IB 

Union Calendar No. 172 

109TH CONGRESS 

1ST SESSION H. R. 2830 

[Report No. 109–232, Parts I and II] 

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. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 9, 2005 

Mr. BOEHNER (for himself, Mr. THOMAS, Mr. SAM JOHNSON of Texas, Mr. 

KLINE, Mr. MCKEON, Mr. TIBERI, and Mr. BOUSTANY) introduced the 

following bill; which was referred to the Committee on Education and the 

Workforce, and in addition to the Committee on Ways and Means, for 

a period to be subsequently determined by the Speaker, in each case for 

consideration of such provisions as fall within the jurisdiction of the committee concerned 

SEPTEMBER 22, 2005 

Reported from the Committee on Education and the Workforce with an 

amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

SEPTEMBER 22, 2005 

Referral to the Committee on Ways and Means extended for a period ending 

not later than September 30, 2005 

SEPTEMBER 30, 2005 

Referral to the Committee on Ways and Means extended for a period ending 

not later than November 4, 2005 

NOVEMBER 4, 2005 

Referral to the Committee on Ways and Means extended for a period ending 

not later than November 18, 2005 
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NOVEMBER 18, 2005 

Referral to the Committee on Ways and Means extended for a period ending 

not later than December 6, 2005 

DECEMBER 6, 2005 

Additional sponsors: Mr. SHAW, Mr. SESSIONS, Mr. OTTER, Mr. CALVERT, 

Mr. WESTMORELAND, Mr. PRICE of Georgia, Mr. ISSA, Mr. BARTLETT

of Maryland, Mr. MANZULLO, and Mr. GERLACH

DECEMBER 6, 2005 

Reported from the Committee on Ways and Means with an amendment; committed to the Committee of the Whole House on the State of the Union 

and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in boldface roman] 

[For text of introduced bill, see copy of bill as introduced on June 9, 2005] 

A BILL 

To amend the Employee Retirement Income Security Act 

of 1974 and the Internal Revenue Code of 1986 to 

reform the pension funding rules, and for other purposes. 

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

5 ‘‘Pension Protection Act of 2005’’. 

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

7 this Act is as follows: 

Sec. 1. Short title and table of contents. 

TITLE I—REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER 

DEFINED BENEFIT PENSION PLANS 

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. 
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Sec. 104. Technical and conforming amendments. 

Subtitle B—Amendments to Internal Revenue Code of 1986 

[See introduced bill, page 71, line 1 through page 140, line 13]. 

Subtitle C—Other Provisions 

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

Sec. 122. Treatment of nonqualified deferred compensation plans when employer 

defined benefit plan in at-risk status [See introduced bill, page 

142, line 3 through page 143, line 16]. 

TITLE II—FUNDING RULES FOR MULTIEMPLOYER DEFINED 

BENEFIT PLANS 

Subtitle A—Amendments to Employee Retirement Income Security Act of 1974 

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

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

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

Sec. 204. Withdrawal liability reforms. 

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

involving withdrawal liability. 

Subtitle B—Amendments to Internal Revenue Code of 1986 

[See introduced bill, page 200, line 8 through page 251, line 15]. 

TITLE III—OTHER PROVISIONS 

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

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

distributions [See introduced bill, page 254, line 6 through page 

255, line 7]. 

Sec. 303. Distributions during working retirement. 

Sec. 304. Other amendments relating to prohibited transactions. 

Sec. 305. Correction period for certain transactions involving securities and commodities. 

Sec. 306. Government Accountability Office pension funding report. 

TITLE IV—IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS 

Sec. 401. Increases in PBGC premiums. 

TITLE V—DISCLOSURE 

Sec. 501. Defined benefit plan funding notices. 

Sec. 502. Additional disclosure requirements. 

Sec. 503. Section 4010 filings with the PBGC. 

TITLE VI—INVESTMENT ADVICE 

Sec. 601. Amendments to Employee Retirement Income Security Act of 1974 providing prohibited transaction exemption for provision of investment advice. 
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Sec. 602. Amendments to Internal Revenue Code of 1986 providing prohibited 

transaction exemption for provision of investment advice [See 

introduced bill, page 287, line 15 through page 298, line 23]. 

TITLE VII—BENEFIT ACCRUAL STANDARDS 

Sec. 701. Improvements in benefit accrual standards. 

TITLE VIII—DEDUCTION LIMITATIONS 

[See introduced bill, page 299, line 1 through page 305, line 20]. 

1 TITLE I—REFORM OF FUNDING 

2 RULES FOR SINGLE-EM3 PLOYER DEFINED BENEFIT 

4 PENSION PLANS 

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

8 SEC. 101. MINIMUM FUNDING STANDARDS. 

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

10 302 through 308 of the Employee Retirement Income Secu11 rity Act of 1974 (29 U.S.C. 1082 through 1086) are re12 pealed. 

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

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

15 (a)) is amended further by inserting after section 301 the 

16 following new section: 

17 ‘‘MINIMUM FUNDING STANDARDS

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

19 FUNDING STANDARD.— 
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1 ‘‘(1) IN GENERAL.—A plan to which this part 

2 applies shall satisfy the minimum funding standard 

3 applicable to the plan for any plan year. 

4 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur5 poses of paragraph (1), a plan shall be treated as sat6 isfying the minimum funding standard for a plan 

7 year if— 

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

9 which is a single-employer plan, the employer 

10 makes contributions to or under the plan for the 

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

12 than the minimum required contribution deter13 mined under section 303 for the plan for the 

14 plan year, 

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

16 which is a single-employer plan, the employer 

17 makes contributions to or under the plan for the 

18 plan year which are required under the terms of 

19 the plan, and 

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

21 the employers make contributions to or under the 

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

23 are sufficient to ensure that the plan does not 

24 have an accumulated funding deficiency under 

25 section 304 as of the end of the plan year. 
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1 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.— 

2 ‘‘(1) IN GENERAL.—Except as provided in para3 graph (2), the amount of any contribution required 

4 by this section (including any required installments 

5 under paragraphs (3) and (4) of section 303(j)) shall 

6 be paid by the employer responsible for making con7 tributions to or under the plan. 

8 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE EM9 PLOYER MEMBER OF CONTROLLED GROUP.—In the 

10 case of a single-employer plan, if the employer re11 ferred to in paragraph (1) is a member of a controlled 

12 group, each member of such group shall be jointly and 

13 severally liable for payment of such contributions. 

14 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND15 ARDS.— 

16 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD17 SHIP.— 

18 ‘‘(A) IN GENERAL.—If— 

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

20 a multiemployer plan, 10 percent or more 

21 of the number of employers contributing to 

22 or under the plan is) unable to satisfy the 

23 minimum funding standard for a plan year 

24 without temporary substantial business 
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1 hardship (substantial business hardship in 

2 the case of a multiemployer plan), and 

3 ‘‘(ii) application of the standard would 

4 be adverse to the interests of plan partici5 pants in the aggregate, 

6 the Secretary of the Treasury may, subject to 

7 subparagraph (C), waive the requirements of 

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

9 or any portion of the minimum funding stand10 ard. The Secretary of the Treasury shall not 

11 waive the minimum funding standard with re12 spect to a plan for more than 3 of any 15 (5 of 

13 any 15 in the case of a multiemployer plan) con14 secutive plan years. 

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

16 granted under subparagraph (A) for any plan 

17 year— 

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

19 plan, the minimum required contribution 

20 under section 303 for the plan year shall be 

21 reduced by the amount of the waived fund22 ing deficiency and such amount shall be 

23 amortized as required under section 303(e), 

24 and 
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1 ‘‘(ii) in the case of a multiemployer 

2 plan, the funding standard account shall be 

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

4 amount of the waived funding deficiency 

5 and such amount shall be amortized as re6 quired under section 304(b)(2)(C). 

7 ‘‘(C) WAIVER OF AMORTIZED PORTION NOT

8 ALLOWED.—The Secretary of the Treasury may 

9 not waive under subparagraph (A) any portion 

10 of the minimum funding standard under sub11 section (a) for a plan year which is attributable 

12 to any waived funding deficiency for any pre13 ceding plan year. 

14 ‘‘(2) DETERMINATION OF BUSINESS HARD15 SHIP.—For purposes of this subsection, the factors 

16 taken into account in determining temporary sub17 stantial business hardship (substantial business hard18 ship in the case of a multiemployer plan) shall in19 clude (but shall not be limited to) whether or not— 

20 ‘‘(A) the employer is operating at an eco21 nomic loss, 

22 ‘‘(B) there is substantial unemployment or 

23 underemployment in the trade or business and 

24 in the industry concerned, 
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1 ‘‘(C) the sales and profits of the industry 

2 concerned are depressed or declining, and 

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

4 will be continued only if the waiver is granted. 

5 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur6 poses of this part, the term ‘waived funding defi7 ciency’ means the portion of the minimum funding 

8 standard under subsection (a) (determined without 

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

10 Secretary of the Treasury and not satisfied by em11 ployer contributions. 

12 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM13 PLOYER PLANS, CONSULTATIONS.— 

14 ‘‘(A) SECURITY MAY BE REQUIRED.— 

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

16 in subparagraph (C), the Secretary of the 

17 Treasury may require an employer main18 taining a defined benefit plan which is a 

19 single-employer plan (within the meaning 

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

21 to such plan as a condition for granting or 

22 modifying a waiver under paragraph (1). 

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

24 provided under clause (i) may be perfected 

25 and enforced only by the Pension Benefit 
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1 Guaranty Corporation, or at the direction 

2 of the Corporation, by a contributing spon3 sor (within the meaning of section 

4 4001(a)(13)), or a member of such sponsor’s 

5 controlled group (within the meaning of sec6 tion 4001(a)(14)). 

7 ‘‘(B) CONSULTATION WITH THE PENSION

8 BENEFIT GUARANTY CORPORATION.—Except as 

9 provided in subparagraph (C), the Secretary of 

10 the Treasury shall, before granting or modifying 

11 a waiver under this subsection with respect to a 

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

13 ‘‘(i) provide the Pension Benefit Guar14 anty Corporation with— 

15 ‘‘(I) notice of the completed appli16 cation for any waiver or modification, 

17 and 

18 ‘‘(II) an opportunity to comment 

19 on such application within 30 days 

20 after receipt of such notice, and 

21 ‘‘(ii) consider— 

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

24 ‘‘(II) any views of any employee 

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

2 in the plan which are submitted in 

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

6 Information provided to the Corporation under 

7 this subparagraph shall be considered tax return 

8 information and subject to the safeguarding and 

9 reporting requirements of section 6103(p) of the 

10 Internal Revenue Code of 1986. 

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

12 ‘‘(i) IN GENERAL.—The preceding pro13 visions of this paragraph shall not apply to 

14 any plan with respect to which the sum 

15 of— 

16 ‘‘(I) the aggregate unpaid min17 imum required contribution for the 

18 plan year and all preceding plan 

19 years, and 

20 ‘‘(II) the present value of all 

21 waiver amortization installments de22 termined for the plan year and suc23 ceeding plan years under section 

24 303(e)(2), 

25 is less than $1,000,000. 
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1 ‘‘(ii) TREATMENT OF WAIVERS FOR

2 WHICH APPLICATIONS ARE PENDING.—The 

3 amount described in clause (i)(I) shall in4 clude any increase in such amount which 

5 would result if all applications for waivers 

6 of the minimum funding standard under 

7 this subsection which are pending with re8 spect to such plan were denied. 

9 ‘‘(iii) UNPAID MINIMUM REQUIRED

10 CONTRIBUTION.—For purposes of this sub11 paragraph— 

12 ‘‘(I) IN GENERAL.—The term ‘un13 paid minimum required contribution’ 

14 means, with respect to any plan year, 

15 any minimum required contribution 

16 under section 303 for the plan year 

17 which is not paid on or before the due 

18 date (as determined under section 

19 303(j)(1)) for the plan year. 

20 ‘‘(II) ORDERING RULE.—For pur21 poses of subclause (I), any payment to 

22 or under a plan for any plan year 

23 shall be allocated first to unpaid min24 imum required contributions for all 

25 preceding plan years on a first-in, 
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1 first-out basis and then to the min2 imum required contribution under sec3 tion 303 for the plan year. 

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

5 PLANS.— 

6 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 7 ⁄2 MONTHS AFTER CLOSE OF

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

9 waiver may be granted under this subsection 

10 with respect to any plan for any plan year un11 less an application therefor is submitted to the 

12 Secretary of the Treasury not later than the 15th 

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

14 such plan year. 

15 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM16 BER OF CONTROLLED GROUP.—In the case of a 

17 single-employer plan, if an employer is a mem18 ber of a controlled group, the temporary substan19 tial business hardship requirements of paragraph 

20 (1) shall be treated as met only if such require21 ments are met— 

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

23 ‘‘(ii) with respect to the controlled 

24 group of which such employer is a member 
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1 (determined by treating all members of such 

2 group as a single employer). 

3 The Secretary of the Treasury may provide that 

4 an analysis of a trade or business or industry of 

5 a member need not be conducted if the Secretary 

6 of the Treasury determines such analysis is not 

7 necessary because the taking into account of such 

8 member would not significantly affect the deter9 mination under this paragraph. 

10 ‘‘(6) ADVANCE NOTICE.— 

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

12 Treasury shall, before granting a waiver under 

13 this subsection, require each applicant to provide 

14 evidence satisfactory to such Secretary that the 

15 applicant has provided notice of the filing of the 

16 application for such waiver to each affected 

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

18 notice shall include a description of the extent to 

19 which the plan is funded for benefits which are 

20 guaranteed under title IV and for benefit liabil21 ities. 

22 ‘‘(B) CONSIDERATION OF RELEVANT INFOR23 MATION.—The Secretary of the Treasury shall 

24 consider any relevant information provided by a 
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1 person to whom notice was given under subpara2 graph (A). 

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

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

5 plan which increases the liabilities of the plan by 

6 reason of any increase in benefits, any change in 

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

8 at which benefits become nonforfeitable under the 

9 plan shall be adopted if a waiver under this sub10 section or an extension of time under section 

11 304(d) is in effect with respect to the plan, or if 

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

13 has been made at any time in the preceding 24 

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

15 preceding sentence, any such waiver, or extension 

16 of time, shall not apply to any plan year ending 

17 on or after the date on which such amendment 

18 is adopted. 

19 ‘‘(B) EXCEPTION.—Paragraph (1) shall not 

20 apply to any plan amendment which— 

21 ‘‘(i) the Secretary of the Treasury de22 termines to be reasonable and which pro23 vides for only de minimis increases in the 

24 liabilities of the plan, 
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1 ‘‘(ii) only repeals an amendment de2 scribed in subsection (d)(2), or 

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

4 qualification under part I of subchapter D, 

5 of chapter 1 of the Internal Revenue Code of 

6 1986. 

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

8 duties of the Secretary of the Treasury with regard to 

9 implementation of the Internal Revenue Code of 1986, 

10 see section 412(c) of such Code. 

11 ‘‘(d) MISCELLANEOUS RULES.— 

12 ‘‘(1) CHANGE IN METHOD OR YEAR.—If the fund13 ing method, the valuation date, or a plan year for a 

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

15 approved by the Secretary of the Treasury. 

16 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND17 MENTS.—For purposes of this section, any amend18 ment applying to a plan year which— 

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

year but no later than 21 20 ⁄2 months after the close 

21 of the plan year (or, in the case of a multiem22 ployer plan, no later than 2 years after the close 

23 of such plan year), 

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

25 any participant determined as of the beginning 
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1 of the first plan year to which the amendment 

2 applies, and 

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

4 any participant determined as of the time of 

5 adoption except to the extent required by the cir6 cumstances, 

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

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

9 plan year. No amendment described in this para10 graph which reduces the accrued benefits of any par11 ticipant shall take effect unless the plan adminis12 trator files a notice with the Secretary of the Treas13 ury notifying him of such amendment and such Sec14 retary has approved such amendment, or within 90 

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

16 failed to disapprove such amendment. No amendment 

17 described in this subsection shall be approved by the 

18 Secretary of the Treasury unless such Secretary deter19 mines that such amendment is necessary because of a 

20 substantial business hardship (as determined under 

21 subsection (c)(2)) and that a waiver under subsection 

22 (c) (or, in the case of a multiemployer plan, any ex23 tension of the amortization period under section 

24 304(d)) is unavailable or inadequate. 
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1 ‘‘(3) CONTROLLED GROUP.—For purposes of this 

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

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

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

5 Code of 1986.’’. 

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

7 section 1 of such Act is amended by striking the items relat8 ing to sections 302 through 308 and inserting the following 

9 new item: 

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

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

11 section shall apply to plan years beginning after 2005. 

12 SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE13 FINED BENEFIT PENSION 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 section 101 of this Act) is amended further by 

17 inserting after section 302 the following new section: 

18 ‘‘MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

19 DEFINED BENEFIT PENSION PLANS

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

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

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

23 contribution’ means, with respect to any plan year of a de24 fined benefit plan which is a single employer plan— 
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1 ‘‘(1) in any case in which the value of plan as2 sets of the plan (as reduced under subsection (f)(4)) 

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

4 year, the sum of— 

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

6 the plan year, 

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

8 any) for the plan for the plan year determined 

9 under subsection (c), and 

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

11 any) for the plan for the plan year as deter12 mined under subsection (e); 

13 ‘‘(2) in any case in which the value of plan as14 sets of the plan (as reduced under subsection (f)(4)) 

15 exceeds the funding target of the plan for the plan 

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

17 year reduced by such excess; or 

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

19 the plan for the plan year. 

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

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

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

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

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

25 during the plan year. For purposes of this subsection, if 
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1 any benefit attributable to services performed in a preceding 

2 plan year is increased by reason of any increase in com3 pensation during the current plan year, the increase in such 

4 benefit shall be treated as having accrued during the current 

5 plan year. 

6 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.— 

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

8 the shortfall amortization charge for a plan for any 

9 plan year is the aggregate total of the shortfall amor10 tization installments for such plan year with respect 

11 to the shortfall amortization bases for such plan year 

12 and each of the 6 preceding plan years. 

13 ‘‘(2) SHORTFALL AMORTIZATION INSTALL14 MENT.—The plan sponsor shall determine, with re15 spect to the shortfall amortization base of the plan for 

16 any plan year, the amounts necessary to amortize 

17 such shortfall amortization base, in level annual in18 stallments over a period of 7 plan years beginning 

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

20 the annual installment of such amortization for each 

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

22 amortization installment for such plan year with re23 spect to such shortfall amortization base. In deter24 mining any shortfall amortization installment under 

25 this paragraph, the plan sponsor shall use the seg-
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1 ment rates determined under subparagraph (C) of 

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

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

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

5 purposes of this section, the shortfall amortization 

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

7 of— 

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

9 such plan year, over 

10 ‘‘(B) the sum of— 

11 ‘‘(i) the present value (determined 

12 using the segment rates determined under 

13 subparagraph (C) of subsection (h)(2), ap14 plied under rules similar to the rules of sub15 paragraph (B) of subsection (h)(2)) of the 

16 aggregate total of the shortfall amortization 

17 installments, for such plan year and the 5 

18 succeeding plan years, which have been de19 termined with respect to the shortfall amor20 tization bases of the plan for each of the 6 

21 plan years preceding such plan year, and 

22 ‘‘(ii) the present value (as so deter23 mined) of the aggregate total of the waiver 

24 amortization installments for such plan 

25 year and the 5 succeeding plan years, which 
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1 have been determined with respect to the 

2 waiver amortization bases of the plan for 

3 each of the 5 plan years preceding such 

4 plan year. 

5 In any case in which the value of plan assets of 

6 the plan (as reduced under subsection (f)(4)) is 

7 equal to or greater than the funding target of the 

8 plan for the plan year, the shortfall amortization 

9 base of the plan for such plan year shall be zero. 

10 ‘‘(4) FUNDING SHORTFALL.— 

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

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

13 the funding shortfall of a plan for any plan year 

14 is the excess (if any) of— 

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

16 the plan year, over 

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

18 plan (as reduced under subsection (f)(4)) for 

19 the plan year which are held by the plan on 

20 the valuation date. 

21 ‘‘(B) TRANSITION RULE.— 

22 ‘‘(i) IN GENERAL.—For purposes of 

23 paragraph (3), in the case of a non-defecit 

24 reduction plan, subparagraph (A) shall be 

25 applied to plan years beginning after 2005 
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1 and before 2010 by substituting for the 

2 amount described in subparagraph (A)(i) 

3 the applicable percentage of the funding tar4 get of the plan for the plan year determined 

5 under the following table: 

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

year: 

The applicable percentage 

is: 

2006 ....................................................................................................... 92 percent

2007 ....................................................................................................... 94 percent

2008 ....................................................................................................... 96 percent

2009 ....................................................................................................... 98 percent. 

6 ‘‘(ii) NON-DEFICIT REDUCTION PLAN.— 

7 For purposes of clause (i), the term ‘non8 deficit reduction plan’ means any plan— 

9 ‘‘(I) to which this part (as in ef10 fect on the day before the date of the 

11 enactment of the Pension Protection 

12 Act of 2005) applied for the plan year 

13 beginning in 2005, and 

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

15 so in effect) did not apply for such 

16 plan year. 

17 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT18 TAINMENT OF FUNDING TARGET.—In any case in 

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

20 is zero, for purposes of determining the shortfall am21 ortization charge for such plan year and succeeding 
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1 plan years, the shortfall amortization bases for all 

2 preceding plan years (and all shortfall amortization 

3 installments determined with respect to such bases) 

4 shall be reduced to zero. 

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

6 purposes of this section— 

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

8 subsection (i)(1) with respect to plans in at-risk sta9 tus, the funding target of a plan for a plan year is 

10 the present value of all liabilities to participants and 

11 their beneficiaries under the plan for the plan year. 

12 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT13 AGE.—The ‘funding target attainment percentage’ of 

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

15 percentage) which— 

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

17 year (as reduced under subsection (f)(4)), bears 

18 to 

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

20 plan year (determined without regard to sub21 section (i)(1)). 

22 ‘‘(e) WAIVER AMORTIZATION CHARGE.— 

23 ‘‘(1) DETERMINATION OF WAIVER AMORTIZATION

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

25 for a plan for any plan year is the aggregate total 
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1 of the waiver amortization installments for such plan 

2 year with respect to the waiver amortization bases for 

3 each of the 5 preceding plan years. 

4 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.— 

5 The plan sponsor shall determine, with respect to the 

6 waiver amortization base of the plan for any plan 

7 year, the amounts necessary to amortize such waiver 

8 amortization base, in level annual installments over 

9 a period of 5 plan years beginning with the suc10 ceeding plan year. For purposes of paragraph (1), the 

11 annual installment of such amortization for each 

12 plan year in such 5-plan year period is the waiver 

13 amortization installment for such plan year with re14 spect to such waiver amortization base. 

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

16 waiver amortization installment under this sub17 section, the plan sponsor shall use the segment rates 

18 determined under subparagraph (C) of subsection 

19 (h)(2), applied under rules similar to the rules of sub20 paragraph (B) of subsection (h)(2). 

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

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

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

24 such plan year under section 302(c). 
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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 waiver amor5 tization charge for such plan year and succeeding 

6 plan years, the waiver amortization base for all pre7 ceding plan years shall be reduced to zero. 

8 ‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU9 TION BY PRE-FUNDING BALANCE AND FUNDING STANDARD

10 CARRYOVER BALANCE.— 

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

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

13 sponsor of a single-employer plan may elect to 

14 maintain a pre-funding balance. 

15 ‘‘(B) FUNDING STANDARD CARRYOVER BAL16 ANCE.— 

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

18 single-employer plan described in clause 

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

20 a funding standard carryover balance, until 

21 such balance is reduced to zero. 

22 ‘‘(ii) PLANS MAINTAINING FUNDING

23 STANDARD ACCOUNT IN 2005.—A plan is de24 scribed in this clause if the plan— 
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1 ‘‘(I) was in effect for a plan year 

2 beginning in 2005, and 

3 ‘‘(II) had a positive balance in the 

4 funding standard account under sec5 tion 302(b) as in effect for such plan 

6 year and determined as of the end of 

7 such plan year. 

8 ‘‘(2) APPLICATION OF BALANCES.—A pre-funding 

9 balance and a funding standard carryover balance 

10 maintained pursuant to this paragraph— 

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

12 the minimum required contribution, pursuant to 

13 an election under paragraph (3), 

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

15 amount treated as the value of plan assets for 

16 purposes of this section, to the extent provided in 

17 paragraph (4), and 

18 ‘‘(C) may be reduced at any time, pursuant 

19 to an election under paragraph (5). 

20 ‘‘(3) ELECTION TO APPLY BALANCES AGAINST

21 MINIMUM REQUIRED CONTRIBUTION.— 

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

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

24 plan year in which the plan sponsor elects to 

25 credit against the minimum required contribu-
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1 tion for the current plan year all or a portion 

2 of the pre-funding balance or the funding stand3 ard carryover balance for the current plan year 

4 (not in excess of such minimum required con5 tribution), the minimum required contribution 

6 for the plan year shall be reduced by the amount 

7 so credited by the plan sponsor. For purposes of 

8 the preceding sentence, the minimum required 

9 contribution shall be determined after taking 

10 into account any waiver under section 302(c). 

11 ‘‘(B) COORDINATION WITH FUNDING STAND12 ARD CARRYOVER BALANCE.—To the extent that 

13 any plan has a funding standard carryover bal14 ance greater than zero, no amount of the pre15 funding balance of such plan may be credited 

16 under this paragraph in reducing the minimum 

17 required contribution. 

18 ‘‘(C) LIMITATION FOR UNDERFUNDED

19 PLANS.—The preceding provisions of this para20 graph shall not apply for any plan year if the 

21 ratio (expressed as a percentage) which— 

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

23 preceding plan year (as reduced under 

24 paragraph (4)), bears to 
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1 ‘‘(ii) the funding target of the plan for 

2 the preceding plan year (determined with3 out regard to subsection (i)(1)), 

4 is less than 80 percent. 

5 ‘‘(4) EFFECT OF BALANCES ON AMOUNTS TREAT6 ED AS VALUE OF PLAN ASSETS.—In the case of any 

7 plan maintaining a pre-funding balance or a funding 

8 standard carryover balance pursuant to this sub9 section, the amount treated as the value of plan assets 

10 shall be deemed to be such amount, reduced as pro11 vided in the following subparagraphs: 

12 ‘‘(A) APPLICABILITY OF SHORTFALL AMOR13 TIZATION CHARGE AND WAIVER AMORTIZATION

14 CHARGE.—For purposes of subsection (c)(3), the 

15 value of plan assets is deemed to be such amount, 

16 reduced by the amount of the pre-funding bal17 ance, but only if an election under paragraph 

18 (2) applying any portion of the pre-funding bal19 ance in reducing the minimum required con20 tribution is in effect for the plan year. 

21 ‘‘(B) DETERMINATION OF EXCESS ASSETS, 

22 FUNDING SHORTFALL, AND FUNDING TARGET AT23 TAINMENT PERCENTAGE.—For purposes of sub24 sections (a), (c)(4)(A)(ii), and (d)(2)(A), the 

25 value of plan assets is deemed to be such amount, 
30 

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1 reduced by the amount of the pre-funding bal2 ance and the funding standard carryover bal3 ance. 

4 ‘‘(C) AVAILABILITY OF BALANCES IN PLAN

5 YEAR FOR CREDITING AGAINST MINIMUM RE6 QUIRED CONTRIBUTION.—For purposes of para7 graph (3)(C)(i) of this subsection, the value of 

8 plan assets is deemed to be such amount, reduced 

9 by the amount of the pre-funding balance. 

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

11 DETERMINATIONS OF VALUE OF PLAN ASSETS AND

12 CREDITING AGAINST MINIMUM REQUIRED CONTRIBU13 TION.— 

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

15 elect to reduce by any amount the balance of the 

16 pre-funding balance and the funding standard 

17 carryover balance for any plan year (but not 

18 below zero). Such reduction shall be effective 

19 prior to any determination of the value of plan 

20 assets for such plan year under this section and 

21 application of the balance in reducing the min22 imum required contribution for such plan for 

23 such plan year pursuant to an election under 

24 paragraph (2). 
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1 ‘‘(B) COORDINATION BETWEEN PRE-FUND2 ING BALANCE AND FUNDING STANDARD CARRY3 OVER BALANCE.—To the extent that any plan 

4 has a funding standard carryover balance great5 er than zero, no election may be made under sub6 paragraph (A) with respect to the pre-funding 

7 balance. 

8 ‘‘(6) PRE-FUNDING BALANCE.— 

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

10 maintained by a plan shall consist of a begin11 ning balance of zero, increased and decreased to 

12 the extent provided in subparagraphs (B) and 

13 (C), and adjusted further as provided in para14 graph (8). 

15 ‘‘(B) INCREASES.—As of the valuation date 

16 for each plan year beginning after 2006, the pre17 funding balance of a plan shall be increased by 

18 the amount elected by the plan sponsor for the 

19 plan year. Such amount shall not exceed the ex20 cess (if any) of— 

21 ‘‘(i) the aggregate total of employer 

22 contributions to the plan for the preceding 

23 plan year, over 

24 ‘‘(ii) the minimum required contribu25 tion for such preceding plan year (increased 
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1 by interest on any portion of such min2 imum required contribution remaining un3 paid as of the valuation date for the current 

4 plan year, at the effective interest rate for 

5 the plan for the preceding plan year, for the 

6 period beginning with the first day of such 

7 preceding plan year and ending on the date 

8 that payment of such portion is made). 

9 ‘‘(C) DECREASES.—As of the valuation date 

10 for each plan year after 2006, the pre-funding 

11 balance of a plan shall be decreased (but not 

12 below zero) by the sum of— 

13 ‘‘(i) the amount of such balance cred14 ited under paragraph (2) (if any) in reduc15 ing the minimum required contribution of 

16 the plan for the preceding plan year, and 

17 ‘‘(ii) any reduction in such balance 

18 elected under paragraph (5). 

19 ‘‘(7) FUNDING STANDARD CARRYOVER BAL20 ANCE.— 

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

22 carryover balance maintained by a plan shall 

23 consist of a beginning balance determined under 

24 subparagraph (B), decreased to the extent pro-
33 

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1 vided in subparagraph (C), and adjusted further 

2 as provided in paragraph (8). 

3 ‘‘(B) BEGINNING BALANCE.—The beginning 

4 balance of the funding standard carryover bal5 ance shall be the positive balance described in 

6 paragraph (1)(B)(ii)(II). 

7 ‘‘(C) DECREASES.—As of the valuation date 

8 for each plan year after 2006, the funding stand9 ard carryover balance of a plan shall be de10 creased (but not below zero) by the sum of— 

11 ‘‘(i) the amount of such balance cred12 ited under paragraph (2) (if any) in reduc13 ing the minimum required contribution of 

14 the plan for the preceding plan year, and 

15 ‘‘(ii) any reduction in such balance 

16 elected under paragraph (5). 

17 ‘‘(8) ADJUSTMENTS TO BALANCES.—In deter18 mining the pre-funding balance or the funding stand19 ard carryover balance of a plan as of the valuation 

20 date (before applying any increase or decrease under 

21 paragraph (6) or (7)), the plan sponsor shall, in ac22 cordance with regulations which shall be prescribed 

23 by the Secretary of the Treasury, adjust such balance 

24 so as to reflect the rate of net gain or loss (deter25 mined, notwithstanding subsection (g)(3), on the basis 
34 

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1 of fair market value) experienced by all plan assets 

2 for the period beginning with the valuation date for 

3 the preceding plan year and ending with the date 

4 preceding the valuation date for the current plan 

5 year, properly taking into account, in accordance 

6 with such regulations, all contributions, distributions, 

7 and other plan payments made during such period. 

8 ‘‘(9) ELECTIONS.—Elections under this sub9 section shall be made at such times, and in such form 

10 and manner, as shall be prescribed in regulations of 

11 the Secretary of the Treasury. 

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

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

14 otherwise provided under this subsection, all deter15 minations under this section for a plan year shall be 

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

17 plan year. 

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

19 section— 

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

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

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

23 plan year. 

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

25 each day during the preceding plan year, a plan 
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1 had 500 or fewer participants, the plan may des2 ignate any day during the plan year as its valu3 ation date for such plan year and succeeding 

4 plan years. For purposes of this subparagraph, 

5 all defined benefit plans (other than multiem6 ployer plans) maintained by the same employer 

7 (or any member of such employer’s controlled 

8 group) shall be treated as 1 plan, but only em9 ployees of such employer or member shall be 

10 taken into account. 

11 ‘‘(C) APPLICATION OF CERTAIN RULES IN

12 DETERMINATION OF PLAN SIZE.—For purposes of 

13 this paragraph— 

14 ‘‘(i) PLANS NOT IN EXISTENCE IN PRE15 CEDING YEAR.—In the case of the first plan 

16 year of any plan, subparagraph (B) shall 

17 apply to such plan by taking into account 

18 the number of participants that the plan is 

19 reasonably expected to have on days during 

20 such first plan year. 

21 ‘‘(ii) PREDECESSORS.—Any reference 

22 in subparagraph (B) to an employer shall 

23 include a reference to any predecessor of 

24 such employer. 
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1 ‘‘(3) AUTHORIZATION OF USE OF ACTUARIAL

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

3 plan assets shall be determined on the basis of any 

4 reasonable actuarial method of valuation which takes 

5 into account fair market value and which is per6 mitted under regulations prescribed by the Secretary 

7 of the Treasury, except that— 

8 ‘‘(A) any such method providing for aver9 aging of fair market values may not provide for 

10 averaging of such values over more than the 3 

11 most recent plan years (including the current 

12 plan year), and 

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

14 determination of the value of plan assets which, 

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

16 than 110 percent of the fair market value of such 

17 assets at such time. 

18 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE19 CEIPTS.—For purposes of this section— 

20 ‘‘(A) CONTRIBUTIONS FOR PRIOR PLAN

21 YEARS TAKEN INTO ACCOUNT.—For purposes of 

22 determining the value of plan assets for any cur23 rent plan year, in any case in which a contribu24 tion properly allocable to amounts owed for a 

25 preceding plan year is made on or after the 
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1 valuation date of the plan for such current plan 

2 year, such contribution shall be taken into ac3 count, except that any such contribution made 

4 during any such current plan year beginning 

5 after 2006 shall be taken into account only in an 

6 amount equal to its present value (determined 

7 using the effective rate of interest for the plan for 

8 the preceding plan year) as of the valuation date 

9 of the plan for such current plan year. 

10 ‘‘(B) CONTRIBUTIONS FOR CURRENT PLAN

11 YEAR DISREGARDED.—For purposes of deter12 mining the value of plan assets for any current 

13 plan year, contributions which are properly allo14 cable to amounts owed for such plan year shall 

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

16 any such contribution made before the valuation 

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

18 of plan assets shall be reduced for interest on 

19 such amount determined using the effective rate 

20 of interest of the plan for the preceding plan 

21 year for the period beginning when such pay22 ment was made and ending on the valuation 

23 date of the plan. 

24 ‘‘(5) ACCOUNTING FOR PLAN LIABILITIES.—For 

25 purposes of this section— 
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1 ‘‘(A) LIABILITIES TAKEN INTO ACCOUNT

2 FOR CURRENT PLAN YEAR.—In determining the 

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

4 liabilities shall be taken into account to the ex5 tent attributable to benefits (including any early 

6 retirement or similar benefit) accrued or earned 

7 as of the beginning of the plan year. 

8 ‘‘(B) ACCRUALS DURING CURRENT PLAN

9 YEAR DISREGARDED.—For purposes of subpara10 graph (A), benefits accrued or earned during 

11 such plan year shall not be taken into account, 

12 irrespective of whether the valuation date of the 

13 plan for such plan year is later than the first 

14 day of such plan year. 

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

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

17 the determination of any present value or other com18 putation under this section shall be made on the basis 

19 of actuarial assumptions and methods— 

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

21 into account the experience of the plan and rea22 sonable expectations), and 

23 ‘‘(B) which, in combination, offer the actu24 ary’s best estimate of anticipated experience 

25 under the plan. 
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1 ‘‘(2) INTEREST RATES.— 

2 ‘‘(A) EFFECTIVE INTEREST RATE.—For 

3 purposes of this section, the term ‘effective inter4 est rate’ means, with respect to any plan for any 

5 plan year, the single rate of interest which, if 

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

7 liabilities referred to in subsection (d)(1), would 

8 result in an amount equal to the funding target 

9 of the plan for such plan year. 

10 ‘‘(B) INTEREST RATES FOR DETERMINING

11 FUNDING TARGET.—For purposes of determining 

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

13 the interest rate used in determining the present 

14 value of the liabilities of the plan shall be— 

15 ‘‘(i) in the case of liabilities reasonably 

16 determined to be payable during the 5-year 

17 period beginning on the first day of the 

18 plan year, the first segment rate with re19 spect to the applicable month, 

20 ‘‘(ii) in the case of liabilities reason21 ably determined to be payable during the 

22 15-year period beginning at the end of the 

23 period described in clause (i), the second 

24 segment rate with respect to the applicable 

25 month, and 
40 

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1 ‘‘(iii) in the case of liabilities reason2 ably determined to be payable after the pe3 riod described in clause (ii), the third seg4 ment rate with respect to the applicable 

5 month. 

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

7 this paragraph— 

8 ‘‘(i) FIRST SEGMENT RATE.—The term 

9 ‘first segment rate’ means, with respect to 

10 any month, the single rate of interest which 

11 shall be determined by the Secretary of the 

12 Treasury for such month on the basis of the 

13 corporate bond yield curve for such month, 

14 taking into account only that portion of 

15 such yield curve which is based on bonds 

16 maturing during the 5-year period com17 mencing with such month. 

18 ‘‘(ii) SECOND SEGMENT RATE.—The 

19 term ‘second segment rate’ means, with re20 spect to any month, the single rate of inter21 est which shall be determined by the Sec22 retary of the Treasury for such month on 

23 the basis of the corporate bond yield curve 

24 for such month, taking into account only 

25 that portion of such yield curve which is 
41 

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1 based on bonds maturing during the 15- 

2 year period beginning at the end of the pe3 riod described in clause (i). 

4 ‘‘(iii) THIRD SEGMENT RATE.—The 

5 term ‘third segment rate’ means, with re6 spect to any month, the single rate of inter7 est which shall be determined by the Sec8 retary of the Treasury for such month on 

9 the basis of the corporate bond yield curve 

10 for such month, taking into account only 

11 that portion of such yield curve which is 

12 based on bonds maturing during periods be13 ginning after the period described in clause 

14 (ii). 

15 ‘‘(D) CORPORATE BOND YIELD CURVE.—For 

16 purposes of this paragraph— 

17 ‘‘(i) IN GENERAL.—The term ‘corporate 

18 bond yield curve’ means, with respect to 

19 any month, a yield curve which is pre20 scribed by the Secretary of the Treasury for 

21 such month and which reflects a 3-year 

22 weighted average of yields on investment 

23 grade corporate bonds with varying matu24 rities. 
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1 ‘‘(ii) 3-YEAR WEIGHTED AVERAGE.— 

2 The term ‘3-year weighted average’ means 

3 an average determined by using a method4 ology under which the most recent year is 

5 weighted 50 percent, the year preceding 

6 such year is weighted 35 percent, and the 

7 second year preceding such year is weighted 

8 15 percent. 

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

10 this paragraph, the term ‘applicable month’ 

11 means, with respect to any plan for any plan 

12 year, the month which includes the valuation 

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

14 election of the plan administrator, any of the 4 

15 months which precede such month. Any election 

16 made under this subparagraph shall apply to the 

17 plan year for which the election is made and all 

18 succeeding plan years, unless the election is re19 voked with the consent of the Secretary of the 

20 Treasury. 

21 ‘‘(F) PUBLICATION REQUIREMENTS.—The 

22 Secretary of the Treasury shall publish for each 

23 month the corporate bond yield curve (and the 

24 corporate bond yield curve reflecting the modi25 fication described in section 205(g)(3)(B)(iii)(I)) 
43 

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1 for such month and each of the rates determined 

2 under subparagraph (B) for such month. The 

3 Secretary of the Treasury shall also publish a de4 scription of the methodology used to determine 

5 such yield curve and such rates which is suffi6 ciently detailed to enable plans to make reason7 able projections regarding the yield curve and 

8 such rates for future months based on the plan’s 

9 projection of future interest rates. 

10 ‘‘(G) TRANSITION RULE.— 

11 ‘‘(i) IN GENERAL.—Notwithstanding 

12 the preceding provisions of this paragraph, 

13 for plan years beginning in 2006 or 2007, 

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

15 plan with respect to any month shall be 

16 equal to the sum of— 

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

18 such month determined without regard 

19 to this subparagraph, multiplied by the 

20 applicable percentage, and 

21 ‘‘(II) the product of the rate deter22 mined under the rules of section 

23 302(b)(5)(B)(ii)(II) (as in effect for 

24 plan years beginning in 2005), multi-
44 

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1 plied by a percentage equal to 100 per2 cent minus the applicable percentage. 

3 ‘‘(ii) APPLICABLE PERCENTAGE.—For 

4 purposes of clause (i), the applicable percentage is 331 5 ⁄3 percent for plan years beginning in 2006 and 662 6 ⁄3 percent for plan 

7 years beginning in 2007. 

8 ‘‘(3) MORTALITY TABLE.— 

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

10 subparagraph (C), the mortality table used in 

11 determining any present value or making any 

12 computation under this section shall be the RP– 

13 2000 Combined Mortality Table, using Scale AA, 

14 as published by the Society of Actuaries, as in 

15 effect on the date of the enactment of the Pension 

16 Protection Act of 2005 and as revised from time 

17 to time under subparagraph (B). 

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

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

20 make revisions in any table in effect under sub21 paragraph (A) to reflect the actual experience of 

22 pension plans and projected trends in such expe23 rience. 

24 ‘‘(C) SUBSTITUTE MORTALITY TABLE.— 
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1 ‘‘(i) IN GENERAL.—Upon request by 

2 the plan sponsor and approval by the Sec3 retary of the Treasury for a period not to 

4 exceed 10 years, a mortality table which 

5 meets the requirements of clause (ii) shall be 

6 used in determining any present value or 

7 making any computation under this section. 

8 A mortality table described in this clause 

9 shall cease to be in effect if the plan actuary 

10 determines at any time that such table does 

11 not meet the requirements of subclauses (I) 

12 and (II) of clause (ii). 

13 ‘‘(ii) REQUIREMENTS.—A mortality 

14 table meets the requirements of this clause if 

15 the Secretary of the Treasury determines 

16 that— 

17 ‘‘(I) such table reflects the actual 

18 experience of the pension plan and 

19 projected trends in such experience, 

20 and 

21 ‘‘(II) such table is significantly 

22 different from the table described in 

23 subparagraph (A). 

24 ‘‘(iii) DEADLINE FOR DISPOSITION OF

25 APPLICATION.—Any mortality table sub-
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1 mitted to the Secretary of the Treasury for 

2 approval under this subparagraph shall be 

3 treated as in effect for the succeeding plan 

4 year unless the Secretary of the Treasury, 

5 during the 180-day period beginning on the 

6 date of such submission, disapproves of such 

7 table and provides the reasons that such 

8 table fails to meet the requirements of clause 

9 (ii). 

10 ‘‘(D) TRANSITION RULE.—Under regula11 tions of the Secretary of the Treasury, any dif12 ference in assumptions as set forth in the mor13 tality table specified in subparagraph (A) and 

14 assumptions as set forth in the mortality table 

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

16 for plan years beginning in 2005) shall be 

17 phased in ratably over the first period of 5 plan 

18 years beginning in or after 2006 so as to be fully 

19 effective for the fifth 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— 
47 

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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 single-employer plan to which this paragraph 

18 applies may be changed without the approval of 

19 the Secretary of the Treasury. 

