan terminates on an underfunded basis. 

Extends the funding notice requirement to single-employer defined benefit pension plans; requires additional information to be provided by each type of plan, including the ratio of inactive to active participants and the projected funded status for the year in which the notice is provided; requires notice to be provided no later than 90 days after the end of the plan year; and requires the Secretary of Labor to publish a model notice no later than 180 days after date of enactment. Effective date.−Plan years beginning 

after December 31, 2005. 

Same a(1) coninformby each status fstatus dfair mainteresincreasbenefit multiemrelating status)for plaparticipinformthe notwith resubject premiunotice Effecti
65 

Provision Present Law House Bill 

B. Additional Disclosure Requirements (sec. 502 of the House bill and secs. 502-504 of the Senate amendment) 

Annual report.−The plan 

administrator of a pension plan generally must file an annual report including certain information about the plan. The annual report is generally due within 210 days after the end of the plan year; under regulations, an automatic extension of up to 2-1/2 months (to approximately 285 days after the end of the plan year) may apply. No further extension is available in the case of hardship. Summary annual report.−A plan 

administrator must provide a summary of the annual report to participants within 2 months after the due date of the annual report. 

Annual report.−Requires certain 

additional information to be provided in the annual report of a defined benefit pension plan, depending on whether it is a single-employer or multiemployer plans and requires certain information to be provided in electronic format for Internet display by the Secretary of Labor. Allows the Secretary of Labor to extend the due date for the annual report required with respect to a pension plan beyond 285 days after the end of the plan year only on a case-by-case basis and only in the case of hardship. Summary annual report.−Requires 

certain additional information to be included in the summary annual report and requires the summary annual report to be provided within 15 business days of the due date of the annual report. Multiemployer plan information on 

request.−Requires actuarial and 

financial reports prepared for a multiemployer plan to be provided to participants and contributing employers on request. Requires the plan administrator to provide withdrawal liability and certain other information to a contributing employer on request. 

Annuaexcept additioprovidSumm

summawithin annual to be mthe sumprovidMultie

request
66 

Provision Present Law House Bill 

PBGC multiemployer plan study.–

The PBGC is required to conduct a study every 5 years relating to multiemployer plan premiums and guarantee levels and report to the House Committees on Ways and Means and Education and the Workforce and the Senate Committees on Finance and Health, Education, Labor, and Pensions. 

New multiemployer plan notice.−No 

provision. Effective date.−Plan years beginning 

after December 31, 2005. 

New m

Requirbe provand emrepresedays ofor the PBGC 

Requirdate of years ton the multiemEffecti

except beginnin the crequirereport 

C. Section 4010 Filings with the PBGC (sec. 503 of the House bill and sec. 505 of the Senate amendment) 

Certain controlled group financial information and plan actuarial information must be reported annually to the PBGC (referred to as “section 4010 reporting”) if, in the aggregate, unfunded vested benefits under single-employer defined benefit 

Requires section 4010 reporting if, instead of unfunded vested benefits exceeding $50 million, (1) in the aggregate, single-employer defined benefit pension plans maintained by controlled group members are less than 60 percent funded, or (2) in the aggregate, plans maintained by 

Same apresenunfundmillionsingle-pensiocontrolthan 90 
67 

Provision Present Law House Bill 

pension plans maintained by controlled group members exceed $50 million (or certain other circumstances apply). Section 4010 information provided to the PBGC generally may not be disclosed to the public, and it is excepted from disclosure under the Freedom of Information Act. 

controlled group members are less than 75 percent funded and the plan sponsor is in an industry with respect to which the PBGC determines that there is substantial unemployment or underemployment and the sales and profits are depressed or declining. Requires notice of section 4010 reporting and certain plan information to be provided to plan participants and to the House Committees on Ways and Means and Education and the Workforce and the Senate Committees on Finance and Health, Education, Labor, and Pensions. (The prohibition on public disclosure continues to apply.) Effective date.−Plan years beginning 

after December 31, 2006. 

investmeither tby the additioand (3) informparticipsummaprovidto Houand the CommLabor, Effecti

D. Disclosure of Termination Information to Plan Participants (sec. 506 of the Senate amendment) 

Distress terminations.−A singleemployer defined benefit pension 

plan with assets insufficient to provide all the benefits due under the plan may be terminated by the employer only if certain criteria relating to financial distress are met. The plan administrator must provide 60 days advance notice of a proposed distress termination to affected parties (i.e., participants, any employee organization representing participants,

No provision. Distres

requirecertain providneed foprovidemployparticipreques
68 

Provision Present Law House Bill 

and the PBGC). In addition, certain information relating to the need for a distress termination must be provided to the PBGC. Involuntary terminations.−The PBGC 

may initiate termination of a singleemployer defined benefit pension plan in certain circumstances after issuing notice thereof to the plan administrator. 

Involu

requireadminiand anany infconfidethe PBinvolunPBGC employthe adman invoEffecti

with reto termdetermterminenactm

E. Benefit Suspension Notice (sec. 507 of the Senate amendment) 

Payment of benefits to a participant may be suspended if (1) a participant in pay status returns to employment with the employer maintaining the plan, or (2) a participant who attains normal retirement age continues in employment. Suspension of benefits is permitted only if a notice including 

No provision. Directs 

modify regulatcase of returns providor duriperiod 
69 

Provision Present Law House Bill 

certain information is provided to the participant. Under DOL regulations, the notice is to be provided during the first calendar month or payroll period in which benefits are suspended. The notice must include the relevant plan provisions. 

 suspen

notice summa(3) the relevanEffecti

the rulbeginn

F. Study and Report by GAO (sec. 508 of the Senate amendment) 

No provision. No provision. Directs 

conducCongreenactmenforceother Fpension Effecti
70 

Provision Present Law House Bill 

VI. INVESTMENT ADVICE (secs. 601-602 of the House bill and sec. 802 Of The Senate amendment) 

The Code and ERISA prohibit certain transactions between a plan and disqualified persons with respect to the plan, such as a plan fiduciary, a person providing services to the plan, or an employer with employees covered by the plan. Certain transactions are specifically exempted from prohibited transaction treatment. ERISA imposes standards on the conduct of plan fiduciaries, including persons who make investment decisions with respect to plan assets. Fiduciaries are personally liable for any losses to the plan due to a violation of fiduciary standards. An individual account plan may permit participants to make investment decisions with respect to their accounts. ERISA fiduciary liability does not apply to investment decisions made by plan participants if participants control the investment of their individual accounts, as determined under ERISA regulations. In that case, a plan fiduciary may be responsible for the investment alternatives made available, but not for the specific investment decisions made by participants. 

Prohibited transaction exemption.−In 

the case of an individual account plan under which participants direct the investment of assets, exemptions from prohibited transaction treatment apply under ERISA and the Code in connection with (1) investment advice provided to the plan or a participant by a fiduciary adviser, (2) investments made pursuant to that advice, and (3) fees received for the advice or investments, if certain disclosures are made and other requirements are met. Fiduciary rules.−An employer or 

fiduciary under ERISA is not subject to fiduciary liability solely because of investment advice provided by a fiduciary adviser that satisfies the requirements for the prohibited transaction exemption. The provision does not exempt a plan fiduciary from fiduciary responsibility for the prudent selection and periodic review of a fiduciary adviser. Plan assets may be used to pay reasonable expenses for investment advice provided by a fiduciary adviser. 

Prohib

provisiFiduciaindividparticipof asseare proemploysatisfy to the pperiodiinvestminvestmThe plnot liabrespect to a painvestminvestmfiduciaof inve
71 

Provision Present Law House Bill 

 Effective date.−Advice provided on 

or after January 1, 2006. 

