II 

Calendar No. 357 

109TH CONGRESS 

2D SESSION H. R. 2830 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 16, 2005 

Received 

JANUARY 27, 2006 

Read twice and placed on the calendar 

AN ACT 

To amend the Employee Retirement Income Security Act 

of 1974 and the Internal Revenue Code of 1986 to 

reform the pension funding rules, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Pension Protection Act of 2005’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title and table of contents. 

TITLE I—REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER 

DEFINED BENEFIT PENSION PLANS 
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Subtitle A—Amendments to Employee Retirement Income Security Act of 

1974 

Sec. 101. Minimum funding standards. 

Sec. 102. Funding rules for single-employer defined benefit pension plans. 

Sec. 103. Benefit limitations under single-employer plans. 

Sec. 104. Technical and conforming amendments. 

Subtitle B—Amendments to Internal Revenue Code of 1986 

Sec. 111. Minimum funding standards. 

Sec. 112. Funding rules for single-employer defined benefit pension plans. 

Sec. 113. Benefit limitations under single-employer plans. 

Sec. 114. Technical and conforming amendments. 

Subtitle C—Other Provisions 

Sec. 121. Modification of transition rule to pension funding requirements. 

Sec. 122. Treatment of nonqualified deferred compensation plans when employer defined benefit plan in at-risk status. 

TITLE II—FUNDING RULES FOR MULTIEMPLOYER DEFINED 

BENEFIT PLANS 

Subtitle A—Amendments to Employee Retirement Income Security Act of 

1974 

Sec. 201. Funding rules for multiemployer defined benefit plans. 

Sec. 202. Additional funding rules for multiemployer plans in endangered or 

critical status. 

Sec. 203. Measures to forestall insolvency of multiemployer plans. 

Sec. 204. Withdrawal liability reforms. 

Sec. 205. Removal of restrictions with respect to procedures applicable to disputes involving withdrawal liability. 

Subtitle B—Amendments to Internal Revenue Code of 1986 

Sec. 211. Funding rules for multiemployer defined benefit plans. 

Sec. 212. Additional funding rules for multiemployer plans in endangered or 

critical status. 

Sec. 213. Measures to forestall insolvency of multiemployer plans. 

TITLE III—OTHER PROVISIONS 

Sec. 301. Interest rate for 2006 funding requirements. 

Sec. 302. Interest rate assumption for determination of lump sum distributions. 

Sec. 303. Interest rate assumption for applying benefit limitations to lump sum 

distributions. 

Sec. 304. Distributions during working retirement. 

Sec. 305. Other amendments relating to prohibited transactions. 

Sec. 306. Correction period for certain transactions involving securities and 

commodities. 

Sec. 307. Recovery by reimbursement or subrogation with respect to provided 

benefits. 

Sec. 308. Exercise of control over plan assets in connection with qualified 

changes in investment options. 

Sec. 309. Clarification of fiduciary rules. 

Sec. 310. Government Accountability Office pension funding report. 
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TITLE IV—IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS 

Sec. 401. Increases in PBGC premiums. 

TITLE V—DISCLOSURE 

Sec. 501. Defined benefit plan funding notices. 

Sec. 502. Additional disclosure requirements. 

Sec. 503. Section 4010 filings with the PBGC. 

TITLE VI—INVESTMENT ADVICE 

Sec. 601. Amendments to Employee Retirement Income Security Act of 1974 

providing prohibited transaction exemption for provision of investment advice. 

Sec. 602. Amendments to Internal Revenue Code of 1986 providing prohibited 

transaction exemption for provision of investment advice. 

TITLE VII—BENEFIT ACCRUAL STANDARDS 

Sec. 701. Benefit accrual standards. 

TITLE VIII—DEDUCTION LIMITATIONS 

Sec. 801. Increase in deduction limits. 

Sec. 802. Updating deduction rules for combination of plans. 

TITLE IX—ENHANCED RETIREMENTS SAVINGS AND DEFINED 

CONTRIBUTION PLANS 

Sec. 901. Pensions and individual retirement arrangement provisions of Economic Growth and Tax Relief Reconciliation Act of 2001 made 

permanent. 

Sec. 902. Saver’s credit. 

Sec. 903. Increasing participation through automatic contribution arrangements. 

Sec. 904. Penalty-free withdrawals from retirement plans for individuals called 

to active duty for at least 179 days. 

Sec. 905. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees. 

Sec. 906. Combat zone compensation taken into account for purposes of determining limitation and deductibility of contributions to individual retirement plans. 

Sec. 907. Direct payment of tax refunds to individual retirement plans. 

Sec. 908. IRA eligibility for the disabled. 

Sec. 909. Allow rollovers by nonspouse beneficiaries of certain retirement plan 

distributions. 

TITLE X—PROVISIONS TO ENHANCE HEALTH CARE 

AFFORDABILITY 

Sec. 1001. Treatment of annuity and life insurance contracts with a long-term 

care insurance feature. 

Sec. 1002. Disposition of unused health and dependent care benefits in cafeteria plans and flexible spending arrangements. 

Sec. 1003. Distributions from governmental retirement plans for health and 

long-term care insurance for public safety officers. 
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TITLE XI—GENERAL PROVISIONS 

Sec. 1101. Provisions relating to plan amendments. 

1 TITLE I—REFORM OF FUNDING 

2 RULES FOR SINGLE-EM3 PLOYER DEFINED BENEFIT 

4 PENSION PLANS 

5 Subtitle A—Amendments to Em6 ployee Retirement Income Secu7 rity Act of 1974 

8 SEC. 101. MINIMUM FUNDING STANDARDS. 

9 (a) REPEAL OF EXISTING FUNDING RULES.—Sec10 tions 302 through 308 of the Employee Retirement In11 come Security Act of 1974 (29 U.S.C. 1082 through 

12 1086) are repealed. 

13 (b) NEW MINIMUM FUNDING STANDARDS.—Part 3 

14 of subtitle B of title I of such Act (as amended by sub15 section (a)) is amended further by inserting after section 

16 301 the following new section: 

17 ‘‘MINIMUM FUNDING STANDARDS

18 ‘‘SEC. 302. (a) REQUIREMENT TO MEET MINIMUM

19 FUNDING STANDARD.— 

20 ‘‘(1) IN GENERAL.—A plan to which this part 

21 applies shall satisfy the minimum funding standard 

22 applicable to the plan for any plan year. 

23 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur24 poses of paragraph (1), a plan shall be treated as 
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1 satisfying the minimum funding standard for a plan 

2 year if— 

3 ‘‘(A) in the case of a defined benefit plan 

4 which is a single-employer plan, the employer 

5 makes contributions to or under the plan for 

6 the plan year which, in the aggregate, are not 

7 less than the minimum required contribution 

8 determined under section 303 for the plan for 

9 the plan year, 

10 ‘‘(B) in the case of a money purchase plan 

11 which is a single-employer plan, the employer 

12 makes contributions to or under the plan for 

13 the plan year which are required under the 

14 terms of the plan, and 

15 ‘‘(C) in the case of a multiemployer plan, 

16 the employers make contributions to or under 

17 the plan for any plan year which, in the aggre18 gate, are sufficient to ensure that the plan does 

19 not have an accumulated funding deficiency 

20 under section 304 as of the end of the plan 

21 year. 

22 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.— 

23 ‘‘(1) IN GENERAL.—Except as provided in para24 graph (2), the amount of any contribution required 

25 by this section (including any required installments 
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1 under paragraphs (3) and (4) of section 303(j)) 

2 shall be paid by the employer responsible for making 

3 contributions to or under the plan. 

4 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

5 EMPLOYER MEMBER OF CONTROLLED GROUP.—In 

6 the case of a single-employer plan, if the employer 

7 referred to in paragraph (1) is a member of a con8 trolled group, each member of such group shall be 

9 jointly and severally liable for payment of such con10 tributions. 

11 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND12 ARDS.— 

13 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD14 SHIP.— 

15 ‘‘(A) IN GENERAL.—If— 

16 ‘‘(i) an employer is (or in the case of 

17 a multiemployer plan, 10 percent or more 

18 of the number of employers contributing to 

19 or under the plan is) unable to satisfy the 

20 minimum funding standard for a plan year 

21 without temporary substantial business 

22 hardship (substantial business hardship in 

23 the case of a multiemployer plan), and 
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1 ‘‘(ii) application of the standard would 

2 be adverse to the interests of plan partici3 pants in the aggregate, 

4 the Secretary of the Treasury may, subject to 

5 subparagraph (C), waive the requirements of 

6 subsection (a) for such year with respect to all 

7 or any portion of the minimum funding stand8 ard. The Secretary of the Treasury shall not 

9 waive the minimum funding standard with re10 spect to a plan for more than 3 of any 15 (5 

11 of any 15 in the case of a multiemployer plan) 

12 consecutive plan years. 

13 ‘‘(B) EFFECTS OF WAIVER.—If a waiver is 

14 granted under subparagraph (A) for any plan 

15 year— 

16 ‘‘(i) in the case of a single-employer 

17 plan, the minimum required contribution 

18 under section 303 for the plan year shall 

19 be reduced by the amount of the waived 

20 funding deficiency and such amount shall 

21 be amortized as required under section 

22 303(e), and 

23 ‘‘(ii) in the case of a multiemployer 

24 plan, the funding standard account shall 

25 be credited under section 304(b)(3)(C) 
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1 with the amount of the waived funding de2 ficiency and such amount shall be amor3 tized as required under section 

4 304(b)(2)(C). 

5 ‘‘(C) WAIVER OF AMORTIZED PORTION

6 NOT ALLOWED.—The Secretary of the Treasury 

7 may not waive under subparagraph (A) any 

8 portion of the minimum funding standard 

9 under subsection (a) for a plan year which is 

10 attributable to any waived funding deficiency 

11 for any preceding plan year. 

12 ‘‘(2) DETERMINATION OF BUSINESS HARD13 SHIP.—For purposes of this subsection, the factors 

14 taken into account in determining temporary sub15 stantial business hardship (substantial business 

16 hardship in the case of a multiemployer plan) shall 

17 include (but shall not be limited to) whether or 

18 not— 

19 ‘‘(A) the employer is operating at an eco20 nomic loss, 

21 ‘‘(B) there is substantial unemployment or 

22 underemployment in the trade or business and 

23 in the industry concerned, 

24 ‘‘(C) the sales and profits of the industry 

25 concerned are depressed or declining, and 
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1 ‘‘(D) it is reasonable to expect that the 

2 plan will be continued only if the waiver is 

3 granted. 

4 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur5 poses of this part, the term ‘waived funding defi6 ciency’ means the portion of the minimum funding 

7 standard under subsection (a) (determined without 

8 regard to the waiver) for a plan year waived by the 

9 Secretary of the Treasury and not satisfied by em10 ployer contributions. 

11 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM12 PLOYER PLANS, CONSULTATIONS.— 

13 ‘‘(A) SECURITY MAY BE REQUIRED.— 

14 ‘‘(i) IN GENERAL.—Except as pro15 vided in subparagraph (C), the Secretary 

16 of the Treasury may require an employer 

17 maintaining a defined benefit plan which is 

18 a single-employer plan (within the meaning 

19 of section 4001(a)(15)) to provide security 

20 to such plan as a condition for granting or 

21 modifying a waiver under paragraph (1). 

22 ‘‘(ii) SPECIAL RULES.—Any security 

23 provided under clause (i) may be perfected 

24 and enforced only by the Pension Benefit 

25 Guaranty Corporation, or at the direction 
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1 of the Corporation, by a contributing spon2 sor (within the meaning of section 

3 4001(a)(13)), or a member of such spon4 sor’s controlled group (within the meaning 

5 of section 4001(a)(14)). 

6 ‘‘(B) CONSULTATION WITH THE PENSION

7 BENEFIT GUARANTY CORPORATION.—Except as 

8 provided in subparagraph (C), the Secretary of 

9 the Treasury shall, before granting or modi10 fying a waiver under this subsection with re11 spect to a plan described in subparagraph 

12 (A)(i)— 

13 ‘‘(i) provide the Pension Benefit 

14 Guaranty Corporation with— 

15 ‘‘(I) notice of the completed ap16 plication for any waiver or modifica17 tion, and 

18 ‘‘(II) an opportunity to comment 

19 on such application within 30 days 

20 after receipt of such notice, and 

21 ‘‘(ii) consider— 

22 ‘‘(I) any comments of the Cor23 poration under clause (i)(II), and 

24 ‘‘(II) any views of any employee 

25 organization (within the meaning of 
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1 section 3(4)) representing participants 

2 in the plan which are submitted in 

3 writing to the Secretary of the Treas4 ury in connection with such applica5 tion. 

6 Information provided to the Corporation under 

7 this subparagraph shall be considered tax re8 turn information and subject to the safe9 guarding and reporting requirements of section 

10 6103(p) of the Internal Revenue Code of 1986. 

11 ‘‘(C) EXCEPTION FOR CERTAIN WAIV12 ERS.— 

13 ‘‘(i) IN GENERAL.—The preceding 

14 provisions of this paragraph shall not 

15 apply to any plan with respect to which the 

16 sum of— 

17 ‘‘(I) the aggregate unpaid min18 imum required contribution for the 

19 plan year and all preceding plan 

20 years, and 

21 ‘‘(II) the present value of all 

22 waiver amortization installments de23 termined for the plan year and suc24 ceeding plan years under section 

25 303(e)(2), 
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1 is less than $1,000,000. 

2 ‘‘(ii) TREATMENT OF WAIVERS FOR

3 WHICH APPLICATIONS ARE PENDING.—The 

4 amount described in clause (i)(I) shall in5 clude any increase in such amount which 

6 would result if all applications for waivers 

7 of the minimum funding standard under 

8 this subsection which are pending with re9 spect to such plan were denied. 

10 ‘‘(iii) UNPAID MINIMUM REQUIRED

11 CONTRIBUTION.—For purposes of this sub12 paragraph— 

13 ‘‘(I) IN GENERAL.—The term 

14 ‘unpaid minimum required contribu15 tion’ means, with respect to any plan 

16 year, any minimum required contribu17 tion under section 303 for the plan 

18 year which is not paid on or before 

19 the due date (as determined under 

20 section 303(j)(1)) for the plan year. 

21 ‘‘(II) ORDERING RULE.—For 

22 purposes of subclause (I), any pay23 ment to or under a plan for any plan 

24 year shall be allocated first to unpaid 

25 minimum required contributions for 
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1 all preceding plan years on a first-in, 

2 first-out basis and then to the min3 imum required contribution under sec4 tion 303 for the plan year. 

5 ‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER

6 PLANS.— 

7 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 8 ⁄2 MONTHS AFTER CLOSE OF

9 YEAR.—In the case of a single-employer plan, 

10 no waiver may be granted under this subsection 

11 with respect to any plan for any plan year un12 less an application therefor is submitted to the 

13 Secretary of the Treasury not later than the 

14 15th day of the 3rd month beginning after the 

15 close of such plan year. 

16 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM17 BER OF CONTROLLED GROUP.—In the case of a 

18 single-employer plan, if an employer is a mem19 ber of a controlled group, the temporary sub20 stantial business hardship requirements of 

21 paragraph (1) shall be treated as met only if 

22 such requirements are met— 

23 ‘‘(i) with respect to such employer, 

24 and 
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1 ‘‘(ii) with respect to the controlled 

2 group of which such employer is a member 

3 (determined by treating all members of 

4 such group as a single employer). 

5 The Secretary of the Treasury may provide that 

6 an analysis of a trade or business or industry 

7 of a member need not be conducted if such Sec8 retary determines such analysis is not necessary 

9 because the taking into account of such member 

10 would not significantly affect the determination 

11 under this paragraph. 

12 ‘‘(6) ADVANCE NOTICE.— 

13 ‘‘(A) IN GENERAL.—The Secretary of the 

14 Treasury shall, before granting a waiver under 

15 this subsection, require each applicant to pro16 vide evidence satisfactory to such Secretary that 

17 the applicant has provided notice of the filing of 

18 the application for such waiver to each affected 

19 party (as defined in section 4001(a)(21)). Such 

20 notice shall include a description of the extent 

21 to which the plan is funded for benefits which 

22 are guaranteed under title IV and for benefit li23 abilities. 

24 ‘‘(B) CONSIDERATION OF RELEVANT IN25 FORMATION.—The Secretary of the Treasury 
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1 shall consider any relevant information provided 

2 by a person to whom notice was given under 

3 subparagraph (A). 

4 ‘‘(7) RESTRICTION ON PLAN AMENDMENTS.— 

5 ‘‘(A) IN GENERAL.—No amendment of a 

6 plan which increases the liabilities of the plan 

7 by reason of any increase in benefits, any 

8 change in the accrual of benefits, or any change 

9 in the rate at which benefits become nonforfeit10 able under the plan shall be adopted if a waiver 

11 under this subsection or an extension of time 

12 under section 304(d) is in effect with respect to 

13 the plan, or if a plan amendment described in 

14 subsection (d)(2) has been made at any time in 

15 the preceding 12 months (24 months in the 

16 case of a multiemployer plan). If a plan is 

17 amended in violation of the preceding sentence, 

18 any such waiver, or extension of time, shall not 

19 apply to any plan year ending on or after the 

20 date on which such amendment is adopted. 

21 ‘‘(B) EXCEPTION.—Paragraph (1) shall 

22 not apply to any plan amendment which— 

23 ‘‘(i) the Secretary of the Treasury de24 termines to be reasonable and which pro-
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1 vides for only de minimis increases in the 

2 liabilities of the plan, 

3 ‘‘(ii) only repeals an amendment de4 scribed in subsection (d)(2), or 

5 ‘‘(iii) is required as a condition of 

6 qualification under part I of subchapter D 

7 of chapter 1 of the Internal Revenue Code 

8 of 1986. 

9 ‘‘(8) CROSS REFERENCE.—For corresponding 

10 duties of the Secretary of the Treasury with regard 

11 to implementation of the Internal Revenue Code of 

12 1986, see section 412(c) of such Code. 

13 ‘‘(d) MISCELLANEOUS RULES.— 

14 ‘‘(1) CHANGE IN METHOD OR YEAR.—If the 

15 funding method, the valuation date, or a plan year 

16 for a plan is changed, the change shall take effect 

17 only if approved by the Secretary of the Treasury. 

18 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND19 MENTS.—For purposes of this section, any amend20 ment applying to a plan year which— 

21 ‘‘(A) is adopted after the close of such plan 

year but no later than 21 22 ⁄2 months after the 

23 close of the plan year (or, in the case of a mul24 tiemployer plan, no later than 2 years after the 

25 close of such plan year), 
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1 ‘‘(B) does not reduce the accrued benefit 

2 of any participant determined as of the begin3 ning of the first plan year to which the amend4 ment applies, and 

5 ‘‘(C) does not reduce the accrued benefit of 

6 any participant determined as of the time of 

7 adoption except to the extent required by the 

8 circumstances, 

9 shall, at the election of the plan administrator, be 

10 deemed to have been made on the first day of such 

11 plan year. No amendment described in this para12 graph which reduces the accrued benefits of any par13 ticipant shall take effect unless the plan adminis14 trator files a notice with the Secretary of the Treas15 ury notifying him of such amendment and such Sec16 retary has approved such amendment, or within 90 

17 days after the date on which such notice was filed, 

18 failed to disapprove such amendment. No amend19 ment described in this subsection shall be approved 

20 by the Secretary of the Treasury unless such Sec21 retary determines that such amendment is necessary 

22 because of a substantial business hardship (as deter23 mined under subsection (c)(2)) and that a waiver 

24 under subsection (c) (or, in the case of a multiem-
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1 ployer plan, any extension of the amortization period 

2 under section 304(d)) is unavailable or inadequate. 

3 ‘‘(3) CONTROLLED GROUP.—For purposes of 

4 this section, the term ‘controlled group’ means any 

5 group treated as a single employer under subsection 

6 (b), (c), (m), or (o) of section 414 of the Internal 

7 Revenue Code of 1986.’’. 

8 (c) CLERICAL AMENDMENT.—The table of contents 

9 in section 1 of such Act is amended by striking the items 

10 relating to sections 302 through 308 and inserting the fol11 lowing new item: 

‘‘Sec. 302. Minimum funding standards.’’. 

12 (d) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to plan years beginning after 2006. 

14 SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE15 FINED BENEFIT PENSION PLANS. 

16 (a) IN GENERAL.—Part 3 of subtitle B of title I of 

17 the Employee Retirement Income Security Act of 1974 (as 

18 amended by section 101 of this Act) is amended further 

19 by inserting after section 302 the following new section: 

20 ‘‘MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

21 DEFINED BENEFIT PENSION PLANS

22 ‘‘SEC. 303. (a) MINIMUM REQUIRED CONTRIBU23 TION.—For purposes of this section and section 

24 302(a)(2)(A), except as provided in subsection (f), the 
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1 term ‘minimum required contribution’ means, with respect 

2 to any plan year of a single-employer plan— 

3 ‘‘(1) in any case in which the value of plan as4 sets of the plan (as reduced under subsection 

5 (f)(4)(B)) is less than the funding target of the plan 

6 for the plan year, the sum of— 

7 ‘‘(A) the target normal cost of the plan for 

8 the plan year, 

9 ‘‘(B) the shortfall amortization charge (if 

10 any) for the plan for the plan year determined 

11 under subsection (c), and 

12 ‘‘(C) the waiver amortization charge (if 

13 any) for the plan for the plan year as deter14 mined under subsection (e); 

15 ‘‘(2) in any case in which the value of plan as16 sets of the plan (as reduced under subsection 

17 (f)(4)(B)) exceeds the funding target of the plan for 

18 the plan year, the target normal cost of the plan for 

19 the plan year reduced by such excess; or 

20 ‘‘(3) in any other case, the target normal cost 

21 of the plan for the plan year. 

22 ‘‘(b) TARGET NORMAL COST.—For purposes of this 

23 section, except as provided in subsection (i)(2) with re24 spect to plans in at-risk status, the term ‘target normal 

25 cost’ means, for any plan year, the present value of all 
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1 benefits which are expected to accrue or to be earned 

2 under the plan during the plan year. For purposes of this 

3 subsection, if any benefit attributable to services per4 formed in a preceding plan year is increased by reason 

5 of any increase in compensation during the current plan 

6 year, the increase in such benefit shall be treated as hav7 ing accrued during the current plan year. 

8 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.— 

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, the shortfall amortization charge for a plan for 

11 any plan year is the aggregate total of the shortfall 

12 amortization installments for such plan year with re13 spect to the shortfall amortization bases for such 

14 plan year and each of the 6 preceding plan years. 

15 ‘‘(2) SHORTFALL AMORTIZATION INSTALL16 MENT.—The plan sponsor shall determine, with re17 spect to the shortfall amortization base of the plan 

18 for any plan year, the amounts necessary to amor19 tize such shortfall amortization base, in level annual 

20 installments over a period of 7 plan years beginning 

21 with such plan year. For purposes of paragraph (1), 

22 the annual installment of such amortization for each 

23 plan year in such 7-plan-year period is the shortfall 

24 amortization installment for such plan year with re25 spect to such shortfall amortization base. In deter-
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1 mining any shortfall amortization installment under 

2 this paragraph, the plan sponsor shall use the seg3 ment rates determined under subparagraph (C) of 

4 subsection (h)(2), applied under rules similar to the 

5 rules of subparagraph (B) of subsection (h)(2). 

6 ‘‘(3) SHORTFALL AMORTIZATION BASE.—For 

7 purposes of this section, the shortfall amortization 

8 base of a plan for a plan year is the excess (if any) 

9 of— 

10 ‘‘(A) the funding shortfall of such plan for 

11 such plan year, over 

12 ‘‘(B) the sum of— 

13 ‘‘(i) the present value (determined 

14 using the segment rates determined under 

15 subparagraph (C) of subsection (h)(2), ap16 plied under rules similar to the rules of 

17 subparagraph (B) of subsection (h)(2)) of 

18 the aggregate total of the shortfall amorti19 zation installments, for such plan year and 

20 the 5 succeeding plan years, which have 

21 been determined with respect to the short22 fall amortization bases of the plan for each 

23 of the 6 plan years preceding such plan 

24 year, and 
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1 ‘‘(ii) the present value (as so deter2 mined) of the aggregate total of the waiver 

3 amortization installments for such plan 

4 year and the 5 succeeding plan years, 

5 which have been determined with respect 

6 to the waiver amortization bases of the 

7 plan for each of the 5 plan years preceding 

8 such plan year. 

9 ‘‘(4) FUNDING SHORTFALL.—For purposes of 

10 this section, the funding shortfall of a plan for any 

11 plan year is the excess (if any) of— 

12 ‘‘(A) the funding target of the plan for the 

13 plan year, over 

14 ‘‘(B) the value of plan assets of the plan 

15 (as reduced under subsection (f)(4)(B)) for the 

16 plan year which are held by the plan on the 

17 valuation date. 

18 ‘‘(5) EXEMPTION FROM NEW SHORTFALL AM19 ORTIZATION BASE.— 

20 ‘‘(A) IN GENERAL.—In any case in which 

21 the value of plan assets of the plan (as reduced 

22 under subsection (f)(4)(A)) is equal to or great23 er than the funding target of the plan for the 

24 plan year, the shortfall amortization base of the 

25 plan for such plan year shall be zero. 
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1 ‘‘(B) TRANSITION RULE.— 

2 ‘‘(i) IN GENERAL.—In the case of a 

3 non-deficit reduction plan, subparagraph 

4 (A) shall be applied to plan years begin5 ning after 2006 and before 2011 by sub6 stituting, for the funding target of the plan 

7 for the plan year, the applicable percentage 

8 of such funding target determined under 

9 the following table: 

‘‘In the case of a plan year beginning in calendar 

year: 

The applicable percentage is: 

2007 .............................................................................................. 92 percent

2008 .............................................................................................. 94 percent

2009 .............................................................................................. 96 percent

2010 .............................................................................................. 98 percent. 

10 ‘‘(ii) LIMITATION.—Clause (i) shall 

11 not apply with respect to any plan year 

12 after 2007 unless the ratio (expressed as a 

13 percentage) which— 

14 ‘‘(I) the value of plan assets for 

15 each preceding plan year after 2006 

16 (as reduced under subsection 

17 (f)(4)(A)), bears to 

18 ‘‘(II) the funding target of the 

19 plan for such preceding plan year (de20 termined without regard to subsection 

21 (i)(1)), 
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1 is not less than the applicable percentage 

2 with respect to such preceding plan deter3 mined under clause (i). 

4 ‘‘(iii) NON-DEFICIT REDUCTION

5 PLAN.—For purposes of clause (i), the 

6 term ‘non-deficit reduction plan’ means 

7 any plan— 

8 ‘‘(I) to which this part (as in ef9 fect on the day before the date of the 

10 enactment of the Pension Protection 

11 Act of 2005) applied for the plan year 

12 beginning in 2006, and 

13 ‘‘(II) to which section 302(d) (as 

14 so in effect) did not apply for such 

15 plan year. 

16 ‘‘(6) EARLY DEEMED AMORTIZATION UPON AT17 TAINMENT OF FUNDING TARGET.—In any case in 

18 which the funding shortfall of a plan for a plan year 

19 is zero, for purposes of determining the shortfall am20 ortization charge for such plan year and succeeding 

21 plan years, the shortfall amortization bases for all 

22 preceding plan years (and all shortfall amortization 

23 installments determined with respect to such bases) 

24 shall be reduced to zero. 
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1 ‘‘(d) RULES RELATING TO FUNDING TARGET.—For 

2 purposes of this section— 

3 ‘‘(1) FUNDING TARGET.—Except as provided in 

4 subsection (i)(1) with respect to plans in at-risk sta5 tus, the funding target of a plan for a plan year is 

6 the present value of all liabilities to participants and 

7 their beneficiaries under the plan for the plan year. 

8 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT9 AGE.—The ‘funding target attainment percentage’ of 

10 a plan for a plan year is the ratio (expressed as a 

11 percentage) which— 

12 ‘‘(A) the value of plan assets for the plan 

13 year (as reduced under subsection (f)(4)(B)), 

14 bears to 

15 ‘‘(B) the funding target of the plan for the 

16 plan year (determined without regard to sub17 section (i)(1)). 

18 ‘‘(e) WAIVER AMORTIZATION CHARGE.— 

19 ‘‘(1) DETERMINATION OF WAIVER AMORTIZA20 TION CHARGE.—The waiver amortization charge (if 

21 any) for a plan for any plan year is the aggregate 

22 total of the waiver amortization installments for 

23 such plan year with respect to the waiver amortiza24 tion bases for each of the 5 preceding plan years. 
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1 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.— 

2 The plan sponsor shall determine, with respect to 

3 the waiver amortization base of the plan for any 

4 plan year, the amounts necessary to amortize such 

5 waiver amortization base, in level annual install6 ments over a period of 5 plan years beginning with 

7 the succeeding plan year. For purposes of paragraph 

8 (1), the annual installment of such amortization for 

9 each plan year in such 5-plan year period is the 

10 waiver amortization installment for such plan year 

11 with respect to such waiver amortization base. 

12 ‘‘(3) INTEREST RATE.—In determining any 

13 waiver amortization installment under this sub14 section, the plan sponsor shall use the segment rates 

15 determined under subparagraph (C) of subsection 

16 (h)(2), applied under rules similar to the rules of 

17 subparagraph (B) of subsection (h)(2). 

18 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiv19 er amortization base of a plan for a plan year is the 

20 amount of the waived funding deficiency (if any) for 

21 such plan year under section 302(c). 

22 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT23 TAINMENT OF FUNDING TARGET.—In any case in 

24 which the funding shortfall of a plan for a plan year 

25 is zero, for purposes of determining the waiver am-
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1 ortization charge for such plan year and succeeding 

2 plan years, the waiver amortization base for all pre3 ceding plan years shall be reduced to zero. 

4 ‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU5 TION BY PRE-FUNDING BALANCE AND FUNDING STAND6 ARD CARRYOVER BALANCE.— 

7 ‘‘(1) ELECTION TO MAINTAIN BALANCES.— 

8 ‘‘(A) PRE-FUNDING BALANCE.—The plan 

9 sponsor of a single-employer plan may elect to 

10 maintain a pre-funding balance. 

11 ‘‘(B) FUNDING STANDARD CARRYOVER

12 BALANCE.— 

13 ‘‘(i) IN GENERAL.—In the case of a 

14 single-employer plan described in clause 

15 (ii), the plan sponsor may elect to maintain 

16 a funding standard carryover balance, until 

17 such balance is reduced to zero. 

18 ‘‘(ii) PLANS MAINTAINING FUNDING

19 STANDARD ACCOUNT IN 2006.—A plan is 

20 described in this clause if the plan— 

21 ‘‘(I) was in effect for a plan year 

22 beginning in 2006, and 

23 ‘‘(II) had a positive balance in 

24 the funding standard account under 

25 section 302(b) as in effect for such 
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1 plan year and determined as of the 

2 end of such plan year. 

3 ‘‘(2) APPLICATION OF BALANCES.—A pre-fund4 ing balance and a funding standard carryover bal5 ance maintained pursuant to this paragraph— 

6 ‘‘(A) shall be available for crediting against 

7 the minimum required contribution, pursuant to 

8 an election under paragraph (3), 

9 ‘‘(B) shall be applied as a reduction in the 

10 amount treated as the value of plan assets for 

11 purposes of this section, to the extent provided 

12 in paragraph (4), and 

13 ‘‘(C) may be reduced at any time, pursu14 ant to an election under paragraph (5). 

15 ‘‘(3) ELECTION TO APPLY BALANCES AGAINST

16 MINIMUM REQUIRED CONTRIBUTION.— 

17 ‘‘(A) IN GENERAL.—Except as provided in 

18 subparagraphs (B) and (C), in the case of any 

19 plan year in which the plan sponsor elects to 

20 credit against the minimum required contribu21 tion for the current plan year all or a portion 

22 of the pre-funding balance or the funding 

23 standard carryover balance for the current plan 

24 year (not in excess of such minimum required 

25 contribution), the minimum required contribu-
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1 tion for the plan year shall be reduced by the 

2 amount so credited by the plan sponsor. For 

3 purposes of the preceding sentence, the min4 imum required contribution shall be determined 

5 after taking into account any waiver under sec6 tion 302(c). 

7 ‘‘(B) COORDINATION WITH FUNDING

8 STANDARD CARRYOVER BALANCE.—To the ex9 tent that any plan has a funding standard car10 ryover balance greater than zero, no amount of 

11 the pre-funding balance of such plan may be 

12 credited under this paragraph in reducing the 

13 minimum required contribution. 

14 ‘‘(C) LIMITATION FOR UNDERFUNDED

15 PLANS.—The preceding provisions of this para16 graph shall not apply for any plan year if the 

17 ratio (expressed as a percentage) which— 

18 ‘‘(i) the value of plan assets for the 

19 preceding plan year (as reduced under 

20 paragraph (4)(C)), bears to 

21 ‘‘(ii) the funding target of the plan for 

22 the preceding plan year (determined with23 out regard to subsection (i)(1)), 

24 is less than 80 percent. 
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1 ‘‘(4) EFFECT OF BALANCES ON AMOUNTS

2 TREATED AS VALUE OF PLAN ASSETS.—In the case 

3 of any plan maintaining a pre-funding balance or a 

4 funding standard carryover balance pursuant to this 

5 subsection, the amount treated as the value of plan 

6 assets shall be deemed to be such amount, reduced 

7 as provided in the following subparagraphs: 

8 ‘‘(A) APPLICABILITY OF SHORTFALL AM9 ORTIZATION BASE.—For purposes of subsection 

10 (c)(5), the value of plan assets is deemed to be 

11 such amount, reduced by the amount of the 

12 pre-funding balance, but only if an election 

13 under paragraph (2) applying any portion of 

14 the pre-funding balance in reducing the min15 imum required contribution is in effect for the 

16 plan year. 

17 ‘‘(B) DETERMINATION OF EXCESS ASSETS, 

18 FUNDING SHORTFALL, AND FUNDING TARGET

19 ATTAINMENT PERCENTAGE.— 

20 ‘‘(i) IN GENERAL.—For purposes of 

21 subsections (a), (c)(4)(B), and (d)(2)(A), 

22 the value of plan assets is deemed to be 

23 such amount, reduced by the amount of 

24 the pre-funding balance and the funding 

25 standard carryover balance. 
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1 ‘‘(ii) SPECIAL RULE FOR CERTAIN

2 BINDING AGREEMENTS WITH PBGC.—For 

3 purposes of subsection (c)(4)(B), the value 

4 of plan assets shall not be deemed to be re5 duced for a plan year by the amount of the 

6 specified balance if, with respect to such 

7 balance, there is in effect for a plan year 

8 a binding written agreement with the Pen9 sion Benefit Guaranty Corporation which 

10 provides that such balance is not available 

11 to reduce the minimum required contribu12 tion for the plan year. For purposes of the 

13 preceding sentence, the term ‘specified bal14 ance’ means the pre-funding balance or the 

15 funding standard carryover balance, as the 

16 case may be. 

17 ‘‘(C) AVAILABILITY OF BALANCES IN PLAN

18 YEAR FOR CREDITING AGAINST MINIMUM RE19 QUIRED CONTRIBUTION.—For purposes of 

20 paragraph (3)(C)(i) of this subsection, the value 

21 of plan assets is deemed to be such amount, re22 duced by the amount of the pre-funding bal23 ance. 

24 ‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO

25 DETERMINATIONS OF VALUE OF PLAN ASSETS AND
32 

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1 CREDITING AGAINST MINIMUM REQUIRED CONTRIBU2 TION.— 

3 ‘‘(A) IN GENERAL.—The plan sponsor may 

4 elect to reduce by any amount the balance of 

5 the pre-funding balance and the funding stand6 ard carryover balance for any plan year (but 

7 not below zero). Such reduction shall be effec8 tive prior to any determination of the value of 

9 plan assets for such plan year under this sec10 tion and application of the balance in reducing 

11 the minimum required contribution for such 

12 plan for such plan year pursuant to an election 

13 under paragraph (2). 

14 ‘‘(B) COORDINATION BETWEEN PRE-FUND15 ING BALANCE AND FUNDING STANDARD CARRY16 OVER BALANCE.—To the extent that any plan 

17 has a funding standard carryover balance great18 er than zero, no election may be made under 

19 subparagraph (A) with respect to the pre-fund20 ing balance. 

21 ‘‘(6) PRE-FUNDING BALANCE.— 

22 ‘‘(A) IN GENERAL.—A pre-funding balance 

23 maintained by a plan shall consist of a begin24 ning balance of zero, increased and decreased to 

25 the extent provided in subparagraphs (B) and 
33 

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1 (C), and adjusted further as provided in para2 graph (8). 

3 ‘‘(B) INCREASES.—As of the valuation 

4 date for each plan year beginning after 2007, 

5 the pre-funding balance of a plan shall be in6 creased by the amount elected by the plan spon7 sor for the plan year. Such amount shall not ex8 ceed the excess (if any) of— 

9 ‘‘(i) the aggregate total of employer 

10 contributions to the plan for the preceding 

11 plan year, over 

12 ‘‘(ii) the minimum required contribu13 tion for such preceding plan year (in14 creased by interest on any portion of such 

15 minimum required contribution remaining 

16 unpaid as of the valuation date for the cur17 rent plan year, at the effective interest rate 

18 for the plan for the preceding plan year, 

19 for the period beginning with the first day 

20 of such preceding plan year and ending on 

21 the date that payment of such portion is 

22 made). 

23 ‘‘(C) DECREASES.—As of the valuation 

24 date for each plan year after 2007, the pre- 
34 

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1 funding balance of a plan shall be decreased 

2 (but not below zero) by the sum of— 

3 ‘‘(i) the amount of such balance cred4 ited under paragraph (2) (if any) in reduc5 ing the minimum required contribution of 

6 the plan for the preceding plan year, and 

7 ‘‘(ii) any reduction in such balance 

8 elected under paragraph (5). 

9 ‘‘(7) FUNDING STANDARD CARRYOVER BAL10 ANCE.— 

11 ‘‘(A) IN GENERAL.—A funding standard 

12 carryover balance maintained by a plan shall 

13 consist of a beginning balance determined 

14 under subparagraph (B), decreased to the ex15 tent provided in subparagraph (C), and ad16 justed further as provided in paragraph (8). 

17 ‘‘(B) BEGINNING BALANCE.—The begin18 ning balance of the funding standard carryover 

19 balance shall be the positive balance described 

20 in paragraph (1)(B)(ii)(II). 

21 ‘‘(C) DECREASES.—As of the valuation 

22 date for each plan year after 2007, the funding 

23 standard carryover balance of a plan shall be 

24 decreased (but not below zero) by the sum of— 
35 

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1 ‘‘(i) the amount of such balance cred2 ited under paragraph (2) (if any) in reduc3 ing the minimum required contribution of 

4 the plan for the preceding plan year, and 

5 ‘‘(ii) any reduction in such balance 

6 elected under paragraph (5). 

7 ‘‘(8) ADJUSTMENTS TO BALANCES.—In deter8 mining the pre-funding balance or the funding 

9 standard carryover balance of a plan as of the valu10 ation date (before applying any increase or decrease 

11 under paragraph (6) or (7)), the plan sponsor shall, 

12 in accordance with regulations which shall be pre13 scribed by the Secretary of the Treasury, adjust 

14 such balance so as to reflect the rate of net gain or 

15 loss (determined, notwithstanding subsection (g)(3), 

16 on the basis of fair market value) experienced by all 

17 plan assets for the period beginning with the valu18 ation date for the preceding plan year and ending 

19 with the date preceding the valuation date for the 

20 current plan year, properly taking into account, in 

21 accordance with such regulations, all contributions, 

22 distributions, and other plan payments made during 

23 such period. 

24 ‘‘(9) ELECTIONS.—Elections under this sub25 section shall be made at such times, and in such 
36 

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1 form and manner, as shall be prescribed in regula2 tions of the Secretary of the Treasury. 

3 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL4 ITIES.— 

5 ‘‘(1) TIMING OF DETERMINATIONS.—Except as 

6 otherwise provided under this subsection, all deter7 minations under this section for a plan year shall be 

8 made as of the valuation date of the plan for such 

9 plan year. 

10 ‘‘(2) VALUATION DATE.—For purposes of this 

11 section— 

12 ‘‘(A) IN GENERAL.—Except as provided in 

13 subparagraph (B), the valuation date of a plan 

14 for any plan year shall be the first day of the 

15 plan year. 

16 ‘‘(B) EXCEPTION FOR SMALL PLANS.—If, 

17 on each day during the preceding plan year, a 

18 plan had 500 or fewer participants, the plan 

19 may designate any day during the plan year as 

20 its valuation date for such plan year and suc21 ceeding plan years. For purposes of this sub22 paragraph, all defined benefit plans which are 

23 single-employer plans and are maintained by 

24 the same employer (or any member of such em25 ployer’s controlled group) shall be treated as 1 
37 

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1 plan, but only participants with respect to such 

2 employer or member shall be taken into ac3 count. 

4 ‘‘(C) APPLICATION OF CERTAIN RULES IN

5 DETERMINATION OF PLAN SIZE.—For purposes 

6 of this paragraph— 

7 ‘‘(i) PLANS NOT IN EXISTENCE IN

8 PRECEDING YEAR.—In the case of the first 

9 plan year of any plan, subparagraph (B) 

10 shall apply to such plan by taking into ac11 count the number of participants that the 

12 plan is reasonably expected to have on 

13 days during such first plan year. 

14 ‘‘(ii) PREDECESSORS.—Any reference 

15 in subparagraph (B) to an employer shall 

16 include a reference to any predecessor of 

17 such employer. 

18 ‘‘(3) AUTHORIZATION OF USE OF ACTUARIAL

19 VALUE.—For purposes of this section, the value of 

20 plan assets shall be determined on the basis of any 

21 reasonable actuarial method of valuation which takes 

22 into account fair market value and which is per23 mitted under regulations prescribed by the Secretary 

24 of the Treasury, except that— 
38 

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1 ‘‘(A) any such method providing for aver2 aging of fair market values may not provide for 

3 averaging of such values over more than the 36- 

4 month period ending with the month which in5 cludes the valuation date, and 

6 ‘‘(B) any such method may not result in a 

7 determination of the value of plan assets which, 

8 at any time, is lower than 90 percent or greater 

9 than 110 percent of the fair market value of 

10 such assets at such time. 

11 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE12 CEIPTS.—For purposes of this section— 

13 ‘‘(A) CONTRIBUTIONS FOR PRIOR PLAN

14 YEARS TAKEN INTO ACCOUNT.—For purposes 

15 of determining the value of plan assets for any 

16 current plan year, in any case in which a con17 tribution properly allocable to amounts owed for 

18 a preceding plan year is made on or after the 

19 valuation date of the plan for such current plan 

20 year, such contribution shall be taken into ac21 count, except that any such contribution made 

22 during any such current plan year beginning 

23 after 2007 shall be taken into account only in 

24 an amount equal to its present value (deter25 mined using the effective rate of interest for the 
39 

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1 plan for the preceding plan year) as of the valu2 ation date of the plan for such current plan 

3 year. 

4 ‘‘(B) CONTRIBUTIONS FOR CURRENT PLAN

5 YEAR DISREGARDED.—For purposes of deter6 mining the value of plan assets for any current 

7 plan year, contributions which are properly allo8 cable to amounts owed for such plan year shall 

9 not be taken into account, and, in the case of 

10 any such contribution made before the valuation 

11 date of the plan for such plan year, such value 

12 of plan assets shall be reduced for interest on 

13 such amount determined using the effective rate 

14 of interest of the plan for the current plan year 

15 for the period beginning when such payment 

16 was made and ending on the valuation date of 

17 the plan. 

18 ‘‘(5) ACCOUNTING FOR PLAN LIABILITIES.— 

19 For purposes of this section— 

20 ‘‘(A) LIABILITIES TAKEN INTO ACCOUNT

21 FOR CURRENT PLAN YEAR.—In determining the 

22 value of liabilities under a plan for a plan year, 

23 liabilities shall be taken into account to the ex24 tent attributable to benefits (including any early 
40 

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1 retirement or similar benefit) accrued or earned 

2 as of the beginning of the plan year. 

3 ‘‘(B) ACCRUALS DURING CURRENT PLAN

4 YEAR DISREGARDED.—For purposes of sub5 paragraph (A), benefits accrued or earned dur6 ing such plan year shall not be taken into ac7 count, irrespective of whether the valuation date 

8 of the plan for such plan year is later than the 

9 first day of such plan year. 

10 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.— 

11 ‘‘(1) IN GENERAL.—Subject to this subsection, 

12 the determination of any present value or other com13 putation under this section shall be made on the 

14 basis of actuarial assumptions and methods— 

15 ‘‘(A) each of which is reasonable (taking 

16 into account the experience of the plan and rea17 sonable expectations), and 

18 ‘‘(B) which, in combination, offer the actu19 ary’s best estimate of anticipated experience 

20 under the plan. 

21 ‘‘(2) INTEREST RATES.— 

22 ‘‘(A) EFFECTIVE INTEREST RATE.—For 

23 purposes of this section, the term ‘effective in24 terest rate’ means, with respect to any plan for 

25 any plan year, the single rate of interest which, 
41 

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1 if used to determine the present value of the 

2 plan’s liabilities referred to in subsection (d)(1), 

3 would result in an amount equal to the funding 

4 target of the plan for such plan year. 

5 ‘‘(B) INTEREST RATES FOR DETERMINING

6 FUNDING TARGET.—For purposes of deter7 mining the funding target of a plan for any 

8 plan year, the interest rate used in determining 

9 the present value of the liabilities of the plan 

10 shall be— 

11 ‘‘(i) in the case of liabilities reason12 ably determined to be payable during the 

13 5-year period beginning on the first day of 

14 the plan year, the first segment rate with 

15 respect to the applicable month, 

16 ‘‘(ii) in the case of liabilities reason17 ably determined to be payable during the 

18 15-year period beginning at the end of the 

19 period described in clause (i), the second 

20 segment rate with respect to the applicable 

21 month, and 

22 ‘‘(iii) in the case of liabilities reason23 ably determined to be payable after the pe24 riod described in clause (ii), the third seg-
42 

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1 ment rate with respect to the applicable 

2 month. 

3 ‘‘(C) SEGMENT RATES.—For purposes of 

4 this paragraph— 

5 ‘‘(i) FIRST SEGMENT RATE.—The 

6 term ‘first segment rate’ means, with re7 spect to any month, the single rate of in8 terest which shall be determined by the 

9 Secretary of the Treasury for such month 

10 on the basis of the corporate bond yield 

11 curve for such month, taking into account 

12 only that portion of such yield curve which 

13 is based on bonds maturing during the 5- 

14 year period commencing with such month. 

15 ‘‘(ii) SECOND SEGMENT RATE.—The 

16 term ‘second segment rate’ means, with re17 spect to any month, the single rate of in18 terest which shall be determined by the 

19 Secretary of the Treasury for such month 

20 on the basis of the corporate bond yield 

21 curve for such month, taking into account 

22 only that portion of such yield curve which 

23 is based on bonds maturing during the 15- 

24 year period beginning at the end of the pe25 riod described in clause (i). 
43 

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1 ‘‘(iii) THIRD SEGMENT RATE.—The 

2 term ‘third segment rate’ means, with re3 spect to any month, the single rate of in4 terest which shall be determined by the 

5 Secretary of the Treasury for such month 

6 on the basis of the corporate bond yield 

7 curve for such month, taking into account 

8 only that portion of such yield curve which 

9 is based on bonds maturing during periods 

10 beginning after the period described in 

11 clause (ii). 

12 ‘‘(D) CORPORATE BOND YIELD CURVE.— 

13 For purposes of this paragraph— 

14 ‘‘(i) IN GENERAL.—The term ‘cor15 porate bond yield curve’ means, with re16 spect to any month, a yield curve which is 

17 prescribed by the Secretary of the Treas18 ury for such month and which reflects a 3- 

19 year weighted average of yields on invest20 ment grade corporate bonds with varying 

21 maturities. 

22 ‘‘(ii) 3-YEAR WEIGHTED AVERAGE.— 

23 The term ‘3-year weighted average’ means 

24 an average determined by using a method25 ology under which the most recent year is 
44 

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1 weighted 50 percent, the year preceding 

2 such year is weighted 35 percent, and the 

3 second year preceding such year is weight4 ed 15 percent. 

5 ‘‘(E) APPLICABLE MONTH.—For purposes 

6 of this paragraph, the term ‘applicable month’ 

7 means, with respect to any plan for any plan 

8 year, the month which includes the valuation 

9 date of such plan for such plan year or, at the 

10 election of the plan sponsor, any of the 4 

11 months which precede such month. Any election 

12 made under this subparagraph shall apply to 

13 the plan year for which the election is made and 

14 all succeeding plan years, unless the election is 

15 revoked with the consent of the Secretary of the 

16 Treasury. 

17 ‘‘(F) PUBLICATION REQUIREMENTS.—The 

18 Secretary of the Treasury shall publish for each 

19 month the corporate bond yield curve (and the 

20 corporate bond yield curve reflecting the modi21 fication described in section 

22 205(g)(3)(B)(iii)(I)) for such month and each 

23 of the rates determined under subparagraph 

24 (B) for such month. The Secretary of the 

25 Treasury shall also publish a description of the 
45 

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1 methodology used to determine such yield curve 

2 and such rates which is sufficiently detailed to 

3 enable plans to make reasonable projections re4 garding the yield curve and such rates for fu5 ture months based on the plan’s projection of 

6 future interest rates. 

7 ‘‘(G) TRANSITION RULE.— 

8 ‘‘(i) IN GENERAL.—Notwithstanding 

9 the preceding provisions of this paragraph, 

10 for plan years beginning in 2007 or 2008, 

11 the first, second, or third segment rate for 

12 a plan with respect to any month shall be 

13 equal to the sum of— 

14 ‘‘(I) the product of such rate for 

15 such month determined without re16 gard to this subparagraph, multiplied 

17 by the applicable percentage, and 

18 ‘‘(II) the product of the rate de19 termined under the rules of section 

20 302(b)(5)(B)(ii)(II) (as in effect for 

21 plan years beginning in 2006), multi22 plied by a percentage equal to 100 

23 percent minus the applicable percent24 age. 
46 

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1 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

2 purposes of clause (i), the applicable percentage is 331 3 ⁄3 percent for plan years beginning in 2007 and 662 4 ⁄3 percent for plan 

5 years beginning in 2008. 

6 ‘‘(iii) NEW PLANS INELIGIBLE.— 

7 Clause (i) shall not apply to any plan if the 

8 first plan year of the plan begins after De9 cember 31, 2006. 

10 ‘‘(3) MORTALITY TABLE.— 

11 ‘‘(A) IN GENERAL.—Except as provided in 

12 subparagraph (B), the mortality table used in 

13 determining any present value or making any 

14 computation under this section shall be the 

15 RP–2000 Combined Mortality Table using 

16 Scale AA published by the Society of Actuaries 

17 (as in effect on the date of the enactment of the 

18 Pension Protection Act of 2005), projected as 

19 of the plan’s valuation date. 

20 ‘‘(B) SUBSTITUTE MORTALITY TABLE.— 

21 ‘‘(i) IN GENERAL.—Upon request by 

22 the plan sponsor and approval by the Sec23 retary of the Treasury for a period not to 

24 exceed 10 years, a mortality table which 

25 meets the requirements of clause (ii) shall 
47 

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1 be used in determining any present value 

2 or making any computation under this sec3 tion. A mortality table described in this 

4 clause shall cease to be in effect if the plan 

5 actuary determines at any time that such 

6 table does not meet the requirements of 

7 subclauses (I) and (II) of clause (ii). 

8 ‘‘(ii) REQUIREMENTS.—A mortality 

9 table meets the requirements of this clause 

10 if the Secretary of the Treasury determines 

11 that— 

12 ‘‘(I) such table reflects the actual 

13 experience of the pension plan and 

14 projected trends in such experience, 

15 and 

16 ‘‘(II) such table is significantly 

17 different from the table described in 

18 subparagraph (A). 

19 ‘‘(iii) DEADLINE FOR DISPOSITION OF

20 APPLICATION.—Any mortality table sub21 mitted to the Secretary of the Treasury for 

22 approval under this subparagraph shall be 

23 treated as in effect for the succeeding plan 

24 year unless such Secretary, during the 

25 180-day period beginning on the date of 
48 

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1 such submission, disapproves of such table 

2 and provides the reasons that such table 

3 fails to meet the requirements of clause 

4 (ii). 

5 ‘‘(C) TRANSITION RULE.—Under regula6 tions of the Secretary of the Treasury, any dif7 ference in present value resulting from the dif8 ference in the assumptions as set forth in the 

9 mortality table specified in subparagraph (A) 

10 and the assumptions as set forth in the mor11 tality table described in section 302(d)(7)(C)(ii) 

12 (as in effect for plan years beginning in 2006) 

13 shall be phased in ratably over the first period 

14 of 5 plan years beginning in or after 2007 so 

15 as to be fully effective for the fifth plan year. 

16 The preceding sentence shall not apply to any 

17 plan if the first plan year of the plan begins 

18 after December 31, 2006. 

19 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

20 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

21 FORMS.—For purposes of determining any present 

22 value or making any computation under this section, 

23 there shall be taken into account— 

24 ‘‘(A) the probability that future benefit 

25 payments under the plan will be made in the 
49 

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1 form of optional forms of benefits provided 

2 under the plan (including lump sum distribu3 tions, determined on the basis of the plan’s ex4 perience and other related assumptions), and 

5 ‘‘(B) any difference in the present value of 

6 such future benefit payments resulting from the 

7 use of actuarial assumptions, in determining 

8 benefit payments in any such optional form of 

9 benefits, which are different from those speci10 fied in this subsection. 

11 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU12 ARIAL ASSUMPTIONS.— 

13 ‘‘(A) IN GENERAL.—No actuarial assump14 tion used to determine the funding target for a 

15 plan to which this paragraph applies may be 

16 changed without the approval of the Secretary 

17 of the Treasury. 

18 ‘‘(B) PLANS TO WHICH PARAGRAPH AP19 PLIES.—This paragraph shall apply to a plan 

20 only if— 

21 ‘‘(i) the plan is a single-employer plan 

22 to which title IV applies, 

23 ‘‘(ii) the aggregate unfunded vested 

24 benefits as of the close of the preceding 

25 plan year (as determined under section 
50 

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1 4006(a)(3)(E)(iii)) of such plan and all 

2 other plans maintained by the contributing 

3 sponsors (as defined in section 

4 4001(a)(13)) and members of such spon5 sors’ controlled groups (as defined in sec6 tion 4001(a)(14)) which are covered by 

7 title IV (disregarding plans with no un8 funded vested benefits) exceed 

9 $50,000,000, and 

10 ‘‘(iii) the change in assumptions (de11 termined after taking into account any 

12 changes in interest rate and mortality 

13 table) results in a decrease in the funding 

14 shortfall of the plan for the current plan 

15 year that exceeds $50,000,000, or that ex16 ceeds $5,000,000 and that is 5 percent or 

17 more of the funding target of the plan be18 fore such change. 

19 ‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.— 

20 ‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK

21 STATUS.— 

22 ‘‘(A) IN GENERAL.—In any case in which 

23 a plan is in at-risk status for a plan year, the 

24 funding target of the plan for the plan year is 

25 the sum of— 
51 

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1 ‘‘(i) the present value of all liabilities 

2 to participants and their beneficiaries 

3 under the plan for the plan year, as deter4 mined by using, in addition to the actu5 arial assumptions described in subsection 

6 (h), the supplemental actuarial assump7 tions described in subparagraph (B), plus 

8 ‘‘(ii) a loading factor determined 

9 under subparagraph (C). 

10 ‘‘(B) SUPPLEMENTAL ACTUARIAL ASSUMP11 TIONS.—The actuarial assumptions used in de12 termining the valuation of the funding target 

13 shall include, in addition to the actuarial as14 sumptions described in subsection (h), an as15 sumption that all participants will elect benefits 

16 at such times and in such forms as will result 

17 in the highest present value of liabilities under 

18 subparagraph (A)(i). 

19 ‘‘(C) LOADING FACTOR.—The loading fac20 tor applied with respect to a plan under this 

21 paragraph for any plan year is the sum of— 

22 ‘‘(i) $700, times the number of par23 ticipants in the plan, plus 
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1 ‘‘(ii) 4 percent of the funding target 

2 (determined without regard to this para3 graph) of the plan for the plan year. 

4 ‘‘(2) TARGET NORMAL COST OF AT-RISK

5 PLANS.—In any case in which a plan is in at-risk 

6 status for a plan year, the target normal cost of the 

7 plan for such plan year shall be the sum of— 

8 ‘‘(A) the present value of all benefits which 

9 are expected to accrue or be earned under the 

10 plan during the plan year, determined under 

11 the actuarial assumptions used under para12 graph (1), plus 

13 ‘‘(B) the loading factor under paragraph 

14 (1)(C), excluding the portion of the loading fac15 tor described in paragraph (1)(C)(i). 

16 ‘‘(3) DETERMINATION OF AT-RISK STATUS.— 

17 For purposes of this subsection, a plan is in ‘at-risk 

18 status’ for a plan year if the funding target attain19 ment percentage of the plan for the preceding plan 

20 year was less than 60 percent. 

21 ‘‘(4) TRANSITION BETWEEN APPLICABLE FUND22 ING TARGETS AND BETWEEN APPLICABLE TARGET

23 NORMAL COSTS.— 

24 ‘‘(A) IN GENERAL.—In any case in which 

25 a plan which is in at-risk status for a plan year 
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1 has been in such status for a consecutive period 

2 of fewer than 5 plan years, the applicable 

3 amount of the funding target and of the target 

4 normal cost shall be, in lieu of the amount de5 termined without regard to this paragraph, the 

6 sum of— 

7 ‘‘(i) the amount determined under this 

8 section without regard to this subsection, 

9 plus 

10 ‘‘(ii) the transition percentage for 

11 such plan year of the excess of the amount 

12 determined under this subsection (without 

13 regard to this paragraph) over the amount 

14 determined under this section without re15 gard to this subsection. 

16 ‘‘(B) TRANSITION PERCENTAGE.—For 

17 purposes of this paragraph, the ‘transition per18 centage’ for a plan year is the product derived 

19 by multiplying— 

20 ‘‘(i) 20 percent, by 

21 ‘‘(ii) the number of plan years during 

22 the period described in subparagraph (A). 

23 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU24 TIONS.— 
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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the due date for any payment of any minimum 

required contribution for any plan year shall be 81 3 ⁄2

4 months after the close of the plan year. 

5 ‘‘(2) INTEREST.—Any payment required under 

6 paragraph (1) for a plan year that is made on a date 

7 other than the valuation date for such plan year 

8 shall be adjusted for interest accruing for the period 

9 between the valuation date and the payment date, at 

10 the effective rate of interest for the plan for such 

11 plan year. 

12 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

13 SCHEDULE FOR UNDERFUNDED PLANS.— 

14 ‘‘(A) INTEREST PENALTY FOR FAILURE TO

15 MEET ACCELERATED QUARTERLY PAYMENT

16 SCHEDULE.—In any case in which the plan has 

17 a funding shortfall for the preceding plan year, 

18 if the required installment is not paid in full, 

19 then the minimum required contribution for the 

20 plan year (as increased under paragraph (2)) 

21 shall be further increased by an amount equal 

22 to the interest on the amount of the under23 payment for the period of the underpayment, 

24 using an interest rate equal to the excess of— 
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1 ‘‘(i) 175 percent of the Federal mid2 term rate (as in effect under section 1274 

3 for the 1st month of such plan year), over 

4 ‘‘(ii) the effective rate of interest for 

5 the plan for the plan year. 

6 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE7 RIOD OF UNDERPAYMENT.—For purposes of 

8 subparagraph (A)— 

9 ‘‘(i) AMOUNT.—The amount of the 

10 underpayment shall be the excess of— 

11 ‘‘(I) the required installment, 

12 over 

13 ‘‘(II) the amount (if any) of the 

14 installment contributed to or under 

15 the plan on or before the due date for 

16 the installment. 

17 ‘‘(ii) PERIOD OF UNDERPAYMENT.— 

18 The period for which any interest is 

19 charged under this paragraph with respect 

20 to any portion of the underpayment shall 

21 run from the due date for the installment 

22 to the date on which such portion is con23 tributed to or under the plan. 

24 ‘‘(iii) ORDER OF CREDITING CON25 TRIBUTIONS.—For purposes of clause 
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1 (i)(II), contributions shall be credited 

2 against unpaid required installments in the 

3 order in which such installments are re4 quired to be paid. 

5 ‘‘(C) NUMBER OF REQUIRED INSTALL6 MENTS; DUE DATES.—For purposes of this 

7 paragraph— 

8 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.— 

9 There shall be 4 required installments for 

10 each plan year. 

11 ‘‘(ii) TIME FOR PAYMENT OF IN12 STALLMENTS.—The due dates for required 

13 installments are set forth in the following 

14 table: 

‘‘In the case of the following 

required installment: 

The due date is: 

1st ........................................................................... April 15 

2nd ......................................................................... July 15 

3rd .......................................................................... October 15 

4th .......................................................................... January 15 of the following year 

15 ‘‘(D) AMOUNT OF REQUIRED INSTALL16 MENT.—For purposes of this paragraph— 

17 ‘‘(i) IN GENERAL.—The amount of 

18 any required installment shall be 25 per19 cent of the required annual payment. 
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1 ‘‘(ii) REQUIRED ANNUAL PAYMENT.— 

2 For purposes of clause (i), the term ‘re3 quired annual payment’ means the lesser 

4 of— 

5 ‘‘(I) 90 percent of the minimum 

6 required contribution (without regard 

7 to any waiver under section 302(c)) to 

8 the plan for the plan year under this 

9 section, or 

10 ‘‘(II) in the case of a plan year 

11 beginning after 2007, 100 percent of 

12 the minimum required contribution 

13 (without regard to any waiver under 

14 section 302(c)) to the plan for the 

15 preceding plan year. 