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

22 only if— 

23 ‘‘(i) the aggregate unfunded vested ben24 efits as of the close of the preceding plan 

25 year (as determined under section 
48 

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

2 other plans maintained by the contributing 

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

4 and members of such sponsors’ controlled 

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

6 which are covered by title IV (disregarding 

7 plans with no unfunded vested benefits) ex8 ceed $50,000,000; and 

9 ‘‘(ii) the change in assumptions (deter10 mined after taking into account any 

11 changes in interest rate and mortality 

12 table) results in a decrease in the funding 

13 shortfall of the plan for the current plan 

14 year that exceeds $50,000,000, or that ex15 ceeds $5,000,000 and that is 5 percent or 

16 more of the funding target of the plan before 

17 such change. 

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

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

20 STATUS.— 

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

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

23 funding target of the plan for the plan year is 

24 the sum of— 
49 

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

2 to participants and their beneficiaries 

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

6 (g), the supplemental actuarial assumptions 

7 described in subparagraph (B), plus 

8 ‘‘(ii) a loading factor determined 

9 under subparagraph (C). 

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

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

16 at such times and in such forms as will result 

17 in the highest present value of liabilities under 

18 subparagraph (A)(i). 

19 ‘‘(C) LOADING FACTOR.—The loading factor 

20 applied with respect to a plan under this para21 graph for any plan year is the sum of— 

22 ‘‘(i) $700, times the number of partici23 pants in the plan, plus 
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1 ‘‘(ii) 4 percent of the funding target 

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

4 ‘‘(2) TARGET NORMAL COST OF AT-RISK

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

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

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

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

9 are expected to accrue or be earned under the 

10 plan during the plan year, determined under the 

11 actuarial assumptions used under paragraph 

12 (1), plus 

13 ‘‘(B) the loading factor under paragraph 

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

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

17 purposes of this subsection, a plan is in ‘at-risk sta18 tus’ for a plan year if the funding target attainment 

19 percentage of the plan for the preceding plan year 

20 was less than 60 percent. 

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

23 NORMAL COSTS.— 

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

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

2 of fewer than 5 plan years, the applicable 

3 amount of the funding target and of the target 

4 normal cost shall be, in lieu of the amount deter5 mined without regard to this paragraph, the sum 

6 of— 

7 ‘‘(i) the amount determined under this 

8 section without regard to this subsection, 

9 plus 

10 ‘‘(ii) the transition percentage for such 

11 plan year of the excess of the amount deter12 mined under this subsection (without regard 

13 to this paragraph) over the amount deter14 mined under this section without regard to 

15 this subsection. 

16 ‘‘(B) TRANSITION PERCENTAGE.—For pur17 poses of this paragraph, the ‘transition percent18 age’ for a plan year is the product derived by 

19 multiplying— 

20 ‘‘(i) 20 percent, by 

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

22 the period described in subparagraph (A). 

23 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU24 TIONS.— 
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1 ‘‘(1) IN GENERAL.—For purposes of this section, 

2 the due date for any payment of any minimum required contribution for any plan year shall be 81 3 ⁄2

4 months after the close of the plan year. 

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

6 paragraph (1) for a plan year made after the valu7 ation date for such plan year shall be increased by in8 terest, for the period from the valuation date to the 

9 payment date, at the effective rate of interest for the 

10 plan for such plan year. 

11 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

12 SCHEDULE FOR UNDERFUNDED PLANS.— 

13 ‘‘(A) INTEREST PENALTY FOR FAILURE TO

14 MEET ACCELERATED QUARTERLY PAYMENT

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

16 a funding shortfall for the preceding plan year, 

17 if the required installment is not paid in full, 

18 then the minimum required contribution for the 

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

20 shall be further increased by an amount equal to 

21 the interest on the amount of the underpayment 

22 for the period of the underpayment, using an in23 terest rate equal to the excess of— 

24 ‘‘(i) 175 percent of the Federal mid25 term rate (as in effect under section 1274 of 
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1 the Internal Revenue Code of 1986 for the 

2 1st month of such plan year), over 

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

4 plan for the plan year. 

5 ‘‘(B) AMOUNT OF UNDERPAYMENT, PERIOD

6 OF UNDERPAYMENT.—For purposes of subpara7 graph (A)— 

8 ‘‘(i) AMOUNT.—The amount of the un9 derpayment shall be the excess of— 

10 ‘‘(I) the required installment, over 

11 ‘‘(II) the amount (if any) of the 

12 installment contributed to or under the 

13 plan on or before the due date for the 

14 installment. 

15 ‘‘(ii) PERIOD OF UNDERPAYMENT.— 

16 The period for which any interest is charged 

17 under this paragraph with respect to any 

18 portion of the underpayment shall run from 

19 the due date for the installment to the date 

20 on which such portion is contributed to or 

21 under the plan. 

22 ‘‘(iii) ORDER OF CREDITING CON23 TRIBUTIONS.—For purposes of clause 

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

25 against unpaid required installments in the 
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1 order in which such installments are re2 quired to be paid. 

3 ‘‘(C) NUMBER OF REQUIRED INSTALL4 MENTS; DUE DATES.—For purposes of this para5 graph— 

6 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.— 

7 There shall be 4 required installments for 

8 each plan year. 

9 ‘‘(ii) TIME FOR PAYMENT OF INSTALL10 MENTS.—The due dates for required install11 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 

12 ‘‘(D) AMOUNT OF REQUIRED INSTALL13 MENT.—For purposes of this paragraph— 

14 ‘‘(i) IN GENERAL.—The amount of any 

15 required installment shall be 25 percent of 

16 the required annual payment. 

17 ‘‘(ii) REQUIRED ANNUAL PAYMENT.— 

18 For purposes of clause (i), the term ‘re19 quired annual payment’ means the lesser 

20 of— 
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1 ‘‘(I) 90 percent of the minimum 

2 required contribution (without regard 

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

4 the plan for the plan year under this 

5 section, or 

6 ‘‘(II) in the case of a plan year 

7 beginning after 2006, 100 percent of 

8 the minimum required contribution 

9 (without regard to any waiver under 

10 section 302(c)) to the plan for the pre11 ceding plan year. 

12 Subclause (II) shall not apply if the pre13 ceding plan year referred to in such clause 

14 was not a year of 12 months. 

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

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

17 paragraph to a plan year beginning on any 

18 date other than January 1, there shall be 

19 substituted for the months specified in this 

20 paragraph, the months which correspond 

21 thereto. 

22 ‘‘(ii) SHORT PLAN YEAR.—This sub23 paragraph shall be applied to plan years of 

24 less than 12 months in accordance with reg-
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1 ulations prescribed by the Secretary of the 

2 Treasury. 

3 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

4 WITH QUARTERLY CONTRIBUTIONS.— 

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

6 paragraph applies shall be treated as failing to 

7 pay the full amount of any required installment 

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

9 of the liquid assets paid in such installment is 

10 less than the liquidity shortfall (whether or not 

11 such liquidity shortfall exceeds the amount of 

12 such installment required to be paid but for this 

13 paragraph). 

14 ‘‘(B) PLANS TO WHICH PARAGRAPH AP15 PLIES.—This paragraph shall apply to a plan 

16 (other than a plan that would be described in 

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

18 ‘500’ therein) which— 

19 ‘‘(i) is required to pay installments 

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

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

22 quarter during such plan year. 

23 ‘‘(C) PERIOD OF UNDERPAYMENT.—For 

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

25 installment that is treated as not paid under 
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1 subparagraph (A) shall continue to be treated as 

2 unpaid until the close of the quarter in which the 

3 due date for such installment occurs. 

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

5 amount of any required installment is increased 

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

7 such increase exceed the amount which, when 

8 added to prior installments for the plan year, is 

9 necessary to increase the funding target attain10 ment percentage of the plan for the plan year 

11 (taking into account the expected increase in 

12 funding target due to benefits accruing or earned 

13 during the plan year) to 100 percent. 

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

15 subparagraph: 

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

17 ‘liquidity shortfall’ means, with respect to 

18 any required installment, an amount equal 

19 to the excess (as of the last day of the quar20 ter for which such installment is made) of— 

21 ‘‘(I) the base amount with respect 

22 to such quarter, over 

23 ‘‘(II) the value (as of such last 

24 day) of the plan’s liquid assets. 

25 ‘‘(ii) BASE AMOUNT.— 
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1 ‘‘(I) IN GENERAL.—The term ‘base 

2 amount’ means, with respect to any 

3 quarter, an amount equal to 3 times 

4 the sum of the adjusted disbursements 

5 from the plan for the 12 months ending 

6 on the last day of such quarter. 

7 ‘‘(II) SPECIAL RULE.—If the 

8 amount determined under subclause (I) 

9 exceeds an amount equal to 2 times the 

10 sum of the adjusted disbursements from 

11 the plan for the 36 months ending on 

12 the last day of the quarter and an en13 rolled actuary certifies to the satisfac14 tion of the Secretary of the Treasury 

15 that such excess is the result of non16 recurring circumstances, the base 

17 amount with respect to such quarter 

18 shall be determined without regard to 

19 amounts related to those nonrecurring 

20 circumstances. 

21 ‘‘(iii) DISBURSEMENTS FROM THE

22 PLAN.—The term ‘disbursements from the 

23 plan’ means all disbursements from the 

24 trust, including purchases of annuities, 
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1 payments of single sums and other benefits, 

2 and administrative expenses. 

3 ‘‘(iv) ADJUSTED DISBURSEMENTS.— 

4 The term ‘adjusted disbursements’ means 

5 disbursements from the plan reduced by the 

6 product of— 

7 ‘‘(I) the plan’s funding target at8 tainment percentage for the plan year, 

9 and 

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

11 annuities, payments of single sums, 

12 and such other disbursements as the 

13 Secretary of the Treasury shall provide 

14 in regulations. 

15 ‘‘(v) LIQUID ASSETS.—The term ‘liq16 uid assets’ means cash, marketable securi17 ties, and such other assets as specified by 

18 the Secretary of the Treasury in regula19 tions. 

20 ‘‘(vi) QUARTER.—The term ‘quarter’ 

21 means, with respect to any required install22 ment, the 3-month period preceding the 

23 month in which the due date for such in24 stallment occurs. 
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1 ‘‘(F) REGULATIONS.—The Secretary of the 

2 Treasury may prescribe such regulations as are 

3 necessary to carry out this paragraph. 

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

5 REQUIRED CONTRIBUTIONS.— 

6 ‘‘(1) IN GENERAL.—In the case of a plan covered 

7 under section 4021 of this Act and to which this sub8 section applies (as provided under paragraph (2)), 

9 if— 

10 ‘‘(A) any person fails to make a contribu11 tion payment required by section 302 and this 

12 section before the due date for such payment, and 

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

14 (including interest), when added to the aggregate 

15 unpaid balance of all preceding such payments 

16 for which payment was not made before the due 

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

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

19 amount determined under paragraph (3) upon all 

20 property and rights to property, whether real or per21 sonal, belonging to such person and any other person 

22 who is a member of the same controlled group of 

23 which such person is a member. 

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

25 This subsection shall apply to a defined benefit plan 
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1 which is a single-employer plan for any plan year for 

2 which the funding target attainment percentage (as 

3 defined in subsection (d)(2)) of such plan is less than 

4 100 percent. 

5 ‘‘(3) AMOUNT OF LIEN.—For purposes of para6 graph (1), the amount of the lien shall be equal to the 

7 aggregate unpaid balance of contribution payments 

8 required under this section and section 302 for which 

9 payment has not been made before the due date. 

10 ‘‘(4) NOTICE OF FAILURE; LIEN.— 

11 ‘‘(A) NOTICE OF FAILURE.—A person com12 mitting a failure described in paragraph (1) 

13 shall notify the Pension Benefit Guaranty Cor14 poration of such failure within 10 days of the 

15 due date for the required contribution payment. 

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

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

18 the required contribution payment and shall con19 tinue until the last day of the first plan year in 

20 which the plan ceases to be described in para21 graph (1)(B). Such lien shall continue to run 

22 without regard to whether such plan continues to 

23 be described in paragraph (2) during the period 

24 referred to in the preceding sentence. 
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1 ‘‘(C) CERTAIN RULES TO APPLY.—Any 

2 amount with respect to which a lien is imposed 

3 under paragraph (1) shall be treated as taxes 

4 due and owing the United States and rules simi5 lar to the rules of subsections (c), (d), and (e) of 

6 section 4068 shall apply with respect to a lien 

7 imposed by subsection (a) and the amount with 

8 respect to such lien. 

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

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

11 the Pension Benefit Guaranty Corporation, or at the 

12 direction of the Pension Benefit Guaranty Corpora13 tion, by the contributing sponsor (or any member of 

14 the controlled group of the contributing sponsor). 

15 ‘‘(6) DEFINITIONS.—For purposes of this sub16 section— 

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

18 ‘contribution payment’ means, in connection 

19 with a plan, a contribution payment required to 

20 be made to the plan, including any required in21 stallment under paragraphs (3) and (4) of sub22 section (i). 

23 ‘‘(B) DUE DATE; REQUIRED INSTALL24 MENT.—The terms ‘due date’ and ‘required in25 stallment’ have the meanings given such terms 
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1 by subsection (j), except that in the case of a 

2 payment other than a required installment, the 

3 due date shall be the date such payment is re4 quired to be made under section 303. 

5 ‘‘(C) CONTROLLED GROUP.—The term ‘con6 trolled group’ means any group treated as a sin7 gle employer under subsections (b), (c), (m), and 

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

9 of 1986. 

10 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT AC11 COUNTS.—In the case of a qualified transfer (as defined in 

12 section 420 of the Internal Revenue Code of 1986), any as13 sets so transferred shall not, for purposes of this section, 

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

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

16 section 1 of such Act (as amended by section 101) is amend17 ed by inserting after the item relating to section 302 the 

18 following new item: 

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

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

20 section shall apply with respect to plan years beginning 

21 after 2005. 
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1 SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EMPLOYER 

2 PLANS. 

3 (a) PROHIBITION OF SHUTDOWN BENEFITS AND

4 OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS

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

6 Employee Retirement Income Security Act of 1974 (29 

7 U.S.C. 1056) is amended by adding at the end the following 

8 new subsection: 

9 ‘‘(g) PROHIBITION OF SHUTDOWN BENEFITS AND

10 OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS

11 UNDER SINGLE-EMPLOYER PLANS.— 

12 ‘‘(1) IN GENERAL.—No pension plan which is a 

13 single-employer plan may provide benefits to which 

14 participants are entitled solely by reason of the occur15 rence of— 

16 ‘‘(A) a plant shutdown, or 

17 ‘‘(B) any other unpredictable contingent 

18 event. 

19 ‘‘(2) UNPREDICTABLE CONTINGENT EVENT.—For 

20 purposes of this subsection, the term ‘unpredictable 

21 contingent event’ means an event other than— 

22 ‘‘(A) attainment of any age, performance of 

23 any service, receipt or derivation of any com24 pensation, or the occurrence of death or dis25 ability, or 
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1 ‘‘(B) an event which is reasonably and reli2 ably predictable (as determined by the Secretary 

3 of the Treasury).’’. 

4 (b) OTHER LIMITS ON BENEFITS AND BENEFIT AC5 CRUALS.— 

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

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

8 adding at the end the following new subsection: 

9 ‘‘(h) FUNDING-BASED LIMITS ON BENEFITS AND BEN10 EFIT ACCRUALS UNDER SINGLE-EMPLOYER PLANS.— 

11 ‘‘(1) LIMITATIONS ON PLAN AMENDMENTS IN12 CREASING LIABILITY FOR BENEFITS.— 

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

14 single-employer plan which has the effect of in15 creasing liabilities of the plan by reason of in16 creases in benefits, establishment of new benefits, 

17 changing the rate of benefit accrual, or changing 

18 the rate at which benefits become nonforfeitable 

19 to the plan may take effect during any plan year 

20 if the funding target attainment percentage as of 

21 the valuation date of the plan for such plan year 

22 is— 

23 ‘‘(i) less than 80 percent, or 

24 ‘‘(ii) would be less than 80 percent tak25 ing into account such amendment. 
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1 For purposes of this subparagraph, any increase 

2 in benefits under the plan by reason of an in3 crease in the benefit rate provided under the 

4 plan or on the basis of an increase in compensa5 tion shall be treated as affected by plan amend6 ment. 

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

8 cease to apply with respect to any plan year, ef9 fective as of the first date of the plan year (or 

10 if later, the effective date of the amendment), 

11 upon payment by the plan sponsor of a contribu12 tion (in addition to any minimum required con13 tribution under section 303) equal to— 

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

15 the amount of the increase in the funding 

16 target of the plan (under section 303) for 

17 the plan year attributable to the amend18 ment, and 

19 ‘‘(ii) in the case of subparagraph 

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

21 funding target attainment percentage of 80 

22 percent. 

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

24 FORMS OF DISTRIBUTION.— 
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1 ‘‘(A) IN GENERAL.—A single-employer plan 

2 shall provide that, in any case in which the 

3 plan’s funding target attainment percentage as 

4 of the valuation date of the plan for a plan year 

5 is less than 80 percent, the plan may not after 

6 such date pay any prohibited payment (as de7 fined in section 206(e)). 

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

9 not apply to any plan for any plan year if the 

10 terms of such plan (as in effect for the period be11 ginning on June 29, 2005, and ending with such 

12 plan year) provide for no benefit accruals with 

13 respect to any participant during such period. 

14 ‘‘(3) LIMITATIONS ON BENEFIT ACCRUALS FOR

15 PLANS WITH SEVERE FUNDING SHORTFALLS.—A sin16 gle-employer plan shall provide that, in any case in 

17 which the plan’s funding target attainment percent18 age as of the valuation date of the plan for a plan 

19 year is less than 60 percent, all future benefit accru20 als under the plan shall cease as of such date. 

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

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

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

24 this paragraph to a plan shall include a reference to 

25 any predecessor plan. 
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1 ‘‘(5) PRESUMED UNDERFUNDING FOR PURPOSES

2 OF BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S

3 FUNDING STATUS.— 

4 ‘‘(A) PRESUMPTION OF CONTINUED UNDER5 FUNDING.—In any case in which a benefit limi6 tation under paragraph (1), (2), or (3) has been 

7 applied to a plan with respect to the plan year 

8 preceding the current plan year, the funding tar9 get attainment percentage of the plan as of the 

10 valuation date of the plan for the current plan 

11 year shall be presumed to be equal to the funding 

12 target attainment percentage of the plan as of 

13 the valuation date of the plan for the preceding 

14 plan year until the enrolled actuary of the plan 

15 certifies the actual funding target attainment 

16 percentage of the plan as of the valuation date 

17 of the plan for the current plan year. 

18 ‘‘(B) PRESUMPTION OF UNDERFUNDING

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

20 such certification is made with respect to the 

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

22 current plan year, for purposes of paragraphs 

23 (1), (2), and (3), the plan’s funding target at24 tainment percentage shall be conclusively pre25 sumed to be less than 60 percent as of the first 
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1 day of such 10th month, and such day shall be 

2 deemed, for purposes of such paragraphs, to be 

3 the valuation date of the plan for the current 

4 plan year. 

5 ‘‘(C) PRESUMPTION OF UNDERFUNDING

6 AFTER 4TH MONTH FOR NEARLY UNDERFUNDED

7 PLANS.—In any case in which— 

8 ‘‘(i) a benefit limitation under para9 graph (1), (2), or (3) did not apply to a 

10 plan with respect to the plan year preceding 

11 the current plan year, but the funding tar12 get attainment percentage of the plan for 

13 such preceding plan year was not more 

14 than 10 percentage points greater than the 

15 percentage which would have caused such 

16 paragraph to apply to the plan with respect 

17 to such preceding plan year, and 

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

19 month of the current plan year, the enrolled 

20 actuary of the plan has not certified the ac21 tual funding target attainment percentage 

22 of the plan as of the valuation date of the 

23 plan for the current plan year, 

24 until the enrolled actuary so certifies, such first 

25 day shall be deemed, for purposes of such para-
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1 graph, to be the valuation date of the plan for 

2 the current plan year and the funding target at3 tainment percentage of the plan as of such first 

4 day shall, for purposes of such paragraph, be 

5 presumed to be equal to 10 percentage points less 

6 than the funding target attainment percentage of 

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

8 such preceding plan year. 

9 ‘‘(6) RESTORATION BY PLAN AMENDMENT OF

10 BENEFITS OR BENEFIT ACCRUAL.—In any case in 

11 which a prohibition under paragraph (2) of the pay12 ment of lump sum distributions or benefits in any 

13 other accelerated form or a cessation of benefit accru14 als under paragraph (3) is applied to a plan with re15 spect to any plan year and such prohibition or ces16 sation, as the case may be, ceases to apply to any 

17 subsequent plan year, the plan may provide for the 

18 resumption of such benefit payment or such benefit 

19 accrual only by means of the adoption of a plan 

20 amendment after the valuation date of the plan for 

21 such subsequent plan year. The preceding sentence 

22 shall not apply to a prohibition or cessation required 

23 by reason of paragraph (5). 

24 ‘‘(7) FUNDING TARGET ATTAINMENT PERCENT25 AGE.— 
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1 ‘‘(A) IN GENERAL.—For purposes of this 

2 subsection, the term ‘funding target attainment 

3 percentage’ means, with respect to any plan for 

4 any plan year, the ratio (expressed as a percent5 age) which— 

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

7 plan year (as determined under section 

8 303(g)) reduced by the pre-funding balance 

9 and the funding standard carryover balance 

10 (within the meaning of section 303(f)), 

11 bears to 

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

13 the plan year (as determined under section 

14 303(d)(1), but without regard to section 

15 303(i)(1)). 

16 ‘‘(B) APPLICATION TO PLANS WHICH ARE

17 FULLY FUNDED WITHOUT REGARD TO REDUC18 TIONS FOR FUNDING BALANCES.—In the case of 

19 a plan for any plan year, if the funding target 

20 attainment percentage is 100 percent or more 

21 (determined without regard to this subparagraph 

22 and without regard to the reduction under sub23 paragraph (A)(i) for the pre-funding balance 

24 and the funding standard carryover balance), 
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1 subparagraph (A) shall be applied without re2 gard to such reduction.’’. 

3 (2) NOTICE REQUIREMENT.— 

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

5 (29 U.S.C. 1021) is amended— 

6 (i) by redesignating subsection (j) as 

7 subsection (k); and 

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

9 following new subsection: 

10 ‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON CER11 TAIN FORMS OF DISTRIBUTION.—The plan administrator 

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

13 plan participants and beneficiaries within 30 days after 

14 the plan has become subject to the restriction described in 

15 section 206(h)(2) or at such other time as may be deter16 mined by the Secretary.’’. 

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

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

19 striking ‘‘section 302(b)(7)(F)(vi)’’ and inserting 

20 ‘‘sections 101(j) and 302(b)(7)(F)(vi)’’. 

21 (c) SPECIAL RULE FOR PLAN AMENDMENTS.—A plan 

22 shall not fail to meet the requirements of section 204(g) of 

23 the Employee Retirement Income Security Act of 1974 or 

24 section 411(d)(6) of the Internal Revenue Code of 1986 sole25 ly by reason of the adoption by the plan of an amendment 
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1 necessary to meet the requirements of the amendments made 

2 by this section. 

3 (d) EFFECTIVE DATE.— 

4 (1) SHUTDOWN BENEFITS.—Except as provided 

5 in paragraph (3), the amendments made by sub6 section (a) shall apply with respect to plant shut7 downs, or other unpredictable contingent events, oc8 curring after 2006. 

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

10 paragraph (3), the amendments made by subsection 

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

12 after 2006. 

13 (3) COLLECTIVE BARGAINING EXCEPTION.—In 

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

15 collective bargaining agreements between employee 

16 representatives and 1 or more employers ratified be17 fore the date of the enactment of this Act, the amend18 ments made by this subsection shall not apply to plan 

19 years beginning before the earlier of— 

20 (A) the later of— 

21 (i) the date on which the last collective 

22 bargaining agreement relating to the plan 

23 terminates (determined without regard to 

24 any extension thereof agreed to after the 

25 date of the enactment of this Act), or 
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1 (ii) the first day of the first plan year 

2 to which the amendments made by this sub3 section would (but for this subparagraph) 

4 apply, or 

5 (B) January 1, 2009. 

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

7 made pursuant to a collective bargaining agreement 

8 relating to the plan which amends the plan solely to 

9 conform to any requirement added by this subsection 

10 shall not be treated as a termination of such collective 

11 bargaining agreement. 

12 SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS. 

13 (a) MISCELLANEOUS AMENDMENTS TO TITLE I.—Sub14 title B of title I of such Act (29 U.S.C. 1021 et seq.) is 

15 amended— 

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

17 302(e)’’ and inserting ‘‘section 303(j)’’; 

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

19 and inserting the following: 

20 ‘‘(i) a statement as to whether— 

21 ‘‘(I) in the case of a single-em22 ployer plan, the plan’s funding target 

23 attainment percentage (as defined in 

24 section 303(d)(2)), or 
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1 ‘‘(II) in the case of a multiem2 ployer plan, the plan’s funded percent3 age (as defined in section 305(d)(2)), 

4 is at least 100 percent (and, if not, the ac5 tual percentage);’’; 

6 (3) in section 103(d)(8)(B), by striking ‘‘the re7 quirements of section 302(c)(3)’’ and inserting ‘‘the 

8 applicable requirements of sections 303(h) and 

9 304(c)(3)’’; 

10 (4) in section 103(d), by striking paragraph (11) 

11 and inserting the following: 

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

13 plan is less than 70 percent of— 

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

15 the funding target (as defined in section 

16 303(d)(1)) of the plan, or 

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

18 the current liability (as defined in section 

19 304(c)(6)(D)) under the plan, 

20 the percentage which such value is of the amount de21 scribed in subparagraph (A) or (B).’’; 

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

23 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 

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

25 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’; 
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1 (7) in section 204(i)(2)(B), by striking ‘‘section 

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

3 (8) in section 204(i)(3), by striking ‘‘funded cur4 rent liability percentage (within the meaning of sec5 tion 302(d)(8) of this Act)’’ and inserting ‘‘funding 

6 target attainment percentage (as defined in section 

7 303(d)(2))’’; 

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

9 302(c)(11)(A), without regard to section 

10 302(c)(11)(B)’’ and inserting ‘‘section 302(b)(1), 

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

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

13 302(d)’’ and inserting ‘‘section 303(j)(4)’’, and by 

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

15 303(j)(4)(E)(i)’’; 

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

17 302(e) by reason of paragraph (5)(A) thereof’’ and in18 serting ‘‘section 303(j)(3) by reason of section 

19 303(j)(4)(A)’’; and 

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

21 408(b)(13), by striking ‘‘American Jobs Creation Act 

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

23 2005’’. 

24 (b) MISCELLANEOUS AMENDMENTS TO TITLE IV.— 

25 Title IV of such Act is amended— 
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1 (1) in section 4001(a)(13) (29 U.S.C. 

2 1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and insert3 ing ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’ and in4 serting ‘‘412(b)(1)’’, by striking ‘‘302(c)(11)(B)’’ and 

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

6 ‘‘412(c)(11)(B)’’ and inserting ‘‘412(b)(2)’’; 

7 (2) in section 4003(e)(1) (29 U.S.C. 1303(e)(1)), 

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

9 ‘‘303(k)(1)(A) and (B)’’, and by striking 

10 ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A) 

11 and (B)’’; 

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

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

14 ‘‘303(k)(1)(A) and (B)’’, and by striking 

15 ‘‘412(n)(1)(A) and (B)’’ and inserting ‘‘430(k)(1)(A) 

16 and (B)’’; 

17 (4) in section 4011(b) (29 U.S.C. 1311(b)), by 

18 striking ‘‘to which’’ and all that follows and inserting 

19 ‘‘for any plan year for which the plan’s funding tar20 get attainment percentage (as defined in section 

21 303(d)(2)) is at least 90 percent.’’; 

22 (5) in section 4062(c)(1) (29 U.S.C. 1362(c)(1)), 

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

24 the following: 
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1 ‘‘(1)(A) in the case of a single-employer plan, the 

2 sum of the shortfall amortization charge (within the 

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

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 shortfall amortization installments (if any) deter8 mined for succeeding plan years under section 

9 303(c)(2) of this Act and section 430(c)(2) of such 

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

11 include any increase in such sum which would result 

12 if all applications for waivers of the minimum fund13 ing standard under section 302(c) of this Act and sec14 tion 412(c) of such Code which are pending with re15 spect to such plan were denied and if no additional 

16 contributions (other than those already made by the 

17 termination date) were made for the plan year in 

18 which the termination date occurs or for any previous 

19 plan year), or 

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

21 outstanding balance of the accumulated funding defi22 ciencies (within the meaning of section 304(a)(2) of 

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

24 Code of 1986) of the plan (if any) (which, for pur25 poses of this subparagraph, shall include the amount 
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1 of any increase in such accumulated funding defi2 ciencies of the plan which would result if all pending 

3 applications for waivers of the minimum funding 

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

5 412(c) of such Code and for extensions of the amorti6 zation period under section 304(d) of this Act or sec7 tion 431(d) of such Code with respect to such plan 

8 were denied and if no additional contributions (other 

9 than those already made by the termination date) 

10 were made for the plan year in which the termination 

11 date occurs or for any previous plan year), 

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

13 sum of the waiver amortization charge (within the 

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

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

16 the plan (if any) for the plan year in which the ter17 mination date occurs, plus the aggregate total of 

18 waiver amortization installments (if any) determined 

19 for succeeding plan years under section 303(e)(2) of 

20 this Act and section 430(j)(3) of such Code, or 

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

22 outstanding balance of the amount of waived funding 

23 deficiencies of the plan waived before such date under 

24 section 302(c) of this Act or section 412(c) of such 

25 Code (if any), and 
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1 ‘‘(3) in the case of a multiemployer plan, the 

2 outstanding balance of the amount of decreases in the 

3 minimum funding standard allowed before such date 

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

5 such Code (if any);’’; 

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

7 ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’; 

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

9 1423(a)(1)(B)), by striking ‘‘302(a)’’ and inserting 

10 ‘‘304(a)’’, and, in clause (i), by striking ‘‘302(a)’’ and 

11 inserting ‘‘304(a)’’; 

12 (8) in section 4243(f)(1) (29 U.S.C. 1423(f)(1)), 

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

14 (9) in section 4243(f)(2) (29 U.S.C. 1423(f)(2)), 

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

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

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

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

19 1978.—Section 106(b)(ii) of Reorganization Plan No. 4 of 

20 1978 (ratified and affirmed as law by Public Law 98–532 

21 (98 Stat. 2705)) is amended by striking ‘‘302(c)(8)’’ and 

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

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

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

25 ‘‘412(d)(2) and 431(d)(1), (d)(2), and (e)(2)(A)’’. 
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1 (d) REPEAL OF EXPIRED AUTHORITY FOR TEMPORARY

2 VARIANCES.— 

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

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

5 (2) CONFORMING AMENDMENT.—The table of 

6 contents in section 1 of such Act is amended by strik7 ing the item relating to section 207. 

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

9 section shall apply to plan years beginning after 2005. 

10 Subtitle B—Amendments to 

11 Internal Revenue Code of 1986 

12 SEC. 111. [See introduced bill, page 71, line 1 through page 140, line 13.] 

13 Subtitle C—Other Provisions 

14 SEC. 121. MODIFICATION OF TRANSITION RULE TO PEN15 SION FUNDING REQUIREMENTS. 

16 (a) IN GENERAL.—In the case of a plan that— 

17 (1) was not required to pay a variable rate pre18 mium for the plan year beginning in 1996, 

19 (2) has not, in any plan year beginning after 

20 1995, merged with another plan (other than a plan 

21 sponsored by an employer that was in 1996 within 

22 the controlled group of the plan sponsor); and 

23 (3) is sponsored by a company that is engaged 

24 primarily in the interurban or interstate passenger 

25 bus service, 
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1 the rules described in subsection (b) shall apply for any 

2 plan year beginning after 2005. 

3 (b) MODIFIED RULES.—The rules described in this 

4 subsection are as follows: 

5 (1) For purposes of section 430(i)(3) of the Inter6 nal Revenue Code of 1986 and section 303(j)(3) of the 

7 Employee Retirement Income Security Act of 1974, 

8 the plan shall be treated as not having a funding 

9 shortfall for any plan year. 

10 (2) For purposes of— 

11 (A) determining unfunded vested benefits 

12 under section 4006(a)(3)(E)(iii) of such Act, and 

13 (B) determining any present value or mak14 ing any computation under section 412 of such 

15 Code or section 302 of such Act, 

16 the mortality table shall be the mortality table used 

17 by the plan. 

18 (3) Notwithstanding section 303(f)(4)(B) of such 

19 Act, for purposes of section 303(c)(4)(B) of such Act, 

20 the value of plan assets is deemed to be such amount, 

21 reduced by the amount of the pre-funding balance if, 

22 pursuant to a binding written agreement with the 

23 Pension Benefit Guaranty Corporation entered into 

24 before January 1, 2006, the funding standard carry-
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1 over balance is not available to reduce the minimum 

2 required contribution for the plan year. 

3 (4) Section 430(c)(4)(B) of such Code and sec4 tion 303(c)(4)(B) of such Act (relating to phase-in of 

5 funding target for determination of funding shortfall) 

6 shall each be applied by substituting ‘‘2011’’ for 

7 ‘‘2010’’ therein and by substituting for the table there8 in the following: 

In the case of a plan year beginning in calendar 

year: 

The applicable percentage 

is: 

2006 ....................................................................................................... 90 percent

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

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

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

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

9 (c) DEFINITIONS.—Any term used in this section 

10 which is also used in section 303 of such Act shall have 

11 the meaning provided such term in such section. 

12 (d) CONFORMING AMENDMENT.— 

13 (1) Section 769 of the Retirement Protection Act 

14 of 1994 (26 U.S.C. 412 note) is amended by striking 

15 subsection (c). 

16 (2) The amendment made this subsection shall 

17 apply to plan years beginning after 2005. 
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1 SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COM2 PENSATION PLANS WHEN EMPLOYER DE3 FINED BENEFIT PLAN IN AT-RISK STATUS. 

4 [See introduced bill, page 142, line 3 through page 

5 143, line 16] 

6 TITLE II—FUNDING RULES FOR 

7 MULTIEMPLOYER DEFINED 

8 BENEFIT PLANS 

9 Subtitle A—Amendments to Em10 ployee Retirement Income Secu11 rity 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 section 102) is amended further by inserting 

17 after section 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) in the case of a plan in existence 

22 on January 1, 1974, the unfunded past 

23 service liability under the plan on the first 

24 day of the first plan year to which this sec25 tion applies, over a period of 40 plan years, 
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1 ‘‘(ii) in the case of a plan which comes 

2 into existence after January 1, 1974, the 

3 unfunded past service liability under the 

4 plan on the first day of the first plan year 

5 to which this section applies, over a period 

6 of 15 plan years, 

7 ‘‘(iii) separately, with respect to each 

8 plan year, the net increase (if any) in un9 funded past service liability under the plan 

10 arising from plan amendments adopted in 

11 such year, over a period of 15 plan years, 

12 ‘‘(iv) separately, with respect to each 

13 plan year, the net experience loss (if any) 

14 under the plan, over a period of 15 plan 

15 years, and 

16 ‘‘(v) separately, with respect to each 

17 plan year, the net loss (if any) resulting 

18 from changes in actuarial assumptions used 

19 under the plan, over a period of 15 plan 

20 years, 

21 ‘‘(C) the amount necessary to amortize each 

22 waived funding deficiency (within the meaning 

23 of section 302(c)(3)) for each prior plan year in 

24 equal annual installments (until fully amor25 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 302(b)(3)(D) (as in effect on the day be6 fore the date of the enactment of the Pension 

7 Protection Act of 2005), and 

8 ‘‘(E) the amount necessary to amortize in 

9 equal annual installments (until fully amor10 tized) over a period of 20 years the contributions 

11 which would be required to be made under the 

12 plan but for the provisions of section 

13 302(c)(7)(A)(i)(I) (as in effect on the day before 

14 the date of the enactment of the Pension Protec15 tion 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 302(c)(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 

24 305 (as in effect on the day before the date of the 

25 enactment of the Pension Protection Act of 
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1 2005), the excess (if any) of any debit balance in 

2 the funding standard account (determined with3 out regard to this subparagraph) over any debit 

4 balance in the alternative minimum funding 

5 standard account. 

6 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AMOR7 TIZED TO PLAN YEARS BEFORE 2006.—In the case of 

8 any amount amortized under section 302(b) (as in ef9 fect on the day before the date of the enactment of the 

10 Pension Protection Act of 2005) over any period be11 ginning with a plan year beginning before 2006, in 

12 lieu of the amortization described in paragraphs 

13 (2)(B) and (3)(B), such amount shall continue to be 

14 amortized under such section as so in effect. 

15 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS TO

16 BE AMORTIZED.—Under regulations prescribed by the 

17 Secretary of the Treasury, amounts required to be 

18 amortized under paragraph (2) or paragraph (3), as 

19 the case may be— 

20 ‘‘(A) may be combined into one amount 

21 under such paragraph to be amortized over a pe22 riod determined on the basis of the remaining 

23 amortization period for all items entering into 

24 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.—Except as provided in sub9 section (c)(9), the funding standard account (and 

10 items therein) shall be charged or credited (as deter11 mined under regulations prescribed by the Secretary 

12 of the Treasury) with interest at the appropriate rate 

13 consistent with the rate or rates of interest used under 

14 the plan to determine costs. 

15 ‘‘(7) CERTAIN AMORTIZATION CHARGES AND

16 CREDITS.—In the case of a plan which, immediately 

17 before the date of the enactment of the Multiemployer 

18 Pension Plan Amendments Act of 1980, was a multi19 employer plan (within the meaning of section 3(37) 

20 as in effect immediately before such date)— 

21 ‘‘(A) any amount described in paragraph 

22 (2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub23 section which arose in a plan year beginning be24 fore such date shall be amortized in equal annual 

25 installments (until fully amortized) over 40 plan 
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1 years, beginning with the plan year in which the 

2 amount arose; 

3 ‘‘(B) any amount described in paragraph 

4 (2)(B)(iv) or (3)(B)(ii) of this subsection which 

5 arose in a plan year beginning before such date 

6 shall be amortized in equal annual installments 

7 (until fully amortized) over 20 plan years, begin8 ning with the plan year in which the amount 

9 arose; 

10 ‘‘(C) any change in past service liability 

11 which arises during the period of 3 plan years 

12 beginning on or after such date, and results from 

13 a plan amendment adopted before such date, 

14 shall be amortized in equal annual installments 

15 (until fully amortized) over 40 plan years, begin16 ning with the plan year in which the change 

17 arises; and 

18 ‘‘(D) any change in past service liability 

19 which arises during the period of 2 plan years 

20 beginning on or after such date, and results from 

21 the changing of a group of participants from one 

22 benefit level to another benefit level under a 

23 schedule of plan benefits which— 

24 ‘‘(i) was adopted before such date, and 
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1 ‘‘(ii) was effective for any plan partici2 pant before the beginning of the first plan 

3 year beginning on or after such date, 

4 shall be amortized in equal annual installments 

5 (until fully amortized) over 40 plan years, begin6 ning with the plan year in which the change 

7 arises. 

8 ‘‘(8) SPECIAL RULES RELATING TO CHARGES

9 AND CREDITS TO FUNDING STANDARD ACCOUNT.—For 

10 purposes of this part— 

11 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

12 amount received by a multiemployer plan in 

13 payment of all or part of an employer’s with14 drawal liability under part 1 of subtitle E of 

15 title IV shall be considered an amount contrib16 uted by the employer to or under the plan. The 

17 Secretary of the Treasury may prescribe by regu18 lation additional charges and credits to a multi19 employer plan’s funding standard account to the 

20 extent necessary to prevent withdrawal liability 

21 payments from being unduly reflected as advance 

22 funding for plan liabilities. 

23 ‘‘(B) ADJUSTMENTS WHEN A MULTIEM24 PLOYER PLAN LEAVES REORGANIZATION.—If a 

25 multiemployer plan is not in reorganization in 
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1 the plan year but was in reorganization in the 

2 immediately preceding plan year, any balance 

3 in the funding standard account at the close of 

4 such immediately preceding plan year— 

5 ‘‘(i) shall be eliminated by an offset6 ting credit or charge (as the case may be), 

7 but 

8 ‘‘(ii) shall be taken into account in 

9 subsequent plan years by being amortized 

10 in equal annual installments (until fully 

11 amortized) over 30 plan years. 

12 The preceding sentence shall not apply to the ex13 tent of any accumulated funding deficiency 

14 under section 4243(a) as of the end of the last 

15 plan year that the plan was in reorganization. 

16 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

17 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

18 FUND.—Any amount paid by a plan during a 

19 plan year to the Pension Benefit Guaranty Cor20 poration pursuant to section 4222 of this Act or 

21 to a fund exempt under section 501(c)(22) of the 

22 Internal Revenue Code of 1986 pursuant to sec23 tion 4223 of this Act shall reduce the amount of 

24 contributions considered received by the plan for 

25 the plan year. 
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1 ‘‘(D) INTERIM WITHDRAWAL LIABILITY PAY2 MENTS.—Any amount paid by an employer 

3 pending a final determination of the employer’s 

4 withdrawal liability under part 1 of subtitle E 

5 of title IV and subsequently refunded to the em6 ployer by the plan shall be charged to the fund7 ing standard account in accordance with regula8 tions prescribed by the Secretary of the Treasury. 

9 ‘‘(E) ELECTION FOR DEFERRAL OF CHARGE

10 FOR PORTION OF NET EXPERIENCE LOSS.—If an 

11 election is in effect under section 302(b)(7)(F) 

12 (as in effect on the day before the date of the en13 actment of the Pension Protection Act of 2005) 

14 for any plan year, the funding standard account 

15 shall be charged in the plan year to which the 

16 portion of the net experience loss deferred by 

17 such election was deferred with the amount so 

18 deferred (and paragraph (2)(B)(iv) shall not 

19 apply to the amount so charged). 

20 ‘‘(F) FINANCIAL ASSISTANCE.—Any amount 

21 of any financial assistance from the Pension 

22 Benefit Guaranty Corporation to any plan, and 

23 any repayment of such amount, shall be taken 

24 into account under this section and section 412 
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1 in such manner as is determined by the Sec2 retary of the Treasury. 

3 ‘‘(G) SHORT-TERM BENEFITS.—To the ex4 tent that any plan amendment increases the un5 funded past service liability under the plan by 

6 reason of an increase in benefits which are pay7 able under the plan during a period that does 

8 not exceed 14 years, paragraph (2)(B)(iii) shall 

9 be applied separately with respect to such in10 crease in unfunded past service liability by sub11 stituting the number of years of the period dur12 ing which such benefits are payable for ‘15’. 

13 ‘‘(c) ADDITIONAL RULES.— 

14 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

15 FUNDING METHOD.—For purposes of this part, nor16 mal costs, accrued liability, past service liabilities, 

17 and experience gains and losses shall be determined 

18 under the funding method used to determine costs 

19 under the plan. 

20 ‘‘(2) VALUATION OF ASSETS.— 

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

22 part, the value of the plan’s assets shall be deter23 mined on the basis of any reasonable actuarial 

24 method of valuation which takes into account 

25 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.—In the case of 

2 plan years beginning after December 

3 31, 1995, the Secretary of the Treasury 

4 shall establish mortality tables which 

5 may be used (in lieu of the tables 

6 under clause (iv)) to determine current 

7 liability under this subsection for indi8 viduals who are entitled to benefits 

9 under the plan on account of dis10 ability. Such Secretary shall establish 

11 separate tables for individuals whose 

12 disabilities occur in plan years begin13 ning before January 1, 1995, and for 

14 individuals whose disabilities occur in 

15 plan years beginning on or after such 

16 date. 

17 ‘‘(II) SPECIAL RULE FOR DISABIL18 ITIES OCCURRING AFTER 1994.—In the 

19 case of disabilities occurring in plan 

20 years beginning after December 31, 

21 1994, the tables under subclause (I) 

22 shall apply only with respect to indi23 viduals described in such subclause 

24 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 of the Treasury shall periodically (at 

5 least every 5 years) review any tables in ef6 fect under this subparagraph and shall, to 

7 the extent such Secretary determines nec8 essary, by regulation update the tables to 

9 reflect the actual experience of pension 

10 plans and projected trends in such experi11 ence. 