Effecti

design
72 

Provision Present Law House Bill 

VII. BENEFIT ACCRUAL STANDARDS; CASH BALANCE AND OTHER HYBRID DEFINED BENEFIT PLANS A. Prohibition on the Reduction in the Rate of Benefit Accrual on Account of Age (sec. 701(a)(1) and (b)(1) of the House bill and sec. 601(a) of the Senate amendment) 

Under the Code, ERISA, and ADEA, a defined benefit plan may not provide that benefit accruals cease or that the rate of benefit accruals is reduced because of the attainment of any age (this requirement is referred to as the prohibition on age discrimination). This requirement is not violated merely because the plan imposes (without regard to age) a limitation on the amount of benefits that the plan provides or a limitation on the number of years of service or participation which are taken into account under the plan. Courts have made various interpretations of these rules as applied to particular plans. 

In general.−Amends ERISA and the 

Code to provide a method, applicable to all defined benefit plans, of satisfying the prohibition on age discrimination. Determination based on entire 

accrued benefit.−A defined benefit 

plan does not violate the prohibition on age discrimination if a participant’s entire accrued benefit, determined as of any date, would be equal to or greater than that of any similarly situated, younger individual. 

In gene

and the balancRules f

qualifiviolate merely expectinteresfor a ydoes ncredit oreason of any A cash benefit benefit the balaccumuand intterm caplans wby the 
73 

Provision Present Law House Bill 

 For this purpose, the subsidized 

portion of any early retirement benefit, including any early retirement subsidy, that is fully or partially included or reflected in an employee’s opening balance or other transition benefits, is disregarded. The entire accrued benefit may be expressed as the present value of accrued benefits projected to normal retirement age, a hypothetical account balance, or the current value of the accumulated percentage of the employee’s final average pay. The provision is intended to apply to hybrid plans, including pension equity plans. Plans do not violate the prohibition on age discrimination solely because the plan provides: • that benefits are offset by all or a 

portion (including an estimate) of Social Security or Railroad Retirement benefits; benefits under another qualified plan of the same employer; or benefits under a retirement program for officers or employees of the Federal or State government; or such other arrangements as the Treasury Secretary may provide; 

• for permitted disparity in 

contributions or benefits; or 

• for indexing of benefits. 

A qualcertain vesting A qualprovidrapidly A qualprovidequivathan thrate angreater the rate investeinvestmdetermSecretaIf a qua variainteresaccrueinteresthe last 
74 

Provision Present Law House Bill 

B. Rules for Converted Plans (secs. 601(b) and 602 of the Senate amendment) 

Under the Code and ERISA, a qualified retirement plan may not decrease the accrued benefit of a plan participant (referred to as the “anticutback” rule). For purposes of the anticutback rule, an amendment is also treated as reducing an accrued benefit if, with respect to benefits accrued before the amendment is adopted, the amendment has the effect of either (1) eliminating or reducing an early retirement benefit or a retirement-type subsidy, or (2) except as provided by Treasury regulations, eliminating an optional form of benefit. 

No special rules. In gene

into a cviolatinanticutconverbalancdetermmethodparticipmethodSecretaspecifiuniformrules abenefitIf the pan elecand, if participa signifuture benefit determmade tgreatesNo we

accruesum of (a) yeabefore of servamend
75 

Provision Present Law House Bill 

 must m

requirefor all after cobenefit formulover agservice is deterformulParticip

providbenefit formulparticipconverOther m

Treasu

benefit regulatcredits balancto the oMerger

Secretamonths prescribalancrespect affectesimilar 
76 

Provision Present Law House Bill 

 Adjust

benefitbenefit not incbalancparticiphas meother rsubsidyNotice 

be giverelating benefit 

C. Calculating Minimum LumpSum Distributions Under Hybrid Plans (secs. 701(a)(2) and 701(b)(2) of the House bill and sec. 601(c) of the Senate amendment) 

Proposed guidance issued by the IRS in 1996 and some case law provide that a lump-sum distribution under a cash balance plan cannot be less than the present value of the benefit payable at normal retirement age, determined using the statutory interest and mortality assumptions. Final regulations have not been issued. 

A defined benefit pension plan under which the accrued benefit payable upon distribution is expressed as the balance of a hypothetical account maintained for the participant is not treated as violating the minimum present value rules solely because of the amount actually made available for distribution under the plan, if the applicable interest rate that would be used under the terms of the plan to project the amount of the participant's account balance to normal retirement age is not greater than a market rate of return. The Secretary of the Treasury is given regulatory authority relating to: (1) the calculation of a market rate of return for this purpose; and 

Except the casplan (avalue oto the baccumuequivavalue d
77 

Provision Present Law House Bill 

 (2) permissible methods of crediting 

interest to the account (including variable interest rates) resulting in effective rates of return not greater than a market rate of return. 

D. Effective Date Periods beginning on or after June 29, 

2005. Legislative history provides that no inference is intended that hybrid plans are illegal under present law. 

The prof the acalculaapply tIn the cJuly 31vesting years b2006, uthe appfor any before Decemrelating plan ameffect aa plan amendamendtaking The stais intenof cash prior to 
78 

Provision Present Law House Bill 

VIII. DEDUCTION LIMITATIONS A. Deduction Limits for Contributions to Single-Employer Defined Benefit Plans (sec. 801 of the House bill and secs. 114 and 122 of the Senate amendment) 

An employer generally may deduct the greater of (1) the required contribution under the funding rules, and (2) the sum of the plan’s normal cost and the amount needed to amortize certain unfunded liabilities over 10 years, but not more than the full funding limitation. In no case is the limit less than the amount of the plan’s unfunded current liability (i.e., the excess of the plan’s current liability over the value of plan assets). Future increases in the compensation and benefit limits applicable to qualified retirement plans may not be taken into account in applying the deduction limits. 

Rule for 2006.−No provision. 

Years after 2006.−An employer 

generally may deduct the greater of (1) the excess (if any) of the sum of (a) 150% of the plan’s funding target and (b) the plan’s target normal cost, over the value of plan assets, and (2) the excess (if any) of the sum of (a) the plan’s at-risk funding target and (b) the plan’s at-risk target normal cost (regardless of whether the plan is in at-risk status), over the value of plan assets. Effective date.−Contributions for 

taxable years beginning after December 31, 2006. 

Rule fo

except the exccurrent assets. Years 

genera(1) the (a) the plan’s cushioplan ascontribThe amexcess plan’s the pla(regardat-risk assets. sum of target, the funcertain benefittaken iEffecti

taxable Decem
79 

Provision Present Law House Bill 

B. Deduction Limits for Contributions to Multiemployer Defined Benefit Plans (sec. 801 of the House bill and secs. 122 and 221 of the Senate amendment) 

An employer generally may deduct the greater of (1) the required contribution under the funding rules, and (2) the sum of the plan’s normal cost and the amount needed to amortize certain unfunded liabilities over 10 years, but not more than the full funding limitation. In no case is the limit less than the amount of the plan’s unfunded current liability (i.e., the excess of the plan’s current liability over the value of plan assets). 

Same as present law, except in no case is the limit less than the excess of 140% of the plan’s current liability over the value of plan assets. Effective date.−Contributions for 

taxable years beginning after December 31, 2006. 

Same acontribbeginnapplies 130% oover thEffecti

taxable Decem

C. Overall Limit on Contributions to Defined Benefit and Defined Contribution Plans (secs. 801-802 of the House bill and secs. 114, 123 and 221 of the Senate amendment) 

If an employer maintains a defined benefit plan and a defined contribution plan covering the same participants, an overall limit applies to the contributions to all such plans. Under the overall limit, the employer generally may deduct the greater of (1) 25% of compensation, or (2) required contributions to the defined benefit plans under the funding rules (but not less than the amount of the plan’s unfunded current liability). 

Contributions to single-employer 

plans.−The overall limit is not less 

than the deduction limit for contributions to single-employer defined benefit plans, as modified by the bill. Contributions to multiemployer 

plans.−The overall limit is not less 

than the excess of 140% of a multiemployer defined benefit plan’s current liability over the value of the plan’s assets. 

Contrib

plans.−

than a benefit single-insured into aclimit. Contrib

plans.−

taken ioverall 
80 

Provision Present Law House Bill 

 Contributions to defined contribution 

plans.−The overall limit applies to 

contributions to a defined contribution plan only to the extent they exceed 6% of compensation. Effective date.−Taxable years 

beginning after December 31, 2006. 