16 Subclause (II) shall not apply if the pre17 ceding plan year referred to in such clause 

18 was not a year of 12 months. 

19 ‘‘(E) FISCAL YEARS AND SHORT YEARS.— 

20 ‘‘(i) FISCAL YEARS.—In applying this 

21 paragraph to a plan year beginning on any 

22 date other than January 1, there shall be 

23 substituted for the months specified in this 

24 paragraph, the months which correspond 

25 thereto. 
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1 ‘‘(ii) SHORT PLAN YEAR.—This sub2 paragraph shall be applied to plan years of 

3 less than 12 months in accordance with 

4 regulations prescribed by the Secretary of 

5 the Treasury. 

6 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

7 WITH QUARTERLY CONTRIBUTIONS.— 

8 ‘‘(A) IN GENERAL.—A plan to which this 

9 paragraph applies shall be treated as failing to 

10 pay the full amount of any required installment 

11 under paragraph (3) to the extent that the 

12 value of the liquid assets paid in such install13 ment is less than the liquidity shortfall (wheth14 er or not such liquidity shortfall exceeds the 

15 amount of such installment required to be paid 

16 but for this paragraph). 

17 ‘‘(B) PLANS TO WHICH PARAGRAPH AP18 PLIES.—This paragraph shall apply to a plan 

19 (other than a plan that would be described in 

20 subsection (f)(2)(B) if ‘100’ were substituted 

21 for ‘500’ therein) which— 

22 ‘‘(i) is required to pay installments 

23 under paragraph (3) for a plan year, and 

24 ‘‘(ii) has a liquidity shortfall for any 

25 quarter during such plan year. 
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1 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

2 purposes of paragraph (3)(A), any portion of an 

3 installment that is treated as not paid under 

4 subparagraph (A) shall continue to be treated 

5 as unpaid until the close of the quarter in 

6 which the due date for such installment occurs. 

7 ‘‘(D) LIMITATION ON INCREASE.—If the 

8 amount of any required installment is increased 

9 by reason of subparagraph (A), in no event 

10 shall such increase exceed the amount which, 

11 when added to prior installments for the plan 

12 year, is necessary to increase the funding target 

13 attainment percentage of the plan for the plan 

14 year (taking into account the expected increase 

15 in funding target due to benefits accruing or 

16 earned during the plan year) to 100 percent. 

17 ‘‘(E) DEFINITIONS.—For purposes of this 

18 subparagraph: 

19 ‘‘(i) LIQUIDITY SHORTFALL.—The 

20 term ‘liquidity shortfall’ means, with re21 spect to any required installment, an 

22 amount equal to the excess (as of the last 

23 day of the quarter for which such install24 ment is made) of— 
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1 ‘‘(I) the base amount with re2 spect to such quarter, over 

3 ‘‘(II) the value (as of such last 

4 day) of the plan’s liquid assets. 

5 ‘‘(ii) BASE AMOUNT.— 

6 ‘‘(I) IN GENERAL.—The term 

7 ‘base amount’ means, with respect to 

8 any quarter, an amount equal to 3 

9 times the sum of the adjusted dis10 bursements from the plan for the 12 

11 months ending on the last day of such 

12 quarter. 

13 ‘‘(II) SPECIAL RULE.—If the 

14 amount determined under subclause 

15 (I) exceeds an amount equal to 2 

16 times the sum of the adjusted dis17 bursements from the plan for the 36 

18 months ending on the last day of the 

19 quarter and an enrolled actuary cer20 tifies to the satisfaction of the Sec21 retary of the Treasury that such ex22 cess is the result of nonrecurring cir23 cumstances, the base amount with re24 spect to such quarter shall be deter25 mined without regard to amounts re-
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1 lated to those nonrecurring cir2 cumstances. 

3 ‘‘(iii) DISBURSEMENTS FROM THE

4 PLAN.—The term ‘disbursements from the 

5 plan’ means all disbursements from the 

6 trust, including purchases of annuities, 

7 payments of single sums and other bene8 fits, and administrative expenses. 

9 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

10 The term ‘adjusted disbursements’ means 

11 disbursements from the plan reduced by 

12 the product of— 

13 ‘‘(I) the plan’s funding target at14 tainment percentage for the plan year, 

15 and 

16 ‘‘(II) the sum of the purchases of 

17 annuities, payments of single sums, 

18 and such other disbursements as the 

19 Secretary of the Treasury shall pro20 vide in regulations. 

21 ‘‘(v) LIQUID ASSETS.—The term ‘liq22 uid assets’ means cash, marketable securi23 ties, and such other assets as specified by 

24 the Secretary of the Treasury in regula25 tions. 
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1 ‘‘(vi) QUARTER.—The term ‘quarter’ 

2 means, with respect to any required install3 ment, the 3-month period preceding the 

4 month in which the due date for such in5 stallment occurs. 

6 ‘‘(F) REGULATIONS.—The Secretary of the 

7 Treasury may prescribe such regulations as are 

8 necessary to carry out this paragraph. 

9 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO

10 MAKE REQUIRED CONTRIBUTIONS.— 

11 ‘‘(1) IN GENERAL.—In the case of a plan to 

12 which this subsection applies (as provided under 

13 paragraph (2)), if— 

14 ‘‘(A) any person fails to make a contribu15 tion payment required by section 302 and this 

16 section before the due date for such payment, 

17 and 

18 ‘‘(B) the unpaid balance of such payment 

19 (including interest), when added to the aggre20 gate unpaid balance of all preceding such pay21 ments for which payment was not made before 

22 the due date (including interest), exceeds 

23 $1,000,000, 

24 then there shall be a lien in favor of the plan in the 

25 amount determined under paragraph (3) upon all 
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1 property and rights to property, whether real or per2 sonal, belonging to such person and any other per3 son who is a member of the same controlled group 

4 of which such person is a member. 

5 ‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.— 

6 This subsection shall apply to a single-employer plan 

7 for any plan year for which the funding target at8 tainment percentage (as defined in subsection 

9 (d)(2)) of such plan is less than 100 percent. This 

10 subsection shall not apply to any plan to which sec11 tion 4021 does not apply (as such section is in effect 

12 on the date of the enactment of the Pension Protec13 tion Act of 2005). 

14 ‘‘(3) AMOUNT OF LIEN.—For purposes of para15 graph (1), the amount of the lien shall be equal to 

16 the aggregate unpaid balance of contribution pay17 ments required under this section and section 302 

18 for which payment has not been made before the due 

19 date. 

20 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

21 ‘‘(A) NOTICE OF FAILURE.—A person 

22 committing a failure described in paragraph (1) 

23 shall notify the Pension Benefit Guaranty Cor24 poration of such failure within 10 days of the 

25 due date for the required contribution payment. 
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1 ‘‘(B) PERIOD OF LIEN.—The lien imposed 

2 by paragraph (1) shall arise on the due date for 

3 the required contribution payment and shall 

4 continue until the last day of the first plan year 

5 in which the plan ceases to be described in 

6 paragraph (1)(B). Such lien shall continue to 

7 run without regard to whether such plan con8 tinues to be described in paragraph (2) during 

9 the period referred to in the preceding sentence. 

10 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

11 amount with respect to which a lien is imposed 

12 under paragraph (1) shall be treated as taxes 

13 due and owing the United States and rules 

14 similar to the rules of subsections (c), (d), and 

15 (e) of section 4068 shall apply with respect to 

16 a lien imposed by subsection (a) and the 

17 amount with respect to such lien. 

18 ‘‘(5) ENFORCEMENT.—Any lien created under 

19 paragraph (1) may be perfected and enforced only 

20 by the Pension Benefit Guaranty Corporation, or at 

21 the direction of the Pension Benefit Guaranty Cor22 poration, by the contributing sponsor (or any mem23 ber of the controlled group of the contributing spon24 sor). 
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1 ‘‘(6) DEFINITIONS.—For purposes of this sub2 section— 

3 ‘‘(A) CONTRIBUTION PAYMENT.—The term 

4 ‘contribution payment’ means, in connection 

5 with a plan, a contribution payment required to 

6 be made to the plan, including any required in7 stallment under paragraphs (3) and (4) of sub8 section (i). 

9 ‘‘(B) DUE DATE; REQUIRED INSTALL10 MENT.—The terms ‘due date’ and ‘required in11 stallment’ have the meanings given such terms 

12 by subsection (j), except that in the case of a 

13 payment other than a required installment, the 

14 due date shall be the date such payment is re15 quired to be made under section 303. 

16 ‘‘(C) CONTROLLED GROUP.—The term 

17 ‘controlled group’ means any group treated as 

18 a single employer under subsections (b), (c), 

19 (m), and (o) of section 414 of the Internal Rev20 enue Code of 1986. 

21 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

22 ACCOUNTS.—In the case of a qualified transfer (as de23 fined in section 420 of the Internal Revenue Code of 

24 1986), any assets so transferred shall not, for purposes 

25 of this section, be treated as assets in the plan.’’. 
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1 (b) CLERICAL AMENDMENT.—The table of sections 

2 in section 1 of such Act (as amended by section 101) is 

3 amended by inserting after the item relating to section 

4 302 the following new item: 

‘‘Sec. 303. Minimum funding standards for single-employer defined benefit pension plans.’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply with respect to plan years begin7 ning after 2006. 

8 SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EM9 PLOYER PLANS. 

10 (a) PROHIBITION OF SHUTDOWN BENEFITS AND

11 OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS

12 UNDER SINGLE-EMPLOYER PLANS.—Section 206 of the 

13 Employee Retirement Income Security Act of 1974 (29 

14 U.S.C. 1056) is amended by adding at the end the fol15 lowing new subsection: 

16 ‘‘(g) FUNDING-BASED LIMITATION ON SHUTDOWN

17 BENEFITS AND OTHER UNPREDICTABLE CONTINGENT

18 EVENT BENEFITS UNDER SINGLE-EMPLOYER PLANS.— 

19 ‘‘(1) IN GENERAL.—No defined benefit plan 

20 which is a single-employer plan may provide benefits 

21 to which participants are entitled solely by reason of 

22 the occurrence of a plant shutdown or any other un23 predictable contingent event occurring during any 

24 plan year if the funding target attainment percent-
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1 age as of the valuation date of the plan for such 

2 plan year— 

3 ‘‘(A) is less than 80 percent, or 

4 ‘‘(B) would be less than 80 percent taking 

5 into account such occurrence. 

6 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease 

7 to apply with respect to any plan year, effective as 

8 of the first date of the plan year, upon payment by 

9 the plan sponsor of a contribution (in addition to 

10 any minimum required contribution under section 

11 303) equal to— 

12 ‘‘(A) in the case of paragraph (1)(A), the 

13 amount of the increase in the funding target of 

14 the plan (under section 303) for the plan year 

15 attributable to the occurrence referred to in 

16 paragraph (1), and 

17 ‘‘(B) in the case of paragraph (1)(B), the 

18 amount sufficient to result in a funding target 

19 attainment percentage of 80 percent. 

20 Rules similar to the rules of subsection (h)(6) shall 

21 apply for purposes of this paragraph. 

22 ‘‘(3) UNPREDICTABLE CONTINGENT EVENT.— 

23 For purposes of this subsection, the term ‘unpredict24 able contingent event’ means an event other than— 
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1 ‘‘(A) attainment of any age, performance 

2 of any service, receipt or derivation of any com3 pensation, or the occurrence of death or dis4 ability, or 

5 ‘‘(B) an event which is reasonably and reli6 ably predictable (as determined by the Sec7 retary of the Treasury). 

8 ‘‘(4) NEW PLANS.—Paragraph (1) shall not 

9 apply to a plan for the first 5 plan years of the plan. 

10 For purposes of this subsection, the reference in this 

11 subsection to a plan shall include a reference to any 

12 predecessor plan. 

13 ‘‘(5) DEEMED REDUCTION OF FUNDING BAL14 ANCES.—A rule similar to the rule of subsection 

15 (h)(8) shall apply for purposes of this subsection.’’. 

16 (b) OTHER LIMITS ON BENEFITS AND BENEFIT AC17 CRUALS.— 

18 (1) IN GENERAL.—Section 206 of such Act (as 

19 amended by subsection (a)) is amended further by 

20 adding at the end the following new subsection: 

21 ‘‘(h) FUNDING-BASED LIMITS ON BENEFITS AND

22 BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER

23 PLANS.— 

24 ‘‘(1) LIMITATIONS ON PLAN AMENDMENTS IN25 CREASING LIABILITY FOR BENEFITS.— 
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1 ‘‘(A) IN GENERAL.—No amendment to a 

2 defined benefit plan which is a single-employer 

3 plan which has the effect of increasing liabilities 

4 of the plan by reason of increases in benefits, 

5 establishment of new benefits, changing the 

6 rate of benefit accrual, or changing the rate at 

7 which benefits become nonforfeitable to the plan 

8 may take effect during any plan year if the 

9 funding target attainment percentage as of the 

10 valuation date of the plan for such plan year 

11 is— 

12 ‘‘(i) less than 80 percent, or 

13 ‘‘(ii) would be less than 80 percent 

14 taking into account such amendment. 

15 For purposes of this subparagraph, any in16 crease in benefits under the plan by reason of 

17 an increase in the benefit rate provided under 

18 the plan or on the basis of an increase in com19 pensation shall be treated as effected by plan 

20 amendment. 

21 ‘‘(B) EXEMPTION.—Subparagraph (A) 

22 shall cease to apply with respect to any plan 

23 year, effective as of the first date of the plan 

24 year (or if later, the effective date of the 

25 amendment), upon payment by the plan sponsor 
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1 of a contribution (in addition to any minimum 

2 required contribution under section 303) equal 

3 to— 

4 ‘‘(i) in the case of subparagraph 

5 (A)(i), the amount of the increase in the 

6 funding target of the plan (under section 

7 303) for the plan year attributable to the 

8 amendment, and 

9 ‘‘(ii) in the case of subparagraph 

10 (A)(ii), the amount sufficient to result in a 

11 funding target attainment percentage of 80 

12 percent. 

13 ‘‘(2) FUNDING-BASED LIMITATION ON CERTAIN

14 FORMS OF DISTRIBUTION.— 

15 ‘‘(A) IN GENERAL.—A defined benefit plan 

16 which is a single-employer plan shall provide 

17 that, in any case in which the plan’s funding 

18 target attainment percentage as of the valu19 ation date of the plan for a plan year is less 

20 than 80 percent, the plan may not after such 

21 date pay any prohibited payment (as defined in 

22 section 206(e)). 

23 ‘‘(B) EXCEPTION.—Subparagraph (A) 

24 shall not apply to any plan for any plan year 

25 if the terms of such plan (as in effect for the 
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1 period beginning on June 29, 2005, and ending 

2 with such plan year) provide for no benefit ac3 cruals with respect to any participant during 

4 such period. 

5 ‘‘(3) LIMITATIONS ON BENEFIT ACCRUALS FOR

6 PLANS WITH SEVERE FUNDING SHORTFALLS.—A de7 fined benefit plan which is a single-employer plan 

8 shall provide that, in any case in which the plan’s 

9 funding target attainment percentage as of the valu10 ation date of the plan for a plan year is less than 

11 60 percent, all future benefit accruals under the 

12 plan shall cease as of such date. 

13 ‘‘(4) NEW PLANS.—Paragraphs (1) and (3) 

14 shall not apply to a plan for the first 5 plan years 

15 of the plan. For purposes of this subsection, the ref16 erence in this subsection to a plan shall include a 

17 reference to any predecessor plan. 

18 ‘‘(5) PRESUMED UNDERFUNDING FOR PUR19 POSES OF BENEFIT LIMITATIONS BASED ON PRIOR

20 YEAR’S FUNDING STATUS.— 

21 ‘‘(A) PRESUMPTION OF CONTINUED

22 UNDERFUNDING.—In any case in which a ben23 efit limitation under paragraph (1), (2), or (3) 

24 has been applied to a plan with respect to the 

25 plan year preceding the current plan year, the 
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1 funding target attainment percentage of the 

2 plan as of the valuation date of the plan for the 

3 current plan year shall be presumed to be equal 

4 to the funding target attainment percentage of 

5 the plan as of the valuation date of the plan for 

6 the preceding plan year until the enrolled actu7 ary of the plan certifies the actual funding tar8 get attainment percentage of the plan as of the 

9 valuation date of the plan for the current plan 

10 year. 

11 ‘‘(B) PRESUMPTION OF UNDERFUNDING

12 AFTER 10TH MONTH.—In any case in which no 

13 such certification is made with respect to the 

14 plan before the first day of the 10th month of 

15 the current plan year, for purposes of para16 graphs (1), (2), and (3), the plan’s funding tar17 get attainment percentage shall be conclusively 

18 presumed to be less than 60 percent as of the 

19 first day of such 10th month, and such day 

20 shall be deemed, for purposes of such sub21 sections, to be the valuation date of the plan for 

22 the current plan year. 

23 ‘‘(C) PRESUMPTION OF UNDERFUNDING

24 AFTER 4TH MONTH FOR NEARLY UNDER25 FUNDED PLANS.—In any case in which— 
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1 ‘‘(i) a benefit limitation under para2 graph (1), (2), or (3) did not apply to a 

3 plan with respect to the plan year pre4 ceding the current plan year, but the fund5 ing target attainment percentage of the 

6 plan for such preceding plan year was not 

7 more than 10 percentage points greater 

8 than the percentage which would have 

9 caused such subsection to apply to the plan 

10 with respect to such preceding plan year, 

11 and 

12 ‘‘(ii) as of the first day of the 4th 

13 month of the current plan year, the en14 rolled actuary of the plan has not certified 

15 the actual funding target attainment per16 centage of the plan as of the valuation date 

17 of the plan for the current plan year, 

18 until the enrolled actuary so certifies, such first 

19 day shall be deemed, for purposes of such sub20 section, to be the valuation date of the plan for 

21 the current plan year and the funding target at22 tainment percentage of the plan as of such first 

23 day shall, for purposes of such paragraph, be 

24 presumed to be equal to 10 percentage points 

25 less than the funding target attainment per-
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1 centage of the plan as of the valuation date of 

2 the plan for such preceding plan year. 

3 ‘‘(6) RESTORATION BY PLAN AMENDMENT OF

4 BENEFITS OR BENEFIT ACCRUAL.—In any case in 

5 which a prohibition under paragraph (2) of a pay6 ment described in paragraph (2)(A) or a cessation of 

7 benefit accruals under paragraph (3) is applied to a 

8 plan with respect to any plan year and such prohibi9 tion or cessation, as the case may be, ceases to apply 

10 to any subsequent plan year, the plan may provide 

11 for the resumption of such benefit payment or such 

12 benefit accrual only by means of the adoption of a 

13 plan amendment after the valuation date of the plan 

14 for such subsequent plan year. The preceding sen15 tence shall not apply to a prohibition or cessation re16 quired by reason of paragraph (5). 

17 ‘‘(7) FUNDING TARGET ATTAINMENT PERCENT18 AGE.— 

19 ‘‘(A) IN GENERAL.—For purposes of this 

20 subsection, the term ‘funding target attainment 

21 percentage’ means, with respect to any plan for 

22 any plan year, the ratio (expressed as a per23 centage) which— 

24 ‘‘(i) the value of plan assets for the 

25 plan year (as determined under section 
75 

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1 303(g)) reduced by the pre-funding bal2 ance and the funding standard carryover 

3 balance (within the meaning of section 

4 303(f)), bears to 

5 ‘‘(ii) the funding target of the plan for 

6 the plan year (as determined under section 

7 303(d)(1), but without regard to section 

8 303(i)(1)). 

9 ‘‘(B) APPLICATION TO PLANS WHICH ARE

10 FULLY FUNDED WITHOUT REGARD TO REDUC11 TIONS FOR FUNDING BALANCES.— 

12 ‘‘(i) IN GENERAL.—In the case of a 

13 plan for any plan year, if the funding tar14 get attainment percentage is 100 percent 

15 or more (determined without regard to this 

16 subparagraph and without regard to the 

17 reduction under subparagraph (A)(i) for 

18 the pre-funding balance and the funding 

19 standard carryover balance), subparagraph 

20 (A) shall be applied without regard to such 

21 reduction. 

22 ‘‘(ii) TRANSITION RULE.—Clause (i) 

23 shall be applied to plan years beginning 

24 after 2006 and before 2011 by substituting 

25 for ‘100 percent’ the applicable percentage 
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1 determined in accordance with the fol2 lowing table: 

‘‘In the case of a plan year beginning in calendar 

year: 

The applicable percentage is: 

2007 .............................................................................................. 92 percent

2008 .............................................................................................. 94 percent

2009 .............................................................................................. 96 percent

2010 .............................................................................................. 98 percent. 

3 ‘‘(iii) LIMITATION.—Clause (ii) shall 

4 not apply with respect to any plan year 

5 after 2007 unless the funding target at6 tainment percentage (determined without 

7 regard to this subparagraph and without 

8 regard to the reduction under subpara9 graph (A)(i) for the pre-funding balance 

10 and the funding standard carryover bal11 ance) of the plan for each preceding plan 

12 year after 2006 was not less than the ap13 plicable percentage with respect to such 

14 preceding plan year determined under 

15 clause (ii). 

16 ‘‘(8) DEEMED REDUCTION OF FUNDING BAL17 ANCES.—In the case of a plan maintained pursuant 

18 to 1 or more collective bargaining agreements be19 tween employee representatives and 1 or more em20 ployers— 
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1 ‘‘(A) IN GENERAL.—In any case in which 

2 a benefit limitation under paragraph (1), (2), or 

3 (3) would (but for this paragraph and deter4 mined without regard to paragraph (1)(B)) 

5 apply to such plan for the plan year, the plan 

6 sponsor of such plan shall be treated for pur7 poses of this Act as having made an election 

8 under section 303(f)(5) to reduce the balance of 

9 the pre-funding balance and the funding stand10 ard carryover balance for the plan year (in a 

11 manner consistent with the requirements of sec12 tion 303(f)(5)(B)) by such amount as is nec13 essary for such benefit limitation to not apply 

14 to the plan for such plan year. 

15 ‘‘(B) EXCEPTION FOR INSUFFICIENT

16 FUNDING BALANCES.—Subparagraph (A) shall 

17 not apply with respect to a benefit limitation 

18 for any plan year if the application of subpara19 graph (A) would not result in the benefit limita20 tion not applying for such plan year.’’. 

21 (2) NOTICE REQUIREMENT.— 

22 (A) IN GENERAL.—Section 101 of such 

23 Act (29 U.S.C. 1021) is amended— 

24 (i) by redesignating subsection (j) as 

25 subsection (k); and 
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1 (ii) by inserting after subsection (i) 

2 the following new subsection: 

3 ‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON

4 CERTAIN FORMS OF DISTRIBUTION.—The plan adminis5 trator of a defined benefit plan which is a single-employer 

6 plan shall provide a written notice to plan participants and 

7 beneficiaries within 30 days after the plan has become 

8 subject to the restriction described in section 206(h)(2) 

9 or at such other time as may be determined by the Sec10 retary.’’. 

11 (B) ENFORCEMENT.—Section 502(c)(4) of 

12 such Act (29 U.S.C. 1132(c)(4)) is amended by 

13 striking ‘‘section 302(b)(7)(F)(vi)’’ and insert14 ing ‘‘sections 101(j) and 302(b)(7)(F)(vi)’’. 

15 (c) EFFECTIVE DATE.— 

16 (1) SHUTDOWN BENEFITS.—Except as provided 

17 in paragraph (3), the amendments made by sub18 section (a) shall apply with respect to plant shut19 downs, or other unpredictable contingent events, oc20 curring after 2006. 

21 (2) OTHER BENEFITS.—Except as provided in 

22 paragraph (3), the amendments made by subsection 

23 (b) shall apply with respect to plan years beginning 

24 after 2006. 
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1 (3) COLLECTIVE BARGAINING EXCEPTION.—In 

2 the case of a plan maintained pursuant to 1 or more 

3 collective bargaining agreements between employee 

4 representatives and 1 or more employers ratified be5 fore the date of the enactment of this Act, the 

6 amendments made by this subsection shall not apply 

7 to plan years beginning before the earlier of— 

8 (A) the later of— 

9 (i) the date on which the last collec10 tive bargaining agreement relating to the 

11 plan terminates (determined without re12 gard to any extension thereof agreed to 

13 after the date of the enactment of this 

14 Act), or 

15 (ii) the first day of the first plan year 

16 to which the amendments made by this 

17 subsection would (but for this subpara18 graph) apply, or 

19 (B) January 1, 2009. 

20 For purposes of clause (i), any plan amendment 

21 made pursuant to a collective bargaining agreement 

22 relating to the plan which amends the plan solely to 

23 conform to any requirement added by this subsection 

24 shall not be treated as a termination of such collec25 tive bargaining agreement. 
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1 (d) SPECIAL RULE FOR 2007.—For purposes of ap2 plying paragraph (5) of section 206(h) of such Act (as 

3 added by this section) to current plan years (within the 

4 meaning of such paragraph) beginning in 2007, the modi5 fied funded current liability percentage of the plan for the 

6 preceding year shall be substituted for the funding target 

7 attainment percentage of the plan for the preceding year. 

8 For purposes of the preceding sentence, the term ‘‘modi9 fied funded current liability percentage’’ means the funded 

10 current liability percentage (as defined in section 302(l)(8) 

11 of such Act), reduced as described in subparagraph (E) 

12 thereof in the case of a plan with a funded current liability 

13 percentage (as so defined and before such reduction) 

14 which is less than 100 percent. 

15 SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS. 

16 (a) MISCELLANEOUS AMENDMENTS TO TITLE I.— 

17 Subtitle B of title I of the Employee Retirement Income 

18 Security Act of 1974 (29 U.S.C. 1021 et seq.) is amend19 ed— 

20 (1) in section 101(d)(3), by striking ‘‘section 

21 302(e)’’ and inserting ‘‘section 303(j)’’; 

22 (2) in section 101(f)(2)(B), by striking clause 

23 (i) and inserting the following: 

24 ‘‘(i) a statement as to whether— 
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1 ‘‘(I) in the case of a defined ben2 efit plan which is a single-employer 

3 plan, the plan’s funding target attain4 ment percentage (as defined in section 

5 303(d)(2)), or 

6 ‘‘(II) in the case of a defined 

7 benefit plan which is a multiemployer 

8 plan, the plan’s funded percentage (as 

9 defined in section 305(d)(2)), 

10 is at least 100 percent (and, if not, the ac11 tual percentage);’’; 

12 (3) in section 103(d)(8)(B), by striking ‘‘the re13 quirements of section 302(c)(3)’’ and inserting ‘‘the 

14 applicable requirements of sections 303(h) and 

15 304(c)(3)’’; 

16 (4) in section 103(d), by striking paragraph 

17 (11) and inserting the following: 

18 ‘‘(11) If the current value of the assets of the 

19 plan is less than 70 percent of— 

20 ‘‘(A) in the case of a defined benefit plan 

21 which is a single-employer plan, the funding 

22 target (as defined in section 303(d)(1)) of the 

23 plan, or 

24 ‘‘(B) in the case of a defined benefit plan 

25 which is a multiemployer plan, the current li-
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1 ability (as defined in section 304(c)(6)(D)) 

2 under the plan, 

3 the percentage which such value is of the amount 

4 described in subparagraph (A) or (B).’’; 

5 (5) in section 203(a)(3)(C), by striking ‘‘section 

6 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

7 (6) in section 204(g)(1), by striking ‘‘section 

8 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

9 (7) in section 204(i)(2)(B), by striking ‘‘section 

10 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

11 (8) in section 204(i)(3), by striking ‘‘funded 

12 current liability percentage (within the meaning of 

13 section 302(d)(8) of this Act)’’ and inserting ‘‘fund14 ing target attainment percentage (as defined in sec15 tion 303(d)(2))’’; 

16 (9) in section 204(i)(4), by striking ‘‘section 

17 302(c)(11)(A), without regard to section 

18 302(c)(11)(B)’’ and inserting ‘‘section 302(b)(1), 

19 without regard to section 302(b)(2)’’; 

20 (10) in section 206(e)(1), by striking ‘‘section 

21 302(d)’’ and inserting ‘‘section 303(j)(4)’’, and by 

22 striking ‘‘section 302(e)(5)’’ and inserting ‘‘section 

23 303(j)(4)(E)(i)’’; 

24 (11) in section 206(e)(3), by striking ‘‘section 

25 302(e) by reason of paragraph (5)(A) thereof’’ and 
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1 inserting ‘‘section 303(j)(3) by reason of section 

2 303(j)(4)(A)’’; and 

3 (12) in sections 101(e)(3), 403(c)(1), and 

4 408(b)(13), by striking ‘‘American Jobs Creation 

5 Act of 2004’’ and inserting ‘‘Pension Protection Act 

6 of 2005’’. 

7 (b) MISCELLANEOUS AMENDMENTS TO TITLE IV.— 

8 Title IV of such Act is amended— 

9 (1) in section 4001(a)(13) (29 U.S.C. 

10 1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and in11 serting ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’ 

12 and inserting ‘‘412(b)(1)’’, by striking 

13 ‘‘302(c)(11)(B)’’ and inserting ‘‘302(b)(2)’’, and by 

14 striking ‘‘412(c)(11)(B)’’ and inserting ‘‘412(b)(2)’’; 

15 (2) in section 4003(e)(1) (29 U.S.C. 

16 1303(e)(1)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

17 inserting ‘‘303(k)(1)(A) and (B)’’, and by striking 

18 ‘‘412(n)(1)(A) and (B)’’ and inserting 

19 ‘‘430(k)(1)(A) and (B)’’; 

20 (3) in section 4010(b)(2) (29 U.S.C. 

21 1310(b)(2)), by striking ‘‘302(f)(1)(A) and (B)’’ and 

22 inserting ‘‘303(k)(1)(A) and (B)’’, and by striking 

23 ‘‘412(n)(1)(A) and (B)’’ and inserting 

24 ‘‘430(k)(1)(A) and (B)’’; 
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1 (4) in section 4011(b) (29 U.S.C. 1311(b)), by 

2 striking ‘‘to which’’ and all that follows and insert3 ing ‘‘for any plan year for which the plan’s funding 

4 target attainment percentage (as defined in section 

5 303(d)(2)) is at least 90 percent.’’; 

6 (5) in section 4062(c)(1) (29 U.S.C. 

7 1362(c)(1)), by striking paragraphs (1), (2), and (3) 

8 and inserting the following: 

9 ‘‘(1)(A) in the case of a single-employer plan, 

10 the sum of the shortfall amortization charge (within 

11 the meaning of section 303(c)(1) of this Act and 

12 430(c)(1) of the Internal Revenue Code of 1986) 

13 with respect to the plan (if any) for the plan year 

14 in which the termination date occurs, plus the aggre15 gate total of shortfall amortization installments (if 

16 any) determined for succeeding plan years under 

17 section 303(c)(2) of this Act and section 430(c)(2) 

18 of such Code (which, for purposes of this subpara19 graph, shall include any increase in such sum which 

20 would result if all applications for waivers of the 

21 minimum funding standard under section 302(c) of 

22 this Act and section 412(c) of such Code which are 

23 pending with respect to such plan were denied and 

24 if no additional contributions (other than those al25 ready made by the termination date) were made for 
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1 the plan year in which the termination date occurs 

2 or for any previous plan year), or 

3 ‘‘(B) in the case of a multiemployer plan, the 

4 outstanding balance of the accumulated funding de5 ficiencies (within the meaning of section 304(a)(2) 

6 of this Act and section 431(a) of the Internal Rev7 enue Code of 1986) of the plan (if any) (which, for 

8 purposes of this subparagraph, shall include the 

9 amount of any increase in such accumulated funding 

10 deficiencies of the plan which would result if all 

11 pending applications for waivers of the minimum 

12 funding standard under section 302(c) of this Act or 

13 section 412(c) of such Code and for extensions of 

14 the amortization period under section 304(d) of this 

15 Act or section 431(d) of such Code with respect to 

16 such plan were denied and if no additional contribu17 tions (other than those already made by the termi18 nation date) were made for the plan year in which 

19 the termination date occurs or for any previous plan 

20 year), 

21 ‘‘(2)(A) in the case of a single-employer plan, 

22 the sum of the waiver amortization charge (within 

23 the meaning of section 303(e)(1) of this Act and 

24 430(j)(2) of the Internal Revenue Code of 1986) 

25 with respect to the plan (if any) for the plan year 
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1 in which the termination date occurs, plus the aggre2 gate total of waiver amortization installments (if 

3 any) determined for succeeding plan years under 

4 section 303(e)(2) of this Act and section 430(j)(3) 

5 of such Code, or 

6 ‘‘(B) in the case of a multiemployer plan, the 

7 outstanding balance of the amount of waived fund8 ing deficiencies of the plan waived before such date 

9 under section 302(c) of this Act or section 412(c) of 

10 such Code (if any), and 

11 ‘‘(3) in the case of a multiemployer plan, the 

12 outstanding balance of the amount of decreases in 

13 the minimum funding standard allowed before such 

14 date under section 304(d) of this Act or section 

15 431(d) of such Code (if any);’’; 

16 (6) in section 4071 (29 U.S.C. 1371), by strik17 ing ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’; 

18 (7) in section 4243(a)(1)(B) (29 U.S.C. 

19 1423(a)(1)(B)), by striking ‘‘302(a)’’ and inserting 

20 ‘‘304(a)’’, and, in clause (i), by striking ‘‘302(a)’’ 

21 and inserting ‘‘304(a)’’; 

22 (8) in section 4243(f)(1) (29 U.S.C. 

23 1423(f)(1)), by striking ‘‘303(a)’’ and inserting 

24 ‘‘302(c)’’; 
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1 (9) in section 4243(f)(2) (29 U.S.C. 

2 1423(f)(2)), by striking ‘‘303(c)’’ and inserting 

3 ‘‘302(c)(3)’’; and 

4 (10) in section 4243(g) (29 U.S.C. 1423(g)), by 

5 striking ‘‘302(c)(3)’’ and inserting ‘‘304(c)(3)’’. 

6 (c) AMENDMENTS TO REORGANIZATION PLAN NO. 4 

7 OF 1978.—Section 106(b)(ii) of Reorganization Plan No. 

8 4 of 1978 (ratified and affirmed as law by Public Law 

9 98–532 (98 Stat. 2705)) is amended by striking 

10 ‘‘302(c)(8)’’ and inserting ‘‘302(d)(2)’’, by striking 

11 ‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘304(d)(1), (d)(2), 

12 and (e)(2)(A)’’, and by striking ‘‘412(c)(8), (e), and 

13 (f)(2)(A)’’ and inserting ‘‘412(d)(2) and 431(d)(1), (d)(2), 

14 and (e)(2)(A)’’. 

15 (d) REPEAL OF EXPIRED AUTHORITY FOR TEM16 PORARY VARIANCES.— 

17 (1) IN GENERAL.—Section 207 of such Act (29 

18 U.S.C. 1057) is repealed. 

19 (2) CONFORMING AMENDMENT.—The table of 

20 contents in section 1 of such Act is amended by 

21 striking the item relating to section 207. 

22 (e) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to plan years beginning after 2006. 
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1 Subtitle B—Amendments to 

2 Internal Revenue Code of 1986 

3 SEC. 111. MINIMUM FUNDING STANDARDS. 

4 (a) NEW MINIMUM FUNDING STANDARDS.—Section 

5 412 of the Internal Revenue Code of 1986 (relating to 

6 minimum funding standards) is amended to read as fol7 lows: 

8 ‘‘SEC. 412. MINIMUM FUNDING STANDARDS. 

9 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING

10 STANDARD.— 

11 ‘‘(1) IN GENERAL.—A plan to which this sec12 tion applies shall satisfy the minimum funding 

13 standard applicable to the plan for any plan year. 

14 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur15 poses of paragraph (1), a plan shall be treated as 

16 satisfying the minimum funding standard for a plan 

17 year if— 

18 ‘‘(A) in the case of a defined benefit plan 

19 which is not a multiemployer plan, the employer 

20 makes contributions to or under the plan for 

21 the plan year which, in the aggregate, are not 

22 less than the minimum required contribution 

23 determined under section 430 for the plan for 

24 the plan year, 
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1 ‘‘(B) in the case of a money purchase plan 

2 which is not a multiemployer plan, the employer 

3 makes contributions to or under the plan for 

4 the plan year which are required under the 

5 terms of the plan, and 

6 ‘‘(C) in the case of a multiemployer plan, 

7 the employers make contributions to or under 

8 the plan for any plan year which, in the aggre9 gate, are sufficient to ensure that the plan does 

10 not have an accumulated funding deficiency 

11 under section 431 as of the end of the plan 

12 year. 

13 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.— 

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), the amount of any contribution required 

16 by this section (including any required installments 

17 under paragraphs (3) and (4) of section 430(j)) 

18 shall be paid by the employer responsible for making 

19 contributions to or under the plan. 

20 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

21 EMPLOYER MEMBER OF CONTROLLED GROUP.—In 

22 the case of a defined benefit plan which is not a 

23 multiemployer plan, if the employer referred to in 

24 paragraph (1) is a member of a controlled group, 
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1 each member of such group shall be jointly and sev2 erally liable for payment of such contributions. 

3 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND4 ARDS.— 

5 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD6 SHIP.— 

7 ‘‘(A) IN GENERAL.—If— 

8 ‘‘(i) an employer is (or in the case of 

9 a multiemployer plan, 10 percent or more 

10 of the number of employers contributing to 

11 or under the plan is) unable to satisfy the 

12 minimum funding standard for a plan year 

13 without temporary substantial business 

14 hardship (substantial business hardship in 

15 the case of a multiemployer plan), and 

16 ‘‘(ii) application of the standard would 

17 be adverse to the interests of plan partici18 pants in the aggregate, 

19 the Secretary may, subject to subparagraph 

20 (C), waive the requirements of subsection (a) 

21 for such year with respect to all or any portion 

22 of the minimum funding standard. The Sec23 retary shall not waive the minimum funding 

24 standard with respect to a plan for more than 
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1 3 of any 15 (5 of any 15 in the case of a multi2 employer plan) consecutive plan years. 

3 ‘‘(B) EFFECTS OF WAIVER.—If a waiver is 

4 granted under subparagraph (A) for any plan 

5 year— 

6 ‘‘(i) in the case of a defined benefit 

7 plan which is not a multiemployer plan, 

8 the minimum required contribution under 

9 section 430 for the plan year shall be re10 duced by the amount of the waived funding 

11 deficiency and such amount shall be amor12 tized as required under section 430(e), and 

13 ‘‘(ii) in the case of a multiemployer 

14 plan, the funding standard account shall 

15 be credited under section 431(b)(3)(C) 

16 with the amount of the waived funding de17 ficiency and such amount shall be amor18 tized as required under section 

19 431(b)(2)(C). 

20 ‘‘(C) WAIVER OF AMORTIZED PORTION

21 NOT ALLOWED.—The Secretary may not waive 

22 under subparagraph (A) any portion of the 

23 minimum funding standard under subsection 

24 (a) for a plan year which is attributable to any 
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1 waived funding deficiency for any preceding 

2 plan year. 

3 ‘‘(2) DETERMINATION OF BUSINESS HARD4 SHIP.—For purposes of this subsection, the factors 

5 taken into account in determining temporary sub6 stantial business hardship (substantial business 

7 hardship in the case of a multiemployer plan) shall 

8 include (but shall not be limited to) whether or 

9 not— 

10 ‘‘(A) the employer is operating at an eco11 nomic loss, 

12 ‘‘(B) there is substantial unemployment or 

13 underemployment in the trade or business and 

14 in the industry concerned, 

15 ‘‘(C) the sales and profits of the industry 

16 concerned are depressed or declining, and 

17 ‘‘(D) it is reasonable to expect that the 

18 plan will be continued only if the waiver is 

19 granted. 

20 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur21 poses of this section and part III of this subchapter, 

22 the term ‘waived funding deficiency’ means the por23 tion of the minimum funding standard under sub24 section (a) (determined without regard to the waiv-
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1 er) for a plan year waived by the Secretary and not 

2 satisfied by employer contributions. 

3 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM4 PLOYER PLANS, CONSULTATIONS.— 

5 ‘‘(A) SECURITY MAY BE REQUIRED.— 

6 ‘‘(i) IN GENERAL.—Except as pro7 vided in subparagraph (C), the Secretary 

8 may require an employer maintaining a de9 fined benefit plan which is a single-em10 ployer plan (within the meaning of section 

11 4001(a)(15) of the Employee Retirement 

12 Income Security Act of 1974) to provide 

13 security to such plan as a condition for 

14 granting or modifying a waiver under 

15 paragraph (1). 

16 ‘‘(ii) SPECIAL RULES.—Any security 

17 provided under clause (i) may be perfected 

18 and enforced only by the Pension Benefit 

19 Guaranty Corporation, or at the direction 

20 of the Corporation, by a contributing spon21 sor (within the meaning of section 

22 4001(a)(13) of the Employee Retirement 

23 Income Security Act of 1974), or a mem24 ber of such sponsor’s controlled group 
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1 (within the meaning of section 4001(a)(14) 

2 of such Act). 

3 ‘‘(B) CONSULTATION WITH THE PENSION

4 BENEFIT GUARANTY CORPORATION.—Except as 

5 provided in subparagraph (C), the Secretary 

6 shall, before granting or modifying a waiver 

7 under this subsection with respect to a plan de8 scribed in subparagraph (A)(i)— 

9 ‘‘(i) provide the Pension Benefit 

10 Guaranty Corporation with— 

11 ‘‘(I) notice of the completed ap12 plication for any waiver or modifica13 tion, and 

14 ‘‘(II) an opportunity to comment 

15 on such application within 30 days 

16 after receipt of such notice, and 

17 ‘‘(ii) consider— 

18 ‘‘(I) any comments of the Cor19 poration under clause (i)(II), and 

20 ‘‘(II) any views of any employee 

21 organization (within the meaning of 

22 section 3(4) of the Employee Retire23 ment Income Security Act of 1974) 

24 representing participants in the plan 

25 which are submitted in writing to the 
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1 Secretary in connection with such ap2 plication. 

3 Information provided to the Corporation under 

4 this subparagraph shall be considered tax re5 turn information and subject to the safe6 guarding and reporting requirements of section 

7 6103(p). 

8 ‘‘(C) EXCEPTION FOR CERTAIN WAIV9 ERS.— 

10 ‘‘(i) IN GENERAL.—The preceding 

11 provisions of this paragraph shall not 

12 apply to any plan with respect to which the 

13 sum of— 

14 ‘‘(I) the aggregate unpaid min15 imum required contribution (within 

16 the meaning of section 4971(c)(4)) for 

17 the plan year and all preceding plan 

18 years, and 

19 ‘‘(II) the present value of all 

20 waiver amortization installments de21 termined for the plan year and suc22 ceeding plan years under section 

23 430(e)(2), 

24 is less than $1,000,000. 
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1 ‘‘(ii) TREATMENT OF WAIVERS FOR

2 WHICH APPLICATIONS ARE PENDING.—The 

3 amount described in clause (i)(I) shall in4 clude any increase in such amount which 

5 would result if all applications for waivers 

6 of the minimum funding standard under 

7 this subsection which are pending with re8 spect to such plan were denied. 

9 ‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER

10 PLANS.— 

11 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 12 ⁄2 MONTHS AFTER CLOSE OF

13 YEAR.—In the case of a defined benefit plan 

14 which is not a multiemployer plan, no waiver 

15 may be granted under this subsection with re16 spect to any plan for any plan year unless an 

17 application therefor is submitted to the Sec18 retary not later than the 15th day of the 3rd 

19 month beginning after the close of such plan 

20 year. 

21 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM22 BER OF CONTROLLED GROUP.—In the case of a 

23 defined benefit plan which is not a multiem24 ployer plan, if an employer is a member of a 

25 controlled group, the temporary substantial 
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1 business hardship requirements of paragraph 

2 (1) shall be treated as met only if such require3 ments are met— 

4 ‘‘(i) with respect to such employer, 

5 and 

6 ‘‘(ii) with respect to the controlled 

7 group of which such employer is a member 

8 (determined by treating all members of 

9 such group as a single employer). 

10 The Secretary may provide that an analysis of 

11 a trade or business or industry of a member 

12 need not be conducted if the Secretary deter13 mines such analysis is not necessary because 

14 the taking into account of such member would 

15 not significantly affect the determination under 

16 this paragraph. 

17 ‘‘(6) ADVANCE NOTICE.— 

18 ‘‘(A) IN GENERAL.—The Secretary shall, 

19 before granting a waiver under this subsection, 

20 require each applicant to provide evidence satis21 factory to the Secretary that the applicant has 

22 provided notice of the filing of the application 

23 for such waiver to each affected party (as de24 fined in section 4001(a)(21) of the Employee 

25 Retirement Income Security Act of 1974). Such 
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1 notice shall include a description of the extent 

2 to which the plan is funded for benefits which 

3 are guaranteed under title IV of the Employee 

4 Retirement Income Security Act of 1974 and 

5 for benefit liabilities. 

6 ‘‘(B) CONSIDERATION OF RELEVANT IN7 FORMATION.—The Secretary shall consider any 

8 relevant information provided by a person to 

9 whom notice was given under subparagraph 

10 (A). 

11 ‘‘(7) RESTRICTION ON PLAN AMENDMENTS.— 

12 ‘‘(A) IN GENERAL.—No amendment of a 

13 plan which increases the liabilities of the plan 

14 by reason of any increase in benefits, any 

15 change in the accrual of benefits, or any change 

16 in the rate at which benefits become nonforfeit17 able under the plan shall be adopted if a waiver 

18 under this subsection or an extension of time 

19 under section 431(d) is in effect with respect to 

20 the plan, or if a plan amendment described in 

21 subsection (d)(2) has been made at any time in 

22 the preceding 12 months (24 months in the 

23 case of a multiemployer plan). If a plan is 

24 amended in violation of the preceding sentence, 

25 any such waiver, or extension of time, shall not 
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1 apply to any plan year ending on or after the 

2 date on which such amendment is adopted. 

3 ‘‘(B) EXCEPTION.—Paragraph (1) shall 

4 not apply to any plan amendment which— 

5 ‘‘(i) the Secretary determines to be 

6 reasonable and which provides for only de 

7 minimis increases in the liabilities of the 

8 plan, 

9 ‘‘(ii) only repeals an amendment de10 scribed in subsection (d)(2), or 

11 ‘‘(iii) is required as a condition of 

12 qualification under part I of subchapter D, 

13 of chapter 1. 

14 ‘‘(d) MISCELLANEOUS RULES.— 

15 ‘‘(1) CHANGE IN METHOD OR YEAR.—If the 

16 funding method, the valuation date, or a plan year 

17 for a plan is changed, the change shall take effect 

18 only if approved by the Secretary. 

19 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND20 MENTS.—For purposes of this section, any amend21 ment applying to a plan year which— 

22 ‘‘(A) is adopted after the close of such plan 

year but no later than 21 23 ⁄2 months after the 

24 close of the plan year (or, in the case of a mul-
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1 tiemployer plan, no later than 2 years after the 

2 close of such plan year), 

3 ‘‘(B) does not reduce the accrued benefit 

4 of any participant determined as of the begin5 ning of the first plan year to which the amend6 ment applies, and 

7 ‘‘(C) does not reduce the accrued benefit of 

8 any participant determined as of the time of 

9 adoption except to the extent required by the 

10 circumstances, 

11 shall, at the election of the plan administrator, be 

12 deemed to have been made on the first day of such 

13 plan year. No amendment described in this para14 graph which reduces the accrued benefits of any par15 ticipant shall take effect unless the plan adminis16 trator files a notice with the Secretary notifying him 

17 of such amendment and the Secretary has approved 

18 such amendment, or within 90 days after the date 

19 on which such notice was filed, failed to disapprove 

20 such amendment. No amendment described in this 

21 subsection shall be approved by the Secretary unless 

22 the Secretary determines that such amendment is 

23 necessary because of a substantial business hardship 

24 (as determined under subsection (c)(2)) and that a 

25 waiver under subsection (c) (or, in the case of a 
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1 multiemployer plan, any extension of the amortiza2 tion period under section 431(d)) is unavailable or 

3 inadequate. 

4 ‘‘(3) CONTROLLED GROUP.—For purposes of 

5 this section, the term ‘controlled group’ means any 

6 group treated as a single employer under subsection 

7 (b), (c), (m), or (o) of section 414. 

8 ‘‘(e) PLANS TO WHICH SECTION APPLIES.— 

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), this section applies to a plan if, for any 

11 plan year beginning after December 31, 2006— 

12 ‘‘(A) such plan included a trust which 

13 qualified (or was determined by the Secretary 

14 to have qualified) under section 401(a), or 

15 ‘‘(B) such plan satisfied (or was deter16 mined by the Secretary to have satisfied) the 

17 requirements of section 403(a). 

18 ‘‘(2) EXCEPTIONS.—This section shall not 

19 apply to— 

20 ‘‘(A) any profit-sharing or stock bonus 

21 plan, 

22 ‘‘(B) any insurance contract plan described 

23 in paragraph (3), 

24 ‘‘(C) any governmental plan (within the 

25 meaning of section 414(d)), 
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1 ‘‘(D) any church plan (within the meaning 

2 of section 414(e)) with respect to which the 

3 election provided by section 410(d) has not been 

4 made, 

5 ‘‘(E) any plan which has not, at any time 

6 after September 2, 1974, provided for employer 

7 contributions, or 

8 ‘‘(F) any plan established and maintained 

9 by a society, order, or association described in 

10 section 501(c)(8) or (9), if no part of the con11 tributions to or under such plan are made by 

12 employers of participants in such plan. 

13 No plan described in subparagraph (C), (D), or (F) 

14 shall be treated as a qualified plan for purposes of 

15 section 401(a) unless such plan meets the require16 ments of section 401(a)(7) as in effect on September 

17 1, 1974. 

18 ‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.— 

19 A plan is described in this paragraph if— 

20 ‘‘(A) the plan is funded exclusively by the 

21 purchase of individual insurance contracts, 

22 ‘‘(B) such contracts provide for level an23 nual premium payments to be paid extending 

24 not later than the retirement age for each indi25 vidual participating in the plan, and com-
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1 mencing with the date the individual became a 

2 participant in the plan (or, in the case of an in3 crease in benefits, commencing at the time such 

4 increase becomes effective), 

5 ‘‘(C) benefits provided by the plan are 

6 equal to the benefits provided under each con7 tract at normal retirement age under the plan 

8 and are guaranteed by an insurance carrier (li9 censed under the laws of a State to do business 

10 with the plan) to the extent premiums have 

11 been paid, 

12 ‘‘(D) premiums payable for the plan year, 

13 and all prior plan years, under such contracts 

14 have been paid before lapse or there is rein15 statement of the policy, 

16 ‘‘(E) no rights under such contracts have 

17 been subject to a security interest at any time 

18 during the plan year, and 

19 ‘‘(F) no policy loans are outstanding at 

20 any time during the plan year. 

21 A plan funded exclusively by the purchase of group 

22 insurance contracts which is determined under regu23 lations prescribed by the Secretary to have the same 

24 characteristics as contracts described in the pre-
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1 ceding sentence shall be treated as a plan described 

2 in this paragraph.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to plan years beginning after De5 cember 31, 2006. 

6 SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DE7 FINED BENEFIT PENSION PLANS. 

8 (a) IN GENERAL.—Subchapter D of chapter 1 of the 

9 Internal Revenue Code of 1986 (relating to deferred com10 pensation, etc.) is amended by adding at the end the fol11 lowing new part: 

12 ‘‘PART III—MINIMUM FUNDING STANDARDS FOR 

13 SINGLE-EMPLOYER DEFINED BENEFIT PEN14 SION PLANS 

15 ‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE16 EMPLOYER DEFINED BENEFIT PENSION 

17 PLANS. 

18 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For 

19 purposes of this section and section 412(a)(2)(A), except 

20 as provided in subsection (f), the term ‘minimum required 

21 contribution’ means, with respect to any plan year of a 

22 defined benefit plan which is not a multiemployer plan— 

23 ‘‘(1) in any case in which the value of plan as24 sets of the plan (as reduced under subsection 
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1 (f)(4)(B)) is less than the funding target of the plan 

2 for the plan year, the sum of— 

3 ‘‘(A) the target normal cost of the plan for 

4 the plan year, 

5 ‘‘(B) the shortfall amortization charge (if 

6 any) for the plan for the plan year determined 

7 under subsection (c), and 

8 ‘‘(C) the waiver amortization charge (if 

9 any) for the plan for the plan year as deter10 mined under subsection (e); 

11 ‘‘(2) in any case in which the value of plan as12 sets of the plan (as reduced under subsection 

13 (f)(4)(B)) exceeds the funding target of the plan for 

14 the plan year, the target normal cost of the plan for 

15 the plan year reduced by such excess; or 

16 ‘‘(3) in any other case, the target normal cost 

17 of the plan for the plan year. 

18 ‘‘(b) TARGET NORMAL COST.—For purposes of this 

19 section, except as provided in subsection (i)(2) with re20 spect to plans in at-risk status, the term ‘target normal 

21 cost’ means, for any plan year, the present value of all 

22 benefits which are expected to accrue or to be earned 

23 under the plan during the plan year. For purposes of this 

24 subsection, if any benefit attributable to services per25 formed in a preceding plan year is increased by reason 
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1 of any increase in compensation during the current plan 

2 year, the increase in such benefit shall be treated as hav3 ing accrued during the current plan year. 

4 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.— 

5 ‘‘(1) IN GENERAL.—For purposes of this sec6 tion, the shortfall amortization charge for a plan for 

7 any plan year is the aggregate total of the shortfall 

8 amortization installments for such plan year with re9 spect to the shortfall amortization bases for such 

10 plan year and each of the 6 preceding plan years. 

11 ‘‘(2) SHORTFALL AMORTIZATION INSTALL12 MENT.—The plan sponsor shall determine, with re13 spect to the shortfall amortization base of the plan 

14 for any plan year, the amounts necessary to amor15 tize such shortfall amortization base, in level annual 

16 installments over a period of 7 plan years beginning 

17 with such plan year. For purposes of paragraph (1), 

18 the annual installment of such amortization for each 

19 plan year in such 7-plan-year period is the shortfall 

20 amortization installment for such plan year with re21 spect to such shortfall amortization base. In deter22 mining any shortfall amortization installment under 

23 this paragraph, the plan sponsor shall use the seg24 ment rates determined under subparagraph (C) of 
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1 subsection (h)(2), applied under rules similar to the 

2 rules of subparagraph (B) of subsection (h)(2). 

3 ‘‘(3) SHORTFALL AMORTIZATION BASE.—For 

4 purposes of this section, the shortfall amortization 

5 base of a plan for a plan year is the excess (if any) 

6 of— 

7 ‘‘(A) the funding shortfall of such plan for 

8 such plan year, over 

9 ‘‘(B) the sum of— 

10 ‘‘(i) the present value (determined 

11 using the segment rates determined under 

12 subparagraph (C) of subsection (h)(2), ap13 plied under rules similar to the rules of 

14 subparagraph (B) of subsection (h)(2)) of 

15 the aggregate total of the shortfall amorti16 zation installments, for such plan year and 

17 the 5 succeeding plan years, which have 

18 been determined with respect to the short19 fall amortization bases of the plan for each 

20 of the 6 plan years preceding such plan 

21 year, and 

22 ‘‘(ii) the present value (as so deter23 mined) of the aggregate total of the waiver 

24 amortization installments for such plan 

25 year and the 5 succeeding plan years, 
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1 which have been determined with respect 

2 to the waiver amortization bases of the 

3 plan for each of the 5 plan years preceding 

4 such plan year. 

5 ‘‘(4) FUNDING SHORTFALL.—For purposes of 

6 this section, the funding shortfall of a plan for any 

7 plan year is the excess (if any) of— 

8 ‘‘(A) the funding target of the plan for the 

9 plan year, over 

10 ‘‘(B) the value of plan assets of the plan 

11 (as reduced under subsection (f)(4)(B)) for the 

12 plan year which are held by the plan on the 

13 valuation date. 

14 ‘‘(5) EXEMPTION FROM NEW SHORTFALL AM15 ORTIZATION BASE.— 

16 ‘‘(A) IN GENERAL.—In any case in which 

17 the value of plan assets of the plan (as reduced 

18 under subsection (f)(4)(A)) is equal to or great19 er than the funding target of the plan for the 

20 plan year, the shortfall amortization base of the 

21 plan for such plan year shall be zero. 

22 ‘‘(B) TRANSITION RULE.— 

23 ‘‘(i) IN GENERAL.—In the case of a 

24 non-deficit reduction plan, subparagraph 

25 (A) shall be applied to plan years begin-
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1 ning after 2006 and before 2011 by sub2 stituting, for the funding target of the plan 

3 for the plan year, the applicable percentage 

4 of such funding target determined under 

5 the following table: 

‘‘In the case of a plan year beginning in calendar 

year: 

The applicable percentage is: 

2007 .............................................................................................. 92 percent

2008 .............................................................................................. 94 percent

2009 .............................................................................................. 96 percent

2010 .............................................................................................. 98 percent. 

6 ‘‘(ii) LIMITATION.—Clause (i) shall 

7 not apply with respect to any plan year 

8 after 2007 unless the ratio (expressed as a 

9 percentage) which— 

10 ‘‘(I) the value of plan assets for 

11 each preceding plan year after 2006 

12 (as reduced under subsection 

13 (f)(4)(A)), bears to 

14 ‘‘(II) the funding target of the 

15 plan for such preceding plan year (de16 termined without regard to subsection 

17 (i)(1)), 

18 is not less than the applicable percentage 

19 with respect to such preceding plan deter20 mined under clause (i). 
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1 ‘‘(iii) NON-DEFICIT REDUCTION

2 PLAN.—For purposes of clause (i), the 

3 term ‘non-deficit reduction plan’ means 

4 any plan— 

5 ‘‘(I) to which this part (as in ef6 fect on the day before the date of the 

7 enactment of the Pension Protection 

8 Act of 2005) applied for the plan year 

9 beginning in 2006, and 

10 ‘‘(II) to which section 412(d) (as 

11 so in effect) did not apply for such 

12 plan year. 

13 ‘‘(6) EARLY DEEMED AMORTIZATION UPON AT14 TAINMENT OF FUNDING TARGET.—In any case in 

15 which the funding shortfall of a plan for a plan year 

16 is zero, for purposes of determining the shortfall am17 ortization charge for such plan year and succeeding 

18 plan years, the shortfall amortization bases for all 

19 preceding plan years (and all shortfall amortization 

20 installments determined with respect to such bases) 

21 shall be reduced to zero. 

22 ‘‘(d) RULES RELATING TO FUNDING TARGET.—For 

23 purposes of this section— 

24 ‘‘(1) FUNDING TARGET.—Except as provided in 

25 subsection (i)(1) with respect to plans in at-risk sta-
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1 tus, the funding target of a plan for a plan year is 

2 the present value of all liabilities to participants and 

3 their beneficiaries under the plan for the plan year. 

4 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT5 AGE.—The ‘funding target attainment percentage’ of 

6 a plan for a plan year is the ratio (expressed as a 

7 percentage) which— 

8 ‘‘(A) the value of plan assets for the plan 

9 year (as reduced under subsection (f)(4)(B)), 

10 bears to 

11 ‘‘(B) the funding target of the plan for the 

12 plan year (determined without regard to sub13 section (i)(1)). 

14 ‘‘(e) WAIVER AMORTIZATION CHARGE.— 

15 ‘‘(1) DETERMINATION OF WAIVER AMORTIZA16 TION CHARGE.—The waiver amortization charge (if 

17 any) for a plan for any plan year is the aggregate 

18 total of the waiver amortization installments for 

19 such plan year with respect to the waiver amortiza20 tion bases for each of the 5 preceding plan years. 

21 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.— 

22 The plan sponsor shall determine, with respect to 

23 the waiver amortization base of the plan for any 

24 plan year, the amounts necessary to amortize such 

25 waiver amortization base, in level annual install-
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1 ments over a period of 5 plan years beginning with 

2 the succeeding plan year. For purposes of paragraph 

3 (1), the annual installment of such amortization for 

4 each plan year in such 5-plan year period is the 

5 waiver amortization installment for such plan year 

6 with respect to such waiver amortization base. 

7 ‘‘(3) INTEREST RATE.—In determining any 

8 waiver amortization installment under this sub9 section, the plan sponsor shall use the segment rates 

10 determined under subparagraph (C) of subsection 

11 (h)(2), applied under rules similar to the rules of 

12 subparagraph (B) of subsection (h)(2). 

13 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiv14 er amortization base of a plan for a plan year is the 

15 amount of the waived funding deficiency (if any) for 

16 such plan year under section 412(c). 

17 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT18 TAINMENT OF FUNDING TARGET.—In any case in 

19 which the funding shortfall of a plan for a plan year 

20 is zero, for purposes of determining the waiver am21 ortization charge for such plan year and succeeding 

22 plan years, the waiver amortization base for all pre23 ceding plan years shall be reduced to zero. 
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1 ‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU2 TION BY PRE-FUNDING BALANCE AND FUNDING STAND3 ARD CARRYOVER BALANCE.— 

4 ‘‘(1) ELECTION TO MAINTAIN BALANCES.— 

5 ‘‘(A) PRE-FUNDING BALANCE.—The plan 

6 sponsor of a defined benefit plan which is not 

7 a multiemployer plan may elect to maintain a 

8 pre-funding balance. 

