In the Senate of the United States,

March 3, 2006.

Resolved, That the bill from the House of Representatives (H.R. 2830) entitled ‘‘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.’’, do pass with the following

AMENDMENT:

Strike out all after the enacting clause and insert:

1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

3 ‘‘Pension Security and Transparency Act of 2005’’.
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1 (b) TABLE OF CONTENTS.—The table of contents for

2 this Act is as follows:

Sec. 1. Short title and table of contents.

TITLE I—FUNDING AND DEDUCTION RULES FOR SINGLEEMPLOYER DEFINED BENEFIT PLANS AND RELATED PROVISIONS

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.

Sec. 105. Special rules for multiple employer plans of certain cooperatives.

Sec. 106. Temporary relief for certain rescued plans.

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 111. Modifications of the minimum funding standards.

Sec. 112. Funding rules applicable to single-employer pension plans.

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

Sec. 114. Increase in deduction limit for single-employer plans.

Sec. 115. Technical and conforming amendments.

Subtitle C—Interest Rate Assumptions and Deductible Amounts for 2006

Sec. 121. Extension of replacement of 30-year Treasury rates.

Sec. 122. Deduction limits for plan contributions.

Sec. 123. Updating deduction rules for combination of plans.

TITLE II—FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER

DEFINED BENEFIT PLANS AND RELATED PROVISIONS

Subtitle A—Funding Rules

PART I—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. Special rule for certain benefits funded under an agreement approved

by the Pension Benefit Guaranty Corporation.

Sec. 205. Withdrawal liability reforms.

PART II—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.

PART III—SUNSET OF FUNDING RULES

Sec. 216. Sunset of funding rules.
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Subtitle B—Deduction and Related Provisions

Sec. 221. Deduction limits for multiemployer plans.

Sec. 222. Transfer of excess pension assets to multiemployer health plan.

TITLE III—INTEREST RATE ASSUMPTIONS

Sec. 301. Interest rate assumption for determination of lump sum distributions.

Sec. 302. Interest rate assumption for applying benefit limitations to lump sum

distributions.

Sec. 303. Restrictions on funding of nonqualified deferred compensation plans by

employers maintaining underfunded or terminated single-employer plans.

Sec. 304. Modification of pension funding requirements for plans subject to current transition rule.

TITLE IV—IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

Sec. 401. Increases in PBGC premiums.

Sec. 402. Authority to enter alternative funding agreements to prevent plan terminations.

Sec. 403. Special funding rules for plans maintained by commercial airlines that

are amended to cease future benefit accruals.

Sec. 404. Limitation on PBGC guarantee of shutdown and other benefits.

Sec. 405. Rules relating to bankruptcy of employer.

Sec. 406. PBGC premiums for new plans of small employers.

Sec. 407. PBGC premiums for small and new plans.

Sec. 408. Authorization for PBGC to pay interest on premium overpayment refunds.

Sec. 409. Rules for substantial owner benefits in terminated plans.

Sec. 410. Acceleration of PBGC computation of benefits attributable to recoveries

from employers.

Sec. 411. Treatment of certain plans where cessation or change in membership of

a controlled group.

Sec. 412. Effect of title.

Sec. 413. Age requirement for employers.

TITLE V—DISCLOSURE

Sec. 501. Defined benefit plan funding notice.

Sec. 502. Access to multiemployer pension plan information.

Sec. 503. Additional annual reporting requirements.

Sec. 504. Timing of annual reporting requirements.

Sec. 505. Section 4010 filings with the PBGC.

Sec. 506. Disclosure of termination information to plan participants.

Sec. 507. Benefit suspension notice.

Sec. 508. Study and report by Government Accountability Office.

TITLE VI—TREATMENT OF CASH BALANCE AND OTHER HYBRID

DEFINED BENEFIT PENSION PLANS

Sec. 601. Prospective application of age discrimination, conversion, and present

value assumption rules.

Sec. 602. Regulations relating to mergers and acquisitions.
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TITLE VII—DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT

PROTECTIONS UNDER DEFINED CONTRIBUTION PLANS

Sec. 701. Defined contribution plans required to provide employees with freedom

to invest their plan assets.

Sec. 702. Notice of freedom to divest employer securities or real property.

Sec. 703. Periodic pension benefit statements.

Sec. 704. Notice to participants or beneficiaries of blackout periods.

Sec. 705. Allowance of, and credit for, additional IRA payments in certain bankruptcy cases.

Sec. 706. Inapplicability of relief from fiduciary liability during suspension of

ability of participant or beneficiary to direct investments.

Sec. 707. Increase in maximum bond amount.

TITLE VIII—INFORMATION TO ASSIST PENSION PLAN

PARTICIPANTS

Sec. 801. Defined contribution plans required to provide adequate investment

education to participants.

Sec. 802. Independent investment advice provided to plan participants.

Sec. 803. Treatment of qualified retirement planning services.

Sec. 804. Increase in penalties for coercive interference with exercise of ERISA

rights.

Sec. 805. Administrative provision.

TITLE IX—PROVISIONS RELATING TO SPOUSAL PENSION

PROTECTION

Sec. 901. Regulations on time and order of issuance of domestic relations orders.

Sec. 902. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee.

Sec. 903. Extension of tier II railroad retirement benefits to surviving former

spouses pursuant to divorce agreements.

Sec. 904. Requirement for additional survivor annuity option.

TITLE X—IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION

RULES

Sec. 1001. Clarifications regarding purchase of permissive service credit.

Sec. 1002. Allow rollover of after-tax amounts in annuity contracts.

Sec. 1003. Clarification of minimum distribution rules for governmental plans.

Sec. 1004. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees.

Sec. 1005. Allow rollovers by nonspouse beneficiaries of certain retirement plan

distributions.

Sec. 1006. Faster vesting of employer nonelective contributions.

Sec. 1007. Allow direct rollovers from retirement plans to Roth IRAS.

Sec. 1008. Elimination of higher penalty on certain simple plan distributions.

Sec. 1009. Simple plan portability.

Sec. 1010. Eligibility for participation in retirement plans.

Sec. 1011. Transfers to the PBGC.

Sec. 1012. Missing participants.

Sec. 1013. Modifications of rules governing hardships and unforseen financial

emergencies.
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TITLE XI—ADMINISTRATIVE PROVISIONS

Sec. 1101. Employee plans compliance resolution system.

Sec. 1102. Notice and consent period regarding distributions.

Sec. 1103. Reporting simplification.

Sec. 1104. Voluntary early retirement incentive and employment retention plans

maintained by local educational agencies and other entities.

Sec. 1105. No reduction in unemployment compensation as a result of pension

rollovers.

Sec. 1106. Withholding on distributions from governmental section 457 plans.

Sec. 1107. Treatment of defined benefit plan as governmental plan.

Sec. 1108. Increasing participation in cash or deferred plans through automatic

contribution arrangements.

Sec. 1109. Treatment of investment of assets by plan where participant fails to

exercise investment election.

Sec. 1110. Clarification of fiduciary rules.

TITLE XII—UNITED STATES TAX COURT MODERNIZATION

Sec. 1200. Amendment of 1986 Code.

Sec. 1201. Annuities for survivors of Tax Court judges who are assassinated.

Sec. 1202. Cost-of-living adjustments for Tax Court judicial survivor annuities.

Sec. 1203. Life insurance coverage for Tax Court judges.

Sec. 1204. Cost of life insurance coverage for Tax Court judges age 65 or over.

Sec. 1205. Modification of timing of lump-sum payment of judges’ accrued annual leave.

Sec. 1206. Participation of Tax Court judges in the Thrift Savings Plan.

Sec. 1207. Exemption of teaching compensation of retired judges from limitation

on outside earned income.

Sec. 1208. General provisions relating to Magistrate Judges of the Tax Court.

Sec. 1209. Annuities to surviving spouses and dependent children of Magistrate

Judges of the Tax Court.

Sec. 1210. Retirement and annuity program.

Sec. 1211. Incumbent Magistrate Judges of the Tax Court.

Sec. 1212. Provisions for recall.

Sec. 1213. Effective date.

TITLE XIII—OTHER PROVISIONS

Subtitle A—Administrative Provision

Sec. 1301. Provisions relating to plan amendments.

Sec. 1302. Authority to the Secretary of Labor, Secretary of the Treasury, and

the Pension Benefit Guaranty Corporation to postpone certain

deadlines.

Subtitle B—Governmental Pension Plan Equalization

Sec. 1311. Definition of governmental plan.

Sec. 1312. Extension to all governmental plans of current moratorium on application of certain nondiscrimination rules applicable to State

and local plans.

Sec. 1313. Clarification that tribal governments are subject to the same defined

benefit plan rules and regulations applied to State and other

local governments, their police and firefighters.

Sec. 1314. Effective date.
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Subtitle C—Miscellaneous Provisions

Sec. 1321. Transfer of excess funds from black lung disability trusts to United

Mine Workers of America Combined Benefit Fund.

Sec. 1322. Treatment of death benefits from corporate-owned life insurance.

Subtitle D—Other Related Pension Provisions

PART I—HEALTH AND MEDICAL BENEFITS

Sec. 1331. Use of excess pension assets for future retiree health benefits.

Sec. 1332. Special rules for funding of collectively bargained retiree health benefits.

Sec. 1333. Allowance of reserve for medical benefits of plans sponsored by bona

fide associations.

PART II—CASH OR DEFERRED ARRANGEMENTS

Sec. 1336. Treatment of eligible combined defined benefit plans and qualified cash

or deferred arrangements.

Sec. 1337. State and local governments eligible to maintain section 401(k) plans.

PART III—EXCESS CONTRIBUTIONS

Sec. 1339. Excess contributions.

PART IV—OTHER PROVISIONS

Sec. 1341. Amendments relating to prohibited transactions.

Sec. 1342. Federal Task Force on Older Workers.

Sec. 1343. Technical corrections to Saver Act.

1 TITLE I—FUNDING AND DEDUC2 TION RULES FOR SINGLE-EM3 PLOYER DEFINED BENEFIT

4 PLANS AND RELATED PROVI5 SIONS

6 Subtitle A—Amendments to Em7 ployee Retirement Income Secu8 rity Act of 1974

9 SEC. 101. MINIMUM FUNDING STANDARDS.

10 (a) REPEAL OF EXISTING FUNDING RULES.—Sections

11 302 through 308 of the Employee Retirement Income Secu-
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1 rity Act of 1974 (29 U.S.C. 1082 through 1086) are re2 pealed.

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

4 subtitle B of title I of such Act (as amended by subsection

5 (a)) is amended by inserting after section 301 the following

6 new section:

7 ‘‘MINIMUM FUNDING STANDARDS

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

9 FUNDING STANDARD.—

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

11 applies shall satisfy the minimum funding standard

12 applicable to the plan for any plan year.

13 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur14 poses of paragraph (1), a plan shall be treated as sat15 isfying the minimum funding standard for a plan

16 year if—

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

18 which is a single-employer plan, the employer

19 makes contributions to or under the plan for the

20 plan year which, in the aggregate, are not less

21 than the minimum required contribution deter22 mined under section 303 for the plan for the

23 plan year,

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

25 which is a single-employer plan, the employer

26 makes contributions to or under the plan for the
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1 plan year which are required under the terms of

2 the plan, and

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

4 the employers make contributions to or under the

5 plan for any plan year which, in the aggregate,

6 are sufficient to ensure that the plan does not

7 have an accumulated funding deficiency under

8 section 304 as of the end of the plan year.

9 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.—

10 ‘‘(1) IN GENERAL.—Except as provided in para11 graph (2), the amount of any contribution required

12 by this section (including any required installments

13 under section 303(j)) shall be paid by the employer

14 responsible for making contributions to or under the

15 plan.

16 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE EM17 PLOYER MEMBER OF CONTROLLED GROUP.—If the

18 employer referred to in paragraph (1) is a member of

19 a controlled group, each member of such group shall

20 be jointly and severally liable for payment of such

21 contributions.

22 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND23 ARDS.—

24 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD25 SHIP.—
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1 ‘‘(A) IN GENERAL.—If—

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

3 a multiemployer plan, 10 percent or more

4 of the number of employers contributing to

5 or under the plan are) unable to satisfy the

6 minimum funding standard for a plan year

7 without temporary substantial business

8 hardship (substantial business hardship in

9 the case of a multiemployer plan), and

10 ‘‘(ii) application of the standard would

11 be adverse to the interests of plan partici12 pants in the aggregate,

13 the Secretary of the Treasury may, subject to

14 subparagraph (C), waive the requirements of

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

16 or any portion of the minimum funding stand17 ard. The Secretary of the Treasury shall not

18 waive the minimum funding standard with re19 spect to a plan for more than 3 of any 15 (5 of

20 any 15 in the case of a multiemployer plan) con21 secutive plan years.

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

23 granted under subparagraph (A) for any plan

24 year—
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1 ‘‘(i) in the case of a single-employer

2 plan, the minimum required contribution

3 under section 303 for the plan year shall be

4 reduced by the amount of the waived fund5 ing deficiency and such amount shall be

6 amortized as required under section 303(e),

7 and

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

9 plan, the funding standard account shall be

10 credited under section 304(b)(3)(C) with the

11 amount of the waived funding deficiency

12 and such amount shall be amortized as re13 quired under section 304(b)(2)(C).

14 ‘‘(C) WAIVER OF AMORTIZED PORTION NOT

15 ALLOWED.—The Secretary of the Treasury may

16 not waive under subparagraph (A) any portion

17 of the minimum funding standard under sub18 section (a) for a plan year which is attributable

19 to any waived funding deficiency for any pre20 ceding plan year.

21 ‘‘(2) DETERMINATION OF BUSINESS HARD22 SHIP.—For purposes of this subsection, the factors

23 taken into account in determining temporary sub24 stantial business hardship (substantial business hard-
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1 ship in the case of a multiemployer plan) shall in2 clude (but shall not be limited to) whether or not—

3 ‘‘(A) the employer is operating at an eco4 nomic loss,

5 ‘‘(B) there is substantial unemployment or

6 underemployment in the trade or business and

7 in the industry concerned,

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

9 concerned are depressed or declining, and

10 ‘‘(D) it is reasonable to expect that the plan

11 will be continued only if the waiver is granted.

12 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur13 poses of this part, the term ‘waived funding defi14 ciency’ means the portion of the minimum funding

15 standard under subsection (a) (determined without

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

17 Secretary of the Treasury and not satisfied by em18 ployer contributions.

19 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM20 PLOYER PLANS, CONSULTATIONS.—

21 ‘‘(A) SECURITY MAY BE REQUIRED.—

22 ‘‘(i) IN GENERAL.—Except as provided

23 in subparagraph (C), the Secretary of the

24 Treasury may require an employer main25 taining a defined benefit plan which is a
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1 single-employer plan (within the meaning

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

3 to such plan as a condition for granting or

4 modifying a waiver under paragraph (1).

5 ‘‘(ii) SPECIAL RULES.—Any security

6 provided under clause (i) may be perfected

7 and enforced only by the Pension Benefit

8 Guaranty Corporation, or, at the direction

9 of the Corporation, by a contributing spon10 sor (within the meaning of section

11 4001(a)(13)) or a member of such sponsor’s

12 controlled group (within the meaning of sec13 tion 4001(a)(14)).

14 ‘‘(B) CONSULTATION WITH THE PENSION

15 BENEFIT GUARANTY CORPORATION.—Except as

16 provided in subparagraph (C), the Secretary of

17 the Treasury shall, before granting or modifying

18 a waiver under this subsection with respect to a

19 plan described in subparagraph (A)(i)—

20 ‘‘(i) provide the Pension Benefit Guar21 anty Corporation with—

22 ‘‘(I) notice of the completed appli23 cation for any waiver or modification,

24 and
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1 ‘‘(II) an opportunity to comment

2 on such application within 30 days

3 after receipt of such notice, and

4 ‘‘(ii) consider—

5 ‘‘(I) any comments of the Cor6 poration under clause (i)(II), and

7 ‘‘(II) any views of any employee

8 organization (within the meaning of

9 section 3(4)) representing participants

10 in the plan which are submitted in

11 writing to the Secretary of the Treas12 ury in connection with such applica13 tion.

14 Information provided to the Corporation under

15 this subparagraph shall be considered tax return

16 information and subject to the safeguarding and

17 reporting requirements of section 6103(p) of the

18 Internal Revenue Code of 1986.

19 ‘‘(C) EXCEPTION FOR CERTAIN WAIVERS.—

20 ‘‘(i) IN GENERAL.—The preceding pro21 visions of this paragraph shall not apply to

22 any plan with respect to which the sum

23 of—

24 ‘‘(I) the aggregate unpaid min25 imum required contributions for the
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1 plan year and all preceding plan

2 years, and

3 ‘‘(II) the present value of all

4 waiver amortization installments de5 termined for the plan year and suc6 ceeding plan years under section

7 303(e)(2),

8 is less than $1,000,000.

9 ‘‘(ii) TREATMENT OF WAIVERS FOR

10 WHICH APPLICATIONS ARE PENDING.—The

11 amount described in clause (i)(I) shall in12 clude any increase in such amount which

13 would result if all applications for waivers

14 of the minimum funding standard under

15 this subsection which are pending with re16 spect to such plan were denied.

17 ‘‘(iii) UNPAID MINIMUM REQUIRED

18 CONTRIBUTION.—For purposes of this

19 subparagraph—

20 ‘‘(I) IN GENERAL.—The term ‘un21 paid minimum required contribution’

22 means, with respect to any plan year,

23 any minimum required contribution

24 under section 303 for the plan year

25 which is not paid on or before the due
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1 date (as determined under section

2 303(j)(1)) for the plan year.

3 ‘‘(II) ORDERING RULE.—For pur4 poses of subclause (I), any payment to

5 or under a plan for any plan year

6 shall be allocated first to unpaid min7 imum required contributions for all

8 preceding plan years on a first-in,

9 first-out basis and then to the min10 imum required contribution under sec11 tion 303 for the plan year.

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

13 PLANS.—

14 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 15 ⁄2 MONTHS AFTER CLOSE OF

16 YEAR.—In the case of a single-employer plan, no

17 waiver may be granted under this subsection

18 with respect to any plan for any plan year un19 less an application therefor is submitted to the

20 Secretary of the Treasury not later than the 15th

21 day of the 3rd month beginning after the close of

22 such plan year.

23 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM24 BER OF CONTROLLED GROUP.—In the case of a

25 single-employer plan, if an employer is a mem-
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1 ber of a controlled group, the temporary substan2 tial business hardship requirements of paragraph

3 (1) shall be treated as met only if such require4 ments are met—

5 ‘‘(i) with respect to such employer, and

6 ‘‘(ii) with respect to the controlled

7 group of which such employer is a member

8 (determined by treating all members of such

9 group as a single employer).

10 The Secretary of the Treasury may provide that

11 an analysis of a trade or business or industry of

12 a member need not be conducted if the Secretary

13 of the Treasury determines such analysis is not

14 necessary because the taking into account of such

15 member would not significantly affect the deter16 mination under this paragraph.

17 ‘‘(6) ADVANCE NOTICE.—

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

19 Treasury shall, before granting a waiver under

20 this subsection, require each applicant to provide

21 evidence satisfactory to such Secretary that the

22 applicant has provided notice of the filing of the

23 application for such waiver to each affected

24 party (as defined in section 4001(a)(21)) other

25 than the Pension Benefit Guaranty Corporation
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1 and in the case of a multiemployer plan, to each

2 employer required to contribute to the plan

3 under subsection (b)(1). Such notice shall include

4 a description of the extent to which the plan is

5 funded for benefits which are guaranteed under

6 title IV and for benefit liabilities.

7 ‘‘(B) CONSIDERATION OF RELEVANT INFOR8 MATION.—The Secretary of the Treasury shall

9 consider any relevant information provided by a

10 person to whom notice was given under subpara11 graph (A).

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

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

14 plan which increases the liabilities of the plan by

15 reason of any increase in benefits, any change in

16 the accrual of benefits, or any change in the rate

17 at which benefits become nonforfeitable under the

18 plan shall be adopted if a waiver under this sub19 section or an extension of time under section

20 304(d) is in effect with respect to the plan, or if

21 a plan amendment described in subsection (d)(2)

22 has been made at any time in the preceding 24

23 months. If a plan is amended in violation of the

24 preceding sentence, any such waiver, or extension

25 of time, shall not apply to any plan year ending
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1 on or after the date on which such amendment

2 is adopted.

3 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

4 not apply to any plan amendment which—

5 ‘‘(i) the Secretary of the Treasury de6 termines to be reasonable and which pro7 vides for only de minimis increases in the

8 liabilities of the 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 of the Internal Revenue Code of

14 1986.

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

16 duties of the Secretary of the Treasury with regard to

17 implementation of the Internal Revenue Code of 1986,

18 see section 412(d) of such Code.

19 ‘‘(d) MISCELLANEOUS RULES.—

20 ‘‘(1) CHANGE IN METHOD OR YEAR.—If the fund21 ing method, the valuation date, or a plan year for a

22 plan is changed, the change shall take effect only if

23 approved by the Secretary of the Treasury.
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1 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND2 MENTS.—For purposes of this section, any amend3 ment applying to a plan year which—

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

year but no later than 21 5 ⁄2 months after the close

6 of the plan year (or, in the case of a multiem7 ployer plan, no later than 2 years after the close

8 of such plan year),

9 ‘‘(B) does not reduce the accrued benefit of

10 any participant determined as of the beginning

11 of the first plan year to which the amendment

12 applies, and

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

14 any participant determined as of the time of

15 adoption except to the extent required by the cir16 cumstances,

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

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

19 plan year. No amendment described in this para20 graph which reduces the accrued benefits of any par21 ticipant shall take effect unless the plan adminis22 trator files a notice with the Secretary of the Treas23 ury notifying him of such amendment and such Sec24 retary has approved such amendment, or within 90

25 days after the date on which such notice was filed,
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1 failed to disapprove such amendment. No amendment

2 described in this subsection shall be approved by the

3 Secretary of the Treasury unless such Secretary deter4 mines that such amendment is necessary because of a

5 temporary substantial business hardship (as deter6 mined under subsection (c)(2)) or a substantial busi7 ness hardship (as so determined) in the case of a mul8 tiemployer plan and that a waiver under subsection

9 (c) (or, in the case of a multiemployer plan, any ex10 tension of the amortization period under section

11 304(d)) is unavailable or inadequate.

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

13 section, the term ‘controlled group’ means any group

14 treated as a single employer under subsection (b), (c),

15 (m), or (o) of section 414 of the Internal Revenue

16 Code of 1986.’’.

17 (c) CLERICAL AMENDMENT.—The table of contents in

18 section 1 of such Act is amended by striking the items relat19 ing to sections 302 through 308 and inserting the following

20 new item:

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

21 (d) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to plan years beginning after 2006.
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1 SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE2 FINED BENEFIT PENSION PLANS.

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

4 the Employee Retirement Income Security Act of 1974 (as

5 amended by section 101 of this Act) is amended by inserting

6 after section 302 the following new section:

7 ‘‘MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

8 DEFINED BENEFIT PENSION PLANS

9 ‘‘SEC. 303. (a) MINIMUM REQUIRED CONTRIBUTION.—

10 For purposes of this section and section 302(a)(2)(A), except

11 as provided in subsection (f), the term ‘minimum required

12 contribution’ means, with respect to any plan year of a de13 fined benefit plan which is a single employer plan—

14 ‘‘(1) in any case in which the value of plan as15 sets of the plan (as reduced under subsection (f)(4))

16 is less than the funding target of the plan for the plan

17 year, the sum of—

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

19 the plan year,

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

21 any) for the plan for the plan year determined

22 under subsection (c), and

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

24 any) for the plan for the plan year as deter25 mined under subsection (e); or
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1 ‘‘(2) in any case in which the value of plan as2 sets of the plan (as reduced under subsection (f)(4))

3 equals or exceeds the funding target of the plan for the

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

5 plan year reduced (but not below zero) by any such

6 excess.

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

8 section, except as provided in subsection (i)(2) with respect

9 to plans in at-risk status, the term ‘target normal cost’

10 means, for any plan year, the present value of all benefits

11 which are expected to accrue or to be earned under the plan

12 during the plan year. For purposes of this subsection, if

13 any benefit attributable to services performed in a preceding

14 plan year is increased by reason of any increase in com15 pensation during the current plan year, the increase in such

16 benefit shall be treated as having accrued during the current

17 plan year.

18 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.—

19 ‘‘(1) IN GENERAL.—For purposes of this section,

20 the shortfall amortization charge for a plan for any

21 plan year is the aggregate total of the shortfall amor22 tization installments for such plan year with respect

23 to the shortfall amortization bases for such plan year

24 and each of the 6 preceding plan years.
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1 ‘‘(2) SHORTFALL AMORTIZATION INSTALL2 MENT.—For purposes of paragraph (1)—

3 ‘‘(A) DETERMINATION.—The shortfall amor4 tization installments are the amounts necessary

5 to amortize the shortfall amortization base of the

6 plan for any plan year in level annual install7 ments over the 7-plan-year period beginning

8 with such plan year.

9 ‘‘(B) SHORTFALL INSTALLMENT.—The

10 shortfall amortization installment for any plan

11 year in the 7-plan-year period under subpara12 graph (A) with respect to any shortfall amortiza13 tion base is the annual installment determined

14 under subparagraph (A) for that year for that

15 base.

16 ‘‘(C) SEGMENT RATES.—In determining

17 any shortfall amortization installment under

18 this paragraph, the plan sponsor shall use the

19 segment rates determined under subparagraph

20 (C) of subsection (h)(2), applied under rules

21 similar to the rules of subparagraph (B) of sub22 section (h)(2).

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

24 purposes of this section, the shortfall amortization
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1 base of a plan for a plan year is the excess (if any)

2 of—

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

4 such plan year, over

5 ‘‘(B) the present value (determined using

6 the segment rates determined under subpara7 graph (C) of subsection (h)(2), applied under

8 rules similar to the rules of subparagraph (B) of

9 subsection (h)(2)) of the aggregate total of the

10 shortfall amortization installments and waiver

11 amortization installments which have been deter12 mined for such plan year and any succeeding

13 plan year with respect to the shortfall amortiza14 tion bases and waiver amortization bases of the

15 plan for any plan year preceding such plan

16 year.

17 ‘‘(4) FUNDING SHORTFALL.—

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

19 section, except as provided in subparagraph (B),

20 the funding shortfall of a plan for any plan year

21 is the excess (if any) of—

22 ‘‘(i) the funding target of the plan for

23 the plan year, over

24 ‘‘(ii) the value of plan assets of the

25 plan (as reduced under subsection (f)(4)) for
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1 the plan year which are held by the plan on

2 the valuation date.

3 ‘‘(B) TRANSITION RULE FOR AMORTIZATION

4 OF FUNDING SHORTFALL.—

5 ‘‘(i) IN GENERAL.—Solely for purposes

6 of applying paragraph (3) in the case of

7 plan years beginning after 2006 and before

8 2011, only the applicable percentage of the

9 funding target shall be taken into account

10 under paragraph (3)(A) in determining the

11 funding shortfall for the plan year.

12 ‘‘(ii) APPLICABLE PERCENTAGE.—For

13 purposes of subparagraph (A)—

14 ‘‘(I) IN GENERAL.—Except as pro15 vided in subclause (II), the applicable

16 percentage shall be 93 percent for plan

17 years beginning in 2007, 96 percent

18 for plan years beginning in 2008, and

19 100 percent for any succeeding plan

20 year.

21 ‘‘(II) SMALL PLANS.—In the case

22 of a plan described in subsection

23 (g)(2)(B), the applicable percentage

24 shall be determined in accordance with

25 the following table:
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‘‘In the case of a plan year The applicable

beginning in calendar year: percentage is—

2007 ................................................................................................ 92

2008 ................................................................................................ 94

2009 ................................................................................................ 96

2010 ................................................................................................ 98.

1 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT2 TAINMENT OF FUNDING TARGET.—In any case in

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

4 is zero, for purposes of determining the shortfall am5 ortization charge for such plan year and succeeding

6 plan years, the shortfall amortization bases for all

7 preceding plan years (and all shortfall amortization

8 installments determined with respect to such bases)

9 shall be reduced to zero.

10 ‘‘(d) RULES RELATING TO FUNDING TARGET.—For

11 purposes of this section—

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

13 subsection (i)(1) with respect to plans in at-risk sta14 tus, the funding target of a plan for a plan year is

15 the present value of all benefits accrued or earned

16 under the plan as of the beginning of the plan year.

17 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT18 AGE.—The ‘funding target attainment percentage’ of

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

20 percentage) which—

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

22 year, bears to
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1 ‘‘(B) the funding target of the plan for the

2 plan year (determined without regard to sub3 section (i)(1)).

4 ‘‘(e) WAIVER AMORTIZATION CHARGE.—

5 ‘‘(1) DETERMINATION OF WAIVER AMORTIZATION

6 CHARGE.—The waiver amortization charge (if any)

7 for a plan for any plan year is the aggregate total

8 of the waiver amortization installments for such plan

9 year with respect to the waiver amortization bases for

10 each of the 5 preceding plan years.

11 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—For

12 purposes of paragraph (1)—

13 ‘‘(A) DETERMINATION.—The waiver amorti14 zation installments are the amounts necessary to

15 amortize the waiver amortization base of the

16 plan for any plan year in level annual install17 ments over a period of 5 plan years beginning

18 with the succeeding plan year.

19 ‘‘(B) WAIVER INSTALLMENT.—The waiver

20 amortization installment for any plan year in

21 the 5-year period under subparagraph (A) with

22 respect to any waiver amortization base is the

23 annual installment determined under subpara24 graph (A) for that year for that base.
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1 ‘‘(3) INTEREST RATE.—In determining any

2 waiver amortization installment under this sub3 section, the plan sponsor shall use the segment rates

4 determined under subparagraph (C) of subsection

5 (h)(2), applied under rules similar to the rules of sub6 paragraph (B) of subsection (h)(2).

7 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiver

8 amortization base of a plan for a plan year is the

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

10 such plan year under section 302(c).

11 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT12 TAINMENT OF FUNDING TARGET.—In any case in

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

14 is zero, for purposes of determining the waiver amor15 tization charge for such plan year and succeeding

16 plan years, the waiver amortization bases for all pre17 ceding plan years (and all waiver amortization in18 stallments with respect to such bases) shall be reduced

19 to zero.

20 ‘‘(f) USE OF PREFUNDING BALANCES TO SATISFY

21 MINIMUM REQUIRED CONTRIBUTIONS.—

22 ‘‘(1) IN GENERAL.—A plan sponsor may credit

23 any amount of a plan’s prefunding balance for a

24 plan year against the minimum required contribution

25 for the plan year and the amount of the contributions
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1 an employer is required to make under section 302(b)

2 for the plan year shall be reduced by the amount so

3 credited. Any such amount shall be credited on the

4 first day of the plan year.

5 ‘‘(2) PREFUNDING BALANCE.—

6 ‘‘(A) BEGINNING BALANCE.—The beginning

7 balance of a prefunding balance maintained by

8 a plan shall be zero, except that if a plan was

9 in effect for a plan year beginning in 2006 and

10 had a positive balance in the funding standard

11 account under section 302(b) (as in effect for

12 such plan year) as of the end of such plan year,

13 the beginning balance for the plan for its first

14 plan year beginning after 2006 shall be such

15 positive balance.

16 ‘‘(B) INCREASES.—

17 ‘‘(i) IN GENERAL.—As of the first day

18 of each plan year beginning after 2007, the

19 prefunding balance of a plan shall be in20 creased by the excess (if any) of—

21 ‘‘(I) the aggregate amount of em22 ployer contributions to the plan for the

23 preceding plan year, over

24 ‘‘(II) the minimum required con25 tribution for the preceding plan year.
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1 ‘‘(ii) ADJUSTMENTS FOR INTEREST.—

2 Any excess contributions under clause (i)

3 shall be properly adjusted for interest accru4 ing for the periods between the first day of

5 the current plan year and the dates on

6 which the excess contributions were made,

7 determined by using the effective interest

8 rate for the preceding plan year and by

9 treating contributions as being first used to

10 satisfy the minimum required contribution.

11 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS12 REGARDED.—Any contribution which is re13 quired to be made under section 206(g) in

14 addition to any contribution required under

15 this section shall not be taken into account

16 for purposes of clause (i).

17 ‘‘(C) DECREASES.—As of the first day of

18 each plan year after 2007, the prefunding bal19 ance of a plan shall be decreased (but not below

20 zero) by the amount of the balance credited

21 under paragraph (1) against the minimum re22 quired contribution of the plan for the preceding

23 plan year.

24 ‘‘(D) ADJUSTMENTS FOR INVESTMENT EX25 PERIENCE.—In determining the prefunding bal-
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1 ance of a plan as of the first day of the plan

2 year, the plan sponsor shall, in accordance with

3 regulations prescribed by the Secretary of the

4 Treasury, adjust such balance to reflect the rate

5 of return on plan assets for the preceding plan

6 year. Notwithstanding subsection (g)(3), such

7 rate of return shall be determined on the basis of

8 fair market value and shall properly take into

9 account, in accordance with such regulations, all

10 contributions, distributions, and other plan pay11 ments made during such period.

12 ‘‘(3) LIMITATION FOR UNDERFUNDED PLANS.—

13 ‘‘(A) IN GENERAL.—If the ratio (expressed

14 as a percentage) for any plan year which—

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

16 preceding plan year, bears to

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

18 the preceding plan year (determined with19 out regard to subsection (i)(1)),

20 is less than 80 percent, the preceding provisions

21 of this subsection shall not apply unless employ22 ers liable for contributions to the plan under sec23 tion 302(b) make contributions to the plan for

24 the plan year in an aggregate amount not less

25 than the amount determined under subpara-
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1 graph (B). Any contribution required by this

2 subparagraph may not be reduced by any credit

3 otherwise allowable under paragraph (1).

4 ‘‘(B) APPLICABLE AMOUNT.—The amount

5 determined under this subparagraph for any

6 plan year is the greater of—

7 ‘‘(i) the target normal cost of the plan

8 for the plan year, or

9 ‘‘(ii) 25 percent of the minimum re10 quired contribution under subsection (a) for

11 the plan year without regard to this sub12 section.

13 ‘‘(4) REDUCTION IN VALUE OF ASSETS.—Solely

14 for purposes of applying subsections (a) and

15 (c)(4)(A)(ii) in determining the minimum required

16 contribution under this section, the value of the plan

17 assets otherwise determined without regard to this

18 paragraph shall be reduced by the amount of the

19 prefunding balance under this subsection.

20 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABILITIES.—

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

22 otherwise provided under this subsection, all deter23 minations under this section for a plan year shall be

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

25 plan year.
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1 ‘‘(2) VALUATION DATE.—For purposes of this

2 section—

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

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

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

6 plan year.

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

8 each day during the preceding plan year, a plan

9 had 100 or fewer participants, the plan may des10 ignate any day during the plan year as its valu11 ation date for such plan year and succeeding

12 plan years. For purposes of this subparagraph,

13 all defined benefit plans (other than multiem14 ployer plans) maintained by the same employer

15 (or any member of such employer’s controlled

16 group) shall be treated as 1 plan, but only em17 ployees of such employer or member shall be

18 taken into account.

19 ‘‘(C) APPLICATION OF CERTAIN RULES IN

20 DETERMINATION OF PLAN SIZE.—For purposes of

21 this paragraph—

22 ‘‘(i) PLANS NOT IN EXISTENCE IN PRE23 CEDING YEAR.—In the case of the first plan

24 year of any plan, subparagraph (B) shall

25 apply to such plan by taking into account
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1 the number of participants that the plan is

2 reasonably expected to have on days during

3 such first plan year.

4 ‘‘(ii) PREDECESSORS.—Any reference

5 in subparagraph (B) to an employer shall

6 include a reference to any predecessor of

7 such employer.

8 ‘‘(3) DETERMINATION OF VALUE OF PLAN AS9 SETS.—For purposes of this section—

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

11 subparagraph (B), the value of plan assets shall

12 be the fair market value of the assets.

13 ‘‘(B) AVERAGING ALLOWED.—A plan may

14 determine the value of plan assets on the basis

15 of any reasonable actuarial method of valuation

16 providing for the averaging of fair market val17 ues, but only if such method—

18 ‘‘(i) is permitted under regulations

19 prescribed by the Secretary of the Treasury,

20 and

21 ‘‘(ii) does not provide for averaging of

22 such values over more than the period be23 ginning on the last day of the 12th month

24 preceding the valuation date and ending on

25 the valuation date (or a similar period in
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HR 2830 EAS

1 the case of a valuation date which is not the

2 1st day of a month).

3 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE4 CEIPTS.—For purposes of determining the value of as5 sets under paragraph (3)—

6 ‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

7 ‘‘(i) an employer makes any contribu8 tion to the plan after the valuation date for

9 the plan year in which the contribution is

10 made, and

11 ‘‘(ii) the contribution is for a pre12 ceding plan year,

13 the contribution shall be taken into account as

14 an asset of the plan as of the valuation date, ex15 cept that in the case of any plan year beginning

16 after 2007, only the present value (determined as

17 of the valuation date) of such contribution may

18 be taken into account. For purposes of the pre19 ceding sentence, present value shall be deter20 mined using the effective interest rate for the

21 preceding plan year to which the contribution is

22 properly allocable.

23 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

24 CONTRIBUTIONS MADE BEFORE VALUATION

25 DATE.—If any contributions for any plan year
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1 are made to or under the plan during the plan

2 year but before the valuation date for the plan

3 year, the assets of the plan as of the valuation

4 date shall not include—

5 ‘‘(i) such contributions, and

6 ‘‘(ii) interest on such contributions for

7 the period between the date of the contribu8 tions and the valuation date, determined by

9 using the effective interest rate for the plan

10 year.

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

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

13 the determination of any present value or other com14 putation under this section shall be made on the basis

15 of actuarial assumptions and methods—

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

17 into account the experience of the plan and rea18 sonable expectations), and

19 ‘‘(B) which, in combination, offer the actu20 ary’s best estimate of anticipated experience

21 under the plan.

22 ‘‘(2) INTEREST RATES.—

23 ‘‘(A) EFFECTIVE INTEREST RATE.—For

24 purposes of this section, the term ‘effective inter25 est rate’ means, with respect to any plan for any
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1 plan year, the single rate of interest which, if

2 used to determine the present value of the plan’s

3 accrued or earned benefits referred to in sub4 section (d)(1), would result in an amount equal

5 to the funding target of the plan for such plan

6 year.

7 ‘‘(B) INTEREST RATES FOR DETERMINING

8 FUNDING TARGET.—For purposes of determining

9 the funding target of a plan for any plan year,

10 the interest rate used in determining the present

11 value of the benefits of the plan shall be—

12 ‘‘(i) in the case of benefits reasonably

13 determined to be payable during the 5-year

14 period beginning on the first day of the

15 plan year, the first segment rate with re16 spect to the applicable month,

17 ‘‘(ii) in the case of benefits reasonably

18 determined to be payable during the 15-year

19 period beginning at the end of the period

20 described in clause (i), the second segment

21 rate with respect to the applicable month,

22 and

23 ‘‘(iii) in the case of benefits reasonably

24 determined to be payable after the period
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1 described in clause (ii), the third segment

2 rate with respect to the applicable month.

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

4 this paragraph—

5 ‘‘(i) FIRST SEGMENT RATE.—The term

6 ‘first segment rate’ means, with respect to

7 any month, the single rate of interest which

8 shall be determined by the Secretary of the

9 Treasury for such month on the basis of the

10 corporate bond yield curve for such month,

11 taking into account only that portion of

12 such yield curve which is based on bonds

13 maturing during the 5-year period com14 mencing 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 inter18 est which shall be determined by the Sec19 retary of the Treasury for such month on

20 the basis of the corporate bond yield curve

21 for such month, taking into account only

22 that portion of such yield curve which is

23 based on bonds maturing during each of the

24 years in the 15-year period beginning at the

25 end of the period described in clause (i).
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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 inter4 est which shall be determined by the Sec5 retary of the Treasury for such month on

6 the basis of the corporate bond yield curve

7 for such month, taking into account only

8 that portion of such yield curve which is

9 based on bonds maturing during periods be10 ginning after the period described in clause

11 (ii).

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

13 term ‘corporate bond yield curve’ means, with re14 spect to any month, a yield curve which is pre15 scribed by the Secretary of the Treasury for such

16 month and which reflects the average, for the 12-

17 month period ending with the month preceding

18 such month, of yields on investment grade cor19 porate bonds with varying maturities.

20 ‘‘(E) APPLICABLE MONTH.—For purposes of

21 this paragraph, the term ‘applicable month’

22 means, with respect to any plan for any plan

23 year, the month which includes the valuation

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

25 election of the plan administrator, any of the 4
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1 months which precede such month. Any election

2 made under this subparagraph shall apply to the

3 plan year for which the election is made and all

4 succeeding plan years, unless the election is re5 voked with the consent of the Secretary of the

6 Treasury.

7 ‘‘(F) PUBLICATION REQUIREMENTS.—The

8 Secretary of the Treasury shall publish for each

9 month the corporate bond yield curve for such

10 month and each of the rates determined under

11 this paragraph for such month. The Secretary of

12 the Treasury shall also publish a description of

13 the methodology used to determine such yield

14 curve and such rates which is sufficiently de15 tailed to enable plans to make reasonable projec16 tions regarding the yield curve and such rates

17 for future months based on the plan’s projection

18 of future interest rates.

19 ‘‘(G) TRANSITION RULE.—

20 ‘‘(i) IN GENERAL.—Notwithstanding

21 the preceding provisions of this paragraph,

22 for plan years beginning in 2007 or 2008,

23 the first, second, or third segment rate for a

24 plan with respect to any month shall be

25 equal to the sum of—
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HR 2830 EAS

1 ‘‘(I) the product of such rate for

2 such month determined without regard

3 to this subparagraph, multiplied by the

4 applicable percentage, and

5 ‘‘(II) the product of the rate deter6 mined under the rules of section

7 302(b)(5)(B)(ii)(II) (as in effect for

8 plan years beginning in 2006), multi9 plied by a percentage equal to 100 per10 cent minus the applicable percentage.

11 ‘‘(ii) APPLICABLE PERCENTAGE.—For

12 purposes of clause (i), the applicable percentage is 331 13 ⁄3 percent for plan years beginning in 2007 and 662 14 ⁄3 percent for plan

15 years beginning in 2008.

16 ‘‘(3) MORTALITY TABLES.—

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

18 subparagraphs (C) and (D), the mortality table

19 used in determining any present value or mak20 ing any computation under this section shall be

21 the RP–2000 Combined Mortality Table, using

22 Scale AA, as published by the Society of Actu23 aries, as in effect on the date of the enactment

24 of the Pension Security and Transparency Act of
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1 2005 and as revised from time to time under

2 subparagraph (B).

3 ‘‘(B) PERIODIC REVISION.—The Secretary

4 of the Treasury shall (at least every 10 years)

5 make revisions in any table in effect under sub6 paragraph (A) to reflect the actual experience of

7 pension plans and projected trends in such expe8 rience.

9 ‘‘(C) SUBSTITUTE MORTALITY TABLE.—

10 ‘‘(i) IN GENERAL.—Upon request by

11 the plan sponsor and approval by the Sec12 retary of the Treasury, a mortality table

13 which meets the requirements of clause (ii)

14 shall be used in determining any present

15 value or making any computation under

16 this section during the 10-consecutive plan

17 year period specified in the request. A mor18 tality table described in this clause shall

19 cease to be in effect if the plan actuary de20 termines at any time that such table does

21 not meet the requirements of clause (ii).

22 ‘‘(ii) REQUIREMENTS.—A mortality

23 table meets the requirements of this clause if

24 the Secretary of the Treasury determines

25 that—
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HR 2830 EAS

1 ‘‘(I) there is a sufficient number

2 of plan participants, and the pension

3 plans have been maintained for a suffi4 cient period of time, to have credible

5 information necessary for purposes of

6 subclause (II),

7 ‘‘(II) such table reflects the actual

8 experience of the pension plans main9 tained by the sponsor and projected

10 trends in general mortality experience,

11 ‘‘(III) except as provided by the

12 Secretary, such table will be used by

13 all plans maintained by the plan spon14 sor and all members of any controlled

15 group which includes the plan sponsor,

16 and

17 ‘‘(IV) such table is significantly

18 different from the table described in

19 subparagraph (A).

20 ‘‘(iii) DEADLINE FOR DISPOSITION OF

21 APPLICATION.—Any mortality table sub22 mitted to the Secretary of the Treasury for

23 approval under this subparagraph shall be

24 treated as in effect for the first plan year in

25 the 10-year period described in clause (i)
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1 unless the Secretary of the Treasury, during

2 the 180-day period beginning on the date of

3 such submission, disapproves of such table

4 and provides the reasons that such table

5 fails to meet the requirements of clause (ii).

6 The 180-day period shall be extended for

7 any period during which the Secretary of

8 the Treasury has requested information

9 from the plan sponsor and such information

10 has not been provided.

11 ‘‘(D) SEPARATE MORTALITY TABLES FOR

12 THE DISABLED.—Notwithstanding subparagraph

13 (A)—

14 ‘‘(i) IN GENERAL.—The Secretary of

15 the Treasury shall establish mortality tables

16 which may be used (in lieu of the tables

17 under subparagraph (A)) under this sub18 section for individuals who are entitled to

19 benefits under the plan on account of dis20 ability. The Secretary of the Treasury shall

21 establish separate tables for individuals

22 whose disabilities occur in plan years begin23 ning before January 1, 1995, and for indi24 viduals whose disabilities occur in plan

25 years beginning on or after such date.
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1 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

2 OCCURRING AFTER 1994.—In the case of dis3 abilities occurring in plan years beginning

4 after December 31, 1994, the tables under

5 clause (i) shall apply only with respect to

6 individuals described in such subclause who

7 are disabled within the meaning of title II

8 of the Social Security Act and the regula9 tions thereunder.

10 ‘‘(iii) PERIODIC REVISION.—The Sec11 retary of the Treasury shall (at least every

12 10 years) make revisions in any table in ef13 fect under clause (i) to reflect the actual ex14 perience of pension plans and projected

15 trends in such experience.

16 ‘‘(E) TRANSITION RULE.—Under regula17 tions of the Secretary of the Treasury, any dif18 ference in present value resulting from any dif19 ferences in assumptions as set forth in the mor20 tality table specified in subparagraph (A) and

21 assumptions as set forth in the mortality table

22 described in section 302(d)(7)(C)(ii) (as in effect

23 for plan years beginning in 2006) shall be

24 phased in ratably over the first period of 5 plan
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HR 2830 EAS

1 years beginning in or after 2007 so as to be fully

2 effective for the fifth plan year.

3 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

4 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

5 FORMS.—For purposes of determining any present

6 value or making any computation under this section,

7 there shall be taken into account—

8 ‘‘(A) the probability that future benefit pay9 ments under the plan will be made in the form

10 of optional forms of benefits provided under the

11 plan (including lump sum distributions, deter12 mined on the basis of the plan’s experience and

13 other related assumptions), and

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

15 such future benefit payments resulting from the

16 use of actuarial assumptions, in determining

17 benefit payments in any such optional form of

18 benefits, which are different from those specified

19 in this subsection.

20 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU21 ARIAL ASSUMPTIONS.—

22 ‘‘(A) IN GENERAL.—No actuarial assump23 tion used to determine the funding target for a

24 plan to which this paragraph applies may be
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1 changed without the approval of the Secretary of

2 the Treasury.

3 ‘‘(B) PLANS TO WHICH PARAGRAPH AP4 PLIES.—This paragraph shall apply to a plan

5 only if—

6 ‘‘(i) the aggregate unfunded benefits as

7 of the close of the preceding plan year (as

8 determined under section

9 4006(a)(3)(E)(iii)) of such plan and all

10 other plans maintained by the contributing

11 sponsors (as defined in section 4001(a)(13))

12 and members of such sponsors’ controlled

13 groups (as defined in section 4001(a)(14))

14 which are covered by title IV (disregarding

15 plans with no unfunded benefits) exceed

16 $50,000,000; and

17 ‘‘(ii) the change in assumptions (deter18 mined after taking into account any

19 changes in interest rate and mortality

20 table) results in a decrease in the funding

21 shortfall of the plan for the current plan

22 year that exceeds $50,000,000, or that ex23 ceeds $5,000,000 and that is 5 percent or

24 more of the funding target of the plan before

25 such change.
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HR 2830 EAS

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

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

3 STATUS.—

4 ‘‘(A) IN GENERAL.—In the case of a plan to

5 which this subsection applies for a plan year, the

6 funding target of the plan for the plan year is

7 equal to the present value of all liabilities to par8 ticipants and their beneficiaries under the plan

9 for the plan year, as determined by using the ad10 ditional actuarial assumptions described in sub11 paragraph (B).

12 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP13 TIONS.—The actuarial assumptions described in

14 this subparagraph are as follows:

15 ‘‘(i) All employees who are not other16 wise assumed to retire as of the valuation

17 date but who will be eligible to elect benefits

18 during the plan year and the 7 succeeding

19 plan years shall be assumed to retire at the

20 earliest retirement date under the plan but

21 not before the end of the plan year for which

22 the at-risk target liability and at-risk target

23 normal cost are being determined.

24 ‘‘(ii) All employees shall be assumed to

25 elect the retirement benefit available under
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1 the plan at the assumed retirement age (de2 termined after application of clause (i))

3 which would result in the highest present

4 value of liabilities.

5 ‘‘(2) TARGET NORMAL COST OF AT-RISK

6 PLANS.—In the case of a plan to which this subsection

7 applies for a plan year, the target normal cost of the

8 plan for such plan year shall be equal to the present

9 value of all benefits which are expected to accrue or

10 be earned under the plan during the plan year, deter11 mined using the additional actuarial assumptions de12 scribed in paragraph (1)(B).

13 ‘‘(3) MINIMUM AMOUNT.—In no event shall—

14 ‘‘(A) the at-risk target liability be less than

15 the target liability, as determined without regard

16 to this subsection, or

17 ‘‘(B) the at-risk target normal cost be less

18 than the target normal cost, as determined with19 out regard to this subsection.

20 ‘‘(4) DETERMINATION OF AT-RISK STATUS.—For

21 purposes of this subsection, a plan is in at-risk status

22 for a plan year if—

23 ‘‘(A) the plan is maintained by a finan24 cially-weak employer, and
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1 ‘‘(B) the funding target attainment percent2 age for the plan year is less than 93 percent.

3 ‘‘(5) FINANCIALLY-WEAK EMPLOYER.—

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

5 subsection, the term ‘financially-weak employer’

6 means any employer if—

7 ‘‘(i) as of the valuation date for each

8 of the years during a period of at least 3

9 consecutive plan years ending with the plan

10 year—

11 ‘‘(I) the employer has an out12 standing senior unsecured debt instru13 ment which is rated lower than invest14 ment grade by each of the nationally

15 recognized statistical rating organiza16 tions for corporate bonds that has

17 issued a credit rating for such instru18 ment, or

19 ‘‘(II) if no such debt instrument

20 has been rated by such an organization

21 but 1 or more of such organizations

22 has made an issuer credit rating for

23 such employer, all such organizations

24 which have so rated the employer have
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1 rated such employer lower than invest2 ment grade, and

3 ‘‘(ii) at least 2 of the years during such

4 period are deterioration years.

5 If an employer is treated as a financially-weak

6 employer for any plan year, clause (ii) shall not

7 apply in determining whether the employer is so

8 treated for any succeeding plan year in any con9 tinuous period of plan years for which the em10 ployer is treated as a financially-weak employer.

11 ‘‘(B) CONTROLLED GROUP EXCEPTION.—If

12 an employer treated as a financially-weak em13 ployer under subparagraph (A) is a member of

14 a controlled group (as defined in section

15 302(d)(3)), the employer shall not be treated as

16 a financially-weak employer if a significant

17 member (as determined under regulations pre18 scribed by the Secretary of the Treasury) of such

19 group has an outstanding senior unsecured debt

20 instrument that is rated as being investment

21 grade by an organization described in subpara22 graph (A).

23 ‘‘(C) EMPLOYERS WITH NO RATINGS.—If—

24 ‘‘(i) an employer has no debt instru25 ment described in subparagraph (A)(i)
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1 which was rated by an organization de2 scribed in such subparagraph, and

3 ‘‘(ii) no such organization has made

4 an issuer credit rating for such employer,

5 then such employer shall only be treated as a fi6 nancially-weak employer to the extent provided

7 in regulations prescribed by the Secretary of the

8 Treasury.

9 ‘‘(6) DETERMINATION OF DETERIORATION

10 YEAR.—For purposes of paragraph (5), the term ‘de11 terioration year’ means any year during the period

12 described in paragraph (5)(A)(i) for which the rating

13 described in subclause (I) or (II) of paragraph

14 (5)(A)(i) by each organization is either—

15 ‘‘(A) lower than the lowest rating of the em16 ployer by such organization for a preceding year

17 in such period, or

18 ‘‘(B) the lowest rating used by such organi19 zation.

20 ‘‘(7) YEARS BEFORE EFFECTIVE DATE.—For

21 purposes of paragraphs (5) and (6), plan years begin22 ning before 2007 shall not be taken into account.

23 ‘‘(8) TRANSITION BETWEEN APPLICABLE FUND24 ING TARGETS AND BETWEEN APPLICABLE TARGET

25 NORMAL COSTS.—
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1 ‘‘(A) IN GENERAL.—In any case in which a

2 plan which is in at-risk status for a plan year

3 has been in such status for a consecutive period

4 of fewer than 5 plan years, the applicable

5 amount of the funding target and of the target

6 normal cost shall be, in lieu of the amount deter7 mined without regard to this paragraph, the sum

8 of—

9 ‘‘(i) the amount determined under this

10 section without regard to this subsection,

11 plus

12 ‘‘(ii) the transition percentage for such

13 plan year of the excess of the amount deter14 mined under this subsection (without regard

15 to this paragraph) over the amount deter16 mined under this section without regard to

17 this subsection.

18 ‘‘(B) IMPROVEMENT YEARS NOT TAKEN INTO

19 ACCOUNT.—

20 ‘‘(i) IN GENERAL.—An improvement

21 year shall not be taken into account in de22 termining any consecutive period of plan

23 years for purposes of subparagraph (A).

24 ‘‘(ii) APPLICATION OF SUBSECTION

25 AFTER IMPROVEMENT YEAR ENDS.—Plan
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1 years immediately before and after an im2 provement year (or consecutive period of

3 improvement years) shall be treated as con4 secutive for purposes of subparagraph (A).

5 ‘‘(iii) IMPROVEMENT YEAR.—For pur6 poses of this subparagraph, the term ‘im7 provement year’ means any plan year for

8 which any rating described in subclause (I)

9 or (II) of paragraph (5)(A)(i) is higher

10 than such rating for the preceding plan

11 year.

12 ‘‘(C) TRANSITION PERCENTAGE.—For pur13 poses of subparagraph (A), the transition per14 centage shall be determined in accordance with

15 the following table:

‘‘If the consecutive number of

years (including the plan year) The transition

the plan is in at-risk status is— percentage is—

1 ...................................................................................................... 20

2 ...................................................................................................... 40

3 ...................................................................................................... 60

4 ...................................................................................................... 80.

16 ‘‘(D) YEARS BEFORE EFFECTIVE DATE.—

17 For purposes of this paragraph, plan years be18 ginning before 2007 shall not be taken into ac19 count.

20 ‘‘(9) PLANS TO WHICH SUBSECTION APPLIES.—

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

22 this paragraph, this subsection shall apply to
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1 any plan to which this section applies and which

2 is in at-risk status for the plan year.

3 ‘‘(B) EXCEPTION FOR SMALL PLANS.—This

4 subsection shall not apply to a plan for a plan

5 year if the plan was described in subsection

6 (g)(2)(B) for the preceding plan year, deter7 mined by substituting ‘500’ for ‘100’.

8 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

9 BY CERTAIN COOPERATIVES.—This subsection

10 shall not apply to an eligible cooperative plan

11 described in subparagraph (D).

12 ‘‘(D) ELIGIBLE COOPERATIVE PLAN DE13 FINED.—For purposes of subparagraph (C), a

14 plan shall be treated as an eligible cooperative

15 plan for a plan year if the plan is maintained

16 by more than 1 employer and at least 85 percent

17 of the employers are—

18 ‘‘(i) rural cooperatives (as defined in

19 section 401(k)(7)(B) of the Internal Revenue

20 Code of 1986 without regard to clause (iv)

21 thereof), or

22 ‘‘(ii) organizations which are—

23 ‘‘(I) cooperative organizations de24 scribed in section 1381(a) of such Code

25 which are more than 50-percent owned
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1 by agricultural producers or by co2 operatives owned by agricultural pro3 ducers, or

4 ‘‘(II) more than 50-percent owned,

5 or controlled by, one or more coopera6 tive organizations described in sub7 clause (I).

8 A plan shall also be treated as an eligible cooper9 ative plan for any plan year for which it is de10 scribed in section 210(a) and is maintained by

11 a rural telephone cooperative association de12 scribed in section 3(40)(B)(v).

13 ‘‘(E) EXCEPTION FOR PLANS SECURED BY

14 THIRD PARTIES BOUND BY PBGC AGREEMENTS.—

15 This subsection shall not apply to any plan if—

16 ‘‘(i) a person other than the employer

17 obligated to contribute under the plan is,

18 under the terms of an agreement with the

19 Pension Benefit Guaranty Corporation, lia20 ble for any failure of the employer to meet

21 its obligation to pay any minimum re22 quired contribution or termination liability

23 with respect to the plan; and

24 ‘‘(ii) such person is not a financially25 weak employer under paragraph (5).
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1 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU2 TIONS.—

3 ‘‘(1) IN GENERAL.—For purposes of this section,

4 the due date for any payment of any minimum required contribution for any plan year shall be 81 5 ⁄2

6 months after the close of the plan year.

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

8 paragraph (1) for a plan year made after the valu9 ation date for such plan year shall be increased by in10 terest for the period from the valuation date to the

11 payment date, determined by using the effective rate

12 of interest for the plan for such plan year.

13 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

14 SCHEDULE FOR UNDERFUNDED PLANS.—

15 ‘‘(A) FAILURE TO TIMELY MAKE REQUIRED

16 INSTALLMENT.—

17 ‘‘(i) IN GENERAL.—In the case of a

18 plan to which this paragraph applies, the

19 employer maintaining the plan shall make

20 the required installments under this para21 graph and if the employer fails to pay the

22 full amount of a required installment for

23 the plan year, then the amount of interest

24 charged under paragraph (2) on the under25 payment for the period of underpayment
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1 shall be determined by using a rate of inter2 est equal to the rate otherwise used under

3 paragraph (2) plus 5 percentage points.

4 ‘‘(ii) PLANS TO WHICH PARAGRAPH AP5 PLIES.—This paragraph applies to any de6 fined benefit plan to which this section ap7 plies other than a plan which—

8 ‘‘(I) is a plan described in sub9 section (g)(2)(B)), or

10 ‘‘(II) had a funding shortfall of

11 $1,000,000 or less for the preceding

12 plan year.

13 ‘‘(B) AMOUNT OF UNDERPAYMENT, PERIOD

14 OF UNDERPAYMENT.—For purposes of subpara15 graph (A)—

16 ‘‘(i) AMOUNT.—The amount of the un17 derpayment shall be the excess of—

18 ‘‘(I) the required installment, over

19 ‘‘(II) the amount (if any) of the

20 installment contributed to or under the

21 plan on or before the due date for the

22 installment.

23 ‘‘(ii) PERIOD OF UNDERPAYMENT.—

24 The period for which any interest is charged

25 under this paragraph with respect to any
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1 portion of the underpayment shall run from

2 the due date for the installment to the date

3 on which such portion is contributed to or

4 under the plan.

5 ‘‘(iii) ORDER OF CREDITING CON6 TRIBUTIONS.—For purposes of clause

7 (i)(II), contributions shall be credited

8 against unpaid required installments in the

9 order in which such installments are re10 quired to be paid.

11 ‘‘(C) NUMBER OF REQUIRED INSTALL12 MENTS; DUE DATES.—For purposes of this

13 paragraph—

14 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.—

15 There shall be 4 required installments for

16 each plan year.

17 ‘‘(ii) TIME FOR PAYMENT OF INSTALL18 MENTS.—The due dates for required install19 ments are set forth in the following 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.

20 ‘‘(D) AMOUNT OF REQUIRED INSTALL21 MENT.—For purposes of this paragraph—
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1 ‘‘(i) IN GENERAL.—The amount of any

2 required installment shall be 25 percent of

3 the required annual payment.

4 ‘‘(ii) REQUIRED ANNUAL PAYMENT.—

5 For purposes of clause (i), the term ‘re6 quired annual payment’ means the lesser

7 of—

8 ‘‘(I) 90 percent of the minimum

9 required contribution (without regard

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

11 the plan for the plan year under this

12 section, or

13 ‘‘(II) in the case of a plan year

14 beginning after 2007, 100 percent of

15 the minimum required contribution

16 (without regard to any waiver under

17 section 302(c)) to the plan for the pre18 ceding plan year.

19 Subclause (II) shall not apply if the pre20 ceding plan year referred to in such clause

21 was not a year of 12 months.

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

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

24 paragraph to a plan year beginning on any

25 date other than January 1, there shall be
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1 substituted for the months specified in this

2 paragraph, the months which correspond

3 thereto.

4 ‘‘(ii) SHORT PLAN YEAR.—This sub5 paragraph shall be applied to plan years of

6 less than 12 months in accordance with reg7 ulations prescribed by the Secretary of the

8 Treasury.

9 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

10 WITH QUARTERLY CONTRIBUTIONS.—

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

12 paragraph applies shall be treated as failing to

13 pay the full amount of any required installment

14 under paragraph (3) to the extent that the value

15 of the liquid assets paid in such installment is

16 less than the liquidity shortfall (whether or not

17 such liquidity shortfall exceeds the amount of

18 such installment required to be paid but for this

19 paragraph).

20 ‘‘(B) PLANS TO WHICH PARAGRAPH AP21 PLIES.—This paragraph shall apply to a plan

22 which—

23 ‘‘(i) is required to pay installments

24 under paragraph (3) for a plan year, and
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1 ‘‘(ii) has a liquidity shortfall for any

2 quarter during such plan year.

3 ‘‘(C) PERIOD OF UNDERPAYMENT.—For

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

5 installment that is treated as not paid under

6 subparagraph (A) shall continue to be treated as

7 unpaid until the close of the quarter in which the

8 due date for such installment occurs.

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

10 amount of any required installment is increased

11 by reason of subparagraph (A), in no event shall

12 such increase exceed the amount which, when

13 added to prior installments for the plan year, is

14 necessary to increase the funding target attain15 ment percentage of the plan for the plan year

16 (taking into account the expected increase in

17 funding target due to benefits accruing or earned

18 during the plan year) to 100 percent.

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

20 subparagraph:

21 ‘‘(i) LIQUIDITY SHORTFALL.—The term

22 ‘liquidity shortfall’ means, with respect to

23 any required installment, an amount equal

24 to the excess (as of the last day of the quar25 ter for which such installment is made) of—
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1 ‘‘(I) the base amount with respect

2 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 ‘base

7 amount’ means, with respect to any

8 quarter, an amount equal to 3 times

9 the sum of the adjusted disbursements

10 from the plan for the 12 months ending

11 on the last day of such quarter.

12 ‘‘(II) SPECIAL RULE.—If the

13 amount determined under subclause (I)

14 exceeds an amount equal to 2 times the

15 sum of the adjusted disbursements from

16 the plan for the 36 months ending on

17 the last day of the quarter and an en18 rolled actuary certifies to the satisfac19 tion of the Secretary of the Treasury

20 that such excess is the result of non21 recurring circumstances, the base

22 amount with respect to such quarter

23 shall be determined without regard to

24 amounts related to those nonrecurring

25 circumstances.
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1 ‘‘(iii) DISBURSEMENTS FROM THE

2 PLAN.—The term ‘disbursements from the

3 plan’ means all disbursements from the

4 trust, including purchases of annuities,

5 payments of single sums and other benefits,

6 and administrative expenses.

7 ‘‘(iv) ADJUSTED DISBURSEMENTS.—

8 The term ‘adjusted disbursements’ means

9 disbursements from the plan reduced by the

10 product of—

11 ‘‘(I) the plan’s funding target at12 tainment percentage for the plan year,

13 and

14 ‘‘(II) the sum of the purchases of

15 annuities, payments of single sums,

16 and such other disbursements as the

17 Secretary of the Treasury shall provide

18 in regulations.

19 ‘‘(v) LIQUID ASSETS.—The term ‘liq20 uid assets’ means cash, marketable securi21 ties, and such other assets as specified by

22 the Secretary of the Treasury in regula23 tions.

24 ‘‘(vi) QUARTER.—The term ‘quarter’

25 means, with respect to any required install-
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1 ment, the 3-month period preceding the

2 month in which the due date for such in3 stallment occurs.

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

5 Treasury may prescribe such regulations as are

6 necessary to carry out this paragraph.

7 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO MAKE

8 REQUIRED CONTRIBUTIONS.—

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

10 which this subsection applies, if—

11 ‘‘(A) any person fails to make a contribu12 tion payment required by section 302 and this

13 section before the due date for such payment, and

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

15 (including interest), when added to the aggregate

16 unpaid balance of all preceding such payments

17 for which payment was not made before the due

18 date (including interest), exceeds $1,000,000,

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

20 amount determined under paragraph (3) upon all

21 property and rights to property, whether real or per22 sonal, belonging to such person and any other person

23 who is a member of the same controlled group of

24 which such person is a member.
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1 ‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—

2 This subsection shall apply to a defined benefit plan

3 which is a single-employer plan covered under section

4 4021 for any plan year for which the funding target

5 attainment percentage (as defined in subsection

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

7 ‘‘(3) AMOUNT OF LIEN.—For purposes of para8 graph (1), the amount of the lien shall be equal to the

9 aggregate unpaid balance of contribution payments

10 required under this section and section 302 for which

11 payment has not been made before the due date.

12 ‘‘(4) NOTICE OF FAILURE; LIEN.—

13 ‘‘(A) NOTICE OF FAILURE.—A person com14 mitting a failure described in paragraph (1)

15 shall notify the Pension Benefit Guaranty Cor16 poration of such failure within 10 days of the

17 due date for the required contribution payment.

18 ‘‘(B) PERIOD OF LIEN.—The lien imposed

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

20 the required contribution payment and shall con21 tinue until the last day of the first plan year in

22 which the plan ceases to be described in para23 graph (1)(B). Such lien shall continue to run

24 without regard to whether such plan continues to
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1 be described in paragraph (2) during the period

2 referred to in the preceding sentence.

3 ‘‘(C) CERTAIN RULES TO APPLY.—Any

4 amount with respect to which a lien is imposed

5 under paragraph (1) shall be treated as taxes

6 due and owing the United States and rules simi7 lar to the rules of subsections (c), (d), and (e) of

8 section 4068 shall apply with respect to a lien

9 imposed by subsection (a) and the amount with

10 respect to such lien.

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

12 paragraph (1) may be perfected and enforced only by

13 the Pension Benefit Guaranty Corporation, or at the

14 direction of the Pension Benefit Guaranty Corpora15 tion, by the contributing sponsor (or any member of

16 the controlled group of the contributing sponsor).

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

18 subsection—

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 (j).
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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 303.

8 ‘‘(C) CONTROLLED GROUP.—The term ‘con9 trolled group’ means any group treated as a sin10 gle employer under subsections (b), (c), (m), and

11 (o) of section 414 of the Internal Revenue Code

12 of 1986.

13 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT AC14 COUNTS.—In the case of a qualified transfer (as defined in

15 section 420 of the Internal Revenue Code of 1986), any as16 sets so transferred shall not, for purposes of this section,

17 be treated as assets in the plan.’’.

18 (b) CLERICAL AMENDMENT.—The table of sections in

19 section 1 of such Act (as amended by section 101) is amend20 ed by inserting after the item relating to section 302 the

21 following new item:

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

pension plans.’’.

22 (c) EFFECTIVE DATE.—The amendments made by this

23 section shall apply with respect to plan years beginning

24 after 2006.
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1 SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER

2 PLANS.

3 (a) LIMITS ON BENEFITS AND BENEFIT ACCRUALS.—

4 (1) IN GENERAL.—Section 206 of such Act is

5 amended by adding at the end the following new sub6 section:

7 ‘‘(g) FUNDING-BASED LIMITS ON BENEFITS AND BEN8 EFIT ACCRUALS UNDER SINGLE-EMPLOYER PLANS.—

9 ‘‘(1) LIMITATIONS ON PLAN AMENDMENTS IN10 CREASING LIABILITY FOR BENEFITS.—

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

12 paragraph (4), no amendment to a single-em13 ployer plan which has the effect of increasing li14 abilities of the plan by reason of increases in

15 benefits, establishment of new benefits, changing

16 the rate of benefit accrual, or changing the rate

17 at which benefits become nonforfeitable may take

18 effect during any plan year if the adjusted fund19 ing target attainment percentage as of the valu20 ation date of the plan for such plan year is—

21 ‘‘(i) less than 80 percent, or

22 ‘‘(ii) would be less than 80 percent tak23 ing into account such amendment.

24 ‘‘(B) EXEMPTION.—Subparagraph (A) shall

25 cease to apply with respect to any plan year, ef26 fective as of the first date of the plan year (or
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1 if later, the effective date of the amendment),

2 upon payment by the plan sponsor of a contribu3 tion (in addition to any minimum required con4 tribution under section 303) equal to—

5 ‘‘(i) in the case of subparagraph (A)(i),

6 the amount of the increase in the funding

7 target of the plan (under section 303) for

8 the plan year attributable to the amend9 ment, and

10 ‘‘(ii) in the case of subparagraph

11 (A)(ii), the amount sufficient to result in an

12 adjusted funding target attainment percent13 age of 80 percent.

14 ‘‘(C) EXCEPTION FOR CERTAIN BENEFIT IN15 CREASES.—Subparagraph (A) shall not apply to

16 any amendment which provides for an increase

17 in benefits under a formula which is not based

18 on a participant’s compensation, but only if the

19 rate of such increase is not in excess of the con20 temporaneous rate of increase in average wages

21 of participants covered by the amendment.

22 ‘‘(2) LIMITATIONS ON ACCELERATED BENEFIT

23 DISTRIBUTIONS.—
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1 ‘‘(A) IN GENERAL.—A defined benefit plan

2 which is a single-employer plan shall provide

3 that, with respect to any plan year—

4 ‘‘(i) if the plan’s adjusted funded tar5 get liability percentage as of the valuation

6 date for the preceding plan year was less

7 than 60 percent and the preceding plan

8 year is not otherwise in a prohibited period,

9 the plan sponsor shall, in addition to any

10 other contribution required under section

11 303, contribute for the current plan year

12 and each succeeding plan year in the pro13 hibited period with respect to the current

14 plan year the amount (if any) which, when

15 added to the portion of the minimum re16 quired contribution for the plan year de17 scribed in subparagraphs (B) and (C) of

18 section 303(a)(1), is sufficient to result in

19 an adjusted funded target liability percent20 age for the plan year of 60 percent, and

21 ‘‘(ii) no prohibited payments will be

22 made during a prohibited period.

23 ‘‘(B) PROHIBITED PAYMENT.—For purpose

24 of this subsection—
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1 ‘‘(i) IN GENERAL.—The term ‘prohib2 ited payment’ means—

3 ‘‘(I) any payment, in excess of the

4 monthly amount paid under a single

5 life annuity (plus any social security

6 supplements described in the last sen7 tence of section 204(b)(1)(G)), to a

8 participant or beneficiary whose annu9 ity starting date (as defined in section

10 205(h)(2)) occurs during a prohibited

11 period,

12 ‘‘(II) any payment for the pur13 chase of an irrevocable commitment

14 from an insurer to pay benefits, and

15 ‘‘(III) any other payment speci16 fied by the Secretary of the Treasury

17 by regulations.

18 ‘‘(ii) EXCEPTION FOR CERTAIN PAY19 MENTS.—In the case of any prohibited pe20 riod described in subparagraph (C)(i), the

21 term ‘prohibited payment’ shall not include

22 any payment if the amount of the payment

23 does not exceed the lesser of—
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1 ‘‘(I) 50 percent of the amount of

2 the payment which could be made

3 without regard to this subsection, or

4 ‘‘(II) the present value (deter5 mined under guidance prescribed by

6 the Pension Benefit Guaranty Cor7 poration, using the interest and mor8 tality assumptions under section

9 205(g)) of the maximum guarantee

10 with respect to the participant under

11 section 4022.

12 The exception under this clause shall only

13 apply once with respect to any participant,

14 except that, for purposes of this sentence, a

15 participant and any beneficiary on his be16 half (including an alternate payee, as de17 fined in section 206(d)(3)(K)) shall be treat18 ed as 1 participant. If the accrued benefit

19 of a participant is allocated to such an al20 ternate payee and 1 or more other persons,

21 the amount under subclause (II) shall be al22 located among such persons in the same

23 manner as the accrued benefit is allocated

24 unless the qualified domestic relations order
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1 (as defined in section 206(d)(3)(B)(i)) pro2 vides otherwise.

3 ‘‘(C) PROHIBITED PERIOD.—For purposes

4 of subparagraph (A), the term ‘prohibited period’

5 means—

6 ‘‘(i) except as provided in subpara7 graph (D), if a plan sponsor is required to

8 make the contribution for the current plan

9 year under subparagraph (A), the period

10 beginning on the 1st day of the plan year

11 and ending on the last day of the 1st period

12 of 2 consecutive plan years (beginning on or

13 after such 1st day) for which the plan’s ad14 justed funded target liability percentage was

15 at least 60 percent,

16 ‘‘(ii) any period the plan sponsor is in

17 bankruptcy, or

18 ‘‘(iii) any period during which the

19 plan has a liquidity shortfall (as defined in

20 section 303(j)(4)(E)(i)).

21 The prohibited period for purposes of clause (ii)

22 shall not include any portion of a plan year

23 (even if the plan sponsor is in bankruptcy dur24 ing such period) which occurs on or after the

25 date the plan’s enrolled actuary certifies that, as
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1 of the valuation date for the plan year, the

2 plan’s adjusted funded target liability percentage

3 is at least 100 percent.

4 ‘‘(D) SATISFACTION OF REQUIREMENT BE5 FORE CLOSE OF PLAN YEAR.—If, before the close

6 of the current plan year—

7 ‘‘(i) the plan sponsor makes the con8 tribution required to be made under sub9 paragraph (A), or

10 ‘‘(ii) the plan’s enrolled actuary cer11 tifies that, as of the valuation date for the

12 plan year, the adjusted funded target liabil13 ity percentage of the plan is at least 60 per14 cent,

15 this paragraph shall be applied as if no prohib16 ited period had begun as of the beginning of such

17 year and the plan shall, under rules described by

18 the Secretary of the Treasury, restore any pay19 ments not made during the prohibited period in

20 effect before the application of this paragraph.

21 ‘‘(3) LIMITATION ON BENEFIT ACCRUALS FOR

22 PLANS WITH SEVERE FUNDING SHORTFALLS.—

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

24 paragraph (4), a single-employer plan shall pro25 vide that all future benefit accruals under the
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1 plan shall cease during a severe funding shortfall

2 period, but only to the extent the cessation of

3 such accruals would have been permitted under

4 section 204(g) if the cessation had been imple5 mented by a plan amendment adopted imme6 diately before the severe funding shortfall period.

7 ‘‘(B) SEVERE FUNDING SHORTFALL PE8 RIOD.—For purposes of subparagraph (A), the

9 term ‘severe funding shortfall period’ means in

10 the case of a plan the adjusted funding target at11 tainment percentage of which as of the valuation

12 date of the plan for any plan year is less than

13 60 percent, the period—

14 ‘‘(i) beginning on the 1st day of the

15 succeeding plan year, and

16 ‘‘(ii) ending on the date the plan’s en17 rolled actuary certifies that the plan’s ad18 justed funding target attainment percentage

19 is at least 60 percent, and

20 ‘‘(C) OPPORTUNITY FOR INCREASED FUND21 ING.—For purposes of subparagraph (B), a plan

22 shall not be treated as described in such subpara23 graph for a plan year if the plan’s enrolled actu24 ary certifies that the plan sponsor has before the

25 end of the plan year contributed (in addition to
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1 any minimum required contribution under sec2 tion 303) the amount sufficient to result in an

3 adjusted funding target attainment percentage as

4 of the valuation date for the plan year of 60 per5 cent.

6 ‘‘(4) EXCEPTION FOR CERTAIN COLLECTIVELY

7 BARGAINED BENEFITS.—In the case of a plan main8 tained pursuant to a collective bargaining agreement

9 between employee representatives and the plan spon10 sor and in effect before the beginning of the first day

11 on which a limitation would otherwise apply under

12 paragraph (1), (2), or (3)—

13 ‘‘(A) such limitations shall not apply to

14 any amendment, prohibited payment, or accrual

15 with respect to such plan, but

16 ‘‘(B) the plan sponsor shall contribute (in

17 addition to any minimum required contribution

18 under section 303) the amount sufficient to re19 sult in an adjusted funding target attainment

20 percentage (as of the valuation date for the plan

21 year in which any such limitation would other22 wise apply) equal to the percentage necessary to

23 prevent the limitation from applying.

24 ‘‘(5) RULES RELATING TO REQUIRED CONTRIBU25 TIONS.—
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1 ‘‘(A) SECURITY MAY BE PROVIDED.—

2 ‘‘(i) IN GENERAL.—For purposes of

3 this subsection, the adjusted funding target

4 attainment percentage shall be determined

5 by treating as an asset of the plan any se6 curity provided by a plan sponsor in a

7 form meeting the requirements of clause (ii).

8 ‘‘(ii) FORM OF SECURITY.—The secu9 rity required under clause (i) shall consist

10 of—

11 ‘‘(I) a bond issued by a corporate

12 surety company that is an acceptable

13 surety for purposes of section 412 of

14 this Act,

15 ‘‘(II) cash, or United States obli16 gations which mature in 3 years or

17 less, held in escrow by a bank or simi18 lar financial institution, or

19 ‘‘(III) such other form of security

20 as is satisfactory to the Secretary of

21 the Treasury and the parties involved.

22 ‘‘(iii) ENFORCEMENT.—Any security

23 provided under clause (i) may be perfected

24 and enforced at any time after the earlier

25 of—
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1 ‘‘(I) the date on which the plan

2 terminates,

3 ‘‘(II) if there is a failure to make

4 a payment of the minimum required

5 contribution for any plan year begin6 ning after the security is provided, the

7 due date for the payment under section

8 303(j), or

9 ‘‘(III) if the adjusted funding tar10 get attainment percentage is less than

11 60 percent for a consecutive period of

12 7 years, the valuation date for the last

13 year in the period.

14 ‘‘(iv) RELEASE OF SECURITY.—The se15 curity shall be released (and any amounts

16 thereunder shall be refunded together with

17 any interest accrued thereon) at such time

18 as the Secretary of the Treasury may pre19 scribe in regulations, including regulations

20 for partial releases of the security by reason

21 of increases in the funding target attain22 ment percentage.

23 ‘‘(B) PREFUNDING BALANCE MAY NOT BE

24 USED.—No prefunding balance under section
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1 303(f) may be used to satisfy any required con2 tribution under this subsection.

3 ‘‘(C) TREATMENT AS UNPAID MINIMUM RE4 QUIRED CONTRIBUTION.—The amount of any re5 quired contribution which a plan sponsor fails to

6 make under paragraph (1) or (3) for any plan

7 year shall be treated as an unpaid minimum re8 quired contribution for purposes of subsection (j)

9 and (k) of section 303 and for purposes of section

10 4971 of the Internal Revenue Code of 1986.

11 ‘‘(6) NEW PLANS.—Paragraphs (1) and (3) shall

12 not apply to a plan for the first 5 plan years of the

13 plan. For purposes of this paragraph, the reference in

14 this paragraph to a plan shall include a reference to

15 any predecessor plan.

16 ‘‘(7) PRESUMED UNDERFUNDING FOR PURPOSES

17 OF BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S

18 FUNDING STATUS.—

19 ‘‘(A) PRESUMPTION OF CONTINUED UNDER20 FUNDING.—In any case in which a benefit limi21 tation under paragraph (1), (2), or (3) has been

22 applied to a plan with respect to the plan year

23 preceding the current plan year, the adjusted

24 funding target attainment percentage of the plan

25 as of the valuation date of the plan for the cur-
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1 rent plan year shall be presumed to be equal to

2 the adjusted funding target attainment percent3 age of the plan as of the valuation date of the

4 plan for the preceding plan year until the en5 rolled actuary of the plan certifies the actual ad6 justed funding target attainment percentage of

7 the plan as of the valuation date of the plan for

8 the current plan year.

9 ‘‘(B) PRESUMPTION OF UNDERFUNDING

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

11 such certification is made with respect to the

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

13 current plan year, for purposes of paragraphs

14 (1), (2), and (3), the plan’s adjusted funding tar15 get attainment percentage shall be conclusively

16 presumed to be less than 60 percent as of the

17 first day of such 10th month.

18 ‘‘(8) TREATMENT OF PLAN AS OF CLOSE OF PRO19 HIBITED OR CESSATION PERIOD.—For purposes of

20 applying this part—

21 ‘‘(A) OPERATION OF PLAN AFTER PERIOD.—

22 Unless the plan provides otherwise, payments

23 and accruals will resume effective as of the day

24 following the close of a period of limitation of
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1 payment or accrual of benefits under paragraph

2 (2) or (3).

3 ‘‘(B) TREATMENT OF AFFECTED BENE4 FITS.—Nothing in this paragraph shall be con5 strued as affecting the plan’s treatment of bene6 fits which would have been paid or accrued but

7 for this subsection.

8 ‘‘(9) FUNDING TARGET ATTAINMENT PERCENT9 AGE.—For purposes of this subsection—

10 ‘‘(A) IN GENERAL.—The term ‘funding tar11 get attainment percentage’ has the same meaning

12 given such term by section 303(d)(2).

13 ‘‘(B) ADJUSTED FUNDED TARGET LIABILITY

14 PERCENTAGE.—The term ‘adjusted funded target

15 liability percentage’ means the funded target li16 ability percentage which is determined under

17 subparagraph (A) by increasing each of the

18 amounts under subparagraphs (A) and (B) of

19 section 303(d)(2) by the aggregate amount of

20 purchases of annuities, payments of single sums,

21 and such other disbursements as the Secretary of

22 the Treasury shall prescribe in regulations,

23 which were made by the plan during the pre24 ceding 2 plan years.
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1 ‘‘(10) YEARS BEFORE EFFECTIVE DATE.—No

2 plan year beginning before 2007 shall be taken into

3 account in determining whether this subsection ap4 plies to any plan year beginning after 2006.’’.

5 (2) NOTICE REQUIREMENT.—

6 (A) IN GENERAL.—Section 101 of such Act

7 (29 U.S.C. 1021) is amended—

8 (i) by redesignating subsection (j) as

9 subsection (k); and

10 (ii) by inserting after subsection (i) the

11 following new subsection:

12 ‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON CER13 TAIN FORMS OF DISTRIBUTION.—The plan administrator

14 of a single-employer plan shall provide a written notice to

15 plan participants and beneficiaries within 30 days—

16 ‘‘(1) after the plan has become subject to the re17 striction described in section 206(g)(2),

18 ‘‘(2) in the case of a plan to which section

19 206(g)(3) applies, after—

20 ‘‘(A) the date in the plan year described in

21 section 206(g)(3)(B) on which the plan’s enrolled

22 actuary certifies that the plan’s adjusted funding

23 target attainment percentage for the plan year is

24 less than 60 percent (or, if earlier, the date such
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1 percentage is deemed to be less than 60 percent

2 under section 206(g)(7)), and

3 ‘‘(B) the first day of the severe funding

4 shortfall period, and

5 ‘‘(3) at such other time as may be determined by

6 the Secretary of the Treasury.

7 The notice required to be provided under this subsection

8 shall be in writing, except that such notice may be in elec9 tronic or other form to the extent that such form is reason10 ably accessible to the recipient.’’.

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)(iv)’’ and inserting

14 ‘‘sections 101(j) and 302(b)(7)(F)(iv)’’.

15 (b) EFFECTIVE DATES.—

16 (1) IN GENERAL.—The amendments made by

17 this section shall apply to plan years beginning after

18 December 31, 2006.

19 (2) COLLECTIVE BARGAINING EXCEPTION.—In

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

21 collective bargaining agreements between employee

22 representatives and 1 or more employers ratified be23 fore January 1, 2007, the amendments made by this

24 section shall not apply to plan years beginning before

25 the earlier of—
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1 (A) the later of—

2 (i) the date on which the last collective

3 bargaining agreement relating to the plan

4 terminates (determined without regard to

5 any extension thereof agreed to after the

6 date of the enactment of this Act), or

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

8 to which the amendments made by this sub9 section would (but for this subparagraph)

10 apply, or

11 (B) January 1, 2010.

12 For purposes of subparagraph (A)(i), any plan

13 amendment made pursuant to a collective bargaining

14 agreement relating to the plan which amends the plan

15 solely to conform to any requirement added by this

16 section shall not be treated as a termination of such

17 collective bargaining agreement.

18 SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

19 (a) MISCELLANEOUS AMENDMENTS TO TITLE I.—Sub20 title B of title I of such Act (29 U.S.C. 1021 et seq.) is

21 amended—

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

23 302(e)’’ and inserting ‘‘section 303(j)’’;

24 (2) in section 103(d)(8)(B), by striking ‘‘the re25 quirements of section 302(c)(3)’’ and inserting ‘‘the
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1 applicable requirements of sections 303(h) and

2 304(c)(3)’’;

3 (3) in section 103(d), by striking paragraph (11)

4 and inserting the following:

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

6 plan is less than 70 percent of—

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

8 the funding target (as defined in section

9 303(d)(1)) of the plan, or

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

11 the current liability (as defined in section

12 304(c)(6)(D)) under the plan,

13 the percentage which such value is of the amount de14 scribed in subparagraph (A) or (B).’’;

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

16 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’;

17 (5) in section 204(g)(1), by striking ‘‘section

18 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’;

19 (6) in section 204(i)(2)(B), by striking ‘‘section

20 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’;

21 (7) in section 204(i)(3), by striking ‘‘funded cur22 rent liability percentage (within the meaning of sec23 tion 302(d)(8) of this Act)’’ and inserting ‘‘funding

24 target attainment percentage (as defined in section

25 303(d)(2))’’;
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1 (8) in section 204(i)(4), by striking ‘‘section

2 302(c)(11)(A), without regard to section

3 302(c)(11)(B)’’ and inserting ‘‘section 302(b)(1),

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

5 (9) in section 206(e)(1), by striking ‘‘section

6 302(d)’’ and inserting ‘‘section 303(j)(4)’’, and by

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

8 303(j)(4)(E)(i)’’;

9 (10) in section 206(e)(3), by striking ‘‘section

10 302(e) by reason of paragraph (5)(A) thereof’’ and in11 serting ‘‘section 303(j)(3) by reason of section

12 303(j)(4)(A)’’; and

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

14 408(b)(13), by striking ‘‘American Jobs Creation Act

15 of 2004’’ and inserting ‘‘Pension Security and Trans16 parency Act of 2005’’.

17 (b) MISCELLANEOUS AMENDMENTS TO TITLE IV.—

18 Title IV of such Act is amended—

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

20 1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and insert21 ing ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’ and in22 serting ‘‘412(c)(1)’’, by striking ‘‘302(c)(11)(B)’’ and

23 inserting ‘‘302(b)(2)’’, and by striking

24 ‘‘412(c)(11)(B)’’ and inserting ‘‘412(c)(2)’’;
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1 (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)),

2 by striking ‘‘302(f)(1)(A) and (B)’’ and inserting

3 ‘‘303(k)(1)(A) and (B)’’, and by striking

4 ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A)

5 and (B)’’;

6 (3) in section 4010(b)(2) (29 U.S.C. 1310(b)(2)),

7 by striking ‘‘302(f)(1)(A) and (B)’’ and inserting

8 ‘‘303(k)(1)(A) and (B)’’, and by striking

9 ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A)

10 and (B)’’;

11 (4) in section 4062(c)(1) (29 U.S.C. 1362(c)(1)),

12 by striking paragraphs (1), (2), and (3) and inserting

13 the following:

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

15 sum of the shortfall amortization charge (within the

16 meaning of section 303(c)(1) of this Act and

17 430(d)(1) of the Internal Revenue Code of 1986) with

18 respect to the plan (if any) for the plan year in which

19 the termination date occurs, plus the aggregate total

20 of shortfall amortization installments (if any) deter21 mined for succeeding plan years under section

22 303(c)(2) of this Act and section 430(d)(2) of such

23 Code (which, for purposes of this subparagraph, shall

24 include any increase in such sum which would result

25 if all applications for waivers of the minimum fund-
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1 ing standard under section 302(c) of this Act and sec2 tion 412(d) of such Code which are pending with re3 spect to such plan were denied and if no additional

4 contributions (other than those already made by the

5 termination date) were made for the plan year in

6 which the termination date occurs or for any previous

7 plan year), or

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

9 outstanding balance of the accumulated funding defi10 ciencies (within the meaning of section 304(a)(2) of

11 this Act and section 431(a) of the Internal Revenue

12 Code of 1986) of the plan (if any) (which, for pur13 poses of this subparagraph, shall include the amount

14 of any increase in such accumulated funding defi15 ciencies of the plan which would result if all pending

16 applications for waivers of the minimum funding

17 standard under section 302(c) of this Act or section

18 412(d) of such Code and for extensions of the amorti19 zation period under section 304(d) of this Act or sec20 tion 431(d) of such Code with respect to such plan

21 were denied and if no additional contributions (other

22 than those already made by the termination date)

23 were made for the plan year in which the termination

24 date occurs or for any previous plan year),
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1 ‘‘(2)(A) in the case of a single-employer plan, the

2 sum of the waiver amortization charge (within the

3 meaning of section 303(e)(1) of this Act and 430(e)(2)

4 of the Internal Revenue Code of 1986) with respect to

5 the plan (if any) for the plan year in which the ter6 mination date occurs, plus the aggregate total of

7 waiver amortization installments (if any) determined

8 for succeeding plan years under section 303(e)(3) of

9 this Act and section 430(e)(3) of such Code, or

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

11 outstanding balance of the amount of waived funding

12 deficiencies of the plan waived before such date under

13 section 302(c) of this Act or section 412(d) of such

14 Code (if any), and

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

16 outstanding balance of the amount of decreases in the

17 minimum funding standard allowed before such date

18 under section 304(d) of this Act or section 431(d) of

19 such Code (if any);’’;

20 (5) in section 4071 (29 U.S.C. 1371), by striking

21 ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’;

22 (6) in section 4243(a)(1)(B) (29 U.S.C.

23 1423(a)(1)(B)), by striking ‘‘302(a)’’ and inserting

24 ‘‘304(a)’’, and, in clause (i), by striking ‘‘302(a)’’ and

25 inserting ‘‘304(a)’’;
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1 (7) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)),

2 by striking ‘‘303(a)’’ and inserting ‘‘302(c)’’;

3 (8) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)),

4 by striking ‘‘303(c)’’ and inserting ‘‘302(c)(3)’’; and

5 (9) in section 4243(g) (29 U.S.C. 1423(g)), by

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

7 (c) AMENDMENTS TO REORGANIZATION PLAN NO. 4 OF

8 1978.—Section 106(b)(ii) of Reorganization Plan No. 4 of

9 1978 (ratified and affirmed as law by Public Law 98–532

10 (98 Stat. 2705)) is amended by striking ‘‘302(c)(8)’’ and

11 inserting ‘‘302(d)(2)’’, by striking ‘‘304(a) and (b)(2)(A)’’

12 and inserting ‘‘304(d)(1), (d)(2), and (e)(2)(A)’’, and by

13 striking ‘‘412(c)(8), (e), and (f)(2)(A)’’ and inserting

14 ‘‘412(d)(2) and 431(d)(1), (d)(2), and (e)(2)(A)’’.

15 (d) REPEAL OF EXPIRED AUTHORITY FOR TEMPORARY

16 VARIANCES.—Section 207 of such Act (29 U.S.C. 1057) is

17 repealed.

18 (e) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to plan years beginning after 2006.

20 SEC. 105. SPECIAL RULES FOR MULTIPLE EMPLOYER PLANS

21 OF CERTAIN COOPERATIVES.

22 (a) GENERAL RULE.—Except as provided in this sec23 tion, if a plan in existence on July 26, 2005, was an eligible

24 cooperative plan for its plan year which includes such date,

25 the amendments made by section 401 of this Act, this sub-
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1 title, and subtitle B shall not apply to plan years beginning

2 before the earlier of—

3 (1) the first plan year for which the plan ceases

4 to be an eligible cooperative plan, or

5 (2) January 1, 2017.

6 (b) INTEREST RATE.—In applying section

7 302(b)(5)(B) of the Employee Retirement Income Security

8 Act of 1974 and section 412(b)(5)(B) of the Internal Rev9 enue Code of 1986 (as in effect before the amendments made

10 by this subtitle and subtitle B) and in applying section

11 4006(a)(3)(E)(iii) of such Act (as in effect before the

12 amendments made by section 401) to an eligible cooperative

13 plan for plan years beginning after December 31, 2006, and

14 before the first plan year to which such amendments apply,

15 the third segment rate determined under section

16 303(h)(2)(C)(iii) of such Act and section 430(h)(2)(C)(iii)

17 of such Code (as added by such amendments) shall be used

18 in lieu of the interest rate otherwise used.

19 (c) ELIGIBLE COOPERATIVE PLAN DEFINED.—For

20 purposes of this section, a plan shall be treated as an eligi21 ble cooperative plan for a plan year if the plan is main22 tained by more than 1 employer and at least 85 percent

23 of the employers are—
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1 (1) rural cooperatives (as defined in section

2 401(k)(7)(B) of such Code without regard to clause

3 (iv) thereof), or

4 (2) organizations which are—

5 (A) cooperative organizations described in

6 section 1381(a) of such Code which are more

7 than 50-percent owned by agricultural producers

8 or by cooperatives owned by agricultural pro9 ducers, or

10 (B) more than 50-percent owned, or con11 trolled by, one or more cooperative organizations

12 described in subparagraph (A).

13 A plan shall also be treated as an eligible cooperative plan

14 for any plan year for which it is described in section 210(a)

15 of the Employee Retirement Income Security Act of 1974

16 and is maintained by a rural telephone cooperative associa17 tion described in section 3(40)(B)(v) of such Act.