Contrib

plans.−

Effecti

contribbeginnexcept overall single-contribbeginn
81 

Provision Present Law House Bill 

IX. ENHANCED RETIREMENT SAVINGS AND DEFINED CONTRIBUTION PLANS A. Pension and IRA Provisions of EGTRRA made Permanent (sec. 901 of the House bill) 

The Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) made a number of changes related to pensions and IRAs. In order to comply with reconciliation procedures under the Congressional Budget Act, EGTRRA’s provisions do not apply to plan, limitation, or taxable years beginning after December 31, 2010. After such date, the Code and ERISA are to be applied as if EGTRRA had not been enacted (i.e., “enacted”). 

The pension and IRA provisions of EGTRRA are made permanent. Effective date.–Date of enactment. 

No pro

B. Saver’s Credit Made Permanent (sec. 902 of the House bill) 

A nonrefundable credit is provided for up to $2,000 of qualified retirement savings contributions. The credit rate is 50%, 20%, or 10%, depending on the adjusted gross income of the taxpayer. Taxpayers with adjusted gross income of more than $50,000 for joint returns, $37,500 for heads of households, and $25,000 for single returns are not eligible for the credit. The credit expires after 2006. 

The Saver’s credit is made permanent. A taxpayer may elect that the amount of any refund due as a result of the credit be paid directly to an IRA. Effective date.−Contributions for 

taxable years beginning after 2006. 

No pro
82 

Provision Present Law House Bill 

C. Increasing Participation Through Automatic Enrollment (sec. 903 of the House bill and secs. 1108-1109 of the Senate amendment) 1. In general 

Under a 401(k) plan, participants are given the choice between having a contribution made to the plan (an “elective contribution”) or receiving the amount in cash. A plan may provide that the participant receives cash unless an affirmative election is made or that elective contributions are made at a specified rate unless the participant elects otherwise. Plans that operate in the latter way are sometimes referred to as “automatic enrollment” or “negative election” plans. Such plans are subject to the same rules as other 401(k) plans. 

An automatic contribution arrangement that meets certain requirements is treated as meeting the nondiscrimination rules for 401(k) plans and matching contributions and as meeting the top-heavy rules. 

Same a
83 

Provision Present Law House Bill 

2. Amount of elective contributions Subject to a statutory dollar limit on 

maximum permitted elective contributions, the amount of such contributions that may be made to a plan is a matter of plan design. 

The automatic enrollment arrangement must provide for automatic elective contributions of not more than 10% of compensation and at least 3% in the first year the employee participates, 4% in the second year, 5% in the third year, and 6% in each year thereafter. (The dollar limit on elective contributions applies as under present law.) Employees who were already participating in the plan do not have to be covered under automatic enrollment. 

The auarrangecontribcompeelectivarrangepercenemploypercenup to 1percenarrangeincreasmay tareceive(rather (The dcontriblaw.) Emploparticipcontribpercenunder tarrangecovereenrollmafter thsuch eaelect). 
84 

Provision Present Law House Bill 

3. Nondiscrimination requirements Elective contributions are subject to a 

special nondiscrimination test that compares the average deferral percentage (“ADP”) of the nonhighly compensated employees to that of the highly compensated employees. Under a safe harbor, a plan is deemed to satisfy the ADP test if nonhighly compensated employees receive (1) matching contributions of 100% up to elective contributions up to 3% of compensation and of 50% for elective deferrals of greater than 3% and up to 5% of compensation, or (2) nonelective contributions of at least 3% of compensation. Matching contributions are subject to a special nondiscrimination test similar to the ADP test. Matching contributions that satisfy the safe harbor (and meet certain other requirements) are deemed to satisfy the applicable nondiscrimination test. 

Matching or nonelective 

contributions.−With respect to 

nonhighly compensated employees, the plan must provide for matching contributions equal to 50 percent of elective contributions up to 6% of compensation or a nonelective contribution equal to at least 2% of compensation. Such contributions are deemed to satisfy the ADP test and comparable rule for matching contributions. Participation requirement.−Elective 

contributions must be made for at least 70% of eligible nonhighly compensated employees (employees who were participating before the automatic feature was adopted may be disregarded). 

Matchi

contrib

bill, excontribrespect 7% of nonelecompeParticip

provisi

4. Vesting and distribution requirements for matching and nonelective contributions 

Matching or nonelective contributions used to satisfy the nondiscrimination tests for elective contributions must be 100% vested and are subject to the withdrawal restrictions applicable to elective contributions. That is, such amounts generally cannot be distributed prior to termination of employment, hardship, age 59-1/5, death or disability. 

Matching or nonelective contributions under the arrangement must vest at least as rapidly as under 2-year cliff vesting. Matching or nonelective contributions are subject to the withdrawal restrictions applicable to elective contributions. 

Same a
85 

Provision Present Law House Bill 

5. Erroneous automatic elective contributions 

Present law provides special rules for distributions of elective contributions that exceed the amount permitted under the nondiscrimination rules or the dollar limit on such contributions. 

Erroneous automatic elective contributions not in excess of $500 that are distributed before April 15 of the year following the year the contribution was made are treated as payments of compensation to the employee, are not subject to the 10-percent early withdrawal tax and are not subject to the otherwise applicable nondiscrimination rules. An erroneous automatic elective contribution is a contribution that is made within the first 3 months that an automatic election applied to an employee and that are designated by the employee as erroneous contributions. 

Similar the elecontribemployautomaeffectivdistribuDistribmust in

6. Fiduciary rules applicable to default investments of individual account plans 

ERISA imposes standards on the conduct of plan fiduciaries, including persons who make investment decisions with respect to plan assets. Fiduciaries are personally liable for any losses to the plan due to a violation of fiduciary standards. An individual account plan may permit participants to make investment decisions with respect to their accounts. ERISA fiduciary liability does not apply to investment decisions made by plan participants if participants exercise control over the investment of their individual 

A participant is treated as exercising control with respect to assets in an individual account plan if such amounts are invested in a default arrangement in accordance with Department of Labor regulations until the participant makes an affirmative election regarding investments. In order for this treatment to apply, notice of the participant’s rights and obligations under the arrangement must be provided. 

Same aLabor regulatdefault months 
86 

Provision Present Law House Bill 

accounts, as determined under ERISA regulations. In that case, a plan fiduciary may be responsible for the investment alternatives made available, but not for the specific investment decisions made by participants. 

7. Preemption of State law ERISA generally preempts all State 

laws relating to employee benefit plans, other than generally applicable criminal laws and laws relating to insurance, banking, or securities. 

Preempts any State law that would directly or indirectly prohibit or restrict the inclusion in a plan of an automatic contribution arrangement. The Labor Secretary is authorized to establish minimum standards for such arrangements in order for preemption to apply. An automatic contribution arrangement is an arrangement: (1) under which an individual is treated as having contributed a stated percentage of compensation to a plan until the participant makes a contrary election, (2) with respect to which notice requirements are satisfied, and (3) under which contributions are invested in accordance with regulations issued by the Labor Secretary (including regulations relating to default investments). 

Same athere is Secretastandararrange

8. Effective date Plan years beginning after 2005. Same a
87 

Provision Present Law House Bill 

D. Penalty-Free Withdrawals for Individuals Called to Active Duty for at least 179 Days (sec. 904 of the House bill) 

A taxable distribution from a qualified retirement plan is subject to an additional 10-percent early withdrawal tax unless the distribution is made after 59-1⁄2, death, or disability or unless another exception to the tax applies. Certain qualified retirement plans, such as 401(k) plans, cannot make in-service distributions prior to attainment of age 59-1⁄2. 