9 ‘‘(B) FUNDING STANDARD CARRYOVER

10 BALANCE.— 

11 ‘‘(i) IN GENERAL.—In the case of a 

12 defined benefit plan (other than a multiem13 ployer plan) described in clause (ii), the 

14 plan sponsor may elect to maintain a fund15 ing standard carryover balance, until such 

16 balance is reduced to zero. 

17 ‘‘(ii) PLANS MAINTAINING FUNDING

18 STANDARD ACCOUNT IN 2006.—A plan is 

19 described in this clause if the plan— 

20 ‘‘(I) was in effect for a plan year 

21 beginning in 2006, and 

22 ‘‘(II) had a positive balance in 

23 the funding standard account under 

24 section 412(b) as in effect for such 
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1 plan year and determined as of the 

2 end of such plan year. 

3 ‘‘(2) APPLICATION OF BALANCES.—A pre-fund4 ing balance and a funding standard carryover bal5 ance maintained pursuant to this paragraph— 

6 ‘‘(A) shall be available for crediting against 

7 the minimum required contribution, pursuant to 

8 an election under paragraph (3), 

9 ‘‘(B) shall be applied as a reduction in the 

10 amount treated as the value of plan assets for 

11 purposes of this section, to the extent provided 

12 in paragraph (4), and 

13 ‘‘(C) may be reduced at any time, pursu14 ant to an election under paragraph (5). 

15 ‘‘(3) ELECTION TO APPLY BALANCES AGAINST

16 MINIMUM REQUIRED CONTRIBUTION.— 

17 ‘‘(A) IN GENERAL.—Except as provided in 

18 subparagraphs (B) and (C), in the case of any 

19 plan year in which the plan sponsor elects to 

20 credit against the minimum required contribu21 tion for the current plan year all or a portion 

22 of the pre-funding balance or the funding 

23 standard carryover balance for the current plan 

24 year (not in excess of such minimum required 

25 contribution), the minimum required contribu-
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1 tion for the plan year shall be reduced by the 

2 amount so credited by the plan sponsor. For 

3 purposes of the preceding sentence, the min4 imum required contribution shall be determined 

5 after taking into account any waiver under sec6 tion 412(c). 

7 ‘‘(B) COORDINATION WITH FUNDING

8 STANDARD CARRYOVER BALANCE.—To the ex9 tent that any plan has a funding standard car10 ryover balance greater than zero, no amount of 

11 the pre-funding balance of such plan may be 

12 credited under this paragraph in reducing the 

13 minimum required contribution. 

14 ‘‘(C) LIMITATION FOR UNDERFUNDED

15 PLANS.—The preceding provisions of this para16 graph shall not apply for any plan year if the 

17 ratio (expressed as a percentage) which— 

18 ‘‘(i) the value of plan assets for the 

19 preceding plan year (as reduced under 

20 paragraph (4)(C)), bears to 

21 ‘‘(ii) the funding target of the plan for 

22 the preceding plan year (determined with23 out regard to subsection (i)(1)), 

24 is less than 80 percent. 
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1 ‘‘(4) EFFECT OF BALANCES ON AMOUNTS

2 TREATED AS VALUE OF PLAN ASSETS.—In the case 

3 of any plan maintaining a pre-funding balance or a 

4 funding standard carryover balance pursuant to this 

5 subsection, the amount treated as the value of plan 

6 assets shall be deemed to be such amount, reduced 

7 as provided in the following subparagraphs: 

8 ‘‘(A) APPLICABILITY OF SHORTFALL AM9 ORTIZATION BASE.—For purposes of subsection 

10 (c)(5), the value of plan assets is deemed to be 

11 such amount, reduced by the amount of the 

12 pre-funding balance, but only if an election 

13 under paragraph (2) applying any portion of 

14 the pre-funding balance in reducing the min15 imum required contribution is in effect for the 

16 plan year. 

17 ‘‘(B) DETERMINATION OF EXCESS ASSETS, 

18 FUNDING SHORTFALL, AND FUNDING TARGET

19 ATTAINMENT PERCENTAGE.— 

20 ‘‘(i) IN GENERAL.—For purposes of 

21 subsections (a), (c)(4)(B), and (d)(2)(A), 

22 the value of plan assets is deemed to be 

23 such amount, reduced by the amount of 

24 the pre-funding balance and the funding 

25 standard carryover balance. 
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1 ‘‘(ii) SPECIAL RULE FOR CERTAIN

2 BINDING AGREEMENTS WITH PBGC.—For 

3 purposes of subsection (c)(4)(B), the value 

4 of plan assets shall not be deemed to be re5 duced for a plan year by the amount of the 

6 specified balance if, with respect to such 

7 balance, there is in effect for a plan year 

8 a binding written agreement with the Pen9 sion Benefit Guaranty Corporation which 

10 provides that such balance is not available 

11 to reduce the minimum required contribu12 tion for the plan year. For purposes of the 

13 preceding sentence, the term ‘specified bal14 ance’ means the pre-funding balance or the 

15 funding standard carryover balance, as the 

16 case may be. 

17 ‘‘(C) AVAILABILITY OF BALANCES IN PLAN

18 YEAR FOR CREDITING AGAINST MINIMUM RE19 QUIRED CONTRIBUTION.—For purposes of 

20 paragraph (3)(C)(i) of this subsection, the value 

21 of plan assets is deemed to be such amount, re22 duced by the amount of the pre-funding bal23 ance. 

24 ‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO

25 DETERMINATIONS OF VALUE OF PLAN ASSETS AND
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1 CREDITING AGAINST MINIMUM REQUIRED CONTRIBU2 TION.— 

3 ‘‘(A) IN GENERAL.—The plan sponsor may 

4 elect to reduce by any amount the balance of 

5 the pre-funding balance and the funding stand6 ard carryover balance for any plan year (but 

7 not below zero). Such reduction shall be effec8 tive prior to any determination of the value of 

9 plan assets for such plan year under this sec10 tion and application of the balance in reducing 

11 the minimum required contribution for such 

12 plan for such plan year pursuant to an election 

13 under paragraph (2). 

14 ‘‘(B) COORDINATION BETWEEN PRE-FUND15 ING BALANCE AND FUNDING STANDARD CARRY16 OVER BALANCE.—To the extent that any plan 

17 has a funding standard carryover balance great18 er than zero, no election may be made under 

19 subparagraph (A) with respect to the pre-fund20 ing balance. 

21 ‘‘(6) PRE-FUNDING BALANCE.— 

22 ‘‘(A) IN GENERAL.—A pre-funding balance 

23 maintained by a plan shall consist of a begin24 ning balance of zero, increased and decreased to 

25 the extent provided in subparagraphs (B) and 
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1 (C), and adjusted further as provided in para2 graph (8). 

3 ‘‘(B) INCREASES.—As of the valuation 

4 date for each plan year beginning after 2007, 

5 the pre-funding balance of a plan shall be in6 creased by the amount elected by the plan spon7 sor for the plan year. Such amount shall not ex8 ceed the excess (if any) of— 

9 ‘‘(i) the aggregate total of employer 

10 contributions to the plan for the preceding 

11 plan year, over 

12 ‘‘(ii) the minimum required contribu13 tion for such preceding plan year (in14 creased by interest on any portion of such 

15 minimum required contribution remaining 

16 unpaid as of the valuation date for the cur17 rent plan year, at the effective interest rate 

18 for the plan for the preceding plan year, 

19 for the period beginning with the first day 

20 of such preceding plan year and ending on 

21 the date that payment of such portion is 

22 made). 

23 ‘‘(C) DECREASES.—As of the valuation 

24 date for each plan year after 2007, the pre- 
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1 funding balance of a plan shall be decreased 

2 (but not below zero) by the sum of— 

3 ‘‘(i) the amount of such balance cred4 ited under paragraph (2) (if any) in reduc5 ing the minimum required contribution of 

6 the plan for the preceding plan year, and 

7 ‘‘(ii) any reduction in such balance 

8 elected under paragraph (5). 

9 ‘‘(7) FUNDING STANDARD CARRYOVER BAL10 ANCE.— 

11 ‘‘(A) IN GENERAL.—A funding standard 

12 carryover balance maintained by a plan shall 

13 consist of a beginning balance determined 

14 under subparagraph (B), decreased to the ex15 tent provided in subparagraph (C), and ad16 justed further as provided in paragraph (8). 

17 ‘‘(B) BEGINNING BALANCE.—The begin18 ning balance of the funding standard carryover 

19 balance shall be the positive balance described 

20 in paragraph (1)(B)(ii)(II). 

21 ‘‘(C) DECREASES.—As of the valuation 

22 date for each plan year after 2007, the funding 

23 standard carryover balance of a plan shall be 

24 decreased (but not below zero) by the sum of— 
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1 ‘‘(i) the amount of such balance cred2 ited under paragraph (2) (if any) in reduc3 ing the minimum required contribution of 

4 the plan for the preceding plan year, and 

5 ‘‘(ii) any reduction in such balance 

6 elected under paragraph (5). 

7 ‘‘(8) ADJUSTMENTS TO BALANCES.—In deter8 mining the pre-funding balance or the funding 

9 standard carryover balance of a plan as of the valu10 ation date (before applying any increase or decrease 

11 under paragraph (6) or (7)), the plan sponsor shall, 

12 in accordance with regulations which shall be pre13 scribed by the Secretary, adjust such balance so as 

14 to reflect the rate of net gain or loss (determined, 

15 notwithstanding subsection (g)(3), on the basis of 

16 fair market value) experienced by all plan assets for 

17 the period beginning with the valuation date for the 

18 preceding plan year and ending with the date pre19 ceding the valuation date for the current plan year, 

20 properly taking into account, in accordance with 

21 such regulations, all contributions, distributions, and 

22 other plan payments made during such period. 

23 ‘‘(9) ELECTIONS.—Elections under this sub24 section shall be made at such times, and in such 
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1 form and manner, as shall be prescribed in regula2 tions of the Secretary. 

3 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL4 ITIES.— 

5 ‘‘(1) TIMING OF DETERMINATIONS.—Except as 

6 otherwise provided under this subsection, all deter7 minations under this section for a plan year shall be 

8 made as of the valuation date of the plan for such 

9 plan year. 

10 ‘‘(2) VALUATION DATE.—For purposes of this 

11 section— 

12 ‘‘(A) IN GENERAL.—Except as provided in 

13 subparagraph (B), the valuation date of a plan 

14 for any plan year shall be the first day of the 

15 plan year. 

16 ‘‘(B) EXCEPTION FOR SMALL PLANS.—If, 

17 on each day during the preceding plan year, a 

18 plan had 500 or fewer participants, the plan 

19 may designate any day during the plan year as 

20 its valuation date for such plan year and suc21 ceeding plan years. For purposes of this sub22 paragraph, all defined benefit plans (other than 

23 multiemployer plans) maintained by the same 

24 employer (or any member of such employer’s 

25 controlled group) shall be treated as 1 plan, but 
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1 only participants with respect to such employer 

2 or member shall be taken into account. 

3 ‘‘(C) APPLICATION OF CERTAIN RULES IN

4 DETERMINATION OF PLAN SIZE.—For purposes 

5 of this paragraph— 

6 ‘‘(i) PLANS NOT IN EXISTENCE IN

7 PRECEDING YEAR.—In the case of the first 

8 plan year of any plan, subparagraph (B) 

9 shall apply to such plan by taking into ac10 count the number of participants that the 

11 plan is reasonably expected to have on 

12 days during such first plan year. 

13 ‘‘(ii) PREDECESSORS.—Any reference 

14 in subparagraph (B) to an employer shall 

15 include a reference to any predecessor of 

16 such employer. 

17 ‘‘(3) AUTHORIZATION OF USE OF ACTUARIAL

18 VALUE.—For purposes of this section, the value of 

19 plan assets shall be determined on the basis of any 

20 reasonable actuarial method of valuation which takes 

21 into account fair market value and which is per22 mitted under regulations prescribed by the Sec23 retary, except that— 

24 ‘‘(A) any such method providing for aver25 aging of fair market values may not provide for 
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1 averaging of such values over more than the 36- 

2 month period ending with the month which in3 cludes the valuation date, and 

4 ‘‘(B) any such method may not result in a 

5 determination of the value of plan assets which, 

6 at any time, is lower than 90 percent or greater 

7 than 110 percent of the fair market value of 

8 such assets at such time. 

9 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE10 CEIPTS.—For purposes of this section— 

11 ‘‘(A) CONTRIBUTIONS FOR PRIOR PLAN

12 YEARS TAKEN INTO ACCOUNT.—For purposes 

13 of determining the value of plan assets for any 

14 current plan year, in any case in which a con15 tribution properly allocable to amounts owed for 

16 a preceding plan year is made on or after the 

17 valuation date of the plan for such current plan 

18 year, such contribution shall be taken into ac19 count, except that any such contribution made 

20 during any such current plan year beginning 

21 after 2007 shall be taken into account only in 

22 an amount equal to its present value (deter23 mined using the effective rate of interest for the 

24 plan for the preceding plan year) as of the valu-
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1 ation date of the plan for such current plan 

2 year. 

3 ‘‘(B) CONTRIBUTIONS FOR CURRENT PLAN

4 YEAR DISREGARDED.—For purposes of deter5 mining the value of plan assets for any current 

6 plan year, contributions which are properly allo7 cable to amounts owed for such plan year shall 

8 not be taken into account, and, in the case of 

9 any such contribution made before the valuation 

10 date of the plan for such plan year, such value 

11 of plan assets shall be reduced for interest on 

12 such amount determined using the effective rate 

13 of interest of the plan for the current plan year 

14 for the period beginning when such payment 

15 was made and ending on the valuation date of 

16 the plan. 

17 ‘‘(5) ACCOUNTING FOR PLAN LIABILITIES.— 

18 For purposes of this section— 

19 ‘‘(A) LIABILITIES TAKEN INTO ACCOUNT

20 FOR CURRENT PLAN YEAR.—In determining the 

21 value of liabilities under a plan for a plan year, 

22 liabilities shall be taken into account to the ex23 tent attributable to benefits (including any early 

24 retirement or similar benefit) accrued or earned 

25 as of the beginning of the plan year. 
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1 ‘‘(B) ACCRUALS DURING CURRENT PLAN

2 YEAR DISREGARDED.—For purposes of sub3 paragraph (A), benefits accrued or earned dur4 ing such plan year shall not be taken into ac5 count, irrespective of whether the valuation date 

6 of the plan for such plan year is later than the 

7 first day of such plan year. 

8 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.— 

9 ‘‘(1) IN GENERAL.—Subject to this subsection, 

10 the determination of any present value or other com11 putation under this section shall be made on the 

12 basis of actuarial assumptions and methods— 

13 ‘‘(A) each of which is reasonable (taking 

14 into account the experience of the plan and rea15 sonable expectations), and 

16 ‘‘(B) which, in combination, offer the actu17 ary’s best estimate of anticipated experience 

18 under the plan. 

19 ‘‘(2) INTEREST RATES.— 

20 ‘‘(A) EFFECTIVE INTEREST RATE.—For 

21 purposes of this section, the term ‘effective in22 terest rate’ means, with respect to any plan for 

23 any plan year, the single rate of interest which, 

24 if used to determine the present value of the 

25 plan’s liabilities referred to in subsection (d)(1), 
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1 would result in an amount equal to the funding 

2 target of the plan for such plan year. 

3 ‘‘(B) INTEREST RATES FOR DETERMINING

4 FUNDING TARGET.—For purposes of deter5 mining the funding target of a plan for any 

6 plan year, the interest rate used in determining 

7 the present value of the liabilities of the plan 

8 shall be— 

9 ‘‘(i) in the case of liabilities reason10 ably determined to be payable during the 

11 5-year period beginning on the first day of 

12 the plan year, the first segment rate with 

13 respect to the applicable month, 

14 ‘‘(ii) in the case of liabilities reason15 ably determined to be payable during the 

16 15-year period beginning at the end of the 

17 period described in clause (i), the second 

18 segment rate with respect to the applicable 

19 month, and 

20 ‘‘(iii) in the case of liabilities reason21 ably determined to be payable after the pe22 riod described in clause (ii), the third seg23 ment rate with respect to the applicable 

24 month. 
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1 ‘‘(C) SEGMENT RATES.—For purposes of 

2 this paragraph— 

3 ‘‘(i) FIRST SEGMENT RATE.—The 

4 term ‘first segment rate’ means, with re5 spect to any month, the single rate of in6 terest which shall be determined by the 

7 Secretary for such month on the basis of 

8 the corporate bond yield curve for such 

9 month, taking into account only that por10 tion of such yield curve which is based on 

11 bonds maturing during the 5-year period 

12 commencing with such month. 

13 ‘‘(ii) SECOND SEGMENT RATE.—The 

14 term ‘second segment rate’ means, with re15 spect to any month, the single rate of in16 terest which shall be determined by the 

17 Secretary for such month on the basis of 

18 the corporate bond yield curve for such 

19 month, taking into account only that por20 tion of such yield curve which is based on 

21 bonds maturing during the 15-year period 

22 beginning at the end of the period de23 scribed in clause (i). 

24 ‘‘(iii) THIRD SEGMENT RATE.—The 

25 term ‘third segment rate’ means, with re-
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1 spect to any month, the single rate of in2 terest which shall be determined by the 

3 Secretary for such month on the basis of 

4 the corporate bond yield curve for such 

5 month, taking into account only that por6 tion of such yield curve which is based on 

7 bonds maturing during periods beginning 

8 after the period described in clause (ii). 

9 ‘‘(D) CORPORATE BOND YIELD CURVE.— 

10 For purposes of this paragraph— 

11 ‘‘(i) IN GENERAL.—The term ‘cor12 porate bond yield curve’ means, with re13 spect to any month, a yield curve which is 

14 prescribed by the Secretary for such month 

15 and which reflects a 3-year weighted aver16 age of yields on investment grade cor17 porate bonds with varying maturities. 

18 ‘‘(ii) 3-YEAR WEIGHTED AVERAGE.— 

19 The term ‘3-year weighted average’ means 

20 an average determined by using a method21 ology under which the most recent year is 

22 weighted 50 percent, the year preceding 

23 such year is weighted 35 percent, and the 

24 second year preceding such year is weight25 ed 15 percent. 
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1 ‘‘(E) APPLICABLE MONTH.—For purposes 

2 of this paragraph, the term ‘applicable month’ 

3 means, with respect to any plan for any plan 

4 year, the month which includes the valuation 

5 date of such plan for such plan year or, at the 

6 election of the plan sponsor, any of the 4 

7 months which precede such month. Any election 

8 made under this subparagraph shall apply to 

9 the plan year for which the election is made and 

10 all succeeding plan years, unless the election is 

11 revoked with the consent of the Secretary. 

12 ‘‘(F) PUBLICATION REQUIREMENTS.—The 

13 Secretary shall publish for each month the cor14 porate bond yield curve (and the corporate bond 

15 yield curve reflecting the modification described 

16 in section 417(e)(3)(D)(i) for such month and 

17 each of the rates determined under subpara18 graph (B) for such month. The Secretary shall 

19 also publish a description of the methodology 

20 used to determine such yield curve and such 

21 rates which is sufficiently detailed to enable 

22 plans to make reasonable projections regarding 

23 the yield curve and such rates for future 

24 months based on the plan’s projection of future 

25 interest rates. 
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1 ‘‘(G) TRANSITION RULE.— 

2 ‘‘(i) IN GENERAL.—Notwithstanding 

3 the preceding provisions of this paragraph, 

4 for plan years beginning in 2007 or 2008, 

5 the first, second, or third segment rate for 

6 a plan with respect to any month shall be 

7 equal to the sum of— 

8 ‘‘(I) the product of such rate for 

9 such month determined without re10 gard to this subparagraph, multiplied 

11 by the applicable percentage, and 

12 ‘‘(II) the product of the rate de13 termined under the rules of section 

14 412(b)(5)(B)(ii)(II) (as in effect for 

15 plan years beginning in 2006), multi16 plied by a percentage equal to 100 

17 percent minus the applicable percent18 age. 

19 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

20 purposes of clause (i), the applicable percentage is 331 21 ⁄3 percent for plan years beginning in 2007 and 662 22 ⁄3 percent for plan 

23 years beginning in 2008. 

24 ‘‘(iii) NEW PLANS INELIGIBLE.— 

25 Clause (i) shall not apply to any plan if the 
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1 first plan year of the plan begins after De2 cember 31, 2006. 

3 ‘‘(3) MORTALITY TABLE.— 

4 ‘‘(A) IN GENERAL.—Except as provided in 

5 subparagraph (B), the mortality table used in 

6 determining any present value or making any 

7 computation under this section shall be the 

8 RP–2000 Combined Mortality Table using 

9 Scale AA published by the Society of Actuaries 

10 (as in effect on the date of the enactment of the 

11 Pension Protection Act of 2005), projected as 

12 of the plan’s valuation date. 

13 ‘‘(B) SUBSTITUTE MORTALITY TABLE.— 

14 ‘‘(i) IN GENERAL.—Upon request by 

15 the plan sponsor and approval by the Sec16 retary for a period not to exceed 10 years, 

17 a mortality table which meets the require18 ments of clause (ii) shall be used in deter19 mining any present value or making any 

20 computation under this section. A mor21 tality table described in this clause shall 

22 cease to be in effect if the plan actuary de23 termines at any time that such table does 

24 not meet the requirements of subclauses 

25 (I) and (II) of clause (ii). 
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1 ‘‘(ii) REQUIREMENTS.—A mortality 

2 table meets the requirements of this clause 

3 if the Secretary determines that— 

4 ‘‘(I) such table reflects the actual 

5 experience of the pension plan and 

6 projected trends in such experience, 

7 and 

8 ‘‘(II) such table is significantly 

9 different from the table described in 

10 subparagraph (A). 

11 ‘‘(iii) DEADLINE FOR DISPOSITION OF

12 APPLICATION.—Any mortality table sub13 mitted to the Secretary for approval under 

14 this subparagraph shall be treated as in ef15 fect for the succeeding plan year unless the 

16 Secretary, during the 180-day period be17 ginning on the date of such submission, 

18 disapproves of such table and provides the 

19 reasons that such table fails to meet the 

20 requirements of clause (ii). 

21 ‘‘(C) TRANSITION RULE.—Under regula22 tions of the Secretary, any difference in present 

23 value resulting from the difference in the as24 sumptions as set forth in the mortality table 

25 specified in subparagraph (A) and the assump-
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1 tions as set forth in the mortality table de2 scribed in section 412(l)(7)(C)(ii) (as in effect 

3 for plan years beginning in 2006) shall be 

4 phased in ratably over the first period of 5 plan 

5 years beginning in or after 2007 so as to be 

6 fully effective for the fifth plan year. The pre7 ceding sentence shall not apply to any plan if 

8 the first plan year of the plan begins after De9 cember 31, 2006. 

10 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

11 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

12 FORMS.—For purposes of determining any present 

13 value or making any computation under this section, 

14 there shall be taken into account— 

15 ‘‘(A) the probability that future benefit 

16 payments under the plan will be made in the 

17 form of optional forms of benefits provided 

18 under the plan (including lump sum distribu19 tions, determined on the basis of the plan’s ex20 perience and other related assumptions), and 

21 ‘‘(B) any difference in the present value of 

22 such future benefit payments resulting from the 

23 use of actuarial assumptions, in determining 

24 benefit payments in any such optional form of 
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1 benefits, which are different from those speci2 fied in this subsection. 

3 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU4 ARIAL ASSUMPTIONS.— 

5 ‘‘(A) IN GENERAL.—No actuarial assump6 tion used to determine the funding target for a 

7 plan to which this paragraph applies may be 

8 changed without the approval of the Secretary. 

9 ‘‘(B) PLANS TO WHICH PARAGRAPH AP10 PLIES.—This paragraph shall apply to a plan 

11 only if— 

12 ‘‘(i) the plan is a defined benefit plan 

13 (other than a multiemployer plan) to which 

14 title IV of the Employee Retirement In15 come Security Act of 1974 applies, 

16 ‘‘(ii) the aggregate unfunded vested 

17 benefits as of the close of the preceding 

18 plan year (as determined under section 

19 4006(a)(3)(E)(iii) of the Employee Retire20 ment Income Security Act of 1974) of such 

21 plan and all other plans maintained by the 

22 contributing sponsors (as defined in sec23 tion 4001(a)(13) of such Act) and mem24 bers of such sponsors’ controlled groups 

25 (as defined in section 4001(a)(14) of such 
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1 Act) which are covered by title IV (dis2 regarding plans with no unfunded vested 

3 benefits) exceed $50,000,000, and 

4 ‘‘(iii) the change in assumptions (de5 termined after taking into account any 

6 changes in interest rate and mortality 

7 table) results in a decrease in the funding 

8 shortfall of the plan for the current plan 

9 year that exceeds $50,000,000, or that ex10 ceeds $5,000,000 and that is 5 percent or 

11 more of the funding target of the plan be12 fore such change. 

13 ‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.— 

14 ‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK

15 STATUS.— 

16 ‘‘(A) IN GENERAL.—In any case in which 

17 a plan is in at-risk status for a plan year, the 

18 funding target of the plan for the plan year is 

19 the sum of— 

20 ‘‘(i) the present value of all liabilities 

21 to participants and their beneficiaries 

22 under the plan for the plan year, as deter23 mined by using, in addition to the actu24 arial assumptions described in subsection 
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1 (h), the supplemental actuarial assump2 tions described in subparagraph (B), plus 

3 ‘‘(ii) a loading factor determined 

4 under subparagraph (C). 

5 ‘‘(B) SUPPLEMENTAL ACTUARIAL ASSUMP6 TIONS.—The actuarial assumptions used in de7 termining the valuation of the funding target 

8 shall include, in addition to the actuarial as9 sumptions described in subsection (h), an as10 sumption that all participants will elect benefits 

11 at such times and in such forms as will result 

12 in the highest present value of liabilities under 

13 subparagraph (A)(i). 

14 ‘‘(C) LOADING FACTOR.—The loading fac15 tor applied with respect to a plan under this 

16 paragraph for any plan year is the sum of— 

17 ‘‘(i) $700, times the number of par18 ticipants in the plan, plus 

19 ‘‘(ii) 4 percent of the funding target 

20 (determined without regard to this para21 graph) of the plan for the plan year. 

22 ‘‘(2) TARGET NORMAL COST OF AT-RISK

23 PLANS.—In any case in which a plan is in at-risk 

24 status for a plan year, the target normal cost of the 

25 plan for such plan year shall be the sum of— 
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1 ‘‘(A) the present value of all benefits which 

2 are expected to accrue or be earned under the 

3 plan during the plan year, determined under 

4 the actuarial assumptions used under para5 graph (1), plus 

6 ‘‘(B) the loading factor under paragraph 

7 (1)(C), excluding the portion of the loading fac8 tor described in paragraph (1)(C)(i). 

9 ‘‘(3) DETERMINATION OF AT-RISK STATUS.— 

10 For purposes of this subsection, a plan is in ‘at-risk 

11 status’ for a plan year if the funding target attain12 ment percentage of the plan for the preceding plan 

13 year was less than 60 percent. 

14 ‘‘(4) TRANSITION BETWEEN APPLICABLE FUND15 ING TARGETS AND BETWEEN APPLICABLE TARGET

16 NORMAL COSTS.— 

17 ‘‘(A) IN GENERAL.—In any case in which 

18 a plan which is in at-risk status for a plan year 

19 has been in such status for a consecutive period 

20 of fewer than 5 plan years, the applicable 

21 amount of the funding target and of the target 

22 normal cost shall be, in lieu of the amount de23 termined without regard to this paragraph, the 

24 sum of— 
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1 ‘‘(i) the amount determined under this 

2 section without regard to this subsection, 

3 plus 

4 ‘‘(ii) the transition percentage for 

5 such plan year of the excess of the amount 

6 determined under this subsection (without 

7 regard to this paragraph) over the amount 

8 determined under this section without re9 gard to this subsection. 

10 ‘‘(B) TRANSITION PERCENTAGE.—For 

11 purposes of this paragraph, the ‘transition per12 centage’ for a plan year is the product derived 

13 by multiplying— 

14 ‘‘(i) 20 percent, by 

15 ‘‘(ii) the number of plan years during 

16 the period described in subparagraph (A). 

17 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU18 TIONS.— 

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the due date for any payment of any minimum 

required contribution for any plan year shall be 81 21 ⁄2

22 months after the close of the plan year. 

23 ‘‘(2) INTEREST.—Any payment required under 

24 paragraph (1) for a plan year that is made on a date 

25 other than the valuation date for such plan year 
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1 shall be adjusted for interest accruing for the period 

2 between the valuation date and the payment date, at 

3 the effective rate of interest for the plan for such 

4 plan year. 

5 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

6 SCHEDULE FOR UNDERFUNDED PLANS.— 

7 ‘‘(A) INTEREST PENALTY FOR FAILURE TO

8 MEET ACCELERATED QUARTERLY PAYMENT

9 SCHEDULE.—In any case in which the plan has 

10 a funding shortfall for the preceding plan year, 

11 if the required installment is not paid in full, 

12 then the minimum required contribution for the 

13 plan year (as increased under paragraph (2)) 

14 shall be further increased by an amount equal 

15 to the interest on the amount of the under16 payment for the period of the underpayment, 

17 using an interest rate equal to the excess of— 

18 ‘‘(i) 175 percent of the Federal mid19 term rate (as in effect under section 1274 

20 for the 1st month of such plan year), over 

21 ‘‘(ii) the effective rate of interest for 

22 the plan for the plan year. 

23 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE24 RIOD OF UNDERPAYMENT.—For purposes of 

25 subparagraph (A)— 
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1 ‘‘(i) AMOUNT.—The amount of the 

2 underpayment shall be the excess of— 

3 ‘‘(I) the required installment, 

4 over 

5 ‘‘(II) the amount (if any) of the 

6 installment contributed to or under 

7 the plan on or before the due date for 

8 the installment. 

9 ‘‘(ii) PERIOD OF UNDERPAYMENT.— 

10 The period for which any interest is 

11 charged under this paragraph with respect 

12 to any portion of the underpayment shall 

13 run from the due date for the installment 

14 to the date on which such portion is con15 tributed to or under the plan. 

16 ‘‘(iii) ORDER OF CREDITING CON17 TRIBUTIONS.—For purposes of clause 

18 (i)(II), contributions shall be credited 

19 against unpaid required installments in the 

20 order in which such installments are re21 quired to be paid. 

22 ‘‘(C) NUMBER OF REQUIRED INSTALL23 MENTS; DUE DATES.—For purposes of this 

24 paragraph— 
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1 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.— 

2 There shall be 4 required installments for 

3 each plan year. 

4 ‘‘(ii) TIME FOR PAYMENT OF IN5 STALLMENTS.—The due dates for required 

6 installments are set forth in the following 

7 table: 

‘‘In the case of the following 

required installment: 

The due date is: 

1st ........................................................................... April 15 

2nd ......................................................................... July 15 

3rd .......................................................................... October 15 

4th .......................................................................... January 15 of the following year 

8 ‘‘(D) AMOUNT OF REQUIRED INSTALL9 MENT.—For purposes of this paragraph— 

10 ‘‘(i) IN GENERAL.—The amount of 

11 any required installment shall be 25 per12 cent of the required annual payment. 

13 ‘‘(ii) REQUIRED ANNUAL PAYMENT.— 

14 For purposes of clause (i), the term ‘re15 quired annual payment’ means the lesser 

16 of— 

17 ‘‘(I) 90 percent of the minimum 

18 required contribution (without regard 

19 to any waiver under section 412(c)) to 
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1 the plan for the plan year under this 

2 section, or 

3 ‘‘(II) in the case of a plan year 

4 beginning after 2007, 100 percent of 

5 the minimum required contribution 

6 (without regard to any waiver under 

7 section 412(c)) to the plan for the 

8 preceding plan year. 

9 Subclause (II) shall not apply if the pre10 ceding plan year referred to in such clause 

11 was not a year of 12 months. 

12 ‘‘(E) FISCAL YEARS AND SHORT YEARS.— 

13 ‘‘(i) FISCAL YEARS.—In applying this 

14 paragraph to a plan year beginning on any 

15 date other than January 1, there shall be 

16 substituted for the months specified in this 

17 paragraph, the months which correspond 

18 thereto. 

19 ‘‘(ii) SHORT PLAN YEAR.—This sub20 paragraph shall be applied to plan years of 

21 less than 12 months in accordance with 

22 regulations prescribed by the Secretary. 

23 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

24 WITH QUARTERLY CONTRIBUTIONS.— 
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1 ‘‘(A) IN GENERAL.—A plan to which this 

2 paragraph applies shall be treated as failing to 

3 pay the full amount of any required installment 

4 under paragraph (3) to the extent that the 

5 value of the liquid assets paid in such install6 ment is less than the liquidity shortfall (wheth7 er or not such liquidity shortfall exceeds the 

8 amount of such installment required to be paid 

9 but for this paragraph). 

10 ‘‘(B) PLANS TO WHICH PARAGRAPH AP11 PLIES.—This paragraph shall apply to a plan 

12 (other than a plan that would be described in 

13 subsection (f)(2)(B) if ‘100’ were substituted 

14 for ‘500’ therein) which— 

15 ‘‘(i) is required to pay installments 

16 under paragraph (3) for a plan year, and 

17 ‘‘(ii) has a liquidity shortfall for any 

18 quarter during such plan year. 

19 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

20 purposes of paragraph (3)(A), any portion of an 

21 installment that is treated as not paid under 

22 subparagraph (A) shall continue to be treated 

23 as unpaid until the close of the quarter in 

24 which the due date for such installment occurs. 
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1 ‘‘(D) LIMITATION ON INCREASE.—If the 

2 amount of any required installment is increased 

3 by reason of subparagraph (A), in no event 

4 shall such increase exceed the amount which, 

5 when added to prior installments for the plan 

6 year, is necessary to increase the funding target 

7 attainment percentage of the plan for the plan 

8 year (taking into account the expected increase 

9 in funding target due to benefits accruing or 

10 earned during the plan year) to 100 percent. 

11 ‘‘(E) DEFINITIONS.—For purposes of this 

12 subparagraph: 

13 ‘‘(i) LIQUIDITY SHORTFALL.—The 

14 term ‘liquidity shortfall’ means, with re15 spect to any required installment, an 

16 amount equal to the excess (as of the last 

17 day of the quarter for which such install18 ment is made) of— 

19 ‘‘(I) the base amount with re20 spect to such quarter, over 

21 ‘‘(II) the value (as of such last 

22 day) of the plan’s liquid assets. 

23 ‘‘(ii) BASE AMOUNT.— 

24 ‘‘(I) IN GENERAL.—The term 

25 ‘base amount’ means, with respect to 
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1 any quarter, an amount equal to 3 

2 times the sum of the adjusted dis3 bursements from the plan for the 12 

4 months ending on the last day of such 

5 quarter. 

6 ‘‘(II) SPECIAL RULE.—If the 

7 amount determined under subclause 

8 (I) exceeds an amount equal to 2 

9 times the sum of the adjusted dis10 bursements from the plan for the 36 

11 months ending on the last day of the 

12 quarter and an enrolled actuary cer13 tifies to the satisfaction of the Sec14 retary that such excess is the result of 

15 nonrecurring circumstances, the base 

16 amount with respect to such quarter 

17 shall be determined without regard to 

18 amounts related to those nonrecurring 

19 circumstances. 

20 ‘‘(iii) DISBURSEMENTS FROM THE

21 PLAN.—The term ‘disbursements from the 

22 plan’ means all disbursements from the 

23 trust, including purchases of annuities, 

24 payments of single sums and other bene25 fits, and administrative expenses. 
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1 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

2 The term ‘adjusted disbursements’ means 

3 disbursements from the plan reduced by 

4 the product of— 

5 ‘‘(I) the plan’s funding target at6 tainment percentage for the plan year, 

7 and 

8 ‘‘(II) the sum of the purchases of 

9 annuities, payments of single sums, 

10 and such other disbursements as the 

11 Secretary shall provide in regulations. 

12 ‘‘(v) LIQUID ASSETS.—The term ‘liq13 uid assets’ means cash, marketable securi14 ties, and such other assets as specified by 

15 the Secretary in regulations. 

16 ‘‘(vi) QUARTER.—The term ‘quarter’ 

17 means, with respect to any required install18 ment, the 3-month period preceding the 

19 month in which the due date for such in20 stallment occurs. 

21 ‘‘(F) REGULATIONS.—The Secretary may 

22 prescribe such regulations as are necessary to 

23 carry out this paragraph. 

24 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO

25 MAKE REQUIRED CONTRIBUTIONS.— 
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1 ‘‘(1) IN GENERAL.—In the case of a plan to 

2 which this subsection applies, if— 

3 ‘‘(A) any person fails to make a contribu4 tion payment required by section 412 and this 

5 section before the due date for such payment, 

6 and 

7 ‘‘(B) the unpaid balance of such payment 

8 (including interest), when added to the aggre9 gate unpaid balance of all preceding such pay10 ments for which payment was not made before 

11 the due date (including interest), exceeds 

12 $1,000,000, 

13 then there shall be a lien in favor of the plan in the 

14 amount determined under paragraph (3) upon all 

15 property and rights to property, whether real or per16 sonal, belonging to such person and any other per17 son who is a member of the same controlled group 

18 of which such person is a member. 

19 ‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.— 

20 This subsection shall apply to a defined benefit plan 

21 (other than a multiemployer plan) for any plan year 

22 for which the funding target attainment percentage 

23 (as defined in subsection (d)(2)) of such plan is less 

24 than 100 percent. This subsection shall not apply to 

25 any plan to which section 4021 of the Employee Re-
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1 tirement Income Security Act of 1974 does not 

2 apply (as such section is in effect on the date of the 

3 enactment of the Pension Protection Act of 2005). 

4 ‘‘(3) AMOUNT OF LIEN.—For purposes of para5 graph (1), the amount of the lien shall be equal to 

6 the aggregate unpaid balance of contribution pay7 ments required under this section and section 412 

8 for which payment has not been made before the due 

9 date. 

10 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

11 ‘‘(A) NOTICE OF FAILURE.—A person 

12 committing a failure described in paragraph (1) 

13 shall notify the Pension Benefit Guaranty Cor14 poration of such failure within 10 days of the 

15 due date for the required contribution payment. 

16 ‘‘(B) PERIOD OF LIEN.—The lien imposed 

17 by paragraph (1) shall arise on the due date for 

18 the required contribution payment and shall 

19 continue until the last day of the first plan year 

20 in which the plan ceases to be described in 

21 paragraph (1)(B). Such lien shall continue to 

22 run without regard to whether such plan con23 tinues to be described in paragraph (2) during 

24 the period referred to in the preceding sentence. 
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1 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

2 amount with respect to which a lien is imposed 

3 under paragraph (1) shall be treated as taxes 

4 due and owing the United States and rules 

5 similar to the rules of subsections (c), (d), and 

6 (e) of section 4068 of the Employee Retirement 

7 Income Security Act of 1974 shall apply with 

8 respect to a lien imposed by subsection (a) and 

9 the amount with respect to such lien. 

10 ‘‘(5) ENFORCEMENT.—Any lien created under 

11 paragraph (1) may be perfected and enforced only 

12 by the Pension Benefit Guaranty Corporation, or at 

13 the direction of the Pension Benefit Guaranty Cor14 poration, by the contributing sponsor (or any mem15 ber of the controlled group of the contributing spon16 sor). 

17 ‘‘(6) DEFINITIONS.—For purposes of this sub18 section— 

19 ‘‘(A) CONTRIBUTION PAYMENT.—The term 

20 ‘contribution payment’ means, in connection 

21 with a plan, a contribution payment required to 

22 be made to the plan, including any required in23 stallment under paragraphs (3) and (4) of sub24 section (i). 
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1 ‘‘(B) DUE DATE; REQUIRED INSTALL2 MENT.—The terms ‘due date’ and ‘required in3 stallment’ have the meanings given such terms 

4 by subsection (j), except that in the case of a 

5 payment other than a required installment, the 

6 due date shall be the date such payment is re7 quired to be made under section 430. 

8 ‘‘(C) CONTROLLED GROUP.—The term 

9 ‘controlled group’ means any group treated as 

10 a single employer under subsections (b), (c), 

11 (m), and (o) of section 414. 

12 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

13 ACCOUNTS.—In the case of a qualified transfer (as de14 fined in section 420), any assets so transferred shall not, 

15 for purposes of this section, be treated as assets in the 

16 plan.’’. 

17 (b) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply with respect to plan years begin19 ning after December 31, 2006. 

20 SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EM21 PLOYER PLANS. 

22 (a) PROHIBITION OF SHUTDOWN BENEFITS AND

23 OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS

24 UNDER SINGLE-EMPLOYER PLANS.— 
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1 (1) IN GENERAL.—Part III of subchapter D of 

2 chapter 1 of the Internal Revenue Code of 1986 (re3 lating to deferred compensation, etc.) is amended— 

4 (A) by striking the heading and inserting 

5 the following: 

6 ‘‘PART III—RULES RELATING TO MINIMUM FUND7 ING STANDARDS AND BENEFIT LIMITATIONS 

‘‘Subpart A. Minimum funding standards for pension plans. 

‘‘Subpart B. Benefit limitations under single-employer plans. 

8 ‘‘Subpart A—Minimum Funding Standards for 

9 Pension Plans 

‘‘Sec. 430. Minimum funding standards for single-employer defined benefit pension plans.’’, and 

10 (B) by adding at the end the following new 

11 subpart: 

12 ‘‘Subpart B—Benefit Limitations Under Single13 employer Plans 

‘‘Sec. 436. Funding-based limitation on shutdown benefits and other unpredictable contingent event benefits under single-employer plans. 

14 ‘‘SEC. 436. FUNDING-BASED LIMITATION ON SHUTDOWN 

15 BENEFITS AND OTHER UNPREDICTABLE CON16 TINGENT EVENT BENEFITS UNDER SINGLE17 EMPLOYER PLANS. 

18 ‘‘(a) IN GENERAL.—No defined benefit plan (other 

19 than a multiemployer plan) may provide benefits to which 

20 participants are entitled solely by reason of the occurrence 
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1 of a plant shutdown or any other unpredictable contingent 

2 event occurring during any plan year if the funding target 

3 attainment percentage as of the valuation date of the plan 

4 for such plan year— 

5 ‘‘(1) is less than 80 percent, or 

6 ‘‘(2) would be less than 80 percent taking into 

7 account such occurrence. 

8 ‘‘(b) EXEMPTION.—Subsection (a) shall cease to 

9 apply with respect to any plan year, effective as of the 

10 first date of the plan year, upon payment by the plan 

11 sponsor of a contribution (in addition to any minimum re12 quired contribution under section 430) equal to— 

13 ‘‘(1) in the case of subsection (a)(1), the 

14 amount of the increase in the funding target of the 

15 plan (under section 430) for the plan year attrib16 utable to the occurrence referred to in subsection 

17 (a), and 

18 ‘‘(2) in the case of subsection (a)(2), the 

19 amount sufficient to result in a funding target at20 tainment percentage of 80 percent. 

21 Rules similar to the rules of section 437(f) shall apply for 

22 purposes of this subsection. 

23 ‘‘(c) UNPREDICTABLE CONTINGENT EVENT.—For 

24 purposes of this section, the term ‘unpredictable contin25 gent event’ means an event other than— 
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1 ‘‘(1) attainment of any age, performance of any 

2 service, receipt or derivation of any compensation, or 

3 the occurrence of death or disability, or 

4 ‘‘(2) an event which is reasonably and reliably 

5 predictable (as determined by the Secretary). 

6 ‘‘(d) NEW PLANS.—Subsection (a) shall not apply to 

7 a plan for the first 5 plan years of the plan. For purposes 

8 of this subsection, the reference in this subsection to a 

9 plan shall include a reference to any predecessor plan. 

10 ‘‘(e) DEEMED REDUCTION OF FUNDING BAL11 ANCES.—A rule similar to the rule of section 437(h) shall 

12 apply for purposes of this section.’’. 

13 (2) CLERICAL AMENDMENT.—The table of 

14 parts for suchapter D of chapter 1 of the Internal 

15 Revenue Code of 1986 is amended by adding at the 

16 end the following new item: 

‘‘PART III—RULES RELATING TO MINIMUM FUNDING STANDARDS AND

BENEFIT LIMITATIONS’’. 

17 (b) OTHER LIMITS ON BENEFITS AND BENEFIT AC18 CRUALS.— 

19 (1) IN GENERAL.—Subpart B of part III of 

20 subchapter D of chapter 1 of such Code is amended 

21 by adding at the end the following: 
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1 ‘‘SEC. 437. FUNDING-BASED LIMITS ON BENEFITS AND BEN2 EFIT ACCRUALS UNDER SINGLE-EMPLOYER 

3 PLANS. 

4 ‘‘(a) LIMITATIONS ON PLAN AMENDMENTS INCREAS5 ING LIABILITY FOR BENEFITS.— 

6 ‘‘(1) IN GENERAL.—No amendment to a de7 fined benefit plan (other than a multiemployer plan) 

8 which has the effect of increasing liabilities of the 

9 plan by reason of increases in benefits, establish10 ment of new benefits, changing the rate of benefit 

11 accrual, or changing the rate at which benefits be12 come nonforfeitable to the plan may take effect dur13 ing any plan year if the funding target attainment 

14 percentage as of the valuation date of the plan for 

15 such plan year is— 

16 ‘‘(A) less than 80 percent, or 

17 ‘‘(B) would be less than 80 percent taking 

18 into account such amendment. 

19 For purposes of this paragraph, any increase in ben20 efits under the plan by reason of an increase in the 

21 benefit rate provided under the plan or on the basis 

22 of an increase in compensation shall be treated as 

23 effected by plan amendment. 

24 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease 

25 to apply with respect to any plan year, effective as 

26 of the first date of the plan year (or if later, the ef-
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1 fective date of the amendment), upon payment by 

2 the plan sponsor of a contribution (in addition to 

3 any minimum required contribution under section 

4 430) equal to— 

5 ‘‘(A) in the case of paragraph (1)(A), the 

6 amount of the increase in the funding target of 

7 the plan (under section 430) for the plan year 

8 attributable to the amendment, and 

9 ‘‘(B) in the case of paragraph (1)(B), the 

10 amount sufficient to result in a funding target 

11 attainment percentage of 80 percent. 

12 ‘‘(b) FUNDING-BASED LIMITATION ON CERTAIN

13 FORMS OF DISTRIBUTION.— 

14 ‘‘(1) IN GENERAL.—A defined benefit plan 

15 (other than a multiemployer plan) shall provide that, 

16 in any case in which the plan’s funding target at17 tainment percentage as of the valuation date of the 

18 plan for a plan year is less than 80 percent, the plan 

19 may not after such date pay any payment described 

20 in section 401(a)(32)(B). 

21 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

22 apply to any plan for any plan year if the terms of 

23 such plan (as in effect for the period beginning on 

24 June 29, 2005, and ending with such plan year) 
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1 provide for no benefit accruals with respect to any 

2 participant during such period. 

3 ‘‘(c) LIMITATIONS ON BENEFIT ACCRUALS FOR

4 PLANS WITH SEVERE FUNDING SHORTFALLS.—A de5 fined benefit plan (other than a multiemployer plan) shall 

6 provide that, in any case in which the plan’s funding tar7 get attainment percentage as of the valuation date of the 

8 plan for a plan year is less than 60 percent, all future 

9 benefit accruals under the plan shall cease as of such date. 

10 ‘‘(d) NEW PLANS.—Subsections (a) and (c) shall not 

11 apply to a plan for the first 5 plan years of the plan. For 

12 purposes of this subsection, the reference in this sub13 section to a plan shall include a reference to any prede14 cessor plan. 

15 ‘‘(e) PRESUMED UNDERFUNDING FOR PURPOSES OF

16 BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S FUND17 ING STATUS.— 

18 ‘‘(1) PRESUMPTION OF CONTINUED UNDER19 FUNDING.—In any case in which a benefit limitation 

20 under subsection (a), (b), or (c) has been applied to 

21 a plan with respect to the plan year preceding the 

22 current plan year, the funding target attainment 

23 percentage of the plan as of the valuation date of 

24 the plan for the current plan year shall be presumed 

25 to be equal to the funding target attainment per-
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1 centage of the plan as of the valuation date of the 

2 plan for the preceding plan year until the enrolled 

3 actuary of the plan certifies the actual funding tar4 get attainment percentage of the plan as of the valu5 ation date of the plan for the current plan year. 

6 ‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER

7 10TH MONTH.—In any case in which no such certifi8 cation is made with respect to the plan before the 

9 first day of the 10th month of the current plan year, 

10 for purposes of subsections (a), (b), and (c), the 

11 plan’s funding target attainment percentage shall be 

12 conclusively presumed to be less than 60 percent as 

13 of the first day of such 10th month, and such day 

14 shall be deemed, for purposes of such subsections, to 

15 be the valuation date of the plan for the current 

16 plan year. 

17 ‘‘(3) PRESUMPTION OF UNDERFUNDING AFTER

18 4TH MONTH FOR NEARLY UNDERFUNDED PLANS.— 

19 In any case in which— 

20 ‘‘(A) a benefit limitation under subsection 

21 (a), (b), or (c) did not apply to a plan with re22 spect to the plan year preceding the current 

23 plan year, but the funding target attainment 

24 percentage of the plan for such preceding plan 

25 year was not more than 10 percentage points 
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1 greater than the percentage which would have 

2 caused such subsection to apply to the plan 

3 with respect to such preceding plan year, and 

4 ‘‘(B) as of the first day of the 4th month 

5 of the current plan year, the enrolled actuary of 

6 the plan has not certified the actual funding 

7 target attainment percentage of the plan as of 

8 the valuation date of the plan for the current 

9 plan year, 

10 until the enrolled actuary so certifies, such first day 

11 shall be deemed, for purposes of such subsection, to 

12 be the valuation date of the plan for the current 

13 plan year and the funding target attainment per14 centage of the plan as of such first day shall, for 

15 purposes of such subsection, be presumed to be 

16 equal to 10 percentage points less than the funding 

17 target attainment percentage of the plan as of the 

18 valuation date of the plan for such preceding plan 

19 year. 

20 ‘‘(f) RESTORATION BY PLAN AMENDMENT OF BENE21 FITS OR BENEFIT ACCRUAL.—In any case in which a pro22 hibition under subsection (b) of a payment described in 

23 subsection (b)(1) or a cessation of benefit accruals under 

24 subsection (c) is applied to a plan with respect to any plan 

25 year and such prohibition or cessation, as the case may 
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1 be, ceases to apply to any subsequent plan year, the plan 

2 may provide for the resumption of such benefit payment 

3 or such benefit accrual only by means of the adoption of 

4 a plan amendment after the valuation date of the plan 

5 for such subsequent plan year. The preceding sentence 

6 shall not apply to a prohibition or cessation required by 

7 reason of subsection (e). 

8 ‘‘(g) FUNDING TARGET ATTAINMENT PERCENT9 AGE.— 

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, the term ‘funding target attainment percent12 age’ means, with respect to any plan for any plan 

13 year, the ratio (expressed as a percentage) which— 

14 ‘‘(A) the value of plan assets for the plan 

15 year (as determined under section 430(g)) re16 duced by the pre-funding balance and the fund17 ing standard carryover balance (within the 

18 meaning of section 430(f)), bears to 

19 ‘‘(B) the funding target of the plan for the 

20 plan year (as determined under section 

21 430(d)(1), but without regard to section 

22 430(i)(1)). 

23 ‘‘(2) APPLICATION TO PLANS WHICH ARE

24 FULLY FUNDED WITHOUT REGARD TO REDUCTIONS

25 FOR FUNDING BALANCES.— 
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1 ‘‘(A) IN GENERAL.—In the case of a plan 

2 for any plan year, if the funding target attain3 ment percentage is 100 percent or more (deter4 mined without regard to this subparagraph and 

5 without regard to the reduction under para6 graph (1)(A) for the pre-funding balance and 

7 the funding standard carryover balance), para8 graph (1) shall be applied without regard to 

9 such reduction. 

10 ‘‘(B) TRANSITION RULE.—Subparagraph 

11 (A) shall be applied to plan years beginning 

12 after 2006 and before 2011 by substituting for 

13 ‘100 percent’ the applicable percentage deter14 mined in accordance with the following table: 

‘‘In the case of a plan year beginning in calendar 

year: 

The applicable percentage is: 

2007 .............................................................................................. 92 percent

2008 .............................................................................................. 94 percent

2009 .............................................................................................. 96 percent

2010 .............................................................................................. 98 percent. 

15 ‘‘(C) LIMITATION.—Subparagraph (B) 

16 shall not apply with respect to any plan year 

17 after 2007 unless the funding target attainment 

18 percentage (determined without regard to this 

19 paragraph and without regard to the reduction 

20 under paragraph (1)(A) for the pre-funding bal21 ance and the funding standard carryover bal-
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1 ance) of the plan for each preceding plan year 

2 after 2006 was not less than the applicable per3 centage with respect to such preceding plan 

4 year determined under subparagraph (B). 

5 ‘‘(h) DEEMED REDUCTION OF FUNDING BAL6 ANCES.—In the case of a plan maintained pursuant to 1 

7 or more collective bargaining agreements between em8 ployee representatives and 1 or more employers— 

9 ‘‘(1) IN GENERAL.—In any case in which a ben10 efit limitation under subsection (a), (b), or (c) would 

11 (but for this subsection and determined without re12 gard to subsection (a)(2)) apply to such plan for the 

13 plan year, the plan sponsor of such plan shall be 

14 treated for purposes of this title as having made an 

15 election under section 430(f)(5) to reduce the bal16 ance of the pre-funding balance and the funding 

17 standard carryover balance for the plan year (in a 

18 manner consistent with the requirements of section 

19 430(f)(5)(B)) by such amount as is necessary for 

20 such benefit limitation to not apply to the plan for 

21 such plan year. 

22 ‘‘(2) EXCEPTION FOR INSUFFICIENT FUNDING

23 BALANCES.—Paragraph (1) shall not apply with re24 spect to a benefit limitation for any plan year if the 
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1 application of paragraph (1) would not result in the 

2 benefit limitation not applying for such plan year.’’. 

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions for such subpart is amended by adding at the 

5 end the following new item: 

‘‘Sec. 437. Funding-based limits on benefits and benefit accruals under singleemployer plans.’’. 

6 (c) EFFECTIVE DATE.— 

7 (1) SHUTDOWN BENEFITS.—Except as provided 

8 in paragraph (3), the amendments made by sub9 section (a) shall apply with respect to plant shut10 downs, or other unpredictable contingent events, oc11 curring after December 31, 2006. 

12 (2) OTHER BENEFITS.—Except as provided in 

13 paragraph (3), the amendments made by subsection 

14 (b) shall apply with respect to plan years beginning 

15 after December 31, 2006. 

16 (3) COLLECTIVE BARGAINING EXCEPTION.—In 

17 the case of a plan maintained pursuant to 1 or more 

18 collective bargaining agreements between employee 

19 representatives and 1 or more employers ratified be20 fore the date of the enactment of this Act, the 

21 amendments made by this subsection shall not apply 

22 to plan years beginning before the earlier of— 

23 (A) the later of— 
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1 (i) the date on which the last collec2 tive bargaining agreement relating to the 

3 plan terminates (determined without re4 gard to any extension thereof agreed to 

5 after the date of the enactment of this 

6 Act), or 

7 (ii) the first day of the first plan year 

8 to which the amendments made by this 

9 subsection would (but for this subpara10 graph) apply, or 

11 (B) January 1, 2009. 

12 For purposes of clause (i), any plan amendment 

13 made pursuant to a collective bargaining agreement 

14 relating to the plan which amends the plan solely to 

15 conform to any requirement added by this subsection 

16 shall not be treated as a termination of such collec17 tive bargaining agreement. 

18 (d) SPECIAL RULE FOR 2007.—For purposes of ap19 plying subsection (e) of section 437 of such Code (as 

20 added by this section) to current plan years (within the 

21 meaning of such subsection) beginning in 2007, the modi22 fied funded current liability percentage of the plan for the 

23 preceding year shall be substituted for the funding target 

24 attainment percentage of the plan for the preceding year. 

25 For purposes of the preceding sentence, the term ‘‘modi-
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1 fied funded current liability percentage’’ means the funded 

2 current liability percentage (as defined in section 412(l)(8) 

3 of such Code), reduced as described in subparagraph (E) 

4 thereof in the case of a plan with a funded current liability 

5 percentage (as so defined and before such reduction) 

6 which is less than 100 percent. 

7 SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS. 

8 (a) AMENDMENTS RELATED TO QUALIFICATION RE9 QUIREMENTS.— 

10 (1) Section 401(a)(29) of the Internal Revenue 

11 Code of 1986 is amended to read as follows: 

12 ‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT13 RISK STATUS.—In the case of a defined benefit plan 

14 (other than a multiemployer plan) to which the re15 quirements of section 412 apply, the trust of which 

16 the plan is a part shall not constitute a qualified 

17 trust under this subsection unless the plan meets the 

18 requirements of sections 436 and 437.’’. 

19 (2) Section 401(a)(32) of such Code is amend20 ed— 

21 (A) in subparagraph (A), by striking 

22 ‘‘412(m)(5)’’ each place it appears and insert23 ing ‘‘430(j)(4)’’, and 

24 (B) in subparagraph (C), by striking ‘‘sec25 tion 412(m) by reason of paragraph (5)(A) 
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1 thereof’’ and inserting ‘‘section 430(j)(3) by 

2 reason of section 430(j)(4)(A)’’. 

3 (3) Section 401(a)(33) of such Code is amend4 ed— 

5 (A) in subparagraph (B)(i), by striking 

6 ‘‘funded current liability percentage (as defined 

7 in section 412(l)(8))’’ and inserting ‘‘funding 

8 target attainment percentage (as defined in sec9 tion 430(d)(2))’’, 

10 (B) in subparagraph (B)(iii), by striking 

11 ‘‘subsection 412(c)(8)’’ and inserting ‘‘section 

12 412(d)(2)’’, and 

13 (C) in subparagraph (D), by striking ‘‘sec14 tion 412(c)(11) (without regard to subpara15 graph (B) thereof)’’ and inserting ‘‘section 

16 412(b) (without regard to paragraph (2) there17 of)’’. 

18 (b) VESTING RULES.—Section 411 of such Code is 

19 amended— 

20 (1) by striking ‘‘section 412(c)(8)’’ in sub21 section (a)(3)(C) and inserting ‘‘section 412(d)(2)’’, 

22 (2) in subsection (b)(1)(F)— 

23 (A) by striking ‘‘paragraphs (2) and (3) of 

24 section 412(i)’’ in clause (ii) and inserting 
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1 ‘‘subparagraphs (B) and (C) of section 

2 412(e)(3)’’, and 

3 (B) by striking ‘‘paragraphs (4), (5), and 

4 (6) of section 412(i)’’ and inserting ‘‘subpara5 graphs (D), (E), and (F) of section 412(e)(3)’’, 

6 and 

7 (3) by striking ‘‘section 412(c)(8)’’ in sub8 section (d)(6)(A) and inserting ‘‘section 412(d)(2)’’. 

9 (c) MERGERS AND CONSOLIDATIONS OF PLANS.— 

10 Subclause (I) of section 414(l)(2)(B)(i) of such Code is 

11 amended to read as follows: 

12 ‘‘(I) the amount determined 

13 under section 431(c)(6)(A)(i) in the 

14 case of a multiemployer plan (and the 

15 sum of the target liability amount and 

16 target normal cost determined under 

17 section 430 in the case of any other 

18 plan), over’’. 

19 (d) TRANSFER OF EXCESS PENSION ASSETS TO RE20 TIREE HEALTH ACCOUNTS.— 

21 (1) Section 420(e)(2) of such Code is amended 

22 to read as follows: 

23 ‘‘(2) EXCESS PENSION ASSETS.—The term ‘ex24 cess pension assets’ means the excess (if any) of— 

25 ‘‘(A) the lesser of— 
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1 ‘‘(i) the fair market value of the 

2 plan’s assets (reduced by the pre-funding 

3 balance and the funding standard carry4 over balance, as determined under section 

5 430(f)), or 

6 ‘‘(ii) the value of plan assets as deter7 mined under section 430(g)(3) (reduced by 

8 the pre-funding balance and the funding 

9 standard carryover balance, as determined 

10 under section 430(f)), over 

11 ‘‘(B) 125 percent of the sum of the target 

12 liability amount and the target normal cost de13 termined under section 430 for such plan 

14 year.’’. 

15 (2) Section 420(e)(4) of such Code is amended 

16 to read as follows: 

17 ‘‘(4) COORDINATION WITH SECTION 430.—In 

18 the case of a qualified transfer, any assets so trans19 ferred shall not, for purposes of this section, be 

20 treated as assets in the plan.’’. 

21 (e) EXCISE TAXES.— 

22 (1) IN GENERAL.—Subsections (a) and (b) of 

23 section 4971 of such Code are amended to read as 

24 follows: 
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1 ‘‘(a) INITIAL TAX.—If at any time during any taxable 

2 year an employer maintains a plan to which section 412 

3 applies, there is hereby imposed for the taxable year a tax 

4 equal to— 

5 ‘‘(1) in the case of a defined benefit plan which 

6 is not a multiemployer plan, 10 percent of the aggre7 gate unpaid minimum required contributions for all 

8 plan years remaining unpaid as of the end of any 

9 plan year ending with or within the taxable year, 

10 and 

11 ‘‘(2) in the case of a multiemployer plan, 5 per12 cent of the accumulated funding deficiency deter13 mined under section 431 as of the end of any plan 

14 year ending with or within the taxable year. 