18 SEC. 106. TEMPORARY RELIEF FOR CERTAIN RESCUED

19 PLANS.

20 (a) GENERAL RULE.—Except as provided in this sec21 tion, if a plan in existence on July 26, 2005, was a rescued

22 plan as of such date, the amendments made by section 401

23 of this Act, this subtitle, and subtitle B shall not apply to

24 plan years beginning before January 1, 2014.
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1 (b) INTEREST RATE.—In applying section

2 302(b)(5)(B) of the Employee Retirement Income Security

3 Act of 1974 and section 412(b)(5)(B) of the Internal Rev4 enue Code of 1986 (as in effect before the amendments made

5 by this subtitle and subtitle B), and in applying section

6 4006(a)(3)(E)(iii) of such Act (as in effect before the

7 amendments made by section 401), to a rescued plan for

8 plan years beginning after December 31, 2006, and before

9 January 1, 2014, the third segment rate determined under

10 section 303(h)(2)(C)(iii) of such Act and section

11 430(h)(2)(C)(iii) of such Code (as added by such amend12 ments) shall be used in lieu of the interest rate otherwise

13 used.

14 (c) RESCUED PLAN.—For purposes of this section, the

15 term ‘‘rescued plan’’ means a defined benefit plan (other

16 than a multiemployer plan) to which section 302 of such

17 Act and section 412 of such Code apply and—

18 (1) which was sponsored by an employer which

19 was in bankruptcy, giving rise to a claim by the Pen20 sion Benefit Guaranty Corporation of at least

21 $100,000,000, but not greater than $150,000,000, and

22 (2) the sponsorship of which was assumed by an23 other employer that was not a member of the same

24 controlled group as the bankrupt sponsor and the

25 claim of the Pension Benefit Guaranty Corporation
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1 was settled or withdrawn in connection with the as2 sumption of the sponsorship.

3 Subtitle B—Amendments to

4 Internal Revenue Code of 1986

5 SEC. 111. MODIFICATIONS OF THE MINIMUM FUNDING

6 STANDARDS.

7 (a) IN GENERAL.—Section 412 of the Internal Revenue

8 Code of 1986 (relating to minimum funding standards) is

9 amended to read as follows:

10 ‘‘SEC. 412. MINIMUM FUNDING STANDARDS.

11 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING

12 STANDARD.—

13 ‘‘(1) IN GENERAL.—A plan to which this section

14 applies shall satisfy the minimum funding standard

15 applicable to the plan for any plan year.

16 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur17 poses of paragraph (1), a plan shall be treated as sat18 isfying the minimum funding standard for a plan

19 year if—

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

21 which is a single-employer plan, the employer

22 makes contributions to or under the plan for the

23 plan year which, in the aggregate, are not less

24 than the minimum required contribution deter-
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1 mined under section 430 for the plan for the

2 plan year,

3 ‘‘(B) in the case of a money purchase pen4 sion plan which is a single-employer plan, the

5 employer makes contributions to or under the

6 plan for the plan year which are required under

7 the terms of the plan, and

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

9 the employers make contributions to or under the

10 plan for the plan year which, in the aggregate,

11 are sufficient to ensure that the plan does not

12 have an accumulated funding deficiency under

13 section 431 as of the end of the plan year.

14 ‘‘(b) PLANS TO WHICH SECTION APPLIES.—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graphs (2) and (3), this section applies to a plan if,

17 for any plan year beginning on or after the effective

18 date of this section for such plan under the Employee

19 Retirement Income Security Act of 1974—

20 ‘‘(A) the plan included a trust which quali21 fied (or was determined by the Secretary to have

22 qualified) under section 401(a), or

23 ‘‘(B) the plan satisfied (or was determined

24 by the Secretary to have satisfied) the require25 ments of section 403(a).
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1 ‘‘(2) EXCEPTIONS.—This section shall not apply

2 to—

3 ‘‘(A) any profit-sharing or stock bonus plan,

4 ‘‘(B) any insurance contract plan described

5 in subsection (g)(3),

6 ‘‘(C) any governmental plan (within the

7 meaning of section 414(d)),

8 ‘‘(D) any church plan (within the meaning

9 of section 414(e)) with respect to which the elec10 tion provided by section 410(d) has not been

11 made,

12 ‘‘(E) any plan which has not, at any time

13 after September 2, 1974, provided for employer

14 contributions, or

15 ‘‘(F) any plan established and maintained

16 by a society, order, or association described in

17 section 501(c)(8) or (9), if no part of the con18 tributions to or under such plan are made by

19 employers of participants in such plan.

20 No plan described in subparagraph (C), (D), or (F)

21 shall be treated as a qualified plan for purposes of

22 section 401(a) unless such plan meets the require23 ments of section 401(a)(7) as in effect on September

24 1, 1974.
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1 ‘‘(3) CERTAIN TERMINATED MULTIEMPLOYER

2 PLANS.—This section applies with respect to a termi3 nated multiemployer plan to which section 4021 of

4 the Employee Retirement Income Security Act of

5 1974 applies until the last day of the plan year in

6 which the plan terminates (within the meaning of sec7 tion 4041A(a)(2) of such Act).

8 ‘‘(c) LIABILITY FOR CONTRIBUTIONS.—

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), the amount of any contribution required

11 by this section and any required installments under

12 section 430(j) shall be paid by any employer respon13 sible for making the contribution to or under the

14 plan.

15 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE EM16 PLOYER MEMBER OF CONTROLLED GROUP.—If the

17 employer referred to in paragraph (1) is a member of

18 a controlled group, each member of such group shall

19 be jointly and severally liable for payment of such

20 contribution or required installment.

21 ‘‘(d) VARIANCE FROM MINIMUM FUNDING STAND22 ARDS.—

23 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD24 SHIP.—

25 ‘‘(A) IN GENERAL.—If—
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1 ‘‘(i) an employer is (or in the case of

2 a multiemployer plan, 10 percent or more

3 of the number of employers contributing to

4 or under the plan are) unable to satisfy the

5 minimum funding standard for a plan year

6 without temporary substantial business

7 hardship (substantial business hardship in

8 the case of a multiemployer plan), and

9 ‘‘(ii) application of the standard would

10 be adverse to the interests of plan partici11 pants in the aggregate,

12 the Secretary may, subject to subparagraph (C),

13 waive the requirements of subsection (a) for such

14 year with respect to all or any portion of the

15 minimum funding standard. The Secretary of

16 the Treasury shall not waive the minimum fund17 ing standard with respect to a plan for more

18 than 3 of any 15 (5 of any 15 in the case of a

19 multiemployer plan) consecutive plan years.

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

21 granted under subparagraph (A) for any plan

22 year—

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

24 plan, the minimum required contribution

25 under section 430 for the plan year shall be
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1 reduced by the amount of the waived fund2 ing deficiency and such amount shall be

3 amortized as required under section 430(e),

4 and

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

6 plan, the funding standard account shall be

7 credited under section 431(b)(3)(C) with the

8 amount of the waived funding deficiency

9 and such amount shall be amortized as re10 quired under section 431(b)(2)(C).

11 ‘‘(C) WAIVER OF AMORTIZED PORTION NOT

12 ALLOWED.—The Secretary may not waive under

13 subparagraph (A) any portion of the minimum

14 funding standard under subsection (a) for a plan

15 year which is attributable to any waived funding

16 deficiency for any preceding plan year.

17 ‘‘(2) DETERMINATION OF BUSINESS HARD18 SHIP.—For purposes of this subsection, the factors

19 taken into account in determining temporary sub20 stantial business hardship (substantial business hard21 ship in the case of a multiemployer plan) shall in22 clude (but shall not be limited to) whether or not—

23 ‘‘(A) the employer is operating at an eco24 nomic loss,
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1 ‘‘(B) there is substantial unemployment or

2 underemployment in the trade or business and

3 in the industry concerned,

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

5 concerned are depressed or declining, and

6 ‘‘(D) it is reasonable to expect that the plan

7 will be continued only if the waiver is granted.

8 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur9 poses of this part, the term ‘waived funding defi10 ciency’ means the portion of the minimum funding

11 standard under subsection (a) (determined without

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

13 Secretary and not satisfied by employer contributions.

14 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM15 PLOYER PLANS, CONSULTATIONS.—

16 ‘‘(A) SECURITY MAY BE REQUIRED.—

17 ‘‘(i) IN GENERAL.—Except as provided

18 in subparagraph (C), the Secretary may re19 quire an employer maintaining a defined

20 benefit plan which is a single-employer plan

21 (within the meaning of section 4001(a)(15)

22 of the Employee Retirement Income Secu23 rity Act of 1974) to provide security to such

24 plan as a condition for granting or modi25 fying a waiver under paragraph (1).
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1 ‘‘(ii) SPECIAL RULES.—Any security

2 provided under clause (i) may be perfected

3 and enforced only by the Pension Benefit

4 Guaranty Corporation, or, at the direction

5 of the Corporation, by a contributing spon6 sor (within the meaning of section

7 4001(a)(13) of such Act) or a member of

8 such sponsor’s controlled group (within the

9 meaning of section 4001(a)(14) of such Act).

10 ‘‘(B) CONSULTATION WITH THE PENSION

11 BENEFIT GUARANTY CORPORATION.—Except as

12 provided in subparagraph (C), the Secretary

13 shall, before granting or modifying a waiver

14 under this subsection with respect to a plan de15 scribed in subparagraph (A)(i)—

16 ‘‘(i) provide the Pension Benefit Guar17 anty Corporation with—

18 ‘‘(I) notice of the completed appli19 cation for any waiver or modification,

20 and

21 ‘‘(II) an opportunity to comment

22 on such application within 30 days

23 after receipt of such notice, and

24 ‘‘(ii) consider—
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1 ‘‘(I) any comments of the Cor2 poration under clause (i)(II), and

3 ‘‘(II) any views of any employee

4 organization (within the meaning of

5 section 3(4) of such Act) representing

6 participants in the plan which are

7 submitted in writing to the Secretary

8 of the Treasury in connection with

9 such application.

10 Information provided to the Corporation under

11 this subparagraph shall be considered tax return

12 information and subject to the safeguarding and

13 reporting requirements of section 6103(p).

14 ‘‘(C) EXCEPTION FOR CERTAIN WAIVERS.—

15 ‘‘(i) IN GENERAL.—The preceding pro16 visions of this paragraph shall not apply to

17 any plan with respect to which the sum

18 of—

19 ‘‘(I) the aggregate unpaid min20 imum required contributions for the

21 plan year and all preceding plan

22 years, and

23 ‘‘(II) the present value of all

24 waiver amortization installments de25 termined for the plan year and suc-
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1 ceeding plan years under section

2 430(e)(2),

3 is less than $1,000,000.

4 ‘‘(ii) TREATMENT OF WAIVERS FOR

5 WHICH APPLICATIONS ARE PENDING.—The

6 amount described in clause (i)(I) shall in7 clude any increase in such amount which

8 would result if all applications for waivers

9 of the minimum funding standard under

10 this subsection which are pending with re11 spect to such plan were denied.

12 ‘‘(iii) UNPAID MINIMUM REQUIRED

13 CONTRIBUTION.—For purposes of this

14 subparagraph—

15 ‘‘(I) IN GENERAL.—The term ‘un16 paid minimum required contribution’

17 means, with respect to any plan year,

18 any minimum required contribution

19 under section 430 for the plan year

20 which is not paid on or before the due

21 date (as determined under section

22 430(j)(1)) for the plan year.

23 ‘‘(II) ORDERING RULE.—For pur24 poses of subclause (I), any payment to

25 or under a plan for any plan year
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1 shall be allocated first to unpaid min2 imum required contributions for all

3 preceding plan years on a first-in,

4 first-out basis and then to the min5 imum required contribution under sec6 tion 430 for the plan year.

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

8 PLANS.—

9 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 10 ⁄2 MONTHS AFTER CLOSE OF

11 YEAR.—In the case of a single-employer plan, no

12 waiver may be granted under this subsection

13 with respect to any plan for any plan year un14 less an application therefor is submitted to the

15 Secretary not later than the 15th day of the 3rd

16 month beginning after the close of such plan

17 year.

18 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM19 BER OF CONTROLLED GROUP.—In the case of a

20 single-employer plan, if an employer is a mem21 ber of a controlled group, the temporary substan22 tial business hardship requirements of paragraph

23 (1) shall be treated as met only if such require24 ments are met—

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

4 group as a single employer).

5 The Secretary may provide that an analysis of

6 a trade or business or industry of a member need

7 not be conducted if the Secretary determines such

8 analysis is not necessary because the taking into

9 account of such member would not significantly

10 affect the determination under this paragraph.

11 ‘‘(6) ADVANCE NOTICE.—

12 ‘‘(A) IN GENERAL.—The Secretary shall, be13 fore granting a waiver under this subsection, re14 quire each applicant to provide evidence satisfac15 tory to such Secretary that the applicant has

16 provided notice of the filing of the application

17 for such waiver to each affected party (as defined

18 in section 4001(a)(21) of the Employee Retire19 ment Income Security Act of 1974) other than

20 the Pension Benefit Guaranty Corporation and

21 in the case of a multiemployer plan, to each em22 ployer required to contribute to the plan under

23 subsection (b)(1). Such notice shall include a de24 scription of the extent to which the plan is fund-
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1 ed for benefits which are guaranteed under title

2 IV of such Act and for benefit liabilities.

3 ‘‘(B) CONSIDERATION OF RELEVANT INFOR4 MATION.—The Secretary shall consider any rel5 evant information provided by a person to whom

6 notice was given under subparagraph (A).

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

8 ‘‘(A) IN GENERAL.—No amendment of a

9 plan which increases the liabilities of the plan by

10 reason of any increase in benefits, any change in

11 the accrual of benefits, or any change in the rate

12 at which benefits become nonforfeitable under the

13 plan shall be adopted if a waiver under this sub14 section or an extension of time under section

15 431(d) is in effect with respect to the plan, or if

16 a plan amendment described in subsection (e)(2)

17 has been made at any time in the preceding 24

18 months. If a plan is amended in violation of the

19 preceding sentence, any such waiver, or extension

20 of time, shall not apply to any plan year ending

21 on or after the date on which such amendment

22 is adopted.

23 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

24 not apply to any plan amendment which—
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1 ‘‘(i) the Secretary determines to be rea2 sonable and which provides for only de

3 minimis increases in the liabilities of the

4 plan,

5 ‘‘(ii) only repeals an amendment de6 scribed in subsection (e)(2), or

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

8 qualification under part I of subchapter D,

9 of chapter 1 of the Internal Revenue Code of

10 1986.

11 ‘‘(e) MISCELLANEOUS RULES.—For purposes of this

12 section—

13 ‘‘(1) CHANGE IN METHOD OR YEAR.—If the fund14 ing method, the valuation date, or a plan year for a

15 plan is changed, the change shall take effect only if

16 approved by the Secretary.

17 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND18 MENTS.—For purposes of this section, any amend19 ment applying to a plan year which—

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

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

22 of the plan year (or, in the case of a multiem23 ployer plan, no later than 2 years after the close

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

2 any participant determined as of the beginning

3 of the first plan year to which the amendment

4 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 cir8 cumstances,

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 notifying him

15 of such amendment and the Secretary has approved

16 such amendment, or within 90 days after the date on

17 which such notice was filed, failed to disapprove such

18 amendment. No amendment described in this sub19 section shall be approved by the Secretary unless the

20 Secretary determines that such amendment is nec21 essary because of a temporary substantial business

22 hardship (as determined under subsection (d)(2)) or

23 a substantial business hardship (as so determined) in

24 the case of a multiemployer plan and that a waiver

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

2 under section 431(d)) is unavailable or inadequate.

3 ‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.—A

4 plan is described in this paragraph if—

5 ‘‘(A) the plan is funded exclusively by the

6 purchase of individual insurance contracts,

7 ‘‘(B) such contracts provide for level annual

8 premium payments to be paid extending not

9 later than the retirement age for each individual

10 participating in the plan, and commencing with

11 the date the individual became a participant in

12 the plan (or, in the case of an increase in bene13 fits, commencing at the time such increase be14 comes effective),

15 ‘‘(C) benefits provided by the plan are equal

16 to the benefits provided under each contract at

17 normal retirement age under the plan and are

18 guaranteed by an insurance carrier (licensed

19 under the laws of a State to do business with the

20 plan) to the extent premiums have been paid,

21 ‘‘(D) premiums payable for the plan year,

22 and all prior plan years, under such contracts

23 have been paid before lapse or there is reinstate24 ment of the policy,
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1 ‘‘(E) no rights under such contracts have

2 been subject to a security interest at any time

3 during the plan year, and

4 ‘‘(F) no policy loans are outstanding at any

5 time during the plan year.

6 A plan funded exclusively by the purchase of group

7 insurance contracts which are determined under regu8 lations prescribed by the Secretary to have the same

9 characteristics as contracts described in the preceding

10 sentence shall be treated as a plan described in this

11 paragraph.

12 ‘‘(4) CONTROLLED GROUP.—For purposes of this

13 section and section 430, the term ‘controlled group’

14 means any group treated as a single employer under

15 subsection (b), (c), (m), or (o) of section 414.’’.

16 (b) EFFECTIVE DATE.—The amendment made by this

17 section shall apply to plan years beginning after December

18 31, 2006.

19 SEC. 112. FUNDING RULES APPLICABLE TO SINGLE-EM20 PLOYER PENSION PLANS.

21 Subchapter D of chapter 1 of the Internal Revenue

22 Code of 1986 (relating to deferred compensation, etc.) is

23 amended by adding at the end the following new part:
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1 ‘‘PART III—RULES RELATING TO MINIMUM

2 FUNDING STANDARDS AND BENEFIT LIMITATION

‘‘430. Minimum funding standards for single-employer defined benefit plans.

‘‘431. Minimum funding standards for multiemployer plans.

3 ‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-EM4 PLOYER DEFINED BENEFIT PLANS.

5 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For pur6 poses of this section and section 412(a)(2)(A), except as pro7 vided in subsection (f), the term ‘minimum required con8 tribution’ means, with respect to any plan year of a defined

9 benefit plan which is a single employer plan—

10 ‘‘(1) in any case in which the value of plan as11 sets of the plan (as reduced under subsection (f)(4))

12 is less than the funding target of the plan for the plan

13 year, the sum of—

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

15 the plan year,

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

17 any) for the plan for the plan year determined

18 under subsection (c), and

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

20 any) for the plan for the plan year as deter21 mined under subsection (e); or

22 ‘‘(2) in any case in which the value of plan as23 sets of the plan (as reduced under subsection (f)(4))

24 equals or exceeds the funding target of the plan for the
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1 plan year, the target normal cost of the plan for the

2 plan year reduced (but not below zero) by any such

3 excess.

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

5 section, except as provided in subsection (i)(2) with respect

6 to plans in at-risk status, the term ‘target normal cost’

7 means, for any plan year, the present value of all benefits

8 which are expected to accrue or to be earned under the plan

9 during the plan year. For purposes of this subsection, if

10 any benefit attributable to services performed in a preceding

11 plan year is increased by reason of any increase in com12 pensation during the current plan year, the increase in such

13 benefit shall be treated as having accrued during the current

14 plan year.

15 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.—

16 ‘‘(1) IN GENERAL.—For purposes of this section,

17 the shortfall amortization charge for a plan for any

18 plan year is the aggregate total of the shortfall amor19 tization installments for such plan year with respect

20 to the shortfall amortization bases for such plan year

21 and each of the 6 preceding plan years.

22 ‘‘(2) SHORTFALL AMORTIZATION INSTALL23 MENT.—For purposes of paragraph (1)—

24 ‘‘(A) DETERMINATION.—The shortfall amor25 tization installments are the amounts necessary
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1 to amortize the shortfall amortization base of the

2 plan for any plan year in level annual install3 ments over the 7-plan-year period beginning

4 with such plan year.

5 ‘‘(B) SHORTFALL INSTALLMENT.—The

6 shortfall amortization installment for any plan

7 year in the 7-plan-year period under subpara8 graph (A) with respect to any shortfall amortiza9 tion base is the annual installment determined

10 under subparagraph (A) for that year for that

11 base.

12 ‘‘(C) SEGMENT RATES.—In determining

13 any shortfall amortization installment under

14 this paragraph, the plan sponsor shall use the

15 segment rates determined under subparagraph

16 (C) of subsection (h)(2), applied under rules

17 similar to the rules of subparagraph (B) of sub18 section (h)(2).

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

20 purposes of this section, the shortfall amortization

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

22 of—

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

24 such plan year, over
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1 ‘‘(B) the present value (determined using

2 the segment rates determined under subpara3 graph (C) of subsection (h)(2), applied under

4 rules similar to the rules of subparagraph (B) of

5 subsection (h)(2)) of the aggregate total of the

6 shortfall amortization installments and waiver

7 amortization installments which have been deter8 mined for such plan year and any succeeding

9 plan year with respect to the shortfall amortiza10 tion bases and waiver amortization bases of the

11 plan for any plan year preceding such plan

12 year.

13 ‘‘(4) FUNDING SHORTFALL.—

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

15 section, except as provided in subparagraph (B),

16 the funding shortfall of a plan for any plan year

17 is the excess (if any) of—

18 ‘‘(i) the funding target of the plan for

19 the plan year, over

20 ‘‘(ii) the value of plan assets of the

21 plan (as reduced under subsection (f)(4)) for

22 the plan year which are held by the plan on

23 the valuation date.

24 ‘‘(B) TRANSITION RULE FOR AMORTIZATION

25 OF FUNDING SHORTFALL.—
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1 ‘‘(i) IN GENERAL.—Solely for purposes

2 of applying paragraph (3) in the case of

3 plan years beginning after 2006 and before

4 2011, only the applicable percentage of the

5 funding target shall be taken into account

6 under paragraph (3)(A) in determining the

7 funding shortfall for the plan year.

8 ‘‘(ii) APPLICABLE PERCENTAGE.—For

9 purposes of subparagraph (A)—

10 ‘‘(I) IN GENERAL.—Except as pro11 vided in subclause (II), the applicable

12 percentage shall be 93 percent for plan

13 years beginning in 2007, 96 percent

14 for plan years beginning in 2008, and

15 100 percent for any succeeding plan

16 year.

17 ‘‘(II) SMALL PLANS.—In the case

18 of a plan described in subsection

19 (g)(2)(B), the applicable percentage

20 shall be determined in accordance with

21 the following table:

‘‘In the case of a plan year The applicable

beginning in calendar year: percentage is—

2007 ................................................................................................ 92

2008 ................................................................................................ 94

2009 ................................................................................................ 96

2010 ................................................................................................ 98.
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1 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT2 TAINMENT OF FUNDING TARGET.—In any case in

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

4 is zero, for purposes of determining the shortfall am5 ortization charge for such plan year and succeeding

6 plan years, the shortfall amortization bases for all

7 preceding plan years (and all shortfall amortization

8 installments determined with respect to such bases)

9 shall be reduced to zero.

10 ‘‘(d) RULES RELATING TO FUNDING TARGET.—For

11 purposes of this section—

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

13 subsection (i)(1) with respect to plans in at-risk sta14 tus, the funding target of a plan for a plan year is

15 the present value of all benefits accrued or earned

16 under the plan as of the beginning of the plan year.

17 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT18 AGE.—The ‘funding target attainment percentage’ of

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

20 percentage) which—

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

22 year, bears to

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

24 plan year (determined without regard to sub25 section (i)(1)).
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1 ‘‘(e) WAIVER AMORTIZATION CHARGE.—

2 ‘‘(1) DETERMINATION OF WAIVER AMORTIZATION

3 CHARGE.—The waiver amortization charge (if any)

4 for a plan for any plan year is the aggregate total

5 of the waiver amortization installments for such plan

6 year with respect to the waiver amortization bases for

7 each of the 5 preceding plan years.

8 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—For

9 purposes of paragraph (1)—

10 ‘‘(A) DETERMINATION.—The waiver amorti11 zation installments are the amounts necessary to

12 amortize the waiver amortization base of the

13 plan for any plan year in level annual install14 ments over a period of 5 plan years beginning

15 with the succeeding plan year.

16 ‘‘(B) WAIVER INSTALLMENT.—The waiver

17 amortization installment for any plan year in

18 the 5-year period under subparagraph (A) with

19 respect to any waiver amortization base is the

20 annual installment determined under subpara21 graph (A) for that year for that base.

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

23 waiver amortization installment under this sub24 section, the plan sponsor shall use the segment rates

25 determined under subparagraph (C) of subsection
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1 (h)(2), applied under rules similar to the rules of sub2 paragraph (B) of subsection (h)(2).

3 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiver

4 amortization base of a plan for a plan year is the

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

6 such plan year under section 412(d).

7 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT8 TAINMENT OF FUNDING TARGET.—In any case in

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

10 is zero, for purposes of determining the waiver amor11 tization charge for such plan year and succeeding

12 plan years, the waiver amortization bases for all pre13 ceding plan years (and all waiver amortization in14 stallments with respect to such bases) shall be reduced

15 to zero.

16 ‘‘(f) USE OF PREFUNDING BALANCES TO SATISFY

17 MINIMUM REQUIRED CONTRIBUTIONS.—

18 ‘‘(1) IN GENERAL.—A plan sponsor may credit

19 any amount of a plan’s prefunding balance for a

20 plan year against the minimum required contribution

21 for the plan year and the amount of the contributions

22 an employer is required to make under section 412(c)

23 for the plan year shall be reduced by the amount so

24 credited. Any such amount shall be credited on the

25 first day of the plan year.
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1 ‘‘(2) PREFUNDING BALANCE.—

2 ‘‘(A) BEGINNING BALANCE.—The beginning

3 balance of a prefunding balance maintained by

4 a plan shall be zero, except that if a plan was

5 in effect for a plan year beginning in 2006 and

6 had a positive balance in the funding standard

7 account under section 412(b) (as in effect for

8 such plan year) as of the end of such plan year,

9 the beginning balance for the plan for its first

10 plan year beginning after 2006 shall be such

11 positive balance.

12 ‘‘(B) INCREASES.—

13 ‘‘(i) IN GENERAL.—As of the first day

14 of each plan year beginning after 2007, the

15 prefunding balance of a plan shall be in16 creased by the excess (if any) of—

17 ‘‘(I) the aggregate amount of em18 ployer contributions to the plan for the

19 preceding plan year, over

20 ‘‘(II) the minimum required con21 tribution for the preceding plan year.

22 ‘‘(ii) ADJUSTMENTS FOR INTEREST.—

23 Any excess contributions under clause (i)

24 shall be properly adjusted for interest accru25 ing for the periods between the first day of
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1 the current plan year and the dates on

2 which the excess contributions were made,

3 determined by using the effective interest

4 rate for the preceding plan year and by

5 treating contributions as being first used to

6 satisfy the minimum required contribution.

7 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS8 REGARDED.—Any contribution which is re9 quired to be made under section 436 in ad10 dition to any contribution required under

11 this section shall not be taken into account

12 for purposes of clause (i).

13 ‘‘(C) DECREASES.—As of the first day of

14 each plan year after 2007, the prefunding bal15 ance of a plan shall be decreased (but not below

16 zero) by the amount of the balance credited

17 under paragraph (1) against the minimum re18 quired contribution of the plan for the preceding

19 plan year.

20 ‘‘(D) ADJUSTMENTS FOR INVESTMENT EX21 PERIENCE.—In determining the prefunding bal22 ance of a plan as of the first day of the plan

23 year, the plan sponsor shall, in accordance with

24 regulations prescribed by the Secretary, adjust

25 such balance to reflect the rate of return on plan
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1 assets for the preceding plan year. Notwith2 standing subsection (g)(3), such rate of return

3 shall be determined on the basis of fair market

4 value and shall properly take into account, in

5 accordance with such regulations, all contribu6 tions, distributions, and other plan payments

7 made during such period.

8 ‘‘(3) LIMITATION FOR UNDERFUNDED PLANS.—

9 ‘‘(A) IN GENERAL.—If the ratio (expressed

10 as a percentage) for any plan year which—

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

12 preceding plan year, bears to

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

14 the preceding plan year (determined with15 out regard to subsection (i)(1)),

16 is less than 80 percent, the preceding provisions

17 of this subsection shall not apply unless employ18 ers liable for contributions to the plan under sec19 tion 412(c) make contributions to the plan for

20 the plan year in an aggregate amount not less

21 than the amount determined under subpara22 graph (B). Any contribution required by this

23 subparagraph may not be reduced by any credit

24 otherwise allowable under paragraph (1).
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1 ‘‘(B) APPLICABLE AMOUNT.—The amount

2 determined under this subparagraph for any

3 plan year is the greater of—

4 ‘‘(i) the target normal cost of the plan

5 for the plan year, or

6 ‘‘(ii) 25 percent of the minimum re7 quired contribution under subsection (a) for

8 the plan year without regard to this sub9 section.

10 ‘‘(4) REDUCTION IN VALUE OF ASSETS.—Solely

11 for purposes of applying subsections (a) and

12 (c)(4)(A)(ii) in determining the minimum required

13 contribution under this section, the value of the plan

14 assets otherwise determined without regard to this

15 paragraph shall be reduced by the amount of the

16 prefunding balance under this subsection.

17 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABILITIES.—

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

19 otherwise provided under this subsection, all deter20 minations under this section for a plan year shall be

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

22 plan year.

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

24 section—
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1 ‘‘(A) IN GENERAL.—Except as provided in

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

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

4 plan year.

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

6 each day during the preceding plan year, a plan

7 had 100 or fewer participants, the plan may des8 ignate any day during the plan year as its valu9 ation date for such plan year and succeeding

10 plan years. For purposes of this subparagraph,

11 all defined benefit plans (other than multiem12 ployer plans) maintained by the same employer

13 (or any member of such employer’s controlled

14 group) shall be treated as 1 plan, but only em15 ployees of such employer or member shall be

16 taken into account.

17 ‘‘(C) APPLICATION OF CERTAIN RULES IN

18 DETERMINATION OF PLAN SIZE.—For purposes of

19 this paragraph—

20 ‘‘(i) PLANS NOT IN EXISTENCE IN PRE21 CEDING YEAR.—In the case of the first plan

22 year of any plan, subparagraph (B) shall

23 apply to such plan by taking into account

24 the number of participants that the plan is
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1 reasonably expected to have on days during

2 such first plan year.

3 ‘‘(ii) PREDECESSORS.—Any reference

4 in subparagraph (B) to an employer shall

5 include a reference to any predecessor of

6 such employer.

7 ‘‘(3) DETERMINATION OF VALUE OF PLAN AS8 SETS.—For purposes of this section—

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

10 subparagraph (B), the value of plan assets shall

11 be the fair market value of the assets.

12 ‘‘(B) AVERAGING ALLOWED.—A plan may

13 determine the value of plan assets on the basis

14 of any reasonable actuarial method of valuation

15 providing for the averaging of fair market val16 ues, but only if such method—

17 ‘‘(i) is permitted under regulations

18 prescribed by the Secretary, and

19 ‘‘(ii) does not provide for averaging of

20 such values over more than the period be21 ginning on the last day of the 12th month

22 preceding the valuation date and ending on

23 the valuation date (or a similar period in

24 the case of a valuation date which is not the

25 1st day of a month).
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1 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE2 CEIPTS.—For purposes of determining the value of as3 sets under paragraph (3)—

4 ‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

5 ‘‘(i) an employer makes any contribu6 tion to the plan after the valuation date for

7 the plan year in which the contribution is

8 made, and

9 ‘‘(ii) the contribution is for a pre10 ceding plan year,

11 the contribution shall be taken into account as

12 an asset of the plan as of the valuation date, ex13 cept that in the case of any plan year beginning

14 after 2007, only the present value (determined as

15 of the valuation date) of such contribution may

16 be taken into account. For purposes of the pre17 ceding sentence, present value shall be deter18 mined using the effective interest rate for the

19 preceding plan year to which the contribution is

20 properly allocable.

21 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

22 CONTRIBUTIONS MADE BEFORE VALUATION

23 DATE.—If any contributions for any plan year

24 are made to or under the plan during the plan

25 year but before the valuation date for the plan
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1 year, the assets of the plan as of the valuation

2 date shall not include—

3 ‘‘(i) such contributions, and

4 ‘‘(ii) interest on such contributions for

5 the period between the date of the contribu6 tions and the valuation date, determined by

7 using the effective interest rate for the plan

8 year.

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

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

11 the determination of any present value or other com12 putation under this section shall be made on the basis

13 of actuarial assumptions and methods—

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

15 into account the experience of the plan and rea16 sonable expectations), and

17 ‘‘(B) which, in combination, offer the actu18 ary’s best estimate of anticipated experience

19 under the plan.

20 ‘‘(2) INTEREST RATES.—

21 ‘‘(A) EFFECTIVE INTEREST RATE.—For

22 purposes of this section, the term ‘effective inter23 est rate’ means, with respect to any plan for any

24 plan year, the single rate of interest which, if

25 used to determine the present value of the plan’s
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1 accrued or earned benefits referred to in sub2 section (d)(1), would result in an amount equal

3 to the funding target of the plan for such plan

4 year.

5 ‘‘(B) INTEREST RATES FOR DETERMINING

6 FUNDING TARGET.—For purposes of determining

7 the funding target of a plan for any plan year,

8 the interest rate used in determining the present

9 value of the benefits of the plan shall be—

10 ‘‘(i) in the case of benefits reasonably

11 determined to be payable during the 5-year

12 period beginning on the first day of the

13 plan year, the first segment rate with re14 spect to the applicable month,

15 ‘‘(ii) in the case of benefits reasonably

16 determined to be payable during the 15-year

17 period beginning at the end of the period

18 described in clause (i), the second segment

19 rate with respect to the applicable month,

20 and

21 ‘‘(iii) in the case of benefits reasonably

22 determined to be payable after the period

23 described in clause (ii), the third segment

24 rate with respect to the applicable month.
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1 ‘‘(C) SEGMENT RATES.—For purposes of

2 this paragraph—

3 ‘‘(i) FIRST SEGMENT RATE.—The term

4 ‘first segment rate’ means, with respect to

5 any month, the single rate of interest which

6 shall be determined by the Secretary for

7 such month on the basis of the corporate

8 bond yield curve for such month, taking

9 into account only that portion of such yield

10 curve which is based on bonds maturing

11 during the 5-year period commencing with

12 such month.

13 ‘‘(ii) SECOND SEGMENT RATE.—The

14 term ‘second segment rate’ means, with re15 spect to any month, the single rate of inter16 est which shall be determined by the Sec17 retary for such month on the basis of the

18 corporate bond yield curve for such month,

19 taking into account only that portion of

20 such yield curve which is based on bonds

21 maturing during each of the years in the

22 15-year period beginning at the end of the

23 period described 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 inter2 est which shall be determined by the Sec3 retary for such month on the basis of the

4 corporate bond yield curve for such month,

5 taking into account only that portion of

6 such yield curve which is based on bonds

7 maturing during periods beginning after

8 the period described in clause (ii).

9 ‘‘(D) CORPORATE BOND YIELD CURVE.—The

10 term ‘corporate bond yield curve’ means, with re11 spect to any month, a yield curve which is pre12 scribed by the Secretary for such month and

13 which reflects the average, for the 12-month pe14 riod ending with the month preceding such

15 month, of yields on investment grade corporate

16 bonds with varying maturities.

17 ‘‘(E) APPLICABLE MONTH.—For purposes of

18 this paragraph, the term ‘applicable month’

19 means, with respect to any plan for any plan

20 year, the month which includes the valuation

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

22 election of the plan administrator, any of the 4

23 months which precede such month. Any election

24 made under this subparagraph shall apply to the

25 plan year for which the election is made and all
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1 succeeding plan years, unless the election is re2 voked with the consent of the Secretary.

3 ‘‘(F) PUBLICATION REQUIREMENTS.—The

4 Secretary shall publish for each month the cor5 porate bond yield curve for such month and each

6 of the rates determined under this paragraph for

7 such month. The Secretary shall also publish a

8 description of the methodology used to determine

9 such yield curve and such rates which is suffi10 ciently detailed to enable plans to make reason11 able projections regarding the yield curve and

12 such rates for future months based on the plan’s

13 projection of future interest rates.

14 ‘‘(G) TRANSITION RULE.—

15 ‘‘(i) IN GENERAL.—Notwithstanding

16 the preceding provisions of this paragraph,

17 for plan years beginning in 2007 or 2008,

18 the first, second, or third segment rate for a

19 plan with respect to any month shall be

20 equal to the sum of—

21 ‘‘(I) the product of such rate for

22 such month determined without regard

23 to this subparagraph, multiplied by the

24 applicable percentage, and
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1 ‘‘(II) the product of the rate deter2 mined under the rules of section

3 412(b)(5)(B)(ii)(II) (as in effect for

4 plan years beginning in 2006), multi5 plied by a percentage equal to 100 per6 cent minus the applicable percentage.

7 ‘‘(ii) APPLICABLE PERCENTAGE.—For

8 purposes of clause (i), the applicable percentage is 331 9 ⁄3 percent for plan years beginning in 2007 and 662 10 ⁄3 percent for plan

11 years beginning in 2008.

12 ‘‘(3) MORTALITY TABLES.—

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

14 subparagraphs (C) and (D), the mortality table

15 used in determining any present value or mak16 ing any computation under this section shall be

17 the RP–2000 Combined Mortality Table, using

18 Scale AA, as published by the Society of Actu19 aries, as in effect on the date of the enactment

20 of the Pension Security and Transparency Act of

21 2005 and as revised from time to time under

22 subparagraph (B).

23 ‘‘(B) PERIODIC REVISION.—The Secretary

24 shall (at least every 10 years) make revisions in

25 any table in effect under subparagraph (A) to re-
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1 flect the actual experience of pension plans and

2 projected trends in such experience.

3 ‘‘(C) SUBSTITUTE MORTALITY TABLE.—

4 ‘‘(i) IN GENERAL.—Upon request by

5 the plan sponsor and approval by the Sec6 retary, a mortality table which meets the re7 quirements of clause (ii) shall be used in de8 termining any present value or making any

9 computation under this section during the

10 10-consecutive plan year period specified in

11 the request. A mortality table described in

12 this clause shall cease to be in effect if the

13 plan actuary determines at any time that

14 such table does not meet the requirements of

15 clause (ii).

16 ‘‘(ii) REQUIREMENTS.—A mortality

17 table meets the requirements of this clause if

18 the Secretary determines that—

19 ‘‘(I) there is a sufficient number

20 of plan participants, and the pension

21 plans have been maintained for a suffi22 cient period of time, to have credible

23 information necessary for purposes of

24 subclause (II),
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1 ‘‘(II) such table reflects the actual

2 experience of the pension plans main3 tained by the sponsor and projected

4 trends in general mortality experience,

5 ‘‘(III) except as provided by the

6 Secretary, such table will be used by

7 all plans maintained by the plan spon8 sor and all members of any controlled

9 group which includes the plan sponsor,

10 and

11 ‘‘(IV) such table is significantly

12 different from the table described in

13 subparagraph (A).

14 ‘‘(iii) DEADLINE FOR DISPOSITION OF

15 APPLICATION.—Any mortality table sub16 mitted to the Secretary for approval under

17 this subparagraph shall be treated as in ef18 fect for the first plan year in the 10-year

19 period described in clause (i) unless the Sec20 retary, during the 180-day period beginning

21 on the date of such submission, disapproves

22 of such table and provides the reasons that

23 such table fails to meet the requirements of

24 clause (ii). The 180-day period shall be ex25 tended for any period during which the Sec-
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1 retary has requested information from the

2 plan sponsor and such information has not

3 been provided.

4 ‘‘(D) SEPARATE MORTALITY TABLES FOR

5 THE DISABLED.—Notwithstanding subparagraph

6 (A)—

7 ‘‘(i) IN GENERAL.—The Secretary shall

8 establish mortality tables which may be

9 used (in lieu of the tables under subpara10 graph (A)) under this subsection for indi11 viduals who are entitled to benefits under

12 the plan on account of disability. The Sec13 retary shall establish separate tables for in14 dividuals whose disabilities occur in plan

15 years beginning before January 1, 1995,

16 and for individuals whose disabilities occur

17 in plan years beginning on or after such

18 date.

19 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

20 OCCURRING AFTER 1994.—In the case of dis21 abilities occurring in plan years beginning

22 after December 31, 1994, the tables under

23 clause (i) shall apply only with respect to

24 individuals described in such subclause who

25 are disabled within the meaning of title II
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1 of the Social Security Act and the regula2 tions thereunder.

3 ‘‘(iii) PERIODIC REVISION.—The Sec4 retary shall (at least every 10 years) make

5 revisions in any table in effect under clause

6 (i) to reflect the actual experience of pension

7 plans and projected trends in such experi8 ence.

9 ‘‘(E) TRANSITION RULE.—Under regula10 tions of the Secretary, any difference in present

11 value resulting from any differences in assump12 tions as set forth in the mortality table specified

13 in subparagraph (A) and assumptions as set

14 forth in the mortality table described in section

15 412(l)(7)(C)(ii) (as in effect for plan years be16 ginning in 2006) shall be phased in ratably over

17 the first period of 5 plan years beginning in or

18 after 2007 so as to be fully effective for the fifth

19 plan year.

20 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

21 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

22 FORMS.—For purposes of determining any present

23 value or making any computation under this section,

24 there shall be taken into account—
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1 ‘‘(A) the probability that future benefit pay2 ments under the plan will be made in the form

3 of optional forms of benefits provided under the

4 plan (including lump sum distributions, deter5 mined on the basis of the plan’s experience and

6 other related assumptions), and

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

8 such future benefit payments resulting from the

9 use of actuarial assumptions, in determining

10 benefit payments in any such optional form of

11 benefits, which are different from those specified

12 in this subsection.

13 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU14 ARIAL ASSUMPTIONS.—

15 ‘‘(A) IN GENERAL.—No actuarial assump16 tion used to determine the funding target for a

17 plan to which this paragraph applies may be

18 changed without the approval of the Secretary.

19 ‘‘(B) PLANS TO WHICH PARAGRAPH AP20 PLIES.—This paragraph shall apply to a plan

21 only if—

22 ‘‘(i) the aggregate unfunded benefits as

23 of the close of the preceding plan year (as

24 determined under section 4006(a)(3)(E)(iii)

25 of the Employee Retirement Income Secu-
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1 rity Act of 1974) of such plan and all other

2 plans maintained by the contributing spon3 sors (as defined in section 4001(a)(13) of

4 such Act) and members of such sponsors’

5 controlled groups (as defined in section

6 4001(a)(14) of such Act) which are covered

7 by title IV of such Act (disregarding plans

8 with no unfunded benefits) exceed

9 $50,000,000; and

10 ‘‘(ii) the change in assumptions (deter11 mined 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 before

18 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 the case of a plan to

23 which this subsection applies for a plan year, the

24 funding target of the plan for the plan year is

25 equal to the present value of all liabilities to par-
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1 ticipants and their beneficiaries under the plan

2 for the plan year, as determined by using the ad3 ditional actuarial assumptions described in sub4 paragraph (B).

5 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP6 TIONS.—The actuarial assumptions described in

7 this subparagraph are as follows:

8 ‘‘(i) All employees who are not other9 wise assumed to retire as of the valuation

10 date but who will be eligible to elect benefits

11 during the plan year and the 7 succeeding

12 plan years shall be assumed to retire at the

13 earliest retirement date under the plan but

14 not before the end of the plan year for which

15 the at-risk target liability and at-risk target

16 normal cost are being determined.

17 ‘‘(ii) All employees shall be assumed to

18 elect the retirement benefit available under

19 the plan at the assumed retirement age (de20 termined after application of clause (i))

21 which would result in the highest present

22 value of liabilities.

23 ‘‘(2) TARGET NORMAL COST OF AT-RISK

24 PLANS.—In the case of a plan to which this subsection

25 applies for a plan year, the target normal cost of the
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1 plan for such plan year shall be equal to the present

2 value of all benefits which are expected to accrue or

3 be earned under the plan during the plan year, deter4 mined using the additional actuarial assumptions de5 scribed in paragraph (1)(B).

6 ‘‘(3) MINIMUM AMOUNT.—In no event shall—

7 ‘‘(A) the at-risk target liability be less than

8 the target liability, as determined without regard

9 to this subsection, or

10 ‘‘(B) the at-risk target normal cost be less

11 than the target normal cost, as determined with12 out regard to this subsection.

13 ‘‘(4) DETERMINATION OF AT-RISK STATUS.—For

14 purposes of this subsection, a plan is in at-risk status

15 for a plan year if—

16 ‘‘(A) the plan is maintained by a finan17 cially-weak employer, and

18 ‘‘(B) the funding target attainment percent19 age for the plan year is less than 93 percent.

20 ‘‘(5) FINANCIALLY-WEAK EMPLOYER.—

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

22 subsection, the term ‘financially-weak employer’

23 means any employer if—

24 ‘‘(i) as of the valuation date for each

25 of the years during a period of at least 3
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1 consecutive plan years ending with the plan

2 year—

3 ‘‘(I) the employer has an out4 standing senior unsecured debt instru5 ment which is rated lower than invest6 ment grade by each of the nationally

7 recognized statistical rating organiza8 tions for corporate bonds that has

9 issued a credit rating for such instru10 ment, or

11 ‘‘(II) if no such debt instrument

12 has been rated by such an organization

13 but 1 or more of such organizations

14 has made an issuer credit rating for

15 such employer, all such organizations

16 which have so rated the employer have

17 rated such employer lower than invest18 ment grade, and

19 ‘‘(ii) at least 2 of the years during such

20 period are deterioration years.

21 If an employer is treated as a financially-weak

22 employer for any plan year, clause (ii) shall not

23 apply in determining whether the employer is so

24 treated for any succeeding plan year in any con-
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1 tinuous period of plan years for which the em2 ployer is treated as a financially-weak employer.

3 ‘‘(B) CONTROLLED GROUP EXCEPTION.—If

4 an employer treated as a financially-weak em5 ployer under subparagraph (A) is a member of

6 a controlled group (as defined in section

7 412(e)(4)), the employer shall not be treated as

8 a financially-weak employer if a significant

9 member (as determined under regulations pre10 scribed by the Secretary) of such group has an

11 outstanding senior unsecured debt instrument

12 that is rated as being investment grade by an or13 ganization described in subparagraph (A).

14 ‘‘(C) EMPLOYERS WITH NO RATINGS.—If—

15 ‘‘(i) an employer has no debt instru16 ment described in subparagraph (A)(i)

17 which was rated by an organization de18 scribed in such subparagraph, and

19 ‘‘(ii) no such organization has made

20 an issuer credit rating for such employer,

21 then such employer shall only be treated as a fi22 nancially-weak employer to the extent provided

23 in regulations prescribed by the Secretary.

24 ‘‘(6) DETERMINATION OF DETERIORATION

25 YEAR.—For purposes of paragraph (5), the term ‘de-
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1 terioration year’ means any year during the period

2 described in paragraph (5)(A)(i) for which the rating

3 described in subclause (I) or (II) of paragraph

4 (5)(A)(i) by each organization is either—

5 ‘‘(A) lower than the lowest rating of the em6 ployer by such organization for a preceding year

7 in such period, or

8 ‘‘(B) the lowest rating used by such organi9 zation.

10 ‘‘(7) YEARS BEFORE EFFECTIVE DATE.—For

11 purposes of paragraphs (5) and (6), plan years begin12 ning before 2007 shall not be taken into account.

13 ‘‘(8) TRANSITION BETWEEN APPLICABLE FUND14 ING TARGETS AND BETWEEN APPLICABLE TARGET

15 NORMAL COSTS.—

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

17 plan which is in at-risk status for a plan year

18 has been in such status for a consecutive period

19 of fewer than 5 plan years, the applicable

20 amount of the funding target and of the target

21 normal cost shall be, in lieu of the amount deter22 mined without regard to this paragraph, the sum

23 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 such

5 plan year of the excess of the amount deter6 mined under this subsection (without regard

7 to this paragraph) over the amount deter8 mined under this section without regard to

9 this subsection.

10 ‘‘(B) IMPROVEMENT YEARS NOT TAKEN INTO

11 ACCOUNT.—

12 ‘‘(i) IN GENERAL.—An improvement

13 year shall not be taken into account in de14 termining any consecutive period of plan

15 years for purposes of subparagraph (A).

16 ‘‘(ii) APPLICATION OF SUBSECTION

17 AFTER IMPROVEMENT YEAR ENDS.—Plan

18 years immediately before and after an im19 provement year (or consecutive period of

20 improvement years) shall be treated as con21 secutive for purposes of subparagraph (A).

22 ‘‘(iii) IMPROVEMENT YEAR.—For pur23 poses of this subparagraph, the term ‘im24 provement year’ means any plan year for

25 which any rating described in subclause (I)
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1 or (II) of paragraph (5)(A)(i) is higher

2 than such rating for the preceding plan

3 year.

4 ‘‘(C) TRANSITION PERCENTAGE.—For pur5 poses of subparagraph (A), the transition per6 centage shall be determined in accordance with

7 the following table:

‘‘If the consecutive number of

years (including the plan year) The transition

the plan is in at-risk status is— percentage is—

1 ...................................................................................................... 20

2 ...................................................................................................... 40

3 ...................................................................................................... 60

4 ...................................................................................................... 80.

8 ‘‘(D) YEARS BEFORE EFFECTIVE DATE.—

9 For purposes of this paragraph, plan years be10 ginning before 2007 shall not be taken into ac11 count.

12 ‘‘(9) PLANS TO WHICH SUBSECTION APPLIES.—

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

14 this paragraph, this subsection shall apply to

15 any plan to which this section applies and which

16 is in at-risk status for the plan year.

17 ‘‘(B) EXCEPTION FOR SMALL PLANS.—This

18 subsection shall not apply to a plan for a plan

19 year if the plan was described in subsection

20 (g)(2)(B) for the preceding plan year, deter21 mined by substituting ‘500’ for ‘100’.
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1 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

2 BY CERTAIN COOPERATIVES.—This subsection

3 shall not apply to an eligible cooperative plan

4 described in subparagraph (D).

5 ‘‘(D) ELIGIBLE COOPERATIVE PLAN DE6 FINED.—For purposes of subparagraph (C), a

7 plan shall be treated as an eligible cooperative

8 plan for a plan year if the plan is maintained

9 by more than 1 employer and at least 85 percent

10 of the employers are—

11 ‘‘(i) rural cooperatives (as defined in

12 section 401(k)(7)(B) without regard to

13 clause (iv) thereof), or

14 ‘‘(ii) organizations which are—

15 ‘‘(I) cooperative organizations de16 scribed in section 1381(a) which are

17 more than 50-percent owned by agri18 cultural producers or by cooperatives

19 owned by agricultural producers, or

20 ‘‘(II) more than 50-percent owned,

21 or controlled by, one or more coopera22 tive organizations described in sub23 clause (I).

24 A plan shall also be treated as an eligible cooper25 ative plan for any plan year for which it is de-
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1 scribed in section 210(a) of the Employee Retire2 ment Income Security Act of 1974 and is main3 tained by a rural telephone cooperative associa4 tion described in section 3(40)(B)(v) of such Act.

5 ‘‘(E) EXCEPTION FOR PLANS SECURED BY

6 THIRD PARTIES BOUND BY PBGC AGREEMENTS.—

7 This subsection shall not apply to any plan if—

8 ‘‘(i) a person other than the employer

9 obligated to contribute under the plan is,

10 under the terms of an agreement with the

11 Pension Benefit Guaranty Corporation, lia12 ble for any failure of the employer to meet

13 its obligation to pay any minimum re14 quired contribution or termination liability

15 with respect to the plan; and

16 ‘‘(ii) such person is not a financially17 weak employer under paragraph (5).

18 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU19 TIONS.—

20 ‘‘(1) IN GENERAL.—For purposes of this section,

21 the due date for any payment of any minimum required contribution for any plan year shall be 81 22 ⁄2

23 months after the close of the plan year.

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

25 paragraph (1) for a plan year made after the valu-
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1 ation date for such plan year shall be increased by in2 terest for the period from the valuation date to the

3 payment date, determined by using the effective rate

4 of interest for the plan for such 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.—A plan shall make the required in10 stallments under this paragraph for a plan year

11 if the plan had a funding shortfall for the pre12 ceding plan year. If the required installment is

13 not paid in full, then the minimum required

14 contribution for the plan year (as increased

15 under paragraph (2)) shall be further increased

16 by an amount equal to the interest on the

17 amount of the underpayment for the period of

18 the underpayment, using an interest rate equal

19 to the excess of—

20 ‘‘(i) 175 percent of the Federal mid21 term rate (as in effect under section 1274

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

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

24 plan for the plan year.
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1 ‘‘(B) AMOUNT OF UNDERPAYMENT, PERIOD

2 OF UNDERPAYMENT.—For purposes of subpara3 graph (A)—

4 ‘‘(i) AMOUNT.—The amount of the un5 derpayment shall be the excess of—

6 ‘‘(I) the required installment, over

7 ‘‘(II) the amount (if any) of the

8 installment contributed to or under the

9 plan on or before the due date for the

10 installment.

11 ‘‘(ii) PERIOD OF UNDERPAYMENT.—

12 The period for which any interest is charged

13 under this paragraph with respect to any

14 portion of the underpayment shall run from

15 the due date for the installment to the date

16 on which such portion is contributed to or

17 under the plan.

18 ‘‘(iii) ORDER OF CREDITING CON19 TRIBUTIONS.—For purposes of clause

20 (i)(II), contributions shall be credited

21 against unpaid required installments in the

22 order in which such installments are re23 quired to be paid.
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1 ‘‘(C) NUMBER OF REQUIRED INSTALL2 MENTS; DUE DATES.—For purposes of this

3 paragraph—

4 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.—

5 There shall be 4 required installments for

6 each plan year.

7 ‘‘(ii) TIME FOR PAYMENT OF INSTALL8 MENTS.—The due dates for required install9 ments are set forth in the following 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.

10 ‘‘(D) AMOUNT OF REQUIRED INSTALL11 MENT.—For purposes of this paragraph—

12 ‘‘(i) IN GENERAL.—The amount of any

13 required installment shall be 25 percent of

14 the required annual payment.

15 ‘‘(ii) REQUIRED ANNUAL PAYMENT.—

16 For purposes of clause (i), the term ‘re17 quired annual payment’ means the lesser

18 of—

19 ‘‘(I) 90 percent of the minimum

20 required contribution (without regard

21 to any waiver under section 302(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 302(c)) to the plan for the pre8 ceding 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 reg22 ulations prescribed by the Secretary of the

23 Treasury.

24 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

25 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 value

5 of the liquid assets paid in such installment is

6 less than the liquidity shortfall (whether or not

7 such liquidity shortfall exceeds the amount of

8 such installment required to be paid but for this

9 paragraph).

10 ‘‘(B) PLANS TO WHICH PARAGRAPH AP11 PLIES.—This paragraph shall apply to a plan

12 which—

13 ‘‘(i) is required to pay installments

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

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

16 quarter during such plan year.

17 ‘‘(C) PERIOD OF UNDERPAYMENT.—For

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

19 installment that is treated as not paid under

20 subparagraph (A) shall continue to be treated as

21 unpaid until the close of the quarter in which the

22 due date for such installment occurs.

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

24 amount of any required installment is increased

25 by reason of subparagraph (A), in no event shall
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1 such increase exceed the amount which, when

2 added to prior installments for the plan year, is

3 necessary to increase the funding target attain4 ment percentage of the plan for the plan year

5 (taking into account the expected increase in

6 funding target due to benefits accruing or earned

7 during the plan year) to 100 percent.

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

9 subparagraph:

10 ‘‘(i) LIQUIDITY SHORTFALL.—The term

11 ‘liquidity shortfall’ means, with respect to

12 any required installment, an amount equal

13 to the excess (as of the last day of the quar14 ter for which such installment is made) of—

15 ‘‘(I) the base amount with respect

16 to such quarter, over

17 ‘‘(II) the value (as of such last

18 day) of the plan’s liquid assets.

19 ‘‘(ii) BASE AMOUNT.—

20 ‘‘(I) IN GENERAL.—The term ‘base

21 amount’ means, with respect to any

22 quarter, an amount equal to 3 times

23 the sum of the adjusted disbursements

24 from the plan for the 12 months ending

25 on the last day of such quarter.
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1 ‘‘(II) SPECIAL RULE.—If the

2 amount determined under subclause (I)

3 exceeds an amount equal to 2 times the

4 sum of the adjusted disbursements from

5 the plan for the 36 months ending on

6 the last day of the quarter and an en7 rolled actuary certifies to the satisfac8 tion of the Secretary that such excess is

9 the result of nonrecurring cir10 cumstances, the base amount with re11 spect to such quarter shall be deter12 mined without regard to amounts re13 lated to those nonrecurring cir14 cumstances.

15 ‘‘(iii) DISBURSEMENTS FROM THE

16 PLAN.—The term ‘disbursements from the

17 plan’ means all disbursements from the

18 trust, including purchases of annuities,

19 payments of single sums and other benefits,

20 and administrative expenses.

21 ‘‘(iv) ADJUSTED DISBURSEMENTS.—

22 The term ‘adjusted disbursements’ means

23 disbursements from the plan reduced by the

24 product of—
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1 ‘‘(I) the plan’s funding target at2 tainment percentage for the plan year,

3 and

4 ‘‘(II) the sum of the purchases of

5 annuities, payments of single sums,

6 and such other disbursements as the

7 Secretary shall provide in regulations.

8 ‘‘(v) LIQUID ASSETS.—The term ‘liq9 uid assets’ means cash, marketable securi10 ties, and such other assets as specified by

11 the Secretary in regulations.

12 ‘‘(vi) QUARTER.—The term ‘quarter’

13 means, with respect to any required install14 ment, the 3-month period preceding the

15 month in which the due date for such in16 stallment occurs.

17 ‘‘(F) REGULATIONS.—The Secretary may

18 prescribe such regulations as are necessary to

19 carry out this paragraph.

20 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO MAKE

21 REQUIRED CONTRIBUTIONS.—

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

23 which this subsection applies, if—
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1 ‘‘(A) any person fails to make a contribu2 tion payment required by section 412 and this

3 section before the due date for such payment, and

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

5 (including interest), when added to the aggregate

6 unpaid balance of all preceding such payments

7 for which payment was not made before the due

8 date (including interest), exceeds $1,000,000,

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

10 amount determined under paragraph (3) upon all

11 property and rights to property, whether real or per12 sonal, belonging to such person and any other person

13 who is a member of the same controlled group of

14 which such person is a member.

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

16 This subsection shall apply to a defined benefit plan

17 which is a single-employer plan covered under section

18 4021 of the Employee Retirement Income Security

19 Act of 1974 for any plan year for which the funding

20 target attainment percentage (as defined in subsection

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

22 ‘‘(3) AMOUNT OF LIEN.—For purposes of para23 graph (1), the amount of the lien shall be equal to the

24 aggregate unpaid balance of contribution payments
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1 required under this section and section 302 for which

2 payment has not been made before the due date.

3 ‘‘(4) NOTICE OF FAILURE; LIEN.—

4 ‘‘(A) NOTICE OF FAILURE.—A person com5 mitting a failure described in paragraph (1)

6 shall notify the Pension Benefit Guaranty Cor7 poration of such failure within 10 days of the

8 due date for the required contribution payment.

9 ‘‘(B) PERIOD OF LIEN.—The lien imposed

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

11 the required contribution payment and shall con12 tinue until the last day of the first plan year in

13 which the plan ceases to be described in para14 graph (1)(B). Such lien shall continue to run

15 without regard to whether such plan continues to

16 be described in paragraph (2) during the period

17 referred to in the preceding sentence.

18 ‘‘(C) CERTAIN RULES TO APPLY.—Any

19 amount with respect to which a lien is imposed

20 under paragraph (1) shall be treated as taxes

21 due and owing the United States and rules simi22 lar to the rules of subsections (c), (d), and (e) of

23 section 4068 of the Employee Retirement Income

24 Security Act of 1974 shall apply with respect to
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1 a lien imposed by subsection (a) and the amount

2 with respect to such lien.

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

4 paragraph (1) may be perfected and enforced only by

5 the Pension Benefit Guaranty Corporation, or at the

6 direction of the Pension Benefit Guaranty Corpora7 tion, by the contributing sponsor (or any member of

8 the controlled group of the contributing sponsor).

9 ‘‘(6) DEFINITIONS.—For purposes of this

10 subsection—

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

12 ‘contribution payment’ means, in connection

13 with a plan, a contribution payment required to

14 be made to the plan, including any required in15 stallment under paragraphs (3) and (4) of sub16 section (j).

17 ‘‘(B) DUE DATE; REQUIRED INSTALL18 MENT.—The terms ‘due date’ and ‘required in19 stallment’ have the meanings given such terms

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

21 payment other than a required installment, the

22 due date shall be the date such payment is re23 quired to be made under section 303.

24 ‘‘(C) CONTROLLED GROUP.—The term ‘con25 trolled group’ means any group treated as a sin-
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1 gle employer under subsections (b), (c), (m), and

2 (o) of section 414.

3 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT AC4 COUNTS.—In the case of a qualified transfer (as defined in

5 section 420), any assets so transferred shall not, for pur6 poses of this section, be treated as assets in the plan.’’.

7 (b) EFFECTIVE DATE.—The amendments made by this

8 section shall apply with respect to plan years beginning

9 after 2006.

10 SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER

11 PLANS.

12 (a) IN GENERAL.—Part III of subchapter D of chapter

13 1 of the Internal Revenue Code of 1986 (relating to rules

14 relating to minimum funding standards) is amended by

15 adding at the end the following new subpart:

16 ‘‘Subpart B—Limitations on Benefit Improvements by

17 Single-Employer Plans

‘‘Sec. 436. Funding-based limits on benefits and benefit accruals under single-employer plans.

18 ‘‘SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BEN19 EFIT ACCRUALS UNDER SINGLE-EMPLOYER

20 PLANS.

21 ‘‘(a) GENERAL RULE.—For purposes of section

22 401(a)(29), a defined benefit plan which is a single-em23 ployer plan shall be treated as meeting the requirements
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1 of this section if the plan meets the requirements of sub2 sections (b), (c), and (d).

3 ‘‘(b) LIMITATIONS ON PLAN AMENDMENTS INCREASING

4 LIABILITY FOR BENEFITS.—

5 ‘‘(1) IN GENERAL.—Except as provided in this

6 section, no amendment to a single-employer plan

7 which has the effect of increasing liabilities of the

8 plan by reason of increases in benefits, establishment

9 of new benefits, changing the rate of benefit accrual,

10 or changing the rate at which benefits become non11 forfeitable may take effect during any plan year if the

12 adjusted funding target attainment percentage as of

13 the valuation date of the plan for such plan year is—

14 ‘‘(A) less than 80 percent, or

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

16 into account such amendment.

17 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease to

18 apply with respect to any plan year, effective as of

19 the first date of the plan year (or if later, the effective

20 date of the amendment), upon payment by the plan

21 sponsor of a contribution (in addition to any min22 imum required contribution under section 430) equal

23 to—

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

25 amount of the increase in the funding target of
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1 the plan (under section 430) for the plan year

2 attributable to the amendment, and

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

4 amount sufficient to result in a funding target

5 attainment percentage of 80 percent.

6 ‘‘(3) EXCEPTION FOR CERTAIN BENEFIT IN7 CREASES.—Paragraph (1) shall not apply to any

8 amendment which provides for an increase in benefits

9 under a formula which is not based on a partici10 pant’s compensation, but only if the rate of such in11 crease is not in excess of the contemporaneous rate of

12 increase in average wages of participants covered by

13 the amendment.

14 ‘‘(c) LIMITATIONS ON ACCELERATED BENEFIT DIS15 TRIBUTIONS.—

16 ‘‘(1) IN GENERAL.—The requirements of this sub17 section are met if the plan provides that, with respect

18 to any plan year—

19 ‘‘(A) if the plan’s adjusted funded target li20 ability percentage as of the valuation date for the

21 preceding plan year was less than 60 percent

22 and the preceding plan year is not otherwise in

23 a prohibited period, the plan sponsor shall, in

24 addition to any other contribution required

25 under section 430, contribute for the current
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1 plan year and each succeeding plan year in the

2 prohibited period with respect to the current

3 plan year the amount (if any) which, when

4 added to the portion of the minimum required

5 contribution for the plan year described in sub6 paragraphs (B) and (C) of section 430(a)(1), is

7 sufficient to result in an adjusted funded target

8 liability percentage for the plan year of 60 per9 cent, and

10 ‘‘(B) no prohibited payments will be made

11 during a prohibited period.

12 ‘‘(2) PROHIBITED PAYMENT.—For purpose of

13 this subsection—

14 ‘‘(A) IN GENERAL.—The term ‘prohibited

15 payment’ means—

16 ‘‘(i) any payment, in excess of the

17 monthly amount paid under a single life

18 annuity (plus any social security supple19 ments described in the last sentence of sec20 tion 411(a)(9)), to a participant or bene21 ficiary whose annuity starting date (as de22 fined in section 417(f)(2)) occurs during a

23 prohibited period,
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1 ‘‘(ii) any payment for the purchase of

2 an irrevocable commitment from an insurer

3 to pay benefits, and

4 ‘‘(iii) any other payment specified by

5 the Secretary by regulations.

6 ‘‘(B) EXCEPTION FOR CERTAIN PAY7 MENTS.—In the case of any prohibited period de8 scribed in paragraph (3)(A), the term ‘prohibited

9 payment’ shall not include any payment if the

10 amount of the payment does not exceed the lesser

11 of—

12 ‘‘(i) 50 percent of the amount of the

13 payment which could be made without re14 gard to this subsection, or

15 ‘‘(ii) the present value (determined

16 under guidance prescribed by the Pension

17 Benefit Guaranty Corporation, using the

18 interest and mortality assumptions under

19 section 417(e)) of the maximum guarantee

20 with respect to the participant under sec21 tion 4022 of the Employee Retirement In22 come Security Act of 1974.

23 The exception under this subparagraph shall

24 only apply once with respect to any participant,

25 except that, for purposes of this sentence, a par-
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1 ticipant and any beneficiary on his behalf (in2 cluding an alternate payee, as defined in section

3 414(p)(8)) shall be treated as 1 participant. If

4 the accrued benefit of a participant is allocated

5 to such an alternate payee and 1 or more other

6 persons, the amount under clause (ii) shall be al7 located among such persons in the same manner

8 as the accrued benefit is allocated unless the

9 qualified domestic relations order (as defined in

10 section 414(p)(1)(A)) provides otherwise.

11 ‘‘(3) PROHIBITED PERIOD.—For purposes of

12 paragraph (1), the term ‘prohibited period’ means—

13 ‘‘(A) except as provided in paragraph (4),

14 if a plan sponsor is required to make the con15 tribution for the current plan year under para16 graph (1), the period beginning on the 1st day

17 of the plan year and ending on the last day of

18 the 1st period of 2 consecutive plan years (begin19 ning on or after such 1st day) for which the

20 plan’s adjusted funded target liability percentage

21 was at least 60 percent,

22 ‘‘(B) any period the plan sponsor is in

23 bankruptcy, or
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1 ‘‘(C) any period during which the plan has

2 a liquidity shortfall (as defined in section

3 430(j)(4)(E)(i)).

4 The prohibited period for purposes of subparagraph

5 (B) shall not include any portion of a plan year

6 (even if the plan sponsor is in bankruptcy during

7 such period) which occurs on or after the date the

8 plan’s enrolled actuary certifies that, as of the valu9 ation date for the plan year, the plan’s adjusted fund10 ed target liability percentage is at least 100 percent.

11 ‘‘(4) SATISFACTION OF REQUIREMENT BEFORE

12 CLOSE OF PLAN YEAR.—If, before the close of the cur13 rent plan year—

14 ‘‘(A) the plan sponsor makes the contribu15 tion required to be made under paragraph (1),

16 or

17 ‘‘(B) the plan’s enrolled actuary certifies

18 that, as of the valuation date for the plan year,

19 the adjusted funded target liability percentage of

20 the plan is at least 60 percent,

21 this subsection shall be applied as if no prohibited pe22 riod had begun as of the beginning of such year and

23 the plan shall, under rules described by the Secretary,

24 restore any payments not made during the prohibited
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1 period in effect before the application of this para2 graph.

3 ‘‘(d) LIMITATION ON BENEFIT ACCRUALS FOR PLANS

4 WITH SEVERE FUNDING SHORTFALLS.—

5 ‘‘(1) IN GENERAL.—Except as provided in sub6 section (e), a single-employer plan shall provide that

7 all future benefit accruals under the plan shall cease

8 during a severe funding shortfall period, but only to

9 the extent the cessation of such accruals would have

10 been permitted under section 411(d)(6) if the ces11 sation had been implemented by a plan amendment

12 adopted immediately before the severe funding short13 fall period.

14 ‘‘(2) SEVERE FUNDING SHORTFALL PERIOD.—

15 For purposes of paragraph (1), the term ‘severe fund16 ing shortfall period’ means in the case of a plan the

17 adjusted funding target attainment percentage of

18 which as of the valuation date of the plan for any

19 plan year is less than 60 percent, the period—

20 ‘‘(A) beginning on the 1st day of the suc21 ceeding plan year, and

22 ‘‘(B) ending on the date the plan’s enrolled

23 actuary certifies that the plan’s funding target

24 attainment percentage is at least 60 percent.
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1 ‘‘(3) OPPORTUNITY FOR INCREASED FUNDING.—

2 For purposes of paragraph (2)(A), a plan shall not

3 be treated as described in such paragraph for a plan

4 year if the plan’s enrolled actuary certifies that the

5 plan sponsor has before the end of the plan year con6 tributed (in addition to any minimum required con7 tribution under section 430) the amount sufficient to

8 result in an adjusted funding target attainment per9 centage as of the valuation date for the plan year of

10 60 percent.

11 ‘‘(e) EXCEPTION FOR CERTAIN COLLECTIVELY BAR12 GAINED BENEFITS.—In the case of a plan maintained pur13 suant to a collective bargaining agreement between em14 ployee representatives and the plan sponsor and in effect

15 before the beginning of the first day on which a limitation

16 would otherwise apply under subsections (b), (c), or (d)—

17 ‘‘(1) such limitations shall not apply to any

18 amendment, prohibited payment, or accrual with re19 spect to such plan, but

20 ‘‘(2) the plan sponsor shall contribute (in addi21 tion to any minimum required contribution under

22 section 430) the amount sufficient to result in a fund23 ing target attainment percentage (as of the valuation

24 date for the plan year in which any such limitation
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1 would otherwise apply) equal to the percentage nec2 essary to prevent the limitation from applying.

3 ‘‘(f) RULES RELATING TO REQUIRED CONTRIBU4 TIONS.—

5 ‘‘(1) SECURITY MAY BE PROVIDED.—

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

7 section, the adjusted funding target attainment

8 percentage shall be determined by treating as an

9 asset of the plan any security provided by a plan

10 sponsor in a form meeting the requirements of

11 subparagraph (B) .

12 ‘‘(B) FORM OF SECURITY.—The security re13 quired under subparagraph (A) shall consist of—

14 ‘‘(i) a bond issued by a corporate sur15 ety company that is an acceptable surety

16 for purposes of section 412 of the Employee

17 Retirement Income Security Act of 1974,

18 ‘‘(ii) cash, or United States obligations

19 which mature in 3 years or less, held in es20 crow by a bank or similar financial institu21 tion, or

22 ‘‘(iii) such other form of security as is

23 satisfactory to the Secretary and the parties

24 involved.
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1 ‘‘(C) ENFORCEMENT.—Any security pro2 vided under subparagraph (A) may be perfected

3 and enforced at any time after the earlier of—

4 ‘‘(i) the date on which the plan termi5 nates,

6 ‘‘(ii) if there is a failure to make a

7 payment of the minimum required con8 tribution for any plan year beginning after

9 the security is provided, the due date for the

10 payment under section 430(j), or

11 ‘‘(iii) if the adjusted funding target at12 tainment percentage is less than 60 percent

13 for a consecutive period of 7 years, the valu14 ation date for the last year in the period.

15 ‘‘(D) RELEASE OF SECURITY.—The security

16 shall be released (and any amounts thereunder

17 shall be refunded together with any interest ac18 crued thereon) at such time as the Secretary may

19 prescribe in regulations, including regulations

20 for partial releases of the security by reason of

21 increases in the funding target attainment per22 centage.

23 ‘‘(2) PREFUNDING BALANCE MAY NOT BE

24 USED.—No prefunding balance under section 430(f)
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1 may be used to satisfy any required contribution

2 under this section.

3 ‘‘(3) TREATMENT AS UNPAID MINIMUM RE4 QUIRED CONTRIBUTION.—The amount of any required

5 contribution which a plan sponsor fails to make

6 under subsection (b) or (d) for any plan year shall

7 be treated as an unpaid minimum required contribu8 tion for purposes of subsection (j) and (k) of section

9 430 and for purposes of section 4971.

10 ‘‘(g) NEW PLANS.—Subsections (b) and (d) 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 subsection

13 to a plan shall include a reference to any predecessor plan.

14 ‘‘(h) PRESUMED UNDERFUNDING FOR PURPOSES OF

15 BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S FUNDING

16 STATUS.—

17 ‘‘(1) PRESUMPTION OF CONTINUED UNDER18 FUNDING.—In any case in which a benefit limitation

19 under subsection (b), (c), or (d) has been applied to

20 a plan with respect to the plan year preceding the

21 current plan year, the adjusted funding target attain22 ment percentage of the plan as of the valuation date

23 of the plan for the current plan year shall be pre24 sumed to be equal to the adjusted funding target at25 tainment percentage of the plan as of the valuation
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1 date of the plan for the preceding plan year until the

2 enrolled actuary of the plan certifies the actual ad3 justed funding target attainment percentage of the

4 plan as of the valuation date of the plan for the cur5 rent 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 first

9 day of the 10th month of the current plan year, for

10 purposes of subsections (b), (c), and (d), the plan’s

11 adjusted funding target attainment percentage shall

12 be conclusively presumed to be less than 60 percent as

13 of the first day of such 10th month.

14 ‘‘(i) TREATMENT OF PLAN AS OF CLOSE OF PROHIB15 ITED OR CESSATION PERIOD.—For purposes of applying

16 this part—

17 ‘‘(1) OPERATION OF PLAN AFTER PERIOD.—Un18 less the plan provides otherwise, payments and accru19 als will resume effective as of the day following the

20 close of a period of limitation of payment or accrual

21 of benefits under subsection (c) or (d).

22 ‘‘(2) TREATMENT OF AFFECTED BENEFITS.—

23 Nothing in this subsection shall be construed as affect24 ing the plan’s treatment of benefits which would have

25 been paid or accrued but for this section.
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1 ‘‘(j) FUNDING TARGET ATTAINMENT PERCENTAGE.—

2 For purposes of this section—

3 ‘‘(1) IN GENERAL.—The term ‘funding target at4 tainment percentage’ has the same meaning given

5 such term by section 430(d)(2).

6 ‘‘(2) ADJUSTED FUNDED TARGET LIABILITY PER7 CENTAGE.—The term ‘adjusted funded target liability

8 percentage’ means the funded target liability percent9 age which is determined under subparagraph (A) by

10 increasing each of the amounts under subparagraphs

11 (A) and (B) of section 430(d)(2) by the aggregate

12 amount of purchases of annuities, payments of single

13 sums, and such other disbursements as the Secretary

14 shall prescribe in regulations, which were made by the

15 plan during the preceding 2 plan years.

16 ‘‘(k) SPECIAL RULES.—

17 ‘‘(1) BANKRUPTCY.—In the case of a plan spon18 sor during any period the plan is in bankruptcy—

19 ‘‘(A) subsection (b) shall be applied by sub20 stituting ‘100 percent’ for ‘80 percent’ each place

21 it appears,

22 ‘‘(B) any exception under subsection (b) for

23 any benefit increases pursuant to a collective

24 bargaining agreement shall not apply, and
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1 ‘‘(C) the exception under subsection (f) shall

2 not apply for purposes of subsection (b).

3 ‘‘(2) YEARS BEFORE EFFECTIVE DATE.—No plan

4 year beginning before 2007 shall be taken into ac5 count in determining whether this section applies to

6 any plan year beginning after 2006.’’.

7 (b) EFFECTIVE DATES.—

8 (1) IN GENERAL.—The amendments made by

9 this section shall apply to plan years beginning after

10 December 31, 2006.

11 (2) COLLECTIVE BARGAINING EXCEPTION.—In

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

13 collective bargaining agreements between employee

14 representatives and 1 or more employers ratified be15 fore January 1, 2007, the amendments made by this

16 section shall not apply to plan years beginning before

17 the earlier of—

18 (A) the later of—

19 (i) the date on which the last collective

20 bargaining agreement relating to the plan

21 terminates (determined without regard to

22 any extension thereof agreed to after the

23 date of the enactment of this Act), or

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

25 to which the amendments made by this sub-
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1 section would (but for this subparagraph)

2 apply, or

3 (B) January 1, 2010.

4 For purposes of subparagraph (A)(i), any plan

5 amendment made pursuant to a collective bargaining

6 agreement relating to the plan which amends the plan

7 solely to conform to any requirement added by this

8 section shall not be treated as a termination of such

9 collective bargaining agreement.

10 SEC. 114. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EM11 PLOYER PLANS.

12 (a) IN GENERAL.—Section 404 of the Internal Revenue

13 Code of 1986 (relating to deduction for contributions of an

14 employer to an employees’ trust or annuity plan and com15 pensation under a deferred payment plan) is amended—

16 (1) in subsection (a)(1)(A), by inserting ‘‘in the

17 case of a defined benefit plan other than a multiem18 ployer plan, in an amount determined under sub19 section (o), and in the case of any other plan’’ after

20 ‘‘section 501(a),’’, and

21 (2) by inserting at the end the following new

22 subsection:

23 ‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER

24 PLANS.—For purposes of subsection (a)(1)(A)—
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1 ‘‘(1) IN GENERAL.—In the case of a defined ben2 efit plan to which subsection (a)(1)(A) applies (other

3 than a multiemployer plan), the amount determined

4 under this subsection for any taxable year shall be

5 equal to the greater of—

6 ‘‘(A) the sum of the amounts determined

7 under paragraph (2) with respect to each plan

8 year ending with or within the taxable year, or

9 ‘‘(B) the sum of the minimum required con10 tributions under section 430 for such plan years.

11 ‘‘(2) DETERMINATION OF AMOUNT.—

12 ‘‘(A) IN GENERAL.—The amount determined

13 under this paragraph for any plan year shall be

14 equal to the excess (if any) of—

15 ‘‘(i) the sum of—

16 ‘‘(I) the funding target for the

17 plan year,

18 ‘‘(II) the target normal cost for

19 the plan year, and

20 ‘‘(III) the cushion amount for the

21 plan year, over

22 ‘‘(ii) the value (determined under sec23 tion 430(g)(2)) of the assets of the plan

24 which are held by the plan as of the valu25 ation date for the plan year.
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1 ‘‘(B) SPECIAL RULE FOR CERTAIN EMPLOY2 ERS.—If section 430(i) does not apply to a plan

3 for a plan year, the amount determined under

4 subparagraph (A)(i) for the plan year shall in

5 no event be less than the sum of—

6 ‘‘(i) the funding target for the plan

7 year (determined as if section 430(i) ap8 plied to the plan), plus

9 ‘‘(ii) the target normal cost for the

10 plan year (as so determined).

11 ‘‘(3) CUSHION AMOUNT.—For purposes of para12 graph (2)(A)(i)(III)—

13 ‘‘(A) IN GENERAL.—The cushion amount for

14 any plan year is the sum of—

15 ‘‘(i) 80 percent of the funding target

16 for the plan year, and

17 ‘‘(ii) the amount by which the funding

18 target for the plan year would increase if

19 the plan were to take into account—

20 ‘‘(I) increases in compensation

21 which are expected to occur in suc22 ceeding plan years, or

23 ‘‘(II) if the plan does not base

24 benefits for service to date on com25 pensation, increases in benefits which
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1 are expected to occur in succeeding

2 plan years (determined on the basis of

3 the average annual increase in benefits

4 over the 6 immediately preceding plan

5 years).

6 ‘‘(B) LIMITATIONS.—

7 ‘‘(i) IN GENERAL.—In making the

8 computation under subparagraph (A)(ii),

9 the plan’s actuary shall assume that the

10 limitations under subsection (l) and section

11 415(b) shall apply.

12 ‘‘(ii) EXPECTED INCREASES.—In the

13 case of a plan year during which a plan is

14 covered under section 4021 of the Employee

15 Retirement Income Security Act of 1974,

16 the plan’s actuary may, notwithstanding

17 subsection (j) or (l), take into account in18 creases in the limitations which are ex19 pected to occur in succeeding plan years.

20 ‘‘(4) SPECIAL RULES FOR PLANS WITH 100 OR

21 FEWER PARTICIPANTS.—

22 ‘‘(A) IN GENERAL.—For purposes of deter23 mining the amount under paragraph (3) for any

24 plan year, in the case of a plan which has 100

25 or fewer participants for the plan year, the li-
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1 ability of the plan attributable to benefit in2 creases for highly compensated employees (as de3 fined in section 414(q)) resulting from a plan

4 amendment which is made or becomes effective,

5 whichever is later, within the last 2 years shall

6 not be taken into account in determining the tar7 get liability.

8 ‘‘(B) RULE FOR DETERMINING NUMBER OF

9 PARTICIPANTS.—For purposes of determining the

10 number of plan participants, all defined benefit

11 plans maintained by the same employer (or any

12 member of such employer’s controlled group

13 (within the meaning of section 412(f)(4))) shall

14 be treated as one plan, but only participants of

15 such member or employer shall be taken into ac16 count.

17 ‘‘(5) SPECIAL RULE FOR TERMINATING PLANS.—

18 In the case of a plan which, subject to section 4041

19 of the Employee Retirement Income Security Act of

20 1974, terminates during the plan year, the amount

21 determined under paragraph (2) shall in no event be

22 less than the amount required to make the plan suffi23 cient for benefit liabilities (within the meaning of sec24 tion 4041(d) of such Act).
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1 ‘‘(6) ACTUARIAL ASSUMPTIONS.—Any computa2 tion under this subsection for any plan year shall use

3 the same actuarial assumptions which are used for

4 the plan year under section 430.

5 ‘‘(7) DEFINITIONS.—Any term used in this sub6 section which is also used in section 430 shall have

7 the same meaning given such term by section 430.’’.

8 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

9 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

10 DEFINED BENEFIT PLANS.—Section 404(a)(7)(C) of such

11 Code, as amended by this Act, is amended by adding at

12 the end the following new clause:

13 ‘‘(iv) GUARANTEED PLANS.—In apply14 ing this paragraph, any single-employer

15 plan covered under section 4021 of the Em16 ployee Retirement Income Security Act of

17 1974 shall not be taken into account.’’.

18 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

19 (1) The last sentence of section 404(a)(1)(A) of

20 such Code is amended by striking ‘‘section 412’’ each

21 place it appears and inserting ‘‘section 431’’.

22 (2) Section 404(a)(1)(B) of such Code is

23 amended—

24 (A) by striking ‘‘In the case of a plan’’ and

25 inserting ‘‘In the case of a multiemployer plan’’,
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1 (B) by striking ‘‘section 412(c)(7)’’ each

2 place it appears and inserting ‘‘section

3 431(c)(6)’’,

4 (C) by striking ‘‘section 412(c)(7)(B)’’ and

5 inserting ‘‘section 431(c)(6)(A)(ii)’’,

6 (D) by striking ‘‘section 412(c)(7)(A)’’ and

7 inserting ‘‘section 431(c)(6)(A)(i)’’, and

8 (E) by striking ‘‘section 412’’ and inserting

9 ‘‘section 431’’.

10 (3) Section 404(a)(7)(A) of such Code, as amend11 ed by this Act, is amended—

12 (A) by adding at the end of subparagraph

13 (A) the following new sentence: ‘‘In the case of a

14 defined benefit plan which is a single employer

15 plan, the amount necessary to satisfy the min16 imum funding standard provided by section 412

17 shall not be less than the plan’s funding shortfall

18 determined under section 430.’’, and

19 (B) by striking subparagraph (D) and in20 serting:

21 ‘‘(D) INSURANCE CONTRACT PLANS.—For

22 purposes of this paragraph, a plan described in

23 section 412(g)(3) shall be treated as a defined

24 benefit plan.’’.
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1 (4) Section 404A(g)(3)(A) of such Code is

2 amended by striking ‘‘paragraphs (3) and (7) of sec3 tion 412(c)’’ and inserting ‘‘paragraphs (3) and (6)

4 of section 431(c)’’.

5 (d) EFFECTIVE DATE.—The amendments made by this

6 section shall apply to plan years beginning after December

7 31, 2006.

8 SEC. 115. TECHNICAL AND CONFORMING AMENDMENTS.

9 (a) AMENDMENTS RELATED TO QUALIFICATION RE10 QUIREMENTS.—

11 (1) Section 401(a)(29) of the Internal Revenue

12 Code of 1986 is amended to read as follows:

13 ‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT14 RISK STATUS.—In the case of a defined benefit plan

15 (other than a multiemployer plan) to which the re16 quirements of section 412 apply, the trust of which

17 the plan is a part shall not constitute a qualified

18 trust under this subsection unless the plan meets the

19 requirements of section 436.’’.

20 (2) Section 401(a)(32) of such Code is

21 amended—

22 (A) in subparagraph (A), by striking

23 ‘‘412(m)(5)’’ each place it appears and inserting

24 ‘‘section 430(j)(4)’’, and
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1 (B) in subparagraph (C), by striking ‘‘sec2 tion 412(m)’’ and inserting ‘‘section 430(j)’’.

3 (3) Section 401(a), as amended by this Act, is

4 amended by striking paragraph (33) and by redesig5 nating paragraphs (34) and (35) as paragraph (33)

6 and (34).

7 (b) VESTING RULES.—Section 411 of such Code is

8 amended—

9 (1) by striking ‘‘section 412(c)(8)’’ in subsection

10 (a)(3)(C) and inserting ‘‘section 412(d)(2)’’,

11 (2) in subsection (b)(1)(F)—

12 (A) by striking ‘‘paragraphs (2) and (3) of

13 section 412(i)’’ in clause (ii) and inserting ‘‘sub14 paragraphs (B) and (C) of section 412(e)(3)’’,

15 and

16 (B) by striking ‘‘paragraphs (4), (5), and

17 (6) of section 412(i)’’ and inserting ‘‘subpara18 graphs (D), (E), and (F) of section 412(e)(3)’’,

19 and

20 (3) by striking ‘‘section 412(c)(8)’’ in subsection

21 (d)(6)(A) and inserting ‘‘section 412(e)(2)’’.

22 (c) MERGERS AND CONSOLIDATIONS OF PLANS.—Sub23 clause (I) of section 414(l)(2)(B)(i) of such Code is amended

24 to read as follows:
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1 ‘‘(I) the amount determined under

2 section 431(c)(6)(A)(i) in the case of a

3 multiemployer plan (and the sum of

4 the funding shortfall and target normal

5 cost determined under section 430 in

6 the case of any other plan), over’’.

7 (d) TRANSFER OF EXCESS PENSION ASSETS TO RE8 TIREE HEALTH ACCOUNTS.—

9 (1) Section 420(e)(2) of such Code is amended to

10 read as follows:

11 ‘‘(2) EXCESS PENSION ASSETS.—The term ‘excess

12 pension assets’ means the excess (if any) of—

13 ‘‘(A) the lesser of—

14 ‘‘(i) the fair market value of the plan’s

15 assets (reduced by the prefunding balance

16 determined under section 430(f)), or

17 ‘‘(ii) the value of plan assets as deter18 mined under section 430(g)(3) after reduc19 tion under section 430(f), over

20 ‘‘(B) 125 percent of the sum of the funding

21 shortfall and the target normal cost determined

22 under section 430 for such plan year.’’.

23 (2) Section 420(e)(4) of such Code is amended to

24 read as follows:
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1 ‘‘(4) COORDINATION WITH SECTION 430.—In the

2 case of a qualified transfer, any assets so transferred

3 shall not, for purposes of this section, be treated as as4 sets in the plan.’’.

5 (e) EXCISE TAXES.—

6 (1) IN GENERAL.—Subsections (a) and (b) of sec7 tion 4971 of such Code are amended to read as fol8 lows:

9 ‘‘(a) INITIAL TAX.—If at any time during any taxable

10 year an employer maintains a plan to which section 412

11 applies, there is hereby imposed for the taxable year a tax

12 equal to—

13 ‘‘(1) in the case of a single-employer plan, 10

14 percent of the aggregate unpaid minimum required

15 contributions for all plan years remaining unpaid as

16 of the end of any plan year ending with or within the

17 taxable year, and

18 ‘‘(2) in the case of a multiemployer plan, 5 per19 cent of the accumulated funding deficiency deter20 mined under section 431 as of the end of any plan

21 year ending with or within the taxable year.

22 ‘‘(b) ADDITIONAL TAX.—If—

23 ‘‘(1) a tax is imposed under subsection (a)(1) on

24 any unpaid required minimum contribution and such
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1 amount remains unpaid as of the close of the taxable

2 period, or

3 ‘‘(2) a tax is imposed under subsection (a)(2) on

4 any accumulated funding deficiency and the accumu5 lated funding deficiency is not corrected within the

6 taxable period,

7 there is hereby imposed a tax equal to 100 percent of the

8 unpaid minimum required contribution or accumulated

9 funding deficiency, whichever is applicable, to the extent not

10 so paid or corrected.’’.

11 (2) Section 4971(c) of such Code is amended—

12 (A) by striking ‘‘the last two sentences of

13 section 412(a)’’ in paragraph (1) and inserting

14 ‘‘section 431’’, and

15 (B) by adding at the end the following new

16 paragraph:

17 ‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU18 TION.—

19 ‘‘(A) IN GENERAL.—The term ‘unpaid min20 imum required contribution’ means, with respect

21 to any plan year, any minimum required con22 tribution under section 430 for the plan year

23 which is not paid on or before the due date (as

24 determined under section 430(j)(1)) for the plan

25 year.
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1 ‘‘(B) ORDERING RULE.—Any payment to or

2 under a plan for any plan year shall be allo3 cated first to unpaid minimum required con4 tributions for all preceding plan years on a first5 in, first-out basis and then to the minimum re6 quired contribution under section 430 for the

7 plan year.’’.

8 (3) Section 4971(e)(1) of such Code is amended

9 by striking ‘‘section 412(b)(3)(A)’’ and inserting ‘‘sec10 tion 412(a)(1)(A)’’.

11 (4) Section 4971(f)(1) of such Code is

12 amended—

13 (A) by striking ‘‘section 412(m)(5)’’ and in14 serting ‘‘section 430(j)(4)’’, and

15 (B) by striking ‘‘section 412(m)’’ and in16 serting ‘‘section 430(j)’’.

17 (5) Section 4972(c)(7) of such Code is amended

18 by striking ‘‘except to the extent that such contribu19 tions exceed the full-funding limitation (as defined in

20 section 412(c)(7), determined without regard to sub21 paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except,

22 in the case of a multiemployer plan, to the extent that

23 such contributions exceed the full-funding limitation

24 (as defined in section 431(c)(6))’’.
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1 (f) REPORTING REQUIREMENTS.—Section 6059(b) of

2 such Code is amended—

3 (1) by striking ‘‘the accumulated funding defi4 ciency (as defined in section 412(a))’’ in paragraph

5 (2) and inserting ‘‘the minimum required contribu6 tion determined under section 430, or the accumu7 lated funding deficiency determined under section

8 431,’’, and

9 (2) by striking paragraph (3)(B) and inserting:

10 ‘‘(B) the requirements for reasonable actu11 arial assumptions under section 430(h)(1) or

12 431(c)(3), whichever are applicable, have been

13 complied with.’’.

14 Subtitle C—Interest Rate Assump15 tions and Deductible Amounts

16 for 2006

17 SEC. 121. EXTENSION OF REPLACEMENT OF 30-YEAR TREAS18 URY RATES.

19 (a) AMENDMENTS OF ERISA.—

20 (1) DETERMINATION OF RANGE.—Subclause (II)

21 of section 302(b)(5)(B)(ii) of the Employee Retire22 ment Income Security Act of 1974 is amended—

23 (A) by striking ‘‘2006’’ and inserting

24 ‘‘2007’’, and
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1 (B) by striking ‘‘AND 2005’’ in the heading

2 and inserting ‘‘, 2005, AND 2006’’.

3 (2) DETERMINATION OF CURRENT LIABILITY.—

4 Subclause (IV) of section 302(d)(7)(C)(i) of such Act

5 is amended—

6 (A) by striking ‘‘or 2005’’ and inserting ‘‘,

7 2005, or 2006’’, and

8 (B) by striking ‘‘AND 2005’’ in the heading

9 and inserting ‘‘, 2005, AND 2006’’.

10 (3) PBGC PREMIUM RATE.—Subclause (V) of

11 section 4006(a)(3)(E)(iii) of such Act is amended by

12 striking ‘‘2006’’ and inserting ‘‘2007’’.

13 (b) AMENDMENTS OF INTERNAL REVENUE CODE.—

14 (1) DETERMINATION OF RANGE.—Subclause (II)

15 of section 412(b)(5)(B)(ii) of the Internal Revenue

16 Code of 1986 is amended—

17 (A) by striking ‘‘2006’’ and inserting

18 ‘‘2007’’, and

19 (B) by striking ‘‘AND 2005’’ in the heading

20 and inserting ‘‘, 2005, AND 2006’’.

21 (2) DETERMINATION OF CURRENT LIABILITY.—

22 Subclause (IV) of section 412(l)(7)(C)(i) of such Code

23 is amended—

24 (A) by striking ‘‘or 2005’’ and inserting ‘‘,

25 2005, or 2006’’, and
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1 (B) by striking ‘‘AND 2005’’ in the heading

2 and inserting ‘‘, 2005, AND 2006’’.

3 (c) PLAN AMENDMENTS.—Clause (ii) of section

4 101(c)(2)(A) of the Pension Funding Equity Act of 2004

5 is amended by striking ‘‘2006’’ and inserting ‘‘2007’’.

6 SEC. 122. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS.

7 (a) IN GENERAL.—Clause (i) of section 404(a)(1)(D)

8 of the Internal Revenue Code of 1986 (relating to special

9 rule in case of certain plans) is amended by striking ‘‘sec10 tion 412(l)’’ and inserting ‘‘section 412(l)(8)(A), except that

11 section 412(l)(8)(A) shall be applied for purposes of this

12 clause by substituting ‘180 percent (130 percent in the case

13 of a multiemployer plan) of current liability’ for ‘the cur14 rent liability’ in clause (i).’’