Plans are allowed to make and the 10-percent early withdrawal tax does not apply to “qualified reservist distributions.” A qualified reservist distribution is made (1) from an IRA or elective deferrals from a 401(k) plan or similar arrangement, (2) to a member of the reserves who, after September 11, 2001, and before September 12, 2007, is called to active duty for a period in excess of 179 days or an indefinite period, and (3) during the period beginning on the date the individual was called to active duty and ending at the close of the active duty. The amount of a qualified reservist distribution may be recontributed to an IRA within 2 years after the end of the active duty period. No deduction is allowed for such contributions. Effective date.−Distributions after 

September 11, 2001. 

No pro

E. Waiver of 10-Percent Early Withdrawal Tax on Certain Distributions for Public Safety Employees (sec. 905 of the House bill and sec. 1004 of the Senate amendment) 

A taxable distribution from a qualified retirement plan is subject to an additional 10-percent early withdrawal tax unless the distribution is made after 59-1⁄2, death, or disability or unless another exception to the tax applies. Under one exception, the early withdrawal tax 

The 10-percent early withdrawal tax does not apply to distributions to a public safety employee from a governmental plan to the extent attributable to a “DROP” benefit. A DROP benefit is a feature of a governmental defined benefit plan under which an employee elects to 

The 10does ngovernmade twho se50. A employ
88 

Provision Present Law House Bill 

does not apply to distributions made to an individual who separates from service after age 55. 

receive credits to an account in the plan which are not in excess of the benefits that would have been provided if the employee had retired under the plan at a specified earlier retirement date and which are in lieu of increases in the employee’s accrued pension benefit under such plan based on years of service after the effective date of the DROP election. A public safety employee is any employee of a police or fire department of a State who provides police, fire fighting, or emergency medical services. Effective date.−Distributions after the 

date of enactment. 

police, medicaEffecti

F. Combat Zone Compensation Taken Into Account for Purposes of IRA Contributions (sec. 906 of the House bill) 

In general, the maximum contribution that may be made to an IRA is limited to the lesser of a dollar amount ($4,000 for 2006) and the taxpayer’s compensation for the year that is includible in gross income. Combat zone pay generally is not includible in gross income and thus is not taken into account for purposes of determining the maximum IRA contribution. 

Combat pay is treated as includible compensation for purposes of determining the maximum contribution to an IRA. Effective date.−Taxable years 

beginning after 2005. 

No pro
89 

Provision Present Law House Bill 

G. Direct Payment of Tax Refunds to IRAs (sec. 907 of the House bill) 

A taxpayer may direct that his or her refund be directly deposited into a checking or savings account rather than have the refund paid to the taxpayer by check. 

The Treasury Secretary is directed to allow individuals to direct that a refund be deposited in an IRA of the individual. The rules relating to limits on and deductibility of IRA contributions are not modified. Effective date.−Taxable years 

beginning after 2006. 

No pro

H. IRA Eligibility for the Disabled (sec. 908 of the House bill) 

In general, the maximum contribution that may be made to an IRA is limited to the lesser of a dollar amount ($4,000 for 2006) and the taxpayer’s compensation for the year that is includible in gross income. 

The rule limiting the maximum IRA contribution to a taxpayer’s includible compensation does not apply to an individual who is disabled and who has not attained age 70-1⁄2. Effective date.−Taxable years 

beginning after 2005. 

No pro

I. Allow Rollovers by Nonspouse Beneficiaries of Certain Retirement Plan Distributions (sec. 909 of the House bill and sec. 1005 of the Senate amendment) 

The spouse of a deceased employee may roll his or her interest in a qualified retirement plan, governmental section 457 plan, or tax-sheltered annuity to an IRA; however, such rollovers are not available to nonspouse beneficiaries. Benefits payable from a retirement plan or IRA after an employee’s death are subject to certain minimum distribution rules. 

Allows a nonspouse beneficiary of a qualified retirement plan, governmental section 457 plan, or tax-sheltered annuity to roll his or her interest over to an IRA, which is subject to the minimum distribution rules applicable to benefits payable after an employee’s death. Effective date.−Distributions made 

after December 31, 2005 

Same aEffecti
90 

Provision Present Law House Bill 

X. PROVISIONS TO ENHANCE HEALTH CARE AFFORDABILITY A. Treatment of Annuity or Life Insurance Contracts with a LongTerm Care Insurance Feature (sec. 1001 of the House bill) 

In general.−Amounts received under a 

qualified long-term care contract generally are excludable from income. In the case of long-term care insurance coverage provided by a rider on or as part of a life insurance contract, the requirements applicable to long-term care insurance contracts apply as if the portion of the contract providing such coverage were a separate contract. Charges against the contract.−

Charges against the cash value of a life insurance or annuity contract are treated as distributions that may be subject to tax. No medical expense deduction generally is allowed for charges against the life insurance contract’s cash surrender value for long-term care insurance provided by a rider on or as part of the contract. 

In general.−The provision provides 

for tax rules applicable to long-term care insurance that is provided by a rider on or as part of an annuity contract, and modifies the tax rules applicable to long-term care insurance coverage provided by a rider on or as part of a life insurance contract. Charges against the contract.−

Charges against the cash value of an annuity contract or the cash surrender value of a life insurance contract for qualified long-term care insurance coverage that is part of or a rider on the annuity or life insurance contract are not includible in the holder’s income. The investment in the contract is reduced by any such charges. The portion of the contract providing long-term care insurance coverage is treated as a separate contract. No medical expense deduction is allowed for such charges. 

No pro
91 

Provision Present Law House Bill 

 Guideline premium limitation.−For 

life insurance contracts with longterm care riders, the guideline premium limitation applicable under section 7702(c)(2) is increased by the sum of charges (but not premium payments) against the life insurance contract's cash surrender value, the imposition of which reduces premiums paid for the contract. Qualified additional benefits.−For 

Federal income tax purposes the definition of a life insurance contract provides that a qualified additional benefit under a life insurance contract means only (1) guaranteed insurability, (2) accidental death or disability benefit, (3) family term coverage, (4) disability waiver benefit, or (5) a benefit prescribed in regulations. Tax-free exchanges.−Present law 

provides for the exchange of certain insurance contracts without recognition of gain or loss. 

Guideline premium limitation.−For 

life insurance and annuity contracts with long-term care riders, the guideline premium limitation is increased by charges against the contract’s cash surrender value for coverage under the qualified longterm care insurance contract (reduced by charges that reduce the premiums paid for the life insurance contract). Qualified additional benefits.−The 

provision increases the amount of prefunding permitted by treating qualified long-term care insurance coverage under the rider as a qualified additional benefit, for purposes of the present-law definition of a life insurance contract. Tax-free exchanges.−Expanding the 

rules for tax-free exchanges of certain insurance contracts, the provision provides that no gain or loss is recognized on the exchange of a life insurance contract, an endowment contract, an annuity contract, or a qualified long-term care insurance contract for a qualified long-term care insurance contract. 
92 

Provision Present Law House Bill 

 Capitalization of certain expenses.−In 

the case of an insurance company, specified policy acquisition expenses for any taxable year are required to be capitalized, and are amortized generally over a 120-month period. Specified policy expenses means a percentage of net premiums: 1.75 percent for annuity contracts, 2.05 percent for group life insurance contracts, and 7.7 percent for all other specified contracts. 

Capitalization of certain expenses.−In 

the case of an annuity or life insurance contract that includes a qualified long-term care insurance contract as a part of or rider on the annuity or life insurance contract, the specified policy acquisition expenses that must be capitalized is determined using 7.7 percent of the net premiums for the taxable year on such contracts. Effective date.−The provision is 

generally effective for contracts issued before, on, or after December 31, 2006, but only with respect to periods beginning after that date. The provision expanding the rules for taxfree exchanges of certain insurance contracts applies with respect to exchanges occurring after December 31, 2006. 

B. Disposition of Unused Amounts in Health and Dependent Care FSAs (sec. 1002 of the House bill) 

Flexible spending arrangements (“FSAs”) generally cannot provide deferred compensation. Thus, amounts remaining in a FSA as of the end of the year generally must be forfeited by the employee. 