12 ‘‘(E) REQUIRED CHANGE OF INTEREST

13 RATE.—For purposes of determining a plan’s 

14 current liability for purposes of this para15 graph— 

16 ‘‘(i) IN GENERAL.—If any rate of in17 terest used under the plan under subsection 

18 (b)(6) to determine cost is not within the 

19 permissible range, the plan shall establish a 

20 new rate of interest within the permissible 

21 range. 

22 ‘‘(ii) PERMISSIBLE RANGE.—For pur23 poses of this subparagraph— 

24 ‘‘(I) IN GENERAL.—Except as pro25 vided in subclause (II), the term ‘per-
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1 missible range’ means a rate of interest 

2 which is not more than 5 percent 

3 above, and not more than 10 percent 

4 below, the weighted average of the rates 

5 of interest on 30-year Treasury securi6 ties during the 4-year period ending on 

7 the last day before the beginning of the 

8 plan year. 

9 ‘‘(II) SECRETARIAL AUTHOR10 ITY.—If the Secretary of the Treasury 

11 finds that the lowest rate of interest 

12 permissible under subclause (I) is un13 reasonably high, such Secretary may 

14 prescribe a lower rate of interest, ex15 cept that such rate may not be less 

16 than 80 percent of the average rate de17 termined under such subclause. 

18 ‘‘(iii) ASSUMPTIONS.—Notwith19 standing paragraph (3)(A), the interest rate 

20 used under the plan shall be— 

21 ‘‘(I) determined without taking 

22 into account the experience of the plan 

23 and reasonable expectations, but 

24 ‘‘(II) consistent with the assump25 tions which reflect the purchase rates 
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1 which would be used by insurance com2 panies to satisfy the liabilities under 

3 the plan. 

4 ‘‘(7) ANNUAL VALUATION.— 

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

6 section, a determination of experience gains and 

7 losses and a valuation of the plan’s liability 

8 shall be made not less frequently than once every 

9 year, except that such determination shall be 

10 made more frequently to the extent required in 

11 particular cases under regulations prescribed by 

12 the Secretary of the Treasury. 

13 ‘‘(B) VALUATION DATE.— 

14 ‘‘(i) CURRENT YEAR.—Except as pro15 vided in clause (ii), the valuation referred 

16 to in subparagraph (A) shall be made as of 

17 a date within the plan year to which the 

18 valuation refers or within one month prior 

19 to the beginning of such year. 

20 ‘‘(ii) USE OF PRIOR YEAR VALU21 ATION.—The valuation referred to in sub22 paragraph (A) may be made as of a date 

23 within the plan year prior to the year to 

24 which the valuation refers if, as of such 

25 date, the value of the assets of the plan are 
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1 not less than 100 percent of the plan’s cur2 rent liability (as defined in paragraph 

3 (6)(D) without regard to clause (iv) there4 of). 

5 ‘‘(iii) ADJUSTMENTS.—Information 

6 under clause (ii) shall, in accordance with 

7 regulations, be actuarially adjusted to re8 flect significant differences in participants. 

9 ‘‘(iv) LIMITATION.—A change in fund10 ing method to use a prior year valuation, 

11 as provided in clause (ii), may not be made 

12 unless as of the valuation date within the 

13 prior plan year, the value of the assets of 

14 the plan are not less than 125 percent of the 

15 plan’s current liability (as defined in para16 graph (6)(D) without regard to clause (iv) 

17 thereof). 

18 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

19 DEEMED MADE.—For purposes of this section, any 

20 contributions for a plan year made by an employer 

21 after the last day of such plan year, but not later 

22 than two and one-half months after such day, shall be 

23 deemed to have been made on such last day. For pur24 poses of this subparagraph, such two and one-half 

25 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 ‘‘(9) INTEREST RULE FOR WAIVERS AND EXTEN4 SIONS.—The interest rate applicable for any plan 

5 year for purposes of computing the amortization 

6 charge described in subsection (b)(2)(C) and in con7 nection with an extension granted under subsection 

8 (d) shall be the greater of— 

9 ‘‘(A) 150 percent of the Federal mid-term 

10 rate (as in effect under section 1274 of the Inter11 nal Revenue Code of 1986 for the 1st month of 

12 such plan year), or 

13 ‘‘(B) the rate of interest used under the plan 

14 for determining costs. 

15 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

16 MULTIEMPLOYER PLANS.—In the case of a multiemployer 

17 plan— 

18 ‘‘(1) EXTENSION.—The period of years required 

19 to amortize any unfunded liability (described in any 

20 clause of subsection (b)(2)(B)) of any multiemployer 

21 plan may be extended (in addition to any extension 

22 under paragraph (2)) by the Secretary of the Treas23 ury for a period of time (not in excess of 5 years) if 

24 such Secretary determines that such extension would 

25 carry out the purposes of this Act and would provide 
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1 adequate protection for participants under the plan 

2 and their beneficiaries and if he determines that the 

3 failure to permit such extension would— 

4 ‘‘(A) result in— 

5 ‘‘(i) a substantial risk to the voluntary 

6 continuation of the plan, or 

7 ‘‘(ii) a substantial curtailment of pen8 sion benefit levels or employee compensa9 tion, and 

10 ‘‘(B) be adverse to the interests of plan par11 ticipants in the aggregate. 

12 ‘‘(2) ADDITIONAL EXTENSION.—The period of 

13 years required to amortize any unfunded liability 

14 (described in any clause of subsection (b)(2)(B)) of 

15 any multiemployer plan may be extended (in addi16 tion to any extension under paragraph (1)) by the 

17 Secretary of the Treasury for a period of time (not 

18 in excess of 5 years) if such Secretary determines 

19 that— 

20 ‘‘(A) absent the extension, the plan would 

21 have an accumulated funding deficiency in any 

22 of the next 10 plan years, 

23 ‘‘(B) the plan sponsor has adopted a plan 

24 to improve the plan’s funding status, and 
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1 ‘‘(C) taking into account the extension, the 

2 plan is projected to have suficient assets to time3 ly pay its expected benefit liabilities and other 

4 anticipated expenditures 

5 ‘‘(3) ADVANCE NOTICE.— 

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

7 Treasury shall, before granting an extension 

8 under this section, require each applicant to pro9 vide evidence satisfactory to such Secretary that 

10 the applicant has provided notice of the filing of 

11 the application for such extension to each af12 fected party (as defined in section 4001(a)(21)) 

13 with respect to the affected plan. Such notice 

14 shall include a description of the extent to which 

15 the plan is funded for benefits which are guaran16 teed under title IV and for benefit liabilities. 

17 ‘‘(B) CONSIDERATION OF RELEVANT INFOR18 MATION.—The Secretary of the Treasury shall 

19 consider any relevant information provided by a 

20 person to whom notice was given under para21 graph (1).’’. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Section 301 of the Employee Retirement In24 come Security Act of 1974 (29 U.S.C. 1081) is 

25 amended by striking subsection (d). 
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1 (2) The table of contents in section 1 of such Act 

2 (as amended by section 102 of this Act) is amended 

3 further by inserting after the item relating to section 

4 303 the following new item: 

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’. 

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

6 section shall apply to plan years beginning after 2005. 

7 SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM8 PLOYER PLANS IN ENDANGERED OR CRIT9 ICAL STATUS. 

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

11 the Employee Retirement Income Security Act of 1974 (as 

12 amended by the preceding provisions of this Act) is amend13 ed further by inserting after section 304 the following new 

14 section: 

15 ‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER

16 PLANS IN ENDANGERED STATUS OR CRITICAL STATUS

17 ‘‘SEC. 305. (a) ANNUAL CERTIFICATION BY PLAN AC18 TUARY.— 

19 ‘‘(1) IN GENERAL.—During the 90-day period 

20 beginning on first day of each plan year of a multi21 employer plan, the plan actuary shall certify to the 

22 Secretary of the Treasury whether or not the plan is 

23 in endangered status for such plan year and whether 

24 or not the plan is in critical status for such plan 

25 year. 
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1 ‘‘(2) ACTUARIAL PROJECTIONS OF ASSETS AND

2 LIABILITIES.— 

3 ‘‘(A) IN GENERAL.—In making the deter4 minations under paragraph (1), the plan actu5 ary shall make projections under subsections 

6 (b)(2) and (c)(2) for the current and succeeding 

7 plan years, using reasonable actuarial assump8 tions and methods, of the current value of the as9 sets of the plan and the present value of all li10 abilities to participants and beneficiaries under 

11 the plan for the current plan year as of the be12 ginning of such year, as based on the actuarial 

13 statement prepared for the preceding plan year 

14 under section 103(d). 

15 ‘‘(B) DETERMINATIONS OF FUTURE CON16 TRIBUTIONS.—Any such actuarial projection of 

17 plan assets shall assume— 

18 ‘‘(i) reasonably anticipated employer 

19 and employee contributions for the current 

20 and succeeding plan years, assuming that 

21 the terms of the one or more collective bar22 gaining agreements pursuant to which the 

23 plan is maintained for the current plan 

24 year continue in effect for succeeding plan 

25 years, or 
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1 ‘‘(ii) that employer and employee con2 tributions for the most recent plan year will 

3 continue indefinitely, but only if the plan 

4 actuary determines there have been no sig5 nificant demographic changes that would 

6 make continued application of such terms 

7 unreasonable. 

8 ‘‘(3) PRESUMED STATUS IN ABSENCE OF TIMELY

9 ACTUARIAL CERTIFICATION.—If certification under 

10 this subsection is not made before the end of the 90- 

11 day period specified in paragraph (1), the plan shall 

12 be presumed to be in critical status for such plan year 

13 until such time as the plan actuary makes a contrary 

14 certification. 

15 ‘‘(4) NOTICE.—In any case in which a multiem16 ployer plan is certified to be in endangered status 

17 under paragraph (1) or enters into critical status, the 

18 plan sponsor shall, not later than 30 days after the 

19 date of the certification or entry, provide notification 

20 of the endangered or critical status to the participants 

21 and beneficiaries, the bargaining parties, the Pension 

22 Benefit Guaranty Corporation, the Secretary of the 

23 Treasury, and the Secretary of Labor. 

24 ‘‘(b) FUNDING RULES FOR MULTIEMPLOYER PLANS IN

25 ENDANGERED STATUS.— 
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1 ‘‘(1) IN GENERAL.—In any case in which a mul2 tiemployer plan is in endangered status for a plan 

3 year and no funding improvement plan under this 

4 subsection with respect to such multiemployer plan is 

5 in effect for the plan year, the plan sponsor shall, in 

6 accordance with this subsection, amend the multiem7 ployer plan to include a funding improvement plan 

8 upon approval thereof by the bargaining parties 

9 under this subsection. The amendment shall be adopt10 ed not later than 240 days after the date on which 

11 the plan is certified to be in endangered status under 

12 subsection (a)(1). 

13 ‘‘(2) ENDANGERED STATUS.—A multiemployer 

14 plan is in endangered status for a plan year if, as 

15 determined by the plan actuary under subsection 

16 (a)— 

17 ‘‘(A) the plan’s funded percentage for such 

18 plan year is less than 80 percent, or 

19 ‘‘(B) the plan has an accumulated funding 

20 deficiency for such plan year under section 304 

21 or is projected to have such an accumulated 

22 funding deficiency for any of the 6 succeeding 

23 plan years, taking into account any extension of 

24 amortization periods under section 304(d). 

25 ‘‘(3) FUNDING IMPROVEMENT PLAN.— 
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1 ‘‘(A) BENCHMARKS.—A funding improve2 ment plan shall consist of amendments to the 

3 plan formulated to provide, under reasonable ac4 tuarial assumptions, for the attainment, during 

5 the funding improvement period under the fund6 ing improvement plan, of the following bench7 marks: 

8 ‘‘(i) INCREASE IN FUNDED PERCENT9 AGE.—An increase in the plan’s funded per10 centage such that— 

11 ‘‘(I) the difference between 100 

12 percent and the plan’s funded percent13 age for the last year of the funding im14 provement period, is not more than 

‘‘(II) 2 15 ⁄3 of the difference between 

16 100 percent and the plan’s funded per17 centage for the first year of the funding 

18 improvement period. 

19 ‘‘(ii) AVOIDANCE OF ACCUMULATED

20 FUNDING DEFICIENCIES.—No accumulated 

21 funding deficiency for any plan year during 

22 the funding improvement period (taking 

23 into account any extension of amortization 

24 periods under section 304(d)). 
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1 ‘‘(B) FUNDING IMPROVEMENT PERIOD.—The 

2 funding improvement period for any funding 

3 improvement plan adopted pursuant to this sub4 section is the 10-year period beginning on the 

5 earlier of— 

6 ‘‘(i) the second anniversary of the date 

7 of the adoption of the funding improvement 

8 plan, or 

9 ‘‘(ii) the first day of the first plan year 

10 of the multiemployer plan following the 

11 plan year in which occurs the first date 

12 after the day of the certification as of which 

13 collective bargaining agreements covering on 

14 the day of such certification at least 75 per15 cent of active participants in such multiem16 ployer plan have expired. 

17 ‘‘(C) SPECIAL RULES FOR CERTAIN SERI18 OUSLY UNDERFUNDED PLANS.— 

19 ‘‘(i) In the case of a plan in which the 

20 funded percentage of a plan for the plan 

21 year is 70 percent or less, subparagraph 

22 (A)(i)(II) shall be applied by substituting 

‘

4⁄5’ for ‘2 23 ⁄3’ and subparagraph (B) shall be 

24 applied by substituting ‘the 15-year period’ 

25 for ‘the 10-year period’. 
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1 ‘‘(ii) In the case of a plan in which the 

2 funded percentage of a plan for the plan 

3 year is more than 70 percent but less than 

4 80 percent, and— 

5 ‘‘(I) the plan actuary certifies 

6 within 30 days after certification 

7 under subsection (a)(1) that the plan is 

8 not able to attain the increase de9 scribed in subparagraph (A)(i) over the 

10 period described in subparagraph (B), 

11 and 

12 ‘‘(II) the plan year is prior to the 

13 day described in subparagraph (B)(ii), 

14 subparagraph (A)(i)(II) shall be applied by 

substituting ‘4⁄5’ for ‘2 15 ⁄3’ and subparagraph 

16 (B) shall be applied by substituting ‘the 15- 

17 year period’ for ‘the 10-year period’. 

18 ‘‘(iii) For any plan year following the 

19 year described in clause (ii)(II), subpara20 graph (A)(i)(II) and subparagraph (B) 

21 shall apply, except that for each plan year 

22 ending after such date for which the plan 

23 actuary certifies (at the time of the annual 

24 certification under subsection (a)(1) for 

25 such plan year) that the plan is not able to 
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1 attain the increase described in subpara2 graph (A)(i) over the period described in 

3 subparagraph (B), subparagraph (B) shall 

4 be applied by substituting ‘the 15-year pe5 riod’ for ‘the 10-year period’. 

6 ‘‘(D) REPORTING.—A summary of any 

7 funding improvement plan or modification 

8 thereto adopted during any plan year, together 

9 with annual updates regarding the funding ratio 

10 of the plan, shall be included in the annual re11 port for such plan year under section 104(a) and 

12 in the summary annual report described in sec13 tion 104(b)(3). 

14 ‘‘(4) DEVELOPMENT OF FUNDING IMPROVEMENT

15 PLAN.— 

16 ‘‘(A) ACTIONS BY PLAN SPONSOR PENDING

17 APPROVAL.—Pending the approval of a funding 

18 improvement plan under this paragraph, the 

19 plan sponsor shall take all reasonable actions, 

20 consistent with the terms of the plan and appli21 cable law, necessary to ensure— 

22 ‘‘(i) an increase in the plan’s funded 

23 percentage, and 
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1 ‘‘(ii) postponement of an accumulated 

2 funding deficiency for at least 1 additional 

3 plan year. 

4 Such actions include applications for extensions 

5 of amortization periods under section 304(d), use 

6 of the shortfall funding method in making fund7 ing standard account computations, amendments 

8 to the plan’s benefit structure, reductions in fu9 ture benefit accruals, and other reasonable ac10 tions consistent with the terms of the plan and 

11 applicable law. 

12 ‘‘(B) RECOMMENDATIONS BY PLAN SPON13 SOR.— 

14 ‘‘(i) IN GENERAL.—During the period 

15 of 90 days following the date on which a 

16 multiemployer plan is certified to be in en17 dangered status, the plan sponsor shall de18 velop and provide to the bargaining parties 

19 alternative proposals for revised benefit 

20 structures, contribution structures, or both, 

21 which, if adopted as amendments to the 

22 plan, may be reasonably expected to meet 

23 the benchmarks described in paragraph 

24 (3)(A). Such proposals shall include— 
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1 ‘‘(I) at least one proposal for re2 ductions in the amount of future ben3 efit accruals necessary to achieve the 

4 benchmarks, assuming no amendments 

5 increasing contributions under the 

6 plan (other than amendments increas7 ing contributions necessary to achieve 

8 the benchmarks after amendments have 

9 reduced future benefit accruals to the 

10 maximum extent permitted by law), 

11 and 

12 ‘‘(II) at least one proposal for in13 creases in contributions under the plan 

14 necessary to achieve the benchmarks, 

15 assuming no amendments reducing fu16 ture benefit accruals under the plan. 

17 ‘‘(ii) REQUESTS BY BARGAINING PAR18 TIES.—Upon the request of any bargaining 

19 party who— 

20 ‘‘(I) employs at least 5 percent of 

21 the active participants, or 

22 ‘‘(II) represents as an employee 

23 organization, for purposes of collective 

24 bargaining, at least 5 percent of the 

25 active participants, 
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1 the plan sponsor shall provide all such par2 ties information as to other combinations of 

3 increases in contributions and reductions in 

4 future benefit accruals which would result 

5 in achieving the benchmarks. 

6 ‘‘(iii) OTHER INFORMATION.—The 

7 plan sponsor may, as it deems appropriate, 

8 prepare and provide the bargaining parties 

9 with additional information relating to con10 tribution structures or benefit structures or 

11 other information relevant to the funding 

12 improvement plan. 

13 ‘‘(5) MAINTENANCE OF CONTRIBUTIONS PENDING

14 APPROVAL OF FUNDING IMPROVEMENT PLAN.—Pend15 ing approval of a funding improvement plan by the 

16 bargaining parties with respect to a multiemployer 

17 plan, the multiemployer plan may not be amended so 

18 as to provide— 

19 ‘‘(A) a reduction in the level of contribu20 tions for participants who are not in pay status, 

21 ‘‘(B) a suspension of contributions with re22 spect to any period of service, or 

23 ‘‘(C) any new direct or indirect exclusion of 

24 younger or newly hired employees from plan 

25 participation. 
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1 ‘‘(6) BENEFIT RESTRICTIONS PENDING APPROVAL

2 OF FUNDING IMPROVEMENT PLAN.—Pending approval 

3 of a funding improvement plan by the bargaining 

4 parties with respect to a multiemployer plan— 

5 ‘‘(A) RESTRICTIONS ON LUMP SUM AND

6 SIMILAR DISTRIBUTIONS.—In any case in which 

7 the present value of a participant’s accrued ben8 efit under the plan exceeds $5,000, such benefit 

9 may not be distributed as an immediate dis10 tribution or in any other accelerated form. 

11 ‘‘(B) PROHIBITION ON BENEFIT IN12 CREASES.— 

13 ‘‘(i) IN GENERAL.—No amendment of 

14 the plan which increases the liabilities of 

15 the plan by reason of any increase in bene16 fits, any change in the accrual of benefits, 

17 or any change in the rate at which benefits 

18 become nonforfeitable under the plan may 

19 be adopted. 

20 ‘‘(ii) EXCEPTION.—Clause (i) shall not 

21 apply to any plan amendment which is re22 quired as a condition of qualification under 

23 part I of subchapter D of chapter 1 of sub24 title A of the Internal Revenue Code of 

25 1986. 
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1 ‘‘(7) DEFAULT CRITICAL STATUS IF NO FUNDING

2 IMPROVEMENT PLAN ADOPTED.—If no plan amend3 ment adopting a funding improvement plan has been 

4 adopted by the end of the 240-day period referred to 

5 in subsection (b)(1), the plan enters into critical sta6 tus as of the first day of the succeeding plan year. 

7 ‘‘(8) RESTRICTIONS UPON APPROVAL OF FUNDING

8 IMPROVEMENT PLAN.—Upon adoption of a funding 

9 improvement plan with respect to a multiemployer 

10 plan, the plan may not be amended— 

11 ‘‘(A) so as to be inconsistent with the fund12 ing improvement plan, or 

13 ‘‘(B) so as to increase future benefit accru14 als, unless the plan actuary certifies in advance 

15 that, after taking into account the proposed in16 crease, the plan is reasonably expected to meet 

17 the the benchmarks described in paragraph 

18 (3)(A). 

19 ‘‘(c) FUNDING RULES FOR MULTIEMPLOYER PLANS IN

20 CRITICAL STATUS.— 

21 ‘‘(1) IN GENERAL.—In any case in which a mul22 tiemployer plan is in critical status for a plan year 

23 as described in paragraph (2) (or otherwise enters 

24 into critical status under this section) and no reha25 bilitation plan under this subsection with respect to 
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1 such multiemployer plan is in effect for the plan year, 

2 the plan sponsor shall, in accordance with this sub3 section, amend the multiemployer plan to include a 

4 rehabilitation plan under this subsection. The amend5 ment shall be adopted not later than 240 days after 

6 the date on which the plan enters into critical status. 

7 ‘‘(2) CRITICAL STATUS.—A multiemployer plan 

8 is in critical status for a plan year if— 

9 ‘‘(A) the plan is in endangered status for 

10 the preceding plan year and the requirements of 

11 subsection (b)(1) were not met with respect to the 

12 plan for such preceding plan year, or 

13 ‘‘(B) as determined by the plan actuary 

14 under subsection (a), the plan is described in 

15 paragraph (3). 

16 ‘‘(3) CRITICALITY DESCRIPTION.—For purposes 

17 of paragraph (2)(B), a plan is described in this para18 graph if the plan is described in at least one of the 

19 following subparagraphs: 

20 ‘‘(A) A plan is described in this subpara21 graph if, as of the beginning of the current plan 

22 year— 

23 ‘‘(i) the funded percentage of the plan 

24 is less than 65 percent, and 

25 ‘‘(ii) the sum of— 
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1 ‘‘(I) the market value of plan as2 sets, plus 

3 ‘‘(II) the present value of the rea4 sonably anticipated employer and em5 ployee contributions for the current 

6 plan year and each of the 6 succeeding 

7 plan years, assuming that the terms of 

8 the one or more collective bargaining 

9 agreements pursuant to which the plan 

10 is maintained for the current plan 

11 year continue in effect for succeeding 

12 plan years, 

13 is less than the present value of all non14 forfeitable benefits for all participants and 

15 beneficiaries projected to be payable under 

16 the plan during the current plan year and 

17 each of the 6 succeeding plan years (plus 

18 administrative expenses for such plan 

19 years). 

20 ‘‘(B) A plan is described in this subpara21 graph if, as of the beginning of the current plan 

22 year, the sum of— 

23 ‘‘(i) the market value of plan assets, 

24 plus 
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1 ‘‘(ii) the present value of the reason2 ably anticipated employer and employee 

3 contributions for the current plan year and 

4 each of the 4 succeeding plan years, assum5 ing that the terms of the one or more collec6 tive bargaining agreements pursuant to 

7 which the plan is maintained for the cur8 rent plan year remain in effect for suc9 ceeding plan years, 

10 is less than the present value of all nonforfeitable 

11 benefits for all participants and beneficiaries 

12 projected to be payable under the plan during 

13 the current plan year and each of the 4 suc14 ceeding plan years (plus administrative expenses 

15 for such plan years). 

16 ‘‘(C) A plan is described in this subpara17 graph if— 

18 ‘‘(i) as of the beginning of the current 

19 plan year, the funded percentage of the plan 

20 is less than 65 percent, and 

21 ‘‘(ii) the plan has an accumulated 

22 funding deficiency for the current plan year 

23 or is projected to have an accumulated 

24 funding deficiency for any of the 4 suc25 ceeding plan years, not taking into account 
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1 any extension of amortization periods under 

2 section 304(d). 

3 ‘‘(D) A plan is described in this subpara4 graph if— 

5 ‘‘(i)(I) the plan’s normal cost for the 

6 current plan year, plus interest (determined 

7 at the rate used for determining cost under 

8 the plan) for the current plan year on the 

9 amount of unfunded benefit liabilities under 

10 the plan as of the last date of the preceding 

11 plan year, exceeds 

12 ‘‘(II) the present value, as of the begin13 ning of the current plan year, of the reason14 ably anticipated employer and employee 

15 contributions for the current plan year, 

16 ‘‘(ii) the present value, as of the begin17 ning of the current plan year, of nonforfeit18 able benefits of inactive participants is 

19 greater than the present value, as of the be20 ginning of the current plan year, of non21 forfeitable benefits of active participants, 

22 and 

23 ‘‘(iii) the plan is projected to have an 

24 accumulated funding deficiency for the cur25 rent plan year or any of the 4 succeeding 
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1 plan years, not taking into account any ex2 tension of amortization periods under sec3 tion 304(d). 

4 ‘‘(E) A plan is described in this subpara5 graph if— 

6 ‘‘(i) the funded percentage of the plan 

7 is greater than 65 percent for the current 

8 plan year, and 

9 ‘‘(ii) the plan is projected to have an 

10 accumulated funding deficiency during any 

11 of the succeeding 3 plan years, not taking 

12 into account any extension of amortization 

13 periods under section 304(d). 

14 ‘‘(4) REHABILITATION PLAN.— 

15 ‘‘(A) IN GENERAL.—A rehabilitation plan 

16 shall consist of— 

17 ‘‘(i) amendments to the plan providing 

18 (under reasonable actuarial assumptions) 

19 for measures, agreed to by the bargaining 

20 parties, to increase contributions, reduce 

21 plan expenditures (including plan mergers 

22 and consolidations), or reduce future benefit 

23 accruals, or to take any combination of such 

24 actions, determined necessary to cause the 
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1 plan to cease, during the rehabilitation pe2 riod, to be in critical status, or 

3 ‘‘(ii) reasonable measures to forestall 

4 possible insolvency (within the meaning of 

5 section 4245) if the plan sponsor determines 

6 that, upon exhaustion of all reasonable 

7 measures, the plan would not cease during 

8 the rehabilitation period to be in critical 

9 status. 

10 ‘‘(B) REHABILITATION PERIOD.—The reha11 bilitation period for any rehabilitation plan 

12 adopted pursuant to this subsection is the 10- 

13 year period beginning on the earlier of— 

14 ‘‘(i) the second anniversary of the date 

15 of the adoption of the rehabilitation plan, or 

16 ‘‘(ii) the first day of the first plan year 

17 of the multiemployer plan following the 

18 plan year in which occurs the first date, 

19 after the date of the plan’s entry into crit20 ical status, as of which collective bargaining 

21 agreements covering at least 75 percent of 

22 active participants in such multiemployer 

23 plan (determined as of such date of entry) 

24 have expired. 
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1 ‘‘(C) REPORTING.—A summary of any re2 habilitation plan or modification thereto adopted 

3 during any plan year, together with annual up4 dates regarding the funding ratio of the plan, 

5 shall be included in the annual report for such 

6 plan year under section 104(a) and in the sum7 mary annual report described in section 

8 104(b)(3). 

9 ‘‘(5) DEVELOPMENT OF REHABILITATION

10 PLAN.— 

11 ‘‘(A) PROPOSALS BY PLAN SPONSOR.— 

12 ‘‘(i) IN GENERAL.—Within 90 days 

13 after the date of entry into critical status 

14 (or the date as of which the requirements of 

15 subsection (b)(1) are not met with respect to 

16 the plan), the plan sponsor shall propose to 

17 all bargaining parties a range of alternative 

18 schedules of increases in contributions and 

19 reductions in future benefit accruals that 

20 would serve to carry out a rehabilitation 

21 plan under this subsection. 

22 ‘‘(ii) PROPOSAL ASSUMING NO CON23 TRIBUTION INCREASES.—Such proposals 

24 shall include, as one of the proposed sched25 ules, a schedule of those reductions in future 
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1 benefit accruals that would be necessary to 

2 cause the plan to cease to be in critical sta3 tus if there were no further increases in 

4 rates of contribution to the plan. 

5 ‘‘(iii) PROPOSAL WHERE CONTRIBU6 TIONS ARE NECESSARY.—If the plan spon7 sor determines that the plan will not cease 

8 to be in critical status during the rehabili9 tation period unless the plan is amended to 

10 provide for an increase in contributions, the 

11 plan sponsor’s proposals shall include a 

12 schedule of those increases in contribution 

13 rates that would be necessary to cause the 

14 plan to cease to be in critical status if fu15 ture benefit accruals were reduced to the 

16 maximum extent permitted by law. 

17 ‘‘(B) REQUESTS FOR ADDITIONAL SCHED18 ULES.—Upon the request of any bargaining 

19 party who— 

20 ‘‘(i) employs at least 5 percent of the 

21 active participants, or 

22 ‘‘(ii) represents as an employee organi23 zation, for purposes of collective bargaining, 

24 at least 5 percent of active participants, 
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1 the plan sponsor shall include among the pro2 posed schedules such schedules of increases in 

3 contributions and reductions in future benefit 

4 accruals as may be specified by the bargaining 

5 parties. 

6 ‘‘(C) SUBSEQUENT AMENDMENTS.—Upon 

7 the adoption of a schedule of increases in con8 tributions or reductions in future benefit accru9 als as part of the rehabilitation plan, the plan 

10 sponsor may amend the plan thereafter to update 

11 the schedule to adjust for any experience of the 

12 plan contrary to past actuarial assumptions, ex13 cept that such an amendment may be made not 

14 more than once in any 3-year period. 

15 ‘‘(D) ALLOCATION OF REDUCTIONS IN FU16 TURE BENEFIT ACCRUALS.—Any schedule con17 taining reductions in future benefit accruals 

18 forming a part of a rehabilitation plan shall be 

19 applicable with respect to any group of active 

20 participants who are employed by any bar21 gaining party (as an employer obligated to con22 tribute under the plan) in proportion to the ex23 tent to which increases in contributions under 

24 such schedule apply to such bargaining party. 
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1 ‘‘(E) LIMITATION ON REDUCTION IN RATES

2 OF FUTURE ACCRUALS.—Any schedule proposed 

3 under this paragraph shall not reduce the rate of 

4 future accruals below the lower of— 

5 ‘‘(i) a monthly benefit equal to 1 per6 cent of the contributions required to be 

7 made with respect to a participant or the 

8 equivalent standard accrual rate for a par9 ticipant or group of participants under the 

10 collective bargaining agreements in effect as 

11 of the first day of the plan year in which 

12 the plan enters critical status, or 

13 ‘‘(ii) if lower, the accrual rate under 

14 the plan on such date. 

15 The equivalent standard accrual rate shall be de16 termined by the trustees based on the standard or 

17 average contribution base units that they deter18 mine to be representative for active participants 

19 and such other factors as they determine to be 

20 relevant. 

21 ‘‘(6) MAINTENANCE OF CONTRIBUTIONS AND RE22 STRICTIONS ON BENEFITS PENDING ADOPTION OF RE23 HABILITATION PLAN.—The rules of paragraphs (5) 

24 and (6) of subsection (b) shall apply for purposes of 
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1 this subsection by substituting the term ‘rehabilitation 

2 plan’ for ‘funding improvement plan’. 

3 ‘‘(7) SPECIAL RULES.— 

4 ‘‘(A) AUTOMATIC EMPLOYER SURCHARGE.— 

5 ‘‘(i) 5 PERCENT AND 10 PERCENT SUR6 CHARGE.—For the first plan year in which 

7 the plan is in critical status, each employer 

8 otherwise obligated to make a contribution 

9 for that plan year shall be obligated to pay 

10 to the plan a surcharge equal to 5 percent 

11 of the contribution otherwise required under 

12 the respective collective bargaining agree13 ment (or other agreement pursuant to which 

14 the employer contributes). For each consecu15 tive plan year thereafter in which the plan 

16 is in critical status, the surcharge shall be 

17 10 percent of the contribution otherwise re18 quired under the respective collective bar19 gaining agreement (or other agreement pur20 suant to which the employer contributes). 

21 ‘‘(ii) ENFORCEMENT OF SURCHARGE.— 

22 The surcharges under clause (i) shall be due 

23 and payable on the same schedule as the 

24 contributions on which they are based. Any 

25 failure to make a surcharge payment shall 
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1 be treated as a delinquent contribution 

2 under section 515 and shall be enforceable 

3 as such. 

4 ‘‘(iii) SURCHARGE TO TERMINATE

5 UPON CBA RENEGOTIATION.—The surcharge 

6 under this paragraph shall cease to be effec7 tive with respect to employees covered by a 

8 collective bargaining agreement, beginning 

9 on the date on which that agreement is re10 negotiated to include— 

11 ‘‘(I) a schedule of benefits and 

12 contributions published by the trustees 

13 pursuant to the plan’s rehabilitation 

14 plan, or 

15 ‘‘(II) otherwise collectively bar16 gained benefit changes. 

17 ‘‘(iv) SURCHARGE NOT TO APPLY

18 UNTIL EMPLOYER RECEIVES 30-DAY NO19 TICE.—The surcharge under this subpara20 graph shall not apply to an employer until 

21 30 days after the employer has been notified 

22 by the trustees that the plan is in critical 

23 status and that the surcharge is in effect. 

24 ‘‘(v) SURCHARGE NOT TO GENERATE

25 INCREASED BENEFIT ACCRUALS.—Notwith-
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1 standing any provision of a plan to the 

2 contrary, the amount of any surcharge shall 

3 not be the basis for any benefit accruals 

4 under the plan. 

5 ‘‘(B) BENEFIT ADJUSTMENTS.— 

6 ‘‘(i) IN GENERAL.—The trustees shall 

7 make appropriate reductions, if any, to ad8 justable benefits based upon the outcome of 

9 collective bargaining over the schedules pro10 vided under paragraph (5). 

11 ‘‘(ii) RETIREE PROTECTION.—Except 

12 as provided in subparagraph (C), the trust13 ees of a plan in critical status may not re14 duce adjustable benefits of any participant 

15 or beneficiary who was in pay status at 

16 least one year before the first day of the first 

17 plan year in which the plan enters into 

18 critical status. 

19 ‘‘(iii) TRUSTEE FLEXIBILITY.—The 

20 trustees shall include in the schedules pro21 vided to the bargaining parties an allow22 ance for funding the benefits of participants 

23 with respect to whom contributions are not 

24 currently required to be made, and shall re25 duce their benefits to the extent permitted 
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1 under this title and considered appropriate 

2 based on the plan’s then current overall 

3 funding status and its future prospects in 

4 light of the results of the parties’ negotia5 tions. 

6 ‘‘(C) ADJUSTABLE BENEFIT DEFINED.—For 

7 purposes of this paragraph, the term ‘adjustable 

8 benefit’ means— 

9 ‘‘(i) benefits, rights, and features, such 

10 as post-retirement death benefits, 60-month 

11 guarantees, disability benefits not yet in 

12 pay status, and similar benefits, 

13 ‘‘(ii) retirement-type subsidies, early 

14 retirement benefits, and benefit payment op15 tions (other than the 50 percent qualified 

16 joint-and-survivor benefit and single life an17 nuity), and 

18 ‘‘(iii) benefit increases that would not 

19 be eligible for a guarantee under section 

20 4022A on the first day of the plan year in 

21 which the plan enters into critical status be22 cause they were adopted, or if later, took ef23 fect less than 60 months before reorganiza24 tion. 
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1 ‘‘(D) NORMAL RETIREMENT BENEFITS PRO2 TECTED.—Nothing in this paragraph shall be 

3 construed to permit a plan to reduce the level of 

4 a participant’s accrued benefit payable at nor5 mal retirement age which is not an adjustable 

6 benefit. 

7 ‘‘(E) ADJUSTMENTS DISREGARDED IN

8 WITHDRAWAL LIABILITY DETERMINATION.— 

9 ‘‘(i) BENEFIT REDUCTIONS.—Any ben10 efit reductions under this paragraph shall 

11 be disregarded in determining a plan’s un12 funded vested benefits for purposes of deter13 mining an employer’s withdrawal liability 

14 under section 4201. 

15 ‘‘(ii) SURCHARGES.—Any surcharges 

16 under this paragraph shall be disregarded 

17 in determining an employer’s withdrawal 

18 liability under section 4211, except for pur19 poses of determining the unfunded vested 

20 benefits attributable to an employer or 

21 under a modified attributable method 

22 adopted with the approval of the Pension 

23 Benefit Guaranty Corporation under sub24 section (c)(5) of that section. 
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1 ‘‘(8) RESTRICTIONS UPON APPROVAL OF REHA2 BILITATION PLAN.—Upon adoption of a rehabilitation 

3 plan with respect to a multiemployer plan, the plan 

4 may not be amended— 

5 ‘‘(A) so as to be inconsistent with the reha6 bilitation plan, or 

7 ‘‘(B) so as to increase future benefit accru8 als, unless the plan actuary certifies in advance 

9 that, after taking into account the proposed in10 crease, the plan is reasonably expected to cease to 

11 be in critical status. 

12 ‘‘(9) IMPLEMENTATION OF DEFAULT SCHEDULE

13 UPON FAILURE TO ADOPT REHABILITATION PLAN.—If 

14 the plan is not amended by the end of the 240-day 

15 period after entry into critical status to include a re16 habilitation plan, the plan sponsor shall amend the 

17 plan to implement the schedule required by para18 graph (5)(A)(ii). 

19 ‘‘(10) DEEMED WITHDRAWAL.—Upon the failure 

20 of any employer who has an obligation to contribute 

21 under the plan to make contributions in compliance 

22 with the schedule adopted under paragraph (4) as 

23 part of the rehabilitation plan, the failure of the em24 ployer may, at the discretion of the plan sponsor, be 

25 treated as a withdrawal by the employer from the 
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1 plan under section 4203 or a partial withdrawal by 

2 the employer under section 4205. 

3 ‘‘(d) DEFINITIONS.—For purposes of this section— 

4 ‘‘(1) BARGAINING PARTY.—The term ‘bargaining 

5 party’ means, in connection with a multiemployer 

6 plan— 

7 ‘‘(A) an employer who has an obligation to 

8 contribute under the plan, and 

9 ‘‘(B) an employee organization which, for 

10 purposes of collective bargaining, represents plan 

11 participants employed by such an employer. 

12 ‘‘(2) FUNDED PERCENTAGE.—The term ‘funded 

13 percentage’ means the percentage expressed as a ratio 

14 of which— 

15 ‘‘(A) the numerator of which is the value of 

16 the plan’s assets, as determined under section 

17 304(c)(2), and 

18 ‘‘(B) the denominator of which is the ac19 crued liability of the plan. 

20 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—The 

21 term ‘accumulated funding deficiency’ has the mean22 ing provided such term in section 304(a). 

23 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 

24 participant’ means, in connection with a multiem-
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1 ployer plan, a participant who is in covered service 

2 under the plan. 

3 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inactive 

4 participant’ means, in connection with a multiem5 ployer plan, a participant who— 

6 ‘‘(A) is not in covered service under the 

7 plan, and 

8 ‘‘(B) is in pay status under the plan or has 

9 a nonforfeitable right to benefits under the plan. 

10 ‘‘(6) PAY STATUS.—A person is in ‘pay status’ 

11 under a multiemployer plan if— 

12 ‘‘(A) at any time during the current plan 

13 year, such person is a participant or beneficiary 

14 under the plan and is paid an early, late, nor15 mal, or disability retirement benefit under the 

16 plan (or a death benefit under the plan related 

17 to a retirement benefit), or 

18 ‘‘(B) to the extent provided in regulations of 

19 the Secretary of the Treasury, such person is en20 titled to such a benefit under the plan. 

21 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 

22 ‘obligation to contribute’ has the meaning provided 

23 such term under section 4212(a). 

24 ‘‘(8) ENTRY INTO CRITICAL STATUS.—A plan 

25 shall be treated as entering into critical status as of 
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1 the date that such plan is certified to be in critical 

2 status under subsection (a)(1), is presumed to be in 

3 critical status under subsection (a)(3), or enters into 

4 critical status under subsection (b)(7).’’. 

5 (b) CONFORMING AMENDMENT.—The table of contents 

6 in section 1 of such Act (as amended by the preceding provi7 sions of this Act) is amended further by inserting after the 

8 item relating to section 304 the following new item: 

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status 

or critical status.’’. 

9 (c) EFFECTIVE DATE.—The amendment made by this 

10 section shall apply with respect to plan years beginning 

11 after 2005. 

12 SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL13 TIEMPLOYER PLANS. 

14 (a) ADVANCE DETERMINATION OF IMPENDING INSOL15 VENCY OVER 5 YEARS.—Section 4245(d)(1) of the Em16 ployee Retirement Income Security Act of 1974 (29 U.S.C. 

17 1426(d)(1)) is amended— 

18 (1) by striking ‘‘3 plan years’’ the second place 

19 it appears and inserting ‘‘5 plan years’’; and 

20 (2) by adding at the end the following new sen21 tence: ‘‘If the plan sponsor makes such a determina22 tion that the plan will be insolvent in any of the next 

23 5 plan years, the plan sponsor shall make the com24 parison under this paragraph at least annually until 
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1 the plan sponsor makes a determination that the plan 

2 will not be insolvent in any of the next 5 plan 

3 years.’’. 

4 (b) EFFECTIVE DATE.—The amendments made by this 

5 section shall apply with respect to determinations made in 

6 plan years beginning after 2005. 

7 SEC. 204. WITHDRAWAL LIABILITY REFORMS. 

8 (a) REPEAL OF LIMITATION ON WITHDRAWAL LIABIL9 ITY IN THE EVENT OF CERTAIN SALES OF EMPLOYER AS10 SETS TO UNRELATED PARTIES.— 

11 (1) IN GENERAL.—Section 4225 of the Employee 

12 Retirement Income Security Act of 1974 (29 U.S.C. 

13 1405) is repealed. 

14 (2) CONFORMING AMENDMENT.—The table of 

15 contents in section 1 of such Act is amended by strik16 ing the item relating to section 4225. 

17 (3) EFFECTIVE DATE.—The amendments made 

18 by this section shall apply with respect to sales occur19 ring on or after January 1, 2006. 

20 (b) REPEAL OF LIMITATION TO 20 ANNUAL PAY21 MENTS.— 

22 (1) IN GENERAL.—Section 4219(c)(1) of such Act 

23 (29 U.S.C. 1399(c)(1)) is amended by striking sub24 paragraph (B). 
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1 (2) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply with respect to withdrawals 

3 occurring on or after January 1, 2006. 

4 (c) WITHDRAWAL LIABILITY CONTINUES IF WORK

5 CONTRACTED OUT.— 

6 (1) IN GENERAL.—Clause (i) of section 

7 4205(b)(2)(A) of such Act (29 U.S.C. 1385(b)(2)(A)) 

8 is amended by inserting ‘‘or to another party or par9 ties’’ after ‘‘to another location’’. 

10 (2) EFFECTIVE DATE.—The amendment made by 

11 this subsection shall apply with respect to work trans12 ferred on or after the date of the enactment of this 

13 Act. 

14 (d) REPEAL OF SPECIAL RULE FOR LONG AND SHORT

15 HAUL TRUCKING INDUSTRY.— 

16 (1) IN GENERAL.—Subsection (d) of section 4203 

17 of such Act (29 U.S.C. 1383(d)) is repealed. 

18 (2) EFFECTIVE DATE.—The repeal under this 

19 subsection shall apply with respect to cessations to 

20 have obligations to contribute to multiemployer plans 

21 and cessations of covered operations under such plans 

22 occurring on or after January 1, 2006. 