15 (b) CONFORMING AMENDMENT.—Section 404(a)(1) of

16 the Internal Revenue Code of 1986 is amended by striking

17 subparagraph (F).

18 (c) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to years beginning after December 31,

20 2005.

21 SEC. 123. UPDATING DEDUCTION RULES FOR COMBINATION

22 OF PLANS.

23 (a) IN GENERAL.—Subparagraph (C) of section

24 404(a)(7) of the Internal Revenue Code of 1986 (relating

25 to limitation on deductions where combination of defined
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1 contribution plan and defined benefit plan) is amended by

2 adding after clause (ii) the following new clause:

3 ‘‘(iii) LIMITATION.—In the case of em4 ployer contributions to 1 or more defined

5 contribution plans, this paragraph shall

6 only apply to the extent that such contribu7 tions exceed 6 percent of the compensation

8 otherwise paid or accrued during the tax9 able year to the beneficiaries under such

10 plans. For purposes of this clause, amounts

11 carried over from preceding taxable years

12 under subparagraph (B) shall be treated as

13 employer contributions to 1 or more defined

14 contributions to the extent attributable to

15 employer contributions to such plans in

16 such preceding taxable years.’’

17 (b) CONFORMING AMENDMENT.—Subparagraph (A) of

18 section 4972(c)(6) of such Code (relating to nondeductible

19 contributions) is amended to read as follows:

20 ‘‘(A) so much of the contributions to 1 or

21 more defined contribution plans which are not

22 deductible when contributed solely because of sec23 tion 404(a)(7) as does not exceed the amount of

24 contributions described in section 401(m)(4)(A),

25 or’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to contributions for taxable years begin3 ning after December 31, 2005.

4 TITLE II—FUNDING AND DEDUC5 TION RULES FOR MULTIEM6 PLOYER DEFINED BENEFIT

7 PLANS AND RELATED PROVI8 SIONS

9 Subtitle A—Funding Rules

10 PART I—AMENDMENTS TO EMPLOYEE

11 RETIREMENT INCOME SECURITY ACT OF 1974

12 SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED

13 BENEFIT PLANS.

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

15 the Employee Retirement Income Security Act of 1974 (as

16 amended by this Act) is amended by inserting after section

17 303 the following new section:

18 ‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER

19 PLANS

20 ‘‘SEC. 304. (a) IN GENERAL.—For purposes of section

21 302, the accumulated funding deficiency of a multiemployer

22 plan for any plan year is—

23 ‘‘(1) except as provided in paragraph (2), the

24 amount, determined as of the end of the plan year,

25 equal to the excess (if any) of the total charges to the

26 funding standard account of the plan for all plan
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1 years (beginning with the first plan year for which

2 this part applies to the plan) over the total credits to

3 such account for such years, and

4 ‘‘(2) if the multiemployer plan is in reorganiza5 tion for any plan year, the accumulated funding defi6 ciency of the plan determined under section 4243.

7 ‘‘(b) FUNDING STANDARD ACCOUNT.—

8 ‘‘(1) ACCOUNT REQUIRED.—Each multiemployer

9 plan to which this part applies shall establish and

10 maintain a funding standard account. Such account

11 shall be credited and charged solely as provided in

12 this section.

13 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year,

14 the funding standard account shall be charged with

15 the sum of—

16 ‘‘(A) the normal cost of the plan for the

17 plan year,

18 ‘‘(B) the amounts necessary to amortize in

19 equal annual installments (until fully amor20 tized)—

21 ‘‘(i) separately, with respect to each

22 plan year, the net increase (if any) in un23 funded past service liability under the plan

24 arising from plan amendments adopted in

25 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 loss (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 loss (if any) resulting

7 from changes in actuarial assumptions used

8 under the plan, over a period of 15 plan

9 years,

10 ‘‘(C) the amount necessary to amortize each

11 waived funding deficiency (within the meaning

12 of section 302(c)(3)) for each prior plan year in

13 equal annual installments (until fully amor14 tized) over a period of 15 plan years,

15 ‘‘(D) the amount necessary to amortize in

16 equal annual installments (until fully amor17 tized) over a period of 5 plan years any amount

18 credited to the funding standard account under

19 section 302(b)(3)(D) (as in effect on the day be20 fore the date of the enactment of the Pension Se21 curity and Transparency Act of 2005), and

22 ‘‘(E) the amount necessary to amortize in

23 equal annual installments (until fully amor24 tized) over a period of 20 years the contributions

25 which would be required to be made under the
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1 plan but for the provisions of section

2 302(c)(7)(A)(i)(I) (as in effect on the day before

3 the date of the enactment of the Pension Security

4 and Transparency Act of 2005).

5 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year,

6 the funding standard account shall be credited with

7 the sum of—

8 ‘‘(A) the amount considered contributed by

9 the employer to or under the plan for the plan

10 year,

11 ‘‘(B) the amount necessary to amortize in

12 equal annual installments (until fully amor13 tized)—

14 ‘‘(i) separately, with respect to each

15 plan year, the net decrease (if any) in un16 funded past service liability under the plan

17 arising from plan amendments adopted in

18 such year, over a period of 15 plan years,

19 ‘‘(ii) separately, with respect to each

20 plan year, the net experience gain (if any)

21 under the plan, over a period of 15 plan

22 years, and

23 ‘‘(iii) separately, with respect to each

24 plan year, the net gain (if any) resulting

25 from changes in actuarial assumptions used
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1 under the plan, over a period of 15 plan

2 years,

3 ‘‘(C) the amount of the waived funding defi4 ciency (within the meaning of section 302(c)(3))

5 for the plan year, and

6 ‘‘(D) in the case of a plan year for which

7 the accumulated funding deficiency is deter8 mined under the funding standard account if

9 such plan year follows a plan year for which

10 such deficiency was determined under the alter11 native minimum funding standard under section

12 305 (as in effect on the day before the date of the

13 enactment of the Pension Security and Trans14 parency Act of 2005), the excess (if any) of any

15 debit balance in the funding standard account

16 (determined without regard to this subpara17 graph) over any debit balance in the alternative

18 minimum funding standard account.

19 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AMOR20 TIZED TO PLAN YEARS BEFORE 2007.—In the case of

21 any amount amortized under section 302(b) (as in ef22 fect on the day before the date of the enactment of the

23 Pension Security and Transparency Act of 2005) over

24 any period beginning with a plan year beginning be25 fore 2007, in lieu of the amortization described in
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1 paragraphs (2)(B) and (3)(B), such amount shall

2 continue to be amortized under such section as so in

3 effect.

4 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS TO

5 BE AMORTIZED.—Under regulations prescribed by the

6 Secretary of the Treasury, amounts required to be

7 amortized under paragraph (2) or paragraph (3), as

8 the case may be—

9 ‘‘(A) may be combined into one amount

10 under such paragraph to be amortized over a pe11 riod determined on the basis of the remaining

12 amortization period for all items entering into

13 such combined amount, and

14 ‘‘(B) may be offset against amounts re15 quired to be amortized under the other such

16 paragraph, with the resulting amount to be am17 ortized over a period determined on the basis of

18 the remaining amortization periods for all items

19 entering into whichever of the two amounts being

20 offset is the greater.

21 ‘‘(6) INTEREST.—The funding standard account

22 (and items therein) shall be charged or credited (as

23 determined under regulations prescribed by the Sec24 retary of the Treasury) with interest at the appro-
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1 priate rate consistent with the rate or rates of interest

2 used under the plan to determine costs.

3 ‘‘(7) SPECIAL RULES RELATING TO CHARGES

4 AND CREDITS TO FUNDING STANDARD ACCOUNT.—For

5 purposes of this part—

6 ‘‘(A) WITHDRAWAL LIABILITY.—Any

7 amount received by a multiemployer plan in

8 payment of all or part of an employer’s with9 drawal liability under part 1 of subtitle E of

10 title IV shall be considered an amount contrib11 uted by the employer to or under the plan. The

12 Secretary of the Treasury may prescribe by regu13 lation additional charges and credits to a multi14 employer plan’s funding standard account to the

15 extent necessary to prevent withdrawal liability

16 payments from being unduly reflected as advance

17 funding for plan liabilities.

18 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM19 PLOYER PLAN LEAVES REORGANIZATION.—If a

20 multiemployer plan is not in reorganization in

21 the plan year but was in reorganization in the

22 immediately preceding plan year, any balance

23 in the funding standard account at the close of

24 such immediately preceding plan year—
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1 ‘‘(i) shall be eliminated by an offset2 ting credit or charge (as the case may be),

3 but

4 ‘‘(ii) shall be taken into account in

5 subsequent plan years by being amortized

6 in equal annual installments (until fully

7 amortized) over 30 plan years.

8 The preceding sentence shall not apply to the ex9 tent of any accumulated funding deficiency

10 under section 4243(a) as of the end of the last

11 plan year that the plan was in reorganization.

12 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

13 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

14 FUND.—Any amount paid by a plan during a

15 plan year to the Pension Benefit Guaranty Cor16 poration pursuant to section 4222 of this Act or

17 to a fund exempt under section 501(c)(22) of the

18 Internal Revenue Code of 1986 pursuant to sec19 tion 4223 of this Act shall reduce the amount of

20 contributions considered received by the plan for

21 the plan year.

22 ‘‘(D) INTERIM WITHDRAWAL LIABILITY PAY23 MENTS.—Any amount paid by an employer

24 pending a final determination of the employer’s

25 withdrawal liability under part 1 of subtitle E
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1 of title IV and subsequently refunded to the em2 ployer by the plan shall be charged to the fund3 ing standard account in accordance with regula4 tions prescribed by the Secretary of the Treasury.

5 ‘‘(E) ELECTION FOR DEFERRAL OF CHARGE

6 FOR PORTION OF NET EXPERIENCE LOSS.—If an

7 election is in effect under section 302(b)(7)(F)

8 (as in effect on the day before the date of the en9 actment of the Pension Security and Trans10 parency Act of 2005) for any plan year, the

11 funding standard account shall be charged in the

12 plan year to which the portion of the net experi13 ence loss deferred by such election was deferred

14 with the amount so deferred (and paragraph

15 (2)(B)(ii) shall not apply to the amount so

16 charged).

17 ‘‘(F) FINANCIAL ASSISTANCE.—Any amount

18 of any financial assistance from the Pension

19 Benefit Guaranty Corporation to any plan, and

20 any repayment of such amount, shall be taken

21 into account under this section and section 412

22 of the Internal Revenue Code of 1986 in such

23 manner as is determined by the Secretary of the

24 Treasury.
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1 ‘‘(G) SHORT-TERM BENEFITS.—To the ex2 tent that any plan amendment increases the un3 funded past service liability under the plan by

4 reason of an increase in benefits which are pay5 able under the terms of the plan for a period that

6 does not exceed 14 years from the effective date

7 of the amendment, paragraph (2)(B)(i) shall be

8 applied separately with respect to such increase

9 in unfunded past service liability by substituting

10 the number of years of the period during which

11 such benefits are payable for ‘15’.

12 ‘‘(c) ADDITIONAL RULES.—

13 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

14 FUNDING METHOD.—For purposes of this part, nor15 mal costs, accrued liability, past service liabilities,

16 and experience gains and losses shall be determined

17 under the funding method used to determine costs

18 under the plan.

19 ‘‘(2) VALUATION OF ASSETS.—

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

21 part, the value of the plan’s assets shall be deter22 mined on the basis of any reasonable actuarial

23 method of valuation which takes into account

24 fair market value and which is permitted under
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1 regulations prescribed by the Secretary of the

2 Treasury.

3 ‘‘(B) ELECTION WITH RESPECT TO

4 BONDS.—The value of a bond or other evidence

5 of indebtedness which is not in default as to

6 principal or interest may, at the election of the

7 plan administrator, be determined on an amor8 tized basis running from initial cost at purchase

9 to par value at maturity or earliest call date.

10 Any election under this subparagraph shall be

11 made at such time and in such manner as the

12 Secretary of the Treasury shall by regulations

13 provide, shall apply to all such evidences of in14 debtedness, and may be revoked only with the

15 consent of such Secretary.

16 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA17 SONABLE.—For purposes of this section, all costs, li18 abilities, rates of interest, and other factors under the

19 plan shall be determined on the basis of actuarial as20 sumptions and methods—

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

22 into account the experience of the plan and rea23 sonable expectations), and
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1 ‘‘(B) which, in combination, offer the actu2 ary’s best estimate of anticipated experience

3 under the plan.

4 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX5 PERIENCE GAIN OR LOSS.—For purposes of this sec6 tion, if—

7 ‘‘(A) a change in benefits under the Social

8 Security Act or in other retirement benefits cre9 ated under Federal or State law, or

10 ‘‘(B) a change in the definition of the term

11 ‘wages’ under section 3121 of the Internal Rev12 enue Code of 1986, or a change in the amount

13 of such wages taken into account under regula14 tions prescribed for purposes of section 401(a)(5)

15 of such Code,

16 results in an increase or decrease in accrued liability

17 under a plan, such increase or decrease shall be treat18 ed as an experience loss or gain.

19 ‘‘(5) FULL FUNDING.—If, as of the close of a

20 plan year, a plan would (without regard to this para21 graph) have an accumulated funding deficiency in ex22 cess of the full funding limitation—

23 ‘‘(A) the funding standard account shall be

24 credited with the amount of such excess, and
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1 ‘‘(B) all amounts described in subpara2 graphs (B), (C), and (D) of subsection (b) (2)

3 and subparagraph (B) of subsection (b)(3) which

4 are required to be amortized shall be considered

5 fully amortized for purposes of such subpara6 graphs.

7 ‘‘(6) FULL-FUNDING LIMITATION.—

8 ‘‘(A) IN GENERAL.—For purposes of para9 graph (5), the term ‘full-funding limitation’

10 means the excess (if any) of—

11 ‘‘(i) the accrued liability (including

12 normal cost) under the plan (determined

13 under the entry age normal funding method

14 if such accrued liability cannot be directly

15 calculated under the funding method used

16 for the plan), over

17 ‘‘(ii) the lesser of—

18 ‘‘(I) the fair market value of the

19 plan’s assets, or

20 ‘‘(II) the value of such assets de21 termined under paragraph (2).

22 ‘‘(B) MINIMUM AMOUNT.—

23 ‘‘(i) IN GENERAL.—In no event shall

24 the full-funding limitation determined
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1 under subparagraph (A) be less than the ex2 cess (if any) of—

3 ‘‘(I) 90 percent of the current li4 ability of the plan (including the ex5 pected increase in current liability due

6 to benefits accruing during the plan

7 year), over

8 ‘‘(II) the value of the plan’s assets

9 determined under paragraph (2).

10 ‘‘(ii) ASSETS.—For purposes of clause

11 (i), assets shall not be reduced by any credit

12 balance in the funding standard account.

13 ‘‘(C) FULL FUNDING LIMITATION.—For pur14 poses of this paragraph, unless otherwise pro15 vided by the plan, the accrued liability under a

16 multiemployer plan shall not include benefits

17 which are not nonforfeitable under the plan after

18 the termination of the plan (taking into consid19 eration section 411(d)(3) of the Internal Revenue

20 Code of 1986).

21 ‘‘(D) CURRENT LIABILITY.—For purposes of

22 this paragraph—

23 ‘‘(i) IN GENERAL.—The term ‘current

24 liability’ means all liabilities to employees

25 and their beneficiaries under the plan.
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1 ‘‘(ii) TREATMENT OF UNPREDICTABLE

2 CONTINGENT EVENT BENEFITS.—For pur3 poses of clause (i), any benefit contingent on

4 an event other than—

5 ‘‘(I) age, service, compensation,

6 death, or disability, or

7 ‘‘(II) an event which is reasonably

8 and reliably predictable (as determined

9 by the Secretary of the Treasury),

10 shall not be taken into account until the

11 event on which the benefit is contingent oc12 curs.

13 ‘‘(iii) INTEREST RATE USED.—The

14 rate of interest used to determine current li15 ability under this paragraph shall be the

16 rate of interest determined under subpara17 graph (E).

18 ‘‘(iv) MORTALITY TABLES.—

19 ‘‘(I) COMMISSIONERS’ STANDARD

20 TABLE.—In the case of plan years be21 ginning before the first plan year to

22 which the first tables prescribed under

23 subclause (II) apply, the mortality

24 table used in determining current li25 ability under this paragraph shall be
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1 the table prescribed by the Secretary of

2 the Treasury which is based on the

3 prevailing commissioners’ standard

4 table (described in section 807(d)(5)(A)

5 of the Internal Revenue Code of 1986)

6 used to determine reserves for group

7 annuity contracts issued on January

8 1, 1993.

9 ‘‘(II) SECRETARIAL AUTHOR10 ITY.—The Secretary of the Treasury

11 may by regulation prescribe for plan

12 years beginning after December 31,

13 1999, mortality tables to be used in de14 termining current liability under this

15 subsection. Such tables shall be based

16 upon the actual experience of pension

17 plans and projected trends in such ex18 perience. In prescribing such tables,

19 such Secretary shall take into account

20 results of available independent studies

21 of mortality of individuals covered by

22 pension plans.

23 ‘‘(v) SEPARATE MORTALITY TABLES

24 FOR THE DISABLED.—Notwithstanding

25 clause (iv)—
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1 ‘‘(I) IN GENERAL.—The Secretary

2 of the Treasury shall establish mor3 tality tables which may be used (in

4 lieu of the tables under clause (iv)) to

5 determine current liability under this

6 subsection for individuals who are en7 titled to benefits under the plan on ac8 count of disability. Such Secretary

9 shall establish separate tables for indi10 viduals whose disabilities occur in

11 plan years beginning before January

12 1, 1995, and for individuals whose dis13 abilities occur in plan years beginning

14 on or after such date.

15 ‘‘(II) SPECIAL RULE FOR DISABIL16 ITIES OCCURRING AFTER 1994.—In the

17 case of disabilities occurring in plan

18 years beginning after December 31,

19 1994, the tables under subclause (I)

20 shall apply only with respect to indi21 viduals described in such subclause

22 who are disabled within the meaning

23 of title II of the Social Security Act

24 and the regulations thereunder.
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1 ‘‘(vi) PERIODIC REVIEW.—The Sec2 retary of the Treasury shall periodically (at

3 least every 5 years) review any tables in ef4 fect under this subparagraph and shall, to

5 the extent such Secretary determines nec6 essary, by regulation update the tables to

7 reflect the actual experience of pension

8 plans and projected trends in such experi9 ence.

10 ‘‘(E) REQUIRED CHANGE OF INTEREST

11 RATE.—For purposes of determining a plan’s

12 current liability for purposes of this

13 paragraph—

14 ‘‘(i) IN GENERAL.—If any rate of in15 terest used under the plan under subsection

16 (b)(6) to determine cost is not within the

17 permissible range, the plan shall establish a

18 new rate of interest within the permissible

19 range.

20 ‘‘(ii) PERMISSIBLE RANGE.—For pur21 poses of this subparagraph—

22 ‘‘(I) IN GENERAL.—Except as pro23 vided in subclause (II), the term ‘per24 missible range’ means a rate of interest

25 which is not more than 5 percent
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1 above, and not more than 10 percent

2 below, the weighted average of the rates

3 of interest on 30-year Treasury securi4 ties during the 4-year period ending on

5 the last day before the beginning of the

6 plan year.

7 ‘‘(II) SECRETARIAL AUTHOR8 ITY.—If the Secretary of the Treasury

9 finds that the lowest rate of interest

10 permissible under subclause (I) is un11 reasonably high, such Secretary may

12 prescribe a lower rate of interest, ex13 cept that such rate may not be less

14 than 80 percent of the average rate de15 termined under such subclause.

16 ‘‘(iii) ASSUMPTIONS.—Notwith17 standing paragraph (3)(A), the interest rate

18 used under the plan shall be—

19 ‘‘(I) determined without taking

20 into account the experience of the plan

21 and reasonable expectations, but

22 ‘‘(II) consistent with the assump23 tions which reflect the purchase rates

24 which would be used by insurance com-
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1 panies to satisfy the liabilities under

2 the plan.

3 ‘‘(7) ANNUAL VALUATION.—

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

5 section, a determination of experience gains and

6 losses and a valuation of the plan’s liability

7 shall be made not less frequently than once every

8 year, except that such determination shall be

9 made more frequently to the extent required in

10 particular cases under regulations prescribed by

11 the Secretary of the Treasury.

12 ‘‘(B) VALUATION DATE.—

13 ‘‘(i) CURRENT YEAR.—Except as pro14 vided in clause (ii), the valuation referred

15 to in subparagraph (A) shall be made as of

16 a date within the plan year to which the

17 valuation refers or within one month prior

18 to the beginning of such year.

19 ‘‘(ii) USE OF PRIOR YEAR VALU20 ATION.—The valuation referred to in sub21 paragraph (A) may be made as of a date

22 within the plan year prior to the year to

23 which the valuation refers if, as of such

24 date, the value of the assets of the plan are

25 not less than 100 percent of the plan’s cur-
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1 rent liability (as defined in paragraph

2 (6)(D) without regard to clause (iv) there3 of).

4 ‘‘(iii) ADJUSTMENTS.—Information

5 under clause (ii) shall, in accordance with

6 regulations, be actuarially adjusted to re7 flect significant differences in participants.

8 ‘‘(iv) LIMITATION.—A change in fund9 ing method to use a prior year valuation,

10 as provided in clause (ii), may not be made

11 unless as of the valuation date within the

12 prior plan year, the value of the assets of

13 the plan are not less than 125 percent of the

14 plan’s current liability (as defined in para15 graph (6)(D) without regard to clause (iv)

16 thereof).

17 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

18 DEEMED MADE.—For purposes of this section, any

19 contributions for a plan year made by an employer

20 after the last day of such plan year, but not later

21 than two and one-half months after such day, shall be

22 deemed to have been made on such last day. For pur23 poses of this subparagraph, such two and one-half

24 month period may be extended for not more than six
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1 months under regulations prescribed by the Secretary

2 of the Treasury.

3 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

4 MULTIEMPLOYER PLANS.—

5 ‘‘(1) AUTOMATIC EXTENSION UPON APPLICATION

6 BY CERTAIN PLANS.—

7 ‘‘(A) IN GENERAL.—If the plan sponsor of

8 a multiemployer plan—

9 ‘‘(i) submits to the Secretary of the

10 Treasury an application for an extension of

11 the period of years required to amortize any

12 unfunded liability described in any clause

13 of subsection (b)(2)(B) or described in sub14 section (b)(4), and

15 ‘‘(ii) includes with the application a

16 certification by the plan’s actuary described

17 in subparagraph (B),

18 the Secretary of the Treasury shall extend the

19 amortization period for the period of time (not

20 in excess of 5 years) specified in the application.

21 Such extension shall be in addition to any exten22 sion under paragraph (2).

23 ‘‘(B) CRITERIA.—A certification with re24 spect to a multiemployer plan is described in
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1 this subparagraph if the plan’s actuary certifies

2 that, based on reasonable assumptions—

3 ‘‘(i) absent the extension under sub4 paragraph (A), the plan would have an ac5 cumulated funding deficiency in the current

6 plan year or any of the 9 succeeding plan

7 years,

8 ‘‘(ii) the plan sponsor has adopted a

9 plan to improve the plan’s funding status,

10 ‘‘(iii) the plan is projected to have suf11 ficient assets to timely pay expected benefits

12 and anticipated expenditures over the amor13 tization period as extended, and

14 ‘‘(iv) the notice required under para15 graph (3)(A) has been provided.

16 ‘‘(2) ADDITIONAL EXTENSION.—

17 ‘‘(A) IN GENERAL.—If the plan sponsor of

18 a multiemployer plan submits to the Secretary of

19 the Treasury an application for an extension of

20 the period of years required to amortize any un21 funded liability described in any clause of sub22 section (b)(2)(B) or described in subsection

23 (b)(4), the Secretary of the Treasury may extend

24 the amortization period for a period of time (not

25 in excess of 5 years) if the Secretary of the
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1 Treasury makes the determination described in

2 subparagraph (B). Such extension shall be in ad3 dition to any extension under paragraph (1).

4 ‘‘(B) DETERMINATION.—The Secretary

5 make grant an extension under subparagraph

6 (A) if the Secretary determines that—

7 ‘‘(i) such extension would carry out the

8 purposes of this Act and would provide ade9 quate protection for participants under the

10 plan and their beneficiaries, and

11 ‘‘(ii) the failure to permit such exten12 sion would—

13 ‘‘(I) result in a substantial risk to

14 the voluntary continuation of the plan,

15 or a substantial curtailment of pension

16 benefit levels or employee compensa17 tion, and

18 ‘‘(II) be adverse to the interests of

19 plan participants in the aggregate.

20 ‘‘(C) ACTION BY SECRETARY.—The Sec21 retary of the Treasury shall act upon any appli22 cation for an extension under this paragraph

23 within 180 days of the submission of such appli24 cation. If the Secretary rejects the application

25 for an extension under this paragraph, the Sec-
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1 retary shall provide notice to the plan detailing

2 the specific reasons for the rejection, including

3 references to the criteria set forth above.

4 ‘‘(3) ADVANCE NOTICE.—

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

6 Treasury shall, before granting an extension

7 under this subsection, require each applicant to

8 provide evidence satisfactory to such Secretary

9 that the applicant has provided notice of the fil10 ing of the application for such extension to each

11 affected party (as defined in section 4001(a)(21))

12 with respect to the affected plan. Such notice

13 shall include a description of the extent to which

14 the plan is funded for benefits which are guaran15 teed under title IV and for benefit liabilities.

16 ‘‘(B) CONSIDERATION OF RELEVANT INFOR17 MATION.—The Secretary of the Treasury shall

18 consider any relevant information provided by a

19 person to whom notice was given under para20 graph (1).’’.

21 (b) SHORTFALL FUNDING METHOD.—

22 (1) IN GENERAL.—A multiemployer plan meet23 ing the criteria of paragraph (2) may adopt, use, or

24 cease using, the shortfall funding method and such

25 adoption, use, or cessation of use of such method, shall
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1 be deemed approved by the Secretary of the Treasury

2 under section 302(d)(1) of the Employee Retirement

3 Income Security Act of 1974 and section 412(e)(1) of

4 the Internal Revenue Code of 1986.

5 (2) CRITERIA.—A multiemployer pension plan

6 meets the criteria of this clause if—

7 (A) the plan has not used the shortfall fund8 ing method during the 5-year period ending on

9 the day before the date the plan is to use the

10 method under paragraph (1); and

11 (B) the plan is not operating under an am12 ortization period extension under section 304(d)

13 of such Act and did not operate under such an

14 extension during such 5-year period.

15 (3) SHORTFALL FUNDING METHOD DEFINED.—

16 For purposes of this subsection, the term ‘‘shortfall

17 funding method’’ means the shortfall funding method

18 described in Treasury Regulations section

19 1.412(c)(1)–2 (26 C.F.R. 1.412(c)(1)–2).

20 (4) BENEFIT RESTRICTIONS TO APPLY.—The

21 benefit restrictions under section 302(c)(7) of such Act

22 and section 412(d)(7) of such Code shall apply during

23 any period a multiemployer plan is on the shortfall

24 funding method pursuant to this subsection.
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1 (5) USE OF SHORTFALL METHOD NOT TO PRE2 CLUDE OTHER OPTIONS.—Nothing in this subsection

3 shall be construed to affect a multiemployer plan’s

4 ability to adopt the shortfall funding method with the

5 Secretary’s permission under otherwise applicable

6 regulations or to affect a multiemployer plan’s right

7 to change funding methods, with or without the Sec8 retary’s consent, as provided in applicable rules and

9 regulations.

10 (c) CONFORMING AMENDMENTS.—

11 (1) Section 301 of the Employee Retirement In12 come Security Act of 1974 (29 U.S.C. 1081) is

13 amended by striking subsection (d).

14 (2) The table of contents in section 1 of such Act

15 (as amended by this Act) is amended by inserting

16 after the item relating to section 303 the following

17 new item:

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’.

18 (d) EFFECTIVE DATE.—

19 (1) IN GENERAL.—The amendments made by

20 this section shall apply to plan years beginning after

21 2006.

22 (2) SPECIAL RULE FOR CERTAIN AMORTIZATION

23 EXTENSIONS.—If the Secretary of the Treasury grants

24 an extension under section 304 of the Employee Re25 tirement Income Security Act of 1974 and section
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1 412(e) of the Internal Revenue Code of 1986 with re2 spect to any application filed with the Secretary of

3 the Treasury on or before June 30, 2005, the exten4 sion (and any modification thereof) shall be applied

5 and administered under the rules of such sections as

6 in effect before the enactment of this Act, including

7 the use of the rate of interest determined under section

8 6621(b) of such Code.

9 SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM10 PLOYER PLANS IN ENDANGERED OR CRIT11 ICAL STATUS.

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 the preceding provisions of this Act) is amend15 ed by inserting after section 304 the following new section:

16 ‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER

17 PLANS IN ENDANGERED STATUS OR CRITICAL STATUS

18 ‘‘SEC. 305. (a) GENERAL RULE.—For purposes of this

19 part, in the case of a multiemployer plan—

20 ‘‘(1) if the plan is in endangered status—

21 ‘‘(A) the plan sponsor shall adopt and im22 plement a funding improvement plan in accord23 ance with the requirements of subsection (c), and

24 ‘‘(B) the requirements of subsection (d) shall

25 apply during the funding plan adoption period

26 and the funding improvement period, and
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1 ‘‘(2) if the plan is in critical status—

2 ‘‘(A) the plan sponsor shall adopt and im3 plement a rehabilitation plan in accordance with

4 the requirements of subsection (e), and

5 ‘‘(B) the requirements of subsection (f) shall

6 apply during the rehabilitation plan adoption

7 period and the rehabilitation period.

8 ‘‘(b) DETERMINATION OF ENDANGERED AND CRITICAL

9 STATUS.—For purposes of this section—

10 ‘‘(1) ENDANGERED STATUS.—A multiemployer

11 plan is in endangered status for a plan year if, as

12 determined by the plan actuary under paragraph (3),

13 the plan is not in critical status for the plan year

14 and either—

15 ‘‘(A) the plan’s funded percentage for such

16 plan year is less than 80 percent, or

17 ‘‘(B) the plan has an accumulated funding

18 deficiency for such plan year, or is projected to

19 have such an accumulated funding deficiency for

20 any of the 6 succeeding plan years, taking into

21 account any extension of amortization periods

22 under section 304(d).

23 For purposes of this section, a plan described in sub24 paragraph (B) shall be treated as in seriously endan25 gered status.
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1 ‘‘(2) CRITICAL STATUS.—A multiemployer plan

2 is in critical status for a plan year if, as determined

3 by the plan actuary under paragraph (3), the plan is

4 described in 1 or more of the following subparagraphs

5 as of the beginning of the plan year:

6 ‘‘(A) A plan is described in this subpara7 graph if—

8 ‘‘(i) the funded percentage of the plan

9 is less than 65 percent, and

10 ‘‘(ii) the sum of—

11 ‘‘(I) the market value of plan as12 sets, plus

13 ‘‘(II) the present value of the rea14 sonably anticipated employer contribu15 tions for the current plan year and

16 each of the 5 succeeding plan years, as17 suming that the terms of all collective

18 bargaining agreements pursuant to

19 which the plan is maintained for the

20 current plan year continue in effect for

21 succeeding plan years,

22 is less than the present value of all benefits

23 projected to be payable under the plan dur24 ing the current plan year and each of the
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1 5 succeeding plan years (plus administra2 tive expenses for such plan years).

3 ‘‘(B) A plan is described in this subpara4 graph if—

5 ‘‘(i) the plan has an accumulated

6 funding deficiency for the current plan

7 year, not taking into account any extension

8 of amortization periods under section

9 304(d), or

10 ‘‘(ii) the plan is projected to have an

11 accumulated funding deficiency for any of

12 the 3 succeeding plan years (4 succeeding

13 plan years if the funded percentage of the

14 plan is 65 percent or less), not taking into

15 account any extension of amortization peri16 ods under section 304(d).

17 ‘‘(C) A plan is described in this subpara18 graph if—

19 ‘‘(i)(I) the plan’s normal cost for the

20 current plan year, plus interest (determined

21 at the rate used for determining costs under

22 the plan) for the current plan year on the

23 amount of unfunded benefit liabilities under

24 the plan as of the last date of the preceding

25 plan year, exceeds
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1 ‘‘(II) the present value of the reason2 ably anticipated employer contributions for

3 the current plan year,

4 ‘‘(ii) the present value of nonforfeitable

5 benefits of inactive participants is greater

6 than the present value of nonforfeitable ben7 efits of active participants, and

8 ‘‘(iii) the plan has an accumulated

9 funding deficiency for the current plan

10 year, or is projected to have such a defi11 ciency for any of the 4 succeeding plan

12 years, not taking into account any exten13 sion of amortization periods under section

14 304(d).

15 ‘‘(D) A plan is described in this subpara16 graph if the sum of—

17 ‘‘(i) the market value of plan assets,

18 plus

19 ‘‘(ii) the present value of the reason20 ably anticipated employer contributions for

21 the current plan year and each of the 4 suc22 ceeding plan years, assuming that the terms

23 of all collective bargaining agreements pur24 suant to which the plan is maintained for
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1 the current plan year continue in effect for

2 succeeding plan years,

3 is less than the present value of all benefits pro4 jected to be payable under the plan during the

5 current plan year and each of the 4 succeeding

6 plan years (plus administrative expenses for

7 such plan years).

8 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU9 ARY.—

10 ‘‘(A) IN GENERAL.—During the 90-day pe11 riod beginning on the first day of each plan year

12 of a multiemployer plan, the plan actuary shall

13 certify to the Secretary of the Treasury—

14 ‘‘(i) whether or not the plan is in en15 dangered status for such plan year and

16 whether or not the plan is in critical status

17 for such plan year, and

18 ‘‘(ii) in the case of a plan which is in

19 a funding improvement or rehabilitation

20 period, whether or not the plan is making

21 the scheduled progress in meeting the re22 quirements of its funding improvement or

23 rehabilitation plan.

24 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

25 AND LIABILITIES.—
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1 ‘‘(i) IN GENERAL.—In making the de2 terminations and projections under this

3 subsection, the plan actuary shall make pro4 jections required for the current and suc5 ceeding plan years, using reasonable actu6 arial estimates, assumptions, and methods,

7 of the current value of the assets of the plan

8 and the present value of all liabilities to

9 participants and beneficiaries under the

10 plan for the current plan year as of the be11 ginning of such year. The projected present

12 value of liabilities as of the beginning of

13 such year shall be determined based on the

14 actuarial statement required under section

15 103(d) with respect to the most recently

16 filed annual report or the actuarial valu17 ation for the preceding plan year.

18 ‘‘(ii) DETERMINATIONS OF FUTURE

19 CONTRIBUTIONS.—Any actuarial projection

20 of plan assets shall assume—

21 ‘‘(I) reasonably anticipated em22 ployer contributions for the current

23 and succeeding plan years, assuming

24 that the terms of the one or more col25 lective bargaining agreements pursuant
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1 to which the plan is maintained for the

2 current plan year continue in effect for

3 succeeding plan years, or

4 ‘‘(II) that employer contributions

5 for the most recent plan year will con6 tinue indefinitely, but only if the plan

7 actuary determines there have been no

8 significant demographic changes that

9 would make such assumption unrea10 sonable.

11 ‘‘(C) PENALTY FOR FAILURE TO SECURE

12 TIMELY ACTUARIAL CERTIFICATION.—Any fail13 ure of the plan’s actuary to certify the plan’s

14 status under this subsection by the date specified

15 in subparagraph (A) shall be treated for pur16 poses of section 502(c)(2) as a failure or refusal

17 by the plan administrator to file the annual re18 port required to be filed with the Secretary under

19 section 101(b)(4).

20 ‘‘(D) NOTICE.—In any case in which a

21 multiemployer plan is certified to be in endan22 gered or critical status under subparagraph (A),

23 the plan sponsor shall, not later than 30 days

24 after the date of the certification, provide notifi25 cation of the endangered or critical status to the
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1 participants and beneficiaries, the bargaining

2 parties, the Pension Benefit Guaranty Corpora3 tion, the Secretary of the Treasury, and the Sec4 retary.

5 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE ADOPT6 ED FOR MULTIEMPLOYER PLANS IN ENDANGERED STA7 TUS.—

8 ‘‘(1) IN GENERAL.—In any case in which a mul9 tiemployer plan is in endangered status for a plan

10 year, the plan sponsor, in accordance with this

11 subsection—

12 ‘‘(A) shall adopt a funding improvement

13 plan not later than 240 days following the re14 quired date for the actuarial certification of en15 dangered status under subsection (b)(3)(A), and

16 ‘‘(B) within 30 days after the adoption of

17 the funding improvement plan—

18 ‘‘(i) in the case of a plan in seriously

19 endangered status, shall provide to the bar20 gaining parties 1 or more schedules showing

21 revised benefit structures, revised contribu22 tion structures, or both, which, if adopted,

23 may reasonably be expected to enable the

24 multiemployer plan to meet the applicable

25 requirements under paragraph (3) in ac-
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1 cordance with the funding improvement

2 plan, including a description of the reduc3 tions in future benefit accruals and in4 creases in contributions that the plan spon5 sor determines are reasonably necessary to

6 meet the applicable requirements if the plan

7 sponsor assumes that there are no increases

8 in contributions under the plan other than

9 the increases necessary to meet the applica10 ble requirements after future benefit accru11 als have been reduced to the maximum ex12 tent permitted by law, and

13 ‘‘(ii) may, if the plan sponsor deems

14 appropriate, prepare and provide the bar15 gaining parties with additional information

16 relating to contribution rates or benefit re17 ductions, alternative schedules, or other in18 formation relevant to achieving the require19 ments under paragraph (3) in accordance

20 with the funding improvement plan.

21 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BE22 GINS.—Paragraph (1) shall not apply to a plan year

23 if such year is in a funding plan adoption period or

24 funding improvement period by reason of the plan

25 being in endangered status for a preceding plan year.
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1 For purposes of this section, such preceding plan year

2 shall be the initial determination year with respect to

3 the funding improvement plan to which it relates.

4 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur5 poses of this section—

6 ‘‘(A) IN GENERAL.—A funding improve7 ment plan is a plan which consists of the ac8 tions, including options or a range of options to

9 be proposed to the bargaining parties, which,

10 under reasonable actuarial assumptions, will re11 sult in the plan meeting the requirements of this

12 paragraph.

13 ‘‘(B) PLANS OTHER THAN SERIOUSLY EN14 DANGERED PLANS.—In the case of plan not in

15 seriously endangered status, the requirements of

16 this paragraph are met if the plan’s funded per17 centage as of the close of the funding improve18 ment period exceeds the lesser of 80 percent or a

19 percentage equal to the sum of—

20 ‘‘(i) such percentage as of the begin21 ning of such period, plus

22 ‘‘(ii) 10 percent of the percentage

23 under clause (i).
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1 ‘‘(C) SERIOUSLY ENDANGERED PLANS.—In

2 the case of a plan in seriously endangered status,

3 the requirements of this paragraph are met if—

4 ‘‘(i) the plan’s funded percentage as of

5 the close of the funding improvement period

6 equals or exceeds the percentage which is

7 equal to the sum of—

8 ‘‘(I) such percentage as of the be9 ginning of such period, plus

10 ‘‘(II) 33 percent of the difference

11 between 100 percent and the percentage

12 under subclause (I), and

13 ‘‘(ii) there is no accumulated funding

14 deficiency for any plan year during the

15 funding improvement period (taking into

16 account any extension of amortization peri17 ods under section 304(d)).

18 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For pur19 poses of this section—

20 ‘‘(A) IN GENERAL.—The funding improve21 ment period for any funding improvement plan

22 adopted pursuant to this subsection is the 10-

23 year period beginning on the first day of the

24 first plan year of the multiemployer plan begin25 ning after the earlier of—
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1 ‘‘(i) the second anniversary of the date

2 of the adoption of the funding improvement

3 plan, or

4 ‘‘(ii) the expiration of the collective

5 bargaining agreements in effect on the due

6 date for the actuarial certification of endan7 gered status for the initial determination

8 year under subsection (b)(3)(A) and cov9 ering, as of such due date, at least 75 per10 cent of the active participants in such mul11 tiemployer plan.

12 ‘‘(B) COORDINATION WITH CHANGES IN STA13 TUS.—

14 ‘‘(i) PLANS NO LONGER IN ENDAN15 GERED STATUS.—If the plan’s actuary cer16 tifies under subsection (b)(3)(A) for a plan

17 year in any funding plan adoption period

18 or funding improvement period that the

19 plan is no longer in endangered status and

20 is not in critical status, the funding plan

21 adoption period or funding improvement

22 period, whichever is applicable, shall end as

23 of the close of the preceding plan year.

24 ‘‘(ii) PLANS IN CRITICAL STATUS.—If

25 the plan’s actuary certifies under subsection
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1 (b)(3)(A) for a plan year in any funding

2 plan adoption period or funding improve3 ment period that the plan is in critical sta4 tus, the funding plan adoption period or

5 funding improvement period, whichever is

6 applicable, shall end as of the close of the

7 plan year preceding the first plan year in

8 the rehabilitation period with respect to

9 such status.

10 ‘‘(C) PLANS IN ENDANGERED STATUS AT

11 END OF PERIOD.—If the plan’s actuary certifies

12 under subsection (b)(3)(A) for the first plan year

13 following the close of the period described in sub14 paragraph (A) that the plan is in endangered

15 status, the provisions of this subsection and sub16 section (d) shall be applied as if such first plan

17 year were an initial determination year, except

18 that the plan may not be amended in a manner

19 inconsistent with the funding improvement plan

20 in effect for the preceding plan year until a new

21 funding improvement plan is adopted.

22 ‘‘(5) SPECIAL RULES FOR CERTAIN UNDER23 FUNDED PLANS.—

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

25 subparagraph (B), if the funded percentage of a
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1 plan in seriously endangered status was 70 per2 cent or less as of the beginning of the initial de3 termination year, the following rules shall apply

4 in determining whether the requirements of

5 paragraph (3)(C)(i) are met:

6 ‘‘(i) The plan’s funded percentage as of

7 the close of the funding improvement period

8 must equal or exceed a percentage which is

9 equal to the sum of—

10 ‘‘(I) such percentage as of the be11 ginning of such period, plus

12 ‘‘(II) 20 percent of the difference

13 between 100 percent and the percentage

14 under subclause (I).

15 ‘‘(ii) The funding improvement period

16 under paragraph (4)(A) shall be 15 years

17 rather than 10 years.

18 ‘‘(B) SPECIAL RULES FOR PLANS WITH

19 FUNDED PERCENTAGE OVER 70 PERCENT.—If the

20 funded percentage described in subparagraph (A)

21 was more than 70 percent but less than 80 per22 cent as of the beginning of the initial determina23 tion year—

24 ‘‘(i) subparagraph (A) shall apply if

25 the plan’s actuary certifies, within 30 days
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1 after the certification under subsection

2 (b)(3)(A) for the initial determination year,

3 that, based on the terms of the plan and the

4 collective bargaining agreements in effect at

5 the time of such certification, the plan is

6 not projected to meet the requirements of

7 paragraph (3)(C)(i) without regard to this

8 paragraph, and

9 ‘‘(ii) if there is a certification under

10 clause (i), the plan may, in formulating its

11 funding improvement plan, only take into

12 account the rules of subparagraph (A) for

13 plan years in the funding improvement pe14 riod beginning on or before the date on

15 which the last of the collective bargaining

16 agreements described in paragraph

17 (4)(A)(ii) expires.

18 Notwithstanding clause (ii), if for any plan year

19 ending after the date described in clause (ii) the

20 plan actuary certifies (at the time of the annual

21 certification under subsection (b)(3)(A) for such

22 plan year) that, based on the terms of the plan

23 and collective bargaining agreements in effect at

24 the time of that annual certification, the plan is

25 not projected to be able to meet the requirements
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1 of paragraph (3)(C)(i) without regard to this

2 paragraph, the plan may continue to assume for

3 such year that the funding improvement period

4 is 15 years rather than 10 years.

5 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT PLAN

6 AND SCHEDULES.—

7 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The

8 plan sponsor shall annually update the funding

9 improvement plan and shall file the update with

10 the plan’s annual report under section 104.

11 ‘‘(B) SCHEDULES.—The plan sponsor may

12 periodically update any schedule of contribution

13 rates provided under this subsection to reflect the

14 experience of the plan, except that the schedule or

15 schedules described in paragraph (1)(B)(i) shall

16 be updated at least once every 3 years.

17 ‘‘(C) DURATION OF SCHEDULE.—A schedule

18 of contribution rates provided by the plan spon19 sor and relied upon by bargaining parties in ne20 gotiating a collective bargaining agreement shall

21 remain in effect for the duration of that collec22 tive bargaining agreement.

23 ‘‘(7) PENALTY IF NO FUNDING IMPROVEMENT

24 PLAN ADOPTED.—A failure of the plan sponsor to

25 adopt a funding improvement plan by the date speci-
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1 fied in paragraph (1)(A) shall be treated for purposes

2 of section 502(c)(2) as a failure or refusal by the plan

3 administrator to file the annual report required to be

4 filed with the Secretary under section 101(b)(4).

5 ‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For

6 purposes of this section, the term ‘funding plan adop7 tion period’ means the period beginning on the date

8 of the certification under subsection (b)(3)(A) for the

9 initial determination year and ending on the day be10 fore the first day of the funding improvement period.

11 ‘‘(d) RULES FOR OPERATION OF PLAN DURING ADOP12 TION AND IMPROVEMENT PERIODS; FAILURE TO MEET RE13 QUIREMENTS.—

14 ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PE15 RIOD.—During the plan adoption period—

16 ‘‘(A) the plan sponsor may not accept a col17 lective bargaining agreement or participation

18 agreement with respect to the multiemployer

19 plan that provides for—

20 ‘‘(i) a reduction in the level of con21 tributions for any participants,

22 ‘‘(ii) a suspension of contributions

23 with respect to any period of service, or
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1 ‘‘(iii) any new direct or indirect exclu2 sion of younger or newly hired employees

3 from plan participation,

4 ‘‘(B) no amendment of the plan which in5 creases the liabilities of the plan by reason of

6 any increase in benefits, any change in the ac7 crual of benefits, or any change in the rate at

8 which benefits become nonforfeitable under the

9 plan may be adopted unless the amendment is

10 required as a condition of qualification under

11 part I of subchapter D of chapter 1 of the Inter12 nal Revenue Code of 1986 or to comply with

13 other applicable law, and

14 ‘‘(C) in the case of a plan in seriously en15 dangered status, the plan sponsor shall take all

16 reasonable actions which are consistent with the

17 terms of the plan and applicable law and which

18 are expected, based on reasonable assumptions, to

19 achieve—

20 ‘‘(i) an increase in the plan’s funded

21 percentage, and

22 ‘‘(ii) postponement of an accumulated

23 funding deficiency for at least 1 additional

24 plan year.
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1 Actions under subparagraph (C) include applications

2 for extensions of amortization periods under section

3 304(d), use of the shortfall funding method in making

4 funding standard account computations, amendments

5 to the plan’s benefit structure, reductions in future

6 benefit accruals, and other reasonable actions con7 sistent with the terms of the plan and applicable law.

8 ‘‘(2) COMPLIANCE WITH FUNDING IMPROVEMENT

9 PLAN.—

10 ‘‘(A) IN GENERAL.—A plan may not be

11 amended after the date of the adoption of a fund12 ing improvement plan under subsection (c) so as

13 to be inconsistent with the funding improvement

14 plan.

15 ‘‘(B) NO REDUCTION IN CONTRIBUTIONS.—

16 A plan sponsor may not during any funding im17 provement period accept a collective bargaining

18 agreement or participation agreement with re19 spect to the multiemployer plan that provides

20 for—

21 ‘‘(i) a reduction in the level of con22 tributions for any participants,

23 ‘‘(ii) a suspension of contributions

24 with respect to any period of service, or
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1 ‘‘(iii) any new direct or indirect exclu2 sion of younger or newly hired employees

3 from plan participation.

4 ‘‘(C) SPECIAL RULES FOR BENEFIT IN5 CREASES.—A plan may not be amended after the

6 date of the adoption of a funding improvement

7 plan under subsection (c) so as to increase bene8 fits, including future benefit accruals, unless—

9 ‘‘(i) in the case of a plan in seriously

10 endangered status, the plan actuary certifies

11 that, after taking into account the benefit

12 increase, the plan is still reasonably ex13 pected to meet the requirements under sub14 section (c)(3) in accordance with the sched15 ule contemplated in the funding improve16 ment plan, and

17 ‘‘(ii) in the case of a plan not in seri18 ously endangered status, the actuary cer19 tifies that such increase is paid for out of

20 contributions not required by the funding

21 improvement plan to meet the requirements

22 under subsection (c)(3) in accordance with

23 the schedule contemplated in the funding

24 improvement plan.

25 ‘‘(3) FAILURE TO MEET REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—Notwithstanding sec2 tion 4971(g) of the Internal Revenue Code of

3 1986, if a plan fails to meet the requirements of

4 subsection (c)(3) by the end of the funding im5 provement period, the plan shall be treated as

6 having an accumulated funding deficiency for

7 purposes of section 4971 of such Code for the last

8 plan year in such period (and each succeeding

9 plan year until such requirements are met) in

10 an amount equal to the greater of the amount of

11 the contributions necessary to meet such require12 ments or the amount of such accumulated fund13 ing deficiency without regard to this paragraph.

14 ‘‘(B) WAIVER.—In the case of a failure de15 scribed in subparagraph (A) which is due to rea16 sonable cause and not to willful neglect, the Sec17 retary of the Treasury may waive part or all of

18 the tax imposed by section 4971 of such Code to

19 the extent that the payment of such tax would be

20 excessive or otherwise inequitable relative to the

21 failure involved.

22 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED FOR

23 MULTIEMPLOYER PLANS IN CRITICAL STATUS.—

24 ‘‘(1) IN GENERAL.—In any case in which a mul25 tiemployer plan is in critical status for a plan year,
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1 the plan sponsor, in accordance with this

2 subsection—

3 ‘‘(A) shall adopt a rehabilitation plan not

4 later than 240 days following the required date

5 for the actuarial certification of critical status

6 under subsection (b)(3)(A), and

7 ‘‘(B) within 30 days after the adoption of

8 the rehabilitation plan—

9 ‘‘(i) shall provide to the bargaining

10 parties 1 or more schedules showing revised

11 benefit structures, revised contribution

12 structures, or both, which, if adopted, may

13 reasonably be expected to enable the multi14 employer plan to emerge from critical status

15 in accordance with the rehabilitation plan,

16 and

17 ‘‘(ii) may, if the plan sponsor deems

18 appropriate, prepare and provide the bar19 gaining parties with additional information

20 relating to contribution rates or benefit re21 ductions, alternative schedules, or other in22 formation relevant to emerging from critical

23 status in accordance with the rehabilitation

24 plan.
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1 The schedule or schedules described in subparagraph

2 (B)(i) shall reflect reductions in future benefit accru3 als and increases in contributions that the plan spon4 sor determines are reasonably necessary to emerge

5 from critical status. One schedule shall be designated

6 as the default schedule and such schedule shall assume

7 that there are no increases in contributions under the

8 plan other than the increases necessary to emerge

9 from critical status after future benefit accruals and

10 other benefits (other than benefits the reduction or

11 elimination of which are not permitted under section

12 204(g)) have been reduced to the maximum extent

13 permitted by law.

14 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BE15 GINS.—Paragraph (1) shall not apply to a plan year

16 if such year is in a rehabilitation plan adoption pe17 riod or rehabilitation period by reason of the plan

18 being in critical status for a preceding plan year. For

19 purposes of this section, such preceding plan year

20 shall be the initial critical year with respect to the re21 habilitation plan to which it relates.

22 ‘‘(3) REHABILITATION PLAN.—For purposes of

23 this section—

24 ‘‘(A) IN GENERAL.—A rehabilitation plan is

25 a plan which consists of—
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1 ‘‘(i) actions which will enable, under

2 reasonable actuarial assumptions, the plan

3 to cease to be in critical status by the end

4 of the rehabilitation period and may in5 clude reductions in plan expenditures (in6 cluding plan mergers and consolidations),

7 reductions in future benefit accruals or in8 creases in contributions, if agreed to by the

9 bargaining parties, or any combination of

10 such actions, or

11 ‘‘(ii) if the plan sponsor determines

12 that, based on reasonable actuarial assump13 tions and upon exhaustion of all reasonable

14 measures, the plan can not reasonably be

15 expected to emerge from critical status by

16 the end of the rehabilitation period, reason17 able measures to emerge from critical status

18 at a later time or to forestall possible insol19 vency (within the meaning of section 4245).

20 Such plan shall include the schedules required to

21 be provided under paragraph (1)(B)(i). If clause

22 (ii) applies, such plan shall set forth the alter23 natives considered, explain why the plan is not

24 reasonably expected to emerge from critical sta25 tus by the end of the rehabilitation period, and
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1 specify when, if ever, the plan is expected to

2 emerge from critical status in accordance with

3 the rehabilitation plan.

4 ‘‘(B) UPDATES TO REHABILITATION PLAN

5 AND SCHEDULES.—

6 ‘‘(i) REHABILITATION PLAN.—The plan

7 sponsor shall annually update the rehabili8 tation plan and shall file the update with

9 the plan’s annual report under section 104.

10 ‘‘(ii) SCHEDULES.—The plan sponsor

11 may periodically update any schedule of

12 contribution rates provided under this sub13 section to reflect the experience of the plan,

14 except that the schedule or schedules de15 scribed in paragraph (1)(B)(i) shall be up16 dated at least once every 3 years.

17 ‘‘(iii) DURATION OF SCHEDULE.—A

18 schedule of contribution rates provided by

19 the plan sponsor and relied upon by bar20 gaining parties in negotiating a collective

21 bargaining agreement shall remain in effect

22 for the duration of that collective bar23 gaining agreement.

24 ‘‘(C) DEFAULT SCHEDULE.—If the collective

25 bargaining agreement providing for contribu-
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1 tions under a multiemployer plan that was in

2 effect at the time the plan entered critical status

3 expires and, after receiving a schedule from the

4 plan sponsor under paragraph (1)(B)(i), the bar5 gaining parties have not adopted a collective

6 bargaining agreement with terms consistent with

7 such a schedule, the default schedule described in

8 the last sentence of paragraph (1) shall go into

9 effect with respect to those bargaining parties.

10 ‘‘(4) REHABILITATION PERIOD.—For purposes of

11 this section—

12 ‘‘(A) IN GENERAL.—The rehabilitation pe13 riod for a plan in critical status is the 10-year

14 period beginning on the first day of the first

15 plan year of the multiemployer plan following

16 the earlier of—

17 ‘‘(i) the second anniversary of the date

18 of the adoption of the rehabilitation plan, or

19 ‘‘(ii) the expiration of the collective

20 bargaining agreements in effect on the date

21 of the due date for the actuarial certifi22 cation of critical status for the initial crit23 ical year under subsection (a)(1) and cov24 ering, as of such date at least 75 percent of
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1 the active participants in such multiem2 ployer plan.

3 If a plan emerges from critical status as pro4 vided under subparagraph (B) before the end of

5 such 10-year period, the rehabilitation period

6 shall end with the plan year preceding the plan

7 year for which the determination under subpara8 graph (B) is made.

9 ‘‘(B) EMERGENCE.—A plan in critical sta10 tus shall remain in such status until a plan year

11 for which the plan actuary certifies, in accord12 ance with subsection (b)(3)(A), that the plan is

13 not projected to have an accumulated funding

14 deficiency for the plan year or any of the 9 suc15 ceeding plan years, without regard to use of the

16 shortfall method or any extension of amortiza17 tion periods under section 304(d).

18 ‘‘(5) PENALTY IF NO REHABILITATION PLAN

19 ADOPTED.—A failure of a plan sponsor to adopt a re20 habilitation plan by the date specified in paragraph

21 (1)(A) shall be treated for purposes of section

22 502(c)(2) as a failure or refusal by the plan adminis23 trator to file the annual report required to be filed

24 with the Secretary under section 101(b)(4).
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1 ‘‘(6) REHABILITATION PLAN ADOPTION PE2 RIOD.—For purposes of this section, the term ‘reha3 bilitation plan adoption period’ means the period be4 ginning on the date of the certification under sub5 section (b)(3)(A) for the initial critical year and end6 ing on the day before the first day of the rehabilita7 tion period.

8 ‘‘(7) LIMITATION ON REDUCTION IN RATES OF

9 FUTURE ACCRUALS.—Any reduction in the rate of fu10 ture accruals under any schedule described in para11 graph (1)(B)(i) shall not reduce the rate of future ac12 cruals below—

13 ‘‘(A) a monthly benefit (payable as a single

14 life annuity commencing at the participant’s

15 normal retirement age) equal to 1 percent of the

16 contributions required to be made with respect to

17 a participant, or the equivalent standard accrual

18 rate for a participant or group of participants

19 under the collective bargaining agreements in ef20 fect as of the first day of the initial critical year,

21 or

22 ‘‘(B) if lower, the accrual rate under the

23 plan on such first day.

24 The equivalent standard accrual rate shall be deter25 mined by the plan sponsor based on the standard or
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1 average contribution base units which the plan spon2 sor determines to be representative for active partici3 pants and such other factors as the plan sponsor de4 termines to be relevant. Nothing in this paragraph

5 shall be construed as limiting the ability of the plan

6 sponsor to prepare and provide the bargaining par7 ties with alternative schedules to the default schedule

8 that established lower or higher accrual and contribu9 tion rates than the rates otherwise described in this

10 paragraph.

11 ‘‘(8) EMPLOYER IMPACT.—For the purposes of

12 this section, the plan sponsor shall consider the im13 pact of the rehabilitation plan and contribution

14 schedules authorized by this section on bargaining

15 parties with fewer than 500 employees and shall im16 plement the plan in a manner that encourages their

17 continued participation in the plan and minimizes

18 financial harm to employers and their workers.

19 ‘‘(f) RULES FOR OPERATION OF PLAN DURING ADOP20 TION AND REHABILITATION PERIOD.—

21 ‘‘(1) COMPLIANCE WITH REHABILITATION

22 PLAN.—

23 ‘‘(A) IN GENERAL.—A plan may not be

24 amended after the date of the adoption of a reha-
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1 bilitation plan under subsection (e) so as to be

2 inconsistent with the rehabilitation plan.

3 ‘‘(B) SPECIAL RULES FOR BENEFIT IN4 CREASES.—A plan may not be amended after the

5 date of the adoption of a rehabilitation plan

6 under subsection (e) so as to increase benefits,

7 including future benefit accruals, unless the plan

8 actuary certifies that such increase is paid for

9 out of additional contributions not contemplated

10 by the rehabilitation plan, and, after taking into

11 account the benefit increase, the multiemployer

12 plan still is reasonably expected to emerge from

13 critical status by the end of the rehabilitation pe14 riod on the schedule contemplated in the reha15 bilitation plan.

16 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMILAR

17 BENEFITS.—

18 ‘‘(A) IN GENERAL.—Effective on the date

19 the notice of certification of the plan’s critical

20 status for the initial critical year under sub21 section (b)(3)(D) is sent, and notwithstanding

22 section 204(g), the plan shall not pay—

23 ‘‘(i) any payment, in excess of the

24 monthly amount paid under a single life

25 annuity (plus any social security supple-
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1 ments described in the last sentence of sec2 tion 204(b)(1)(G)),

3 ‘‘(ii) any payment for the purchase of

4 an irrevocable commitment from an insurer

5 to pay benefits, and

6 ‘‘(iii) any other payment specified by

7 the Secretary of the Treasury by regula8 tions.

9 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

10 not apply to a benefit which under section 203(e)

11 may be immediately distributed without the con12 sent of the participant or to any makeup pay13 ment in the case of a retroactive annuity start14 ing date or any similar payment of benefits

15 owed with respect to a prior period.

16 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH17 DRAWAL LIABILITY DETERMINATION.—Any benefit re18 ductions under this subsection shall be disregarded in

19 determining a plan’s unfunded vested benefits for

20 purposes of determining an employer’s withdrawal li21 ability under section 4201.

22 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE23 RIOD.—During the rehabilitation plan adoption

24 period—
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1 ‘‘(A) the plan sponsor may not accept a col2 lective bargaining agreement or participation

3 agreement with respect to the multiemployer

4 plan that provides for—

5 ‘‘(i) a reduction in the level of con6 tributions for any participants,

7 ‘‘(ii) a suspension of contributions

8 with respect to any period of service, or

9 ‘‘(iii) any new direct or indirect exclu10 sion of younger or newly hired employees

11 from plan participation, and

12 ‘‘(B) no amendment of the plan which in13 creases the liabilities of the plan by reason of

14 any increase in benefits, any change in the ac15 crual of benefits, or any change in the rate at

16 which benefits become nonforfeitable under the

17 plan may be adopted unless the amendment is

18 required as a condition of qualification under

19 part I of subchapter D of chapter 1 of the Inter20 nal Revenue Code of 1986 or to comply with

21 other applicable law.

22 ‘‘(5) FAILURE TO MEET REQUIREMENTS.—

23 ‘‘(A) IN GENERAL.—Notwithstanding sec24 tion 4971(g) of the Internal Revenue Code of

25 1986, if a plan—
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1 ‘‘(i) fails to meet the requirements of

2 subsection (e) by the end of the rehabilita3 tion period, or

4 ‘‘(ii) has received a certification under

5 subsection (b)(3)(A)(ii) for 3 consecutive

6 plan years that the plan is not making the

7 scheduled progress in meeting its require8 ments under the rehabilitation plan,

9 the plan shall be treated as having an accumu10 lated funding deficiency for purposes of section

11 4971 of such Code for the last plan year in such

12 period (and each succeeding plan year until such

13 requirements are met) in an amount equal to the

14 greater of the amount of the contributions nec15 essary to meet such requirements or the amount

16 of such accumulated funding deficiency without

17 regard to this paragraph.

18 ‘‘(B) WAIVER.—In the case of a failure de19 scribed in subparagraph (A) which is due to rea20 sonable cause and not to willful neglect, the Sec21 retary of the Treasury may waive part or all of

22 the tax imposed by section 4971 of such Code to

23 the extent that the payment of such tax would be

24 excessive or otherwise inequitable relative to the

25 failure involved.
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1 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR DE2 CISIONS.—If, within 60 days of the due date for adoption

3 of a funding improvement plan under subsection (c) or a

4 rehabilitation plan under subsection (e), the plan sponsor

5 of a plan in endangered status or a plan in critical status

6 has not agreed on a funding improvement plan or rehabili7 tation plan, then any member of the board or group that

8 constitutes the plan sponsor may require that the plan

9 sponsor enter into an expedited dispute resolution procedure

10 for the development and adoption of a funding improvement

11 plan or rehabilitation plan.

12 ‘‘(h) NONBARGAINED PARTICIPATION.—

13 ‘‘(1) BOTH BARGAINED AND NONBARGAINED EM14 PLOYEE-PARTICIPANTS.—In the case of an employer

15 that contributes to a multiemployer plan with respect

16 to both employees who are covered by one or more col17 lective bargaining agreements and to employees who

18 are not so covered, if the plan is in endangered status

19 or in critical status, benefits of and contributions for

20 the nonbargained employees, including surcharges on

21 those contributions, shall be determined as if those

22 nonbargained employees were covered under the first

23 to expire of the employer’s collective bargaining agree24 ments in effect when the plan entered endangered or

25 critical status.
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1 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In the

2 case of an employer that contributes to a multiem3 ployer plan only with respect to employees who are

4 not covered by a collective bargaining agreement, this

5 section shall be applied as if the employer were the

6 bargaining parties, and its participation agreement

7 with the plan was a collective bargaining agreement

8 with a term ending on the first day of the plan year

9 beginning after the employer is provided the schedule

10 or schedules described in subsections (c) and (e).

11 ‘‘(3) EMPLOYEES COVERED BY A COLLECTIVE

12 BARGAINING AGREEMENT.—The determination as to

13 whether an employee covered by a collective bar14 gaining agreement for purposes of this section shall be

15 made without regard to the special rule in Treasury

16 Regulation section 1.410(b)–6(d)(ii)(D).

17 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur18 poses of this section—

19 ‘‘(1) BARGAINING PARTY.—The term ‘bargaining

20 party’ means—

21 ‘‘(A)(i) except as provided in clause (ii), an

22 employer who has an obligation to contribute

23 under the plan; or

24 ‘‘(ii) in the case of a plan described under

25 section 404(c) of the Internal Revenue Code of
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1 1986, or a continuation of such a plan, the asso2 ciation of employers that is the employee settlor

3 of the plan; and

4 ‘‘(B) an employee organization which, for

5 purposes of collective bargaining, represents plan

6 participants employed by an employer who has

7 an obligation to contribute under the plan.

8 ‘‘(2) FUNDED PERCENTAGE.—The term ‘funded

9 percentage’ means the percentage equal to a

10 fraction—

11 ‘‘(A) the numerator of which is the value of

12 the plan’s assets, as determined under section

13 304(c)(2), and

14 ‘‘(B) the denominator of which is the ac15 crued liability of the plan, determined using ac16 tuarial assumptions described in section

17 304(c)(3).

18 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—The

19 term ‘accumulated funding deficiency’ has the mean20 ing given such term in section 304(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 ‘inactive

2 participant’ means, in connection with a multiem3 ployer plan, a participant, or the beneficiary or alter4 nate payee of a participant, who—

5 ‘‘(A) is not in covered service under the

6 plan, and

7 ‘‘(B) is in pay status under the plan or has

8 a nonforfeitable right to benefits under the 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 of

18 the Secretary of the Treasury, such person is en19 titled to such a benefit under the plan.

20 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term

21 ‘obligation to contribute’ has the meaning given such

22 term under section 4212(a).

23 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding

24 any other provision of this section, the actuary’s de25 terminations with respect to a plan’s normal cost, ac-
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1 tuarial accrued liability, and improvements in a

2 plan’s funded percentage under this section shall be

3 based upon the unit credit funding method (whether

4 or not that method is used for the plan’s actuarial

5 valuation).

6 ‘‘(9) PLAN SPONSOR.—In the case of a plan de7 scribed under section 404(c) of the Internal Revenue

8 Code of 1986, or a continuation of such a plan, the

9 term ‘plan sponsor’ means the bargaining parties de10 scribed under paragraph (1).’’.

11 (b) CAUSE OF ACTION TO COMPEL ADOPTION OF

12 FUNDING IMPROVEMENT OR REHABILITATION PLAN.—Sec13 tion 502(a) of the Employee Retirement Income Security

14 Act of 1974 is amended by striking ‘‘or’’ at the end of para15 graph (8), by striking the period at the end of paragraph

16 (9) and inserting ‘‘; or’’ and by adding at the end the fol17 lowing:

18 ‘‘(10) in the case of a multiemployer plan that

19 has been certified by the actuary to be in endangered

20 or critical status under section 305, if the plan spon21 sor has not adopted a funding improvement or reha22 bilitation plan under subsection (c) or (e) of that sec23 tion by the deadline established in that section, by an

24 employer that has an obligation to contribute with re25 spect to the multiemployer plan or an employee orga-
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1 nization that represents active participants in the

2 multiemployer plan, for an order compelling the plan

3 sponsor to adopt a funding improvement or rehabili4 tation plan.’’.

5 (c) 4971 EXCISE TAX INAPPLICABLE.—Section 4971

6 of the Internal Revenue Code of 1986 is amended by redesig7 nating subsection (g) as subsection (h), and inserting after

8 subsection (f) the following:

9 ‘‘(g) MULTIEMPLOYER PLANS IN CRITICAL STATUS.—

10 No tax shall be imposed under this section for a taxable

11 year with respect to a multiemployer plan if, for the plan

12 years ending with or within the taxable year, the plan is

13 in critical status pursuant to section 305 of the Employee

14 Retirement Income Security Act of 1974. This subsection

15 shall only apply if the plan adopts a rehabilitation plan

16 in accordance with section 305(e) of such Act and complies

17 with such rehabilitation plan (and any modifications of the

18 plan) and shall not apply if an excise tax is required to

19 be imposed under this section by reason of a violation of

20 such section 305.’’.

21 (d) NO ADDITIONAL CONTRIBUTIONS REQUIRED.—

22 (1) Section 302(b) of the Employee Retirement

23 Income Security Act of 1974, as amended by this Act,

24 is amended by adding at the end the following new

25 paragraph:
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1 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA2 TUS.—Subparagraph (A) shall not apply in the case

3 of a multiemployer plan for any plan year in which

4 the plan is in critical status pursuant to section 305.

5 This paragraph shall only apply if the plan adopts

6 a rehabilitation plan in accordance with section

7 305(e) and complies with such rehabilitation plan

8 (and any modifications of the plan).’’.

9 (2) Section 412(c) of the Internal Revenue Code

10 of 1986, as amended by this Act, is amended by add11 ing at the end the following new paragraph:

12 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA13 TUS.—Subparagraph (A) shall not apply in the case

14 of a multiemployer plan for any plan year in which

15 the plan is in critical status pursuant to section 305

16 of the Employee Retirement Income Security Act of

17 1974. This paragraph shall only apply if the plan

18 adopts a rehabilitation plan in accordance with sec19 tion 305(e) of such Act and complies with such reha20 bilitation plan (and any modifications of the plan).’’.

21 (e) CONFORMING AMENDMENT.—The table of contents

22 in section 1 of such Act (as amended by the preceding provi23 sions of this Act) is amended by inserting after the item

24 relating to section 304 the following new item:

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status

or critical status.’’.
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1 (f) EFFECTIVE DATES.—

2 (1) IN GENERAL.—The amendment made by this

3 section shall apply with respect to plan years begin4 ning after 2006.

5 (2) SPECIAL RULE FOR CERTAIN RESTORED BEN6 EFITS.—In the case of a multiemployer plan—

7 (A) with respect to which benefits were re8 duced pursuant to a plan amendment adopted

9 on or after January 1, 2002, and before June 30,

10 2005, and

11 (B) which, pursuant to the plan document,

12 the trust agreement, or a formal written commu13 nication from the plan sponsor to participants

14 provided before June 30, 2005, provided for the

15 restoration of such benefits,

16 the amendments made by this section shall not apply

17 to such benefit restorations to the extent that any re18 striction on the providing or accrual of such benefits

19 would otherwise apply by reason of such amendments.

20 SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL21 TIEMPLOYER PLANS.

22 (a) ADVANCE DETERMINATION OF IMPENDING INSOL23 VENCY OVER 5 YEARS.—Section 4245(d)(1) of the Em24 ployee Retirement Income Security Act of 1974 (29 U.S.C.

25 1426(d)(1)) is amended—
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1 (1) by striking ‘‘3 plan years’’ the second place

2 it appears and inserting ‘‘5 plan years’’; and

3 (2) by adding at the end the following new sen4 tence: ‘‘If the plan sponsor makes such a determina5 tion that the plan will be insolvent in any of the next

6 5 plan years, the plan sponsor shall make the com7 parison under this paragraph at least annually until

8 the plan sponsor makes a determination that the plan

9 will not be insolvent in any of the next 5 plan

10 years.’’.

11 (b) EFFECTIVE DATE.—The amendments made by this

12 section shall apply with respect to determinations made in

13 plan years beginning after 2006.

14 SEC. 204. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED

15 UNDER AN AGREEMENT APPROVED BY THE

16 PENSION BENEFIT GUARANTY CORPORATION.

17 In the case of a multiemployer plan that is a party

18 to an agreement that was approved by the Pension Benefit

19 Guaranty Corporation prior to June 30, 2005, and that—

20 (1) increases benefits, and

21 (2) provides for special withdrawal liability

22 rules under section 4203(f) of the Employee Retire23 ment Income Security Act of 1974 (29 U.S.C. 1383),

24 the amendments made by sections 201, 202, 211, and 212

25 of this Act shall not apply to the benefit increases under
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1 any plan amendment adopted prior to June 30, 2005, that

2 are funded pursuant to such agreement if the plan is funded

3 in compliance with such agreement (and any amendments

4 thereto).

5 SEC. 205. WITHDRAWAL LIABILITY REFORMS.

6 (a) REPEAL OF LIMITATION ON WITHDRAWAL LIABIL7 ITY OF INSOLVENT EMPLOYERS.—

8 (1) IN GENERAL.—Subsections (b) and (d) of sec9 tion 4225 of the Employee Retirement Income Secu10 rity Act of 1974 (29 U.S.C. 1405) are repealed.

11 (2) CONFORMING AMENDMENTS.—Subsections (c)

12 and (e) of section 4225 of such Act are redesignated

13 as subsections (b) and (c), respectively.

14 (3) EFFECTIVE DATE.—The amendments made

15 by this section shall apply with respect to sales occur16 ring on or after January 1, 2006.

17 (b) WITHDRAWAL LIABILITY CONTINUES IF WORK

18 CONTRACTED OUT.—

19 (1) IN GENERAL.—Clause (i) of section

20 4205(b)(2)(A) of such Act (29 U.S.C. 1385(b)(2)(A))

21 is amended by inserting ‘‘or to an entity or entities

22 owned or controlled by the employer’’ after ‘‘to an23 other location’’.

24 (2) EFFECTIVE DATE.—The amendment made by

25 this subsection shall apply with respect to work trans-
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1 ferred on or after the date of the enactment of this

2 Act.

3 (c) APPLICATION OF FORGIVENESS RULE TO PLANS

4 PRIMARILY COVERING EMPLOYEES IN THE BUILDING AND

5 CONSTRUCTION.—

6 (1) IN GENERAL.—Section 4210(b) of such Act

7 (29 U.S.C. 1390(b)) is amended—

8 (A) by striking paragraph (1); and

9 (B) by redesignating paragraphs (2)

10 through (4) as paragraphs (1) through (3), re11 spectively.

12 (2) EFFECTIVE DATE.—The amendments made

13 by this subsection shall apply with respect to plan

14 withdrawals occurring on or after January 1, 2006.

15 PART II—AMENDMENTS TO INTERNAL REVENUE

16 CODE OF 1986

17 SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED

18 BENEFIT PLANS.

19 (a) IN GENERAL.—Subpart A of part III of subchapter

20 D of chapter 1 of the Internal Revenue Code of 1986 (as

21 added by this Act) is amended by inserting after section

22 430 the following new section:
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1 ‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM2 PLOYER PLANS.

3 ‘‘(a) IN GENERAL.—For purposes of section 412, the

4 accumulated funding deficiency of a multiemployer plan for

5 any plan year is—

6 ‘‘(1) except as provided in paragraph (2), the

7 amount, determined as of the end of the plan year,

8 equal to the excess (if any) of the total charges to the

9 funding standard account of the plan for all plan

10 years (beginning with the first plan year for which

11 this part applies to the plan) over the total credits to

12 such account for such years, and

13 ‘‘(2) if the multiemployer plan is in reorganiza14 tion for any plan year, the accumulated funding defi15 ciency of the plan determined under section 4243 of

16 the Employee Retirement Income Security Act of

17 1974.

18 ‘‘(b) FUNDING STANDARD ACCOUNT.—

19 ‘‘(1) ACCOUNT REQUIRED.—Each multiemployer

20 plan to which this part applies shall establish and

21 maintain a funding standard account. Such account

22 shall be credited and charged solely as provided in

23 this section.

24 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year,

25 the funding standard account shall be charged with

26 the sum of—
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1 ‘‘(A) the normal cost of the plan for the

2 plan year,

3 ‘‘(B) the amounts necessary to amortize in

4 equal annual installments (until fully amor5 tized)—

6 ‘‘(i) separately, with respect to each

7 plan year, the net increase (if any) in un8 funded past service liability under the plan

9 arising from plan amendments adopted in

10 such year, over a period of 15 plan years,

11 ‘‘(ii) separately, with respect to each

12 plan year, the net experience loss (if any)

13 under the plan, over a period of 15 plan

14 years, and

15 ‘‘(iii) separately, with respect to each

16 plan year, the net loss (if any) resulting

17 from changes in actuarial assumptions used

18 under the plan, over a period of 15 plan

19 years,

20 ‘‘(C) the amount necessary to amortize each

21 waived funding deficiency (within the meaning

22 of section 412(d)(3)) for each prior plan year in

23 equal annual installments (until fully amor24 tized) 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 412(b)(3)(D) (as in effect on the day be6 fore the date of the enactment of the Pension Se7 curity and Transparency 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 contributions

11 which would be required to be made under the

12 plan but for the provisions of section

13 412(c)(7)(A)(i)(I) (as in effect on the day before

14 the date of the enactment of the Pension Security

15 and Transparency 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 used

13 under the plan, over a period of 15 plan

14 years,

15 ‘‘(C) the amount of the waived funding defi16 ciency (within the meaning of section 412(d)(3))

17 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

24 412(g) (as in effect on the day before the date of

25 the enactment of the Pension Security and
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1 Transparency Act of 2005), the excess (if any) of

2 any debit balance in the funding standard ac3 count (determined without regard to this sub4 paragraph) over any debit balance in the alter5 native minimum funding standard account.

6 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AMOR7 TIZED TO PLAN YEARS BEFORE 2007.—In the case of

8 any amount amortized under section 412(b) (as in ef9 fect on the day before the date of the enactment of the

10 Pension Security and Transparency Act of 2005) over

11 any period beginning with a plan year beginning be12 fore 2007, in lieu of the amortization described in

13 paragraphs (2)(B) and (3)(B), such amount shall

14 continue to be amortized under such section as so in

15 effect.

16 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS TO

17 BE AMORTIZED.—Under regulations prescribed by the

18 Secretary, amounts required to be amortized under

19 paragraph (2) or paragraph (3), as the case may

20 be—

21 ‘‘(A) may be combined into one amount

22 under such paragraph to be amortized over a pe23 riod determined on the basis of the remaining

24 amortization period for all items entering into

25 such combined amount, and
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1 ‘‘(B) may be offset against amounts re2 quired to be amortized under the other such

3 paragraph, with the resulting amount to be am4 ortized over a period determined on the basis of

5 the remaining amortization periods for all items

6 entering into whichever of the two amounts being

7 offset is the greater.

8 ‘‘(6) INTEREST.—The funding standard account

9 (and items therein) shall be charged or credited (as

10 determined under regulations prescribed by the Sec11 retary of the Treasury) with interest at the appro12 priate rate consistent with the rate or rates of interest

13 used under the plan to determine costs.

14 ‘‘(7) SPECIAL RULES RELATING TO CHARGES

15 AND CREDITS TO FUNDING STANDARD ACCOUNT.—For

16 purposes of this part—

17 ‘‘(A) WITHDRAWAL LIABILITY.—Any

18 amount received by a multiemployer plan in

19 payment of all or part of an employer’s with20 drawal liability under part 1 of subtitle E of

21 title IV of the Employee Retirement Income Se22 curity Act of 1974 shall be considered an amount

23 contributed by the employer to or under the

24 plan. The Secretary may prescribe by regulation

25 additional charges and credits to a multiem-
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1 ployer plan’s funding standard account to the

2 extent necessary to prevent withdrawal liability

3 payments from being unduly reflected as advance

4 funding for plan liabilities.

5 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM6 PLOYER PLAN LEAVES REORGANIZATION.—If a

7 multiemployer plan is not in reorganization in

8 the plan year but was in reorganization in the

9 immediately preceding plan year, any balance

10 in the funding standard account at the close of

11 such immediately preceding plan year—

12 ‘‘(i) shall be eliminated by an offset13 ting credit or charge (as the case may be),

14 but

15 ‘‘(ii) shall be taken into account in

16 subsequent plan years by being amortized

17 in equal annual installments (until fully

18 amortized) over 30 plan years.

19 The preceding sentence shall not apply to the ex20 tent of any accumulated funding deficiency

21 under section 4243(a) of such Act as of the end

22 of the last plan year that the plan was in reorga23 nization.

24 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

25 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT
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1 FUND.—Any amount paid by a plan during a

2 plan year to the Pension Benefit Guaranty Cor3 poration pursuant to section 4222 of such Act or

4 to a fund exempt under section 501(c)(22) pur5 suant to section 4223 of such Act shall reduce the

6 amount of contributions considered received by

7 the plan for the plan year.

8 ‘‘(D) INTERIM WITHDRAWAL LIABILITY PAY9 MENTS.—Any amount paid by an employer

10 pending a final determination of the employer’s

11 withdrawal liability under part 1 of subtitle E

12 of title IV of such Act and subsequently refunded

13 to the employer by the plan shall be charged to

14 the funding standard account in accordance with

15 regulations prescribed by the Secretary.

16 ‘‘(E) ELECTION FOR DEFERRAL OF CHARGE

17 FOR PORTION OF NET EXPERIENCE LOSS.—If an

18 election is in effect under section 412(b)(7)(F)

19 (as in effect on the day before the date of the en20 actment of the Pension Security and Trans21 parency Act of 2005) for any plan year, the

22 funding standard account shall be charged in the

23 plan year to which the portion of the net experi24 ence loss deferred by such election was deferred

25 with the amount so deferred (and paragraph
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1 (2)(B)(ii) shall not apply to the amount so

2 charged).

3 ‘‘(F) FINANCIAL ASSISTANCE.—Any amount

4 of any financial assistance from the Pension

5 Benefit Guaranty Corporation to any plan, and

6 any repayment of such amount, shall be taken

7 into account under this section and section 412

8 in such manner as is determined by the Sec9 retary.

10 ‘‘(G) SHORT-TERM BENEFITS.—To the ex11 tent that any plan amendment increases the un12 funded past service liability under the plan by

13 reason of an increase in benefits which are pay14 able under the terms of the plan for a period that

15 does not exceed 14 years from the effective date

16 of the amendment, paragraph (2)(B)(i) shall be

17 applied separately with respect to such increase

18 in unfunded past service liability by substituting

19 the number of years of the period during which

20 such benefits are payable for ‘15’.

21 ‘‘(c) ADDITIONAL RULES.—

22 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

23 FUNDING METHOD.—For purposes of this part, nor24 mal costs, accrued liability, past service liabilities,

25 and experience gains and losses shall be determined
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1 under the funding method used to determine costs

2 under the plan.

3 ‘‘(2) VALUATION OF ASSETS.—

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

5 part, the value of the plan’s assets shall be deter6 mined on the basis of any reasonable actuarial

7 method of valuation which takes into account

8 fair market value and which is permitted under

9 regulations prescribed by the Secretary.

10 ‘‘(B) ELECTION WITH RESPECT TO

11 BONDS.—The value of a bond or other evidence

12 of indebtedness which is not in default as to

13 principal or interest may, at the election of the

14 plan administrator, be determined on an amor15 tized basis running from initial cost at purchase

16 to par value at maturity or earliest call date.

17 Any election under this subparagraph shall be

18 made at such time and in such manner as the

19 Secretary shall by regulations provide, shall

20 apply to all such evidences of indebtedness, and

21 may be revoked only with the consent of the Sec22 retary.

23 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA24 SONABLE.—For purposes of this section, all costs, li25 abilities, rates of interest, and other factors under the
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1 plan shall be determined on the basis of actuarial as2 sumptions and methods—

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

4 into account the experience of the plan and rea5 sonable expectations), and

6 ‘‘(B) which, in combination, offer the actu7 ary’s best estimate of anticipated experience

8 under the plan.

9 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX10 PERIENCE GAIN OR LOSS.—For purposes of this sec11 tion, if—

12 ‘‘(A) a change in benefits under the Social

13 Security Act or in other retirement benefits cre14 ated under Federal or State law, or

15 ‘‘(B) a change in the definition of the term

16 ‘wages’ under section 3121, or a change in the

17 amount of such wages taken into account under

18 regulations prescribed for purposes of section

19 401(a)(5),

20 results in an increase or decrease in accrued liability

21 under a plan, such increase or decrease shall be treat22 ed as an experience loss or gain.

23 ‘‘(5) FULL FUNDING.—If, as of the close of a

24 plan year, a plan would (without regard to this para-
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1 graph) have an accumulated funding deficiency in ex2 cess of the full funding limitation—

3 ‘‘(A) the funding standard account shall be

4 credited with the amount of such excess, and

5 ‘‘(B) all amounts described in subpara6 graphs (B), (C), and (D) of subsection (b) (2)

7 and subparagraph (B) of subsection (b)(3) which

8 are required to be amortized shall be considered

9 fully amortized for purposes of such subpara10 graphs.

11 ‘‘(6) FULL-FUNDING LIMITATION.—

12 ‘‘(A) IN GENERAL.—For purposes of para13 graph (5), the term ‘full-funding limitation’

14 means the excess (if any) of—

15 ‘‘(i) the accrued liability (including

16 normal cost) under the plan (determined

17 under the entry age normal funding method

18 if such accrued liability cannot be directly

19 calculated under the funding method used

20 for the plan), over

21 ‘‘(ii) the lesser of—

22 ‘‘(I) the fair market value of the

23 plan’s assets, or

24 ‘‘(II) the value of such assets de25 termined under paragraph (2).
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1 ‘‘(B) MINIMUM AMOUNT.—

2 ‘‘(i) IN GENERAL.—In no event shall

3 the full-funding limitation determined

4 under subparagraph (A) be less than the ex5 cess (if any) of—

6 ‘‘(I) 90 percent of the current li7 ability of the plan (including the ex8 pected increase in current liability due

9 to benefits accruing during the plan

10 year), over

11 ‘‘(II) the value of the plan’s assets

12 determined under paragraph (2).

13 ‘‘(ii) ASSETS.—For purposes of clause

14 (i), assets shall not be reduced by any credit

15 balance in the funding standard account.

16 ‘‘(C) FULL FUNDING LIMITATION.—For pur17 poses of this paragraph, unless otherwise pro18 vided by the plan, the accrued liability under a

19 multiemployer plan shall not include benefits

20 which are not nonforfeitable under the plan after

21 the termination of the plan (taking into consid22 eration section 411(d)(3)).

23 ‘‘(D) CURRENT LIABILITY.—For purposes of

24 this paragraph—
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1 ‘‘(i) IN GENERAL.—The term ‘current

2 liability’ means all liabilities to employees

3 and their beneficiaries under the plan.

4 ‘‘(ii) TREATMENT OF UNPREDICTABLE

5 CONTINGENT EVENT BENEFITS.—For pur6 poses of clause (i), any benefit contingent on

7 an event other than—

8 ‘‘(I) age, service, compensation,

9 death, or disability, or

10 ‘‘(II) an event which is reasonably

11 and reliably predictable (as determined

12 by the Secretary),

13 shall not be taken into account until the

14 event on which the benefit is contingent oc15 curs.

16 ‘‘(iii) INTEREST RATE USED.—The

17 rate of interest used to determine current li18 ability under this paragraph shall be the

19 rate of interest determined under subpara20 graph (E).

21 ‘‘(iv) MORTALITY TABLES.—

22 ‘‘(I) COMMISSIONERS’ STANDARD

23 TABLE.—In the case of plan years be24 ginning before the first plan year to

25 which the first tables prescribed under
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1 subclause (II) apply, the mortality

2 table used in determining current li3 ability under this paragraph shall be

4 the table prescribed by the Secretary

5 which is based on the prevailing com6 missioners’ standard table (described

7 in section 807(d)(5)(A)) used to deter8 mine reserves for group annuity con9 tracts issued on January 1, 1993.

10 ‘‘(II) SECRETARIAL AUTHOR11 ITY.—The Secretary may by regulation

12 prescribe for plan years beginning

13 after December 31, 1999, mortality ta14 bles to be used in determining current

15 liability under this subsection. Such

16 tables shall be based upon the actual

17 experience of pension plans and pro18 jected trends in such experience. In

19 prescribing such tables, the Secretary

20 shall take into account results of avail21 able independent studies of mortality

22 of individuals covered by pension

23 plans.
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1 ‘‘(v) SEPARATE MORTALITY TABLES

2 FOR THE DISABLED.—Notwithstanding

3 clause (iv)—

4 ‘‘(I) IN GENERAL.—The Secretary

5 shall establish mortality tables which

6 may be used (in lieu of the tables

7 under clause (iv)) to determine current

8 liability under this subsection for indi9 viduals who are entitled to benefits

10 under the plan on account of dis11 ability. The Secretary shall establish

12 separate tables for individuals whose

13 disabilities occur in plan years begin14 ning before January 1, 1995, and for

15 individuals whose disabilities occur in

16 plan years beginning on or after such

17 date.

18 ‘‘(II) SPECIAL RULE FOR DISABIL19 ITIES OCCURRING AFTER 1994.—In the

20 case of disabilities occurring in plan

21 years beginning after December 31,

22 1994, the tables under subclause (I)

23 shall apply only with respect to indi24 viduals described in such subclause

25 who are disabled within the meaning
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1 of title II of the Social Security Act

2 and the regulations thereunder.

3 ‘‘(vi) PERIODIC REVIEW.—The Sec4 retary shall periodically (at least every 5

5 years) review any tables in effect under this

6 subparagraph and shall, to the extent such

7 Secretary determines necessary, by regula8 tion update the tables to reflect the actual

9 experience of pension plans and projected

10 trends in such experience.

11 ‘‘(E) REQUIRED CHANGE OF INTEREST

12 RATE.—For purposes of determining a plan’s

13 current liability for purposes of this

14 paragraph—

15 ‘‘(i) IN GENERAL.—If any rate of in16 terest used under the plan under subsection

17 (b)(6) to determine cost is not within the

18 permissible range, the plan shall establish a

19 new rate of interest within the permissible

20 range.

21 ‘‘(ii) PERMISSIBLE RANGE.—For pur22 poses of this subparagraph—

23 ‘‘(I) IN GENERAL.—Except as pro24 vided in subclause (II), the term ‘per25 missible range’ means a rate of interest
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1 which is not more than 5 percent

2 above, and not more than 10 percent

3 below, the weighted average of the rates

4 of interest on 30-year Treasury securi5 ties during the 4-year period ending on

6 the last day before the beginning of the

7 plan year.

8 ‘‘(II) SECRETARIAL AUTHOR9 ITY.—If the Secretary finds that the

10 lowest rate of interest permissible

11 under subclause (I) is unreasonably

12 high, the Secretary may prescribe a

13 lower rate of interest, except that such

14 rate may not be less than 80 percent of

15 the average rate determined under such

16 subclause.

17 ‘‘(iii) ASSUMPTIONS.—Notwith18 standing paragraph (3)(A), the interest rate

19 used under the plan shall be—

20 ‘‘(I) determined without taking

21 into account the experience of the plan

22 and reasonable expectations, but

23 ‘‘(II) consistent with the assump24 tions which reflect the purchase rates

25 which would be used by insurance com-
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1 panies to satisfy the liabilities under

2 the plan.

3 ‘‘(7) ANNUAL VALUATION.—

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

5 section, a determination of experience gains and

6 losses and a valuation of the plan’s liability

7 shall be made not less frequently than once every

8 year, except that such determination shall be

9 made more frequently to the extent required in

10 particular cases under regulations prescribed by

11 the Secretary.

12 ‘‘(B) VALUATION DATE.—

13 ‘‘(i) CURRENT YEAR.—Except as pro14 vided in clause (ii), the valuation referred

15 to in subparagraph (A) shall be made as of

16 a date within the plan year to which the

17 valuation refers or within one month prior

18 to the beginning of such year.

19 ‘‘(ii) USE OF PRIOR YEAR VALU20 ATION.—The valuation referred to in sub21 paragraph (A) may be made as of a date

22 within the plan year prior to the year to

23 which the valuation refers if, as of such

24 date, the value of the assets of the plan are

25 not less than 100 percent of the plan’s cur-
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1 rent liability (as defined in paragraph

2 (6)(D) without regard to clause (iv) there3 of).

4 ‘‘(iii) ADJUSTMENTS.—Information

5 under clause (ii) shall, in accordance with

6 regulations, be actuarially adjusted to re7 flect significant differences in participants.

8 ‘‘(iv) LIMITATION.—A change in fund9 ing method to use a prior year valuation,

10 as provided in clause (ii), may not be made

11 unless as of the valuation date within the

12 prior plan year, the value of the assets of

13 the plan are not less than 125 percent of the

14 plan’s current liability (as defined in para15 graph (6)(D) without regard to clause (iv)

16 thereof).

17 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

18 DEEMED MADE.—For purposes of this section, any

19 contributions for a plan year made by an employer

20 after the last day of such plan year, but not later

21 than two and one-half months after such day, shall be

22 deemed to have been made on such last day. For pur23 poses of this subparagraph, such two and one-half

24 month period may be extended for not more than six

25 months under regulations prescribed by the Secretary.
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1 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

2 MULTIEMPLOYER PLANS.—

3 ‘‘(1) AUTOMATIC EXTENSION UPON APPLICATION

4 BY CERTAIN PLANS.—

5 ‘‘(A) IN GENERAL.—If the plan sponsor of

6 a multiemployer plan—

7 ‘‘(i) submits to the Secretary an appli8 cation for an extension of the period of

9 years required to amortize any unfunded li10 ability described in any clause of subsection

11 (b)(2)(B) or described in subsection (b)(4),

12 and

13 ‘‘(ii) includes with the application a

14 certification by the plan’s actuary described

15 in subparagraph (B),

16 the Secretary shall extend the amortization pe17 riod for the period of time (not in excess of 5

18 years) specified in the application. Such exten19 sion shall be in addition to any extension under

20 paragraph (2).

21 ‘‘(B) CRITERIA.—A certification with re22 spect to a multiemployer plan is described in

23 this subparagraph if the plan’s actuary certifies

24 that, based on reasonable assumptions—
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1 ‘‘(i) absent the extension under sub2 paragraph (A), the plan would have an ac3 cumulated funding deficiency in the current

4 plan year or any of the 9 succeeding plan

5 years,

6 ‘‘(ii) the plan sponsor has adopted a

7 plan to improve the plan’s funding status,

8 ‘‘(iii) the plan is projected to have suf9 ficient assets to timely pay expected benefits

10 and anticipated expenditures over the amor11 tization period as extended, and

12 ‘‘(iv) the notice required under para13 graph (3)(A) has been provided.

14 ‘‘(2) ADDITIONAL EXTENSION.—

15 ‘‘(A) IN GENERAL.—If the plan sponsor of

16 a multiemployer plan submits to the Secretary

17 an application for an extension of the period of

18 years required to amortize any unfunded liabil19 ity described in any clause of subsection

20 (b)(2)(B) or described in subsection (b)(4), the

21 Secretary may extend the amortization period

22 for a period of time (not in excess of 5 years) if

23 the Secretary of the Treasury makes the deter24 mination described in subparagraph (B). Such
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1 extension shall be in addition to any extension

2 under paragraph (1).