Up to $500 of unused benefits in a health care FSA may be either carried forward to the next year or contributed by the employer to a health savings account (“HSA”) for the employee (to the extent permitted under the HSA rules). Up to $500 of unused benefits in a dependent care FSA may be carried forward to the next year. 

No pro
93 

Provision Present Law House Bill 

Effective date.−Taxable years 

beginning after 2005. 

C. Distributions from Government Retirement Plans for Health and Long-Term Care Insurance for Public Safety Officers (sec. 1003 of the House bill) 

Distributions from a qualified retirement plan are includible in gross income except to the extent they are a return of the individual’s after-tax contributions. 

Distributions from a governmental plan to a pay for health or qualified long-term care insurance premiums of a retired public safety officer are excludable from gross income, up to a maximum of $5,000 per year. The premium must be paid directly to the insurer. Public safety officers include individuals serving a public agency as a law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew. Effective date.−Distributions in 

taxable years beginning after 2005. 

No pro
94 

Provision Present Law House Bill 

XI. GENERAL PROVISIONS: PROVISIONS RELATING TO PLAN AMENDMENTS (sec. 1101 of the House bill and sec. 1301 of the Senate amendment) 

In certain circumstances, a plan may be amended retroactively to comply with the plan qualification requirements. Plan amendments to reflect changes in the law generally must be made by the time prescribed by law for filing the income tax return of the employer for the employer’s taxable year in which the change in law is effective. Plan amendments generally may not reduce accrued benefits or eliminate an optional form of benefit unless an exception applies (referred to as “anticutback relief”). 

Subject to certain requirements: (1) allows plan amendments made pursuant to the provisions of the bill to be made by the end of the 2008 plan year (2010 for governmental plans); and (2) provides anticutback relief for such amendments, except as provided by the Secretary of Treasury. Effective date.−Date of enactment. 

Same aapplies pursuaEconomReconcallows by the such laSecretalater foEffecti
95 

Provision Present Law House Bill 

XII. DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT PROTECTIONS UNDER DEFINED CONTRIBUTION PLANS A. Defined Contribution Plans Required to Provide Employees with Freedom to Invest Their Plan Assets (sec. 701 of the Senate amendment) 

In general, the terms of a defined contribution plan are permitted to require plan assets to be invested in employer securities or real property. An employee stock ownership plan (“ESOP”) is a type of defined contribution plan designed to invest primarily in employer stock; however, a participant who has attained age 55 and has at least 10 years of participation in an ESOP must be permitted to diversify the investment of his or her account in assets other than employer securities. Defined contribution plans often allow participants to direct the investment of their accounts. 

No provision. Requir

holding securitsecuritdiversiemployDoes ncontainemploycontribanotheretiremonly buspouseRequirrights felectivcontribrights aamounnonelecontribEffecti

plan ye31, 200rule (exand a d
96 

Provision Present Law House Bill 

 collect

ESOPs stock o

B. Notice of Freedom to Divest Employer Securities or Real Property (secs. 702 and 805 of the Senate amendment) 

Under ERISA, plan participants must be provided with various notices and information about plans in which they participate. In order for a participant in a defined contribution plan to exercise control over the assets in his or her account, the participant must be given an explanation of the investment options under the plan and of the circumstances under which investment instructions may be given. 

No provision. A plan 

participother indays bright to employViolatipenalty Effecti

beginn

C. Periodic Pension Benefit Statements (sec. 703 of the Senate amendment) 

ERISA requires a plan administrator to provide a benefit statement to a participant on request, but not more than once during any 12-month period. Violation may result in liability to participant of up to $100 a day. 

No provision. Requir

defined (1) quaparticipinvestm(2) annparticipadminito provwith be(or to nannualavailabparticippenalty 
97 

Provision Present Law House Bill 

 Effecti

beginnwith a collect

D. Notice to Participants or Beneficiaries of Blackout Periods (sec. 704 of the Senate amendment) 

ERISA requires the plan administrator of a defined contribution plan to provide participants with advance notice of a blackout period (generally a period during which participants’ ability to change investments, or to obtain loans or distributions, is suspended for more than three consecutive business days). Blackout notices are not required with respect to oneparticipant retirement plans. 

No provision. Makes 

definitretiremEffecti

related Oxley 

E. Allowance of, and Credit for, Additional IRA Payments in Certain Bankruptcy Cases (sec. 705 of the Senate amendment) 

Individuals generally may make IRA contributions up to the lesser of (1) the individual’s compensation, or (2) a certain dollar amount ($4,000 for 2006). Individuals age 50 or older may make additional “catch-up” contributions up to a certain dollar amount ($1,000 for 2006). As a result of the sunset provision in the Economic Growth and Tax Relief Reconciliation Act of 2001, after 2010, only contributions of up to $2000 may be made to an IRA (or an individual’s compensation, if less). 

No provision. Allows 

additio$1,500 2009. catch-ua modipercenfor 200individ401(k) contribform obefore bankruemploy
98 

Provision Present Law House Bill 

For years before 2007, certain individuals may receive a tax credit (referred to as the “saver’s credit”) for retirement plan contributions, including IRA contributions. 

 subject 

resultinrelated Effecti

beginn

F. Increase in Maximum Bond Amount (sec. 707 of the Senate amendment) 

ERISA generally requires a plan fiduciary and any person handling plan assets to be bonded, generally in an amount between $1,000 and $500,000. 

No provision. Raises 

fiduciato $1 mholds eEffecti

after D
99 

Provision Present Law House Bill 

XIII. INFORMATION TO ASSIST PENSION PLAN PARTICIPANTS A. Defined Contribution Plans to Provide Adequate Investment Education to Participants (sec. 801 of the Senate amendment) 

Under ERISA, plan participants must be provided with various notices and information about plans in which they participate. 

No provision. The pl

contribparticipparticipdirect irelating guidelideveloin consTreasuto partiViolatipenalty Effecti

after Ddelayebargain

B. Treatment of Qualified Retirement Planning Services (sec. 803 of the Senate amendment) 

Qualified retirement planning services provided to employees by an employer maintaining a qualified employer plan are excluded from gross income. 

No provision. Allows 

choice and quserviceinvestmlimit oEffecti

beginnand be
100 

Provision Present Law House Bill 

C. Increase in Penalties for Coercive Interference with Exercise of ERISA Rights (sec. 804 of the Senate amendment) 

ERISA prohibits the use or attempt to use force or violence to restrain, coerce, or intimidate a plan participant in order to interfere with or prevent the exercise of rights under ERISA or the Welfare and Pension Plans Disclosure Act. Willful violation of this prohibition is a criminal offense subject to a $10,000 fine or imprisonment of up to one year, or both. 

No provision. Increas

for wilinterfea term years. Effecti

on and 
101 

Provision Present Law House Bill 

XIV. PROVISIONS RELATING TO SPOUSAL PENSION PROTECTION A. Regulations on Time and Order of Issuance of Domestic Relations Orders (sec. 901 of the Senate amendment) 

Rights to benefits under a pension plan may be provided to an alternate payee, including a former spouse, only under a qualified domestic relations order (“QDRO”). Present law generally does not provide specific rules for the treatment of a domestic relations order that (1) is issued after another domestic relations order or a QDRO (including an order issued after a divorce decree), or (2) revises another domestic relations order or a QDRO. 

No provision. Directs 

issue rdomestmeetinnot fail of the tissued domestQDROwithin enactmEffecti

B. Entitlement of Divorced Spouses to Railroad Retirement Annuities Independent of Actual Entitlement of Employee (sec. 902 of the Senate amendment) 

A former spouse of a railroad employee who is otherwise eligible for Tier I or Tier II benefits under the Railroad Retirement System generally cannot receive benefits until the employee begins receiving benefits, regardless of whether a State divorce court has awarded benefits to the former spouse. 

No provision. Elimin

railroarailroaformer II benedivorce Effecti

date of 
102 

Provision Present Law House Bill 

C. Extension of Tier II Railroad Retirement Benefits to Surviving Former Spouses Pursuant to Divorce Agreements (sec. 903 of the Senate amendment) 

A former spouse of a railroad employee may be eligible for survivor’s benefits under Tier I, but loses eligibility for Tier II benefits upon death of the employee. 