23 (e) APPLICATION OF FORGIVENESS RULE TO PLANS

24 PRIMARILY COVERING EMPLOYEES IN THE BUILDING AND

25 CONSTRUCTION.— 
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1 (1) IN GENERAL.—Section 4210(b) of such Act 

2 (29 U.S.C. 1390(b)) is amended— 

3 (A) by striking paragraph (1); and 

4 (B) by redesignating paragraphs (2) 

5 through (4) as paragraphs (1) through (3), re6 spectively. 

7 (2) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply with respect to plan 

9 withdrawals occurring on or after January 1, 2006. 

10 SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO 

11 PROCEDURES APPLICABLE TO DISPUTES IN12 VOLVING WITHDRAWAL LIABILITY. 

13 (a) IN GENERAL.—Section 4221(f)(1) of the Employee 

14 Retirement Income Security Act of 1974 (29 U.S.C. 

15 1401(f)(1)) is amended— 

16 (1) in subparagraph (A) by inserting ‘‘and’’ 

17 after ‘‘plan,’’, and 

18 (2) by striking subparagraphs (B) and (C) and 

19 inserting the following new subparagraph: 

20 ‘‘(B) such determination is based in whole 

21 or in part on a finding by the plan sponsor 

22 under section 4212(c) that a principal purpose 

23 of any transaction which occurred at least 5 

24 years (2 years in the case of a small employer) 

25 before the date of the complete or partial with-
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1 drawal was to evade or avoid withdrawal liabil2 ity under this subtitle,’’. 

3 (b) SMALL EMPLOYER.—Paragraph (2) of section 

4 4221(f) of such Act is amended by adding at the end the 

5 following new subparagraph: 

6 ‘‘(C) SMALL EMPLOYER.—For purposes of 

7 paragraph (1)(B)— 

8 ‘‘(i) IN GENERAL.—The term ‘small 

9 employer’ means any employer who (as of 

10 immediately before the transaction referred 

11 to in paragraph (1)(B))— 

12 ‘‘(I) employs not more than 500 

13 employees, and 

14 ‘‘(II) is required to make con15 tributions to the plan for not more 

16 than 250 employees. 

17 ‘‘(ii) CONTROLLED GROUP.—Any 

18 group treated as a single employer under 

19 subsection (b), (c), (m), or (o) of section 414 

20 of the Internal Revenue Code of 1986 shall 

21 be treated as a single employer for purposes 

22 of this subparagraph.’’. 

23 (c) ADDITIONAL AMENDMENTS.— 

24 (1) Subparagraph (A) of section 4221(f)(2) of 

25 such Act (29 U.S.C. 1401(f)(2)) is amended by strik-
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1 ing ‘‘Notwithstanding’’ and inserting ‘‘In the case of 

2 a transaction occurring before January 1, 1999, and 

3 at least 5 years before the date of the complete or par4 tial withdrawal, notwithstanding’’. 

5 (2) Section 4221(f)(2)(B) of such Act (29 U.S.C. 

6 1401(f)(2)(B)) is amended— 

7 (A) by inserting ‘‘with respect to with8 drawal liability payments’’ after ‘‘determina9 tion’’ the first place it appears, and 

10 (B) by striking ‘‘any’’ and inserting ‘‘the’’. 

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

12 section shall apply to any employer that receives a notifica13 tion under section 4219(b)(1) of the Employee Retirement 

14 Income Security Act of 1974 on or after the date of the 

15 enactment of this Act. 

16 Subtitle B—Amendments to 

17 Internal Revenue Code of 1986 

18 SEC. 211. [See introduced bill, page 200, line 8 through page 251, line 15.] 

19 TITLE III—OTHER PROVISIONS 

20 SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINA21 TION OF LUMP SUM DISTRIBUTIONS. 

22 (a) AMENDMENTS TO EMPLOYEE RETIREMENT IN23 COME SECURITY ACT OF 1974.—Paragraph (3) of section 

24 205(g) of the Employee Retirement Income Security Act of 

25 1974 (29 U.S.C. 1055(g)(3)) is amended to read as follows: 
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1 ‘‘(3)(A) For purposes of paragraphs (1) and (2), the 

2 present value shall not be less than the present value cal3 culated by using the applicable mortality table and the ap4 plicable interest rate. 

5 ‘‘(B) For purposes of subparagraph (A)— 

6 ‘‘(i) The term ‘applicable mortality table’ means 

7 a mortality table, modified as appropriate by the Sec8 retary of the Treasury, based on the mortality table 

9 specified for the plan year under section 303(h)(3). 

10 ‘‘(ii) The term ‘applicable interest rate’ means 

11 the adjusted first, second, and third segment rates ap12 plied under rules similar to the rules of section 

13 303(h)(2)(C) for the month before the date of the dis14 tribution or such other time as the Secretary of the 

15 Treasury may by regulations prescribe. 

16 ‘‘(iii) For purposes of clause (ii), the adjusted 

17 first, second, and third segment rates are the first, 

18 second, and third segment rates which would be deter19 mined under section 303(h)(2)(C) if— 

20 ‘‘(I) section 303(h)(2)(D)(i) were applied by 

21 substituting ‘the yields’ for ‘a 3-year weighted 

22 average of yields’, 

23 ‘‘(II) section 303(h)(2)(G)(i)(II) were ap24 plied by substituting ‘section 
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1 205(g)(3)(A)(ii)(II)’ for ‘section 

2 302(b)(5)(B)(ii)(II)’, and 

3 ‘‘(III) the applicable percentage under sec4 tion 303(h)(2)(G) were determined in accordance 

5 with the following table: 

‘‘In the case of plan years beginning in: The applicable 

percentage is:

2006 .................................................................... 20 percent

2007 .................................................................... 40 percent

2008 .................................................................... 60 percent

2009 .................................................................... 80 percent.’’. 

6 (b) AMENDMENTS TO INTERNAL REVENUE CODE OF

7 1986.—[See introduced bill, page 252, line 19 through page 

8 254, line 5] 

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 sole12 ly by reason of the adoption by the plan of an amendment 

13 necessary to meet the requirements of the amendments made 

14 by this section. 

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

16 section shall apply with respect to plan years beginning 

17 after 2005. 
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1 SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING 

2 BENEFIT LIMITATIONS TO LUMP SUM DIS3 TRIBUTIONS. 

4 [See introduced bill, page 254, line 6 through page 

5 255, line 7] 

6 SEC. 303. DISTRIBUTIONS DURING WORKING RETIREMENT. 

7 (a) IN GENERAL.—Subparagraph (A) of section 3(2) 

8 of the Employee Retirement Income Security Act of 1974 

9 (29 U.S.C. 1002(2)) is amended by adding at the end the 

10 following new sentence: ‘‘A distribution from a plan, fund, 

11 or program shall not be treated as made in a form other 

12 than retirement income or as a distribution prior to termi13 nation of covered employment solely because such distribu14 tion is made to an employee who has attained age 62 and 

15 who is not separated from employment at the time of such 

16 distribution.’’. 

17 (b) EFFECTIVE DATE.—The amendment made by sub18 section (a) shall apply to distributions in plan years begin19 ning after 2005. 

20 SEC. 304. OTHER AMENDMENTS RELATING TO PROHIBITED 

21 TRANSACTIONS. 

22 (a) DEFINITION OF AMOUNT INVOLVED.—Section 

23 502(i) of the Employee Retirement Income Security Act of 

24 1974 (29 U.S.C. 1132(i)) is amended to read as follows: 

25 ‘‘(i)(1) In the case of a transaction prohibited by sec26 tion 406 by a party in interest with respect to a plan to 
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1 which this part applies, the Secretary may assess a civil 

2 penalty against such party in interest. The amount of such 

3 penalty may not exceed 5 percent of the amount involved 

4 in each such transaction for each year or part thereof dur5 ing which the prohibited transaction continues, except that, 

6 if the transaction is not corrected (in such manner as the 

7 Secretary shall prescribe in regulations) within 90 days 

8 after notice from the Secretary (or such longer period as 

9 the Secretary may permit), such penalty may be in an 

10 amount not more than 100 percent of the amount involved. 

11 ‘‘(2) For purposes of paragraph (1)— 

12 ‘‘(A) Except as provided in subparagraphs (C) 

13 and (D), the term ‘amount involved’ means, with re14 spect to a prohibited transaction, the greater of— 

15 ‘‘(i) the amount of money and the fair mar16 ket value of the other property given, or 

17 ‘‘(ii) the amount of money and the fair 

18 market value of the other property received. 

19 ‘‘(B) For purposes of subparagraph (A), fair 

20 market value— 

21 ‘‘(i) shall be determined as of the date on 

22 which the prohibited transaction occurs; and 

23 ‘‘(ii) shall be the highest fair market value 

24 during the period between the date of the trans25 action and the date of correction. 
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1 ‘‘(C) In the case of services described in sub2 section (b)(2) or (c)(2) of section 408, the term 

3 ‘amount involved’ means only the amount of excess 

4 compensation. 

5 ‘‘(D) In the case of principal transactions in6 volving securities or commodities, the term ‘amount 

7 involved’ means only the amount received by the dis8 qualified person in excess of the amount such person 

9 would have received in an arm’s length transaction 

10 with an unrelated party as of the same date. 

11 ‘‘(E) For the purposes of this paragraph— 

12 ‘‘(i) the term ‘security’ has the meaning 

13 given such term by section 475(c)(2) of the Inter14 nal Revenue Code of 1986 (without regard to 

15 subparagraph (F)(iii) and the last sentence 

16 thereof) , and 

17 ‘‘(ii) the term ‘commodity’ has the meaning 

18 given such term by section 475(e)(2) of such Code 

19 (without regard to subparagraph (D)(iii) there20 of).’’. 

21 (b) EXEMPTION FOR BLOCK TRADING.—Section 408(b) 

22 of such Act (29 U.S.C. 1108(b)), as amended by section 601, 

23 is further amended by adding at the end the following new 

24 paragraph: 
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1 ‘‘(15)(A) Any transaction involving the purchase 

2 or sale of securities between a plan and a party in 

3 interest (other than a fiduciary) with respect to a 

4 plan if— 

5 ‘‘(i) the transaction involves a block trade, 

6 ‘‘(ii) at the time of the transaction, the in7 terest of the plan (together with the interests of 

8 any other plans maintained by the same plan 

9 sponsor), does not exceed 10 percent of the aggre10 gate size of the block trade, and 

11 ‘‘(iii) the terms of the transaction, includ12 ing the price, are at least as favorable to the 

13 plan as an arm’s length transaction. 

14 ‘‘(B) For purposes of this paragraph, the term 

15 ‘block trade’ includes any trade which will be allo16 cated across two or more client accounts of a fidu17 ciary.’’. 

18 (c) BONDING RELIEF.— Section 412(a) of such Act (29 

19 U.S.C. 1112(a)) is amended— 

20 (1) by redesignating paragraph (2) as para21 graph (3); 

22 (2) by striking ‘‘and’’ at the end of paragraph 

23 (1); and 

24 (3) by inserting after paragraph (1) the fol25 lowing new paragraph: 
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1 ‘‘(2) no bond shall be required of an entity which 

2 is subject to regulation as a broker or a dealer under 

3 section 15 of the Securities Exchange Act of 1934 (15 

4 U.S.C. 78a et seq.) or an entity registered under the 

5 Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 

6 seq.), including requirements imposed by a self-regu7 latory organization (within the meaning of section 

8 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)), or any 

9 affiliate with respect to which the broker or dealer 

10 agrees to be liable to the same extent as if they held 

11 the assets directly.’’. 

12 (d) EXEMPTION FOR ELECTRONIC COMMUNICATION

13 NETWORK.—Section 408(b) of such Act (as amended by 

14 subsection (b)) is further amended by adding at the end 

15 the following: 

16 ‘‘(16) Any transaction involving the purchase 

17 and sale of securities or other property between a 

18 plan and a fiduciary or a party in interest if— 

19 ‘‘(A) the transaction is executed through an 

20 exchange, electronic communication network, al21 ternative trading system, or similar execution 

22 system or trading venue subject to regulation 

23 and oversight by the applicable governmental 

24 regulating entity, 
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1 ‘‘(B) neither the execution system nor the 

2 parties to the transaction take into account the 

3 identity of the parties in the execution of trades, 

4 ‘‘(C) the transaction is effected pursuant to 

5 rules designed to match purchases and sales at 

6 the best price available through the execution sys7 tem, and 

8 ‘‘(D) the price and compensation associated 

9 with the purchase and sale are not greater than 

10 an arm’s length transaction with an unrelated 

11 party.’’. 

12 (e) CONFORMING ERISA’S PROHIBITED TRANSACTION

13 PROVISION TO FERSA.—Section 408(b) of such Act (29 

14 U.S.C. 1106), as amended by subsection (d), is further 

15 amended by adding at the end the following new paragraph: 

16 ‘‘(17)(A) transactions described in subpara17 graphs (A), (B), and (D) of section 406(a)(1) between 

18 a plan and a party that is a party in interest (under 

19 section 3(14)) solely by reason of providing services, 

20 but only if in connection with such transaction the 

21 plan receives no less, nor pays no more, than ade22 quate consideration. 

23 ‘‘(B) For purposes of this paragraph, the term 

24 ‘adequate consideration’ means— 
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1 ‘‘(i) in the case of a security for which there 

2 is a generally recognized market— 

3 ‘‘(I) the price of the security prevailing 

4 on a national securities exchange which is 

5 registered under section 6 of the Securities 

6 Exchange Act of 1934, taking into account 

7 factors such as the size of the transaction 

8 and marketability of the security, or 

9 ‘‘(II) if the security is not traded on 

10 such a national securities exchange, a price 

11 not less favorable to the plan than the offer12 ing price for the security as established by 

13 the current bid and asked prices quoted by 

14 persons independent of the issuer and of the 

15 party in interest, taking into account fac16 tors such as the size of the transaction and 

17 marketability of the security, and 

18 ‘‘(ii) in the case of an asset other than a se19 curity for which there is a generally recognized 

20 market, the fair market value of the asset as de21 termined in good faith by a fiduciary or fidu22 ciaries in accordance with regulations prescribed 

23 by the Secretary.’’. 

24 (f) RELIEF FOR FOREIGN EXCHANGE TRANS25 ACTIONS.— Section 408(b) of such Act (as amended by the 
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1 preceding provisions of this section) is further amended by 

2 adding at the end the following new paragraph: 

3 ‘‘(18) Any foreign exchange transactions, between 

4 a bank or broker-dealer, or any affiliate of either 

5 thereof, and a plan with respect to which the bank or 

6 broker-dealer, or any affiliate, is a trustee, custodian, 

7 fiduciary, or other party in interest, if— 

8 ‘‘(A) the transaction is in connection with 

9 the purchase or sale of securities, 

10 ‘‘(B) at the time the foreign exchange trans11 action is entered into, the terms of the trans12 action are not less favorable to the plan than the 

13 terms generally available in comparable arm’s 

14 length foreign exchange transactions between un15 related parties, or the terms afforded by the bank 

16 or the broker-dealer (or any affiliate thereof) in 

17 comparable arm’s-length foreign exchange trans18 actions involving unrelated parties, 

19 ‘‘(C) the exchange rate used by the bank or 

20 broker-dealer for a particular foreign exchange 

21 transaction must be at a rate no less favorable 

22 than the rate quoted for transactions of similar 

23 size at the time of the transaction as displayed 

24 on an independent service that reports rates of 
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1 exchange in the foreign currency market for such 

2 currency, and 

3 ‘‘(D) the bank or broker-dealer, or any affil4 iate, does not have investment discretion, or pro5 vide investment advice, with respect to the secu6 rities transaction.’’. 

7 (g) DEFINITION OF PLAN ASSET VEHICLE.—Section 3 

8 of such Act (29 U.S.C. 1002) is amended by adding at the 

9 end the following new paragraph: 

10 ‘‘(42) the term ‘plan assets’ means plan assets as de11 fined by such regulations as the Secretary may prescribe, 

12 except that under such regulations the assets of any entity 

13 shall not be treated as plan assets if, immediately after the 

14 most recent acquisition of any equity interest in the entity, 

15 less than 50 percent of the total value of all equity interests 

16 in the entity are held by employee benefit plan investors. 

17 For purposes of determinations pursuant to this paragraph, 

18 the value of any equity interest owned by a person (other 

19 than such an employee benefit plan) who has discretionary 

20 authority or control with respect to the assets of the entity 

21 or any person who provides investment advice for a fee (di22 rect or indirect) with respect to such assets, or any affiliate 

23 of such a person, shall be disregarded for purposes of calcu24 lating the 50 percent threshold. An entity shall be consid25 ered to hold plan assets only to the extent of the percentage 
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1 of the equity interest owned by benefit plan investors. For 

2 purposes of this paragraph, the term ‘benefit plan investor’ 

3 means an employee benefit plan subject to this part and 

4 any plan to which section 4975 of the Internal Revenue 

5 Code of 1986 applies.’’. 

6 SEC. 305. CORRECTION PERIOD FOR CERTAIN TRANS7 ACTIONS INVOLVING SECURITIES AND COM8 MODITIES. 

9 (a) IN GENERAL.—Section 408(b) of the Employee Re10 tirement Income Security Act of 1974 (29 U.S.C. 1108(b)), 

11 as amended by sections 304 and 601, is further amended 

12 by adding at the end the following new paragraph: 

13 ‘‘(19)(A) Except as provided in subparagraphs 

14 (B) and (C), a transaction described in section 406(a) 

15 in connection with the acquisition, holding, or dis16 position of any security or commodity, if the trans17 action is corrected before the end of the correction pe18 riod. 

19 ‘‘(B) Subparagraph (A) does not apply to any 

20 transaction between a plan and a plan sponsor or its 

21 affiliates that involves the acquisition or sale of an 

22 employer security (as defined in section 407(d)(1)) or 

23 the acquisition, sale, or lease of employer real prop24 erty (as defined in section 407(d)(2)). 
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1 ‘‘(C) In the case of any fiduciary or other party 

2 in interest (or any other person knowingly partici3 pating in such transaction), subparagraph (A) does 

4 not apply to any prohibited transaction if, at the 

5 time such transaction is discovered, such fiduciary or 

6 party in interest (or other person) knew that the 

7 transaction would (without regard to this paragraph) 

8 constitute a violation of section 406(a). 

9 ‘‘(D) For purposes of this paragraph, the term 

10 ‘correction period’ means, in connection with a fidu11 ciary or party in interest (or other person knowingly 

12 participating in the transaction), the 14-day period 

13 beginning on the date on which such fiduciary or 

14 party in interest (or other person) discovers, or rea15 sonably should have discovered, that the transaction 

16 would (without regard to this paragraph) constitute 

17 a violation of section 406(a). 

18 ‘‘(E) For purposes of this paragraph— 

19 ‘‘(i) The term ‘security’ has the meaning 

20 given such term by section 475(c)(2) of the Inter21 nal Revenue Code of 1986 (without regard to 

22 subparagraph (F)(iii) and the last sentence 

23 thereof). 

24 ‘‘(ii) The term ‘commodity’ has the meaning 

25 given such term by section 475(e)(2) of such Code 
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1 (without regard to subparagraph (D)(iii) there2 of). 

3 ‘‘(iii) The term ‘correct’ means, with respect 

4 to a transaction, to undo the transaction to the 

5 extent possible, but in any case, to make good to 

6 the plan or affected account any losses resulting 

7 from the transaction and to restore to the plan 

8 or affected account any profits made through use 

9 of the plan. ’’. 

10 (b) EFFECTIVE DATE.—The amendments made by this 

11 section shall apply to any transaction which the fiduciary 

12 or disqualified person discovers, or reasonably should have 

13 discovered, after the date of the enactment of this Act, con14 stitutes a prohibited transaction. 

15 SEC. 306. GOVERNMENT ACCOUNTABILITY OFFICE PENSION 

16 FUNDING REPORT. 

17 (a) IN GENERAL.—The Comptroller General of the 

18 Government Accountability Office shall transmit to the 

19 Congress a pension funding report not later than one year 

20 after the date of the enactment of this Act. 

21 (b) REPORT CONTENT.—The pension funding report 

22 required under subsection (a) shall include an analysis of 

23 the feasibility, advantages, and disadvantages of— 

24 (1) requiring an employee pension benefit plan 

25 to insure a portion of such plan’s total investments; 
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1 (2) requiring an employee pension benefit plan 

2 to adhere to uniform solvency standards set by the 

3 Pension Benefit Guaranty Corporation, which are 

4 similar to those applied on a State level in the insur5 ance industry; and 

6 (3) amortizing a single-employer defined benefit 

7 pension plan’s shortfall amortization base (referred to 

8 in section 303(c)(3) of the Employee Retirement In9 come Security Act of 1974 (as amended by this Act)) 

10 over various periods of not more than 7 years. 

11 TITLE IV—IMPROVEMENTS IN 

12 PBGC GUARANTEE PROVISIONS 

13 SEC. 401. INCREASES IN PBGC PREMIUMS. 

14 (a) FLAT-RATE PREMIUMS.—Section 4006(a)(3) of the 

15 Employee Retirement Income Security Act of 1974 (29 

16 U.S.C. 1306(a)(3)) is amended— 

17 (1) by striking clause (i) of subparagraph (A) 

18 and inserting the following: 

19 ‘‘(i) in the case of a single-employer plan, an 

20 amount equal to— 

21 ‘‘(I) for plan years beginning after Decem22 ber 31, 1990, and before January 1, 2006, $19, 

23 or 
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1 ‘‘(II) for plan years beginning after Decem2 ber 31, 2005, the amount determined under sub3 paragraph (F), 

4 plus the additional premium (if any) determined 

5 under subparagraph (E) for each individual who is 

6 a participant in such plan during the plan year;’’; 

7 and 

8 (2) by adding at the end the following new sub9 paragraph: 

10 ‘‘(F)(i) Except as otherwise provided in this subpara11 graph, for purposes of determining the annual premium 

12 rate payable to the corporation by a single-employer plan 

13 for basic benefits guaranteed under this title, the amount 

14 determined under this subparagraph is the greater of $30 

15 or the adjusted amount determined under clause (ii). 

16 ‘‘(ii) For plan years beginning after 2006, the adjusted 

17 amount determined under this clause is the product derived 

18 by multiplying $30 by the ratio of— 

19 ‘‘(I) the national average wage index (as defined 

20 in section 209(k)(1) of the Social Security Act) for the 

21 first of the 2 calendar years preceding the calendar 

22 year in which the plan year begins, to 

23 ‘‘(II) the national average wage index (as so de24 fined) for 2004, 
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1 with such product, if not a multiple of $1, being rounded 

2 to the next higher multiple of $1 where such product is a 

3 multiple of $0.50 but not of $1, and to the nearest multiple 

4 of $1 in any other case. 

5 ‘‘(iii) For purposes of determining the annual pre6 mium rate payable to the corporation by a single-employer 

7 plan for basic benefits guaranteed under this title for any 

8 plan year beginning after 2005 and before 2010— 

9 ‘‘(I) except as provided in subclause (II), the pre10 mium amount referred to in subparagraph (A)(i)(II) 

11 for any such plan year is the amount set forth in con12 nection with such plan year in the following table: 

‘‘If the plan year begins in: The amount is: 

2006 ............................................................................. $21.20 

2007 ............................................................................. $23.40 

2008 ............................................................................. $25.60 

2009 ............................................................................. $27.80; or 

13 ‘‘(II) if the plan’s funding target attainment 

14 percentage for the plan year preceding the current 

15 plan year was less than 80 percent, the premium 

16 amount referred to in subparagraph (A)(i)(II) for 

17 such current plan year is the amount set forth in con18 nection with such current plan year in the following 

19 table: 

‘‘If the plan year begins in: The amount is:

2006 ............................................................................. $22.67
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2007 ............................................................................. $26.33

2008 or 2009 ............................................................... the amount provided 

under clause (i). 

1 ‘‘(iv) For purposes of this subparagraph, the term 

2 ‘funding target attainment percentage’ has the meaning 

3 provided such term in section 303(d)(2).’’. 

4 (b) RISK-BASED PREMIUMS.— 

5 (1) CONFORMING AMENDMENTS RELATED TO

6 FUNDING RULES FOR SINGLE-EMPLOYER PLANS.—Sec7 tion 4006(a)(3)(E) of such Act is amended by striking 

8 clauses (iii) and (iv) and inserting the following: 

9 ‘‘(iii)(I) For purposes of clause (ii), except as provided 

10 in subclause (II), the term ‘unfunded vested benefits’ means, 

11 for a plan year, the amount which would be the plan’s fund12 ing shortfall (as defined in section 303(c)(4)), if the value 

13 of plan assets of the plan were equal to the fair market value 

14 of such assets and only vested benefits were taken into ac15 count. 

16 ‘‘(II) The interest rate used in valuing vested benefits 

17 for purposes of subclause (I) shall be equal to the first, sec18 ond, or third segment rate which would be determined 

19 under section 303(h)(2)(C) if section 303(h)(2)(D)(i) were 

20 applied by substituting ‘the yields’ for ‘the 3-year weighted 

21 average of yields’, as applicable under rules similar to the 

22 rules under section 303(h)(2)(B).’’. 
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1 (2) EFFECTIVE DATE.—The amendments made 

2 by paragraph (1) shall apply with respect to plan 

3 years beginning after 2005. 

4 TITLE V—DISCLOSURE 

5 SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES. 

6 (a) APPLICATION OF PLAN FUNDING NOTICE RE7 QUIREMENTS TO ALL DEFINED BENEFIT PLANS.—Section 

8 101(f) of the Employee Retirement Income Security Act of 

9 1974 (29 U.S.C. 1021(f)) is amended— 

10 (1) in the heading, by striking ‘‘MULTIEM11 PLOYER’’; 

12 (2) in paragraph (1), by striking ‘‘which is a 

13 multiemployer plan’’; and 

14 (3) by striking paragraph (2)(B)(iii) and insert15 ing the following: 

16 ‘‘(iii)(I) in the case of a single-em17 ployer plan, a summary of the rules gov18 erning termination of single-employer plans 

19 under subtitle C of title IV, or 

20 ‘‘(II) in the case of a multiemployer 

21 plan, a summary of the rules governing in22 solvent multiemployer plans, including the 

23 limitations on benefit payments and any 

24 potential benefit reductions and suspensions 

25 (and the potential effects of such limita-
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1 tions, reductions, and suspensions on the 

2 plan); and’’. 

3 (b) INCLUSION OF STATEMENT OF THE RATIO OF IN4 ACTIVE PARTICIPANTS TO ACTIVE PARTICIPANTS.—Section 

5 101(f)(2)(B) of such Act (29 U.S.C. 1021(f)(2)(B)) is 

6 amended— 

7 (1) in clause (iii)(II) (added by subsection (a)(3) 

8 of this section), by striking ‘‘and’’ at the end; 

9 (2) in clause (iv), by striking ‘‘apply.’’ and in10 serting ‘‘apply; and’’; and 

11 (3) by adding at the end the following new 

12 clause: 

13 ‘‘(v) a statement of the ratio, as of the 

14 end of the plan year to which the notice re15 lates, of— 

16 ‘‘(I) the number of participants 

17 who are not in covered service under 

18 the plan and are in pay status under 

19 the plan or have a nonforfeitable right 

20 to benefits under the plan, to 

21 ‘‘(II) the number of participants 

22 who are in covered service under the 

23 plan.’’. 

24 (c) COMPARISON OF MONTHLY AVERAGE OF VALUE OF

25 PLAN ASSETS TO PROJECTED CURRENT LIABILITIES.— 
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1 Section 101(f)(2)(B) of such Act (29 U.S.C. 1021(f)(2)(B)) 

2 (as amended by the preceding provisions of this section) is 

3 amended further— 

4 (1) by striking clause (ii) and inserting the fol5 lowing: 

6 ‘‘(ii) a statement of a reasonable esti7 mate of— 

8 ‘‘(I) the value of the plan’s assets 

9 for the plan year to which the notice 

10 relates, 

11 ‘‘(II) projected liabilities of the 

12 plan for the plan year to which the no13 tice relates, and 

14 ‘‘(III) the ratio of the estimated 

15 amount determined under subclause (I) 

16 to the estimated amount determined 

17 under subclause (II);’’; and 

18 (2) by adding at the end (after and below clause 

19 (v)) the following: 

20 ‘‘For purposes of determining a plan’s projected 

21 liabilities for a plan year under clause (ii)(II), 

22 such projected liabilities shall be determined by 

23 projecting forward in a reasonable manner to the 

24 end of the plan year the liabilities of the plan to 

25 participants and beneficiaries as of the first day 
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1 of the plan year, taking into account any signifi2 cant events that occur during the plan year and 

3 that have a material effect on such liabilities, in4 cluding any plan amendments in effect for the 

5 plan year.’’. 

6 (d) STATEMENT OF PLAN’S FUNDING POLICY AND

7 METHOD OF ASSET ALLOCATION.—Section 101(f)(2)(B) of 

8 such Act (as amended by the preceding provisions of this 

9 section) is amended further— 

10 (1) in clause (iv), by striking ‘‘and’’ at the end; 

11 (2) in clause (v), by striking the period and in12 serting ‘‘; and’’; and 

13 (3) by inserting after clause (v) the following 

14 new clause: 

15 ‘‘(vi) a statement setting forth the 

16 funding policy of the plan and the asset al17 location of investments under the plan (ex18 pressed as percentages of total assets) as of 

19 the end of the plan year to which the notice 

20 relates.’’. 

21 (e) NOTICE OF FUNDING IMPROVEMENT PLAN OR RE22 HABILITATION PLAN ADOPTED BY MULTIEMPLOYER

23 PLAN.—Section 101(f)(2)(B) of such Act (as amended by 

24 the preceding provisions of this section) is amended fur25 ther— 
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1 (1) in clause (v), by striking ‘‘and’’ at the end; 

2 (2) in clause (vi), by striking the period and in3 serting ‘‘; and’’; and 

4 (3) by inserting after clause (vi) the following 

5 new clause: 

6 ‘‘(vii) a summary of any funding im7 provement plan, rehabilitation plan, or 

8 modification thereof adopted under section 

9 305 during the plan year to which the no10 tice relates.’’. 

11 (f) NOTICE DUE 90 DAYS AFTER PLAN’S VALUATION

12 DATE.— 

13 (1) IN GENERAL.—Section 101(f)(3) of such Act 

14 (29 U.S.C. 1021(f)(3)) is amended by striking ‘‘two 

15 months after the deadline (including extensions) for 

16 filing the annual report for the plan year’’ and in17 serting ‘‘90 days after the end of the plan year’’. 

18 (2) MODEL NOTICE.—Not later than 180 days 

19 after the date of the enactment of this Act, the Sec20 retary of Labor shall publish a model version of the 

21 notice required by section 101(f) of the Employee Re22 tirement Income Security Act of 1974. 

23 (g) EFFECTIVE DATE.—The amendments made by this 

24 section shall apply to plan years beginning after December 

25 31, 2005. 
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1 SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS. 

2 (a) ADDITIONAL ANNUAL REPORTING REQUIRE3 MENTS.—Section 103 of the Employee Retirement Income 

4 Security Act of 1974 (29 U.S.C. 1023) is amended— 

5 (1) in subsection (a)(1)(B), by striking ‘‘sub6 sections (d) and (e)’’ and inserting ‘‘subsections (d), 

7 (e), and (f)’’; and 

8 (2) by adding at the end the following new sub9 section: 

10 ‘‘(f)(1) With respect to any defined benefit plan, an 

11 annual report under this section for a plan year shall in12 clude the following: 

13 ‘‘(A) The ratio, as of the end of such plan year, 

14 of— 

15 ‘‘(i) the number of participants who, as of 

16 the end of such plan year, are not in covered 

17 service under the plan and are in pay status 

18 under the plan or have a nonforfeitable right to 

19 benefits under the plan, to 

20 ‘‘(ii) the number of participants who are in 

21 covered service under the plan as of the end of 

22 such plan year. 

23 ‘‘(B) In any case in which any liabilities to par24 ticipants or their beneficiaries under such plan as of 

25 the end of such plan year consist (in whole or in 

26 part) of liabilities to such participants and bene-
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1 ficiaries borne by 2 or more pension plans as of im2 mediately before such plan year, the funded ratio of 

3 each of such 2 or more pension plans as of imme4 diately before such plan year and the funded ratio of 

5 the plan with respect to which the annual report is 

6 filed as of the end of such plan year. 

7 ‘‘(C) For purposes of this paragraph, the term 

8 ‘funded ratio’ means, in connection with a plan, the 

9 percentage which— 

10 ‘‘(i) the value of the plan’s assets is of 

11 ‘‘(ii) the liabilities to participants and 

12 beneficiaries under the plan. 

13 ‘‘(2) With respect to any defined benefit plan which 

14 is a multiemployer plan, an annual report under this sec15 tion for a plan year shall include the following: 

16 ‘‘(A) The number of employers obligated to con17 tribute to the plan as of the end of such plan year. 

18 ‘‘(B) The number of participants under the plan 

19 on whose behalf no employer contributions have been 

20 made to the plan for such plan year. For purposes of 

21 this subparagraph, the term ‘employer contribution’ 

22 means, in connection with a participant, a contribu23 tion made by an employer as an employer of such 

24 participant.’’. 
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1 (b) ADDITIONAL INFORMATION IN ANNUAL ACTUARIAL

2 STATEMENT REGARDING PLAN RETIREMENT PROJEC3 TIONS.—Section 103(d) of such Act (29 U.S.C. 1023(d)) is 

4 amended— 

5 (1) by redesignating paragraphs (12) and (13) 

6 as paragraphs (13) and (14), respectively; and 

7 (2) by inserting after paragraph (11) the fol8 lowing new paragraph: 

9 ‘‘(12) A statement explaining the actuarial as10 sumptions and methods used in projecting future re11 tirements and forms of benefit distributions under the 

12 plan.’’. 

13 (c) FILING AFTER 275 DAYS AFTER PLAN YEAR ONLY

14 IN CASES OF HARDSHIP.—Section 104(a)(1) of such Act 

15 (29 U.S.C. 1024(a)(1)) is amended by inserting after the 

16 first sentence the following new sentence: ‘‘In the case of 

17 a pension plan, the Secretary may extend the deadline for 

18 filing the annual report for any plan year past 275 days 

19 after the close of the plan year only on a case by case basis 

20 and only in cases of hardship, in accordance with regula21 tions which shall be prescribed by the Secretary.’’. 

22 (d) INTERNET DISPLAY OF INFORMATION.—Section 

23 104(b) of such Act (29 U.S.C. 1024(b)) is amended by add24 ing at the end the following: 
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1 ‘‘(5) Identification and basic plan information and ac2 tuarial information included in the annual report for any 

3 plan year shall be filed with the Secretary in an electronic 

4 format which accommodates display on the Internet, in ac5 cordance with regulations which shall be prescribed by the 

6 Secretary. The Secretary shall provide for display of such 

7 information included in the annual report, within 90 days 

8 after the date of the filing of the annual report, on a website 

9 maintained by the Secretary on the Internet and other ap10 propriate media. Such information shall also be displayed 

11 on any website maintained by the plan sponsor (or by the 

12 plan administrator on behalf of the plan sponsor) on the 

13 Internet, in accordance with regulations which shall be pre14 scribed by the Secretary.’’. 

15 (e) SUMMARY ANNUAL REPORT FILED WITHIN 15 

16 DAYS AFTER DEADLINE FOR FILING OF ANNUAL RE17 PORT.—Section 104(b)(3) of such Act (29 U.S.C. 

18 1024(b)(3)) is amended— 

19 (1) by striking ‘‘Within 210 days after the close 

20 of the fiscal year of the plan,’’ and inserting ‘‘Within 

21 15 business days after the due date under subsection 

22 (a)(1) for the filing of the annual report for the fiscal 

23 year of the plan,’’; and 

24 (2) by striking ‘‘the latest’’ and inserting ‘‘such’’. 
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1 (f) DISCLOSURE OF PLAN ASSETS AND LIABILITIES IN

2 SUMMARY ANNUAL REPORT.— 

3 (1) IN GENERAL.—Section 104(b)(3) of such Act 

4 (as amended by subsection (a)) is amended further— 

5 (A) by inserting ‘‘(A)’’ after ‘‘(3)’’; and 

6 (B) by adding at the end the following: 

7 ‘‘(B) The material provided pursuant to subparagraph 

8 (A) to summarize the latest annual report shall be written 

9 in a manner calculated to be understood by the average 

10 plan participant and shall set forth the total assets and li11 abilities of the plan for the plan year for which the latest 

12 annual report was filed and for each of the 2 preceding 

13 plan years, as reported in the annual report for each such 

14 plan year under this section.’’. 

15 (g) INFORMATION MADE AVAILABLE TO PARTICIPANTS, 

16 BENEFICIARIES, AND EMPLOYERS WITH RESPECT TO MUL17 TIEMPLOYER PLANS.— 

18 (1) IN GENERAL.—Section 101 of the Employee 

19 Retirement Income Security Act of 1974 (29 U.S.C. 

20 1021) (as amended by section 103(b)(2)(A)) is further 

21 amended— 

22 (A) by redesignating subsection (k) as sub23 section (l); and 

24 (B) by inserting after subsection (j) the fol25 lowing new subsection: 
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1 ‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE

2 AVAILABLE ON REQUEST.— 

3 ‘‘(1) IN GENERAL.—Each administrator of a 

4 multiemployer plan shall furnish to any plan partici5 pant or beneficiary or any employer having an obli6 gation to contribute to the plan, who so requests in 

7 writing— 

8 ‘‘(A) a copy of any actuarial report received 

9 by the plan for any plan year which has been in 

10 receipt by the plan for at least 30 days, and 

11 ‘‘(B) a copy of any financial report pre12 pared for the plan by any plan investment man13 ager or advisor or other person who is a plan fi14 duciary which has been in receipt by the plan 

15 for at least 30 days. 

16 ‘‘(2) COMPLIANCE.—Information required to be 

17 provided under paragraph (1) — 

18 ‘‘(A) shall be provided to the requesting par19 ticipant, beneficiary, or employer within 30 days 

20 after the request in a form and manner pre21 scribed in regulations of the Secretary, and 

22 ‘‘(B) may be provided in written, electronic, 

23 or other appropriate form to the extent such form 

24 is reasonably accessible to persons to whom the 

25 information is required to be provided. 
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1 ‘‘(3) LIMITATIONS.—In no case shall a partici2 pant, beneficiary, or employer be entitled under this 

3 subsection to receive more than one copy of any report 

4 described in paragraph (1) during any one 12-month 

5 period. The administrator may make a reasonable 

6 charge to cover copying, mailing, and other costs of 

7 furnishing copies of information pursuant to para8 graph (1). The Secretary may by regulations pre9 scribe the maximum amount which will constitute a 

10 reasonable charge under the preceding sentence.’’. 

11 (2) ENFORCEMENT.—Section 502(c)(4) of such 

12 Act (29 U.S.C. 1132(c)(4)) (as amended by section 

13 103(b)(2)(B)) is further amended by striking ‘‘sec14 tions 101(j) and 302(b)(7)(F)(iv)’’ and inserting ‘‘sec15 tions 101(j), 101(k), and 302(b)(7)(F)(iv)’’. 

16 (3) REGULATIONS.—The Secretary shall pre17 scribe regulations under section 101(k)(2) of the Em18 ployee Retirement Income Security Act of 1974 

19 (added by paragraph (1) of this subsection) not later 

20 than 90 days after the date of the enactment of this 

21 Act. 

22 (h) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY

23 TO MULTIEMPLOYER PLANS.— 
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1 (1) IN GENERAL.—Section 101 of such Act (as 

2 amended by subsection (g) of this section) is further 

3 amended— 

4 (A) by redesignating subsection (l) as sub5 section (m); and 

6 (B) by inserting after subsection (k) the fol7 lowing new subsection: 

8 ‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABIL9 ITY.— 

10 ‘‘(1) IN GENERAL.—The plan sponsor or admin11 istrator of a multiemployer plan shall furnish to any 

12 employer who has an obligation to contribute under 

13 the plan and who so requests in writing notice of— 

14 ‘‘(A) the amount which would be the 

15 amount of such employer’s withdrawal liability 

16 under part 1 of subtitle E of title IV if such em17 ployer withdrew on the last day of the plan year 

18 preceding the date of the request, and 

19 ‘‘(B) the average increase, per participant 

20 under the plan, in accrued liabilities under the 

21 plan as of the end of such plan year to partici22 pants under such plan on whose behalf no em23 ployer contributions are payable (or their bene24 ficiaries), which would be attributable to such a 

25 withdrawal by such employer. 
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1 For purposes of subparagraph (B), the term ‘employer 

2 contribution’ means, in connection with a partici3 pant, a contribution made by an employer as an em4 ployer of such participant. 

5 ‘‘(2) COMPLIANCE.—Any notice required to be 

6 provided under paragraph (1)— 

7 ‘‘(A) shall be provided to the requesting em8 ployer within 180 days after the request in a 

9 form and manner prescribed in regulations of 

10 the Secretary, and 

11 ‘‘(B) may be provided in written, electronic, 

12 or other appropriate form to the extent such form 

13 is reasonably accessible to employers to whom the 

14 information is required to be provided. 

15 ‘‘(3) LIMITATIONS.—In no case shall an em16 ployer be entitled under this subsection to receive 

17 more than one notice described in paragraph (1) dur18 ing any one 12-month period. The person required to 

19 provide such notice may make a reasonable charge to 

20 cover copying, mailing, and other costs of furnishing 

21 such notice pursuant to paragraph (1). The Secretary 

22 may by regulations prescribe the maximum amount 

23 which will constitute a reasonable charge under the 

24 preceding sentence.’’. 
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1 (2) ENFORCEMENT.—Section 502(c)(4) of such 

2 Act (29 U.S.C. 1132(c)(4)) (as amended by para3 graph (1)) is further amended by striking ‘‘sections 

4 101(j), 101(k), and 302(b)(7)(F)(iv)’’ and inserting 

5 ‘‘sections 101(j), 101(k), 101(l), and 

6 302(b)(7)(F)(iv)’’. 

7 (i) MODEL FORM.—Not later than 180 days after the 

8 date of the enactment of this Act, the Secretary of Labor 

9 shall publish a model form for providing the statements, 

10 schedules, and other material required to be provided under 

11 section 104(b)(3) of the Employee Retirement Income Secu12 rity Act of 1974, as amended by this section. 

13 (j) EFFECTIVE DATE.—The amendments made by this 

14 section shall apply to plan years beginning after December 

15 31, 2005. 

16 SEC. 503. SECTION 4010 FILINGS WITH THE PBGC. 

17 (a) CHANGE IN CRITERIA FOR PERSONS REQUIRED TO

18 PROVIDE INFORMATION TO PBGC.—Section 4010(b) of the 

19 Employee Retirement Income Security Act of 1974 (29 

20 U.S.C. 1310(b)) is amended by striking paragraph (1), by 

21 redesignating paragraphs (2) and (3) as paragraphs (3) 

22 and (4), respectively, and by inserting before paragraph (3) 

23 (as so redesignated) the following new paragraphs: 
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1 ‘‘(1) the aggregate funding target attainment 

2 percentage of the plan (as defined in subsection 

3 (d)(2)) is less than 60 percent; 

4 ‘‘(2)(A) the aggregate funding target attainment 

5 percentage of the plan (as defined in subsection 

6 (d)(2)) is less than 75 percent, and 

7 ‘‘(B) the plan sponsor is in an industry with re8 spect to which the corporation determines that there 

9 is substantial unemployment or underemployment 

10 and the sales and profits are depressed or declining; 

11 ’’. 