3 ‘‘(B) DETERMINATION.—The Secretary may

4 grant an extension under subparagraph (A) if

5 the Secretary determines that—

6 ‘‘(i) such extension would carry out the

7 purposes of this Act and would provide ade8 quate protection for participants under the

9 plan and their beneficiaries, and

10 ‘‘(ii) the failure to permit such exten11 sion would—

12 ‘‘(I) result in a substantial risk to

13 the voluntary continuation of the plan,

14 or a substantial curtailment of pension

15 benefit levels or employee compensa16 tion, and

17 ‘‘(II) be adverse to the interests of

18 plan participants in the aggregate.

19 ‘‘(C) ACTION BY SECRETARY.—The Sec20 retary shall act upon any application for an ex21 tension under this paragraph within 180 days of

22 the submission of such application. If the Sec23 retary rejects the application for an extension

24 under this paragraph, the Secretary shall pro25 vide notice to the plan detailing the specific rea-
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1 sons for the rejection, including references to the

2 criteria set forth above.

3 ‘‘(3) ADVANCE NOTICE.—

4 ‘‘(A) IN GENERAL.—The Secretary shall, be5 fore granting an extension under this subsection,

6 require each applicant to provide evidence satis7 factory to such Secretary that the applicant has

8 provided notice of the filing of the application

9 for such extension to each affected party (as de10 fined in section 4001(a)(21) of the Employee Re11 tirement Income Security Act of 1974) with re12 spect to the affected plan. Such notice shall in13 clude a description of the extent to which the

14 plan is funded for benefits which are guaranteed

15 under title IV of such Act and for benefit liabil16 ities.

17 ‘‘(B) CONSIDERATION OF RELEVANT INFOR18 MATION.—The Secretary shall consider any rel19 evant information provided by a person to whom

20 notice was given under paragraph (1).’’.

21 (b) EFFECTIVE DATE.—

22 (1) IN GENERAL.—The amendments made by

23 this section shall apply to plan years beginning after

24 2006.
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1 (2) SPECIAL RULE FOR CERTAIN AMORTIZATION

2 EXTENSIONS.—If the Secretary of the Treasury grants

3 an extension under section 304 of the Employee Re4 tirement Income Security Act of 1974 and section

5 412(e) of the Internal Revenue Code of 1986 with re6 spect to any application filed with the Secretary of

7 the Treasury on or before June 30, 2005, the exten8 sion (and any modification thereof) shall be applied

9 and administered under the rules of such sections as

10 in effect before the enactment of this Act, including

11 the use of the rate of interest determined under section

12 6621(b) of such Code.

13 SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEM14 PLOYER PLANS IN ENDANGERED OR CRIT15 ICAL STATUS.

16 (a) IN GENERAL.—Subpart A of part III of subchapter

17 D of chapter 1 of the Internal Revenue Code of 1986 (as

18 amended by this Act) is amended by inserting after section

19 431 the following new section:

20 ‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEM21 PLOYER PLANS IN ENDANGERED STATUS OR

22 CRITICAL STATUS.

23 ‘‘(a) GENERAL RULE.—For purposes of this part, in

24 the case of a multiemployer plan—

25 ‘‘(1) if the plan is in endangered status—
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1 ‘‘(A) the plan sponsor shall adopt and im2 plement a funding improvement plan in accord3 ance with the requirements of subsection (c), and

4 ‘‘(B) the requirements of subsection (d) shall

5 apply during the funding plan adoption period

6 and the funding improvement period, and

7 ‘‘(2) if the plan is in critical status—

8 ‘‘(A) the plan sponsor shall adopt and im9 plement a rehabilitation plan in accordance with

10 the requirements of subsection (e), and

11 ‘‘(B) the requirements of subsection (f) shall

12 apply during the rehabilitation plan adoption

13 period and the rehabilitation period.

14 ‘‘(b) DETERMINATION OF ENDANGERED AND CRITICAL

15 STATUS.—For purposes of this section—

16 ‘‘(1) ENDANGERED STATUS.—A multiemployer

17 plan is in endangered status for a plan year if, as

18 determined by the plan actuary under paragraph (3),

19 the plan is not in critical status for the plan year

20 and either—

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, or is projected to

25 have such an accumulated funding deficiency for
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1 any of the 6 succeeding plan years, taking into

2 account any extension of amortization periods

3 under section 431(d).

4 For purposes of this section, a plan described in sub5 paragraph (B) shall be treated as in seriously endan6 gered status.

7 ‘‘(2) CRITICAL STATUS.—A multiemployer plan

8 is in critical status for a plan year if, as determined

9 by the plan actuary under paragraph (3), the plan is

10 described in 1 or more of the following subparagraphs

11 as of the beginning of the plan year:

12 ‘‘(A) A plan is described in this subpara13 graph if—

14 ‘‘(i) the funded percentage of the plan

15 is less than 65 percent, and

16 ‘‘(ii) the sum of—

17 ‘‘(I) the market value of plan as18 sets, plus

19 ‘‘(II) the present value of the rea20 sonably anticipated employer contribu21 tions for the current plan year and

22 each of the 5 succeeding plan years, as23 suming that the terms of all collective

24 bargaining agreements pursuant to

25 which the plan is maintained for the
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1 current plan year continue in effect for

2 succeeding plan years,

3 is less than the present value of all benefits

4 projected to be payable under the plan dur5 ing the current plan year and each of the

6 5 succeeding plan years (plus administra7 tive expenses for such plan years).

8 ‘‘(B) A plan is described in this subpara9 graph if—

10 ‘‘(i) the plan has an accumulated

11 funding deficiency for the current plan

12 year, not taking into account any extension

13 of amortization periods under section

14 431(d), or

15 ‘‘(ii) the plan is projected to have an

16 accumulated funding deficiency for any of

17 the 3 succeeding plan years (4 succeeding

18 plan years if the funded percentage of the

19 plan is 65 percent or less), not taking into

20 account any extension of amortization peri21 ods under section 431(d).

22 ‘‘(C) A plan is described in this subpara23 graph if—

24 ‘‘(i)(I) the plan’s normal cost for the

25 current plan year, plus interest (determined
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1 at the rate used for determining costs under

2 the plan) for the current plan year on the

3 amount of unfunded benefit liabilities under

4 the plan as of the last date of the preceding

5 plan year, exceeds

6 ‘‘(II) the present value of the reason7 ably anticipated employer contributions for

8 the current plan year,

9 ‘‘(ii) the present value of nonforfeitable

10 benefits of inactive participants is greater

11 than the present value of nonforfeitable ben12 efits of active participants, and

13 ‘‘(iii) the plan has an accumulated

14 funding deficiency for the current plan

15 year, or is projected to have such a defi16 ciency for any of the 4 succeeding plan

17 years, not taking into account any exten18 sion of amortization periods under section

19 431(d).

20 ‘‘(D) A plan is described in this subpara21 graph if the sum of—

22 ‘‘(i) the market value of plan assets,

23 plus

24 ‘‘(ii) the present value of the reason25 ably anticipated employer contributions for
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1 the current plan year and each of the 4 suc2 ceeding plan years, assuming that the terms

3 of all collective bargaining agreements pur4 suant to which the plan is maintained for

5 the current plan year continue in effect for

6 succeeding plan years,

7 is less than the present value of all benefits pro8 jected to be payable under the plan during the

9 current plan year and each of the 4 succeeding

10 plan years (plus administrative expenses for

11 such plan years).

12 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU13 ARY.—

14 ‘‘(A) IN GENERAL.—During the 90-day pe15 riod beginning on the first day of each plan year

16 of a multiemployer plan, the plan actuary shall

17 certify to the Secretary—

18 ‘‘(i) whether or not the plan is in en19 dangered status for such plan year and

20 whether or not the plan is in critical status

21 for such plan year, and

22 ‘‘(ii) in the case of a plan which is in

23 a funding improvement or rehabilitation

24 period, whether or not the plan is making

25 the scheduled progress in meeting the re-
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1 quirements of its funding improvement or

2 rehabilitation plan.

3 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

4 AND LIABILITIES.—

5 ‘‘(i) IN GENERAL.—In making the de6 terminations and projections under this

7 subsection, the plan actuary shall make pro8 jections required for the current and suc9 ceeding plan years, using reasonable actu10 arial estimates, assumptions, and methods,

11 of the current value of the assets of the plan

12 and the present value of all liabilities to

13 participants and beneficiaries under the

14 plan for the current plan year as of the be15 ginning of such year. The projected present

16 value of liabilities as of the beginning of

17 such year shall be determined based on the

18 actuarial statement required under section

19 103(d) of the Employee Retirement Income

20 Security Act of 1974 with respect to the

21 most recently filed annual report or the ac22 tuarial valuation for the preceding plan

23 year.
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1 ‘‘(ii) DETERMINATIONS OF FUTURE

2 CONTRIBUTIONS.—Any actuarial projection

3 of plan assets shall assume—

4 ‘‘(I) reasonably anticipated em5 ployer contributions for the current

6 and succeeding plan years, assuming

7 that the terms of the one or more col8 lective bargaining agreements pursuant

9 to which the plan is maintained for the

10 current plan year continue in effect for

11 succeeding plan years, or

12 ‘‘(II) that employer contributions

13 for the most recent plan year will con14 tinue indefinitely, but only if the plan

15 actuary determines there have been no

16 significant demographic changes that

17 would make such assumption unrea18 sonable.

19 ‘‘(C) PENALTY FOR FAILURE TO SECURE

20 TIMELY ACTUARIAL CERTIFICATION.—Any fail21 ure of the plan’s actuary to certify the plan’s

22 status under this subsection by the date specified

23 in subparagraph (A) shall be treated for pur24 poses of section 502(c)(2) of such Act as a failure

25 or refusal by the plan administrator to file the
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1 annual report required to be filed with the Sec2 retary under section 101(b)(4) of such Act.

3 ‘‘(D) NOTICE.—In any case in which a

4 multiemployer plan is certified to be in endan5 gered or critical status under subparagraph (A),

6 the plan sponsor shall, not later than 30 days

7 after the date of the certification, provide notifi8 cation of the endangered or critical status to the

9 participants and beneficiaries, the bargaining

10 parties, the Pension Benefit Guaranty Corpora11 tion, the Secretary, and the Secretary of Labor.

12 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE ADOPT13 ED FOR MULTIEMPLOYER PLANS IN ENDANGERED STA14 TUS.—

15 ‘‘(1) IN GENERAL.—In any case in which a mul16 tiemployer plan is in endangered status for a plan

17 year, the plan sponsor, in accordance with this

18 subsection—

19 ‘‘(A) shall adopt a funding improvement

20 plan not later than 240 days following the re21 quired date for the actuarial certification of en22 dangered status under subsection (b)(3)(A), and

23 ‘‘(B) within 30 days after the adoption of

24 the funding improvement plan—
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1 ‘‘(i) in the case of a plan in seriously

2 endangered status, shall provide to the bar3 gaining parties 1 or more schedules showing

4 revised benefit structures, revised contribu5 tion structures, or both, which, if adopted,

6 may reasonably be expected to enable the

7 multiemployer plan to meet the applicable

8 requirements under paragraph (3) in ac9 cordance with the funding improvement

10 plan, including a description of the reduc11 tions in future benefit accruals and in12 creases in contributions that the plan spon13 sor determines are reasonably necessary to

14 meet the applicable requirements if the plan

15 sponsor assumes that there are no increases

16 in contributions under the plan other than

17 the increases necessary to meet the applica18 ble requirements after future benefit accru19 als have been reduced to the maximum ex20 tent permitted by law, and

21 ‘‘(ii) may, if the plan sponsor deems

22 appropriate, prepare and provide the bar23 gaining parties with additional information

24 relating to contribution rates or benefit re25 ductions, alternative schedules, or other in-
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1 formation relevant to achieving the require2 ments under paragraph (3) in accordance

3 with the funding improvement plan.

4 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BE5 GINS.—Paragraph (1) shall not apply to a plan year

6 if such year is in a funding plan adoption period or

7 funding improvement period by reason of the plan

8 being in endangered status for a preceding plan year.

9 For purposes of this section, such preceding plan year

10 shall be the initial determination year with respect to

11 the funding improvement plan to which it relates.

12 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur13 poses of this section—

14 ‘‘(A) IN GENERAL.—A funding improve15 ment plan is a plan which consists of the ac16 tions, including options or a range of options to

17 be proposed to the bargaining parties, which,

18 under reasonable actuarial assumptions, will re19 sult in the plan meeting the requirements of this

20 paragraph.

21 ‘‘(B) PLANS OTHER THAN SERIOUSLY EN22 DANGERED PLANS.—In the case of plan not in

23 seriously endangered status, the requirements of

24 this paragraph are met if the plan’s funded per25 centage as of the close of the funding improve-
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1 ment period exceeds the lesser of 80 percent or a

2 percentage equal to the sum of—

3 ‘‘(i) such percentage as of the begin4 ning of such period, plus

5 ‘‘(ii) 10 percent of the percentage deter6 mined under clause (i).

7 ‘‘(C) SERIOUSLY ENDANGERED PLANS.—In

8 the case of a plan in seriously endangered status,

9 the requirements of this paragraph are met if—

10 ‘‘(i) the plan’s funded percentage as of

11 the close of the funding improvement period

12 equals or exceeds the percentage which is

13 equal to the sum of—

14 ‘‘(I) such percentage as of the be15 ginning of such period, plus

16 ‘‘(II) 33 percent of the difference

17 between 100 percent and the percentage

18 under subclause (I), and

19 ‘‘(ii) there is no accumulated funding

20 deficiency for any plan year during the

21 funding improvement period (taking into

22 account any extension of amortization peri23 ods under section 431(d)).

24 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For pur25 poses of this section—
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1 ‘‘(A) IN GENERAL.—The funding improve2 ment period for any funding improvement plan

3 adopted pursuant to this subsection is the 10-

4 year period beginning on the first day of the

5 first plan year of the multiemployer plan begin6 ning after the earlier of—

7 ‘‘(i) the second anniversary of the date

8 of the adoption of the funding improvement

9 plan, or

10 ‘‘(ii) the expiration of the collective

11 bargaining agreements in effect on the due

12 date for the actuarial certification of endan13 gered status for the initial determination

14 year under subsection (b)(3)(A) and cov15 ering, as of such due date, at least 75 per16 cent of the active participants in such mul17 tiemployer plan.

18 ‘‘(B) COORDINATION WITH CHANGES IN STA19 TUS.—

20 ‘‘(i) PLANS NO LONGER IN ENDAN21 GERED STATUS.—If the plan’s actuary cer22 tifies under subsection (b)(3)(A) for a plan

23 year in any funding plan adoption period

24 or funding improvement period that the

25 plan is no longer in endangered status and
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1 is not in critical status, the funding plan

2 adoption period or funding improvement

3 period, whichever is applicable, shall end as

4 of the close of the preceding plan year.

5 ‘‘(ii) PLANS IN CRITICAL STATUS.—If

6 the plan’s actuary certifies under subsection

7 (b)(3)(A) for a plan year in any funding

8 plan adoption period or funding improve9 ment period that the plan is in critical sta10 tus, the funding plan adoption period or

11 funding improvement period, whichever is

12 applicable, shall end as of the close of the

13 plan year preceding the first plan year in

14 the rehabilitation period with respect to

15 such status.

16 ‘‘(5) SPECIAL RULES FOR CERTAIN UNDER17 FUNDED PLANS.—

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

19 subparagraph (B), if the funded percentage of a

20 plan in seriously endangered status was 70 per21 cent or less as of the beginning of the initial de22 termination year, the following rules shall apply

23 in determining whether the requirements of

24 paragraph (3)(C)(i) are met:
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1 ‘‘(i) The plan’s funded percentage as of

2 the close of the funding improvement period

3 must equal or exceed a percentage which is

4 equal to the sum of—

5 ‘‘(I) such percentage as of the be6 ginning of such period, plus

7 ‘‘(II) 20 percent of the difference

8 between 100 percent and the percentage

9 under subclause (I).

10 ‘‘(ii) The funding improvement period

11 under paragraph (4)(A) shall be 15 years

12 rather than 10 years.

13 ‘‘(B) SPECIAL RULES FOR PLANS WITH

14 FUNDED PERCENTAGE OVER 70 PERCENT.—If the

15 funded percentage described in subparagraph (A)

16 was more than 70 percent but less than 80 per17 cent as of the beginning of the initial determina18 tion year—

19 ‘‘(i) subparagraph (A) shall apply if

20 the plan’s actuary certifies, within 30 days

21 after the certification under subsection

22 (b)(3)(A) for the initial determination year,

23 that, based on the terms of the plan and the

24 collective bargaining agreements in effect at

25 the time of such certification, the plan is
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1 not projected to meet the requirements of

2 paragraph (3)(C)(i) without regard to this

3 paragraph, and

4 ‘‘(ii) if there is a certification under

5 clause (i), the plan may, in formulating its

6 funding improvement plan, only take into

7 account the rules of subparagraph (A) for

8 plan years in the funding improvement pe9 riod beginning on or before the date on

10 which the last of the collective bargaining

11 agreements described in paragraph

12 (4)(A)(ii) expires.

13 Notwithstanding clause (ii), if for any plan year

14 ending after the date described in clause (ii) the

15 plan actuary certifies (at the time of the annual

16 certification under subsection (b)(3)(A) for such

17 plan year) that, based on the terms of the plan

18 and collective bargaining agreements in effect at

19 the time of that annual certification, the plan is

20 not projected to be able to meet the requirements

21 of paragraph (3)(C)(i) without regard to this

22 paragraph, the plan may continue to assume for

23 such year that the funding improvement period

24 is 15 years rather than 10 years.
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1 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT PLAN

2 AND SCHEDULES.—

3 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The

4 plan sponsor shall annually update the funding

5 improvement plan and shall file the update with

6 the plan’s annual report under section 104 of the

7 Employee Retirement Income Security Act of

8 1974.

9 ‘‘(B) SCHEDULES.—The plan sponsor may

10 periodically update any schedule of contribution

11 rates provided under this subsection to reflect the

12 experience of the plan, except that the schedule or

13 schedules described in paragraph (1)(B)(i) shall

14 be updated at least once every 3 years.

15 ‘‘(C) DURATION OF SCHEDULE.—A schedule

16 of contribution rates provided by the plan spon17 sor and relied upon by bargaining parties in ne18 gotiating a collective bargaining agreement shall

19 remain in effect for the duration of that collec20 tive bargaining agreement.

21 ‘‘(7) PENALTY IF NO FUNDING IMPROVEMENT

22 PLAN ADOPTED.—A failure of the plan sponsor to

23 adopt a funding improvement plan by the date speci24 fied in paragraph (1)(A) shall be treated for purposes

25 of section 502(c)(2) of such Act as a failure or refusal
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1 by the plan administrator to file the annual report

2 required to be filed with the Secretary of Labor under

3 section 101(b)(4) of such Act.

4 ‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For

5 purposes of this section, the term ‘funding plan adop6 tion period’ means the period beginning on the date

7 of the certification under subsection (b)(3)(A) for the

8 initial determination year and ending on the day be9 fore the first day of the funding improvement period.

10 ‘‘(d) RULES FOR OPERATION OF PLAN DURING ADOP11 TION AND IMPROVEMENT PERIODS; FAILURE TO MEET RE12 QUIREMENTS.—

13 ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PE14 RIOD.—During the plan adoption period—

15 ‘‘(A) the plan sponsor may not accept a col16 lective bargaining agreement or participation

17 agreement with respect to the multiemployer

18 plan that provides for—

19 ‘‘(i) a reduction in the level of con20 tributions for any participants,

21 ‘‘(ii) a suspension of contributions

22 with respect to any period of service, or

23 ‘‘(iii) any new direct or indirect exclu24 sion of younger or newly hired employees

25 from plan participation,
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1 ‘‘(B) no amendment of the plan which in2 creases the liabilities of the plan by reason of

3 any increase in benefits, any change in the ac4 crual of benefits, or any change in the rate at

5 which benefits become nonforfeitable under the

6 plan may be adopted unless the amendment is

7 required as a condition of qualification under

8 part I of subchapter D of chapter 1 or to comply

9 with other applicable law, and

10 ‘‘(C) in the case of a plan in seriously en11 dangered status, the plan sponsor shall take all

12 reasonable actions which are consistent with the

13 terms of the plan and applicable law and which

14 are expected, based on reasonable assumptions, to

15 achieve—

16 ‘‘(i) an increase in the plan’s funded

17 percentage, and

18 ‘‘(ii) postponement of an accumulated

19 funding deficiency for at least 1 additional

20 plan year.

21 Actions under subparagraph (C) include applications

22 for extensions of amortization periods under section

23 431(d), use of the shortfall funding method in making

24 funding standard account computations, amendments

25 to the plan’s benefit structure, reductions in future
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1 benefit accruals, and other reasonable actions con2 sistent with the terms of the plan and applicable law.

3 ‘‘(2) COMPLIANCE WITH FUNDING IMPROVEMENT

4 PLAN.—

5 ‘‘(A) IN GENERAL.—A plan may not be

6 amended after the date of the adoption of a fund7 ing improvement plan under subsection (c) so as

8 to be inconsistent with the funding improvement

9 plan.

10 ‘‘(B) NO REDUCTION IN CONTRIBUTIONS.—

11 A plan sponsor may not during any funding im12 provement period accept a collective bargaining

13 agreement or participation agreement with re14 spect to the multiemployer plan that provides

15 for—

16 ‘‘(i) a reduction in the level of con17 tributions for any participants,

18 ‘‘(ii) a suspension of contributions

19 with respect to any period of service, or

20 ‘‘(iii) any new direct or indirect exclu21 sion of younger or newly hired employees

22 from plan participation.

23 ‘‘(C) SPECIAL RULES FOR BENEFIT IN24 CREASES.—A plan may not be amended after the

25 date of the adoption of a funding improvement
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1 plan under subsection (c) so as to increase bene2 fits, including future benefit accruals, unless—

3 ‘‘(i) in the case of a plan in seriously

4 endangered status, the plan actuary certifies

5 that, after taking into account the benefit

6 increase, the plan is still reasonably ex7 pected to meet the requirements under sub8 section (c)(3) in accordance with the sched9 ule contemplated in the funding improve10 ment plan, and

11 ‘‘(ii) in the case of a plan not in seri12 ously endangered status, the actuary cer13 tifies that such increase is paid for out of

14 contributions not required by the funding

15 improvement plan to meet the requirements

16 under subsection (c)(3) in accordance with

17 the schedule contemplated in the funding

18 improvement plan.

19 ‘‘(3) FAILURE TO MEET REQUIREMENTS.—

20 ‘‘(A) IN GENERAL.—Notwithstanding sec21 tion 4971(g), if a plan fails to meet the require22 ments of subsection (c)(3) by the end of the fund23 ing improvement period, the plan shall be treat24 ed as having an accumulated funding deficiency

25 for purposes of section 4971 for the last plan
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1 year in such period (and each succeeding plan

2 year until such requirements are met) in an

3 amount equal to the greater of the amount of the

4 contributions necessary to meet such require5 ments or the amount of such accumulated fund6 ing deficiency without regard to this paragraph.

7 ‘‘(B) WAIVER.—In the case of a failure de8 scribed in subparagraph (A) which is due to rea9 sonable cause and not to willful neglect, the Sec10 retary of the Treasury may waive part or all of

11 the tax imposed by section 4971 of such Code to

12 the extent that the payment of such tax would be

13 excessive or otherwise inequitable relative to the

14 failure involved.

15 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED FOR

16 MULTIEMPLOYER PLANS IN CRITICAL STATUS.—

17 ‘‘(1) IN GENERAL.—In any case in which a mul18 tiemployer plan is in critical status for a plan year,

19 the plan sponsor, in accordance with this

20 subsection—

21 ‘‘(A) shall adopt a rehabilitation plan not

22 later than 240 days following the required date

23 for the actuarial certification of critical status

24 under subsection (b)(3)(A), and
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1 ‘‘(B) within 30 days after the adoption of

2 the rehabilitation plan—

3 ‘‘(i) shall provide to the bargaining

4 parties 1 or more schedules showing revised

5 benefit structures, revised contribution

6 structures, or both, which, if adopted, may

7 reasonably be expected to enable the multi8 employer plan to emerge from critical status

9 in accordance with the rehabilitation plan,

10 and

11 ‘‘(ii) may, if the plan sponsor deems

12 appropriate, prepare and provide the bar13 gaining parties with additional information

14 relating to contribution rates or benefit re15 ductions, alternative schedules, or other in16 formation relevant to emerging from critical

17 status in accordance with the rehabilitation

18 plan.

19 The schedule or schedules described in subparagraph

20 (B)(i) shall reflect reductions in future benefit accru21 als and increases in contributions that the plan spon22 sor determines are reasonably necessary to emerge

23 from critical status. One schedule shall be designated

24 as the default schedule and such schedule shall assume

25 that there are no increases in contributions under the
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1 plan other than the increases necessary to emerge

2 from critical status after future benefit accruals and

3 other benefits (other than benefits the reduction or

4 elimination of which are not permitted under section

5 411(d)(6)) have been reduced to the maximum extent

6 permitted by law.

7 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS BE8 GINS.—Paragraph (1) shall not apply to a plan year

9 if such year is in a rehabilitation plan adoption pe10 riod or rehabilitation period by reason of the plan

11 being in critical status for a preceding plan year. For

12 purposes of this section, such preceding plan year

13 shall be the initial critical year with respect to the re14 habilitation plan to which it relates.

15 ‘‘(3) REHABILITATION PLAN.—For purposes of

16 this section—

17 ‘‘(A) IN GENERAL.—A rehabilitation plan is

18 a plan which consists of—

19 ‘‘(i) actions which will enable, under

20 reasonable actuarial assumptions, the plan

21 to cease to be in critical status by the end

22 of the rehabilitation period and may in23 clude reductions in plan expenditures (in24 cluding plan mergers and consolidations),

25 reductions in future benefit accruals or in-
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1 creases in contributions, if agreed to by the

2 bargaining parties, or any combination of

3 such actions, or

4 ‘‘(ii) if the plan sponsor determines

5 that, based on reasonable actuarial assump6 tions and upon exhaustion of all reasonable

7 measures, the plan can not reasonably be

8 expected to emerge from critical status by

9 the end of the rehabilitation period, reason10 able measures to emerge from critical status

11 at a later time or to forestall possible insol12 vency (within the meaning of section 4245

13 of the Employee Retirement Income Secu14 rity Act of 1974).

15 Such plan shall include the schedules required to

16 be provided under paragraph (1)(B)(i). If clause

17 (ii) applies, such plan shall set forth the alter18 natives considered, explain why the plan is not

19 reasonably expected to emerge from critical sta20 tus by the end of the rehabilitation period, and

21 specify when, if ever, the plan is expected to

22 emerge from critical status in accordance with

23 the rehabilitation plan.

24 ‘‘(B) UPDATES TO REHABILITATION PLAN

25 AND SCHEDULES.—
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1 ‘‘(i) REHABILITATION PLAN.—The plan

2 sponsor shall annually update the rehabili3 tation plan and shall file the update with

4 the plan’s annual report under section 104

5 of the Employee Retirement Income Secu6 rity Act of 1974.

7 ‘‘(ii) SCHEDULES.—The plan sponsor

8 may periodically update any schedule of

9 contribution rates provided under this sub10 section to reflect the experience of the plan,

11 except that the schedule or schedules de12 scribed in paragraph (1)(B)(i) shall be up13 dated at least once every 3 years.

14 ‘‘(iii) DURATION OF SCHEDULE.—A

15 schedule of contribution rates provided by

16 the plan sponsor and relied upon by bar17 gaining parties in negotiating a collective

18 bargaining agreement shall remain in effect

19 for the duration of that collective bar20 gaining agreement.

21 ‘‘(C) DEFAULT SCHEDULE.—If the collective

22 bargaining agreement providing for contribu23 tions under a multiemployer plan that was in

24 effect at the time the plan entered critical status

25 expires and, after receiving a schedule from the
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1 plan sponsor under paragraph (1)(B)(i), the bar2 gaining parties have not adopted a collective

3 bargaining agreement with terms consistent with

4 such a schedule, the default schedule described in

5 the last sentence of paragraph (1) shall go into

6 effect with respect to those bargaining parties.

7 ‘‘(4) REHABILITATION PERIOD.—For purposes of

8 this section—

9 ‘‘(A) IN GENERAL.—The rehabilitation pe10 riod for a plan in critical status is the 10-year

11 period beginning on the first day of the first

12 plan year of the multiemployer plan following

13 the earlier of—

14 ‘‘(i) the second anniversary of the date

15 of the adoption of the rehabilitation plan, or

16 ‘‘(ii) the expiration of the collective

17 bargaining agreements in effect on the date

18 of the due date for the actuarial certifi19 cation of critical status for the initial crit20 ical year under subsection (a)(1) and cov21 ering, as of such date at least 75 percent of

22 the active participants in such multiem23 ployer plan.

24 If a plan emerges from critical status as pro25 vided under subparagraph (B) before the end of
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1 such 10-year period, the rehabilitation period

2 shall end with the plan year preceding the plan

3 year for which the determination under subpara4 graph (B) is made.

5 ‘‘(B) EMERGENCE.—A plan in critical sta6 tus shall remain in such status until a plan year

7 for which the plan actuary certifies, in accord8 ance with subsection (b)(3)(A), that the plan is

9 not projected to have an accumulated funding

10 deficiency for the plan year or any of the 9 suc11 ceeding plan years, without regard to use of the

12 shortfall method or any extension of amortiza13 tion periods under section 431(d).

14 ‘‘(5) PENALTY IF NO REHABILITATION PLAN

15 ADOPTED.—A failure of a plan sponsor to adopt a re16 habilitation plan by the date specified in paragraph

17 (1)(A) shall be treated for purposes of section

18 502(c)(2) of the Employee Retirement Income Secu19 rity Act of 1974 as a failure or refusal by the plan

20 administrator to file the annual report required to be

21 filed with the Secretary of Labor under section

22 101(b)(4) of such Act.

23 ‘‘(6) REHABILITATION PLAN ADOPTION PE24 RIOD.—For purposes of this section, the term ‘reha25 bilitation plan adoption period’ means the period be-
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1 ginning on the date of the certification under sub2 section (b)(3)(A) for the initial critical year and end3 ing on the day before the first day of the rehabilita4 tion period.

5 ‘‘(7) LIMITATION ON REDUCTION IN RATES OF

6 FUTURE ACCRUALS.—Any reduction in the rate of fu7 ture accruals under any schedule described in para8 graph (1)(B)(i) shall not reduce the rate of future ac9 cruals below—

10 ‘‘(A) a monthly benefit (payable as a single

11 life annuity commencing at the participant’s

12 normal retirement age) equal to 1 percent of the

13 contributions required to be made with respect to

14 a participant, or the equivalent standard accrual

15 rate for a participant or group of participants

16 under the collective bargaining agreements in ef17 fect as of the first day of the initial critical year,

18 or

19 ‘‘(B) if lower, the accrual rate under the

20 plan on such first day.

21 The equivalent standard accrual rate shall be deter22 mined by the plan sponsor based on the standard or

23 average contribution base units which the plan spon24 sor determines to be representative for active partici25 pants and such other factors as the plan sponsor de-
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1 termines to be relevant. Nothing in this paragraph

2 shall be construed as limiting the ability of the plan

3 sponsor to prepare and provide the bargaining par4 ties with alternative schedules to the default schedule

5 that established lower or higher accrual and contribu6 tion rates than the rates otherwise described in this

7 paragraph.

8 ‘‘(8) EMPLOYER IMPACT.—For the purposes of

9 this section, the plan sponsor shall consider the im10 pact of the rehabilitation plan and contribution

11 schedules authorized by this section on bargaining

12 parties with fewer than 500 employees and shall im13 plement the plan in a manner that encourages their

14 continued participation in the plan and minimizes

15 financial harm to employers and their workers.

16 ‘‘(f) RULES FOR OPERATION OF PLAN DURING ADOP17 TION AND REHABILITATION PERIOD.—

18 ‘‘(1) COMPLIANCE WITH REHABILITATION

19 PLAN.—

20 ‘‘(A) IN GENERAL.—A plan may not be

21 amended after the date of the adoption of a reha22 bilitation plan under subsection (e) so as to be

23 inconsistent with the rehabilitation plan.

24 ‘‘(B) SPECIAL RULES FOR BENEFIT IN25 CREASES.—A plan may not be amended after the
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1 date of the adoption of a rehabilitation plan

2 under subsection (e) so as to increase benefits,

3 including future benefit accruals, unless the plan

4 actuary certifies that such increase is paid for

5 out of additional contributions not contemplated

6 by the rehabilitation plan, and, after taking into

7 account the benefit increase, the multiemployer

8 plan still is reasonably expected to emerge from

9 critical status by the end of the rehabilitation pe10 riod on the schedule contemplated in the reha11 bilitation plan.

12 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMILAR

13 BENEFITS.—

14 ‘‘(A) IN GENERAL.—Effective on the date

15 the notice of certification of the plan’s critical

16 status for the initial critical year under sub17 section (b)(3)(D) is sent, and notwithstanding

18 section 411(d)(6), the plan shall not pay—

19 ‘‘(i) any payment, in excess of the

20 monthly amount paid under a single life

21 annuity (plus any social security supple22 ments described in the last sentence of sec23 tion 411(b)(1)(A)),
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1 ‘‘(ii) any payment for the purchase of

2 an irrevocable commitment from an insurer

3 to pay benefits, and

4 ‘‘(iii) any other payment specified by

5 the Secretary by regulations.

6 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

7 not apply to a benefit which under section

8 411(a)(11) may be immediately distributed with9 out the consent of the participant or to any

10 makeup payment in the case of a retroactive an11 nuity starting date or any similar payment of

12 benefits owed with respect to a prior period.

13 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH14 DRAWAL LIABILITY DETERMINATION.—Any benefit re15 ductions under this subsection shall be disregarded in

16 determining a plan’s unfunded vested benefits for

17 purposes of determining an employer’s withdrawal li18 ability under section 4201 of the Employee Retire19 ment Income Security Act of 1974.

20 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE21 RIOD.—During the rehabilitation plan adoption

22 period—

23 ‘‘(A) the plan sponsor may not accept a col24 lective bargaining agreement or participation
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1 agreement with respect to the multiemployer

2 plan that provides for—

3 ‘‘(i) a reduction in the level of con4 tributions for any participants,

5 ‘‘(ii) a suspension of contributions

6 with respect to any period of service, or

7 ‘‘(iii) any new direct or indirect exclu8 sion of younger or newly hired employees

9 from plan participation, and

10 ‘‘(B) no amendment of the plan which in11 creases the liabilities of the plan by reason of

12 any increase in benefits, any change in the ac13 crual of benefits, or any change in the rate at

14 which benefits become nonforfeitable under the

15 plan may be adopted unless the amendment is

16 required as a condition of qualification under

17 part I of subchapter D of chapter 1 or to comply

18 with other applicable law.

19 ‘‘(5) FAILURE TO MEET REQUIREMENTS.—

20 ‘‘(A) IN GENERAL.—Notwithstanding sec21 tion 4971(g), if a plan—

22 ‘‘(i) fails to meet the requirements of

23 subsection (e) by the end of the rehabilita24 tion period, or
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1 ‘‘(ii) has received a certification under

2 subsection (b)(3)(A)(ii) for 3 consecutive

3 plan years that the plan is not making the

4 scheduled progress in meeting its require5 ments under the rehabilitation plan,

6 the plan shall be treated as having an accumu7 lated funding deficiency for purposes of section

8 4971 for the last plan year in such period (and

9 each succeeding plan year until such require10 ments are met) in an amount equal to the great11 er of the amount of the contributions necessary

12 to meet such requirements or the amount of such

13 accumulated funding deficiency without regard

14 to this paragraph.

15 ‘‘(B) WAIVER.—In the case of a failure de16 scribed in subparagraph (A) which is due to rea17 sonable cause and not to willful neglect, the Sec18 retary may waive part or all of the tax imposed

19 by section 4971 to the extent that the payment

20 of such tax would be excessive or otherwise in21 equitable relative to the failure involved.

22 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR DE23 CISIONS.—If, within 60 days of the due date for adoption

24 of a funding improvement plan under subsection (c) or a

25 rehabilitation plan under subsection (e), the plan sponsor
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1 of a plan in endangered status or a plan in critical status

2 has not agreed on a funding improvement plan or rehabili3 tation plan, then any member of the board or group that

4 constitutes the plan sponsor may require that the plan

5 sponsor enter into an expedited dispute resolution procedure

6 for the development and adoption of a funding improvement

7 plan or rehabilitation plan.

8 ‘‘(h) NONBARGAINED PARTICIPATION.—

9 ‘‘(1) BOTH BARGAINED AND NONBARGAINED EM10 PLOYEE-PARTICIPANTS.—In the case of an employer

11 that contributes to a multiemployer plan with respect

12 to both employees who are covered by one or more col13 lective bargaining agreements and to employees who

14 are not so covered, if the plan is in endangered status

15 or in critical status, benefits of and contributions for

16 the nonbargained employees, including surcharges on

17 those contributions, shall be determined as if those

18 nonbargained employees were covered under the first

19 to expire of the employer’s collective bargaining agree20 ments in effect when the plan entered endangered or

21 critical status.

22 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In the

23 case of an employer that contributes to a multiem24 ployer plan only with respect to employees who are

25 not covered by a collective bargaining agreement, this
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1 section shall be applied as if the employer were the

2 bargaining parties, and its participation agreement

3 with the plan was a collective bargaining agreement

4 with a term ending on the first day of the plan year

5 beginning after the employer is provided the schedule

6 or schedules described in subsections (c) and (e).

7 ‘‘(3) EMPLOYEES COVERED BY A COLLECTIVE

8 BARGAINING AGREEMENT.—The determination as to

9 whether an employee covered by a collective bar10 gaining agreement for purposes of this section shall be

11 made without regard to the special rule in Treasury

12 Regulation section 1.410(b)–6(d)(ii)(D).

13 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur14 poses of this section—

15 ‘‘(1) BARGAINING PARTY.—The term ‘bargaining

16 party’ means—

17 ‘‘(A)(i) except as provided in clause (ii), an

18 employer who has an obligation to contribute

19 under the plan; or

20 ‘‘(ii) in the case of a plan described under

21 section 404(c), or a continuation of such a plan,

22 the association of employers that is the employee

23 settlor of the plan; and

24 ‘‘(B) an employee organization which, for

25 purposes of collective bargaining, represents plan
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1 participants employed by an employer who has

2 an obligation to contribute under the plan.

3 ‘‘(2) FUNDED PERCENTAGE.—The term ‘funded

4 percentage’ means the percentage equal to a

5 fraction—

6 ‘‘(A) the numerator of which is the value of

7 the plan’s assets, as determined under section

8 431(c)(2), and

9 ‘‘(B) the denominator of which is the ac10 crued liability of the plan, determined using ac11 tuarial assumptions described in section

12 431(c)(3).

13 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—The

14 term ‘accumulated funding deficiency’ has the mean15 ing given such term in section 412(a).

16 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active

17 participant’ means, in connection with a multiem18 ployer plan, a participant who is in covered service

19 under the plan.

20 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inactive

21 participant’ means, in connection with a multiem22 ployer plan, a participant, or the beneficiary or alter23 nate payee of a participant, who—

24 ‘‘(A) is not in covered service under the

25 plan, and
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1 ‘‘(B) is in pay status under the plan or has

2 a nonforfeitable right to benefits under the plan.

3 ‘‘(6) PAY STATUS.—A person is in pay status

4 under a multiemployer plan if—

5 ‘‘(A) at any time during the current plan

6 year, such person is a participant or beneficiary

7 under the plan and is paid an early, late, nor8 mal, or disability retirement benefit under the

9 plan (or a death benefit under the plan related

10 to a retirement benefit), or

11 ‘‘(B) to the extent provided in regulations of

12 the Secretary, such person is entitled to such a

13 benefit under the plan.

14 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term

15 ‘obligation to contribute’ has the meaning given such

16 term under section 4212(a) of the Employee Retire17 ment Income Security Act of 1974.

18 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding

19 any other provision of this section, the actuary’s de20 terminations with respect to a plan’s normal cost, ac21 tuarial accrued liability, and improvements in a

22 plan’s funded percentage under this section shall be

23 based upon the unit credit funding method (whether

24 or not that method is used for the plan’s actuarial

25 valuation).
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1 ‘‘(9) PLAN SPONSOR.—In the case of a plan de2 scribed under section 404(c), or a continuation of

3 such a plan, the term ‘plan sponsor’ means the bar4 gaining parties described under paragraph (1).’’

5 (b) EFFECTIVE DATES.—

6 (1) IN GENERAL.—The amendment made by this

7 section shall apply with respect to plan years begin8 ning after 2006.

9 (2) SPECIAL RULE FOR CERTAIN RESTORED BEN10 EFITS.—In the case of a multiemployer plan—

11 (A) with respect to which benefits were re12 duced pursuant to a plan amendment adopted

13 on or after January 1, 2002, and before June 30,

14 2005, and

15 (B) which, pursuant to the plan document,

16 the trust agreement, or a formal written commu17 nication from the plan sponsor to participants

18 provided before June 30, 2005, provided for the

19 restoration of such benefits,

20 the amendments made by this section shall not apply

21 to such benefit restorations to the extent that any re22 striction on the providing or accrual of such benefits

23 would otherwise apply by reason of such amendments.
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1 PART III—SUNSET OF FUNDING RULES

2 SEC. 216. SUNSET OF FUNDING RULES.

3 (a) REPORT.—Not later than December 31, 2011, the

4 Secretary of Labor, the Secretary of the Treasury, and the

5 Executive Director of the Pension Benefit Guaranty Cor6 poration shall conduct a study of the effect of the amend7 ments made by this subtitle on the operation and funding

8 status of multiemployer plans and shall report the results

9 of such study, including any recommendations for legisla10 tion, to the Congress.

11 (b) MATTERS INCLUDED IN STUDY.—The study re12 quired under subsection (a) shall include—

13 (1) the effect of funding difficulties, funding rules

14 in effect before the date of the enactment of this Act,

15 and the amendments made by this subtitle on small

16 businesses participating in multiemployer plans,

17 (2) the effect on the financial status of small em18 ployers of—

19 (A) funding targets set in funding improve20 ment and rehabilitation plans and associated

21 contribution increases,

22 (B) funding deficiencies,

23 (C) excise taxes,

24 (D) withdrawal liability,
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1 (E) the possibility of alternatives schedules

2 and procedures for financially-troubled employ3 ers, and

4 (F) other aspects of the multiemployer sys5 tem, and

6 (3) the role of the multiemployer pension plan

7 system in helping small employers to offer pension

8 benefits.

9 (c) SUNSET.—

10 (1) IN GENERAL.—Except as provided in this

11 subsection, notwithstanding any other provision of

12 this Act, the provisions of, and the amendments made

13 by, this subtitle shall not apply to plan years begin14 ning after December 31, 2014, and the Employee Re15 tirement Income Security Act of 1974 and the Inter16 nal Revenue Code of 1986 shall be applied to such

17 plan years under the provisions of sections 302

18 through 308 of such Act and 412 of such Code (as in

19 effect before the amendments made by this Act).

20 (2) FUNDING IMPROVEMENT AND REHABILITA21 TION PLANS.—If a plan is operating under a funding

22 improvement or rehabilitation plan under section 305

23 of such Act or 432 of such Code for its last year be24 ginning before January 1, 2015, such plan shall con25 tinue to operate under such funding improvement or
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1 rehabilitation plan during any period after December

2 31, 2014, such funding improvement or rehabilitation

3 plan is in effect and all provisions of such Act or

4 Code relating to the operation of such funding im5 provement or rehabilitation plan shall continue in ef6 fect during such period.

7 (3) AMORTIZATION SCHEDULES.—In the case of

8 any amount amortized under section 304(b) of such

9 Act or 431 of such Code (as in effect after the amend10 ments made by this subtitle) over any period begin11 ning with a plan year beginning before January 1,

12 2015, such amount shall, in lieu of the amortization

13 which would apply after the application of this sub14 section, continue to be amortized under such section

15 304 or 431 (as so in effect).

16 Subtitle B—Deduction and Related

17 Provisions

18 SEC. 221. DEDUCTION LIMITS FOR MULTIEMPLOYER PLANS.

19 (a) INCREASE IN DEDUCTION.—Section 404(a)(1)(D)

20 of the Internal Revenue Code of 1986, as amended by this

21 Act, is amended to read as follows:

22 ‘‘(D) AMOUNT DETERMINED ON BASIS OF

23 UNFUNDED CURRENT LIABILITY.—

24 ‘‘(i) IN GENERAL.—In the case of a de25 fined benefit plan which is a multiemployer
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1 plan, except as provided in regulations, the

2 maximum amount deductible under the lim3 itations of this paragraph shall not be less

4 than the unfunded current liability of the

5 plan.

6 ‘‘(ii) UNFUNDED CURRENT LIABIL7 ITY.—For purposes of clause (i), the term

8 ‘unfunded current liability’ means the ex9 cess (if any) of—

10 ‘‘(I) 140 percent of the current li11 ability of the plan determined under

12 section 431(c)(6)(C), over

13 ‘‘(II) the value of the plan’s assets

14 determined under section 431(c)(2).’’.

15 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

16 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

17 DEFINED BENEFIT PLANS.—

18 (1) IN GENERAL.—Section 404(a)(7)(C) of such

19 Code, as amended by this Act, is amended by adding

20 at the end the following new clause:

21 ‘‘(v) MULTIEMPLOYER PLANS.—In ap22 plying this paragraph, any multiemployer

23 plan shall not be taken into account.’’.
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1 (2) CONFORMING AMENDMENT.—Section

2 404(a)(7)(A) of such Code is amended by striking the

3 last sentence.

4 (c) EFFECTIVE DATES.—

5 (1) DEDUCTION LIMIT.—The amendment made

6 by subsection (a) shall apply to years beginning after

7 December 31, 2006.

8 (2) EXCEPTION.—The amendments made by sub9 section (b) shall apply to years beginning after De10 cember 31, 2005.

11 SEC. 222. TRANSFER OF EXCESS PENSION ASSETS TO MUL12 TIEMPLOYER HEALTH PLAN.

13 (a) IN GENERAL.—Section 420(e) of the Internal Rev14 enue Code of 1986 (relating to definitions and special rules)

15 is amended by adding at the end the following new para16 graph:

17 ‘‘(5) APPLICATION TO MULTIEMPLOYER PLAN.—

18 In the case of any plan to which section 404(c) ap19 plies (or any successor plan primarily covering em20 ployees in the building and construction industry)—

21 ‘‘(A) the prohibition under subsection (a) on

22 the application of this section to a multiem23 ployer plan shall not apply, and

24 ‘‘(B) this section shall be applied to any

25 such plan—
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1 ‘‘(i) by treating any reference in this

2 section to an employer as a reference to all

3 employers maintaining the plan (or, if ap4 propriate, the plan sponsor), and

5 ‘‘(ii) in accordance with such modi6 fications of this section (and the provisions

7 of this title and the Employee Retirement

8 Income Security Act of 1974 relating to this

9 section) as the Secretary determines appro10 priate to reflect the fact the plan is not

11 maintained by a single employer.’’

12 (b) AMENDMENTS OF ERISA.—

13 (1) Section 101(e)(3) of the Employee Retirement

14 Income Security Act of 1974 (29 U.S.C. 1021(e)(3))

15 is amended by striking ‘‘American Jobs Creation Act

16 of 2004’’ and inserting ‘‘Pension Security and Trans17 parency Act of 2005’’.

18 (2) Section 403(c)(1) of such Act (29 U.S.C.

19 1103(c)(1)) is amended by striking ‘‘American Jobs

20 Creation Act of 2004’’ and inserting ‘‘Pension Secu21 rity and Transparency Act of 2005’’.

22 (3) Section 408(b)(13) of such Act (29 U.S.C.

23 1108(b)(13)) is amended by striking ‘‘American Jobs

24 Creation Act of 2004’’ and inserting ‘‘Pension Secu25 rity and Transparency Act of 2005’’.
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1 (c) EFFECTIVE DATE.—The amendment made by this

2 section shall apply to transfers made in taxable years begin3 ning after December 31, 2004.

4 TITLE III—INTEREST RATE

5 ASSUMPTIONS

6 SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINA7 TION OF LUMP SUM DISTRIBUTIONS.

8 (a) AMENDMENTS OF ERISA.—

9 (1) IN GENERAL.—Section 205(g)(3)(A) of the

10 Employee Retirement Income Security Act of 1974

11 (29 U.S.C. 1055(g)(3)(A)) is amended by adding at

12 the end the following new sentence: ‘‘In the case of

13 plan years beginning after 2006, the preceding sen14 tence shall be applied by using the applicable yield

15 curve method under subparagraph (C) rather than the

16 applicable interest rate.’’.

17 (2) APPLICABLE YIELD CURVE METHOD.—Sec18 tion 205(g)(3) of such Act (29 U.S.C. 1055(g)(3)) is

19 amended by adding at the end the following new sub20 paragraphs:

21 ‘‘(C) APPLICABLE YIELD CURVE METHOD.—

22 For purposes of subparagraph (A), the term ‘ap23 plicable yield curve method’ means—
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1 ‘‘(i) the phase-in yield curve method in

2 the case of plan years beginning in 2007,

3 2008, and 2009, and

4 ‘‘(ii) the yield curve method for years

5 beginning after 2009.

6 ‘‘(D) YIELD CURVE METHOD.—For purposes

7 of this paragraph—

8 ‘‘(i) IN GENERAL.—The yield curve

9 method is a method under which present

10 value is determined—

11 ‘‘(I) by using interest rates drawn

12 from a yield curve which is prescribed

13 by the Secretary of the Treasury and

14 which reflects the yield on high-quality

15 corporate bonds with varying matu16 rities, and

17 ‘‘(II) by matching the timing of

18 the expected benefit payments under

19 the plan to the interest rates on such

20 yield curve.

21 ‘‘(ii) PUBLICATION.—Each month the

22 Secretary of the Treasury shall publish any

23 yield curve prescribed under this subpara24 graph which shall apply to plan years be25 ginning in such month and such yield curve
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1 shall be based on average interest rates for

2 business days occurring during the 3 pre3 ceding months.

4 ‘‘(E) PHASE-IN YIELD CURVE METHOD.—

5 ‘‘(i) IN GENERAL.—Present value de6 termined under the phase-in yield curve

7 method shall be equal to the sum of—

8 ‘‘(I) the applicable percentage of

9 such amount determined under the

10 yield curve method described in sub11 paragraph (D), and

12 ‘‘(II) the product of such amount

13 determined by using the applicable in14 terest rate and a percentage equal to

15 100 percent minus the applicable per16 centage.

17 ‘‘(ii) APPLICABLE PERCENTAGE.—For

18 purposes of clause (i), the applicable per19 centage is 25 percent for plan years begin20 ning in 2007, 50 percent for plan years be21 ginning in 2008, and 75 percent for plan

22 years beginning in 2009.’’.

23 (b) AMENDMENTS OF INTERNAL REVENUE CODE.—

24 (1) IN GENERAL.—Section 417(e)(3)(A) of the

25 Internal Revenue Code of 1986 (relating to deter-
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1 mination of present value) is amended by adding at

2 the end the following new sentence: ‘‘In the case of

3 plan years beginning after 2006, the preceding sen4 tence shall be applied by using the applicable yield

5 curve method under subparagraph (C) rather than the

6 applicable interest rate.’’

7 (2) APPLICABLE YIELD CURVE METHOD.—Sec8 tion 417(e) of such Code is amended by adding at the

9 end the following new subparagraphs:

10 ‘‘(C) APPLICABLE YIELD CURVE METHOD.—

11 For purposes of subparagraph (A), the term ‘ap12 plicable yield curve method’ means—

13 ‘‘(i) the phase-in yield curve method in

14 the case of plan years beginning in 2007,

15 2008, and 2009, and

16 ‘‘(ii) the yield curve method for years

17 beginning after 2009.

18 ‘‘(D) YIELD CURVE METHOD.—For purposes

19 of this paragraph—

20 ‘‘(i) IN GENERAL.—The yield curve

21 method is a method under which present

22 value is determined—

23 ‘‘(I) by using interest rates drawn

24 from a yield curve which is prescribed

25 by the Secretary and which reflects the
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1 yield on high-quality corporate bonds

2 with varying maturities, and

3 ‘‘(II) by matching the timing of

4 the expected benefit payments under

5 the plan to the interest rates on such

6 yield curve.

7 ‘‘(ii) PUBLICATION.—Each month the

8 Secretary shall publish any yield curve pre9 scribed under this subparagraph which shall

10 apply to plan years beginning in such

11 month and such yield curve shall be based

12 on average interest rates for business days

13 occurring during the 3 preceding months.

14 ‘‘(E) PHASE-IN YIELD CURVE METHOD.—

15 ‘‘(i) IN GENERAL.—Present value de16 termined under the phase-in yield curve

17 method shall be equal to the sum of—

18 ‘‘(I) the applicable percentage of

19 such amount determined under the

20 yield curve method described in sub21 paragraph (D), and

22 ‘‘(II) the product of such amount

23 determined by using the applicable in24 terest rate and a percentage equal to
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1 100 percent minus the applicable per2 centage.

3 ‘‘(ii) APPLICABLE PERCENTAGE.—For

4 purposes of clause (i), the applicable per5 centage is 25 percent for plan years begin6 ning in 2007, 50 percent for plan years be7 ginning in 2008, and 75 percent for plan

8 years beginning in 2009.’’.

9 (c) SPECIAL RULE FOR PLAN AMENDMENTS.—A plan

10 shall not fail to meet the requirements of section 204(g) of

11 the Employee Retirement Income Security Act of 1974 or

12 section 411(d)(6) of the Internal Revenue Code of 1986 sole13 ly by reason of the adoption by the plan of an amendment

14 necessary to meet the requirements of the amendments made

15 by this section.

16 (d) EFFECTIVE DATE.—The amendments made by this

17 section shall apply with respect to plan years beginning

18 after 2006.

19 SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING

20 BENEFIT LIMITATIONS TO LUMP SUM DIS21 TRIBUTIONS.

22 (a) IN GENERAL.—Clause (ii) of section 415(b)(2)(E)

23 of the Internal Revenue Code of 1986 is amended to read

24 as follows:
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1 ‘‘(ii) For purposes of adjusting any

2 benefit under subparagraph (B) for any

3 form of benefit subject to section 417(e)(3),

4 clause (i) shall be applied by substituting

5 ‘5.5 percent’ for ‘5 percent’.’’.

6 (b) EFFECTIVE DATE.—The amendment made by sub7 section (a) shall apply to years beginning after December

8 31, 2005.

9 SEC. 303. RESTRICTIONS ON FUNDING OF NONQUALIFIED

10 DEFERRED COMPENSATION PLANS BY EM11 PLOYERS MAINTAINING UNDERFUNDED OR

12 TERMINATED SINGLE-EMPLOYER PLANS.

13 (a) AMENDMENTS OF ERISA.—

14 (1) IN GENERAL.—Part 3 of subtitle A of title I

15 of the Employee Retirement Income Security Act of

16 1974 (29 U.S.C. 1081 et seq.), as amended by this

17 Act, is amended by adding at the end the following

18 new section:

19 ‘‘NOTICE OF FUNDING OF NONQUALIFIED DEFERRED

20 COMPENSATION PLANS

21 ‘‘SEC. 306. (a) NOTICE AND ACCESS.—

22 ‘‘(1) NOTICE RELATING TO RESTRICTED PE23 RIOD.—The plan administrator of a defined benefit

24 plan which is a single-employer plan shall notify each

25 plan sponsor of the plan within a reasonable period

26 of time after the occurrence of an event which results
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1 in a restricted period with respect to the plan. Such

2 notice shall include information—

3 ‘‘(A) as to the duration of the restricted pe4 riod, and

5 ‘‘(B) the restrictions under section

6 409A(b)(3) of the Internal Revenue Code of 1986

7 which apply during the restricted period to the

8 plan sponsor and any member of a controlled

9 group which includes such sponsor.

10 ‘‘(2) NOTICE OF EXISTENCE OF, AND TRANSFERS

11 TO, NONQUALIFIED DEFERRED COMPENSATION

12 PLANS.—

13 ‘‘(A) INITIAL NOTICE.—Within 30 days of

14 receipt of a notice under paragraph (1), each

15 plan sponsor shall notify the plan administrator

16 of the plan described in paragraph (1)—

17 ‘‘(i) of nonqualified deferred compensa18 tion plans maintained by the plan sponsor

19 or any member of a controlled group which

20 includes such sponsor, and

21 ‘‘(ii) the amount of any assets trans22 ferred or otherwise reserved by the plan

23 sponsor or such member in violation of sec24 tion 409A(b)(3) of such Code during any

25 portion of the restricted period occurring on
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1 or before the date the plan sponsor provides

2 such notice.

3 ‘‘(B) ADDITIONAL NOTICES.—If, after the

4 date on which notice is provided under subpara5 graph (A) and during any portion of the re6 maining restricted period specified in the notice

7 provided under paragraph (1), the plan sponsor

8 of a plan described in paragraph (1) or a mem9 ber of a controlled group which includes such

10 sponsor—

11 ‘‘(i) transfers or reserves assets in vio12 lation of section 409A(b)(3) of such Code, or

13 ‘‘(ii) establishes a new nonqualified de14 ferred compensation plan,

15 the plan sponsor shall notify the plan adminis16 trator of the plan described in paragraph (1) of

17 such transfer, reservation, or establishment with18 in 3 days of the date of such action.

19 ‘‘(3) ACCESS TO FINANCIAL DATA.—Any fidu20 ciary of the plan shall have access to the financial

21 records of a plan sponsor or any member of a con22 trolled group which includes such sponsor to deter23 mine if assets were transferred or otherwise reserved

24 in violation of section 409A(b)(3) of such Code.
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1 ‘‘(4) FORM AND MANNER.—The Secretary may

2 prescribe the form and manner of a notice required

3 under this section. Such a notice shall be written in

4 a manner calculated to be understood by the average

5 plan participant and may be delivered in written,

6 electronic, or other appropriate form to the extent

7 that such form is reasonably accessible to the recipi8 ent.

9 ‘‘(b) RESTRICTED PERIOD.—For purposes of this sec10 tion, the term ‘restricted period’ means, with respect to any

11 plan described in subsection (a)(1)—

12 ‘‘(1) any period—

13 ‘‘(A) beginning on the first day of a plan

14 year following a plan year for which the plan’s

15 adjusted funding target attainment percentage

16 (as defined in section 303) was less than 60 per17 cent (determined as of the close of such year),

18 and

19 ‘‘(B) ending on the last day of the first pe20 riod of 2 consecutive plan years (beginning on or

21 after such first day) for which such percentage

22 was at least 60 percent,

23 ‘‘(2) any period the plan sponsor is in bank24 ruptcy, and
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1 ‘‘(3) the 12-month period beginning on the date

2 which is 6 months before the termination date of the

3 plan if, as of the termination date, the plan is not

4 sufficient for benefit liabilities (within the meaning of

5 section 4041).

6 In the case of a plan which is in at-risk status, paragraph

7 (1) shall be applied by substituting ‘80 percent’ for ‘60 per8 cent’ each place it appears.

9 ‘‘(c) NONQUALIFIED DEFERRED COMPENSATION

10 PLAN.—For purposes of this section—

11 ‘‘(1) IN GENERAL.—The term ‘nonqualified de12 ferred compensation plan’ means any plan that pro13 vides for the deferral of compensation, other than—

14 ‘‘(A) a qualified employer plan, and

15 ‘‘(B) any bona fide vacation leave, sick

16 leave, compensatory time, disability pay, or

17 death benefit plan.

18 ‘‘(2) QUALIFIED EMPLOYER PLAN.—The term

19 ‘qualified employer plan’ means—

20 ‘‘(A) any plan, contract, pension, account,

21 or trust described in subparagraph (A) or (B) of

22 section 219(g)(5) of the Internal Revenue Code of

23 1986 (without regard to subparagraph (A)(iii)),
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1 ‘‘(B) any eligible deferred compensation

2 plan (within the meaning of section 457(b)) of

3 such Code, and

4 ‘‘(C) any plan described in section 415(m)

5 of such Code.

6 ‘‘(3) PLAN INCLUDES ARRANGEMENTS, ETC.—The

7 term ‘plan’ includes any agreement or arrangement,

8 including an agreement or arrangement that includes

9 one person.

10 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

11 section—

12 ‘‘(1) APPLICABLE COVERED EMPLOYEE.—

13 ‘‘(A) IN GENERAL.—The term ‘applicable

14 covered employee’ means any—

15 ‘‘(i) covered employee of a plan spon16 sor,

17 ‘‘(ii) covered employee of a member of

18 a controlled group which includes the plan

19 sponsor, and

20 ‘‘(iii) former employee who was a cov21 ered employee at the time of termination of

22 employment with the plan sponsor or a

23 member of a controlled group which in24 cludes the plan sponsor.
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1 ‘‘(B) COVERED EMPLOYEE.—The term ‘cov2 ered employee’ has the meaning given such term

3 by section 162(m)(3) of the Internal Revenue

4 Code of 1986.

5 ‘‘(2) CONTROLLED GROUP.—The term ‘controlled

6 group’ has the meaning given such term by section

7 302(d)(3).’’.

8 (2) ENFORCEMENT.—

9 (A) IN GENERAL.—Section 502(a) of the

10 Employee Retirement Income Security Act (29

11 U.S.C. 1132(a)), as amended by this Act, is

12 amended—

13 (i) by striking ‘‘or’’ at the end of para14 graph (9), by striking the period at the end

15 of paragraph (10) and inserting ‘‘; or’’, and

16 by adding at the end the following new

17 paragraph:

18 ‘‘(11) by a fiduciary of a defined benefit plan

19 which is a single-employer plan against—

20 ‘‘(A) a plan sponsor, a member of a con21 trolled group which includes the plan sponsor,

22 an applicable covered employee, or a person

23 holding assets which are part of a nonqualified

24 deferred compensation plan to recover on behalf

25 of the plan—
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1 ‘‘(i) assets which were set aside or

2 transferred in violation of section

3 409A(b)(3) of the Internal Revenue Code of

4 1986 (and any earnings properly allocable

5 to the assets); or

6 ‘‘(ii) amounts equivalent to the assets

7 and earnings described in clause (i); or

8 ‘‘(B) a plan sponsor, or a member of a con9 trolled group which includes the plan sponsor, to

10 compel the production of records the fiduciary is

11 entitled to under section 306.’’; and

12 (ii) by adding at the end the following

13 new flush sentence:

14 ‘‘For purposes of paragraph (11), any term used in such

15 paragraph which is also used in section 306 shall have the

16 meaning given such term by section 306.’’.

17 (B) AWARDING OF FEES.—Section 502(g) of

18 such Act (29 U.S.C. 1132(g)) is amended by add19 ing at the end the following new paragraph:

20 ‘‘(3) ACTIONS TO RECOVER ASSETS TRANS21 FERRED TO NONQUALIFIED DEFERRED COMPENSA22 TION PLANS.—If, in any action under subsection

23 (a)(11) by a fiduciary for or on behalf of a plan to

24 enforce section 306 of this Act and section 409A(b)(3),

25 a judgment is awarded in favor of the plan, the court
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1 may, in addition to any other amount, award the

2 plan reasonable attorney’s fees and costs of the action,

3 to be paid by the defendant’’.

4 (3) CLERICAL AMENDMENT.—The table of con5 tents in section 1 of such Act, as amended by this Act,

6 is amended by adding at the end the following new

7 item:

‘‘Sec. 306. Restrictions on funding of nonqualified deferred compensation

plans.’’.

8 (b) AMENDMENTS OF INTERNAL REVENUE CODE.—

9 (1) IN GENERAL.—Subsection (b) of section 409A

10 of the Internal Revenue Code of 1986 (providing rules

11 relating to funding) is amended by redesignating

12 paragraphs (3) and (4) as paragraphs (4) and (5),

13 respectively, and by inserting after paragraph (2) the

14 following new paragraph:

15 ‘‘(3) EMPLOYERS OF UNDERFUNDED OR TERMI16 NATED DEFINED BENEFIT PLANS.—During any re17 stricted period—

18 ‘‘(A) a plan sponsor of a defined benefit

19 plan which is a single-employer plan, or

20 ‘‘(B) any member of a controlled group

21 which includes such sponsor,

22 shall not directly or indirectly transfer assets, or di23 rectly or indirectly otherwise reserve assets, in a trust

24 (or other arrangement determined by the Secretary)
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1 for purposes of paying deferred compensation of an

2 applicable covered employee under a nonqualified de3 ferred compensation plan of the plan sponsor or mem4 ber. Any assets transferred or reserved in violation of

5 the preceding sentence shall, for purposes of section

6 83, be treated as property transferred in connection

7 with the performance of services whether or not such

8 assets are available to satisfy claims of general credi9 tors. For purposes of this paragraph, any term used

10 in this paragraph which is also used in section 306

11 of the Employee Retirement Income Security Act of

12 1974 shall have the meaning given such term by such

13 section.’’.

14 (2) CONFORMING AMENDMENTS.—Paragraphs

15 (4) and (5) of section 409A(b) of such Code, as redes16 ignated by subsection (a) of this subsection, are each

17 amended by striking ‘‘paragraph (1) or (2)’’ each

18 place it appears and inserting ‘‘paragraph (1), (2), or

19 (3)’’.

20 (c) EFFECTIVE DATE.—The amendments made by this

21 section shall apply to transfers or other reservation of assets

22 after December 31, 2006.
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1 SEC. 304. MODIFICATION OF PENSION FUNDING REQUIRE2 MENTS FOR PLANS SUBJECT TO CURRENT

3 TRANSITION RULE.

4 (a) PLAN YEAR BEFORE NEW FUNDING RULES.—Sec5 tion 769(c)(3) of the Retirement Protection Act of 1994, as

6 added by section 201 of the Pension Funding Equity Act

7 of 2004, is amended by striking ‘‘and 2005’’ and inserting

8 ‘‘, 2005, and 2006’’.

9 (b) PLAN YEARS AFTER NEW FUNDING RULES.—

10 (1) IN GENERAL.—In the case of a plan that—

11 (A) was not required to pay a variable rate

12 premium for the plan year beginning in 1996,

13 (B) has not, in any plan year beginning

14 after 1995, merged with another plan (other than

15 a plan sponsored by an employer that was in

16 1996 within the controlled group of the plan

17 sponsor), and

18 (C) is sponsored by a company that is en19 gaged primarily in the interurban or interstate

20 passenger bus service,

21 the rules described in subsection (b) shall apply for

22 any plan year beginning after 2006.

23 (2) MODIFIED RULES.—The rules described in

24 this subsection are as follows:

25 (A) For purposes of—
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1 (i) determining unfunded benefits

2 under section 4006(a)(3)(E)(ii) of the Em3 ployee Retirement Income Security Act of

4 1974, and

5 (ii) determining any present value or

6 making any computation under section 412

7 and section 430 of the Internal Revenue

8 Code of 1986 and sections 302 and 303 of

9 such Act,

10 the mortality table shall be the mortality table used

11 by the plan.

12 (B) Notwithstanding section 303(f)(4) of

13 such Act or 430(f)(4) of such Code, for purposes

14 of section 303(c)(4)(A)(ii) of such Act and

15 430(c)(4)(A)(ii) of such Code, the value of plan

16 assets shall not be reduced by the amount of the

17 prefunding balance if, pursuant to a binding

18 written agreement with the Pension Benefit

19 Guaranty Corporation entered into before Janu20 ary 1, 2006, the prefunding balance is not avail21 able to reduce the minimum required contribu22 tion for the plan year.

23 (3) DEFINITIONS.—Any term used in this section

24 which is also used in section 303 of such Act or sec-
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1 tion 430 of such Code shall have the meaning pro2 vided such term in such section.

3 (4) CONFORMING AMENDMENT.—Section 769 of

4 the Retirement Protection Act of 1994 is amended by

5 striking subsection (c).

6 (5) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply to plan years beginning

8 after 2006.

9 TITLE IV—IMPROVEMENTS IN

10 PBGC GUARANTEE PROVISIONS

11 SEC. 401. INCREASES IN PBGC PREMIUMS.

12 (a) FLAT-RATE PREMIUMS.—

13 (1) IN GENERAL.—Section 4006(a)(3)(A)(i) of

14 the Employee Retirement Income Security Act of

15 1974 (29 U.S.C. 1306(a)(3)(A)(i)) is amended to read

16 as follows:

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

18 plan, an amount equal to—

19 ‘‘(I) for plan years beginning

20 after December 31, 1990, and before

21 January 1, 2006, $19, or

22 ‘‘(II) for plan years beginning

23 after December 31, 2005, the amount

24 determined under subparagraph (H),
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1 plus the additional premium (if any) deter2 mined under subparagraph (E) for each in3 dividual who is a participant in such plan

4 during the plan year;’’.

5 (2) AMOUNT OF PREMIUM AFTER 2005.—Section

6 4006(a)(3) of such Act (29 U.S.C. 1306(a)(3)), as

7 amended by sections 406 and 407, is amended by

8 adding at the end the following:

9 ‘‘(H) AMOUNT OF PREMIUM.—

10 ‘‘(i) IN GENERAL.—The amount deter11 mined under this subparagraph is the great12 er of $30 or in the case of plan years begin13 ning after December 31, 2006, the adjusted

14 amount determined under clause (ii).

15 ‘‘(ii) ADJUSTED AMOUNT.—The ad16 justed amount determined under this clause

17 is the product derived by multiplying $30

18 by the ratio of—

19 ‘‘(I) the contribution and benefit

20 base (determined under section 230 of

21 the Social Security Act) in effect in the

22 calendar year in which the plan year

23 begins, to

24 ‘‘(II) the contribution and benefit

25 base in effect in 2006.
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1 ‘‘(iii) ROUNDING.—If the amount de2 termined under clause (ii) is not a multiple

3 of $1, such product shall be rounded to the

4 nearest multiple of $1.’’.

5 (b) RISK-BASED PREMIUMS.—

6 (1) CONFORMING AMENDMENTS RELATED TO

7 FUNDING RULES FOR SINGLE-EMPLOYER PLANS.—Sec8 tion 4006(a)(3)(E) of such Act is amended by striking

9 clauses (iii) and (iv) and inserting the following:

10 ‘‘(iii)(I) For purposes of clause (ii), except as provided

11 in subclause (II), the term ‘unfunded benefits’ means, for

12 a plan year, the amount which would be the plan’s funding

13 shortfall (as defined in section 303(c)(4)) if the value of

14 plan assets of the plan were equal to the fair market value

15 of such assets.

16 ‘‘(II) The interest rate used in valuing benefits for pur17 poses of subclause (I) shall be equal to the first, second, or

18 third segment rate which would be determined under section

19 303(h)(2)(C) if section 303(h)(2)(D) were applied by using

20 the yields on investment grade corporate bonds with vary21 ing maturities rather than the average of such yields for

22 a 12-month period.’’.

23 (2) EFFECTIVE DATE.—The amendments made

24 by paragraph (1) shall apply with respect to plan

25 years beginning after 2006.
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1 (c) FLAT-RATE PREMIUM ADJUSTMENT.—

2 (1) IN GENERAL.—Beginning in 2011, and every

3 5 years thereafter, the Board of Directors of the Pen4 sion Benefit Guaranty Corporation under title IV of

5 the Employee Retirement Income Security Act (29

6 U.S.C. 1301 et seq.) shall submit to Congress a report

7 that describes any recommendations for adjusting the

8 premium rate payable to the Corporation described

9 under section 4006(a)(3)(A)(i) of such Act (as amend10 ed by subsection (a)).

11 (2) CONSIDERATIONS.—In developing the report

12 described under paragraph (1), the Corporation shall

13 consider—

14 (A) the national average wage index (as de15 fined in section 209(k)(1) of the Social Security

16 Act (42 U.S.C. 409(k)(1)));

17 (B) the finances of the Corporation as of the

18 date of such report and an actuarial evaluation

19 of the expected operations and status of the funds

20 established under section 4005 of such title IV

21 (29 U.S.C. 1305) for the 5 years succeeding such

22 date;

23 (C) the impact of any increases in such pre24 mium rate on plan sponsors subject to such title

25 IV; and
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1 (D) such other factors determined relevant

2 by the Corporation.

3 SEC. 402. AUTHORITY TO ENTER ALTERNATIVE FUNDING

4 AGREEMENTS TO PREVENT PLAN TERMI5 NATIONS.

6 (a) AUTHORITY TO ENTER INTO AGREEMENTS.—

7 (1) DISTRESS TERMINATIONS.—Section 4041(c)

8 of the Employee Retirement Income Security Act of

9 1974 (29 U.S.C. 1341(c)) is amended by adding at

10 the end the following:

11 ‘‘(4) ALTERNATIVE FUNDING AGREEMENTS.—

12 ‘‘(A) IN GENERAL.—If the corporation de13 termines that—

14 ‘‘(i) a plan meets the requirements for

15 a distress termination under this subsection

16 without regard to an alternative funding

17 agreement under section 4047(a), and

18 ‘‘(ii) the termination of the plan would

19 not be necessary if such an agreement were

20 entered into,

21 the corporation may request that the Secretary of

22 the Treasury, in consultation with the corpora23 tion, enter into such an agreement with the con24 tributing sponsors under the plan.
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1 ‘‘(B) EARLY ACTION INITIATIVES.—Subject

2 to the limitations in subsection (a)(3), if—

3 ‘‘(i) the corporation determines that it

4 is reasonable to believe that a plan may be

5 subject to a distress termination within 6

6 months unless action is taken, the corpora7 tion may request that the Secretary of the

8 Treasury, in consultation with the corpora9 tion, enter into an alternative funding

10 agreement under section 4047(a); and

11 ‘‘(ii) the corporation, upon the request

12 of the contributing sponsor of a plan or

13 other person, determines that it is reason14 able to believe that a plan may be subject

15 to a distress termination within 2 years un16 less action is taken, the corporation may re17 quest that the Secretary of the Treasury, in

18 consultation with the corporation, enter into

19 an alternative funding agreement under sec20 tion 4047(a).’’.

21 (2) INVOLUNTARY TERMINATIONS.—Section 4042

22 of the Employee Retirement Income Security Act of

23 1974 (29 U.S.C. 1342) is amended by adding at the

24 end the following:

25 ‘‘(i) ALTERNATIVE FUNDING AGREEMENTS.—If—
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1 ‘‘(1) the corporation determines that it is reason2 able to believe that a plan will meet the requirements

3 for an involuntary termination under this section

4 without regard to an alternative funding agreement

5 under section 4047(a) within 6 months unless action

6 is taken, or

7 ‘‘(B) the corporation, upon the request of the

8 contributing sponsor of a plan or other person, deter9 mines that it is reasonable to believe that a plan may

10 be subject to an involuntary termination within 2

11 years unless action is taken,

12 and such a termination would not be necessary if such an

13 agreement is entered into, the corporation may request that

14 the Secretary of the Treasury, in consultation with the cor15 poration, enter into an alternative funding agreement

16 under section 4047(a).’’.

17 (b) ALTERNATIVE FUNDING SCHEDULES TO PREVENT

18 PLAN TERMINATION.—

19 (1) IN GENERAL.—Section 4047 of the Employee

20 Retirement Income Security Act of 1974 (29 U.S.C.

21 1347) is amended by—

22 (A) striking the section heading and all that

23 follows through ‘‘Whenever’’ and inserting—
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1 ‘‘SEC. 4047. ALTERNATIVE FUNDING SCHEDULES TO PRE2 VENT TERMINATION; RESTORATION OF TER3 MINATED PLANS.

4 ‘‘(a) ALTERNATIVE FUNDING AGREEMENTS.—

5 ‘‘(1) IN GENERAL.—If the requirements of section

6 4041(c)(4) or 4042(i) are met with respect to any

7 plan, the Secretary of the Treasury, in consultation

8 with the corporation, may enter into an alternative

9 funding agreement with the contributing sponsors

10 under the plan that meets the requirements of this

11 subsection.

12 ‘‘(2) OTHER REQUIREMENTS.—An alternative

13 funding agreement may be entered into by the Sec14 retary of the Treasury, in consultation with corpora15 tion, only if—

16 ‘‘(A) such Secretary finds the agreement to

17 be in the best interests of the participants and

18 beneficiaries; and

19 ‘‘(B) the agreement meets the requirements

20 set forth by such Secretary in regulations.

21 ‘‘(3) ALTERNATIVE FUNDING AGREEMENT.—

22 ‘‘(A) IN GENERAL.—An agreement meets the

23 requirements of this subsection if the

24 agreement—
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1 ‘‘(i) provides for an additional amorti2 zation schedule for a period not to exceed 10

3 years,

4 ‘‘(ii) requires the plan to pay at the

5 time the agreement is entered into any pro6 fessional fees or other expenses incurred by

7 the Secretary of the Treasury or the cor8 poration in connection with the agreements,

9 ‘‘(iii) requires approval by the cor10 poration before the contributing sponsor es11 tablishes or maintains any other defined

12 benefit plan other than any multiemployer

13 plan that covers a substantial number of

14 employees who are covered by the plan sub15 ject to the agreement or who perform sub16 stantially the same type of work with re17 spect to the same business operations as em18 ployees covered by such plan, and

19 ‘‘(iv) provides for a termination date,

20 or a schedule of termination dates, for the

21 purpose of the guarantee under section

22 4022, to apply if a plan terminates during

23 the period that the agreement is in effect.

24 ‘‘(B) OTHER CONDITIONS.—Notwith25 standing any other provision of this Act, an
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1 agreement meeting the requirements of this sub2 section may provide—

3 ‘‘(i) for restrictions on, or the elimi4 nation of, future accruals, but only to the

5 extent that such restrictions or eliminations

6 would have been permitted under section

7 204(g) or section 411(d)(6) of the Internal

8 Revenue Code of 1986 if they had been im9 plemented by a plan amendment adopted

10 immediately before the effective date of the

11 agreement,

12 ‘‘(ii) that the contributing sponsors

13 will provide security or other collateral in

14 such form and amount as specified in the

15 agreement,

16 ‘‘(iii) conditions under which the plan

17 could be terminated in a standard termi18 nation under section 4041(b) or conditions

19 under which accruals to which clause (i)

20 applies could resume in the future, and

21 ‘‘(iv) for such other terms and condi22 tions as the Secretary of the Treasury, in

23 consultation with the corporation, deter24 mines necessary to protect the interests of

25 the corporation.
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1 ‘‘(C) EMPLOYEE REQUIREMENTS.—

2 ‘‘(i) IN GENERAL.—An agreement

3 meets the requirements of this subsection

4 only if—

5 ‘‘(I) at least 60 days before the

6 agreement is to take effect the contrib7 uting sponsors notify affected parties

8 (other than the corporation) of the

9 terms of the agreement and its effect on

10 such parties, and

11 ‘‘(II) each employee organization

12 representing participants in the plan

13 approves the agreement before it takes

14 effect.

15 ‘‘(ii) FORM AND MANNER OF NOTICE.—

16 The notice under clause (i) shall be written

17 in a manner calculated to be understood by

18 the average plan participant and may be

19 provided to a person designated, in writing,

20 by the person to which it would otherwise be

21 provided. Such notice may be provided in

22 written, electronic, or other appropriate

23 form to the extent such form is reasonably

24 accessible to persons to whom the notice is

25 required to be provided.
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1 ‘‘(4) COORDINATION WITH MINIMUM FUNDING

2 REQUIREMENTS.—Any alternative funding schedule

3 under an agreement meeting the requirements under

4 this subsection shall supersede the minimum funding

5 requirements of this Act and the Internal Revenue

6 Code of 1986. For purposes of applying this Act or

7 such Code, any contribution required under such

8 schedule shall be treated in the same manner as con9 tributions required under section 302 of this Act and

10 section 412 of such Code.

11 ‘‘(b) RESTORATION OF TERMINATED PLANS.—When12 ever’’.

13 (2) CONFORMING AMENDMENT.—The table of

14 contents for title IV of such Act is amended by strik15 ing the item relating to section 4047 and inserting

16 the following:

‘‘4047. Alternative funding schedules to prevent terminations; restoration of

terminated plans.’’.

17 (c) AMENDMENTS TO OTHER PROVISIONS.—

18 (1) QUALIFICATION REQUIREMENT.—Section

19 401(a) of the Internal Revenue Code of 1986, as

20 amended by sections 115 and 701 of this Act, is

21 amended by inserting after paragraph (35) the fol22 lowing new paragraph:

23 ‘‘(36) SUCCESSOR PLANS TO CERTAIN PLANS.—

24 If—
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1 ‘‘(A) an alternative funding agreement de2 scribed in section 4047(a) of the Employee Re3 tirement Income Security Act of 1974 is in effect

4 with respect to any plan, and

5 ‘‘(B) the plan is maintained by an em6 ployer that establishes or maintains 1 or more

7 other defined benefit plans (other than any mul8 tiemployer plan), and such other plans in com9 bination provide benefit accruals to any substan10 tial number of successor employees,

11 the Secretary may, in the Secretary’s discretion, de12 termine that any trust of which any other such plan

13 is a part does not constitute a qualified trust under

14 this subsection unless all benefit obligations of the

15 plan to which the alternative funding agreement ap16 plies have been satisfied. For purposes of this para17 graph, the term ‘successor employee’ means any em18 ployee who is or was covered by the plan to which the

19 alternative funding agreement applies and any em20 ployee who performs substantially the same type of

21 work with respect to the same business operations as

22 an employee covered by such plan.’’.

23 (2) LIMITATION ON DEDUCTIONS UNDER CERTAIN

24 PLANS.—Section 404(a)(7)(C) of the Internal Revenue
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1 Code of 1986 is amended by adding at the end the fol2 lowing:

3 ‘‘(iii) PLANS SUBJECT TO ALTER4 NATIVE FUNDING AGREEMENTS.—This

5 paragraph shall not apply to any plan for

6 a plan year if an alternative funding agree7 ment described in section 4047(a) of the

8 Employee Retirement Income Security Act

9 of 1974 is in effect for such year.’’.

10 (d) EFFECTIVE DATE.—The amendments made by this

11 section shall take effect on the date of enactment of this Act.

12 SEC. 403. SPECIAL FUNDING RULES FOR PLANS MAIN13 TAINED BY COMMERCIAL AIRLINES THAT ARE

14 AMENDED TO CEASE FUTURE BENEFIT AC15 CRUALS.

16 (a) IN GENERAL.—If an election is made to have this

17 section apply to an eligible plan—

18 (1) in the case of any applicable plan year be19 ginning before January 1, 2007, the plan shall not

20 have an accumulated funding deficiency for purposes

21 of section 302 of the Employee Retirement Income Se22 curity Act of 1974 and sections 412 and 4971 of the

23 Internal Revenue Code of 1986 if contributions to the

24 plan for the plan year are not less than the minimum
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1 required contribution determined under subsection (d)

2 for the plan for the plan year, and

3 (2) in the case of any applicable plan year be4 ginning on or after January 1, 2007, the minimum

5 required contribution determined under sections 303

6 of such Act and 430 of such Code shall, for purposes

7 of sections 302 and 303 of such Act and sections 412,

8 430, and 4971 of such Code, be equal to the minimum

9 required contribution determined under subsection (d)

10 for the plan for the plan year.

11 (b) ELIGIBLE PLAN.—For purposes of this section—

12 (1) IN GENERAL.—The term ‘‘eligible plan’’

13 means a defined benefit plan (other than a multiem14 ployer plan) to which sections 302 of such Act and

15 412 of such Code applies—

16 (A) which is sponsored by an employer—

17 (i) which is a commercial airline pas18 senger airline, or

19 (ii) the principal business of which is

20 providing catering services to a commercial

21 passenger airline, and

22 (B) with respect to which the requirements

23 of paragraphs (2) and (3) are met.

24 (2) ACCRUAL RESTRICTIONS.—
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1 (A) IN GENERAL.—The requirements of this

2 paragraph are met if, effective as of the first day

3 of the first applicable plan year and at all times

4 thereafter while an election under this section is

5 in effect, the plan provides that—

6 (i) the accrued benefit, any death or

7 disability benefit, and any social security

8 supplement described in the last sentence of

9 section 411(a)(9) of such Code and section

10 204(b)(1)(G) of such Act, of each partici11 pant are frozen at the amount of such ben12 efit or supplement immediately before such

13 first day, and

14 (ii) all other benefits under the plan

15 are eliminated,

16 but only to the extent the freezing or elimination

17 of such benefits would have been permitted under

18 section 411(d)(6) of such Code and section 204(g)

19 of such Act if they had been implemented by a

20 plan amendment adopted immediately before

21 such first day.

22 (B) INCREASES IN SECTION 415 LIMITS DIS23 REGARDED.—If a plan provides that an accrued

24 benefit of a participant which has been subject to

25 any limitation under section 415 of such Code
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1 will be increased if such limitation is increased,

2 the plan shall not be treated as meeting the re3 quirements of this paragraph unless, effective as

4 of the first day of the first applicable plan year

5 and at all times thereafter while an election

6 under this section is in effect, the plan provides

7 that any such increase shall not take effect. A

8 plan shall not fail to meet the requirements of

9 section 411(d)(6) of such Code and section 204(g)

10 of such Act solely because the plan is amended

11 to meet the requirements of this subparagraph.

12 (3) RESTRICTION ON APPLICABLE BENEFIT IN13 CREASES.—

14 (A) IN GENERAL.—The requirements of this

15 paragraph are met if no applicable benefit in16 crease takes effect at any time during the period

17 beginning on July 26, 2005, and ending on the

18 day before the first day of the first applicable

19 plan year.

20 (B) APPLICABLE BENEFIT INCREASE.—For

21 purposes of this paragraph, the term ‘‘applicable

22 benefit increase’’ means, with respect to any

23 plan year, any increase in liabilities of the plan

24 by plan amendment (or otherwise provided in

25 regulations provided by the Secretary) which,
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1 but for this paragraph, would occur during the

2 plan year by reason of—

3 (i) any increase in benefits,

4 (ii) any change in the accrual of bene5 fits, or

6 (iii) any change in the rate at which

7 benefits become nonforfeitable under the

8 plan.

9 (4) EXCEPTION FOR IMPUTED DISABILITY SERV10 ICE.—Paragraphs (2) and (3) shall not apply to any

11 accrual or increase with respect to imputed service

12 provided to a participant during any period of the

13 participant’s disability occurring on or after the effec14 tive date of the plan amendment providing the re15 strictions under paragraph (2) if the participant—

16 (A) was receiving disability benefits as of

17 such date, or

18 (B) was receiving sick pay and subsequently

19 determined to be eligible for disability benefits as

20 of such date.

21 (c) ELECTIONS AND RELATED TERMS.—

22 (1) IN GENERAL.—A plan sponsor shall make the

23 election under subsection (a) at such time and in such

24 manner as the Secretary of the Treasury may pre25 scribe. Except as provided in subsection (h)(5), such
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1 election, once made, may be revoked only with the

2 consent of such Secretary.

3 (2) YEARS FOR WHICH ELECTION MADE.—

4 (A) IN GENERAL.—The plan sponsor may

5 select the first plan year to which the election

6 under subsection (a) applies from among plan

7 years ending after the date of the election. The

8 election shall apply to such plan year and all

9 subsequent years.

10 (B) ELECTION OF NEW PLAN YEAR.—The

11 plan sponsor may specify a new plan year in the

12 election under subsection (a) and the plan year

13 of the plan may be changed to such new plan

14 year without the approval of the Secretary of the

15 Treasury.

16 (3) APPLICABLE PLAN YEAR.—The term ‘‘appli17 cable plan year’’ means each plan year to which the

18 election under subsection (a) applies under paragraph

19 (1).

20 (d) MINIMUM REQUIRED CONTRIBUTION.—

21 (1) IN GENERAL.—In the case of any applicable

22 plan year during the amortization period, the min23 imum required contribution shall be the amount nec24 essary to amortize the unfunded liability of the plan,

25 determined as of the first day of the plan year, in
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1 equal annual installments (until fully amortized) over

2 the remainder of the amortization period. Such

3 amount shall be separately determined for each appli4 cable plan year.

5 (2) YEARS AFTER AMORTIZATION PERIOD.—In

6 the case of any plan year beginning after the end of

7 the amortization period, section 302(a)(2)(A) of such

8 Act and section 412(a)(2)(A) of such Code shall apply

9 to such plan, but the prefunding balance as of the

10 first day of the first of such years under section 303(f)

11 of such Act and section 430(f) of such Code shall be

12 zero.

13 (3) DEFINITIONS.—For purposes of this

14 section—

15 (A) UNFUNDED LIABILITY.—The term ‘‘un16 funded liability’’ means the unfunded accrued li17 ability under the plan, determined under the

18 unit credit funding method.

19 (B) AMORTIZATION PERIOD.—The term

20 ‘‘amortization period’’ means the 20-plan year

21 period beginning with the first applicable plan

22 year.

23 (4) OTHER RULES.—In determining the min24 imum required contribution and amortization

25 amount under this subsection—
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1 (A) the provisions of section 302(c)(3) of

2 such Act and section 412(c)(3) of such Code, as

3 in effect before the date of enactment of this sec4 tion, shall apply,

5 (B) the rate of interest under section 302(b)

6 of such Act and section 412(b) of such Code, as

7 so in effect, shall be used for all calculations re8 quiring an interest rate, and

9 (C) the value of plan assets shall be equal

10 to their fair market value.

11 (5) SPECIAL RULE FOR CERTAIN PLAN SPIN12 OFFS.—For purposes of subsection (a), if, with respect

13 to any eligible plan to which this subsection applies—

14 (A) any applicable plan year includes the

15 date of the enactment of this Act,

16 (B) a plan was spun off from the eligible

17 plan during the plan year but before such date

18 of enactment,

19 the minimum required contribution under subsection

20 (a)(1) for the eligible plan for such applicable plan

21 year shall be determined as if the plans were a single

22 plan for that plan year (based on the full 12-month

23 plan year in effect prior to the spin-off). The em24 ployer shall designate the allocation of the minimum

25 required contribution between such plans for the ap-
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1 plicable plan year and direct the appropriate re2 allocation between the plans of any contributions for

3 the applicable plan year.

4 (e) FUNDING STANDARD ACCOUNT AND PREFUNDING

5 BALANCE.—Any charge or credit in the funding standard

6 account under section 302 of such Act or section 412 of such

7 Code, and any prefunding balance under section 303 of such

8 Act or section 430 of such Code, as of the day before the

9 first day of the first applicable plan year, shall be reduced

10 to zero.

11 (f) AMENDMENTS TO OTHER PROVISIONS.—

12 (1) QUALIFICATION REQUIREMENT.—Section

13 401(a)(36) of the Internal Revenue Code of 1986, as

14 added by section 402 of this Act, is amended by add15 ing at the end the following: ‘‘This paragraph shall

16 also apply to any plan during any period during

17 which an amortization schedule under section 403 of

18 the Pension Security and Transparency Act of 2005

19 is in effect.’’

20 (2) PBGC LIABILITY LIMITED.—Section 4022 of

21 the Employee Retirement Income Security Act of

22 1974, as amended by this Act, is amended by adding

23 at the end the following new subsection:

24 ‘‘(h) SPECIAL RULE FOR PLANS ELECTING CERTAIN

25 FUNDING REQUIREMENTS.—During any period in which
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1 an election by a plan under section 403 of the Pension Secu2 rity and Transparency Act of 2005 is in effect, then this

3 section and section 4044(a)(3) shall be applied by treating

4 the first day of the first applicable plan year as the termi5 nation date of the plan. This subsection shall not apply to

6 any plan for which an election under section 403(h) of such

7 Act is in effect.’’.

8 (3) LIMITATION ON DEDUCTIONS UNDER CERTAIN

9 PLANS.—Section 404(a)(7)(C)(iii) of the Internal

10 Revenue Code of 1986, as added by this Act, is

11 amended by adding at the end the following new sen12 tence: ‘‘This clause shall also apply to any plan for

13 a plan year if an election under section 403 of the

14 Pension Security and Transparency Act of 2005 is in

15 effect for such year.’’

16 (4) NOTICE.—In the case of a plan amendment

17 adopted in order to comply with this section, any no18 tice required under section 204(h) of such Act or sec19 tion 4980F(e) of such Code shall be provided within

20 15 days of the effective date of such plan amendment.

21 This subsection shall not apply to any plan unless

22 such plan is maintained pursuant to one or more col23 lective bargaining agreements between employee rep24 resentatives and 1 or more employers.
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1 (g) SPECIAL RULES FOR TERMINATION OF ELIGIBLE

2 PLANS.—During any period an election is in effect under

3 this section with respect to an eligible plan, the Pension

4 Benefit Guaranty Corporation shall, before it seeks or ap5 proves a termination of such plan under section 4041(c)

6 or 4042 of the Employee Retirement Income Security Act

7 of 1974—

8 (1) make a determination under section

9 4041(c)(4) or 4042(i) of such Act whether the termi10 nation would be necessary if the Secretary of the

11 Treasury were to enter into an agreement under sec12 tion 4047(a) of such Act which provides an alter13 native funding agreement to replace the amortization

14 schedule under this section, and

15 (2) if the Corporation determines such an agree16 ment would make such termination unnecessary, take

17 all necessary actions to ensure the agreement is en18 tered into.

19 The Pension Benefit Guaranty Corporation shall make the

20 determination under paragraph (1) within 90 days of re21 ceiving all information needed in connection with a request

22 for a termination (or if no such request is made, within

23 90 days of consideration of the termination by the Corpora24 tion).
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1 (h) CERTAIN BENEFIT ACCRUALS AND INCREASES AL2 LOWED IF ADDITIONAL CONTRIBUTIONS MADE TO COVER

3 COSTS.—

4 (1) IN GENERAL.—If an employer elects the ap5 plication of this subsection—

6 (A) the requirements of paragraphs (2) and

7 (3) of subsection (b) shall not apply with respect

8 to any eligible plan maintained by the employer

9 and specified in the election, and

10 (B) the minimum required contribution

11 under subsection (d) for any plan year with re12 spect to the plan shall be increased by the

13 amounts described in paragraphs (2) and (3).

14 Any liabilities and assets taken into account under

15 this subsection shall not be taken into account in de16 termining the unfunded liability of the plan for pur17 poses of subsection (d).

18 (2) CURRENT FUNDING OF ACCRUALS AND IN19 CREASES.—The amount determined under this para20 graph for any plan year is the target normal cost

21 which would occur under section 303(b) of such Act

22 and 430(b) of such Code if—

23 (A) any benefit accrual, or benefit increase

24 taking effect, during the plan year by reason of
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1 this subsection were treated as having been ac2 crued or earned during the plan year, and

3 (B) the plan were treated as if it were in

4 at-risk status.