15 ‘‘(b) ADDITIONAL TAX.—If— 

16 ‘‘(1) a tax is imposed under subsection (a)(1) 

17 on any unpaid required minimum contribution and 

18 such amount remains unpaid as of the close of the 

19 taxable period, or 

20 ‘‘(2) a tax is imposed under subsection (a)(2) 

21 on any accumulated funding deficiency and the accu22 mulated funding deficiency is not corrected within 

23 the taxable period, 

24 there is hereby imposed a tax equal to 100 percent of the 

25 unpaid minimum required contribution or accumulated 
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1 funding deficiency, whichever is applicable, to the extent 

2 not so paid or corrected.’’. 

3 (2) Section 4971(c) of such Code is amended— 

4 (A) by striking ‘‘the last two sentences of 

5 section 412(a)’’ in paragraph (1) and inserting 

6 ‘‘section 431’’, and 

7 (B) by adding at the end the following new 

8 paragraph: 

9 ‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU10 TION.— 

11 ‘‘(A) IN GENERAL.—The term ‘unpaid 

12 minimum required contribution’ means, with re13 spect to any plan year, any minimum required 

14 contribution under section 430 for the plan 

15 year which is not paid on or before the due date 

16 (as determined under section 430(j)(1)) for the 

17 plan year. 

18 ‘‘(B) ORDERING RULE.—Any payment to 

19 or under a plan for any plan year shall be allo20 cated first to unpaid minimum required con21 tributions for all preceding plan years in the 

22 order in which such contributions became due 

23 and then to the minimum required contribution 

24 under section 430 for the plan year.’’. 
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1 (3) Section 4971(e)(1) of such Code is amended 

2 by striking ‘‘section 412(b)(3)(A)’’ and inserting 

3 ‘‘section 412(a)(2)’’. 

4 (4) Section 4971(f)(1) of such Code is amend5 ed— 

6 (A) by striking ‘‘section 412(m)(5)’’ and 

7 inserting ‘‘section 430(j)(4)’’, and 

8 (B) by striking ‘‘section 412(m)’’ and in9 serting ‘‘section 430(j)(3)’’. 

10 (5) Section 4972(c)(7) of such Code is amended 

11 by striking ‘‘except to the extent that such contribu12 tions exceed the full-funding limitation (as defined in 

13 section 412(c)(7), determined without regard to sub14 paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except, 

15 in the case of a multiemployer plan, to the extent 

16 that such contributions exceed the full-funding limi17 tation (as defined in section 431(c)(6))’’. 

18 (f) REPORTING REQUIREMENTS.—Section 6059(b) of 

19 such Code is amended— 

20 (1) by striking ‘‘the accumulated funding defi21 ciency (as defined in section 412(a))’’ in paragraph 

22 (2) and inserting ‘‘the minimum required contribu23 tion determined under section 430, or the accumu24 lated funding deficiency determined under section 

25 431,’’, and 
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1 (2) by striking paragraph (3)(B) and inserting: 

2 ‘‘(B) the requirements for reasonable actu3 arial assumptions under section 430(h)(1) or 

4 431(c)(3), whichever are applicable, have been 

5 complied with,’’. 

6 (g) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to years beginning after December 

8 31, 2006. 

9 Subtitle C—Other Provisions 

10 SEC. 121. MODIFICATION OF TRANSITION RULE TO PEN11 SION FUNDING REQUIREMENTS. 

12 (a) IN GENERAL.—In the case of a plan that— 

13 (1) was not required to pay a variable rate pre14 mium for the plan year beginning in 1996, 

15 (2) has not, in any plan year beginning after 

16 1995, merged with another plan (other than a plan 

17 sponsored by an employer that was in 1996 within 

18 the controlled group of the plan sponsor); and 

19 (3) is sponsored by a company that is engaged 

20 primarily in the interurban or interstate passenger 

21 bus service, 

22 the rules described in subsection (b) shall apply for any 

23 plan year beginning after December 31, 2006. 

24 (b) MODIFIED RULES.—The rules described in this 

25 subsection are as follows: 
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1 (1) For purposes of section 430(j)(3) of the In2 ternal Revenue Code of 1986 and section 303(j)(3) 

3 of the Employee Retirement Income Security Act of 

4 1974, the plan shall be treated as not having a fund5 ing shortfall for any plan year. 

6 (2) For purposes of— 

7 (A) determining unfunded vested benefits 

8 under section 4006(a)(3)(E)(iii) of such Act, 

9 and 

10 (B) determining any present value or mak11 ing any computation under section 412 of such 

12 Code or section 302 of such Act, 

13 the mortality table shall be the mortality table used 

14 by the plan. 

15 (3) Section 430(c)(5)(B) of such Code and sec16 tion 303(c)(5)(B) of such Act (relating to phase-in 

17 of funding target for exemption from new shortfall 

18 amortization base) shall each be applied by sub19 stituting ‘‘2012’’ for ‘‘2011’’ therein and by sub20 stituting for the table therein the following: 

In the case of a plan year beginning in calendar 

year: 

The applicable percentage is: 

2007 .............................................................................................. 90 percent

2008 .............................................................................................. 92 percent

2009 .............................................................................................. 94 percent

2010 .............................................................................................. 96 percent

2011 .............................................................................................. 98 percent. 
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1 (c) DEFINITIONS.—Any term used in this section 

2 which is also used in section 430 of such Code or section 

3 303 of such Act shall have the meaning provided such 

4 term in such section. If the same term has a different 

5 meaning in such Code and such Act, such term shall, for 

6 purposes of this section, have the meaning provided by 

7 such Code when applied with respect to such Code and 

8 the meaning provided by such Act when applied with re9 spect to such Act. 

10 (d) SPECIAL RULE FOR 2006.— 

11 (1) IN GENERAL.—Section 769(c)(3) of the Re12 tirement Protection Act of 1994, as added by section 

13 201 of the Pension Funding Equity Act of 2004, is 

14 amended by striking ‘‘and 2005’’ and inserting ‘‘, 

15 2005, and 2006’’. 

16 (2) EFFECTIVE DATE.—The amendment made 

17 by paragraph (1) shall apply to plan years beginning 

18 after December 31, 2005. 

19 (e) CONFORMING AMENDMENT.— 

20 (1) Section 769 of the Retirement Protection 

21 Act of 1994 is amended by striking subsection (c). 

22 (2) The amendment made by paragraph (1) 

23 shall take effect on December 31, 2006, and shall 

24 apply to plan years beginning after such date. 
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1 SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COM2 PENSATION PLANS WHEN EMPLOYER DE3 FINED BENEFIT PLAN IN AT-RISK STATUS. 

4 (a) IN GENERAL.—Subsection (b) of section 409A of 

5 the Internal Revenue Code of 1986 (providing rules relat6 ing to funding) is amended by redesignating paragraphs 

7 (3) and (4) as paragraphs (4) and (5), respectively, and 

8 by inserting after paragraph (2) the following new para9 graph: 

10 ‘‘(3) EMPLOYER’S DEFINED BENEFIT PLAN IN

11 AT-RISK STATUS.—If— 

12 ‘‘(A) during any period in which a defined 

13 benefit plan to which section 412 applies is in 

14 an at-risk status (as defined in section 

15 430(i)(3)), assets are set aside (directly or indi16 rectly) in a trust (or other arrangement deter17 mined by the Secretary), or transferred to such 

18 a trust or other arrangement, for purposes of 

19 paying deferred compensation under a non20 qualified deferred compensation plan of the em21 ployer maintaining the defined benefit plan, or 

22 ‘‘(B) a nonqualified deferred compensation 

23 plan of the employer provides that assets will 

24 become restricted to the provision of benefits 

25 under the plan in connection with such at-risk 

26 status (or other similar financial measure deter-
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1 mined by the Secretary) of the defined benefit 

2 plan, or assets are so restricted, 

3 such assets shall for purposes of section 83 be treat4 ed as property transferred in connection with the 

5 performance of services whether or not such assets 

6 are available to satisfy claims of general creditors. 

7 Subparagraph (A) shall not apply with respect to 

8 any assets which are so set aside before the defined 

9 benefit plan is in at-risk status.’’. 

10 (b) CONFORMING AMENDMENTS.—Paragraphs (4) 

11 and (5) of section 409A(b) of such Code, as redesignated 

12 by subsection (a) of this subsection, are each amended by 

13 striking ‘‘paragraph (1) or (2)’’ each place it appears and 

14 inserting ‘‘paragraph (1), (2), or (3)’’. 

15 (c) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to transfers or reservations of as17 sets after December 31, 2005. 

18 (d) SPECIAL RULE FOR 2006.—For purposes of de19 termining if a plan is in at-risk status (within the meaning 

20 of section 409A of such Code, as added by this section) 

21 for any plan year beginning in 2006, such section shall 

22 be applied by substituting the plan’s modified funded cur23 rent liability percentage for the plan’s funding target at24 tainment percentage. For purposes of the preceding sen25 tence, the term ‘‘modified funded current liability percent-
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1 age’’ means the funded current liability percentage (as de2 fined in section 412(l)(8) of such Code), reduced as de3 scribed in subparagraph (E) thereof. 

4 TITLE II—FUNDING RULES FOR 

5 MULTIEMPLOYER DEFINED 

6 BENEFIT PLANS 

7 Subtitle A—Amendments to Em8 ployee Retirement Income Secu9 rity Act of 1974 

10 SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED 

11 BENEFIT PLANS. 

12 (a) IN GENERAL.—Part 3 of subtitle B of title I of 

13 the Employee Retirement Income Security Act of 1974 (as 

14 amended by section 102) is amended further by inserting 

15 after section 303 the following new section: 

16 ‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER

17 PLANS

18 ‘‘SEC. 304. (a) IN GENERAL.—For purposes of sec19 tion 302, the accumulated funding deficiency of a multi20 employer plan for any plan year is— 

21 ‘‘(1) except as provided in paragraph (2), the 

22 amount, determined as of the end of the plan year, 

23 equal to the excess (if any) of the total charges to 

24 the funding standard account of the plan for all plan 

25 years (beginning with the first plan year for which 
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1 this part applies to the plan) over the total credits 

2 to such account for such years, and 

3 ‘‘(2) if the multiemployer plan is in reorganiza4 tion for any plan year, the accumulated funding de5 ficiency of the plan determined under section 4243. 

6 ‘‘(b) FUNDING STANDARD ACCOUNT.— 

7 ‘‘(1) ACCOUNT REQUIRED.—Each multiem8 ployer plan to which this part applies shall establish 

9 and maintain a funding standard account. Such ac10 count shall be credited and charged solely as pro11 vided in this section. 

12 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 

13 the funding standard account shall be charged with 

14 the sum of— 

15 ‘‘(A) the normal cost of the plan for the 

16 plan year, 

17 ‘‘(B) the amounts necessary to amortize in 

18 equal annual installments (until fully amor19 tized)— 

20 ‘‘(i) in the case of a plan in existence 

21 on January 1, 1974, the unfunded past 

22 service liability under the plan on the first 

23 day of the first plan year to which this 

24 part applies, over a period of 40 plan 

25 years, 
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1 ‘‘(ii) in the case of a plan which comes 

2 into existence after January 1, 1974, the 

3 unfunded past service liability under the 

4 plan on the first day of the first plan year 

5 to which this part applies, over a period of 

6 15 plan years, 

7 ‘‘(iii) separately, with respect to each 

8 plan year, the net increase (if any) in un9 funded past service liability under the plan 

10 arising from plan amendments adopted in 

11 such year, over a period of 15 plan years, 

12 ‘‘(iv) separately, with respect to each 

13 plan year, the net experience loss (if any) 

14 under the plan, over a period of 15 plan 

15 years, and 

16 ‘‘(v) separately, with respect to each 

17 plan year, the net loss (if any) resulting 

18 from changes in actuarial assumptions 

19 used under the plan, over a period of 15 

20 plan years, 

21 ‘‘(C) the amount necessary to amortize 

22 each waived funding deficiency (within the 

23 meaning of section 302(c)(3)) for each prior 

24 plan year in equal annual installments (until 

25 fully amortized) over a period of 15 plan years, 
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1 ‘‘(D) the amount necessary to amortize in 

2 equal annual installments (until fully amor3 tized) over a period of 5 plan years any amount 

4 credited to the funding standard account under 

5 section 302(b)(3)(D) (as in effect on the day 

6 before the date of the enactment of the Pension 

7 Protection Act of 2005), and 

8 ‘‘(E) the amount necessary to amortize in 

9 equal annual installments (until fully amor10 tized) over a period of 20 years the contribu11 tions which would be required to be made under 

12 the plan but for the provisions of section 

13 302(c)(7)(A)(i)(I) (as in effect on the day be14 fore the date of the enactment of the Pension 

15 Protection Act of 2005). 

16 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 

17 the funding standard account shall be credited with 

18 the sum of— 

19 ‘‘(A) the amount considered contributed by 

20 the employer to or under the plan for the plan 

21 year, 

22 ‘‘(B) the amount necessary to amortize in 

23 equal annual installments (until fully amor24 tized)— 
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1 ‘‘(i) separately, with respect to each 

2 plan year, the net decrease (if any) in un3 funded past service liability under the plan 

4 arising from plan amendments adopted in 

5 such year, over a period of 15 plan years, 

6 ‘‘(ii) separately, with respect to each 

7 plan year, the net experience gain (if any) 

8 under the plan, over a period of 15 plan 

9 years, and 

10 ‘‘(iii) separately, with respect to each 

11 plan year, the net gain (if any) resulting 

12 from changes in actuarial assumptions 

13 used under the plan, over a period of 15 

14 plan years, 

15 ‘‘(C) the amount of the waived funding de16 ficiency (within the meaning of section 

17 302(c)(3)) for the plan year, and 

18 ‘‘(D) in the case of a plan year for which 

19 the accumulated funding deficiency is deter20 mined under the funding standard account if 

21 such plan year follows a plan year for which 

22 such deficiency was determined under the alter23 native minimum funding standard under section 

24 305 (as in effect on the day before the date of 

25 the enactment of the Pension Protection Act of 
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1 2005), the excess (if any) of any debit balance 

2 in the funding standard account (determined 

3 without regard to this subparagraph) over any 

4 debit balance in the alternative minimum fund5 ing standard account. 

6 ‘‘(4) SPECIAL RULES FOR CERTAIN PRE-2007

7 AMORTIZATIONS.— 

8 ‘‘(A) IN GENERAL.—In the case of any 

9 amount amortized under section 302(b) (as in 

10 effect on the day before the date of the enact11 ment of the Pension Protection Act of 2005) 

12 over any period beginning with a plan year be13 ginning before 2007, in lieu of the amortization 

14 described in paragraphs (2)(B) and (3)(B), 

15 such amount shall continue to be amortized 

16 under such section as so in effect. 

17 ‘‘(B) INTEREST RATE.—For purposes of 

18 amortizations under section 302(b) (as in effect 

19 on the day before the date of the enactment of 

20 the Pension Protection Act of 2005), in the 

21 case of any waiver under section 303 (as so in 

22 effect) or extension under section 304 (as so in 

23 effect) with respect to which application has 

24 been made before June 30, 2005, the interest 

25 rate under section 303(a)(2) (as so in effect) or 
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1 section 304(a) (as so in effect), as the case may 

2 be, shall apply. 

3 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS

4 TO BE AMORTIZED.—Under regulations prescribed 

5 by the Secretary of the Treasury, amounts required 

6 to be amortized under paragraph (2) or paragraph 

7 (3), as the case may be— 

8 ‘‘(A) may be combined into one amount 

9 under such paragraph to be amortized over a 

10 period determined on the basis of the remaining 

11 amortization period for all items entering into 

12 such combined amount, and 

13 ‘‘(B) may be offset against amounts re14 quired to be amortized under the other such 

15 paragraph, with the resulting amount to be am16 ortized over a period determined on the basis of 

17 the remaining amortization periods for all items 

18 entering into whichever of the two amounts 

19 being offset is the greater. 

20 ‘‘(6) INTEREST.—Except as provided in sub21 section (c)(9), the funding standard account (and 

22 items therein) shall be charged or credited (as deter23 mined under regulations prescribed by the Secretary 

24 of the Treasury) with interest at the appropriate 
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1 rate consistent with the rate or rates of interest used 

2 under the plan to determine costs. 

3 ‘‘(7) CERTAIN AMORTIZATION CHARGES AND

4 CREDITS.—In the case of a plan which, immediately 

5 before the date of the enactment of the Multiem6 ployer Pension Plan Amendments Act of 1980, was 

7 a multiemployer plan (within the meaning of section 

8 3(37) as in effect immediately before such date)— 

9 ‘‘(A) any amount described in paragraph 

10 (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub11 section which arose in a plan year beginning be12 fore such date shall be amortized in equal an13 nual installments (until fully amortized) over 40 

14 plan years, beginning with the plan year in 

15 which the amount arose, 

16 ‘‘(B) any amount described in paragraph 

17 (2)(B)(iv) or (3)(B)(ii) of this subsection which 

18 arose in a plan year beginning before such date 

19 shall be amortized in equal annual installments 

20 (until fully amortized) over 20 plan years, be21 ginning with the plan year in which the amount 

22 arose, 

23 ‘‘(C) any change in past service liability 

24 which arises during the period of 3 plan years 

25 beginning on or after such date, and results 
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1 from a plan amendment adopted before such 

2 date, shall be amortized in equal annual install3 ments (until fully amortized) over 40 plan 

4 years, beginning with the plan year in which the 

5 change arises, and 

6 ‘‘(D) any change in past service liability 

7 which arises during the period of 2 plan years 

8 beginning on or after such date, and results 

9 from the changing of a group of participants 

10 from one benefit level to another benefit level 

11 under a schedule of plan benefits which— 

12 ‘‘(i) was adopted before such date, 

13 and 

14 ‘‘(ii) was effective for any plan partici15 pant before the beginning of the first plan 

16 year beginning on or after such date, 

17 shall be amortized in equal annual installments 

18 (until fully amortized) over 40 plan years, be19 ginning with the plan year in which the change 

20 arises. 

21 ‘‘(8) SPECIAL RULES RELATING TO CHARGES

22 AND CREDITS TO FUNDING STANDARD ACCOUNT.— 

23 For purposes of this section— 

24 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

25 amount received by a multiemployer plan in 
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1 payment of all or part of an employer’s with2 drawal liability under part 1 of subtitle E of 

3 title IV shall be considered an amount contrib4 uted by the employer to or under the plan. The 

5 Secretary of the Treasury may prescribe by reg6 ulation additional charges and credits to a mul7 tiemployer plan’s funding standard account to 

8 the extent necessary to prevent withdrawal li9 ability payments from being unduly reflected as 

10 advance funding for plan liabilities. 

11 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM12 PLOYER PLAN LEAVES REORGANIZATION.—If a 

13 multiemployer plan is not in reorganization in 

14 the plan year but was in reorganization in the 

15 immediately preceding plan year, any balance in 

16 the funding standard account at the close of 

17 such immediately preceding plan year— 

18 ‘‘(i) shall be eliminated by an offset19 ting credit or charge (as the case may be), 

20 but 

21 ‘‘(ii) shall be taken into account in 

22 subsequent plan years by being amortized 

23 in equal annual installments (until fully 

24 amortized) over 30 plan years. 
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1 The preceding sentence shall not apply to the 

2 extent of any accumulated funding deficiency 

3 under section 4243(a) as of the end of the last 

4 plan year that the plan was in reorganization. 

5 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

6 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

7 FUND.—Any amount paid by a plan during a 

8 plan year to the Pension Benefit Guaranty Cor9 poration pursuant to section 4222 of this Act or 

10 to a fund exempt under section 501(c)(22) of 

11 the Internal Revenue Code of 1986 pursuant to 

12 section 4223 of this Act shall reduce the 

13 amount of contributions considered received by 

14 the plan for the plan year. 

15 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

16 PAYMENTS.—Any amount paid by an employer 

17 pending a final determination of the employer’s 

18 withdrawal liability under part 1 of subtitle E 

19 of title IV and subsequently refunded to the 

20 employer by the plan shall be charged to the 

21 funding standard account in accordance with 

22 regulations prescribed by the Secretary of the 

23 Treasury. 

24 ‘‘(E) ELECTION FOR DEFERRAL OF

25 CHARGE FOR PORTION OF NET EXPERIENCE
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1 LOSS.—If an election is in effect under section 

2 302(b)(7)(F) (as in effect on the day before the 

3 date of the enactment of the Pension Protection 

4 Act of 2005) for any plan year, the funding 

5 standard account shall be charged in the plan 

6 year to which the portion of the net experience 

7 loss deferred by such election was deferred with 

8 the amount so deferred (and paragraph 

9 (2)(B)(iv) shall not apply to the amount so 

10 charged). 

11 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

12 amount of any financial assistance from the 

13 Pension Benefit Guaranty Corporation to any 

14 plan, and any repayment of such amount, shall 

15 be taken into account under this section and 

16 section 302 in such manner as is determined by 

17 the Secretary of the Treasury. 

18 ‘‘(G) SHORT-TERM BENEFITS.—To the ex19 tent that any plan amendment increases the un20 funded past service liability under the plan by 

21 reason of an increase in benefits which are pay22 able under the plan during a period that does 

23 not exceed 14 years, paragraph (2)(B)(iii) shall 

24 be applied separately with respect to such in25 crease in unfunded past service liability by sub-
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1 stituting the number of years of the period dur2 ing which such benefits are payable for ‘15’. 

3 ‘‘(c) ADDITIONAL RULES.— 

4 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

5 FUNDING METHOD.—For purposes of this section, 

6 normal costs, accrued liability, past service liabilities, 

7 and experience gains and losses shall be determined 

8 under the funding method used to determine costs 

9 under the plan. 

10 ‘‘(2) VALUATION OF ASSETS.— 

11 ‘‘(A) IN GENERAL.—For purposes of this 

12 section, the value of the plan’s assets shall be 

13 determined on the basis of any reasonable actu14 arial method of valuation which takes into ac15 count fair market value and which is permitted 

16 under regulations prescribed by the Secretary of 

17 the Treasury. 

18 ‘‘(B) ELECTION WITH RESPECT TO

19 BONDS.—The value of a bond or other evidence 

20 of indebtedness which is not in default as to 

21 principal or interest may, at the election of the 

22 plan administrator, be determined on an amor23 tized basis running from initial cost at purchase 

24 to par value at maturity or earliest call date. 

25 Any election under this subparagraph shall be 
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1 made at such time and in such manner as the 

2 Secretary of the Treasury shall by regulations 

3 provide, shall apply to all such evidences of in4 debtedness, and may be revoked only with the 

5 consent of such Secretary. 

6 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA7 SONABLE.—For purposes of this section, all costs, li8 abilities, rates of interest, and other factors under 

9 the plan shall be determined on the basis of actu10 arial assumptions and methods— 

11 ‘‘(A) each of which is reasonable (taking 

12 into account the experience of the plan and rea13 sonable expectations), and 

14 ‘‘(B) which, in combination, offer the actu15 ary’s best estimate of anticipated experience 

16 under the plan. 

17 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX18 PERIENCE GAIN OR LOSS.—For purposes of this sec19 tion, if— 

20 ‘‘(A) a change in benefits under the Social 

21 Security Act or in other retirement benefits cre22 ated under Federal or State law, or 

23 ‘‘(B) a change in the definition of the term 

24 ‘wages’ under section 3121 of the Internal Rev25 enue Code of 1986, or a change in the amount 
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1 of such wages taken into account under regula2 tions prescribed for purposes of section 

3 401(a)(5) of such Code, 

4 results in an increase or decrease in accrued liability 

5 under a plan, such increase or decrease shall be 

6 treated as an experience loss or gain. 

7 ‘‘(5) FULL FUNDING.—If, as of the close of a 

8 plan year, a plan would (without regard to this para9 graph) have an accumulated funding deficiency in 

10 excess of the full funding limitation— 

11 ‘‘(A) the funding standard account shall be 

12 credited with the amount of such excess, and 

13 ‘‘(B) all amounts described in subpara14 graphs (B), (C), and (D) of subsection (b)(2) 

15 and subparagraph (B) of subsection (b)(3) 

16 which are required to be amortized shall be con17 sidered fully amortized for purposes of such 

18 subparagraphs. 

19 ‘‘(6) FULL-FUNDING LIMITATION.— 

20 ‘‘(A) IN GENERAL.—For purposes of para21 graph (5), the term ‘full-funding limitation’ 

22 means the excess (if any) of— 

23 ‘‘(i) the accrued liability (including 

24 normal cost) under the plan (determined 

25 under the entry age normal funding meth-
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1 od if such accrued liability cannot be di2 rectly calculated under the funding method 

3 used for the plan), over 

4 ‘‘(ii) the lesser of— 

5 ‘‘(I) the fair market value of the 

6 plan’s assets, or 

7 ‘‘(II) the value of such assets de8 termined under paragraph (2). 

9 ‘‘(B) MINIMUM AMOUNT.— 

10 ‘‘(i) IN GENERAL.—In no event shall 

11 the full-funding limitation determined 

12 under subparagraph (A) be less than the 

13 excess (if any) of— 

14 ‘‘(I) 90 percent of the current li15 ability of the plan (including the ex16 pected increase in current liability due 

17 to benefits accruing during the plan 

18 year), over 

19 ‘‘(II) the value of the plan’s as20 sets determined under paragraph (2). 

21 ‘‘(ii) ASSETS.—For purposes of clause 

22 (i), assets shall not be reduced by any 

23 credit balance in the funding standard ac24 count. 
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1 ‘‘(C) FULL FUNDING LIMITATION.—For 

2 purposes of this paragraph, unless otherwise 

3 provided by the plan, the accrued liability under 

4 a multiemployer plan shall not include benefits 

5 which are not nonforfeitable under the plan 

6 after the termination of the plan (taking into 

7 consideration section 411(d)(3) of the Internal 

8 Revenue Code of 1986). 

9 ‘‘(D) CURRENT LIABILITY.—For purposes 

10 of this paragraph— 

11 ‘‘(i) IN GENERAL.—The term ‘current 

12 liability’ means all liabilities to employees 

13 and their beneficiaries under the plan. 

14 ‘‘(ii) TREATMENT OF UNPREDICTABLE

15 CONTINGENT EVENT BENEFITS.—For pur16 poses of clause (i), any benefit contingent 

17 on an event other than— 

18 ‘‘(I) age, service, compensation, 

19 death, or disability, or 

20 ‘‘(II) an event which is reason21 ably and reliably predictable (as deter22 mined by the Secretary of the Treas23 ury), 
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1 shall not be taken into account until the 

2 event on which the benefit is contingent oc3 curs. 

4 ‘‘(iii) INTEREST RATE USED.—The 

5 rate of interest used to determine current 

6 liability under this paragraph shall be the 

7 rate of interest determined under subpara8 graph (E). 

9 ‘‘(iv) MORTALITY TABLES.— 

10 ‘‘(I) COMMISSIONERS’ STANDARD

11 TABLE.—In the case of plan years be12 ginning before the first plan year to 

13 which the first tables prescribed under 

14 subclause (II) apply, the mortality 

15 table used in determining current li16 ability under this paragraph shall be 

17 the table prescribed by the Secretary 

18 of the Treasury which is based on the 

19 prevailing commissioners’ standard 

20 table (described in section 

21 807(d)(5)(A) of the Internal Revenue 

22 Code of 1986) used to determine re23 serves for group annuity contracts 

24 issued on January 1, 1993. 
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1 ‘‘(II) SECRETARIAL AUTHOR2 ITY.—The Secretary of the Treasury 

3 may by regulation prescribe for plan 

4 years beginning after December 31, 

5 1999, mortality tables to be used in 

6 determining current liability under 

7 this subsection. Such tables shall be 

8 based upon the actual experience of 

9 pension plans and projected trends in 

10 such experience. In prescribing such 

11 tables, such Secretary shall take into 

12 account results of available inde13 pendent studies of mortality of indi14 viduals covered by pension plans. 

15 ‘‘(v) SEPARATE MORTALITY TABLES

16 FOR THE DISABLED.—Notwithstanding 

17 clause (iv)— 

18 ‘‘(I) IN GENERAL.—In the case 

19 of plan years beginning after Decem20 ber 31, 1995, the Secretary of the 

21 Treasury shall establish mortality ta22 bles which may be used (in lieu of the 

23 tables under clause (iv)) to determine 

24 current liability under this subsection 

25 for individuals who are entitled to 
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1 benefits under the plan on account of 

2 disability. Such Secretary shall estab3 lish separate tables for individuals 

4 whose disabilities occur in plan years 

5 beginning before January 1, 1995, 

6 and for individuals whose disabilities 

7 occur in plan years beginning on or 

8 after such date. 

9 ‘‘(II) SPECIAL RULE FOR DIS10 ABILITIES OCCURRING AFTER 1994.— 

11 In the case of disabilities occurring in 

12 plan years beginning after December 

13 31, 1994, the tables under subclause 

14 (I) shall apply only with respect to in15 dividuals described in such subclause 

16 who are disabled within the meaning 

17 of title II of the Social Security Act 

18 and the regulations thereunder. 

19 ‘‘(vi) PERIODIC REVIEW.—The Sec20 retary of the Treasury shall periodically (at 

21 least every 5 years) review any tables in ef22 fect under this subparagraph and shall, to 

23 the extent such Secretary determines nec24 essary, by regulation update the tables to 

25 reflect the actual experience of pension 
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1 plans and projected trends in such experi2 ence. 

3 ‘‘(E) REQUIRED CHANGE OF INTEREST

4 RATE.—For purposes of determining a plan’s 

5 current liability for purposes of this para6 graph— 

7 ‘‘(i) IN GENERAL.—If any rate of in8 terest used under the plan under sub9 section (b)(6) to determine cost is not 

10 within the permissible range, the plan shall 

11 establish a new rate of interest within the 

12 permissible range. 

13 ‘‘(ii) PERMISSIBLE RANGE.—For pur14 poses of this subparagraph— 

15 ‘‘(I) IN GENERAL.—Except as 

16 provided in subclause (II), the term 

17 ‘permissible range’ means a rate of in18 terest which is not more than 5 per19 cent above, and not more than 10 per20 cent below, the weighted average of 

21 the rates of interest on 30-year Treas22 ury securities during the 4-year period 

23 ending on the last day before the be24 ginning of the plan year. 
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1 ‘‘(II) SECRETARIAL AUTHOR2 ITY.—If the Secretary of the Treasury 

3 finds that the lowest rate of interest 

4 permissible under subclause (I) is un5 reasonably high, such Secretary may 

6 prescribe a lower rate of interest, ex7 cept that such rate may not be less 

8 than 80 percent of the average rate 

9 determined under such subclause. 

10 ‘‘(iii) ASSUMPTIONS.—Notwith11 standing paragraph (3)(A), the interest 

12 rate used under the plan shall be— 

13 ‘‘(I) determined without taking 

14 into account the experience of the 

15 plan and reasonable expectations, but 

16 ‘‘(II) consistent with the assump17 tions which reflect the purchase rates 

18 which would be used by insurance 

19 companies to satisfy the liabilities 

20 under the plan. 

21 ‘‘(7) ANNUAL VALUATION.— 

22 ‘‘(A) IN GENERAL.—For purposes of this 

23 section, a determination of experience gains and 

24 losses and a valuation of the plan’s liability 

25 shall be made not less frequently than once 
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1 every year, except that such determination shall 

2 be made more frequently to the extent required 

3 in particular cases under regulations prescribed 

4 by the Secretary of the Treasury. 

5 ‘‘(B) VALUATION DATE.— 

6 ‘‘(i) CURRENT YEAR.—Except as pro7 vided in clause (ii), the valuation referred 

8 to in subparagraph (A) shall be made as of 

9 a date within the plan year to which the 

10 valuation refers or within one month prior 

11 to the beginning of such year. 

12 ‘‘(ii) USE OF PRIOR YEAR VALU13 ATION.—The valuation referred to in sub14 paragraph (A) may be made as of a date 

15 within the plan year prior to the year to 

16 which the valuation refers if, as of such 

17 date, the value of the assets of the plan are 

18 not less than 100 percent of the plan’s cur19 rent liability (as defined in paragraph 

20 (6)(D) without regard to clause (iv) there21 of). 

22 ‘‘(iii) ADJUSTMENTS.—Information 

23 under clause (ii) shall, in accordance with 

24 regulations, be actuarially adjusted to re25 flect significant differences in participants. 
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1 ‘‘(iv) LIMITATION.—A change in fund2 ing method to use a prior year valuation, 

3 as provided in clause (ii), may not be made 

4 unless as of the valuation date within the 

5 prior plan year, the value of the assets of 

6 the plan are not less than 125 percent of 

7 the plan’s current liability (as defined in 

8 paragraph (6)(D) without regard to clause 

9 (iv) thereof). 

10 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

11 DEEMED MADE.—For purposes of this section, any 

12 contributions for a plan year made by an employer 

13 after the last day of such plan year, but not later 

14 than two and one-half months after such day, shall 

15 be deemed to have been made on such last day. For 

16 purposes of this subparagraph, such two and one17 half month period may be extended for not more 

18 than six months under regulations prescribed by the 

19 Secretary of the Treasury. 

20 ‘‘(9) INTEREST RULE FOR WAIVERS AND EX21 TENSIONS.—The interest rate applicable for any 

22 plan year for purposes of computing the amortiza23 tion charge described in subsection (b)(2)(C) and in 

24 connection with an extension granted under sub25 section (d) shall be the greater of— 
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1 ‘‘(A) 150 percent of the Federal mid-term 

2 rate (as in effect under section 1274 of the In3 ternal Revenue Code of 1986 for the 1st month 

4 of such plan year), or 

5 ‘‘(B) the rate of interest used under the 

6 plan for determining costs. 

7 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

8 MULTIEMPLOYER PLANS.—In the case of a multiemployer 

9 plan— 

10 ‘‘(1) EXTENSION.—The period of years re11 quired to amortize any unfunded liability (described 

12 in any clause of subsection (b)(2)(B)) of any multi13 employer plan shall be extended by the Secretary of 

14 the Treasury for a period of time (not in excess of 

15 5 years) if it is demonstrated to such Secretary 

16 that— 

17 ‘‘(A) absent the extension, the plan would 

18 have an accumulated funding deficiency in any 

19 of the next 10 plan years, 

20 ‘‘(B) the plan sponsor has adopted a plan 

21 to improve the plan’s funding status, and 

22 ‘‘(C) taking into account the extension, the 

23 plan is projected to have sufficient assets to 

24 timely pay its expected benefit liabilities and 

25 other anticipated expenditures. 
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1 ‘‘(2) ADDITIONAL EXTENSION.—The period of 

2 years required to amortize any unfunded liability 

3 (described in any clause of subsection (b)(2)(B)) of 

4 any multiemployer plan may be extended (in addi5 tion to any extension under paragraph (1)) by the 

6 Secretary of the Treasury for a period of time (not 

7 in excess of 5 years) if such Secretary determines 

8 that such extension would carry out the purposes of 

9 this Act and would provide adequate protection for 

10 participants under the plan and their beneficiaries 

11 and if such Secretary determines that the failure to 

12 permit such extension would— 

13 ‘‘(A) result in— 

14 ‘‘(i) a substantial risk to the voluntary 

15 continuation of the plan, or 

16 ‘‘(ii) a substantial curtailment of pen17 sion benefit levels or employee compensa18 tion, and 

19 ‘‘(B) be adverse to the interests of plan 

20 participants in the aggregate. 

21 ‘‘(3) ADVANCE NOTICE.— 

22 ‘‘(A) IN GENERAL.—The Secretary of the 

23 Treasury shall, before granting an extension 

24 under this section, require each applicant to 

25 provide evidence satisfactory to such Secretary 
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1 that the applicant has provided notice of the fil2 ing of the application for such extension to each 

3 affected party (as defined in section 

4 4001(a)(21)) with respect to the affected plan. 

5 Such notice shall include a description of the 

6 extent to which the plan is funded for benefits 

7 which are guaranteed under title IV and for 

8 benefit liabilities. 

9 ‘‘(B) CONSIDERATION OF RELEVANT IN10 FORMATION.—The Secretary of the Treasury 

11 shall consider any relevant information provided 

12 by a person to whom notice was given under 

13 paragraph (1).’’. 

14 (b) CONFORMING AMENDMENTS.— 

15 (1) Section 301 of such Act (29 U.S.C. 1081) 

16 is amended by striking subsection (d). 

17 (2) The table of contents in section 1 of such 

18 Act (as amended by section 102 of this Act) is 

19 amended further by inserting after the item relating 

20 to section 303 the following new item: 

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to plan years beginning after De23 cember 31, 2006. 
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1 SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM2 PLOYER PLANS IN ENDANGERED OR CRIT3 ICAL STATUS. 

4 (a) IN GENERAL.—Part 3 of subtitle B of title I of 

5 the Employee Retirement Income Security Act of 1974 (as 

6 amended by the preceding provisions of this Act) is 

7 amended further by inserting after section 304 the fol8 lowing new section: 

9 ‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER

10 PLANS IN ENDANGERED STATUS OR CRITICAL STATUS

11 ‘‘SEC. 305. (a) ANNUAL CERTIFICATION BY PLAN

12 ACTUARY.— 

13 ‘‘(1) IN GENERAL.—During the 90-day period 

14 beginning on first day of each plan year of a multi15 employer plan, the plan actuary shall certify to the 

16 Secretary of the Treasury whether or not the plan 

17 is in endangered status for such plan year and 

18 whether or not the plan is in critical status for such 

19 plan year. 

20 ‘‘(2) ACTUARIAL PROJECTIONS OF ASSETS AND

21 LIABILITIES.— 

22 ‘‘(A) IN GENERAL.—In making the deter23 minations under paragraph (1), the plan actu24 ary shall make projections under subsections 

25 (b)(2) and (c)(2) for the current and succeeding 

26 plan years, using reasonable actuarial assump-
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1 tions and methods, of the current value of the 

2 assets of the plan and the present value of all 

3 liabilities to participants and beneficiaries under 

4 the plan for the current plan year as of the be5 ginning of such year, as based on the actuarial 

6 statement prepared for the preceding plan year 

7 under section 103(d). 

8 ‘‘(B) DETERMINATIONS OF FUTURE CON9 TRIBUTIONS.—Any such actuarial projection of 

10 plan assets shall assume— 

11 ‘‘(i) reasonably anticipated employer 

12 and employee contributions for the current 

13 and succeeding plan years, assuming that 

14 the terms of the one or more collective bar15 gaining agreements pursuant to which the 

16 plan is maintained for the current plan 

17 year continue in effect for succeeding plan 

18 years, or 

19 ‘‘(ii) that employer and employee con20 tributions for the most recent plan year 

21 will continue indefinitely, but only if the 

22 plan actuary determines there have been 

23 no significant demographic changes that 

24 would make continued application of such 

25 terms unreasonable. 
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1 ‘‘(3) PRESUMED STATUS IN ABSENCE OF TIME2 LY ACTUARIAL CERTIFICATION.—If certification 

3 under this subsection is not made before the end of 

4 the 90-day period specified in paragraph (1), the 

5 plan shall be presumed to be in critical status for 

6 such plan year until such time as the plan actuary 

7 makes a contrary certification. 

8 ‘‘(4) NOTICE.—In any case in which a multiem9 ployer plan is certified to be in endangered status 

10 under paragraph (1) or enters into critical status, 

11 the plan sponsor shall, not later than 30 days after 

12 the date of the certification or entry, provide notifi13 cation of the endangered or critical status to the 

14 participants and beneficiaries, the bargaining par15 ties, the Pension Benefit Guaranty Corporation, the 

16 Secretary of the Treasury, and the Secretary of 

17 Labor. 

18 ‘‘(b) FUNDING RULES FOR MULTIEMPLOYER PLANS

19 IN ENDANGERED STATUS.— 

20 ‘‘(1) IN GENERAL.—In any case in which a 

21 multiemployer plan is in endangered status for a 

22 plan year and no funding improvement plan under 

23 this subsection with respect to such multiemployer 

24 plan is in effect for the plan year, the plan sponsor 

25 shall, in accordance with this subsection, amend the 
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1 multiemployer plan to include a funding improve2 ment plan upon approval thereof by the bargaining 

3 parties under this subsection. The amendment shall 

4 be adopted not later than 240 days after the date 

5 on which the plan is certified to be in endangered 

6 status under subsection (a)(1). 

7 ‘‘(2) ENDANGERED STATUS.—A multiemployer 

8 plan is in endangered status for a plan year if, as 

9 determined by the plan actuary under subsection 

10 (a)— 

11 ‘‘(A) the plan’s funded percentage for such 

12 plan year is less than 80 percent, or 

13 ‘‘(B) the plan has an accumulated funding 

14 deficiency for such plan year under section 304 

15 or is projected to have such an accumulated 

16 funding deficiency for any of the 6 succeeding 

17 plan years, taking into account any extension of 

18 amortization periods under section 304(d). 

19 ‘‘(3) FUNDING IMPROVEMENT PLAN.— 

20 ‘‘(A) BENCHMARKS.—A funding improve21 ment plan shall consist of amendments to the 

22 plan formulated to provide, under reasonable 

23 actuarial assumptions, for the attainment, dur24 ing the funding improvement period under the 
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1 funding improvement plan, of the following 

2 benchmarks: 

3 ‘‘(i) INCREASE IN FUNDED PERCENT4 AGE.—An increase in the plan’s funded 

5 percentage such that— 

6 ‘‘(I) the difference between 100 

7 percent and the plan’s funded per8 centage for the last year of the fund9 ing improvement period, is not more 

10 than 

‘‘(II) 2 11 ⁄3 of the difference between 

12 100 percent and the plan’s funded 

13 percentage for the first year of the 

14 funding improvement period. 

15 ‘‘(ii) AVOIDANCE OF ACCUMULATED

16 FUNDING DEFICIENCIES.—No accumulated 

17 funding deficiency for any plan year during 

18 the funding improvement period (taking 

19 into account any extension of amortization 

20 periods under section 304(d)). 

21 ‘‘(B) FUNDING IMPROVEMENT PERIOD.— 

22 The funding improvement period for any fund23 ing improvement plan adopted pursuant to this 

24 subsection is the 10-year period beginning on 

25 the earlier of— 
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1 ‘‘(i) the second anniversary of the 

2 date of the adoption of the funding im3 provement plan, or 

4 ‘‘(ii) the first day of the first plan 

5 year of the multiemployer plan following 

6 the plan year in which occurs the first date 

7 after the day of the certification as of 

8 which collective bargaining agreements cov9 ering on the day of such certification at 

10 least 75 percent of active participants in 

11 such multiemployer plan have expired. 

12 ‘‘(C) SPECIAL RULES FOR CERTAIN SERI13 OUSLY UNDERFUNDED PLANS.— 

14 ‘‘(i) In the case of a plan in which the 

15 funded percentage of a plan for the plan 

16 year is 70 percent or less, subparagraph 

17 (A)(i)(II) shall be applied by substituting 

‘

4⁄5’ for ‘2 18 ⁄3’ and subparagraph (B) shall be 

19 applied by substituting ‘the 15-year period’ 

20 for ‘the 10-year period’. 

21 ‘‘(ii) In the case of a plan in which 

22 the funded percentage of a plan for the 

23 plan year is more than 70 percent but less 

24 than 80 percent, and— 
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1 ‘‘(I) the plan actuary certifies 

2 within 30 days after certification 

3 under subsection (a)(1) that the plan 

4 is not able to attain the increase de5 scribed in subparagraph (A)(i) over 

6 the period described in subparagraph 

7 (B), and 

8 ‘‘(II) the plan year is prior to the 

9 day described in subparagraph (B)(ii), 

10 subparagraph (A)(i)(II) shall be applied by 

substituting ‘4⁄5’ for ‘2 11 ⁄3’ and subparagraph 

12 (B) shall be applied by substituting ‘the 

13 15-year period’ for ‘the 10-year period’. 

14 ‘‘(iii) For any plan year following the 

15 year described in clause (ii)(II), subpara16 graph (A)(i)(II) and subparagraph (B) 

17 shall apply, except that for each plan year 

18 ending after such date for which the plan 

19 actuary certifies (at the time of the annual 

20 certification under subsection (a)(1) for 

21 such plan year) that the plan is not able 

22 to attain the increase described in subpara23 graph (A)(i) over the period described in 

24 subparagraph (B), subparagraph (B) shall 
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1 be applied by substituting ‘the 15-year pe2 riod’ for ‘the 10-year period’. 

3 ‘‘(D) REPORTING.—A summary of any 

4 funding improvement plan or modification 

5 thereto adopted during any plan year, together 

6 with annual updates regarding the funding 

7 ratio of the plan, shall be included in the an8 nual report for such plan year under section 

9 104(a) and in the summary annual report de10 scribed in section 104(b)(3). 

11 ‘‘(4) DEVELOPMENT OF FUNDING IMPROVE12 MENT PLAN.— 

13 ‘‘(A) ACTIONS BY PLAN SPONSOR PENDING

14 APPROVAL.—Pending the approval of a funding 

15 improvement plan under this paragraph, the 

16 plan sponsor shall take all reasonable actions, 

17 consistent with the terms of the plan and appli18 cable law, necessary to ensure— 

19 ‘‘(i) an increase in the plan’s funded 

20 percentage, and 

21 ‘‘(ii) postponement of an accumulated 

22 funding deficiency for at least 1 additional 

23 plan year. 

24 Such actions include applications for extensions 

25 of amortization periods under section 304(d), 
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1 use of the shortfall funding method in making 

2 funding standard account computations, 

3 amendments to the plan’s benefit structure, re4 ductions in future benefit accruals, and other 

5 reasonable actions consistent with the terms of 

6 the plan and applicable law. 

7 ‘‘(B) RECOMMENDATIONS BY PLAN SPON8 SOR.— 

9 ‘‘(i) IN GENERAL.—During the period 

10 of 90 days following the date on which a 

11 multiemployer plan is certified to be in en12 dangered status, the plan sponsor shall de13 velop and provide to the bargaining parties 

14 alternative proposals for revised benefit 

15 structures, contribution structures, or 

16 both, which, if adopted as amendments to 

17 the plan, may be reasonably expected to 

18 meet the benchmarks described in para19 graph (3)(A). Such proposals shall in20 clude— 

21 ‘‘(I) at least one proposal for re22 ductions in the amount of future ben23 efit accruals necessary to achieve the 

24 benchmarks, assuming no amend25 ments increasing contributions under 
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1 the plan (other than amendments in2 creasing contributions necessary to 

3 achieve the benchmarks after amend4 ments have reduced future benefit ac5 cruals to the maximum extent per6 mitted by law), and 

7 ‘‘(II) at least one proposal for in8 creases in contributions under the 

9 plan necessary to achieve the bench10 marks, assuming no amendments re11 ducing future benefit accruals under 

12 the plan. 

13 ‘‘(ii) REQUESTS BY BARGAINING PAR14 TIES.—Upon the request of any bargaining 

15 party who— 

16 ‘‘(I) employs at least 5 percent of 

17 the active participants, or 

18 ‘‘(II) represents as an employee 

19 organization, for purposes of collective 

20 bargaining, at least 5 percent of the 

21 active participants, 

22 the plan sponsor shall provide all such par23 ties information as to other combinations 

24 of increases in contributions and reduc-
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1 tions in future benefit accruals which 

2 would result in achieving the benchmarks. 

3 ‘‘(iii) OTHER INFORMATION.—The 

4 plan sponsor may, as it deems appropriate, 

5 prepare and provide the bargaining parties 

6 with additional information relating to con7 tribution structures or benefit structures 

8 or other information relevant to the fund9 ing improvement plan. 

10 ‘‘(5) MAINTENANCE OF CONTRIBUTIONS PEND11 ING APPROVAL OF FUNDING IMPROVEMENT PLAN.— 

12 Pending approval of a funding improvement plan by 

13 the bargaining parties with respect to a multiem14 ployer plan, the multiemployer plan may not be 

15 amended so as to provide— 

16 ‘‘(A) a reduction in the level of contribu17 tions for participants who are not in pay status, 

18 ‘‘(B) a suspension of contributions with re19 spect to any period of service, or 

20 ‘‘(C) any new direct or indirect exclusion 

21 of younger or newly hired employees from plan 

22 participation. 

23 ‘‘(6) BENEFIT RESTRICTIONS PENDING AP24 PROVAL OF FUNDING IMPROVEMENT PLAN.—Pend25 ing approval of a funding improvement plan by the 
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1 bargaining parties with respect to a multiemployer 

2 plan— 

3 ‘‘(A) RESTRICTIONS ON LUMP SUM AND

4 SIMILAR DISTRIBUTIONS.—In any case in which 

5 the present value of a participant’s accrued 

6 benefit under the plan exceeds $5,000, such 

7 benefit may not be distributed as an immediate 

8 distribution or in any other accelerated form. 

9 ‘‘(B) PROHIBITION ON BENEFIT IN10 CREASES.— 

11 ‘‘(i) IN GENERAL.—No amendment of 

12 the plan which increases the liabilities of 

13 the plan by reason of any increase in bene14 fits, any change in the accrual of benefits, 

15 or any change in the rate at which benefits 

16 become nonforfeitable under the plan may 

17 be adopted. 

18 ‘‘(ii) EXCEPTION.—Clause (i) shall 

19 not apply to any plan amendment which is 

20 required as a condition of qualification 

21 under part I of subchapter D of chapter 1 

22 of subtitle A of the Internal Revenue Code 

23 of 1986. 

24 ‘‘(7) DEFAULT CRITICAL STATUS IF NO FUND25 ING IMPROVEMENT PLAN ADOPTED.—If no plan 
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1 amendment adopting a funding improvement plan 

2 has been adopted by the end of the 240-day period 

3 referred to in subsection (b)(1), the plan enters into 

4 critical status as of the first day of the succeeding 

5 plan year. 

6 ‘‘(8) RESTRICTIONS UPON APPROVAL OF FUND7 ING IMPROVEMENT PLAN.—Upon adoption of a 

8 funding improvement plan with respect to a multi9 employer plan, the plan may not be amended— 

10 ‘‘(A) so as to be inconsistent with the 

11 funding improvement plan, or 

12 ‘‘(B) so as to increase future benefit accru13 als, unless the plan actuary certifies in advance 

14 that, after taking into account the proposed in15 crease, the plan is reasonably expected to meet 

16 the benchmarks described in paragraph (3)(A). 

17 ‘‘(c) FUNDING RULES FOR MULTIEMPLOYER PLANS

18 IN CRITICAL STATUS.— 

19 ‘‘(1) IN GENERAL.—In any case in which a 

20 multiemployer plan is in critical status for a plan 

21 year as described in paragraph (2) (or otherwise en22 ters into critical status under this section) and no 

23 rehabilitation plan under this subsection with respect 

24 to such multiemployer plan is in effect for the plan 

25 year, the plan sponsor shall, in accordance with this 
217 

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1 subsection, amend the multiemployer plan to include 

2 a rehabilitation plan under this subsection. The 

3 amendment shall be adopted not later than 240 days 

4 after the date on which the plan enters into critical 

5 status. 

6 ‘‘(2) CRITICAL STATUS.—A multiemployer plan 

7 is in critical status for a plan year if— 

8 ‘‘(A) the plan is in endangered status for 

9 the preceding plan year and the requirements of 

10 subsection (b)(1) were not met with respect to 

11 the plan for such preceding plan year, or 

12 ‘‘(B) as determined by the plan actuary 

13 under subsection (a), the plan is described in 

14 paragraph (3). 

15 ‘‘(3) CRITICALITY DESCRIPTION.—For purposes 

16 of paragraph (2)(B), a plan is described in this 

17 paragraph if the plan is described in at least one of 

18 the following subparagraphs: 

19 ‘‘(A) A plan is described in this subpara20 graph if, as of the beginning of the current plan 

21 year— 

22 ‘‘(i) the funded percentage of the plan 

23 is less than 65 percent, and 

24 ‘‘(ii) the sum of— 
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1 ‘‘(I) the market value of plan as2 sets, plus 

3 ‘‘(II) the present value of the 

4 reasonably anticipated employer and 

5 employee contributions for the current 

6 plan year and each of the 6 suc7 ceeding plan years, assuming that the 

8 terms of the one or more collective 

9 bargaining agreements pursuant to 

10 which the plan is maintained for the 

11 current plan year continue in effect 

12 for succeeding plan years, 

13 is less than the present value of all non14 forfeitable benefits for all participants and 

15 beneficiaries projected to be payable under 

16 the plan during the current plan year and 

17 each of the 6 succeeding plan years (plus 

18 administrative expenses for such plan 

19 years). 

20 ‘‘(B) A plan is described in this subpara21 graph if, as of the beginning of the current plan 

22 year, the sum of— 

23 ‘‘(i) the market value of plan assets, 

24 plus 
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1 ‘‘(ii) the present value of the reason2 ably anticipated employer and employee 

3 contributions for the current plan year and 

4 each of the 4 succeeding plan years, as5 suming that the terms of the one or more 

6 collective bargaining agreements pursuant 

7 to which the plan is maintained for the 

8 current plan year remain in effect for suc9 ceeding plan years, 

10 is less than the present value of all nonforfeit11 able benefits for all participants and bene12 ficiaries projected to be payable under the plan 

13 during the current plan year and each of the 4 

14 succeeding plan years (plus administrative ex15 penses for such plan years). 

16 ‘‘(C) A plan is described in this subpara17 graph if— 

18 ‘‘(i) as of the beginning of the current 

19 plan year, the funded percentage of the 

20 plan is less than 65 percent, and 

21 ‘‘(ii) the plan has an accumulated 

22 funding deficiency for the current plan 

23 year or is projected to have an accumu24 lated funding deficiency for any of the 4 

25 succeeding plan years, not taking into ac-
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1 count any extension of amortization peri2 ods under section 304(d). 

3 ‘‘(D) A plan is described in this subpara4 graph if— 

5 ‘‘(i)(I) the plan’s normal cost for the 

6 current plan year, plus interest (deter7 mined at the rate used for determining 

8 cost under the plan) for the current plan 

9 year on the amount of unfunded benefit li10 abilities under the plan as of the last date 

11 of the preceding plan year, exceeds 

12 ‘‘(II) the present value, as of the be13 ginning of the current plan year, of the 

14 reasonably anticipated employer and em15 ployee contributions for the current plan 

16 year, 

17 ‘‘(ii) the present value, as of the be18 ginning of the current plan year, of non19 forfeitable benefits of inactive participants 

20 is greater than the present value, as of the 

21 beginning of the current plan year, of non22 forfeitable benefits of active participants, 

23 and 

24 ‘‘(iii) the plan is projected to have an 

25 accumulated funding deficiency for the 
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1 current plan year or any of the 4 suc2 ceeding plan years, not taking into account 

3 any extension of amortization periods 

4 under section 304(d). 

5 ‘‘(E) A plan is described in this subpara6 graph if— 

7 ‘‘(i) the funded percentage of the plan 

8 is greater than 65 percent for the current 

9 plan year, and 

10 ‘‘(ii) the plan is projected to have an 

11 accumulated funding deficiency during any 

12 of the succeeding 3 plan years, not taking 

13 into account any extension of amortization 

14 periods under section 304(d). 

15 ‘‘(4) REHABILITATION PLAN.— 

16 ‘‘(A) IN GENERAL.—A rehabilitation plan 

17 shall consist of— 

18 ‘‘(i) amendments to the plan providing 

19 (under reasonable actuarial assumptions) 

20 for measures, agreed to by the bargaining 

21 parties, to increase contributions, reduce 

22 plan expenditures (including plan mergers 

23 and consolidations), or reduce future ben24 efit accruals, or to take any combination of 

25 such actions, determined necessary to 
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1 cause the plan to cease, during the reha2 bilitation period, to be in critical status, or 

3 ‘‘(ii) reasonable measures to forestall 

4 possible insolvency (within the meaning of 

5 section 4245) if the plan sponsor deter6 mines that, upon exhaustion of all reason7 able measures, the plan would not cease 

8 during the rehabilitation period to be in 

9 critical status. 

10 A rehabilitation must provide annual standards 

11 for meeting the requirements of such rehabilita12 tion plan. 

13 ‘‘(B) REHABILITATION PERIOD.—The re14 habilitation period for any rehabilitation plan 

15 adopted pursuant to this subsection is the 10- 

16 year period beginning on the earlier of— 

17 ‘‘(i) the second anniversary of the 

18 date of the adoption of the rehabilitation 

19 plan, or 

20 ‘‘(ii) the first day of the first plan 

21 year of the multiemployer plan following 

22 the plan year in which occurs the first 

23 date, after the date of the plan’s entry into 

24 critical status, as of which collective bar25 gaining agreements covering at least 75 
223 

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1 percent of active participants in such mul2 tiemployer plan (determined as of such 

3 date of entry) have expired. 

4 ‘‘(C) REPORTING.—A summary of any re5 habilitation plan or modification thereto adopt6 ed during any plan year, together with annual 

7 updates regarding the funding ratio of the plan, 

8 shall be included in the annual report for such 

9 plan year under section 104(a) and in the sum10 mary annual report described in section 

11 104(b)(3). 

12 ‘‘(5) DEVELOPMENT OF REHABILITATION

13 PLAN.— 

14 ‘‘(A) PROPOSALS BY PLAN SPONSOR.— 

15 ‘‘(i) IN GENERAL.—Within 90 days 

16 after the date of entry into critical status 

17 (or the date as of which the requirements 

18 of subsection (b)(1) are not met with re19 spect to the plan), the plan sponsor shall 

20 propose to all bargaining parties a range of 

21 alternative schedules of increases in con22 tributions and reductions in future benefit 

23 accruals that would serve to carry out a re24 habilitation plan under this subsection. 
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1 ‘‘(ii) PROPOSAL ASSUMING NO CON2 TRIBUTION INCREASES.—Such proposals 

3 shall include, as one of the proposed sched4 ules, a schedule of those reductions in fu5 ture benefit accruals that would be nec6 essary to cause the plan to cease to be in 

7 critical status if there were no further in8 creases in rates of contribution to the plan. 

9 ‘‘(iii) PROPOSAL WHERE CONTRIBU10 TIONS ARE NECESSARY.—If the plan spon11 sor determines that the plan will not cease 

12 to be in critical status during the rehabili13 tation period unless the plan is amended to 

14 provide for an increase in contributions, 

15 the plan sponsor’s proposals shall include a 

16 schedule of those increases in contribution 

17 rates that would be necessary to cause the 

18 plan to cease to be in critical status if fu19 ture benefit accruals were reduced to the 

20 maximum extent permitted by law. 

21 ‘‘(B) REQUESTS FOR ADDITIONAL SCHED22 ULES.—Upon the request of any bargaining 

23 party who— 

24 ‘‘(i) employs at least 5 percent of the 

25 active participants, or 
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1 ‘‘(ii) represents as an employee orga2 nization, for purposes of collective bar3 gaining, at least 5 percent of active partici4 pants, 

5 the plan sponsor shall include among the pro6 posed schedules such schedules of increases in 

7 contributions and reductions in future benefit 

8 accruals as may be specified by the bargaining 

9 parties. 

10 ‘‘(C) SUBSEQUENT AMENDMENTS.—Upon 

11 the adoption of a schedule of increases in con12 tributions or reductions in future benefit accru13 als as part of the rehabilitation plan, the plan 

14 sponsor may amend the plan thereafter to up15 date the schedule to adjust for any experience 

16 of the plan contrary to past actuarial assump17 tions, except that such an amendment may be 

18 made not more than once in any 3-year period. 

19 ‘‘(D) ALLOCATION OF REDUCTIONS IN FU20 TURE BENEFIT ACCRUALS.—Any schedule con21 taining reductions in future benefit accruals 

22 forming a part of a rehabilitation plan shall be 

23 applicable with respect to any group of active 

24 participants who are employed by any bar25 gaining party (as an employer obligated to con-
226 

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1 tribute under the plan) in proportion to the ex2 tent to which increases in contributions under 

3 such schedule apply to such bargaining party. 

4 ‘‘(E) LIMITATION ON REDUCTION IN

5 RATES OF FUTURE ACCRUALS.—Any schedule 

6 proposed under this paragraph shall not reduce 

7 the rate of future accruals below the lower of— 

8 ‘‘(i) a monthly benefit equal to 1 per9 cent of the contributions required to be 

10 made with respect to a participant or the 

11 equivalent standard accrual rate for a par12 ticipant or group of participants under the 

13 collective bargaining agreements in effect 

14 as of the first day of the plan year in 

15 which the plan enters critical status, or 

16 ‘‘(ii) if lower, the accrual rate under 

17 the plan on such date. 

18 The equivalent standard accrual rate shall be 

19 determined by the trustees based on the stand20 ard or average contribution base units that they 

21 determine to be representative for active partici22 pants and such other factors as they determine 

23 to be relevant. 

24 ‘‘(F) PROTECTION OF RESTORED RATES

25 OF ACCRUAL.— 
227 

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1 ‘‘(i) IN GENERAL.—Any schedule pro2 posed under this paragraph shall not re3 duce the rate of future accruals below any 

4 restored accrual rate. 

5 ‘‘(ii) RESTORED ACCRUAL RATE.—For 

6 purposes of clause (i), the term ‘restored 

7 accrual rate’ means a rate of benefit accru8 als which was reduced and subsequently 

9 restored before entry of the plan into crit10 ical status. 

11 ‘‘(6) MAINTENANCE OF CONTRIBUTIONS AND

12 RESTRICTIONS ON BENEFITS PENDING ADOPTION OF

13 REHABILITATION PLAN.—The rules of paragraphs 

14 (5) and (6) of subsection (b) shall apply for pur15 poses of this subsection by substituting the term ‘re16 habilitation plan’ for ‘funding improvement plan’. 