No provision. Provid

not losupon dEffecti

date of 

D. Requirement for Additional Survivor Annuity Option (sec. 904 of Senate amendment) 

Defined benefit pension plans and money purchase pension plans generally must provide benefits in the form of a qualified joint and survivor annuity (“QJSA”), i.e., an annuity for the life of the participant, with a survivor annuity for the life of the spouse in an amount not less than 50 percent (and not more than 100 percent) of the amount payable during the joint lives of the participant and spouse. 

No provision. Requir

plans aplans aof an oan annparticipfor the applicapayablparticipapplicathe QJsurvivoand (2) survivoEffecti

after Ddelayebargain
103 

Provision Present Law House Bill 

XV. IMPROVEMENTS IN PORTABILITY A. Clarifications Regarding Purchase of Permissive Service Credit (sec. 1001 of the Senate amendment) 

State and local government defined benefit plans may provide “permissive service credit,” i.e., credit for a period of service not otherwise credited under the plan which applies only if the employee makes contributions to fund the benefit attributable to the period of service. Permissive service credit of more than 5 years may not be provided unless based on actual service performed as an employee of a governmental entity, an association representing government employees, certain educational institutions, or in military service. Subject to certain requirements, tax-free transfers from a 403(b) annuity or a governmental 457 plan may be made to purchase permissive service credit. 

No provision. Allows 

order tfor a pcrediteyears oregardlactual service with edthe Untransfegovernwhetheservice and trathe samEffecti

includeof 199and Ta

B. Rollover of After-Tax Amounts (sec. 1002 of the Senate amendment) 

After-tax contributions may be rolled over from a qualified plan to a qualified defined contribution plan if the rollover is a direct rollover and the recipient plan separately accounts for such contributions. After-tax contributions may be rolled over from a tax-sheltered annuity (a “403(b) 

No provision. After-t

after-tashelterto any tax-sherolloverequire
104 

Provision Present Law House Bill 

annuity”) to another tax-sheltered annuity if the rollover is a direct rollover and the annuity to which the rollover is made separately accounts for such contributions. 

 Effecti

beginn

C. Clarification of Minimum Distribution Rules for Governmental Plans (sec. 1003 of the Senate amendment) 

Minimum distribution rules apply to tax-favored retirement arrangements, including governmental plans. In general, these rules require that minimum distributions must begin no later than April 1 following the later of (1) the calendar year in which the participants retires or (2) the calendar year in which the participant attains age 70-1⁄2. Separate minimum distribution requirements apply after the death of the participant. An excise tax is imposed on the failure to comply with the minimum distribution rules. 

No provision. The Tr

issue rgoverncomplydistribuwith a interprregulatto whicrules aEffecti

D. Faster Vesting of Employer Nonelective Contributions (sec. 1006 of the Senate amendment) 

Employer contributions to a qualified plan must generally vest at least as rapidly as under one of two schedules: (1) 5-year cliff vesting, or (2) a graduated schedule that provides for 20% vesting after 3 years of service, increasing until the participant is 100% vested after 7 years of service. 

No provision. Provid

matchiemploycontribEffecti

years bdelay f
105 

Provision Present Law House Bill 

Employer matching contributions must vest at least as rapidly as under one of two schedules: (1) 3-year cliff vesting, or (2) a graduated schedule that provides for 20% vesting after 2 years of service, increasing until the participant is 100% vested after 6 years of service. 

E. Allow Direct Rollovers from Retirement Plans to Roth IRAs (sec. 1007 of the Senate amendment) 

Distributions from qualified retirement plans, tax-sheltered annuities, and governmental 457 plans can be rolled over to a traditional IRA, which can then be converted to a Roth IRA (subject to eligibility for a Roth IRA conversion). However, distributions from such plans cannot be rolled over directly to a Roth IRA. 

No provision. Allows 

retiremannuitiplans tand tre(subjecconverEffecti

after D

F. Elimination of Higher Penalty on Certain Simple Plan Distributions and Simple Plan Portability (secs. 1008-1009 of the Senate amendment) 

A distribution from a SIMPLE IRA during the first two years an employee participates in the SIMPLE IRA (1) is subject to a 25% early withdrawal tax (rather than 10%) if made before age 59-1⁄2, unless an exception applies, and (2) may be rolled over only to another SIMPLE IRA. 

No provision. Applie

and roldistribuyears odistribuEffecti

Decem
106 

Provision Present Law House Bill 

G. Eligibility for Participation in Retirement Plans (sec. 1010 of the Senate amendment) 

Benefits under a nongovernmental section 457 plan are includible in gross income when paid or made available. Under Code section 457 as in effect before 1997, benefits under a 457 plan were not treated as made available merely because a participant who separated from service could elect a lump sum if (1) the total amount payable under the plan did not exceed $3,500, and (2) no additional amounts could be deferred under the plan. Under present law, an amount is not treated as made available if the plan allows distributions not to exceed $5,000, there have been no prior distributions, and no amount has been deferred for 2 years prior to distribution. 

No provision. An ind

participcompehaving permittin effeEffecti

H. Transfers to the PBGC (sec. 1011 of the Senate amendment) 

Plans may provide that accrued benefits not exceeding $5,000 may be distributed on termination of employment without a participant’s consent. Such distributions that exceed $1,000 generally must be rolled over to an IRA unless the participant elects otherwise (referred to as an “automatic rollover”). If a single-employer defined benefit plan is terminated and a participant cannot be located (a “missing 

No provision. Allows 

rollovedefined contribthe PBunder papplicaparticipwhetheparticip
107 

Provision Present Law House Bill 

participant”), the plan administrator may transfer the missing participant’s benefit to the PBGC to hold until the PBGC locates the participant. 

 Effecti

after isregulatprovisisuch reDecem

I. Missing Participants (sec. 1012 of the Senate amendment) 

If a single-employer defined benefit plan is terminated and a participant cannot be located (a “missing participant”), the plan administrator may transfer the missing participant’s benefit to the PBGC to hold until the PBGC locates the participant. The PBGC missing participant program does not apply to multiemployer plans or other plans (such as defined contribution plans) not covered by the PBGC insurance program. 

No provision. Extend

participmultiemand terthe PBdefined plans oemployEffecti

after isregulatprovisi

J. Modifications of Rules Governing Hardships and Unforeseen Financial Emergencies (sec. 1013 of the Senate amendment) 

Distributions from section 401(k) plans, tax-sheltered annuities, and section 457 plans may be made in the case of a financial hardship or unforeseeable emergency. Under regulations, a financial hardship or unforeseeable emergency includes a financial hardship or unforeseeable emergency of a participant’s spouse or dependent. 

No provision. Directs 

revise financiemergehardshof a pebeneficregulatdays oEffecti
108 

Provision Present Law House Bill 

XVI. ADMINISTRATIVE PROVISIONS A. Employee Plans Compliance Resolution System (sec. 1101 of the Senate amendment) 

The IRS has established the Employee Plans Compliance Resolution System (“EPCRS”), a corrections program for failures with respect to retirement plans and annuities to satisfy requirements for tax-favored status. EPCRS permits employers to correct compliance failures and continue to provide their employees with retirement benefits on a tax-favored basis. The IRS has expressed its intent that EPCRS will be updated and improved periodically in light of experience and comments from those who use it. 

No provision. Clarifi

respect to be cimprovEffecti

B. Notice and Consent Period Regarding Distributions (sec. 1102 of the Senate amendment) 

Notice and consent requirements apply to certain distributions from qualified retirement plans. These requirements relate to the content and timing of information that a plan must provide to a participant prior to a distribution. 

No provision. Expand

distributo empSecretaconseninformdistribuEffecti

beginn
109 

Provision Present Law House Bill 

C. Reporting Simplification (sec. 1103 of the Senate amendment) 

A plan administrator of a retirement plan must file an annual return with respect to a plan. A simplified annual return applies in the case of a oneparticipant plan (i.e., plans covering only business owners and their spouses). No annual return is required with respect to a one-participant plan if the plan does not have an accumulated funding deficiency and the total value of the plan assets does not exceed $100,000. 