5 (3) FUNDING MUST BE MAINTAINED.—The

6 amount determined under this paragraph for any

7 plan year is the amount of any increase in the short8 fall amortization charge which would occur under sec9 tion 303(c) of such Act and 430(c) of such Code if—

10 (A) the funding target were determined by

11 only taking into account benefits to which para12 graph (2) applied for preceding plan years,

13 (B) the only assets taken into account were

14 the contributions required under this paragraph

15 and paragraph (2) for preceding plan years

16 (and any earnings thereon),

17 (C) the amortization period included only

18 the plan year,

19 (D) the transition rule under section

20 303(c)(4)(B) of such Act and section

21 430(c)(4)(B) of such Code did not apply, and

22 (E) the plan were treated as if it were in

23 at-risk status.

24 (4) SPECIAL RULES FOR YEARS BEFORE 2007.—

25 Notwithstanding any other provision of this Act, in
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1 the case of an applicable plan year of an eligible plan

2 to which this subsection applies which begins before

3 January 1, 2007, in determining the amounts de4 scribed in paragraphs (2) and (3) for such plan

5 year—

6 (A) the provisions of, and amendments

7 made by, sections 101, 102, 111, and 112 shall

8 apply to such plan year, except that

9 (B) the interest rate used under section 303

10 of such Act and section 430 of such Code for pur11 poses of applying paragraphs (2) and (3) to such

12 plan year shall be the interest rate determined

13 under section 302(b)(5) of such Act and section

14 412(b)(5) of such Code, as in effect for plan

15 years beginning in 2005.

16 (5) ELECTION OUT OF SECTION.—An employer

17 maintaining an eligible plan to which this subsection

18 applies may make a one-time election with respect to

19 any applicable plan year not to have this section

20 apply to such plan year and all subsequent plan

21 years. Subject to subsection (d)(2), the minimum re22 quired contribution under section 303 of such Act and

23 430 of such Code for all such plan years shall be de24 termined without regard to this section.
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1 (i) EXCLUSION OF CERTAIN EMPLOYEES FROM MIN2 IMUM COVERAGE REQUIREMENTS.—

3 (1) IN GENERAL.—Section 410(b)(3) of such

4 Code is amended by striking the last sentence and in5 serting the following: ‘‘For purposes of subparagraph

6 (B), management pilots who are not represented in

7 accordance with title II of the Railway Labor Act

8 shall be treated as covered by a collective bargaining

9 agreement described in such subparagraph if the

10 management pilots manage the flight operations of

11 air pilots who are so represented and the management

12 pilots are, pursuant to the terms of the agreement, in13 cluded in the group of employees benefitting under the

14 trust described in such subparagraph. Subparagraph

15 (B) shall not apply in the case of a plan which pro16 vides contributions or benefits for employees whose

17 principal duties are not customarily performed

18 aboard an aircraft in flight (other than management

19 pilots described in the preceding sentence).’’

20 (2) EFFECTIVE DATE.—The amendment made by

21 this subsection shall apply to years beginning before,

22 on, or after the date of the enactment of this Act.

23 (j) EFFECTIVE DATE.—Except as otherwise provided

24 in this section, the amendments made by this section shall
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1 apply to plan years ending after the date of the enactment

2 of this Act.

3 SEC. 404. LIMITATION ON PBGC GUARANTEE OF SHUTDOWN

4 AND OTHER BENEFITS.

5 (a) IN GENERAL.—Section 4022(b) of the Employee

6 Retirement Income Security Act of 1974 (29 U.S.C.

7 1322(b)) is amended by adding at the end the following:

8 ‘‘(8) If a benefit is payable by reason of—

9 ‘‘(A) a plant shutdown or similar event; or

10 ‘‘(B) any event other than attainment of

11 any age, performance of any service, receipt or

12 derivation of any compensation, or the occur13 rence of death or disability,

14 this section shall be applied as if a plan amendment

15 had been adopted on the date such event occurred that

16 provides for the payment of such benefit.’’.

17 (b) EFFECTIVE DATE.—The amendment made by this

18 section shall apply to benefits that become payable as a re19 sult of a plant shutdown or other similar event, as such

20 terms are used in the amendment made by subsection (a),

21 that occurs after July 26, 2005.

22 SEC. 405. RULES RELATING TO BANKRUPTCY OF EM23 PLOYER.

24 (a) GUARANTEE.—Section 4022 of the Employee Re25 tirement Income Security Act of 1974 (29 U.S.C. 1322),
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1 as amended by this Act, is amended by adding at the end

2 the following:

3 ‘‘(i) BANKRUPTCY FILING SUBSTITUTED FOR TERMI4 NATION DATE.—If a contributing sponsor of a plan has

5 filed or has had filed against such person a petition seeking

6 liquidation or reorganization in a case under title 11,

7 United States Code, or under any similar Federal law or

8 law of a State or political subdivision, and the case has

9 not been dismissed as of the termination date, then this sec10 tion shall be applied by treating the date such petition was

11 filed as the termination date of the plan.’’.

12 (b) ALLOCATION OF ASSETS AMONG PRIORITY GROUPS

13 IN BANKRUPTCY PROCEEDINGS.—Section 4044 of the Em14 ployee Retirement Income Security Act of 1974 (29 U.S.C.

15 1344) is amended by adding at the end the following:

16 ‘‘(e) BANKRUPTCY FILING SUBSTITUTED FOR TERMI17 NATION DATE.—If a contributing sponsor of a plan has

18 filed or has had filed against such person a petition seeking

19 liquidation or reorganization in a case under title 11,

20 United States Code, or under any similar Federal law or

21 law of a State or political subdivision, and the case has

22 not been dismissed as of the termination date, then sub23 section (a)(3) shall be applied by treating the date such pe24 tition was filed as the termination date of the plan.’’.
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1 (c) EFFECTIVE DATE.—The amendments made this

2 section shall apply with respect to proceedings initiated

3 under title 11, United States Code, or under any similar

4 Federal law or law of a State or political subdivision, on

5 or after the date that is 30 days after the date of enactment

6 of this Act.

7 SEC. 406. PBGC PREMIUMS FOR NEW PLANS OF SMALL EM8 PLOYERS.

9 (a) IN GENERAL.—Subparagraph (A) of section

10 4006(a)(3) of the Employee Retirement Income Security

11 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—

12 (1) in clause (i), by inserting ‘‘other than a new

13 single-employer plan (as defined in subparagraph

14 (F)) maintained by a small employer (as so de15 fined),’’ after ‘‘single-employer plan,’’,

16 (2) in clause (iii), by striking the period at the

17 end and inserting ‘‘, and’’, and

18 (3) by adding at the end the following new

19 clause:

20 ‘‘(v) in the case of a new single-employer plan

21 (as defined in subparagraph (F)) maintained by a

22 small employer (as so defined) for the plan year, $5

23 for each individual who is a participant in such plan

24 during the plan year.’’
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1 (b) DEFINITION OF NEW SINGLE-EMPLOYER PLAN.—

2 Section 4006(a)(3) of the Employee Retirement Income Se3 curity Act of 1974 (29 U.S.C. 1306(a)(3)) is amended by

4 adding at the end the following new subparagraph:

5 ‘‘(F)(i) For purposes of this paragraph, a single-em6 ployer plan maintained by a contributing sponsor shall be

7 treated as a new single-employer plan for each of its first

8 5 plan years if, during the 36-month period ending on the

9 date of the adoption of such plan, the sponsor or any mem10 ber of such sponsor’s controlled group (or any predecessor

11 of either) did not establish or maintain a plan to which

12 this title applies with respect to which benefits were accrued

13 for substantially the same employees as are in the new sin14 gle-employer plan.

15 ‘‘(ii)(I) For purposes of this paragraph, the term

16 ‘small employer’ means an employer which on the first day

17 of any plan year has, in aggregation with all members of

18 the controlled group of such employer, 100 or fewer employ19 ees.

20 ‘‘(II) In the case of a plan maintained by two or more

21 contributing sponsors that are not part of the same con22 trolled group, the employees of all contributing sponsors and

23 controlled groups of such sponsors shall be aggregated for

24 purposes of determining whether any contributing sponsor

25 is a small employer.’’
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to plans first effective after December

3 31, 2005.

4 SEC. 407. PBGC PREMIUMS FOR SMALL AND NEW PLANS.

5 (a) NEW PLANS.—Subparagraph (E) of section

6 4006(a)(3) of the Employee Retirement Income Security

7 Act of 1974 (29 U.S.C. 1306(a)(3)), as amended by this

8 Act, is amended by adding at the end the following new

9 clause:

10 ‘‘(iv) In the case of a new defined benefit plan, the

11 amount determined under clause (ii) for any plan year

12 shall be an amount equal to the product of the amount de13 termined under clause (ii) and the applicable percentage.

14 For purposes of this clause, the term ‘applicable percentage’

15 means—

16 ‘‘(I) 0 percent, for the first plan year.

17 ‘‘(II) 20 percent, for the second plan year.

18 ‘‘(III) 40 percent, for the third plan year.

19 ‘‘(IV) 60 percent, for the fourth plan year.

20 ‘‘(V) 80 percent, for the fifth plan year.

21 For purposes of this clause, a defined benefit plan (as de22 fined in section 3(35)) maintained by a contributing spon23 sor shall be treated as a new defined benefit plan for each

24 of its first 5 plan years if, during the 36-month period end25 ing on the date of the adoption of the plan, the sponsor
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1 and each member of any controlled group including the

2 sponsor (or any predecessor of either) did not establish or

3 maintain a plan to which this title applies with respect

4 to which benefits were accrued for substantially the same

5 employees as are in the new plan.’’

6 (b) SMALL PLANS.—Paragraph (3) of section 4006(a)

7 of the Employee Retirement Income Security Act of 1974

8 (29 U.S.C. 1306(a)), is amended—

9 (1) by striking ‘‘The’’ in subparagraph (E)(i)

10 and inserting ‘‘Except as provided in subparagraph

11 (G), the’’, and

12 (2) by inserting after subparagraph (F) the fol13 lowing new subparagraph:

14 ‘‘(G)(i) In the case of an employer who has 25 or fewer

15 employees on the first day of the plan year, the additional

16 premium determined under subparagraph (E) for each par17 ticipant shall not exceed $5 multiplied by the number of

18 participants in the plan as of the close of the preceding plan

19 year.

20 ‘‘(ii) For purposes of clause (i), whether an employer

21 has 25 or fewer employees on the first day of the plan year

22 is determined by taking into consideration all of the em23 ployees of all members of the contributing sponsor’s con24 trolled group. In the case of a plan maintained by two or

25 more contributing sponsors, the employees of all contrib-
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1 uting sponsors and their controlled groups shall be aggre2 gated for purposes of determining whether the 25-or-fewer3 employees limitation has been satisfied.’’

4 (c) EFFECTIVE DATES.—

5 (1) SUBSECTION (a).—The amendments made by

6 subsection (a) shall apply to plans first effective after

7 December 31, 2005.

8 (2) SUBSECTION (b).—The amendments made by

9 subsection (b) shall apply to plan years beginning

10 after December 31, 2005.

11 SEC. 408. AUTHORIZATION FOR PBGC TO PAY INTEREST ON

12 PREMIUM OVERPAYMENT REFUNDS.

13 (a) IN GENERAL.—Section 4007(b) of the Employment

14 Retirement Income Security Act of 1974 (29 U.S.C.

15 1307(b)) is amended—

16 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, and

17 (2) by inserting at the end the following new

18 paragraph:

19 ‘‘(2) The corporation is authorized to pay, subject to

20 regulations prescribed by the corporation, interest on the

21 amount of any overpayment of premium refunded to a des22 ignated payor. Interest under this paragraph shall be cal23 culated at the same rate and in the same manner as interest

24 is calculated for underpayments under paragraph (1).’’
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 section (a) shall apply to interest accruing for periods be3 ginning not earlier than the date of the enactment of this

4 Act.

5 SEC. 409. RULES FOR SUBSTANTIAL OWNER BENEFITS IN

6 TERMINATED PLANS.

7 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

8 Section 4022(b)(5) of the Employee Retirement Income Se9 curity Act of 1974 (29 U.S.C. 1322(b)(5)) is amended to

10 read as follows:

11 ‘‘(5)(A) For purposes of this paragraph, the term ‘ma12 jority owner’ means an individual who, at any time during

13 the 60-month period ending on the date the determination

14 is being made—

15 ‘‘(i) owns the entire interest in an unincor16 porated trade or business,

17 ‘‘(ii) in the case of a partnership, is a partner

18 who owns, directly or indirectly, 50 percent or more

19 of either the capital interest or the profits interest in

20 such partnership, or

21 ‘‘(iii) in the case of a corporation, owns, directly

22 or indirectly, 50 percent or more in value of either the

23 voting stock of that corporation or all the stock of that

24 corporation.
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1 For purposes of clause (iii), the constructive ownership

2 rules of section 1563(e) of the Internal Revenue Code of

3 1986 (other than paragraph (3)(C) thereof) shall apply, in4 cluding the application of such rules under section 414(c)

5 of such Code.

6 ‘‘(B) In the case of a participant who is a majority

7 owner, the amount of benefits guaranteed under this section

8 shall equal the product of—

9 ‘‘(i) a fraction (not to exceed 1) the numerator

10 of which is the number of years from the later of the

11 effective date or the adoption date of the plan to the

12 termination date, and the denominator of which is

13 10, and

14 ‘‘(ii) the amount of benefits that would be guar15 anteed under this section if the participant were not

16 a majority owner.’’

17 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

18 (1) Section 4044(a)(4)(B) of the Employee Re19 tirement Income Security Act of 1974 (29 U.S.C.

20 1344(a)(4)(B)) is amended by striking ‘‘section

21 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.

22 (2) Section 4044(b) of such Act (29 U.S.C.

23 1344(b)) is amended—

24 (A) by striking ‘‘(5)’’ in paragraph (2) and

25 inserting ‘‘(4), (5),’’, and
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1 (B) by redesignating paragraphs (3)

2 through (6) as paragraphs (4) through (7), re3 spectively, and by inserting after paragraph (2)

4 the following new paragraph:

5 ‘‘(3) If assets available for allocation under

6 paragraph (4) of subsection (a) are insufficient to sat7 isfy in full the benefits of all individuals who are de8 scribed in that paragraph, the assets shall be allocated

9 first to benefits described in subparagraph (A) of that

10 paragraph. Any remaining assets shall then be allo11 cated to benefits described in subparagraph (B) of

12 that paragraph. If assets allocated to such subpara13 graph (B) are insufficient to satisfy in full the bene14 fits described in that subparagraph, the assets shall be

15 allocated pro rata among individuals on the basis of

16 the present value (as of the termination date) of their

17 respective benefits described in that subparagraph.’’

18 (c) CONFORMING AMENDMENTS.—

19 (1) Section 4021 of the Employee Retirement In20 come Security Act of 1974 (29 U.S.C. 1321) is

21 amended—

22 (A) in subsection (b)(9), by striking ‘‘as de23 fined in section 4022(b)(6)’’, and

24 (B) by adding at the end the following new

25 subsection:
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1 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub2 stantial owner’ means an individual who, at any time dur3 ing the 60-month period ending on the date the determina4 tion is being made—

5 ‘‘(1) owns the entire interest in an unincor6 porated trade or business,

7 ‘‘(2) in the case of a partnership, is a partner

8 who owns, directly or indirectly, more than 10 per9 cent of either the capital interest or the profits inter10 est in such partnership, or

11 ‘‘(3) in the case of a corporation, owns, directly

12 or indirectly, more than 10 percent in value of either

13 the voting stock of that corporation or all the stock of

14 that corporation.

15 For purposes of paragraph (3), the constructive ownership

16 rules of section 1563(e) of the Internal Revenue Code of

17 1986 (other than paragraph (3)(C) thereof) shall apply, in18 cluding the application of such rules under section 414(c)

19 of such Code.’’

20 (2) Section 4043(c)(7) of such Act (29 U.S.C.

21 1343(c)(7)) is amended by striking ‘‘section

22 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’.

23 (d) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section shall

3 apply to plan terminations—

4 (A) under section 4041(c) of the Employee

5 Retirement Income Security Act of 1974 (29

6 U.S.C. 1341(c)) with respect to which notices of

7 intent to terminate are provided under section

8 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2))

9 after December 31, 2005, and

10 (B) under section 4042 of such Act (29

11 U.S.C. 1342) with respect to which proceedings

12 are instituted by the corporation after such date.

13 (2) CONFORMING AMENDMENTS.—The amend14 ments made by subsection (c) shall take effect on Jan15 uary 1, 2006.

16 SEC. 410. ACCELERATION OF PBGC COMPUTATION OF BEN17 EFITS ATTRIBUTABLE TO RECOVERIES FROM

18 EMPLOYERS.

19 (a) MODIFICATION OF AVERAGE RECOVERY PERCENT20 AGE OF OUTSTANDING AMOUNT OF BENEFIT LIABILITIES

21 PAYABLE BY CORPORATION TO PARTICIPANTS AND BENE22 FICIARIES.—Section 4022(c)(3)(B)(ii) of the Employee Re23 tirement Income Security Act of 1974 (29 U.S.C.

24 1322(c)(3)(B)(ii)) is amended to read as follows:
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1 ‘‘(ii) notices of intent to terminate

2 were provided (or in the case of a termi3 nation by the corporation, a notice of deter4 mination under section 4042 was issued)

5 during the 5-Federal fiscal year period end6 ing with the third fiscal year preceding the

7 fiscal year in which occurs the date of the

8 notice of intent to terminate (or the notice

9 of determination under section 4042) with

10 respect to the plan termination for which

11 the recovery ratio is being determined.’’

12 (b) VALUATION OF SECTION 4062(c) LIABILITY FOR

13 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

14 PARTICIPANTS AND BENEFICIARIES.—

15 (1) SINGLE-EMPLOYER PLAN BENEFITS GUARAN16 TEED.—Section 4022(c)(3)(A) of the Employee Re17 tirement Income Security Act of 1974 (29 U.S.C. 13)

18 is amended to read as follows:

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

20 subparagraph (C), the term ‘recovery ratio’

21 means the ratio which—

22 ‘‘(i) the sum of the values of all recov23 eries under section 4062, 4063, or 4064, de24 termined by the corporation in connection
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1 with plan terminations described under sub2 paragraph (B), bears to

3 ‘‘(ii) the sum of all unfunded benefit li4 abilities under such plans as of the termi5 nation date in connection with any such

6 prior termination.’’.

7 (2) ALLOCATION OF ASSETS.—Section 4044 of

8 the Employee Retirement Income Security Act of

9 1974 (29 U.S.C. 1362) is amended by adding at the

10 end the following new subsection:

11 ‘‘(e) VALUATION OF SECTION 4062(c) LIABILITY FOR

12 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

13 PARTICIPANTS AND BENEFICIARIES.—

14 ‘‘(1) IN GENERAL.—In the case of a terminated

15 plan, the value of the recovery of liability under sec16 tion 4062(c) allocable as a plan asset under this sec17 tion for purposes of determining the amount of bene18 fits payable by the corporation shall be determined by

19 multiplying—

20 ‘‘(A) the amount of liability under section

21 4062(c) as of the termination date of the plan,

22 by

23 ‘‘(B) the applicable section 4062(c) recovery

24 ratio.
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1 ‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For

2 purposes of this subsection—

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

4 subparagraph (C), the term ‘section 4062(c) re5 covery ratio’ means the ratio which—

6 ‘‘(i) the sum of the values of all recov7 eries under section 4062(c) determined by

8 the corporation in connection with plan ter9 minations described under subparagraph

10 (B), bears to

11 ‘‘(ii) the sum of all the amounts of li12 ability under section 4062(c) with respect to

13 such plans as of the termination date in

14 connection with any such prior termi15 nation.

16 ‘‘(B) PRIOR TERMINATIONS.—A plan termi17 nation described in this subparagraph is a ter18 mination with respect to which—

19 ‘‘(i) the value of recoveries under sec20 tion 4062(c) have been determined by the

21 corporation, and

22 ‘‘(ii) notices of intent to terminate

23 were provided (or in the case of a termi24 nation by the corporation, a notice of deter25 mination under section 4042 was issued)
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1 during the 5-Federal fiscal year period end2 ing with the third fiscal year preceding the

3 fiscal year in which occurs the date of the

4 notice of intent to terminate (or the notice

5 of determination under section 4042) with

6 respect to the plan termination for which

7 the recovery ratio is being determined.

8 ‘‘(C) EXCEPTION.—In the case of a termi9 nated plan with respect to which the outstanding

10 amount of benefit liabilities exceeds $20,000,000,

11 the term ‘section 4062(c) recovery ratio’ means,

12 with respect to the termination of such plan, the

13 ratio of—

14 ‘‘(i) the value of the recoveries on be15 half of the plan under section 4062(c), to

16 ‘‘(ii) the amount of the liability owed

17 under section 4062(c) as of the date of plan

18 termination to the trustee appointed under

19 section 4042 (b) or (c).

20 ‘‘(3) SUBSECTION NOT TO APPLY.—This sub21 section shall not apply with respect to the determina22 tion of—

23 ‘‘(A) whether the amount of outstanding

24 benefit liabilities exceeds $20,000,000, or
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1 ‘‘(B) the amount of any liability under sec2 tion 4062 to the corporation or the trustee ap3 pointed under section 4042 (b) or (c).

4 ‘‘(4) DETERMINATIONS.—Determinations under

5 this subsection shall be made by the corporation. Such

6 determinations shall be binding unless shown by clear

7 and convincing evidence to be unreasonable.’’

8 (c) EFFECTIVE DATE.—The amendments made by this

9 section shall apply for any termination for which notices

10 of intent to terminate are provided (or in the case of a ter11 mination by the corporation, a notice of determination

12 under section 4042 under the Employee Retirement Income

13 Security Act of 1974 is issued) on or after the date which

14 is 30 days after the date of enactment of this section.

15 SEC. 411. TREATMENT OF CERTAIN PLANS WHERE CES16 SATION OR CHANGE IN MEMBERSHIP OF A

17 CONTROLLED GROUP.

18 (a) IN GENERAL.—Section 4041(b) of the Employee

19 Retirement Income Security Act of 1974 (29 U.S.C.

20 1341(b)) is amended by adding at the end the following new

21 paragraph:

22 ‘‘(5) SPECIAL RULE FOR CERTAIN PLANS WHERE

23 CESSATION OR CHANGE IN MEMBERSHIP OF A CON24 TROLLED GROUP.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), if—

3 ‘‘(i) there is transaction or series of

4 transactions which result in a single-em5 ployer plan which is a defined benefit plan

6 being maintained by an employer which is

7 not a member of the same controlled group

8 of which the employer maintaining the plan

9 before such transaction or series of trans10 actions was a member,

11 ‘‘(ii) the corporation treats the trans12 action or series of transactions as resulting

13 in a standard termination to which this

14 subsection applies, and

15 ‘‘(iii) the plan is fully funded,

16 then the interest rate used in determining wheth17 er the plan is sufficient for benefit liabilities for

18 purposes of this subsection shall be the interest

19 rate used in determining whether the plan is

20 fully funded.

21 ‘‘(B) LIMITATIONS.—Subparagraph (A)

22 shall not apply to any transaction or series of

23 transactions unless—
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1 ‘‘(i) any employer maintaining the

2 plan immediately before or after such trans3 action or series of transactions—

4 ‘‘(I) has an outstanding senior

5 unsecured debt instrument which is

6 rated investment grade by each of the

7 nationally recognized statistical rating

8 organizations for corporate bonds that

9 has issued a credit rating for such in10 strument, or

11 ‘‘(II) if no such debt instrument

12 of such employer has been rated by

13 such an organization but 1 or more of

14 such organizations has made an issuer

15 credit rating for such employer, all

16 such organizations which have so rated

17 the employer have rated such employer

18 investment grade, and

19 ‘‘(ii) the employer maintaining the

20 plan after the transaction or series of trans21 actions employs at least 30 percent of the

22 employees located in the United States who

23 were employed by such employer imme24 diately before the transaction or series of

25 transactions.
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1 ‘‘(C) FULLY FUNDED.—For purposes of sub2 paragraph (A), a plan shall be treated as fully

3 funded with respect to any transaction or series

4 of transactions if—

5 ‘‘(i) in the case of a transaction or se6 ries of transactions which occur in a plan

7 year beginning before January 1, 2007, the

8 funded current liability percentage deter9 mined under section 302(d) for the plan

10 year is at least 100 percent, and

11 ‘‘(ii) in the case of a transaction or se12 ries of transactions which occur in a plan

13 year beginning on or after such date, the

14 funding target attainment percentage deter15 mined under section 303 is, as of the valu16 ation date for such plan year, at least 100

17 percent.’’

18 (b) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to any transaction or series of trans20 actions occurring on and after the date of the enactment

21 of this Act.

22 SEC. 412. EFFECT OF TITLE.

23 The decreases in Federal outlays resulting from the en24 actment of this title, and the amendments made by this
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1 title, shall be treated as in lieu of the decreases in Federal

2 outlays which—

3 (1) resulted from amendments made to title IV

4 of the Employee Retirement Income Security Act of

5 1974 (29 U.S.C. 1301 et seq.); and

6 (2) were contained in an Act enacted pursuant

7 to the concurrent resolution on the budget for fiscal

8 year 2006.

9 SEC. 413. AGE REQUIREMENT FOR EMPLOYERS.

10 (a) SINGLE-EMPLOYER PLAN BENEFITS GUARAN11 TEED.—Section 4022(b) of the Employee Retirement In12 come Security Act of 1974 (29 U.S.C. 1322(b)) is amended

13 in the flush matter following paragraph (3), by adding at

14 the end the following: ‘‘If, at the time of termination of a

15 plan under this title, regulations prescribed by the Federal

16 Aviation Administration require an individual to separate

17 from service as a commercial airline pilot after attaining

18 any age before age 65, paragraph (3) shall be applied to

19 an individual who is a participant in the plan by reason

20 of such service by substituting such age for age 65.’’.

21 (b) MULTIEMPLOYER PLAN BENEFITS GUARAN22 TEED.—Section 4022B(a) of the Employee Retirement In23 come Security Act of 1974 (29 U.S.C. 1322b(a)) is amended

24 by adding at the end the following: ‘‘If, at the time of termi25 nation of a plan under this title, regulations prescribed by
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1 the Federal Aviation Administration require an individual

2 to separate from service as a commercial airline pilot after

3 attaining any age before age 65, this subsection shall be

4 applied to an individual who is a participant in the plan

5 by reason of such service by substituting such age for age

6 65.’’.

7 (c) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to benefits payable on or after the date

9 of enactment of this Act.

10 TITLE V—DISCLOSURE

11 SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.

12 (a) IN GENERAL.—Section 101(f) of the Employee Re13 tirement Income Security Act of 1974 (29 U.S.C. 1021(f))

14 is amended to read as follows:

15 ‘‘(f) DEFINED BENEFIT PLAN FUNDING NOTICES.—

16 ‘‘(1) IN GENERAL.—The administrator of a de17 fined benefit plan shall for each plan year provide a

18 plan funding notice to the Pension Benefit Guaranty

19 Corporation, to each plan participant and bene20 ficiary, to each labor organization representing such

21 participants or beneficiaries, and, in the case of a

22 multiemployer plan, to each employer that has an ob23 ligation to contribute to the plan.

24 ‘‘(2) INFORMATION CONTAINED IN NOTICES.—
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1 ‘‘(A) IDENTIFYING INFORMATION.—Each no2 tice required under paragraph (1) shall contain

3 identifying information, including the name of

4 the plan, the address and phone number of the

5 plan administrator and the plan’s principal ad6 ministrative officer, each plan sponsor’s em7 ployer identification number, and the plan num8 ber of the plan.

9 ‘‘(B) SPECIFIC INFORMATION.—A plan

10 funding notice under paragraph (1) shall

11 include—

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

13 plan, a statement as to whether the plan’s

14 funding target attainment percentage (as

15 defined in section 303(d)(2)) for the plan

16 year to which the notice relates, and for the

17 2 preceding plan years, is at least 100 per18 cent (and, if not, the actual percentages), or

19 ‘‘(II) in the case of a multiemployer

20 plan, a statement as to whether the plan’s

21 funded percentage (as defined in section

22 305(i)) for the plan year to which the notice

23 relates, and for the 2 preceding plan years,

24 is at least 100 percent (and, if not, the ac25 tual percentages),
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1 ‘‘(ii)(I) in the case of a single-employer

2 plan, a statement of the value of the plan’s

3 assets and liabilities for the plan year to

4 which the notice relates as of the last day

5 of the plan year to which the notice relates

6 determined using the asset valuation under

7 subclause (I) of section 4006(a)(3)(E)(iii)

8 and the interest rate under subclause (II) of

9 such section, and

10 ‘‘(II) in the case of a multiemployer

11 plan, a statement of the value of the plan’s

12 assets and liabilities for the plan year to

13 which the notice relates as the last day of

14 such plan year,

15 ‘‘(iii) a statement of the number of

16 participants who are—

17 ‘‘(I) retired or separated from

18 service and are receiving benefits,

19 ‘‘(II) retired or separated partici20 pants entitled to future benefits, and

21 ‘‘(II) active participants under

22 the plan,

23 ‘‘(iv) a statement setting forth the

24 funding policy of the plan and the asset al25 location of investments under the plan (ex-
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1 pressed as percentages of total assets) as of

2 the end of the plan year to which the notice

3 relates,

4 ‘‘(v) in the case of a multiemployer

5 plan, whether the plan was in critical or

6 endangered status under section 305 for

7 such plan year and, if so—

8 ‘‘(I) a list of the actions taken by

9 the plan to improve its funding status,

10 and

11 ‘‘(II) a statement describing how

12 a person may obtain a copy of the

13 plan’s improvement or rehabilitation

14 plan, as appropriate, adopted under

15 section 305 and the actuarial and fi16 nancial data that demonstrate any ac17 tion taken by the plan toward fiscal

18 improvement,

19 ‘‘(vi) a summary of any funding im20 provement plan, rehabilitation plan, or

21 modification thereof adopted under section

22 305 during the plan year to which the no23 tice relates,

24 ‘‘(vii) in the case of any plan amend25 ments, scheduled benefit increase or reduc-
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1 tion, or other known event taking effect in

2 the current plan year and having a mate3 rial effect on plan liabilities or assets for

4 the year (as defined in regulations by the

5 Secretary), an explanation of the amend6 ment, schedule increase or reduction, or

7 event, and a projection to the end of such

8 plan year of the effect of the amendment,

9 scheduled increase or reduction, or event on

10 plan liabilities,

11 ‘‘(viii)(I) in the case of a single-em12 ployer plan, a summary of the rules gov13 erning termination of single-employer plans

14 under subtitle C of title IV, or

15 ‘‘(II) in the case of a multiemployer

16 plan, a summary of the rules governing re17 organization or insolvency, including the

18 limitations on benefit payments and any

19 potential benefit reductions and suspensions

20 (and the potential effects of such limita21 tions, reductions, and suspensions on the

22 plan), and

23 ‘‘(ix) a general description of the bene24 fits under the plan which are eligible to be

25 guaranteed by the Pension Benefit Guar-
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1 anty Corporation, along with an expla2 nation of the limitations on the guarantee

3 and the circumstances under which such

4 limitations apply.

5 ‘‘(C) OTHER INFORMATION.—Each notice

6 under paragraph (1) shall include—

7 ‘‘(i) in the case of a multiemployer

8 plan, a statement that the plan adminis9 trator shall provide, upon written request,

10 to any labor organization representing plan

11 participants and beneficiaries and any em12 ployer that has an obligation to contribute

13 to the plan, a copy of the annual report

14 filed with the Secretary under section

15 104(a), and

16 ‘‘(ii) any additional information

17 which the plan administrator elects to in18 clude to the extent not inconsistent with reg19 ulations prescribed by the Secretary.

20 ‘‘(3) TIME FOR PROVIDING NOTICE.—

21 ‘‘(A) IN GENERAL.—Any notice under para22 graph (1) shall be provided not later than 90

23 days after the end of the plan year to which the

24 notice relates.
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1 ‘‘(B) EXCEPTION FOR SMALL PLANS.—In

2 the case of a small plan (as such term is used

3 under section 303(g)(2)(B)) any notice under

4 paragraph (1) shall be provided upon filing of

5 the annual report under section 104(a).

6 ‘‘(4) FORM AND MANNER.—Any notice under

7 paragraph (1)—

8 ‘‘(A) shall be provided in a form and man9 ner prescribed in regulations of the Secretary,

10 ‘‘(B) shall be written in a manner so as to

11 be understood by the average plan participant,

12 and

13 ‘‘(C) may be provided in written, electronic,

14 or other appropriate form to the extent such form

15 is reasonably accessible to persons to whom the

16 notice is required to be provided.’’.

17 (b) MODEL NOTICE.—Not later than 180 days after

18 the date of the enactment of this Act, the Secretary of Labor

19 shall publish a model version of the notice required by sec20 tion 101(f) of the Employee Retirement Income Security

21 Act of 1974. The Secretary of Labor may promulgate any

22 interim final rules as the Secretary determines appropriate

23 to carry out the provisions of this subsection.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to plan years beginning after December

3 31, 2005.

4 SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN IN5 FORMATION.

6 (a) FINANCIAL INFORMATION WITH RESPECT TO MUL7 TIEMPLOYER PLANS.—

8 (1) IN GENERAL.—Section 101 of the Employee

9 Retirement Income Security Act of 1974 (29 U.S.C.

10 1021) is amended—

11 (A) by redesignating subsection (k) as sub12 section (l); and

13 (B) by inserting after subsection (j) the fol14 lowing new subsection:

15 ‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE

16 AVAILABLE ON REQUEST.—

17 ‘‘(1) IN GENERAL.—Each administrator of a

18 multiemployer plan shall, upon written request, fur19 nish to any plan participant or beneficiary, employee

20 representative, or any employer that has an obliga21 tion to contribute to the plan—

22 ‘‘(A) a copy of any periodic actuarial re23 port (including sensitivity testing) received by

24 the plan for any plan year which has been in the

25 plan’s possession for at least 30 days, and
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1 ‘‘(B)(i) a copy of any quarterly, semi-an2 nual, or annual financial report prepared for the

3 plan by any plan investment manager or advi4 sor or other fiduciary which has been in the

5 plan’s possession for at least 30 days, or

6 ‘‘(ii) at the discretion of the person submit7 ting the written request, a copy of a quarterly

8 summary of the financial reports described

9 clause (i).

10 ‘‘(2) COMPLIANCE.—Information required to be

11 provided under paragraph (1) —

12 ‘‘(A) shall be provided to the requesting par13 ticipant, beneficiary, or employer within 30 days

14 after the request in a form and manner pre15 scribed in regulations of the Secretary,

16 ‘‘(B) may be provided in written, electronic,

17 or other appropriate form to the extent such form

18 is reasonably accessible to persons to whom the

19 information is required to be provided, and

20 ‘‘(C) shall not—

21 ‘‘(i) include any individually identifi22 able information regarding any plan par23 ticipant, beneficiary, employee, fiduciary,

24 or contributing employer, or
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1 ‘‘(ii) reveal any proprietary informa2 tion regarding the plan, any contributing

3 employer, or entity providing services to the

4 plan.

5 ‘‘(3) LIMITATIONS.—In no case shall a partici6 pant, beneficiary, or employer be entitled under this

7 subsection to receive more than one copy of any report

8 described in paragraph (1) during any one 12-month

9 period. The administrator may make a reasonable

10 charge to cover copying, mailing, and other costs of

11 furnishing copies of information pursuant to para12 graph (1). The Secretary may by regulations pre13 scribe the maximum amount which will constitute a

14 reasonable charge under the preceding sentence.’’.

15 (2) ENFORCEMENT.—Section 502(c)(4) of such

16 Act (29 U.S.C. 1132(c)(4)) is amended by striking

17 ‘‘section 101(j)’’ and inserting ‘‘subsection (j) or (k)

18 of section 101’’.

19 (3) REGULATIONS.—The Secretary shall pre20 scribe regulations under section 101(k)(2) of the Em21 ployee Retirement Income Security Act of 1974

22 (added by paragraph (1)) not later than 270 days

23 after the date of the enactment of this Act.

24 (b) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY

25 TO MULTIEMPLOYER PLANS.—
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1 (1) IN GENERAL.—Section 101 of such Act (as

2 amended by subsection (a)) is amended—

3 (A) by redesignating subsection (l) as sub4 section (m); and

5 (B) by inserting after subsection (k) the fol6 lowing new subsection:

7 ‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABIL8 ITY.—

9 ‘‘(1) IN GENERAL.—The plan sponsor or admin10 istrator of a multiemployer plan shall, upon written

11 request, furnish to any employer who has an obliga12 tion to contribute to the plan a notice of—

13 ‘‘(A) the estimated amount which would be

14 the amount of such employer’s withdrawal liabil15 ity under part 1 of subtitle E of title IV if such

16 employer withdrew on the last day of the plan

17 year preceding the date of the request, and

18 ‘‘(B) an explanation of how such estimated

19 liability amount was determined, including the

20 actuarial assumptions and methods used to de21 termine the value of the plan liabilities and as22 sets, the data regarding employer contributions,

23 unfunded vested benefits, annual changes in the

24 plan’s unfunded vested benefits, and the applica-
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1 tion of any relevant limitations on the estimated

2 withdrawal liability.

3 For purposes of subparagraph (B), the term ‘employer

4 contribution’ means, in connection with a partici5 pant, a contribution made by an employer as an em6 ployer of such participant.

7 ‘‘(2) COMPLIANCE.—Any notice required to be

8 provided under paragraph (1)—

9 ‘‘(A) shall be provided to the requesting em10 ployer within—

11 ‘‘(i) 180 days after the request in a

12 form and manner prescribed in regulations

13 of the Secretary, or

14 ‘‘(ii) subject to regulations of the Sec15 retary, such longer time as may be nec16 essary in the case of a plan that determines

17 withdrawal liability based on any method

18 described under paragraph (4) or (5) of sec19 tion 4211(c); and

20 ‘‘(B) may be provided in written, electronic,

21 or other appropriate form to the extent such form

22 is reasonably accessible to employers to whom the

23 information is required to be provided.

24 ‘‘(3) LIMITATIONS.—In no case shall an em25 ployer be entitled under this subsection to receive
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1 more than one notice described in paragraph (1) dur2 ing any one 12-month period. The person required to

3 provide such notice may make a reasonable charge to

4 cover copying, mailing, and other costs of furnishing

5 such notice pursuant to paragraph (1). The Secretary

6 may by regulations prescribe the maximum amount

7 which will constitute a reasonable charge under the

8 preceding sentence.’’.

9 (2) ENFORCEMENT.—Section 502(c)(4) of such

10 Act (29 U.S.C. 1132(c)(4)) is amended by striking

11 ‘‘section 101(j) or (k)’’ and inserting ‘‘subsection (j),

12 (k), or (l) of section 101’’.

13 (c) NOTICE OF AMENDMENT REDUCING FUTURE AC14 CRUALS.—Section 204(h)(1) of such Act (29 U.S.C.

15 1054(h)(1)) is amended by inserting at the end before the

16 period ‘‘and to each employer who has an obligation to con17 tribute to the plan.’’.

18 (d) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to plan years beginning after December

20 31, 2005.

21 SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIRE22 MENTS.

23 (a) ADDITIONAL ANNUAL REPORTING REQUIREMENTS

24 WITH RESPECT TO DEFINED BENEFIT PLANS.—
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1 (1) IN GENERAL.—Section 103 of the Employee

2 Retirement Income Security Act of 1974 (29 U.S.C.

3 1023) is amended—

4 (A) in subsection (a)(1)(B), by striking

5 ‘‘subsections (d) and (e)’’ and inserting ‘‘sub6 sections (d), (e), and (f)’’; and

7 (B) by adding at the end the following new

8 subsection:

9 ‘‘(f) ADDITIONAL INFORMATION WITH RESPECT TO

10 DEFINED BENEFIT PLANS.—

11 ‘‘(1) GENERAL INFORMATION.—With respect to

12 any defined benefit plan, an annual report under this

13 section for a plan year shall include the following:

14 ‘‘(A) In any case in which any liabilities to

15 participants or their beneficiaries under such

16 plan as of the end of such plan year consist (in

17 whole or in part) of liabilities to such partici18 pants and beneficiaries under 2 or more pension

19 plans as of immediately before such plan year,

20 the funded percentage of each of such 2 or more

21 pension plans as of the last day of such plan

22 year and the funded percentage of the plan with

23 respect to which the annual report is filed as of

24 the last day of such plan year.
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1 ‘‘(B) For purposes of this paragraph, the

2 term ‘funded percentage’—

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

4 plan, means the funding target attainment

5 percentage, as defined in section 303(d)(2),

6 and

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

8 plan, has the meaning given such term in

9 section 305(i)(2).

10 ‘‘(2) ADDITIONAL INFORMATION FOR MULTIEM11 PLOYER PLANS.—With respect to any defined benefit

12 plan which is a multiemployer plan, an annual re13 port under this section for a plan year shall include,

14 in addition to the information required under para15 graph (1), the following, as of the end of the plan year

16 to which the notice relates:

17 ‘‘(A) The number of employers obligated to

18 contribute to the plan.

19 ‘‘(B) A list of the employers that contrib20 uted more than 5 percent of the total contribu21 tions to the plan during such plan year.

22 ‘‘(C) The number of participants under the

23 plan on whose behalf no employer contributions

24 have been made to the plan for such plan year

25 and for each of the 2 preceding plan years. For
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1 purposes of this subparagraph, the term ‘em2 ployer contribution’ means, in connection with a

3 participant, a contribution made by an em4 ployer as an employer of such participant.

5 ‘‘(D) The ratio of—

6 ‘‘(i) the number of participants under

7 the plan on whose behalf no employer had

8 an obligation to make an employer con9 tribution during the plan year, to

10 ‘‘(ii) the number of participants under

11 the plan on whose behalf no employer had

12 an obligation to make an employer con13 tribution during each of the 2 preceding

14 plan years.

15 ‘‘(E) Whether the plan received an amorti16 zation extension under section 304(d) or section

17 431(d) of the Internal Revenue Code of 1986 for

18 such plan year and, if so, the amount of the dif19 ference between the minimum required contribu20 tion for the year and the minimum required con21 tribution which would have been required with22 out regard to the extension, and the period of

23 such extension.

24 ‘‘(F) Whether the plan used the shortfall

25 funding method (as such term is used in section
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1 305) for such plan year and, if so, the amount

2 of the difference between the minimum required

3 contribution for the year and the minimum re4 quired contribution which would have been re5 quired without regard to the use of such method,

6 and the period of use of such method.

7 ‘‘(G) Whether the plan was in critical or

8 endangered status under section 305 for such

9 plan year, and if so, a summary of any funding

10 improvement or rehabilitation plan (or modi11 fication thereto) adopted during the plan year,

12 and the funding ratio of the plan.

13 ‘‘(H) The number of employers that with14 drew from the plan during the preceding plan

15 year and the aggregate amount of withdrawal li16 ability assessed, or estimated to be assessed,

17 against such withdrawn employers.

18 ‘‘(I) In the case of a multiemployer plan

19 that has merged with another plan or to which

20 assets and liabilities have been transferred, the

21 actuarial valuation of the assets and liabilities of

22 each affected plan during the year preceding the

23 effective date of the merger or transfer, based

24 upon the most recent data available as of the day

25 before the first day of the plan year, or other
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1 valuation method performed under standards

2 and procedures as the Secretary may prescribe

3 by regulation.’’.

4 (2) GUIDANCE BY SECRETARY OF LABOR.—

5 (A) IN GENERAL.—Not later than 180 days

6 after the date of enactment of this Act, the Sec7 retary of Labor shall publish guidance to assist

8 multiemployer defined benefit plans to—

9 (i) identify and enumerate plan par10 ticipants for whom there is no employer

11 with an obligation to make an employer

12 contribution under the plan; and

13 (ii) report such information under sec14 tion 103(f)(2)(D) of the Employee Retire15 ment Income Security Act of 1974 (as

16 added by this section).

17 (B) WAIVER OF REQUIREMENT.—The Sec18 retary of Labor shall waive the requirement

19 under section 103(f)(2)(D) of such Act (as added

20 by this section) for the construction and enter21 tainment industries.

22 (b) ADDITIONAL INFORMATION IN ANNUAL ACTUARIAL

23 STATEMENT REGARDING PLAN RETIREMENT PROJEC24 TIONS.—Section 103(d) of such Act (29 U.S.C. 1023(d)) is

25 amended—
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1 (1) by redesignating paragraphs (12) and (13)

2 as paragraphs (13) and (14), respectively; and

3 (2) by inserting after paragraph (11) the fol4 lowing new paragraph:

5 ‘‘(12) A statement explaining the actuarial as6 sumptions and methods used in projecting future re7 tirements and forms of benefit distributions under the

8 plan.’’.

9 (c) FORM AND MANNER OF REPORT.—Section

10 104(b)(3) of such Act (29 U.S.C. 1024(b)(3)) is amended

11 by—

12 (1) striking ‘‘(3) Within’’ and inserting—

13 ‘‘(A) IN GENERAL.—Within’’; and

14 (2) adding at the end the following:

15 ‘‘(B) FORM OF REPORT.—The material pro16 vided pursuant to subparagraph (A) to summa17 rize the latest annual report shall be written in

18 a manner calculated to be understood by the av19 erage plan participant.

20 (d) FURNISHING SUMMARY PLAN INFORMATION TO

21 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF MULTI22 EMPLOYER PLANS.—

23 (1) IN GENERAL.—Section 104 of such Act (29

24 U.S.C. 1024) is amended—
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1 (A) in the header, by striking ‘‘PARTICI2 PANTS’’ and inserting ‘‘PARTICIPANTS AND CER3 TAIN EMPLOYERS’’;

4 (B) redesignating subsection (d) as sub5 section (e); and

6 (C) inserting after subsection (c) the fol7 lowing:

8 ‘‘(d) FURNISHING SUMMARY PLAN INFORMATION TO

9 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF MULTI10 EMPLOYER PLANS.—

11 ‘‘(1) IN GENERAL.—With respect to a multiem12 ployer plan subject to this section, within 30 days

13 after the due date under subsection (a)(1) for the fil14 ing of the annual report for the fiscal year of the

15 plan, the administrators shall furnish to each em16 ployee organization, employer with an obligation to

17 contribute to the plan, and the Pension Benefit Guar18 anty Corporation, a report that contains—

19 ‘‘(A) a description of the contribution sched20 ules and benefit formulas under the plan, and

21 any modification to such schedules and formulas,

22 during such plan year;

23 ‘‘(B) the number of employers obligated to

24 contribute to the plan;
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1 ‘‘(C) a list of the employers that contributed

2 more than 5 percent of the total contributions to

3 the plan during such plan year;

4 ‘‘(D) the number of participants under the

5 plan on whose behalf no employer contributions

6 (which, for purposes of this paragraph, means,

7 in connection with a participant, a contribution

8 made by an employer as an employer of such

9 participant) have been made to the plan for such

10 plan year and for each of the 2 preceding plan

11 years;

12 ‘‘(E) whether the plan was in critical or en13 dangered status under section 305 for such plan

14 year and, if so, include—

15 ‘‘(i) a list of the actions taken by the

16 plan to improve its funding status; and

17 ‘‘(ii) a statement describing how a per18 son may obtain a copy of the plan’s im19 provement or rehabilitation plan, as appro20 priate, adopted under section 305 and the

21 actuarial and financial data that dem22 onstrate any action taken by the plan to23 ward fiscal improvement;

24 ‘‘(H) the number of employers that with25 drew from the plan during the preceding plan
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1 year and the aggregate amount of withdrawal li2 ability assessed, or estimated to be assessed,

3 against such withdrawn employers, as reported

4 on the annual report for the plan year to which

5 the report under this subsection relates;

6 ‘‘(I) in the case of a multiemployer plan

7 that has merged with another plan or to which

8 assets and liabilities have been transferred, the

9 actuarial valuation of the assets and liabilities of

10 each affected plan during the year preceding the

11 effective date of the merger or transfer, based

12 upon the most recent data available as of the day

13 before the first day of the plan year, or other

14 valuation method performed under standards

15 and procedures as the Secretary may prescribe

16 by regulation;

17 ‘‘(J) a description as to whether the plan—

18 ‘‘(i) sought or received an amortization

19 extension under section 304(d) or section

20 431(d) of the Internal Revenue Code of 1986

21 for such plan year;

22 ‘‘(ii) used the shortfall funding method

23 (as such term is used in section 305) for

24 such plan year; or
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1 ‘‘(iii) was in critical or endangered

2 status under section 305 for such plan year;

3 and

4 ‘‘(K) notification of the right under this sec5 tion of the recipient to a copy of the annual re6 port filed with the Secretary under subsection

7 (a), summary annual report, summary plan de8 scription, summary of any material modifica9 tion of the plan, upon written request, but

10 that—

11 ‘‘(i) in no case shall a recipient be en12 titled to receive more than one copy of any

13 such report described during any one 12-

14 month period; and

15 ‘‘(ii) the administrator may make a

16 reasonable charge to cover copying, mailing,

17 and other costs of furnishing copies of infor18 mation pursuant to this subparagraph.

19 ‘‘(2) EFFECT OF SECTION.—Nothing in this sec20 tion waives any other provision under this title re21 quiring plan administrators to provide, upon request,

22 information to employers that have an obligation to

23 contribution under the plan.’’.

24 (e) MODEL FORM.—Not later than 270 days after the

25 date of the enactment of this Act, the Secretary of Labor
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1 shall publish a model form for providing the statements,

2 schedules, and other material required to be provided under

3 section 104(b)(3) of the Employee Retirement Income Secu4 rity Act of 1974, as amended by this section. The Secretary

5 of Labor may promulgate any interim final rules as the

6 Secretary determines appropriate to carry out the provi7 sions of this subsection.

8 (f) FIVE-YEAR REPORT WITH RESPECT TO MULTIEM9 PLOYER PLANS.—Section 4022A(f) of such Act (29 U.S.C.

10 1322a(f)) is amended by adding at the end the following:

11 ‘‘(6) Not later than 5 years after the date of the

12 enactment of the Pension Security and Transparency

13 Act of 2005, and at least every fifth year thereafter,

14 the corporation shall submit to Congress a report that

15 contains a description of the fiscal conditions of the

16 multiemployer pension plan system as of the date of

17 such report based on the information submitted to the

18 corporation under section 104(d).’’.

19 (g) CONFORMING AMENDMENT.—Title IV of such Act

20 (29 U.S.C. 1301 et seq.) is amended by striking section

21 4011.

22 (h) EFFECTIVE DATES.—

23 (1) IN GENERAL.—The amendments made by

24 this section shall apply to plan years beginning after

25 December 31, 2005.
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1 (2) SPECIAL RULE.—Notwithstanding the provi2 sions of paragraph (1), the requirement under section

3 103(f)(2)(D) of the Employee Retirement Income Se4 curity Act (as added by this section) shall apply to

5 plan years beginning after December 31, 2007.

6 SEC. 504. TIMING OF ANNUAL REPORTING REQUIREMENTS.

7 (a) FILING AFTER 285 DAYS AFTER PLAN YEAR ONLY

8 IN CASES OF HARDSHIP.—Section 104(a)(1) of such Act

9 (29 U.S.C. 1024(a)(1)) is amended by inserting after the

10 first sentence the following new sentence: ‘‘In the case of

11 a pension plan, the Secretary may extend the deadline for

12 filing the annual report for any plan year past 285 days

13 after the close of the plan year only on a case by case basis

14 and only in cases of hardship, in accordance with regula15 tions which shall be prescribed by the Secretary.’’.

16 (b) INTERNET DISPLAY OF INFORMATION.—Section

17 104(b) of such Act (29 U.S.C. 1024(b)) is amended by add18 ing at the end the following:

19 ‘‘(5) Identification and basic plan information and ac20 tuarial information included in the annual report for any

21 plan year shall be filed with the Secretary in an electronic

22 format which accommodates display on the Internet, in ac23 cordance with regulations which shall be prescribed by the

24 Secretary. The Secretary shall provide for display of such

25 information included in the annual report, within 90 days
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1 after the date of the filing of the annual report, on an Inter2 net website maintained by the Secretary and other appro3 priate media. Such information shall also be displayed on

4 any Internet website maintained by the plan sponsor (or

5 by the plan administrator on behalf of the plan sponsor),

6 in accordance with regulations which shall be prescribed by

7 the Secretary.’’.

8 (c) SUMMARY ANNUAL REPORT FILED WITHIN 30

9 DAYS AFTER DEADLINE FOR FILING OF ANNUAL RE10 PORT.—Section 104(b)(3) of such Act (29 U.S.C.

11 1024(b)(3)), as amended by section 503, is amended by—

12 (1) striking ‘‘(3)(A) Within 210 days after the

13 close of the fiscal year,’’ and inserting ‘‘(3)(A) Within

14 30 days after the due date under subsection (a)(1) for

15 the filing of the annual report for the fiscal year of

16 the plan’’;

17 (2) striking ‘‘the latest’’ and inserting ‘‘such’’;

18 and

19 (3) adding at the end the following

20 ‘‘(C) DATE OF INTERNET DISPLAY.—Dis21 play of the summary annual report on the Inter22 net website maintained by the plan sponsor (or

23 by the plan administrator on behalf of the plan

24 sponsor) by the date required under subpara25 graph (A) shall be treated as furnishing such re-
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1 port to each participant and beneficiary receiv2 ing benefits under the plan by such date, except

3 that such report shall be furnished to each such

4 participant and beneficiary as soon as prac5 ticable thereafter, and in no event later the 30

6 days after such date.’’.

7 (d) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to plan years beginning after December

9 31, 2005.

10 SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.

11 (a) CHANGE IN CRITERIA FOR PERSONS REQUIRED TO

12 PROVIDE INFORMATION TO PBGC.—Section 4010(b) of the

13 Employee Retirement Income Security Act of 1974 (29

14 U.S.C. 1310(b)) is amended—

15 (1) in paragraph (1)—

16 (A) by striking ’’(1) the aggregate’’ and in17 serting ‘‘(1)(A) the aggregate’’;

18 (B) by striking the semicolon and inserting

19 ‘‘; and’’;

20 (C) by inserting after subparagraph (A) the

21 following:

22 ‘‘(B)(i) the aggregate funding targets attainment

23 percentage of the plan (as defined in subsection (d))

24 is less than 90 percent; or
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1 ‘‘(ii) any debt instrument of the plan sponsor or

2 the plan sponsor has received a rating described in

3 subclause (I) or (II) of section 303(i)(5)(A)(i);’’; and

4 (2) by redesignating paragraphs (2) and (3) as

5 paragraphs (4) and (5), respectively, and by inserting

6 before paragraph (4) (as so redesignated) the fol7 lowing new paragraphs:

8 ‘‘(2) the aggregate funding targets attainment

9 percentage of the plan (as defined in subsection (d))

10 is less than 60 percent;

11 ‘‘(3)(A) the aggregate funding targets attainment

12 percentage of the plan (as defined in subsection (d))

13 is less than 75 percent, and

14 ‘‘(B) the plan sponsor is in an industry with re15 spect to which the corporation determines that there

16 is substantial unemployment or underemployment

17 and the sales and profits are depressed or declining;’’.

18 (b) ADDITIONAL INFORMATION REQUIRED.—Section

19 4010 of the Employee Retirement Income Security Act of

20 1974 (29 U.S.C. 1310) is amended by adding at the end

21 the following new subsection:

22 ‘‘(d) ADDITIONAL INFORMATION REQUIRED.—

23 ‘‘(1) IN GENERAL.—The information submitted

24 to the corporation under subsection (a) shall

25 include—
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1 ‘‘(A) the amount of benefit liabilities under

2 the plan determined using the assumptions used

3 by the corporation in determining liabilities;

4 ‘‘(B) the funding target of the plan deter5 mined as if the plan has been in at-risk status

6 for at least 5 plan years; and

7 ‘‘(C) the funding target attainment percent8 age of the plan.

9 ‘‘(2) DEFINITIONS.—For purposes of this sub10 section:

11 ‘‘(A) VALUE OF PLAN ASSETS.—The term

12 ‘value of plan assets’ means the value of plan as13 sets, as determined under section 303(g)(3).

14 ‘‘(B) FUNDING TARGET.—The term ‘funding

15 target’ has the meaning provided under section

16 303(d)(1).

17 ‘‘(C) FUNDING TARGET ATTAINMENT PER18 CENTAGE.—The term ‘funding target attainment

19 percentage’ has the meaning provided in section

20 303(d)(2).

21 ‘‘(D) AGGREGATE FUNDING TARGETS AT22 TAINMENT PERCENTAGE.—The term ‘aggregate

23 funding targets attainment percentage’ means,

24 with respect to a contributing sponsor for a plan

25 year, the percentage, taking into account all
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1 plans maintained by the contributing sponsor

2 and the members of its controlled group as of the

3 end of such plan year, which—

4 ‘‘(i) the aggregate total of the values of

5 plan assets, as of the end of such plan year,

6 of such plans, is of

7 ‘‘(ii) the aggregate total of the funding

8 targets of such plans, as of the end of such

9 plan year, taking into account only benefits

10 to which participants and beneficiaries have

11 a nonforfeitable right.

12 ‘‘(E) AT-RISK STATUS.—The term ‘at-risk

13 status’ has the meaning provided in section

14 303(i)(4).

15 ‘‘(e) NOTICE TO CONGRESS.—The Corporation shall,

16 on an annual basis, submit to the Committee on Health,

17 Education, Labor, and Pensions of the Senate and the Com18 mittee on Education and the Workforce of the House of Rep19 resentatives, a summary report of the information sub20 mitted to the Corporation under this section.’’.

21 (c) EFFECTIVE DATE.—The amendment made by this

22 section shall apply with respect to plan years beginning

23 after 2006.
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1 SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO

2 PLAN PARTICIPANTS.

3 (a) DISTRESS TERMINATIONS.—

4 (1) IN GENERAL.—Section 4041(c)(2) of the Em5 ployee Retirement Income Security Act of 1974 (29

6 U.S.C. 1341(c)(2)) is amended by adding at the end

7 the following:

8 ‘‘(D) DISCLOSURE OF TERMINATION INFOR9 MATION.—

10 ‘‘(i) IN GENERAL.—A plan adminis11 trator that has filed a notice of intent to

12 terminate under subsection (a)(2) shall pro13 vide to an affected party any information

14 provided to the corporation under para15 graph (2) not later than 15 days after—

16 ‘‘(I) receipt of a request from the

17 affected party for the information; or

18 ‘‘(II) the provision of new infor19 mation to the corporation relating to

20 the previous request.

21 ‘‘(ii) CONFIDENTIALITY.—

22 ‘‘(I) IN GENERAL.—The plan ad23 ministrator shall not provide informa24 tion under clause (i) in a form that in25 cludes any information that may di26 rectly or indirectly be associated with,
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1 or otherwise identify, an individual

2 participant or beneficiary.

3 ‘‘(II) LIMITATION.—A court may

4 limit disclosure under this subpara5 graph of confidential information de6 scribed in section 552(b) of title 5,

7 United States Code, to any authorized

8 representative of the participants or

9 beneficiaries that agrees to ensure the

10 confidentiality of such information.

11 ‘‘(iii) FORM AND MANNER OF INFORMA12 TION; CHARGES.—

13 ‘‘(I) FORM AND MANNER.—The

14 corporation may prescribe the form

15 and manner of the provision of infor16 mation under this subparagraph,

17 which shall include delivery in written,

18 electronic, or other appropriate form to

19 the extent that such form is reasonably

20 accessible to individuals to whom the

21 information is required to be provided.

22 ‘‘(II) REASONABLE CHARGES.—A

23 plan sponsor may charge a reasonable

24 fee for any information provided under
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1 this subparagraph in other than elec2 tronic form.

3 ‘‘(iv) AUTHORIZED REPRESENTA4 TIVE.—For purposes of this subparagraph,

5 the term ‘authorized representative’ means

6 any employee organization representing

7 participants in the pension plan.’’.

8 (2) CONFORMING AMENDMENT.—Section

9 4041(c)(1) of the Employee Retirement Income Secu10 rity Act of 1974 (29 U.S.C. 1341(c)(1)) is amended

11 in subparagraph (C) by striking ‘‘subparagraph (B)’’

12 and inserting ‘‘subparagraphs (B) and (D)’’.

13 (b) INVOLUNTARY TERMINATIONS.—

14 (1) IN GENERAL.—Section 4042(c) of the Em15 ployee Retirement Income Security Act of 1974 (29

16 U.S.C. 1342(c)) is amended by—

17 (A) striking ‘‘(c) If the’’ and inserting

18 ‘‘(c)(1) If the’’;

19 (B) redesignating paragraph (3) as para20 graph (2); and

21 (C) adding at the end the following:

22 ‘‘(3) DISCLOSURE OF TERMINATION INFORMA23 TION.—

24 ‘‘(A) IN GENERAL.—
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1 ‘‘(i) INFORMATION FROM PLAN SPON2 SOR OR ADMINISTRATOR.—A plan sponsor

3 or plan administrator of a single-employer

4 plan that has received a notice from the cor5 poration of a determination that the plan

6 should be terminated under this section

7 shall provide to an affected party any infor8 mation provided to the corporation in con9 junction with the plan termination.

10 ‘‘(ii) INFORMATION FROM CORPORA11 TION.—The corporation shall provide a

12 copy of the administrative record, including

13 the trusteeship decision record of a termi14 nation of a plan described under clause (i).

15 ‘‘(B) TIMING OF DISCLOSURE.—The plan

16 sponsor, plan administrator, or the corporation,

17 as applicable, shall provide the information de18 scribed in subparagraph (A) not later than 15

19 days after—

20 ‘‘(i) receipt of a request from an af21 fected party for such information; or

22 ‘‘(ii) in the case of information de23 scribed under subparagraph (A)(i), the pro24 vision of any new information to the cor-
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1 poration relating to a previous request by

2 an affected party.

3 ‘‘(C) CONFIDENTIALITY.—

4 ‘‘(i) IN GENERAL.—The plan adminis5 trator and plan sponsor shall not provide

6 information under subparagraph (A)(i) in

7 a form which includes any information that

8 may directly or indirectly be associated

9 with, or otherwise identify, an individual

10 participant or beneficiary.

11 ‘‘(ii) LIMITATION.—A court may limit

12 disclosure under this paragraph of confiden13 tial information described in section 552(b)

14 of title 5, United States Code, to authorized

15 representatives (within the meaning of sec16 tion 4041(c)(2)(D)(iv)) of the participants

17 or beneficiaries that agree to ensure the con18 fidentiality of such information.

19 ‘‘(D) FORM AND MANNER OF INFORMATION;

20 CHARGES.—

21 ‘‘(i) FORM AND MANNER.—The cor22 poration may prescribe the form and man23 ner of the provision of information under

24 this paragraph, which shall include delivery

25 in written, electronic, or other appropriate
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1 form to the extent that such form is reason2 ably accessible to individuals to whom the

3 information is required to be provided.

4 ‘‘(ii) REASONABLE CHARGES.—A plan

5 sponsor may charge a reasonable fee for any

6 information provided under this paragraph

7 in other than electronic form.’’.

8 (c) EFFECTIVE DATE.—The amendments made by this

9 section shall apply to any plan termination under title IV

10 of the Employee Retirement Income Security Act of 1974

11 (29 U.S.C. 1301 et seq.) with respect to which the notice

12 of intent to terminate (or in the case of a termination by

13 the Pension Benefit Guaranty Corporation, a notice of de14 termination under section 4042 of such Act (29 U.S.C.

15 1342)) occurs after the date of enactment of this Act.

16 SEC. 507. BENEFIT SUSPENSION NOTICE.

17 (a) MODIFICATION OF REGULATION.—The Secretary of

18 Labor shall modify the regulation under subparagraph (B)

19 of section 203(a)(3) of the Employee Retirement Income Se20 curity Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide

21 that the notification required by such regulation in connec22 tion with any suspension of benefits described in such

23 subparagraph—

24 (1) in the case of an employee who returns to

25 service described in section 203(a)(3)(B) (i) or (ii) of
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1 such Act after commencement of payment of benefits

2 under the plan, shall be made during the first cal3 endar month or the first 4- or 5-week payroll period

4 ending in a calendar month in which the plan with5 holds payments, and

6 (2) in the case of any employee who is not de7 scribed in paragraph (1)—

8 (A) may be included in the summary plan

9 description for the plan furnished in accordance

10 with section 104(b) of such Act (29 U.S.C.

11 1024(b)), rather than in a separate notice, and

12 (B) need not include a copy of the relevant

13 plan provisions.

14 (b) EFFECTIVE DATE.—The modification made under

15 this section shall apply to plan years beginning after De16 cember 31, 2005.

17 SEC. 508. STUDY AND REPORT BY GOVERNMENT ACCOUNT18 ABILITY OFFICE.

19 (a) IN GENERAL.—The Comptroller General of the

20 United States shall conduct a study to determine the effec21 tiveness of the enforcement of provisions in the Employee

22 Retirement Income Security Act of 1974 (29 U.S.C. 1001

23 et seq.) and in other Federal laws designed to protect pen24 sion plans and the assets and participants of such plan

25 from fraud and mismanagement, including excessive invest-
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1 ment management fees, violations of fiduciary duties under

2 Title I of such Act, and the quality of plan assets.

3 (b) CONTENT OF STUDY.—The study described in sub4 section (a) shall include:

5 (1) An identification of which Federal depart6 ments and agencies have responsibility for enforce7 ment of these provisions, including the recovery of lost

8 plan assets due to fraud and mismanagement.

9 (2) Identification of all administrative enforce10 ment powers, procedures, and strategies used by the

11 Securities and Exchange Commission that have the

12 potential to improve the Department of Labor’s en13 forcement of the fiduciary provisions of the Employee

14 Retirement Income Security Act of 1974 (29 U.S.C.

15 1001 et seq.).

16 (3) Identification of any statutory or other bar17 riers that restrict the Department of Labor’s author18 ity to use such powers, procedures, and strategies

19 identified in paragraph (2).

20 (4) An evaluation of whether giving additional

21 investigative or enforcement authority to the Pension

22 Benefit Guaranty Corporation or the Securities and

23 Exchange Commission would significantly improve

24 enforcement of those provisions.
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1 (5) An evaluation of the current authority of the

2 Pension Benefit Guaranty Corporation to bring ac3 tions to recover any funds lost by pension plans due

4 to violations of any fiduciary standards under Title

5 I of such Act or other Federal statutes.

6 (6) The impact that expanding any such author7 ity by the Pension Benefit Guaranty Corporation to

8 bring such actions would have on the Corporation’s

9 solvency.

10 (c) REPORT.—Not later than 6 months after the enact11 ment of this Act, the Comptroller General shall submit a

12 report to Congress on the study conducted under subsection

13 (a) that includes such recommendations for legislation or

14 administrative action as the Comptroller General deter15 mines are appropriate.

16 TITLE VI—TREATMENT OF CASH

17 BALANCE AND OTHER HYBRID

18 DEFINED BENEFIT PENSION

19 PLANS

20 SEC. 601. PROSPECTIVE APPLICATION OF AGE DISCRIMINA21 TION, CONVERSION, AND PRESENT VALUE AS22 SUMPTION RULES.

23 (a) APPLICATION OF AGE DISCRIMINATION PROHIBI24 TIONS.—
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1 (1) AMENDMENT OF ERISA.—Section 204(b) of

2 the Employee Retirement Income Security Act of

3 1974 (29 U.S.C. 1054(b)) is amended by adding at

4 the end the following:

5 ‘‘(5) SPECIAL RULES FOR CASH BALANCE AND

6 OTHER HYBRID DEFINED BENEFIT PLANS.—

7 ‘‘(A) IN GENERAL.—A qualified cash bal8 ance plan shall not be treated as violating the re9 quirements of paragraph (1)(H) merely because

10 it may reasonably be expected that the period

11 over which interest credits will be made to a par12 ticipant’s accumulation account (or its equiva13 lent) is longer for a younger participant. This

14 paragraph shall not apply to any plan if the

15 rate of any pay credit or interest credit to such

16 an account under the plan decreases by reason of

17 the participant’s attainment of any age.

18 ‘‘(B) QUALIFIED CASH BALANCE PLAN.—

19 For purposes of this paragraph—

20 ‘‘(i) IN GENERAL.—The term ‘qualified

21 cash balance plan’ means a cash balance

22 plan which meets the vesting requirement

23 under clause (ii) and the interest credit re24 quirement under clause (iii).
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1 ‘‘(ii) VESTING REQUIREMENTS.—A

2 plan meets the requirements of this clause if

3 an employee who has completed at least 3

4 years of service has a nonforfeitable right to

5 100 percent of the employee’s accrued ben6 efit derived from employer contributions.

7 ‘‘(iii) INTEREST CREDITS.—A plan

8 meets the requirements of this clause if the

9 terms of the plan provide that any interest

10 credit (or equivalent amount) for any plan

11 year shall be at a rate which—

12 ‘‘(I) is not less than the applicable

13 Federal mid-term interest rate (as de14 termined under section 1274(d)(1) of

15 the Internal Revenue Code of 1986),

16 and

17 ‘‘(II) is not greater than the

18 greater of the rate determined under

19 subclause (I) or a rate equal to the rate

20 of interest on amounts invested con21 servatively in long-term investment

22 grade corporate bonds.

23 ‘‘(iv) DETERMINATION OF RATES.—For

24 purposes of clause (iii)(II), the rate of inter25 est on amounts invested conservatively in
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1 long-term investment grade corporate bonds

2 shall be determined by the Secretary of the

3 Treasury on the basis of 2 or more indices

4 that are selected periodically by the Sec5 retary of the Treasury. The Secretary of the

6 Treasury shall make publicly available the

7 indices and methodology used to determine

8 the rate.

9 ‘‘(v) VARIABLE RATE OF INTEREST.—If

10 the interest credit rate under the plan is a

11 variable rate, the plan shall provide that,

12 upon the termination of the plan, the rate

13 of interest used to determine accrued bene14 fits under the plan shall be equal to the av15 erage of the rates of interest used under the

16 plan during the 5-year period ending on the

17 termination date.

18 ‘‘(C) CASH BALANCE PLAN.—For purposes

19 of this paragraph, the term ‘cash balance plan’

20 means a defined benefit plan under which—

21 ‘‘(i) the accrued benefit is determined

22 by reference to the balance of a hypothetical

23 accumulation account, and

24 ‘‘(ii) pay credits and interest credits

25 are credited to such account.
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1 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

2 OR OTHER HYBRID PLANS.—

3 ‘‘(i) CASH BALANCE PLAN.—The Sec4 retary of the Treasury shall issue regula5 tions which include in the definition of cash

6 balance plan any defined benefit plan (or

7 any portion of such a plan) which has an

8 effect similar to a cash balance plan. Such

9 regulations may provide that if a plan

10 sponsor represents in communications to

11 participants and beneficiaries that a plan

12 amendment results in a plan being de13 scribed in the preceding sentence, such plan

14 shall be treated as a cash balance plan.

15 ‘‘(ii) QUALIFIED CASH BALANCE

16 PLAN.—The Secretary of the Treasury may

17 in the regulations issued under clause (i)

18 provide for the treatment of a cash balance

19 plan as a qualified cash balance plan in

20 cases where the cash balance plan has an ef21 fect similar to the qualified cash balance

22 plan.’’.

23 (2) AGE DISCRIMINATION IN EMPLOYMENT

24 ACT.—Section 4(i)(2) of the Age Discrimination of
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1 Employment Act of 1967 (29 U.S.C. 623(i)(2)) is

2 amended—

3 (A) by inserting ‘‘(A)’’ after ‘‘(2)’’, and

4 (B) by adding at the end the following new

5 subparagraph:

6 ‘‘(B) A defined benefit plan which is treated as a

7 qualified cash balance plan for purposes of section 204(b)(5)

8 of the Employee Retirement Income Security Act of 1974

9 shall not be treated as violating the requirements of para10 graph (1)(A) merely because it may reasonably be expected

11 that the period over which interest credits will be made

12 under the plan to a participant’s accumulation account (or

13 its equivalent) is longer for a younger participant. This

14 subparagraph shall not apply to any plan if the rate of

15 any pay credit or interest credit to such an account under

16 the plan decreases by reason of the participant’s attainment

17 of any age.’’.

18 (3) AMENDMENT OF INTERNAL REVENUE

19 CODE.—Section 411(b) of the Internal Revenue Code

20 of 1986 (relating to accrued benefit requirements) is

21 amended by adding at the end the following:

22 ‘‘(5) SPECIAL RULES FOR CASH BALANCE AND

23 OTHER HYBRID DEFINED BENEFIT PLANS.—

24 ‘‘(A) IN GENERAL.—A qualified cash bal25 ance plan shall not be treated as violating the re-
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1 quirements of paragraph (1)(H) merely because

2 it may reasonably be expected that the period

3 over which interest credits will be made to a par4 ticipant’s accumulation account (or its equiva5 lent) is longer for a younger participant. This

6 paragraph shall not apply to any plan if the

7 rate of any pay credit or interest credit to such

8 an account under the plan decreases by reason of

9 the participant’s attainment of any age.

10 ‘‘(B) QUALIFIED CASH BALANCE PLAN.—

11 For purposes of this paragraph—

12 ‘‘(i) IN GENERAL.—The term ‘qualified

13 cash balance plan’ means a cash balance

14 plan which meets the vesting requirement

15 under clause (ii) and the interest credit re16 quirement under clause (iii).

17 ‘‘(ii) VESTING REQUIREMENTS.—A

18 plan meets the requirements of this clause if

19 an employee who has completed at least 3

20 years of service has a nonforfeitable right to

21 100 percent of the employee’s accrued ben22 efit derived from employer contributions.

23 ‘‘(iii) INTEREST CREDITS.—A plan

24 meets the requirements of this clause if the

25 terms of the plan provide that any interest
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1 credit (or equivalent amount) for any plan

2 year shall be at a rate which—

3 ‘‘(I) is not less than the applicable

4 Federal mid-term interest rate (as de5 termined under section 1274(d)(1)),

6 and

7 ‘‘(II) is not greater than the

8 greater of the rate determined under

9 subclause (I) or a rate equal to the rate

10 of interest on amounts invested con11 servatively in long-term investment

12 grade corporate bonds.

13 ‘‘(iv) DETERMINATION OF RATES.—For

14 purposes of clause (iii)(II), the rate of inter15 est on amounts invested conservatively in

16 long-term investment grade corporate bonds

17 shall be determined by the Secretary on the

18 basis of 2 or more indices that are selected

19 periodically by the Secretary. The Secretary

20 shall make publicly available the indices

21 and methodology used to determine the rate.

22 ‘‘(v) VARIABLE RATE OF INTEREST.—If

23 the interest credit rate under the plan is a

24 variable rate, the plan shall provide that,

25 upon the termination of the plan, the rate
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1 of interest used to determine accrued bene2 fits under the plan shall be equal to the av3 erage of the rates of interest used under the

4 plan during the 5-year period ending on the

5 termination date.

6 ‘‘(C) CASH BALANCE PLAN.—For purposes

7 of this paragraph, the term ‘cash balance plan’

8 means a defined benefit plan under which—

9 ‘‘(i) the accrued benefit is determined

10 by reference to the balance of a hypothetical

11 accumulation account, and

12 ‘‘(ii) pay credits and interest credits

13 are credited to such account.

14 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

15 OR OTHER HYBRID PLANS.—

16 ‘‘(i) CASH BALANCE PLAN.—The Sec17 retary shall issue regulations which include

18 in the definition of cash balance plan any

19 defined benefit plan (or any portion of such

20 a plan) which has an effect similar to a

21 cash balance plan. Such regulations may

22 provide that if a plan sponsor represents in

23 communications to participants and bene24 ficiaries that a plan amendment results in

25 a plan being described in the preceding sen-
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1 tence, such plan shall be treated as a cash

2 balance plan.

3 ‘‘(ii) QUALIFIED CASH BALANCE

4 PLAN.—The Secretary may in the regula5 tions issued under clause (i) provide for the

6 treatment of a cash balance plan as a quali7 fied cash balance plan in cases where the

8 cash balance plan has an effect similar to

9 the qualified cash balance plan.’’.

10 (b) RULES APPLICABLE TO ACCRUED BENEFITS

11 UNDER CONVERTED PLANS.—

12 (1) AMENDMENT OF ERISA.—Section 204(g) of

13 the Employee Retirement Income Security Act of

14 1974 (29 U.S.C. 1054(g)) is amended by adding at

15 the end the following new paragraph:

16 ‘‘(6) TREATMENT OF CONVERSIONS TO CASH BAL17 ANCE OR OTHER HYBRID PLANS.—

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

19 subsection, an applicable plan amendment shall

20 be treated as reducing the accrued benefit of a

21 participant if, under the terms of the plan as in

22 effect after the amendment, the accrued benefit of

23 any participant who was a participant as of the

24 effective date of the amendment may at any time

25 be less than the accrued benefit determined under
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1 the method under subparagraph (B), (C), or (D)

2 which is specified in the plan and applies uni3 formly to all participants. An applicable plan

4 amendment shall in no event be treated as meet5 ing the requirements of any such subparagraph

6 if the conversion described in subparagraph

7 (G)(i) is into a cash balance plan other than a

8 qualified cash balance plan (as defined in sub9 section (b)(5)(B)).

10 ‘‘(B) NO WEARAWAY.—

11 ‘‘(i) IN GENERAL.—The accrued benefit

12 determined under this subparagraph is the

13 sum of—

14 ‘‘(I) the participant’s accrued ben15 efit for years of service before the effec16 tive date of the amendment, determined

17 under the terms of the plan as in effect

18 before the amendment, plus

19 ‘‘(II) except as provided in clause

20 (ii), the participant’s accrued benefit

21 for years of service after the effective

22 date of the amendment, determined

23 under the terms of the plan as in effect

24 after the amendment.
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1 ‘‘(ii) REQUIRED AMOUNTS FOR CER2 TAIN PERIODS.—Notwithstanding clause

3 (i)(II), the plan shall provide that either—

4 ‘‘(I) the accrued benefit of all par5 ticipants for each of the first 5 plan

6 years to which the amendment applies

7 shall be equal to the greater of the ac8 crued benefit determined under the

9 terms of the plan as in effect both be10 fore and after the amendment, or

11 ‘‘(II) the accrued benefit for peri12 ods after the effective date of the

13 amendment of all participants who, as

14 of the effective date of the amendment,

15 had attained the age of 40 and had a

16 combined age and years of service

17 under the plan of not less than 55 shall

18 be determined under either of the meth19 ods described in clause (iii) which is

20 selected by the plan and which is speci21 fied in the amendment.

22 ‘‘(iii) APPLICABLE METHOD.—For pur23 poses of clause (ii)(II), the plan shall select

24 1 of the following methods:
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1 ‘‘(I) The accrued benefit shall be

2 equal to the greater of the accrued ben3 efit determined under the terms of the

4 plan as in effect both before and after

5 the amendment.

6 ‘‘(II) At the election of the partici7 pant, the accrued benefit shall be deter8 mined under the terms of the plan as

9 in effect either before or after the

10 amendment.

11 ‘‘(C) GREATER OF OLD OR NEW OR ELEC12 TION OF EITHER.—The accrued benefit deter13 mined under this subparagraph is the accrued

14 benefit determined under 1 of the following meth15 ods which is selected by the plan and which is

16 specified in the amendment:

17 ‘‘(i) The accrued benefit shall be equal

18 to the greater of the accrued benefit deter19 mined under the terms of the plan as in ef20 fect both before and after the amendment.

21 ‘‘(ii) At the election of the participant,

22 the accrued benefit shall be determined

23 under the terms of the plan as in effect ei24 ther before or after the amendment.
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1 ‘‘(D) METHOD PRESCRIBED BY SEC2 RETARY.—The accrued benefit determined under

3 this subparagraph shall be determined under reg4 ulations prescribed by the Secretary which are

5 consistent with the purposes of this paragraph

6 and which may require a plan to provide a cred7 it of additional amounts or increases in initial

8 account balances in amounts substantially equiv9 alent to the benefits that would be required to be

10 provided to meet the requirements of subpara11 graphs (B) or (C).

12 ‘‘(E) INCLUSION OF PRIOR ACCRUED BEN13 EFIT INTO INITIAL ACCOUNT BALANCE.—

14 ‘‘(i) IN GENERAL.—If, for purposes of

15 subparagraphs (B), (C), or (D), an applica16 ble plan amendment provides that an

17 amount will be initially credited to a par18 ticipant’s accumulation account (or its

19 equivalent) on the effective date of the

20 amendment with respect to the participant’s

21 accrued benefit for periods before such date,

22 the requirements of such subparagraph shall

23 be treated as met with respect to such ac24 crued benefit if the amount initially cred25 ited is not less than the present value of the
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1 participant’s accrued benefit determined by

2 using the applicable mortality table and the

3 lower of the applicable interest rate under

4 section 205(g)(3)(A), or the interest rate

5 used to credit interest under the plan, as of

6 such date.

7 ‘‘(ii) ADJUSTMENTS FOR CERTAIN SUB8 SIDIZED BENEFITS.—For purposes of sub9 paragraph (B), if any early retirement ben10 efit or retirement-type subsidy (within the

11 meaning of paragraph (6)(B)(i)) is not in12 cluded in the initial account balance under

13 clause (i), the plan shall credit the accumu14 lation account with the amount of such ben15 efit or subsidy for the plan year in which

16 the participant retires if, as of such time,

17 the participant has met the age, years of

18 service, and other requirements under the

19 plan for entitlement to such benefit or sub20 sidy.

21 ‘‘(F) REQUIREMENTS WHERE PARTICIPANT

22 OFFERED CHOICE.—If a plan provides a partici23 pant with an election described in subparagraph

24 (B)(iii)(II) or (C)(ii), the following rules shall

25 apply:
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1 ‘‘(i) NOTICE.—The plan shall not be

2 treated as meeting the requirements of either

3 such subparagraph unless the plan provides

4 the participant a notice of the right to make

5 such election which includes information

6 (meeting such requirements as may be pre7 scribed by the Secretary of the Treasury)—

8 ‘‘(I) by which the participant

9 may project benefits under the for10 mulas from which the participant may

11 choose and may model the impact of

12 any such choice, and

13 ‘‘(II) with respect to cir14 cumstances under which a participant

15 may not receive the projected accrued

16 benefits by reason of a plan termi17 nation or otherwise.

18 ‘‘(ii) SIGNIFICANT REDUCTION OF RATE

19 OF ACCRUAL.—The plan shall provide that

20 if, during any of the first 5 plan years dur21 ing which such an election is in effect, the

22 plan adopts an amendment which results in

23 a significant reduction in the rate of future

24 benefit accrual (within the meaning of sec25 tion 204(h)), the accrued benefit of the par-
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1 ticipant shall be determined as if the par2 ticipant had made the election which re3 sulted in the greatest accrued benefit.

4 ‘‘(iii) BENEFITS MUST NOT BE CONTIN5 GENT ON ELECTION.—The plan shall not be

6 treated as meeting the requirements of either

7 such subparagraph if any other benefit is

8 conditioned (directly or indirectly) on such

9 election.

10 ‘‘(G) APPLICABLE PLAN AMENDMENT.—For

11 purposes of this paragraph—

12 ‘‘(i) IN GENERAL.—The term ‘applica13 ble plan amendment’ means an amendment

14 to a defined benefit plan which has the ef15 fect of converting the plan to a cash balance

16 plan.

17 ‘‘(ii) SPECIAL RULE FOR COORDINATED

18 BENEFITS.—If the benefits of 2 or more de19 fined benefit plans established or main20 tained by an employer are coordinated in

21 such a manner as to have the effect of the

22 adoption of an amendment described in

23 clause (i), the sponsor of the defined benefit

24 plan or plans providing for such coordina25 tion shall be treated as having adopted such
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1 a plan amendment as of the date such co2 ordination begins.

3 ‘‘(iii) MULTIPLE AMENDMENTS.—The

4 Secretary of the Treasury shall issue regula5 tions to prevent the avoidance of the pur6 poses of this paragraph through the use of

7 2 or more plan amendments rather than a

8 single amendment.

9 ‘‘(iv) CASH BALANCE PLAN.—For pur10 poses of this paragraph, the term ‘cash bal11 ance plan’ has the meaning given such term

12 by subsection (b)(5)(C).

13 ‘‘(v) COORDINATION WITH ACCRUAL

14 RULES.—If a plan amendment is treated as

15 meeting the requirements of this paragraph

16 with respect to any participant because

17 such participant is eligible to continue to

18 accrue benefits in the same manner as

19 under the terms of the plan in effect before

20 the amendment, the Secretary of the Treas21 ury shall prescribe regulations under which

22 the plan shall not be treated as failing to

23 meet the requirements of subparagraph (A),

24 (B), or (C) of section 204(b)(1) if the re25 quirements of this paragraph are met.
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1 ‘‘(H) APPLICATION OF CERTAIN RULES TO

2 EARLY-RETIREMENT BENEFITS.—Rules similar

3 to the rules of clauses (i), (ii), and (iii) of sub4 paragraph (B) and subparagraph (C) shall

5 apply in the case of any early retirement benefit

6 or retirement-type subsidy (within the meaning

7 of section 204(g)(2)(A)).’’.

8 (2) AMENDMENT OF INTERNAL REVENUE

9 CODE.—Section 411(d) of the Internal Revenue Code

10 of 1986 (relating to special rules) is amended by add11 ing at the end the following new paragraph:

12 ‘‘(7) TREATMENT OF CONVERSIONS TO CASH BAL13 ANCE OR OTHER HYBRID PLANS.—

14 ‘‘(A) IN GENERAL.—For purposes of para15 graph (6), an applicable plan amendment shall

16 be treated as reducing the accrued benefit of a

17 participant if, under the terms of the plan as in

18 effect after the amendment, the accrued benefit of

19 any participant who was a participant as of the

20 effective date of the amendment may at any time

21 be less than the accrued benefit determined under

22 the method under subparagraph (B), (C), or (D)

23 which is specified in the plan and applies uni24 formly to all participants. An applicable plan

25 amendment shall in no event be treated as meet-
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1 ing the requirements of any such subparagraph

2 if the conversion described in subparagraph

3 (G)(i) is into a cash balance plan other than a

4 qualified cash balance plan (as defined in sub5 section (b)(5)(B)).

6 ‘‘(B) NO WEARAWAY.—

7 ‘‘(i) IN GENERAL.—The accrued benefit

8 determined under this subparagraph is the

9 sum of—

10 ‘‘(I) the participant’s accrued ben11 efit for years of service before the effec12 tive date of the amendment, determined

13 under the terms of the plan as in effect

14 before the amendment, plus

15 ‘‘(II) except as provided in clause

16 (ii), the participant’s accrued benefit

17 for years of service after the effective

18 date of the amendment, determined

19 under the terms of the plan as in effect

20 after the amendment.

21 A similar rule shall apply in the case of

22 any early retirement benefit or retirement23 type subsidy (within the meaning of section

24 411(d)(6)(B)(i)).
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1 ‘‘(ii) REQUIRED AMOUNTS FOR CER2 TAIN PERIODS.—Notwithstanding clause

3 (i)(II), the plan shall provide that either—

4 ‘‘(I) the accrued benefit of all par5 ticipants for each of the first 5 plan

6 years to which the amendment applies

7 shall be equal to the greater of the ac8 crued benefit determined under the

9 terms of the plan as in effect both be10 fore and after the amendment, or

11 ‘‘(II) the accrued benefit for peri12 ods after the effective date of the

13 amendment of all participants who, as

14 of the effective date of the amendment,

15 had attained the age of 40 and had a

16 combined age and years of service

17 under the plan of not less than 55 shall

18 be determined under either of the meth19 ods described in clause (iii) which is

20 selected by the plan and which is speci21 fied in the amendment.

22 ‘‘(iii) APPLICABLE METHOD.—For pur23 poses of clause (ii)(II), the plan shall select

24 1 of the following methods:
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1 ‘‘(I) The accrued benefit shall be

2 equal to the greater of the accrued ben3 efit determined under the terms of the

4 plan as in effect both before and after

5 the amendment.

6 ‘‘(II) At the election of the partici7 pant, the accrued benefit shall be deter8 mined under the terms of the plan as

9 in effect either before or after the

10 amendment.

11 ‘‘(C) GREATER OF OLD OR NEW OR ELEC12 TION OF EITHER.—The accrued benefit deter13 mined under this subparagraph is the accrued

14 benefit determined under 1 of the following meth15 ods which is selected by the plan and which is

16 specified in the amendment:

17 ‘‘(i) The accrued benefit shall be equal

18 to the greater of the accrued benefit deter19 mined under the terms of the plan as in ef20 fect both before and after the amendment.

21 ‘‘(ii) At the election of the participant,

22 the accrued benefit shall be determined

23 under the terms of the plan as in effect ei24 ther before or after the amendment.
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1 ‘‘(D) METHOD PRESCRIBED BY SEC2 RETARY.—The accrued benefit determined under

3 this subparagraph shall be determined under reg4 ulations prescribed by the Secretary which are

5 consistent with the purposes of this paragraph

6 and which may require a plan to provide a cred7 it of additional amounts or increases in initial

8 account balances in amounts substantially equiv9 alent to the benefits that would be required to be

10 provided to meet the requirements of subpara11 graphs (B) or (C).

12 ‘‘(E) INCLUSION OF PRIOR ACCRUED BEN13 EFIT INTO INITIAL ACCOUNT BALANCE.—

14 ‘‘(i) IN GENERAL.—If, for purposes of

15 subparagraphs (B), (C), or (D), an applica16 ble plan amendment provides that an

17 amount will be initially credited to a par18 ticipant’s accumulation account (or its

19 equivalent) on the effective date of the

20 amendment with respect to the participant’s

21 accrued benefit for periods before such date,

22 the requirements of such subparagraph shall

23 be treated as met with respect to such ac24 crued benefit if the amount initially cred25 ited is not less than the present value of the
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1 participant’s accrued benefit determined by

2 using the applicable mortality table and the

3 lower of the applicable interest rate under

4 section 417(e)(3)(A), or the interest rate

5 used to credit interest under the plan, as of

6 such date.

7 ‘‘(ii) ADJUSTMENTS FOR CERTAIN SUB8 SIDIZED BENEFITS.—For purposes of sub9 paragraph (B), if any early retirement ben10 efit or retirement-type subsidy (within the

11 meaning of paragraph (6)(B)(i)) is not in12 cluded in the initial account balance under

13 clause (i), the plan shall credit the accumu14 lation account with the amount of such ben15 efit or subsidy for the plan year in which

16 the participant retires if, as of such time,

17 the participant has met the age, years of

18 service, and other requirements under the

19 plan for entitlement to such benefit or sub20 sidy.

21 ‘‘(F) REQUIREMENTS WHERE PARTICIPANT

22 OFFERED CHOICE.—If a plan provides a partici23 pant with an election described in subparagraph

24 (B)(iii)(II) or (C)(ii), the following rules shall

25 apply:
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1 ‘‘(i) NOTICE.—The plan shall not be

2 treated as meeting the requirements of either

3 such subparagraph unless the plan provides

4 the participant a notice of the right to make

5 such election which includes information

6 (meeting such requirements as may be pre7 scribed by the Secretary)—

8 ‘‘(I) by which the participant

9 may project benefits under the for10 mulas from which the participant may

11 choose and may model the impact of

12 any such choice, and

13 ‘‘(II) with respect to cir14 cumstances under which a participant

15 may not receive the projected accrued

16 benefits by reason of a plan termi17 nation or otherwise.

18 ‘‘(ii) SIGNIFICANT REDUCTION OF RATE

19 OF ACCRUAL.—The plan shall provide that

20 if, during any of the first 5 plan years dur21 ing which such an election is in effect, the

22 plan adopts an amendment which results in

23 a significant reduction in the rate of future

24 benefit accrual (within the meaning of sec25 tion 4980F(e)), the accrued benefit of the
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1 participant shall be determined as if the

2 participant had made the election which re3 sulted in the greatest accrued benefit.

4 ‘‘(iii) BENEFITS MUST NOT BE CONTIN5 GENT ON ELECTION.—The plan shall not be

6 treated as meeting the requirements of either

7 such subparagraph if any other benefit is

8 conditioned (directly or indirectly) on such

9 election.

10 ‘‘(G) APPLICABLE PLAN AMENDMENT.—For

11 purposes of this paragraph—

12 ‘‘(i) IN GENERAL.—The term ‘applica13 ble plan amendment’ means an amendment

14 to a defined benefit plan which has the ef15 fect of converting the plan to a cash balance

16 plan.

17 ‘‘(ii) SPECIAL RULE FOR COORDINATED

18 BENEFITS.—If the benefits of 2 or more de19 fined benefit plans established or main20 tained by an employer are coordinated in

21 such a manner as to have the effect of the

22 adoption of an amendment described in

23 clause (i), the sponsor of the defined benefit

24 plan or plans providing for such coordina25 tion shall be treated as having adopted such
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1 a plan amendment as of the date such co2 ordination begins.

3 ‘‘(iii) MULTIPLE AMENDMENTS.—The

4 Secretary shall issue regulations to prevent

5 the avoidance of the purposes of this para6 graph through the use of 2 or more plan

7 amendments rather than a single amend8 ment.

9 ‘‘(iv) CASH BALANCE PLAN.—For pur10 poses of this paragraph, the term ‘cash bal11 ance plan’ has the meaning given such term

12 by subsection (b)(5)(C).

13 ‘‘(v) COORDINATION WITH ACCRUAL

14 AND NONDISCRIMINATION RULES.—If a plan

15 amendment is treated as meeting the re16 quirements of this paragraph with respect

17 to any participant because such participant

18 is eligible to continue to accrue benefits in

19 the same manner as under the terms of the

20 plan in effect before the amendment, the

21 Secretary shall prescribe regulations under

22 which—

23 ‘‘(I) the plan shall not be treated

24 as failing to meet the requirements of

25 subparagraph (A), (B), or (C) of sec-
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1 tion 411(b)(1) if the requirements of

2 this paragraph are met, and

3 ‘‘(II) the plan shall, subject to

4 such terms and conditions as may be

5 provided in such regulations, not be

6 treated as failing to meet the require7 ments of section 401(a)(4) merely be8 cause the plan provides any accrual or

9 benefit which is required to be provided

10 under subparagraph (B), (C), or (D)

11 or because only participants as of the

12 effective date of the amendment are so

13 eligible, except that this subclause shall

14 only apply if the plan met the require15 ments of section 401(a)(4) under the

16 terms of the plan as in effect before the

17 amendment.