17 ‘‘(7) SPECIAL RULES.— 

18 ‘‘(A) AUTOMATIC EMPLOYER SUR19 CHARGE.— 

20 ‘‘(i) 5 PERCENT AND 10 PERCENT

21 SURCHARGE.—For the first plan year in 

22 which the plan is in critical status, each 

23 employer otherwise obligated to make a 

24 contribution for that plan year shall be ob25 ligated to pay to the plan a surcharge 
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1 equal to 5 percent of the contribution oth2 erwise required under the respective collec3 tive bargaining agreement (or other agree4 ment pursuant to which the employer con5 tributes). For each consecutive plan year 

6 thereafter in which the plan is in critical 

7 status, the surcharge shall be 10 percent of 

8 the contribution otherwise required under 

9 the respective collective bargaining agree10 ment (or other agreement pursuant to 

11 which the employer contributes). 

12 ‘‘(ii) ENFORCEMENT OF SUR13 CHARGE.—The surcharges under clause (i) 

14 shall be due and payable on the same 

15 schedule as the contributions on which 

16 they are based. Any failure to make a sur17 charge payment shall be treated as a delin18 quent contribution under section 515 and 

19 shall be enforceable as such. 

20 ‘‘(iii) SURCHARGE TO TERMINATE

21 UPON CBA RENEGOTIATION.—The sur22 charge under this paragraph shall cease to 

23 be effective with respect to employees cov24 ered by a collective bargaining agreement, 
229 

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1 beginning on the date on which that agree2 ment is renegotiated to include— 

3 ‘‘(I) a schedule of benefits and 

4 contributions published by the trust5 ees pursuant to the plan’s rehabilita6 tion plan, or 

7 ‘‘(II) otherwise collectively bar8 gained benefit changes. 

9 ‘‘(iv) SURCHARGE NOT TO APPLY

10 UNTIL EMPLOYER RECEIVES 30-DAY NO11 TICE.—The surcharge under this subpara12 graph shall not apply to an employer until 

13 30 days after the employer has been noti14 fied by the trustees that the plan is in crit15 ical status and that the surcharge is in ef16 fect. 

17 ‘‘(v) SURCHARGE NOT TO GENERATE

18 INCREASED BENEFIT ACCRUALS.—Not19 withstanding any provision of a plan to the 

20 contrary, the amount of any surcharge 

21 shall not be the basis for any benefit ac22 cruals under the plan. 

23 ‘‘(B) BENEFIT ADJUSTMENTS.— 

24 ‘‘(i) IN GENERAL.—The trustees shall 

25 make appropriate reductions, if any, to ad-
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1 justable benefits based upon the outcome 

2 of collective bargaining over the schedules 

3 provided under paragraph (5). 

4 ‘‘(ii) RETIREE PROTECTION.—Except 

5 as provided in subparagraph (C), the trust6 ees of a plan in critical status may not re7 duce adjustable benefits of any participant 

8 or beneficiary who was in pay status at 

9 least one year before the first day of the 

10 first plan year in which the plan enters 

11 into critical status. 

12 ‘‘(iii) TRUSTEE FLEXIBILITY.—The 

13 trustees shall include in the schedules pro14 vided to the bargaining parties an allow15 ance for funding the benefits of partici16 pants with respect to whom contributions 

17 are not currently required to be made, and 

18 shall reduce their benefits to the extent 

19 permitted under this title and considered 

20 appropriate based on the plan’s then cur21 rent overall funding status and its future 

22 prospects in light of the results of the par23 ties’ negotiations. 
231 

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1 ‘‘(C) ADJUSTABLE BENEFIT DEFINED.— 

2 For purposes of this paragraph, the term ‘ad3 justable benefit’ means— 

4 ‘‘(i) benefits, rights, and features, 

5 such as post-retirement death benefits, 60- 

6 month guarantees, disability benefits not 

7 yet in pay status, and similar benefits, 

8 ‘‘(ii) retirement-type subsidies, early 

9 retirement benefits, and benefit payment 

10 options (other than the 50 percent quali11 fied joint-and-survivor benefit and single 

12 life annuity), and 

13 ‘‘(iii) benefit increases that would not 

14 be eligible for a guarantee under section 

15 4022A on the first day of the plan year in 

16 which the plan enters into critical status 

17 because they were adopted, or if later, took 

18 effect less than 60 months before reorga19 nization. 

20 ‘‘(D) NORMAL RETIREMENT BENEFITS

21 PROTECTED.—Nothing in this paragraph shall 

22 be construed to permit a plan to reduce the 

23 level of a participant’s accrued benefit payable 

24 at normal retirement age which is not an ad25 justable benefit. 
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1 ‘‘(E) ADJUSTMENTS DISREGARDED IN

2 WITHDRAWAL LIABILITY DETERMINATION.— 

3 ‘‘(i) BENEFIT REDUCTIONS.—Any 

4 benefit reductions under this paragraph 

5 shall be disregarded in determining a 

6 plan’s unfunded vested benefits for pur7 poses of determining an employer’s with8 drawal liability under section 4201. 

9 ‘‘(ii) SURCHARGES.—Any surcharges 

10 under this paragraph shall be disregarded 

11 in determining an employer’s withdrawal 

12 liability under section 4211, except for 

13 purposes of determining the unfunded vest14 ed benefits attributable to an employer or 

15 under a modified attributable method 

16 adopted with the approval of the Pension 

17 Benefit Guaranty Corporation under sub18 section (c)(5) of that section. 

19 ‘‘(8) RESTRICTIONS UPON APPROVAL OF REHA20 BILITATION PLAN.—Upon adoption of a rehabilita21 tion plan with respect to a multiemployer plan, the 

22 plan may not be amended— 

23 ‘‘(A) so as to be inconsistent with the re24 habilitation plan, or 
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1 ‘‘(B) so as to increase future benefit accru2 als, unless the plan actuary certifies in advance 

3 that, after taking into account the proposed in4 crease, the plan is reasonably expected to cease 

5 to be in critical status. 

6 ‘‘(9) IMPLEMENTATION OF DEFAULT SCHED7 ULE UPON FAILURE TO ADOPT REHABILITATION

8 PLAN.—If the plan is not amended by the end of the 

9 240-day period after entry into critical status to in10 clude a rehabilitation plan, the plan sponsor shall 

11 amend the plan to implement the schedule required 

12 by paragraph (5)(A)(ii). 

13 ‘‘(10) DEEMED WITHDRAWAL.—Upon the fail14 ure of any employer who has an obligation to con15 tribute under the plan to make contributions in com16 pliance with the schedule adopted under paragraph 

17 (4) as part of the rehabilitation plan, the failure of 

18 the employer may, at the discretion of the plan spon19 sor, be treated as a withdrawal by the employer from 

20 the plan under section 4203 or a partial withdrawal 

21 by the employer under section 4205. 

22 ‘‘(11) SPECIAL RULE FOR PLAN AMEND23 MENTS.—A multiemployer plan in critical status 

24 shall not fail to meet the requirements of section 

25 204(g) or section 411(d)(6) of the Internal Revenue 
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1 Code of 1986 solely by reason of the adoption by the 

2 plan of an amendment necessary to meet the re3 quirements of this subsection. 

4 ‘‘(d) DEFINITIONS.—For purposes of this section— 

5 ‘‘(1) BARGAINING PARTY.—The term ‘bar6 gaining party’ means, in connection with a multiem7 ployer plan— 

8 ‘‘(A) an employer who has an obligation to 

9 contribute under the plan, and 

10 ‘‘(B) an employee organization which, for 

11 purposes of collective bargaining, represents 

12 plan participants employed by such an em13 ployer. 

14 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund15 ed percentage’ means the percentage expressed as a 

16 ratio of which— 

17 ‘‘(A) the numerator of which is the value 

18 of the plan’s assets, as determined under sec19 tion 304(c)(2), and 

20 ‘‘(B) the denominator of which is the ac21 crued liability of the plan. 

22 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.— 

23 The term ‘accumulated funding deficiency’ has the 

24 meaning provided such term in section 304(a). 
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1 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 

2 participant’ means, in connection with a multiem3 ployer plan, a participant who is in covered service 

4 under the plan. 

5 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac6 tive participant’ means, in connection with a multi7 employer plan, a participant who— 

8 ‘‘(A) is not in covered service under the 

9 plan, and 

10 ‘‘(B) is in pay status under the plan or has 

11 a nonforfeitable right to benefits under the 

12 plan. 

13 ‘‘(6) PAY STATUS.—A person is in ‘pay status’ 

14 under a multiemployer plan if— 

15 ‘‘(A) at any time during the current plan 

16 year, such person is a participant or beneficiary 

17 under the plan and is paid an early, late, nor18 mal, or disability retirement benefit under the 

19 plan (or a death benefit under the plan related 

20 to a retirement benefit), or 

21 ‘‘(B) to the extent provided in regulations 

22 of the Secretary of the Treasury, such person 

23 is entitled to such a benefit under the plan. 
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1 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 

2 ‘obligation to contribute’ has the meaning provided 

3 such term under section 4212(a). 

4 ‘‘(8) ENTRY INTO CRITICAL STATUS.—A plan 

5 shall be treated as entering into critical status as of 

6 the date that such plan is certified to be in critical 

7 status under subsection (a)(1), is presumed to be in 

8 critical status under subsection (a)(3), or enters into 

9 critical status under subsection (b)(7).’’. 

10 (b) ENFORCEMENT.—Section 502 of the Employee 

11 Retirement Income Security Act of 1974 (29 U.S.C. 1132) 

12 is amended— 

13 (1) in subsection (a)(6) by striking ‘‘(6), or 

14 (7)’’ and inserting ‘‘(6), (7), or (8)’’; 

15 (2) by redesignating subsection (c)(8) as sub16 section (c)(9); and 

17 (3) by inserting after subsection (c)(7) the fol18 lowing new paragraph: 

19 ‘‘(8) The Secretary may assess a civil penalty 

20 against— 

21 ‘‘(A) any person of not more than $1,100 

22 per day for each violation by such person of 

23 subsection (a)(1), (b)(1), or (c)(1) of section 

24 305, or 
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1 ‘‘(B) any plan sponsor for failure by the 

2 plan sponsor to implement the terms of any 

3 funding improvement plan or rehabilitation plan 

4 adopted under section 305.’’. 

5 (c) CONFORMING AMENDMENT.—The table of con6 tents in section 1 of such Act (as amended by the pre7 ceding provisions of this Act) is amended further by in8 serting after the item relating to section 304 the following 

9 new item: 

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status or critical status.’’. 

10 (d) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply with respect to plan years begin12 ning after 2005. 

13 (e) SPECIAL RULE FOR 2006.—In the case of any 

14 plan year beginning in 2006, any reference in section 305 

15 of the Employee Retirement Income Security Act of 1974 

16 (as added by this section) to section 304 of such Act (as 

17 added by this Act) shall be treated as a reference to the 

18 corresponding provision of the Employee Retirement In19 come Security Act of 1974 as in effect for plan years be20 ginning in such year. 

21 SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL22 TIEMPLOYER PLANS. 

23 (a) ADVANCE DETERMINATION OF IMPENDING IN24 SOLVENCY OVER 5 YEARS.—Section 4245(d)(1) of the 
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1 Employee Retirement Income Security Act of 1974 (29 

2 U.S.C. 1426(d)(1)) is amended— 

3 (1) by striking ‘‘3 plan years’’ the second place 

4 it appears and inserting ‘‘5 plan years’’; and 

5 (2) by adding at the end the following new sen6 tence: ‘‘If the plan sponsor makes such a determina7 tion that the plan will be insolvent in any of the next 

8 5 plan years, the plan sponsor shall make the com9 parison under this paragraph at least annually until 

10 the plan sponsor makes a determination that the 

11 plan will not be insolvent in any of the next 5 plan 

12 years.’’. 

13 (b) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply with respect to determinations 

15 made in plan years beginning after December 31, 2005. 

16 SEC. 204. WITHDRAWAL LIABILITY REFORMS. 

17 (a) REPEAL OF LIMITATION ON WITHDRAWAL LI18 ABILITY IN THE EVENT OF CERTAIN SALES OF EM19 PLOYER ASSETS TO UNRELATED PARTIES.— 

20 (1) IN GENERAL.—Section 4225 of the Em21 ployee Retirement Income Security Act of 1974 (29 

22 U.S.C. 1405) is repealed. 

23 (2) CONFORMING AMENDMENT.—The table of 

24 contents in section 1 of such Act is amended by 

25 striking the item relating to section 4225. 
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1 (3) EFFECTIVE DATE.—The amendments made 

2 by this section shall apply with respect to sales oc3 curring on or after January 1, 2006. 

4 (b) REPEAL OF LIMITATION TO 20 ANNUAL PAY5 MENTS.— 

6 (1) IN GENERAL.—Section 4219(c)(1) of such 

7 Act (29 U.S.C. 1399(c)(1)) is amended by striking 

8 subparagraph (B). 

9 (2) EFFECTIVE DATE.—The amendment made 

10 by this section shall apply with respect to with11 drawals occurring on or after January 1, 2006. 

12 (c) WITHDRAWAL LIABILITY CONTINUES IF WORK

13 CONTRACTED OUT.— 

14 (1) IN GENERAL.—Clause (i) of section 

15 4205(b)(2)(A) of such Act (29 U.S.C. 

16 1385(b)(2)(A)) is amended by inserting ‘‘or to an17 other party or parties’’ after ‘‘to another location’’. 

18 (2) EFFECTIVE DATE.—The amendment made 

19 by this subsection shall apply with respect to work 

20 transferred on or after the date of the enactment of 

21 this Act. 

22 (d) REPEAL OF SPECIAL RULE FOR LONG AND

23 SHORT HAUL TRUCKING INDUSTRY.— 

24 (1) IN GENERAL.—Subsection (d) of section 

25 4203 of such Act (29 U.S.C. 1383(d)) is repealed. 
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1 (2) EFFECTIVE DATE.—The repeal under this 

2 subsection shall apply with respect to cessations to 

3 have obligations to contribute to multiemployer 

4 plans and cessations of covered operations under 

5 such plans occurring on or after January 1, 2006. 

6 (e) APPLICATION OF FORGIVENESS RULE TO PLANS

7 PRIMARILY COVERING EMPLOYEES IN THE BUILDING

8 AND CONSTRUCTION.— 

9 (1) IN GENERAL.—Section 4210(b) of such Act 

10 (29 U.S.C. 1390(b)) is amended— 

11 (A) by striking paragraph (1); and 

12 (B) by redesignating paragraphs (2) 

13 through (4) as paragraphs (1) through (3), re14 spectively. 

15 (2) EFFECTIVE DATE.—The amendments made 

16 by this subsection shall apply with respect to plan 

17 withdrawals occurring on or after January 1, 2006. 

18 SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO 

19 PROCEDURES APPLICABLE TO DISPUTES IN20 VOLVING WITHDRAWAL LIABILITY. 

21 (a) IN GENERAL.—Section 4221(f)(1) of the Em22 ployee Retirement Income Security Act of 1974 (29 

23 U.S.C. 1401(f)(1)) is amended— 

24 (1) in subparagraph (A) by inserting ‘‘and’’ 

25 after ‘‘plan,’’, and 
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1 (2) by striking subparagraphs (B) and (C) and 

2 inserting the following new subparagraph: 

3 ‘‘(B) such determination is based in whole 

4 or in part on a finding by the plan sponsor 

5 under section 4212(c) that a principal purpose 

6 of any transaction which occurred at least 5 

7 years (2 years in the case of a small employer) 

8 before the date of the complete or partial with9 drawal was to evade or avoid withdrawal liabil10 ity under this subtitle,’’. 

11 (b) SMALL EMPLOYER.—Paragraph (2) of section 

12 4221(f) of such Act is amended by adding at the end the 

13 following new subparagraph: 

14 ‘‘(C) SMALL EMPLOYER.—For purposes of 

15 paragraph (1)(B)— 

16 ‘‘(i) IN GENERAL.—The term ‘small 

17 employer’ means any employer who (as of 

18 immediately before the transaction referred 

19 to in paragraph (1)(B))— 

20 ‘‘(I) employs not more than 500 

21 employees, and 

22 ‘‘(II) is required to make con23 tributions to the plan for not more 

24 than 250 employees. 
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1 ‘‘(ii) CONTROLLED GROUP.—Any 

2 group treated as a single employer under 

3 subsection (b), (c), (m), or (o) of section 

4 414 of the Internal Revenue Code of 1986 

5 shall be treated as a single employer for 

6 purposes of this subparagraph.’’. 

7 (c) ADDITIONAL AMENDMENTS.— 

8 (1) Subparagraph (A) of section 4221(f)(2) of 

9 such Act (29 U.S.C. 1401(f)(2)) is amended by 

10 striking ‘‘Notwithstanding’’ and inserting ‘‘In the 

11 case of a transaction occurring before January 1, 

12 1999, and at least 5 years before the date of the 

13 complete or partial withdrawal, notwithstanding’’. 

14 (2) Section 4221(f)(2)(B) of such Act (29 

15 U.S.C. 1401(f)(2)(B)) is amended— 

16 (A) by inserting ‘‘with respect to with17 drawal liability payments’’ after ‘‘determina18 tion’’ the first place it appears, and 

19 (B) by striking ‘‘any’’ and inserting ‘‘the’’. 

20 (d) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to any employer that receives a 

22 notification under section 4219(b)(1) of the Employee Re23 tirement Income Security Act of 1974 on or after the date 

24 of the enactment of this Act. 
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1 Subtitle B—Amendments to 

2 Internal Revenue Code of 1986 

3 SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED 

4 BENEFIT PLANS. 

5 (a) IN GENERAL.—Subpart A of part III of sub6 chapter D of chapter 1 of the Internal Revenue Code of 

7 1986 (added by section 112 of this Act) is amended by 

8 adding at the end the following new section: 

9 ‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM10 PLOYER PLANS. 

11 ‘‘(a) IN GENERAL.—For purposes of section 412, the 

12 accumulated funding deficiency of a multiemployer plan 

13 for any plan year is— 

14 ‘‘(1) except as provided in paragraph (2), the 

15 amount, determined as of the end of the plan year, 

16 equal to the excess (if any) of the total charges to 

17 the funding standard account of the plan for all plan 

18 years (beginning with the first plan year for which 

19 section 412 applies to the plan) over the total credits 

20 to such account for such years, and 

21 ‘‘(2) if the multiemployer plan is in reorganiza22 tion for any plan year, the accumulated funding de23 ficiency of the plan determined under section 418B. 

24 ‘‘(b) FUNDING STANDARD ACCOUNT.— 
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1 ‘‘(1) ACCOUNT REQUIRED.—Each multiem2 ployer plan to which section 412 applies shall estab3 lish and maintain a funding standard account. Such 

4 account shall be credited and charged solely as pro5 vided in this section. 

6 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year, 

7 the funding standard account shall be charged with 

8 the sum of— 

9 ‘‘(A) the normal cost of the plan for the 

10 plan year, 

11 ‘‘(B) the amounts necessary to amortize in 

12 equal annual installments (until fully amor13 tized)— 

14 ‘‘(i) in the case of a plan in existence 

15 on January 1, 1974, the unfunded past 

16 service liability under the plan on the first 

17 day of the first plan year to which section 

18 412 applies, over a period of 40 plan years, 

19 ‘‘(ii) in the case of a plan which comes 

20 into existence after January 1, 1974, the 

21 unfunded past service liability under the 

22 plan on the first day of the first plan year 

23 to which section 412 applies, over a period 

24 of 15 plan years, 
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1 ‘‘(iii) separately, with respect to each 

2 plan year, the net increase (if any) in un3 funded past service liability under the plan 

4 arising from plan amendments adopted in 

5 such year, over a period of 15 plan years, 

6 ‘‘(iv) separately, with respect to each 

7 plan year, the net experience loss (if any) 

8 under the plan, over a period of 15 plan 

9 years, and 

10 ‘‘(v) separately, with respect to each 

11 plan year, the net loss (if any) resulting 

12 from changes in actuarial assumptions 

13 used under the plan, over a period of 15 

14 plan years, 

15 ‘‘(C) the amount necessary to amortize 

16 each waived funding deficiency (within the 

17 meaning of section 412(c)(3)) for each prior 

18 plan year in equal annual installments (until 

19 fully amortized) over a period of 15 plan years, 

20 ‘‘(D) the amount necessary to amortize in 

21 equal annual installments (until fully amor22 tized) over a period of 5 plan years any amount 

23 credited to the funding standard account under 

24 section 412(b)(3)(D) (as in effect on the day 
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1 before the date of the enactment of the Pension 

2 Protection Act of 2005), and 

3 ‘‘(E) the amount necessary to amortize in 

4 equal annual installments (until fully amor5 tized) over a period of 20 years the contribu6 tions which would be required to be made under 

7 the plan but for the provisions of section 

8 412(c)(7)(A)(i)(I) (as in effect on the day be9 fore the date of the enactment of the Pension 

10 Protection Act of 2005). 

11 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year, 

12 the funding standard account shall be credited with 

13 the sum of— 

14 ‘‘(A) the amount considered contributed by 

15 the employer to or under the plan for the plan 

16 year, 

17 ‘‘(B) the amount necessary to amortize in 

18 equal annual installments (until fully amor19 tized)— 

20 ‘‘(i) separately, with respect to each 

21 plan year, the net decrease (if any) in un22 funded past service liability under the plan 

23 arising from plan amendments adopted in 

24 such year, over a period of 15 plan years, 
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1 ‘‘(ii) separately, with respect to each 

2 plan year, the net experience gain (if any) 

3 under the plan, over a period of 15 plan 

4 years, and 

5 ‘‘(iii) separately, with respect to each 

6 plan year, the net gain (if any) resulting 

7 from changes in actuarial assumptions 

8 used under the plan, over a period of 15 

9 plan years, 

10 ‘‘(C) the amount of the waived funding de11 ficiency (within the meaning of section 

12 412(c)(3)) for the plan year, and 

13 ‘‘(D) in the case of a plan year for which 

14 the accumulated funding deficiency is deter15 mined under the funding standard account if 

16 such plan year follows a plan year for which 

17 such deficiency was determined under the alter18 native minimum funding standard under section 

19 412(g) (as in effect on the day before the date 

20 of the enactment of the Pension Protection Act 

21 of 2005), the excess (if any) of any debit bal22 ance in the funding standard account (deter23 mined without regard to this subparagraph) 

24 over any debit balance in the alternative min25 imum funding standard account. 
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1 ‘‘(4) SPECIAL RULES FOR PRE-2007 AMORTIZA2 TIONS.— 

3 ‘‘(A) IN GENERAL.—In the case of any 

4 amount amortized under section 412(b) (as in 

5 effect on the day before the date of the enact6 ment of the Pension Protection Act of 2005) 

7 over any period beginning with a plan year be8 ginning before 2007, in lieu of the amortization 

9 described in paragraphs (2)(B) and (3)(B), 

10 such amount shall continue to be amortized 

11 under such section as so in effect. 

12 ‘‘(B) INTEREST RATE.—For purposes of 

13 amortizations under section 412(b) (as in effect 

14 on the day before the date of the enactment of 

15 the Pension Protection Act of 2005), in the 

16 case of any waiver under section 412(d) (as so 

17 in effect) or extension under section 412(e) (as 

18 so in effect) with respect to which application 

19 has been made before June 30, 2005, the inter20 est rate under section 412(d)(1)(A) (as so in ef21 fect) or section 412(e) (as so in effect), as the 

22 case may be, shall apply. 

23 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS

24 TO BE AMORTIZED.—Under regulations prescribed 

25 by the Secretary, amounts required to be amortized 
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1 under paragraph (2) or paragraph (3), as the case 

2 may be— 

3 ‘‘(A) may be combined into one amount 

4 under such paragraph to be amortized over a 

5 period determined on the basis of the remaining 

6 amortization period for all items entering into 

7 such combined amount, and 

8 ‘‘(B) may be offset against amounts re9 quired to be amortized under the other such 

10 paragraph, with the resulting amount to be am11 ortized over a period determined on the basis of 

12 the remaining amortization periods for all items 

13 entering into whichever of the two amounts 

14 being offset is the greater. 

15 ‘‘(6) INTEREST.—Except as provided in sub16 section (c)(9), the funding standard account (and 

17 items therein) shall be charged or credited (as deter18 mined under regulations prescribed by the Sec19 retary) with interest at the appropriate rate con20 sistent with the rate or rates of interest used under 

21 the plan to determine costs. 

22 ‘‘(7) CERTAIN AMORTIZATION CHARGES AND

23 CREDITS.—In the case of a plan which, immediately 

24 before the date of the enactment of the Multiem25 ployer Pension Plan Amendments Act of 1980, was 
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1 a multiemployer plan (within the meaning of section 

2 414(f) as in effect immediately before such date)— 

3 ‘‘(A) any amount described in paragraph 

4 (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub5 section which arose in a plan year beginning be6 fore such date shall be amortized in equal an7 nual installments (until fully amortized) over 40 

8 plan years, beginning with the plan year in 

9 which the amount arose, 

10 ‘‘(B) any amount described in paragraph 

11 (2)(B)(iv) or (3)(B)(ii) of this subsection which 

12 arose in a plan year beginning before such date 

13 shall be amortized in equal annual installments 

14 (until fully amortized) over 20 plan years, be15 ginning with the plan year in which the amount 

16 arose, 

17 ‘‘(C) any change in past service liability 

18 which arises during the period of 3 plan years 

19 beginning on or after such date, and results 

20 from a plan amendment adopted before such 

21 date, shall be amortized in equal annual install22 ments (until fully amortized) over 40 plan 

23 years, beginning with the plan year in which the 

24 change arises, and 
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1 ‘‘(D) any change in past service liability 

2 which arises during the period of 2 plan years 

3 beginning on or after such date, and results 

4 from the changing of a group of participants 

5 from one benefit level to another benefit level 

6 under a schedule of plan benefits which— 

7 ‘‘(i) was adopted before such date, 

8 and 

9 ‘‘(ii) was effective for any plan partici10 pant before the beginning of the first plan 

11 year beginning on or after such date, 

12 shall be amortized in equal annual installments 

13 (until fully amortized) over 40 plan years, be14 ginning with the plan year in which the change 

15 arises. 

16 ‘‘(8) SPECIAL RULES RELATING TO CHARGES

17 AND CREDITS TO FUNDING STANDARD ACCOUNT.— 

18 For purposes of this section— 

19 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

20 amount received by a multiemployer plan in 

21 payment of all or part of an employer’s with22 drawal liability under part 1 of subtitle E of 

23 title IV of the Employee Retirement Income Se24 curity Act of 1974 shall be considered an 

25 amount contributed by the employer to or 
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1 under the plan. The Secretary may prescribe by 

2 regulation additional charges and credits to a 

3 multiemployer plan’s funding standard account 

4 to the extent necessary to prevent withdrawal li5 ability payments from being unduly reflected as 

6 advance funding for plan liabilities. 

7 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM8 PLOYER PLAN LEAVES REORGANIZATION.—If a 

9 multiemployer plan is not in reorganization in 

10 the plan year but was in reorganization in the 

11 immediately preceding plan year, any balance in 

12 the funding standard account at the close of 

13 such immediately preceding plan year— 

14 ‘‘(i) shall be eliminated by an offset15 ting credit or charge (as the case may be), 

16 but 

17 ‘‘(ii) shall be taken into account in 

18 subsequent plan years by being amortized 

19 in equal annual installments (until fully 

20 amortized) over 30 plan years. 

21 The preceding sentence shall not apply to the 

22 extent of any accumulated funding deficiency 

23 under section 418B(a) as of the end of the last 

24 plan year that the plan was in reorganization. 
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1 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

2 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

3 FUND.—Any amount paid by a plan during a 

4 plan year to the Pension Benefit Guaranty Cor5 poration pursuant to section 4222 of the Em6 ployee Retirement Income Security Act of 1974 

7 or to a fund exempt under section 501(c)(22) 

8 pursuant to section 4223 of such Act shall re9 duce the amount of contributions considered re10 ceived by the plan for the plan year. 

11 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

12 PAYMENTS.—Any amount paid by an employer 

13 pending a final determination of the employer’s 

14 withdrawal liability under part 1 of subtitle E 

15 of title IV of such Act and subsequently re16 funded to the employer by the plan shall be 

17 charged to the funding standard account in ac18 cordance with regulations prescribed by the 

19 Secretary. 

20 ‘‘(E) ELECTION FOR DEFERRAL OF

21 CHARGE FOR PORTION OF NET EXPERIENCE

22 LOSS.—If an election is in effect under section 

23 412(b)(7)(F) (as in effect on the day before the 

24 date of the enactment of the Pension Protection 

25 Act of 2005) for any plan year, the funding 
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1 standard account shall be charged in the plan 

2 year to which the portion of the net experience 

3 loss deferred by such election was deferred with 

4 the amount so deferred (and paragraph 

5 (2)(B)(iv) shall not apply to the amount so 

6 charged). 

7 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

8 amount of any financial assistance from the 

9 Pension Benefit Guaranty Corporation to any 

10 plan, and any repayment of such amount, shall 

11 be taken into account under this section and 

12 section 412 in such manner as is determined by 

13 the Secretary. 

14 ‘‘(G) SHORT-TERM BENEFITS.—To the ex15 tent that any plan amendment increases the un16 funded past service liability under the plan by 

17 reason of an increase in benefits which are pay18 able under the plan during a period that does 

19 not exceed 14 years, paragraph (2)(B)(iii) shall 

20 be applied separately with respect to such in21 crease in unfunded past service liability by sub22 stituting the number of years of the period dur23 ing which such benefits are payable for ‘15’. 

24 ‘‘(c) ADDITIONAL RULES.— 
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1 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

2 FUNDING METHOD.—For purposes of this section, 

3 normal costs, accrued liability, past service liabilities, 

4 and experience gains and losses shall be determined 

5 under the funding method used to determine costs 

6 under the plan. 

7 ‘‘(2) VALUATION OF ASSETS.— 

8 ‘‘(A) IN GENERAL.—For purposes of this 

9 section, the value of the plan’s assets shall be 

10 determined on the basis of any reasonable actu11 arial method of valuation which takes into ac12 count fair market value and which is permitted 

13 under regulations prescribed by the Secretary. 

14 ‘‘(B) ELECTION WITH RESPECT TO

15 BONDS.—The value of a bond or other evidence 

16 of indebtedness which is not in default as to 

17 principal or interest may, at the election of the 

18 plan administrator, be determined on an amor19 tized basis running from initial cost at purchase 

20 to par value at maturity or earliest call date. 

21 Any election under this subparagraph shall be 

22 made at such time and in such manner as the 

23 Secretary shall by regulations provide, shall 

24 apply to all such evidences of indebtedness, and 
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1 may be revoked only with the consent of the 

2 Secretary. 

3 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA4 SONABLE.—For purposes of this section, all costs, li5 abilities, rates of interest, and other factors under 

6 the plan shall be determined on the basis of actu7 arial assumptions and methods— 

8 ‘‘(A) each of which is reasonable (taking 

9 into account the experience of the plan and rea10 sonable expectations), and 

11 ‘‘(B) which, in combination, offer the actu12 ary’s best estimate of anticipated experience 

13 under the plan. 

14 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX15 PERIENCE GAIN OR LOSS.—For purposes of this sec16 tion, if— 

17 ‘‘(A) a change in benefits under the Social 

18 Security Act or in other retirement benefits cre19 ated under Federal or State law, or 

20 ‘‘(B) a change in the definition of the term 

21 ‘wages’ under section 3121, or a change in the 

22 amount of such wages taken into account under 

23 regulations prescribed for purposes of section 

24 401(a)(5), 
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1 results in an increase or decrease in accrued liability 

2 under a plan, such increase or decrease shall be 

3 treated as an experience loss or gain. 

4 ‘‘(5) FULL FUNDING.—If, as of the close of a 

5 plan year, a plan would (without regard to this para6 graph) have an accumulated funding deficiency in 

7 excess of the full funding limitation— 

8 ‘‘(A) the funding standard account shall be 

9 credited with the amount of such excess, and 

10 ‘‘(B) all amounts described in subpara11 graphs (B), (C), and (D) of subsection (b)(2) 

12 and subparagraph (B) of subsection (b)(3) 

13 which are required to be amortized shall be con14 sidered fully amortized for purposes of such 

15 subparagraphs. 

16 ‘‘(6) FULL-FUNDING LIMITATION.— 

17 ‘‘(A) IN GENERAL.—For purposes of para18 graph (5), the term ‘full-funding limitation’ 

19 means the excess (if any) of— 

20 ‘‘(i) the accrued liability (including 

21 normal cost) under the plan (determined 

22 under the entry age normal funding meth23 od if such accrued liability cannot be di24 rectly calculated under the funding method 

25 used for the plan), over 
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1 ‘‘(ii) the lesser of— 

2 ‘‘(I) the fair market value of the 

3 plan’s assets, or 

4 ‘‘(II) the value of such assets de5 termined under paragraph (2). 

6 ‘‘(B) MINIMUM AMOUNT.— 

7 ‘‘(i) IN GENERAL.—In no event shall 

8 the full-funding limitation determined 

9 under subparagraph (A) be less than the 

10 excess (if any) of— 

11 ‘‘(I) 90 percent of the current li12 ability of the plan (including the ex13 pected increase in current liability due 

14 to benefits accruing during the plan 

15 year), over 

16 ‘‘(II) the value of the plan’s as17 sets determined under paragraph (2). 

18 ‘‘(ii) ASSETS.—For purposes of clause 

19 (i), assets shall not be reduced by any 

20 credit balance in the funding standard ac21 count. 

22 ‘‘(C) FULL FUNDING LIMITATION.—For 

23 purposes of this paragraph, unless otherwise 

24 provided by the plan, the accrued liability under 

25 a multiemployer plan shall not include benefits 
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1 which are not nonforfeitable under the plan 

2 after the termination of the plan (taking into 

3 consideration section 411(d)(3)). 

4 ‘‘(D) CURRENT LIABILITY.—For purposes 

5 of this paragraph— 

6 ‘‘(i) IN GENERAL.—The term ‘current 

7 liability’ means all liabilities to employees 

8 and their beneficiaries under the plan. 

9 ‘‘(ii) TREATMENT OF UNPREDICTABLE

10 CONTINGENT EVENT BENEFITS.—For pur11 poses of clause (i), any benefit contingent 

12 on an event other than— 

13 ‘‘(I) age, service, compensation, 

14 death, or disability, or 

15 ‘‘(II) an event which is reason16 ably and reliably predictable (as deter17 mined by the Secretary), 

18 shall not be taken into account until the 

19 event on which the benefit is contingent oc20 curs. 

21 ‘‘(iii) INTEREST RATE USED.—The 

22 rate of interest used to determine current 

23 liability under this paragraph shall be the 

24 rate of interest determined under subpara25 graph (E). 
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1 ‘‘(iv) MORTALITY TABLES.— 

2 ‘‘(I) COMMISSIONERS’ STANDARD

3 TABLE.—In the case of plan years be4 ginning before the first plan year to 

5 which the first tables prescribed under 

6 subclause (II) apply, the mortality 

7 table used in determining current li8 ability under this paragraph shall be 

9 the table prescribed by the Secretary 

10 which is based on the prevailing com11 missioners’ standard table (described 

12 in section 807(d)(5)(A)) used to de13 termine reserves for group annuity 

14 contracts issued on January 1, 1993. 

15 ‘‘(II) SECRETARIAL AUTHOR16 ITY.—The Secretary may by regula17 tion prescribe for plan years beginning 

18 after December 31, 1999, mortality 

19 tables to be used in determining cur20 rent liability under this subsection. 

21 Such tables shall be based upon the 

22 actual experience of pension plans and 

23 projected trends in such experience. 

24 In prescribing such tables, the Sec25 retary shall take into account results 
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1 of available independent studies of 

2 mortality of individuals covered by 

3 pension plans. 

4 ‘‘(v) SEPARATE MORTALITY TABLES

5 FOR THE DISABLED.—Notwithstanding 

6 clause (iv)— 

7 ‘‘(I) IN GENERAL.—In the case 

8 of plan years beginning after Decem9 ber 31, 1995, the Secretary shall es10 tablish mortality tables which may be 

11 used (in lieu of the tables under 

12 clause (iv)) to determine current li13 ability under this subsection for indi14 viduals who are entitled to benefits 

15 under the plan on account of dis16 ability. The Secretary shall establish 

17 separate tables for individuals whose 

18 disabilities occur in plan years begin19 ning before January 1, 1995, and for 

20 individuals whose disabilities occur in 

21 plan years beginning on or after such 

22 date. 

23 ‘‘(II) SPECIAL RULE FOR DIS24 ABILITIES OCCURRING AFTER 1994.— 

25 In the case of disabilities occurring in 
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1 plan years beginning after December 

2 31, 1994, the tables under subclause 

3 (I) shall apply only with respect to in4 dividuals described in such subclause 

5 who are disabled within the meaning 

6 of title II of the Social Security Act 

7 and the regulations thereunder. 

8 ‘‘(vi) PERIODIC REVIEW.—The Sec9 retary shall periodically (at least every 5 

10 years) review any tables in effect under 

11 this subparagraph and shall, to the extent 

12 the Secretary determines necessary, by 

13 regulation update the tables to reflect the 

14 actual experience of pension plans and pro15 jected trends in such experience. 

16 ‘‘(E) REQUIRED CHANGE OF INTEREST

17 RATE.—For purposes of determining a plan’s 

18 current liability for purposes of this para19 graph— 

20 ‘‘(i) IN GENERAL.—If any rate of in21 terest used under the plan under sub22 section (b)(6) to determine cost is not 

23 within the permissible range, the plan shall 

24 establish a new rate of interest within the 

25 permissible range. 
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1 ‘‘(ii) PERMISSIBLE RANGE.—For pur2 poses of this subparagraph— 

3 ‘‘(I) IN GENERAL.—Except as 

4 provided in subclause (II), the term 

5 ‘permissible range’ means a rate of in6 terest which is not more than 5 per7 cent above, and not more than 10 per8 cent below, the weighted average of 

9 the rates of interest on 30-year Treas10 ury securities during the 4-year period 

11 ending on the last day before the be12 ginning of the plan year. 

13 ‘‘(II) SECRETARIAL AUTHOR14 ITY.—If the Secretary finds that the 

15 lowest rate of interest permissible 

16 under subclause (I) is unreasonably 

17 high, the Secretary may prescribe a 

18 lower rate of interest, except that 

19 such rate may not be less than 80 

20 percent of the average rate deter21 mined under such subclause. 

22 ‘‘(iii) ASSUMPTIONS.—Notwith23 standing paragraph (3)(A), the interest 

24 rate used under the plan shall be— 
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1 ‘‘(I) determined without taking 

2 into account the experience of the 

3 plan and reasonable expectations, but 

4 ‘‘(II) consistent with the assump5 tions which reflect the purchase rates 

6 which would be used by insurance 

7 companies to satisfy the liabilities 

8 under the plan. 

9 ‘‘(7) ANNUAL VALUATION.— 

10 ‘‘(A) IN GENERAL.—For purposes of this 

11 section, a determination of experience gains and 

12 losses and a valuation of the plan’s liability 

13 shall be made not less frequently than once 

14 every year, except that such determination shall 

15 be made more frequently to the extent required 

16 in particular cases under regulations prescribed 

17 by the Secretary. 

18 ‘‘(B) VALUATION DATE.— 

19 ‘‘(i) CURRENT YEAR.—Except as pro20 vided in clause (ii), the valuation referred 

21 to in subparagraph (A) shall be made as of 

22 a date within the plan year to which the 

23 valuation refers or within one month prior 

24 to the beginning of such year. 
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1 ‘‘(ii) USE OF PRIOR YEAR VALU2 ATION.—The valuation referred to in sub3 paragraph (A) may be made as of a date 

4 within the plan year prior to the year to 

5 which the valuation refers if, as of such 

6 date, the value of the assets of the plan are 

7 not less than 100 percent of the plan’s cur8 rent liability (as defined in paragraph 

9 (6)(D) without regard to clause (iv) there10 of). 

11 ‘‘(iii) ADJUSTMENTS.—Information 

12 under clause (ii) shall, in accordance with 

13 regulations, be actuarially adjusted to re14 flect significant differences in participants. 

15 ‘‘(iv) LIMITATION.—A change in fund16 ing method to use a prior year valuation, 

17 as provided in clause (ii), may not be made 

18 unless as of the valuation date within the 

19 prior plan year, the value of the assets of 

20 the plan are not less than 125 percent of 

21 the plan’s current liability (as defined in 

22 paragraph (6)(D) without regard to clause 

23 (iv) thereof). 

24 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

25 DEEMED MADE.—For purposes of this section, any 
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1 contributions for a plan year made by an employer 

2 after the last day of such plan year, but not later 

3 than two and one-half months after such day, shall 

4 be deemed to have been made on such last day. For 

5 purposes of this subparagraph, such two and one6 half month period may be extended for not more 

7 than six months under regulations prescribed by the 

8 Secretary. 

9 ‘‘(9) INTEREST RULE FOR WAIVERS AND EX10 TENSIONS.—The interest rate applicable for any 

11 plan year for purposes of computing the amortiza12 tion charge described in subsection (b)(2)(C) and in 

13 connection with an extension granted under sub14 section (d) shall be the greater of— 

15 ‘‘(A) 150 percent of the Federal mid-term 

16 rate (as in effect under section 1274 for the 1st 

17 month of such plan year), or 

18 ‘‘(B) the rate of interest used under the 

19 plan for determining costs. 

20 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

21 MULTIEMPLOYER PLANS.—In the case of a multiemployer 

22 plan— 

23 ‘‘(1) EXTENSION.—The period of years re24 quired to amortize any unfunded liability (described 

25 in any clause of subsection (b)(2)(B)) of any multi-
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1 employer plan shall be extended by the Secretary for 

2 a period of time (not in excess of 5 years) if it is 

3 demonstrated to the Secretary that— 

4 ‘‘(A) absent the extension, the plan would 

5 have an accumulated funding deficiency in any 

6 of the next 10 plan years, 

7 ‘‘(B) the plan sponsor has adopted a plan 

8 to improve the plan’s funding status, and 

9 ‘‘(C) taking into account the extension, the 

10 plan is projected to have sufficient assets to 

11 timely pay its expected benefit liabilities and 

12 other anticipated expenditures. 

13 ‘‘(2) ADDITIONAL EXTENSION.—The period of 

14 years required to amortize any unfunded liability 

15 (described in any clause of subsection (b)(2)(B)) of 

16 any multiemployer plan may be extended (in addi17 tion to any extension under paragraph (1)) by the 

18 Secretary for a period of time (not in excess of 5 

19 years) if the Secretary determines that such exten20 sion would carry out the purposes of the Employee 

21 Retirement Income Security Act of 1974 and would 

22 provide adequate protection for participants under 

23 the plan and their beneficiaries and if the Secretary 

24 determines that the failure to permit such extension 

25 would— 
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1 ‘‘(A) result in— 

2 ‘‘(i) a substantial risk to the voluntary 

3 continuation of the plan, or 

4 ‘‘(ii) a substantial curtailment of pen5 sion benefit levels or employee compensa6 tion, and 

7 ‘‘(B) be adverse to the interests of plan 

8 participants in the aggregate. 

9 ‘‘(3) ADVANCE NOTICE.— 

10 ‘‘(A) IN GENERAL.—The Secretary shall, 

11 before granting an extension under this section, 

12 require each applicant to provide evidence satis13 factory to the Secretary that the applicant has 

14 provided notice of the filing of the application 

15 for such extension to each affected party (as de16 fined in section 4001(a)(21) of the Employee 

17 Retirement Income Security Act of 1974) with 

18 respect to the affected plan. Such notice shall 

19 include a description of the extent to which the 

20 plan is funded for benefits which are guaran21 teed under title IV of such Act and for benefit 

22 liabilities. 

23 ‘‘(B) CONSIDERATION OF RELEVANT IN24 FORMATION.—The Secretary shall consider any 
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1 relevant information provided by a person to 

2 whom notice was given under paragraph (1).’’. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 418(b)(2) of such Code is amend5 ed— 

6 (A) by striking ‘‘section 412(b)(2)’’ in sub7 paragraph (A) and inserting ‘‘section 

8 431(b)(2)’’, and 

9 (B) by striking ‘‘section 412(b)(3)(B)’’ in 

10 subparagraph (B) and inserting ‘‘section 

11 431(b)(3)(B)’’. 

12 (2) Section 418B of such Code is amended— 

13 (A) by striking ‘‘section 412(b)(2)(A) or 

14 (B)’’ in subsection (d)(1)(B) and inserting 

15 ‘‘section 431(b)(2)(A) or (B)’’, 

16 (B) by striking ‘‘section 412(c)(8)’’ in sub17 section (e) and inserting ‘‘section 412(d)(2)’’, 

18 and 

19 (C) by striking ‘‘section 412(c)(3)’’ in sub20 section (g) and inserting ‘‘section 431(c)(3)’’. 

21 (3) Section 418D(a)(2) of such Code is amend22 ed— 

23 (A) by striking ‘‘section 412(c)(8)’’ and in24 serting ‘‘section 412(d)(2)’’, and 
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1 (B) by striking ‘‘section 412(c)(10)’’ and 

2 inserting ‘‘section 431(c)(8)’’. 

3 (c) CLERICAL AMENDMENT.—The table of sections 

4 for subpart A of part III of subchapter D of chapter 1 

5 of such Code is amended by adding after the item relating 

6 to section 430 the following new item: 

‘‘Sec. 431. Minimum funding standards for multiemployer plans.’’. 

7 (d) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to plan years beginning after De9 cember 31, 2006. 

10 SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEM11 PLOYER PLANS IN ENDANGERED OR CRIT12 ICAL STATUS. 

13 (a) IN GENERAL.—Subpart A of part III of sub14 chapter D of chapter 1 of the Internal Revenue Code of 

15 1986 is amended by inserting after section 431 the fol16 lowing new section: 

17 ‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEM18 PLOYER PLANS IN ENDANGERED STATUS OR 

19 CRITICAL STATUS. 

20 ‘‘(a) ANNUAL CERTIFICATION BY PLAN ACTUARY.— 

21 ‘‘(1) IN GENERAL.—During the 90-day period 

22 beginning on first day of each plan year of a multi23 employer plan, the plan actuary shall certify to the 

24 Secretary whether or not the plan is in endangered 
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1 status for such plan year and whether or not the 

2 plan is in critical status for such plan year. 

3 ‘‘(2) ACTUARIAL PROJECTIONS OF ASSETS AND

4 LIABILITIES.— 

5 ‘‘(A) IN GENERAL.—In making the deter6 minations under paragraph (1), the plan actu7 ary shall make projections under subsections 

8 (b)(2) and (c)(2) for the current and succeeding 

9 plan years, using reasonable actuarial assump10 tions and methods, of the current value of the 

11 assets of the plan and the present value of all 

12 liabilities to participants and beneficiaries under 

13 the plan for the current plan year as of the be14 ginning of such year, as based on the actuarial 

15 statement prepared for the preceding plan year 

16 under section 103(d) of the Employee Retire17 ment Income Security Act of 1974. 

18 ‘‘(B) DETERMINATIONS OF FUTURE CON19 TRIBUTIONS.—Any such actuarial projection of 

20 plan assets shall assume— 

21 ‘‘(i) reasonably anticipated employer 

22 and employee contributions for the current 

23 and succeeding plan years, assuming that 

24 the terms of the one or more collective bar25 gaining agreements pursuant to which the 
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1 plan is maintained for the current plan 

2 year continue in effect for succeeding plan 

3 years, or 

4 ‘‘(ii) that employer and employee con5 tributions for the most recent plan year 

6 will continue indefinitely, but only if the 

7 plan actuary determines there have been 

8 no significant demographic changes that 

9 would make continued application of such 

10 terms unreasonable. 

11 ‘‘(3) PRESUMED STATUS IN ABSENCE OF TIME12 LY ACTUARIAL CERTIFICATION.—If certification 

13 under this subsection is not made before the end of 

14 the 90-day period specified in paragraph (1), the 

15 plan shall be presumed to be in critical status for 

16 such plan year until such time as the plan actuary 

17 makes a contrary certification. 

18 ‘‘(4) NOTICE.—In any case in which a multiem19 ployer plan is certified to be in endangered status 

20 under paragraph (1) or enters into critical status, 

21 the plan sponsor shall, not later than 30 days after 

22 the date of the certification or entry, provide notifi23 cation of the endangered or critical status to the 

24 participants and beneficiaries, the bargaining par25 ties, the Pension Benefit Guaranty Corporation, the 
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1 Secretary of the Treasury, and the Secretary of 

2 Labor. 

3 ‘‘(b) FUNDING RULES FOR MULTIEMPLOYER PLANS

4 IN ENDANGERED STATUS.— 

5 ‘‘(1) IN GENERAL.—In any case in which a 

6 multiemployer plan is in endangered status for a 

7 plan year and no funding improvement plan under 

8 this subsection with respect to such multiemployer 

9 plan is in effect for the plan year, the plan sponsor 

10 shall, in accordance with this subsection, amend the 

11 multiemployer plan to include a funding improve12 ment plan upon approval thereof by the bargaining 

13 parties under this subsection. The amendment shall 

14 be adopted not later than 240 days after the date 

15 on which the plan is certified to be in endangered 

16 status under subsection (a)(1). 

17 ‘‘(2) ENDANGERED STATUS.—A multiemployer 

18 plan is in endangered status for a plan year if, as 

19 determined by the plan actuary under subsection 

20 (a)— 

21 ‘‘(A) the plan’s funded percentage for such 

22 plan year is less than 80 percent, or 

23 ‘‘(B) the plan has an accumulated funding 

24 deficiency for such plan year under section 431 

25 or is projected to have such an accumulated 
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1 funding deficiency for any of the 6 succeeding 

2 plan years, taking into account any extension of 

3 amortization periods under section 431(d). 

4 ‘‘(3) FUNDING IMPROVEMENT PLAN.— 

5 ‘‘(A) BENCHMARKS.—A funding improve6 ment plan shall consist of amendments to the 

7 plan formulated to provide, under reasonable 

8 actuarial assumptions, for the attainment, dur9 ing the funding improvement period under the 

10 funding improvement plan, of the following 

11 benchmarks: 

12 ‘‘(i) INCREASE IN FUNDED PERCENT13 AGE.—An increase in the plan’s funded 

14 percentage such that— 

15 ‘‘(I) the difference between 100 

16 percent and the plan’s funded per17 centage for the last year of the fund18 ing improvement period, is not more 

19 than 

‘‘(II) 2 20 ⁄3 of the difference between 

21 100 percent and the plan’s funded 

22 percentage for the first year of the 

23 funding improvement period. 

24 ‘‘(ii) AVOIDANCE OF ACCUMULATED

25 FUNDING DEFICIENCIES.—No accumulated 
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1 funding deficiency for any plan year during 

2 the funding improvement period (taking 

3 into account any extension of amortization 

4 periods under section 431(d)). 

5 ‘‘(B) FUNDING IMPROVEMENT PERIOD.— 

6 The funding improvement period for any fund7 ing improvement plan adopted pursuant to this 

8 subsection is the 10-year period beginning on 

9 the earlier of— 

10 ‘‘(i) the second anniversary of the 

11 date of the adoption of the funding im12 provement plan, or 

13 ‘‘(ii) the first day of the first plan 

14 year of the multiemployer plan following 

15 the plan year in which occurs the first date 

16 after the day of the certification as of 

17 which collective bargaining agreements cov18 ering on the day of such certification at 

19 least 75 percent of active participants in 

20 such multiemployer plan have expired. 

21 ‘‘(C) SPECIAL RULES FOR CERTAIN SERI22 OUSLY UNDERFUNDED PLANS.— 

23 ‘‘(i) In the case of a plan in which the 

24 funded percentage of a plan for the plan 

25 year is 70 percent or less, subparagraph 
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1 (A)(i)(II) shall be applied by substituting 

‘

4⁄5’ for ‘2 2 ⁄3’ and subparagraph (B) shall be 

3 applied by substituting ‘the 15-year period’ 

4 for ‘the 10-year period’. 

5 ‘‘(ii) In the case of a plan in which 

6 the funded percentage of a plan for the 

7 plan year is more than 70 percent but less 

8 than 80 percent, and— 

9 ‘‘(I) the plan actuary certifies 

10 within 30 days after certification 

11 under subsection (a)(1) that the plan 

12 is not able to attain the increase de13 scribed in subparagraph (A)(i) over 

14 the period described in subparagraph 

15 (B), and 

16 ‘‘(II) the plan year is prior to the 

17 day described in subparagraph (B)(ii), 

18 subparagraph (A)(i)(II) shall be applied by 

substituting ‘4⁄5’ for ‘2 19 ⁄3’ and subparagraph 

20 (B) shall be applied by substituting ‘the 

21 15-year period’ for ‘the 10-year period’. 

22 ‘‘(iii) For any plan year following the 

23 year described in clause (ii)(II), subpara24 graph (A)(i)(II) and subparagraph (B) 

25 shall apply, except that for each plan year 
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1 ending after such date for which the plan 

2 actuary certifies (at the time of the annual 

3 certification under subsection (a)(1) for 

4 such plan year) that the plan is not able 

5 to attain the increase described in subpara6 graph (A)(i) over the period described in 

7 subparagraph (B), subparagraph (B) shall 

8 be applied by substituting ‘the 15-year pe9 riod’ for ‘the 10-year period’. 

10 ‘‘(D) REPORTING.—A summary of any 

11 funding improvement plan or modification 

12 thereto adopted during any plan year, together 

13 with annual updates regarding the funding 

14 ratio of the plan, shall be included in the an15 nual report for such plan year under section 

16 104(a) of the Employee Retirement Income Se17 curity Act of 1974 and in the summary annual 

18 report described in section 104(b)(3) of such 

19 Act. 

20 ‘‘(4) DEVELOPMENT OF FUNDING IMPROVE21 MENT PLAN.— 

22 ‘‘(A) ACTIONS BY PLAN SPONSOR PENDING

23 APPROVAL.—Pending the approval of a funding 

24 improvement plan under this paragraph, the 

25 plan sponsor shall take all reasonable actions, 
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1 consistent with the terms of the plan and appli2 cable law, necessary to ensure— 

3 ‘‘(i) an increase in the plan’s funded 

4 percentage, and 

5 ‘‘(ii) postponement of an accumulated 

6 funding deficiency for at least 1 additional 

7 plan year. 

8 Such actions include applications for extensions 

9 of amortization periods under section 431(d), 

10 use of the shortfall funding method in making 

11 funding standard account computations, 

12 amendments to the plan’s benefit structure, re13 ductions in future benefit accruals, and other 

14 reasonable actions consistent with the terms of 

15 the plan and applicable law. 

16 ‘‘(B) RECOMMENDATIONS BY PLAN SPON17 SOR.— 

18 ‘‘(i) IN GENERAL.—During the period 

19 of 90 days following the date on which a 

20 multiemployer plan is certified to be in en21 dangered status, the plan sponsor shall de22 velop and provide to the bargaining parties 

23 alternative proposals for revised benefit 

24 structures, contribution structures, or 

25 both, which, if adopted as amendments to 
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1 the plan, may be reasonably expected to 

2 meet the benchmarks described in para3 graph (3)(A). Such proposals shall in4 clude— 

5 ‘‘(I) at least one proposal for re6 ductions in the amount of future ben7 efit accruals necessary to achieve the 

8 benchmarks, assuming no amend9 ments increasing contributions under 

10 the plan (other than amendments in11 creasing contributions necessary to 

12 achieve the benchmarks after amend13 ments have reduced future benefit ac14 cruals to the maximum extent per15 mitted by law), and 

16 ‘‘(II) at least one proposal for in17 creases in contributions under the 

18 plan necessary to achieve the bench19 marks, assuming no amendments re20 ducing future benefit accruals under 

21 the plan. 

22 ‘‘(ii) REQUESTS BY BARGAINING PAR23 TIES.—Upon the request of any bargaining 

24 party who— 
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1 ‘‘(I) employs at least 5 percent of 

2 the active participants, or 

3 ‘‘(II) represents as an employee 

4 organization, for purposes of collective 

5 bargaining, at least 5 percent of the 

6 active participants, 

7 the plan sponsor shall provide all such par8 ties information as to other combinations 

9 of increases in contributions and reduc10 tions in future benefit accruals which 

11 would result in achieving the benchmarks. 

12 ‘‘(iii) OTHER INFORMATION.—The 

13 plan sponsor may, as it deems appropriate, 

14 prepare and provide the bargaining parties 

15 with additional information relating to con16 tribution structures or benefit structures 

17 or other information relevant to the fund18 ing improvement plan. 

19 ‘‘(5) MAINTENANCE OF CONTRIBUTIONS PEND20 ING APPROVAL OF FUNDING IMPROVEMENT PLAN.— 

21 Pending approval of a funding improvement plan by 

22 the bargaining parties with respect to a multiem23 ployer plan, the multiemployer plan may not be 

24 amended so as to provide— 
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1 ‘‘(A) a reduction in the level of contribu2 tions for participants who are not in pay status, 

3 ‘‘(B) a suspension of contributions with re4 spect to any period of service, or 

5 ‘‘(C) any new direct or indirect exclusion 

6 of younger or newly hired employees from plan 

7 participation. 

8 ‘‘(6) BENEFIT RESTRICTIONS PENDING AP9 PROVAL OF FUNDING IMPROVEMENT PLAN.—Pend10 ing approval of a funding improvement plan by the 

11 bargaining parties with respect to a multiemployer 

12 plan— 

13 ‘‘(A) RESTRICTIONS ON LUMP SUM AND

14 SIMILAR DISTRIBUTIONS.—In any case in which 

15 the present value of a participant’s accrued 

16 benefit under the plan exceeds $5,000, such 

17 benefit may not be distributed as an immediate 

18 distribution or in any other accelerated form. 

19 ‘‘(B) PROHIBITION ON BENEFIT IN20 CREASES.— 

21 ‘‘(i) IN GENERAL.—No amendment of 

22 the plan which increases the liabilities of 

23 the plan by reason of any increase in bene24 fits, any change in the accrual of benefits, 

25 or any change in the rate at which benefits 
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1 become nonforfeitable under the plan may 

2 be adopted. 

3 ‘‘(ii) EXCEPTION.—Clause (i) shall 

4 not apply to any plan amendment which is 

5 required as a condition of qualification 

6 under part I of subchapter D of chapter 1 

7 of subtitle A. 

8 ‘‘(7) DEFAULT CRITICAL STATUS IF NO FUND9 ING IMPROVEMENT PLAN ADOPTED.—If no plan 

10 amendment adopting a funding improvement plan 

11 has been adopted by the end of the 240-day period 

12 referred to in subsection (b)(1), the plan enters into 

13 critical status as of the first day of the succeeding 

14 plan year. 

15 ‘‘(8) RESTRICTIONS UPON APPROVAL OF FUND16 ING IMPROVEMENT PLAN.—Upon adoption of a 

17 funding improvement plan with respect to a multi18 employer plan, the plan may not be amended— 

19 ‘‘(A) so as to be inconsistent with the 

20 funding improvement plan, or 

21 ‘‘(B) so as to increase future benefit accru22 als, unless the plan actuary certifies in advance 

23 that, after taking into account the proposed in24 crease, the plan is reasonably expected to meet 

25 the benchmarks described in paragraph (3)(A). 
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1 ‘‘(c) FUNDING RULES FOR MULTIEMPLOYER PLANS

2 IN CRITICAL STATUS.— 

3 ‘‘(1) IN GENERAL.—In any case in which a 

4 multiemployer plan is in critical status for a plan 

5 year as described in paragraph (2) (or otherwise en6 ters into critical status under this section) and no 

7 rehabilitation plan under this subsection with respect 

8 to such multiemployer plan is in effect for the plan 

9 year, the plan sponsor shall, in accordance with this 

10 subsection, amend the multiemployer plan to include 

11 a rehabilitation plan under this subsection. The 

12 amendment shall be adopted not later than 240 days 

13 after the date on which the plan enters into critical 

14 status. 

15 ‘‘(2) CRITICAL STATUS.—A multiemployer plan 

16 is in critical status for a plan year if— 

17 ‘‘(A) the plan is in endangered status for 

18 the preceding plan year and the requirements of 

19 subsection (b)(1) were not met with respect to 

20 the plan for such preceding plan year, or 

21 ‘‘(B) as determined by the plan actuary 

22 under subsection (a), the plan is described in 

23 paragraph (3). 

24 ‘‘(3) CRITICALITY DESCRIPTION.—For purposes 

25 of paragraph (2)(B), a plan is described in this 
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1 paragraph if the plan is described in at least one of 

2 the following subparagraphs: 

3 ‘‘(A) A plan is described in this subpara4 graph if, as of the beginning of the current plan 

5 year— 

6 ‘‘(i) the funded percentage of the plan 

7 is less than 65 percent, and 

8 ‘‘(ii) the sum of— 

9 ‘‘(I) the market value of plan as10 sets, plus 

11 ‘‘(II) the present value of the 

12 reasonably anticipated employer and 

13 employee contributions for the current 

14 plan year and each of the 6 suc15 ceeding plan years, assuming that the 

16 terms of the one or more collective 

17 bargaining agreements pursuant to 

18 which the plan is maintained for the 

19 current plan year continue in effect 

20 for succeeding plan years, 

21 is less than the present value of all non22 forfeitable benefits for all participants and 

23 beneficiaries projected to be payable under 

24 the plan during the current plan year and 

25 each of the 6 succeeding plan years (plus 
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1 administrative expenses for such plan 

2 years). 

3 ‘‘(B) A plan is described in this subpara4 graph if, as of the beginning of the current plan 

5 year, the sum of— 

6 ‘‘(i) the market value of plan assets, 

7 plus 

8 ‘‘(ii) the present value of the reason9 ably anticipated employer and employee 

10 contributions for the current plan year and 

11 each of the 4 succeeding plan years, as12 suming that the terms of the one or more 

13 collective bargaining agreements pursuant 

14 to which the plan is maintained for the 

15 current plan year remain in effect for suc16 ceeding plan years, 

17 is less than the present value of all nonforfeit18 able benefits for all participants and bene19 ficiaries projected to be payable under the plan 

20 during the current plan year and each of the 4 

21 succeeding plan years (plus administrative ex22 penses for such plan years). 