No provision. Remov

requirewith asDirects and Laannual fewer tEffecti

on or aparticipbeginnfor plaparticip

D. Voluntary Early Retirement Incentive and Employment Retention Plans Maintained by Local Educational Agencies and Other Entities (sec. 1104 of the Senate amendment) 

Under the Code, nonqualified deferred compensation of employees of State and local governments and tax-exempt organizations is generally includible in income at the time of vesting unless it is provided under an eligible deferred compensation plan. Under ERISA, different rules apply to welfare benefit plans and pension plans. The Age Discrimination in Employment Act (“ADEA”), which generally prohibits discrimination in employment because of age, contains special rules for the subsidized portion of an early retirement benefit under a defined benefit plan and voluntary early retirement incentive plans. 

No provision. Except

retirememploymaintaand cerfrom thnonquaplans; benefit benefitretiremunder a purposEffecti

enactmof enac
110 

Provision Present Law House Bill 

E. No Reduction in Unemployment Compensation as a Result of Pension Rollovers (sec. 1105 of the Senate amendment) 

State unemployment compensation is generally reduced if an individual receives retirement benefits. Some States currently apply this reduction if an individual receives a retirement plan distribution that is rolled over tax-free to another plan (a “rollover” distribution). 

No provision. Amend

reducticompedoes nreceiveEffecti

or after 

F. Withholding on Distributions from Governmental Section 457 Plans (sec. 1106 of the Senate amendment) 

The Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) conformed the rollover and withholding rules for governmental section 457 plans to the rules for qualified retirement plans. As a result, 20-percent withholding applies to certain distributions from a governmental section 457 plan, including installment distributions that began before 2002 when the EGTRRA changes became effective. 

No provision. Provid

prior-laapply tbegan governEffecti

EGTR

G. Treatment of Defined Benefit Plan as Governmental Plan (sec. 1107 of the Senate amendment) 

Retirement plans maintained by governmental employers are exempt from ERISA and from Code provisions corresponding to ERISA provisions. Governmental plans are also eligible for various special rules under the Code. 

No provision. Provid

benefit governand ERbenefit maintaorganizon Sepnonproorganizsuppor
111 

Provision Present Law House Bill 

 public 

created July 1, entity umembeEffecti

before, 
112 

Provision Present Law House Bill 

XVII. UNITED STATES TAX COURT MODERNIZATION A. Judges of the Tax Court (secs. 1200-1207 and 1213 of the Senate amendment) 

Tax Court judges: • may elect to be covered by a Tax 

Court survivor’s annuity plan under which benefits are payable after 5 years of service and COLAs are based on pay increases for Tax Court judges; 

• are not eligible to participate in 

the Thrift Savings Plan; 

• may participate in the Federal 

Employees Group Life Insurance (“FEGLI”) program after retirement; 

• are not covered by the leave 

system for Federal Executive Branch employees; and 

• are subject to limitations on 

outside earned income under the Ethics in Government Act of 1978. 

No provision. Provid

• ben

Tawiif a COcoCi

• jud

Theli

• the 

preFEor 

• a ju

pathe leaEx

• com

Tanoincin 

Effecti

on date 
113 

Provision Present Law House Bill 

B. Special Trial Judges of the Tax Court (secs. 1208-1213 of the Senate amendment) 

The chief judge of the Tax Court may appoint special trial judges to handle certain cases. Special trial judges: • serve for an indefinite term; • receive a salary of 90% of the 

salary of a Tax Court judge; and 

• are generally covered by the leave 

and benefit programs that apply to Federal Executive Branch employees. 

No provision. Renam

judge aCourt”judges

• are 

8-yin 

• rec

sal

• are 

proEx

• are 

retpro

• aft

to pe

Effecti

on date 
114 

Provision Present Law House Bill 

XVIII. OTHER PROVISIONS A. Authority of Secretary of Labor, Secretary of Treasury, and Pension Benefit Guaranty Corporation to Postpone Certain Deadlines (sec. 1302 of the Senate amendment) 

In connection with a Presidentially declared disaster, the Secretary of Treasury, Secretary of Labor and Executive Director of the PBGC have the authority to extend the periods in which certain actions relating to retirement plans must be taken. A plan does not fail to be operated in accordance with its terms as a result of operation in accordance with such an extension. This authority has been exercised with respect to certain periods in connection with the Presidentially declared disasters by reason of Hurricanes Katrina, Rita, and Wilma. 

No provision. Directs 

SecretaDirectotheir auin conndeclareKatrinaissue gparticipregardirules acircumprovisiany plarequirecontribEffecti

B. Governmental Pension Plan Equalization 1. Definition of governmental plan (sec. 1311 of the Senate amendment) 

Governmental plans are exempt from ERISA and from Code requirements that correspond to ERISA requirements. A governmental plan is generally a plan established and maintained for its employees by (1) the Federal government, (2) the government of a State or political 

No provision. Provid

a plan its empgovernIndian or instran Indientity e
115 

Provision Present Law House Bill 

subdivision of a State, or (3) any agency or instrumentality of any of the foregoing. 

State, oowned forego

2. Extension to all governmental plans of current moratorium on application of certain nondiscrimination rules applicable to State and local governmental plans (sec. 1312 of the Senate amendment) 

Retirement plans maintained by State and local governments are exempt from various nondiscrimination requirements under the Code. Other governmental plans are subject to these requirements. 

No provision. Exemp

the non

3. Clarification that tribal governments are subject to same defined benefit plan rules and regulations applied to State and other local governments, their police and firefighters (sec. 1313 of the Senate amendment) 

Benefits under a defined benefit plan generally cannot exceed the lesser of (1) 100 percent of average compensation, or (2) a dollar amount ($175,000 for 2006), subject to certain special rules for defined benefit plans maintained by State and local government employers and other special rules for employees of a police or fire department. Employee contributions to a defined benefit plan are generally subject to tax; however, employee contributions may be made to a State or local government defined benefit plan on a pretax basis (referred to as “pickup” contributions). Governmental defined benefit plans are not covered by the PBGC insurance program. 

No provision. Extend

mainta(1) the State aemploydepartmcontribbenefit governPBGC 
116 

Provision Present Law House Bill 

4. Effective date (sec. 1314 of the Senate amendment) 

 Any ye

after d

C. Miscellaneous Provisions 1. Transfer of excess funds from Black Lung disability trusts to United Mine Workers of America Combined Benefit Fund (sec. 1321 of the Senate amendment) 

Assets in qualified black lung benefit trusts may be used to pay expenses relating to health benefits for retired coal miners and their spouses and dependents, subject to the lower of a yearly limit and an aggregate limit. The United Mine Workers of America (“UMWA”) Combined Benefit Fund was established by the Coal Industry Retiree Health Benefit Act of 1992 to assume responsibility of payments for medical care expenses of certain retired miners and their dependents. The Combined Benefit Fund is financed in part by assessments on current and former signatories to labor agreements with the UMWA, including premiums for unassigned beneficiaries. 