18 ‘‘(H) APPLICATION OF CERTAIN RULES TO

19 EARLY-RETIREMENT BENEFITS.—Rules similar

20 to the rules of clauses (i), (ii), and (iii) of sub21 paragraph (B) and subparagraph (C) shall

22 apply in the case of any early retirement benefit

23 or retirement-type subsidy (within the meaning

24 of section 411(d)(6)(B)(i)).’’.
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1 (c) ASSUMPTIONS USED IN COMPUTING PRESENT

2 VALUE OF ACCRUED BENEFIT.—

3 (1) AMENDMENT OF ERISA.—Section 205(g)(3) of

4 such Act (29 U.S.C. 1055(g)(3)), is amended—

5 (A) by striking ‘‘or (B)’’ in subparagraph

6 (A)(i) and inserting ‘‘, (B), or (C)’’, and

7 (B) by adding at the end the following new

8 subparagraph:

9 ‘‘(C) PRESENT VALUE OF ACCRUED BENEFIT

10 UNDER CASH BALANCE PLAN.—Except as pro11 vided in regulations, in the case of a qualified

12 cash balance plan (as defined in section

13 204(g)(6)(B)), the present value of the accrued

14 benefit of any participant shall, for purposes of

15 paragraphs (1) and (2), be equal to the balance

16 in the participant’s accumulation account (or its

17 equivalent) as of the time the present value deter18 mination is being made.’’.

19 (2) AMENDMENT OF INTERNAL REVENUE

20 CODE.—Section 417(e)(3) of such Code, is amended—

21 (A) by striking ‘‘or (B)’’ in subparagraph

22 (A)(i) and inserting ‘‘, (B), or (C)’’, and

23 (B) by adding at the end the following new

24 subparagraph:
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1 ‘‘(C) PRESENT VALUE OF ACCRUED BENEFIT

2 UNDER CASH BALANCE PLAN.—Except as pro3 vided in regulations, in the case of a qualified

4 cash balance plan (as defined in section

5 411(d)(7)(B)), the present value of the accrued

6 benefit of any participant shall, for purposes of

7 paragraphs (1) and (2), be equal to the balance

8 in the participant’s accumulation account (or its

9 equivalent) as of the time the present value deter10 mination is being made.’’

11 (d) NO INFERENCE.—Nothing in the amendments

12 made by this section shall be construed to infer the proper

13 treatment of cash balance plans or conversions to cash bal14 ance plans under sections 204(b)(1)(H) of the Employee Re15 tirement Income Security Act of 1974, 4(i)(1) of the Age

16 Discrimination in Employment Act of 1967, and

17 411(b)(1)(H) of the Internal Revenue Code of 1986, as in

18 effect before such amendments.

19 (e) EFFECTIVE DATES.—

20 (1) AGE DISCRIMINATION AND LUMP-SUM DIS21 TRIBUTIONS.—

22 (A) IN GENERAL.—The amendments made

23 by subsections (a) and (c) shall apply to periods

24 after July 31, 2005.
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1 (B) VESTING AND INTEREST CREDIT RE2 QUIREMENTS.—In the case of a plan in existence

3 on July 31, 2005, the requirements of clauses (ii)

4 and (iii) of section 411(b)(5)(B) of the Internal

5 Revenue Code of 1986, and of clauses (ii) and

6 (iii) of 204(b)(5)(B) of the Employee Retirement

7 Income Security Act of 1974 shall, for purposes

8 of applying the amendments made by subsections

9 (a) and (c), apply to years beginning after De10 cember 31, 2006, unless the plan sponsor elects

11 the application of such requirements for any pe12 riod after July 31, 2005, and before the first

13 year beginning after December 31, 2006.

14 (C) SPECIAL RULE FOR COLLECTIVELY BAR15 GAINED PLANS.—In the case of a plan main16 tained pursuant to 1 or more collective bar17 gaining agreements between employee representa18 tives and 1 or more employers ratified on or be19 fore the date of the enactment of this Act, the re20 quirements described in subparagraph (B) shall,

21 for purposes of applying the amendments made

22 by subsections (a) and (c), not apply to plan

23 years beginning before—

24 (i) the earlier of—
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1 (I) the date on which the last of

2 such collective bargaining agreements

3 terminates (determined without regard

4 to any extension thereof on or after

5 such date of enactment), or

6 (II) January 1, 2007, or

7 (ii) January 1, 2009.

8 (2) CONVERSIONS.—The amendments made by

9 subsection (b) shall apply to plan amendments adopt10 ed after, and taking effect after, July 31, 2005, except

11 that the plan sponsor may elect to have such amend12 ments apply to plan amendments adopted before, and

13 taking effect after, such date.

14 SEC. 602. REGULATIONS RELATING TO MERGERS AND AC15 QUISITIONS.

16 The Secretary of the Treasury or his delegate shall, not

17 later than 12 months after the date of the enactment of this

18 Act, prescribe regulations for the application of the amend19 ments made by, and the provisions of, this title in cases

20 where the conversion of a plan to a cash balance plan is

21 made with respect to a group of employees who become em22 ployees by reason of a merger, acquisition, or similar trans23 action.
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1 TITLE VII—DIVERSIFICATION

2 RIGHTS AND OTHER PARTICI3 PANT PROTECTIONS UNDER

4 DEFINED CONTRIBUTION

5 PLANS

6 SEC. 701. DEFINED CONTRIBUTION PLANS REQUIRED TO

7 PROVIDE EMPLOYEES WITH FREEDOM TO IN8 VEST THEIR PLAN ASSETS.

9 (a) AMENDMENTS OF INTERNAL REVENUE CODE.—

10 (1) QUALIFICATION REQUIREMENT.—Section

11 401(a) of the Internal Revenue Code of 1986 (relating

12 to qualified pension, profit-sharing, and stock bonus

13 plans), as amended by section 115 of this Act, is

14 amended by inserting after paragraph (34) the fol15 lowing new paragraph:

16 ‘‘(35) DIVERSIFICATION REQUIREMENTS FOR

17 CERTAIN DEFINED CONTRIBUTION PLANS.—

18 ‘‘(A) IN GENERAL.—A trust which is part of

19 an applicable defined contribution plan shall not

20 be treated as a qualified trust unless the plan

21 meets the diversification requirements of sub22 paragraphs (B), (C), and (D).

23 ‘‘(B) EMPLOYEE CONTRIBUTIONS AND ELEC24 TIVE DEFERRALS INVESTED IN EMPLOYER SECU25 RITIES OR REAL PROPERTY.—In the case of the
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1 portion of an applicable individual’s account at2 tributable to employee contributions and elective

3 deferrals which is invested in employer securities

4 or employer real property, a plan meets the re5 quirements of this subparagraph if the applicable

6 individual may elect to direct the plan to divest

7 any such securities or real property and to rein8 vest an equivalent amount in other investment

9 options meeting the requirements of subpara10 graph (D).

11 ‘‘(C) EMPLOYER CONTRIBUTIONS INVESTED

12 IN EMPLOYER SECURITIES OR REAL PROP13 ERTY.—In the case of the portion of the account

14 attributable to employer contributions other than

15 elective deferrals which is invested in employer

16 securities or employer real property, a plan

17 meets the requirements of this subparagraph if

18 each applicable individual who—

19 ‘‘(i) is a participant who has com20 pleted at least 3 years of service, or

21 ‘‘(ii) is a beneficiary of a participant

22 described in clause (i) or of a deceased par23 ticipant,

24 may elect to direct the plan to divest any such

25 securities or real property and to reinvest an
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1 equivalent amount in other investment options

2 meeting the requirements of subparagraph (D).

3 ‘‘(D) INVESTMENT OPTIONS.—

4 ‘‘(i) IN GENERAL.—The requirements

5 of this subparagraph are met if the plan of6 fers not less than 3 investment options,

7 other than employer securities or employer

8 real property, to which an applicable indi9 vidual may direct the proceeds from the di10 vestment of employer securities or employer

11 real property pursuant to this paragraph,

12 each of which is diversified and has materi13 ally different risk and return characteris14 tics.

15 ‘‘(ii) TREATMENT OF CERTAIN RE16 STRICTIONS AND CONDITIONS.—

17 ‘‘(I) TIME FOR MAKING INVEST18 MENT CHOICES.—A plan shall not be

19 treated as failing to meet the require20 ments of this subparagraph merely be21 cause the plan limits the time for di22 vestment and reinvestment to periodic,

23 reasonable opportunities occurring no

24 less frequently than quarterly.
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1 ‘‘(II) CERTAIN RESTRICTIONS AND

2 CONDITIONS NOT ALLOWED.—Except as

3 provided in regulations, a plan shall

4 not meet the requirements of this sub5 paragraph if the plan imposes restric6 tions or conditions with respect to the

7 investment of employer securities or

8 employer real property which are not

9 imposed on the investment of other as10 sets of the plan. This subclause shall

11 not apply to any restrictions or condi12 tions imposed by reason of the applica13 tion of securities laws.

14 ‘‘(E) APPLICABLE DEFINED CONTRIBUTION

15 PLAN.—For purposes of this paragraph—

16 ‘‘(i) IN GENERAL.—The term ‘applica17 ble defined contribution plan’ means any

18 defined contribution plan which holds any

19 publicly traded employer securities.

20 ‘‘(ii) EXCEPTION FOR CERTAIN

21 ESOPS.—Such term does not include an em22 ployee stock ownership plan if—

23 ‘‘(I) there are no contributions to

24 such plan (or earnings thereunder)

25 which are held within such plan and
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1 are subject to subsection (k) or (m),

2 and

3 ‘‘(II) such plan is a separate plan

4 for purposes of section 414(l) with re5 spect to any other defined benefit plan

6 or defined contribution plan main7 tained by the same employer or em8 ployers.

9 ‘‘(iii) EXCEPTION FOR ONE PARTICI10 PANT PLANS.—Such term does not include a

11 one-participant retirement plan.

12 ‘‘(iv) ONE-PARTICIPANT RETIREMENT

13 PLAN.—For purposes of clause (iii), the

14 term ‘one-participant retirement plan’

15 means a retirement plan that—

16 ‘‘(I) on the first day of the plan

17 year covered only one individual (or

18 the individual and the individual’s

19 spouse) and the individual owned 100

20 percent of the plan sponsor (whether or

21 not incorporated), or covered only one

22 or more partners (or partners and

23 their spouses) in the plan sponsor,

24 ‘‘(II) meets the minimum coverage

25 requirements of section 410(b) without
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1 being combined with any other plan of

2 the business that covers the employees

3 of the business,

4 ‘‘(III) does not provide benefits to

5 anyone except the individual (and the

6 individual’s spouse) or the partners

7 (and their spouses),

8 ‘‘(IV) does not cover a business

9 that is a member of an affiliated serv10 ice group, a controlled group of cor11 porations, or a group of businesses

12 under common control, and

13 ‘‘(V) does not cover a business

14 that uses the services of leased employ15 ees (within the meaning of section

16 414(n)).

17 For purposes of this clause, the term ‘part18 ner’ includes a 2-percent shareholder (as de19 fined in section 1372(b)) of an S corpora20 tion.

21 ‘‘(F) CERTAIN PLANS TREATED AS HOLDING

22 PUBLICLY TRADED EMPLOYER SECURITIES.—

23 ‘‘(i) IN GENERAL.—Except as provided

24 in regulations or in clause (ii), a plan hold25 ing employer securities which are not pub-
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1 licly traded employer securities shall be

2 treated as holding publicly traded employer

3 securities if any employer corporation, or

4 any member of a controlled group of cor5 porations which includes such employer cor6 poration, has issued a class of stock which

7 is a publicly traded employer security.

8 ‘‘(ii) EXCEPTION FOR CERTAIN CON9 TROLLED GROUPS WITH PUBLICLY TRADED

10 SECURITIES.—Clause (i) shall not apply to

11 a plan if—

12 ‘‘(I) no employer corporation, or

13 parent corporation of an employer cor14 poration, has issued any publicly trad15 ed employer security, and

16 ‘‘(II) no employer corporation, or

17 parent corporation of an employer cor18 poration, has issued any special class

19 of stock which grants particular rights

20 to, or bears particular risks for, the

21 holder or issuer with respect to any

22 corporation described in clause (i)

23 which has issued any publicly traded

24 employer security.
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1 ‘‘(iii) DEFINITIONS.—For purposes of

2 this subparagraph, the term—

3 ‘‘(I) ‘controlled group of corpora4 tions’ has the meaning given such term

5 by section 1563(a), except that ‘50 per6 cent’ shall be substituted for ‘80 per7 cent’ each place it appears,

8 ‘‘(II) ‘employer corporation’

9 means a corporation which is an em10 ployer maintaining the plan, and

11 ‘‘(III) ‘parent corporation’ has the

12 meaning given such term by section

13 424(e).

14 ‘‘(G) OTHER DEFINITIONS.—For purposes

15 of this paragraph—

16 ‘‘(i) APPLICABLE INDIVIDUAL.—The

17 term ‘applicable individual’ means—

18 ‘‘(I) any participant in the plan,

19 and

20 ‘‘(II) any beneficiary who has an

21 account under the plan with respect to

22 which the beneficiary is entitled to ex23 ercise the rights of a participant.
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1 ‘‘(ii) ELECTIVE DEFERRAL.—The term

2 ‘elective deferral’ means an employer con3 tribution described in section 402(g)(3)(A).

4 ‘‘(iii) EMPLOYER SECURITY.—The

5 term ‘employer security’ has the meaning

6 given such term by section 407(d)(1) of the

7 Employee Retirement Income Security Act

8 of 1974.

9 ‘‘(iv) EMPLOYER REAL PROPERTY.—

10 The term ‘employer real property’ has the

11 meaning given such term by section

12 407(d)(2) of the Employee Retirement In13 come Security Act of 1974.

14 ‘‘(v) EMPLOYEE STOCK OWNERSHIP

15 PLAN.—The term ‘employee stock ownership

16 plan’ has the meaning given such term by

17 section 4975(e)(7).

18 ‘‘(vi) PUBLICLY TRADED EMPLOYER

19 SECURITIES.—The term ‘publicly traded

20 employer securities’ means employer securi21 ties which are readily tradable on an estab22 lished securities market.

23 ‘‘(vii) YEAR OF SERVICE.—The term

24 ‘year of service’ has the meaning given such

25 term by section 411(a)(5).
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1 ‘‘(H) TRANSITION RULE FOR SECURITIES

2 OR REAL PROPERTY ATTRIBUTABLE TO EM3 PLOYER CONTRIBUTIONS.—

4 ‘‘(i) RULES PHASED IN OVER 3

5 YEARS.—

6 ‘‘(I) IN GENERAL.—In the case of

7 the portion of an account to which sub8 paragraph (C) applies and which con9 sists of employer securities or employer

10 real property acquired in a plan year

11 beginning before January 1, 2006, sub12 paragraph (C) shall only apply to the

13 applicable percentage of such securities

14 or real property. This subparagraph

15 shall be applied separately with respect

16 to each class of securities and employer

17 real property.

18 ‘‘(II) EXCEPTION FOR CERTAIN

19 PARTICIPANTS AGED 55 OR OVER.—

20 Subclause (I) shall not apply to an ap21 plicable individual who is a partici22 pant who has attained age 55 and

23 completed at least 3 years of service be24 fore the first plan year beginning after

25 December 31, 2005.
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1 ‘‘(ii) APPLICABLE PERCENTAGE.—For

2 purposes of clause (i), the applicable per3 centage shall be determined as follows:

Plan year to which The applicable

subparagraph (C) applies: percentage is:

1st .................................................................................................... 33

2d .................................................................................................... 66

3d and following ............................................................................ 100.’’.

4 (2) CONFORMING AMENDMENTS.—

5 (A) Section 401(a)(28)(B) of such Code (re6 lating to additional requirements relating to em7 ployee stock ownership plans) is amended by

8 adding at the end the following new clause:

9 ‘‘(v) EXCEPTION.—This subparagraph

10 shall not apply to an applicable defined

11 contribution plan (as defined in paragraph

12 (35)(E)).’’

13 (B) Section 409(h)(7) of such Code is

14 amended by inserting ‘‘or subparagraph (B) or

15 (C) of section 401(a)(35)’’ before the period at

16 the end.

17 (C) Section 4980(c)(3)(A) of such Code is

18 amended by striking ‘‘if—’’ and all that follows

19 and inserting ‘‘if the requirements of subpara20 graphs (B), (C), and (D) are met.’’

21 (b) AMENDMENTS OF ERISA.—

22 (1) IN GENERAL.—Section 204 of the Employee

23 Retirement Income Security Act of 1974 (29 U.S.C.
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1 1054) is amended by redesignating subsection (j) as

2 subsection (k) and by inserting after subsection (i) the

3 following new subsection:

4 ‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN

5 INDIVIDUAL ACCOUNT PLANS.—

6 ‘‘(1) IN GENERAL.—An applicable individual ac7 count plan shall meet the diversification requirements

8 of paragraphs (2), (3), and (4).

9 ‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELECTIVE

10 DEFERRALS INVESTED IN EMPLOYER SECURITIES OR

11 REAL PROPERTY.—In the case of the portion of an

12 applicable individual’s account attributable to em13 ployee contributions and elective deferrals which is

14 invested in employer securities or employer real prop15 erty, a plan meets the requirements of this paragraph

16 if the applicable individual may elect to direct the

17 plan to divest any such securities or real property

18 and to reinvest an equivalent amount in other invest19 ment options meeting the requirements of paragraph

20 (4).

21 ‘‘(3) EMPLOYER CONTRIBUTIONS INVESTED IN

22 EMPLOYER SECURITIES OR REAL PROPERTY.—In the

23 case of the portion of the account attributable to em24 ployer contributions other than elective deferrals

25 which is invested in employer securities or employer
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1 real property, a plan meets the requirements of this

2 paragraph if each applicable individual who—

3 ‘‘(A) is a participant who has completed at

4 least 3 years of service, or

5 ‘‘(B) is a beneficiary of a participant de6 scribed in subparagraph (A) or of a deceased

7 participant,

8 may elect to direct the plan to divest any such securi9 ties or real property and to reinvest an equivalent

10 amount in other investment options meeting the re11 quirements of paragraph (4).

12 ‘‘(4) INVESTMENT OPTIONS.—

13 ‘‘(A) IN GENERAL.—The requirements of

14 this paragraph are met if the plan offers not less

15 than 3 investment options, other than employer

16 securities or employer real property, to which an

17 applicable individual may direct the proceeds

18 from the divestment of employer securities or em19 ployer real property pursuant to this subsection,

20 each of which is diversified and has materially

21 different risk and return characteristics.

22 ‘‘(B) TREATMENT OF CERTAIN RESTRIC23 TIONS AND CONDITIONS.—

24 ‘‘(i) TIME FOR MAKING INVESTMENT

25 CHOICES.—A plan shall not be treated as
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1 failing to meet the requirements of this

2 paragraph merely because the plan limits

3 the time for divestment and reinvestment to

4 periodic, reasonable opportunities occurring

5 no less frequently than quarterly.

6 ‘‘(ii) CERTAIN RESTRICTIONS AND CON7 DITIONS NOT ALLOWED.—Except as pro8 vided in regulations, a plan shall not meet

9 the requirements of this paragraph if the

10 plan imposes restrictions or conditions with

11 respect to the investment of employer securi12 ties or employer real property which are not

13 imposed on the investment of other assets of

14 the plan. This subparagraph shall not

15 apply to any restrictions or conditions im16 posed by reason of the application of securi17 ties laws.

18 ‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—

19 For purposes of this subsection—

20 ‘‘(A) IN GENERAL.—The term ‘applicable

21 individual account plan’ means any individual

22 account plan (as defined in section 3(34)) which

23 holds any publicly traded employer securities.
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1 ‘‘(B) EXCEPTION FOR CERTAIN ESOPS.—

2 Such term does not include an employee stock

3 ownership plan if—

4 ‘‘(i) there are no contributions to such

5 plan (or earnings thereunder) which are

6 held within such plan and are subject to

7 subsection (k) or (m) of section 401 of the

8 Internal Revenue Code of 1986, and

9 ‘‘(ii) such plan is a separate plan (for

10 purposes of section 414(l) of such Code)

11 with respect to any other defined benefit

12 plan or individual account plan main13 tained by the same employer or employers.

14 ‘‘(C) EXCEPTION FOR ONE PARTICIPANT

15 PLANS.—Such term shall not include a one-par16 ticipant retirement plan (as defined in section

17 101(i)(8)(B)).

18 ‘‘(D) CERTAIN PLANS TREATED AS HOLDING

19 PUBLICLY TRADED EMPLOYER SECURITIES.—

20 ‘‘(i) IN GENERAL.—Except as provided

21 in regulations or in clause (ii), a plan hold22 ing employer securities which are not pub23 licly traded employer securities shall be

24 treated as holding publicly traded employer

25 securities if any employer corporation, or
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1 any member of a controlled group of cor2 porations which includes such employer cor3 poration, has issued a class of stock which

4 is a publicly traded employer security.

5 ‘‘(ii) EXCEPTION FOR CERTAIN CON6 TROLLED GROUPS WITH PUBLICLY TRADED

7 SECURITIES.—Clause (i) shall not apply to

8 a plan if—

9 ‘‘(I) no employer corporation, or

10 parent corporation of an employer cor11 poration, has issued any publicly trad12 ed employer security, and

13 ‘‘(II) no employer corporation, or

14 parent corporation of an employer cor15 poration, has issued any special class

16 of stock which grants particular rights

17 to, or bears particular risks for, the

18 holder or issuer with respect to any

19 corporation described in clause (i)

20 which has issued any publicly traded

21 employer security.

22 ‘‘(iii) DEFINITIONS.—For purposes of

23 this subparagraph, the term—

24 ‘‘(I) ‘controlled group of corpora25 tions’ has the meaning given such term
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1 by section 1563(a) of the Internal Rev2 enue Code of 1986, except that ‘50 per3 cent’ shall be substituted for ‘80 per4 cent’ each place it appears,

5 ‘‘(II) ‘employer corporation’

6 means a corporation which is an em7 ployer maintaining the plan, and

8 ‘‘(III) ‘parent corporation’ has the

9 meaning given such term by section

10 424(e) of such Code.

11 ‘‘(6) OTHER DEFINITIONS.—For purposes of this

12 paragraph—

13 ‘‘(A) APPLICABLE INDIVIDUAL.—The term

14 ‘applicable individual’ means—

15 ‘‘(i) any participant in the plan, and

16 ‘‘(ii) any beneficiary who has an ac17 count under the plan with respect to which

18 the beneficiary is entitled to exercise the

19 rights of a participant.

20 ‘‘(B) ELECTIVE DEFERRAL.—The term ‘elec21 tive deferral’ means an employer contribution

22 described in section 402(g)(3)(A) of the Internal

23 Revenue Code of 1986.
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1 ‘‘(C) EMPLOYER SECURITY.—The term ‘em2 ployer security’ has the meaning given such term

3 by section 407(d)(1).

4 ‘‘(D) EMPLOYER REAL PROPERTY.—The

5 term ‘employer real property’ has the meaning

6 given such term by section 407(d)(2).

7 ‘‘(E) EMPLOYEE STOCK OWNERSHIP

8 PLAN.—The term ‘employee stock ownership

9 plan’ has the meaning given such term by sec10 tion 4975(e)(7) of such Code.

11 ‘‘(F) PUBLICLY TRADED EMPLOYER SECURI12 TIES.—The term ‘publicly traded employer secu13 rities’ means employer securities which are read14 ily tradable on an established securities market.

15 ‘‘(G) YEAR OF SERVICE.—The term ‘year of

16 service’ has the meaning given such term by sec17 tion 203(b)(2).

18 ‘‘(7) TRANSITION RULE FOR SECURITIES OR

19 REAL PROPERTY ATTRIBUTABLE TO EMPLOYER CON20 TRIBUTIONS.—

21 ‘‘(A) RULES PHASED IN OVER 3 YEARS.—

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

23 portion of an account to which paragraph

24 (3) applies and which consists of employer

25 securities or employer real property ac-
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1 quired in a plan year beginning before Jan2 uary 1, 2006, paragraph (3) shall only

3 apply to the applicable percentage of such

4 securities or real property. This subpara5 graph shall be applied separately with re6 spect to each class of securities and em7 ployer real property.

8 ‘‘(ii) EXCEPTION FOR CERTAIN PAR9 TICIPANTS AGED 55 OR OVER.—Clause (i)

10 shall not apply to an applicable individual

11 who is a participant who has attained age

12 55 and completed at least 3 years of service

13 before the first plan year beginning after

14 December 31, 2005.

15 ‘‘(B) APPLICABLE PERCENTAGE.—For pur16 poses of subparagraph (A), the applicable per17 centage shall be determined as follows:

Plan year to which The applicable

paragraph (3) applies: percentage is:

1st .................................................................................................... 33

2d .................................................................................................... 66

3d and following ............................................................................ 100.’’.

18 (2) CONFORMING AMENDMENT.—Section

19 407(b)(3) of such Act (29 U.S.C. 1107(b)(3)) is

20 amended by adding at the end the following:

‘‘(D) For diversification requirements for qualifying employer securities and qualifying real property held in certain individual account plans, see

section 204(j).’’

21 (c) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), the amendments made by this sec3 tion shall apply to plan years beginning after Decem4 ber 31, 2005.

5 (2) SPECIAL RULE FOR COLLECTIVELY BAR6 GAINED AGREEMENTS.—In the case of a plan main7 tained pursuant to 1 or more collective bargaining

8 agreements between employee representatives and 1 or

9 more employers ratified on or before the date of the

10 enactment of this Act, paragraph (1) shall be applied

11 to benefits pursuant to, and individuals covered by,

12 any such agreement by substituting for ‘‘December 31,

13 2005’’ the earlier of—

14 (A) the later of—

15 (i) December 31, 2006, or

16 (ii) the date on which the last of such

17 collective bargaining agreements terminates

18 (determined without regard to any exten19 sion thereof after such date of enactment),

20 or

21 (B) December 31, 2007.

22 (3) SPECIAL RULE FOR CERTAIN EMPLOYER SE23 CURITIES HELD IN AN ESOP.—

24 (A) IN GENERAL.—In the case of employer

25 securities to which this paragraph applies, the
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1 amendments made by this section shall apply to

2 plan years beginning after the earlier of—

3 (i) December 31, 2006, or

4 (ii) the first date on which the fair

5 market value of such securities exceeds the

6 guaranteed minimum value described in

7 subparagraph (B)(ii).

8 (B) APPLICABLE SECURITIES.—This para9 graph shall apply to employer securities which

10 are attributable to employer contributions other

11 than elective deferrals, and which, on September

12 17, 2003—

13 (i) consist of preferred stock, and

14 (ii) are within an employee stock own15 ership plan (as defined in section

16 4975(e)(7) of the Internal Revenue Code of

17 1986), the terms of which provide that the

18 value of the securities cannot be less than

19 the guaranteed minimum value specified by

20 the plan on such date.

21 (C) COORDINATION WITH TRANSITION

22 RULE.—In applying section 401(a)(35)(H) of the

23 Internal Revenue Code of 1986 and section

24 204(j)(7) of the Employee Retirement Income Se25 curity Act of 1974 (as added by this section) to
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1 employer securities to which this paragraph ap2 plies, the applicable percentage shall be deter3 mined without regard to this paragraph.

4 SEC. 702. NOTICE OF FREEDOM TO DIVEST EMPLOYER SE5 CURITIES OR REAL PROPERTY.

6 (a) IN GENERAL.—Section 101 of the Employee Retire7 ment Income Security Act of 1974 (29 U.S.C. 1021), as

8 amended by this Act, is amended by redesignating sub9 section (m) as subsection (n) and by inserting after sub10 section (l) the following:

11 ‘‘(m) NOTICE OF RIGHT TO DIVEST.—Not later than

12 30 days before the first date on which an applicable indi13 vidual of an applicable individual account plan is eligible

14 to exercise the right under section 204(j) to direct the pro15 ceeds from the divestment of employer securities or employer

16 real property with respect to any type of contribution, the

17 administrator shall provide to such individual a notice—

18 ‘‘(1) setting forth such right under such section,

19 and

20 ‘‘(2) describing the importance of diversifying

21 the investment of retirement account assets.

22 The notice required by this subsection shall be written in

23 a manner calculated to be understood by the average plan

24 participant and may be delivered in written, electronic, or
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1 other appropriate form to the extent that such form is rea2 sonably accessible to the recipient.’’

3 (b) PENALTIES.—Section 502(c)(7) of the Employee

4 Retirement Income Security Act of 1974 (29 U.S.C.

5 1132(c)(7)) is amended by striking ‘‘section 101(i)’’ and in6 serting ‘‘subsection (i) or (m) of section 101’’.

7 (c) MODEL NOTICE.—The Secretary of the Treasury

8 shall, within 180 days after the date of the enactment of

9 this subsection, prescribe a model notice for purposes of sat10 isfying the requirements of the amendments made by this

11 section.

12 (d) EFFECTIVE DATES.—

13 (1) IN GENERAL.—The amendments made by

14 this section shall apply to plan years beginning after

15 December 31, 2005.

16 (2) TRANSITION RULE.—If notice under section

17 101(m) of the Employee Retirement Income Security

18 Act of 1974 (as added by this section) would otherwise

19 be required to be provided before the 90th day after

20 the date of the enactment of this Act, such notice shall

21 not be required to be provided until such 90th day.

22 SEC. 703. PERIODIC PENSION BENEFIT STATEMENTS.

23 (a) AMENDMENTS OF ERISA.—
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1 (1) IN GENERAL.—Section 105(a) of the Em2 ployee Retirement Income Security Act of 1974 (29

3 U.S.C. 1025(a)) is amended to read as follows:

4 ‘‘(a) REQUIREMENTS TO PROVIDE PENSION BENEFIT

5 STATEMENTS.—

6 ‘‘(1) REQUIREMENTS.—

7 ‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The ad8 ministrator of an individual account plan (other

9 than a one-participant retirement plan described

10 in section 101(i)(8)(B)) shall furnish a pension

11 benefit statement—

12 ‘‘(i) at least once each calendar quarter

13 to a participant or beneficiary who has the

14 right to direct the investment of assets in

15 his or her account under the plan,

16 ‘‘(ii) at least once each calendar year

17 to a participant or beneficiary who has his

18 or her own account under the plan but does

19 not have the right to direct the investment

20 of assets in that account, and

21 ‘‘(iii) upon written request to a plan

22 beneficiary not described in clause (i) or

23 (ii).

24 ‘‘(B) DEFINED BENEFIT PLAN.—The ad25 ministrator of a defined benefit plan (other than
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1 a one-participant retirement plan described in

2 section 101(i)(8)(B)) shall furnish a pension ben3 efit statement—

4 ‘‘(i) at least once every 3 years to each

5 participant with a nonforfeitable accrued

6 benefit and who is employed by the em7 ployer maintaining the plan at the time the

8 statement is to be furnished, and

9 ‘‘(ii) to a participant or beneficiary of

10 the plan upon written request.

11 Information furnished under clause (i) to a par12 ticipant may be based on reasonable estimates

13 determined under regulations prescribed by the

14 Secretary, in consultation with the Pension Ben15 efit Guaranty Corporation.

16 ‘‘(2) STATEMENTS.—

17 ‘‘(A) IN GENERAL.—A pension benefit state18 ment under paragraph (1)—

19 ‘‘(i) shall indicate, on the basis of the

20 latest available information—

21 ‘‘(I) the total benefits accrued,

22 and

23 ‘‘(II) the nonforfeitable pension

24 benefits, if any, which have accrued, or
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1 the earliest date on which benefits will

2 become nonforfeitable,

3 ‘‘(ii) shall include an explanation of

4 any permitted disparity under section

5 401(l) of the Internal Revenue Code of 1986

6 or any floor-offset arrangement that may be

7 applied in determining any accrued benefits

8 described in clause (i),

9 ‘‘(iii) shall be written in a manner cal10 culated to be understood by the average plan

11 participant, and

12 ‘‘(iv) may be delivered in written, elec13 tronic, or other appropriate form to the ex14 tent such form is reasonably accessible to

15 the participant or beneficiary.

16 ‘‘(B) ADDITIONAL INFORMATION.—In the

17 case of an individual account plan, any pension

18 benefit statement under clause (i) or (ii) of para19 graph (1)(A) shall include—

20 ‘‘(i) the value of each investment to

21 which assets in the individual account have

22 been allocated, determined as of the most re23 cent valuation date under the plan, includ24 ing the value of any assets held in the form

25 of employer securities or employer real
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1 property, without regard to whether such se2 curities or real property were contributed

3 by the plan sponsor or acquired at the di4 rection of the plan or of the participant or

5 beneficiary, and

6 ‘‘(ii) in the case of a pension benefit

7 statement under paragraph (1)(A)(i)—

8 ‘‘(I) an explanation of any limi9 tations or restrictions on any right of

10 the participant or beneficiary under

11 the plan to direct an investment, and

12 ‘‘(II) a notice that investments in

13 any individual account may not be

14 adequately diversified if the value of

15 any investment in the account exceeds

16 20 percent of the fair market value of

17 all investments in the account.

18 ‘‘(C) ALTERNATIVE NOTICE.—The require19 ments of subparagraph (A)(i)(II) are met if, at

20 least annually and in accordance with require21 ments of the Secretary, the plan—

22 ‘‘(i) updates the information described

23 in such paragraph which is provided in the

24 pension benefit statement, or
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1 ‘‘(ii) provides in a separate statement

2 such information as is necessary to enable

3 a participant or beneficiary to determine

4 their nonforfeitable vested benefits.

5 ‘‘(3) DEFINED BENEFIT PLANS.—

6 ‘‘(A) ALTERNATIVE NOTICE.—In the case of

7 a defined benefit plan, the requirements of para8 graph (1)(B)(i) shall be treated as met with re9 spect to a participant if at least once each year

10 the administrator provides to the participant no11 tice of the availability of the pension benefit

12 statement and the ways in which the participant

13 may obtain such statement. Such notice may be

14 delivered in written, electronic, or other appro15 priate form to the extent such form is reasonably

16 accessible to the participant.

17 ‘‘(B) YEARS IN WHICH NO BENEFITS AC18 CRUE.—The Secretary may provide that years in

19 which no employee or former employee benefits

20 (within the meaning of section 410(b) of the In21 ternal Revenue Code of 1986) under the plan

22 need not be taken into account in determining

23 the 3-year period under paragraph (1)(B)(i).’’

24 (2) CONFORMING AMENDMENTS.—
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1 (A) Section 105 of the Employee Retirement

2 Income Security Act of 1974 (29 U.S.C. 1025) is

3 amended by striking subsection (d).

4 (B) Section 105(b) of such Act (29 U.S.C.

5 1025(b)) is amended to read as follows:

6 ‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In

7 no case shall a participant or beneficiary of a plan be enti8 tled to more than 1 statement described in subparagraph

9 (A)(iii) or (B)(ii) of subsection (a)(1), whichever is applica10 ble, in any 12-month period.’’

11 (C) Section 502(c)(1) of such Act (29 U.S.C.

12 1132(c)(1)) is amended by striking ‘‘or section

13 101(f)’’ and inserting ‘‘section 101(f), or section

14 105(a)’’.

15 (b) MODEL STATEMENTS.—

16 (1) IN GENERAL.—The Secretary of Labor shall,

17 within 180 days after the date of the enactment of

18 this section, develop 1 or more model benefit state19 ments that are written in a manner calculated to be

20 understood by the average plan participant and that

21 may be used by plan administrators in complying

22 with the requirements of section 105 of the Employee

23 Retirement Income Security Act of 1974.

24 (2) INTERIM FINAL RULES.—The Secretary of

25 Labor may promulgate any interim final rules as the
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1 Secretary determines appropriate to carry out the

2 provisions of this subsection.

3 (d) EFFECTIVE DATE.—

4 (1) IN GENERAL.—The amendments made by

5 this section shall apply to plan years beginning after

6 December 31, 2006.

7 (2) SPECIAL RULE FOR COLLECTIVELY BAR8 GAINED AGREEMENTS.—In the case of a plan main9 tained pursuant to 1 or more collective bargaining

10 agreements between employee representatives and 1 or

11 more employers ratified on or before the date of the

12 enactment of this Act, paragraph (1) shall be applied

13 to benefits pursuant to, and individuals covered by,

14 any such agreement by substituting for ‘‘December 31,

15 2006’’ the earlier of—

16 (A) the later of—

17 (i) December 31, 2007, or

18 (ii) the date on which the last of such

19 collective bargaining agreements terminates

20 (determined without regard to any exten21 sion thereof after such date of enactment),

22 or

23 (B) December 31, 2008.
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1 SEC. 704. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF

2 BLACKOUT PERIODS.

3 (a) AMENDMENTS OF ERISA.—

4 (1) IN GENERAL.—Section 101(i) of the Em5 ployee Retirement Income Security Act of 1974 (29

6 U.S.C. 1021(i)) is amended—

7 (A) by striking clauses (i) through (iv) of

8 paragraph (8)(B) and inserting:

9 ‘‘(i) on the first day of the plan year—

10 ‘‘(I) covered only one individual

11 (or the individual and the individual’s

12 spouse) and the individual (or the in13 dividual and the individual’s spouse)

14 owned 100 percent of the plan sponsor

15 (whether or not incorporated), or

16 ‘‘(II) covered only one or more

17 partners (or partners and their

18 spouses) in the plan sponsor, and’’,

19 and

20 (B) in paragraph (8)(B), by redesignating

21 clause (v) as clause (ii).

22 (2) EFFECTIVE DATE.—The amendments made

23 by this subsection shall take effect as if included in

24 the provisions of section 306 of Public Law 107–204

25 (116 Stat. 745 et seq.).
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1 SEC. 705. ALLOWANCE OF, AND CREDIT FOR, ADDITIONAL

2 IRA PAYMENTS IN CERTAIN BANKRUPTCY

3 CASES.

4 (a) ALLOWANCE OF CONTRIBUTIONS.—Section

5 219(b)(5) of the Internal Revenue Code of 1986 (relating

6 to deductible amount) is amended by redesignating sub7 paragraph (C) as subparagraph (D) and by inserting after

8 subparagraph (B) the following new subparagraph:

9 ‘‘(C) CATCHUP CONTRIBUTIONS FOR CER10 TAIN INDIVIDUALS.—

11 ‘‘(i) IN GENERAL.—In the case of an

12 applicable individual who elects to make a

13 qualified retirement contribution in addi14 tion to the deductible amount determined

15 under subparagraph (A)—

16 ‘‘(I) the deductible amount for

17 any taxable year shall be increased by

18 an amount equal to 3 times the appli19 cable amount determined under sub20 paragraph (B) for such taxable year,

21 and

22 ‘‘(II) subparagraph (B) shall not

23 apply.

24 ‘‘(ii) APPLICABLE INDIVIDUAL.—For

25 purposes of this subparagraph, the term

26 ‘applicable individual’ means, with respect
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1 to any taxable year, any individual who

2 was a qualified participant in a qualified

3 cash or deferred arrangement (as defined in

4 section 401(k)) of an employer described in

5 clause (iii) under which the employer

6 matched at least 50 percent of the employ7 ee’s contributions to such arrangement with

8 stock of such employer.

9 ‘‘(iii) EMPLOYER DESCRIBED.—An em10 ployer is described in this clause if, in any

11 taxable year preceding the taxable year de12 scribed in clause (ii)—

13 ‘‘(I) such employer (or any con14 trolling corporation of such employer)

15 was a debtor in a case under title 11

16 of the United States Code, or similar

17 Federal or State law, and

18 ‘‘(II) such employer (or any other

19 person) was subject to an indictment

20 or conviction resulting from business

21 transactions related to such case.

22 ‘‘(iv) QUALIFIED PARTICIPANT.—For

23 purposes of clause (ii), the term ‘qualified

24 participant’ means any applicable indi25 vidual who was a participant in the cash or
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1 deferred arrangement described in clause (i)

2 on the date that is 6 months before the fil3 ing of the case described in clause (iii).

4 ‘‘(v) TERMINATION.—This subpara5 graph shall not apply to taxable years be6 ginning after December 31, 2009.’’

7 (b) SAVER’S CREDIT EXPANDED TO INCLUDE CATCH8 UP CONTRIBUTIONS.—

9 (1) IN GENERAL.—Section 25B of the Internal

10 Revenue Code of 1986 (relating to credit for elective

11 deferrals and IRA contributions by certain individ12 uals) is amended by redesignating subsection (h) as

13 subsection (i) and by inserting after subsection (g) the

14 following new subsection:

15 ‘‘(h) ADDITIONAL CREDIT FOR CERTAIN CATCHUP

16 CONTRIBUTIONS.—

17 ‘‘(1) IN GENERAL.—In the case of an eligible in18 dividual who is an applicable individual under sec19 tion 219(b)(5)(C) for any taxable year, the amount of

20 the credit allowable under subsection (a) for the tax21 able year shall be increased by 50 percent of so much

22 of the qualified retirement contributions (as defined

23 in section 219(e)) of the individual for the taxable

24 year as exceeds the deductible amount for the taxable
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1 year under section 219(b)(5) (without regard to sub2 paragraphs (B) and (C) thereof).

3 ‘‘(2) COORDINATION WITH OTHER CONTRIBU4 TIONS.—For purposes of this section—

5 ‘‘(A) any contribution to which this sub6 section applies shall not be taken into account in

7 determining the amount of the credit allowable

8 under subsection (a) without regard to this sub9 section, and

10 ‘‘(B) in applying any reduction in qualified

11 retirement savings contributions under sub12 section (d)(2), the reduction shall be applied first

13 to qualified retirement savings contributions

14 other than contributions to which this subsection

15 applies.’’.

16 (2) EXTENSION OF TERMINATION DATE FOR

17 CATCHUP CREDIT.—Section 25B(i) of such Code, as

18 redesignated by paragraph (1), is amended by insert19 ing ‘‘(December 31, 2007, in the case of the portion

20 of the credit allowed under subsection (h))’’ after

21 ‘‘2006’’.

22 (c) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to taxable years beginning after Decem24 ber 31, 2004.
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1 SEC. 706. INAPPLICABILITY OF RELIEF FROM FIDUCIARY LI2 ABILITY DURING SUSPENSION OF ABILITY OF

3 PARTICIPANT OR BENEFICIARY TO DIRECT

4 INVESTMENTS.

5 (a) IN GENERAL.—Section 404(c)(1) of the Employee

6 Retirement Income Security Act of 1974 (29 U.S.C.

7 1104(c)(1)) is amended—

8 (1) by redesignating subparagraphs (A) and (B)

9 as clauses (i) and (ii), respectively, and by inserting

10 ‘‘(A)’’ after ‘‘(c)(1)’’,

11 (2) in subparagraph (A)(ii) (as redesignated by

12 paragraph (1)), by inserting before the period the fol13 lowing: ‘‘, except that this clause shall not apply in

14 connection with such participant or beneficiary for

15 any blackout period during which the ability of such

16 participant or beneficiary to direct the investment of

17 the assets in his or her account is suspended by a

18 plan sponsor or fiduciary’’, and

19 (3) by adding at the end the following new sub20 paragraphs:

21 ‘‘(B)(i) If a person referred to in subparagraph (A)(ii)

22 meets the requirements of this title in connection with au23 thorizing and implementing the blackout period, any person

24 who is otherwise a fiduciary shall not be liable under this

25 title for any loss occurring during such period as a result

26 of any exercise by the participant or beneficiary of control
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1 over assets in his or her account before the period. Matters

2 to be considered in determining whether such person has

3 satisfied the requirements of this title include, but are not

4 limited to, whether such person—

5 ‘‘(I) has considered the reasonableness of the ex6 pected blackout period,

7 ‘‘(II) has provided the notice required under sec8 tion 101(i)(1), and

9 ‘‘(III) has acted in accordance with the require10 ments of subsection (a) in determining whether to

11 enter into the blackout period.

12 ‘‘(ii) For purposes of this subsection, if a blackout pe13 riod arises in connection with a change in the investment

14 options offered under the plan, a participant or beneficiary

15 shall be deemed to have exercised control over the assets in

16 his or her account prior to the blackout period if, after no17 tice of the change in investment options is given to such

18 participant or beneficiary, assets in the account of the par19 ticipant or beneficiary are transferred—

20 ‘‘(I) to plan investment options in accordance

21 with the affirmative election of the participant or

22 beneficiary; or

23 ‘‘(II) in the absence of such an election and in

24 the case in which fiduciary relief was provided under

25 this subsection for the prior investment options, to
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1 plan investment options in the manner set forth in

2 such notice.

3 ‘‘(C) For purposes of this paragraph, the term ‘black4 out period’ has the meaning given such term by section

5 101(i)(7).’’

6 (b) GUIDANCE.—Not later than 180 days after the date

7 of enactment of this Act, the Secretary of Labor, in con8 sultation with the Secretary of the Treasury, shall issue in9 terim final regulations providing guidance, including safe

10 harbors, on how plan sponsors or any other affected fidu11 ciaries can satisfy their fiduciary responsibilities during

12 any blackout period during which the ability of a partici13 pant or beneficiary to direct the investment of assets in his

14 or her individual account is suspended.

15 (c) EFFECTIVE DATE.—

16 (1) IN GENERAL.—The amendments made by

17 this section shall apply to plan years beginning after

18 December 31, 2005.

19 (2) SPECIAL RULE FOR COLLECTIVELY BAR20 GAINED AGREEMENTS.—In the case of a plan main21 tained pursuant to 1 or more collective bargaining

22 agreements between employee representatives and 1 or

23 more employers ratified on or before the date of the

24 enactment of this Act, paragraph (1) shall be applied

25 to benefits pursuant to, and individuals covered by,
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1 any such agreement by substituting for ‘‘December 31,

2 2005’’ the earlier of—

3 (A) the later of—

4 (i) December 31, 2006, or

5 (ii) the date on which the last of such

6 collective bargaining agreements terminates

7 (determined without regard to any exten8 sion thereof after such date of enactment),

9 or

10 (B) December 31, 2007.

11 SEC. 707. INCREASE IN MAXIMUM BOND AMOUNT.

12 (a) IN GENERAL.—Section 412(a) of the Employee Re13 tirement Income Security Act of 1974 (29 U.S.C. 1112) is

14 amended by adding at the end the following: ‘‘In the case

15 of a plan that holds employer securities (within the mean16 ing of section 407(d)(1)), this subsection shall be applied

17 by substituting ‘$1,000,000’ for ‘$500,000’ each place it ap18 pears.’’

19 (b) EFFECTIVE DATE.—The amendment made by this

20 section shall apply to plan years beginning after December

21 31, 2005.
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1 TITLE VIII—INFORMATION TO

2 ASSIST PENSION PLAN PAR3 TICIPANTS

4 SEC. 801. DEFINED CONTRIBUTION PLANS REQUIRED TO

5 PROVIDE ADEQUATE INVESTMENT EDU6 CATION TO PARTICIPANTS.

7 (a) ADEQUATE INVESTMENT EDUCATION.—

8 (1) IN GENERAL.—Section 101 of the Employee

9 Retirement Income Security Act of 1974 (29 U.S.C.

10 1024), as amended by this Act, is amended by redes11 ignating subsection (n) as subsection (o) and by in12 serting after subsection (m) the following:

13 ‘‘(n) BASIC INVESTMENT GUIDELINES.—

14 ‘‘(1) IN GENERAL.—The administrator of an in15 dividual account plan (other than a one-participant

16 retirement plan described in subsection (i)(8)(B))

17 shall furnish at least once each year to each partici18 pant or beneficiary who has the right to direct the in19 vestment of assets in his or her account the model

20 form relating to basic investment guidelines which is

21 described in paragraph (2).

22 ‘‘(2) MODEL FORM.—

23 ‘‘(A) IN GENERAL.—The Secretary shall, in

24 consultation with the Secretary of Treasury, de25 velop and make available to individual account
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1 plans for distribution under paragraph (1) a

2 model form containing basic guidelines for in3 vesting for retirement. Except as otherwise pro4 vided by the Secretary, such guidelines shall

5 include—

6 ‘‘(i) information on the benefits of di7 versification,

8 ‘‘(ii) information on the essential dif9 ferences, in terms of risk and return, of pen10 sion plan investments, including stocks,

11 bonds, mutual funds, and money market in12 vestments,

13 ‘‘(iii) information on how an individ14 ual’s pension plan investment allocations

15 may differ depending on the individual’s

16 age and years to retirement and on other

17 factors determined by the Secretary,

18 ‘‘(iv) sources of information where in19 dividuals may learn more about pension

20 rights, individual investing, and investment

21 advice, and

22 ‘‘(v) such other information related to

23 individual investing as the Secretary deter24 mines appropriate.
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1 ‘‘(B) CALCULATION INFORMATION.—The

2 model form under subparagraph (A) shall in3 clude addresses for Internet sites, and a work4 sheet, which a participant or beneficiary may

5 use to calculate—

6 ‘‘(i) the retirement age value of the

7 participant’s or beneficiary’s nonforfeitable

8 pension benefits under the plan (expressed

9 as an annuity amount and determined by

10 reference to varied historical annual rates of

11 return and annuity interest rates), and

12 ‘‘(ii) other important amounts relating

13 to retirement savings, including the amount

14 which a participant or beneficiary would be

15 required to save annually to provide a re16 tirement income equal to various percent17 ages of their current salary (adjusted for ex18 pected growth prior to retirement).

19 The Secretary shall develop an Internet site

20 which an individual may use in making such

21 calculations and the address for such site shall be

22 included with the form.

23 ‘‘(C) PUBLIC COMMENT.—The Secretary of

24 Labor shall provide at least 90 days for public
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1 comment before publishing final notice of the

2 model form.

3 ‘‘(3) RULES RELATING TO FORM AND STATE4 MENT.—The model form under paragraph (2)—

5 ‘‘(A) shall be written in a manner cal6 culated to be understood by the average plan

7 participant, and

8 ‘‘(B) may be delivered in written, electronic,

9 or other appropriate form to the extent such form

10 is reasonably accessible to participants and bene11 ficiaries.’’

12 (2) ENFORCEMENT.—Section 502(c)(7) of such

13 Act (29 U.S.C. 1132(c)(7)), as amended by this Act,

14 is amended by striking ‘‘or (l)’’ and inserting ‘‘, (l),

15 or (n)’’.

16 (c) EFFECTIVE DATE.—

17 (1) IN GENERAL.—The amendments made by

18 this section shall apply to plan years beginning after

19 December 31, 2006.

20 (2) SPECIAL RULE FOR COLLECTIVELY BAR21 GAINED AGREEMENTS.—In the case of a plan main22 tained pursuant to 1 or more collective bargaining

23 agreements between employee representatives and 1 or

24 more employers ratified on or before the date of the

25 enactment of this Act, paragraph (1) shall be applied
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1 to benefits pursuant to, and individuals covered by,

2 any such agreement by substituting for ‘‘December 31,

3 2006’’ the earlier of—

4 (A) the later of—

5 (i) December 31, 2007, or

6 (ii) the date on which the last of such

7 collective bargaining agreements terminates

8 (determined without regard to any exten9 sion thereof after such date of enactment),

10 or

11 (B) December 31, 2008.

12 SEC. 802. INDEPENDENT INVESTMENT ADVICE PROVIDED

13 TO PLAN PARTICIPANTS.

14 (a) IN GENERAL.—Section 404 of the Employee Re15 tirement Income Security Act of 1974 (29 U.S.C. 1104) is

16 amended by adding at the end the following new subsection:

17 ‘‘(e) INDEPENDENT INVESTMENT ADVISER.—

18 ‘‘(1) IN GENERAL.—In the case of an individual

19 account plan which permits a plan participant or

20 beneficiary to direct the investment of the assets in

21 his or her account, if a plan sponsor or other person

22 who is a fiduciary designates and monitors a quali23 fied investment adviser pursuant to the requirements

24 of paragraph (3), such fiduciary—
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1 ‘‘(A) shall be deemed to have satisfied the

2 requirements under this section for the prudent

3 designation and periodic review of an investment

4 adviser with whom the plan sponsor or other

5 person who is a fiduciary enters into an ar6 rangement for the provision of advice referred to

7 in section 3(21)(A)(ii),

8 ‘‘(B) shall not be liable under this section

9 for any loss, or by reason of any breach, with re10 spect to the provision of investment advice given

11 by such adviser to any plan participant or bene12 ficiary, and

13 ‘‘(C) shall not be liable for any co-fiduciary

14 liability under subsections (a)(2) and (b) of sec15 tion 405 with respect to the provision of invest16 ment advice given by such adviser to any plan

17 participant or beneficiary.

18 ‘‘(2) QUALIFIED INVESTMENT ADVISER.—

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

20 subsection, the term ‘qualified investment ad21 viser’ means, with respect to a plan, a person—

22 ‘‘(i) who is a fiduciary of the plan by

23 reason of the provision of investment advice

24 by such person to a plan participant or

25 beneficiary;
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1 ‘‘(ii) who—

2 ‘‘(I) is registered as an investment

3 adviser under the Investment Advisers

4 Act of 1940 (15 U.S.C. 80b–1 et seq.),

5 ‘‘(II) is registered as an invest6 ment adviser under the laws of the

7 State in which such adviser maintains

8 the principal office and place of busi9 ness of such adviser, but only if such

10 State laws are consistent with section

11 203A of the Investment Advisers Act of

12 1940 (15 U.S.C. 80b–3a),

13 ‘‘(III) is a bank or similar finan14 cial institution referred to in section

15 408(b)(4),

16 ‘‘(IV) is an insurance company

17 qualified to do business under the laws

18 of a State, or

19 ‘‘(V) is any other comparably

20 qualified entity which satisfies such

21 criteria as the Secretary determines

22 appropriate, consistent with the pur23 poses of this subsection, and

24 ‘‘(iii) who meets the requirements of

25 subparagraph (B).
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1 ‘‘(B) ADVISER REQUIREMENTS.—The re2 quirements of this subparagraph are met if every

3 individual employed (or otherwise compensated)

4 by a person described in subparagraph (A)(ii)

5 who provides investment advice on behalf of such

6 person to any plan participant or beneficiary

7 is—

8 ‘‘(i) an individual described in sub9 clause (I) of subparagraph (A)(ii),

10 ‘‘(ii) an individual described in sub11 clause (II) of subparagraph (A)(ii), but

12 only if such State has an examination re13 quirement to qualify for registration,

14 ‘‘(iii) registered as a broker or dealer

15 under the Securities Exchange Act of 1934

16 (15 U.S.C. 78a et seq.),

17 ‘‘(iv) a registered representative as de18 scribed in section 3(a)(18) of the Securities

19 Exchange Act of 1934 (15 U.S.C.

20 78c(a)(18)) or section 202(a)(17) of the In21 vestment Advisers Act of 1940 (15 U.S.C.

22 80b–2(a)(17)), or

23 ‘‘(v) any other comparably qualified

24 individual who satisfies such criteria as the
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1 Secretary determines appropriate, con2 sistent with the purposes of this subsection.

3 ‘‘(3) VERIFICATION REQUIREMENTS.—The re4 quirements of this paragraph are met if—

5 ‘‘(A) the plan sponsor or other person who

6 is a fiduciary in designating a qualified invest7 ment adviser receives at the time of the designa8 tion, and annually thereafter, a written

9 verification from the qualified investment ad10 viser that the investment adviser—

11 ‘‘(i) is and remains a qualified invest12 ment adviser,

13 ‘‘(ii) acknowledges that the investment

14 adviser is a fiduciary with respect to the

15 plan and is solely responsible for its invest16 ment advice,

17 ‘‘(iii) has reviewed the plan documents

18 (including investment options) and has de19 termined that its relationship with the plan

20 and the investment advice provided to any

21 plan participant or beneficiary, including

22 any fees or other compensation it will re23 ceive, will not constitute a violation of sec24 tion 406,
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1 ‘‘(iv) will, in providing investment ad2 vice to any participant or beneficiary, con3 sider any employer securities or employer

4 real property allocated to his or her ac5 count, and

6 ‘‘(v) has the necessary insurance cov7 erage (as determined by the Secretary) for

8 any claim by any plan participant or bene9 ficiary,

10 ‘‘(B) the plan sponsor or other person who

11 is a fiduciary in designating a qualified invest12 ment adviser reviews the documents described in

13 paragraph (4) provided by such adviser and de14 termines that there is no material reason not to

15 enter into an arrangement for the provision of

16 advice by such qualified investment adviser, and

17 ‘‘(C) the plan sponsor or other person who

18 is a fiduciary in designating a qualified invest19 ment adviser, within 30 days of having informa20 tion brought to its attention that the investment

21 adviser is no longer qualified or that a substan22 tial number of plan participants or beneficiaries

23 have raised concerns about the services being

24 provided by the investment adviser—
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1 ‘‘(i) investigates such information and

2 concerns, and

3 ‘‘(ii) determines that there is no mate4 rial reason not to continue the designation

5 of the adviser as a qualified investment ad6 viser.

7 ‘‘(4) DOCUMENTATION.—A qualified investment

8 adviser shall provide the following documents to the

9 plan sponsor or other person who is a fiduciary in

10 designating the adviser:

11 ‘‘(A) The contract with the plan sponsor or

12 other person who is a fiduciary for the services

13 to be provided by the investment adviser to the

14 plan participants and beneficiaries.

15 ‘‘(B) A disclosure as to any fees or other

16 compensation that will be received by the invest17 ment adviser for the provision of such investment

18 advice and as to any fees and other compensa19 tion that will be received as a result of a partici20 pant’s investment election.

21 ‘‘(C) The Uniform Application for Invest22 ment Adviser Registration as filed with the Secu23 rities and Exchange Commission or a substan24 tially similar disclosure application as deter25 mined by and filed with the Secretary.
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1 ‘‘(5) TREATMENT AS FIDUCIARY.—Any qualified

2 investment adviser that acknowledges it is a fiduciary

3 pursuant to paragraph (3)(A)(ii) shall be deemed a

4 fiduciary under this part with respect to the provi5 sion of investment advice to a plan participant or

6 beneficiary.’’

7 (b) FIDUCIARY LIABILITY.—Section 404(c)(1)(B) of

8 such Act is amended by inserting ‘‘(other than a qualified

9 investment adviser)’’ after ‘‘fiduciary’’.

10 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply with respect to investment advisers des12 ignated after the date of the enactment of this Act.

13 SEC. 803. TREATMENT OF QUALIFIED RETIREMENT PLAN14 NING SERVICES.

15 (a) IN GENERAL.—Subsection (m) of section 132 of the

16 Internal Revenue Code of 1986 (defining qualified retire17 ment services) is amended by adding at the end the fol18 lowing new paragraph:

19 ‘‘(4) NO CONSTRUCTIVE RECEIPT.—

20 ‘‘(A) IN GENERAL.—No amount shall be in21 cluded in the gross income of any employee solely

22 because the employee may choose between any

23 qualified retirement planning services provided

24 by an eligible investment advisor and compensa25 tion which would otherwise be includible in the
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1 gross income of such employee. The preceding

2 sentence shall apply to highly compensated em3 ployees only if the choice described in such sen4 tence is available on substantially the same

5 terms to each member of the group of employees

6 normally provided education and information

7 regarding the employer’s qualified employer

8 plan.

9 ‘‘(B) LIMITATION.—The maximum amount

10 which may be excluded under subparagraph (A)

11 with respect to any employee for any taxable

12 year shall not exceed $1,000.

13 ‘‘(C) ELIGIBLE INVESTMENT ADVISER.—For

14 purposes of this paragraph, the term ‘eligible in15 vestment adviser’ means, with respect to a plan,

16 a person—

17 ‘‘(i) who—

18 ‘‘(I) is registered as an investment

19 adviser under the Investment Advisers

20 Act of 1940 (15 U.S.C. 80b–1 et seq.),

21 ‘‘(II) is registered as an invest22 ment adviser under the laws of the

23 State in which such adviser maintains

24 the principal office and place of busi25 ness of such adviser, but only if such
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1 State laws are consistent with section

2 203A of the Investment Advisers Act of

3 1940 (15 U.S.C. 80b–3a),

4 ‘‘(III) is a bank or similar finan5 cial institution referred to in section

6 408(b)(4),

7 ‘‘(IV) is an insurance company

8 qualified to do business under the laws

9 of a State, or

10 ‘‘(V) is any other comparably

11 qualified entity which satisfies such

12 criteria as the Secretary determines

13 appropriate, consistent with the pur14 poses of this subsection, and

15 ‘‘(ii) who meets the requirements of

16 subparagraph (D).

17 ‘‘(D) ADVISER REQUIREMENTS.—The re18 quirements of this subparagraph are met if every

19 individual employed (or otherwise compensated)

20 by a person described in subparagraph (C)(i)

21 who provides investment advice on behalf of such

22 person to any plan participant or beneficiary

23 is—

24 ‘‘(i) an individual described in sub25 clause (I) of subparagraph (C)(i),
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1 ‘‘(ii) an individual described in sub2 clause (II) of subparagraph (C)(i), but only

3 if such State has an examination require4 ment to qualify for registration,

5 ‘‘(iii) registered as a broker or dealer

6 under the Securities Exchange Act of 1934

7 (15 U.S.C. 78a et seq.),

8 ‘‘(iv) a registered representative as de9 scribed in section 3(a)(18) of the Securities

10 Exchange Act of 1934 (15 U.S.C.

11 78c(a)(18)) or section 202(a)(17) of the In12 vestment Advisers Act of 1940 (15 U.S.C.

13 80b–2(a)(17)), or

14 ‘‘(v) any other comparably qualified

15 individual who satisfies such criteria as the

16 Secretary determines appropriate, con17 sistent with the purposes of this paragraph.

18 ‘‘(E) TERMINATION.—This paragraph shall

19 not apply to taxable years beginning after De20 cember 31, 2010.’’.

21 (b) CONFORMING AMENDMENTS.—

22 (1) Section 403(b)(3)(B) of such Code is amend23 ed by inserting ‘‘132(m)(4),’’ after ‘‘132(f)(4),’’.

24 (2) Section 414(s)(2) of such Code is amended by

25 inserting ‘‘132(m)(4),’’ after ‘‘132(f)(4),’’.
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1 (3) Section 415(c)(3)(D)(ii) of such Code is

2 amended by inserting ‘‘132(m)(4),’’ after ‘‘132(f)(4),’’.

3 (c) EFFECTIVE DATE.—The amendments made by this

4 section shall apply to taxable years beginning after Decem5 ber 31, 2005.

6 SEC. 804. INCREASE IN PENALTIES FOR COERCIVE INTER7 FERENCE WITH EXERCISE OF ERISA RIGHTS.

8 (a) IN GENERAL.—Section 511 of the Employment Re9 tirement Income Security Act of 1974 (29 U.S.C. 1141) is

10 amended—

11 (1) by striking ‘‘$10,000’’ and inserting

12 ‘‘$100,000’’, and

13 (2) by striking ‘‘one year’’ and inserting ‘‘10

14 years’’.

15 (b) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to violations occurring on and after the

17 date of the enactment of this Act.

18 SEC. 805. ADMINISTRATIVE PROVISION.

19 The Secretary of the Treasury shall have the authority

20 to prescribe rules applicable to the statements required

21 under sections 101(j) and 101(m) of the Employee Retire22 ment Income Security Act of 1974 (as added by this Act).
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1 TITLE IX—PROVISIONS RELAT2 ING TO SPOUSAL PENSION

3 PROTECTION

4 SEC. 901. REGULATIONS ON TIME AND ORDER OF ISSUANCE

5 OF DOMESTIC RELATIONS ORDERS.

6 Not later than 1 year after the date of the enactment

7 of this Act, the Secretary of Labor shall issue regulations

8 under section 206(d)(3) of the Employee Retirement Secu9 rity Act of 1974 and section 414(p) of the Internal Revenue

10 Code of 1986 which clarify that—

11 (1) a domestic relations order otherwise meeting

12 the requirements to be a qualified domestic relations

13 order, including the requirements of section

14 206(d)(3)(D) of such Act and section 414(p)(3) of

15 such Code, shall not fail to be treated as a qualified

16 domestic relations order solely because—

17 (A) the order is issued after, or revises, an18 other domestic relations order or qualified do19 mestic relations order; or

20 (B) of the time at which it is issued; and

21 (2) any order described in paragraph (1) shall

22 be subject to the same requirements and protections

23 which apply to qualified domestic relations orders, in24 cluding the provisions of section 206(d)(3)(H) of such

25 Act and section 414(p)(7) of such Code.
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1 SEC. 902. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL2 ROAD RETIREMENT ANNUITIES INDE3 PENDENT OF ACTUAL ENTITLEMENT OF EM4 PLOYEE.

5 (a) IN GENERAL.—Section 2 of the Railroad Retire6 ment Act of 1974 (45 U.S.C. 231a) is amended—

7 (1) in subsection (c)(4)(i), by striking ‘‘(A) is en8 titled to an annuity under subsection (a)(1) and

9 (B)’’; and

10 (2) in subsection (e)(5), by striking ‘‘or divorced

11 wife’’ the second place it appears.

12 (b) EFFECTIVE DATE.—The amendments made by this

13 section shall take effect 1 year after the date of the enact14 ment of this Act.

15 SEC. 903. EXTENSION OF TIER II RAILROAD RETIREMENT

16 BENEFITS TO SURVIVING FORMER SPOUSES

17 PURSUANT TO DIVORCE AGREEMENTS.

18 (a) IN GENERAL.—Section 5 of the Railroad Retire19 ment Act of 1974 (45 U.S.C. 231d) is amended by adding

20 at the end the following:

21 ‘‘(d) Notwithstanding any other provision of law, the

22 payment of any portion of an annuity computed under sec23 tion 3(b) to a surviving former spouse in accordance with

24 a court decree of divorce, annulment, or legal separation

25 or the terms of any court-approved property settlement inci26 dent to any such court decree shall not be terminated upon
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1 the death of the individual who performed the service with

2 respect to which such annuity is so computed unless such

3 termination is otherwise required by the terms of such court

4 decree.’’

5 (b) EFFECTIVE DATE.—The amendment made by this

6 section shall take effect 1 year after the date of the enact7 ment of this Act.

8 SEC. 904. REQUIREMENT FOR ADDITIONAL SURVIVOR AN9 NUITY OPTION.

10 (a) AMENDMENTS TO INTERNAL REVENUE CODE.—

11 (1) ELECTION OF SURVIVOR ANNUITY.—Section

12 417(a)(1)(A) of the Internal Revenue Code of 1986 is

13 amended—

14 (A) in clause (i), by striking ‘‘, and’’ and

15 inserting a comma;

16 (B) by redesignating clause (ii) as clause

17 (iii); and

18 (C) by inserting after clause (i) the fol19 lowing:

20 ‘‘(ii) if the participant elects a waiver

21 under clause (i), may elect the qualified optional

22 survivor annuity at any time during the appli23 cable election period, and’’.

24 (2) DEFINITION.—Section 417 of such Code is

25 amended by adding at the end the following:
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1 ‘‘(g) DEFINITION OF QUALIFIED OPTIONAL SURVIVOR

2 ANNUITY.—

3 ‘‘(1) IN GENERAL.—For purposes of this section,

4 the term ‘qualified optional survivor annuity’ means

5 an annuity—

6 ‘‘(A) for the life of the participant with a

7 survivor annuity for the life of the spouse which

8 is equal to the applicable percentage of the

9 amount of the annuity which is payable during

10 the joint lives of the participant and the spouse,

11 and

12 ‘‘(B) which is the actuarial equivalent of a

13 single annuity for the life of the participant.

14 Such term also includes any annuity in a form hav15 ing the effect of an annuity described in the preceding

16 sentence.

17 ‘‘(2) APPLICABLE PERCENTAGE.—

18 ‘‘(A) IN GENERAL.—For purposes of para19 graph (1), if the survivor annuity percentage—

20 ‘‘(i) is less than 75 percent, the appli21 cable percentage is 75 percent, and

22 ‘‘(ii) is greater than or equal to 75 per23 cent, the applicable percentage is 50 per24 cent.
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1 ‘‘(B) SURVIVOR ANNUITY PERCENTAGE.—

2 For purposes of subparagraph (A), the term ‘sur3 vivor annuity percentage’ means the percentage

4 which the survivor annuity under the plan’s

5 qualified joint and survivor annuity bears to the

6 annuity payable during the joint lives of the

7 participant and the spouse.’’.

8 (3) NOTICE.—Section 417(a)(3)(A)(i) of such

9 Code is amended by inserting ‘‘and of the qualified

10 optional survivor annuity’’ after ‘‘annuity’’.

11 (b) AMENDMENTS TO ERISA.—

12 (1) ELECTION OF SURVIVOR ANNUITY.—Section

13 205(c)(1)(A) of the Employee Retirement Income Se14 curity Act of 1974 (29 U.S.C. 1055(c)(1)(A)) is

15 amended—

16 (A) in clause (i), by striking ‘‘, and’’ and

17 inserting a comma;

18 (B) by redesignating clause (ii) as clause

19 (iii); and

20 (C) by inserting after clause (i) the fol21 lowing:

22 ‘‘(ii) if the participant elects a waiver

23 under clause (i), may elect the qualified optional

24 survivor annuity at any time during the appli25 cable election period, and’’.
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1 (2) DEFINITION.—Section 205(d) of such Act (29

2 U.S.C. 1055(d)) is amended—

3 (A) by inserting ‘‘(1)’’ after ‘‘(d)’’;

4 (B) by redesignating paragraphs (1) and

5 (2) as subparagraphs (A) and (B), respectively;

6 and

7 (C) by adding at the end the following:

8 ‘‘(2)(A) For purposes of this section, the term ‘qualified

9 optional survivor annuity’ means an annuity—

10 ‘‘(i) for the life of the participant with a sur11 vivor annuity for the life of the spouse which is equal

12 to the applicable percentage of the amount of the an13 nuity which is payable during the joint lives of the

14 participant and the spouse, and

15 ‘‘(ii) which is the actuarial equivalent of a single

16 annuity for the life of the participant.

17 Such term also includes any annuity in a form having the

18 effect of an annuity described in the preceding sentence.

19 ‘‘(B)(i) For purposes of subparagraph (A), if the sur20 vivor annuity percentage—

21 ‘‘(I) is less than 75 percent, the applicable per22 centage is 75 percent, and

23 ‘‘(II) is greater than or equal to 75 percent, the

24 applicable percentage is 50 percent.
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1 ‘‘(ii) For purposes of clause (i), the term ‘survivor an2 nuity percentage’ means the percentage which the survivor

3 annuity under the plan’s qualified joint and survivor annu4 ity bears to the annuity payable during the joint lives of

5 the participant and the spouse.’’.

6 (3) NOTICE.—Section 205(c)(3)(A)(i) of such Act

7 (29 U.S.C. 1055(c)(3)(A)(i)) is amended by inserting

8 ‘‘and of the qualified optional survivor annuity’’ after

9 ‘‘annuity’’.

10 (c) EFFECTIVE DATES.—

11 (1) IN GENERAL.—The amendments made by

12 this section shall apply to plan years beginning after

13 December 31, 2005.

14 (2) SPECIAL RULE FOR COLLECTIVELY BAR15 GAINED PLANS.—In the case of a plan maintained

16 pursuant to 1 or more collective bargaining agree17 ments between employee representatives and 1 or

18 more employers ratified on or before the date of the

19 enactment of this Act, the amendments made by this

20 section shall apply to the first plan year beginning on

21 or after the earlier of—

22 (A) the later of—

23 (i) January 1, 2006, or

24 (ii) the date on which the last of such

25 collective bargaining agreements terminates
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1 (determined without regard to any exten2 sion thereof after the date of enactment of

3 this Act), or

4 (B) January 1, 2007.

5 TITLE X—IMPROVEMENTS IN

6 PORTABILITY AND DISTRIBU7 TION RULES

8 SEC. 1001. CLARIFICATIONS REGARDING PURCHASE OF

9 PERMISSIVE SERVICE CREDIT.

10 (a) IN GENERAL.—Section 415(n) of the Internal Rev11 enue Code of 1986 (relating to special rules for the purchase

12 of permissive service credit) is amended—

13 (1) by striking ‘‘an employee’’ in paragraph (1)

14 and inserting ‘‘a participant’’, and

15 (2) by adding at the end of paragraph (3)(A) the

16 following new flush sentence:

17 ‘‘Such term may include service credit for peri18 ods for which there is no performance of service,

19 and notwithstanding clause (ii), may include

20 service credited in order to provide an increased

21 benefit for service credit which a participant is

22 receiving under the plan.’’

23 (b) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE

24 TRANSFERS.—Section 415(n)(3) of such Code is amended

25 by adding at the end the following new subparagraph:
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1 ‘‘(D) SPECIAL RULES FOR TRUSTEE-TO2 TRUSTEE TRANSFERS.—In the case of a trustee3 to-trustee transfer to which section 403(b)(13)(A)

4 or 457(e)(17)(A) applies (without regard to

5 whether the transfer is made between plans

6 maintained by the same employer)—

7 ‘‘(i) the limitations of subparagraph

8 (B) shall not apply in determining whether

9 the transfer is for the purchase of permissive

10 service credit, and

11 ‘‘(ii) the distribution rules applicable

12 under this title to the defined benefit gov13 ernmental plan to which any amounts are

14 so transferred shall apply to such amounts

15 and any benefits attributable to such

16 amounts.’’.

17 (c) NONQUALIFIED SERVICE.—Section 415(n)(3) of

18 such Code is amended—

19 (1) by striking ‘‘permissive service credit attrib20 utable to nonqualified service’’ each place it appears

21 in subparagraph (B) and inserting ‘‘nonqualified

22 service credit’’,

23 (2) by striking so much of subparagraph (C) as

24 precedes clause (i) and inserting:
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1 ‘‘(C) NONQUALIFIED SERVICE CREDIT.—For

2 purposes of subparagraph (B), the term ‘non3 qualified service credit’ means permissive service

4 credit other than that allowed with respect to—

5 ’’, and

6 (3) by striking ‘‘elementary or secondary edu7 cation (through grade 12), as determined under State

8 law’’ and inserting ‘‘elementary or secondary edu9 cation (through grade 12), or a comparable level of

10 education, as determined under the applicable law of

11 the jurisdiction in which the service was performed’’.

12 (d) EFFECTIVE DATES.—

13 (1) IN GENERAL.—The amendments made by

14 subsections (a) and (c) shall take effect as if included

15 in the amendments made by section 1526 of the Tax16 payer Relief Act of 1997.

17 (2) SUBSECTION (b).—The amendments made by

18 subsection (b) shall take effect as if included in the

19 amendments made by section 647 of the Economic

20 Growth and Tax Relief Reconciliation Act of 2001.

21 SEC. 1002. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN

22 ANNUITY CONTRACTS.

23 (a) IN GENERAL.—Subparagraph (A) of section

24 402(c)(2) (relating to the maximum amount which may be

25 rolled over) is amended—
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1 (1) by striking ‘‘which is part of a plan which

2 is a defined contribution plan and which agrees to

3 separately account’’ and inserting ‘‘or to an annuity

4 contract described in section 403(b) and such trust or

5 contract provides for separate accounting’’; and

6 (2) by inserting ‘‘(and earnings thereon)’’ after

7 ‘‘so transferred’’.

8 (b) EFFECTIVE DATE.—The amendment made by sub9 section (a) shall apply to taxable years beginning after De10 cember 31, 2005.

11 SEC. 1003. CLARIFICATION OF MINIMUM DISTRIBUTION

12 RULES FOR GOVERNMENTAL PLANS.

13 The Secretary of the Treasury shall issue regulations

14 under which a governmental plan (as defined in section

15 414(d) of the Internal Revenue Code of 1986) shall, for all

16 years to which section 401(a)(9) of such Code applies to

17 such plan, be treated as having complied with such section

18 401(a)(9) if such plan complies with a reasonable good faith

19 interpretation of such section 401(a)(9).

20 SEC. 1004. WAIVER OF 10 PERCENT EARLY WITHDRAWAL

21 PENALTY TAX ON CERTAIN DISTRIBUTIONS

22 OF PENSION PLANS FOR PUBLIC SAFETY EM23 PLOYEES.

24 (a) IN GENERAL.—Section 72(t) of the Internal Rev25 enue Code of 1986 (relating to subsection not to apply to
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1 certain distributions) is amended by adding at the end the

2 following new paragraph:

3 ‘‘(10) DISTRIBUTIONS TO QUALIFIED PUBLIC

4 SAFETY EMPLOYEES IN GOVERNMENTAL PLANS.—

5 ‘‘(A) IN GENERAL.—In the case of a dis6 tribution to a qualified public safety employee

7 from a governmental plan (within the meaning

8 of section 414(d)) which is a defined benefit

9 plan, paragraph (2)(A)(v) shall be applied by

10 substituting ‘age 50’ for ‘age 55’.

11 ‘‘(B) QUALIFIED PUBLIC SAFETY EM12 PLOYEE.—For purposes of this paragraph, the

13 term ‘qualified public safety employee’ means

14 any employee of a State or political subdivision

15 of a State who provides police protection, fire16 fighting services, or emergency medical services

17 for any area within the jurisdiction of such

18 State or political subdivision.’’

19 (b) EFFECTIVE DATE.—The amendment made by this

20 section shall apply to distributions after the date of the en21 actment of this Act.

22 SEC. 1005. ALLOW ROLLOVERS BY NONSPOUSE BENE23 FICIARIES OF CERTAIN RETIREMENT PLAN

24 DISTRIBUTIONS.

25 (a) IN GENERAL.—
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1 (1) QUALIFIED PLANS.—Section 402(c) of the In2 ternal Revenue Code of 1986 (relating to rollovers

3 from exempt trusts) is amended by adding at the end

4 the following new paragraph:

5 ‘‘(11) DISTRIBUTIONS TO INHERITED INDIVIDUAL

6 RETIREMENT PLAN OF NONSPOUSE BENEFICIARY.—

7 ‘‘(A) IN GENERAL.—If, with respect to any

8 portion of a distribution from an eligible retire9 ment plan of a deceased employee, a direct trust10 ee-to-trustee transfer is made to an individual

11 retirement plan described in clause (i) or (ii) of

12 paragraph (8)(B) established for the purposes of

13 receiving the distribution on behalf of an indi14 vidual who is a designated beneficiary (as de15 fined by section 401(a)(9)(E)) of the employee

16 and who is not the surviving spouse of the

17 employee—

18 ‘‘(i) the transfer shall be treated as an

19 eligible rollover distribution for purposes of

20 this subsection,

21 ‘‘(ii) the individual retirement plan

22 shall be treated as an inherited individual

23 retirement account or individual retirement

24 annuity (within the meaning of section

25 408(d)(3)(C)) for purposes of this title, and
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1 ‘‘(iii) section 401(a)(9)(B) (other than

2 clause (iv) thereof) shall apply to such plan.

3 ‘‘(B) CERTAIN TRUSTS TREATED AS BENE4 FICIARIES.—For purposes of this paragraph, to

5 the extent provided in rules prescribed by the

6 Secretary, a trust maintained for the benefit of

7 one or more designated beneficiaries shall be

8 treated in the same manner as a designated ben9 eficiary.’’.

10 (2) SECTION 403(a) PLANS.—Subparagraph (B)

11 of section 403(a)(4) of such Code (relating to rollover

12 amounts) is amended by striking ‘‘and (9)’’ and in13 serting ‘‘, (9), and (11)’’.

14 (3) SECTION 403(b) PLANS.—Subparagraph (B)

15 of section 403(b)(8) of such Code (relating to rollover

16 amounts) is amended by striking ‘‘and (9)’’ and in17 serting ‘‘, (9), and (11)’’.

18 (4) SECTION 457 PLANS.—Subparagraph (B) of

19 section 457(e)(16) of such Code (relating to rollover

20 amounts) is amended by striking ‘‘and (9)’’ and in21 serting ‘‘, (9), and (11)’’.

22 (b) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to distributions after December 31, 2005.
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1 SEC. 1006. FASTER VESTING OF EMPLOYER NONELECTIVE

2 CONTRIBUTIONS.

3 (a) AMENDMENTS TO THE INTERNAL REVENUE CODE

4 OF 1986.—

5 (1) IN GENERAL.—Paragraph (2) of section

6 411(a) of the Internal Revenue Code of 1986 (relating

7 to employer contributions) is amended to read as fol8 lows:

9 ‘‘(2) EMPLOYER CONTRIBUTIONS.—

10 ‘‘(A) DEFINED BENEFIT PLANS.—

11 ‘‘(i) IN GENERAL.—In the case of a de12 fined benefit plan, a plan satisfies the re13 quirements of this paragraph if it satisfies

14 the requirements of clause (ii) or (iii).

15 ‘‘(ii) 5-YEAR VESTING.—A plan satis16 fies the requirements of this clause if an em17 ployee who has completed at least 5 years of

18 service has a nonforfeitable right to 100 per19 cent of the employee’s accrued benefit de20 rived from employer contributions.

21 ‘‘(iii) 3 TO 7 YEAR VESTING.—A plan

22 satisfies the requirements of this clause if an

23 employee has a nonforfeitable right to a per24 centage of the employee’s accrued benefit de25 rived from employer contributions deter26 mined under the following table:
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The nonforfeitable

‘‘Years of service: percentage is:

3 .................................................................................................. 20

4 .................................................................................................. 40

5 .................................................................................................. 60

6 .................................................................................................. 80

7 or more .................................................................................... 100.

1 ‘‘(B) DEFINED CONTRIBUTION PLANS.—

2 ‘‘(i) IN GENERAL.—In the case of a de3 fined contribution plan, a plan satisfies the

4 requirements of this paragraph if it satisfies

5 the requirements of clause (ii) or (iii).

6 ‘‘(ii) 3-YEAR VESTING.—A plan satis7 fies the requirements of this clause if an em8 ployee who has completed at least 3 years of

9 service has a nonforfeitable right to 100 per10 cent of the employee’s accrued benefit de11 rived from employer contributions.

12 ‘‘(iii) 2 TO 6 YEAR VESTING.—A plan

13 satisfies the requirements of this clause if an

14 employee has a nonforfeitable right to a per15 centage of the employee’s accrued benefit de16 rived from employer contributions deter17 mined under the following table:

The nonforfeitable

‘‘Years of service: percentage is:

2 .................................................................................................. 20

3 .................................................................................................. 40

4 .................................................................................................. 60

5 .................................................................................................. 80

6 or more .................................................................................... 100.’’.
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1 (2) CONFORMING AMENDMENT.—Section 411(a)

2 of such Code (relating to general rule for minimum

3 vesting standards) is amended by striking paragraph

4 (12).

5 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

6 INCOME SECURITY ACT OF 1974.—

7 (1) IN GENERAL.—Paragraph (2) of section

8 203(a) of the Employee Retirement Income Security

9 Act of 1974 (29 U.S.C. 1053(a)(2)) is amended to

10 read as follows:

11 ‘‘(2)(A)(i) In the case of a defined benefit plan,

12 a plan satisfies the requirements of this paragraph if

13 it satisfies the requirements of clause (ii) or (iii).

14 ‘‘(ii) A plan satisfies the requirements of this

15 clause if an employee who has completed at least 5

16 years of service has a nonforfeitable right to 100 per17 cent of the employee’s accrued benefit derived from

18 employer contributions.

19 ‘‘(iii) A plan satisfies the requirements of this

20 clause if an employee has a nonforfeitable right to a

21 percentage of the employee’s accrued benefit derived

22 from employer contributions determined under the fol23 lowing table:

The nonforfeitable

‘‘Years of service: percentage is:

3 .................................................................................................. 20

4 .................................................................................................. 40

5 .................................................................................................. 60
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6 .................................................................................................. 80

7 or more .................................................................................... 100.

1 ‘‘(B)(i) In the case of an individual account

2 plan, a plan satisfies the requirements of this para3 graph if it satisfies the requirements of clause (ii) or

4 (iii).

5 ‘‘(ii) A plan satisfies the requirements of this

6 clause if an employee who has completed at least 3

7 years of service has a nonforfeitable right to 100 per8 cent of the employee’s accrued benefit derived from

9 employer contributions.

10 ‘‘(iii) A plan satisfies the requirements of this

11 clause if an employee has a nonforfeitable right to a

12 percentage of the employee’s accrued benefit derived

13 from employer contributions determined under the fol14 lowing table:

The nonforfeitable

‘‘Years of service: percentage is:

2 .................................................................................................. 20

3 .................................................................................................. 40

4 .................................................................................................. 60

5 .................................................................................................. 80

6 or more .................................................................................... 100.’’.

15 (2) CONFORMING AMENDMENT.—Section 203(a)

16 of such Act is amended by striking paragraph (4).

17 (c) EFFECTIVE DATES.—

18 (1) IN GENERAL.—Except as provided in para19 graphs (2) and (4), the amendments made by this sec20 tion shall apply to contributions for plan years begin21 ning after December 31, 2005.
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1 (2) COLLECTIVE BARGAINING AGREEMENTS.—In

2 the case of a plan maintained pursuant to one or

3 more collective bargaining agreements between em4 ployee representatives and one or more employers

5 ratified before the date of the enactment of this Act,

6 the amendments made by this section shall not apply

7 to contributions on behalf of employees covered by any

8 such agreement for plan years beginning before the

9 earlier of—

10 (A) the later of—

11 (i) the date on which the last of such

12 collective bargaining agreements terminates

13 (determined without regard to any exten14 sion thereof on or after such date of the en15 actment); or

16 (ii) January 1, 2006; or

17 (B) January 1, 2008.

18 (3) SERVICE REQUIRED.—With respect to any

19 plan, the amendments made by this section shall not

20 apply to any employee before the date that such em21 ployee has 1 hour of service under such plan in any

22 plan year to which the amendments made by this sec23 tion apply.

24 (4) SPECIAL RULE FOR STOCK OWNERSHIP

25 PLANS.—Notwithstanding paragraph (1) or (2), in
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1 the case of an employee stock ownership plan (as de2 fined in section 4975(e)(7) of the Internal Revenue

3 Code of 1986) which had outstanding on September

4 26, 2005, a loan incurred for the purpose of acquiring

5 qualifying employer securities (as defined in section

6 4975(e)(8) of such Code), the amendments made by

7 this section shall not apply to any plan year begin8 ning before the earlier of—

9 (A) the date on which the loan is fully re10 paid, or

11 (B) the date on which the loan was, as of

12 September 26, 2005, scheduled to be fully repaid.

13 SEC. 1007. ALLOW DIRECT ROLLOVERS FROM RETIREMENT

14 PLANS TO ROTH IRAS.

15 (a) IN GENERAL.—Subsection (e) of section 408A of

16 the Internal Revenue Code of 1986 (defining qualified roll17 over contribution) is amended to read as follows:

18 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For pur19 poses of this section, the term ‘qualified rollover contribu20 tion’ means a rollover contribution—

21 ‘‘(1) to a Roth IRA from another such account,

22 ‘‘(2) from an eligible retirement plan, but only

23 if—
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1 ‘‘(A) in the case of an individual retirement

2 plan, such rollover contribution meets the re3 quirements of section 408(d)(3), and

4 ‘‘(B) in the case of any eligible retirement

5 plan (as defined in section 402(c)(8)(B) other

6 than clauses (i) and (ii) thereof), such rollover

7 contribution meets the requirements of section

8 402(c), 403(b)(8), or 457(e)(16), as applicable.

9 For purposes of section 408(d)(3)(B), there shall be dis10 regarded any qualified rollover contribution from an indi11 vidual retirement plan (other than a Roth IRA) to a Roth

12 IRA.’’

13 (b) CONFORMING AMENDMENTS.—

14 (1) Section 408A(c)(3)(B) of such Code is

15 amended—

16 (A) in the text by striking ‘‘individual re17 tirement plan’’ and inserting ‘‘an eligible retire18 ment plan (as defined by section 402(c)(8)(B))’’,

19 and

20 (B) in the heading by striking ‘‘IRA’’ and

21 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.

22 (2) Section 408A(d)(3) of such Code is

23 amended—
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1 (A) in subparagraph (A), by striking ‘‘sec2 tion 408(d)(3)’’ inserting ‘‘sections 402(c),

3 403(b)(8), 408(d)(3), and 457(e)(16)’’,

4 (B) in subparagraph (B), by striking ‘‘indi5 vidual retirement plan’’ and inserting ‘‘eligible

6 retirement plan (as defined by section

7 402(c)(8)(B))’’,

8 (C) in subparagraph (D), by inserting ‘‘or

9 6047’’ after ‘‘408(i)’’,

10 (D) in subparagraph (D), by striking ‘‘or

11 both’’ and inserting ‘‘persons subject to section

12 6047(d)(1), or all of the foregoing persons’’, and

13 (E) in the heading, by striking ‘‘IRA’’ and

14 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.

15 (c) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to distributions after December 31, 2005.

17 SEC. 1008. ELIMINATION OF HIGHER PENALTY ON CERTAIN

18 SIMPLE PLAN DISTRIBUTIONS.

19 (a) IN GENERAL.—Subsection (t) of section 72 of the

20 Internal Revenue Code of 1986 (relating to 10-percent addi21 tional tax on early distributions from qualified retirement

22 plans), as amended by section 1004, is amended by striking

23 paragraph (6) and redesignating paragraphs (7), (8), (9),

24 and (10) as paragraphs (6), (7), (8), and (9), respectively.

25 (b) CONFORMING AMENDMENTS.—
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1 (1) Section 72(t)(2)(E) of such Code is amended

2 by striking ‘‘paragraph (7)’’ and inserting ‘‘para3 graph (6)’’.

4 (2) Section 72(t)(2)(F) of such Code is amended

5 by striking ‘‘paragraph (8)’’ and inserting ‘‘para6 graph (7)’’.

7 (3) Section 408(d)(3)(G) of such Code is amend8 ed by striking ‘‘applies’’ and inserting ‘‘applied on

9 the day before the date of the enactment of the Pen10 sion Security and Transparency Act of 2005)’’.

11 (4) Section 457(a)(2) of such Code is amended

12 by striking ‘‘section 72(t)(9)’’ and inserting ‘‘section

13 72(t)(8)’’.

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to years beginning after December 31,

16 2005.

17 SEC. 1009. SIMPLE PLAN PORTABILITY.

18 (a) REPEAL OF LIMITATION.—Paragraph (3) of sec19 tion 408(d) of the Internal Revenue Code of 1986 (relating

20 to rollover contributions), as amended by this Act, is

21 amended by striking subparagraph (G) and redesignating

22 subparagraphs (H) and (I) as subparagraphs (G) and (H),

23 respectively.
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1 (b) EFFECTIVE DATE.—The amendment made by this

2 section shall apply to years beginning after December 31,

3 2005.

4 SEC. 1010. ELIGIBILITY FOR PARTICIPATION IN RETIRE5 MENT PLANS.

6 An individual shall not be precluded from partici7 pating in an eligible deferred compensation plan by reason

8 of having received a distribution under section 457(e)(9) of

9 the Internal Revenue Code of 1986, as in effect prior to the

10 enactment of the Small Business Job Protection Act of 1996.

11 SEC. 1011. TRANSFERS TO THE PBGC.

12 (a) MANDATORY DISTRIBUTIONS TO PBGC.—Clause

13 (i) of section 401(a)(31)(B) of the Internal Revenue Code

14 of 1986 (relating to general rule for certain mandatory dis15 tributions) is amended by inserting ‘‘to the Pension Benefit

16 Guaranty Corporation in accordance with section 4050(e)

17 of the Employee Retirement Income Security Act of 1974

18 or’’ after ‘‘such transfer’’.

19 (b) TAX TREATMENT OF DISTRIBUTIONS.—Subpara20 graph (B) of section 401(a)(31) of such Code is amended

21 by adding at the end the following new clause:

22 ‘‘(iii) INCOME TAX TREATMENT OF

23 TRANSFERS TO PBGC.—For purposes of de24 termining the income tax treatment relating
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1 to transfers to the Pension Benefit Guar2 anty Corporation under clause (i)—

3 ‘‘(I) the transfer of amounts to the

4 Pension Benefit Guaranty Corporation

5 pursuant to clause (i) shall be treated

6 as a transfer to an individual retire7 ment plan under such clause, and

8 ‘‘(II) the distribution of such

9 amounts from the Pension Benefit

10 Guaranty Corporation shall be treated

11 as a distribution from an individual

12 retirement plan.’’.

13 (c) MISSING PARTICIPANTS AND BENEFICIARIES.—

14 Section 4050 of the Employee Retirement Income Security

15 Act of 1974 (29 U.S.C. 1350), as amended by section 1012,

16 is amended by redesignating subsection (e) as subsection (g)

17 and by inserting after subsection (d) the following new sub18 sections:

19 ‘‘(e) INVOLUNTARY CASHOUTS.—

20 ‘‘(1) PAYMENT BY THE CORPORATION.—If bene21 fits under a plan described in paragraph (3) were

22 transferred to the corporation under section

23 401(a)(31)(B) of the Internal Revenue Code of 1986,

24 the corporation shall, upon application filed by the

25 participant or beneficiary with the corporation in
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1 such form and manner as may be prescribed in regu2 lations of the corporation, pay to the participant or

3 beneficiary the amount transferred (or the appro4 priate survivor benefit) either—

5 ‘‘(A) in a single sum (plus interest), or

6 ‘‘(B) in such other form as is specified in

7 regulations of the corporation.

8 ‘‘(2) INFORMATION TO THE CORPORATION.—To

9 the extent provided in regulations, the plan adminis10 trator of a plan described in paragraph (3) shall,

11 upon a transfer of benefits to the corporation under

12 section 401(a)(31)(B) of such Code, provide the cor13 poration information with respect to benefits of the

14 participant or beneficiary so transferred.

15 ‘‘(3) PLANS DESCRIBED.—A plan is described in

16 this paragraph if the plan is a pension plan (within

17 the meaning of section 3(2))—

18 ‘‘(A) which provides for mandatory dis19 tributions under section 401(a)(31)(B) of the In20 ternal Revenue Code of 1986, and

21 ‘‘(B) which is not a plan described in para22 graphs (2) through (11) of section 4021(b).

23 ‘‘(4) CERTAIN PROVISIONS NOT TO APPLY.—Sub24 sections (a)(1) and (a)(3) shall not apply to a plan

25 described in paragraph (3).
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1 ‘‘(f) AUTHORITY TO CHARGE FEE.—The corporation

2 may charge a reasonable fee for costs incurred in connection

3 with the transfer and management of amounts transferred

4 to the corporation under this section. Such fee may be im5 posed on the transferor and may be deducted from amounts

6 so transferred.’’.

7 (d) EFFECTIVE DATES.—

8 (1) INTERNAL REVENUE CODE PROVISIONS.—The

9 amendments made by subsections (a) and (b) shall

10 take effect as if included in the amendments made by

11 section 657 of the Economic Growth and Tax Relief

12 Reconciliation Act of 2001.

13 (2) EMPLOYEE RETIREMENT INCOME SECURITY

14 ACT OF 1974 PROVISIONS.—The amendments made by

15 subsection (c) shall apply to distributions made after

16 final regulations implementing subsections (e) and (f)

17 of section 4050 of the Employee Retirement Income

18 Security Act of 1974 (as added by subsection (c)) are

19 prescribed.