23 ‘‘(C) A plan is described in this subpara24 graph if— 
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1 ‘‘(i) as of the beginning of the current 

2 plan year, the funded percentage of the 

3 plan is less than 65 percent, and 

4 ‘‘(ii) the plan has an accumulated 

5 funding deficiency for the current plan 

6 year or is projected to have an accumu7 lated funding deficiency for any of the 4 

8 succeeding plan years, not taking into ac9 count any extension of amortization peri10 ods under section 431(d). 

11 ‘‘(D) A plan is described in this subpara12 graph if— 

13 ‘‘(i)(I) the plan’s normal cost for the 

14 current plan year, plus interest (deter15 mined at the rate used for determining 

16 cost under the plan) for the current plan 

17 year on the amount of unfunded benefit li18 abilities under the plan as of the last date 

19 of the preceding plan year, exceeds 

20 ‘‘(II) the present value, as of the be21 ginning of the current plan year, of the 

22 reasonably anticipated employer and em23 ployee contributions for the current plan 

24 year, 
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1 ‘‘(ii) the present value, as of the be2 ginning of the current plan year, of non3 forfeitable benefits of inactive participants 

4 is greater than the present value, as of the 

5 beginning of the current plan year, of non6 forfeitable benefits of active participants, 

7 and 

8 ‘‘(iii) the plan is projected to have an 

9 accumulated funding deficiency for the 

10 current plan year or any of the 4 suc11 ceeding plan years, not taking into account 

12 any extension of amortization periods 

13 under section 431(d). 

14 ‘‘(E) A plan is described in this subpara15 graph if— 

16 ‘‘(i) the funded percentage of the plan 

17 is greater than 65 percent for the current 

18 plan year, and 

19 ‘‘(ii) the plan is projected to have an 

20 accumulated funding deficiency during any 

21 of the succeeding 3 plan years, not taking 

22 into account any extension of amortization 

23 periods under section 431(d). 

24 ‘‘(4) REHABILITATION PLAN.— 
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1 ‘‘(A) IN GENERAL.—A rehabilitation plan 

2 shall consist of— 

3 ‘‘(i) amendments to the plan providing 

4 (under reasonable actuarial assumptions) 

5 for measures, agreed to by the bargaining 

6 parties, to increase contributions, reduce 

7 plan expenditures (including plan mergers 

8 and consolidations), or reduce future ben9 efit accruals, or to take any combination of 

10 such actions, determined necessary to 

11 cause the plan to cease, during the reha12 bilitation period, to be in critical status, or 

13 ‘‘(ii) reasonable measures to forestall 

14 possible insolvency (within the meaning of 

15 section 418E) if the plan sponsor deter16 mines that, upon exhaustion of all reason17 able measures, the plan would not cease 

18 during the rehabilitation period to be in 

19 critical status. 

20 A rehabilitation must provide annual standards 

21 for meeting the requirements of such rehabilita22 tion plan. 

23 ‘‘(B) REHABILITATION PERIOD.—The re24 habilitation period for any rehabilitation plan 
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1 adopted pursuant to this subsection is the 10- 

2 year period beginning on the earlier of— 

3 ‘‘(i) the second anniversary of the 

4 date of the adoption of the rehabilitation 

5 plan, or 

6 ‘‘(ii) the first day of the first plan 

7 year of the multiemployer plan following 

8 the plan year in which occurs the first 

9 date, after the date of the plan’s entry into 

10 critical status, as of which collective bar11 gaining agreements covering at least 75 

12 percent of active participants in such mul13 tiemployer plan (determined as of such 

14 date of entry) have expired. 

15 ‘‘(C) REPORTING.—A summary of any re16 habilitation plan or modification thereto adopt17 ed during any plan year, together with annual 

18 updates regarding the funding ratio of the plan, 

19 shall be included in the annual report for such 

20 plan year under section 104(a) of the Employee 

21 Retirement Income Security Act of 1974 and in 

22 the summary annual report described in section 

23 104(b)(3) of such Act. 

24 ‘‘(5) DEVELOPMENT OF REHABILITATION

25 PLAN.— 
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1 ‘‘(A) PROPOSALS BY PLAN SPONSOR.— 

2 ‘‘(i) IN GENERAL.—Within 90 days 

3 after the date of entry into critical status 

4 (or the date as of which the requirements 

5 of subsection (b)(1) are not met with re6 spect to the plan), the plan sponsor shall 

7 propose to all bargaining parties a range of 

8 alternative schedules of increases in con9 tributions and reductions in future benefit 

10 accruals that would serve to carry out a re11 habilitation plan under this subsection. 

12 ‘‘(ii) PROPOSAL ASSUMING NO CON13 TRIBUTION INCREASES.—Such proposals 

14 shall include, as one of the proposed sched15 ules, a schedule of those reductions in fu16 ture benefit accruals that would be nec17 essary to cause the plan to cease to be in 

18 critical status if there were no further in19 creases in rates of contribution to the plan. 

20 ‘‘(iii) PROPOSAL WHERE CONTRIBU21 TIONS ARE NECESSARY.—If the plan spon22 sor determines that the plan will not cease 

23 to be in critical status during the rehabili24 tation period unless the plan is amended to 

25 provide for an increase in contributions, 
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1 the plan sponsor’s proposals shall include a 

2 schedule of those increases in contribution 

3 rates that would be necessary to cause the 

4 plan to cease to be in critical status if fu5 ture benefit accruals were reduced to the 

6 maximum extent permitted by law. 

7 ‘‘(B) REQUESTS FOR ADDITIONAL SCHED8 ULES.—Upon the request of any bargaining 

9 party who— 

10 ‘‘(i) employs at least 5 percent of the 

11 active participants, or 

12 ‘‘(ii) represents as an employee orga13 nization, for purposes of collective bar14 gaining, at least 5 percent of active partici15 pants, 

16 the plan sponsor shall include among the pro17 posed schedules such schedules of increases in 

18 contributions and reductions in future benefit 

19 accruals as may be specified by the bargaining 

20 parties. 

21 ‘‘(C) SUBSEQUENT AMENDMENTS.—Upon 

22 the adoption of a schedule of increases in con23 tributions or reductions in future benefit accru24 als as part of the rehabilitation plan, the plan 

25 sponsor may amend the plan thereafter to up-
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1 date the schedule to adjust for any experience 

2 of the plan contrary to past actuarial assump3 tions, except that such an amendment may be 

4 made not more than once in any 3-year period. 

5 ‘‘(D) ALLOCATION OF REDUCTIONS IN FU6 TURE BENEFIT ACCRUALS.—Any schedule con7 taining reductions in future benefit accruals 

8 forming a part of a rehabilitation plan shall be 

9 applicable with respect to any group of active 

10 participants who are employed by any bar11 gaining party (as an employer obligated to con12 tribute under the plan) in proportion to the ex13 tent to which increases in contributions under 

14 such schedule apply to such bargaining party. 

15 ‘‘(E) LIMITATION ON REDUCTION IN

16 RATES OF FUTURE ACCRUALS.—Any schedule 

17 proposed under this paragraph shall not reduce 

18 the rate of future accruals below the lower of— 

19 ‘‘(i) a monthly benefit equal to 1 per20 cent of the contributions required to be 

21 made with respect to a participant or the 

22 equivalent standard accrual rate for a par23 ticipant or group of participants under the 

24 collective bargaining agreements in effect 
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1 as of the first day of the plan year in 

2 which the plan enters critical status, or 

3 ‘‘(ii) if lower, the accrual rate under 

4 the plan on such date. 

5 The equivalent standard accrual rate shall be 

6 determined by the trustees based on the stand7 ard or average contribution base units that they 

8 determine to be representative for active partici9 pants and such other factors as they determine 

10 to be relevant. 

11 ‘‘(F) PROTECTION OF RESTORED RATES

12 OF ACCRUAL.— 

13 ‘‘(i) IN GENERAL.—Any schedule pro14 posed under this paragraph shall not re15 duce the rate of future accruals below any 

16 restored accrual rate. 

17 ‘‘(ii) RESTORED ACCRUAL RATE.—For 

18 purposes of clause (i), the term ‘restored 

19 accrual rate’ means a rate of benefit accru20 als which was reduced and subsequently 

21 restored before entry of the plan into crit22 ical status. 

23 ‘‘(6) MAINTENANCE OF CONTRIBUTIONS AND

24 RESTRICTIONS ON BENEFITS PENDING ADOPTION OF

25 REHABILITATION PLAN.—The rules of paragraphs 
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1 (5) and (6) of subsection (b) shall apply for pur2 poses of this subsection by substituting the term ‘re3 habilitation plan’ for ‘funding improvement plan’. 

4 ‘‘(7) SPECIAL RULES.— 

5 ‘‘(A) AUTOMATIC EMPLOYER SUR6 CHARGE.— 

7 ‘‘(i) 5 PERCENT AND 10 PERCENT

8 SURCHARGE.—For the first plan year in 

9 which the plan is in critical status, each 

10 employer otherwise obligated to make a 

11 contribution for that plan year shall be ob12 ligated to pay to the plan a surcharge 

13 equal to 5 percent of the contribution oth14 erwise required under the respective collec15 tive bargaining agreement (or other agree16 ment pursuant to which the employer con17 tributes). For each consecutive plan year 

18 thereafter in which the plan is in critical 

19 status, the surcharge shall be 10 percent of 

20 the contribution otherwise required under 

21 the respective collective bargaining agree22 ment (or other agreement pursuant to 

23 which the employer contributes). 

24 ‘‘(ii) ENFORCEMENT OF SUR25 CHARGE.—The surcharges under clause (i) 
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1 shall be due and payable on the same 

2 schedule as the contributions on which 

3 they are based. Any failure to make a sur4 charge payment shall be treated as a delin5 quent contribution under section 515 of 

6 the Employee Retirement Income Security 

7 Act of 1974 and shall be enforceable as 

8 such. 

9 ‘‘(iii) SURCHARGE TO TERMINATE

10 UPON CBA RENEGOTIATION.—The sur11 charge under this paragraph shall cease to 

12 be effective with respect to employees cov13 ered by a collective bargaining agreement, 

14 beginning on the date on which that agree15 ment is renegotiated to include— 

16 ‘‘(I) a schedule of benefits and 

17 contributions published by the trust18 ees pursuant to the plan’s rehabilita19 tion plan, or 

20 ‘‘(II) otherwise collectively bar21 gained benefit changes. 

22 ‘‘(iv) SURCHARGE NOT TO APPLY

23 UNTIL EMPLOYER RECEIVES 30-DAY NO24 TICE.—The surcharge under this subpara25 graph shall not apply to an employer until 
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1 30 days after the employer has been noti2 fied by the trustees that the plan is in crit3 ical status and that the surcharge is in ef4 fect. 

5 ‘‘(v) SURCHARGE NOT TO GENERATE

6 INCREASED BENEFIT ACCRUALS.—Not7 withstanding any provision of a plan to the 

8 contrary, the amount of any surcharge 

9 shall not be the basis for any benefit ac10 cruals under the plan. 

11 ‘‘(B) BENEFIT ADJUSTMENTS.— 

12 ‘‘(i) IN GENERAL.—The trustees shall 

13 make appropriate reductions, if any, to ad14 justable benefits based upon the outcome 

15 of collective bargaining over the schedules 

16 provided under paragraph (5). 

17 ‘‘(ii) RETIREE PROTECTION.—Except 

18 as provided in subparagraph (C), the trust19 ees of a plan in critical status may not re20 duce adjustable benefits of any participant 

21 or beneficiary who was in pay status at 

22 least one year before the first day of the 

23 first plan year in which the plan enters 

24 into critical status. 
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1 ‘‘(iii) TRUSTEE FLEXIBILITY.—The 

2 trustees shall include in the schedules pro3 vided to the bargaining parties an allow4 ance for funding the benefits of partici5 pants with respect to whom contributions 

6 are not currently required to be made, and 

7 shall reduce their benefits to the extent 

8 permitted under this title and considered 

9 appropriate based on the plan’s then cur10 rent overall funding status and its future 

11 prospects in light of the results of the par12 ties’ negotiations. 

13 ‘‘(C) ADJUSTABLE BENEFIT DEFINED.— 

14 For purposes of this paragraph, the term ‘ad15 justable benefit’ means— 

16 ‘‘(i) benefits, rights, and features, 

17 such as post-retirement death benefits, 60- 

18 month guarantees, disability benefits not 

19 yet in pay status, and similar benefits, 

20 ‘‘(ii) retirement-type subsidies, early 

21 retirement benefits, and benefit payment 

22 options (other than the 50 percent quali23 fied joint-and-survivor benefit and single 

24 life annuity), and 
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1 ‘‘(iii) benefit increases that would not 

2 be eligible for a guarantee under section 

3 4022A of the Employee Retirement Income 

4 Security Act of 1974 on the first day of 

5 the plan year in which the plan enters into 

6 critical status because they were adopted, 

7 or if later, took effect less than 60 months 

8 before reorganization. 

9 ‘‘(D) NORMAL RETIREMENT BENEFITS

10 PROTECTED.—Nothing in this paragraph shall 

11 be construed to permit a plan to reduce the 

12 level of a participant’s accrued benefit payable 

13 at normal retirement age which is not an ad14 justable benefit. 

15 ‘‘(E) ADJUSTMENTS DISREGARDED IN

16 WITHDRAWAL LIABILITY DETERMINATION.— 

17 ‘‘(i) BENEFIT REDUCTIONS.—Any 

18 benefit reductions under this paragraph 

19 shall be disregarded in determining a 

20 plan’s unfunded vested benefits for pur21 poses of determining an employer’s with22 drawal liability under section 4201 of the 

23 Employee Retirement Income Security Act 

24 of 1974. 
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1 ‘‘(ii) SURCHARGES.—Any surcharges 

2 under this paragraph shall be disregarded 

3 in determining an employer’s withdrawal 

4 liability under section 4211 of the Em5 ployee Retirement Income Security Act of 

6 1974, except for purposes of determining 

7 the unfunded vested benefits attributable 

8 to an employer or under a modified attrib9 utable method adopted with the approval 

10 of the Pension Benefit Guaranty Corpora11 tion under subsection (c)(5) of that sec12 tion. 

13 ‘‘(8) RESTRICTIONS UPON APPROVAL OF REHA14 BILITATION PLAN.—Upon adoption of a rehabilita15 tion plan with respect to a multiemployer plan, the 

16 plan may not be amended— 

17 ‘‘(A) so as to be inconsistent with the re18 habilitation plan, or 

19 ‘‘(B) so as to increase future benefit accru20 als, unless the plan actuary certifies in advance 

21 that, after taking into account the proposed in22 crease, the plan is reasonably expected to cease 

23 to be in critical status. 

24 ‘‘(9) IMPLEMENTATION OF DEFAULT SCHED25 ULE UPON FAILURE TO ADOPT REHABILITATION
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1 PLAN.—If the plan is not amended by the end of the 

2 240-day period after entry into critical status to in3 clude a rehabilitation plan, the plan sponsor shall 

4 amend the plan to implement the schedule required 

5 by paragraph (5)(A)(ii). 

6 ‘‘(10) DEEMED WITHDRAWAL.—Upon the fail7 ure of any employer who has an obligation to con8 tribute under the plan to make contributions in com9 pliance with the schedule adopted under paragraph 

10 (4) as part of the rehabilitation plan, the failure of 

11 the employer may, at the discretion of the plan spon12 sor, be treated as a withdrawal by the employer from 

13 the plan under section 4203 of the Employee Retire14 ment Income Security Act of 1974 or a partial with15 drawal by the employer under section 4205 of such 

16 Act. 

17 ‘‘(11) SPECIAL RULE FOR PLAN AMEND18 MENTS.—A multiemployer plan in critical status 

19 shall not fail to meet the requirements of section 

20 204(g) of the Employee Retirement Income Security 

21 Act of 1974 or section 411(d)(6) solely by reason of 

22 the adoption by the plan of an amendment necessary 

23 to meet the requirements of this subsection. 

24 ‘‘(d) DEFINITIONS.—For purposes of this section— 
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1 ‘‘(1) BARGAINING PARTY.—The term ‘bar2 gaining party’ means, in connection with a multiem3 ployer plan— 

4 ‘‘(A) an employer who has an obligation to 

5 contribute under the plan, and 

6 ‘‘(B) an employee organization which, for 

7 purposes of collective bargaining, represents 

8 plan participants employed by such an em9 ployer. 

10 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund11 ed percentage’ means the percentage expressed as a 

12 ratio of which— 

13 ‘‘(A) the numerator of which is the value 

14 of the plan’s assets, as determined under sec15 tion 431(c)(2), and 

16 ‘‘(B) the denominator of which is the ac17 crued liability of the plan. 

18 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.— 

19 The term ‘accumulated funding deficiency’ has the 

20 meaning provided such term in section 431(a). 

21 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 

22 participant’ means, in connection with a multiem23 ployer plan, a participant who is in covered service 

24 under the plan. 
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1 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac2 tive participant’ means, in connection with a multi3 employer plan, a participant who— 

4 ‘‘(A) is not in covered service under the 

5 plan, and 

6 ‘‘(B) is in pay status under the plan or has 

7 a nonforfeitable right to benefits under the 

8 plan. 

9 ‘‘(6) PAY STATUS.—A person is in ‘pay status’ 

10 under a multiemployer plan if— 

11 ‘‘(A) at any time during the current plan 

12 year, such person is a participant or beneficiary 

13 under the plan and is paid an early, late, nor14 mal, or disability retirement benefit under the 

15 plan (or a death benefit under the plan related 

16 to a retirement benefit), or 

17 ‘‘(B) to the extent provided in regulations 

18 of the Secretary, such person is entitled to such 

19 a benefit under the plan. 

20 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 

21 ‘obligation to contribute’ has the meaning provided 

22 such term under section 4212(a) of the Employee 

23 Retirement Income Security Act of 1974. 

24 ‘‘(8) ENTRY INTO CRITICAL STATUS.—A plan 

25 shall be treated as entering into critical status as of 
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1 the date that such plan is certified to be in critical 

2 status under subsection (a)(1), is presumed to be in 

3 critical status under subsection (a)(3), or enters into 

4 critical status under subsection (b)(7).’’. 

5 (b) EXCISE TAX ON FAILURES TO ACT WITH RE6 SPECT TO MULTIEMPLOYER PLANS IN CRITICAL STA7 TUS.—Section 4971 of the Internal Revenue Code of 1986 

8 is amended by redesignating subsection (g) as subsection 

9 (h) and by inserting after subsection (f) the following: 

10 ‘‘(g) MULTIEMPLOYER PLANS IN CRITICAL STA11 TUS.— 

12 ‘‘(1) SUBSTITUTION OF EXCISE TAX FOR INI13 TIAL AND ADDITIONAL TAX.—In the case of a multi14 employer plan to which section 432(c) applies for a 

15 period, subsections (a) and (b) shall not apply with 

16 respect to such period. 

17 ‘‘(2) FAILURE TO ADOPT REHABILITATION

18 PLAN.— 

19 ‘‘(A) IN GENERAL.—In the case of a multi20 employer plan to which section 432(c) applies, 

21 there is hereby imposed a tax on the failure of 

22 such plan to adopt a rehabilitation plan. 

23 ‘‘(B) AMOUNT OF TAX.—The amount of 

24 the tax imposed under subparagraph (A) with 
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1 respect to any plan sponsor shall be the greater 

2 of— 

3 ‘‘(i) the amount of tax imposed under 

4 subsection (a) (determined without regard 

5 to this subsection), or 

6 ‘‘(ii) the amount equal to $1,100 mul7 tiplied by the number of days in the period 

8 beginning on the first day of the 240-day 

9 period described in section 432(c)(1) and 

10 ending on the day on which the rehabilita11 tion plan is adopted. 

12 ‘‘(C) LIABILITY FOR TAX.— 

13 ‘‘(i) IN GENERAL.—The tax imposed 

14 by subparagraph (A) shall be paid by each 

15 plan sponsor. 

16 ‘‘(ii) PLAN SPONSOR.—For purposes 

17 of clause (i), the term ‘plan sponsor’ in the 

18 case of a multiemployer plan means the as19 sociation, committee, joint board of trust20 ees, or other similar group of representa21 tives of the parties who establish or main22 tain the plan. 

23 ‘‘(3) FAILURE TO COMPLY WITH REHABILITA24 TION PLAN.— 
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1 ‘‘(A) IN GENERAL.—In the case of a multi2 employer plan to which section 432(c) applies, 

3 there is hereby imposed a tax on each failure to 

4 make a required contribution under the reha5 bilitation plan within the time required under 

6 such plan. 

7 ‘‘(B) AMOUNT OF TAX.—The amount of 

8 the tax imposed by subparagraph (A) shall be, 

9 with respect to each required contribution 

10 under the rehabilitation plan, the amount equal 

11 to the excess of the amount of such required 

12 contribution over the amount contributed. 

13 ‘‘(C) LIABILITY FOR TAX.—The tax im14 posed by subparagraph (A) shall be paid by the 

15 employer responsible for contributing to or 

16 under the rehabilitation plan which fails to 

17 make the contribution. 

18 ‘‘(4) REHABILITATION PLAN.—For purposes of 

19 this subsection, the term ‘rehabilitation plan’ means 

20 the plan required to be adopted under section 

21 432(c).’’. 

22 (c) CLERICAL AMENDMENT.—The table of sections 

23 for subpart A of part III of subchapter D of chapter 1 

24 of such Code is amended by adding at the end the fol25 lowing new item: 
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‘‘Sec. 432. Additional funding rules for multiemployer plans in endangered status or critical status.’’. 

1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply with respect to plan years begin3 ning after December 31, 2005. 

4 (e) SPECIAL RULE FOR 2006.—In the case of any 

5 plan year beginning in 2006, any reference in section 432 

6 of the Internal Revenue Code of 1986 (as added by this 

7 section) to section 431 of such Code (as added by this 

8 Act) shall be treated as a reference to the corresponding 

9 provision of such Code as in effect for plan years begin10 ning in such year. 

11 SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MUL12 TIEMPLOYER PLANS. 

13 (a) ADVANCE DETERMINATION OF IMPENDING IN14 SOLVENCY OVER 5 YEARS.—Section 418E(d)(1) of the 

15 Internal Revenue Code of 1986 is amended— 

16 (1) by striking ‘‘3 plan years’’ the second place 

17 it appears and inserting ‘‘5 plan years’’, and 

18 (2) by adding at the end the following new sen19 tence: ‘‘If the plan sponsor makes such a determina20 tion that the plan will be insolvent in any of the next 

21 5 plan years, the plan sponsor shall make the com22 parison under this paragraph at least annually until 

23 the plan sponsor makes a determination that the 
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1 plan will not be insolvent in any of the next 5 plan 

2 years.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply with respect to determinations 

5 made in plan years beginning after December 31, 2005. 

6 TITLE III—OTHER PROVISIONS 

7 SEC. 301. INTEREST RATE FOR 2006 FUNDING REQUIRE8 MENTS. 

9 (a) AMENDMENTS TO EMPLOYEE RETIREMENT IN10 COME SECURITY ACT OF 1974.— 

11 (1) IN GENERAL.—Subclause (II) of section 

12 302(b)(5)(B)(ii) of the Employee Retirement Income 

13 Security Act of 1974 (29 U.S.C. 1082(b)(5)(B)(ii)) 

14 is amended— 

15 (A) by striking ‘‘January 1, 2006’’ and in16 serting ‘‘January 1, 2007’’, and 

17 (B) by striking ‘‘AND 2005’’ in the heading 

18 and inserting ‘‘, 2005, AND 2006’’. 

19 (2) CURRENT LIABILITY.—Subclause (IV) of 

20 section 302(d)(7)(C)(i) of such Act (29 U.S.C. 

21 1082(d)(7)(C)(i)) is amended— 

22 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

23 2005, or 2006’’, and 

24 (B) by striking ‘‘AND 2005’’ in the heading 

25 and inserting ‘‘, 2005, AND 2006’’. 
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1 (b) AMENDMENTS TO INTERNAL REVENUE CODE OF

2 1986.— 

3 (1) IN GENERAL.—Subclause (II) of section 

4 412(b)(5)(B)(ii) of the Internal Revenue Code of 

5 1986 is amended— 

6 (A) by striking ‘‘January 1, 2006’’ and in7 serting ‘‘January 1, 2007’’, and 

8 (B) by striking ‘‘AND 2005’’ in the heading 

9 and inserting ‘‘, 2005, AND 2006’’. 

10 (2) CURRENT LIABILITY.—Subclause (IV) of 

11 section 412(l)(7)(C)(i) of such Code is amended— 

12 (A) by striking ‘‘or 2005’’ and inserting ‘‘, 

13 2005, or 2006’’, and 

14 (B) by striking ‘‘AND 2005’’ in the heading 

15 and inserting ‘‘, 2005, AND 2006’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to plan years beginning after De18 cember 31, 2005. 

19 SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINA20 TION OF LUMP SUM DISTRIBUTIONS. 

21 (a) AMENDMENT TO EMPLOYEE RETIREMENT IN22 COME SECURITY ACT OF 1974.—Paragraph (3) of section 

23 205(g) of the Employee Retirement Income Security Act 

24 of 1974 (29 U.S.C. 1055(g)(3)) is amended to read as 

25 follows: 
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1 ‘‘(3)(A) For purposes of paragraphs (1) and (2), the 

2 present value shall not be less than the present value cal3 culated by using the applicable mortality table and the ap4 plicable interest rate. 

5 ‘‘(B) For purposes of subparagraph (A)— 

6 ‘‘(i) The term ‘applicable mortality table’ means 

7 a mortality table, modified as appropriate by the 

8 Secretary of the Treasury, based on the mortality 

9 table specified for the plan year under section 

10 303(h)(3). 

11 ‘‘(ii) The term ‘applicable interest rate’ means 

12 the adjusted first, second, and third segment rates 

13 applied under rules similar to the rules of section 

14 303(h)(2)(C) for the month before the date of the 

15 distribution or such other time as the Secretary of 

16 the Treasury may by regulations prescribe. 

17 ‘‘(iii) For purposes of clause (ii), the adjusted 

18 first, second, and third segment rates are the first, 

19 second, and third segment rates which would be de20 termined under section 303(h)(2)(C) if— 

21 ‘‘(I) section 303(h)(2)(D)(i) were applied 

22 by substituting ‘the yields’ for ‘a 3-year weight23 ed average of yields’, 

24 ‘‘(II) section 303(h)(2)(G)(i)(II) were ap25 plied by substituting ‘section 
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1 205(g)(3)(A)(ii)(II)’ for ‘section 

2 302(b)(5)(B)(ii)(II)’, and 

3 ‘‘(III) the applicable percentage under sec4 tion 303(h)(2)(G) were determined in accord5 ance with the following table: 

‘‘In the case of plan years beginning in: The applicable 

percentage is:

2007 .............................................................. 20 percent

2008 .............................................................. 40 percent

2009 .............................................................. 60 percent

2010 .............................................................. 80 percent.’’. 

6 (b) AMENDMENT TO INTERNAL REVENUE CODE OF

7 1986.—Paragraph (3) of section 417(e) of the Internal 

8 Revenue Code of 1986 is amended to read as follows: 

9 ‘‘(3) DETERMINATION OF PRESENT VALUE.— 

10 ‘‘(A) IN GENERAL.—For purposes of para11 graphs (1) and (2), the present value shall not 

12 be less than the present value calculated by 

13 using the applicable mortality table and the ap14 plicable interest rate. 

15 ‘‘(B) APPLICABLE MORTALITY TABLE.— 

16 For purposes of subparagraph (A), the term 

17 ‘applicable mortality table’ means a mortality 

18 table, modified as appropriate by the Secretary, 

19 based on the mortality table specified for the 

20 plan year under section 430(h)(3). 
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1 ‘‘(C) APPLICABLE INTEREST RATE.—For 

2 purposes of subparagraph (A), the term ‘appli3 cable interest rate’ means the adjusted first, 

4 second, and third segment rates applied under 

5 rules similar to the rules of section 

6 430(h)(2)(C) for the month before the date of 

7 the distribution or such other time as the Sec8 retary may by regulations prescribe. 

9 ‘‘(D) APPLICABLE SEGMENT RATES.—For 

10 purposes of subparagraph (C), the adjusted 

11 first, second, and third segment rates are the 

12 first, second, and third segment rates which 

13 would be determined under section 

14 430(h)(2)(C) if— 

15 ‘‘(i) section 430(h)(2)(D)(i) were ap16 plied by substituting ‘the yields’ for ‘a 3- 

17 year weighted average of yields’, 

18 ‘‘(ii) section 430(h)(2)(G)(i)(II) were 

19 applied by substituting ‘section 

20 417(e)(3)(A)(ii)(II)’ for ‘section 

21 412(b)(5)(B)(ii)(II)’, and 

22 ‘‘(iii) the applicable percentage under 

23 section 430(h)(2)(G) were determined in 

24 accordance with the following table: 
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‘‘In the case of plan years beginning in: The applicable 

percentage is:

2007 ....................................................................... 20 percent

2008 ....................................................................... 40 percent

2009 ....................................................................... 60 percent

2010 ....................................................................... 80 percent.’’. 

1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply with respect to plan years begin3 ning after December 31, 2006. 

4 SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING 

5 BENEFIT LIMITATIONS TO LUMP SUM DIS6 TRIBUTIONS. 

7 (a) IN GENERAL.—Clause (ii) of section 

8 415(b)(2)(E) of the Internal Revenue Code of 1986 is 

9 amended to read as follows: 

10 ‘‘(ii) For purposes of adjusting any 

11 benefit under subparagraph (B) for any 

12 form of benefit subject to section 

13 417(e)(3), the interest rate assumption 

14 shall not be less than the greater of— 

15 ‘‘(I) 5.5 percent, 

16 ‘‘(II) the rate that provides a 

17 benefit of not more than 105 percent 

18 of the benefit that would be provided 

19 if the applicable interest rate (as de20 fined in section 417(e)(3)) were the 

21 interest rate assumption, or 
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1 ‘‘(III) the rate specified under 

2 the plan.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 subsection (a) shall apply to distributions made in years 

5 beginning after December 31, 2005. 

6 SEC. 304. DISTRIBUTIONS DURING WORKING RETIREMENT. 

7 (a) AMENDMENT TO THE EMPLOYEE RETIREMENT

8 INCOME SECURITY ACT OF 1974.—Subparagraph (A) of 

9 section 3(2) of the Employee Retirement Income Security 

10 Act of 1974 (29 U.S.C. 1002(2)) is amended by adding 

11 at the end the following new sentence: ‘‘A distribution 

12 from a plan, fund, or program shall not be treated as 

13 made in a form other than retirement income or as a dis14 tribution prior to termination of covered employment sole15 ly because such distribution is made to an employee who 

16 has attained age 62 and who is not separated from em17 ployment at the time of such distribution.’’. 

18 (b) AMENDMENT TO THE INTERNAL REVENUE CODE

19 OF 1986.—Subsection (a) of section 401 of the Internal 

20 Revenue Code of 1986 is amended by inserting after para21 graph (34) the following new paragraph: 

22 ‘‘(35) DISTRIBUTIONS DURING WORKING RE23 TIREMENT.—A trust forming part of a pension plan 

24 shall not be treated as failing to constitute a quali25 fied trust under this section solely because a dis-
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1 tribution is made from such trust to an employee 

2 who has attained age 62 and who is not separated 

3 from employment at the time of such distribution.’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to distributions in plan years be6 ginning after December 31, 2005. 

7 SEC. 305. OTHER AMENDMENTS RELATING TO PROHIBITED 

8 TRANSACTIONS. 

9 (a) DEFINITION OF AMOUNT INVOLVED.—Section 

10 502(i) of the Employee Retirement Income Security Act 

11 of 1974 (29 U.S.C. 1132(i)) is amended to read as follows: 

12 ‘‘(i)(1) In the case of a transaction prohibited by sec13 tion 406 by a party in interest with respect to a plan to 

14 which this part applies, the Secretary may assess a civil 

15 penalty against such party in interest. Except as provided 

16 in paragraph (2), the amount of such penalty may not ex17 ceed 5 percent of the amount involved in each such trans18 action for each year or part thereof during which the pro19 hibited transaction continues. 

20 ‘‘(2) If the transaction is not corrected (in such man21 ner as the Secretary shall prescribe in regulations) within 

22 90 days after notice from the Secretary (or such longer 

23 period as the Secretary may permit), such penalty may 

24 be in an amount not more than 100 percent of the amount 

25 involved. 
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1 ‘‘(3) For purposes of paragraph (1)— 

2 ‘‘(A) Except as provided in subparagraphs (C) 

3 and (D), the term ‘amount involved’ means, with re4 spect to a prohibited transaction, the greater of— 

5 ‘‘(i) the amount of money and the fair 

6 market value of the other property given, or 

7 ‘‘(ii) the amount of money and the fair 

8 market value of the other property received. 

9 ‘‘(B) For purposes of subparagraph (A), fair 

10 market value shall be determined as of the date on 

11 which the prohibited transaction occurs, except that 

12 in the case described in paragraph (2) fair market 

13 value shall be the highest fair market value during 

14 the period between the date of the transaction and 

15 the date of correction. 

16 ‘‘(C) In the case of services described in sub17 section (b)(2) or (c)(2) of section 408, the term 

18 ‘amount involved’ means only the amount of excess 

19 compensation. 

20 ‘‘(D) In the case of principal transactions pro21 hibited under section 406(a) involving securities or 

22 commodities, the term ‘amount involved’ means only 

23 the amount received by the disqualified person in ex24 cess of the amount such person would have received 
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1 in an arm’s length transaction with an unrelated 

2 party as of the same date. 

3 ‘‘(E) For the purposes of this paragraph— 

4 ‘‘(i) the term ‘security’ has the meaning 

5 given such term by section 475(c)(2) of the In6 ternal Revenue Code of 1986 (without regard to 

7 subparagraph (F)(iii) and the last sentence 

8 thereof), and 

9 ‘‘(ii) the term ‘commodity’ has the mean10 ing given such term by section 475(e)(2) of 

11 such Code (without regard to subparagraph 

12 (D)(iii) thereof).’’. 

13 (b) EXEMPTION FOR BLOCK TRADING.— 

14 (1) AMENDMENTS TO EMPLOYEE RETIREMENT

15 INCOME SECURITY ACT OF 1974.—Section 408(b) of 

16 such Act (29 U.S.C. 1108(b)), as amended by sec17 tion 601, is further amended by adding at the end 

18 the following new paragraph: 

19 ‘‘(15)(A) Any transaction involving the pur20 chase or sale of securities between a plan and a 

21 party in interest (other than a fiduciary described in 

22 section 3(21)(A)(ii)) with respect to a plan if— 

23 ‘‘(i) the transaction involves a block trade, 

24 ‘‘(ii) at the time of the transaction, the in25 terest of the plan (together with the interests of 
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1 any other plans maintained by the same plan 

2 sponsor), does not exceed 10 percent of the ag3 gregate size of the block trade, and 

4 ‘‘(iii) the terms of the transaction, includ5 ing the price, are at least as favorable to the 

6 plan as an arm’s length transaction. 

7 ‘‘(B) For purposes of this paragraph, the term 

8 ‘block trade’ includes any trade which will be allo9 cated across two or more client accounts of a fidu10 ciary.’’. 

11 (2) AMENDMENTS TO INTERNAL REVENUE

12 CODE OF 1986.— 

13 (A) IN GENERAL.—Subsection (d) of sec14 tion 4975 of the Internal Revenue Code of 1986 

15 (relating to exemptions) is amended by striking 

16 ‘‘or’’ at the end of paragraph (15), by striking 

17 the period at the end of paragraph (16) and in18 serting ‘‘, or’’, and by adding at the end the fol19 lowing new paragraph: 

20 ‘‘(17) any transaction involving the purchase or 

21 sale of securities between a plan and a party in in22 terest (other than a fiduciary described in subsection 

23 (e)(3)(B)) with respect to a plan if— 

24 ‘‘(A) the transaction involves a block trade, 
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1 ‘‘(B) at the time of the transaction, the in2 terest of the plan (together with the interests of 

3 any other plans maintained by the same plan 

4 sponsor), does not exceed 10 percent of the ag5 gregate size of the block trade, and 

6 ‘‘(C) the terms of the transaction, includ7 ing the price, are at least as favorable to the 

8 plan as an arm’s length transaction. 

9 ‘‘(D) For purposes of this paragraph, the term 

10 ‘block trade’ includes any trade which will be allo11 cated across two or more client accounts of a fidu12 ciary.’’. 

13 (B) SPECIAL RULE RELATING TO BLOCK

14 TRADE.—Subsection (f) of section 4975 of such 

15 Code (relating to other definitions and special 

16 rules) is amended by adding at the end the fol17 lowing new paragraph: 

18 ‘‘(8) BLOCK TRADE.—For purposes of sub19 section (d)(17), the term ‘block trade’ includes any 

20 trade which will be allocated across two or more cli21 ent accounts of a fiduciary.’’. 

22 (c) BONDING RELIEF.—Section 412(a) of such Act 

23 (29 U.S.C. 1112(a)) is amended— 

24 (1) by redesignating paragraph (2) as para25 graph (3); 
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1 (2) by striking ‘‘and’’ at the end of paragraph 

2 (1); and 

3 (3) by inserting after paragraph (1) the fol4 lowing new paragraph: 

5 ‘‘(2) no bond shall be required of an entity 

6 which is subject to regulation as a broker or a dealer 

7 under section 15 of the Securities Exchange Act of 

8 1934 (15 U.S.C. 78a et seq.) or an entity registered 

9 under the Investment Advisers Act of 1940 (15 

10 U.S.C. 80b-1 et seq.), including requirements im11 posed by a self-regulatory organization (within the 

12 meaning of section 3(a)(26) of such Act (15 U.S.C. 

13 78c(a)(26)), or any affiliate with respect to which 

14 the broker or dealer agrees to be liable to the same 

15 extent as if they held the assets directly.’’. 

16 (d) EXEMPTION FOR ELECTRONIC COMMUNICATION

17 NETWORK.— 

18 (1) IN GENERAL.—Section 408(b) of such Act 

19 (as amended by subsection (b)) is further amended 

20 by adding at the end the following: 

21 ‘‘(16) Any transaction involving the purchase or 

22 sale of securities, or other property (as determined 

23 in regulations of the Secretary) between a plan and 

24 a fiduciary or a party in interest if— 
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1 ‘‘(A) the transaction is executed through 

2 an exchange, electronic communication network, 

3 alternative trading system, or similar execution 

4 system or trading venue subject to regulation 

5 and oversight by— 

6 ‘‘(i) the applicable Federal regulating 

7 entity, or 

8 ‘‘(ii) such other applicable govern9 mental regulating agency as the Secretary 

10 may determine appropriate in the case of 

11 any fiduciary or party in interest or class 

12 of fiduciaries or parties in interest or any 

13 transaction or class of transactions, 

14 ‘‘(B) neither the execution system nor the 

15 parties to the transaction take into account the 

16 identity of the parties in the execution of 

17 trades, 

18 ‘‘(C) the transaction is effected pursuant 

19 to rules designed to match purchases and sales 

20 at the best price available through the execution 

21 system, 

22 ‘‘(D) the price and compensation associ23 ated with the purchase and sale are not greater 

24 than an arm’s length transaction with an unre25 lated party, 
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1 ‘‘(E) if the fiduciary or party in interest 

2 has an ownership interest in the system or 

3 venue described in subparagraph (A), the sys4 tem or venue has been authorized under the 

5 plan for transactions described in this para6 graph, and 

7 ‘‘(F) not less than 30 days prior to the ini8 tial transaction described in this paragraph exe9 cuted through any system or venue described in 

10 subparagraph (A), the plan administrator is 

11 provided written notice of the execution of such 

12 transaction through such system or venue.’’. 

13 (2) EFFECTIVE DATE.—The amendment made 

14 by this subsection shall take effect 30 days after the 

15 date of the enactment of this Act. 

16 (e) CONFORMING ERISA’S PROHIBITED TRANS17 ACTION PROVISION TO FERSA.—Section 408(b) of such 

18 Act (29 U.S.C. 1106), as amended by subsection (d), is 

19 further amended by adding at the end the following new 

20 paragraph: 

21 ‘‘(17)(A) transactions described in subpara22 graphs (A), (B), and (D) of section 406(a)(1) be23 tween a plan and a party that is a party in interest 

24 (under section 3(14)) solely by reason of providing 

25 services, but only if in connection with such trans-
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1 action the plan receives no less, nor pays no more, 

2 than adequate consideration. 

3 ‘‘(B) For purposes of this paragraph, the term 

4 ‘adequate consideration’ means— 

5 ‘‘(i) in the case of a security for which 

6 there is a generally recognized market— 

7 ‘‘(I) the price of the security pre8 vailing on a national securities exchange 

9 which is registered under section 6 of the 

10 Securities Exchange Act of 1934, taking 

11 into account factors such as the size of the 

12 transaction and marketability of the secu13 rity, or 

14 ‘‘(II) if the security is not traded on 

15 such a national securities exchange, a price 

16 not less favorable to the plan than the of17 fering price for the security as established 

18 by the current bid and asked prices quoted 

19 by persons independent of the issuer and 

20 of the party in interest, taking into ac21 count factors such as the size of the trans22 action and marketability of the security, 

23 and 

24 ‘‘(ii) in the case of an asset other than a 

25 security for which there is a generally recog-
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1 nized market, the fair market value of the asset 

2 as determined in good faith by a fiduciary or fi3 duciaries in accordance with regulations pre4 scribed by the Secretary.’’. 

5 (f) RELIEF FOR FOREIGN EXCHANGE TRANS6 ACTIONS.—Section 408(b) of such Act (as amended by the 

7 preceding provisions of this section) is further amended 

8 by adding at the end the following new paragraph: 

9 ‘‘(18) Any foreign exchange transactions, be10 tween a bank or broker-dealer, or any affiliate of ei11 ther thereof, and a plan with respect to which the 

12 bank or broker-dealer, or any affiliate, is a trustee, 

13 custodian, fiduciary, or other party in interest, if— 

14 ‘‘(A) the transaction is in connection with 

15 the purchase or sale of securities, 

16 ‘‘(B) at the time the foreign exchange 

17 transaction is entered into, the terms of the 

18 transaction are not less favorable to the plan 

19 than the terms generally available in com20 parable arm’s length foreign exchange trans21 actions between unrelated parties, or the terms 

22 afforded by the bank or the broker-dealer (or 

23 any affiliate thereof) in comparable arm’s24 length foreign exchange transactions involving 

25 unrelated parties, and 
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1 ‘‘(C) the exchange rate used by the bank 

2 or broker-dealer for a particular foreign ex3 change transaction may not deviate by more 

4 than 3 percent from the interbank bid and 

5 asked rates at the time of the transaction as 

6 displayed on an independent service that re7 ports rates of exchange in the foreign currency 

8 market for such currency.’’. 

9 (g) DEFINITION OF PLAN ASSET VEHICLE.—Section 

10 3 of such Act (29 U.S.C. 1002) is amended by adding 

11 at the end the following new paragraph: 

12 ‘‘(42) the term ‘plan assets’ means plan assets as de13 fined by such regulations as the Secretary may prescribe, 

14 except that under such regulations the assets of any entity 

15 shall not be treated as plan assets if, immediately after 

16 the most recent acquisition of any equity interest in the 

17 entity, less than 50 percent of the total value of each class 

18 of equity interest in the entity is held by employee benefit 

19 plan investors. For purposes of determinations pursuant 

20 to this paragraph, the value of any equity interest owned 

21 by a person (other than such an employee benefit plan) 

22 who has discretionary authority or control with respect to 

23 the assets of the entity or any person who provides invest24 ment advice for a fee (direct or indirect) with respect to 

25 such assets, or any affiliate of such a person, shall be dis-
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1 regarded for purposes of calculating the 50 percent 

2 threshold. An entity shall be considered to hold plan assets 

3 only to the extent of the percentage of the equity interest 

4 owned by benefit plan investors. For purposes of this para5 graph, the term ‘benefit plan investor’ means an employee 

6 benefit plan subject to this part and any plan to which 

7 section 4975 of the Internal Revenue Code of 1986 ap8 plies.’’. 

9 SEC. 306. CORRECTION PERIOD FOR CERTAIN TRANS10 ACTIONS INVOLVING SECURITIES AND COM11 MODITIES. 

12 (a) AMENDMENT OF EMPLOYEE RETIREMENT IN13 COME SECURITY ACT OF 1974.—Section 408(b) of the 

14 Employee Retirement Income Security Act of 1974 (29 

15 U.S.C. 1108(b)), as amended by sections 304 and 601, 

16 is further amended by adding at the end the following new 

17 paragraph: 

18 ‘‘(19)(A) Except as provided in subparagraphs 

19 (B) and (C), a transaction described in section 

20 406(a) in connection with the acquisition, holding, 

21 or disposition of any security or commodity, if the 

22 transaction is corrected before the end of the correc23 tion period. 

24 ‘‘(B) Subparagraph (A) does not apply to any 

25 transaction between a plan and a plan sponsor or its 
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1 affiliates that involves the acquisition or sale of an 

2 employer security (as defined in section 407(d)(1)) 

3 or the acquisition, sale, or lease of employer real 

4 property (as defined in section 407(d)(2)). 

5 ‘‘(C) In the case of any fiduciary or other party 

6 in interest (or any other person knowingly partici7 pating in such transaction), subparagraph (A) does 

8 not apply to any transaction if, at the time the 

9 transaction occurs, such fiduciary or party in inter10 est (or other person) knew (or reasonably should 

11 have known) that the transaction would (without re12 gard to this paragraph) constitute a violation of sec13 tion 406(a). 

14 ‘‘(D) For purposes of this paragraph, the term 

15 ‘correction period’ means, in connection with a fidu16 ciary or party in interest (or other person knowingly 

17 participating in the transaction), the 14-day period 

18 beginning on the date on which such fiduciary or 

19 party in interest (or other person) discovers, or rea20 sonably should have discovered, that the transaction 

21 would (without regard to this paragraph) constitute 

22 a violation of section 406(a). 

23 ‘‘(E) For purposes of this paragraph— 

24 ‘‘(i) The term ‘security’ has the meaning 

25 given such term by section 475(c)(2) of the In-
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1 ternal Revenue Code of 1986 (without regard to 

2 subparagraph (F)(iii) and the last sentence 

3 thereof). 

4 ‘‘(ii) The term ‘commodity’ has the mean5 ing given such term by section 475(e)(2) of 

6 such Code (without regard to subparagraph 

7 (D)(iii) thereof). 

8 ‘‘(iii) The term ‘correct’ means, with re9 spect to a transaction— 

10 ‘‘(I) to undo the transaction to the ex11 tent possible and in any case to make good 

12 to the plan or affected account any losses 

13 resulting from the transaction, and 

14 ‘‘(II) to restore to the plan or affected 

15 account any profits made through the use 

16 of assets of the plan.’’. 

17 (b) AMENDMENT OF INTERNAL REVENUE CODE OF

18 1986.— 

19 (1) IN GENERAL.—Subsection (d) of section 

20 4975 of the Internal Revenue Code of 1986 (relating 

21 to exemptions), as amended by this Act, is amended 

22 by striking ‘‘or’’ at the end of paragraph (16), by 

23 striking the period at the end of paragraph (17) and 

24 inserting ‘‘, or’’, and by adding at the end the fol25 lowing new paragraph: 
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1 ‘‘(18) except as provided in subsection (f)(9), a 

2 transaction described in subparagraph (A), (B), (C), 

3 or (D) of subsection (c)(1) in connection with the 

4 acquisition, holding, or disposition of any security or 

5 commodity, if the transaction is corrected before the 

6 end of the correction period.’’. 

7 (2) SPECIAL RULES RELATING TO CORRECTION

8 PERIOD.—Subsection (f) of section 4975 of such 

9 Code (relating to other definitions and special rules), 

10 as amended by this Act, is amended by adding at 

11 the end the following new paragraph: 

12 ‘‘(9) CORRECTION PERIOD.— 

13 ‘‘(A) IN GENERAL.—For purposes of sub14 section (d)(18), the term ‘correction period’ 

15 means the 14-day period beginning on the date 

16 on which the disqualified person discovers, or 

17 reasonably should have discovered, that the 

18 transaction would (without regard to this para19 graph and subsection (d)(18)) constitute a pro20 hibited transaction. 

21 ‘‘(B) EXCEPTIONS.— 

22 ‘‘(i) EMPLOYER SECURITIES.—Sub23 section (d)(18) does not apply to any 

24 transaction between a plan and a plan 

25 sponsor or its affiliates that involves the 
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1 acquisition or sale of an employer security 

2 (as defined in section 407(d)(1)) or the ac3 quisition, sale, or lease of employer real 

4 property (as defined in section 407(d)(2)). 

5 ‘‘(ii) KNOWING PROHIBITED TRANS6 ACTION.—In the case of any disqualified 

7 person, subsection (d)(18) does not apply 

8 to a transaction if, at the time the trans9 action is entered into, the disqualified per10 son knew (or reasonably should have 

11 known) that the transaction would (with12 out regard to this paragraph) constitute a 

13 prohibited transaction. 

14 ‘‘(C) ABATEMENT OF TAX WHERE THERE

15 IS A CORRECTION.—If a transaction is not 

16 treated as a prohibited transaction by reason of 

17 subsection (d)(18), then no tax under sub18 section (a) and (b) shall be assessed with re19 spect to such transaction, and if assessed the 

20 assessment shall be abated, and if collected 

21 shall be credited or refunded as an overpay22 ment. 

23 ‘‘(D) DEFINITIONS.—For purposes of this 

24 paragraph and subsection (d)(18)— 
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1 ‘‘(i) SECURITY.—The term ‘security’ 

2 has the meaning given such term by sec3 tion 475(c)(2) (without regard to subpara4 graph (F)(iii) and the last sentence there5 of). 

6 ‘‘(ii) COMMODITY.—The term ‘com7 modity’ has the meaning given such term 

8 by section 475(e)(2) (without regard to 

9 subparagraph (D)(iii) thereof). 

10 ‘‘(iii) CORRECT.—The term ‘correct’ 

11 means, with respect to a transaction— 

12 ‘‘(I) to undo the transaction to 

13 the extent possible and in any case to 

14 make good to the plan or affected ac15 count any losses resulting from the 

16 transaction, and 

17 ‘‘(II) to restore to the plan or af18 fected account any profits made 

19 through the use of assets of the 

20 plan.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to any transaction which the fidu23 ciary or disqualified person discovers, or reasonably should 

24 have discovered, after the date of the enactment of this 

25 Act constitutes a prohibited transaction. 
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1 SEC. 307. RECOVERY BY REIMBURSEMENT OR SUBROGA2 TION WITH RESPECT TO PROVIDED BENE3 FITS. 

4 (a) IN GENERAL.—Section 502(a) of the Employee 

5 Retirement Income Security Act of 1974 (29 U.S.C. 

6 1132(a)) is amended by adding, after and below para7 graph (9), the following new sentence: 

8 ‘‘Actions described under paragraph (3) include an action 

9 by a fiduciary for recovery of amounts on behalf of the 

10 plan enforcing terms of the plan that provide a right of 

11 recovery by reimbursement or subrogation with respect to 

12 benefits provided to or for a participant or beneficiary.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 subsection (a) shall take effect on January 1, 2006. 

15 SEC. 308. EXERCISE OF CONTROL OVER PLAN ASSETS IN 

16 CONNECTION WITH QUALIFIED CHANGES IN 

17 INVESTMENT OPTIONS. 

18 (a) IN GENERAL.—Section 404(c) of the Employee 

19 Retirement Income Security Act of 1974 (29 U.S.C. 

20 1104(c)) is amended by adding at the end the following 

21 new paragraph: 

22 ‘‘(4)(A) In any case in which a qualified change in 

23 investment options occurs in connection with an individual 

24 account plan, a participant or beneficiary shall not be 

25 treated for purposes of paragraph (1) as not exercising 

26 control over the assets in his account in connection with 
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1 such change if the requirements of subparagraph (C) are 

2 met in connection with such change. 

3 ‘‘(B) For purposes of subparagraph (A), the term 

4 ‘qualified change in investment options’ means, in connec5 tion with an individual account plan, a change in the in6 vestment options offered to the participant or beneficiary 

7 under the terms of the plan, under which— 

8 ‘‘(i) the participant’s account is reallocated 

9 among one or more new investment options which 

10 are offered in lieu of one or more investment options 

11 offered immediately prior to the effective date of the 

12 change, and 

13 ‘‘(ii) the characteristics of the new investment 

14 options, including characteristics relating to risk and 

15 rate of return, are, as of immediately after the 

16 change, reasonably similar to those of the existing 

17 investment options as of immediately before the 

18 change. 

19 ‘‘(C) The requirements of this subparagraph are met 

20 in connection with a qualified change in investment op21 tions if— 

22 ‘‘(i) at least 60 days prior to the effective date 

23 of the change, the plan administrator furnishes writ24 ten notice of the change to the participants and 

25 beneficiaries, including information comparing the 
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1 existing and new investment options and an expla2 nation that, in the absence of affirmative investment 

3 instructions from the participant or beneficiary to 

4 the contrary, the account of the participant or bene5 ficiary will be invested in the manner described in 

6 subparagraph (B), 

7 ‘‘(ii) the participant has not provided to the 

8 plan administrator, in advance of the effective date 

9 of the change, affirmative investment instructions 

10 contrary to the change, and 

11 ‘‘(iii) the investments under the plan of the par12 ticipant or beneficiary as in effect immediately prior 

13 to the effective date of the change was the product 

14 of the exercise by such participant or beneficiary of 

15 control over the assets of the account within the 

16 meaning of paragraph (1).’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 subsection (a) shall apply with respect to changes in in19 vestment options taking effect on or after January 1, 

20 2006. 

21 SEC. 309. CLARIFICATION OF FIDUCIARY RULES. 

22 Not later than 1 year after the date of the enactment 

23 of this Act, the Secretary of Labor shall issue final regula24 tions clarifying that the selection of an annuity contract 
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1 as an optional form of distribution from an individual ac2 count plan to a participant or beneficiary— 

3 (1) is not subject to the safest available annuity 

4 standard under Interpretive Bulletin 95–1 (29 

5 C.F.R. 2509.95–1), and 

6 (2) is subject to all otherwise applicable fidu7 ciary standards. 

8 SEC. 310. GOVERNMENT ACCOUNTABILITY OFFICE PEN9 SION FUNDING REPORT. 

10 (a) IN GENERAL.—The Comptroller General of the 

11 Government Accountability Office shall transmit to the 

12 Congress a pension funding report not later than one year 

13 after the date of the enactment of this Act. 

14 (b) REPORT CONTENT.—The pension funding report 

15 required under subsection (a) shall include an analysis of 

16 the feasibility, advantages, and disadvantages of— 

17 (1) requiring an employee pension benefit plan 

18 to insure a portion of such plan’s total investments; 

19 (2) requiring an employee pension benefit plan 

20 to adhere to uniform solvency standards set by the 

21 Pension Benefit Guaranty Corporation, which are 

22 similar to those applied on a State level in the insur23 ance industry; and 

24 (3) amortizing a single-employer defined benefit 

25 pension plan’s shortfall amortization base (referred 
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1 to in section 303(c)(3) of the Employee Retirement 

2 Income Security Act of 1974 (as amended by this 

3 Act)) over various periods of not more than 7 years. 

4 TITLE IV—IMPROVEMENTS IN 

5 PBGC GUARANTEE PROVISIONS 

6 SEC. 401. INCREASES IN PBGC PREMIUMS. 

7 (a) FLAT-RATE PREMIUMS.—Section 4006(a)(3) of 

8 the Employee Retirement Income Security Act of 1974 

9 (29 U.S.C. 1306(a)(3)) is amended— 

10 (1) by striking clause (i) of subparagraph (A) 

11 and inserting the following: 

12 ‘‘(i) in the case of a single-employer plan, an 

13 amount equal to— 

14 ‘‘(I) for plan years beginning after Decem15 ber 31, 1990, and before January 1, 2006, $19, 

16 or 

17 ‘‘(II) for plan years beginning after De18 cember 31, 2005, the amount determined under 

19 subparagraph (F), 

20 plus the additional premium (if any) determined 

21 under subparagraph (E) for each individual who is 

22 a participant in such plan during the plan year;’’; 

23 and 

24 (2) by adding at the end the following new sub25 paragraph: 
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1 ‘‘(F)(i) Except as otherwise provided in this subpara2 graph, for purposes of determining the annual premium 

3 rate payable to the corporation by a single-employer plan 

4 for basic benefits guaranteed under this title, the amount 

5 determined under this subparagraph is the greater of $30 

6 or the adjusted amount determined under clause (ii). 

7 ‘‘(ii) For plan years beginning after 2006, the ad8 justed amount determined under this clause is the product 

9 derived by multiplying $30 by the ratio of— 

10 ‘‘(I) the national average wage index (as de11 fined in section 209(k)(1) of the Social Security Act) 

12 for the first of the 2 calendar years preceding the 

13 calendar year in which the plan year begins, to 

14 ‘‘(II) the national average wage index (as so de15 fined) for 2004, 

16 with such product, if not a multiple of $1, being rounded 

17 to the next higher multiple of $1 where such product is 

18 a multiple of $0.50 but not of $1, and to the nearest mul19 tiple of $1 in any other case. 

20 ‘‘(iii) For purposes of determining the annual pre21 mium rate payable to the corporation by a single-employer 

22 plan for basic benefits guaranteed under this title for any 

23 plan year beginning after 2005 and before 2010— 

24 ‘‘(I) except as provided in subclause (II), the 

25 premium amount referred to in subparagraph 
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1 (A)(i)(II) for any such plan year is the amount set 

2 forth in connection with such plan year in the fol3 lowing table: 

‘‘If the plan year begins in: The amount is: 

2006 ....................................................................... $21.20 

2007 ....................................................................... $23.40 

2008 ....................................................................... $25.60 

2009 ....................................................................... $27.80; or 

4 ‘‘(II) if the plan’s funding target attainment 

5 percentage for the plan year preceding the current 

6 plan year was less than 80 percent, the premium 

7 amount referred to in subparagraph (A)(i)(II) for 

8 such current plan year is the amount set forth in 

9 connection with such current plan year in the fol10 lowing table: 

‘‘If the plan year begins in: The amount is:

2006 ....................................................................... $22.67

2007 ....................................................................... $26.33

2008 or 2009 .......................................................... the amount provided 

under clause (i). 

11 ‘‘(iv) For purposes of this subparagraph, the term 

12 ‘funding target attainment percentage’ has the meaning 

13 provided such term in section 303(d)(2).’’. 

14 (b) PREMIUM RATE FOR CERTAIN TERMINATED SIN15 GLE-EMPLOYER PLANS.—Subsection (a) of section 4006 

16 of such Act (29 U.S.C. 1306) is amended by adding at 

17 the end the following: 
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1 ‘‘(7) PREMIUM RATE FOR CERTAIN TERMINATED

2 SINGLE-EMPLOYER PLANS.— 

3 ‘‘(A) IN GENERAL.—If there is a termination of 

4 a single-employer plan under clause (ii) or (iii) of 

5 section 4041(c)(2)(B) or section 4042, there shall be 

6 payable to the corporation, with respect to each ap7 plicable 12-month period, a premium at a rate equal 

8 to $1,250 multiplied by the number of individuals 

9 who were participants in the plan immediately before 

10 the termination date. Such premium shall be in ad11 dition to any other premium under this section. 

12 ‘‘(B) SPECIAL RULE FOR PLANS TERMINATED

13 IN BANKRUPTCY REORGANIZATION.—If the plan is 

14 terminated under 4041(c)(2)(B)(ii) or under section 

15 4042 and, as of the termination date, a person who 

16 is (as of such date) a contributing sponsor of the 

17 plan or a member of such sponsor’s controlled group 

18 has filed or has had filed against such person a peti19 tion seeking reorganization in a case under title 11 

20 of the United States Code, or under any similar law 

21 of a State or a political subdivision of a State (or 

22 a case described in section 4041(c)(2)(B)(i) filed by 

23 or against such person has been converted, as of 

24 such date, to such a case in which reorganization is 

25 sought), subparagraph (A) shall not apply to such 
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1 plan until the date of the discharge of such person 

2 in such case. 

3 ‘‘(C) APPLICABLE 12-MONTH PERIOD.—For 

4 purposes of subparagraph (A)— 

5 ‘‘(i) IN GENERAL.—The term ‘applicable 

6 12-month period’ means— 

7 ‘‘(I) the 12-month period beginning 

8 with the first month following the month 

9 in which the termination date occurs, and 

10 ‘‘(II) each of the first two 12-month 

11 periods immediately following the period 

12 described in subclause (I). 

13 ‘‘(ii) PLANS TERMINATED IN BANKRUPTCY

14 REORGANIZATION.—In any case in which the 

15 requirements of subparagraph (B) are met in 

16 connection with the termination of the plan 

17 with respect to 1 or more persons described in 

18 such subparagraph, the 12-month period de19 scribed in clause (i)(I) shall be the 12-month 

20 period beginning with the first month following 

21 the month which includes the earliest date as of 

22 which each such person is discharged in the 

23 case described in such clause in connection with 

24 such person. 

25 ‘‘(D) COORDINATION WITH SECTION 4007.— 
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1 ‘‘(i) Notwithstanding section 4007— 

2 ‘‘(I) premiums under this paragraph 

3 shall be due within 30 days after the be4 ginning of any applicable 12-month period, 

5 and 

6 ‘‘(II) the designated payor shall be the 

7 person who is the contributing sponsor as 

8 of immediately before the termination date. 