No provision. Elimin

amounassets texpensfor retispouseSecretato the UFund thin the Teliminadirects used to premiuEffecti

beginn

2. Treatment of death benefits from company-owned life insurance (“COLI”) (sec. 1322 of the Senate amendment) 

Amounts received under a life insurance contract paid by reason of the death of the insured are not includible in gross income for Federal tax purposes. No Federal income tax generally is imposed on a policyholder with respect to the 

No provision. The bil

proceelife inspurchaand higincludiemploy
117 

Provision Present Law House Bill 

earnings under a life insurance contract (inside buildup). No deduction is permitted for premiums paid on any life insurance, annuity or endowment contract, if the taxpayer is directly or indirectly a beneficiary under the contract. No deduction generally is allowed for interest paid or accrued on any debt with respect to a life insurance, annuity or endowment contract owned by the taxpayer covering the life of any individual, with an exception for key persons. No deduction generally is allowed for the pro rata portion of interest expense of a taxpayer (other than a natural person) that is allocable to the unborrowed policy cash value of a life insurance, annuity or endowment contract, with an exception for contracts covering 20-percent owners, officers, directors or employees of the taxpayer’s business. Federal tax law generally does not impose notice and consent or specific reporting requirements with respect to employer-owned life insurance. 

 who w

months notice met. Othe recthey ex(1) paifamily benefitused to partnerin the asuch a trust or The noof the pissuancemploythe appinsure notifieat issue that the the life employbeing ithat suthe insand (3) writing 
118 

Provision Present Law House Bill 

 policyh

any prothe emannual by appone or insuranEffecti

for conenactmafter suexchanthe Comateriaor othegeneratreated exceptmaster 

D. Health and Medical Benefits 1. Ability to use excess pension assets for future retiree health benefits (sec. 1331 of the Senate amendment) 

Defined benefit plans may provide retiree medical benefits through separate accounts (“retiree medical accounts”) under the plan. In the case of a single-employer plan, if the value of plan assets exceeds the greater of (1) accrued liability, or (2) 125 percent of current liability, and certain other requirements are met, qualified transfers of excess pension 

No provision. Permit

2014) oa singlmedicacost of current period,years), exceedliability
119 

Provision Present Law House Bill 

assets may be made to retiree medical accounts, but the amount transferred cannot exceed the expected cost of retiree medical benefits for the year of the transfer (“current year”). Retiree medical benefits must be maintained at a certain level for the current year and 4 subsequent years. Such transfers may not be made after December 31, 2013. 

liability qualifiRequirto be mlevel d(2) retimaintatransfeyears. Effecti

enactm

2. Addition of special rules for funding of collectively bargained retiree health benefits (sec. 1332 of the Senate amendment) 

Transfer of pension assets.−Defined 

benefit plans may provide retiree medical benefits through separate accounts (“retiree medical accounts”) under the plan. In the case of a single-employer plan, if the value of plan assets exceeds the greater of (1) accrued liability, or (2) 125 percent of current liability, and certain other requirements are met, qualified transfers of excess pension assets may be made to retiree medical accounts, but the amount transferred cannot exceed the expected cost of retiree medical benefits for the year of the transfer (“current year”). Retiree medical benefits must be maintained at a certain level for the current year 

No provision. Transf

transfeexcess employaccounretiree the curcollectthe reqtransfeonly if year enare proand deemployaggregyear is employ
120 

Provision Present Law House Bill 

and four subsequent years. Such transfers may not be made after December 31, 2013. Deductions for contributions.−

Deductions for contributions to qualified retirement plans are subject to certain limits. Deductions for contributions to funded welfare benefit plans are generally also subject to limits, including limits on the amount that may be contributed to an account to fund the expected cost of retiree medical benefits for future years. The limit on the amount that may be contributed to an account to fund the expected cost of retiree medical benefits for future years does not apply to a separate fund established under a collective bargaining agreement. 

 Requir

be provunder tagreemremainretiree dependcoveracollectsuch cospouse Deduc

Providdeductcollectfunds amedicamedicabargainlimits oto qualapply tthe Secproviddeductor for dthe samEffecti

Decem
121 

Provision Present Law House Bill 

3. Allowance of reserve for medical benefits of plans sponsored by bona fide associations (sec. 1333 of the Senate amendment) 

Deductions for contributions to funded welfare benefit plans are generally subject to limits, including limits on the amount that may be contributed to an account to fund medical benefits (other than retiree medical benefits) for future years, which is generally limited to the amount needed to fund claims for medical benefits incurred but unpaid as of the close of the current year. These limits do not apply to a welfare benefit fund that is part of a plan (referred to a “10-or-more employer” plan), to which (1) more than one employer contributes, and (2) no employer normally contributes more than 10 percent of the total contributions, provided that the plan may not maintain experience rating arrangements with respect to individual employers. 

No provision. Allows 

to fund (other for futubona fisection Health cannot of (1) mcurrent claims current Effecti

after D

E. Cash or Deferred Arrangements 1. Treatment of eligible combined defined benefit plans and qualified cash or deferred arrangements (sec. 1336 of the Senate amendment) 

In general.−The assets of a qualified 

retirement plan (either a defined contribution plan or a defined benefit plan) must be held in trust for the exclusive benefit of participants and beneficiaries. The requirements 

No provision. In gene

an “elias a plaemploynot mothe pre
122 

Provision Present Law House Bill 

applicable to defined contribution plans and defined benefit plans differ in some respects. Qualified retirement plans are also subject to annual reporting requirements, which generally apply on a plan-by-plan basis. Nondiscrimination rules.−

Contributions or benefits under a qualified retirement plan generally may not discriminate in favor of highly compensated employees. In some cases these nondiscrimination requirements may be met on a safeharbor basis or by taking into account permitted disparity or contributions or benefits under another plan. Elective deferrals under a section 401(k) plan, employee contributions, and matching contributions are subject to special nondiscrimination tests that generally cannot be satisfied by taking into account other contributions or benefits, except as provided under certain safe harbors (described above in Item IX.C.3). Under a section 401(k) plan, no benefits other than matching contributions can be contingent on whether an employee makes elective deferrals. 

defined 401(k) are helassets and all(4) mevestingrequireThe reqapplicaa sectioan eligapply. section combinthe topeligible single purposDefine

benefit combinparticipbenefit final avservicepay. Arequirebenefit Additioif they nondiswithou
123 

Provision Present Law House Bill 

Vesting rules.−In general, the right to 

employer-provided contributions or benefits under a qualified retirement plan must be fully vested after five years of service or must vest at a rate of not less than 20 percent a year after three through seven years of service. Employer matching contributions must be fully vested after three years of service or must vest at a rate of not less than 20 percent a year after two through six years of service. Faster vesting schedules (and certain minimum required contributions or benefits) are required under a plan that is top-heavy. Elective deferrals and employee contributions must be fully vested when made. 

benefitpermittuniformbenefitvested Section 

section combinautomacompematchielectivcompesatisfy requiredeferraAdditiomay be applicarequirecontribanotheare proparticipthree yEffecti

after D
124 

Provision Present Law House Bill 

2. State and local governments eligible to maintain section 401(k) plans (sec. 1337 of the Senate amendment) 

State and local governments generally may not maintain a section 401(k) plan, except for certain plans adopted (or treated as adopted) before May 6, 1986 (“grandfathered” plans). Elective deferrals under a section 401(k) plan may not exceed a dollar amount ($15,000 for 2006). Amounts deferred under an eligible deferred compensation plan (a “section 457” plan) of a governmental employer are also subject to the same dollar limit. Before 2002, a single limit applied to elective deferrals under a section 401(k) plan and deferrals under a section 457 plan. 

No provision. Allows 

employplans. grandfelectivamoungovernEffecti

after D

F. Excess Contributions (sec. 1339 of the Senate amendment) 

An excise tax applies to elective deferrals and matching contributions for highly compensated employees in excess of the amount permitted under applicable nondiscrimination tests (referred to as “excess contributions”). The excise tax does not apply if the excess contributions (and income attributable thereto) are distributed or forfeited (to the extent forfeiture is permitted) within 2-1/2 months after the close of the plan year. Amounts distributed within that period are generally included in income for the year of the contribution. 

No provision. In the c

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Provision Present Law House Bill 

G. Other Provisions 1. Federal task force on older workers (sec. 1342 of the Senate amendment) 

No provision. No provision. Directs 

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2. Technical correction to Saver Act (sec. 1343 of the Senate amendment) 

The Savings Are Vital to Everyone’s Retirement (“SAVER”) Act initiated a public-private partnership to educate American workers about retirement savings and directed the Department of Labor to maintain an ongoing program of public information and outreach. The Act also convened a National Summit on Retirement Savings held June 4-5, 1998. National Summits have also been held February 28-March 1, 2002 and March 1-2, 2006. 

No provision. Provid

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