20 (3) REGULATIONS.—The Pension Benefit Guar21 anty Corporation shall issue regulations necessary to

22 carry out the amendments made by subsection (c) not

23 later than December 31, 2006.
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1 SEC. 1012. MISSING PARTICIPANTS.

2 (a) IN GENERAL.—Section 4050 of the Employee Re3 tirement Income Security Act of 1974 (29 U.S.C. 1350) is

4 amended by redesignating subsection (c) as subsection (e)

5 and by inserting after subsection (b) the following new sub6 sections:

7 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall

8 prescribe rules similar to the rules in subsection (a) for mul9 tiemployer plans covered by this title that terminate under

10 section 4041A.

11 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

12 ‘‘(1) TRANSFER TO CORPORATION.—The plan ad13 ministrator of a plan described in paragraph (4) may

14 elect to transfer a missing participant’s benefits to the

15 corporation upon termination of the plan.

16 ‘‘(2) INFORMATION TO THE CORPORATION.—To

17 the extent provided in regulations, the plan adminis18 trator of a plan described in paragraph (4) shall,

19 upon termination of the plan, provide the corporation

20 information with respect to benefits of a missing par21 ticipant if the plan transfers such benefits—

22 ‘‘(A) to the corporation, or

23 ‘‘(B) to an entity other than the corporation

24 or a plan described in paragraph (4)(B)(ii).

25 ‘‘(3) PAYMENT BY THE CORPORATION.—If bene26 fits of a missing participant were transferred to the
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1 corporation under paragraph (1), the corporation

2 shall, upon location of the participant or beneficiary,

3 pay to the participant or beneficiary the amount

4 transferred (or the appropriate survivor benefit)

5 either—

6 ‘‘(A) in a single sum (plus interest), or

7 ‘‘(B) in such other form as is specified in

8 regulations of the corporation.

9 ‘‘(4) PLANS DESCRIBED.—A plan is described in

10 this paragraph if—

11 ‘‘(A) the plan is a pension plan (within the

12 meaning of section 3(2))—

13 ‘‘(i) to which the provisions of this sec14 tion do not apply (without regard to this

15 subsection), and

16 ‘‘(ii) which is not a plan described in

17 paragraphs (2) through (11) of section

18 4021(b), and

19 ‘‘(B) at the time the assets are to be distrib20 uted upon termination, the plan—

21 ‘‘(i) has missing participants, and

22 ‘‘(ii) has not provided for the transfer

23 of assets to pay the benefits of all missing

24 participants to another pension plan (with25 in the meaning of section 3(2)).
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1 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—Sub2 sections (a)(1) and (a)(3) shall not apply to a plan

3 described in paragraph (4).’’.

4 (b) CONFORMING AMENDMENTS.—Section 206(f) of

5 such Act (29 U.S.C. 1056(f)) is amended—

6 (1) by striking ‘‘title IV’’ and inserting ‘‘section

7 4050’’; and

8 (2) by striking ‘‘the plan shall provide that,’’.

9 (c) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to distributions made after final regula11 tions implementing subsections (c) and (d) of section 4050

12 of the Employee Retirement Income Security Act of 1974

13 (as added by subsection (a)), respectively, are prescribed.

14 SEC. 1013. MODIFICATIONS OF RULES GOVERNING HARD15 SHIPS AND UNFORSEEN FINANCIAL EMER16 GENCIES.

17 Within 180 days after the date of the enactment of this

18 Act, the Secretary of the Treasury shall modify the rules

19 for determining whether a participant has had a hardship

20 for purposes of section 401(k)(2)(B)(i)(IV) of the Internal

21 Revenue Code of 1986 to provide that if an event (including

22 the occurrence of a medical expense) would constitute a

23 hardship under the plan if it occurred with respect to the

24 participant’s spouse or dependent (as defined in section 152

25 of such Code), such event shall, to the extent permitted
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1 under a plan, constitute a hardship if it occurs with respect

2 to a person who is a beneficiary under the plan with respect

3 to the participant. The Secretary of the Treasury shall issue

4 similar rules for purposes of determining whether a partici5 pant has had—

6 (1) a hardship for purposes of section

7 403(b)(11)(B) of such Code; or

8 (2) an unforeseen financial emergency for pur9 poses of sections 409A(a)(2)(A)(vi), 409A(a)(2)(B)(ii),

10 and 457(d)(1)(A)(iii) of such Code.

11 TITLE XI—ADMINISTRATIVE

12 PROVISIONS

13 SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION

14 SYSTEM.

15 (a) IN GENERAL.—The Secretary of the Treasury shall

16 have full authority to establish and implement the Em17 ployee Plans Compliance Resolution System (or any suc18 cessor program) and any other employee plans correction

19 policies, including the authority to waive income, excise,

20 or other taxes to ensure that any tax, penalty, or sanction

21 is not excessive and bears a reasonable relationship to the

22 nature, extent, and severity of the failure.

23 (b) IMPROVEMENTS.—The Secretary of the Treasury

24 shall continue to update and improve the Employee Plans
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1 Compliance Resolution System (or any successor program),

2 giving special attention to—

3 (1) increasing the awareness and knowledge of

4 small employers concerning the availability and use

5 of the program;

6 (2) taking into account special concerns and cir7 cumstances that small employers face with respect to

8 compliance and correction of compliance failures;

9 (3) extending the duration of the self-correction

10 period under the Self-Correction Program for signifi11 cant compliance failures;

12 (4) expanding the availability to correct insig13 nificant compliance failures under the Self-Correction

14 Program during audit; and

15 (5) assuring that any tax, penalty, or sanction

16 that is imposed by reason of a compliance failure is

17 not excessive and bears a reasonable relationship to

18 the nature, extent, and severity of the failure.

19 SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DIS20 TRIBUTIONS.

21 (a) EXPANSION OF PERIOD.—

22 (1) AMENDMENT OF INTERNAL REVENUE

23 CODE.—
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1 (A) IN GENERAL.—Section 417(a)(6)(A) of

2 the Internal Revenue Code of 1986 is amended

3 by striking ‘‘90-day’’ and inserting ‘‘180-day’’.

4 (B) MODIFICATION OF REGULATIONS.—The

5 Secretary of the Treasury shall modify the regu6 lations under sections 402(f), 411(a)(11), and

7 417 of the Internal Revenue Code of 1986 by sub8 stituting ‘‘180 days’’ for ‘‘90 days’’ each place it

9 appears in Treasury Regulations sections

10 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–1(b).

11 (2) AMENDMENT OF ERISA.—

12 (A) IN GENERAL.—Section 205(c)(7)(A) of

13 the Employee Retirement Income Security Act of

14 1974 (29 U.S.C. 1055(c)(7)(A)) is amended by

15 striking ‘‘90-day’’ and inserting ‘‘180-day’’.

16 (B) MODIFICATION OF REGULATIONS.—The

17 Secretary of the Treasury shall modify the regu18 lations under part 2 of subtitle B of title I of the

19 Employee Retirement Income Security Act of

20 1974 relating to sections 203(e) and 205 of such

21 Act by substituting ‘‘180 days’’ for ‘‘90 days’’

22 each place it appears.

23 (3) EFFECTIVE DATE.—The amendments and

24 modifications made or required by this subsection
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1 shall apply to years beginning after December 31,

2 2005.

3 (b) NOTIFICATION OF RIGHT TO DEFER.—

4 (1) IN GENERAL.—The Secretary of the Treasury

5 shall modify the regulations under section 411(a)(11)

6 of the Internal Revenue Code of 1986 and under sec7 tion 205 of the Employee Retirement Income Security

8 Act of 1974 to provide that the description of a par9 ticipant’s right, if any, to defer receipt of a distribu10 tion shall also describe the consequences of failing to

11 defer such receipt.

12 (2) EFFECTIVE DATE.—

13 (A) IN GENERAL.—The modifications re14 quired by paragraph (1) shall apply to years be15 ginning after December 31, 2005.

16 (B) REASONABLE NOTICE.—A plan shall

17 not be treated as failing to meet the requirements

18 of section 411(a)(11) of such Code or section 205

19 of such Act with respect to any description of

20 consequences described in paragraph (1) made

21 within 90 days after the Secretary of the Treas22 ury issues the modifications required by para23 graph (1) if the plan administrator makes a rea24 sonable attempt to comply with such require25 ments.
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1 SEC. 1103. REPORTING SIMPLIFICATION.

2 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

3 OWNERS AND THEIR SPOUSES.—

4 (1) IN GENERAL.—The Secretary of the Treasury

5 shall modify the requirements for filing annual re6 turns with respect to one-participant retirement plans

7 to ensure that such plans with assets of $250,000 or

8 less as of the close of the plan year need not file a

9 return for that year.

10 (2) ONE-PARTICIPANT RETIREMENT PLAN DE11 FINED.—For purposes of this subsection, the term

12 ‘‘one-participant retirement plan’’ means a retire13 ment plan with respect to which the following require14 ments are met:

15 (A) on the first day of the plan year—

16 (i) the plan covered only one indi17 vidual (or the individual and the individ18 ual’s spouse) and the individual owned 100

19 percent of the plan sponsor (whether or not

20 incorporated), or

21 (ii) the plan covered only one or more

22 partners (or partners and their spouses) in

23 the plan sponsor;

24 (B) the plan meets the minimum coverage

25 requirements of section 410(b) of the Internal

26 Revenue Code of 1986 without being combined
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1 with any other plan of the business that covers

2 the employees of the business;

3 (C) the plan does not provide benefits to

4 anyone except the individual (and the individ5 ual’s spouse) or the partners (and their spouses);

6 (D) the plan does not cover a business that

7 is a member of an affiliated service group, a con8 trolled group of corporations, or a group of busi9 nesses under common control; and

10 (E) the plan does not cover a business that

11 uses the services of leased employees (within the

12 meaning of section 414(n) of such Code).

13 For purposes of this paragraph, the term ‘‘partner’’

14 includes a 2-percent shareholder (as defined in section

15 1372(b) of such Code) of an S corporation.

16 (3) OTHER DEFINITIONS.—Terms used in para17 graph (2) which are also used in section 414 of the

18 Internal Revenue Code of 1986 shall have the respec19 tive meanings given such terms by such section.

20 (4) EFFECTIVE DATE.—The provisions of this

21 subsection shall apply to plan years beginning on or

22 after January 1, 2006.

23 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

24 PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the case

25 of plan years beginning after December 31, 2006, the Sec-
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1 retary of the Treasury and the Secretary of Labor shall pro2 vide for the filing of a simplified annual return for any

3 retirement plan which covers less than 25 participants on

4 the first day of a plan year and which meets the require5 ments described in subparagraphs (B), (D), and (E) of sub6 section (a)(2).

7 SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE

8 AND EMPLOYMENT RETENTION PLANS MAIN9 TAINED BY LOCAL EDUCATIONAL AGENCIES

10 AND OTHER ENTITIES.

11 (a) VOLUNTARY EARLY RETIREMENT INCENTIVE

12 PLANS.—

13 (1) TREATMENT AS PLAN PROVIDING SEVERANCE

14 PAY.—Section 457(e)(11) of the Internal Revenue

15 Code of 1986 (relating to certain plans excluded) is

16 amended by adding at the end the following new sub17 paragraph:

18 ‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE19 MENT INCENTIVE PLANS.—

20 ‘‘(i) IN GENERAL.—If an applicable

21 voluntary early retirement incentive plan—

22 ‘‘(I) makes payments or supple23 ments as an early retirement benefit, a

24 retirement-type subsidy, or a benefit
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1 described in the last sentence of section

2 411(a)(9), and

3 ‘‘(II) such payments or supple4 ments are made in coordination with a

5 defined benefit plan which is described

6 in section 401(a) and includes a trust

7 exempt from tax under section 501(a)

8 and which is maintained by an eligible

9 employer described in paragraph

10 (1)(A) or by an education association

11 described in clause (ii)(II),

12 such applicable plan shall be treated for

13 purposes of subparagraph (A)(i) as a bona

14 fide severance pay plan with respect to such

15 payments or supplements to the extent such

16 payments or supplements could otherwise

17 have been provided under such defined ben18 efit plan (determined as if section 411 ap19 plied to such defined benefit plan).

20 ‘‘(ii) APPLICABLE VOLUNTARY EARLY

21 RETIREMENT INCENTIVE PLAN.—For pur22 poses of this subparagraph, the term ‘appli23 cable voluntary early retirement incentive

24 plan’ means a voluntary early retirement

25 incentive plan maintained by—
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1 ‘‘(I) a local educational agency

2 (as defined in section 9101 of the Ele3 mentary and Secondary Education Act

4 of 1965 (20 U.S.C. 7801)), or

5 ‘‘(II) an education association

6 which principally represents employees

7 of 1 or more agencies described in sub8 clause (I) and which is described in

9 section 501(c) (5) or (6) and exempt

10 from tax under section 501(a).’’

11 (2) AGE DISCRIMINATION IN EMPLOYMENT

12 ACT.—Section 4(l)(1) of the Age Discrimination in

13 Employment Act of 1967 (29 U.S.C. 623(l)(1)) is

14 amended—

15 (A) by inserting ‘‘(A)’’ after ‘‘(1)’’,

16 (B) by redesignating subparagraphs (A)

17 and (B) as clauses (i) and (ii), respectively,

18 (C) by redesignating clauses (i) and (ii) of

19 subparagraph (B) (as in effect before the amend20 ments made by subparagraph (B)) as subclauses

21 (I) and (II), respectively, and

22 (D) by adding at the end the following:

23 ‘‘(B) A voluntary early retirement incentive plan

24 that—

25 ‘‘(i) is maintained by—
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1 ‘‘(I) a local educational agency (as de2 fined in section 9101 of the Elementary and

3 Secondary Education Act of 1965 (20

4 U.S.C. 7801), or

5 ‘‘(II) an education association which

6 principally represents employees of 1 or

7 more agencies described in subclause (I) and

8 which is described in section 501(c) (5) or

9 (6) of the Internal Revenue Code of 1986

10 and exempt from taxation under section

11 501(a) of such Code, and

12 ‘‘(ii) makes payments or supplements de13 scribed in subclauses (I) and (II) of subpara14 graph (A)(ii) in coordination with a defined

15 benefit plan (as so defined) maintained by an el16 igible employer described in section 457(e)(1)(A)

17 of such Code or by an education association de18 scribed in clause (i)(II),

19 shall be treated solely for purposes of subparagraph

20 (A)(ii) as if it were a part of the defined benefit plan

21 with respect to such payments or supplements. Pay22 ments or supplements under such a voluntary early

23 retirement incentive plan shall not constitute sever24 ance pay for purposes of section 4(l)(2) of the Age
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1 Discrimination in Employment Act (29 U.S.C.

2 623(l)(2)).’’.

3 (b) EMPLOYMENT RETENTION PLANS.—

4 (1) IN GENERAL.—Section 457(f)(2) of the Inter5 nal Revenue Code of 1986 (relating to exceptions) is

6 amended by striking ‘‘and’’ at the end of subpara7 graph (D), by striking the period at the end of sub8 paragraph (E) and inserting ‘‘, and’’, and by adding

9 at the end the following:

10 ‘‘(F) that portion of any applicable employ11 ment retention plan described in paragraph (4)

12 with respect to any participant.’’

13 (2) DEFINITIONS AND RULES RELATING TO EM14 PLOYMENT RETENTION PLANS.—Section 457(f) of such

15 Code is amended by adding at the end the following

16 new paragraph:

17 ‘‘(4) EMPLOYMENT RETENTION PLANS.—For pur18 poses of paragraph (2)(F)—

19 ‘‘(A) IN GENERAL.—The portion of an ap20 plicable employment retention plan described in

21 this paragraph with respect to any participant

22 is that portion of the plan which provides bene23 fits payable to the participant not in excess of

24 twice the applicable dollar limit determined

25 under subsection (e)(15).
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1 ‘‘(B) OTHER RULES.—

2 ‘‘(i) LIMITATION.—Paragraph (2)(F)

3 shall only apply to the portion of the plan

4 described in subparagraph (A) for years

5 preceding the year in which such portion is

6 paid or otherwise made available to the

7 participant.

8 ‘‘(ii) TREATMENT.—A plan shall not

9 be treated for purposes of this title as pro10 viding for the deferral of compensation for

11 any year with respect to the portion of the

12 plan described in subparagraph (A).

13 ‘‘(C) APPLICABLE EMPLOYMENT RETENTION

14 PLAN.—The term ‘applicable employment reten15 tion plan’ means an employment retention plan

16 maintained by—

17 ‘‘(i) a local educational agency (as de18 fined in section 9101 of the Elementary and

19 Secondary Education Act of 1965 (20

20 U.S.C. 7801), or

21 ‘‘(ii) an education association which

22 principally represents employees of 1 or

23 more agencies described in clause (i) and

24 which is described in section 501(c) (5) or
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1 (6) and exempt from taxation under section

2 501(a).

3 ‘‘(D) EMPLOYMENT RETENTION PLAN.—The

4 term ‘employment retention plan’ means a plan

5 to pay, upon termination of employment, com6 pensation to an employee of a local educational

7 agency or education association described in sub8 paragraph (C) for purposes of—

9 ‘‘(i) retaining the services of the em10 ployee, or

11 ‘‘(ii) rewarding such employee for the

12 employee’s service with 1 or more such

13 agencies or associations.’’.

14 (c) COORDINATION WITH ERISA.—Section 3(2)(B) of

15 the Employee Retirement Income Security Act of 1974 (29

16 U.S.C. 1002(2)(B)) is amended by adding at the end the

17 following: ‘‘An applicable voluntary early retirement incen18 tive plan (as defined in section 457(e)(11)(D)(ii) of the In19 ternal Revenue Code of 1986) making payments or supple20 ments described in section 457(e)(11)(D)(i) of such Code,

21 and an applicable employment retention plan (as defined

22 in section 457(f)(4)(C) of such Code) making payments of

23 benefits described in section 457(f)(4)(A) of such Code, shall,

24 for purposes of this title, be treated as a welfare plan (and
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1 not a pension plan) with respect to such payments and sup2 plements.’’

3 (d) EFFECTIVE DATES.—

4 (1) IN GENERAL.—The amendments made by

5 this Act shall take effect on the date of the enactment

6 of this Act.

7 (2) TAX AMENDMENTS.—The amendments made

8 by subsections (a)(1) and (b) shall apply to taxable

9 years ending after the date of the enactment of this

10 Act.

11 (3) ERISA AMENDMENTS.—The amendment

12 made by subsection (c) shall apply to plan years end13 ing after the date of the enactment of this Act.

14 (4) CONSTRUCTION.—Nothing in the amend15 ments made by this section shall alter or affect the

16 construction of the Internal Revenue Code of 1986, the

17 Employee Retirement Income Security Act of 1974, or

18 the Age Discrimination in Employment Act of 1967

19 as applied to any plan, arrangement, or conduct to

20 which such amendments do not apply.

21 SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSA22 TION AS A RESULT OF PENSION ROLLOVERS.

23 (a) IN GENERAL.—Section 3304(a) of the Internal

24 Revenue Code of 1986 (relating to requirements for State
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1 unemployment laws) is amended by adding at the end the

2 following new flush sentence:

3 ‘‘Compensation shall not be reduced under paragraph (15)

4 for any pension, retirement or retired pay, annuity, or

5 similar payment which is not includible in gross income

6 of the individual for the taxable year in which paid because

7 it was part of a rollover distribution.’’.

8 (b) EFFECTIVE DATE.—The amendment made by this

9 section shall apply to weeks beginning on or after the date

10 of the enactment of this Act.

11 SEC. 1106. WITHHOLDING ON DISTRIBUTIONS FROM GOV12 ERNMENTAL SECTION 457 PLANS.

13 (a) IN GENERAL.—Section 641(f) of the Economic

14 Growth and Tax Relief Reconciliation Act of 2001 is

15 amended by adding at the end the following new paragraph:

16 ‘‘(4) TRANSITION RULE FOR CERTAIN GOVERN17 MENTAL PLANS.—In the case of distributions from an

18 eligible deferred compensation plan of an employer

19 described in section 457(e)(1)(A) of the Internal Rev20 enue Code of 1986 which are made after December 31,

21 2001, and which are part of a series of distributions

22 which—

23 ‘‘(A) began before January 1, 2002, and

24 ‘‘(B) are payable for 10 years or less, the

25 Internal Revenue Code of 1986 may be applied
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1 to such distributions without regard to the

2 amendments made by subsection (a)(1)(D).’’.

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall take effect as if included in the provisions

5 of section 641 of the Economic Growth and Tax Relief Rec6 onciliation Act of 2001.

7 SEC. 1107. TREATMENT OF DEFINED BENEFIT PLAN AS GOV8 ERNMENTAL PLAN.

9 (a) IN GENERAL.—For purposes of the Internal Rev10 enue Code of 1986 and the Employee Retirement Income

11 Security Act of 1974, an eligible defined benefit plan shall

12 be treated as a governmental plan (within the meaning of

13 section 414(d) of such Code and section 3(32) of such Act).

14 (b) ELIGIBLE DEFINED BENEFIT PLAN.—For pur15 poses of this section, an eligible defined benefit plan is a

16 defined benefit plan maintained by a nonprofit corporation

17 which was—

18 (1) incorporated on September 16, 1998, under

19 a State nonprofit corporation statute; and

20 (2) organized for the express purpose of sup21 porting the missions and goals of a public corpora22 tion which—

23 (A) was created by a State statute effective

24 on July 1, 1995;
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1 (B) is a governmental entity under State

2 law; and

3 (C) is a member of the nonprofit corpora4 tion.

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

6 section shall apply to any year beginning before, on, or after

7 the date of the enactment of this Act.

8 SEC. 1108. INCREASING PARTICIPATION IN CASH OR DE9 FERRED PLANS THROUGH AUTOMATIC CON10 TRIBUTION ARRANGEMENTS.

11 (a) IN GENERAL.—Section 401(k) of the Internal Rev12 enue Code of 1986 (relating to cash or deferred arrange13 ment) is amended by adding at the end the following new

14 paragraph:

15 ‘‘(13) NONDISCRIMINATION REQUIREMENTS FOR

16 AUTOMATIC CONTRIBUTION TRUSTS.—

17 ‘‘(A) IN GENERAL.—A cash or deferred ar18 rangement shall be treated as meeting the re19 quirements of paragraph (3)(A)(ii) if such ar20 rangement constitutes an automatic contribution

21 trust.

22 ‘‘(B) AUTOMATIC CONTRIBUTION TRUST.—

23 ‘‘(i) IN GENERAL.—For purposes of

24 this paragraph, the term ‘automatic con25 tribution trust’ means an arrangement—
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1 ‘‘(I) except as provided in clauses

2 (ii) and (iii), under which each em3 ployee eligible to participate in the ar4 rangement is treated as having elected

5 to have the employer make elective con6 tributions in an amount equal to the

7 applicable percentage of the employee’s

8 compensation, and

9 ‘‘(II) which meets the require10 ments of subparagraphs (C), (D), (E),

11 and (F).

12 ‘‘(ii) EXCEPTION FOR EXISTING EM13 PLOYEES.—In the case of any employee—

14 ‘‘(I) who was eligible to partici15 pate in the arrangement (or a prede16 cessor arrangement) immediately before

17 the first date on which the arrange18 ment is an automatic contribution

19 trust, and

20 ‘‘(II) whose rate of contribution

21 immediately before such first date was

22 less than the applicable percentage for

23 the employee,

24 clause (i)(I) shall not apply to such em25 ployee until the date which is 1 year after
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1 such first date (or such earlier date as the

2 employee may elect).

3 ‘‘(iii) ELECTION OUT.—Each employee

4 eligible to participate in the arrangement

5 may specifically elect not to have contribu6 tions made under clause (i), and such

7 clause shall cease to apply to compensation

8 paid on or after the effective date of the elec9 tion.

10 ‘‘(iv) APPLICABLE PERCENTAGE.—For

11 purposes of this subparagraph—

12 ‘‘(I) IN GENERAL.—The term ‘ap13 plicable percentage’ means, with re14 spect to any employee, the uniform

15 percentage (not less than 3 percent) de16 termined under the arrangement. In

17 the case of an employee who was eligi18 ble to participate in the arrangement

19 (or a predecessor arrangement) imme20 diately before the first date on which

21 the arrangement is an automatic con22 tribution trust, the initial applicable

23 percentage shall in no event be less

24 than the percentage in effect with re25 spect to the employee under the ar-
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1 rangement immediately before the em2 ployee first begins participation in the

3 automatic contribution trust.

4 ‘‘(II) INCREASE IN PERCENT5 AGE.—In the case of the second plan

6 year beginning after the first date on

7 which the election under clause (i)(I) is

8 in effect with respect to the employee

9 and any succeeding plan year, the ap10 plicable percentage shall be a percent11 age (not greater than 10 percent or

12 such higher uniform percentage deter13 mined under the arrangement) equal to

14 the sum of the applicable percentage

15 for the employee as of the close of the

16 preceding plan year plus 1 percentage

17 point (or such higher percentage speci18 fied by the plan). A plan may elect to

19 provide that, in lieu of any increase

20 under the preceding sentence, the in21 crease in the applicable percentage re22 quired under this subclause shall occur

23 after each increase in compensation an

24 employee receives on or after the first

25 day of such second plan year and that
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1 the applicable percentage after each

2 such increase in compensation shall be

3 equal to the applicable percentage for

4 the employee immediately before such

5 increase in compensation plus 1 per6 centage point (or such higher percent7 age specified by the plan).

8 ‘‘(C) MATCHING OR NONELECTIVE CON9 TRIBUTIONS.—

10 ‘‘(i) IN GENERAL.—The requirements

11 of this subparagraph are met if, under the

12 arrangement, the employer—

13 ‘‘(I) makes matching contribu14 tions on behalf of each employee who is

15 not a highly compensated employee in

16 an amount equal to 50 percent of the

17 elective contributions of the employee to

18 the extent such elective contributions do

19 not exceed 7 percent of compensation;

20 or

21 ‘‘(II) is required, without regard

22 to whether the employee makes an elec23 tive contribution or employee contribu24 tion, to make a contribution to a de25 fined contribution plan on behalf of
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1 each employee who is not a highly

2 compensated employee and who is eli3 gible to participate in the arrangement

4 in an amount equal to at least 3 per5 cent of the employee’s compensation,

6 The rules of clauses (ii) and (iii) of para7 graph (12)(B) shall apply for purposes of

8 subclause (I). The rules of paragraph

9 (12)(E)(ii) shall apply for purposes of sub10 clauses (I) and (II).

11 ‘‘(ii) OTHER PLANS.—An arrangement

12 shall be treated as meeting the requirements

13 under clause (i) if any other plan main14 tained by the employer meets such require15 ments with respect to employees eligible

16 under the arrangement.

17 ‘‘(D) NOTICE REQUIREMENTS.—

18 ‘‘(i) IN GENERAL.—The requirements

19 of this subparagraph are met if the require20 ments of clauses (ii) and (iii) are met.

21 ‘‘(ii) REASONABLE PERIOD TO MAKE

22 ELECTION.—The requirements of this clause

23 are met if each employee to whom subpara24 graph (B)(i) applies—
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1 ‘‘(I) receives a notice explaining

2 the employee’s right under the arrange3 ment to elect not to have elective con4 tributions made on the employee’s be5 half, and how contributions made

6 under the arrangement will be invested

7 in the absence of any investment elec8 tion by the employee, and

9 ‘‘(II) has a reasonable period of

10 time after receipt of such notice and

11 before the first elective contribution is

12 made to make such election.

13 ‘‘(iii) ANNUAL NOTICE OF RIGHTS AND

14 OBLIGATIONS.—The requirements of this

15 clause are met if each employee eligible to

16 participate in the arrangement is, within a

17 reasonable period before any year (or if the

18 plan elects to change the applicable percent19 age after any increase in compensation, be20 fore the increase), given notice of the em21 ployee’s rights and obligations under the ar22 rangement.

23 The requirements of clauses (i) and (ii) of para24 graph (12)(D) shall be met with respect to the
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1 notices described in clauses (ii) and (iii) of this

2 subparagraph.

3 ‘‘(E) PARTICIPATION, WITHDRAWAL, AND

4 VESTING REQUIREMENTS.—The requirements of

5 this subparagraph are met if—

6 ‘‘(i) the arrangement requires that each

7 employee eligible to participate in the ar8 rangement (determined without regard to

9 any minimum service requirement other10 wise applicable under section 410(a) or the

11 plan) commences participation in the ar12 rangement no later than the 1st day of the

13 1st calendar quarter beginning after the

14 date on which employee first becomes so eli15 gible,

16 ‘‘(ii) the withdrawal requirements of

17 paragraph (2)(B) are met with respect to

18 all employer contributions (including

19 matching and elective contributions) taken

20 into account in determining whether the ar21 rangement meets the requirements of sub22 paragraph (C), and

23 ‘‘(iii) the arrangement requires that an

24 employee’s right to the accrued benefit de25 rived from employer contributions described
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1 in clause (ii) (other than elective contribu2 tions) is nonforfeitable after the employee

3 has completed at least 2 years of service.

4 ‘‘(F) CERTAIN WITHDRAWALS MUST BE AL5 LOWED.—Notwithstanding any other provision

6 of this subsection, the requirements of this sub7 paragraph are met if the arrangement allows

8 employees to elect to make permissible with9 drawals in accordance with section 414(w).’’

10 (b) MATCHING CONTRIBUTIONS.—Section 401(m) of

11 the Internal Revenue Code of 1986 (relating to non12 discrimination test for matching contributions and em13 ployee contributions) is amended by redesignating para14 graph (12) as paragraph (13) and by inserting after para15 graph (11) the following new paragraph:

16 ‘‘(12) ALTERNATE METHOD FOR AUTOMATIC CON17 TRIBUTION TRUSTS.—A defined contribution plan

18 shall be treated as meeting the requirements of para19 graph (2) with respect to matching contributions if

20 the plan—

21 ‘‘(A) meets the contribution requirements of

22 subparagraphs (B)(i) and (C) of subsection

23 (k)(13);

24 ‘‘(B) meets the notice requirements of sub25 paragraph (D) of subsection (k)(13); and
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1 ‘‘(C) meets the requirements of paragraph

2 (11)(B) (ii) and (iii).’’.

3 (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY

4 PLANS.—

5 (1) ELECTIVE CONTRIBUTION RULE.—Clause (i)

6 of section 416(g)(4)(H) of the Internal Revenue Code

7 of 1986 is amended by inserting ‘‘or 401(k)(13)’’ after

8 ‘‘section 401(k)(12)’’.

9 (2) MATCHING CONTRIBUTION RULE.—Clause

10 (ii) of section 416(g)(4)(H) of such Code is amended

11 by inserting ‘‘or 401(m)(12)’’ after ‘‘section

12 401(m)(11)’’.

13 (d) SECTION 403(b) CONTRACTS.—Paragraph (11) of

14 section 401(m) of the Internal Revenue Code of 1986 is

15 amended by adding at the end the following:

16 ‘‘(C) SECTION 403(b) CONTRACTS.—An an17 nuity contract under section 403(b) shall be

18 treated as meeting the requirements of paragraph

19 (2) with respect to matching contributions if

20 such contract meets requirements similar to the

21 requirements under subparagraph (A).’’.

22 (e) PREEMPTION OF CONFLICTING STATE REGULA23 TION.—Section 514 of the Employee Retirement Income Se24 curity of 1974 (29 U.S.C. 1144) is amended by inserting

25 at the end the following new subsection:
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1 ‘‘(e) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—

2 ‘‘(1) IN GENERAL.—Notwithstanding any other

3 provision of this section, any law of a State shall be

4 superseded if it would directly or indirectly prohibit

5 or restrict the inclusion in any plan of an eligible

6 automatic contribution arrangement.

7 ‘‘(2) ELIGIBLE AUTOMATIC CONTRIBUTION AR8 RANGEMENT.—For purposes of this subsection, the

9 term ‘eligible automatic contribution arrangement’

10 means an arrangement—

11 ‘‘(A) under which a participant may elect

12 to have the employer make payments as con13 tributions under the plan on behalf of the partic14 ipant, or to the participant directly in cash,

15 ‘‘(B) under which the participant is treated

16 as having elected to have the employer make such

17 contributions in an amount equal to a uniform

18 percentage of compensation provided under the

19 plan until the participant specifically elects not

20 to have such contributions made (or specifically

21 elects to have such contributions made at a dif22 ferent percentage),

23 ‘‘(C) under which contributions described in

24 subparagraph (B) are invested in accordance
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1 with regulations prescribed by the Secretary

2 under section 404(c)(4), and

3 ‘‘(D) which meets the requirements of para4 graph (3).

5 ‘‘(3) NOTICE REQUIREMENTS.—

6 ‘‘(A) IN GENERAL.—The administrator of

7 an individual account plan shall, within a rea8 sonable period before each plan year, give to each

9 employee to whom an arrangement described in

10 paragraph (2) applies for such plan year notice

11 of the employee’s rights and obligations under

12 the arrangement which—

13 ‘‘(i) is sufficiently accurate and com14 prehensive to apprise the employee of such

15 rights and obligations, and

16 ‘‘(ii) is written in a manner calculated

17 to be understood by the average employee to

18 whom the arrangement applies.

19 ‘‘(B) TIME AND FORM OF NOTICE.—A notice

20 shall not be treated as meeting the requirements

21 of subparagraph (A) with respect to an employee

22 unless—

23 ‘‘(i) the notice includes a notice ex24 plaining the employee’s right under the ar25 rangement to elect not to have elective con-
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1 tributions made on the employee’s behalf (or

2 to elect to have such contributions made at

3 a different percentage),

4 ‘‘(ii) the employee has a reasonable pe5 riod of time after receipt of the notice de6 scribed in clause (i) and before the first elec7 tive contribution is made to make such elec8 tion, and

9 ‘‘(iii) the notice explains how contribu10 tions made under the arrangement will be

11 invested in the absence of any investment

12 election by the employee.’’.

13 (f) TREATMENT OF WITHDRAWALS OF CONTRIBUTIONS

14 DURING FIRST 60 DAYS.—Section 414 of the Internal Rev15 enue Code of 1986 is amended by adding at the end the

16 following new subsection:

17 ‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS

18 FROM ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGE19 MENTS.—

20 ‘‘(1) IN GENERAL.—If an eligible automatic con21 tribution arrangement allows an employee to elect to

22 make permissible withdrawals—

23 ‘‘(A) the amount of any such withdrawal

24 shall be includible in the gross income of the em-
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1 ployee for the taxable year of the employee in

2 which the distribution is made,

3 ‘‘(B) no tax shall be imposed under section

4 72(t) with respect to the distribution, and

5 ‘‘(C) the arrangement shall not be treated as

6 violating any restriction on distributions under

7 this title solely by reason of allowing the with8 drawal.

9 In the case of any distribution to an employee by rea10 son of an election under this paragraph, employer

11 matching contributions shall be forfeited or subject to

12 such other treatment as the Secretary may prescribe.

13 ‘‘(2) PERMISSIBLE WITHDRAWAL.—For purposes

14 of this subsection—

15 ‘‘(A) IN GENERAL.—The term ‘permissible

16 withdrawal’ means any withdrawal from an eli17 gible automatic contribution arrangement meet18 ing the requirements of this paragraph which—

19 ‘‘(i) is made pursuant to an election by

20 an employee, and

21 ‘‘(ii) consists of elective contributions

22 described in paragraph (3)(B) (and earn23 ings attributable thereto).

24 ‘‘(B) TIME FOR MAKING ELECTION.—Sub25 paragraph (A) shall not apply to an election by
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1 an employee unless the election is made no later

2 than the date which is 60 days after the date of

3 the first elective contribution with respect to the

4 employee under the arrangement.

5 ‘‘(C) AMOUNT OF DISTRIBUTION.—Subpara6 graph (A) shall not apply to any election by an

7 employee unless the amount of any distribution

8 by reason of the election is equal to the amount

9 of elective contributions made with respect to the

10 first payroll period to which the eligible auto11 matic contribution arrangement applies to the

12 employee and any succeeding payroll period be13 ginning before the effective date of the election

14 (and earnings attributable thereto).

15 ‘‘(3) ELIGIBLE AUTOMATIC CONTRIBUTION AR16 RANGEMENT.—For purposes of this subsection, the

17 term ‘eligible automatic contribution arrangement’

18 means an arrangement—

19 ‘‘(A) under which a participant may elect

20 to have the employer make payments as con21 tributions under the plan on behalf of the partic22 ipant, or to the participant directly in cash,

23 ‘‘(B) under which the participant is treated

24 as having elected to have the employer make such

25 contributions in an amount equal to a uniform
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1 percentage of compensation provided under the

2 plan until the participant specifically elects not

3 to have such contributions made (or specifically

4 elects to have such contributions made at a dif5 ferent percentage),

6 ‘‘(C) under which contributions described in

7 subparagraph (B) are invested in accordance

8 with regulations prescribed by the Secretary of

9 Labor under section 404(c)(4) of the Employee

10 Retirement Income Security Act of 1974, and

11 ‘‘(D) which meets the requirements of para12 graph (4).

13 ‘‘(4) NOTICE REQUIREMENTS.—

14 ‘‘(A) IN GENERAL.—The administrator of a

15 plan containing an arrangement described in

16 paragraph (3) shall, within a reasonable period

17 before each plan year, give to each employee to

18 whom an arrangement described in paragraph

19 (3) applies for such plan year notice of the em20 ployee’s rights and obligations under the ar21 rangement which—

22 ‘‘(i) is sufficiently accurate and com23 prehensive to apprise the employee of such

24 rights and obligations, and
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1 ‘‘(ii) is written in a manner calculated

2 to be understood by the average employee to

3 whom the arrangement applies.

4 ‘‘(B) TIME AND FORM OF NOTICE.—A notice

5 shall not be treated as meeting the requirements

6 of subparagraph (A) with respect to an employee

7 unless—

8 ‘‘(i) the notice includes a notice ex9 plaining the employee’s right under the ar10 rangement to elect not to have elective con11 tributions made on the employee’s behalf (or

12 to elect to have such contributions made at

13 a different percentage),

14 ‘‘(ii) the employee has a reasonable pe15 riod of time after receipt of the notice de16 scribed in clause (i) and before the first elec17 tive contribution is made to make such elec18 tion, and

19 ‘‘(iii) the notice explains how contribu20 tions made under the arrangement will be

21 invested in the absence of any investment

22 election by the employee.’’.

23 (g) EFFECTIVE DATE.—

24 (1) IN GENERAL.—Except as provided by para25 graph (2), the amendments made by this section shall
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1 apply to plan years beginning after December 31,

2 2005.

3 (2) SECTION 403(b) CONTRACTS.—The amend4 ments made by subsection (d) shall apply to years

5 ending after the date of the enactment of this Act.

6 SEC. 1109. TREATMENT OF INVESTMENT OF ASSETS BY

7 PLAN WHERE PARTICIPANT FAILS TO EXER8 CISE INVESTMENT ELECTION.

9 (a) IN GENERAL.—Section 404(c) of the Employee Re10 tirement Income Security Act of 1974 (29 U.S.C. 1104(c))

11 is amended by adding at the end the following new para12 graph:

13 ‘‘(4) DEFAULT INVESTMENT ARRANGEMENTS.—

14 ‘‘(A) IN GENERAL.—For purposes of para15 graph (1), a participant in an individual ac16 count plan meeting the notice requirements of

17 subparagraph (B) shall be treated as exercising

18 control over the assets in the account with re19 spect to the amount of contributions and earn20 ings which, in the absence of an investment elec21 tion by the participant, are invested by the plan

22 in accordance with regulations prescribed by the

23 Secretary. The regulations under this subpara24 graph shall provide guidance on the appropriate25 ness of designating default investments that in-
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1 clude a mix of asset classes consistent with cap2 ital preservation, long-term capital appreciation,

3 or a blend of both.

4 ‘‘(B) NOTICE REQUIREMENTS.—

5 ‘‘(i) IN GENERAL.—The requirements

6 of this subparagraph are met if each

7 participant—

8 ‘‘(I) receives, within a reasonable

9 period of time before each plan year, a

10 notice explaining the employee’s right

11 under the plan to designate how con12 tributions and earnings will be in13 vested and explaining how, in the ab14 sence of any investment election by the

15 participant, such contributions and

16 earnings will be invested, and

17 ‘‘(II) has a reasonable period of

18 time after receipt of such notice and

19 before the beginning of the plan year to

20 make such designation.

21 ‘‘(ii) FORM OF NOTICE.—The require22 ments of clauses (i) and (ii) of section

23 401(k)(12)(D) of the Internal Revenue Code

24 of 1986 shall be met with respect to the no25 tices described in this subparagraph.’’.
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1 (b) EFFECTIVE DATE.—

2 (1) IN GENERAL.—The amendments made by

3 this section shall apply to plan years beginning after

4 December 31, 2005.

5 (2) REGULATIONS.—Final regulations under sec6 tion 404(c)(4)(A) of the Employee Retirement Income

7 Security Act of 1974 (as added by this section) shall

8 be issued no later than 6 months after the date of the

9 enactment of this Act.

10 SEC. 1110. CLARIFICATION OF FIDUCIARY RULES.

11 (a) IN GENERAL.—Not later than 1 year after the date

12 of the enactment of this Act, the Secretary of Labor shall

13 issue final regulations clarifying that the selection of an

14 annuity contract as an optional form of distribution from

15 an individual account plan to a participant or

16 beneficiary—

17 (1) is not subject to the safest available annuity

18 standard under Interpretive Bulletin 95–1 (29 C.F.R.

19 2509.95–1), and

20 (2) is subject to all otherwise applicable fidu21 ciary standards.

22 (b) EFFECTIVE DATE.—This section shall take effect

23 on the date of enactment of this Act.
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1 TITLE XII—UNITED STATES TAX

2 COURT MODERNIZATION

3 SEC. 1200. AMENDMENT OF 1986 CODE.

4 Except as otherwise expressly provided, whenever in

5 this title an amendment or repeal is expressed in terms of

6 an amendment to, or repeal of, a section or other provision,

7 the reference shall be considered to be made to a section or

8 other provision of the Internal Revenue Code of 1986.

9 SEC. 1201. ANNUITIES FOR SURVIVORS OF TAX COURT

10 JUDGES WHO ARE ASSASSINATED.

11 (a) ELIGIBILITY IN CASE OF DEATH BY ASSASSINA12 TION.—Subsection (h) of section 7448 (relating to annuities

13 to surviving spouses and dependent children of judges) is

14 amended to read as follows:

15 ‘‘(h) ENTITLEMENT TO ANNUITY.—

16 ‘‘(1) IN GENERAL.—

17 ‘‘(A) ANNUITY TO SURVIVING SPOUSE.—If a

18 judge described in paragraph (2) is survived by

19 a surviving spouse but not by a dependent child,

20 there shall be paid to such surviving spouse an

21 annuity beginning with the day of the death of

22 the judge or following the surviving spouse’s at23 tainment of the age of 50 years, whichever is the

24 later, in an amount computed as provided in

25 subsection (m).
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1 ‘‘(B) ANNUITY TO CHILD.—If such a judge

2 is survived by a surviving spouse and a depend3 ent child or children, there shall be paid to such

4 surviving spouse an immediate annuity in an

5 amount computed as provided in subsection (m),

6 and there shall also be paid to or on behalf of

7 each such child an immediate annuity equal to

8 the lesser of—

9 ‘‘(i) 10 percent of the average annual

10 salary of such judge (determined in accord11 ance with subsection (m)), or

12 ‘‘(ii) 20 percent of such average annual

13 salary, divided by the number of such chil14 dren.

15 ‘‘(C) ANNUITY TO SURVIVING DEPENDENT

16 CHILDREN.—If such a judge leaves no surviving

17 spouse but leaves a surviving dependent child or

18 children, there shall be paid to or on behalf of

19 each such child an immediate annuity equal to

20 the lesser of—

21 ‘‘(i) 20 percent of the average annual

22 salary of such judge (determined in accord23 ance with subsection (m)), or
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1 ‘‘(ii) 40 percent of such average annual

2 salary, divided by the number of such chil3 dren.

4 ‘‘(2) COVERED JUDGES.—Paragraph (1) applies

5 to any judge electing under subsection (b)—

6 ‘‘(A) who dies while a judge after having

7 rendered at least 5 years of civilian service com8 puted as prescribed in subsection (n), for the last

9 5 years of which the salary deductions provided

10 for by subsection (c)(1) or the deposits required

11 by subsection (d) have actually been made or the

12 salary deductions required by the civil service re13 tirement laws have actually been made, or

14 ‘‘(B) who dies by assassination after having

15 rendered less than 5 years of civilian service

16 computed as prescribed in subsection (n) if, for

17 the period of such service, the salary deductions

18 provided for by subsection (c)(1) or the deposits

19 required by subsection (d) have actually been

20 made.

21 ‘‘(3) TERMINATION OF ANNUITY.—

22 ‘‘(A) IN THE CASE OF A SURVIVING

23 SPOUSE.—The annuity payable to a surviving

24 spouse under this subsection shall be terminable

25 upon such surviving spouse’s death or such sur-
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1 viving spouse’s remarriage before attaining age

2 55.

3 ‘‘(B) IN THE CASE OF A CHILD.—The annu4 ity payable to a child under this subsection shall

5 be terminable upon (i) the child attaining the

6 age of 18 years, (ii) the child’s marriage, or (iii)

7 the child’s death, whichever first occurs, except

8 that if such child is incapable of self-support by

9 reason of mental or physical disability the

10 child’s annuity shall be terminable only upon

11 death, marriage, or recovery from such dis12 ability.

13 ‘‘(C) IN THE CASE OF A DEPENDENT CHILD

14 AFTER DEATH OF SURVIVING SPOUSE.—In case

15 of the death of a surviving spouse of a judge

16 leaving a dependent child or children of the

17 judge surviving such spouse, the annuity of such

18 child or children shall be recomputed and paid

19 as provided in paragraph (1)(C).

20 ‘‘(D) RECOMPUTATION.—In any case in

21 which the annuity of a dependent child is termi22 nated under this subsection, the annuities of any

23 remaining dependent child or children, based

24 upon the service of the same judge, shall be re25 computed and paid as though the child whose
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1 annuity was so terminated had not survived

2 such judge.

3 ‘‘(4) SPECIAL RULE FOR ASSASSINATED

4 JUDGES.—In the case of a survivor or survivors of a

5 judge described in paragraph (2)(B), there shall be

6 deducted from the annuities otherwise payable under

7 this section an amount equal to—

8 ‘‘(A) the amount of salary deductions pro9 vided for by subsection (c)(1) that would have

10 been made if such deductions had been made for

11 5 years of civilian service computed as pre12 scribed in subsection (n) before the judge’s death,

13 reduced by

14 ‘‘(B) the amount of such salary deductions

15 that were actually made before the date of the

16 judge’s death.’.’

17 (b) DEFINITION OF ASSASSINATION.—Section 7448(a)

18 (relating to definitions) is amended by adding at the end

19 the following new paragraph:

20 ‘‘(8) The terms ‘assassinated’ and ‘assassination’

21 mean the killing of a judge that is motivated by the

22 performance by that judge of his or her official du23 ties.’’.

24 (c) DETERMINATION OF ASSASSINATION.—Subsection

25 (i) of section 7448 is amended—
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1 (1) by striking the subsection heading and in2 serting the following:

3 ‘‘(i) DETERMINATIONS BY CHIEF JUDGE.—

4 ‘‘(1) DEPENDENCY AND DISABILITY.—’’,

5 (2) by moving the text 2 ems to the right, and

6 (3) by adding at the end the following new para7 graph:

8 ‘‘(2) ASSASSINATION.—The chief judge shall de9 termine whether the killing of a judge was an assas10 sination, subject to review only by the Tax Court. The

11 head of any Federal agency that investigates the kill12 ing of a judge shall provide information to the chief

13 judge that would assist the chief judge in making such

14 a determination.’’.

15 (d) COMPUTATION OF ANNUITIES.—Subsection (m) of

16 section 7448 is amended—

17 (1) by striking the subsection heading and in18 serting the following:

19 ‘‘(m) COMPUTATION OF ANNUITIES.—

20 ‘‘(1) IN GENERAL.—’’,

21 (2) by moving the text 2 ems to the right, and

22 (3) by adding at the end the following new para23 graph:

24 ‘‘(2) ASSASSINATED JUDGES.—In the case of a

25 judge who is assassinated and who has served less
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1 than 3 years, the annuity of the surviving spouse of

2 such judge shall be based upon the average annual

3 salary received by such judge for judicial service.’’.

4 (e) OTHER BENEFITS.—Section 7448 is amended by

5 adding at the end the following:

6 ‘‘(u) OTHER BENEFITS.—In the case of a judge who

7 is assassinated, an annuity shall be paid under this section

8 notwithstanding a survivor’s eligibility for or receipt of

9 benefits under chapter 81 of title 5, United States Code,

10 except that the annuity for which a surviving spouse is eli11 gible under this section shall be reduced to the extent that

12 the total benefits paid under this section and chapter 81

13 of that title for any year would exceed the current salary

14 for that year of the office of the judge.’’.

15 SEC. 1202. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT

16 JUDICIAL SURVIVOR ANNUITIES.

17 (a) IN GENERAL.—Subsection (s) of section 7448 (re18 lating to annuities to surviving spouses and dependent chil19 dren of judges) is amended to read as follows:

20 ‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each time

21 that an increase is made under section 8340(b) of title 5,

22 United States Code, in annuities payable under subchapter

23 III of chapter 83 of that title, each annuity payable from

24 the survivors annuity fund under this section shall be in-
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1 creased at the same time by the same percentage by which

2 annuities are increased under such section 8340(b).’’.

3 (b) EFFECTIVE DATE.—The amendment made by this

4 section shall apply with respect to increases made under

5 section 8340(b) of title 5, United States Code, in annuities

6 payable under subchapter III of chapter 83 of that title,

7 taking effect after the date of the enactment of this Act.

8 SEC. 1203. LIFE INSURANCE COVERAGE FOR TAX COURT

9 JUDGES.

10 (a) IN GENERAL.—Section 7447 (relating to retire11 ment of judges) is amended by adding at the end the fol12 lowing new subsection:

13 ‘‘(j) LIFE INSURANCE COVERAGE.—For purposes of

14 chapter 87 of title 5, United States Code (relating to life

15 insurance), any individual who is serving as a judge of the

16 Tax Court or who is retired under this section is deemed

17 to be an employee who is continuing in active employ18 ment.’’.

19 (b) EFFECTIVE DATE.—The amendment made by this

20 section shall apply to any individual serving as a judge

21 of the United States Tax Court or to any retired judge of

22 the United States Tax Court on the date of the enactment

23 of this Act.
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1 SEC. 1204. COST OF LIFE INSURANCE COVERAGE FOR TAX

2 COURT JUDGES AGE 65 OR OVER.

3 Section 7472 (relating to expenditures) is amended by

4 inserting after the first sentence the following new sentence:

5 ‘‘Notwithstanding any other provision of law, the Tax

6 Court is authorized to pay on behalf of its judges, age 65

7 or over, any increase in the cost of Federal Employees’

8 Group Life Insurance imposed after April 24, 1999, includ9 ing any expenses generated by such payments, as authorized

10 by the chief judge in a manner consistent with such pay11 ments authorized by the Judicial Conference of the United

12 States pursuant to section 604(a)(5) of title 28, United

13 States Code.’’

14 SEC. 1205. MODIFICATION OF TIMING OF LUMP-SUM PAY15 MENT OF JUDGES’ ACCRUED ANNUAL LEAVE.

16 (a) IN GENERAL.—Section 7443 (relating to member17 ship of the Tax Court) is amended by adding at the end

18 the following new subsection:

19 ‘‘(h) LUMP-SUM PAYMENT OF JUDGES’ ACCRUED AN20 NUAL LEAVE.—Notwithstanding the provisions of sections

21 5551 and 6301 of title 5, United States Code, when an indi22 vidual subject to the leave system provided in chapter 63

23 of that title is appointed by the President to be a judge

24 of the Tax Court, the individual shall be entitled to receive,

25 upon appointment to the Tax Court, a lump-sum payment

26 from the Tax Court of the accumulated and accrued current
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1 annual leave standing to the individual’s credit as certified

2 by the agency from which the individual resigned.’’.

3 (b) EFFECTIVE DATE.—The amendment made by this

4 section shall apply to any judge of the United States Tax

5 Court who has an outstanding leave balance on the date

6 of the enactment of this Act and to any individual ap7 pointed by the President to serve as a judge of the United

8 States Tax Court after such date.

9 SEC. 1206. PARTICIPATION OF TAX COURT JUDGES IN THE

10 THRIFT SAVINGS PLAN.

11 (a) IN GENERAL.—Section 7447 (relating to retire12 ment of judges), as amended by this Act, is amended by

13 adding at the end the following new subsection:

14 ‘‘(k) THRIFT SAVINGS PLAN.—

15 ‘‘(1) ELECTION TO CONTRIBUTE.—

16 ‘‘(A) IN GENERAL.—A judge of the Tax

17 Court may elect to contribute to the Thrift Sav18 ings Fund established by section 8437 of title 5,

19 United States Code.

20 ‘‘(B) PERIOD OF ELECTION.—An election

21 may be made under this paragraph only during

22 a period provided under section 8432(b) of title

23 5, United States Code, for individuals subject to

24 chapter 84 of such title.
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1 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—

2 Except as otherwise provided in this subsection, the

3 provisions of subchapters III and VII of chapter 84

4 of title 5, United States Code, shall apply with re5 spect to a judge who makes an election under para6 graph (1).

7 ‘‘(3) SPECIAL RULES.—

8 ‘‘(A) AMOUNT CONTRIBUTED.—The amount

9 contributed by a judge to the Thrift Savings

10 Fund in any pay period shall not exceed the

11 maximum percentage of such judge’s basic pay

12 for such period as allowable under section 8440f

13 of title 5, United States Code. Basic pay does not

14 include any retired pay paid pursuant to this

15 section.

16 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

17 JUDGE.—No contributions may be made for the

18 benefit of a judge under section 8432(c) of title

19 5, United States Code.

20 ‘‘(C) APPLICABILITY OF SECTION 8433(b) OF

21 TITLE 5 WHETHER OR NOT JUDGE RETIRES.—

22 Section 8433(b) of title 5, United States Code,

23 applies with respect to a judge who makes an

24 election under paragraph (1) and who either—

25 ‘‘(i) retires under subsection (b), or
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1 ‘‘(ii) ceases to serve as a judge of the

2 Tax Court but does not retire under sub3 section (b).

4 Retirement under subsection (b) is a separation

5 from service for purposes of subchapters III and

6 VII of chapter 84 of that title.

7 ‘‘(D) APPLICABILITY OF SECTION 8351(b)(5)

8 OF TITLE 5.—The provisions of section

9 8351(b)(5) of title 5, United States Code, shall

10 apply with respect to a judge who makes an elec11 tion under paragraph (1).

12 ‘‘(E) EXCEPTION.—Notwithstanding sub13 paragraph (C), if any judge retires under this

14 section, or resigns without having met the age

15 and service requirements set forth under sub16 section (b)(2), and such judge’s nonforfeitable ac17 count balance is less than an amount that the

18 Executive Director of the Office of Personnel

19 Management prescribes by regulation, the Execu20 tive Director shall pay the nonforfeitable account

21 balance to the participant in a single payment.’’.

22 (b) EFFECTIVE DATE.—The amendment made by this

23 section shall take effect on the date of the enactment of this

24 Act, except that United States Tax Court judges may only
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1 begin to participate in the Thrift Savings Plan at the next

2 open season beginning after such date.

3 SEC. 1207. EXEMPTION OF TEACHING COMPENSATION OF

4 RETIRED JUDGES FROM LIMITATION ON OUT5 SIDE EARNED INCOME.

6 (a) IN GENERAL.—Section 7447 (relating to retire7 ment of judges), as amended by this Act, is amended by

8 adding at the end the following new subsection:

9 ‘‘(l) TEACHING COMPENSATION OF RETIRED

10 JUDGES.—For purposes of the limitation under section

11 501(a) of the Ethics in Government Act of 1978 (5 U.S.C.

12 App.), any compensation for teaching approved under sec13 tion 502(a)(5) of such Act shall not be treated as outside

14 earned income when received by a judge of the Tax Court

15 who has retired under subsection (b) for teaching performed

16 during any calendar year for which such a judge has met

17 the requirements of subsection (c), as certified by the chief

18 judge of the Tax Court.’’.

19 (b) EFFECTIVE DATE.—The amendment made by this

20 section shall apply to any individual serving as a retired

21 judge of the United States Tax Court on or after the date

22 of the enactment of this Act.
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1 SEC. 1208. GENERAL PROVISIONS RELATING TO MAG2 ISTRATE JUDGES OF THE TAX COURT.

3 (a) TITLE OF SPECIAL TRIAL JUDGE CHANGED TO

4 MAGISTRATE JUDGE OF THE TAX COURT.—The heading of

5 section 7443A is amended to read as follows:

6 ‘‘SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.’’

7 (b) APPOINTMENT, TENURE, AND REMOVAL.—Sub8 section (a) of section 7443A is amended to read as follows:

9 ‘‘(a) APPOINTMENT, TENURE, AND REMOVAL.—

10 ‘‘(1) APPOINTMENT.—The chief judge may, from

11 time to time, appoint and reappoint magistrate

12 judges of the Tax Court for a term of 8 years. The

13 magistrate judges of the Tax Court shall proceed

14 under such rules as may be promulgated by the Tax

15 Court.

16 ‘‘(2) REMOVAL.—Removal of a magistrate judge

17 of the Tax Court during the term for which he or she

18 is appointed shall be only for incompetency, mis19 conduct, neglect of duty, or physical or mental dis20 ability, but the office of a magistrate judge of the Tax

21 Court shall be terminated if the judges of the Tax

22 Court determine that the services performed by the

23 magistrate judge of the Tax Court are no longer need24 ed. Removal shall not occur unless a majority of all

25 the judges of the Tax Court concur in the order of re26 moval. Before any order of removal shall be entered,
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1 a full specification of the charges shall be furnished

2 to the magistrate judge of the Tax Court, and he or

3 she shall be accorded by the judges of the Tax Court

4 an opportunity to be heard on the charges.’’.

5 (c) SALARY.—Section 7443A(d) (relating to salary) is

6 amended by striking ‘‘90’’ and inserting ‘‘92’’.

7 (d) EXEMPTION FROM FEDERAL LEAVE PROVI8 SIONS.—Section 7443A is amended by adding at the end

9 the following new subsection:

10 ‘‘(f) EXEMPTION FROM FEDERAL LEAVE PROVI11 SIONS.—

12 ‘‘(1) IN GENERAL.—A magistrate judge of the

13 Tax Court appointed under this section shall be ex14 empt from the provisions of subchapter I of chapter

15 63 of title 5, United States Code.

16 ‘‘(2) TREATMENT OF UNUSED LEAVE.—

17 ‘‘(A) AFTER SERVICE AS MAGISTRATE

18 JUDGE.—If an individual who is exempted

19 under paragraph (1) from the subchapter re20 ferred to in such paragraph was previously sub21 ject to such subchapter and, without a break in

22 service, again becomes subject to such subchapter

23 on completion of the individual’s service as a

24 magistrate judge, the unused annual leave and

25 sick leave standing to the individual’s credit
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1 when such individual was exempted from this

2 subchapter is deemed to have remained to the in3 dividual’s credit.

4 ‘‘(B) COMPUTATION OF ANNUITY.—In com5 puting an annuity under section 8339 of title 5,

6 United States Code, the total service of an indi7 vidual specified in subparagraph (A) who retires

8 on an immediate annuity or dies leaving a sur9 vivor or survivors entitled to an annuity in10 cludes, without regard to the limitations imposed

11 by subsection (f) of such section 8339, the days

12 of unused sick leave standing to the individual’s

13 credit when such individual was exempted from

14 subchapter I of chapter 63 of title 5, United

15 States Code, except that these days will not be

16 counted in determining average pay or annuity

17 eligibility.

18 ‘‘(C) LUMP SUM PAYMENT.—Any accumu19 lated and current accrued annual leave or vaca20 tion balances credited to a magistrate judge as of

21 the date of the enactment of this subsection shall

22 be paid in a lump sum at the time of separation

23 from service pursuant to the provisions and re24 strictions set forth in section 5551 of title 5,
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1 United States Code, and related provisions re2 ferred to in such section.’’.

3 (e) CONFORMING AMENDMENTS.—

4 (1) The heading of subsection (b) of section

5 7443A is amended by striking ‘‘SPECIAL TRIAL

6 JUDGES’’ and inserting ‘‘Magistrate Judges of the

7 Tax Court’’.

8 (2) Section 7443A(b) is amended by striking

9 ‘‘special trial judges of the court’’ and inserting

10 ‘‘magistrate judges of the Tax Court’’.

11 (3) Subsections (c) and (d) of section 7443A are

12 amended by striking ‘‘special trial judge’’ and insert13 ing ‘‘magistrate judge of the Tax Court’’ each place

14 it appears.

15 (4) Section 7443A(e) is amended by striking

16 ‘‘special trial judges’’ and inserting ‘‘magistrate

17 judges of the Tax Court’’.

18 (5) Section 7456(a) is amended by striking ‘‘spe19 cial trial judge’’ each place it appears and inserting

20 ‘‘magistrate judge’’.

21 (6) Subsection (c) of section 7471 is amended—

22 (A) by striking the subsection heading and

23 inserting ‘‘MAGISTRATE JUDGES OF THE TAX

24 COURT.—’’, and
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1 (B) by striking ‘‘special trial judges’’ and

2 inserting ‘‘magistrate judges’’.

3 SEC. 1209. ANNUITIES TO SURVIVING SPOUSES AND DE4 PENDENT CHILDREN OF MAGISTRATE

5 JUDGES OF THE TAX COURT.

6 (a) DEFINITIONS.—Section 7448(a) (relating to defini7 tions), as amended by this Act, is amended by redesignating

8 paragraphs (5), (6), (7), and (8) as paragraphs (7), (8),

9 (9), and (10), respectively, and by inserting after para10 graph (4) the following new paragraphs:

11 ‘‘(5) The term ‘magistrate judge’ means a judi12 cial officer appointed pursuant to section 7443A, in13 cluding any individual receiving an annuity under

14 section 7443B, or chapters 83 or 84, as the case may

15 be, of title 5, United States Code, whether or not per16 forming judicial duties under section 7443C.

17 ‘‘(6) The term ‘magistrate judge’s salary’ means

18 the salary of a magistrate judge received under sec19 tion 7443A(d), any amount received as an annuity

20 under section 7443B, or chapters 83 or 84, as the case

21 may be, of title 5, United States Code, and compensa22 tion received under section 7443C.’’.

23 (b) ELECTION.—Subsection (b) of section 7448 (relat24 ing to annuities to surviving spouses and dependent chil25 dren of judges) is amended—
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1 (1) by striking the subsection heading and in2 serting the following:

3 ‘‘(b) ELECTION.—

4 ‘‘(1) JUDGES.—’’,

5 (2) by moving the text 2 ems to the right, and

6 (3) by adding at the end the following new para7 graph:

8 ‘‘(2) MAGISTRATE JUDGES.—Any magistrate

9 judge may by written election filed with the chief

10 judge bring himself or herself within the purview of

11 this section. Such election shall be filed not later than

12 the later of 6 months after—

13 ‘‘(A) 6 months after the date of the enact14 ment of this paragraph,

15 ‘‘(B) the date the judge takes office, or

16 ‘‘(C) the date the judge marries.’’.

17 (c) CONFORMING AMENDMENTS.—

18 (1) The heading of section 7448 is amended by

19 inserting ‘‘AND MAGISTRATE JUDGES’’ after

20 ‘‘JUDGES’’.

21 (2) The item relating to section 7448 in the table

22 of sections for part I of subchapter C of chapter 76

23 is amended by inserting ‘‘and magistrate judges’’

24 after ‘‘judges’’.
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1 (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m),

2 (n), and (u) of section 7448, as amended by this Act,

3 are each amended—

4 (A) by inserting ‘‘or magistrate judge’’ after

5 ‘‘judge’’ each place it appears other than in the

6 phrase ‘‘chief judge’’, and

7 (B) by inserting ‘‘or magistrate judge’s’’

8 after ‘‘judge’s’’ each place it appears.

9 (4) Section 7448(c) is amended—

10 (A) in paragraph (1), by striking ‘‘Tax

11 Court judges’’ and inserting ‘‘Tax Court judicial

12 officers’’,

13 (B) in paragraph (2)—

14 (i) in subparagraph (A), by inserting

15 ‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’, and

16 (ii) in subparagraph (B), by striking

17 ‘‘subsection (a)(4)’’ and inserting ‘‘sub18 sections (a)(4) and (a)(6)’’.

19 (5) Section 7448(g) is amended by inserting ‘‘or

20 section 7443B’’ after ‘‘section 7447’’ each place it ap21 pears, and by inserting ‘‘or an annuity’’ after ‘‘re22 tired pay’’.

23 (6) Section 7448(j)(1) is amended—

24 (A) in subparagraph (A), by striking ‘‘serv25 ice or retired’’ and inserting ‘‘service, retired’’,
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1 and by inserting ‘‘, or receiving any annuity

2 under section 7443B or chapters 83 or 84 of title

3 5, United States Code,’’ after ‘‘section 7447’’,

4 and

5 (B) in the last sentence, by striking ‘‘sub6 sections (a) (6) and (7)’’ and inserting ‘‘para7 graphs (8) and (9) of subsection (a)’’.

8 (7) Section 7448(m)(1), as amended by this Act,

9 is amended—

10 (A) by inserting ‘‘or any annuity under sec11 tion 7443B or chapters 83 or 84 of title 5,

12 United States Code’’ after ‘‘7447(d)’’, and

13 (B) by inserting ‘‘or 7443B(m)(1)(B) after

14 ‘‘7447(f)(4)’’.

15 (8) Section 7448(n) is amended by inserting ‘‘his

16 years of service pursuant to any appointment under

17 section 7443A,’’ after ‘‘of the Tax Court,’’.

18 (9) Section 3121(b)(5)(E) is amended by insert19 ing ‘‘or magistrate judge’’ before ‘‘of the United States

20 Tax Court’’.

21 (10) Section 210(a)(5)(E) of the Social Security

22 Act is amended by inserting ‘‘or magistrate judge’’ be23 fore ‘‘of the United States Tax Court’’.
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1 SEC. 1210. RETIREMENT AND ANNUITY PROGRAM.

2 (a) RETIREMENT AND ANNUITY PROGRAM.—Part I of

3 subchapter C of chapter 76 is amended by inserting after

4 section 7443A the following new section:

5 ‘‘SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF

6 THE TAX COURT.

7 ‘‘(a) RETIREMENT BASED ON YEARS OF SERVICE.—

8 A magistrate judge of the Tax Court to whom this section

9 applies and who retires from office after attaining the age

10 of 65 years and serving at least 14 years, whether continu11 ously or otherwise, as such magistrate judge shall, subject

12 to subsection (f), be entitled to receive, during the remainder

13 of the magistrate judge’s lifetime, an annuity equal to the

14 salary being received at the time the magistrate judge leaves

15 office.

16 ‘‘(b) RETIREMENT UPON FAILURE OF REAPPOINT17 MENT.—A magistrate judge of the Tax Court to whom this

18 section applies who is not reappointed following the expira19 tion of the term of office of such magistrate judge and who

20 retires upon the completion of the term shall, subject to sub21 section (f), be entitled to receive, upon attaining the age

22 of 65 years and during the remainder of such magistrate

23 judge’s lifetime, an annuity equal to that portion of the sal24 ary being received at the time the magistrate judge leaves

25 office which the aggregate number of years of service, not

26 to exceed 14, bears to 14, if—
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1 ‘‘(1) such magistrate judge has served at least 1

2 full term as a magistrate judge, and

3 ‘‘(2) not earlier than 9 months before the date on

4 which the term of office of such magistrate judge ex5 pires, and not later than 6 months before such date,

6 such magistrate judge notified the chief judge of the

7 Tax Court in writing that such magistrate judge was

8 willing to accept reappointment to the position in

9 which such magistrate judge was serving.

10 ‘‘(c) SERVICE OF AT LEAST 8 YEARS.—A magistrate

11 judge of the Tax Court to whom this section applies and

12 who retires after serving at least 8 years, whether continu13 ously or otherwise, as such a magistrate judge shall, subject

14 to subsection (f), be entitled to receive, upon attaining the

15 age of 65 years and during the remainder of the magistrate

16 judge’s lifetime, an annuity equal to that portion of the sal17 ary being received at the time the magistrate judge leaves

18 office which the aggregate number of years of service, not

19 to exceed 14, bears to 14. Such annuity shall be reduced

by 1 20 ⁄6 of 1 percent for each full month such magistrate judge

21 was under the age of 65 at the time the magistrate judge

22 left office, except that such reduction shall not exceed 20

23 percent.

24 ‘‘(d) RETIREMENT FOR DISABILITY.—A magistrate

25 judge of the Tax Court to whom this section applies, who
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1 has served at least 5 years, whether continuously or other2 wise, as such a magistrate judge and who retires or is re3 moved from office upon the sole ground of mental or phys4 ical disability shall, subject to subsection (f), be entitled to

5 receive, during the remainder of the magistrate judge’s life6 time, an annuity equal to 40 percent of the salary being

7 received at the time of retirement or removal or, in the case

8 of a magistrate judge who has served for at least 10 years,

9 an amount equal to that proportion of the salary being re10 ceived at the time of retirement or removal which the aggre11 gate number of years of service, not to exceed 14, bears to

12 14.

13 ‘‘(e) COST-OF-LIVING ADJUSTMENTS.—A magistrate

14 judge of the Tax Court who is entitled to an annuity under

15 this section is also entitled to a cost-of-living adjustment

16 in such annuity, calculated and payable in the same man17 ner as adjustments under section 8340(b) of title 5, United

18 States Code, except that any such annuity, as increased

19 under this subsection, may not exceed the salary then pay20 able for the position from which the magistrate judge retired

21 or was removed.

22 ‘‘(f) ELECTION; ANNUITY IN LIEU OF OTHER ANNU23 ITIES.—

24 ‘‘(1) IN GENERAL.—A magistrate judge of the

25 Tax Court shall be entitled to an annuity under this
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1 section if the magistrate judge elects an annuity

2 under this section by notifying the chief judge of the

3 Tax Court not later than the later of—

4 ‘‘(A) 5 years after the magistrate judge of

5 the Tax Court begins judicial service, or

6 ‘‘(B) 5 years after the date of the enactment

7 of this subsection.

8 Such notice shall be given in accordance with proce9 dures prescribed by the Tax Court.

10 ‘‘(2) ANNUITY IN LIEU OF OTHER ANNUITY.—A

11 magistrate judge who elects to receive an annuity

12 under this section shall not be entitled to receive—

13 ‘‘(A) any annuity to which such magistrate

14 judge would otherwise have been entitled under

15 subchapter III of chapter 83, or under chapter

16 84 (except for subchapters III and VII), of title

17 5, United States Code, for service performed as

18 a magistrate or otherwise,

19 ‘‘(B) an annuity or salary in senior status

20 or retirement under section 371 or 372 of title

21 28, United States Code,

22 ‘‘(C) retired pay under section 7447, or

23 ‘‘(D) retired pay under section 7296 of title

24 38, United States Code.
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1 ‘‘(3) COORDINATION WITH TITLE 5.—A mag2 istrate judge of the Tax Court who elects to receive an

3 annuity under this section—

4 ‘‘(A) shall not be subject to deductions and

5 contributions otherwise required by section

6 8334(a) of title 5, United States Code,

7 ‘‘(B) shall be excluded from the operation of

8 chapter 84 (other than subchapters III and VII)

9 of such title 5, and

10 ‘‘(C) is entitled to a lump-sum credit under

11 section 8342(a) or 8424 of such title 5, as the

12 case may be.

13 ‘‘(g) CALCULATION OF SERVICE.—For purposes of cal14 culating an annuity under this section—

15 ‘‘(1) service as a magistrate judge of the Tax

16 Court to whom this section applies may be credited,

17 and

18 ‘‘(2) each month of service shall be credited as

1 19 ⁄12 of a year, and the fractional part of any month

20 shall not be credited.

21 ‘‘(h) COVERED POSITIONS AND SERVICE.—This section

22 applies to any magistrate judge of the Tax Court or special

23 trial judge of the Tax Court appointed under this sub24 chapter, but only with respect to service as such a mag25 istrate judge or special trial judge after a date not earlier
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than 91 1 ⁄2 years before the date of the enactment of this sub2 section.

3 ‘‘(i) PAYMENTS PURSUANT TO COURT ORDER.—

4 ‘‘(1) IN GENERAL.—Payments under this section

5 which would otherwise be made to a magistrate judge

6 of the Tax Court based upon his or her service shall

7 be paid (in whole or in part) by the chief judge of the

8 Tax Court to another person if and to the extent ex9 pressly provided for in the terms of any court decree

10 of divorce, annulment, or legal separation, or the

11 terms of any court order or court-approved property

12 settlement agreement incident to any court decree of

13 divorce, annulment, or legal separation. Any payment

14 under this paragraph to a person bars recovery by

15 any other person.

16 ‘‘(2) REQUIREMENTS FOR PAYMENT.—Paragraph

17 (1) shall apply only to payments made by the chief

18 judge of the Tax Court after the date of receipt by the

19 chief judge of written notice of such decree, order, or

20 agreement, and such additional information as the

21 chief judge may prescribe.

22 ‘‘(3) COURT DEFINED.—For purposes of this sub23 section, the term ‘court’ means any court of any

24 State, the District of Columbia, the Commonwealth of

25 Puerto Rico, Guam, the Northern Mariana Islands, or
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1 the Virgin Islands, and any Indian tribal court or

2 courts of Indian offense.

3 ‘‘(j) DEDUCTIONS, CONTRIBUTIONS, AND DEPOSITS.—

4 ‘‘(1) DEDUCTIONS.—Beginning with the next

5 pay period after the chief judge of the Tax Court re6 ceives a notice under subsection (f) that a magistrate

7 judge of the Tax Court has elected an annuity under

8 this section, the chief judge shall deduct and withhold

9 1 percent of the salary of such magistrate judge.

10 Amounts shall be so deducted and withheld in a man11 ner determined by the chief judge. Amounts deducted

12 and withheld under this subsection shall be deposited

13 in the Treasury of the United States to the credit of

14 the Tax Court Judicial Officers’ Retirement Fund.

15 Deductions under this subsection from the salary of a

16 magistrate judge shall terminate upon the retirement

17 of the magistrate judge or upon completion of 14

18 years of service for which contributions under this

19 section have been made, whether continuously or oth20 erwise, as calculated under subsection (g), whichever

21 occurs first.

22 ‘‘(2) CONSENT TO DEDUCTIONS; DISCHARGE OF

23 CLAIMS.—Each magistrate judge of the Tax Court

24 who makes an election under subsection (f) shall be

25 deemed to consent and agree to the deductions from
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1 salary which are made under paragraph (1). Pay2 ment of such salary less such deductions (and any de3 ductions made under section 7448) is a full and com4 plete discharge and acquittance of all claims and de5 mands for all services rendered by such magistrate

6 judge during the period covered by such payment, ex7 cept the right to those benefits to which the magistrate

8 judge is entitled under this section (and section 7448).

9 ‘‘(k) DEPOSITS FOR PRIOR SERVICE.—Each mag10 istrate judge of the Tax Court who makes an election under

11 subsection (f) may deposit, for service performed before such

12 election for which contributions may be made under this

13 section, an amount equal to 1 percent of the salary received

14 for that service. Credit for any period covered by that serv15 ice may not be allowed for purposes of an annuity under

16 this section until a deposit under this subsection has been

17 made for that period.

18 ‘‘(l) INDIVIDUAL RETIREMENT RECORDS.—The

19 amounts deducted and withheld under subsection (j), and

20 the amounts deposited under subsection (k), shall be credited

21 to individual accounts in the name of each magistrate judge

22 of the Tax Court from whom such amounts are received,

23 for credit to the Tax Court Judicial Officers’ Retirement

24 Fund.

25 ‘‘(m) ANNUITIES AFFECTED IN CERTAIN CASES.—
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1 ‘‘(1) 1-YEAR FORFEITURE FOR FAILURE TO PER2 FORM JUDICIAL DUTIES.—Subject to paragraph (3),

3 any magistrate judge of the Tax Court who retires

4 under this section and who fails to perform judicial

5 duties required of such individual by section 7443C

6 shall forfeit all rights to an annuity under this sec7 tion for a 1-year period which begins on the 1st day

8 on which such individual fails to perform such duties.

9 ‘‘(2) PERMANENT FORFEITURE OF RETIRED PAY

10 WHERE CERTAIN NON-GOVERNMENT SERVICES PER11 FORMED.—Subject to paragraph (3), any magistrate

12 judge of the Tax Court who retires under this section

13 and who thereafter performs (or supervises or directs

14 the performance of) legal or accounting services in the

15 field of Federal taxation for the individual’s client,

16 the individual’s employer, or any of such employer’s

17 clients, shall forfeit all rights to an annuity under

18 this section for all periods beginning on or after the

19 first day on which the individual performs (or super20 vises or directs the performance of) such services. The

21 preceding sentence shall not apply to any civil office

22 or employment under the Government of the United

23 States.

24 ‘‘(3) FORFEITURES NOT TO APPLY WHERE INDI25 VIDUAL ELECTS TO FREEZE AMOUNT OF ANNUITY.—
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1 ‘‘(A) IN GENERAL.—If a magistrate judge of

2 the Tax Court makes an election under this

3 paragraph—

4 ‘‘(i) paragraphs (1) and (2) (and sec5 tion 7443C) shall not apply to such mag6 istrate judge beginning on the date such

7 election takes effect, and

8 ‘‘(ii) the annuity payable under this

9 section to such magistrate judge, for periods

10 beginning on or after the date such election

11 takes effect, shall be equal to the annuity to

12 which such magistrate judge is entitled on

13 the day before such effective date.

14 ‘‘(B) ELECTION REQUIREMENTS.—An elec15 tion under subparagraph (A)—

16 ‘‘(i) may be made by a magistrate

17 judge of the Tax Court eligible for retire18 ment under this section, and

19 ‘‘(ii) shall be filed with the chief judge

20 of the Tax Court.

21 Such an election, once it takes effect, shall be ir22 revocable.

23 ‘‘(C) EFFECTIVE DATE OF ELECTION.—Any

24 election under subparagraph (A) shall take effect
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1 on the first day of the first month following the

2 month in which the election is made.

3 ‘‘(4) ACCEPTING OTHER EMPLOYMENT.—Any

4 magistrate judge of the Tax Court who retires under

5 this section and thereafter accepts compensation for

6 civil office or employment under the United States

7 Government (other than for the performance of func8 tions as a magistrate judge of the Tax Court under

9 section 7443C) shall forfeit all rights to an annuity

10 under this section for the period for which such com11 pensation is received. For purposes of this paragraph,

12 the term ‘compensation’ includes retired pay or sal13 ary received in retired status.

14 ‘‘(n) LUMP-SUM PAYMENTS.—

15 ‘‘(1) ELIGIBILITY.—

16 ‘‘(A) IN GENERAL.—Subject to paragraph

17 (2), an individual who serves as a magistrate

18 judge of the Tax Court and—

19 ‘‘(i) who leaves office and is not re20 appointed as a magistrate judge of the Tax

21 Court for at least 31 consecutive days,

22 ‘‘(ii) who files an application with the

23 chief judge of the Tax Court for payment of

24 a lump-sum credit,
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1 ‘‘(iii) is not serving as a magistrate

2 judge of the Tax Court at the time of filing

3 of the application, and

4 ‘‘(iv) will not become eligible to receive

5 an annuity under this section within 31

6 days after filing the application,

7 is entitled to be paid the lump-sum credit. Pay8 ment of the lump-sum credit voids all rights to

9 an annuity under this section based on the serv10 ice on which the lump-sum credit is based, until

11 that individual resumes office as a magistrate

12 judge of the Tax Court.

13 ‘‘(B) PAYMENT TO SURVIVORS.—Lump-sum

14 benefits authorized by subparagraphs (C), (D),

15 and (E) of this paragraph shall be paid to the

16 person or persons surviving the magistrate judge

17 of the Tax Court and alive on the date title to

18 the payment arises, in the order of precedence set

19 forth in subsection (o) of section 376 of title 28,

20 United States Code, and in accordance with the

21 last 2 sentences of paragraph (1) of that sub22 section. For purposes of the preceding sentence,

23 the term ‘judicial official’ as used in subsection

24 (o) of such section 376 shall be deemed to mean

25 ‘magistrate judge of the Tax Court’ and the
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1 terms ‘Administrative Office of the United States

2 Courts’ and ‘Director of the Administrative Of3 fice of the United States Courts’ shall be deemed

4 to mean ‘chief judge of the Tax Court’.

5 ‘‘(C) PAYMENT UPON DEATH OF JUDGE BE6 FORE RECEIPT OF ANNUITY.—If a magistrate

7 judge of the Tax Court dies before receiving an

8 annuity under this section, the lump-sum credit

9 shall be paid.

10 ‘‘(D) PAYMENT OF ANNUITY REMAINDER.—

11 If all annuity rights under this section based on

12 the service of a deceased magistrate judge of the

13 Tax Court terminate before the total annuity

14 paid equals the lump-sum credit, the difference

15 shall be paid.

16 ‘‘(E) PAYMENT UPON DEATH OF JUDGE

17 DURING RECEIPT OF ANNUITY.—If a magistrate

18 judge of the Tax Court who is receiving an an19 nuity under this section dies, any accrued annu20 ity benefits remaining unpaid shall be paid.

21 ‘‘(F) PAYMENT UPON TERMINATION.—Any

22 accrued annuity benefits remaining unpaid on

23 the termination, except by death, of the annuity

24 of a magistrate judge of the Tax Court shall be

25 paid to that individual.
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1 ‘‘(G) PAYMENT UPON ACCEPTING OTHER

2 EMPLOYMENT.—Subject to paragraph (2), a

3 magistrate judge of the Tax Court who forfeits

4 rights to an annuity under subsection (m)(4) be5 fore the total annuity paid equals the lump-sum

6 credit shall be entitled to be paid the difference

7 if the magistrate judge of the Tax Court files an

8 application with the chief judge of the Tax Court

9 for payment of that difference. A payment under

10 this subparagraph voids all rights to an annuity

11 on which the payment is based.

12 ‘‘(2) SPOUSES AND FORMER SPOUSES.—

13 ‘‘(A) IN GENERAL.—Payment of the lump14 sum credit under paragraph (1)(A) or a pay15 ment under paragraph (1)(G)—

16 ‘‘(i) may be made only if any current

17 spouse and any former spouse of the mag18 istrate judge of the Tax Court are notified

19 of the magistrate judge’s application, and

20 ‘‘(ii) shall be subject to the terms of a

21 court decree of divorce, annulment, or legal

22 separation, or any court or court approved

23 property settlement agreement incident to

24 such decree, if—
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1 ‘‘(I) the decree, order, or agree2 ment expressly relates to any portion

3 of the lump-sum credit or other pay4 ment involved, and

5 ‘‘(II) payment of the lump-sum

6 credit or other payment would extin7 guish entitlement of the magistrate

8 judge’s spouse or former spouse to any

9 portion of an annuity under subsection

10 (i).

11 ‘‘(B) NOTIFICATION.—Notification of a

12 spouse or former spouse under this paragraph

13 shall be made in accordance with such proce14 dures as the chief judge of the Tax Court shall

15 prescribe. The chief judge may provide under

16 such procedures that subparagraph (A)(i) may

17 be waived with respect to a spouse or former

18 spouse if the magistrate judge establishes to the

19 satisfaction of the chief judge that the where20 abouts of such spouse or former spouse cannot be

21 determined.

22 ‘‘(C) RESOLUTION OF 2 OR MORE OR23 DERS.—The chief judge shall prescribe proce24 dures under which this paragraph shall be ap25 plied in any case in which the chief judge re-
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1 ceives 2 or more orders or decrees described in

2 subparagraph (A).

3 ‘‘(3) DEFINITION.—For purposes of this sub4 section, the term ‘lump-sum credit’ means the

5 unrefunded amount consisting of—

6 ‘‘(A) retirement deductions made under this

7 section from the salary of a magistrate judge of

8 the Tax Court,

9 ‘‘(B) amounts deposited under subsection

10 (k) by a magistrate judge of the Tax Court cov11 ering earlier service, and

12 ‘‘(C) interest on the deductions and deposits

13 which, for any calendar year, shall be equal to

14 the overall average yield to the Tax Court Judi15 cial Officers’ Retirement Fund during the pre16 ceding fiscal year from all obligations purchased

17 by the Secretary during such fiscal year under

18 subsection (o); but does not include interest—

19 ‘‘(i) if the service covered thereby ag20 gregates 1 year or less, or

21 ‘‘(ii) for the fractional part of a month

22 in the total service.

23 ‘‘(o) TAX COURT JUDICIAL OFFICERS’ RETIREMENT

24 FUND.—
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1 ‘‘(1) ESTABLISHMENT.—There is established in

2 the Treasury a fund which shall be known as the ‘Tax

3 Court Judicial Officers’ Retirement Fund’. Amounts

4 in the Fund are authorized to be appropriated for the

5 payment of annuities, refunds, and other payments

6 under this section.

7 ‘‘(2) INVESTMENT OF FUND.—The Secretary

8 shall invest, in interest bearing securities of the

9 United States, such currently available portions of the

10 Tax Court Judicial Officers’ Retirement Fund as are

11 not immediately required for payments from the

12 Fund. The income derived from these investments con13 stitutes a part of the Fund.

14 ‘‘(3) UNFUNDED LIABILITY.—

15 ‘‘(A) IN GENERAL.—There are authorized to

16 be appropriated to the Tax Court Judicial Offi17 cers’ Retirement Fund amounts required to re18 duce to zero the unfunded liability of the Fund.

19 ‘‘(B) UNFUNDED LIABILITY.—For purposes

20 of subparagraph (A), the term ‘unfunded liabil21 ity’ means the estimated excess, determined on

22 an annual basis in accordance with the provi23 sions of section 9503 of title 31, United States

24 Code, of the present value of all benefits payable
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1 from the Tax Court Judicial Officers’ Retirement

2 Fund over the sum of—

3 ‘‘(i) the present value of deductions to

4 be withheld under this section from the fu5 ture basic pay of magistrate judges of the

6 Tax Court, plus

7 ‘‘(ii) the balance in the Fund as of the

8 date the unfunded liability is determined.

9 ‘‘(p) PARTICIPATION IN THRIFT SAVINGS PLAN.—

10 ‘‘(1) ELECTION TO CONTRIBUTE.—

11 ‘‘(A) IN GENERAL.—A magistrate judge of

12 the Tax Court who elects to receive an annuity

13 under this section or under section 611 of the

14 Pension Security and Transparency Act of 2005

15 may elect to contribute an amount of such indi16 vidual’s basic pay to the Thrift Savings Fund es17 tablished by section 8437 of title 5, United States

18 Code.

19 ‘‘(B) PERIOD OF ELECTION.—An election

20 may be made under this paragraph only during

21 a period provided under section 8432(b) of title

22 5, United States Code, for individuals subject to

23 chapter 84 of such title.

24 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—

25 Except as otherwise provided in this subsection, the
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1 provisions of subchapters III and VII of chapter 84

2 of title 5, United States Code, shall apply with re3 spect to a magistrate judge who makes an election

4 under paragraph (1).

5 ‘‘(3) SPECIAL RULES.—

6 ‘‘(A) AMOUNT CONTRIBUTED.—The amount

7 contributed by a magistrate judge to the Thrift

8 Savings Fund in any pay period shall not ex9 ceed the maximum percentage of such judge’s

10 basic pay for such pay period as allowable under

11 section 8440f of title 5, United States Code.

12 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

13 JUDGE.—No contributions may be made for the

14 benefit of a magistrate judge under section

15 8432(c) of title 5, United States Code.

16 ‘‘(C) APPLICABILITY OF SECTION 8433(b) OF

17 TITLE 5.—Section 8433(b) of title 5, United

18 States Code, applies with respect to a magistrate

19 judge who makes an election under paragraph

20 (1) and—

21 ‘‘(i) who retires entitled to an imme22 diate annuity under this section (including

23 a disability annuity under subsection (d) of

24 this section) or section 611 of the Pension

25 Security and Transparency Act of 2005,
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1 ‘‘(ii) who retires before attaining age

2 65 but is entitled, upon attaining age 65, to

3 an annuity under this section or section

4 611 of the Pension Security and Trans5 parency Act of 2005, or

6 ‘‘(iii) who retires before becoming enti7 tled to an immediate annuity, or an annu8 ity upon attaining age 65, under this sec9 tion or section 611 of the Pension Security

10 and Transparency Act of 2005.

11 ‘‘(D) SEPARATION FROM SERVICE.—With

12 respect to a magistrate judge to whom this sub13 section applies, retirement under this section or

14 section 611 of the Pension Security and Trans15 parency Act of 2005 is a separation from service

16 for purposes of subchapters III and VII of chap17 ter 84 of title 5, United States Code.

18 ‘‘(4) DEFINITIONS.—For purposes of this sub19 section, the terms ‘retirement’ and ‘retire’ include re20 moval from office under section 7443A(a)(2) on the

21 sole ground of mental or physical disability.

22 ‘‘(5) OFFSET.—In the case of a magistrate judge

23 who receives a distribution from the Thrift Savings

24 Fund and who later receives an annuity under this

25 section, that annuity shall be offset by an amount
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1 equal to the amount which represents the Govern2 ment’s contribution to that person’s Thrift Savings

3 Account, without regard to earnings attributable to

4 that amount. Where such an offset would exceed 50

5 percent of the annuity to be received in the first year,

6 the offset may be divided equally over the first 2 years

7 in which that person receives the annuity.

8 ‘‘(6) EXCEPTION.—Notwithstanding clauses (i)

9 and (ii) of paragraph (3)(C), if any magistrate judge

10 retires under circumstances making such magistrate

11 judge eligible to make an election under subsection (b)

12 of section 8433 of title 5, United States Code, and

13 such magistrate judge’s nonforfeitable account balance

14 is less than an amount that the Executive Director of

15 the Office of Personnel Management prescribes by reg16 ulation, the Executive Director shall pay the non17 forfeitable account balance to the participant in a

18 single payment.’’.

19 (b) CONFORMING AMENDMENT.—The table of sections

20 for part I of subchapter C of chapter 76 is amended by

21 inserting after the item relating to section 7443A the fol22 lowing new item:

‘‘Sec. 7443B. Retirement for magistrate judges of the Tax Court.’’.
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1 SEC. 1211. INCUMBENT MAGISTRATE JUDGES OF THE TAX

2 COURT.

3 (a) RETIREMENT ANNUITY UNDER TITLE 5 AND SEC4 TION 7443B OF THE INTERNAL REVENUE CODE OF 1986.—

5 A magistrate judge of the United States Tax Court in active

6 service on the date of the enactment of this Act shall, subject

7 to subsection (b), be entitled, in lieu of the annuity other8 wise provided under the amendments made by this title,

9 to—

10 (1) an annuity under subchapter III of chapter

11 83, or under chapter 84 (except for subchapters III

12 and VII), of title 5, United States Code, as the case

13 may be, for creditable service before the date on which

14 service would begin to be credited for purposes of

15 paragraph (2), and

16 (2) an annuity calculated under subsection (b)

17 or (c) and subsection (g) of section 7443B of the In18 ternal Revenue Code of 1986, as added by this Act,

19 for any service as a magistrate judge of the United

20 States Tax Court or special trial judge of the United

21 States Tax Court but only with respect to service as

22 such a magistrate judge or special trial judge after a

date not earlier than 91 23 ⁄2 years prior to the date of

24 the enactment of this Act (as specified in the election

25 pursuant to subsection (b)) for which deductions and

26 deposits are made under subsections (j) and (k) of
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1 such section 7443B, as applicable, without regard to

2 the minimum number of years of service as such a

3 magistrate judge of the United States Tax Court, ex4 cept that—

5 (A) in the case of a magistrate judge who

6 retired with less than 8 years of service, the an7 nuity under subsection (c) of such section 7443B

8 shall be equal to that proportion of the salary

9 being received at the time the magistrate judge

10 leaves office which the years of service bears to

11 14, subject to a reduction in accordance with

12 subsection (c) of such section 7443B if the mag13 istrate judge is under age 65 at the time he or

14 she leaves office, and

15 (B) the aggregate amount of the annuity

16 initially payable on retirement under this sub17 section may not exceed the rate of pay for the

18 magistrate judge which is in effect on the day be19 fore the retirement becomes effective.

20 (b) FILING OF NOTICE OF ELECTION.—A magistrate

21 judge of the United States Tax Court shall be entitled to

22 an annuity under this section only if the magistrate judge

23 files a notice of that election with the chief judge of the

24 United States Tax Court specifying the date on which serv25 ice would begin to be credited under section 7443B of the
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1 Internal Revenue Code of 1986, as added by this Act, in

2 lieu of chapter 83 or chapter 84 of title 5, United States

3 Code. Such notice shall be filed in accordance with such

4 procedures as the chief judge of the United States Tax Court

5 shall prescribe.

6 (c) LUMP-SUM CREDIT UNDER TITLE 5.—A mag7 istrate judge of the United States Tax Court who makes

8 an election under subsection (b) shall be entitled to a lump9 sum credit under section 8342 or 8424 of title 5, United

10 States Code, as the case may be, for any service which is

11 covered under section 7443B of the Internal Revenue Code

12 of 1986, as added by this Act, pursuant to that election,

13 and with respect to which any contributions were made by

14 the magistrate judge under the applicable provisions of title

15 5, United States Code.

16 (d) RECALL.—With respect to any magistrate judge of

17 the United States Tax Court receiving an annuity under

18 this section who is recalled to serve under section 7443C

19 of the Internal Revenue Code of 1986, as added by this

20 Act—

21 (1) the amount of compensation which such re22 called magistrate judge receives under such section

23 7443C shall be calculated on the basis of the annuity

24 received under this section, and
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1 (2) such recalled magistrate judge of the United

2 States Tax Court may serve as a reemployed annu3 itant to the extent otherwise permitted under title 5,

4 United States Code.

5 Section 7443B(m)(4) of the Internal Revenue Code of 1986,

6 as added by this Act, shall not apply with respect to service

7 as a reemployed annuitant described in paragraph (2).