9 ‘‘(ii) The fifth sentence of section 4007(a) 

10 shall not apply in connection with premiums de11 termined under this paragraph.’’. 

12 (c) RISK-BASED PREMIUMS.— 

13 (1) EXTENSION THROUGH 2006.—Section 

14 4006(a)(3)(E)(iii)(V) of such Act is amended by 

15 striking ‘‘January 1, 2006’’ and inserting ‘‘January 

16 1, 2007’’. 

17 (2) CONFORMING AMENDMENTS RELATED TO

18 FUNDING RULES FOR SINGLE-EMPLOYER PLANS.— 

19 Section 4006(a)(3)(E) of such Act is amended by 

20 striking clauses (iii) and (iv) and inserting the fol21 lowing: 

22 ‘‘(iii)(I) For purposes of clause (ii), except as pro23 vided in subclause (II), the term ‘unfunded vested bene24 fits’ means, for a plan year, the amount which would be 

25 the plan’s funding shortfall (as defined in section 
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1 303(c)(4)), if the value of plan assets of the plan were 

2 equal to the fair market value of such assets and only vest3 ed benefits were taken into account. 

4 ‘‘(II) The interest rate used in valuing vested benefits 

5 for purposes of subclause (I) shall be equal to the first, 

6 second, or third segment rate which would be determined 

7 under section 303(h)(2)(C) if section 303(h)(2)(D)(i) were 

8 applied by substituting ‘the yields’ for ‘the 3-year weighted 

9 average of yields’, as applicable under rules similar to the 

10 rules under section 303(h)(2)(B).’’. 

11 (d) EFFECTIVE DATES.— 

12 (1) IN GENERAL.—The amendments made by 

13 subsection (a) and (c)(1) shall apply to plan years 

14 beginning after December 31, 2005. 

15 (2) PREMIUM RATE FOR CERTAIN TERMINATED

16 SINGLE-EMPLOYER PLANS.—The amendment made 

17 by subsection (b) shall apply with respect to cases 

18 commenced under title 11, United States Code, or 

19 under any similar law of a State or political subdivi20 sion of a State after October 26, 2005. 

21 (3) CONFORMING AMENDMENTS RELATED TO

22 FUNDING RULES FOR SINGLE-EMPLOYER PLANS.— 

23 The amendments made by subsection (c)(2) shall 

24 take effect on December 31, 2006, and shall apply 

25 to plan years beginning after such date. 
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1 TITLE V—DISCLOSURE 

2 SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES. 

3 (a) APPLICATION OF PLAN FUNDING NOTICE RE4 QUIREMENTS TO ALL DEFINED BENEFIT PLANS.—Sec5 tion 101(f) of the Employee Retirement Income Security 

6 Act of 1974 (29 U.S.C. 1021(f)) is amended— 

7 (1) in the heading, by striking ‘‘MULTIEM8 PLOYER’’; 

9 (2) in paragraph (1), by striking ‘‘which is a 

10 multiemployer plan’’; and 

11 (3) by striking paragraph (2)(B)(iii) and insert12 ing the following: 

13 ‘‘(iii)(I) in the case of a single-em14 ployer plan, a summary of the rules gov15 erning termination of single-employer plans 

16 under subtitle C of title IV, or 

17 ‘‘(II) in the case of a multiemployer 

18 plan, a summary of the rules governing in19 solvent multiemployer plans, including the 

20 limitations on benefit payments and any 

21 potential benefit reductions and suspen22 sions (and the potential effects of such lim23 itations, reductions, and suspensions on 

24 the plan); and’’. 
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1 (b) INCLUSION OF STATEMENT OF THE RATIO OF IN2 ACTIVE PARTICIPANTS TO ACTIVE PARTICIPANTS.—Sec3 tion 101(f)(2)(B) of such Act (29 U.S.C. 1021(f)(2)(B)) 

4 is amended— 

5 (1) in clause (iii)(II) (added by subsection 

6 (a)(3) of this section), by striking ‘‘and’’ at the end; 

7 (2) in clause (iv), by striking ‘‘apply.’’ and in8 serting ‘‘apply; and’’; and 

9 (3) by adding at the end the following new 

10 clause: 

11 ‘‘(v) a statement of the ratio, as of 

12 the end of the plan year to which the no13 tice relates, of— 

14 ‘‘(I) the number of participants 

15 who are not in covered service under 

16 the plan and are in pay status under 

17 the plan or have a nonforfeitable right 

18 to benefits under the plan, to 

19 ‘‘(II) the number of participants 

20 who are in covered service under the 

21 plan.’’. 

22 (c) COMPARISON OF MONTHLY AVERAGE OF VALUE

23 OF PLAN ASSETS TO PROJECTED CURRENT LIABIL24 ITIES.—Section 101(f)(2)(B) of such Act (29 U.S.C. 
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1 1021(f)(2)(B)) (as amended by the preceding provisions 

2 of this section) is amended further— 

3 (1) by striking clause (ii) and inserting the fol4 lowing: 

5 ‘‘(ii) a statement of a reasonable esti6 mate of— 

7 ‘‘(I) the value of the plan’s assets 

8 for the plan year to which the notice 

9 relates, 

10 ‘‘(II) projected liabilities of the 

11 plan for the plan year to which the 

12 notice relates, and 

13 ‘‘(III) the ratio of the estimated 

14 amount determined under subclause 

15 (I) to the estimated amount deter16 mined under subclause (II);’’; and 

17 (2) by adding at the end (after and below 

18 clause (v)) the following: 

19 ‘‘For purposes of determining a plan’s projected 

20 liabilities for a plan year under clause (ii)(II), 

21 such projected liabilities shall be determined by 

22 projecting forward in a reasonable manner to 

23 the end of the plan year the liabilities of the 

24 plan to participants and beneficiaries as of the 

25 first day of the plan year, taking into account 
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1 any significant events that occur during the 

2 plan year and that have a material effect on 

3 such liabilities, including any plan amendments 

4 in effect for the plan year.’’. 

5 (d) STATEMENT OF PLAN’S FUNDING POLICY AND

6 METHOD OF ASSET ALLOCATION.—Section 101(f)(2)(B) 

7 of such Act (as amended by the preceding provisions of 

8 this section) is amended further— 

9 (1) in clause (iv), by striking ‘‘and’’ at the end; 

10 (2) in clause (v), by striking the period and in11 serting ‘‘; and’’; and 

12 (3) by inserting after clause (v) the following 

13 new clause: 

14 ‘‘(vi) a statement setting forth the 

15 funding policy of the plan and the asset al16 location of investments under the plan (ex17 pressed as percentages of total assets) as 

18 of the end of the plan year to which the 

19 notice relates.’’. 

20 (e) NOTICE OF FUNDING IMPROVEMENT PLAN OR

21 REHABILITATION PLAN ADOPTED BY MULTIEMPLOYER

22 PLAN.—Section 101(f)(2)(B) of such Act (as amended by 

23 the preceding provisions of this section) is amended fur24 ther— 

25 (1) in clause (v), by striking ‘‘and’’ at the end; 
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1 (2) in clause (vi), by striking the period and in2 serting ‘‘; and’’; and 

3 (3) by inserting after clause (vi) the following 

4 new clause: 

5 ‘‘(vii) a summary of any funding im6 provement plan, rehabilitation plan, or 

7 modification thereof adopted under section 

8 305 during the plan year to which the no9 tice relates.’’. 

10 (f) NOTICE DUE 90 DAYS AFTER PLAN’S VALU11 ATION DATE.— 

12 (1) IN GENERAL.—Section 101(f)(3) of such 

13 Act (29 U.S.C. 1021(f)(3)) is amended by striking 

14 ‘‘two months after the deadline (including exten15 sions) for filing the annual report for the plan year’’ 

16 and inserting ‘‘90 days after the end of the plan 

17 year’’. 

18 (2) MODEL NOTICE.—Not later than 180 days 

19 after the date of the enactment of this Act, the Sec20 retary of Labor shall publish a model version of the 

21 notice required by section 101(f) of the Employee 

22 Retirement Income Security Act of 1974. 

23 (g) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to plan years beginning after De25 cember 31, 2005. 
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1 SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS. 

2 (a) ADDITIONAL ANNUAL REPORTING REQUIRE3 MENTS.—Section 103 of the Employee Retirement Income 

4 Security Act of 1974 (29 U.S.C. 1023) is amended— 

5 (1) in subsection (a)(1)(B), by striking ‘‘sub6 sections (d) and (e)’’ and inserting ‘‘subsections (d), 

7 (e), and (f)’’; and 

8 (2) by adding at the end the following new sub9 section: 

10 ‘‘(f)(1) With respect to any defined benefit plan, an 

11 annual report under this section for a plan year shall in12 clude the following: 

13 ‘‘(A) The ratio, as of the end of such plan year, 

14 of— 

15 ‘‘(i) the number of participants who, as of 

16 the end of such plan year, are not in covered 

17 service under the plan and are in pay status 

18 under the plan or have a nonforfeitable right to 

19 benefits under the plan, to 

20 ‘‘(ii) the number of participants who are in 

21 covered service under the plan as of the end of 

22 such plan year. 

23 ‘‘(B) In any case in which any liabilities to par24 ticipants or their beneficiaries under such plan as of 

25 the end of such plan year consist (in whole or in 

26 part) of liabilities to such participants and bene-
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1 ficiaries borne by 2 or more pension plans as of im2 mediately before such plan year, the funded ratio of 

3 each of such 2 or more pension plans as of imme4 diately before such plan year and the funded ratio 

5 of the plan with respect to which the annual report 

6 is filed as of the end of such plan year. 

7 ‘‘(C) For purposes of this paragraph, the term 

8 ‘funded ratio’ means, in connection with a plan, the 

9 percentage which— 

10 ‘‘(i) the value of the plan’s assets is of 

11 ‘‘(ii) the liabilities to participants and 

12 beneficiaries under the plan. 

13 ‘‘(2) With respect to any defined benefit plan which 

14 is a multiemployer plan, an annual report under this sec15 tion for a plan year shall include the following: 

16 ‘‘(A) The number of employers obligated to con17 tribute to the plan as of the end of such plan year. 

18 ‘‘(B) The number of participants under the 

19 plan on whose behalf no employer contributions have 

20 been made to the plan for such plan year. For pur21 poses of this subparagraph, the term ‘employer con22 tribution’ means, in connection with a participant, a 

23 contribution made by an employer as an employer of 

24 such participant.’’. 
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1 (b) ADDITIONAL INFORMATION IN ANNUAL ACTU2 ARIAL STATEMENT REGARDING PLAN RETIREMENT PRO3 JECTIONS.—Section 103(d) of such Act (29 U.S.C. 

4 1023(d)) is amended— 

5 (1) by redesignating paragraphs (12) and (13) 

6 as paragraphs (13) and (14), respectively; and 

7 (2) by inserting after paragraph (11) the fol8 lowing new paragraph: 

9 ‘‘(12) A statement explaining the actuarial as10 sumptions and methods used in projecting future re11 tirements and forms of benefit distributions under 

12 the plan.’’. 

13 (c) FILING AFTER 285 DAYS AFTER PLAN YEAR

14 ONLY IN CASES OF HARDSHIP.—Section 104(a)(1) of 

15 such Act (29 U.S.C. 1024(a)(1)) is amended by inserting 

16 after the first sentence the following new sentence: ‘‘In 

17 the case of a pension plan, the Secretary may extend the 

18 deadline for filing the annual report for any plan year past 

19 285 days after the close of the plan year only on a case 

20 by case basis and only in cases of hardship, in accordance 

21 with regulations which shall be prescribed by the Sec22 retary.’’. 

23 (d) INTERNET DISPLAY OF INFORMATION.—Section 

24 104(b) of such Act (29 U.S.C. 1024(b)) is amended by 

25 adding at the end the following: 
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1 ‘‘(5) Identification and basic plan information and ac2 tuarial information included in the annual report for any 

3 plan year shall be filed with the Secretary in an electronic 

4 format which accommodates display on the Internet, in ac5 cordance with regulations which shall be prescribed by the 

6 Secretary. The Secretary shall provide for display of such 

7 information included in the annual report, within 90 days 

8 after the date of the filing of the annual report, on a 

9 website maintained by the Secretary on the Internet and 

10 other appropriate media. Such information shall also be 

11 displayed on any website maintained by the plan sponsor 

12 (or by the plan administrator on behalf of the plan spon13 sor) on the Internet, in accordance with regulations which 

14 shall be prescribed by the Secretary.’’. 

15 (e) SUMMARY ANNUAL REPORT FILED WITHIN 15 

16 DAYS AFTER DEADLINE FOR FILING OF ANNUAL RE17 PORT.—Section 104(b)(3) of such Act (29 U.S.C. 

18 1024(b)(3)) is amended— 

19 (1) by striking ‘‘Within 210 days after the close 

20 of the fiscal year of the plan,’’ and inserting ‘‘Within 

21 15 business days after the due date under subsection 

22 (a)(1) for the filing of the annual report for the fis23 cal year of the plan,’’; and 

24 (2) by striking ‘‘the latest’’ and inserting 

25 ‘‘such’’. 
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1 (f) DISCLOSURE OF PLAN ASSETS AND LIABILITIES

2 IN SUMMARY ANNUAL REPORT.— 

3 (1) IN GENERAL.—Section 104(b)(3) of such 

4 Act (as amended by subsection (a)) is amended fur5 ther— 

6 (A) by inserting ‘‘(A)’’ after ‘‘(3)’’; and 

7 (B) by adding at the end the following: 

8 ‘‘(B) The material provided pursuant to subpara9 graph (A) to summarize the latest annual report shall be 

10 written in a manner calculated to be understood by the 

11 average plan participant and shall set forth the total as12 sets and liabilities of the plan for the plan year for which 

13 the latest annual report was filed and for each of the 2 

14 preceding plan years, as reported in the annual report for 

15 each such plan year under this section.’’. 

16 (g) INFORMATION MADE AVAILABLE TO PARTICI17 PANTS, BENEFICIARIES, AND EMPLOYERS WITH RESPECT

18 TO MULTIEMPLOYER PLANS.— 

19 (1) IN GENERAL.—Section 101 of the Employee 

20 Retirement Income Security Act of 1974 (29 U.S.C. 

21 1021) (as amended by section 103(b)(2)(A)) is fur22 ther amended— 

23 (A) by redesignating subsection (k) as sub24 section (l); and 
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1 (B) by inserting after subsection (j) the 

2 following new subsection: 

3 ‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE

4 AVAILABLE ON REQUEST.— 

5 ‘‘(1) IN GENERAL.—Each administrator of a 

6 multiemployer plan shall furnish to any plan partici7 pant or beneficiary or any employer having an obli8 gation to contribute to the plan, who so requests in 

9 writing— 

10 ‘‘(A) a copy of any actuarial report re11 ceived by the plan for any plan year which has 

12 been in receipt by the plan for at least 30 days, 

13 and 

14 ‘‘(B) a copy of any financial report pre15 pared for the plan by any plan investment man16 ager or advisor or other person who is a plan 

17 fiduciary which has been in receipt by the plan 

18 for at least 30 days. 

19 ‘‘(2) COMPLIANCE.—Information required to be 

20 provided under paragraph (1) — 

21 ‘‘(A) shall be provided to the requesting 

22 participant, beneficiary, or employer within 30 

23 days after the request in a form and manner 

24 prescribed in regulations of the Secretary, and 
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1 ‘‘(B) may be provided in written, elec2 tronic, or other appropriate form to the extent 

3 such form is reasonably accessible to persons to 

4 whom the information is required to be pro5 vided. 

6 ‘‘(3) LIMITATIONS.—In no case shall a partici7 pant, beneficiary, or employer be entitled under this 

8 subsection to receive more than one copy of any re9 port described in paragraph (1) during any one 12- 

10 month period. The administrator may make a rea11 sonable charge to cover copying, mailing, and other 

12 costs of furnishing copies of information pursuant to 

13 paragraph (1). The Secretary may by regulations 

14 prescribe the maximum amount which will constitute 

15 a reasonable charge under the preceding sentence.’’. 

16 (2) ENFORCEMENT.—Section 502(c)(4) of such 

17 Act (29 U.S.C. 1132(c)(4)) (as amended by section 

18 103(b)(2)(B)) is further amended by striking ‘‘sec19 tions 101(j) and 302(b)(7)(F)(iv)’’ and inserting 

20 ‘‘sections 101(j), 101(k), and 302(b)(7)(F)(iv)’’. 

21 (3) REGULATIONS.—The Secretary shall pre22 scribe regulations under section 101(k)(2) of the 

23 Employee Retirement Income Security Act of 1974 

24 (added by paragraph (1) of this subsection) not later 
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1 than 90 days after the date of the enactment of this 

2 Act. 

3 (h) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY

4 TO MULTIEMPLOYER PLANS.— 

5 (1) IN GENERAL.—Section 101 of such Act (as 

6 amended by subsection (g) of this section) is further 

7 amended— 

8 (A) by redesignating subsection (l) as sub9 section (m); and 

10 (B) by inserting after subsection (k) the 

11 following new subsection: 

12 ‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABIL13 ITY.— 

14 ‘‘(1) IN GENERAL.—The plan sponsor or ad15 ministrator of a multiemployer plan shall furnish to 

16 any employer who has an obligation to contribute 

17 under the plan and who so requests in writing notice 

18 of— 

19 ‘‘(A) the amount which would be the 

20 amount of such employer’s withdrawal liability 

21 under part 1 of subtitle E of title IV if such 

22 employer withdrew on the last day of the plan 

23 year preceding the date of the request, and 

24 ‘‘(B) the average increase, per participant 

25 under the plan, in accrued liabilities under the 
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1 plan as of the end of such plan year to partici2 pants under such plan on whose behalf no em3 ployer contributions are payable (or their bene4 ficiaries), which would be attributable to such a 

5 withdrawal by such employer. 

6 For purposes of subparagraph (B), the term ‘em7 ployer contribution’ means, in connection with a par8 ticipant, a contribution made by an employer as an 

9 employer of such participant. 

10 ‘‘(2) COMPLIANCE.—Any notice required to be 

11 provided under paragraph (1)— 

12 ‘‘(A) shall be provided to the requesting 

13 employer within 180 days after the request in 

14 a form and manner prescribed in regulations of 

15 the Secretary, and 

16 ‘‘(B) may be provided in written, elec17 tronic, or other appropriate form to the extent 

18 such form is reasonably accessible to employers 

19 to whom the information is required to be pro20 vided. 

21 ‘‘(3) LIMITATIONS.—In no case shall an em22 ployer be entitled under this subsection to receive 

23 more than one notice described in paragraph (1) 

24 during any one 12-month period. The person re25 quired to provide such notice may make a reasonable 
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1 charge to cover copying, mailing, and other costs of 

2 furnishing such notice pursuant to paragraph (1). 

3 The Secretary may by regulations prescribe the max4 imum amount which will constitute a reasonable 

5 charge under the preceding sentence.’’. 

6 (2) ENFORCEMENT.—Section 502(c)(4) of such 

7 Act (29 U.S.C. 1132(c)(4)) (as amended by para8 graph (1)) is further amended by striking ‘‘sections 

9 101(j), 101(k), and 302(b)(7)(F)(iv)’’ and inserting 

10 ‘‘sections 101(j), 101(k), 101(l), and 

11 302(b)(7)(F)(iv)’’. 

12 (i) MODEL FORM.—Not later than 180 days after the 

13 date of the enactment of this Act, the Secretary of Labor 

14 shall publish a model form for providing the statements, 

15 schedules, and other material required to be provided 

16 under section 104(b)(3) of the Employee Retirement In17 come Security Act of 1974, as amended by this section. 

18 (j) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to plan years beginning after De20 cember 31, 2005. 

21 SEC. 503. SECTION 4010 FILINGS WITH THE PBGC. 

22 (a) CHANGE IN CRITERIA FOR PERSONS REQUIRED

23 TO PROVIDE INFORMATION TO PBGC.—Section 4010(b) 

24 of the Employee Retirement Income Security Act of 1974 

25 (29 U.S.C. 1310(b)) is amended by striking paragraph 
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1 (1), by redesignating paragraphs (2) and (3) as para2 graphs (3) and (4), respectively, and by inserting before 

3 paragraph (3) (as so redesignated) the following new para4 graphs: 

5 ‘‘(1) the aggregate funding target attainment 

6 percentage of the plan (as defined in subsection 

7 (d)(2)) is less than 60 percent; 

8 ‘‘(2)(A) the aggregate funding target attain9 ment percentage of the plan (as defined in sub10 section (d)(2)) is less than 75 percent, and 

11 ‘‘(B) the plan sponsor is in an industry with re12 spect to which the corporation determines that there 

13 is substantial unemployment or underemployment 

14 and the sales and profits are depressed or declin15 ing;’’. 

16 (b) NOTICE TO PARTICIPANTS AND BENE17 FICIARIES.—Section 4010 of the Employee Retirement In18 come Security Act of 1974 (29 U.S.C. 1310) is amended 

19 by adding at the end the following new subsection: 

20 ‘‘(d) NOTICE TO PARTICIPANTS AND BENE21 FICIARIES.— 

22 ‘‘(1) IN GENERAL.—Not later than 90 days 

23 after the submission by any person to the corpora24 tion of information or documentary material with re25 spect to any plan pursuant to subsection (a), such 
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1 person shall provide notice of such submission to 

2 each participant and beneficiary under the plan (and 

3 under all plans maintained by members of the con4 trolled group of each contributing sponsor of the 

5 plan). Such notice shall also set forth— 

6 ‘‘(A) the number of single-employer plans 

7 covered by this title which are in at-risk status 

8 and are maintained by contributing sponsors of 

9 such plan (and by members of their controlled 

10 groups) with respect to which the funding tar11 get attainment percentage for the preceding 

12 plan year of each plan is less than 60 percent; 

13 ‘‘(B) the value of the assets of each of the 

14 plans described in subparagraph (A) for the 

15 plan year, the funding target for each of such 

16 plans for the plan year, and the funding target 

17 attainment percentage of each of such plans for 

18 the plan year; and 

19 ‘‘(C) taking into account all single-em20 ployer plans maintained by the contributing 

21 sponsor and the members of its controlled 

22 group as of the end of such plan year— 

23 ‘‘(i) the aggregate total of the values 

24 of plan assets of such plans as of the end 

25 of such plan year, 
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1 ‘‘(ii) the aggregate total of the fund2 ing targets of such plans, as of the end of 

3 such plan year, taking into account only 

4 benefits to which participants and bene5 ficiaries have a nonforfeitable right, and 

6 ‘‘(iii) the aggregate funding targets 

7 attainment percentage with respect to the 

8 contributing sponsor for the preceding plan 

9 year. 

10 ‘‘(2) DEFINITIONS.—For purposes of this sub11 section— 

12 ‘‘(A) VALUE OF PLAN ASSETS.—The term 

13 ‘value of plan assets’ means the value of plan 

14 assets, as determined under section 303(g)(3). 

15 ‘‘(B) FUNDING TARGET.—The term ‘fund16 ing target’ has the meaning provided under sec17 tion 303(d)(1). 

18 ‘‘(C) FUNDING TARGET ATTAINMENT PER19 CENTAGE.—The term ‘funding target attain20 ment percentage’ has the meaning provided in 

21 section 303(d)(2). 

22 ‘‘(D) AGGREGATE FUNDING TARGETS AT23 TAINMENT PERCENTAGE.—The term ‘aggregate 

24 funding targets attainment percentage’ with re25 spect to a contributing sponsor for a plan year 
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1 is the percentage, taking into account all plans 

2 maintained by the contributing sponsor and the 

3 members of its controlled group as of the end 

4 of such plan year, which 

5 ‘‘(i) the aggregate total of the values 

6 of plan assets, as of the end of such plan 

7 year, of such plans, is of 

8 ‘‘(ii) the aggregate total of the fund9 ing targets of such plans, as of the end of 

10 such plan year, taking into account only 

11 benefits to which participants and bene12 ficiaries have a nonforfeitable right. 

13 ‘‘(E) AT-RISK STATUS.—The term ‘at-risk 

14 status’ has the meaning provided in section 

15 303(i)(3). 

16 ‘‘(3) COMPLIANCE.— 

17 ‘‘(A) IN GENERAL.—Any notice required to 

18 be provided under paragraph (1) may be pro19 vided in written, electronic, or other appropriate 

20 form to the extent such form is reasonably ac21 cessible to individuals to whom the information 

22 is required to be provided. 

23 ‘‘(B) LIMITATIONS.—In no case shall a 

24 participant or beneficiary be entitled under this 

25 subsection to receive more than one notice de-
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1 scribed in paragraph (1) during any one 12- 

2 month period. The person required to provide 

3 such notice may make a reasonable charge to 

4 cover copying, mailing, and other costs of fur5 nishing such notice pursuant to paragraph (1). 

6 The corporation may by regulations prescribe 

7 the maximum amount which will constitute a 

8 reasonable charge under the preceding sentence. 

9 ‘‘(4) NOTICE TO CONGRESS.—Concurrent with 

10 the provision of any notice under paragraph (1), 

11 such person shall provide such notice to the Com12 mittee on Education and the Workforce and the 

13 Committee on Ways and Means of the House of 

14 Representatives and the Committee on Health, Edu15 cation, Labor, and Pensions and the Committee on 

16 Finance of the Senate, which shall be treated as ma17 terials provided in executive session.’’. 

18 (c) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply with respect to plan years begin20 ning after December 31, 2006. 
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1 TITLE VI—INVESTMENT ADVICE 

2 SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT IN3 COME SECURITY ACT OF 1974 PROVIDING 

4 PROHIBITED TRANSACTION EXEMPTION FOR 

5 PROVISION OF INVESTMENT ADVICE. 

6 (a) EXEMPTION FROM PROHIBITED TRANS7 ACTIONS.—Section 408(b) of the Employee Retirement 

8 Income Security Act of 1974 (29 U.S.C. 1108(b)) is 

9 amended by adding at the end the following new para10 graph: 

11 ‘‘(14)(A) Any transaction described in subpara12 graph (B) in connection with the provision of invest13 ment advice described in section 3(21)(A)(ii), in any 

14 case in which— 

15 ‘‘(i) the investment of assets of the plan is 

16 subject to the direction of plan participants or 

17 beneficiaries, 

18 ‘‘(ii) the advice is provided to the plan or 

19 a participant or beneficiary of the plan by a fi20 duciary adviser in connection with any sale, ac21 quisition, or holding of a security or other prop22 erty for purposes of investment of plan assets, 

23 and 
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1 ‘‘(iii) the requirements of subsection (g) 

2 are met in connection with the provision of the 

3 advice. 

4 ‘‘(B) The transactions described in this sub5 paragraph are the following: 

6 ‘‘(i) the provision of the advice to the 

7 plan, participant, or beneficiary; 

8 ‘‘(ii) the sale, acquisition, or holding 

9 of a security or other property (including 

10 any lending of money or other extension of 

11 credit associated with the sale, acquisition, 

12 or holding of a security or other property) 

13 pursuant to the advice; and 

14 ‘‘(iii) the direct or indirect receipt of 

15 fees or other compensation by the fiduciary 

16 adviser or an affiliate thereof (or any em17 ployee, agent, or registered representative 

18 of the fiduciary adviser or affiliate) in con19 nection with the provision of the advice or 

20 in connection with a sale, acquisition, or 

21 holding of a security or other property pur22 suant to the advice.’’. 

23 (b) REQUIREMENTS.—Section 408 of such Act is 

24 amended further by adding at the end the following new 

25 subsection: 
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1 ‘‘(g) REQUIREMENTS RELATING TO PROVISION OF

2 INVESTMENT ADVICE BY FIDUCIARY ADVISERS.— 

3 ‘‘(1) IN GENERAL.—The requirements of this 

4 subsection are met in connection with the provision 

5 of investment advice referred to in section 

6 3(21)(A)(ii), provided to an employee benefit plan or 

7 a participant or beneficiary of an employee benefit 

8 plan by a fiduciary adviser with respect to the plan 

9 in connection with any sale, acquisition, or holding 

10 of a security or other property for purposes of in11 vestment of amounts held by the plan, if— 

12 ‘‘(A) in the case of the initial provision of 

13 the advice with regard to the security or other 

14 property by the fiduciary adviser to the plan, 

15 participant, or beneficiary, the fiduciary adviser 

16 provides to the recipient of the advice, at a time 

17 reasonably contemporaneous with the initial 

18 provision of the advice, a written notification 

19 (which may consist of notification by means of 

20 electronic communication)— 

21 ‘‘(i) of all fees or other compensation 

22 relating to the advice that the fiduciary ad23 viser or any affiliate thereof is to receive 

24 (including compensation provided by any 

25 third party) in connection with the provi-
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1 sion of the advice or in connection with the 

2 sale, acquisition, or holding of the security 

3 or other property, 

4 ‘‘(ii) of any material affiliation or con5 tractual relationship of the fiduciary ad6 viser or affiliates thereof in the security or 

7 other property, 

8 ‘‘(iii) of any limitation placed on the 

9 scope of the investment advice to be pro10 vided by the fiduciary adviser with respect 

11 to any such sale, acquisition, or holding of 

12 a security or other property, 

13 ‘‘(iv) of the types of services provided 

14 by the fiduciary adviser in connection with 

15 the provision of investment advice by the 

16 fiduciary adviser, 

17 ‘‘(v) that the adviser is acting as a fi18 duciary of the plan in connection with the 

19 provision of the advice, and 

20 ‘‘(vi) that a recipient of the advice 

21 may separately arrange for the provision of 

22 advice by another adviser, that could have 

23 no material affiliation with and receive no 

24 fees or other compensation in connection 

25 with the security or other property, 
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1 ‘‘(B) the fiduciary adviser provides appro2 priate disclosure, in connection with the sale, 

3 acquisition, or holding of the security or other 

4 property, in accordance with all applicable secu5 rities laws, 

6 ‘‘(C) the sale, acquisition, or holding oc7 curs solely at the direction of the recipient of 

8 the advice, 

9 ‘‘(D) the compensation received by the fi10 duciary adviser and affiliates thereof in connec11 tion with the sale, acquisition, or holding of the 

12 security or other property is reasonable, and 

13 ‘‘(E) the terms of the sale, acquisition, or 

14 holding of the security or other property are at 

15 least as favorable to the plan as an arm’s 

16 length transaction would be. 

17 ‘‘(2) STANDARDS FOR PRESENTATION OF IN18 FORMATION.— 

19 ‘‘(A) IN GENERAL.—The notification re20 quired to be provided to participants and bene21 ficiaries under paragraph (1)(A) shall be writ22 ten in a clear and conspicuous manner and in 

23 a manner calculated to be understood by the av24 erage plan participant and shall be sufficiently 

25 accurate and comprehensive to reasonably ap-
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1 prise such participants and beneficiaries of the 

2 information required to be provided in the noti3 fication. 

4 ‘‘(B) MODEL FORM FOR DISCLOSURE OF

5 FEES AND OTHER COMPENSATION.—The Sec6 retary shall issue a model form for the disclo7 sure of fees and other compensation required in 

8 paragraph (1)(A)(i) which meets the require9 ments of subparagraph (A). 

10 ‘‘(3) EXEMPTION CONDITIONED ON MAKING RE11 QUIRED INFORMATION AVAILABLE ANNUALLY, ON

12 REQUEST, AND IN THE EVENT OF MATERIAL

13 CHANGE.—The requirements of paragraph (1)(A) 

14 shall be deemed not to have been met in connection 

15 with the initial or any subsequent provision of advice 

16 described in paragraph (1) to the plan, participant, 

17 or beneficiary if, at any time during the provision of 

18 advisory services to the plan, participant, or bene19 ficiary, the fiduciary adviser fails to maintain the in20 formation described in clauses (i) through (iv) of 

21 subparagraph (A) in currently accurate form and in 

22 the manner described in paragraph (2) or fails— 

23 ‘‘(A) to provide, without charge, such cur24 rently accurate information to the recipient of 

25 the advice no less than annually, 
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1 ‘‘(B) to make such currently accurate in2 formation available, upon request and without 

3 charge, to the recipient of the advice, or 

4 ‘‘(C) in the event of a material change to 

5 the information described in clauses (i) through 

6 (iv) of paragraph (1)(A), to provide, without 

7 charge, such currently accurate information to 

8 the recipient of the advice at a time reasonably 

9 contemporaneous to the material change in in10 formation. 

11 ‘‘(4) MAINTENANCE FOR 6 YEARS OF EVIDENCE

12 OF COMPLIANCE.—A fiduciary adviser referred to in 

13 paragraph (1) who has provided advice referred to in 

14 such paragraph shall, for a period of not less than 

15 6 years after the provision of the advice, maintain 

16 any records necessary for determining whether the 

17 requirements of the preceding provisions of this sub18 section and of subsection (b)(14) have been met. A 

19 transaction prohibited under section 406 shall not be 

20 considered to have occurred solely because the 

21 records are lost or destroyed prior to the end of the 

22 6-year period due to circumstances beyond the con23 trol of the fiduciary adviser. 

24 ‘‘(5) EXEMPTION FOR PLAN SPONSOR AND CER25 TAIN OTHER FIDUCIARIES.— 
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), a plan sponsor or other person who 

3 is a fiduciary (other than a fiduciary adviser) 

4 shall not be treated as failing to meet the re5 quirements of this part solely by reason of the 

6 provision of investment advice referred to in 

7 section 3(21)(A)(ii) (or solely by reason of con8 tracting for or otherwise arranging for the pro9 vision of the advice), if— 

10 ‘‘(i) the advice is provided by a fidu11 ciary adviser pursuant to an arrangement 

12 between the plan sponsor or other fidu13 ciary and the fiduciary adviser for the pro14 vision by the fiduciary adviser of invest15 ment advice referred to in such section, 

16 ‘‘(ii) the terms of the arrangement re17 quire compliance by the fiduciary adviser 

18 with the requirements of this subsection, 

19 and 

20 ‘‘(iii) the terms of the arrangement 

21 include a written acknowledgment by the 

22 fiduciary adviser that the fiduciary adviser 

23 is a fiduciary of the plan with respect to 

24 the provision of the advice. 
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1 ‘‘(B) CONTINUED DUTY OF PRUDENT SE2 LECTION OF ADVISER AND PERIODIC REVIEW.— 

3 Nothing in subparagraph (A) shall be construed 

4 to exempt a plan sponsor or other person who 

5 is a fiduciary from any requirement of this part 

6 for the prudent selection and periodic review of 

7 a fiduciary adviser with whom the plan sponsor 

8 or other person enters into an arrangement for 

9 the provision of advice referred to in section 

10 3(21)(A)(ii). The plan sponsor or other person 

11 who is a fiduciary has no duty under this part 

12 to monitor the specific investment advice given 

13 by the fiduciary adviser to any particular recipi14 ent of the advice. 

15 ‘‘(C) AVAILABILITY OF PLAN ASSETS FOR

16 PAYMENT FOR ADVICE.—Nothing in this part 

17 shall be construed to preclude the use of plan 

18 assets to pay for reasonable expenses in pro19 viding investment advice referred to in section 

20 3(21)(A)(ii). 

21 ‘‘(6) DEFINITIONS.—For purposes of this sub22 section and subsection (b)(14)— 

23 ‘‘(A) FIDUCIARY ADVISER.—The term ‘fi24 duciary adviser’ means, with respect to a plan, 

25 a person who is a fiduciary of the plan by rea-
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1 son of the provision of investment advice by the 

2 person to the plan or to a participant or bene3 ficiary and who is— 

4 ‘‘(i) registered as an investment ad5 viser under the Investment Advisers Act of 

6 1940 (15 U.S.C. 80b–1 et seq.) or under 

7 the laws of the State in which the fiduciary 

8 maintains its principal office and place of 

9 business, 

10 ‘‘(ii) a bank or similar financial insti11 tution referred to in section 408(b)(4) or a 

12 savings association (as defined in section 

13 3(b)(1) of the Federal Deposit Insurance 

14 Act (12 U.S.C. 1813(b)(1))), but only if 

15 the advice is provided through a trust de16 partment of the bank or similar financial 

17 institution or savings association which is 

18 subject to periodic examination and review 

19 by Federal or State banking authorities, 

20 ‘‘(iii) an insurance company qualified 

21 to do business under the laws of a State, 

22 ‘‘(iv) a person registered as a broker 

23 or dealer under the Securities Exchange 

24 Act of 1934 (15 U.S.C. 78a et seq.), 
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1 ‘‘(v) an affiliate of a person described 

2 in any of clauses (i) through (iv), or 

3 ‘‘(vi) an employee, agent, or registered 

4 representative of a person described in any 

5 of clauses (i) through (v) who satisfies the 

6 requirements of applicable insurance, 

7 banking, and securities laws relating to the 

8 provision of the advice. 

9 ‘‘(B) AFFILIATE.—The term ‘affiliate’ of 

10 another entity means an affiliated person of the 

11 entity (as defined in section 2(a)(3) of the In12 vestment Company Act of 1940 (15 U.S.C. 

13 80a–2(a)(3))). 

14 ‘‘(C) REGISTERED REPRESENTATIVE.— 

15 The term ‘registered representative’ of another 

16 entity means a person described in section 

17 3(a)(18) of the Securities Exchange Act of 

18 1934 (15 U.S.C. 78c(a)(18)) (substituting the 

19 entity for the broker or dealer referred to in 

20 such section) or a person described in section 

21 202(a)(17) of the Investment Advisers Act of 

22 1940 (15 U.S.C. 80b–2(a)(17)) (substituting 

23 the entity for the investment adviser referred to 

24 in such section).’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply with respect to advice referred to 

3 in section 3(21)(A)(ii) of the Employee Retirement In4 come Security Act of 1974 provided on or after January 

5 1, 2006. 

6 SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF 

7 1986 PROVIDING PROHIBITED TRANSACTION 

8 EXEMPTION FOR PROVISION OF INVESTMENT 

9 ADVICE. 

10 (a) EXEMPTION FROM PROHIBITED TRANS11 ACTIONS.—Subsection (d) of section 4975 of the Internal 

12 Revenue Code of 1986 (relating to exemptions from tax 

13 on prohibited transactions), as amended by this Act, is 

14 amended— 

15 (1) in paragraph (17), by striking ‘‘or’’ at the 

16 end; 

17 (2) in paragraph (18), by striking the period at 

18 the end and inserting ‘‘; or’’; and 

19 (3) by adding at the end the following new 

20 paragraph: 

21 ‘‘(19) any transaction described in subsection 

22 (f)(10)(A) in connection with the provision of invest23 ment advice described in subsection (e)(3)(B)(i), in 

24 any case in which— 
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1 ‘‘(A) the investment of assets of the plan 

2 is subject to the direction of plan participants 

3 or beneficiaries, 

4 ‘‘(B) the advice is provided to the plan or 

5 a participant or beneficiary of the plan by a fi6 duciary adviser in connection with any sale, ac7 quisition, or holding of a security or other prop8 erty for purposes of investment of plan assets, 

9 and 

10 ‘‘(C) the requirements of subsection 

11 (f)(10)(B) are met in connection with the provi12 sion of the advice.’’. 

13 (b) ALLOWED TRANSACTIONS AND REQUIRE14 MENTS.—Subsection (f) of such section 4975 (relating to 

15 other definitions and special rules), as amended by this 

16 Act, is amended by adding at the end the following new 

17 paragraph: 

18 ‘‘(10) PROVISIONS RELATING TO INVESTMENT

19 ADVICE PROVIDED BY FIDUCIARY ADVISERS.— 

20 ‘‘(A) TRANSACTIONS ALLOWABLE IN CON21 NECTION WITH INVESTMENT ADVICE PROVIDED

22 BY FIDUCIARY ADVISERS.—The transactions re23 ferred to in subsection (d)(19), in connection 

24 with the provision of investment advice by a fi25 duciary adviser, are the following: 
375 

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1 ‘‘(i) the provision of the advice to the 

2 plan, participant, or beneficiary; 

3 ‘‘(ii) the sale, acquisition, or holding 

4 of a security or other property (including 

5 any lending of money or other extension of 

6 credit associated with the sale, acquisition, 

7 or holding of a security or other property) 

8 pursuant to the advice; and 

9 ‘‘(iii) the direct or indirect receipt of 

10 fees or other compensation by the fiduciary 

11 adviser or an affiliate thereof (or any em12 ployee, agent, or registered representative 

13 of the fiduciary adviser or affiliate) in con14 nection with the provision of the advice or 

15 in connection with a sale, acquisition, or 

16 holding of a security or other property pur17 suant to the advice. 

18 ‘‘(B) REQUIREMENTS RELATING TO PROVI19 SION OF INVESTMENT ADVICE BY FIDUCIARY

20 ADVISERS.—The requirements of this subpara21 graph (referred to in subsection (d)(19)(C)) are 

22 met in connection with the provision of invest23 ment advice referred to in subsection (e)(3)(B), 

24 provided to a plan or a participant or bene25 ficiary of a plan by a fiduciary adviser with re-
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1 spect to the plan in connection with any sale, 

2 acquisition, or holding of a security or other 

3 property for purposes of investment of amounts 

4 held by the plan, if— 

5 ‘‘(i) in the case of the initial provision 

6 of the advice with regard to the security or 

7 other property by the fiduciary adviser to 

8 the plan, participant, or beneficiary, the fi9 duciary adviser provides to the recipient of 

10 the advice, at a time reasonably contem11 poraneous with the initial provision of the 

12 advice, a written notification (which may 

13 consist of notification by means of elec14 tronic communication)— 

15 ‘‘(I) of all fees or other com16 pensation relating to the advice that 

17 the fiduciary adviser or any affiliate 

18 thereof is to receive (including com19 pensation provided by any third 

20 party) in connection with the provi21 sion of the advice or in connection 

22 with the sale, acquisition, or holding 

23 of the security or other property, 

24 ‘‘(II) of any material affiliation 

25 or contractual relationship of the fidu-
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1 ciary adviser or affiliates thereof in 

2 the security or other property, 

3 ‘‘(III) of any limitation placed on 

4 the scope of the investment advice to 

5 be provided by the fiduciary adviser 

6 with respect to any such sale, acquisi7 tion, or holding of a security or other 

8 property, 

9 ‘‘(IV) of the types of services 

10 provided by the fiduciary adviser in 

11 connection with the provision of in12 vestment advice by the fiduciary ad13 viser, 

14 ‘‘(V) that the adviser is acting as 

15 a fiduciary of the plan in connection 

16 with the provision of the advice, and 

17 ‘‘(VI) that a recipient of the ad18 vice may separately arrange for the 

19 provision of advice by another adviser, 

20 that could have no material affiliation 

21 with and receive no fees or other com22 pensation in connection with the secu23 rity or other property, 

24 ‘‘(ii) the fiduciary adviser provides ap25 propriate disclosure, in connection with the 
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1 sale, acquisition, or holding of the security 

2 or other property, in accordance with all 

3 applicable securities laws, 

4 ‘‘(iii) the sale, acquisition, or holding 

5 occurs solely at the direction of the recipi6 ent of the advice, 

7 ‘‘(iv) the compensation received by the 

8 fiduciary adviser and affiliates thereof in 

9 connection with the sale, acquisition, or 

10 holding of the security or other property is 

11 reasonable, and 

12 ‘‘(v) the terms of the sale, acquisition, 

13 or holding of the security or other property 

14 are at least as favorable to the plan as an 

15 arm’s length transaction would be. 

16 ‘‘(C) STANDARDS FOR PRESENTATION OF

17 INFORMATION.—The notification required to be 

18 provided to participants and beneficiaries under 

19 subparagraph (B)(i) shall be written in a clear 

20 and conspicuous manner and in a manner cal21 culated to be understood by the average plan 

22 participant and shall be sufficiently accurate 

23 and comprehensive to reasonably apprise such 

24 participants and beneficiaries of the information 

25 required to be provided in the notification. 
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1 ‘‘(D) EXEMPTION CONDITIONED ON MAK2 ING REQUIRED INFORMATION AVAILABLE ANNU3 ALLY, ON REQUEST, AND IN THE EVENT OF MA4 TERIAL CHANGE.—The requirements of sub5 paragraph (B)(i) shall be deemed not to have 

6 been met in connection with the initial or any 

7 subsequent provision of advice described in sub8 paragraph (B) to the plan, participant, or bene9 ficiary if, at any time during the provision of 

10 advisory services to the plan, participant, or 

11 beneficiary, the fiduciary adviser fails to main12 tain the information described in subclauses (I) 

13 through (IV) of subparagraph (B)(i) in cur14 rently accurate form and in the manner re15 quired by subparagraph (C), or fails— 

16 ‘‘(i) to provide, without charge, such 

17 currently accurate information to the re18 cipient of the advice no less than annually, 

19 ‘‘(ii) to make such currently accurate 

20 information available, upon request and 

21 without charge, to the recipient of the ad22 vice, or 

23 ‘‘(iii) in the event of a material 

24 change to the information described in 

25 subclauses (I) through (IV) of subpara-
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1 graph (B)(i), to provide, without charge, 

2 such currently accurate information to the 

3 recipient of the advice at a time reasonably 

4 contemporaneous to the material change in 

5 information. 

6 ‘‘(E) MAINTENANCE FOR 6 YEARS OF EVI7 DENCE OF COMPLIANCE.—A fiduciary adviser 

8 referred to in subparagraph (B) who has pro9 vided advice referred to in such subparagraph 

10 shall, for a period of not less than 6 years after 

11 the provision of the advice, maintain any 

12 records necessary for determining whether the 

13 requirements of the preceding provisions of this 

14 paragraph and of subsection (d)(19) have been 

15 met. A transaction prohibited under subsection 

16 (c)(1) shall not be considered to have occurred 

17 solely because the records are lost or destroyed 

18 prior to the end of the 6-year period due to cir19 cumstances beyond the control of the fiduciary 

20 adviser. 

21 ‘‘(F) EXEMPTION FOR PLAN SPONSOR AND

22 CERTAIN OTHER FIDUCIARIES.—A plan sponsor 

23 or other person who is a fiduciary (other than 

24 a fiduciary adviser) shall not be treated as fail25 ing to meet the requirements of this section 
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1 solely by reason of the provision of investment 

2 advice referred to in subsection (e)(3)(B) (or 

3 solely by reason of contracting for or otherwise 

4 arranging for the provision of the advice), if— 

5 ‘‘(i) the advice is provided by a fidu6 ciary adviser pursuant to an arrangement 

7 between the plan sponsor or other fidu8 ciary and the fiduciary adviser for the pro9 vision by the fiduciary adviser of invest10 ment advice referred to in such section, 

11 ‘‘(ii) the terms of the arrangement re12 quire compliance by the fiduciary adviser 

13 with the requirements of this paragraph, 

14 ‘‘(iii) the terms of the arrangement 

15 include a written acknowledgment by the 

16 fiduciary adviser that the fiduciary adviser 

17 is a fiduciary of the plan with respect to 

18 the provision of the advice, and 

19 ‘‘(iv) the requirements of part 4 of 

20 subtitle B of title I of the Employee Re21 tirement Income Security Act of 1974 are 

22 met in connection with the provision of 

23 such advice. 

24 ‘‘(G) DEFINITIONS.—For purposes of this 

25 paragraph and subsection (d)(19)— 
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1 ‘‘(i) FIDUCIARY ADVISER.—The term 

2 ‘fiduciary adviser’ means, with respect to a 

3 plan, a person who is a fiduciary of the 

4 plan by reason of the provision of invest5 ment advice by the person to the plan or 

6 to a participant or beneficiary and who 

7 is— 

8 ‘‘(I) registered as an investment 

9 adviser under the Investment Advisers 

10 Act of 1940 (15 U.S.C. 80b–1 et seq.) 

11 or under the laws of the State in 

12 which the fiduciary maintains its prin13 cipal office and place of business, 

14 ‘‘(II) a bank or similar financial 

15 institution referred to in subsection 

16 (d)(4) or a savings association (as de17 fined in section 3(b)(1) of the Federal 

18 Deposit Insurance Act (12 U.S.C. 

19 1813(b)(1))), but only if the advice is 

20 provided through a trust department 

21 of the bank or similar financial insti22 tution or savings association which is 

23 subject to periodic examination and 

24 review by Federal or State banking 

25 authorities, 
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1 ‘‘(III) an insurance company 

2 qualified to do business under the 

3 laws of a State, 

4 ‘‘(IV) a person registered as a 

5 broker or dealer under the Securities 

6 Exchange Act of 1934 (15 U.S.C. 78a 

7 et seq.), 

8 ‘‘(V) an affiliate of a person de9 scribed in any of subclauses (I) 

10 through (IV), or 

11 ‘‘(VI) an employee, agent, or reg12 istered representative of a person de13 scribed in any of subclauses (I) 

14 through (V) who satisfies the require15 ments of applicable insurance, bank16 ing, and securities laws relating to the 

17 provision of the advice. 

18 ‘‘(ii) AFFILIATE.—The term ‘affiliate’ 

19 of another entity means an affiliated per20 son of the entity (as defined in section 

21 2(a)(3) of the Investment Company Act of 

22 1940 (15 U.S.C. 80a–2(a)(3))). 

23 ‘‘(iii) REGISTERED REPRESENTA24 TIVE.—The term ‘registered representa25 tive’ of another entity means a person de-
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1 scribed in section 3(a)(18) of the Securi2 ties Exchange Act of 1934 (15 U.S.C. 

3 78c(a)(18)) (substituting the entity for the 

4 broker or dealer referred to in such sec5 tion) or a person described in section 

6 202(a)(17) of the Investment Advisers Act 

7 of 1940 (15 U.S.C. 80b–2(a)(17)) (sub8 stituting the entity for the investment ad9 viser referred to in such section).’’. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply with respect to advice referred to 

12 in section 4975(c)(3)(B) of the Internal Revenue Code of 

13 1986 provided on or after January 1, 2006. 

14 TITLE VII—BENEFIT ACCRUAL 

15 STANDARDS 

16 SEC. 701. BENEFIT ACCRUAL STANDARDS. 

17 (a) AMENDMENTS TO THE EMPLOYEE RETIREMENT

18 INCOME SECURITY ACT OF 1974.— 

19 (1) RULES RELATING TO REDUCTION IN RATE

20 OF BENEFIT ACCRUAL.—Section 204(b)(1)(H) of the 

21 Employee Retirement Income Security Act of 1974 

22 (29 U.S.C. 1054(b)(1)(H)) is amended by adding at 

23 the end the following new clauses: 

24 ‘‘(vii)(I) A plan shall not be treated as failing to meet 

25 the requirements of clause (i) if a participant’s entire ac-
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1 crued benefit, as determined as of any date under the for2 mula for determining benefits as set forth in the text of 

3 the plan documents, would be equal to or greater than 

4 that of any similarly situated, younger individual. 

5 ‘‘(II) For purposes of this clause, an individual is 

6 similarly situated to a participant if such individual is 

7 identical to such participant in every respect (including pe8 riod of service, compensation, position, date of hire, work 

9 history, and any other respect) except for age. 

10 ‘‘(III) In determining the entire accrued benefit for 

11 purposes of this clause, the subsidized portion of any early 

12 retirement benefit (including any early retirement subsidy 

13 that is fully or partially included or reflected in an employ14 ee’s opening balance or other transition benefits) shall be 

15 disregarded. 

16 ‘‘(IV) In determining the entire accrued benefit for 

17 purposes of this clause, such benefit may be calculated as 

18 the present value of accrued benefits projected to normal 

19 retirement age, as an account balance, or as the current 

20 value of the accumulated percentage of the employee’s 

21 final average compensation. 

22 ‘‘(viii) A plan shall not be treated as failing to meet 

23 the requirements of this subparagraph solely because the 

24 plan provides allowable offsets against those benefits 

25 under the plan which are attributable to employer con-
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1 tributions, based on benefits which are provided under 

2 title II of the Social Security Act, under the Railroad Re3 tirement Act of 1974, under another plan described in sec4 tion 401(a) of the Internal Revenue Code of 1986 main5 tained by the same employer, under any retirement pro6 gram for officers or employees of the Federal Government 

7 or of the government of any State or political subdivision 

8 thereof, or under such other arrangements as the Sec9 retary of the Treasury may provide. For purposes of this 

10 clause, allowable offsets based on such benefits consist of 

11 offsets equal to all or part of the actual benefit payment 

12 amounts, reasonable projections or estimations of such 

13 benefit payment amounts, or actuarial equivalents of such 

14 actual benefit payment amounts, projections, or esti15 mations (determined on the basis of reasonable actuarial 

16 assumptions). 

17 ‘‘(ix) A plan shall not be treated as failing to meet 

18 the requirements of this subparagraph solely because the 

19 plan provides a disparity in contributions or benefits with 

20 respect to which the requirements of section 401(l) of the 

21 Internal Revenue Code of 1986 are met. 

22 ‘‘(x)(I) A plan shall not be treated as failing to meet 

23 the requirements of this subparagraph solely because the 

24 plan provides for indexing of accrued benefits under the 

25 plan. 
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1 ‘‘(II) Except in the case of any benefit provided in 

2 the form of a variable annuity, subclause (I) shall not 

3 apply with respect to any indexing which results in an ac4 crued benefit less than the accrued benefit determined 

5 without regard to such indexing. 

6 ‘‘(III) For purposes of this clause, the term ‘indexing’ 

7 means, in connection with an accrued benefit, the periodic 

8 adjustment of the accrued benefit by means of the applica9 tion of a recognized investment index or methodology.’’. 

10 (2) DETERMINATIONS OF ACCRUED BENEFIT AS

11 BALANCE OF BENEFIT ACCOUNT.—Section 203 of 

12 such Act (29 U.S.C. 1053) is amended by adding at 

13 the end the following new subsection: 

14 ‘‘(f)(1) A defined benefit plan under which the ac15 crued benefit payable under the plan upon distribution (or 

16 any portion thereof) is expressed as the balance of a hypo17 thetical account maintained for the participant shall not 

18 be treated as failing to meet the requirements of sub19 section (a)(2), section 204(c) (but only in the case of a 

20 plan which does not provide for employee contributions), 

21 or section 205(g) solely because of the amount actually 

22 made available for such distribution under the terms of 

23 the plan, in any case in which the applicable interest rate 

24 that would be used under the terms of the plan to project 
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1 the amount of the participant’s account balance to normal 

2 retirement age is not greater than a market rate of return. 

3 ‘‘(2) The Secretary of the Treasury may provide by 

4 regulation for rules governing the calculation of a market 

5 rate of return for purposes of paragraph (1) and for per6 missible methods of crediting interest to the account (in7 cluding fixed or variable interest rates) resulting in effec8 tive rates of return meeting the requirements of paragraph 

9 (1).’’. 

10 (b) AMENDMENTS TO THE INTERNAL REVENUE

11 CODE OF 1986.— 

12 (1) RULES RELATING TO REDUCTION IN RATE

13 OF BENEFIT ACCRUAL.—Subparagraph (H) of sec14 tion 411(b)(1) of the Internal Revenue Code of 1986 

15 is amended by adding at the end the following new 

16 clauses: 

17 ‘‘(vi) COMPARISON TO SIMILARLY SIT18 UATED YOUNGER INDIVIDUAL.— 

19 ‘‘(I) IN GENERAL.—A plan shall 

20 not be treated as failing to meet the 

21 requirements of clause (i) if a partici22 pant’s entire accrued benefit, as deter23 mined as of any date under the for24 mula for determining benefits as set 

25 forth in the text of the plan docu-
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1 ments, would be equal to or greater 

2 than that of any similarly situated, 

3 younger individual. 

4 ‘‘(II) SIMILARLY SITUATED.— 

5 For purposes of this clause, an indi6 vidual is similarly situated to a partic7 ipant if such individual is identical to 

8 such participant in every respect (in9 cluding period of service, compensa10 tion, position, date of hire, work his11 tory, and any other respect) except for 

12 age. 

13 ‘‘(III) DISREGARD OF SUB14 SIDIZED EARLY RETIREMENT BENE15 FITS.—In determining the entire ac16 crued benefit for purposes of this 

17 clause, the subsidized portion of any 

18 early retirement benefit (including any 

19 early retirement subsidy that is fully 

20 or partially included or reflected in an 

21 employee’s opening balance or other 

22 transition benefits) shall be dis23 regarded. 

24 ‘‘(IV) ENTIRE ACCRUED BEN25 EFIT.—In determining the entire ac-
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1 crued benefit for purposes of this 

2 clause, such benefit may be calculated 

3 as the present value of accrued bene4 fits projected to normal retirement 

5 age, as an account balance, or as the 

6 current value of the accumulated per7 centage of the employee’s final aver8 age compensation. 

9 ‘‘(vii) CERTAIN OFFSETS PER10 MITTED.—A plan shall not be treated as 

11 failing to meet the requirements of this 

12 subparagraph solely because the plan pro13 vides allowable offsets against those bene14 fits under the plan which are attributable 

15 to employer contributions, based on bene16 fits which are provided under title II of the 

17 Social Security Act, under the Railroad 

18 Retirement Act of 1974, under another 

19 plan described in section 401(a) main20 tained by the same employer, under any 

21 retirement program for officers or employ22 ees of the Federal Government or of the 

23 government of any State or political sub24 division thereof, or under such other ar25 rangements as the Secretary may provide. 
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1 For purposes of this clause, allowable off2 sets based on such benefits consist of off3 sets equal to all or part of the actual ben4 efit payment amounts, reasonable projec5 tions or estimations of such benefit pay6 ment amounts, or actuarial equivalents of 

7 such actual benefit payment amounts, pro8 jections, or estimations (determined on the 

9 basis of reasonable actuarial assumptions). 

10 ‘‘(viii) PERMITTED DISPARITIES IN

11 PLAN CONTRIBUTIONS OR BENEFITS.—A 

12 plan shall not be treated as failing to meet 

13 the requirements of this subparagraph 

14 solely because the plan provides a disparity 

15 in contributions or benefits with respect to 

16 which the requirements of section 401(l) 

17 are met. 

18 ‘‘(ix) INDEXING PERMITTED.— 

19 ‘‘(I) IN GENERAL.—A plan shall 

20 not be treated as failing to meet the 

21 requirements of this subparagraph 

22 solely because the plan provides for 

23 indexing of accrued benefits under the 

24 plan. 
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1 ‘‘(II) PROTECTION OF ECONOMIC

2 VALUE.—Except in the case of any 

3 benefit provided in the form of a vari4 able annuity, subclause (I) shall not 

5 apply with respect to any indexing 

6 which results in an accrued benefit 

7 less than the accrued benefit deter8 mined without regard to such index9 ing. 

10 ‘‘(III) INDEXING.—For purposes 

11 of this clause, the term ‘indexing’ 

12 means, in connection with an accrued 

13 benefit, the periodic adjustment of the 

14 accrued benefit by means of the appli15 cation of a recognized investment 

16 index or methodology.’’. 

17 (2) DETERMINATIONS OF ACCRUED BENEFIT AS

18 BALANCE OF BENEFIT ACCOUNT.—Subsection (a) of 

19 section 411 of such Code is amended by adding at 

20 the end the following new paragraph: 

21 ‘‘(13) DETERMINATIONS OF ACCRUED BENEFIT

22 AS BALANCE OF BENEFIT ACCOUNT.— 

23 ‘‘(A) IN GENERAL.—A defined benefit plan 

24 under which the accrued benefit payable under 

25 the plan upon distribution (or any portion 
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1 thereof) is expressed as the balance of a hypo2 thetical account maintained for the participant 

3 shall not be treated as failing to meet the re4 quirements of subsection (a)(2), subsection (c) 

5 (but only in the case of a plan which does not 

6 provide for employee contributions), or section 

7 417(e) solely because of the amount actually 

8 made available for such distribution under the 

9 terms of the plan, in any case in which the ap10 plicable interest rate that would be used under 

11 the terms of the plan to project the amount of 

12 the participant’s account balance to normal re13 tirement age is not greater than a market rate 

14 of return. 

15 ‘‘(B) REGULATIONS.—The Secretary may 

16 provide by regulation for rules governing the 

17 calculation of a market rate of return for pur18 poses of subparagraph (A) and for permissible 

19 methods of crediting interest to the account (in20 cluding fixed or variable interest rates) result21 ing in effective rates of return meeting the re22 quirements of subparagraph (A).’’. 

23 (c) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to periods beginning on or after 

25 June 29, 2005. 
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1 TITLE VIII—DEDUCTION 

2 LIMITATIONS 

3 SEC. 801. INCREASE IN DEDUCTION LIMITS. 

4 (a) INCREASE IN DEDUCTION LIMIT FOR SINGLE5 EMPLOYER PLANS.—Section 404 of the Internal Revenue 

6 Code of 1986 (relating to deduction for contributions of 

7 an employer to an employees’ trust or annuity plan and 

8 compensation under a deferred payment plan) is amend9 ed— 

10 (1) in subsection (a)(1)(A), by inserting ‘‘in the 

11 case of a defined benefit plan other than a multiem12 ployer plan, in an amount determined under sub13 section (o), and in the case of any other plan’’ after 

14 ‘‘section 501(a),’’, and 

15 (2) by inserting at the end the following new 

16 subsection: 

17 ‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER

18 PLANS.—For purposes of subsection (a)(1)(A)— 

19 ‘‘(1) IN GENERAL.—In the case of a defined 

20 benefit plan to which subsection (a)(1)(A) applies 

21 (other than a multiemployer plan), the amount de22 termined under this subsection for any taxable year 

23 shall be equal to the amount determined under para24 graph (2) with respect to each plan year ending with 

25 or within the taxable year. 
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1 ‘‘(2) DETERMINATION OF AMOUNT.—The 

2 amount determined under this paragraph for any 

3 plan year shall be equal to the excess (if any) of— 

4 ‘‘(A) the greater of— 

5 ‘‘(i) the sum of— 

6 ‘‘(I) 150 percent of the funding 

7 target applicable to the plan for such 

8 plan year, determined under section 

9 430, plus 

10 ‘‘(II) the target normal cost ap11 plicable to the plan for such plan 

12 year, determined under section 

13 430(b), or 

14 ‘‘(ii) in the case of a plan that is not 

15 in an at-risk status (as determined under 

16 430(i)), the sum of— 

17 ‘‘(I) the funding target which 

18 would be applicable to the plan for 

19 such plan year if such plan were in an 

20 at-risk status, determined under sec21 tion 430(d) (with regard to section 

22 430(i)), plus 

23 ‘‘(II) the target normal cost 

24 which would be applicable to the plan 

25 for such plan year if such plan were 
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1 in an at-risk status, determined under 

2 section 430(d) (with regard to section 

3 430(i)), over 

4 ‘‘(B) the value of the plan assets (deter5 mined under section 430(g)). 