12 (b) NOTICE TO PARTICIPANTS AND BENEFICIARIES.— 

13 Section 4010 of the Employee Retirement Income Security 

14 Act of 1974 (29 U.S.C. 1310) is amended by adding at the 

15 end the following new subsection: 

16 ‘‘(d) NOTICE TO PARTICIPANTS AND BENE17 FICIARIES.— 

18 ‘‘(1) IN GENERAL.—Not later than 90 days after 

19 the submission by any person to the corporation of 

20 information or documentary material with respect to 

21 any plan pursuant to subsection (a), such person 

22 shall provide notice of such submission to each partic23 ipant and beneficiary under the plan (and under all 

24 plans maintained by members of the controlled group 
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1 of each contributing sponsor of the plan). Such notice 

2 shall also set forth— 

3 ‘‘(A) the number of single-employer plans 

4 covered by this title which are in at-risk status 

5 and are maintained by contributing sponsors of 

6 such plan (and by members of their controlled 

7 groups) with respect to which the funding target 

8 attainment percentage for the preceding plan 

9 year of each plan is less than 60 percent; 

10 ‘‘(B) the value of the assets of each of the 

11 plans described in subparagraph (A) for the plan 

12 year, the funding target for each of such plans 

13 for the plan year, and the funding target attain14 ment percentage of each of such plans for the 

15 plan year; and 

16 ‘‘(C) taking into account all single-employer 

17 plans maintained by the contributing sponsor 

18 and the members of its controlled group as of the 

19 end of such plan year— 

20 ‘‘(i) the aggregate total of the values of 

21 plan assets of such plans as of the end of 

22 such plan year, 

23 ‘‘(ii) the aggregate total of the funding 

24 targets of such plans, as of the end of such 

25 plan year, taking into account only benefits 
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1 to which participants and beneficiaries have 

2 a nonforfeitable right, and 

3 ‘‘(iii) the aggregate funding targets at4 tainment percentage with respect to the con5 tributing sponsor for the preceding plan 

6 year. 

7 ‘‘(2) DEFINITIONS.—For purposes of this sub8 section— 

9 ‘‘(A) VALUE OF PLAN ASSETS.—The term 

10 ‘value of plan assets’ means the value of plan as11 sets, as determined under section 303(g)(3). 

12 ‘‘(B) FUNDING TARGET.—The term ‘funding 

13 target’ has the meaning provided under section 

14 303(d)(1). 

15 ‘‘(C) FUNDING TARGET ATTAINMENT PER16 CENTAGE.—The term ‘funding target attainment 

17 percentage’ has the meaning provided in section 

18 303(d)(2). 

19 ‘‘(D) AGGREGATE FUNDING TARGETS AT20 TAINMENT PERCENTAGE.—The term ‘aggregate 

21 funding targets attainment percentage’ with re22 spect to a contributing sponsor for a plan year 

23 is the percentage, taking into account all plans 

24 maintained by the contributing sponsor and the 
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1 members of its controlled group as of the end of 

2 such plan year, which 

3 ‘‘(i) the aggregate total of the values of 

4 plan assets, as of the end of such plan year, 

5 of such plans, is of 

6 ‘‘(ii) the aggregate total of the funding 

7 targets of such plans, as of the end of such 

8 plan year, taking into account only benefits 

9 to which participants and beneficiaries have 

10 a nonforfeitable right. 

11 ‘‘(E) AT-RISK STATUS.—The term ‘at-risk 

12 status’ has the meaning provided in section 

13 303(i)(3). 

14 ‘‘(3) COMPLIANCE.— 

15 ‘‘(A) IN GENERAL.—Any notice required to 

16 be provided under paragraph (1) may be pro17 vided in written, electronic, or other appropriate 

18 form to the extent such form is reasonably acces19 sible to individuals to whom the information is 

20 required to be provided. 

21 ‘‘(B) LIMITATIONS.—In no case shall a par22 ticipant or beneficiary be entitled under this sub23 section to receive more than one notice described 

24 in paragraph (1) during any one 12-month pe25 riod. The person required to provide such notice 
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1 may make a reasonable charge to cover copying, 

2 mailing, and other costs of furnishing such no3 tice pursuant to paragraph (1). The corporation 

4 may by regulations prescribe the maximum 

5 amount which will constitute a reasonable charge 

6 under the preceding sentence. 

7 ‘‘(4) NOTICE TO CONGRESS.—Concurrent with 

8 the provision of any notice under paragraph (1), such 

9 person shall provide such notice to the Committee on 

10 Education and the Workforce of the House of Rep11 resentatives and the Committee on Health, Education, 

12 Labor, and Pensions of the Senate, which shall be 

13 treated as materials provided in executive session.’’. 

14 (c) EFFECTIVE DATE.—The amendment made by this 

15 section shall apply with respect to plan years beginning 

16 after 2006. 

17 TITLE VI—INVESTMENT ADVICE 

18 SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT IN19 COME SECURITY ACT OF 1974 PROVIDING 

20 PROHIBITED TRANSACTION EXEMPTION FOR 

21 PROVISION OF INVESTMENT ADVICE. 

22 (a) EXEMPTION FROM PROHIBITED TRANSACTIONS.— 

23 Section 408(b) of the Employee Retirement Income Security 

24 Act of 1974 (29 U.S.C. 1108(b)) is amended by adding at 

25 the end the following new paragraph: 
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1 ‘‘(14)(A) Any transaction described in subpara2 graph (B) in connection with the provision of invest3 ment advice described in section 3(21)(A)(ii), in any 

4 case in which— 

5 ‘‘(i) the investment of assets of the plan is 

6 subject to the direction of plan participants or 

7 beneficiaries, 

8 ‘‘(ii) the advice is provided to the plan or 

9 a participant or beneficiary of the plan by a fi10 duciary adviser in connection with any sale, ac11 quisition, or holding of a security or other prop12 erty for purposes of investment of plan assets, 

13 and 

14 ‘‘(iii) the requirements of subsection (g) are 

15 met in connection with the provision of the ad16 vice. 

17 ‘‘(B) The transactions described in this subpara18 graph are the following: 

19 ‘‘(i) the provision of the advice to the 

20 plan, participant, or beneficiary; 

21 ‘‘(ii) the sale, acquisition, or holding of 

22 a security or other property (including any 

23 lending of money or other extension of cred24 it associated with the sale, acquisition, or 
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1 holding of a security or other property) 

2 pursuant to the advice; and 

3 ‘‘(iii) the direct or indirect receipt of 

4 fees or other compensation by the fiduciary 

5 adviser or an affiliate thereof (or any em6 ployee, agent, or registered representative of 

7 the fiduciary adviser or affiliate) in connec8 tion with the provision of the advice or in 

9 connection with a sale, acquisition, or hold10 ing of a security or other property pursuant 

11 to the advice.’’. 

12 (b) REQUIREMENTS.—Section 408 of such Act is 

13 amended further by adding at the end the following new 

14 subsection: 

15 ‘‘(g) REQUIREMENTS RELATING TO PROVISION OF IN16 VESTMENT ADVICE BY FIDUCIARY ADVISERS.— 

17 ‘‘(1) IN GENERAL.—The requirements of this sub18 section are met in connection with the provision of 

19 investment advice referred to in section 3(21)(A)(ii), 

20 provided to an employee benefit plan or a participant 

21 or beneficiary of an employee benefit plan by a fidu22 ciary adviser with respect to the plan in connection 

23 with any sale, acquisition, or holding of a security or 

24 other property for purposes of investment of amounts 

25 held by the plan, if— 
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1 ‘‘(A) in the case of the initial provision of 

2 the advice with regard to the security or other 

3 property by the fiduciary adviser to the plan, 

4 participant, or beneficiary, the fiduciary adviser 

5 provides to the recipient of the advice, at a time 

6 reasonably contemporaneous with the initial pro7 vision of the advice, a written notification 

8 (which may consist of notification by means of 

9 electronic communication)— 

10 ‘‘(i) of all fees or other compensation 

11 relating to the advice that the fiduciary ad12 viser or any affiliate thereof is to receive 

13 (including compensation provided by any 

14 third party) in connection with the provi15 sion of the advice or in connection with the 

16 sale, acquisition, or holding of the security 

17 or other property, 

18 ‘‘(ii) of any material affiliation or 

19 contractual relationship of the fiduciary ad20 viser or affiliates thereof in the security or 

21 other property, 

22 ‘‘(iii) of any limitation placed on the 

23 scope of the investment advice to be pro24 vided by the fiduciary adviser with respect 
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1 to any such sale, acquisition, or holding of 

2 a security or other property, 

3 ‘‘(iv) of the types of services provided 

4 by the fiduciary adviser in connection with 

5 the provision of investment advice by the fi6 duciary adviser, 

7 ‘‘(v) that the adviser is acting as a fi8 duciary of the plan in connection with the 

9 provision of the advice, and 

10 ‘‘(vi) that a recipient of the advice 

11 may separately arrange for the provision of 

12 advice by another adviser, that could have 

13 no material affiliation with and receive no 

14 fees or other compensation in connection 

15 with the security or other property, 

16 ‘‘(B) the fiduciary adviser provides appro17 priate disclosure, in connection with the sale, ac18 quisition, or holding of the security or other 

19 property, in accordance with all applicable secu20 rities laws, 

21 ‘‘(C) the sale, acquisition, or holding occurs 

22 solely at the direction of the recipient of the ad23 vice, 

24 ‘‘(D) the compensation received by the fidu25 ciary adviser and affiliates thereof in connection 
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1 with the sale, acquisition, or holding of the secu2 rity or other property is reasonable, and 

3 ‘‘(E) the terms of the sale, acquisition, or 

4 holding of the security or other property are at 

5 least as favorable to the plan as an arm’s length 

6 transaction would be. 

7 ‘‘(2) STANDARDS FOR PRESENTATION OF INFOR8 MATION.— 

9 ‘‘(A) IN GENERAL.—The notification re10 quired to be provided to participants and bene11 ficiaries under paragraph (1)(A) shall be written 

12 in a clear and conspicuous manner and in a 

13 manner calculated to be understood by the aver14 age plan participant and shall be sufficiently ac15 curate and comprehensive to reasonably apprise 

16 such participants and beneficiaries of the infor17 mation required to be provided in the notifica18 tion. 

19 ‘‘(B) MODEL FORM FOR DISCLOSURE OF

20 FEES AND OTHER COMPENSATION.—The Sec21 retary shall issue a model form for the disclosure 

22 of fees and other compensation required in para23 graph (1)(A)(i) which meets the requirements of 

24 subparagraph (A). 
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1 ‘‘(3) EXEMPTION CONDITIONED ON MAKING RE2 QUIRED INFORMATION AVAILABLE ANNUALLY, ON RE3 QUEST, AND IN THE EVENT OF MATERIAL CHANGE.— 

4 The requirements of paragraph (1)(A) shall be deemed 

5 not to have been met in connection with the initial 

6 or any subsequent provision of advice described in 

7 paragraph (1) to the plan, participant, or beneficiary 

8 if, at any time during the provision of advisory serv9 ices to the plan, participant, or beneficiary, the fidu10 ciary adviser fails to maintain the information de11 scribed in clauses (i) through (iv) of subparagraph 

12 (A) in currently accurate form and in the manner de13 scribed in paragraph (2) or fails— 

14 ‘‘(A) to provide, without charge, such cur15 rently accurate information to the recipient of 

16 the advice no less than annually, 

17 ‘‘(B) to make such currently accurate infor18 mation available, upon request and without 

19 charge, to the recipient of the advice, or 

20 ‘‘(C) in the event of a material change to 

21 the information described in clauses (i) through 

22 (iv) of paragraph (1)(A), to provide, without 

23 charge, such currently accurate information to 

24 the recipient of the advice at a time reasonably 
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1 contemporaneous to the material change in in2 formation. 

3 ‘‘(4) MAINTENANCE FOR 6 YEARS OF EVIDENCE

4 OF COMPLIANCE.—A fiduciary adviser referred to in 

5 paragraph (1) who has provided advice referred to in 

6 such paragraph shall, for a period of not less than 6 

7 years after the provision of the advice, maintain any 

8 records necessary for determining whether the require9 ments of the preceding provisions of this subsection 

10 and of subsection (b)(14) have been met. A trans11 action prohibited under section 406 shall not be con12 sidered to have occurred solely because the records are 

13 lost or destroyed prior to the end of the 6-year period 

14 due to circumstances beyond the control of the fidu15 ciary adviser. 

16 ‘‘(5) EXEMPTION FOR PLAN SPONSOR AND CER17 TAIN OTHER FIDUCIARIES.— 

18 ‘‘(A) IN GENERAL.—Subject to subpara19 graph (B), a plan sponsor or other person who 

20 is a fiduciary (other than a fiduciary adviser) 

21 shall not be treated as failing to meet the re22 quirements of this part solely by reason of the 

23 provision of investment advice referred to in sec24 tion 3(21)(A)(ii) (or solely by reason of con-
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1 tracting for or otherwise arranging for the provi2 sion of the advice), if— 

3 ‘‘(i) the advice is provided by a fidu4 ciary adviser pursuant to an arrangement 

5 between the plan sponsor or other fiduciary 

6 and the fiduciary adviser for the provision 

7 by the fiduciary adviser of investment ad8 vice referred to in such section, 

9 ‘‘(ii) the terms of the arrangement re10 quire compliance by the fiduciary adviser 

11 with the requirements of this subsection, 

12 and 

13 ‘‘(iii) the terms of the arrangement in14 clude a written acknowledgment by the fidu15 ciary adviser that the fiduciary adviser is a 

16 fiduciary of the plan with respect to the 

17 provision of the advice. 

18 ‘‘(B) CONTINUED DUTY OF PRUDENT SELEC19 TION OF ADVISER AND PERIODIC REVIEW.—Noth20 ing in subparagraph (A) shall be construed to 

21 exempt a plan sponsor or other person who is a 

22 fiduciary from any requirement of this part for 

23 the prudent selection and periodic review of a fi24 duciary adviser with whom the plan sponsor or 

25 other person enters into an arrangement for the 
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1 provision of advice referred to in section 

2 3(21)(A)(ii). The plan sponsor or other person 

3 who is a fiduciary has no duty under this part 

4 to monitor the specific investment advice given 

5 by the fiduciary adviser to any particular re6 cipient of the advice. 

7 ‘‘(C) AVAILABILITY OF PLAN ASSETS FOR

8 PAYMENT FOR ADVICE.—Nothing in this part 

9 shall be construed to preclude the use of plan as10 sets to pay for reasonable expenses in providing 

11 investment advice referred to in section 

12 3(21)(A)(ii). 

13 ‘‘(6) DEFINITIONS.—For purposes of this sub14 section and subsection (b)(14)— 

15 ‘‘(A) FIDUCIARY ADVISER.—The term ‘fidu16 ciary adviser’ means, with respect to a plan, a 

17 person who is a fiduciary of the plan by reason 

18 of the provision of investment advice by the per19 son to the plan or to a participant or beneficiary 

20 and who is— 

21 ‘‘(i) registered as an investment ad22 viser under the Investment Advisers Act of 

23 1940 (15 U.S.C. 80b–1 et seq.) or under the 

24 laws of the State in which the fiduciary 
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1 maintains its principal office and place of 

2 business, 

3 ‘‘(ii) a bank or similar financial insti4 tution referred to in section 408(b)(4) or a 

5 savings association (as defined in section 

6 3(b)(1) of the Federal Deposit Insurance Act 

7 (12 U.S.C. 1813(b)(1))), but only if the ad8 vice is provided through a trust department 

9 of the bank or similar financial institution 

10 or savings association which is subject to 

11 periodic examination and review by Federal 

12 or State banking authorities, 

13 ‘‘(iii) an insurance company qualified 

14 to do business under the laws of a State, 

15 ‘‘(iv) a person registered as a broker or 

16 dealer under the Securities Exchange Act of 

17 1934 (15 U.S.C. 78a et seq.), 

18 ‘‘(v) an affiliate of a person described 

19 in any of clauses (i) through (iv), or 

20 ‘‘(vi) an employee, agent, or registered 

21 representative of a person described in any 

22 of clauses (i) through (v) who satisfies the 

23 requirements of applicable insurance, bank24 ing, and securities laws relating to the pro25 vision of the advice. 
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1 ‘‘(B) AFFILIATE.—The term ‘affiliate’ of 

2 another entity means an affiliated person of the 

3 entity (as defined in section 2(a)(3) of the In4 vestment Company Act of 1940 (15 U.S.C. 80a– 

5 2(a)(3))). 

6 ‘‘(C) REGISTERED REPRESENTATIVE.—The 

7 term ‘registered representative’ of another entity 

8 means a person described in section 3(a)(18) of 

9 the Securities Exchange Act of 1934 (15 U.S.C. 

10 78c(a)(18)) (substituting the entity for the broker 

11 or dealer referred to in such section) or a person 

12 described in section 202(a)(17) of the Investment 

13 Advisers Act of 1940 (15 U.S.C. 80b–2(a)(17)) 

14 (substituting the entity for the investment ad15 viser referred to in such section).’’. 

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

17 section shall apply with respect to advice referred to in sec18 tion 3(21)(A)(ii) of the Employee Retirement Income Secu19 rity Act of 1974 provided on or after January 1, 2006. 

20 SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF 

21 1986 PROVIDING PROHIBITED TRANSACTION 

22 EXEMPTION FOR PROVISION OF INVESTMENT 

23 ADVICE. 

24 [See introduced bill, page 287, line 15 through page 

25 298, line 23] 
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1 TITLE VII—BENEFIT ACCRUAL 

2 STANDARDS 

3 SEC. 701. IMPROVEMENTS IN BENEFIT ACCRUAL STAND4 ARDS. 

5 (a) AMENDMENTS TO THE EMPLOYEE RETIREMENT

6 INCOME SECURITY ACT OF 1974.— 

7 (1) RULES RELATING TO REDUCTION IN AC8 CRUED BENEFITS BECAUSE OF ATTAINMENT OF ANY

9 AGE.—Section 204(b)(1)(H) of the Employee Retire10 ment Income Security Act of 1974 (29 U.S.C. 

11 1054(b)(1)(H)) is amended by adding at the end the 

12 following new clauses: 

13 ‘‘(vii)(I) A plan shall not be treated as failing to meet 

14 the requirements of clause (i) if a participant’s entire ac15 crued benefit, as determined as of any date under the for16 mula for determining benefits as set forth in the text of the 

17 plan documents, would be equal to or greater than that of 

18 any similarly situated, younger individual. 

19 ‘‘(II) For purposes of this clause, an individual is 

20 similarly situated to a participant if such individual is 

21 identical to such participant in every respect (including pe22 riod of service, compensation, position, date of hire, work 

23 history, and any other respect) except for age. 

24 ‘‘(III) In determining the entire accrued benefit for 

25 purposes of this clause, the subsidized portion of any early 
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1 retirement benefit (including any early retirement subsidy 

2 that is fully or partially included or reflected in an employ3 ee’s opening balance or other transition benefits) shall be 

4 disregarded. 

5 ‘‘(viii) A plan under which the accrued benefit payable 

6 under the plan upon distribution (or any portion thereof) 

7 is expressed as the balance of a hypothetical account main8 tained for the participant shall not be treated as failing 

9 to meet the requirements of clause (i) solely because interest 

10 accruing on such balance is taken into account. 

11 ‘‘(ix) A plan shall not be treated as failing to meet 

12 the requirements of this subparagraph solely because the 

13 plan provides allowable offsets against those benefits under 

14 the plan which are attributable to employer contributions, 

15 based on benefits which are provided under title II of the 

16 Social Security Act, the Railroad Retirement Act of 1974, 

17 another plan described in section 401(a) of the Internal 

18 Revenue Code of 1986 maintained by the same employer, 

19 or under any retirement program for officers or employees 

20 of the Federal Government or of the government of any 

21 State or political subdivision thereof. For purposes of this 

22 clause, allowable offsets based on such benefits consist of off23 sets equal to all or part of the actual benefit payment 

24 amounts, reasonable projections or estimations of such ben25 efit payment amounts, or actuarial equivalents of such ac-
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1 tual benefit payment amounts, projections, or estimations 

2 (determined on the basis of reasonable actuarial assump3 tions). 

4 ‘‘(x) A plan shall not be treated as failing to meet the 

5 requirements of this subparagraph solely because the plan 

6 provides a disparity in contributions or benefits with re7 spect to which the requirements of section 401(l) of the In8 ternal Revenue Code of 1986 are met. 

9 ‘‘(xi)(I) A plan shall not be treated as failing to meet 

10 the requirements of this subparagraph solely because the 

11 plan provides for pre-retirement indexing of accrued bene12 fits under the plan. 

13 ‘‘(II) For purposes of this clause, the term ‘pre-retire14 ment indexing’ means, in connection with an accrued ben15 efit, the periodic adjustment of the accrued benefit by means 

16 of the application of a recognized index or methodology so 

17 as to protect the economic value of the benefit against infla18 tion prior to distribution.’’. 

19 (2) DETERMINATIONS OF ACCRUED BENEFIT AS

20 BALANCE OF BENEFIT ACCOUNT.—Section 203 of such 

21 Act (29 U.S.C. 1053) is amended by adding at the 

22 end the following new subsection: 

23 ‘‘(f)(1) A defined benefit plan under which the accrued 

24 benefit payable under the plan upon distribution (or any 

25 portion thereof) is expressed as the balance of a hypothetical 
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1 account maintained for the participant shall not be treated 

2 as failing to meet the requirements of subsection (a)(2) and 

3 section 205(g) solely because of the amount actually made 

4 available for such distribution under the terms of the plan, 

5 in any case in which the applicable interest rate that would 

6 be used under the terms of the plan to project the amount 

7 of the participant’s account balance to normal retirement 

8 age is not greater than a market rate of return. 

9 ‘‘(2) The Secretary of the Treasury may provide by 

10 regulation for rules governing the calculation of a market 

11 rate of return for purposes of paragraph (1) and for permis12 sible methods of crediting interest to the account (including 

13 variable interest rates) resulting in effective rates of return 

14 meeting the requirements of paragraph (1).’’. 

15 (b) EFFECTIVE DATE.—The amendments made by this 

16 section shall apply to periods beginning on or after June 

17 29, 2005. 

18 TITLE VIII—DEDUCTION 

19 LIMITATIONS 

20 SEC. 801. [See introduced bill, page 299, line 1 through page 305, line 20.] 

21 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

23 the ‘‘Pension Protection Act of 2005’’. 

24 (b) TABLE OF CONTENTS.—The table of con25 tents for this Act is as follows: 

Sec. 1. Short title and table of contents. 
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TITLE I—REFORM OF FUNDING RULES FOR SINGLEEMPLOYER DEFINED BENEFIT PENSION PLANS 

Subtitle A—Amendments to Employee Retirement Income 

Security Act of 1974 

Sec. 101. Minimum funding standards. 

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

pension plans. 

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

Sec. 104. Technical and conforming amendments. 

Subtitle B—Amendments to Internal Revenue Code of 1986 

Sec. 111. Minimum funding standards. 

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

pension plans. 

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

Sec. 114. Technical and conforming amendments. 

Subtitle C—Other Provisions 

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

Sec. 122. Treatment of nonqualified deferred compensation 

plans when employer defined benefit plan in atrisk status. 

TITLE II—FUNDING RULES FOR MULTIEMPLOYER 

DEFINED BENEFIT PLANS 

Subtitle A—Amendments to Employee Retirement Income 

Security Act of 1974 

Sec. 201. Funding rules for multiemployer defined benefit 

plans. 

Sec. 202. Additional funding rules for multiemployer plans in 

endangered or critical status. 

Sec. 203. Measures to forestall insolvency of multiemployer 

plans. 

Sec. 204. Withdrawal liability reforms. 

Sec. 205. Removal of restrictions with respect to procedures 

applicable to disputes involving withdrawal liability. 

Subtitle B—Amendments to Internal Revenue Code of 1986 

Sec. 211. Funding rules for multiemployer defined benefit 

plans. 

Sec. 212. Additional funding rules for multiemployer plans in 

endangered or critical status. 

Sec. 213. Measures to forestall insolvency of multiemployer 

plans. 

TITLE III—OTHER PROVISIONS 

Sec. 301. Interest rate for 2006 funding requirements. 
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Sec. 302. Interest rate assumption for determination of lump 

sum distributions. 

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

Sec. 304. Distributions during working retirement. 

Sec. 305. Other amendments relating to prohibited transactions. 

Sec. 306. Correction period for certain transactions involving 

securities and commodities. 

Sec. 307. Government Accountability Office pension funding 

report. 

TITLE IV—IMPROVEMENTS IN PBGC GUARANTEE 

PROVISIONS 

Sec. 401. Increases in PBGC premiums. 

TITLE V—DISCLOSURE 

Sec. 501. Defined benefit plan funding notices. 

Sec. 502. Additional disclosure requirements. 

Sec. 503. Section 4010 filings with the PBGC. 

TITLE VI—INVESTMENT ADVICE 

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

exemption for provision of investment advice. 

Sec. 602. Amendments to Internal Revenue Code of 1986 providing prohibited transaction exemption for provision of investment advice. 

TITLE VII—BENEFIT ACCRUAL STANDARDS 

Sec. 701. Improvements in benefit accrual standards. 

TITLE VIII—DEDUCTION LIMITATIONS 

Sec. 801. Increase in deduction limits. 

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

TITLE IX—ENHANCED RETIREMENTS SAVINGS AND 

DEFINED CONTRIBUTION PLANS 

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

Sec. 902. Saver’s credit. 

Sec. 903. Increasing participation through automatic contribution arrangements. 

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

individuals called to active duty for at least 179 

days. 

Sec. 905. Waiver of 10 percent early withdrawal penalty tax on 

certain distributions of pension plans for public 

safety employees. 
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Sec. 906. Combat zone compensation taken into account for 

purposes of determining limitation and deductibility of contributions to individual retirement 

plans. 

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

Sec. 908. IRA eligibility for the disabled. 

Sec. 909. Allow rollovers by nonspouse beneficiaries of certain 

retirement plan distributions. 

TITLE X—PROVISIONS TO ENHANCE HEALTH CARE 

AFFORDABILITY 

Sec. 1001. Treatment of annuity and life insurance contracts 

with a long-term care insurance feature. 

Sec. 1002. Disposition of unused health benefits in cafeteria 

plans and flexible spending arrangements. 

Sec. 1003. Distributions from governmental retirement plans 

for health and long-term care insurance for public safety officers. 

1 TITLE I—REFORM OF FUNDING 

2 RULES FOR SINGLE-EM3 PLOYER DEFINED BENEFIT 

4 PENSION PLANS 

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

8 SEC. 101. MINIMUM FUNDING STANDARDS. 

9 [See section 101 of the bill as reported by 

10 the Committee on Education and the Work11 force.] 

12 SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE13 FINED BENEFIT PENSION PLANS. 

14 [See section 102 of the bill as reported by 

15 the Committee on Education and the Work16 force.] 
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1 SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EM2 PLOYER PLANS. 

3 [See section 103 of the bill as reported by 

4 the Committee on Education and the Work5 force.] 

6 SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS. 

7 [See section 104 of the bill as reported by 

8 the Committee on Education and the Work9 force.] 

10 Subtitle B—Amendments to 

11 Internal Revenue Code of 1986 

12 SEC. 111. MINIMUM FUNDING STANDARDS. 

13 (a) NEW MINIMUM FUNDING STANDARDS.—

14 Section 412 of the Internal Revenue Code of 

15 1986 (relating to minimum funding standards) 

16 is amended to read as follows: 

17 ‘‘SEC. 412. MINIMUM FUNDING STANDARDS. 

18 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUND19 ING STANDARD.—

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

21 section applies shall satisfy the minimum 

22 funding standard applicable to the plan 

23 for any plan year. 

24 ‘‘(2) MINIMUM FUNDING STANDARD.—For 

25 purposes of paragraph (1), a plan shall be 
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1 treated as satisfying the minimum fund2 ing standard for a plan year if—

3 ‘‘(A) in the case of a defined ben4 efit plan which is not a multiem5 ployer plan, the employer makes con6 tributions to or under the plan for 

7 the plan year which, in the aggregate, 

8 are not less than the minimum re9 quired contribution determined 

10 under section 430 for the plan for the 

11 plan year, 

12 ‘‘(B) in the case of a money pur13 chase plan which is not a multiem14 ployer plan, the employer makes con15 tributions to or under the plan for 

16 the plan year which are required 

17 under the terms of the plan, and 

18 ‘‘(C) in the case of a multiem19 ployer plan, the employers make con20 tributions to or under the plan for 

21 any plan year which, in the aggre22 gate, are sufficient to ensure that the 

23 plan does not have an accumulated 

24 funding deficiency under section 431 

25 as of the end of the plan year. 
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1 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.—

2 ‘‘(1) IN GENERAL.—Except as provided 

3 in paragraph (2), the amount of any con4 tribution required by this section (includ5 ing any required installments under 

6 paragraphs (3) and (4) of section 430(j)) 

7 shall be paid by the employer responsible 

8 for making contributions to or under the 

9 plan. 

10 ‘‘(2) JOINT AND SEVERAL LIABILITY

11 WHERE EMPLOYER MEMBER OF CONTROLLED

12 GROUP.—In the case of a defined benefit 

13 plan which is not a multiemployer plan, 

14 if the employer referred to in paragraph 

15 (1) is a member of a controlled group, 

16 each member of such group shall be joint17 ly and severally liable for payment of 

18 such contributions. 

19 ‘‘(c) VARIANCE FROM MINIMUM FUNDING

20 STANDARDS.—

21 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD22 SHIP.—

23 ‘‘(A) IN GENERAL.—If—

24 ‘‘(i) an employer is (or in the 

25 case of a multiemployer plan, 10 
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1 percent or more of the number of 

2 employers contributing to or 

3 under the plan is) unable to sat4 isfy the minimum funding stand5 ard for a plan year without tem6 porary substantial business hard7 ship (substantial business hard8 ship in the case of a multiem9 ployer plan), and 

10 ‘‘(ii) application of the stand11 ard would be adverse to the inter12 ests of plan participants in the ag13 gregate, 

14 the Secretary may, subject to sub15 paragraph (C), waive the require16 ments of subsection (a) for such year 

17 with respect to all or any portion of 

18 the minimum funding standard. The 

19 Secretary shall not waive the min20 imum funding standard with respect 

21 to a plan for more than 3 of any 15 (5 

22 of any 15 in the case of a multiem23 ployer plan) consecutive plan years. 
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1 ‘‘(B) EFFECTS OF WAIVER.—If a 

2 waiver is granted under subpara3 graph (A) for any plan year—

4 ‘‘(i) in the case of a defined 

5 benefit plan which is not a multi6 employer plan, the minimum re7 quired contribution under section 

8 430 for the plan year shall be re9 duced by the amount of the 

10 waived funding deficiency and 

11 such amount shall be amortized 

12 as required under section 430(e), 

13 and 

14 ‘‘(ii) in the case of a multiem15 ployer plan, the funding standard 

16 account shall be credited under 

17 section 431(b)(3)(C) with the 

18 amount of the waived funding de19 ficiency and such amount shall be 

20 amortized as required under sec21 tion 431(b)(2)(C). 

22 ‘‘(C) WAIVER OF AMORTIZED POR23 TION NOT ALLOWED.—The Secretary 

24 may not waive under subparagraph 

25 (A) any portion of the minimum fund-
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1 ing standard under subsection (a) for 

2 a plan year which is attributable to 

3 any waived funding deficiency for 

4 any preceding plan year. 

5 ‘‘(2) DETERMINATION OF BUSINESS HARD6 SHIP.—For purposes of this subsection, 

7 the factors taken into account in deter8 mining temporary substantial business 

9 hardship (substantial business hardship 

10 in the case of a multiemployer plan) shall 

11 include (but shall not be limited to) 

12 whether or not—

13 ‘‘(A) the employer is operating at 

14 an economic loss, 

15 ‘‘(B) there is substantial unem16 ployment or underemployment in the 

17 trade or business and in the industry 

18 concerned, 

19 ‘‘(C) the sales and profits of the 

20 industry concerned are depressed or 

21 declining, and 

22 ‘‘(D) it is reasonable to expect 

23 that the plan will be continued only if 

24 the waiver is granted. 
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1 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For 

2 purposes of this section and part III of 

3 this subchapter, the term ‘waived funding 

4 deficiency’ means the portion of the min5 imum funding standard under subsection 

6 (a) (determined without regard to the 

7 waiver) for a plan year waived by the 

8 Secretary and not satisfied by employer 

9 contributions. 

10 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE11 EMPLOYER PLANS, CONSULTATIONS.—

12 ‘‘(A) SECURITY MAY BE REQUIRED.—

13 ‘‘(i) IN GENERAL.—Except as 

14 provided in subparagraph (C), the 

15 Secretary may require an em16 ployer maintaining a defined ben17 efit plan which is not a multiem18 ployer plan to provide security to 

19 such plan as a condition for 

20 granting or modifying a waiver 

21 under paragraph (1). 

22 ‘‘(ii) SPECIAL RULES.—Any secu23 rity provided under clause (i) may 

24 be perfected and enforced only by 

25 the Pension Benefit Guaranty 
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1 Corporation, or at the direction of 

2 the Corporation, by a contrib3 uting sponsor (within the mean4 ing of section 4001(a)(13) of the 

5 Employee Retirement Income Se6 curity Act of 1974), or a member 

7 of such sponsor’s controlled 

8 group (within the meaning of sec9 tion 4001(a)(14) of such Act). 

10 ‘‘(B) CONSULTATION WITH THE PEN11 SION BENEFIT GUARANTY CORPORA12 TION.—Except as provided in subpara13 graph (C), the Secretary shall, before 

14 granting or modifying a waiver under 

15 this subsection with respect to a plan 

16 described in subparagraph (A)(i)—

17 ‘‘(i) provide the Pension Ben18 efit Guaranty Corporation with—

19 ‘‘(I) notice of the com20 pleted application for any 

21 waiver or modification, and 

22 ‘‘(II) an opportunity to 

23 comment on such application 

24 within 30 days after receipt of 

25 such notice, and 
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1 ‘‘(ii) consider—

2 ‘‘(I) any comments of the 

3 Corporation under clause 

4 (i)(II), and 

5 ‘‘(II) any views of any em6 ployee organization (within 

7 the meaning of section 3(4) of 

8 the Employee Retirement In9 come Security Act of 1974) 

10 representing participants in 

11 the plan which are submitted 

12 in writing to the Secretary in 

13 connection with such applica14 tion. 

15 Information provided to the Corpora16 tion under this subparagraph shall be 

17 considered tax return information 

18 and subject to the safeguarding and 

19 reporting requirements of section 

20 6103(p). 

21 ‘‘(C) EXCEPTION FOR CERTAIN WAIV22 ERS.—

23 ‘‘(i) IN GENERAL.—The pre24 ceding provisions of this para25 graph shall not apply to any plan 
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1 with respect to which the sum 

2 of—

3 ‘‘(I) the aggregate unpaid 

4 minimum required contribu5 tion (within the meaning of 

6 section 4971(c)(4)) for the plan 

7 year and all preceding plan 

8 years, and 

9 ‘‘(II) the present value of 

10 all waiver amortization in11 stallments determined for the 

12 plan year and succeeding 

13 plan years under section 

14 430(e)(2), 

15 is less than $1,000,000. 

16 ‘‘(ii) TREATMENT OF WAIVERS

17 FOR WHICH APPLICATIONS ARE PEND18 ING.—The amount described in 

19 clause (i)(I) shall include any in20 crease in such amount which 

21 would result if all applications for 

22 waivers of the minimum funding 

23 standard under this subsection 

24 which are pending with respect 

25 to such plan were denied. 
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1 ‘‘(5) SPECIAL RULES FOR SINGLE-EM2 PLOYER PLANS.—

3 ‘‘(A) APPLICATION MUST BE SUBMITTED BEFORE DATE 21 4 ⁄2 MONTHS AFTER

5 CLOSE OF YEAR.—In the case of a de6 fined benefit plan which is not a mul7 tiemployer plan, no waiver may be 

8 granted under this subsection with 

9 respect to any plan for any plan year 

10 unless an application therefor is sub11 mitted to the Secretary not later than 

12 the 15th day of the 3rd month begin13 ning after the close of such plan year. 

14 ‘‘(B) SPECIAL RULE IF EMPLOYER IS

15 MEMBER OF CONTROLLED GROUP.—In 

16 the case of a defined benefit plan 

17 which is not a multiemployer plan, if 

18 an employer is a member of a con19 trolled group, the temporary substan20 tial business hardship requirements 

21 of paragraph (1) shall be treated as 

22 met only if such requirements are 

23 met— 

24 ‘‘(i) with respect to such em25 ployer, and 
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1 ‘‘(ii) with respect to the con2 trolled group of which such em3 ployer is a member (determined 

4 by treating all members of such 

5 group as a single employer). 

6 The Secretary may provide that an 

7 analysis of a trade or business or in8 dustry of a member need not be con9 ducted if the Secretary determines 

10 such analysis is not necessary be11 cause the taking into account of such 

12 member would not significantly affect 

13 the determination under this para14 graph. 

15 ‘‘(6) ADVANCE NOTICE.—

16 ‘‘(A) IN GENERAL.—The Secretary 

17 shall, before granting a waiver under 

18 this subsection, require each appli19 cant to provide evidence satisfactory 

20 to the Secretary that the applicant 

21 has provided notice of the filing of 

22 the application for such waiver to to 

23 each affected party (as defined in sec24 tion 4001(a)(21) of the Employee Re25 tirement Income Security Act of 
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1 1974). Such notice shall include a de2 scription of the extent to which the 

3 plan is funded for benefits which are 

4 guaranteed under title IV and for 

5 benefit liabilities. 

6 ‘‘(B) CONSIDERATION OF RELEVANT

7 INFORMATION.—The Secretary shall 

8 consider any relevant information 

9 provided by a person to whom notice 

10 was given under subparagraph (A). 

11 ‘‘(7) RESTRICTION ON PLAN AMEND12 MENTS.—

13 ‘‘(A) IN GENERAL.—No amendment 

14 of a plan which increases the liabil15 ities of the plan by reason of any in16 crease in benefits, any change in the 

17 accrual of benefits, or any change in 

18 the rate at which benefits become 

19 nonforfeitable under the plan shall be 

20 adopted if a waiver under this sub21 section or an extension of time under 

22 section 431(d) is in effect with respect 

23 to the plan, or if a plan amendment 

24 described in subsection (d)(2) has 

25 been made at any time in the pre-
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1 ceding 12 months (24 months in the 

2 case of a multiemployer plan). If a 

3 plan is amended in violation of the 

4 preceding sentence, any such waiver, 

5 or extension of time, shall not apply 

6 to any plan year ending on or after 

7 the date on which such amendment is 

8 adopted. 

9 ‘‘(B) EXCEPTION.—Paragraph (1) 

10 shall not apply to any plan amend11 ment which—

12 ‘‘(i) the Secretary determines 

13 to be reasonable and which pro14 vides for only de minimis in15 creases in the liabilities of the 

16 plan, 

17 ‘‘(ii) only repeals an amend18 ment described in subsection 

19 (d)(2), or 

20 ‘‘(iii) is required as a condi21 tion of qualification under part I 

22 of subchapter D, of chapter 1. 

23 ‘‘(d) MISCELLANEOUS RULES.—

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

25 the funding method, the valuation date, 
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1 or a plan year for a plan is changed, the 

2 change shall take effect only if approved 

3 by the Secretary. 

4 ‘‘(2) CERTAIN RETROACTIVE PLAN

5 AMENDMENTS.—For purposes of this sec6 tion, any amendment applying to a plan 

7 year which—

8 ‘‘(A) is adopted after the close of 

such plan year but no later than 21 9 ⁄2

10 months after the close of the plan 

11 year (or, in the case of a multiem12 ployer plan, no later than 2 years 

13 after the close of such plan year), 

14 ‘‘(B) does not reduce the accrued 

15 benefit of any participant determined 

16 as of the beginning of the first plan 

17 year to which the amendment ap18 plies, and 

19 ‘‘(C) does not reduce the accrued 

20 benefit of any participant determined 

21 as of the time of adoption except to 

22 the extent required by the cir23 cumstances, 

24 shall, at the election of the plan adminis25 trator, be deemed to have been made on 
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1 the first day of such plan year. No 

2 amendment described in this paragraph 

3 which reduces the accrued benefits of 

4 any participant shall take effect unless 

5 the plan administrator files a notice with 

6 the Secretary notifying him of such 

7 amendment and the Secretary has ap8 proved such amendment, or within 90 

9 days after the date on which such notice 

10 was filed, failed to disapprove such 

11 amendment. No amendment described in 

12 this subsection shall be approved by the 

13 Secretary unless the Secretary deter14 mines that such amendment is necessary 

15 because of a substantial business hard16 ship (as determined under subsection 

17 (c)(2)) and that a waiver under sub18 section (c) (or, in the case of a multiem19 ployer plan, any extension of the amorti20 zation period under section 431(d)) is un21 available or inadequate. 

22 ‘‘(3) CONTROLLED GROUP.—For pur23 poses of this section, the term ‘controlled 

24 group’ means any group treated as a sin-
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1 gle employer under subsection (b), (c), 

2 (m), or (o) of section 414. 

3 ‘‘(e) PLANS TO WHICH SECTION APPLIES.—

4 ‘‘(1) IN GENERAL.—Except as provided 

5 in paragraph (2), this section applies to a 

6 plan if, for any plan year beginning after 

7 December 31, 2006—

8 ‘‘(A) such plan included a trust 

9 which qualified (or was determined 

10 by the Secretary to have qualified) 

11 under section 401(a), or 

12 ‘‘(B) such plan satisfied (or was 

13 determined by the Secretary to have 

14 satisfied) the requirements of section 

15 403(a). 

16 ‘‘(2) EXCEPTIONS.—This section shall 

17 not apply to—

18 ‘‘(A) any profit-sharing or stock 

19 bonus plan, 

20 ‘‘(B) any insurance contract plan 

21 described in paragraph (3), 

22 ‘‘(C) any governmental plan (with23 in the meaning of section 414(d)), 

24 ‘‘(D) any church plan (within the 

25 meaning of section 414(e)) with re-
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1 spect to which the election provided 

2 by section 410(d) has not been made, 

3 ‘‘(E) any plan which has not, at 

4 any time after September 2, 1974, pro5 vided for employer contributions, or 

6 ‘‘(F) any plan established and 

7 maintained by a society, order, or as8 sociation described in section 

9 501(c)(8) or (9), if no part of the con10 tributions to or under such plan are 

11 made by employers of participants in 

12 such plan. 

13 No plan described in subparagraph (C), 

14 (D), or (F) shall be treated as a qualified 

15 plan for purposes of section 401(a) unless 

16 such plan meets the requirements of sec17 tion 401(a)(7) as in effect on September 1, 

18 1974. 

19 ‘‘(3) CERTAIN INSURANCE CONTRACT

20 PLANS.—A plan is described in this para21 graph if—

22 ‘‘(A) the plan is funded exclusively 

23 by the purchase of individual insur24 ance contracts, 
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1 ‘‘(B) such contracts provide for 

2 level annual premium payments to be 

3 paid extending not later than the re4 tirement age for each individual par5 ticipating in the plan, and com6 mencing with the date the individual 

7 became a participant in the plan (or, 

8 in the case of an increase in benefits, 

9 commencing at the time such in10 crease becomes effective), 

11 ‘‘(C) benefits provided by the plan 

12 are equal to the benefits provided 

13 under each contract at normal retire14 ment age under the plan and are 

15 guaranteed by an insurance carrier 

16 (licensed under the laws of a State to 

17 do business with the plan) to the ex18 tent premiums have been paid, 

19 ‘‘(D) premiums payable for the 

20 plan year, and all prior plan years, 

21 under such contracts have been paid 

22 before lapse or there is reinstatement 

23 of the policy, 

24 ‘‘(E) no rights under such con25 tracts have been subject to a security 
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1 interest at any time during the plan 

2 year, and 

3 ‘‘(F) no policy loans are out4 standing at any time during the plan 

5 year. 

6 A plan funded exclusively by the pur7 chase of group insurance contracts which 

8 is determined under regulations pre9 scribed by the Secretary to have the same 

10 characteristics as contracts described in 

11 the preceding sentence shall be treated 

12 as a plan described in this paragraph.’’. 

13 (b) EFFECTIVE DATE.—The amendments 

14 made by this section shall apply to plan years 

15 beginning after December 31, 2006. 