8 SEC. 1212. PROVISIONS FOR RECALL.

9 (a) IN GENERAL.—Part I of subchapter C of chapter

10 76, as amended by this Act, is amended by inserting after

11 section 7443B the following new section:

12 ‘‘SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX

13 COURT.

14 ‘‘(a) RECALLING OF RETIRED MAGISTRATE

15 JUDGES.—Any individual who has retired pursuant to sec16 tion 7443B or the applicable provisions of title 5, United

17 States Code, upon reaching the age and service require18 ments established therein, may at or after retirement be

19 called upon by the chief judge of the Tax Court to perform

20 such judicial duties with the Tax Court as may be requested

21 of such individual for any period or periods specified by

22 the chief judge; except that in the case of any such

23 individual—
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1 ‘‘(1) the aggregate of such periods in any 1 cal2 endar year shall not (without such individual’s con3 sent) exceed 90 calendar days, and

4 ‘‘(2) such individual shall be relieved of per5 forming such duties during any period in which ill6 ness or disability precludes the performance of such

7 duties.

8 Any act, or failure to act, by an individual performing ju9 dicial duties pursuant to this subsection shall have the same

10 force and effect as if it were the act (or failure to act) of

11 a magistrate judge of the Tax Court.

12 ‘‘(b) COMPENSATION.—For the year in which a period

13 of recall occurs, the magistrate judge shall receive, in addi14 tion to the annuity provided under the provisions of section

15 7443B or under the applicable provisions of title 5, United

16 States Code, an amount equal to the difference between that

17 annuity and the current salary of the office to which the

18 magistrate judge is recalled. The annuity of the magistrate

19 judge who completes that period of service, who is not re20 called in a subsequent year, and who retired under section

21 7443B, shall be equal to the salary in effect at the end of

22 the year in which the period of recall occurred for the office

23 from which such individual retired.
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1 ‘‘(c) RULEMAKING AUTHORITY.—The provisions of this

2 section may be implemented under such rules as may be

3 promulgated by the Tax Court.’’

4 (b) CONFORMING AMENDMENT.—The table of sections

5 for part I of subchapter C of chapter 76, as amended by

6 this Act, is amended by inserting after the item relating

7 to section 7443B the following new item:

‘‘Sec. 7443C. Recall of magistrate judges of the Tax Court.’’.

8 SEC. 1213. EFFECTIVE DATE.

9 Except as otherwise provided, the amendments made

10 by this subtitle shall take effect on the date of the enactment

11 of this Act.

12 TITLE XIII—OTHER PROVISIONS

13 Subtitle A—Administrative

14 Provision

15 SEC. 1301. PROVISIONS RELATING TO PLAN AMENDMENTS.

16 (a) IN GENERAL.—If this section applies to any plan

17 or contract amendment—

18 (1) such plan or contract shall be treated as

19 being operated in accordance with the terms of the

20 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 plan shall not fail to meet the require24 ments of section 411(d)(6) of the Internal Revenue

25 Code of 1986 and section 204(g) of the Employee Re-
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1 tirement Income Security Act of 1974 by reason of

2 such amendment.

3 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

4 (1) IN GENERAL.—This section shall apply to

5 any amendment to any plan or annuity contract

6 which is made—

7 (A) pursuant to any amendment made by

8 this Act or the Economic Growth and Tax Relief

9 Reconciliation Act of 2001, or pursuant to any

10 regulation issued by the Secretary of the Treas11 ury or the Secretary of Labor under such Acts,

12 and

13 (B) on or before the last day of the first

14 plan year beginning on or after January 1,

15 2007, or such later date as the Secretary of the

16 Treasury may prescribe.

17 In the case of a governmental plan (as defined in sec18 tion 414(d) of the Internal Revenue Code of 1986),

19 subparagraph (B) shall be applied by substituting the

20 date which is 2 years after the date otherwise applied

21 under subparagraph (B).

22 (2) CONDITIONS.—This section shall not apply to

23 any amendment unless—

24 (A) during the period—
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1 (i) beginning on the date the legislative

2 or regulatory amendment described in para3 graph (1)(A) takes effect (or in the case of

4 a plan or contract amendment not required

5 by such legislative or regulatory amend6 ment, the effective date specified by the

7 plan), and

8 (ii) ending on the date described in

9 paragraph (1)(B) (or, if earlier, the date the

10 plan or contract amendment is adopted),

11 the plan or contract is operated as if such plan

12 or contract amendment were in effect; and

13 (B) such plan or contract amendment ap14 plies retroactively for such period.

15 SEC. 1302. AUTHORITY TO THE SECRETARY OF LABOR, SEC16 RETARY OF THE TREASURY, AND THE PEN17 SION BENEFIT GUARANTY CORPORATION TO

18 POSTPONE CERTAIN DEADLINES.

19 The Secretary of Labor, the Secretary of the Treasury,

20 and the Executive Director of the Pension Benefit Guaranty

21 Corporation shall exercise their authority under section 518

22 of the Employee Retirement Income Security Act of 1974

23 (29 U.S.C. 1148) and section 7508A of the Internal Revenue

24 Code of 1986 to postpone certain deadlines by reason of the

25 Presidentially declared disaster areas in Louisiana, Mis-
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1 sissippi, Alabama, Texas, Florida, or elsewhere, due to the

2 effect of Hurricane Katrina, Rita, or Wilma. The Secre3 taries and the Executive Director of the Corporation shall

4 issue guidance as soon as is practicable to plan sponsors

5 and participants regarding extension of deadlines and rules

6 applicable to these extraordinary circumstances. Nothing in

7 this section shall be construed to relieve any plan sponsor

8 from any requirement to pay benefits or make contributions

9 under the plan of the sponsor.

10 Subtitle B—Governmental Pension

11 Plan Equalization

12 SEC. 1311. DEFINITION OF GOVERNMENTAL PLAN.

13 (a) AMENDMENT TO INTERNAL REVENUE CODE OF

14 1986.—Section 414(d) of the Internal Revenue Code of 1986

15 (definition of governmental plan) is amended by adding at

16 the end the following: ‘‘The term ‘governmental plan’ in17 cludes a plan established or maintained for its employees

18 by an Indian tribal government (as defined in section

19 7701(a)(40)), a subdivision of an Indian tribal government

20 (determined in accordance with section 7871(d)), an agency

21 instrumentality (or subdivision) of an Indian tribal govern22 ment, or an entity established under Federal, State, or trib23 al law which is wholly owned or controlled by any of the

24 foregoing.’’.
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1 (b) AMENDMENT TO EMPLOYEE RETIREMENT INCOME

2 SECURITY ACT OF 1974.—Section 3(32) of the Employee

3 Retirement Income Security Act of 1974 (29 U.S.C.

4 1002(32)) is amended by adding at the end the following:

5 ‘‘The term ‘governmental plan’ includes a plan established

6 or maintained for its employees by an Indian tribal govern7 ment (as defined in section 7701(a)(40)), a subdivision of

8 an Indian tribal government (determined in accordance

9 with section 7871(d)), an agency instrumentality (or sub10 division) of an Indian tribal government, or an entity es11 tablished under Federal, State, or tribal law that is wholly

12 owned or controlled by any of the foregoing.’’.

13 SEC. 1312. EXTENSION TO ALL GOVERNMENTAL PLANS OF

14 CURRENT MORATORIUM ON APPLICATION OF

15 CERTAIN NONDISCRIMINATION RULES APPLI16 CABLE TO STATE AND LOCAL PLANS.

17 (a) IN GENERAL.—

18 (1) Subparagraph (G) of section 401(a)(5) and

19 subparagraph (G) of section 401(a)(26) of the Inter20 nal Revenue Code of 1986 are each amended by strik21 ing ‘‘section 414(d))’’ and all that follows and insert22 ing ‘‘section 414(d)).’’.

23 (2) Subparagraph (G) of section 401(k)(3) of

24 such Code and paragraph (2) of section 1505(d) of the

25 Taxpayer Relief Act of 1997 (Public Law 105–34;
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1 111 Stat. 1063) are each amended by striking ‘‘main2 tained by a State or local government or political

3 subdivision thereof (or agency or instrumentality

4 thereof)’’.

5 (b) CONFORMING AMENDMENTS.—

6 (1) The heading of subparagraph (G) of section

7 401(a)(5) of the Internal Revenue Code of 1986 is

8 amended by striking ‘‘STATE AND LOCAL GOVERN9 MENTAL’’ and inserting ‘‘GOVERNMENTAL’’.

10 (2) The heading of subparagraph (G) of section

11 401(a)(26) of such Code is amended by striking ‘‘EX12 CEPTION FOR STATE AND LOCAL’’ and inserting ‘‘EX13 CEPTION FOR’’.

14 (3) Section 401(k)(3)(G) of such Code is amend15 ed by inserting ‘‘GOVERNMENTAL PLAN.—’’ after

16 ‘‘(G)’’.

17 SEC. 1313. CLARIFICATION THAT TRIBAL GOVERNMENTS

18 ARE SUBJECT TO THE SAME DEFINED BEN19 EFIT PLAN RULES AND REGULATIONS AP20 PLIED TO STATE AND OTHER LOCAL GOVERN21 MENTS, THEIR POLICE AND FIREFIGHTERS.

22 (a) AMENDMENTS TO INTERNAL REVENUE CODE OF

23 1986.—
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1 (1) POLICE AND FIREFIGHTERS.—Subparagraph

2 (H) section 415(b)(2) of the Internal Revenue Code of

3 1986 (defining participant) is amended—

4 (A) in clause (i), by striking ‘‘State or po5 litical subdivision’’ and inserting ‘‘State, Indian

6 tribal government (as defined in section

7 7701(a)(40)), or any political subdivision’’; and

8 (B) in clause (ii)(I), by striking ‘‘State or

9 political subdivision’’ each place it appears and

10 inserting ‘‘State, Indian tribal government (as so

11 defined), or any political subdivision’’.

12 (2) STATE AND LOCAL GOVERNMENT PLANS.—

13 (A) IN GENERAL.—Subparagraph (A) of

14 section 415(b)(10) of such Code (relating to limi15 tation to equal accrued benefit) is amended—

16 (i) by inserting ‘‘, Indian tribal gov17 ernment (as defined in section

18 7701(a)(40)),’’ after ‘‘State’’;

19 (ii) by inserting ‘‘any’’ before ‘‘polit20 ical subdivision’’; and

21 (iii) by inserting ‘‘any of’’ before ‘‘the

22 foregoing’’.

23 (B) CONFORMING AMENDMENT.—The head24 ing of paragraph (1) of section 415(b) of such

25 Code is amended by striking ‘‘SPECIAL RULE
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1 FOR STATE AND’’ and inserting ‘‘SPECIAL RULE

2 FOR STATE, INDIAN TRIBAL, AND’’.

3 (3) GOVERNMENT PICK UP CONTRIBUTIONS.—

4 Paragraph (2) of section 414(h) of such Code (relat5 ing to designation by units of government) is amend6 ed by striking ‘‘State or political subdivision’’ and

7 inserting ‘‘State, Indian tribal government (as de8 fined in section 7701(a)(40)), or any political sub9 division’’.

10 (b) AMENDMENTS TO EMPLOYEE RETIREMENT INCOME

11 SECURITY ACT OF 1974.—Section 4021(b) of the Employee

12 Retirement Income Security Act of 1974 (29 U.S.C.

13 1321(b)) is amended—

14 (1) in paragraph (12), by striking ‘‘or’’ at the

15 end;

16 (2) in paragraph (13), by striking ‘‘plan.’’ and

17 inserting ‘‘plan; or’’; and

18 (3) by adding at the end the following:

19 ‘‘(14) established and maintained for its employ20 ees by an Indian tribal government (as defined in sec21 tion 7701(a)(40) of the Internal Revenue Code of

22 1986), a subdivision of an Indian tribal government

23 (determined in accordance with section 7871(d) of

24 such Code), an agency or instrumentality of an In25 dian tribal government or subdivision thereof, or an
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1 entity established under Federal, State, or tribal law

2 that is wholly owned or controlled by any of the fore3 going.’’.

4 SEC. 1314. EFFECTIVE DATE.

5 The amendments made by this subtitle shall apply to

6 any year beginning before, on, or after the date of the enact7 ment of this Act.

8 Subtitle C—Miscellaneous

9 Provisions

10 SEC. 1321. TRANSFER OF EXCESS FUNDS FROM BLACK

11 LUNG DISABILITY TRUSTS TO UNITED MINE

12 WORKERS OF AMERICA COMBINED BENEFIT

13 FUND.

14 (a) IN GENERAL.—So much of section 501(c)(21)(C)

15 of the Internal Revenue Code of 1986 (relating to black lung

16 disability trusts) as precedes the last sentence is amended

17 to read as follows:

18 ‘‘(C) Payments described in subparagraph

19 (A)(i)(IV) may be made from such trust during

20 a taxable year only to the extent that the aggre21 gate amount of such payments during such tax22 able year does not exceed the excess (if any), as

23 of the close of the preceding taxable year, of—

24 ‘‘(i) the fair market value of the assets

25 of the trust, over
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1 ‘‘(ii) 110 percent of the present value

2 of the liability described in subparagraph

3 (A)(i)(I) of such person.’’

4 (b) TRANSFER.—Section 9705 of such Code (relating

5 to transfer) is amended by adding at the end the following

6 new subsection:

7 ‘‘(c) TRANSFER FROM BLACK LUNG DISABILITY

8 TRUSTS.—

9 ‘‘(1) IN GENERAL.—The Secretary shall transfer

10 each fiscal year to the Fund from the general fund of

11 the Treasury an amount which the Secretary esti12 mates to be the additional amounts received in the

13 Treasury for that fiscal year by reason of the amend14 ment made by section 1321(a) of the Pension Security

15 and Transparency Act of 2005. The Secretary shall

16 adjust the amount transferred for any year to the ex17 tent necessary to correct errors in any estimate for

18 any prior year.

19 ‘‘(2) USE OF FUNDS.—Any amount transferred

20 to the Combined Fund under paragraph (1) shall be

21 used to proportionately reduce the unassigned bene22 ficiary premium under section 9704(a)(3) of each as23 signed operator for any plan year beginning after De24 cember 31, 2002.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 2002.

4 SEC. 1322. TREATMENT OF DEATH BENEFITS FROM COR5 PORATE-OWNED LIFE INSURANCE.

6 (a) IN GENERAL.—Section 101 of the Internal Revenue

7 Code of 1986 (relating to certain death benefits) is amended

8 by adding at the end the following new subsection:

9 ‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED LIFE

10 INSURANCE CONTRACTS.—

11 ‘‘(1) GENERAL RULE.—In the case of an em12 ployer-owned life insurance contract, the amount ex13 cluded from gross income of an applicable policy14 holder by reason of paragraph (1) of subsection (a)

15 shall not exceed an amount equal to the sum of the

16 premiums and other amounts paid by the policy17 holder for the contract.

18 ‘‘(2) EXCEPTIONS.—In the case of an employer19 owned life insurance contract with respect to which

20 the notice and consent requirements of paragraph (4)

21 are met, paragraph (1) shall not apply to any of the

22 following:

23 ‘‘(A) EXCEPTIONS BASED ON INSURED’S

24 STATUS.—Any amount received by reason of the
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1 death of an insured who, with respect to an ap2 plicable policyholder—

3 ‘‘(i) was an employee at any time dur4 ing the 12-month period before the insured’s

5 death, or

6 ‘‘(ii) is, at the time the contract is

7 issued—

8 ‘‘(I) a director,

9 ‘‘(II) a highly compensated em10 ployee within the meaning of section

11 414(q) (without regard to paragraph

12 (1)(B)(ii) thereof), or

13 ‘‘(III) a highly compensated indi14 vidual within the meaning of section

15 105(h)(5), except that ‘35 percent’ shall

16 be substituted for ‘25 percent’ in sub17 paragraph (C) thereof.

18 ‘‘(B) EXCEPTION FOR AMOUNTS PAID TO IN19 SURED’S HEIRS.—Any amount received by rea20 son of the death of an insured to the extent—

21 ‘‘(i) the amount is paid to a member

22 of the family (within the meaning of section

23 267(c)(4)) of the insured, any individual

24 who is the designated beneficiary of the in25 sured under the contract (other than the ap-
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1 plicable policyholder), a trust established for

2 the benefit of any such member of the fam3 ily or designated beneficiary, or the estate of

4 the insured, or

5 ‘‘(ii) the amount is used to purchase

6 an equity (or capital or profits) interest in

7 the applicable policyholder from any person

8 described in clause (i).

9 ‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CON10 TRACT.—

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

12 subsection, the term ‘employer-owned life insur13 ance contract’ means a life insurance contract

14 which—

15 ‘‘(i) is owned by a person engaged in

16 a trade or business and under which such

17 person (or a related person described in sub18 paragraph (B)(ii)) is directly or indirectly

19 a beneficiary under the contract, and

20 ‘‘(ii) covers the life of an insured who

21 is an employee with respect to the trade or

22 business of the applicable policyholder on

23 the date the contract is issued.

24 For purposes of the preceding sentence, if cov25 erage for each insured under a master contract
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1 is treated as a separate contract for purposes of

2 sections 817(h), 7702, and 7702A, coverage for

3 each such insured shall be treated as a separate

4 contract.

5 ‘‘(B) APPLICABLE POLICYHOLDER.—For

6 purposes of this subsection—

7 ‘‘(i) IN GENERAL.—The term ‘applica8 ble policyholder’ means, with respect to any

9 employer-owned life insurance contract, the

10 person described in subparagraph (A)(i)

11 which owns the contract.

12 ‘‘(ii) RELATED PERSONS.—The term

13 ‘applicable policyholder’ includes any per14 son which—

15 ‘‘(I) bears a relationship to the

16 person described in clause (i) which is

17 specified in section 267(b) or

18 707(b)(1), or

19 ‘‘(II) is engaged in trades or busi20 nesses with such person which are

21 under common control (within the

22 meaning of subsection (a) or (b) of sec23 tion 52).

24 ‘‘(4) NOTICE AND CONSENT REQUIREMENTS.—

25 The notice and consent requirements of this para-
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1 graph are met if, before the issuance of the contract,

2 the employee—

3 ‘‘(A) is notified in writing that the applica4 ble policyholder intends to insure the employee’s

5 life and the maximum face amount for which the

6 employee could be insured at the time the con7 tract was issued,

8 ‘‘(B) provides written consent to being in9 sured under the contract and that such coverage

10 may continue after the insured terminates em11 ployment, and

12 ‘‘(C) is informed in writing that an appli13 cable policyholder will be a beneficiary of any

14 proceeds payable upon the death of the employee.

15 ‘‘(5) DEFINITIONS.—For purposes of this

16 subsection—

17 ‘‘(A) EMPLOYEE.—The term ‘employee’ in18 cludes an officer, director, and highly com19 pensated employee (within the meaning of sec20 tion 414(q)).

21 ‘‘(B) INSURED.—The term ‘insured’ means,

22 with respect to an employer-owned life insurance

23 contract, an individual covered by the contract

24 who is a United States citizen or resident. In the

25 case of a contract covering the joint lives of 2 in-
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1 dividuals, references to an insured include both

2 of the individuals.’’.

3 (b) REPORTING REQUIREMENTS.—Subpart A of part

4 III of subchapter A of chapter 61 of the Internal Revenue

5 Code of 1986 (relating to information concerning persons

6 subject to special provisions) is amended by inserting after

7 section 6039H the following new section:

8 ‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO

9 EMPLOYER-OWNED LIFE INSURANCE CON10 TRACTS.

11 ‘‘(a) IN GENERAL.—Every applicable policyholder

12 owning 1 or more employer-owned life insurance contracts

13 issued after the date of the enactment of this section shall

14 file a return (at such time and in such manner as the Sec15 retary shall by regulations prescribe) showing for each year

16 such contracts are owned—

17 ‘‘(1) the number of employees of the applicable

18 policyholder at the end of the year,

19 ‘‘(2) the number of such employees insured under

20 such contracts at the end of the year,

21 ‘‘(3) the total amount of insurance in force at the

22 end of the year under such contracts,

23 ‘‘(4) the name, address, and taxpayer identifica24 tion number of the applicable policyholder and the
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1 type of business in which the policyholder is engaged,

2 and

3 ‘‘(5) that the applicable policyholder has a valid

4 consent for each insured employee (or, if all such con5 sents are not obtained, the number of insured employ6 ees for whom such consent was not obtained).

7 ‘‘(b) RECORDKEEPING REQUIREMENT.—Each applica8 ble policyholder owning 1 or more employer-owned life in9 surance contracts during any year shall keep such records

10 as may be necessary for purposes of determining whether

11 the requirements of this section and section 101(j) are met.

12 ‘‘(c) DEFINITIONS.—Any term used in this section

13 which is used in section 101(j) shall have the same meaning

14 given such term by section 101(j).’’.

15 (c) CONFORMING AMENDMENTS.—

16 (1) Paragraph (1) of section 101(a) of the Inter17 nal Revenue Code of 1986 is amended by striking

18 ‘‘and subsection (f)’’ and inserting ‘‘subsection (f),

19 and subsection (j)’’.

20 (2) The table of sections for subpart A of part III

21 of subchapter A of chapter 61 of such Code is amend22 ed by inserting after the item relating to section

23 6039H the following new item:

‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance

contracts.’’.
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1 (d) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to life insurance contracts issued after

3 the date of the enactment of this Act, except for a contract

4 issued after such date pursuant to an exchange described

5 in section 1035 of the Internal Revenue Code of 1986 for

6 a contract issued on or prior to that date. For purposes

7 of the preceding sentence, any material increase in the

8 death benefit or other material change shall cause the con9 tract to be treated as a new contract except that, in the

10 case of a master contract (within the meaning of section

11 264(f)(4)(E) of such Code), the addition of covered lives

12 shall be treated as a new contract only with respect to such

13 additional covered lives.

14 Subtitle D—Other Related Pension

15 Provisions

16 PART I—HEALTH AND MEDICAL BENEFITS

17 SEC. 1331. USE OF EXCESS PENSION ASSETS FOR FUTURE

18 RETIREE HEALTH BENEFITS.

19 (a) IN GENERAL.—Section 420 of the Internal Revenue

20 Code of 1986 (relating to transfers of excess pension assets

21 to retiree health accounts), as amended by this Act, is

22 amended by adding at the end the following new subsection:

23 ‘‘(f) QUALIFIED TRANSFER TO COVER FUTURE RE24 TIREE HEALTH COSTS.—
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1 ‘‘(1) IN GENERAL.—An employer maintaining a

2 defined benefit plan (other than a multiemployer

3 plan) may elect for any taxable year to have the plan

4 make a qualified future transfer rather than a quali5 fied transfer for the taxable year. Except as provided

6 in this subsection, a qualified future transfer shall be

7 treated for purposes of this title and the Employee

8 Retirement Income Security Act of 1974 as if it were

9 a qualified transfer.

10 ‘‘(2) QUALIFIED FUTURE TRANSFER.—For pur11 poses of this subsection—

12 ‘‘(A) IN GENERAL.—The term ‘qualified fu13 ture transfer’ means a transfer which meets all

14 of the requirements for a qualified transfer, ex15 cept that—

16 ‘‘(i) the determination of excess pen17 sion assets shall be made under subpara18 graph (B),

19 ‘‘(ii) the limitation on the amount

20 transferred shall be made under subpara21 graph (C), and

22 ‘‘(iii) the minimum cost requirements

23 of subsection (c)(3) shall be modified as pro24 vided under subparagraph (D).

25 ‘‘(B) EXCESS PENSION ASSETS.—
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1 ‘‘(i) IN GENERAL.—In determining ex2 cess pension assets for purposes of this sub3 section, subsection (e)(2) shall be applied by

4 substituting ‘115 percent’ for ‘125 percent’.

5 ‘‘(ii) REQUIREMENT TO MAINTAIN

6 FUNDED STATUS.—If, as of any valuation

7 date of any plan year in the transfer pe8 riod, the amount determined under sub9 section (e)(2)(B) (after application of clause

10 (i)) exceeds the amount determined under

11 subsection (e)(2)(A), either—

12 ‘‘(I) the employer maintaining the

13 plan shall make contributions to the

14 plan in an amount not less than the

15 amount required to reduce such excess

16 to zero as of such date, or

17 ‘‘(II) there is transferred from the

18 health benefits account to the plan an

19 amount not less than the amount re20 quired to reduce such excess to zero as

21 of such date.

22 ‘‘(C) LIMITATION ON AMOUNT TRANS23 FERRED.—Notwithstanding subsection (b)(3), the

24 amount of the excess pension assets which may
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1 be transferred in a qualified future transfer shall

2 be equal to the sum of—

3 ‘‘(i) if the transfer period includes the

4 taxable year of the transfer, the amount de5 termined under subsection (b)(3) for such

6 taxable year, plus

7 ‘‘(ii) in the case of all other taxable

8 years in the transfer period, the sum of the

9 qualified current retiree health liabilities

10 which the plan reasonably estimates, in ac11 cordance with guidance issued by the Sec12 retary, will be incurred for each of such

13 years.

14 ‘‘(D) MINIMUM COST REQUIREMENTS.—

15 ‘‘(i) IN GENERAL.—The requirements

16 of subsection (c)(3) shall be treated as met

17 if each group health plan or arrangement

18 under which applicable health benefits are

19 provided provides applicable health benefits

20 during the period beginning with the first

21 year of the transfer period and ending with

22 the last day of the 4th year following the

23 transfer period such that the annual aver24 age amount of such benefits provided during

25 such period is not less than the applicable
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1 employer cost determined under subsection

2 (c)(3)(A) with respect to the transfer.

3 ‘‘(ii) ELECTION TO MAINTAIN BENE4 FITS.—An employer may elect, in lieu of

5 the requirements of clause (i), to meet the

6 requirements of subsection (c)(3) by meeting

7 the requirements of such subsection (as in

8 effect before the amendments made by sec9 tion 535 of the Tax Relief Extension Act of

10 1999) for each of the years described in the

11 period under clause (i).

12 ‘‘(3) COORDINATION WITH OTHER TRANSFERS.—

13 In applying subsection (b)(3) to any subsequent

14 transfer during a taxable year in a transfer period,

15 qualified current retiree health liabilities shall be re16 duced by any such liabilities taken into account with

17 respect to the qualified future transfer to which such

18 period relates.

19 ‘‘(4) TRANSFER PERIOD.—For purposes of this

20 subsection, the term ‘transfer period’ means, with re21 spect to any transfer, a period of consecutive taxable

22 years specified in the election under paragraph (1)

23 which begins and ends during the 10-taxable-year pe24 riod beginning with the taxable year of the transfer.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to transfers after the date of the enact3 ment of this Act.

4 SEC. 1332. SPECIAL RULES FOR FUNDING OF COLLEC5 TIVELY BARGAINED RETIREE HEALTH BENE6 FITS.

7 (a) COLLECTIVELY BARGAINED TRANSFER TREATED

8 AS A QUALIFIED TRANSFER.—

9 (1) IN GENERAL.—Section 420(b) of the Internal

10 Revenue Code of 1986 (defining qualified transfer) is

11 amended by redesignating paragraph (5) as para12 graph (6) and by inserting after paragraph (4) the

13 following new paragraph:

14 ‘‘(5) A collectively bargained transfer (as defined

15 in subsection (e)(5)) shall be treated as a qualified

16 transfer.’’.

17 (2) CONFORMING AMENDMENTS.—

18 (A) Subparagraph (B) of section 420(b)(2)

19 of such Code is amended by inserting ‘‘or a col20 lectively bargained transfer’’ after ‘‘paragraph

21 (4)’’.

22 (B) Paragraph (3) of section 420(b) of such

23 Code is amended to read as follows:

24 ‘‘(3) LIMITATION ON AMOUNT TRANSFERRED.—
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1 ‘‘(A) IN GENERAL.—The amount of excess

2 pension assets which may be transferred in a

3 qualified transfer (other than a collectively bar4 gained transfer) shall not exceed the amount

5 which is reasonably estimated to be the amount

6 the employer maintaining the plan will pay

7 (whether directly or through reimbursement) out

8 of such account during the taxable year of the

9 transfer for qualified current retiree health li10 abilities.

11 ‘‘(B) EXCEPTION FOR COLLECTIVELY BAR12 GAINED TRANSFERS.—The amount of excess pen13 sion assets which may be transferred in a collec14 tively bargained transfer shall not exceed the

15 amount which is reasonably estimated, in ac16 cordance with the provisions of the collective bar17 gaining agreement and generally accepted ac18 counting principles, to be the amount the em19 ployer maintaining the plan will pay (whether

20 directly or through reimbursement) out of such

21 account during the collectively bargained cost

22 maintenance period for collectively bargained re23 tiree health liabilities.’’.

24 (b) REQUIREMENTS OF PLANS MAKING COLLECTIVELY

25 BARGAINED TRANSFERS.—
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1 (1) IN GENERAL.—Paragraph (1) of section

2 420(c) of the Internal Revenue Code of 1986 (relating

3 to requirements of plan transferring assets) is amend4 ed to read as follows:

5 ‘‘(1) USE OF TRANSFERRED ASSETS.—

6 ‘‘(A) IN GENERAL.—Except in the case of a

7 collectively bargained transfer, any assets trans8 ferred to a health benefits account in a qualified

9 transfer (and any income allocable thereto) shall

10 be used only to pay qualified current retiree

11 health liabilities (other than liabilities of key em12 ployees not taken into account under subsection

13 (e)(1)(D)) for the taxable year of the transfer

14 (whether directly or through reimbursement).

15 ‘‘(B) COLLECTIVELY BARGAINED TRANS16 FER.—Any assets transferred to a health benefits

17 account in a collectively bargained transfer (and

18 any income allocable thereto) shall be used only

19 to pay collectively bargained retiree health liabil20 ities (other than liabilities of key employees not

21 taken into account under subsection (e)(6)(D))

22 for the taxable year of the transfer or for any

23 subsequent taxable year during the collectively

24 bargained cost maintenance period (whether di25 rectly or through reimbursement).
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1 ‘‘(C) AMOUNTS NOT USED TO PAY FOR

2 HEALTH BENEFITS.—

3 ‘‘(i) IN GENERAL.—Any assets trans4 ferred to a health benefits account in a

5 qualified transfer (and any income allocable

6 thereto) which are not used as provided in

7 subparagraph (A) (in the case of a qualified

8 transfer other than a collectively bargained

9 transfer) or cannot be used as provided in

10 subparagraph (B) (in the case of a collec11 tively bargained transfer) shall be trans12 ferred out of the account to the transferor

13 plan.

14 ‘‘(ii) TAX TREATMENT OF AMOUNTS.—

15 Any amount transferred out of an account

16 under clause (i)—

17 ‘‘(I) shall not be includible in the

18 gross income of the employer, but

19 ‘‘(II) shall be treated as an em20 ployer reversion for purposes of section

21 4980 (without regard to subsection (d)

22 thereof).

23 ‘‘(D) ORDERING RULE.—For purposes of

24 this section, any amount paid out of a health

25 benefits account shall be treated as paid first out
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1 of the assets and income described in subpara2 graph (A) (in the case of a qualified transfer

3 other than a collectively bargained transfer) or

4 subparagraph (B) (in the case of a collectively

5 bargained transfer).’’.

6 (2) CONFORMING AMENDMENTS.—

7 (A) Subparagraph (A) of section 420(c)(3)

8 of such Code is amended to read as follows:

9 ‘‘(A) IN GENERAL.—The requirements of

10 this paragraph are met if—

11 ‘‘(i) except as provided in clause (ii),

12 each group health plan or arrangement

13 under which applicable health benefits are

14 provided provides that the applicable em15 ployer cost for each taxable year during the

16 cost maintenance period shall not be less

17 than the higher of the applicable employer

18 costs for each of the 2 taxable years imme19 diately preceding the taxable year of the

20 qualified transfer, and

21 ‘‘(ii) in the case of a collectively bar22 gained transfer, each collectively bargained

23 group health plan under which collectively

24 bargained health benefits are provided pro25 vides that the collectively bargained em-
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1 ployer cost for each taxable year during the

2 collectively bargained cost maintenance pe3 riod shall not be less than the amount speci4 fied by the collective bargaining agree5 ment.’’.

6 (B) Section 420(c)(3) of such Code is

7 amended by redesignating subparagraphs (C),

8 (D), and (E) as subparagraphs (D), (E), and

9 (F), respectively, and by inserting after subpara10 graph (B) the following new subparagraph:

11 ‘‘(C) COLLECTIVELY BARGAINED EMPLOYER

12 COST.—For purposes of this paragraph, the term

13 ‘collectively bargained employer cost’ means the

14 average cost per covered individual of providing

15 collectively bargained retiree health benefits as

16 determined in accordance with the applicable

17 collective bargaining agreement. Such agreement

18 may provide for an appropriate reduction in the

19 collectively bargained employer cost to take into

20 account any portion of the collectively bargained

21 retiree health benefits that is provided or fi22 nanced by a government program or other

23 source.’’.
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1 (C) Subparagraph (E) of section 420(c)(3)

2 of such Code (as redesignated by subparagraph

3 (B)) is amended to read as follows:

4 ‘‘(E) MAINTENANCE PERIOD.—For purposes

5 of this paragraph—

6 ‘‘(i) COST MAINTENANCE PERIOD.—The

7 term ‘cost maintenance period’ means the

8 period of 5 taxable years beginning with the

9 taxable year in which the qualified transfer

10 occurs. If a taxable year is in 2 or more

11 overlapping cost maintenance periods, this

12 paragraph shall be applied by taking into

13 account the highest applicable employer cost

14 required to be provided under subparagraph

15 (A)(i) for such taxable year.

16 ‘‘(ii) COLLECTIVELY BARGAINED COST

17 MAINTENANCE PERIOD.—The term ‘collec18 tively bargained cost maintenance period’

19 means, with respect to each covered retiree

20 and his covered spouse and dependents, the

21 shorter of—

22 ‘‘(I) the remaining lifetime of

23 such covered retiree and his covered

24 spouse and dependents, or
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1 ‘‘(II) the period of coverage pro2 vided by the collectively bargained

3 health plan (determined as of the date

4 of the collectively bargained transfer)

5 with respect to such covered retiree and

6 his covered spouse and dependents.’’.

7 (c) LIMITATIONS ON EMPLOYER.—Subsection (d) of

8 section 420 of the Internal Revenue Code of 1986 is amend9 ed to read as follows:

10 ‘‘(d) LIMITATIONS ON EMPLOYER.—For purposes of

11 this title—

12 ‘‘(1) DEDUCTION LIMITATIONS.—No deduction

13 shall be allowed—

14 ‘‘(A) for the transfer of any amount to a

15 health benefits account in a qualified transfer (or

16 any retransfer to the plan under subsection

17 (c)(1)(C)),

18 ‘‘(B) for qualified current retiree health li19 abilities or collectively bargained retiree health

20 liabilities paid out of the assets (and income) de21 scribed in subsection (c)(1), or

22 ‘‘(C) except in the case of a collectively bar23 gained transfer, for any amounts to which sub24 paragraph (B) does not apply and which are

25 paid for qualified current retiree health liabil-
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1 ities for the taxable year to the extent such

2 amounts are not greater than the excess (if any)

3 of—

4 ‘‘(i) the amount determined under sub5 paragraph (A) (and income allocable there6 to), over

7 ‘‘(ii) the amount determined under

8 subparagraph (B).

9 ‘‘(2) OTHER LIMITATIONS.—

10 ‘‘(A) NO CONTRIBUTIONS ALLOWED.—Ex11 cept as provided in subparagraph (B), an em12 ployer may not contribute after December 31,

13 1990, any amount to a health benefits account or

14 welfare benefit fund (as defined in section

15 419(e)(1)) with respect to qualified current re16 tiree health liabilities for which transferred as17 sets are required to be used under subsection

18 (c)(1)(A).

19 ‘‘(B) EXCEPTION.—An employer may con20 tribute an amount to a health benefits account or

21 welfare benefit fund (as defined in section

22 419(e)(1)) with respect to collectively bargained

23 retiree health liabilities for which transferred as24 sets are required to be used under subsection

25 (c)(1)(B), and the deductibility of any such con-
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1 tribution shall be governed by the limits applica2 ble to the deductibility of contributions to a wel3 fare benefit fund under a collective bargaining

4 agreement (as determined under section

5 419A(f)(5)(A)) without regard to whether such

6 contributions are made to a health benefits ac7 count or welfare benefit fund and without regard

8 to the provisions of section 404 or the other pro9 visions of this section. The Secretary shall pro10 vide rules to ensure that the application of this

11 section does not result in a deduction being al12 lowed more than once for the same contribution

13 or for 2 or more contributions or expenditures

14 relating to the same collectively bargained retiree

15 health liabilities.’’.

16 (d) DEFINITIONS.—Section 420(e) of the Internal Rev17 enue Code of 1986 (relating to definition and special rules)

18 is amended by adding at the end the following new para19 graphs:

20 ‘‘(5) COLLECTIVELY BARGAINED TRANSFER.—

21 The term ‘collectively bargained transfer’ means a

22 transfer—

23 ‘‘(A) of excess pension assets to a health

24 benefits account which is part of such plan in a
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1 taxable year beginning after December 31, 2005,

2 and

3 ‘‘(B) which does not contravene any other

4 provision of law,

5 ‘‘(C) with respect to which are met in con6 nection with the plan—

7 ‘‘(i) the use requirements of subsection

8 (c)(1),

9 ‘‘(ii) the vesting requirements of sub10 section (c)(2), and

11 ‘‘(iii) the minimum cost requirements

12 of subsection (c)(3),

13 ‘‘(D) which is made in accordance with a

14 collective bargaining agreement,

15 ‘‘(E) which, before the transfer, the em16 ployer designates, in a written notice delivered to

17 each employee organization that is a party to the

18 collective bargaining agreement, as a collectively

19 bargained transfer in accordance with this sec20 tion, and

21 ‘‘(F) which involves—

22 ‘‘(i) a plan maintained by an em23 ployer which, in its taxable year ending in

24 2005, provided health benefits or coverage to

25 retirees and their spouses and dependents
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1 under all of the benefit plans maintained by

2 the employer, but only if the aggregate cost

3 (including administrative expenses) of such

4 benefits or coverage which would have been

5 allowable as a deduction to the employer (if

6 such benefits or coverage had been provided

7 directly by the employer and the employer

8 used the cash receipts and disbursements

9 method of accounting) is at least 5 percent

10 of the gross receipts of the employer (deter11 mined in accordance with the last sentence

12 of subsection (c)(2)(E)(ii)(II)) for such tax13 able year,

14 ‘‘(ii) or a plan maintained by a suc15 cessor to such employer.

16 Such term shall not include a transfer after De17 cember 31, 2013.

18 ‘‘(6) COLLECTIVELY BARGAINED RETIREE

19 HEALTH LIABILITIES.—

20 ‘‘(A) IN GENERAL.—The term ‘collectively

21 bargained retiree health liabilities’ means the

22 present value, as of the beginning of a taxable

23 year and determined in accordance with the ap24 plicable collective bargaining agreement, of all

25 collectively bargained health benefits (including
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1 administrative expenses) for such taxable year

2 and all subsequent taxable years during the col3 lectively bargained cost maintenance period.

4 ‘‘(B) REDUCTION FOR AMOUNTS PRE5 VIOUSLY SET ASIDE.—The amount determined

6 under subparagraph (A) shall be reduced by the

7 value (as of the close of the plan year preceding

8 the year of the collectively bargained transfer) of

9 the assets in all health benefits accounts or wel10 fare benefit funds (as defined in section

11 419(e)(1)) set aside to pay for the collectively

12 bargained retiree health liabilities.

13 ‘‘(C) KEY EMPLOYEES EXCLUDED.—If an

14 employee is a key employee (within the meaning

15 of section 416(I)(1)) with respect to any plan

16 year ending in a taxable year, such employee

17 shall not be taken into account in computing col18 lectively bargained retiree health liabilities for

19 such taxable year or in calculating collectively

20 bargained employer cost under subsection

21 (c)(3)(C).

22 ‘‘(7) COLLECTIVELY BARGAINED HEALTH BENE23 FITS.—The term ‘collectively bargained health bene24 fits’ means health benefits or coverage which are pro25 vided to—
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1 ‘‘(A) retired employees who, immediately be2 fore the collectively bargained transfer, are enti3 tled to receive such benefits upon retirement and

4 who are entitled to pension benefits under the

5 plan, and their spouses and dependents, and

6 ‘‘(B) if specified by the provisions of the col7 lective bargaining agreement governing the col8 lectively bargained transfer, active employees

9 who, following their retirement, are entitled to

10 receive such benefits and who are entitled to pen11 sion benefits under the plan, and their spouses

12 and dependents.

13 ‘‘(8) COLLECTIVELY BARGAINED HEALTH

14 PLAN.—The term ‘collectively bargained health plan’

15 means a group health plan or arrangement for retired

16 employees and their spouses and dependents that is

17 maintained pursuant to 1 or more collective bar18 gaining agreements.’’.

19 (e) CONFORMING AMENDMENT.—The last sentence of

20 section 401(h) of the Internal Revenue Code of 1986 is

21 amended by inserting ‘‘(other than contributions with re22 spect to collectively bargained retiree health liabilities with23 in the meaning of section 420(e)(6))’’ after ‘‘medical bene24 fits’’.
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1 (f) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to years beginning after December 31,

3 2004.

4 SEC. 1333. ALLOWANCE OF RESERVE FOR MEDICAL BENE5 FITS OF PLANS SPONSORED BY BONA FIDE

6 ASSOCIATIONS.

7 (a) IN GENERAL.—Section 419A(c) of the Internal

8 Revenue Code of 1986 (relating to account limit) is amend9 ed by adding at the end the following new paragraph:

10 ‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BENE11 FITS OF BONA FIDE ASSOCIATION PLANS.—

12 ‘‘(A) IN GENERAL.—An applicable account

13 limit for any taxable year may include a reserve

14 in an amount not to exceed 35 percent of the

15 sum of—

16 ‘‘(i) the qualified direct costs, and

17 ‘‘(ii) the change in claims incurred but

18 unpaid,

19 for such taxable year with respect to medical

20 benefits (other than post-retirement medical ben21 efits).

22 ‘‘(B) APPLICABLE ACCOUNT LIMIT.—For

23 purposes of this subsection, the term ‘applicable

24 account limit’ means an account limit for a

25 qualified asset account with respect to medical
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1 benefits provided through a plan maintained by

2 a bona fide association (as defined in section

3 2791(d)(3) of the Public Health Service Act (42

4 U.S.C. 300gg–91(d)(3))’’.

5 (b) EFFECTIVE DATE.—The amendment made by this

6 section shall apply to taxable years ending after December

7 31, 2005.

8 PART II—CASH OR DEFERRED ARRANGEMENTS

9 SEC. 1336. TREATMENT OF ELIGIBLE COMBINED DEFINED

10 BENEFIT PLANS AND QUALIFIED CASH OR DE11 FERRED ARRANGEMENTS.

12 (a) AMENDMENTS OF INTERNAL REVENUE CODE.—

13 Section 414 of the Internal Revenue Code of 1986, as

14 amended by this Act, is amended by adding at the end the

15 following new subsection:

16 ‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DE17 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE18 FERRED ARRANGEMENTS.—

19 ‘‘(1) GENERAL RULE.—Except as provided in

20 this subsection, the requirements of this title shall be

21 applied to any defined benefit plan or applicable de22 fined contribution plan which are part of an eligible

23 combined plan in the same manner as if each such

24 plan were not a part of the eligible combined plan.
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1 ‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes

2 of this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘eligible com4 bined plan’ means a plan—

5 ‘‘(i) which is maintained by an em6 ployer which, at the time the plan is estab7 lished, is a small employer,

8 ‘‘(ii) which consists of a defined benefit

9 plan and an applicable defined contribution

10 plan,

11 ‘‘(iii) the assets of which are held in a

12 single trust forming part of the plan and

13 are clearly identified and allocated to the

14 defined benefit plan and the applicable de15 fined contribution plan to the extent nec16 essary for the separate application of this

17 title under paragraph (1), and

18 ‘‘(iv) with respect to which the benefit,

19 contribution, vesting, and nondiscrimina20 tion requirements of subparagraphs (B),

21 (C), (D), (E), and (F) are met.

22 For purposes of this subparagraph, the term

23 ‘small employer’ has the meaning given such

24 term by section 4980D(d)(2), except that such
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1 section shall be applied by substituting ‘500’ for

2 ‘50’ each place it appears.

3 ‘‘(B) BENEFIT REQUIREMENTS.—

4 ‘‘(i) IN GENERAL.—The benefit require5 ments of this subparagraph are met with re6 spect to the defined benefit plan forming

7 part of the eligible combined plan if the ac8 crued benefit of each participant derived

9 from employer contributions, when ex10 pressed as an annual retirement benefit, is

11 not less than the applicable percentage of

12 the participant’s final average pay. For

13 purposes of this clause, final average pay

14 shall be determined using the period of con15 secutive years (not exceeding 5) during

16 which the participant had the greatest ag17 gregate compensation from the employer.

18 ‘‘(ii) APPLICABLE PERCENTAGE.—For

19 purposes of clause (i), the applicable per20 centage is the lesser of—

21 ‘‘(I) 1 percent multiplied by the

22 number of years of service with the em23 ployer, or

24 ‘‘(II) 20 percent.
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1 ‘‘(iii) SPECIAL RULE FOR CASH BAL2 ANCE PLANS.—If the defined benefit plan

3 under clause (i) is a qualified cash balance

4 plan (within the meaning of section

5 411(b)(5)), the plan shall be treated as

6 meeting the requirements of clause (i) with

7 respect to any plan year if each participant

8 receives pay credit for the year which is not

9 less than the percentage of compensation de10 termined in accordance with the following

11 table:

‘‘If the participant’s age as of the

beginning of the year is— The percentage is—

30 or less ......................................................................................... 2

Over 30 but less than 40 ............................................................... 4

40 or over but less than 50 ........................................................... 6

50 or over ....................................................................................... 8.

12 ‘‘(iv) YEARS OF SERVICE.—For pur13 poses of this subparagraph, years of service

14 shall be determined under the rules of para15 graphs (4), (5), and (6) of section 411(a),

16 except that the plan may not disregard any

17 year of service because of a participant

18 making, or failing to make, any elective de19 ferral with respect to the qualified cash or

20 deferred arrangement to which subpara21 graph (C) applies.

22 ‘‘(C) CONTRIBUTION REQUIREMENTS.—
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1 ‘‘(i) IN GENERAL.—The contribution

2 requirements of this subparagraph with re3 spect to any applicable defined contribution

4 plan forming part of eligible combined plan

5 are met if—

6 ‘‘(I) the qualified cash or deferred

7 arrangement included in such plan

8 constitutes an automatic contribution

9 arrangement, and

10 ‘‘(II) the employer is required to

11 make matching contributions on behalf

12 of each employee eligible to participate

13 in the arrangement in an amount

14 equal to 50 percent of the elective con15 tributions of the employee to the extent

16 such elective contributions do not ex17 ceed 4 percent of compensation.

18 Rules similar to the rules of clauses (ii) and

19 (iii) of section 401(k)(12)(B) shall apply for

20 purposes of this clause.

21 ‘‘(ii) NONELECTIVE CONTRIBUTIONS.—

22 An applicable defined contribution plan

23 shall not be treated as failing to meet the

24 requirements of clause (i) because the em25 ployer makes nonelective contributions
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1 under the plan but such contributions shall

2 not be taken into account in determining

3 whether the requirements of clause (i)(II)

4 are met.

5 ‘‘(D) VESTING REQUIREMENTS.—The vest6 ing requirements of this subparagraph are met

7 if—

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

9 plan forming part of an eligible combined

10 plan an employee who has completed at

11 least 3 years of service has a nonforfeitable

12 right to 100 percent of the employee’s ac13 crued benefit under the plan derived from

14 employer contributions, and

15 ‘‘(ii) in the case of an applicable de16 fined contribution plan forming part of eli17 gible combined plan—

18 ‘‘(I) an employee has a nonforfeit19 able right to any matching contribu20 tion made under the qualified cash or

21 deferred arrangement included in such

22 plan by an employer with respect to

23 any elective contribution, including

24 matching contributions in excess of the
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1 contributions required under subpara2 graph (C)(i)(II), and

3 ‘‘(II) an employee who has com4 pleted at least 3 years of service has a

5 nonforfeitable right to 100 percent of

6 the employee’s accrued benefit derived

7 under the arrangement from nonelec8 tive contributions of the employer.

9 For purposes of this subparagraph, the rules

10 of section 411 shall apply to the extent not

11 inconsistent with this subparagraph.

12 ‘‘(E) UNIFORM PROVISION OF BENEFITS.—

13 In the case of a defined benefit plan or applica14 ble defined contribution plan forming part of an

15 eligible combined plan, the requirements of this

16 subparagraph are met if all benefits under each

17 such plan, and all rights and features under each

18 such plan, must be provided uniformly to all

19 participants.

20 ‘‘(F) REQUIREMENTS MUST BE MET WITH21 OUT TAKING INTO ACCOUNT SOCIAL SECURITY

22 AND SIMILAR CONTRIBUTIONS AND BENEFITS OR

23 OTHER PLANS.—
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1 ‘‘(i) IN GENERAL.—The requirements

2 of this subparagraph are met if the require3 ments of clauses (ii) and (iii) are met.

4 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

5 CONTRIBUTIONS.—The requirements of this

6 clause are met if—

7 ‘‘(I) the requirements of subpara8 graphs (B) and (C) are met without

9 regard to section 401(l), and

10 ‘‘(II) the requirements of sections

11 401(a)(4) and 410(b) are met with re12 spect to both the applicable defined

13 contribution plan and defined benefit

14 plan forming part of an eligible com15 bined plan without regard to section

16 401(l).

17 ‘‘(iii) OTHER PLANS AND ARRANGE18 MENTS.—The requirements of this clause

19 are met if the applicable defined contribu20 tion plan and defined benefit plan forming

21 part of an eligible combined plan meet the

22 requirements of sections 401(a)(4) and

23 410(b) without being combined with any

24 other plan.
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1 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

2 QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

3 ‘‘(A) IN GENERAL.—A qualified cash or de4 ferred arrangement which is included in an ap5 plicable defined contribution plan forming part

6 of an eligible combined plan shall be treated as

7 meeting the requirements of section

8 401(k)(3)(A)(ii) if the requirements of paragraph

9 (2)(C) are met with respect to such arrangement.

10 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap11 plying section 401(m)(11) to any matching con12 tribution with respect to a contribution to which

13 paragraph (2)(C) applies, the contribution re14 quirement of paragraph (2)(C) and the notice re15 quirements of paragraph (5)(B) shall be sub16 stituted for the requirements otherwise applicable

17 under clauses (i) and (ii) of section

18 401(m)(11)(A).

19 ‘‘(4) SATISFACTION OF TOP-HEAVY RULES.—A

20 defined benefit plan and applicable defined contribu21 tion plan forming part of an eligible combined plan

22 for any plan year shall be treated as meeting the re23 quirements of section 416 for the plan year.

24 ‘‘(5) AUTOMATIC CONTRIBUTION ARRANGE25 MENT.—For purposes of this subsection—
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1 ‘‘(A) IN GENERAL.—A qualified cash or de2 ferred arrangement shall be treated as an auto3 matic contribution arrangement if the

4 arrangement—

5 ‘‘(i) provides that each employee eligi6 ble to participate in the arrangement is

7 treated as having elected to have the em8 ployer make elective contributions in an

9 amount equal to 4 percent of the employee’s

10 compensation unless the employee specifi11 cally elects not to have such contributions

12 made or to have such contributions made at

13 a different rate, and

14 ‘‘(ii) meets the notice requirements

15 under subparagraph (B).

16 ‘‘(B) NOTICE REQUIREMENTS.—

17 ‘‘(i) IN GENERAL.—The requirements

18 of this subparagraph are met if the require19 ments of clauses (ii) and (iii) are met.

20 ‘‘(ii) REASONABLE PERIOD TO MAKE

21 ELECTION.—The requirements of this clause

22 are met if each employee to whom subpara23 graph (A)(i) applies—

24 ‘‘(I) receives a notice explaining

25 the employee’s right under the arrange-
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1 ment to elect not to have elective con2 tributions made on the employee’s be3 half or to have the contributions made

4 at a different rate, and

5 ‘‘(II) has a reasonable period of

6 time after receipt of such notice and

7 before the first elective contribution is

8 made to make such election.

9 ‘‘(iii) ANNUAL NOTICE OF RIGHTS AND

10 OBLIGATIONS.—The requirements of this

11 clause are met if each employee eligible to

12 participate in the arrangement is, within a

13 reasonable period before any year, given no14 tice of the employee’s rights and obligations

15 under the arrangement.

16 The requirements of clauses (i) and (ii) of section

17 401(k)(12)(D) shall be met with respect to the

18 notices described in clauses (ii) and (iii) of this

19 subparagraph.

20 ‘‘(6) COORDINATION WITH OTHER REQUIRE21 MENTS.—

22 ‘‘(A) TREATMENT OF SEPARATE PLANS.—

23 Section 414(k) shall not apply to an eligible

24 combined plan.
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1 ‘‘(B) REPORTING.—An eligible combined

2 plan shall be treated as a single plan for pur3 poses of sections 6058 and 6059.

4 ‘‘(7) APPLICABLE DEFINED CONTRIBUTION

5 PLAN.—For purposes of this subsection—

6 ‘‘(A) IN GENERAL.—The term ‘applicable

7 defined contribution plan’ means a defined con8 tribution plan which includes a qualified cash or

9 deferred arrangement.

10 ‘‘(B) QUALIFIED CASH OR DEFERRED AR11 RANGEMENT.—The term ‘qualified cash or de12 ferred arrangement’ has the meaning given such

13 term by section 401(k)(2).’’.

14 (b) AMENDMENTS OF ERISA.—

15 (1) IN GENERAL.—Section 210 of the Employee

16 Retirement Income Security Act of 1974 is amended

17 by adding at the end the following new subsection:

18 ‘‘(e) SPECIAL RULES FOR ELIGIBLE COMBINED DE19 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE20 FERRED ARRANGEMENTS.—

21 ‘‘(1) GENERAL RULE.—Except as provided in

22 this subsection, this Act shall be applied to any de23 fined benefit plan or applicable individual account

24 plan which are part of an eligible combined plan in
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1 the same manner as if each such plan were not a part

2 of the eligible combined plan.

3 ‘‘(2) ELIGIBLE COMBINED PLAN.—For purposes

4 of this subsection—

5 ‘‘(A) IN GENERAL.—The term ‘eligible com6 bined plan’ means a plan—

7 ‘‘(i) which, at the time the plan is es8 tablished, is maintained by a small em9 ployer,

10 ‘‘(ii) which consists of a defined benefit

11 plan and an applicable individual account

12 plan each of which qualifies under section

13 401(a) of the Internal Revenue Code of

14 1986,

15 ‘‘(iii) the assets of which are held in a

16 single trust forming part of the plan and

17 are clearly identified and allocated to the

18 defined benefit plan and the applicable in19 dividual account plan to the extent nec20 essary for the separate application of this

21 Act under paragraph (1), and

22 ‘‘(iv) with respect to which the benefit,

23 contribution, vesting, and nondiscrimina24 tion requirements of subparagraphs (B),

25 (C), (D), (E), and (F) are met.
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1 For purposes of this subparagraph, the term

2 ‘small employer’ has the meaning given such

3 term by section 4980D(d)(2), except that such

4 section shall be applied by substituting ‘500’ for

5 ‘50’ each place it appears.

6 ‘‘(B) BENEFIT REQUIREMENTS.—

7 ‘‘(i) IN GENERAL.—The benefit require8 ments of this subparagraph are met with re9 spect to the defined benefit plan forming

10 part of the eligible combined plan if the ac11 crued benefit of each participant derived

12 from employer contributions, when ex13 pressed as an annual retirement benefit, is

14 not less than the applicable percentage of

15 the participant’s final average pay. For

16 purposes of this clause, final average pay

17 shall be determined using the period of con18 secutive years (not exceeding 5) during

19 which the participant had the greatest ag20 gregate compensation from the employer.

21 ‘‘(ii) APPLICABLE PERCENTAGE.—For

22 purposes of clause (i), the applicable per23 centage is the lesser of—
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1 ‘‘(I) 1 percent multiplied by the

2 number of years of service with the em3 ployer, or

4 ‘‘(II) 20 percent.

5 ‘‘(iii) SPECIAL RULE FOR CASH BAL6 ANCE PLANS.—If the defined benefit plan

7 under clause (i) is a qualified cash balance

8 plan (within the meaning of section

9 204(b)(5)), the plan shall be treated as

10 meeting the requirements of clause (i) with

11 respect to any plan year if each participant

12 receives pay credit for the year which is not

13 less than the percentage of compensation de14 termined in accordance with the following

15 table:

‘‘If the participant’s age as of the

beginning of the year is— The percentage is—

30 or less ......................................................................................... 2

Over 30 but less than 40 ............................................................... 4

40 or over but less than 50 ........................................................... 6

50 or over ....................................................................................... 8.

16 ‘‘(iv) YEARS OF SERVICE.—For pur17 poses of this subparagraph, years of service

18 shall be determined under the rules of para19 graphs (1), (2), and (3) of section 203(b),

20 except that the plan may not disregard any

21 year of service because of a participant

22 making, or failing to make, any elective de-
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1 ferral with respect to the qualified cash or

2 deferred arrangement to which subpara3 graph (C) applies.

4 ‘‘(C) CONTRIBUTION REQUIREMENTS.—

5 ‘‘(i) IN GENERAL.—The contribution

6 requirements of this subparagraph with re7 spect to any applicable individual account

8 plan forming part of eligible combined plan

9 are met if—

10 ‘‘(I) the qualified cash or deferred

11 arrangement included in such plan

12 constitutes an automatic contribution

13 arrangement, and

14 ‘‘(II) the employer is required to

15 make matching contributions on behalf

16 of each employee eligible to participate

17 in the arrangement in an amount

18 equal to 50 percent of the elective con19 tributions of the employee to the extent

20 such elective contributions do not ex21 ceed 4 percent of compensation.

22 Rules similar to the rules of clauses (ii) and

23 (iii) of section 401(k)(12)(B) of the Internal

24 Revenue Code of 1986 shall apply for pur25 poses of this clause.
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1 ‘‘(ii) NONELECTIVE CONTRIBUTIONS.—

2 An applicable individual account plan shall

3 not be treated as failing to meet the require4 ments of clause (i) because the employer

5 makes nonelective contributions under the

6 plan but such contributions shall not be

7 taken into account in determining whether

8 the requirements of clause (i)(II) are met.

9 ‘‘(D) VESTING REQUIREMENTS.—The vest10 ing requirements of this subparagraph are met

11 if—

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

13 plan forming part of an eligible combined

14 plan an employee who has completed at

15 least 3 years of service has a nonforfeitable

16 right to 100 percent of the employee’s ac17 crued benefit under the plan derived from

18 employer contributions, and

19 ‘‘(ii) in the case of an applicable indi20 vidual account plan forming part of eligible

21 combined plan—

22 ‘‘(I) an employee has a nonforfeit23 able right to any matching contribu24 tion made under the qualified cash or

25 deferred arrangement included in such
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1 plan by an employer with respect to

2 any elective contribution, including

3 matching contributions in excess of the

4 contributions required under subpara5 graph (C)(i)(II), and

6 ‘‘(II) an employee who has com7 pleted at least 3 years of service has a

8 nonforfeitable right to 100 percent of

9 the employee’s accrued benefit derived

10 under the arrangement from nonelec11 tive contributions of the employer.

12 For purposes of this subparagraph, the rules

13 of section 203 shall apply to the extent not

14 inconsistent with this subparagraph.

15 ‘‘(E) UNIFORM PROVISION OF BENEFITS.—

16 In the case of a defined benefit plan or applica17 ble individual account plan forming part of an

18 eligible combined plan, the requirements of this

19 subparagraph are met if all benefits under each

20 such plan, and all rights and features under each

21 such plan, must be provided uniformly to all

22 participants.

23 ‘‘(F) REQUIREMENTS MUST BE MET WITH24 OUT TAKING INTO ACCOUNT SOCIAL SECURITY
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1 AND SIMILAR CONTRIBUTIONS AND BENEFITS OR

2 OTHER PLANS.—

3 ‘‘(i) IN GENERAL.—The requirements

4 of this subparagraph are met if the require5 ments of clauses (ii) and (iii) are met.

6 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

7 CONTRIBUTIONS.—The requirements of this

8 clause are met if—

9 ‘‘(I) the requirements of subpara10 graphs (B) and (C) are met without

11 regard to section 401(l) of the Internal

12 Revenue Code of 1986, and

13 ‘‘(II) the requirements of sections

14 401(a)(4) and 410(b) of the Internal

15 Revenue Code of 1986 are met with re16 spect to both the applicable defined

17 contribution plan and defined benefit

18 plan forming part of an eligible com19 bined plan without regard to section

20 401(l) of the Internal Revenue Code of

21 1986.

22 ‘‘(iii) OTHER PLANS AND ARRANGE23 MENTS.—The requirements of this clause

24 are met if the applicable defined contribu25 tion plan and defined benefit plan forming
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1 part of an eligible combined plan meet the

2 requirements of sections 401(a)(4) and

3 410(b) of the Internal Revenue Code of 1986

4 without being combined with any other

5 plan.

6 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

7 QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

8 ‘‘(A) IN GENERAL.—A qualified cash or de9 ferred arrangement which is included in an ap10 plicable individual account plan forming part of

11 an eligible combined plan shall be treated as

12 meeting the requirements of section

13 401(k)(3)(A)(ii) of the Internal Revenue Code of

14 1986 if the requirements of subparagraph (C) are

15 met with respect to such arrangement.

16 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap17 plying section 401(m)(11) of such Code to any

18 matching contribution with respect to a con19 tribution to which paragraph (2)(C) applies, the

20 contribution requirement of paragraph (2)(C)

21 and the notice requirements of paragraph (5)(B)

22 shall be substituted for the requirements other23 wise applicable under clauses (i) and (ii) of sec24 tion 401(m)(11)(A) of such Code.
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1 ‘‘(4) AUTOMATIC CONTRIBUTION ARRANGE2 MENT.—For purposes of this subsection—

3 ‘‘(A) IN GENERAL.—A qualified cash or de4 ferred arrangement shall be treated as an auto5 matic contribution arrangement if the

6 arrangement—

7 ‘‘(i) provides that each employee eligi8 ble to participate in the arrangement is

9 treated as having elected to have the em10 ployer make elective contributions in an

11 amount equal to 4 percent of the employee’s

12 compensation unless the employee specifi13 cally elects not to have such contributions

14 made or to have such contributions made at

15 a different rate, and

16 ‘‘(ii) meets the notice requirements

17 under subparagraph (B).

18 ‘‘(B) NOTICE REQUIREMENTS.—

19 ‘‘(i) IN GENERAL.—The requirements

20 of this subparagraph are met if the require21 ments of clauses (ii) and (iii) are met.

22 ‘‘(ii) REASONABLE PERIOD TO MAKE

23 ELECTION.—The requirements of this clause

24 are met if each employee to whom subpara25 graph (A)(i) applies—
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1 ‘‘(I) receives a notice explaining

2 the employee’s right under the arrange3 ment to elect not to have elective con4 tributions made on the employee’s be5 half or to have the contributions made

6 at a different rate, and

7 ‘‘(II) has a reasonable period of

8 time after receipt of such notice and

9 before the first elective contribution is

10 made to make such election.

11 ‘‘(iii) ANNUAL NOTICE OF RIGHTS AND

12 OBLIGATIONS.—The requirements of this

13 clause are met if each employee eligible to

14 participate in the arrangement is, within a

15 reasonable period before any year, given no16 tice of the employee’s rights and obligations

17 under the arrangement.

18 The requirements of clauses (i) and (ii) of section

19 401(k)(12)(D) of the Internal Revenue Code of

20 1986 shall be met with respect to the notices de21 scribed in clauses (ii) and (iii) of this subpara22 graph.

23 ‘‘(5) COORDINATION WITH OTHER REQUIRE24 MENTS.—
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1 ‘‘(A) TREATMENT OF SEPARATE PLANS.—

2 Section 414(k) of the Internal Revenue Code of

3 1986 shall not apply to an eligible combined

4 plan.

5 ‘‘(B) REPORTING.—An eligible combined

6 plan shall be treated as a single plan for pur7 poses of section 103.

8 ‘‘(6) APPLICABLE INDIVIDUAL ACCOUNT PLAN.—

9 For purposes of this subsection—

10 ‘‘(A) IN GENERAL.—The term ‘applicable

11 individual account plan’ means an individual

12 account plan which includes a qualified cash or

13 deferred arrangement.

14 ‘‘(B) QUALIFIED CASH OR DEFERRED AR15 RANGEMENT.—The term ‘qualified cash or de16 ferred arrangement’ has the meaning given such

17 term by section 401(k)(2) of the Internal Rev18 enue Code of 1986.’’.

19 (2) CONFORMING CHANGES.—

20 (A) The heading for section 210 of such Act

21 is amended to read as follows:

22 ‘‘SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPE23 CIAL RULES.’’.

24 (B) The table of contents in section 1 of

25 such Act is amended by striking the item relat-
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1 ing to section 210 and inserting the following

2 new item:

‘‘Sec. 210. Multiple employer plans and other special rules’’.

3 (c) EFFECTIVE DATE.—The amendments made by this

4 section shall apply to plan years beginning after December

5 31, 2008.

6 SEC. 1337. STATE AND LOCAL GOVERNMENTS ELIGIBLE TO

7 MAINTAIN SECTION 401(k) PLANS.

8 (a) IN GENERAL.—Clause (ii) of section 401(k)(4)(B)

9 of the Internal Revenue Code of 1986 (relating to govern10 ments ineligible) is amended to read as follows:

11 ‘‘(ii) GOVERNMENTS ELIGIBLE.—A

12 State or local government or political sub13 division thereof, or any agency or instru14 mentality thereof, may include a qualified

15 cash or deferred arrangement as part of a

16 plan maintained by it.’’

17 (b) COORDINATION WITH SECTION 457 LIMITS.—Sec18 tion 402(g) of the Internal Revenue Code of 1986 is amend19 ed by adding at the end the following:

20 ‘‘(9) COORDINATION OF SECTION 457 LIMITS FOR

21 STATE AND LOCAL GOVERNMENTAL PLANS.—

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

23 subparagraph (B), in the case of an individual

24 who is a participant in 1 or more qualified cash

25 or deferred arrangements maintained by a gov-
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1 ernmental entity described in section

2 401(k)(4)(B)(ii), the amount excludable from

3 gross income under paragraph (1) with respect

4 to the individual for any taxable year with re5 spect to elective deferrals under such arrange6 ments shall be reduced by the aggregate amounts

7 deferred under section 457 with respect to the in8 dividual for the taxable year under 1 or more el9 igible deferred compensation plans (as defined in

10 section 457(b)) maintained by an employer de11 scribed in section 457(e)(1)(A).

12 ‘‘(B) SPECIAL RULE FOR PRE-1986 GRAND13 FATHERED PLANS.—Subparagraph (A) shall not

14 apply to any qualified cash or deferred arrange15 ment maintained by a governmental entity de16 scribed in section 401(k)(4)(B)(ii) if the arrange17 ment (or any predecessor) was adopted by the

18 entity before May 6, 1986, or treated as so

19 adopted under section 1116(f)(2)(B) of the Tax

20 Reform Act of 1986.’’

21 (c) EFFECTIVE DATES.—The amendments made by

22 this section shall apply to plan years beginning after De23 cember 31, 2005.
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1 PART III—EXCESS CONTRIBUTIONS

2 SEC. 1339. EXCESS CONTRIBUTIONS.

3 (a) EXPANSION OF CORRECTIVE DISTRIBUTION PE4 RIOD FOR AUTOMATIC CONTRIBUTION ARRANGEMENTS.—

5 Subsection (f) of section 4979 of the Internal Revenue Code

6 of 1986 is amended—

7 (1) by and inserting ‘‘(6 months in the case of

8 an excess contribution or excess aggregate contribu9 tion to an eligible automatic contribution arrangement (as defined in section 414(w)(3)))’’ after ‘‘21 10 ⁄2

11 months’’ in paragraph (1), and

(2) by striking ‘‘21 12 ⁄2 MONTHS OF’’ in the heading

13 and inserting ‘‘SPECIFIED PERIOD AFTER’’.

14 (b) YEAR OF INCLUSION.—Paragraph (2) of section

15 4979(f) of such Code is amended to read as follows:

16 ‘‘(2) YEAR OF INCLUSION.—Any amount distrib17 uted as provided in paragraph (1) shall be treated as

18 earned and received by the recipient in the recipient’s

19 taxable year in which such distributions were made.’’.

20 (c) SIMPLIFICATION OF ALLOCABLE EARNINGS.—

21 (1) SECTION 4979.—Subsection (f) of section 4979

22 of such Code is amended—

23 (A) by adding ‘‘through the end of the plan

24 year for which the contribution was made’’ after

25 ‘‘thereto’’ in paragraph (1), and
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1 (B) by adding ‘‘through the end of the plan

2 year for which the contributions were made’’

3 after ‘‘thereto’’ in paragraph (2)(B).

4 (2) SECTION 401(k) AND 401(M).—

5 (A) Clause (i) of section 401(k)(8)(A) is

6 amended by adding ‘‘through the end of such

7 year’’ after ‘‘such contributions’’.

8 (B) Subparagraph (A) of section 401(m)(6)

9 of such Code is amended by adding ‘‘through the

10 end of such year’’ after ‘‘to such contributions’’.

11 (d) EFFECTIVE DATE.—The amendments made by this

12 section shall apply to years beginning after December 31,

13 2005.

14 PART IV—OTHER PROVISIONS

15 SEC. 1341. AMENDMENTS RELATING TO PROHIBITED

16 TRANSACTIONS.

17 (a) EXEMPTION FOR BLOCK TRADING.—

18 (1) IN GENERAL.—Section 408(b) of the Em19 ployee Retirement Income Security Act (29 U.S.C.

20 1108(b)) is amended by adding at the end the fol21 lowing new paragraph:

22 ‘‘(14) BLOCK TRADING.—

23 ‘‘(A) IN GENERAL.—Any transaction in24 volving the purchase or sale of securities between

25 a plan and a party in interest (other than a fi-
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1 duciary who has investment discretion or control

2 with respect to the assets involved in the trans3 action or is providing investment advice as a fi4 duciary for purposes of this title to enter into the

5 transaction) with respect to a plan if—

6 ‘‘(i) the transaction involves a block

7 trade,

8 ‘‘(ii) at the time of the transaction, the

9 interest of the plan (together with the inter10 ests of any other plans maintained by the

11 same plan sponsor) does not exceed 10 per12 cent of the aggregate size of the block trade,

13 ‘‘(iii) the terms of the transaction, in14 cluding the price, are at least as favorable

15 to the plan as an arm’s length transaction,

16 and

17 ‘‘(iv) compensation associated with the

18 purchase and sale is not greater than an

19 arm’s length transaction with an unrelated

20 party.

21 ‘‘(B) BLOCK TRADE.—For purposes of this

22 paragraph, the term ‘block trade’ includes any

23 trade of at least 10,000 shares or with a market

24 value of at least $200,000 which will be allocated
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1 across two or more unrelated client accounts of

2 a fiduciary.’’.

3 (2) CONFORMING AMENDMENTS.—

4 (A) Section 4975(d) of such Code is

5 amended—

6 (i) by striking ‘‘or’’ at the end of para7 graph (15),

8 (ii) by striking the period at the end of

9 paragraph (16)(F) and inserting ‘‘; or’’,

10 and

11 (iii) by adding at the end the following

12 new paragraph:

13 ‘‘(17) any transaction involving the purchase or

14 sale of securities between a plan and a disqualified

15 person (other than a fiduciary who has investment

16 discretion or control over the transaction or is pro17 viding investment advice as a fiduciary for purposes

18 of title I of the Employee Retirement Income Security

19 Act to enter into the transaction) with respect to a

20 plan if—

21 ‘‘(A) the transaction involves a block trade,

22 ‘‘(B) at the time of the transaction, the in23 terest of the plan (together with the interests of

24 any other plans maintained by the same plan
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1 sponsor) does not exceed 10 percent of the aggre2 gate size of the block trade,

3 ‘‘(C) the terms of the transaction, including

4 the price, are at least as favorable to the plan as

5 an arm’s length transaction, and

6 ‘‘(D) compensation associated with the pur7 chase and sale is not greater than an arm’s

8 length transaction with an unrelated party.’’.

9 (B) Section 4975(e) of such Code is amend10 ed by adding at the end the following new para11 graph:

12 ‘‘(11) BLOCK TRADE.—The term ‘block trade’ in13 cludes any trade of at least 10,000 shares or with a

14 market value of at least $200,000 which will be allo15 cated across two or more unrelated client accounts of

16 a fiduciary.’’.

17 (b) BONDING RELIEF.—Section 412(a) of such Act (29

18 U.S.C. 1112(a)) is amended—

19 (1) by redesignating paragraph (2) as para20 graph (3),

21 (2) by striking ‘‘and’’ at the end of paragraph

22 (1), and

23 (3) by inserting after paragraph (1) the fol24 lowing new paragraph:
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1 ‘‘(2) no bond shall be required of any entity

2 which is registered as a broker or a dealer under sec3 tion 15(b) of the Securities Exchange Act of 1934 (15

4 U.S.C. 78o(b)) if the broker or dealer is subject to the

5 fidelity bond requirements of a self-regulatory organi6 zation (within the meaning of section 3(a)(26) of such

7 Act (15 U.S.C. 78c(a)(26)).’’.

8 (c) EXEMPTION FOR FINANCIAL MARKETS TRADING

9 SYSTEMS.—

10 (1) IN GENERAL.—Section 408(b) of such Act, as

11 amended by subsection (b)(1), is amended by adding

12 at the end the following new paragraph:

13 ‘‘(15) FINANCIAL MARKETS TRADING SYSTEMS.—

14 Any transaction involving the purchase and sale of

15 securities between a plan and a fiduciary or a party

16 in interest if—

17 ‘‘(A) the transaction is executed through—

18 ‘‘(i) a national securities exchange or a

19 trading system owned by a national securi20 ties association registered with the Securi21 ties and Exchange Commission, regardless

22 of whether such fiduciary or party in inter23 est (or any affiliate of either) has an inter24 est in such exchange or trading system,
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1 ‘‘(ii) an alternative trading system or

2 electronic communication network subject to

3 regulation and oversight by the Securities

4 and Exchange Commission, regardless of

5 whether such fiduciary or party in interest

6 (or any affiliate of either) has an interest in

7 such alternative trading system or electronic

8 communications network, or

9 ‘‘(iii) any other trading system for se10 curities or other property approved by the

11 Secretary through regulatory or exemptive

12 relief,

13 ‘‘(B) the price associated with the purchase

14 and sale is at least as favorable as an arm’s

15 length transaction with an unrelated party,

16 ‘‘(C) the compensation associated with the

17 purchase and sale is not greater than an arm’s

18 length transaction with an unrelated party,

19 ‘‘(D) in the event the fiduciary or party in

20 interest directing the transaction (or any affil21 iate of either) has an ownership interest in the

22 trading system (other than an exchange or trad23 ing system described in subparagraph (A)(i)),

24 the execution of transactions on such system is

25 annually authorized by a plan fiduciary,
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1 ‘‘(E) the transaction is executed in accord2 ance with the nondiscretionary rules and proce3 dures adopted by such trading system to match

4 offsetting orders, and

5 ‘‘(F) in the event the transaction is not exe6 cuted on an exchange or trading system de7 scribed in subparagraph (A)(i)—

8 ‘‘(i) neither the trading system nor the

9 parties to the transaction take into account

10 the identity of the parties in the execution

11 of trades, and the parties to the transaction

12 do not actually know the identity of the

13 other at the time that the terms and price

14 of the transaction are agreed to, or

15 ‘‘(ii) the transaction is effected pursu16 ant to rules designed to match purchases

17 and sales at the best price available through

18 the trading system.’’.

19 (2) CONFORMING AMENDMENT.—Section 4975(d)

20 of such Code (as amended by subsection (b)(2)) is

21 amended—

22 (A) by striking ‘‘or’’ at the end of para23 graph (16),

24 (B) by striking the period at the end of

25 paragraph (17)(E) and inserting ‘‘; or’’, and
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1 (C) by adding at the end the following new

2 paragraph:

3 ‘‘(18) any transaction involving the purchase

4 and sale of securities or other property between a

5 plan and a fiduciary or a disqualified person if—

6 ‘‘(A) the transaction is executed through—

7 ‘‘(i) a national securities exchange or a

8 trading system owned by a national securi9 ties association registered with the Securi10 ties and Exchange Commission, regardless

11 of whether such fiduciary or disqualified

12 person (or any affiliate of either) has an in13 terest in such exchange or trading system,

14 ‘‘(ii) an alternative trading system or

15 electronic communication network subject to

16 regulation and oversight by the Securities

17 and Exchange Commission, regardless of

18 whether such fiduciary or disqualified per19 son (or any affiliate of either) has an inter20 est in such alternative trading system or

21 electronic communications network, or

22 ‘‘(iii) any other trading system for se23 curities or other property approved by the

24 Secretary through regulatory or exemptive

25 relief,
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1 ‘‘(B) the price associated with the purchase

2 and sale is at least as favorable as an arm’s

3 length transaction with an unrelated party,

4 ‘‘(C) the compensation associated with the

5 purchase and sale is not greater than an arm’s

6 length transaction with an unrelated party,

7 ‘‘(D) in the event the fiduciary or disquali8 fied person directing the transaction (or any af9 filiate of either) has an ownership interest in the

10 trading system (other than an exchange or trad11 ing system described in subparagraph (A)(i)),

12 the execution of transactions on such system is

13 annually authorized by a plan fiduciary,

14 ‘‘(E) the transaction is executed in accord15 ance with the nondiscretionary rules and proce16 dures adopted by such trading system to match

17 offsetting orders, and

18 ‘‘(F) in the event the transaction is not exe19 cuted on an exchange or trading system de20 scribed in subparagraph (A)(i)—

21 ‘‘(i) neither the trading system nor the

22 parties to the transaction take into account

23 the identity of the parties in the execution

24 of trades, and the parties to the transaction

25 do not actually know the identity of the
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1 other at the time that the terms and price

2 of the transaction are agreed to, or

3 ‘‘(ii) the transaction is effected pursu4 ant to rules designed to match purchases

5 and sales at the best price available through

6 the trading system.’’.

7 (d) RELIEF FOR FOREIGN EXCHANGE TRANS8 ACTIONS.—

9 (1) IN GENERAL.—Section 408(b) of such Act (29

10 U.S.C. 1108(b)), as amended by subsection (c)(1), is

11 amended by adding at the end the following new

12 paragraph:

13 ‘‘(16) Any foreign exchange transactions, between

14 a bank or broker-dealer (or any affiliate of either),

15 and a plan or an individual retirement account

16 (within the meaning of section 408 of the Internal

17 Revenue Code of 1986) with respect to which such

18 bank or broker-dealer (or affiliate) is a trustee, custo19 dian, fiduciary, or other party in interest, if—

20 ‘‘(A) the transaction is in connection with

21 the purchase, holding, or sale of securities,

22 ‘‘(B) at the time the foreign exchange trans23 action is entered into, the terms of the trans24 action are not less favorable to the plan than the

25 terms generally available in comparable arm’s
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1 length foreign exchange transactions between un2 related parties, or the terms afforded by the bank

3 or broker-dealer (or any affiliate of either) in

4 comparable arm’s-length foreign exchange trans5 actions involving unrelated parties,

6 ‘‘(C) the exchange rate used by such bank or

7 broker-dealer (or affiliate) for a particular for8 eign exchange transaction does not deviate by

9 more or less than 3 percent from the interbank

10 bid and asked rates at the time of the trans11 action as displayed on an independent service

12 that reports rates of exchange in the foreign cur13 rency market for such currency, and

14 ‘‘(D) the bank or broker-dealer (or any affil15 iate of either) does not have investment discre16 tion, or provide investment advice, with respect

17 to the transaction.’’.

18 (2) CONFORMING AMENDMENT.—Section 4975(d)

19 of such Code, as amended by subsection (c)(2), is

20 amended—

21 (A) by striking ‘‘or’’ at the end of para22 graph (17)(E),

23 (B) by striking the period at the end of

24 paragraph (18)(F)(ii) and inserting ‘‘; or’’, and
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1 (C) by adding at the end the following new

2 paragraph:

3 ‘‘(19) any foreign exchange transactions, between

4 a bank or broker-dealer (or any affiliate of either)

5 and a plan or an individual retirement account

6 (within the meaning of section 408) with respect to

7 which such bank or broker-dealer (or affiliate) is a

8 trustee, custodian, fiduciary, or disqualified person,

9 if—

10 ‘‘(A) the transaction is in connection with

11 the purchase, holding, or sale of securities,

12 ‘‘(B) at the time the foreign exchange trans13 action is entered into, the terms of the trans14 action are not less favorable to the plan than the

15 terms generally available in comparable arm’s

16 length foreign exchange transactions between un17 related parties, or the terms afforded by the bank

18 or broker-dealer (or any affiliate of either) in

19 comparable arm’s-length foreign exchange trans20 actions involving unrelated parties,

21 ‘‘(C) the exchange rate used by such bank or

22 broker-dealer (or affiliate) for a particular for23 eign exchange transaction does not deviate by

24 more or less than 3 percent from the interbank

25 bid and asked rates at the time of the trans-
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1 action as displayed on an independent service

2 that reports rates of exchange in the foreign cur3 rency market for such currency, and

4 ‘‘(D) the bank or broker-dealer (or any affil5 iate of either) does not have investment discre6 tion, or provide investment advice, with respect

7 to the transaction.’’.

8 (e) CORRECTION PERIOD FOR CERTAIN TRANSACTIONS

9 INVOLVING SECURITIES AND COMMODITIES.—

10 (1) IN GENERAL.—Section 408(b) of such Act (29

11 U.S.C. 1108(b)), as amended by subsection (d)(1), is

12 amended by adding at the end the following new

13 paragraph:

14 ‘‘(17) CORRECTION PERIOD FOR CERTAIN TRANS15 ACTIONS INVOLVING SECURITIES AND COMMOD16 ITIES.—

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

18 subparagraphs (B) and (C), a transaction de19 scribed in section 406(a) in connection with the

20 acquisition, holding, or disposition of any secu21 rity or commodity, if the transaction is corrected

22 before the end of the correction period.

23 ‘‘(B) EXCEPTION FOR EMPLOYER SECURI24 TIES AND REAL PROPERTY.—Subparagraph (A)

25 does not apply to any transaction between a
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1 plan and a plan sponsor or its affiliates that in2 volves the acquisition or sale of an employer se3 curity (as defined in section 407(d)(1)) or the

4 acquisition, sale, or lease of employer real prop5 erty (as defined in section 407(d)(2)).

6 ‘‘(C) EXCEPTION FOR KNOWING VIOLA7 TIONS.—In the case of any fiduciary or other

8 party in interest (or any other person knowingly

9 participating in such transaction), subpara10 graph (A) does not apply to any prohibited

11 transaction if, at the time such transaction oc12 curs, such fiduciary or party in interest (or

13 other person) knew that the transaction would

14 (without regard to this paragraph) constitute a

15 violation of section 406(a).

16 ‘‘(D) CORRECTION PERIOD.—For purposes

17 of this paragraph, the term ‘correction period’

18 means the 14-day period beginning on the date

19 on which such transaction occurs.

20 ‘‘(E) OTHER DEFINITIONS.—For purposes

21 of this paragraph—

22 ‘‘(i) the term ‘security’ has the mean23 ing given such term by section 475(c)(2) of

24 the Internal Revenue Code of 1986 (without
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1 regard to subparagraph (F)(iii) and the last

2 sentence thereof),

3 ‘‘(ii) the term ‘commodity’ has the

4 meaning given such term by section

5 475(e)(2) of such Code (without regard to

6 subparagraph (D)(iii) thereof), and

7 ‘‘(iii) the terms ‘correction’ and ‘cor8 rect’ mean, with respect to a transaction,

9 undoing the transaction to the extent pos10 sible, but in any case, making good to the

11 plan or affected account any losses resulting

12 from the transaction and restoring to the

13 plan or affected account any profits made

14 through use of the plan.’’.

15 (2) CONFORMING AMENDMENTS.—

16 (A) Section 4975(d) of such Code, as

17 amended by subsection (d)(2), is amended—

18 (i) by striking ‘‘or’’ at the end of para19 graph (18)(F)(2),

20 (ii) by striking the period at the end of

21 paragraph (19)(D) and inserting ‘‘; or’’,

22 and

23 (iii) by adding at the end the following

24 new paragraph:
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1 ‘‘(20) except as provided in subparagraph (B) or

2 (C) of subsection (f)(8), a transaction described in

3 subparagraph (A), (B), (C), or (D) of subsection

4 (c)(1) in connection with the acquisition, holding, or

5 disposition of any security or commodity, if the

6 transaction is corrected before the end of the correc7 tion period.’’.

8 (B) Section 4975(f) of such Code is amend9 ed by adding at the end the following new para10 graph:

11 ‘‘(8) CORRECTION PERIOD.—

12 ‘‘(A) IN GENERAL.—For purposes of sub13 section (d)(20), the term ‘correction period’

14 means the 14-day period beginning on the date

15 on which such transaction occurs.

16 ‘‘(B) EXCEPTION FOR EMPLOYER SECURI17 TIES AND REAL PROPERTY.—Subsection (d)(20)

18 does not apply to any transaction between a

19 plan and a plan sponsor or its affiliates that in20 volves the acquisition or sale of an employer se21 curity (as defined in section 407(d)(1) of the

22 Employee Retirement Income Security Act) or

23 the acquisition, sale, or lease of employer real

24 property (as defined in section 407(d)(2) of such

25 Act).
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1 ‘‘(C) EXCEPTION FOR KNOWING VIOLA2 TIONS.—In the case of any fiduciary or other

3 disqualified person (or any other person know4 ingly participating in such transaction), sub5 section (d)(20) does not apply to any prohibited

6 transaction if, at the time such transaction oc7 curs, such fiduciary or disqualified person (or

8 other person) knew that the transaction would

9 (without regard to subsection (d)(20) or this

10 paragraph) constitute a violation of subpara11 graph (A), (B), (C), or (D) of subsection (c)(1).

12 ‘‘(D) ABATEMENT OF TAX WHERE THERE IS

13 A CORRECTION.—If a transaction is not treated

14 as a prohibited transaction by reason of sub15 section (d)(20), then no tax under subsections (a)

16 and (b) shall be assessed with respect to such

17 transaction, and, if assessed, the assessment shall

18 be abated, and, if collected, shall be credited or

19 refunded as an overpayment.

20 ‘‘(E) OTHER DEFINITIONS.—For purposes

21 of this paragraph and subsection (d)(20)—

22 ‘‘(i) the term ‘security’ has the mean23 ing given such term by section 475(c)(2)

24 (without regard to subparagraph (F)(iii)

25 and the last sentence thereof),
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1 ‘‘(ii) the term ‘commodity’ has the

2 meaning given such term by section

3 475(e)(2) (without regard to subparagraph

4 (D)(iii) thereof), and

5 ‘‘(iii) the terms ‘correction’ and ‘cor6 rect’ mean, with respect to a transaction,

7 undoing the transaction to the extent pos8 sible, but in any case, making good to the

9 plan or affected account any losses resulting

10 from the transaction and restoring to the

11 plan or affected account any profits made

12 through use of the plan.’’.

13 (C) Section 4975(f)(5) of such Code is

14 amended by striking ‘‘The terms’’ and inserting

15 ‘‘Except as provided in paragraph (8)(E)(iii),

16 the terms’’.

17 (f) CROSS TRADES STUDY.—Not later than 2 years

18 after the date of the enactment of this Act, the Secretary

19 of Labor, in consultation with the President’s Working

20 Group on Financial Markets, shall report to the President

21 and Congress the results of a study on the implications for

22 pension plans, plan sponsors, plan fiduciaries, and plan

23 participants of a prohibited transaction exemption for ac24 tive cross trades and the impact that such a prohibited

25 transaction exemption could have on the safety and security
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1 of pension plan assets. The study shall review and include

2 recommendations regarding—

3 (1) the regulation and practice of passive and

4 active cross trades in United States securities mar5 kets,

6 (2) the potential benefits and drawbacks of per7 mitting active cross trades for retirement funds, and

8 (3) the ease or difficulty in policing cross trad9 ing activities for plan sponsors, plan fiduciaries, and

10 any Federal agency charged with safeguarding the

11 Nation’s retirement funds.

12 (g) GAO STUDY.—The Comptroller General of the

13 United States shall prepare a preliminary report not later

14 than 2 years after the date of the enactment of this Act

15 and a final report not later than 3 years after such date

16 regarding the effects of the amendments made by this sec17 tion, focusing on the effect of electronic communication net18 works and block trading on plan investments and on the

19 oversight and enforcement activities of the Department of

20 Labor to protect the rights of plan participants and bene21 ficiaries. The Comptroller General of the United States shall

22 submit the reports required under the preceding sentence

23 to the Committees on Finance and Health, Education,

24 Labor, and Pensions of the Senate and the Committees on
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1 Ways and Means and Education and the Workforce of the

2 House of Representatives.

3 (h) EFFECTIVE DATE.—The amendments made by this

4 section shall apply to any transaction after the date of the

5 enactment of this Act.

6 SEC. 1342. FEDERAL TASK FORCE ON OLDER WORKERS.

7 (a) ESTABLISHMENT.—Not later than 90 days after

8 the date of enactment of this section, the Secretary of Labor

9 shall establish a Federal Task Force on Older Workers (re10 ferred to in this section as the ‘‘Task Force’’).

11 (b) MEMBERSHIP.—The Task Force established pursu12 ant to subsection (a) shall be composed of representatives

13 from all relevant Federal agencies that have regulatory ju14 risdiction over, or a clear policy interest in, pension issues

15 relating to older workers, including the Internal Revenue

16 Service and the Equal Employment Opportunity Commis17 sion.

18 (c) ACTIVITIES.—

19 (1) IN GENERAL.—Not later than 1 year after

20 the date of establishment of the Task Force, the Task

21 Force shall—

22 (A) identify statutory and regulatory provi23 sions in current pension law that are disincen24 tives to work and develop legislative and regu-
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1 latory proposals to address such disincentives;

2 and

3 (B) identify best pension practices in the

4 private sector for hiring and retaining older

5 workers, and serve as a clearinghouse of such in6 formation.

7 (2) REPORT.—Not later than 1 year after the

8 date of establishment of the Task Force, the Task

9 Force shall submit a report to Congress on the activi10 ties of the Task Force pursuant to paragraph (1).

11 Such report shall be made available to the public.

12 (d) CONSULTATION.—In carrying out activities pursu13 ant to this section, the Task Force shall consult with senior,

14 business, labor, and other interested organizations.

15 (e) APPLICABILITY OF FACA; TERMINATION OF TASK

16 FORCE.—

17 (1) FACA.—The Federal Advisory Committee

18 Act (5 U.S.C. App.) shall not apply to the Task Force

19 established pursuant to this section.

20 (2) TERMINATION.—The Task Force shall termi21 nate 30 days after the date the Task Force completes

22 all of its duties under this section.

23 SEC. 1343. TECHNICAL CORRECTIONS TO SAVER ACT.

24 Section 517 of the Employee Retirement Income Secu25 rity Act of 1974 (29 U.S.C. 1147) is amended—
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1 (1) in subsection (a), by striking ‘‘2001 and

2 2005 on or after September 1 of each year involved’’

3 and inserting ‘‘2006 and 2010’’;

4 (2) in subsection (b), by adding at the end the

5 following new sentence: ‘‘To effectuate the purposes of

6 this paragraph, the Secretary may enter into a coop7 erative agreement, pursuant to the Federal Grant and

8 Cooperative Agreement Act of 1977 (31 U.S.C. 6301

9 et seq.), with any appropriate, qualified entity.’’;

10 (3) in subsection (e)(2)—

11 (A) by striking ‘‘Committee on Labor and

12 Human Resources’’ in subparagraph (D) and in13 serting ‘‘Committee on Health, Education,

14 Labor, and Pensions’’;

15 (B) by striking subparagraph (F) and in16 serting the following:

17 ‘‘(F) the Chairman and Ranking Member of

18 the Subcommittee on Labor, Health and Human

19 Services, and Education of the Committee on

20 Appropriations of the House of Representatives

21 and the Chairman and Ranking Member of the

22 Subcommittee on Labor, Health and Human

23 Services, and Education of the Committee on

24 Appropriations of the Senate;’’;
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1 (C) by redesignating subparagraph (G) as

2 subparagraph (J); and

3 (D) by inserting after subparagraph (F) the

4 following new subparagraphs:

5 ‘‘(G) the Chairman and Ranking Member of

6 the Committee on Finance of the Senate;

7 ‘‘(H) the Chairman and Ranking Member

8 of the Committee on Ways and Means of the

9 House of Representatives;

10 ‘‘(I) the Chairman and Ranking Member of

11 the Subcommittee on Employer-Employee Rela12 tions of the Committee on Education and the

13 Workforce of the House of Representatives; and’’;

14 (4) in subsection (e)(3)(B), by striking ‘‘January

15 31, 1998’’ and inserting ‘‘3 months before the con16 vening of each summit;’’;

17 (5) in subsection (f)(1)(C), by inserting ‘‘, no

18 later than 90 days prior to the date of the commence19 ment of the National Summit,’’ after ‘‘comment’’;

20 (6) in subsection (g), by inserting ‘‘, in consulta21 tion with the congressional leaders specified in sub22 section (e)(2),’’ after ‘‘report’’ the first place it ap23 pears in the text;

24 (7) in subsection (i)—
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1 (A) by striking ‘‘for fiscal years beginning

2 on or after October 1, 1997,’’; and

3 (B) by adding at the end the following new

4 paragraph:

5 ‘‘(3) RECEPTION AND REPRESENTATION AUTHORITY.—

6 The Secretary is hereby granted reception and representa7 tion authority limited specifically to the events at the Na8 tional Summit. The Secretary shall use any private con9 tributions accepted in connection with the National Sum10 mit prior to using funds appropriated for purposes of the

11 National Summit pursuant to this paragraph.’’; and

12 (8) in subsection (k)—

13 (A) by striking ‘‘shall enter into a contract

14 on a sole-source basis’’ and inserting ‘‘may enter

15 into a contract on a sole-source basis’’; and

16 (B) by striking ‘‘in fiscal year 1998’’.

Attest:

Secretary.
109TH CONGRESS

2D SESSION H. R. 2830

AMENDMENT