6 ‘‘(3) SPECIAL RULE FOR TERMINATING

7 PLANS.—In the case of a plan which, subject to sec8 tion 4041 of the Employee Retirement Income Secu9 rity Act of 1974, terminates during the plan year, 

10 the amount determined under paragraph (2) shall 

11 not be less than the amount required to make the 

12 plan sufficient for benefit liabilities (within the 

13 meaning of section 4041(d) of such Act). 

14 ‘‘(4) DEFINITIONS.—Any term used in this sub15 section which is also used in section 430 shall have 

16 the same meaning given such term by section 430.’’. 

17 (b) INCREASE IN DEDUCTION LIMIT FOR MULTIEM18 PLOYER PLANS.—Section 404(a)(1)(D) of such Code is 

19 amended to read as follows: 

20 ‘‘(D) MINIMUM DEDUCTION FOR MULTIEM21 PLOYER PLANS.—In the case of a defined ben22 efit plan which is a multiemployer plan, except 

23 as provided in regulations, the maximum 

24 amount deductible under the limitations of this 
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1 paragraph shall not be less than the excess (if 

2 any) of— 

3 ‘‘(i) 140 percent of the current liabil4 ity of the plan determined under section 

5 431(c)(6)(D), over 

6 ‘‘(ii) the value of the plan’s assets de7 termined under section 431(c)(2).’’. 

8 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

9 (1) The last sentence of section 404(a)(1)(A) of 

10 such Code is amended by striking ‘‘section 412’’ 

11 each place it appears and inserting ‘‘section 431’’. 

12 (2) Section 404(a)(1)(B) of such Code is 

13 amended— 

14 (A) by striking ‘‘In the case of a plan’’ and 

15 inserting ‘‘In the case of a multiemployer plan’’, 

16 (B) by striking ‘‘section 412(c)(7)’’ each 

17 place it appears and inserting ‘‘section 

18 431(c)(6)’’, 

19 (C) by striking ‘‘section 412(c)(7)(B)’’ and 

20 inserting ‘‘section 431(c)(6)(D)’’, 

21 (D) by striking ‘‘section 412(c)(7)(A)’’ and 

22 inserting ‘‘section 431(c)(6)(A)’’, and 

23 (E) by striking ‘‘section 412’’ and insert24 ing ‘‘section 431’’. 
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1 (3) Section 404(a)(1) of such Code is amended 

2 by striking subparagraph (F). 

3 (4) Section 404(a)(7) of such Code is amend4 ed— 

5 (A) in subparagraph (A)(ii), by striking 

6 ‘‘for the plan year’’ and all that follows and in7 serting ‘‘which are multiemployer plans for the 

8 plan year which ends with or within such tax9 able year (or for any prior plan year) and the 

10 maximum amount of employer contributions al11 lowable under subsection (o) with respect to any 

12 such defined benefit plans which are not multi13 employer plans for the plan year.’’, 

14 (B) by striking ‘‘section 412(l)’’ in the last 

15 sentence of subparagraph (A) and inserting 

16 ‘‘paragraph (1)(D)(ii)’’, and 

17 (C) by striking subparagraph (D) and in18 serting: 

19 ‘‘(D) INSURANCE CONTRACT PLANS.—For 

20 purposes of this paragraph, a plan described in 

21 section 412(e)(3) shall be treated as a defined 

22 benefit plan.’’. 

23 (5) Section 404A(g)(3)(A) of such Code is 

24 amended by striking ‘‘paragraphs (3) and (7) of sec-
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1 tion 412(c)’’ and inserting ‘‘sections 430(h)(1) and 

2 431(c)(3) and (6)’’. 

3 (d) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to contributions for taxable years 

5 beginning after December 31, 2006. 

6 SEC. 802. UPDATING DEDUCTION RULES FOR COMBINA7 TION OF PLANS. 

8 (a) IN GENERAL.—Subparagraph (C) of section 

9 404(a)(7) of the Internal Revenue Code of 1986 (relating 

10 to limitation on deductions where combination of defined 

11 contribution plan and defined benefit plan) is amended by 

12 adding after clause (ii) the following new clause: 

13 ‘‘(iii) LIMITATION.—In the case of 

14 employer contributions to 1 or more de15 fined contribution plans, this paragraph 

16 shall only apply to the extent that such 

17 contributions exceed 6 percent of the com18 pensation otherwise paid or accrued during 

19 the taxable year to the beneficiaries under 

20 such plans. For purposes of this clause, 

21 amounts carried over from preceding tax22 able years under subparagraph (B) shall 

23 be treated as employer contributions to 1 

24 or more defined contributions to the extent 

25 attributable to employer contributions to 
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1 such plans in such preceding taxable 

2 years.’’. 

3 (b) CONFORMING AMENDMENTS.—Subparagraph (A) 

4 of section 4972(c)(6) of such Code (relating to nondeduct5 ible contributions) is amended to read as follows: 

6 ‘‘(A) so much of the contributions to 1 or 

7 more defined contribution plans which are not 

8 deductible when contributed solely because of 

9 section 404(a)(7) as does not exceed the 

10 amount of contributions described in section 

11 401(m)(4)(A), or’’. 

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to contributions for taxable years 

14 beginning after December 31, 2006. 

15 TITLE IX—ENHANCED RETIRE16 MENTS SAVINGS AND DE17 FINED CONTRIBUTION PLANS 

18 SEC. 901. PENSIONS AND INDIVIDUAL RETIREMENT AR19 RANGEMENT PROVISIONS OF ECONOMIC 

20 GROWTH AND TAX RELIEF RECONCILIATION 

21 ACT OF 2001 MADE PERMANENT. 

22 Title IX of the Economic Growth and Tax Relief Rec23 onciliation Act of 2001 shall not apply to the provisions 

24 of, and amendments made by, subtitles (A) through (F) 
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1 of title VI of such Act (relating to pension and individual 

2 retirement arrangement provisions). 

3 SEC. 902. SAVER’S CREDIT. 

4 (a) PERMANENCY.—Section 25B of the Internal Rev5 enue Code of 1986 (relating to elective deferrals and IRA 

6 contributions by certain individuals) is amended by strik7 ing subsection (h). 

8 (b) VOLUNTARY DEPOSIT INTO QUALIFIED AC9 COUNT.— 

10 (1) Section 25B of such Code, as amended by 

11 subsection (a), is further amended by adding at the 

12 end the following new subsection: 

13 ‘‘(h) VOLUNTARY DEPOSIT INTO QUALIFIED AC14 COUNT.— 

15 ‘‘(1) IN GENERAL.—So much of any overpay16 ment under section 6401(b) as does not exceed the 

17 amount allowed as a tax credit under subsection (a) 

18 shall, at the election of the taxpayer, be paid on be19 half of the individual taxpayer to an applicable re20 tirement plan designated by the individual, except 

21 that in the case of a joint return, each spouse shall 

22 be entitled to designate an applicable retirement 

23 plan with respect to payments attributable to such 

24 spouse. 
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1 ‘‘(2) APPLICABLE RETIREMENT PLAN.—For 

2 purposes of this subsection, the term ‘applicable re3 tirement plan’ means any eligible retirement plan 

4 (as defined in section 402(c)(8)(B)) that elects to 

5 accept deposits under this subsection.’’. 

6 (2) EFFECTIVE DATE.—The amendment made 

7 by paragraph (1) shall apply to taxable years begin8 ning after December 31, 2006. 

9 SEC. 903. INCREASING PARTICIPATION THROUGH AUTO10 MATIC CONTRIBUTION ARRANGEMENTS. 

11 (a) IN GENERAL.—Section 401(k) of the Internal 

12 Revenue Code of 1986 (relating to cash or deferred ar13 rangement) is amended by adding at the end the following 

14 new paragraph: 

15 ‘‘(13) ALTERNATIVE METHOD FOR AUTOMATIC

16 CONTRIBUTION ARRANGEMENTS TO MEET NON17 DISCRIMINATION REQUIREMENTS.— 

18 ‘‘(A) IN GENERAL.—A qualified automatic 

19 contribution arrangement shall be treated as 

20 meeting the requirements of paragraph 

21 (3)(A)(ii). 

22 ‘‘(B) QUALIFIED AUTOMATIC CONTRIBU23 TION ARRANGEMENT.—For purposes of this 

24 paragraph, the term ‘qualified automatic con25 tribution arrangement’ means any cash or de-
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1 ferred arrangement which meets the require2 ments of subparagraphs (C) through (F). 

3 ‘‘(C) AUTOMATIC DEFERRAL.— 

4 ‘‘(i) IN GENERAL.—The requirements 

5 of this subparagraph are met if, under the 

6 arrangement, each employee eligible to 

7 participate in the arrangement is treated 

8 as having elected to have the employer 

9 make elective contributions in an amount 

10 equal to a qualified percentage of com11 pensation. 

12 ‘‘(ii) ELECTION OUT.—The election 

13 treated as having been made under clause 

14 (i) shall cease to apply with respect to any 

15 employee if such employee makes an af16 firmative election— 

17 ‘‘(I) to not have such contribu18 tions made, or 

19 ‘‘(II) to make elective contribu20 tions at a level specified in such af21 firmative election. 

22 ‘‘(iii) QUALIFIED PERCENTAGE.—For 

23 purposes of this subparagraph, the term 

24 ‘qualified percentage’ means, with respect 

25 to any employee, any percentage deter-
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1 mined under the arrangement if such per2 centage is applied uniformly, does not ex3 ceed 10 percent, and is at least— 

4 ‘‘(I) 3 percent during the period 

5 ending on the last day of the first 

6 plan year which begins after the date 

7 on which the first elective contribution 

8 described in clause (i) is made with 

9 respect to such employee, 

10 ‘‘(II) 4 percent during the first 

11 plan year following the plan year de12 scribed in subclause (I), 

13 ‘‘(III) 5 percent during the sec14 ond plan year following the plan year 

15 described in subclause (I), and 

16 ‘‘(IV) 6 percent during any sub17 sequent plan year. 

18 ‘‘(iv) AUTOMATIC DEFERRAL FOR

19 CURRENT EMPLOYEES NOT REQUIRED.— 

20 Clause (i) shall be applied without taking 

21 into account any employee who was eligible 

22 to participate in the arrangement (or a 

23 predecessor arrangement) immediately be24 fore the date on which such arrangement 

25 becomes a qualified automatic contribution 
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1 arrangement (determined after application 

2 of this clause). 

3 ‘‘(D) PARTICIPATION.— 

4 ‘‘(i) IN GENERAL.—An arrangement 

5 meets the requirements of this subpara6 graph for any year if, during the plan year 

7 or the preceding plan year, elective con8 tributions are made on behalf of at least 

9 70 percent of the employees eligible to par10 ticipate in the arrangement other than— 

11 ‘‘(I) highly compensated employ12 ees, and 

13 ‘‘(II) at the election of the plan 

14 administrator, employees described in 

15 subparagraph (C)(iv). 

16 ‘‘(ii) FIRST PLAN YEAR.—An arrange17 ment (other than a successor arrangement) 

18 shall be treated as meeting the require19 ments of this subparagraph with respect to 

20 the first plan year with respect to which 

21 such arrangement is a qualified automatic 

22 contribution arrangement (determined 

23 without regard to this subparagraph). 

24 ‘‘(E) MATCHING OR NONELECTIVE CON25 TRIBUTIONS.— 
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1 ‘‘(i) IN GENERAL.—The requirements 

2 of this subparagraph are met if, under the 

3 arrangement, the employer— 

4 ‘‘(I) makes matching contribu5 tions on behalf of each employee who 

6 is not a highly compensated employee 

7 in an amount equal to 50 percent of 

8 the elective contributions of the em9 ployee to the extent such elective con10 tributions do not exceed 6 percent of 

11 compensation, or 

12 ‘‘(II) is required, without regard 

13 to whether the employee makes an 

14 elective contribution or employee con15 tribution, to make a contribution to a 

16 defined contribution plan on behalf of 

17 each employee who is not a highly 

18 compensated employee and who is eli19 gible to participate in the arrange20 ment in an amount equal to at least 

21 2 percent of the employee’s compensa22 tion. 

23 ‘‘(ii) APPLICATION OF RULES FOR

24 MATCHING CONTRIBUTIONS.—The rules of 
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1 clauses (ii) and (iii) of paragraph (12)(B) 

2 shall apply for purposes of clause (i)(I). 

3 ‘‘(iii) WITHDRAWAL AND VESTING RE4 STRICTIONS.—An arrangement shall not be 

5 treated as meeting the requirements of 

6 clause (i) unless, with respect to employer 

7 contributions (including matching con8 tributions) taken into account in deter9 mining whether the requirements of clause 

10 (i) are met— 

11 ‘‘(I) any employee who has com12 pleted at least 2 years of service 

13 (within the meaning of section 

14 411(a)) has a nonforfeitable right to 

15 100 percent of the employee’s accrued 

16 benefit derived from such employer 

17 contributions, and 

18 ‘‘(II) the requirements of sub19 paragraph (B) of paragraph (2) are 

20 met with respect to all such employer 

21 contributions. 

22 ‘‘(iv) APPLICATION OF CERTAIN

23 OTHER RULES.—The rules of subpara24 graphs (E)(ii) and (F) of paragraph (12) 
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1 shall apply for purposes of subclauses (I) 

2 and (II) of clause (i). 

3 ‘‘(F) NOTICE REQUIREMENTS.— 

4 ‘‘(i) IN GENERAL.—The requirements 

5 of this subparagraph are met if, within a 

6 reasonable period before each plan year, 

7 each employee eligible to participate in the 

8 arrangement for such year receives written 

9 notice of the employee’s rights and obliga10 tions under the arrangement which— 

11 ‘‘(I) is sufficiently accurate and 

12 comprehensive to apprise the employee 

13 of such rights and obligations, and 

14 ‘‘(II) is written in a manner cal15 culated to be understood by the aver16 age employee to whom the arrange17 ment applies. 

18 ‘‘(ii) TIMING AND CONTENT REQUIRE19 MENTS.—A notice shall not be treated as 

20 meeting the requirements of clause (i) with 

21 respect to an employee unless— 

22 ‘‘(I) the notice explains the em23 ployee’s right under the arrangement 

24 to elect not to have elective contribu25 tions made on the employee’s behalf 
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1 (or to elect to have such contributions 

2 made at a different percentage), 

3 ‘‘(II) in the case of an arrange4 ment under which the employee may 

5 elect among 2 or more investment op6 tions, the notice explains how con7 tributions made under the arrange8 ment will be invested in the absence of 

9 any investment election by the em10 ployee, and 

11 ‘‘(III) the employee has a reason12 able period of time after receipt of the 

13 notice described in subclauses (I) and 

14 (II) and before the first elective con15 tribution is made to make either such 

16 election.’’. 

17 (b) MATCHING CONTRIBUTIONS.—Section 401(m) of 

18 such Code (relating to nondiscrimination test for matching 

19 contributions and employee contributions) is amended by 

20 redesignating paragraph (12) as paragraph (13) and by 

21 inserting after paragraph (11) the following new para22 graph: 

23 ‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC

24 CONTRIBUTION ARRANGEMENTS.—A defined con25 tribution plan shall be treated as meeting the re-
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1 quirements of paragraph (2) with respect to match2 ing contributions if the plan— 

3 ‘‘(A) is a qualified automatic contribution 

4 arrangement (as defined in subsection (k)(13)), 

5 and 

6 ‘‘(B) meets the requirements of paragraph 

7 (11)(B).’’. 

8 (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY

9 PLANS.— 

10 (1) ELECTIVE CONTRIBUTION RULE.—Clause 

11 (i) of section 416(g)(4)(H) of such Code is amended 

12 by inserting ‘‘or 401(k)(13)’’ after ‘‘section 

13 401(k)(12)’’. 

14 (2) MATCHING CONTRIBUTION RULE.—Clause 

15 (ii) of section 416(g)(4)(H) of such Code is amended 

16 by inserting ‘‘or 401(m)(12)’’ after ‘‘section 

17 401(m)(11)’’. 

18 (d) CORRECTIVE DISTRIBUTIONS.— 

19 (1) IN GENERAL.—Section 414 of the Internal 

20 Revenue Code of 1986 (relating to definitions and 

21 special rules) is amended by adding at the end the 

22 following new subsection: 

23 ‘‘(w) AUTOMATIC CONTRIBUTION ARRANGEMENTS.— 

24 ‘‘(1) IN GENERAL.—No tax shall be imposed 

25 under section 72(t) on a distribution from an appli-
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1 cable employer plan to the employee with respect to 

2 whom such contribution relates if such distribution 

3 does not exceed the erroneous automatic contribu4 tion amount and is made not later than the 1st 

5 April 15 following the close of the taxable year in 

6 which such contribution was made. 

7 ‘‘(2) ERRONEOUS AUTOMATIC CONTRIBUTION

8 AMOUNT.—For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘erroneous 

10 automatic contribution amount’ means the less11 er of— 

12 ‘‘(i) the amount of automatic con13 tributions made during the applicable pe14 riod which the employee elects in a notice 

15 to the plan administrator to treat as an er16 roneous automatic contribution amount for 

17 purposes of this subsection, or 

18 ‘‘(ii) $500. 

19 ‘‘(B) AUTOMATIC CONTRIBUTION.—The 

20 term ‘automatic contribution’ means contribu21 tions which, under the terms of the plan— 

22 ‘‘(i) the employee can elect to be made 

23 as contributions under the plan on behalf 

24 of the employee, or to the employee di25 rectly in cash, and 
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1 ‘‘(ii) which are made on behalf of the 

2 employee under the plan pursuant to a 

3 plan provision treating the employee as 

4 having elected to have the employer make 

5 such contributions on behalf of the em6 ployee until the employee affirmatively 

7 elects not to have such contribution made 

8 or affirmatively elects to make contribu9 tions as a specified level. 

10 ‘‘(3) APPLICABLE EMPLOYER PLAN.—For pur11 poses of this subsection, the term ‘applicable em12 ployer plan’ means— 

13 ‘‘(A) an employees’ trust described in sec14 tion 401(a) which is exempt from tax under 

15 section 501(a), 

16 ‘‘(B) a plan under which amounts are con17 tributed by an individual’s employer for an an18 nuity contract described in section 403(b), and 

19 ‘‘(C) an eligible deferred compensation 

20 plan described in section 457(b) which is main21 tained by an eligible employer described in sec22 tion 457(e)(1)(A). 

23 ‘‘(4) APPLICABLE PERIOD.—For purposes of 

24 this subsection, the term ‘applicable period’ means, 

25 with respect to any employee, the three month pe-
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1 riod that begins on the first date that an automatic 

2 contribution described in paragraph (2)(B) is made 

3 with respect to such employee. 

4 ‘‘(5) SPECIAL RULES.—A distribution described 

5 in paragraph (1) (subject to the limitation of para6 graph (2))— 

7 ‘‘(A) shall not be treated as a distribution 

8 for purposes of sections 401(k)(2)(B)(i), 

9 403(b)(7), 403(b)(11), and 457(d)(1)(A), and 

10 ‘‘(B) shall not be taken into account for 

11 purposes of section 401(k)(3).’’. 

12 (2) VESTING CONFORMING AMENDMENTS.— 

13 (A) Section 411(a)(3)(G) of such Code is 

14 amended by inserting ‘‘an erroneous automatic 

15 contribution under section 414(w),’’ after 

16 ‘‘402(g)(2)(A),’’. 

17 (B) The heading of section 411(a)(3)(G) of 

18 such Code is amended by inserting ‘‘OR ERRO19 NEOUS AUTOMATIC CONTRIBUTION’’ before the 

20 period. 

21 (C) Section 401(k)(8)(E) of such Code is 

22 amended by inserting ‘‘an erroneous automatic 

23 contribution under section 414(w),’’ after 

24 ‘‘402(g)(2)(A),’’. 
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1 (D) The heading of section 401(k)(8)(E) 

2 of such Code is amended by inserting ‘‘OR ER3 RONEOUS AUTOMATIC CONTRIBUTION’’ before 

4 the period. 

5 (E) Section 203(a)(3)(F) of the Employee 

6 Retirement Income Security Act of 1974 (29 

7 U.S.C. 1053(a)(3)(F)) is amended by inserting 

8 ‘‘an erroneous automatic contribution under 

9 section 414(w) of such Code,’’ after 

10 ‘‘402(g)(2)(A) of such Code,’’. 

11 (e) CONTROL OVER PLAN ASSETS DEEMED TO HAVE

12 BEEN EXERCISED WITH RESPECT TO DEFAULT INVEST13 MENT ARRANGEMENTS.—Section 404(c) of the Employee 

14 Retirement Income Security Act of 1974, as amended by 

15 section 308, is further amended by adding at the end the 

16 following new paragraph: 

17 ‘‘(5)(A) For purposes of paragraph (1), a participant 

18 in an individual account plan shall be treated as exercising 

19 control over the assets in the account with respect to the 

20 amount of contributions made under a default investment 

21 arrangement. 

22 ‘‘(B)(i) For purposes of this paragraph, the term ‘de23 fault investment arrangement’ means an arrangement— 

24 ‘‘(I) which meets the requirements of subpara25 graph (C), 
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1 ‘‘(II) under which the participant is treated as 

2 having elected to have the plan sponsor exercise con3 trol over the assets in the participant’s account until 

4 the participant specifically elects to exercise such 

5 control, and 

6 ‘‘(III) under which assets described in sub7 clause (II) are invested in accordance with regula8 tions prescribed by the Secretary. 

9 ‘‘(ii) The regulations prescribed pursuant to clause 

10 (i)(III) shall provide guidance on the appropriateness of 

11 certain investments for designation as default investments 

12 under the arrangement, which shall include guidance re13 garding— 

14 ‘‘(I) appropriate mixes of default investments 

15 and asset classes which the Secretary considers con16 sistent with long-term capital appreciation, and 

17 ‘‘(II) the designation of other default invest18 ments. 

19 ‘‘(C)(i) For purposes of subparagraph (B)(i)(I), an 

20 arrangement meets the requirements of this subparagraph 

21 for any plan year if, within a reasonable period before such 

22 plan year, the plan administrator gives to each participant 

23 to whom the arrangement applies for such plan year notice 

24 of the participant’s rights and obligations under the ar25 rangement which— 
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1 ‘‘(I) is sufficiently accurate and comprehensive 

2 to apprise the participant of such rights and obliga3 tions, and 

4 ‘‘(II) is written in a manner calculated to be 

5 understood by the average participant to whom the 

6 arrangement applies. 

7 ‘‘(ii) A notice shall not be treated as meeting the re8 quirements of clause (i) with respect to a participant un9 less— 

10 ‘‘(I) the notice includes an explanation of the 

11 participant’s right under the arrangement to specifi12 cally elect to exercise control over the assets in the 

13 participant’s account, 

14 ‘‘(II) the employee has a reasonable period of 

15 time, after receipt of the notice described in sub16 clause (I) and before the assets are first invested, to 

17 specifically make such an election, and 

18 ‘‘(III) the notice explains how contributions 

19 made under the arrangement will be invested in the 

20 absence of any investment election specifically made 

21 by the employee.’’. 

22 (f) PREEMPTION OF CONFLICTING STATE REGULA23 TION.—Section 514 of the Employee Retirement Income 

24 Security Act of 1974 (29 U.S.C. 1144) is amended by 

25 adding at the end the following new subsection: 
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1 ‘‘(e)(1) Notwithstanding any other provision of this 

2 section, this title shall supersede any law of a State which 

3 would directly or indirectly prohibit or restrict the inclu4 sion in any plan of an automatic contribution arrange5 ment. The Secretary may prescribe regulations which 

6 would establish minimum standards that such an arrange7 ment would be required to satisfy in order for this sub8 section to apply in the case of such arrangement. 

9 ‘‘(2)(A) For purposes of this subsection, the term 

10 ‘automatic contribution arrangement’ means an arrange11 ment— 

12 ‘‘(i) which meets the requirements of paragraph 

13 (3), 

14 ‘‘(ii) under which a participant may elect to 

15 have the plan sponsor make payments as contribu16 tions under the plan on behalf of the participant, or 

17 to the participant directly in cash, 

18 ‘‘(iii) under which a participant is treated as 

19 having elected to have the plan sponsor make such 

20 contributions in an amount equal to a uniform per21 centage of compensation provided under the plan 

22 until the participant specifically elects not to have 

23 such contributions made (or specifically elects to 

24 have such contributions made at a different percent25 age), and 
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1 ‘‘(iv) under which such contributions are in2 vested in accordance with regulations prescribed by 

3 the Secretary. 

4 ‘‘(B) The regulations prescribed pursuant to subpara5 graph (A)(iv) shall provide guidance on the appropriate6 ness of certain investments for designation as default in7 vestments under the arrangement, which shall include 

8 guidance regarding appropriate mixes of default invest9 ments and asset classes which the Secretary considers con10 sistent with long-term capital appreciation 

11 ‘‘(3)(A) For purposes of paragraph (2)(A)(i), an ar12 rangement meets the requirements of this paragraph for 

13 any plan year if, within a reasonable period before such 

14 plan year, the plan administrator gives to each participant 

15 to whom the arrangement applies for such plan year notice 

16 of the participant’s rights and obligations under the ar17 rangement which— 

18 ‘‘(i) is sufficiently accurate and comprehensive 

19 to apprise the participant of such rights and obliga20 tions, and 

21 ‘‘(ii) is written in a manner calculated to be un22 derstood by the average participant to whom the ar23 rangement applies. 
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1 ‘‘(B) A notice shall not be treated as meeting the re2 quirements of subparagraph (A) with respect to a partici3 pant unless— 

4 ‘‘(i) the notice includes an explanation of the 

5 participant’s right under the arrangement not to 

6 have elective contributions made on the participant’s 

7 behalf (or to elect to have such contributions made 

8 at a different percentage), 

9 ‘‘(ii) the participant has a reasonable period of 

10 time, after receipt of the notice described in clause 

11 (i) and before the first elective contribution is made, 

12 to make such election, and 

13 ‘‘(iii) the notice explains how contributions 

14 made under the arrangement will be invested in the 

15 absence of any investment election by the partici16 pant.’’. 

17 (g) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to plan years beginning after De19 cember 31, 2005. 

20 SEC. 904. PENALTY-FREE WITHDRAWALS FROM RETIRE21 MENT PLANS FOR INDIVIDUALS CALLED TO 

22 ACTIVE DUTY FOR AT LEAST 179 DAYS. 

23 (a) IN GENERAL.—Paragraph (2) of section 72(t) of 

24 the Internal Revenue Code of 1986 (relating to 10-percent 

25 additional tax on early distributions from qualified retire-
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1 ment plans) is amended by adding at the end the following 

2 new subparagraph: 

3 ‘‘(G) DISTRIBUTIONS FROM RETIREMENT

4 PLANS TO INDIVIDUALS CALLED TO ACTIVE

5 DUTY.— 

6 ‘‘(i) IN GENERAL.—Any qualified re7 servist distribution. 

8 ‘‘(ii) AMOUNT DISTRIBUTED MAY BE

9 REPAID.—Any individual who receives a 

10 qualified reservist distribution may, at any 

11 time during the 2-year period beginning on 

12 the day after the end of the active duty pe13 riod, make one or more contributions to an 

14 individual retirement plan of such indi15 vidual in an aggregate amount not to ex16 ceed the amount of such distribution. The 

17 dollar limitations otherwise applicable to 

18 contributions to individual retirement plans 

19 shall not apply to any contribution made 

20 pursuant to the preceding sentence. No de21 duction shall be allowed for any contribu22 tion pursuant to this clause. 

23 ‘‘(iii) QUALIFIED RESERVIST DIS24 TRIBUTION.—For purposes of this sub25 paragraph, the term ‘qualified reservist 
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1 distribution’ means any distribution to an 

2 individual if— 

3 ‘‘(I) such distribution is from an 

4 individual retirement plan, or from 

5 amounts attributable to employer con6 tributions made pursuant to elective 

7 deferrals described in subparagraph 

8 (A) or (C) of section 402(g)(3) or sec9 tion 501(c)(18)(D)(iii), 

10 ‘‘(II) such individual was (by rea11 son of being a member of a reserve 

12 component (as defined in section 101 

13 of title 37, United States Code)), or14 dered or called to active duty for a pe15 riod in excess of 179 days or for an 

16 indefinite period, and 

17 ‘‘(III) such distribution is made 

18 during the period beginning on the 

19 date of such order or call and ending 

20 at the close of the active duty period. 

21 ‘‘(iv) APPLICATION OF SUBPARA22 GRAPH.—This subparagraph applies to in23 dividuals ordered or called to active duty 

24 after September 11, 2001, and before Sep25 tember 12, 2007. In no event shall the 2- 
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1 year period referred to in clause (ii) end 

2 before the date which is 2-years after the 

3 date of the enactment of this subpara4 graph.’’. 

5 (b) CONFORMING AMENDMENTS.— 

6 (1) Section 401(k)(2)(B)(i) of such Code is 

7 amended by striking ‘‘or’’ at the end of subclause 

8 (III), by striking ‘‘and’’ at the end of subclause (IV) 

9 and inserting ‘‘or’’, and by inserting after subclause 

10 (IV) the following new subclause: 

11 ‘‘(V) in the case of a qualified re12 servist distribution (as defined in sec13 tion 72(t)(2)(G)(iii)), the date on 

14 which a period referred to in sub15 clause (III) of such section begins, 

16 and’’. 

17 (2) Section 403(b)(7)(A)(ii) of such Code is 

18 amended by inserting ‘‘(unless such amount is a dis19 tribution to which section 72(t)(2)(G) applies)’’ after 

20 ‘‘distributee’’. 

21 (3) Section 403(b)(11) of such Code is amend22 ed by striking ‘‘or’’ at the end of subparagraph (A), 

23 by striking the period at the end of subparagraph 

24 (B) and inserting ‘‘, or’’, and by inserting after sub25 paragraph (B) the following new subparagraph: 
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1 ‘‘(C) for distributions to which section 

2 72(t)(2)(G) applies.’’. 

3 (c) EFFECTIVE DATE; WAIVER OF LIMITATIONS.— 

4 (1) EFFECTIVE DATE.—The amendment made 

5 by this section shall apply to distributions after Sep6 tember 11, 2001. 

7 (2) WAIVER OF LIMITATIONS.—If refund or 

8 credit of any overpayment of tax resulting from the 

9 amendments made by this section is prevented at 

10 any time before the close of the 1-year period begin11 ning on the date of the enactment of this Act by the 

12 operation of any law or rule of law (including res ju13 dicata), such refund or credit may nevertheless be 

14 made or allowed if claim therefor is filed before the 

15 close of such period. 

16 SEC. 905. WAIVER OF 10 PERCENT EARLY WITHDRAWAL 

17 PENALTY TAX ON CERTAIN DISTRIBUTIONS 

18 OF PENSION PLANS FOR PUBLIC SAFETY EM19 PLOYEES. 

20 (a) IN GENERAL.—Section 72(t)(2) of the Internal 

21 Revenue Code of 1986 (relating to subsection not to apply 

22 to certain distributions), as amended by section 904, is 

23 amended by adding at the end the following new sub24 section: 
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1 ‘‘(H) DROP DISTRIBUTIONS TO QUALI2 FIED PUBLIC SAFETY EMPLOYEES IN GOVERN3 MENTAL PLANS.— 

4 ‘‘(i) IN GENERAL.—Distributions to 

5 an individual who is a qualified public safe6 ty employee from a governmental plan 

7 within the meaning of section 414(d) to 

8 the extent such distributions are attrib9 utable to a DROP benefit. 

10 ‘‘(ii) DEFINITIONS.—For purposes of 

11 this subparagraph— 

12 ‘‘(I) DROP BENEFIT.—The term 

13 ‘DROP benefit’ means a feature of a 

14 governmental plan which is a defined 

15 benefit plan and under which an em16 ployee elects to receive credits to an 

17 account (including a notional account) 

18 in the plan which are not in excess of 

19 the plan benefits (payable in the form 

20 of an annuity) that would have been 

21 provided if the employee had retired 

22 under the plan at a specified earlier 

23 retirement date and which are in lieu 

24 of increases in the employee’s accrued 

25 pension benefit based on years of 
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1 service after the effective date of the 

2 DROP election. 

3 ‘‘(II) QUALIFIED PUBLIC SAFETY

4 EMPLOYEE.—The term ‘qualified pub5 lic safety employee’ means any em6 ployee of any police department or fire 

7 department organized and operated by 

8 a State or political subdivision of a 

9 State if the employee provides police 

10 protection, firefighting services, or 

11 emergency medical services for any 

12 area within the jurisdiction of such 

13 State or political subdivision and if 

14 the employee was eligible to retire on 

15 or before the date of such election and 

16 receive immediate retirement bene17 fits.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to distributions after the date of 

20 the enactment of this Act. 
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1 SEC. 906. COMBAT ZONE COMPENSATION TAKEN INTO AC2 COUNT FOR PURPOSES OF DETERMINING 

3 LIMITATION AND DEDUCTIBILITY OF CON4 TRIBUTIONS TO INDIVIDUAL RETIREMENT 

5 PLANS. 

6 (a) IN GENERAL.—Subsection (f) of section 219 of 

7 the Internal Revenue Code of 1986 is amended by redesig8 nating paragraph (7) as paragraph (8) and by inserting 

9 after paragraph (6) the following new paragraph: 

10 ‘‘(7) SPECIAL RULE FOR COMPENSATION

11 EARNED BY MEMBERS OF THE ARMED FORCES FOR

12 SERVICE IN A COMBAT ZONE.—For purposes of sub13 sections (b)(1)(B) and (c), the amount of compensa14 tion includible in an individual’s gross income shall 

15 be determined without regard to section 112.’’. 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2005. 

19 SEC. 907. DIRECT PAYMENT OF TAX REFUNDS TO INDI20 VIDUAL RETIREMENT PLANS. 

21 (a) IN GENERAL.—The Secretary of the Treasury (or 

22 the Secretary’s delegate) shall make available a form (or 

23 modify existing forms) for use by individuals to direct that 

24 a portion of any refund of overpayment of tax imposed 

25 by chapter 1 of the Internal Revenue Code of 1986 be 
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1 paid directly to an individual retirement plan (as defined 

2 in section 7701(a)(37) of such Code) of such individual. 

3 (b) EFFECTIVE DATE.—The form required by sub4 section (a) shall be made available for taxable years begin5 ning after December 31, 2006. 

6 SEC. 908. IRA ELIGIBILITY FOR THE DISABLED. 

7 (a) IN GENERAL.—Subsection (f) of section 219 of 

8 the Internal Revenue Code of 1986 (relating to other defi9 nitions and special rules), as amended by this Act, is fur10 ther amended by redesignating paragraph (8) as para11 graph (9) and by inserting after paragraph (7) the fol12 lowing new paragraph: 

13 ‘‘(8) SPECIAL RULE FOR CERTAIN DISABLED

14 INDIVIDUALS.—In the case of an individual— 

15 ‘‘(A) who is disabled (within the meaning 

16 of section 72(m)(7)), and 

17 ‘‘(B) who has not attained the applicable 

18 age (as defined in section 401(a)(9)(H)) before 

19 the close of the taxable year, 

20 subparagraph (B) of subsection (b)(1) shall not 

21 apply.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2005. 
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1 SEC. 909. ALLOW ROLLOVERS BY NONSPOUSE BENE2 FICIARIES OF CERTAIN RETIREMENT PLAN 

3 DISTRIBUTIONS. 

4 (a) IN GENERAL.— 

5 (1) QUALIFIED PLANS.—Section 402(c) of the 

6 Internal Revenue Code of 1986 (relating to rollovers 

7 from exempt trusts) is amended by adding at the 

8 end the following new paragraph: 

9 ‘‘(11) DISTRIBUTIONS TO INHERITED INDI10 VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE11 FICIARY.— 

12 ‘‘(A) IN GENERAL.—If, with respect to any 

13 portion of a distribution from an eligible retire14 ment plan of a deceased employee, a direct 

15 trustee-to-trustee transfer is made to an indi16 vidual retirement plan described in clause (i) or 

17 (ii) of paragraph (8)(B) established for the pur18 poses of receiving the distribution on behalf of 

19 an individual who is a designated beneficiary 

20 (as defined by section 401(a)(9)(E)) of the em21 ployee and who is not the surviving spouse of 

22 the employee— 

23 ‘‘(i) the transfer shall be treated as an 

24 eligible rollover distribution for purposes of 

25 this subsection, 
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1 ‘‘(ii) the individual retirement plan 

2 shall be treated as an inherited individual 

3 retirement account or individual retirement 

4 annuity (within the meaning of section 

5 408(d)(3)(C)) for purposes of this title, 

6 and 

7 ‘‘(iii) section 401(a)(9)(B) (other than 

8 clause (iv) thereof) shall apply to such 

9 plan. 

10 ‘‘(B) CERTAIN TRUSTS TREATED AS BENE11 FICIARIES.—For purposes of this paragraph, to 

12 the extent provided in rules prescribed by the 

13 Secretary, a trust maintained for the benefit of 

14 one or more designated beneficiaries shall be 

15 treated in the same manner as a trust des16 ignated beneficiary.’’. 

17 (2) SECTION 403(a) PLANS.—Subparagraph 

18 (B) of section 403(a)(4) of such Code (relating to 

19 rollover amounts) is amended by inserting ‘‘and 

20 (11)’’ after ‘‘(7)’’. 

21 (3) SECTION 403(b) PLANS.—Subparagraph 

22 (B) of section 403(b)(8) of such Code (relating to 

23 rollover amounts) is amended by striking ‘‘and (9)’’ 

24 and inserting ‘‘, (9), and (11)’’. 
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1 (4) SECTION 457 PLANS.—Subparagraph (B) of 

2 section 457(e)(16) of such Code (relating to rollover 

3 amounts) is amended by striking ‘‘and (9)’’ and in4 serting ‘‘, (9), and (11)’’. 

5 (b) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to distributions after December 31, 

7 2005. 

8 TITLE X—PROVISIONS TO EN9 HANCE HEALTH CARE AF10 FORDABILITY 

11 SEC. 1001. TREATMENT OF ANNUITY AND LIFE INSURANCE 

12 CONTRACTS WITH A LONG-TERM CARE IN13 SURANCE FEATURE. 

14 (a) EXCLUSION FROM GROSS INCOME.—Subsection 

15 (e) of section 72 of the Internal Revenue Code of 1986 

16 (relating to amounts not received as annuities) is amended 

17 by redesignating paragraph (11) as paragraph (12) and 

18 by inserting after paragraph (10) the following new para19 graph: 

20 ‘‘(11) SPECIAL RULES FOR CERTAIN COMBINA21 TION CONTRACTS PROVIDING LONG-TERM CARE IN22 SURANCE.—Notwithstanding paragraphs (2), (5)(C), 

23 and (10), in the case of any charge against the cash 

24 value of an annuity contract or the cash surrender 

25 value of a life insurance contract made as payment 
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1 for coverage under a qualified long-term care insur2 ance contract which is part of or a rider on such an3 nuity or life insurance contract— 

4 ‘‘(A) the investment in the contract shall 

5 be reduced (but not below zero) by such charge, 

6 and 

7 ‘‘(B) such charge shall not be includible in 

8 gross income.’’. 

9 (b) TAX-FREE EXCHANGES AMONG CERTAIN INSUR10 ANCE POLICIES.— 

11 (1) ANNUITY CONTRACTS CAN INCLUDE QUALI12 FIED LONG-TERM CARE INSURANCE RIDERS.—Para13 graph (2) of section 1035(b) of such Code is amend14 ed by adding at the end the following new sentence: 

15 ‘‘For purposes of the preceding sentence, a contract 

16 shall not fail to be treated as an annuity contract 

17 solely because a qualified long-term care insurance 

18 contract is a part of or a rider on such contract.’’. 

19 (2) LIFE INSURANCE CONTRACTS CAN INCLUDE

20 QUALIFIED LONG-TERM CARE INSURANCE RIDERS.— 

21 Paragraph (3) of section 1035(b) of such Code is 

22 amended by adding at the end the following new 

23 sentence: ‘‘For purposes of the preceding sentence, 

24 a contract shall not fail to be treated as a life insur25 ance contract solely because a qualified long-term 
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1 care insurance contract is a part of or a rider on 

2 such contract.’’. 

3 (3) EXPANSION OF TAX-FREE EXCHANGES OF

4 LIFE INSURANCE, ENDOWMENT, AND ANNUITY CON5 TRACTS FOR LONG-TERM CARE CONTRACTS.—Sub6 section (a) of section 1035 of such Code (relating to 

7 certain exchanges of insurance policies) is amend8 ed— 

9 (A) in paragraph (1) by striking ‘‘con10 tract;’’ and inserting ‘‘contract or for a quali11 fied long-term care insurance contract;’’, 

12 (B) in paragraph (2) by striking ‘‘con13 tract;’’ and inserting ‘‘contract, or (C) for a 

14 qualified long-term care insurance contract;’’, 

15 and 

16 (C) in paragraph (3) by striking ‘‘con17 tract.’’ and inserting ‘‘contract or for a quali18 fied long-term care insurance contract.’’. 

19 (4) TAX-FREE EXCHANGES OF QUALIFIED

20 LONG-TERM CARE INSURANCE CONTRACT.—Sub21 section (a) of section 1035 of such Code (relating to 

22 certain exchanges of insurance policies) is amended 

23 by striking ‘‘or’’ at the end of paragraph (2), by 

24 striking the period at the end of paragraph (3) and 
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1 inserting ‘‘; or’’, and by inserting after paragraph 

2 (3) the following new paragraph: 

3 ‘‘(4) a qualified long-term care insurance con4 tract for a qualified long-term care insurance con5 tract.’’. 

6 (c) TREATMENT OF COVERAGE PROVIDED AS PART

7 OF A LIFE INSURANCE OR ANNUITY CONTRACT.—Sub8 section (e) of section 7702B of such Code (relating to 

9 treatment of qualified long-term care insurance) is amend10 ed to read as follows: 

11 ‘‘(e) TREATMENT OF COVERAGE PROVIDED AS PART

12 OF A LIFE INSURANCE OR ANNUITY CONTRACT.— 

13 ‘‘(1) COVERAGE TREATED AS CONTRACT.—Ex14 cept as otherwise provided in regulations prescribed 

15 by the Secretary, in the case of any long-term care 

16 insurance coverage (whether or not qualified) pro17 vided by a rider on or as part of a life insurance 

18 contract or an annuity contract, this title shall apply 

19 as if the portion of the contract providing such cov20 erage is a separate contract. 

21 ‘‘(2) DENIAL OF DEDUCTION UNDER SECTION

22 213.—No deduction shall be allowed under section 

23 213(a) for any payment made for coverage under a 

24 qualified long-term care insurance contract if such 

25 payment is made as a charge against the cash value 
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1 of an annuity contract or the cash surrender value 

2 of a life insurance contract. 

3 ‘‘(3) APPLICATION OF SECTION 7702.—Section 

4 7702(c)(2) (relating to the guideline premium limi5 tation) shall be applied by increasing the guideline 

6 premium limitation with respect to the life insurance 

7 contract, as of any date— 

8 ‘‘(A) by the sum of any charges (but not 

9 premium payments) against the life insurance 

10 contract’s cash surrender value (within the 

11 meaning of section 7702(f)(2)(A)) for coverage 

12 under the qualified long-term care insurance 

13 contract made to that date under the life insur14 ance contract, less 

15 ‘‘(B) any such charges the imposition of 

16 which reduces the premiums paid for the life in17 surance contract (within the meaning of section 

18 7702(f)(1)). 

19 ‘‘(4) PORTION DEFINED.—For purposes of this 

20 subsection, the term ‘portion’ means only the terms 

21 and benefits under a life insurance contract or annu22 ity contract that are in addition to the terms and 

23 benefits under the contract without regard to long24 term care insurance coverage. 
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1 ‘‘(5) ANNUITY CONTRACTS TO WHICH PARA2 GRAPH (1) DOES NOT APPLY.—For purposes of this 

3 subsection, none of the following shall be treated as 

4 an annuity contract: 

5 ‘‘(A) A trust described in section 401(a) 

6 which is exempt from tax under section 501(a). 

7 ‘‘(B) A contract— 

8 ‘‘(i) purchased by a trust described in 

9 subparagraph (A), 

10 ‘‘(ii) purchased as part of a plan de11 scribed in section 403(a), 

12 ‘‘(iii) described in section 403(b), 

13 ‘‘(iv) provided for employees of a life 

14 insurance company under a plan described 

15 in section 818(a)(3), or 

16 ‘‘(v) from an individual retirement ac17 count or an individual retirement annuity. 

18 ‘‘(C) A contract purchased by an employer 

19 for the benefit of the employee (or the employ20 ee’s spouse). 

21 Any dividend described in section 404(k) which is 

22 received by a participant or beneficiary shall, for 

23 purposes of this paragraph, be treated as paid under 

24 a separate contract to which subparagraph (B)(i) 

25 applies.’’. 
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1 (d) INFORMATION REPORTING.— 

2 (1) Subpart B of part III of subchapter A of 

3 chapter 61 of such Code (relating to information 

4 concerning transactions with other persons) is 

5 amended by adding at the end the following new sec6 tion: 

7 ‘‘SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED 

8 LONG-TERM CARE INSURANCE CONTRACTS 

9 UNDER COMBINED ARRANGEMENTS. 

10 ‘‘(a) REQUIREMENT OF REPORTING.—Any person 

11 who makes a charge against the cash value of an annuity 

12 contract, or the cash surrender value of a life insurance 

13 contract, which is excludible from gross income under sec14 tion 72(e)(11) shall make a return, according to the forms 

15 or regulations prescribed by the Secretary, setting forth— 

16 ‘‘(1) the amount of the aggregate of such 

17 charges against each such contract for the calendar 

18 year, 

19 ‘‘(2) the amount of the reduction in the invest20 ment in each such contract by reason of such 

21 charges, and 

22 ‘‘(3) the name, address, and TIN of the indi23 vidual who is the holder of each such contract. 

24 ‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS

25 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 
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1 Every person required to make a return under subsection 

2 (a) shall furnish to each individual whose name is required 

3 to be set forth in such return a written statement show4 ing— 

5 ‘‘(1) the name, address, and phone number of 

6 the information contact of the person making the 

7 payments, and 

8 ‘‘(2) the information required to be shown on 

9 the return with respect to such individual. 

10 The written statement required under the preceding sen11 tence shall be furnished to the individual on or before Jan12 uary 31 of the year following the calendar year for which 

13 the return under subsection (a) was required to be made.’’. 

14 (2) CLERICAL AMENDMENT.—The table of sec15 tions for subpart B of part III of subchapter A of 

16 such chapter 61 of such Code is amended by adding 

17 at the end the following new item: 

‘‘Sec. 6050U. Charges or payments for qualified long-term care insurance contracts under combined arrangements.’’. 

18 (e) TREATMENT OF POLICY ACQUISITION EX19 PENSES.—Subsection (e) of section 848 of such Code (re20 lating to classification of contracts) is amended by adding 

21 at the end the following new paragraph: 

22 ‘‘(6) TREATMENT OF CERTAIN QUALIFIED

23 LONG-TERM CARE INSURANCE CONTRACT ARRANGE24 MENTS.—An annuity or life insurance contract 
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1 which includes a qualified long-term care insurance 

2 contract as a part of or a rider on such annuity or 

3 life insurance contract shall be treated as a specified 

4 insurance contract not described in subparagraph 

5 (A) or (B) of subsection (c)(1).’’. 

6 (f) TREATMENT AS QUALIFIED ADDITIONAL BEN7 EFIT.—Subparagraph (A) of section 7702(f)(5) of such 

8 Code (relating to qualified additional benefits) is amended 

9 by striking ‘‘or’’ at the end of clause (iv), by redesignating 

10 clause (v) as clause (vi), and by inserting after clause (iv) 

11 the following new clause: 

12 ‘‘(v) qualified long-term care insur13 ance contract which is a part of or a rider 

14 on the contract, or’’. 

15 (g) EFFECTIVE DATES.— 

16 (1) IN GENERAL.—Except as provided by para17 graph (2), the amendments made by this section 

18 shall apply to contracts issued before, on, or after 

19 December 31, 2006, but only with respect to periods 

20 beginning after such date. 

21 (2) SUBSECTION (b).—The amendments made 

22 by subsection (b) shall apply with respect to ex23 changes occurring after December 31, 2006. 
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1 SEC. 1002. DISPOSITION OF UNUSED HEALTH AND DEPEND2 ENT CARE BENEFITS IN CAFETERIA PLANS 

3 AND FLEXIBLE SPENDING ARRANGEMENTS. 

4 (a) IN GENERAL.—Section 125 of the Internal Rev5 enue Code of 1986 (relating to cafeteria plans) is amended 

6 by redesignating subsections (h) and (i) as subsections (i) 

7 and (j), respectively, and by inserting after subsection (g) 

8 the following: 

9 ‘‘(h) CONTRIBUTIONS OF CERTAIN UNUSED HEALTH

10 AND DEPENDENT CARE BENEFITS.— 

11 ‘‘(1) IN GENERAL.—For purposes of this title, 

12 a plan or other arrangement shall not fail to be 

13 treated as a cafeteria plan solely because under such 

14 plan qualified benefits include— 

15 ‘‘(A) a health flexible spending arrange16 ment under which not more than $500 of un17 used benefits under such arrangement may 

18 be— 

19 ‘‘(i) carried forward to the succeeding 

20 plan year of such health flexible spending 

21 arrangement, or 

22 ‘‘(ii) to the extent permitted by sec23 tion 106(d), contributed by the employer to 

24 a health savings account (as defined in sec25 tion 223(d)) maintained for the benefit of 

26 the employee, and 
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1 ‘‘(B) a dependent care flexible spending ar2 rangement under which not more than $500 of 

3 unused benefits under such arrangement may 

4 be carried forward to the succeeding plan year 

5 of such dependent care flexible spending ar6 rangement. 

7 ‘‘(2) HEALTH FLEXIBLE SPENDING ARRANGE8 MENT.—For purposes of this subsection, the term 

9 ‘health flexible spending arrangement’ means a flexi10 ble spending arrangement (as defined in section 

11 106(c)) that is a qualified benefit and only permits 

12 reimbursement for expenses for medical care (as de13 fined in section 213(d)(1), without regard to sub14 paragraphs (C) and (D) thereof). 

15 ‘‘(3) DEPENDENT CARE FLEXIBLE SPENDING

16 ARRANGEMENT.—For purposes of this subsection, 

17 the term ‘dependent care flexible spending arrange18 ment’ means a flexible spending arrangement (as de19 fined in section 106(c)) that is a qualified benefit 

20 and only permits reimbursement for expenses for de21 pendent care assistance which meets the require22 ments of section 129(d). 

23 ‘‘(4) UNUSED BENEFITS.—For purposes of this 

24 subsection, with respect to an employee, the term 

25 ‘unused benefits’ means the excess of— 
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1 ‘‘(A) the maximum amount of reimburse2 ment allowable to the employee for a plan year 

3 under a health flexible spending arrangement or 

4 the dependent care flexible spending arrange5 ment, as the case may be, over 

6 ‘‘(B) the actual amount of reimbursement 

7 for such year under such arrangement.’’. 

8 (b) EFFECTIVE DATE.—The amendments made by 

9 subsection (a) shall apply to taxable years beginning after 

10 December 31, 2005. 

11 SEC. 1003. DISTRIBUTIONS FROM GOVERNMENTAL RETIRE12 MENT PLANS FOR HEALTH AND LONG-TERM 

13 CARE INSURANCE FOR PUBLIC SAFETY OFFI14 CERS. 

15 (a) IN GENERAL.—Section 402 of the Internal Rev16 enue Code of 1986 (relating to taxability of beneficiary 

17 of employees’ trust) is amended by adding at the end the 

18 following new subsection: 

19 ‘‘(l) DISTRIBUTIONS FROM GOVERNMENTAL PLANS

20 FOR HEALTH AND LONG-TERM CARE INSURANCE.— 

21 ‘‘(1) IN GENERAL.—In the case of an employee 

22 who is an eligible retired public safety officer who 

23 makes the election described in paragraph (6) with 

24 respect to any taxable year of such employee, gross 

25 income of such employee for such taxable year does 
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1 not include any distribution from an eligible retire2 ment plan to the extent that the aggregate amount 

3 of such distributions does not exceed the amount 

4 paid by such employee for qualified health insurance 

5 premiums of the employee, his spouse, or dependents 

6 (as defined in section 152) for such taxable year. 

7 ‘‘(2) LIMITATION.—The amount which may be 

8 excluded from gross income for the taxable year by 

9 reason of paragraph (1) shall not exceed $5,000. 

10 ‘‘(3) DISTRIBUTIONS MUST OTHERWISE BE IN11 CLUDIBLE.— 

12 ‘‘(A) IN GENERAL.—An amount shall be 

13 treated as a distribution for purposes of para14 graph (1) only to the extent that such amount 

15 would be includible in gross income without re16 gard to paragraph (1). 

17 ‘‘(B) APPLICATION OF SECTION 72.—Not18 withstanding section 72, in determining the ex19 tent to which an amount is treated as a dis20 tribution for purposes of subparagraph (A), the 

21 aggregate amounts distributed from an eligible 

22 retirement plan in a taxable year (up to the 

23 amount excluded under paragraph (1)) shall be 

24 treated as includible in gross income (without 

25 regard to subparagraph (A)) to the extent that 
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1 such amount does not exceed the aggregate 

2 amount which would have been so includible if 

3 all amounts distributed from all eligible retire4 ment plans were treated as 1 contract for pur5 poses of determining the inclusion of such dis6 tribution under section 72. Proper adjustments 

7 shall be made in applying section 72 to other 

8 distributions in such taxable year and subse9 quent taxable years. 

10 ‘‘(4) DEFINITIONS.—For purposes of this sub11 section— 

12 ‘‘(A) ELIGIBLE RETIREMENT PLAN.—For 

13 purposes of paragraph (1), the term ‘eligible re14 tirement plan’ means a governmental plan 

15 (within the meaning of section 414(d)) which is 

16 described in clause (iii), (iv), (v), or (vi) of sub17 section (c)(8)(B). 

18 ‘‘(B) ELIGIBLE RETIRED PUBLIC SAFETY

19 OFFICER.—The term ‘eligible retired public 

20 safety officer’ means an individual who, by rea21 son of disability or attainment of normal retire22 ment age, is separated from service as a public 

23 safety officer with the employer who maintains 

24 the eligible retirement plan from which distribu25 tions subject to paragraph (1) are made. 
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1 ‘‘(C) PUBLIC SAFETY OFFICER.—The term 

2 ‘public safety officer’ shall have the same mean3 ing given such term by section 1204(8)(A) of 

4 the Omnibus Crime Control and Safe Streets 

5 Act of 1968 (42 U.S.C. 3796b(8)(A)). 

6 ‘‘(D) QUALIFIED HEALTH INSURANCE

7 PREMIUMS.—The term ‘qualified health insur8 ance premiums’ means premiums for coverage 

9 for the eligible retired public safety officer, his 

10 spouse, and dependents, by an accident or 

11 health insurance plan or qualified long-term 

12 care insurance contract (as defined in section 

13 7702B(b)). 

14 ‘‘(5) SPECIAL RULES.—For purposes of this 

15 subsection— 

16 ‘‘(A) DIRECT PAYMENT TO INSURER RE17 QUIRED.—Paragraph (1) shall only apply to a 

18 distribution if payment of the premiums is 

19 made directly to the provider of the accident or 

20 health insurance plan or qualified long-term 

21 care insurance contract by deduction from a 

22 distribution from the eligible retirement plan. 

23 ‘‘(B) RELATED PLANS TREATED AS 1.—All 

24 eligible retirement plans of an employer shall be 

25 treated as a single plan. 
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1 ‘‘(6) ELECTION DESCRIBED.— 

2 ‘‘(A) IN GENERAL.—For purposes of para3 graph (1), an election is described in this para4 graph if the election is made by an employee 

5 after separation from service with respect to 

6 amounts not distributed from an eligible retire7 ment plan to have amounts from such plan dis8 tributed in order to pay for qualified health in9 surance premiums. 

10 ‘‘(B) SPECIAL RULE.—A plan shall not be 

11 treated as violating the requirements of section 

12 401, or as engaging in a prohibited transaction 

13 for purposes of section 503(b), merely because 

14 it provides for an election with respect to 

15 amounts that are otherwise distributable under 

16 the plan or merely because of a distribution 

17 made pursuant to an election described in sub18 paragraph (A). 

19 ‘‘(7) COORDINATION WITH MEDICAL EXPENSE

20 DEDUCTION.—The amounts excluded from gross in21 come under paragraph (1) shall not be taken into 

22 account under section 213. 

23 ‘‘(8) COORDINATION WITH DEDUCTION FOR

24 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN25 DIVIDUALS.—The amounts excluded from gross in-
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1 come under paragraph (1) shall not be taken into 

2 account under section 162(l).’’. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 403(a) of such Code (relating to 

5 taxability of beneficiary under a qualified annuity 

6 plan) is amended by inserting after paragraph (1) 

7 the following new paragraph: 

8 ‘‘(2) SPECIAL RULE FOR HEALTH AND LONG9 TERM CARE INSURANCE.—To the extent provided in 

10 section 402(l), paragraph (1) shall not apply to the 

11 amount distributed under the contract which is oth12 erwise includible in gross income under this sub13 section.’’. 

14 (2) Section 403(b) of such Code (relating to 

15 taxability of beneficiary under annuity purchased by 

16 section 501(c)(3) organization or public school) is 

17 amended by inserting after paragraph (1) the fol18 lowing new paragraph: 

19 ‘‘(2) SPECIAL RULE FOR HEALTH AND LONG20 TERM CARE INSURANCE.—To the extent provided in 

21 section 402(l), paragraph (1) shall not apply to the 

22 amount distributed under the contract which is oth23 erwise includible in gross income under this sub24 section.’’. 
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1 (3) Section 457(a) of such Code (relating to 

2 year of inclusion in gross income) is amended by 

3 adding at the end the following new paragraph: 

4 ‘‘(3) SPECIAL RULE FOR HEALTH AND LONG5 TERM CARE INSURANCE.—In the case of a plan of 

6 an eligible employer described in subsection 

7 (e)(1)(A), to the extent provided in section 402(l), 

8 paragraph (1) shall not apply to amounts otherwise 

9 includible in gross income under this subsection.’’. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to distributions in taxable years 

12 beginning after December 31, 2005. 

13 TITLE XI—GENERAL 

14 PROVISIONS 

15 SEC. 1101. PROVISIONS RELATING TO PLAN AMENDMENTS. 

16 (a) IN GENERAL.—If this section applies to any pen17 sion plan or contract amendment— 

18 (1) such pension plan or contract shall be treat19 ed as being operated in accordance with the terms 

20 of the plan during the period described in subsection 

21 (b)(2)(A), and 

22 (2) except as provided by the Secretary of the 

23 Treasury, such pension plan shall not fail to meet 

24 the requirements of section 411(d)(6) of the Internal 

25 Revenue Code of 1986 and section 204(g) of the 
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1 Employee Retirement Income Security Act of 1974 

2 by reason of such amendment. 

3 (b) AMENDMENTS TO WHICH SECTION APPLIES.— 

4 (1) IN GENERAL.—This section shall apply to 

5 any amendment to any pension plan or annuity con6 tract which is made— 

7 (A) pursuant to any amendment made by 

8 this Act or pursuant to any regulation issued by 

9 the Secretary of the Treasury or the Secretary 

10 of Labor under this Act, and 

11 (B) on or before the last day of the first 

12 plan year beginning on or after January 1, 

13 2008. 

14 In the case of a governmental plan (as defined in 

15 section 414(d) of the Internal Revenue Code of 

16 1986), this paragraph shall be applied by sub17 stituting ‘‘2010’’ for ‘‘2008’’. 

18 (2) CONDITIONS.—This section shall not apply 

19 to any amendment unless— 

20 (A) during the period— 

21 (i) beginning on the date the legisla22 tive or regulatory amendment described in 

23 paragraph (1)(A) takes effect (or in the 

24 case of a plan or contract amendment not 

25 required by such legislative or regulatory 
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1 amendment, the effective date specified by 

2 the plan), and 

3 (ii) ending on the date described in 

4 paragraph (1)(B) (or, if earlier, the date 

5 the plan or contract amendment is adopt6 ed), 

7 the plan or contract is operated as if such plan 

8 or contract amendment were in effect; and 

9 (B) such plan or contract amendment ap10 plies retroactively for such period. 

Passed the House of Representatives December 15, 

2005. 

Attest: KAREN L. HAAS, 

Clerk. 
Calendar No. 357 

109TH CONGRESS 

2D SESSION H. R. 2830 

AN ACT 

To amend the Employee Retirement Income Secufor other purposes. of 1986 to reform the pension funding rules, and rity Act of 1974 and the Internal Revenue Code 

JANUARY 27, 2006 

Read twice and placed on the calendar