16 SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DE17 FINED BENEFIT PENSION PLANS. 

18 (a) IN GENERAL.—Subchapter D of chapter 

19 1 of the Internal Revenue Code of 1986 (relat20 ing to deferred compensation, etc.) is amend21 ed by adding at the end the following new 

22 part: 
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1 ‘‘PART III—MINIMUM FUNDING STANDARDS FOR 

2 SINGLE-EMPLOYER DEFINED BENEFIT PEN3 SION PLANS 

4 ‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE5 EMPLOYER DEFINED BENEFIT PENSION 

6 PLANS. 

7 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—

8 For purposes of this section and section 

9 412(a)(2)(A), except as provided in subsection 

10 (f), the term ‘minimum required contribution’

11 means, with respect to any plan year of a de12 fined benefit plan which is not a multiem13 ployer plan—

14 ‘‘(1) in any case in which the value of 

15 plan assets of the plan (as reduced under 

16 subsection (f)(4)(B)) is less than the fund17 ing target of the plan for the plan year, 

18 the sum of—

19 ‘‘(A) the target normal cost of the 

20 plan for the plan year, 

21 ‘‘(B) the shortfall amortization 

22 charge (if any) for the plan for the 

23 plan year determined under sub24 section (c), and 

25 ‘‘(C) the waiver amortization 

26 charge (if any) for the plan for the 
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1 plan year as determined under sub2 section (e); 

3 ‘‘(2) in any case in which the value of 

4 plan assets of the plan (as reduced under 

5 subsection (f)(4)(B)) exceeds the funding 

6 target of the plan for the plan year, the 

7 target normal cost of the plan for the 

8 plan year reduced by such excess; or 

9 ‘‘(3) in any other case, the target nor10 mal cost of the plan for the plan year. 

11 ‘‘(b) TARGET NORMAL COST.—For purposes 

12 of this section, except as provided in sub13 section (i)(2) with respect to plans in at-risk 

14 status, the term ‘target normal cost’ means, 

15 for any plan year, the present value of all ben16 efits which are expected to accrue or to be 

17 earned under the plan during the plan year. 

18 For purposes of this subsection, if any benefit 

19 attributable to services performed in a pre20 ceding plan year is increased by reason of any 

21 increase in compensation during the current 

22 plan year, the increase in such benefit shall 

23 be treated as having accrued during the cur24 rent plan year. 

25 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.—
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1 ‘‘(1) IN GENERAL.—For purposes of this 

2 section, the shortfall amortization charge 

3 for a plan for any plan year is the aggre4 gate total of the shortfall amortization in5 stallments for such plan year with re6 spect to the shortfall amortization bases 

7 for such plan year and each of the 6 pre8 ceding plan years. 

9 ‘‘(2) SHORTFALL AMORTIZATION INSTALL10 MENT.—The plan sponsor shall determine, 

11 with respect to the shortfall amortization 

12 base of the plan for any plan year, the 

13 amounts necessary to amortize such 

14 shortfall amortization base, in level an15 nual installments over a period of 7 plan 

16 years beginning with such plan year. For 

17 purposes of paragraph (1), the annual in18 stallment of such amortization for each 

19 plan year in such 7-plan-year period is 

20 the shortfall amortization installment for 

21 such plan year with respect to such 

22 shortfall amortization base. In deter23 mining any shortfall amortization install24 ment under this paragraph, the plan 

25 sponsor shall use the segment rates de-
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1 termined under subparagraph (C) of sub2 section (h)(2), applied under rules similar 

3 to the rules of subparagraph (B) of sub4 section (h)(2). 

5 ‘‘(3) SHORTFALL AMORTIZATION BASE.—

6 For purposes of this section, the shortfall 

7 amortization base of a plan for a plan 

8 year is the excess (if any) of—

9 ‘‘(A) the funding shortfall of such 

10 plan for such plan year, over 

11 ‘‘(B) the sum of—

12 ‘‘(i) the present value (deter13 mined using the segment rates de14 termined under subparagraph (C) 

15 of subsection (h)(2), applied 

16 under rules similar to the rules of 

17 subparagraph (B) of subsection 

18 (h)(2)) of the aggregate total of 

19 the shortfall amortization install20 ments, for such plan year and the 

21 5 succeeding plan years, which 

22 have been determined with re23 spect to the shortfall amortization 

24 bases of the plan for each of the 6 
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1 plan years preceding such plan 

2 year, and 

3 ‘‘(ii) the present value (as so 

4 determined) of the aggregate total 

5 of the waiver amortization install6 ments for such plan year and the 

7 5 succeeding plan years, which 

8 have been determined with re9 spect to the waiver amortization 

10 bases of the plan for each of the 5 

11 plan years preceding such plan 

12 year. 

13 In any case in which the value of plan 

14 assets of the plan (as reduced under 

15 subsection (f)(4)(A)) is equal to or 

16 greater than the funding target of the 

17 plan for the plan year, the shortfall 

18 amortization base of the plan for such 

19 plan year shall be zero. 

20 ‘‘(4) FUNDING SHORTFALL.—

21 ‘‘(A) IN GENERAL.—For purposes of 

22 this section, except as provided in 

23 subparagraph (B), the funding short24 fall of a plan for any plan year is the 

25 excess (if any) of—
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1 ‘‘(i) the funding target of the 

2 plan for the plan year, over 

3 ‘‘(ii) the value of plan assets of 

4 the plan (as reduced under sub5 section (f)(4)(B)) for the plan year 

6 which are held by the plan on the 

7 valuation date. 

8 ‘‘(B) TRANSITION RULE.—

9 ‘‘(i) IN GENERAL.—For purposes 

10 of paragraph (3), in the case of a 

11 non-deficit reduction plan, sub12 paragraph (A) shall be applied to 

13 plan years beginning after 2006 

14 and before 2011 by substituting 

15 for the amount described in sub16 paragraph (A)(i) the applicable 

17 percentage of the funding target 

18 of the plan for the plan year de19 termined under the following 

20 table: 

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

year: 

The applicable percentage is: 

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

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

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

2010 .................................................................................... 98 percent. 
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1 ‘‘(ii) NON-DEFICIT REDUCTION

2 PLAN.—For purposes of clause (i), 

3 the term ‘non-deficit reduction 

4 plan’ means any plan—

5 ‘‘(I) to which section 412 

6 (as in effect on the day before 

7 the date of the enactment of 

8 the Pension Protection Act of 

9 2005) applied for the plan 

10 year beginning in 2006, and 

11 ‘‘(II) to which subsection 

12 (l) of such section (as so in ef13 fect) did not apply for such 

14 plan year. 

15 ‘‘(5) EARLY DEEMED AMORTIZATION UPON

16 ATTAINMENT OF FUNDING TARGET.—In any 

17 case in which the funding shortfall of a 

18 plan for a plan year is zero, for purposes 

19 of determining the shortfall amortization 

20 charge for such plan year and succeeding 

21 plan years, the shortfall amortization 

22 bases for all preceding plan years (and all 

23 shortfall amortization installments deter24 mined with respect to such bases) shall 

25 be reduced to zero. 
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1 ‘‘(d) RULES RELATING TO FUNDING TAR2 GET.—For purposes of this section—

3 ‘‘(1) FUNDING TARGET.—Except as pro4 vided in subsection (i)(1) with respect to 

5 plans in at-risk status, the funding target 

6 of a plan for a plan year is the present 

7 value of all liabilities to participants and 

8 their beneficiaries under the plan for the 

9 plan year. 

10 ‘‘(2) FUNDING TARGET ATTAINMENT PER11 CENTAGE.—The ‘funding target attainment 

12 percentage’ of a plan for a plan year is 

13 the ratio (expressed as a percentage) 

14 which—

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

16 the plan year (as reduced under sub17 section (f)(4)(B)), bears to 

18 ‘‘(B) the funding target of the plan 

19 for the plan year (determined without 

20 regard to subsection (i)(1)). 

21 ‘‘(e) WAIVER AMORTIZATION CHARGE.—

22 ‘‘(1) DETERMINATION OF WAIVER AMORTI23 ZATION CHARGE.—The waiver amortization 

24 charge (if any) for a plan for any plan 

25 year is the aggregate total of the waiver 
231 

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1 amortization installments for such plan 

2 year with respect to the waiver amortiza3 tion bases for each of the 5 preceding 

4 plan years. 

5 ‘‘(2) WAIVER AMORTIZATION INSTALL6 MENT.—The plan sponsor shall determine, 

7 with respect to the waiver amortization 

8 base of the plan for any plan year, the 

9 amounts necessary to amortize such 

10 waiver amortization base, in level annual 

11 installments over a period of 5 plan years 

12 beginning with the succeeding plan year. 

13 For purposes of paragraph (1), the annual 

14 installment of such amortization for each 

15 plan year in such 5-plan year period is 

16 the waiver amortization installment for 

17 such plan year with respect to such waiv18 er amortization base. 

19 ‘‘(3) INTEREST RATE.—In determining 

20 any waiver amortization installment 

21 under this subsection, the plan sponsor 

22 shall use the segment rates determined 

23 under subparagraph (C) of subsection 

24 (h)(2), applied under rules similar to the 
232 

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1 rules of subparagraph (B) of subsection 

2 (h)(2). 

3 ‘‘(4) WAIVER AMORTIZATION BASE.—The 

4 waiver amortization base of a plan for a 

5 plan year is the amount of the waived 

6 funding deficiency (if any) for such plan 

7 year under section 412(c). 

8 ‘‘(5) EARLY DEEMED AMORTIZATION UPON

9 ATTAINMENT OF FUNDING TARGET.—In any 

10 case in which the funding shortfall of a 

11 plan for a plan year is zero, for purposes 

12 of determining the waiver amortization 

13 charge for such plan year and succeeding 

14 plan years, the waiver amortization base 

15 for all preceding plan years shall be re16 duced to zero. 

17 ‘‘(f) REDUCTION OF MINIMUM REQUIRED CON18 TRIBUTION BY PRE-FUNDING BALANCE AND FUND19 ING STANDARD CARRYOVER BALANCE.—

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

21 ‘‘(A) PRE-FUNDING BALANCE.—The 

22 plan sponsor of a defined benefit plan 

23 which is not a multiemployer plan 

24 may elect to maintain a pre-funding 

25 balance. 
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1 ‘‘(B) FUNDING STANDARD CARRY2 OVER BALANCE.—

3 ‘‘(i) IN GENERAL.—In the case 

4 of a defined benefit plan (other 

5 than a multiemployer plan) de6 scribed in clause (ii), the plan 

7 sponsor may elect to maintain a 

8 funding standard carryover bal9 ance, until such balance is re10 duced to zero. 

11 ‘‘(ii) PLANS MAINTAINING FUND12 ING STANDARD ACCOUNT IN 2006.—A 

13 plan is described in this clause if 

14 the plan—

15 ‘‘(I) was in effect for a 

16 plan year beginning in 2006, 

17 and 

18 ‘‘(II) had a positive bal19 ance in the funding standard 

20 account under section 412(b) 

21 as in effect for such plan year 

22 and determined as of the end 

23 of such plan year. 

24 ‘‘(2) APPLICATION OF BALANCES.—A pre25 funding balance and a funding standard 
234 

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1 carryover balance maintained pursuant 

2 to this paragraph—

3 ‘‘(A) shall be available for cred4 iting against the minimum required 

5 contribution, pursuant to an election 

6 under paragraph (3), 

7 ‘‘(B) shall be applied as a reduc8 tion in the amount treated as the 

9 value of plan assets for purposes of 

10 this section, to the extent provided in 

11 paragraph (4), and 

12 ‘‘(C) may be reduced at any time, 

13 pursuant to an election under para14 graph (5). 

15 ‘‘(3) ELECTION TO APPLY BALANCES

16 AGAINST MINIMUM REQUIRED CONTRIBU17 TION.—

18 ‘‘(A) IN GENERAL.—Except as pro19 vided in subparagraphs (B) and (C), 

20 in the case of any plan year in which 

21 the plan sponsor elects to credit 

22 against the minimum required con23 tribution for the current plan year all 

24 or a portion of the pre-funding bal25 ance or the funding standard carry-
235 

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1 over balance for the current plan 

2 year (not in excess of such minimum 

3 required contribution), the minimum 

4 required contribution for the plan 

5 year shall be reduced by the amount 

6 so credited by the plan sponsor. For 

7 purposes of the preceding sentence, 

8 the minimum required contribution 

9 shall be determined after taking into 

10 account any waiver under section 

11 412(c). 

12 ‘‘(B) COORDINATION WITH FUNDING

13 STANDARD CARRYOVER BALANCE.—To 

14 the extent that any plan has a fund15 ing standard carryover balance great16 er than zero, no amount of the pre17 funding balance of such plan may be 

18 credited under this paragraph in re19 ducing the minimum required con20 tribution. 

21 ‘‘(C) LIMITATION FOR UNDERFUNDED

22 PLANS.—The preceding provisions of 

23 this paragraph shall not apply for 

24 any plan year if the ratio (expressed 

25 as a percentage) which—
236 

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1 ‘‘(i) the value of plan assets 

2 for the preceding plan year (as re3 duced under paragraph (4)(C)), 

4 bears to 

5 ‘‘(ii) the funding target of the 

6 plan for the preceding plan year 

7 (determined without regard to 

8 subsection (i)(1)), 

9 is less than 80 percent. 

10 ‘‘(4) EFFECT OF BALANCES ON AMOUNTS

11 TREATED AS VALUE OF PLAN ASSETS.—In the 

12 case of any plan maintaining a pre-fund13 ing balance or a funding standard carry14 over balance pursuant to this subsection, 

15 the amount treated as the value of plan 

16 assets shall be deemed to be such 

17 amount, reduced as provided in the fol18 lowing subparagraphs: 

19 ‘‘(A) APPLICABILITY OF SHORTFALL

20 AMORTIZATION BASE.—For purposes of 

21 subsection (c)(3), the value of plan as22 sets is deemed to be such amount, re23 duced by the amount of the pre-fund24 ing balance, but only if an election 

25 under paragraph (2) applying any 
237 

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1 portion of the pre-funding balance in 

2 reducing the minimum required con3 tribution is in effect for the plan year. 

4 ‘‘(B) DETERMINATION OF EXCESS AS5 SETS, FUNDING SHORTFALL, AND FUND6 ING TARGET ATTAINMENT PERCENTAGE.—

7 For purposes of subsections (a), 

8 (c)(4)(A)(ii), and (d)(2)(A), the value of 

9 plan assets is deemed to be such 

10 amount, reduced by the amount of 

11 the pre-funding balance and the fund12 ing standard carryover balance. 

13 ‘‘(C) AVAILABILITY OF BALANCES IN

14 PLAN YEAR FOR CREDITING AGAINST MIN15 IMUM REQUIRED CONTRIBUTION.—For 

16 purposes of paragraph (3)(C)(i) of this 

17 subsection, the value of plan assets is 

18 deemed to be such amount, reduced 

19 by the amount of the pre-funding bal20 ance. 

21 ‘‘(5) ELECTION TO REDUCE BALANCE

22 PRIOR TO DETERMINATIONS OF VALUE OF

23 PLAN ASSETS AND CREDITING AGAINST MIN24 IMUM REQUIRED CONTRIBUTION.—
238 

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1 ‘‘(A) IN GENERAL.—The plan spon2 sor may elect to reduce by any 

3 amount the balance of the pre-fund4 ing balance and the funding standard 

5 carryover balance for any plan year 

6 (but not below zero). Such reduction 

7 shall be effective prior to any deter8 mination of the value of plan assets 

9 for such plan year under this section 

10 and application of the balance in re11 ducing the minimum required con12 tribution for such plan for such plan 

13 year pursuant to an election under 

14 paragraph (2). 

15 ‘‘(B) COORDINATION BETWEEN PRE16 FUNDING BALANCE AND FUNDING STAND17 ARD CARRYOVER BALANCE.—To the ex18 tent that any plan has a funding 

19 standard carryover balance greater 

20 than zero, no election may be made 

21 under subparagraph (A) with respect 

22 to the pre-funding balance. 

23 ‘‘(6) PRE-FUNDING BALANCE.—

24 ‘‘(A) IN GENERAL.—A pre-funding 

25 balance maintained by a plan shall 
239 

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1 consist of a beginning balance of 

2 zero, increased and decreased to the 

3 extent provided in subparagraphs (B) 

4 and (C), and adjusted further as pro5 vided in paragraph (8). 

6 ‘‘(B) INCREASES.—As of the valu7 ation date for each plan year begin8 ning after 2007, the pre-funding bal9 ance of a plan shall be increased by 

10 the amount elected by the plan spon11 sor for the plan year. Such amount 

12 shall not exceed the excess (if any) 

13 of—

14 ‘‘(i) the aggregate total of em15 ployer contributions to the plan 

16 for the preceding plan year, over 

17 ‘‘(ii) the minimum required 

18 contribution for such preceding 

19 plan year (increased by interest 

20 on any portion of such minimum 

21 required contribution remaining 

22 unpaid as of the valuation date 

23 for the current plan year, at the 

24 effective interest rate for the plan 

25 for the preceding plan year, for 
240 

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1 the period beginning with the 

2 first day of such preceding plan 

3 year and ending on the date that 

4 payment of such portion is made). 

5 ‘‘(C) DECREASES.—As of the valu6 ation date for each plan year after 

7 2007, the pre-funding balance of a 

8 plan shall be decreased (but not 

9 below zero) by the sum of—

10 ‘‘(i) the amount of such bal11 ance credited under paragraph 

12 (2) (if any) in reducing the min13 imum required contribution of 

14 the plan for the preceding plan 

15 year, and 

16 ‘‘(ii) any reduction in such 

17 balance elected under paragraph 

18 (5). 

19 ‘‘(7) FUNDING STANDARD CARRYOVER

20 BALANCE.—

21 ‘‘(A) IN GENERAL.—A funding 

22 standard carryover balance main23 tained by a plan shall consist of a be24 ginning balance determined under 

25 subparagraph (B), decreased to the 
241 

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1 extent provided in subparagraph (C), 

2 and adjusted further as provided in 

3 paragraph (8). 

4 ‘‘(B) BEGINNING BALANCE.—The be5 ginning balance of the funding stand6 ard carryover balance shall be the 

7 positive balance described in para8 graph (1)(B)(ii)(II). 

9 ‘‘(C) DECREASES.—As of the valu10 ation date for each plan year after 

11 2007, the funding standard carryover 

12 balance of a plan shall be decreased 

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

14 ‘‘(i) the amount of such bal15 ance credited under paragraph 

16 (2) (if any) in reducing the min17 imum required contribution of 

18 the plan for the preceding plan 

19 year, and 

20 ‘‘(ii) any reduction in such 

21 balance elected under paragraph 

22 (5). 

23 ‘‘(8) ADJUSTMENTS TO BALANCES.—In 

24 determining the pre-funding balance or 

25 the funding standard carryover balance 
242 

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1 of a plan as of the valuation date (before 

2 applying any increase or decrease under 

3 paragraph (6) or (7)), the plan sponsor 

4 shall, in accordance with regulations 

5 which shall be prescribed by the Sec6 retary, adjust such balance so as to re7 flect the rate of net gain or loss (deter8 mined, notwithstanding subsection (g)(3), 

9 on the basis of fair market value) experi10 enced by all plan assets for the period be11 ginning with the valuation date for the 

12 preceding plan year and ending with the 

13 date preceding the valuation date for the 

14 current plan year, properly taking into 

15 account, in accordance with such regula16 tions, all contributions, distributions, and 

17 other plan payments made during such 

18 period. 

19 ‘‘(9) ELECTIONS.—Elections under this 

20 subsection shall be made at such times, 

21 and in such form and manner, as shall be 

22 prescribed in regulations of the Sec23 retary. 

24 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL25 ITIES.—
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1 ‘‘(1) TIMING OF DETERMINATIONS.—Ex2 cept as otherwise provided under this 

3 subsection, all determinations under this 

4 section for a plan year shall be made as 

5 of the valuation date of the plan for such 

6 plan year. 

7 ‘‘(2) VALUATION DATE.—For purposes of 

8 this section—

9 ‘‘(A) IN GENERAL.—Except as pro10 vided in subparagraph (B), the valu11 ation date of a plan for any plan year 

12 shall be the first day of the plan year. 

13 ‘‘(B) EXCEPTION FOR SMALL

14 PLANS.—If, on each day during the 

15 preceding plan year, a plan had 500 

16 or fewer participants, the plan may 

17 designate any day during the plan 

18 year as its valuation date for such 

19 plan year and succeeding plan years. 

20 For purposes of this subparagraph, 

21 all defined benefit plans (other than 

22 multiemployer plans) maintained by 

23 the same employer (or any member of 

24 such employer’s controlled group) 

25 shall be treated as 1 plan, but only 
244 

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1 participants with respect to such em2 ployer or member shall be taken into 

3 account. 

4 ‘‘(C) APPLICATION OF CERTAIN

5 RULES IN DETERMINATION OF PLAN

6 SIZE.—For purposes of this para7 graph—

8 ‘‘(i) PLANS NOT IN EXISTENCE IN

9 PRECEDING YEAR.—In the case of 

10 the first plan year of any plan, 

11 subparagraph (B) shall apply to 

12 such plan by taking into account 

13 the number of participants that 

14 the plan is reasonably expected to 

15 have on days during such first 

16 plan year. 

17 ‘‘(ii) PREDECESSORS.—Any ref18 erence in subparagraph (B) to an 

19 employer shall include a ref20 erence to any predecessor of such 

21 employer. 

22 ‘‘(3) AUTHORIZATION OF USE OF ACTU23 ARIAL VALUE.—For purposes of this sec24 tion, the value of plan assets shall be de25 termined on the basis of any reasonable 
245 

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1 actuarial method of valuation which 

2 takes into account fair market value and 

3 which is permitted under regulations 

4 prescribed by the Secretary, except 

5 that—

6 ‘‘(A) any such method providing 

7 for averaging of fair market values 

8 may not provide for averaging of 

9 such values over more than the 3 

10 most recent plan years (including the 

11 current plan year), and 

12 ‘‘(B) any such method may not re13 sult in a determination of the value of 

14 plan assets which, at any time, is 

15 lower than 90 percent or greater than 

16 110 percent of the fair market value 

17 of such assets at such time. 

18 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE19 CEIPTS.—For purposes of this section—

20 ‘‘(A) CONTRIBUTIONS FOR PRIOR

21 PLAN YEARS TAKEN INTO ACCOUNT.—For 

22 purposes of determining the value of 

23 plan assets for any current plan year, 

24 in any case in which a contribution 

25 properly allocable to amounts owed 
246 

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1 for a preceding plan year is made on 

2 or after the valuation date of the plan 

3 for such current plan year, such con4 tribution shall be taken into account, 

5 except that any such contribution 

6 made during any such current plan 

7 year beginning after 2007 shall be 

8 taken into account only in an amount 

9 equal to its present value (deter10 mined using the effective rate of in11 terest for the plan for the preceding 

12 plan year) as of the valuation date of 

13 the plan for such current plan year. 

14 ‘‘(B) CONTRIBUTIONS FOR CURRENT

15 PLAN YEAR DISREGARDED.—For pur16 poses of determining the value of 

17 plan assets for any current plan year, 

18 contributions which are properly al19 locable to amounts owed for such 

20 plan year shall not be taken into ac21 count, and, in the case of any such 

22 contribution made before the valu23 ation date of the plan for such plan 

24 year, such value of plan assets shall 

25 be reduced for interest on such 
247 

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1 amount determined using the effec2 tive rate of interest of the plan for 

3 the current plan year for the period 

4 beginning when such payment was 

5 made and ending on the valuation 

6 date of the plan. 

7 ‘‘(5) ACCOUNTING FOR PLAN LIABIL8 ITIES.—For purposes of this section—

9 ‘‘(A) LIABILITIES TAKEN INTO AC10 COUNT FOR CURRENT PLAN YEAR.—In 

11 determining the value of liabilities 

12 under a plan for a plan year, liabil13 ities shall be taken into account to 

14 the extent attributable to benefits (in15 cluding any early retirement or simi16 lar benefit) accrued or earned as of 

17 the beginning of the plan year. 

18 ‘‘(B) ACCRUALS DURING CURRENT

19 PLAN YEAR DISREGARDED.—For pur20 poses of subparagraph (A), benefits 

21 accrued or earned during such plan 

22 year shall not be taken into account, 

23 irrespective of whether the valuation 

24 date of the plan for such plan year is 
248 

•HR 2830 RH 

1 later than the first day of such plan 

2 year. 

3 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METH4 ODS.—

5 ‘‘(1) IN GENERAL.—Subject to this sub6 section, the determination of any present 

7 value or other computation under this 

8 section shall be made on the basis of ac9 tuarial assumptions and methods—

10 ‘‘(A) each of which is reasonable 

11 (taking into account the experience 

12 of the plan and reasonable expecta13 tions), and 

14 ‘‘(B) which, in combination, offer 

15 the actuary’s best estimate of antici16 pated experience under the plan. 

17 ‘‘(2) INTEREST RATES.—

18 ‘‘(A) EFFECTIVE INTEREST RATE.—

19 For purposes of this section, the term 

20 ‘effective interest rate’ means, with 

21 respect to any plan for any plan year, 

22 the single rate of interest which, if 

23 used to determine the present value 

24 of the plan’s liabilities referred to in 

25 subsection (d)(1), would result in an 
249 

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1 amount equal to the funding target of 

2 the plan for such plan year. 

3 ‘‘(B) INTEREST RATES FOR DETER4 MINING FUNDING TARGET.—For pur5 poses of determining the funding tar6 get of a plan for any plan year, the in7 terest rate used in determining the 

8 present value of the liabilities of the 

9 plan shall be—

10 ‘‘(i) in the case of liabilities 

11 reasonably determined to be pay12 able during the 5-year period be13 ginning on the first day of the 

14 plan year, the first segment rate 

15 with respect to the applicable 

16 month, 

17 ‘‘(ii) in the case of liabilities 

18 reasonably determined to be pay19 able during the 15-year period be20 ginning at the end of the period 

21 described in clause (i), the second 

22 segment rate with respect to the 

23 applicable month, and 

24 ‘‘(iii) in the case of liabilities 

25 reasonably determined to be pay-
250 

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1 able after the period described in 

2 clause (ii), the third segment rate 

3 with respect to the applicable 

4 month. 

5 ‘‘(C) SEGMENT RATES.—For pur6 poses of this paragraph—

7 ‘‘(i) FIRST SEGMENT RATE.—The 

8 term ‘first segment rate’ means, 

9 with respect to any month, the 

10 single rate of interest which shall 

11 be determined by the Secretary 

12 for such month on the basis of the 

13 corporate bond yield curve for 

14 such month, taking into account 

15 only that portion of such yield 

16 curve which is based on bonds 

17 maturing during the 5-year pe18 riod commencing with such 

19 month. 

20 ‘‘(ii) SECOND SEGMENT RATE.—

21 The term ‘second segment rate’

22 means, with respect to any 

23 month, the single rate of interest 

24 which shall be determined by the 

25 Secretary for such month on the 
251 

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1 basis of the corporate bond yield 

2 curve for such month, taking into 

3 account only that portion of such 

4 yield curve which is based on 

5 bonds maturing during the 15- 

6 year period beginning at the end 

7 of the period described in clause 

8 (i). 

9 ‘‘(iii) THIRD SEGMENT RATE.—

10 The term ‘third segment rate’

11 means, with respect to any 

12 month, the single rate of interest 

13 which shall be determined by the 

14 Secretary for such month on the 

15 basis of the corporate bond yield 

16 curve for such month, taking into 

17 account only that portion of such 

18 yield curve which is based on 

19 bonds maturing during periods 

20 beginning after the period de21 scribed in clause (ii). 

22 ‘‘(D) CORPORATE BOND YIELD

23 CURVE.—For purposes of this para24 graph—
252 

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1 ‘‘(i) IN GENERAL.—The term 

2 ‘corporate bond yield curve’

3 means, with respect to any 

4 month, a yield curve which is pre5 scribed by the Secretary for such 

6 month and which reflects a 3-year 

7 weighted average of yields on in8 vestment grade corporate bonds 

9 with varying maturities. 

10 ‘‘(ii) 3-YEAR WEIGHTED AVER11 AGE.—The term ‘3-year weighted 

12 average’ means an average deter13 mined by using a methodology 

14 under which the most recent year 

15 is weighted 50 percent, the year 

16 preceding such year is weighted 

17 35 percent, and the second year 

18 preceding such year is weighted 

19 15 percent. 

20 ‘‘(E) APPLICABLE MONTH.—For pur21 poses of this paragraph, the term ‘ap22 plicable month’ means, with respect 

23 to any plan for any plan year, the 

24 month which includes the valuation 

25 date of such plan for such plan year 
253 

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1 or, at the election of the plan sponsor, 

2 any of the 4 months which precede 

3 such month. Any election made under 

4 this subparagraph shall apply to the 

5 plan year for which the election is 

6 made and all succeeding plan years, 

7 unless the election is revoked with 

8 the consent of the Secretary. 

9 ‘‘(F) PUBLICATION REQUIREMENTS.—

10 The Secretary shall publish for each 

11 month the corporate bond yield curve 

12 (and the corporate bond yield curve 

13 reflecting the modification described 

14 in section 417(e)(3)(A)(iv)(I)) for such 

15 month and each of the rates deter16 mined under subparagraph (B) for 

17 such month. The Secretary shall also 

18 publish a description of the method19 ology used to determine such yield 

20 curve and such rates which is suffi21 ciently detailed to enable plans to 

22 make reasonable projections regard23 ing the yield curve and such rates for 

24 future months based on the plan’s 

25 projection of future interest rates. 
254 

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1 ‘‘(G) TRANSITION RULE.—

2 ‘‘(i) IN GENERAL.—Notwith3 standing the preceding provisions 

4 of this paragraph, for plan years 

5 beginning in 2007 or 2008, the 

6 first, second, or third segment 

7 rate for a plan with respect to 

8 any month shall be equal to the 

9 sum of—

10 ‘‘(I) the product of such 

11 rate for such month deter12 mined without regard to this 

13 subparagraph, multiplied by 

14 the applicable percentage, 

15 and 

16 ‘‘(II) the product of the 

17 rate determined under the 

18 rules of section 

19 412(b)(5)(B)(ii)(II) (as in effect 

20 for plan years beginning in 

21 2006), multiplied by a percent22 age equal to 100 percent 

23 minus the applicable percent24 age. 
255 

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1 ‘‘(ii) APPLICABLE PERCENT2 AGE.—For purposes of clause (i), 

the applicable percentage is 331 3 ⁄3

4 percent for plan years beginning 

in 2007 and 662 5 ⁄3 percent for plan 

6 years beginning in 2008. 

7 ‘‘(iii) NEW PLANS INELIGIBLE.—

8 Clause (i) shall not apply to any 

9 plan if the first plan year of the 

10 plan begins after December 31, 

11 2006. 

12 ‘‘(3) MORTALITY TABLE.—

13 ‘‘(A) IN GENERAL.—Except as pro14 vided in subparagraph (C), the mor15 tality table used in determining any 

16 present value or making any com17 putation under this section shall be 

18 the RP–2000 Combined Mortality 

19 Table, using Scale AA, as published 

20 by the Society of Actuaries, as in ef21 fect on the date of the enactment of 

22 the Pension Protection Act of 2005 

23 and as revised from time to time 

24 under subparagraph (B). 
256 

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1 ‘‘(B) PERIODIC REVISION.—The Sec2 retary shall (at least every 10 years) 

3 make revisions in any table in effect 

4 under subparagraph (A) to reflect the 

5 actual experience of pension plans 

6 and projected trends in such experi7 ence. 

8 ‘‘(C) SUBSTITUTE MORTALITY

9 TABLE.—

10 ‘‘(i) IN GENERAL.—Upon re11 quest by the plan sponsor and ap12 proval by the Secretary for a pe13 riod not to exceed 10 years, a 

14 mortality table which meets the 

15 requirements of clause (ii) shall 

16 be used in determining any 

17 present value or making any com18 putation under this section. A 

19 mortality table described in this 

20 clause shall cease to be in effect if 

21 the plan actuary determines at 

22 any time that such table does not 

23 meet the requirements of sub24 clauses (I) and (II) of clause (ii). 
257 

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1 ‘‘(ii) REQUIREMENTS.—A mor2 tality table meets the require3 ments of this clause if the Sec4 retary determines that—

5 ‘‘(I) such table reflects the 

6 actual experience of the pen7 sion plan and projected 

8 trends in such experience, 

9 and 

10 ‘‘(II) such table is signifi11 cantly different from the table 

12 described in subparagraph 

13 (A). 

14 ‘‘(iii) DEADLINE FOR DISPOSI15 TION OF APPLICATION.—Any mor16 tality table submitted to the Sec17 retary for approval under this 

18 subparagraph shall be treated as 

19 in effect for the succeeding plan 

20 year unless the Secretary, during 

21 the 180-day period beginning on 

22 the date of such submission, dis23 approves of such table and pro24 vides the reasons that such table 
258 

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1 fails to meet the requirements of 

2 clause (ii). 

3 ‘‘(D) TRANSITION RULE.—Under reg4 ulations of the Secretary, any dif5 ference in assumptions as set forth in 

6 the mortality table specified in sub7 paragraph (A) and assumptions as set 

8 forth in the mortality table described 

9 in section 412(l)(7)(C)(ii) (as in effect 

10 for plan years beginning in 2006) 

11 shall be phased in ratably over the 

12 first period of 5 plan years beginning 

13 in or after 2007 so as to be fully effec14 tive for the fifth plan year. The pre15 ceding sentence shall not apply to 

16 any plan if the first plan year of the 

17 plan begins after December 31, 2006. 

18 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS

19 IN THE FORM OF LUMP SUMS OR OTHER OP20 TIONAL FORMS.—For purposes of deter21 mining any present value or making any 

22 computation under this section, there 

23 shall be taken into account—

24 ‘‘(A) the probability that future 

25 benefit payments under the plan will 
259 

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1 be made in the form of optional forms 

2 of benefits provided under the plan 

3 (including lump sum distributions, 

4 determined on the basis of the plan’s 

5 experience and other related assump6 tions), and 

7 ‘‘(B) any difference in the present 

8 value of such future benefit payments 

9 resulting from the use of actuarial as10 sumptions, in determining benefit 

11 payments in any such optional form 

12 of benefits, which are different from 

13 those specified in this subsection. 

14 ‘‘(5) APPROVAL OF LARGE CHANGES IN

15 ACTUARIAL ASSUMPTIONS.—

16 ‘‘(A) IN GENERAL.—No actuarial as17 sumption used to determine the fund18 ing target for a plan to which this 

19 paragraph applies may be changed 

20 without the approval of the Sec21 retary. 

22 ‘‘(B) PLANS TO WHICH PARAGRAPH

23 APPLIES.—This paragraph shall apply 

24 to a plan only if—
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1 ‘‘(i) the plan is a defined ben2 efit plan (other than a multiem3 ployer plan) to which title IV of 

4 the Employee Retirement Income 

5 Security Act of 1974 applies, 

6 ‘‘(ii) the aggregate unfunded 

7 vested benefits as of the close of 

8 the preceding plan year (as deter9 mined under section 

10 4006(a)(3)(E)(iii) of the Employee 

11 Retirement Income Security Act 

12 of 1974) of such plan and all other 

13 plans maintained by the contrib14 uting sponsors (as defined in sec15 tion 4001(a)(13) of such Act) and 

16 members of such sponsors’ con17 trolled groups (as defined in sec18 tion 4001(a)(14) of such Act) 

19 which are covered by title IV (dis20 regarding plans with no un21 funded vested benefits) exceed 

22 $50,000,000, and 

23 ‘‘(iii) the change in assump24 tions (determined after taking 

25 into account any changes in inter-
261 

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1 est rate and mortality table) re2 sults in a decrease in the funding 

3 shortfall of the plan for the cur4 rent plan year that exceeds 

5 $50,000,000, or that exceeds 

6 $5,000,000 and that is 5 percent or 

7 more of the funding target of the 

8 plan before such change. 

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

10 ‘‘(1) FUNDING TARGET FOR PLANS IN AT11 RISK STATUS.—

12 ‘‘(A) IN GENERAL.—In any case in 

13 which a plan is in at-risk status for a 

14 plan year, the funding target of the 

15 plan for the plan year is the sum of—

16 ‘‘(i) the present value of all li17 abilities to participants and their 

18 beneficiaries under the plan for 

19 the plan year, as determined by 

20 using, in addition to the actuarial 

21 assumptions described in sub22 section (g), the supplemental ac23 tuarial assumptions described in 

24 subparagraph (B), plus 
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1 ‘‘(ii) a loading factor deter2 mined under subparagraph (C). 

3 ‘‘(B) SUPPLEMENTAL ACTUARIAL AS4 SUMPTIONS.—The actuarial assump5 tions used in determining the valu6 ation of the funding target shall in7 clude, in addition to the actuarial as8 sumptions described in subsection 

9 (h), an assumption that all partici10 pants will elect benefits at such times 

11 and in such forms as will result in the 

12 highest present value of liabilities 

13 under subparagraph (A)(i). 

14 ‘‘(C) LOADING FACTOR.—The load15 ing factor applied with respect to a 

16 plan under this paragraph for any 

17 plan year is the sum of—

18 ‘‘(i) $700, times the number of 

19 participants in the plan, plus 

20 ‘‘(ii) 4 percent of the funding 

21 target (determined without re22 gard to this paragraph) of the 

23 plan for the plan year. 

24 ‘‘(2) TARGET NORMAL COST OF AT-RISK

25 PLANS.—In any case in which a plan is in 
263 

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1 at-risk status for a plan year, the target 

2 normal cost of the plan for such plan 

3 year shall be the sum of—

4 ‘‘(A) the present value of all bene5 fits which are expected to accrue or 

6 be earned under the plan during the 

7 plan year, determined under the actu8 arial assumptions used under para9 graph (1), plus 

10 ‘‘(B) the loading factor under 

11 paragraph (1)(C), excluding the por12 tion of the loading factor described in 

13 paragraph (1)(C)(i). 

14 ‘‘(3) DETERMINATION OF AT-RISK STA15 TUS.—For purposes of this subsection, a 

16 plan is in ‘at-risk status’ for a plan year 

17 if the funding target attainment percent18 age of the plan for the preceding plan 

19 year was less than 60 percent. 

20 ‘‘(4) TRANSITION BETWEEN APPLICABLE

21 FUNDING TARGETS AND BETWEEN APPLICA22 BLE TARGET NORMAL COSTS.—

23 ‘‘(A) IN GENERAL.—In any case in 

24 which a plan which is in at-risk sta25 tus for a plan year has been in such 
264 

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1 status for a consecutive period of 

2 fewer than 5 plan years, the applica3 ble amount of the funding target and 

4 of the target normal cost shall be, in 

5 lieu of the amount determined with6 out regard to this paragraph, the sum 

7 of—

8 ‘‘(i) the amount determined 

9 under this section without regard 

10 to this subsection, plus 

11 ‘‘(ii) the transition percentage 

12 for such plan year of the excess of 

13 the amount determined under 

14 this subsection (without regard to 

15 this paragraph) over the amount 

16 determined under this section 

17 without regard to this subsection. 

18 ‘‘(B) TRANSITION PERCENTAGE.—For 

19 purposes of this paragraph, the ‘tran20 sition percentage’ for a plan year is 

21 the product derived by multiplying—

22 ‘‘(i) 20 percent, by 

23 ‘‘(ii) the number of plan years 

24 during the period described in 

25 subparagraph (A). 
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1 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CON2 TRIBUTIONS.—

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

4 section, the due date for any payment of 

5 any minimum required contribution for 

any plan year shall be 81 6 ⁄2 months after 

7 the close of the plan year. 

8 ‘‘(2) INTEREST.—Any payment required 

9 under paragraph (1) for a plan year that 

10 is made on a date other than the valu11 ation date for such plan year shall be ad12 justed for interest accruing for the period 

13 between the valuation date and the pay14 ment date, at the effective rate of interest 

15 for the plan for such plan year. 

16 ‘‘(3) ACCELERATED QUARTERLY CON17 TRIBUTION SCHEDULE FOR UNDERFUNDED

18 PLANS.—

19 ‘‘(A) INTEREST PENALTY FOR FAIL20 URE TO MEET ACCELERATED QUARTERLY

21 PAYMENT SCHEDULE.—In any case in 

22 which the plan has a funding short23 fall for the preceding plan year, if the 

24 required installment is not paid in 

25 full, then the minimum required con-
266 

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1 tribution for the plan year (as in2 creased under paragraph (2)) shall be 

3 further increased by an amount equal 

4 to the interest on the amount of the 

5 underpayment for the period of the 

6 underpayment, using an interest rate 

7 equal to the excess of—

8 ‘‘(i) 175 percent of the Federal 

9 mid-term rate (as in effect under 

10 section 1274 for the 1st month of 

11 such plan year), over 

12 ‘‘(ii) the effective rate of inter13 est for the plan for the plan year. 

14 ‘‘(B) AMOUNT OF UNDERPAYMENT, 

15 PERIOD OF UNDERPAYMENT.—For pur16 poses of subparagraph (A)—

17 ‘‘(i) AMOUNT.—The amount of 

18 the underpayment shall be the ex19 cess of—

20 ‘‘(I) the required install21 ment, over 

22 ‘‘(II) the amount (if any) of 

23 the installment contributed to 

24 or under the plan on or before 
267 

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1 the due date for the install2 ment. 

3 ‘‘(ii) PERIOD OF UNDER4 PAYMENT.—The period for which 

5 any interest is charged under this 

6 paragraph with respect to any 

7 portion of the underpayment 

8 shall run from the due date for 

9 the installment to the date on 

10 which such portion is contributed 

11 to or under the plan. 

12 ‘‘(iii) ORDER OF CREDITING CON13 TRIBUTIONS.—For purposes of 

14 clause (i)(II), contributions shall 

15 be credited against unpaid re16 quired installments in the order 

17 in which such installments are re18 quired to be paid. 

19 ‘‘(C) NUMBER OF REQUIRED INSTALL20 MENTS; DUE DATES.—For purposes of 

21 this paragraph—

22 ‘‘(i) PAYABLE IN 4 INSTALL23 MENTS.—There shall be 4 required 

24 installments for each plan year. 
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1 ‘‘(ii) TIME FOR PAYMENT OF IN2 STALLMENTS.—The due dates for 

3 required installments are set 

4 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 

5 ‘‘(D) AMOUNT OF REQUIRED INSTALL6 MENT.—For purposes of this para7 graph—

8 ‘‘(i) IN GENERAL.—The amount 

9 of any required installment shall 

10 be 25 percent of the required an11 nual payment. 

12 ‘‘(ii) REQUIRED ANNUAL PAY13 MENT.—For purposes of clause (i), 

14 the term ‘required annual pay15 ment’ means the lesser of—

16 ‘‘(I) 90 percent of the min17 imum required contribution 

18 (without regard to any waiver 

19 under section 412(c)) to the 
269 

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1 plan for the plan year under 

2 this section, or 

3 ‘‘(II) in the case of a plan 

4 year beginning after 2007, 100 

5 percent of the minimum re6 quired contribution (without 

7 regard to any waiver under 

8 section 412(c)) to the plan for 

9 the preceding plan year. 

10 Subclause (II) shall not apply if 

11 the preceding plan year referred 

12 to in such clause was not a year 

13 of 12 months. 

14 ‘‘(E) FISCAL YEARS AND SHORT

15 YEARS.—

16 ‘‘(i) FISCAL YEARS.—In applying 

17 this paragraph to a plan year be18 ginning on any date other than 

19 January 1, there shall be sub20 stituted for the months specified 

21 in this paragraph, the months 

22 which correspond thereto. 

23 ‘‘(ii) SHORT PLAN YEAR.—This 

24 subparagraph shall be applied to 

25 plan years of less than 12 months 
270 

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1 in accordance with regulations 

2 prescribed by the Secretary. 

3 ‘‘(4) LIQUIDITY REQUIREMENT IN CON4 NECTION WITH QUARTERLY CONTRIBU5 TIONS.—

6 ‘‘(A) IN GENERAL.—A plan to which 

7 this paragraph applies shall be treat8 ed as failing to pay the full amount of 

9 any required installment under para10 graph (3) to the extent that the value 

11 of the liquid assets paid in such in12 stallment is less than the liquidity 

13 shortfall (whether or not such liquid14 ity shortfall exceeds the amount of 

15 such installment required to be paid 

16 but for this paragraph). 

17 ‘‘(B) PLANS TO WHICH PARAGRAPH

18 APPLIES.—This paragraph shall apply 

19 to a plan (other than a plan that 

20 would be described in subsection 

21 (f)(2)(B) if ‘100’ were substituted for 

22 ‘500’ therein) which—

23 ‘‘(i) is required to pay install24 ments under paragraph (3) for a 

25 plan year, and 
271 

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1 ‘‘(ii) has a liquidity shortfall 

2 for any quarter during such plan 

3 year. 

4 ‘‘(C) PERIOD OF UNDERPAYMENT.—

5 For purposes of paragraph (3)(A), any 

6 portion of an installment that is 

7 treated as not paid under subpara8 graph (A) shall continue to be treated 

9 as unpaid until the close of the quar10 ter in which the due date for such in11 stallment occurs. 

12 ‘‘(D) LIMITATION ON INCREASE.—If 

13 the amount of any required install14 ment is increased by reason of sub15 paragraph (A), in no event shall such 

16 increase exceed the amount which, 

17 when added to prior installments for 

18 the plan year, is necessary to increase 

19 the funding target attainment per20 centage of the plan for the plan year 

21 (taking into account the expected in22 crease in funding target due to bene23 fits accruing or earned during the 

24 plan year) to 100 percent. 
272 

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1 ‘‘(E) DEFINITIONS.—For purposes 

2 of this subparagraph: 

3 ‘‘(i) LIQUIDITY SHORTFALL.—The 

4 term ‘liquidity shortfall’ means, 

5 with respect to any required in6 stallment, an amount equal to the 

7 excess (as of the last day of the 

8 quarter for which such install9 ment is made) of—

10 ‘‘(I) the base amount with 

11 respect to such quarter, over 

12 ‘‘(II) the value (as of such 

13 last day) of the plan’s liquid 

14 assets. 

15 ‘‘(ii) BASE AMOUNT.—

16 ‘‘(I) IN GENERAL.—The term 

17 ‘base amount’ means, with re18 spect to any quarter, an 

19 amount equal to 3 times the 

20 sum of the adjusted disburse21 ments from the plan for the 12 

22 months ending on the last day 

23 of such quarter. 

24 ‘‘(II) SPECIAL RULE.—If the 

25 amount determined under 
273 

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1 subclause (I) exceeds an 

2 amount equal to 2 times the 

3 sum of the adjusted disburse4 ments from the plan for the 36 

5 months ending on the last day 

6 of the quarter and an enrolled 

7 actuary certifies to the satis8 faction of the Secretary that 

9 such excess is the result of 

10 nonrecurring circumstances, 

11 the base amount with respect 

12 to such quarter shall be deter13 mined without regard to 

14 amounts related to those non15 recurring circumstances. 

16 ‘‘(iii) DISBURSEMENTS FROM THE

17 PLAN.—The term ‘disbursements 

18 from the plan’ means all disburse19 ments from the trust, including 

20 purchases of annuities, payments 

21 of single sums and other benefits, 

22 and administrative expenses. 

23 ‘‘(iv) ADJUSTED DISBURSE24 MENTS.—The term ‘adjusted dis25 bursements’ means disbursements 
274 

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1 from the plan reduced by the 

2 product of—

3 ‘‘(I) the plan’s funding tar4 get attainment percentage for 

5 the plan year, and 

6 ‘‘(II) the sum of the pur7 chases of annuities, payments 

8 of single sums, and such other 

9 disbursements as the Sec10 retary shall provide in regula11 tions. 

12 ‘‘(v) LIQUID ASSETS.—The term 

13 ‘liquid assets’ means cash, mar14 ketable securities, and such other 

15 assets as specified by the Sec16 retary in regulations. 

17 ‘‘(vi) QUARTER.—The term 

18 ‘quarter’ means, with respect to 

19 any required installment, the 3- 

20 month period preceding the 

21 month in which the due date for 

22 such installment occurs. 

23 ‘‘(F) REGULATIONS.—The Secretary 

24 may prescribe such regulations as are 
275 

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1 necessary to carry out this para2 graph. 

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

4 MAKE REQUIRED CONTRIBUTIONS.—

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

6 to which this subsection applies, if—

7 ‘‘(A) any person fails to make a 

8 contribution payment required by 

9 section 412 and this section before 

10 the due date for such payment, and 

11 ‘‘(B) the unpaid balance of such 

12 payment (including interest), when 

13 added to the aggregate unpaid bal14 ance of all preceding such payments 

15 for which payment was not made be16 fore the due date (including interest), 

17 exceeds $1,000,000, 

18 then there shall be a lien in favor of the 

19 plan in the amount determined under 

20 paragraph (3) upon all property and 

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

23 other person who is a member of the 

24 same controlled group of which such per25 son is a member. 
276 

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1 ‘‘(2) PLANS TO WHICH SUBSECTION AP2 PLIES.—This subsection shall apply to a 

3 defined benefit plan (other than a multi4 employer plan) for any plan year for 

5 which the funding target attainment per6 centage (as defined in subsection (d)(2)) 

7 of such plan is less than 100 percent. This 

8 subsection shall not apply to any plan to 

9 which section 4021 of the Employee Re10 tirement Income Security Act of 1974 

11 does not apply (as such section is in ef12 fect on the date of the enactment of the 

13 Pension Protection Act of 2005). 

14 ‘‘(3) AMOUNT OF LIEN.—For purposes of 

15 paragraph (1), the amount of the lien 

16 shall be equal to the aggregate unpaid 

17 balance of contribution payments re18 quired under this section and section 412 

19 for which payment has not been made be20 fore the due date. 

21 ‘‘(4) NOTICE OF FAILURE; LIEN.—

22 ‘‘(A) NOTICE OF FAILURE.—A person 

23 committing a failure described in 

24 paragraph (1) shall notify the Pension 

25 Benefit Guaranty Corporation of such 
277 

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1 failure within 10 days of the due date 

2 for the required contribution pay3 ment. 

4 ‘‘(B) PERIOD OF LIEN.—The lien im5 posed by paragraph (1) shall arise on 

6 the due date for the required con7 tribution payment and shall continue 

8 until the last day of the first plan 

9 year in which the plan ceases to be 

10 described in paragraph (1)(B). Such 

11 lien shall continue to run without re12 gard to whether such plan continues 

13 to be described in paragraph (2) dur14 ing the period referred to in the pre15 ceding sentence. 

16 ‘‘(C) CERTAIN RULES TO APPLY.—

17 Any amount with respect to which a 

18 lien is imposed under paragraph (1) 

19 shall be treated as taxes due and 

20 owing the United States and rules 

21 similar to the rules of subsections (c), 

22 (d), and (e) of section 4068 of the Em23 ployee Retirement Income Security 

24 Act of 1974 shall apply with respect to 
278 

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1 a lien imposed by subsection (a) and 

2 the amount with respect to such lien. 

3 ‘‘(5) ENFORCEMENT.—Any lien created 

4 under paragraph (1) may be perfected 

5 and enforced only by the Pension Benefit 

6 Guaranty Corporation, or at the direction 

7 of the Pension Benefit Guaranty Corpora8 tion, by the contributing sponsor (or any 

9 member of the controlled group of the 

10 contributing sponsor). 

11 ‘‘(6) DEFINITIONS.—For purposes of 

12 this subsection—

13 ‘‘(A) CONTRIBUTION PAYMENT.—The 

14 term ‘contribution payment’ means, 

15 in connection with a plan, a contribu16 tion payment required to be made to 

17 the plan, including any required in18 stallment under paragraphs (3) and 

19 (4) of subsection (i). 

20 ‘‘(B) DUE DATE; REQUIRED INSTALL21 MENT.—The terms ‘due date’ and ‘re22 quired installment’ have the mean23 ings given such terms by subsection 

24 (j), except that in the case of a pay25 ment other than a required install-
279 

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1 ment, the due date shall be the date 

2 such payment is required to be made 

3 under section 430. 

4 ‘‘(C) CONTROLLED GROUP.—The 

5 term ‘controlled group’ means any 

6 group treated as a single employer 

7 under subsections (b), (c), (m), and (o) 

8 of section 414. 

9 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BEN10 EFIT ACCOUNTS.—In the case of a qualified 

11 transfer (as defined in section 420), any assets 

12 so transferred shall not, for purposes of this 

13 section, be treated as assets in the plan.’’. 

14 (b) EFFECTIVE DATE.—The amendments 

15 made by this section shall apply with respect 

16 to plan years beginning after December 31, 

17 2006. 

18 SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EM19 PLOYER PLANS. 

20 (a) PROHIBITION OF SHUTDOWN BENEFITS

21 AND OTHER UNPREDICTABLE CONTINGENT EVENT

22 BENEFITS UNDER SINGLE-EMPLOYER PLANS.—

23 (1) IN GENERAL.—Part III of sub24 chapter D of chapter 1 of the Internal 
280 

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1 Revenue Code of 1986 (relating to de2 ferred compensation, etc.) is amended—

3 (A) by striking the heading and 

4 inserting the following: 

5 ‘‘PART III—RULES RELATING TO MINIMUM FUND6 ING STANDARDS AND BENEFIT LIMITATIONS 

‘‘Subpart A. Minimum funding standards for pension plans. 

‘‘Subpart B. Benefit limitations under single-employer plans. 

7 ‘‘Subpart A—Minimum Funding Standards for 

8 Pension Plans 

‘‘Sec. 430. Minimum funding standards for single-employer defined benefit pension plans.’’, and 

9 (B) by adding at the end the fol10 lowing new subpart: 

11 ‘‘Subpart B—Benefit Limitations Under Single12 employer Plans 

‘‘Sec. 436. Prohibition of shutdown benefits and other unpredictable contingent event benefits under singleemployer plans. 

13 ‘‘SEC. 436. PROHIBITION OF SHUTDOWN BENEFITS AND 

14 OTHER UNPREDICTABLE CONTINGENT 

15 EVENT BENEFITS UNDER SINGLE-EMPLOYER 

16 PLANS. 

17 ‘‘(a) IN GENERAL.—No pension plan which 

18 is defined benefit plan (other than a multiem19 ployer plan) may provide benefits to which 
281 

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1 participants are entitled solely by reason of 

2 the occurrence of—

3 ‘‘(1) a plant shutdown, or 

4 ‘‘(2) any other unpredictable contin5 gent event. 

6 ‘‘(b) UNPREDICTABLE CONTINGENT EVENT.—

7 For purposes of this subsection, the term ‘un8 predictable contingent event’ means an event 

9 other than—

10 ‘‘(1) attainment of any age, perform11 ance of any service, receipt or derivation 

12 of any compensation, or the occurrence 

13 of death or disability, or 

14 ‘‘(2) an event which is reasonably and 

15 reliably predictable (as determined by 

16 the Secretary).’’. 

17 (2) CLERICAL AMENDMENT.—The table 

18 of parts for suchapter D of chapter 1 of 

19 the Internal Revenue Code of 1986 is 

20 amended by adding at the end the fol21 lowing new item: 

‘‘PART IIIlRULES RELATING TO MINIMUM FUNDING STANDARDS

AND BENEFIT LIMITATIONS’’. 

22 (b) OTHER LIMITS ON BENEFITS AND BENEFIT

23 ACCRUALS.—
282 

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1 (1) IN GENERAL.—Subpart B of part III 

2 of subchapter D of chapter 1 of such 

3 Code is amended by adding at the end 

4 the following: 

5 ‘‘SEC. 437. FUNDING-BASED LIMITS ON BENEFITS AND BEN6 EFIT ACCRUALS UNDER SINGLE-EMPLOYER 

7 PLANS. 

8 ‘‘(a) LIMITATIONS ON PLAN AMENDMENTS IN9 CREASING LIABILITY FOR BENEFITS.—

10 ‘‘(1) IN GENERAL.—No amendment to a 

11 defined benefit plan (other than a multi12 employer plan) which has the effect of in13 creasing liabilities of the plan by reason 

14 of increases in benefits, establishment of 

15 new benefits, changing the rate of benefit 

16 accrual, or changing the rate at which 

17 benefits become nonforfeitable to the 

18 plan may take effect during any plan 

19 year if the funding target attainment per20 centage as of the valuation date of the 

21 plan for such plan year is—

22 ‘‘(A) less than 80 percent, or 

23 ‘‘(B) would be less than 80 percent 

24 taking into account such amendment. 
283 

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1 For purposes of this subparagraph, any 

2 increase in benefits under the plan by 

3 reason of an increase in the benefit rate 

4 provided under the plan or on the basis 

5 of an increase in compensation shall be 

6 treated as effected by plan amendment. 

7 ‘‘(2) EXEMPTION.—Paragraph (1) shall 

8 cease to apply with respect to any plan 

9 year, effective as of the first date of the 

10 plan year (or if later, the effective date of 

11 the amendment), upon payment by the 

12 plan sponsor of a contribution (in addi13 tion to any minimum required contribu14 tion under section 430) equal to—

15 ‘‘(A) in the case of paragraph 

16 (1)(A), the amount of the increase in 

17 the funding target of the plan (under 

18 section 430) for the plan year attrib19 utable to the amendment, and 

20 ‘‘(B) in the case of paragraph 

21 (1)(B), the amount sufficient to result 

22 in a funding target attainment per23 centage of 80 percent. 

24 ‘‘(b) FUNDING-BASED LIMITATION ON CER25 TAIN FORMS OF DISTRIBUTION.—
284 

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1 ‘‘(1) IN GENERAL.—A defined benefit 

2 plan (other than a multiemployer plan) 

3 shall provide that, in any case in which 

4 the plan’s funding target attainment per5 centage as of the valuation date of the 

6 plan for a plan year is less than 80 per7 cent, the plan may not after such date 

8 pay any payment described in section 

9 401(a)(32)(B). 

10 ‘‘(2) EXCEPTION.—Paragraph (1) shall 

11 not apply to any plan for any plan year if 

12 the terms of such plan (as in effect for 

13 the period beginning on June 29, 2005, 

14 and ending with such plan year) provide 

15 for no benefit accruals with respect to 

16 any participant during such period. 

17 ‘‘(c) LIMITATIONS ON BENEFIT ACCRUALS FOR

18 PLANS WITH SEVERE FUNDING SHORTFALLS.—A 

19 defined benefit plan (other than a multiem20 ployer plan) shall provide that, in any case in 

21 which the plan’s funding target attainment 

22 percentage as of the valuation date of the 

23 plan for a plan year is less than 60 percent, 

24 all future benefit accruals under the plan 

25 shall cease as of such date. 
285 

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1 ‘‘(d) NEW PLANS.—Subsections (a) and (c) 

2 shall not apply to a plan for the first 5 plan 

3 years of the plan. For purposes of this sub4 section, the reference in this subsection to a 

5 plan shall include a reference to any prede6 cessor plan. 

7 ‘‘(e) PRESUMED UNDERFUNDING FOR PUR8 POSES OF BENEFIT LIMITATIONS BASED ON PRIOR

9 YEAR’S FUNDING STATUS.—

10 ‘‘(1) PRESUMPTION OF CONTINUED

11 UNDERFUNDING.—In any case in which a 

12 benefit limitation under subsection (a), 

13 (b), or (c) has been applied to a plan with 

14 respect to the plan year preceding the 

15 current plan year, the funding target at16 tainment percentage of the plan as of the 

17 valuation date of the plan for the current 

18 plan year shall be presumed to be equal 

19 to the funding target attainment percent20 age of the plan as of the valuation date of 

21 the plan for the preceding plan year until 

22 the enrolled actuary of the plan certifies 

23 the actual funding target attainment per24 centage of the plan as of the valuation 

25 date of the plan for the current plan year. 
286 

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1 ‘‘(2) PRESUMPTION OF UNDERFUNDING

2 AFTER 10TH MONTH.—In any case in which 

3 no such certification is made with re4 spect to the plan before the first day of 

5 the 10th month of the current plan year, 

6 for purposes of subsections (a), (b), and 

7 (c), the plan’s funding target attainment 

8 percentage shall be conclusively pre9 sumed to be less than 60 percent as of the 

10 first day of such 10th month, and such 

11 day shall be deemed, for purposes of such 

12 subsections, to be the valuation date of 

13 the plan for the current plan year. 

14 ‘‘(3) PRESUMPTION OF UNDERFUNDING

15 AFTER 4TH MONTH FOR NEARLY UNDER16 FUNDED PLANS.—In any case in which—

17 ‘‘(A) a benefit limitation under 

18 subsection (a), (b), or (c) did not 

19 apply to a plan with respect to the 

20 plan year preceding the current plan 

21 year, but the funding target attain22 ment percentage of the plan for such 

23 preceding plan year was not more 

24 than 10 percentage points greater 

25 than the percentage which would 
287 

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1 have caused such subsection to apply 

2 to the plan with respect to such pre3 ceding plan year, and 

4 ‘‘(B) as of the first day of the 4th 

5 month of the current plan year, the 

6 enrolled actuary of the plan has not 

7 certified the actual funding target at8 tainment percentage of the plan as of 

9 the valuation date of the plan for the 

10 current plan year, 

11 until the enrolled actuary so certifies, 

12 such first day shall be deemed, for pur13 poses of such subsection, to be the valu14 ation date of the plan for the current 

15 plan year and the funding target attain16 ment percentage of the plan as of such 

17 first day shall, for purposes of such sub18 section, be presumed to be equal to 10 

19 percentage points less than the funding 

20 target attainment percentage of the plan 

21 as of the valuation date of the plan for 

22 such preceding plan year. 

23 ‘‘(f) RESTORATION BY PLAN AMENDMENT OF

24 BENEFITS OR BENEFIT ACCRUAL.—In any case in 

25 which a prohibition under subsection (b) of 
288 

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1 the payment of lump sum distributions or 

2 benefits in any other accelerated form or a 

3 cessation of benefit accruals under subsection 

4 (c) is applied to a plan with respect to any 

5 plan year and such prohibition or cessation, 

6 as the case may be, ceases to apply to any sub7 sequent plan year, the plan may provide for 

8 the resumption of such benefit payment or 

9 such benefit accrual only by means of the 

10 adoption of a plan amendment after the valu11 ation date of the plan for such subsequent 

12 plan year. The preceding sentence shall not 

13 apply to a prohibition or cessation required 

14 by reason of subsection (e). 

15 ‘‘(g) FUNDING TARGET ATTAINMENT PER16 CENTAGE.—

17 ‘‘(1) IN GENERAL.—For purposes of this 

18 section, the term ‘funding target attain19 ment percentage’ means, with respect to 

20 any plan for any plan year, the ratio (ex21 pressed as a percentage) which—

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

23 the plan year (as determined under 

24 section 430(g)) reduced by the pre25 funding balance and the funding 
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1 standard carryover balance (within 

2 the meaning of section 430(f)), bears 

3 to 

4 ‘‘(B) the funding target of the plan 

5 for the plan year (as determined 

6 under section 430(d)(1), but without 

7 regard to section 430(i)(1)). 

8 ‘‘(2) APPLICATION TO PLANS WHICH ARE

9 FULLY FUNDED WITHOUT REGARD TO REDUC10 TIONS FOR FUNDING BALANCES.—In the case 

11 of a plan for any plan year, if the funding 

12 target attainment percentage is 100 per13 cent or more (determined without regard 

14 to this paragraph and without regard to 

15 the reduction under paragraph (1)(A) for 

16 the pre-funding balance and the funding 

17 standard carryover balance), paragraph 

18 (1) shall be applied without regard to 

19 such reduction.’’. 

20 (2) CLERICAL AMENDMENT.—The table 

21 of sections for such subpart is amended 

22 by adding at the end the following new 

23 item: 

‘‘Sec. 437. Funding-based limits on benefits and benefit accruals under single-employer plans.’’. 
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1 (c) SPECIAL RULE FOR PLAN AMENDMENTS.—

2 A plan shall not fail to meet the requirements 

3 of section 411(d)(6) of the Internal Revenue 

4 Code of 1986 or section 204(g) of the Employee 

5 Retirement Income Security Act of 1974 solely 

6 by reason of the adoption by the plan of an 

7 amendment necessary to meet the require8 ments of the amendments made by this sec9 tion. 

10 (d) EFFECTIVE DATE.—

11 (1) SHUTDOWN BENEFITS.—Except as 

12 provided in paragraph (3), the amend13 ments made by subsection (a) shall apply 

14 with respect to plant shutdowns, or other 

15 unpredictable contingent events, occur16 ring after December 31, 2006. 

17 (2) OTHER BENEFITS.—Except as pro18 vided in paragraph (3), the amendments 

19 made by subsection (b) shall apply with 

20 respect to plan years beginning after De21 cember 31, 2006. 

22 (3) COLLECTIVE BARGAINING EXCEP23 TION.—In the case of a plan maintained 

24 pursuant to 1 or more collective bar25 gaining agreements between employee 
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1 representatives and 1 or more employers 

2 ratified before the date of the enactment 

3 of this Act, the amendments made by this 

4 subsection shall not apply to plan years 

5 beginning before the earlier of—

6 (A) the later of—

7 (i) the date on which the last 

8 collective bargaining agreement 

9 relating to the plan terminates 

10 (determined without regard to 

11 any extension thereof agreed to 

12 after the date of the enactment of 

13 this Act), or 

14 (ii) the first day of the first 

15 plan year to which the amend16 ments made by this subsection 

17 would (but for this subparagraph) 

18 apply, or 

19 (B) January 1, 2009. 

20 For purposes of clause (i), any plan 

21 amendment made pursuant to a collec22 tive bargaining agreement relating to the 

23 plan which amends the plan solely to 

24 conform to any requirement added by 

25 this subsection shall not be treated as a 
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1 termination of such collective bargaining 

2 agreement. 

3 (e) SPECIAL RULE FOR 2007.—For purposes 

4 of applying subsection (e) of section 437 of 

5 such Code (as added by this section) to cur6 rent plan years (within the meaning of such 

7 subsection) beginning in 2007, the modified 

8 funded current liability percentage of the 

9 plan for the preceding year shall be sub10 stituted for the funding target attainment 

11 percentage of the plan for the preceding year. 

12 For purposes of the preceding sentence, the 

13 term ‘‘modified funded current liability per14 centage’’ means the funded current liability 

15 percentage (as defined in section 412(l)(8) of 

16 such Code), reduced as described in subpara17 graph (E) thereof in the case of a plan with 

18 a funded current liability percentage (as so 

19 defined and before such reduction) which is 

20 less than 100 percent. 

21 SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS. 

22 (a) AMENDMENTS RELATED TO QUALIFICA23 TION REQUIREMENTS.—
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1 (1) Section 401(a)(29) of the Internal 

2 Revenue Code of 1986 is amended to read 

3 as follows: 

4 ‘‘(29) BENEFIT LIMITATIONS ON PLANS IN

5 AT-RISK STATUS.—In the case of a defined 

6 benefit plan (other than a multiemployer 

7 plan) to which the requirements of sec8 tion 412 apply, the trust of which the 

9 plan is a part shall not constitute a quali10 fied trust under this subsection unless 

11 the plan meets the requirements of sec12 tions 436 and 437.’’. 

13 (2) Section 401(a)(32) of such Code is 

14 amended—

15 (A) in subparagraph (A), by strik16 ing ‘‘412(m)(5)’’ each place it appears 

17 and inserting ‘‘430(j)(4)’’, and 

18 (B) in subparagraph (C), by strik19 ing ‘‘section 412(m) by reason of para20 graph (5)(A) thereof’’ and inserting 

21 ‘‘section 430(j)(3) by reason of section 

22 430(j)(4)(A)’’. 

23 (3) Section 401(a)(33) of such Code is 

24 amended—
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1 (A) in subparagraph (B)(i), by 

2 striking ‘‘funded current liability per3 centage (as defined in section 

4 412(l)(8))’’ and inserting ‘‘funding tar5 get attainment percentage (as defined 

6 in section 430(d)(2))’’, 

7 (B) in subparagraph (B)(iii), by 

8 striking ‘‘subsection 412(c)(8)’’ and in9 serting ‘‘section 412(d)(2)’’, and 

10 (C) in subparagraph (D), by strik11 ing ‘‘section 412(c)(11) (without re12 gard to subparagraph (B) thereof)’’

13 and inserting ‘‘section 412(b) (without 

14 regard to paragraph (2) thereof)’’. 

15 (b) VESTING RULES.—Section 411 of such 

16 Code is amended—

17 (1) by striking ‘‘section 412(c)(8)’’ in 

18 subsection (a)(3)(C) and inserting ‘‘sec19 tion 412(d)(2)’’

, 

20 (2) in subsection (b)(1)(F)—

21 (A) by striking ‘‘paragraphs (2) 

22 and (3) of section 412(i)’’ in clause (ii) 

23 and inserting ‘‘subparagraphs (B) and 

24 (C) of section 412(e)(3)’’, and 
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1 (B) by striking ‘‘paragraphs (4), 

2 (5), and (6) of section 412(i)’’ and in3 serting ‘‘subparagraphs (D), (E), and 

4 (F) of section 412(e)(3)’’, and 

5 (3) by striking ‘‘section 412(c)(8)’’ in 

6 subsection (d)(6)(A) and inserting ‘‘sec7 tion 412(d)(2)’’. 

8 (c) MERGERS AND CONSOLIDATIONS OF

9 PLANS.—Subclause (I) of section 414(l)(2)(B)(i) 

10 of such Code is amended to read as follows: 

11 ‘‘(I) the amount deter12 mined under section 

13 431(c)(6)(A)(i) in the case of a 

14 multiemployer plan (and the 

15 sum of the target liability 

16 amount and target normal 

17 cost determined under section 

18 430 in the case of any other 

19 plan), over’’. 

20 (d) TRANSFER OF EXCESS PENSION ASSETS

21 TO RETIREE HEALTH ACCOUNTS.—

22 (1) Section 420(e)(2) of such Code is 

23 amended to read as follows: 
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1 ‘‘(2) EXCESS PENSION ASSETS.—The 

2 term ‘excess pension assets’ means the ex3 cess (if any) of—

4 ‘‘(A) the lesser of—

5 ‘‘(i) the fair market value of 

6 the plan’s assets (reduced by the 

7 pre-funding balance and the fund8 ing standard carryover balance, 

9 as determined under section 

10 430(f)), or 

11 ‘‘(ii) the value of plan assets 

12 as determined under section 

13 430(g)(3) (reduced by the pre14 funding balance and the funding 

15 standard carryover balance, as 

16 determined under section 430(f)), 

17 over 

18 ‘‘(B) 125 percent of the sum of the 

19 target liability amount and the target 

20 normal cost determined under sec21 tion 430 for such plan year.’’. 

22 (2) Section 420(e)(4) of such Code is 

23 amended to read as follows: 

24 ‘‘(4) COORDINATION WITH SECTION 430.—

25 In the case of a qualified transfer, any as-
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1 sets so transferred shall not, for purposes 

2 of this section, be treated as assets in the 

3 plan.’’. 

4 (e) EXCISE TAXES.—

5 (1) IN GENERAL.—Subsections (a) and 

6 (b) of section 4971 of such Code are 

7 amended to read as follows: 

8 ‘‘(a) INITIAL TAX.—If at any time during 

9 any taxable year an employer maintains a 

10 plan to which section 412 applies, there is 

11 hereby imposed for the taxable year a tax 

12 equal to—

13 ‘‘(1) in the case of a defined benefit 

14 plan which is not a multiemployer plan, 

15 10 percent of the aggregate unpaid min16 imum required contributions for all plan 

17 years remaining unpaid as of the end of 

18 any plan year ending with or within the 

19 taxable year, and 

20 ‘‘(2) in the case of a multiemployer 

21 plan, 5 percent of the accumulated fund22 ing deficiency determined under section 

23 431 as of the end of any plan year ending 

24 with or within the taxable year. 

25 ‘‘(b) ADDITIONAL TAX.—If—
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1 ‘‘(1) a tax is imposed under subsection 

2 (a)(1) on any unpaid required minimum 

3 contribution and such amount remains 

4 unpaid as of the close of the taxable pe5 riod, or 

6 ‘‘(2) a tax is imposed under subsection 

7 (a)(2) on any accumulated funding defi8 ciency and the accumulated funding defi9 ciency is not corrected within the taxable 

10 period, 

11 there is hereby imposed a tax equal to 100 

12 percent of the unpaid minimum required con13 tribution or accumulated funding deficiency, 

14 whichever is applicable, to the extent not so 

15 paid or corrected.’’. 

16 (2) Section 4971(c) of such Code is 

17 amended—

18 (A) by striking ‘‘the last two sen19 tences of section 412(a)’’ in paragraph 

20 (1) and inserting ‘‘section 431’’, and 

21 (B) by adding at the end the fol22 lowing new paragraph: 

23 ‘‘(4) UNPAID MINIMUM REQUIRED CON24 TRIBUTION.—
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1 ‘‘(A) IN GENERAL.—The term ‘un2 paid minimum required contribution’

3 means, with respect to any plan year, 

4 any minimum required contribution 

5 under section 430 for the plan year 

6 which is not paid on or before the 

7 due date (as determined under sec8 tion 430(j)(1)) for the plan year. 

9 ‘‘(B) ORDERING RULE.—Any pay10 ment to or under a plan for any plan 

11 year shall be allocated first to unpaid 

12 minimum required contributions for 

13 all preceding plan years in the order 

14 in which such contributions became 

15 due and then to the minimum re16 quired contribution under section 430 

17 for the plan year.’’. 

18 (3) Section 4971(e)(1) of such Code is 

19 amended by striking ‘‘section 

20 412(b)(3)(A)’’ and inserting ‘‘section 

21 412(a)(2)’’. 

22 (4) Section 4971(f)(1) of such Code is 

23 amended—

24 (A) by striking ‘‘section 412(m)(5)’’

25 and inserting ‘‘section 430(j)(4)’’, and 
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1 (B) by striking ‘‘section 412(m)’’

2 and inserting ‘‘section 430(j)(3)’’. 

3 (5) Section 4972(c)(7) of such Code is 

4 amended by striking ‘‘except to the ex5 tent that such contributions exceed the 

6 full-funding limitation (as defined in sec7 tion 412(c)(7), determined without regard 

8 to subparagraph (A)(i)(I) thereof)’’ and in9 serting ‘‘except, in the case of a multiem10 ployer plan, to the extent that such con11 tributions exceed the full-funding limita12 tion (as defined in section 431(c)(6))’’. 

13 (f) REPORTING REQUIREMENTS.—Section 

14 6059(b) of such Code is amended—

15 (1) by striking ‘‘the accumulated 

16 funding deficiency (as defined in section 

17 412(a))’’ in paragraph (2) and inserting 

18 ‘‘the minimum required contribution de19 termined under section 430, or the accu20 mulated funding deficiency determined 

21 under section 431,’’, and 

22 (2) by striking paragraph (3)(B) and 

23 inserting: 

24 ‘‘(B) the requirements for reason25 able actuarial assumptions under sec-
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1 tion 430(h)(1) or 431(c)(3), whichever 

2 are applicable, have been complied 

3 with,’’. 

4 (g) EFFECTIVE DATE.—The amendments 

5 made by this section shall apply to years be6 ginning after December 31, 2006. 

7 Subtitle C—Other Provisions 

8 SEC. 121. MODIFICATION OF TRANSITION RULE TO PEN9 SION FUNDING REQUIREMENTS. 

10 (a) IN GENERAL.—In the case of a plan 

11 that—

12 (1) was not required to pay a variable 

13 rate premium for the plan year beginning 

14 in 1996, 

15 (2) has not, in any plan year begin16 ning after 1995, merged with another 

17 plan (other than a plan sponsored by an 

18 employer that was in 1996 within the con19 trolled group of the plan sponsor); and 

20 (3) is sponsored by a company that is 

21 engaged primarily in the interurban or 

22 interstate passenger bus service, 

23 the rules described in subsection (b) shall 

24 apply for any plan year beginning after De25 cember 31, 2006. 
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1 (b) MODIFIED RULES.—The rules described 

2 in this subsection are as follows: 

3 (1) For purposes of section 430(j)(3) of 

4 the Internal Revenue Code of 1986 and 

5 section 303(j)(3) of the Employee Retire6 ment Income Security Act of 1974, the 

7 plan shall be treated as not having a 

8 funding shortfall for any plan year. 

9 (2) For purposes of—

10 (A) determining unfunded vested 

11 benefits under section 

12 4006(a)(3)(E)(iii) of such Act, and 

13 (B) determining any present 

14 value or making any computation 

15 under section 412 of such Code or 

16 section 302 of such Act, 

17 the mortality table shall be the mortality 

18 table used by the plan. 

19 (3) Notwithstanding section 

20 430(f)(4)(B) of such Code and section 

21 303(f)(4)(B) of such Act, for purposes of 

22 section 430(c)(4)(A)(ii) of such Code and 

23 section 303(c)(4)(A)(ii) of such Act, the 

24 value of plan assets is deemed to be such 

25 amount, reduced by the amount of the 
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1 pre-funding balance if, pursuant to a 

2 binding written agreement with the Pen3 sion Benefit Guaranty Corporation en4 tered into before January 1, 2007, the 

5 funding standard carryover balance is 

6 not available to reduce the minimum re7 quired contribution for the plan year. 

8 (4) Section 430(c)(4)(B) of such Code 

9 and section 303(c)(4)(B) of such Act (relat10 ing to phase-in of funding target for de11 termination of funding shortfall) shall 

12 each be applied by substituting ‘‘2012’’ for 

13 ‘‘2011’’ therein and by substituting for the 

14 table therein the following: 

In the case of a plan year beginning in calendar 

year: 

The applicable percentage is: 

2007 .................................................................................... 90 percent

2008 .................................................................................... 92 percent

2009 .................................................................................... 94 percent

2010 .................................................................................... 96 percent

2011 .................................................................................... 98 percent. 

15 (c) DEFINITIONS.—Any term used in this 

16 section which is also used in section 430 of 

17 such Code or section 303 of such Act shall 

18 have the meaning provided such term in such 

19 section. If the same term has a different 

20 meaning in such Code and such Act, such 

21 term shall, for purposes of this section, have 
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1 the meaning provided by such Code when ap2 plied with respect to such Code and the mean3 ing provided by such Act when applied with 

4 respect to such Act. 

5 (d) SPECIAL RULE FOR 2006.—

6 (1) IN GENERAL.—Section 769(c)(3) of 

7 the Retirement Protection Act of 1994, as 

8 added by section 201 of the Pension 

9 Funding Equity Act of 2004, is amended 

10 by striking ‘‘and 2005’’ and inserting ‘‘, 

11 2005, and 2006’’. 

12 (2) EFFECTIVE DATE.—The amendment 

13 made by paragraph (1) shall apply to plan 

14 years beginning after December 31, 2005. 

15 (e) CONFORMING AMENDMENT.—

16 (1) Section 769 of the Retirement Pro17 tection Act of 1994 is amended by strik18 ing subsection (c). 

19 (2) The amendment made by para20 graph (1) shall take effect on December 

21 31, 2006, and shall apply to plan years be22 ginning after such date. 
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1 SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COM2 PENSATION PLANS WHEN EMPLOYER DE3 FINED BENEFIT PLAN IN AT-RISK STATUS. 

4 (a) IN GENERAL.—Subsection (b) of section 

5 409A of the Internal Revenue Code of 1986 

6 (providing rules relating to funding) is 

7 amended by redesignating paragraphs (3) and 

8 (4) as paragraphs (4) and (5), respectively, and 

9 by inserting after paragraph (2) the following 

10 new paragraph: 

11 ‘‘(3) EMPLOYER’S DEFINED BENEFIT PLAN

12 IN AT-RISK STATUS.—If—

13 ‘‘(A) during any period in which a 

14 defined benefit plan to which section 

15 412 applies is in an at-risk status (as 

16 defined in section 430(i)(3)), assets 

17 are set aside (directly or indirectly) 

18 in a trust (or other arrangement de19 termined by the Secretary), or trans20 ferred to such a trust or other ar21 rangement, for purposes of paying de22 ferred compensation under a non23 qualified deferred compensation plan 

24 of the employer maintaining the de25 fined benefit plan, or 
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1 ‘‘(B) a nonqualified deferred com2 pensation plan of the employer pro3 vides that assets will become re4 stricted to the provision of benefits 

5 under the plan in connection with 

6 such at-risk status (or other similar 

7 financial measure determined by the 

8 Secretary) of the defined benefit plan, 

9 or assets are so restricted, 

10 such assets shall for purposes of section 

11 83 be treated as property transferred in 

12 connection with the performance of serv13 ices whether or not such assets are avail14 able to satisfy claims of general creditors. 

15 Subparagraph (A) shall not apply with re16 spect to any assets which are so set aside 

17 before the defined benefit plan is in at18 risk status.’’. 

19 (b) CONFORMING AMENDMENTS.—Para20 graphs (4) and (5) of section 409A(b) of such 

21 Code, as redesignated by subsection (a) of this 

22 subsection, are each amended by striking 

23 ‘‘paragraph (1) or (2)’’ each place it appears 

24 and inserting ‘‘paragraph (1), (2), or (3)’’. 
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1 (c) EFFECTIVE DATE.—The amendments 

2 made by this section shall apply to transfers 

3 or reservations of assets after December 31, 

4 2005. 

5 (d) SPECIAL RULE FOR 2006.—For purposes 

6 of determining if a plan is in at-risk status 

7 (within the meaning of section 409A of such 

8 Code, as added by this section) for any plan 

9 year beginning in 2006, such section shall be 

10 applied by substituting the plan’s modified 

11 funded current liability percentage for the 

12 plan’s funding target attainment percentage. 

13 For purposes of the preceding sentence, the 

14 term ‘‘modified funded current liability per15 centage’’ means the funded current liability 

16 percentage (as defined in section 412(l)(8) of 

17 such Code), reduced as described in subpara18 graph (E) thereof. 
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1 TITLE II—FUNDING RULES FOR 

2 MULTIEMPLOYER DEFINED 

3 BENEFIT PLANS 

4 Subtitle A—Amendments to Em5 ployee Retirement Income Secu6 rity Act of 1974 

7 SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED 

8 BENEFIT PLANS. 

9 [See section 201 of the bill as reported by 

10 the Committee on Education and the Work11 force.] 

12 SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM13 PLOYER PLANS IN ENDANGERED OR CRIT14 ICAL STATUS. 

15 [See section 202 of the bill as reported by 

16 the Committee on Education and the Work17 force.] 

18 SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL19 TIEMPLOYER PLANS. 

20 [See section 203 of the bill as reported by 

21 the Committee on Education and the Work22 force.] 
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1 SEC. 204. WITHDRAWAL LIABILITY REFORMS. 

2 [See section 204 of the bill as reported by 

3 the Committee on Education and the Work4 force.] 

5 SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO 

6 PROCEDURES APPLICABLE TO DISPUTES IN7 VOLVING WITHDRAWAL LIABILITY. 

8 [See section 205 of the bill as reported by 

9 the Committee on Education and the Work10 force.] 

11 Subtitle B—Amendments to 

12 Internal Revenue Code of 1986 

13 SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED 

14 BENEFIT PLANS. 

15 (a) IN GENERAL.—Subpart A of part III of 

16 subchapter D of chapter 1 of the Internal Rev17 enue Code of 1986 (added by section 112 of 

18 this Act) is amended by adding at the end the 

19 following new section: 

20 ‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM21 PLOYER PLANS. 

22 ‘‘(a) IN GENERAL.—For purposes of section 

23 412, the accumulated funding deficiency of a 

24 multiemployer plan for any plan year is—

25 ‘‘(1) except as provided in paragraph 

26 (2), the amount, determined as of the end 
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1 of the plan year, equal to the excess (if 

2 any) of the total charges to the funding 

3 standard account of the plan for all plan 

4 years (beginning with the first plan year 

5 for which section 412 applies to the plan) 

6 over the total credits to such account for 

7 such years, and 

8 ‘‘(2) if the multiemployer plan is in re9 organization for any plan year, the accu10 mulated funding deficiency of the plan 

11 determined under section 418B. 

12 ‘‘(b) FUNDING STANDARD ACCOUNT.—

13 ‘‘(1) ACCOUNT REQUIRED.—Each multi14 employer plan to which section 412 ap15 plies shall establish and maintain a fund16 ing standard account. Such account shall 

17 be credited and charged solely as pro18 vided in this section. 

19 ‘‘(2) CHARGES TO ACCOUNT.—For a plan 

20 year, the funding standard account shall 

21 be charged with the sum of—

22 ‘‘(A) the normal cost of the plan 

23 for the plan year, 
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1 ‘‘(B) the amounts necessary to am2 ortize in equal annual installments 

3 (until fully amortized)—

4 ‘‘(i) in the case of a plan in ex5 istence on January 1, 1974, the 

6 unfunded past service liability 

7 under the plan on the first day of 

8 the first plan year to which sec9 tion 412 applies, over a period of 

10 40 plan years, 

11 ‘‘(ii) in the case of a plan 

12 which comes into existence after 

13 January 1, 1974, the unfunded 

14 past service liability under the 

15 plan on the first day of the first 

16 plan year to which section 412 ap17 plies, over a period of 15 plan 

18 years, 

19 ‘‘(iii) separately, with respect 

20 to each plan year, the net in21 crease (if any) in unfunded past 

22 service liability under the plan 

23 arising from plan amendments 

24 adopted in such year, over a pe25 riod of 15 plan years, 
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1 ‘‘(iv) separately, with respect 

2 to each plan year, the net experi3 ence loss (if any) under the plan, 

4 over a period of 15 plan years, 

5 and 

6 ‘‘(v) separately, with respect 

7 to each plan year, the net loss (if 

8 any) resulting from changes in ac9 tuarial assumptions used under 

10 the plan, over a period of 15 plan 

11 years, 

12 ‘‘(C) the amount necessary to am13 ortize each waived funding deficiency 

14 (within the meaning of section 

15 412(c)(3)) for each prior plan year in 

16 equal annual installments (until fully 

17 amortized) over a period of 15 plan 

18 years, 

19 ‘‘(D) the amount necessary to am20 ortize in equal annual installments 

21 (until fully amortized) over a period 

22 of 5 plan years any amount credited 

23 to the funding standard account 

24 under section 412(b)(3)(D) (as in ef25 fect on the day before the date of the 
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1 enactment of the Pension Protection 

2 Act of 2005), and 

3 ‘‘(E) the amount necessary to am4 ortize in equal annual installments 

5 (until fully amortized) over a period 

6 of 20 years the contributions which 

7 would be required to be made under 

8 the plan but for the provisions of sec9 tion 412(c)(7)(A)(i)(I) (as in effect on 

10 the day before the date of the enact11 ment of the Pension Protection Act of 

12 2005). 

13 ‘‘(3) CREDITS TO ACCOUNT.—For a plan 

14 year, the funding standard account shall 

15 be credited with the sum of—

16 ‘‘(A) the amount considered con17 tributed by the employer to or under 

18 the plan for the plan year, 

19 ‘‘(B) the amount necessary to am20 ortize in equal annual installments 

21 (until fully amortized)—

22 ‘‘(i) separately, with respect to 

23 each plan year, the net decrease 

24 (if any) in unfunded past service 

25 liability under the plan arising 
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1 from plan amendments adopted 

2 in such year, over a period of 15 

3 plan years, 

4 ‘‘(ii) separately, with respect 

5 to each plan year, the net experi6 ence gain (if any) under the plan, 

7 over a period of 15 plan years, 

8 and 

9 ‘‘(iii) separately, with respect 

10 to each plan year, the net gain (if 

11 any) resulting from changes in ac12 tuarial assumptions used under 

13 the plan, over a period of 15 plan 

14 years, 

15 ‘‘(C) the amount of the waived 

16 funding deficiency (within the mean17 ing of section 412(c)(3)) for the plan 

18 year, and 

19 ‘‘(D) in the case of a plan year for 

20 which the accumulated funding defi21 ciency is determined under the fund22 ing standard account if such plan 

23 year follows a plan year for which 

24 such deficiency was determined 

25 under the alternative minimum fund-
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1 ing standard under section 412(g) (as 

2 in effect on the day before the date of 

3 the enactment of the Pension Protec4 tion Act of 2005), the excess (if any) of 

5 any debit balance in the funding 

6 standard account (determined with7 out regard to this subparagraph) over 

8 any debit balance in the alternative 

9 minimum funding standard account. 

10 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST

11 AMORTIZED TO PLAN YEARS BEFORE 2007.—In 

12 the case of any amount amortized under 

13 section 412(b) (as in effect on the day be14 fore the date of the enactment of the Pen15 sion Protection Act of 2005) over any pe16 riod beginning with a plan year begin17 ning before 2007, in lieu of the amortiza18 tion described in paragraphs (2)(B) and 

19 (3)(B), such amount shall continue to be 

20 amortized under such section as so in ef21 fect. 

22 ‘‘(5) COMBINING AND OFFSETTING

23 AMOUNTS TO BE AMORTIZED.—Under regula24 tions prescribed by the Secretary, 

25 amounts required to be amortized under 
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1 paragraph (2) or paragraph (3), as the 

2 case may be—

3 ‘‘(A) may be combined into one 

4 amount under such paragraph to be 

5 amortized over a period determined 

6 on the basis of the remaining amorti7 zation period for all items entering 

8 into such combined amount, and 

9 ‘‘(B) may be offset against 

10 amounts required to be amortized 

11 under the other such paragraph, with 

12 the resulting amount to be amortized 

13 over a period determined on the basis 

14 of the remaining amortization peri15 ods for all items entering into which16 ever of the two amounts being offset 

17 is the greater. 

18 ‘‘(6) INTEREST.—Except as provided in 

19 subsection (c)(9), the funding standard 

20 account (and items therein) shall be 

21 charged or credited (as determined 

22 under regulations prescribed by the Sec23 retary) with interest at the appropriate 

24 rate consistent with the rate or rates of 
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1 interest used under the plan to determine 

2 costs. 

3 ‘‘(7) CERTAIN AMORTIZATION CHARGES

4 AND CREDITS.—In the case of a plan which, 

5 immediately before the date of the enact6 ment of the Multiemployer Pension Plan 

7 Amendments Act of 1980, was a multiem8 ployer plan (within the meaning of sec9 tion 414(f) as in effect immediately before 

10 such date)—

11 ‘‘(A) any amount described in 

12 paragraph (2)(B)(ii), (2)(B)(iii), or 

13 (3)(B)(i) of this subsection which 

14 arose in a plan year beginning before 

15 such date shall be amortized in equal 

16 annual installments (until fully amor17 tized) over 40 plan years, beginning 

18 with the plan year in which the 

19 amount arose, 

20 ‘‘(B) any amount described in 

21 paragraph (2)(B)(iv) or (3)(B)(ii) of 

22 this subsection which arose in a plan 

23 year beginning before such date shall 

24 be amortized in equal annual install25 ments (until fully amortized) over 20 
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1 plan years, beginning with the plan 

2 year in which the amount arose, 

3 ‘‘(C) any change in past service li4 ability which arises during the period 

5 of 3 plan years beginning on or after 

6 such date, and results from a plan 

7 amendment adopted before such date, 

8 shall be amortized in equal annual in9 stallments (until fully amortized) over 

10 40 plan years, beginning with the 

11 plan year in which the change arises, 

12 and 

13 ‘‘(D) any change in past service li14 ability which arises during the period 

15 of 2 plan years beginning on or after 

16 such date, and results from the 

17 changing of a group of participants 

18 from one benefit level to another ben19 efit level under a schedule of plan 

20 benefits which—

21 ‘‘(i) was adopted before such 

22 date, and 

23 ‘‘(ii) was effective for any plan 

24 participant before the beginning 
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1 of the first plan year beginning 

2 on or after such date, 

3 shall be amortized in equal annual in4 stallments (until fully amortized) over 

5 40 plan years, beginning with the 

6 plan year in which the change arises. 

7 ‘‘(8) SPECIAL RULES RELATING TO

8 CHARGES AND CREDITS TO FUNDING STAND9 ARD ACCOUNT.—For purposes of this sec10 tion—

11 ‘‘(A) WITHDRAWAL LIABILITY.—Any 

12 amount received by a multiemployer 

13 plan in payment of all or part of an 

14 employer’s withdrawal liability under 

15 part 1 of subtitle E of title IV of the 

16 Employee Retirement Income Secu17 rity Act of 1974 shall be considered 

18 an amount contributed by the em19 ployer to or under the plan. The Sec20 retary may prescribe by regulation 

21 additional charges and credits to a 

22 multiemployer plan’s funding stand23 ard account to the extent necessary 

24 to prevent withdrawal liability pay-
320 

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1 ments from being unduly reflected as 

2 advance funding for plan liabilities. 

3 ‘‘(B) ADJUSTMENTS WHEN A MULTI4 EMPLOYER PLAN LEAVES REORGANIZA5 TION.—If a multiemployer plan is not 

6 in reorganization in the plan year but 

7 was in reorganization in the imme8 diately preceding plan year, any bal9 ance in the funding standard account 

10 at the close of such immediately pre11 ceding plan year—

12 ‘‘(i) shall be eliminated by an 

13 offsetting credit or charge (as the 

14 case may be), but 

15 ‘‘(ii) shall be taken into ac16 count in subsequent plan years by 

17 being amortized in equal annual 

18 installments (until fully amor19 tized) over 30 plan years. 

20 The preceding sentence shall not 

21 apply to the extent of any accumu22 lated funding deficiency under sec23 tion 418B(a) as of the end of the last 

24 plan year that the plan was in reorga25 nization. 
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1 ‘‘(C) PLAN PAYMENTS TO SUPPLE2 MENTAL PROGRAM OR WITHDRAWAL LI3 ABILITY PAYMENT FUND.—Any amount 

4 paid by a plan during a plan year to 

5 the Pension Benefit Guaranty Cor6 poration pursuant to section 4222 of 

7 the Employee Retirement Income Se8 curity Act of 1974 or to a fund exempt 

9 under section 501(c)(22) pursuant to 

10 section 4223 of such Act shall reduce 

11 the amount of contributions consid12 ered received by the plan for the plan 

13 year. 

14 ‘‘(D) INTERIM WITHDRAWAL LIABIL15 ITY PAYMENTS.—Any amount paid by 

16 an employer pending a final deter17 mination of the employer’s with18 drawal liability under part 1 of sub19 title E of title IV of such Act and sub20 sequently refunded to the employer 

21 by the plan shall be charged to the 

22 funding standard account in accord23 ance with regulations prescribed by 

24 the Secretary. 
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1 ‘‘(E) ELECTION FOR DEFERRAL OF

2 CHARGE FOR PORTION OF NET EXPERI3 ENCE LOSS.—If an election is in effect 

4 under section 412(b)(7)(F) (as in effect 

5 on the day before the date of the en6 actment of the Pension Protection 

7 Act of 2005) for any plan year, the 

8 funding standard account shall be 

9 charged in the plan year to which the 

10 portion of the net experience loss de11 ferred by such election was deferred 

12 with the amount so deferred (and 

13 paragraph (2)(B)(iv) shall not apply to 

14 the amount so charged). 

15 ‘‘(F) FINANCIAL ASSISTANCE.—Any 

16 amount of any financial assistance 

17 from the Pension Benefit Guaranty 

18 Corporation to any plan, and any re19 payment of such amount, shall be 

20 taken into account under this section 

21 and section 412 in such manner as is 

22 determined by the Secretary. 

23 ‘‘(G) SHORT-TERM BENEFITS.—To 

24 the extent that any plan amendment 

25 increases the unfunded past service 
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1 liability under the plan by reason of 

2 an increase in benefits which are pay3 able under the plan during a period 

4 that does not exceed 14 years, para5 graph (2)(B)(iii) shall be applied sepa6 rately with respect to such increase 

7 in unfunded past service liability by 

8 substituting the number of years of 

9 the period during which such bene10 fits are payable for ‘15’. 

11 ‘‘(c) ADDITIONAL RULES.—

12 ‘‘(1) DETERMINATIONS TO BE MADE

13 UNDER FUNDING METHOD.—For purposes of 

14 this section, normal costs, accrued liabil15 ity, past service liabilities, and experi16 ence gains and losses shall be determined 

17 under the funding method used to deter18 mine costs under the plan. 

19 ‘‘(2) VALUATION OF ASSETS.—

20 ‘‘(A) IN GENERAL.—For purposes of 

21 this section, the value of the plan’s as22 sets shall be determined on the basis 

23 of any reasonable actuarial method of 

24 valuation which takes into account 

25 fair market value and which is per-
324 

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1 mitted under regulations prescribed 

2 by the Secretary. 

3 ‘‘(B) ELECTION WITH RESPECT TO

4 BONDS.—The value of a bond or other 

5 evidence of indebtedness which is not 

6 in default as to principal or interest 

7 may, at the election of the plan ad8 ministrator, be determined on an am9 ortized basis running from initial cost 

10 at purchase to par value at maturity 

11 or earliest call date. Any election 

12 under this subparagraph shall be 

13 made at such time and in such man14 ner as the Secretary shall by regula15 tions provide, shall apply to all such 

16 evidences of indebtedness, and may 

17 be revoked only with the consent of 

18 the Secretary. 

19 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE

20 REASONABLE.—For purposes of this sec21 tion, all costs, liabilities, rates of interest, 

22 and other factors under the plan shall be 

23 determined on the basis of actuarial as24 sumptions and methods—
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1 ‘‘(A) each of which is reasonable 

2 (taking into account the experience 

3 of the plan and reasonable expecta4 tions), and 

5 ‘‘(B) which, in combination, offer 

6 the actuary’s best estimate of antici7 pated experience under the plan. 

8 ‘‘(4) TREATMENT OF CERTAIN CHANGES

9 AS EXPERIENCE GAIN OR LOSS.—For pur10 poses of this section, if—

11 ‘‘(A) a change in benefits under 

12 the Social Security Act or in other re13 tirement benefits created under Fed14 eral or State law, or 

15 ‘‘(B) a change in the definition of 

16 the term ‘wages’ under section 3121, 

17 or a change in the amount of such 

18 wages taken into account under regu19 lations prescribed for purposes of 

20 section 401(a)(5), 

21 results in an increase or decrease in ac22 crued liability under a plan, such in23 crease or decrease shall be treated as an 

24 experience loss or gain. 
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1 ‘‘(5) FULL FUNDING.—If, as of the close 

2 of a plan year, a plan would (without re3 gard to this paragraph) have an accumu4 lated funding deficiency in excess of the 

5 full funding limitation—

6 ‘‘(A) the funding standard account 

7 shall be credited with the amount of 

8 such excess, and 

9 ‘‘(B) all amounts described in sub10 paragraphs (B), (C), and (D) of sub11 section (b)(2) and subparagraph (B) of 

12 subsection (b)(3) which are required 

13 to be amortized shall be considered 

14 fully amortized for purposes of such 

15 subparagraphs. 

16 ‘‘(6) FULL-FUNDING LIMITATION.—

17 ‘‘(A) IN GENERAL.—For purposes of 

18 paragraph (5), the term ‘full-funding 

19 limitation’ means the excess (if any) 

20 of—

21 ‘‘(i) the accrued liability (in22 cluding normal cost) under the 

23 plan (determined under the entry 

24 age normal funding method if 

25 such accrued liability cannot be 
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1 directly calculated under the 

2 funding method used for the 

3 plan), over 

4 ‘‘(ii) the lesser of—

5 ‘‘(I) the fair market value 

6 of the plan’s assets, or 

7 ‘‘(II) the value of such as8 sets determined under para9 graph (2). 

10 ‘‘(B) MINIMUM AMOUNT.—

11 ‘‘(i) IN GENERAL.—In no event 

12 shall the full-funding limitation 

13 determined under subparagraph 

14 (A) be less than the excess (if any) 

15 of—

16 ‘‘(I) 90 percent of the cur17 rent liability of the plan (in18 cluding the expected increase 

19 in current liability due to ben20 efits accruing during the plan 

21 year), over 

22 ‘‘(II) the value of the 

23 plan’s assets determined 

24 under paragraph (2). 
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1 ‘‘(ii) ASSETS.—For purposes of 

2 clause (i), assets shall not be re3 duced by any credit balance in 

4 the funding standard account. 

5 ‘‘(C) FULL FUNDING LIMITATION.—

6 For purposes of this paragraph, un7 less otherwise provided by the plan, 

8 the accrued liability under a multi9 employer plan shall not include bene10 fits which are not nonforfeitable 

11 under the plan after the termination 

12 of the plan (taking into consideration 

13 section 411(d)(3)). 

14 ‘‘(D) CURRENT LIABILITY.—For pur15 poses of this paragraph—

16 ‘‘(i) IN GENERAL.—The term 

17 ‘current liability’ means all liabil18 ities to employees and their bene19 ficiaries under the plan. 

20 ‘‘(ii) TREATMENT OF UNPREDICT21 ABLE CONTINGENT EVENT BENE22 FITS.—For purposes of clause (i), 

23 any benefit contingent on an 

24 event other than—
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1 ‘‘(I) age, service, com2 pensation, death, or disability, 

3 or 

4 ‘‘(II) an event which is 

5 reasonably and reliably pre6 dictable (as determined by the 

7 Secretary), 

8 shall not be taken into account 

9 until the event on which the ben10 efit is contingent occurs. 

11 ‘‘(iii) INTEREST RATE USED.—

12 The rate of interest used to deter13 mine current liability under this 

14 paragraph shall be the rate of in15 terest determined under subpara16 graph (E). 

17 ‘‘(iv) MORTALITY TABLES.—

18 ‘‘(I) COMMISSIONERS’ STAND19 ARD TABLE.—In the case of 

20 plan years beginning before 

21 the first plan year to which 

22 the first tables prescribed 

23 under subclause (II) apply, 

24 the mortality table used in de25 termining current liability 
330 

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1 under this paragraph shall be 

2 the table prescribed by the 

3 Secretary which is based on 

4 the prevailing commissioners’

5 standard table (described in 

6 section 807(d)(5)(A)) used to 

7 determine reserves for group 

8 annuity contracts issued on 

9 January 1, 1993. 

10 ‘‘(II) SECRETARIAL AUTHOR11 ITY.—The Secretary may by 

12 regulation prescribe for plan 

13 years beginning after Decem14 ber 31, 1999, mortality tables 

15 to be used in determining cur16 rent liability under this sub17 section. Such tables shall be 

18 based upon the actual experi19 ence of pension plans and 

20 projected trends in such expe21 rience. In prescribing such ta22 bles, the Secretary shall take 

23 into account results of avail24 able independent studies of 
331 

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1 mortality of individuals cov2 ered by pension plans. 

3 ‘‘(v) SEPARATE MORTALITY TA4 BLES FOR THE DISABLED.—Notwith5 standing clause (iv)—

6 ‘‘(I) IN GENERAL.—In the 

7 case of plan years beginning 

8 after December 31, 1995, the 

9 Secretary shall establish mor10 tality tables which may be 

11 used (in lieu of the tables 

12 under clause (iv)) to deter13 mine current liability under 

14 this subsection for individuals 

15 who are entitled to benefits 

16 under the plan on account of 

17 disability. The Secretary shall 

18 establish separate tables for 

19 individuals whose disabilities 

20 occur in plan years beginning 

21 before January 1, 1995, and 

22 for individuals whose disabil23 ities occur in plan years be24 ginning on or after such date. 
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1 ‘‘(II) SPECIAL RULE FOR DIS2 ABILITIES OCCURRING AFTER

3 1994.—In the case of disabil4 ities occurring in plan years 

5 beginning after December 31, 

6 1994, the tables under sub7 clause (I) shall apply only 

8 with respect to individuals 

9 described in such subclause 

10 who are disabled within the 

11 meaning of title II of the So12 cial Security Act and the reg13 ulations thereunder. 

14 ‘‘(vi) PERIODIC REVIEW.—The 

15 Secretary shall periodically (at 

16 least every 5 years) review any ta17 bles in effect under this subpara18 graph and shall, to the extent the 

19 Secretary determines necessary, 

20 by regulation update the tables to 

21 reflect the actual experience of 

22 pension plans and projected 

23 trends in such experience. 

24 ‘‘(E) REQUIRED CHANGE OF INTER25 EST RATE.—For purposes of deter-
333 

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1 mining a plan’s current liability for 

2 purposes of this paragraph—

3 ‘‘(i) IN GENERAL.—If any rate of 

4 interest used under the plan 

5 under subsection (b)(6) to deter6 mine cost is not within the per7 missible range, the plan shall es8 tablish a new rate of interest 

9 within the permissible range. 

10 ‘‘(ii) PERMISSIBLE RANGE.—For 

11 purposes of this subparagraph—

12 ‘‘(I) IN GENERAL.—Except 

13 as provided in subclause (II), 

14 the term ‘permissible range’

15 means a rate of interest which 

16 is not more than 5 percent 

17 above, and not more than 10 

18 percent below, the weighted 

19 average of the rates of inter20 est on 30-year Treasury secu21 rities during the 4-year period 

22 ending on the last day before 

23 the beginning of the plan 

24 year. 
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1 ‘‘(II) SECRETARIAL AUTHOR2 ITY.—If the Secretary finds 

3 that the lowest rate of inter4 est permissible under sub5 clause (I) is unreasonably 

6 high, the Secretary may pre7 scribe a lower rate of interest, 

8 except that such rate may not 

9 be less than 80 percent of the 

10 average rate determined 

11 under such subclause. 

12 ‘‘(iii) ASSUMPTIONS.—Notwith13 standing paragraph (3)(A), the in14 terest rate used under the plan 

15 shall be—

16 ‘‘(I) determined without 

17 taking into account the expe18 rience of the plan and reason19 able expectations, but 

20 ‘‘(II) consistent with the 

21 assumptions which reflect the 

22 purchase rates which would 

23 be used by insurance compa24 nies to satisfy the liabilities 

25 under the plan. 
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1 ‘‘(7) ANNUAL VALUATION.—

2 ‘‘(A) IN GENERAL.—For purposes of 

3 this section, a determination of expe4 rience gains and losses and a valu5 ation of the plan’s liability shall be 

6 made not less frequently than once 

7 every year, except that such deter8 mination shall be made more fre9 quently to the extent required in par10 ticular cases under regulations pre11 scribed by the Secretary. 

12 ‘‘(B) VALUATION DATE.—

13 ‘‘(i) CURRENT YEAR.—Except as 

14 provided in clause (ii), the valu15 ation referred to in subparagraph 

16 (A) shall be made as of a date 

17 within the plan year to which the 

18 valuation refers or within one 

19 month prior to the beginning of 

20 such year. 

21 ‘‘(ii) USE OF PRIOR YEAR VALU22 ATION.—The valuation referred to 

23 in subparagraph (A) may be made 

24 as of a date within the plan year 

25 prior to the year to which the 
336 

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1 valuation refers if, as of such 

2 date, the value of the assets of the 

3 plan are not less than 100 percent 

4 of the plan’s current liability (as 

5 defined in paragraph (6)(D) with6 out regard to clause (iv) thereof). 

7 ‘‘(iii) ADJUSTMENTS.—Informa8 tion under clause (ii) shall, in ac9 cordance with regulations, be ac10 tuarially adjusted to reflect sig11 nificant differences in partici12 pants. 

13 ‘‘(iv) LIMITATION.—A change in 

14 funding method to use a prior 

15 year valuation, as provided in 

16 clause (ii), may not be made un17 less as of the valuation date with18 in the prior plan year, the value 

19 of the assets of the plan are not 

20 less than 125 percent of the plan’s 

21 current liability (as defined in 

22 paragraph (6)(D) without regard 

23 to clause (iv) thereof). 

24 ‘‘(8) TIME WHEN CERTAIN CONTRIBU25 TIONS DEEMED MADE.—For purposes of this 
337 

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1 section, any contributions for a plan year 

2 made by an employer after the last day of 

3 such plan year, but not later than two 

4 and one-half months after such day, shall 

5 be deemed to have been made on such 

6 last day. For purposes of this subpara7 graph, such two and one-half month pe8 riod may be extended for not more than 

9 six months under regulations prescribed 

10 by the Secretary. 

11 ‘‘(9) INTEREST RULE FOR WAIVERS AND

12 EXTENSIONS.—The interest rate applicable 

13 for any plan year for purposes of com14 puting the amortization charge described 

15 in subsection (b)(2)(C) and in connection 

16 with an extension granted under sub17 section (d) shall be the greater of—

18 ‘‘(A) 150 percent of the Federal 

19 mid-term rate (as in effect under sec20 tion 1274 for the 1st month of such 

21 plan year), or 

22 ‘‘(B) the rate of interest used 

23 under the plan for determining costs. 
338 

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1 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS

2 FOR MULTIEMPLOYER PLANS.—In the case of a 

3 multiemployer plan—

4 ‘‘(1) EXTENSION.—The period of years 

5 required to amortize any unfunded liabil6 ity (described in any clause of subsection 

7 (b)(2)(B)) of any multiemployer plan shall 

8 be extended by the Secretary for a period 

9 of time (not in excess of 5 years) if the 

10 Secretary determines that—

11 ‘‘(A) absent the extension, the 

12 plan would have an accumulated 

13 funding deficiency in any of the next 

14 10 plan years, 

15 ‘‘(B) the plan sponsor has adopted 

16 a plan to improve the plan’s funding 

17 status, and 

18 ‘‘(C) taking into account the ex19 tension, the plan is projected to have 

20 sufficient assets to timely pay its ex21 pected benefit liabilities and other 

22 anticipated expenditures 

23 ‘‘(2) ADDITIONAL EXTENSION.—The pe24 riod of years required to amortize any 

25 unfunded liability (described in any 
339 

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1 clause of subsection (b)(2)(B)) of any mul2 tiemployer plan may be extended (in ad3 dition to any extension under paragraph 

4 (1)) by the Secretary for a period of time 

5 (not in excess of 5 years) if the Secretary 

6 determines that such extension would 

7 carry out the purposes of the Employee 

8 Retirement Income Security Act of 1974 

9 and would provide adequate protection 

10 for participants under the plan and their 

11 beneficiaries and if the Secretary deter12 mines that the failure to permit such ex13 tension would—

14 ‘‘(A) result in—

15 ‘‘(i) a substantial risk to the 

16 voluntary continuation of the 

17 plan, or 

18 ‘‘(ii) a substantial curtailment 

19 of pension benefit levels or em20 ployee compensation, and 

21 ‘‘(B) be adverse to the interests of 

22 plan participants in the aggregate. 

23 ‘‘(3) ADVANCE NOTICE.—

24 ‘‘(A) IN GENERAL.—The Secretary 

25 shall, before granting an extension 
340 

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1 under this section, require each ap2 plicant to provide evidence satisfac3 tory to the Secretary that the appli4 cant has provided notice of the filing 

5 of the application for such extension 

6 to each affected party (as defined in 

7 section 4001(a)(21) of the Employee 

8 Retirement Income Security Act of 

9 1974) with respect to the affected 

10 plan. Such notice shall include a de11 scription of the extent to which the 

12 plan is funded for benefits which are 

13 guaranteed under title IV of such Act 

14 and for benefit liabilities. 

15 ‘‘(B) CONSIDERATION OF RELEVANT

16 INFORMATION.—The Secretary shall 

17 consider any relevant information 

18 provided by a person to whom notice 

19 was given under paragraph (1).’’. 

20 (b) CONFORMING AMENDMENTS.—

21 (1) Section 418(b)(2) of such Code is 

22 amended—

23 (A) by striking ‘‘section 412(b)(2)’’

24 in subparagraph (A) and inserting 

25 ‘‘section 431(b)(2)’’, and 
341 

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1 (B) by striking ‘‘section 

2 412(b)(3)(B)’’ in subparagraph (B) and 

3 inserting ‘‘section 431(b)(3)(B)’’. 

4 (2) Section 418B of such Code is 

5 amended—

6 (A) by striking ‘‘section 

7 412(b)(2)(A) or (B)’’ in subsection 

8 (d)(1)(B) and inserting ‘‘section 

9 431(b)(2)(A) or (B)’’, 

10 (B) by striking ‘‘section 412(c)(8)’’

11 in subsection (e) and inserting ‘‘sec12 tion 412(d)(2)’’, and 

13 (C) by striking ‘‘section 412(c)(3)’’

14 in subsection (g) and inserting ‘‘sec15 tion 431(c)(3)’’. 

16 (3) Section 418D(a)(2) of such Code is 

17 amended—

18 (A) by striking ‘‘section 412(c)(8)’’

19 and inserting ‘‘section 412(d)(2)’’, and 

20 (B) by striking ‘‘section 412(c)(10)’’

21 and inserting ‘‘section 431(c)(8)’’. 

22 (c) CLERICAL AMENDMENT.—The table of 

23 sections for subpart A of part III of sub24 chapter D of chapter 1 of such Code is amend-
342 

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1 ed by adding after the item relating to section 

2 430 the following new item: 

‘‘Sec. 431. Minimum funding standards for multiemployer 

plans.’’. 

3 (d) EFFECTIVE DATE.—The amendments 

4 made by this section shall apply to plan years 

5 beginning after December 31, 2006. 

6 SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEM7 PLOYER PLANS IN ENDANGERED OR CRIT8 ICAL STATUS. 

9 (a) IN GENERAL.—Subpart A of part III of 

10 subchapter D of chapter 1 of the Internal Rev11 enue Code of 1986 is amended by inserting 

12 after section 431 the following new section: 

13 ‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEM14 PLOYER PLANS IN ENDANGERED STATUS OR 

15 CRITICAL STATUS. 

16 ‘‘(a) ANNUAL CERTIFICATION BY PLAN ACTU17 ARY.—

18 ‘‘(1) IN GENERAL.—During the 90-day 

19 period beginning on first day of each 

20 plan year of a multiemployer plan, the 

21 plan actuary shall certify to the Sec22 retary whether or not the plan is in en23 dangered status for such plan year and 
343 

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1 whether or not the plan is in critical sta2 tus for such plan year. 

3 ‘‘(2) ACTUARIAL PROJECTIONS OF ASSETS

4 AND LIABILITIES.—

5 ‘‘(A) IN GENERAL.—In making the 

6 determinations under paragraph (1), 

7 the plan actuary shall make projec8 tions under subsections (b)(2) and 

9 (c)(2) for the current and succeeding 

10 plan years, using reasonable actu11 arial assumptions and methods, of the 

12 current value of the assets of the plan 

13 and the present value of all liabilities 

14 to participants and beneficiaries 

15 under the plan for the current plan 

16 year as of the beginning of such year, 

17 as based on the actuarial statement 

18 prepared for the preceding plan year 

19 under section 103(d) of the Employee 

20 Retirement Income Security Act of 

21 1974. 

22 ‘‘(B) DETERMINATIONS OF FUTURE

23 CONTRIBUTIONS.—Any such actuarial 

24 projection of plan assets shall as25 sume—
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1 ‘‘(i) reasonably anticipated 

2 employer and employee contribu3 tions for the current and suc4 ceeding plan years, assuming that 

5 the terms of the one or more col6 lective bargaining agreements 

7 pursuant to which the plan is 

8 maintained for the current plan 

9 year continue in effect for suc10 ceeding plan years, or 

11 ‘‘(ii) that employer and em12 ployee contributions for the most 

13 recent plan year will continue in14 definitely, but only if the plan ac15 tuary determines there have been 

16 no significant demographic 

17 changes that would make contin18 ued application of such terms un19 reasonable. 

20 ‘‘(3) PRESUMED STATUS IN ABSENCE OF

21 TIMELY ACTUARIAL CERTIFICATION.—If cer22 tification under this subsection is not 

23 made before the end of the 90-day period 

24 specified in paragraph (1), the plan shall 

25 be presumed to be in critical status for 
345 

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1 such plan year until such time as the 

2 plan actuary makes a contrary certifi3 cation. 

4 ‘‘(4) NOTICE.—In any case in which a 

5 multiemployer plan is certified to be in 

6 endangered status under paragraph (1) 

7 or enters into critical status, the plan 

8 sponsor shall, not later than 30 days after 

9 the date of the certification or entry, pro10 vide notification of the endangered or 

11 critical status to the participants and 

12 beneficiaries, the bargaining parties, the 

13 Pension Benefit Guaranty Corporation, 

14 the Secretary of the Treasury, and the 

15 Secretary of Labor. 

16 ‘‘(b) FUNDING RULES FOR MULTIEMPLOYER

17 PLANS IN ENDANGERED STATUS.—

18 ‘‘(1) IN GENERAL.—In any case in 

19 which a multiemployer plan is in endan20 gered status for a plan year and no fund21 ing improvement plan under this sub22 section with respect to such multiem23 ployer plan is in effect for the plan year, 

24 the plan sponsor shall, in accordance 

25 with this subsection, amend the multiem-
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1 ployer plan to include a funding improve2 ment plan upon approval thereof by the 

3 bargaining parties under this subsection. 

4 The amendment shall be adopted not 

5 later than 240 days after the date on 

6 which the plan is certified to be in en7 dangered status under subsection (a)(1). 

8 ‘‘(2) ENDANGERED STATUS.—A multiem9 ployer plan is in endangered status for a 

10 plan year if, as determined by the plan 

11 actuary under subsection (a)—

12 ‘‘(A) the plan’s funded percentage 

13 for such plan year is less than 80 per14 cent, or 

15 ‘‘(B) the plan has an accumulated 

16 funding deficiency for such plan year 

17 under section 431 or is projected to 

18 have such an accumulated funding 

19 deficiency for any of the 6 succeeding 

20 plan years, taking into account any 

21 extension of amortization periods 

22 under section 431(d). 

23 ‘‘(3) FUNDING IMPROVEMENT PLAN.—

24 ‘‘(A) BENCHMARKS.—A funding im25 provement plan shall consist of 
347 

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1 amendments to the plan formulated 

2 to provide, under reasonable actu3 arial assumptions, for the attainment, 

4 during the funding improvement pe5 riod under the funding improvement 

6 plan, of the following benchmarks: 

7 ‘‘(i) INCREASE IN FUNDED PER8 CENTAGE.—An increase in the 

9 plan’s funded percentage such 

10 that—

11 ‘‘(I) the difference be12 tween 100 percent and the 

13 plan’s funded percentage for 

14 the last year of the funding 

15 improvement period, is not 

16 more than 

‘‘(II) 2 17 ⁄3 of the difference 

18 between 100 percent and the 

19 plan’s funded percentage for 

20 the first year of the funding 

21 improvement period. 

22 ‘‘(ii) AVOIDANCE OF ACCUMU23 LATED FUNDING DEFICIENCIES.—No 

24 accumulated funding deficiency 

25 for any plan year during the 
348 

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1 funding improvement period (tak2 ing into account any extension of 

3 amortization periods under sec4 tion 431(d)). 

5 ‘‘(B) FUNDING IMPROVEMENT PE6 RIOD.—The funding improvement pe7 riod for any funding improvement 

8 plan adopted pursuant to this sub9 section is the 10-year period begin10 ning on the earlier of—

11 ‘‘(i) the second anniversary of 

12 the date of the adoption of the 

13 funding improvement plan, or 

14 ‘‘(ii) the first day of the first 

15 plan year of the multiemployer 

16 plan following the plan year in 

17 which occurs the first date after 

18 the day of the certification as of 

19 which collective bargaining 

20 agreements covering on the day 

21 of such certification at least 75 

22 percent of active participants in 

23 such multiemployer plan have ex24 pired. 
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1 ‘‘(C) SPECIAL RULES FOR CERTAIN

2 SERIOUSLY UNDERFUNDED PLANS.—

3 ‘‘(i) In the case of a plan in 

4 which the funded percentage of a 

5 plan for the plan year is 70 per6 cent or less, subparagraph 

7 (A)(i)(II) shall be applied by substituting ‘

4⁄5’ for ‘2 8 ⁄3’ and subpara9 graph (B) shall be applied by sub10 stituting ‘the 15-year period’ for 

11 ‘the 10-year period’. 

12 ‘‘(ii) In the case of a plan in 

13 which the funded percentage of a 

14 plan for the plan year is more 

15 than 70 percent but less than 80 

16 percent, and—

17 ‘‘(I) the plan actuary cer18 tifies within 30 days after cer19 tification under subsection 

20 (a)(1) that the plan is not able 

21 to attain the increase de22 scribed in subparagraph (A)(i) 

23 over the period described in 

24 subparagraph (B), and 
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•HR 2830 RH 

1 ‘‘(II) the plan year is prior 

2 to the day described in sub3 paragraph (B)(ii), 

4 subparagraph (A)(i)(II) shall be 

applied by substituting ‘

4⁄5’ for ‘2 5 ⁄3’

6 and subparagraph (B) shall be ap7 plied by substituting ‘the 15-year 

8 period’ for ‘the 10-year period’. 

9 ‘‘(iii) For any plan year fol10 lowing the year described in 

11 clause (ii)(II), subparagraph 

12 (A)(i)(II) and subparagraph (B) 

13 shall apply, except that for each 

14 plan year ending after such date 

15 for which the plan actuary cer16 tifies (at the time of the annual 

17 certification under subsection 

18 (a)(1) for such plan year) that the 

19 plan is not able to attain the in20 crease described in subparagraph 

21 (A)(i) over the period described in 

22 subparagraph (B), subparagraph 

23 (B) shall be applied by sub24 stituting ‘the 15-year period’ for 

25 ‘the 10-year period’. 
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1 ‘‘(D) REPORTING.—A summary of 

2 any funding improvement plan or 

3 modification thereto adopted during 

4 any plan year, together with annual 

5 updates regarding the funding ratio 

6 of the plan, shall be included in the 

7 annual report for such plan year 

8 under section 104(a) of the Employee 

9 Retirement Income Security Act of 

10 1974 and in the summary annual re11 port described in section 104(b)(3) of 

12 such Act. 

13 ‘‘(4) DEVELOPMENT OF FUNDING IM14 PROVEMENT PLAN.—

15 ‘‘(A) ACTIONS BY PLAN SPONSOR

16 PENDING APPROVAL.—Pending the ap17 proval of a funding improvement plan 

18 under this paragraph, the plan spon19 sor shall take all reasonable actions, 

20 consistent with the terms of the plan 

21 and applicable law, necessary to en22 sure—

23 ‘‘(i) an increase in the plan’s 

24 funded percentage, and 
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1 ‘‘(ii) postponement of an accu2 mulated funding deficiency for at 

3 least 1 additional plan year. 

4 Such actions include applications for 

5 extensions of amortization periods 

6 under section 431(d), use of the short7 fall funding method in making fund8 ing standard account computations, 

9 amendments to the plan’s benefit 

10 structure, reductions in future ben11 efit accruals, and other reasonable 

12 actions consistent with the terms of 

13 the plan and applicable law. 

14 ‘‘(B) RECOMMENDATIONS BY PLAN

15 SPONSOR.—

16 ‘‘(i) IN GENERAL.—During the 

17 period of 90 days following the 

18 date on which a multiemployer 

19 plan is certified to be in endan20 gered status, the plan sponsor 

21 shall develop and provide to the 

22 bargaining parties alternative 

23 proposals for revised benefit 

24 structures, contribution struc25 tures, or both, which, if adopted 
353 

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1 as amendments to the plan, may 

2 be reasonably expected to meet 

3 the benchmarks described in 

4 paragraph (3)(A). Such proposals 

5 shall include—

6 ‘‘(I) at least one proposal 

7 for reductions in the amount 

8 of future benefit accruals nec9 essary to achieve the bench10 marks, assuming no amend11 ments increasing contribu12 tions under the plan (other 

13 than amendments increasing 

14 contributions necessary to 

15 achieve the benchmarks after 

16 amendments have reduced fu17 ture benefit accruals to the 

18 maximum extent permitted by 

19 law), and 

20 ‘‘(II) at least one proposal 

21 for increases in contributions 

22 under the plan necessary to 

23 achieve the benchmarks, as24 suming no amendments re-
354 

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1 ducing future benefit accruals 

2 under the plan. 

3 ‘‘(ii) REQUESTS BY BARGAINING

4 PARTIES.—Upon the request of any 

5 bargaining party who—

6 ‘‘(I) employs at least 5 per7 cent of the active partici8 pants, or 

9 ‘‘(II) represents as an em10 ployee organization, for pur11 poses of collective bargaining, 

12 at least 5 percent of the active 

13 participants, 

14 the plan sponsor shall provide all 

15 such parties information as to 

16 other combinations of increases 

17 in contributions and reductions 

18 in future benefit accruals which 

19 would result in achieving the 

20 benchmarks. 

21 ‘‘(iii) OTHER INFORMATION.—

22 The plan sponsor may, as it 

23 deems appropriate, prepare and 

24 provide the bargaining parties 

25 with additional information relat-
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1 ing to contribution structures or 

2 benefit structures or other infor3 mation relevant to the funding 

4 improvement plan. 

5 ‘‘(5) MAINTENANCE OF CONTRIBUTIONS

6 PENDING APPROVAL OF FUNDING IMPROVE7 MENT PLAN.—Pending approval of a fund8 ing improvement plan by the bargaining 

9 parties with respect to a multiemployer 

10 plan, the multiemployer plan may not be 

11 amended so as to provide—

12 ‘‘(A) a reduction in the level of 

13 contributions for participants who 

14 are not in pay status, 

15 ‘‘(B) a suspension of contributions 

16 with respect to any period of service, 

17 or 

18 ‘‘(C) any new direct or indirect ex19 clusion of younger or newly hired em20 ployees from plan participation. 

21 ‘‘(6) BENEFIT RESTRICTIONS PENDING AP22 PROVAL OF FUNDING IMPROVEMENT PLAN.—

23 Pending approval of a funding improve24 ment plan by the bargaining parties with 

25 respect to a multiemployer plan—
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1 ‘‘(A) RESTRICTIONS ON LUMP SUM

2 AND SIMILAR DISTRIBUTIONS.—In any 

3 case in which the present value of a 

4 participant’s accrued benefit under 

5 the plan exceeds $5,000, such benefit 

6 may not be distributed as an imme7 diate distribution or in any other ac8 celerated form. 

9 ‘‘(B) PROHIBITION ON BENEFIT IN10 CREASES.—

11 ‘‘(i) IN GENERAL.—No amend12 ment of the plan which increases 

13 the liabilities of the plan by rea14 son of any increase in benefits, 

15 any change in the accrual of ben16 efits, or any change in the rate at 

17 which benefits become nonforfeit18 able under the plan may be 

19 adopted. 

20 ‘‘(ii) EXCEPTION.—Clause (i) 

21 shall not apply to any plan 

22 amendment which is required as 

23 a condition of qualification under 

24 part I of subchapter D of chapter 

25 1 of subtitle A. 
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1 ‘‘(7) DEFAULT CRITICAL STATUS IF NO

2 FUNDING IMPROVEMENT PLAN ADOPTED.—If 

3 no plan amendment adopting a funding 

4 improvement plan has been adopted by 

5 the end of the 240-day period referred to 

6 in subsection (b)(1), the plan enters into 

7 critical status as of the first day of the 

8 succeeding plan year. 

9 ‘‘(8) RESTRICTIONS UPON APPROVAL OF

10 FUNDING IMPROVEMENT PLAN.—Upon adop11 tion of a funding improvement plan with 

12 respect to a multiemployer plan, the plan 

13 may not be amended—

14 ‘‘(A) so as to be inconsistent with 

15 the funding improvement plan, or 

16 ‘‘(B) so as to increase future ben17 efit accruals, unless the plan actuary 

18 certifies in advance that, after taking 

19 into account the proposed increase, 

20 the plan is reasonably expected to 

21 meet the the benchmarks described 

22 in paragraph (3)(A). 

23 ‘‘(c) FUNDING RULES FOR MULTIEMPLOYER

24 PLANS IN CRITICAL STATUS.—
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1 ‘‘(1) IN GENERAL.—In any case in 

2 which a multiemployer plan is in critical 

3 status for a plan year as described in 

4 paragraph (2) (or otherwise enters into 

5 critical status under this section) and no 

6 rehabilitation plan under this subsection 

7 with respect to such multiemployer plan 

8 is in effect for the plan year, the plan 

9 sponsor shall, in accordance with this 

10 subsection, amend the multiemployer 

11 plan to include a rehabilitation plan 

12 under this subsection. The amendment 

13 shall be adopted not later than 240 days 

14 after the date on which the plan enters 

15 into critical status. 

16 ‘‘(2) CRITICAL STATUS.—A multiem17 ployer plan is in critical status for a plan 

18 year if—

19 ‘‘(A) the plan is in endangered sta20 tus for the preceding plan year and 

21 the requirements of subsection (b)(1) 

22 were not met with respect to the plan 

23 for such preceding plan year, or 
359 

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1 ‘‘(B) as determined by the plan ac2 tuary under subsection (a), the plan 

3 is described in paragraph (3). 

4 ‘‘(3) CRITICALITY DESCRIPTION.—For 

5 purposes of paragraph (2)(B), a plan is 

6 described in this paragraph if the plan is 

7 described in at least one of the following 

8 subparagraphs: 

9 ‘‘(A) A plan is described in this 

10 subparagraph if, as of the beginning 

11 of the current plan year—

12 ‘‘(i) the funded percentage of 

13 the plan is less than 65 percent, 

14 and 

15 ‘‘(ii) the sum of—

16 ‘‘(I) the market value of 

17 plan assets, plus 

18 ‘‘(II) the present value of 

19 the reasonably anticipated 

20 employer and employee con21 tributions for the current 

22 plan year and each of the 6 

23 succeeding plan years, assum24 ing that the terms of the one 

25 or more collective bargaining 
360 

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1 agreements pursuant to 

2 which the plan is maintained 

3 for the current plan year con4 tinue in effect for succeeding 

5 plan years, 

6 is less than the present value of 

7 all nonforfeitable benefits for all 

8 participants and beneficiaries 

9 projected to be payable under the 

10 plan during the current plan year 

11 and each of the 6 succeeding plan 

12 years (plus administrative ex13 penses for such plan years). 

14 ‘‘(B) A plan is described in this 

15 subparagraph if, as of the beginning 

16 of the current plan year, the sum of—

17 ‘‘(i) the market value of plan 

18 assets, plus 

19 ‘‘(ii) the present value of the 

20 reasonably anticipated employer 

21 and employee contributions for 

22 the current plan year and each of 

23 the 4 succeeding plan years, as24 suming that the terms of the one 

25 or more collective bargaining 
361 

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1 agreements pursuant to which 

2 the plan is maintained for the 

3 current plan year remain in effect 

4 for succeeding plan years, 

5 is less than the present value of all 

6 nonforfeitable benefits for all partici7 pants and beneficiaries projected to 

8 be payable under the plan during the 

9 current plan year and each of the 4 

10 succeeding plan years (plus adminis11 trative expenses for such plan years). 

12 ‘‘(C) A plan is described in this 

13 subparagraph if—

14 ‘‘(i) as of the beginning of the 

15 current plan year, the funded per16 centage of the plan is less than 65 

17 percent, and 

18 ‘‘(ii) the plan has an accumu19 lated funding deficiency for the 

20 current plan year or is projected 

21 to have an accumulated funding 

22 deficiency for any of the 4 suc23 ceeding plan years, not taking 

24 into account any extension of am-
362 

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1 ortization periods under section 

2 431(d). 

3 ‘‘(D) A plan is described in this 

4 subparagraph if—

5 ‘‘(i)(I) the plan’s normal cost 

6 for the current plan year, plus in7 terest (determined at the rate 

8 used for determining cost under 

9 the plan) for the current plan 

10 year on the amount of unfunded 

11 benefit liabilities under the plan 

12 as of the last date of the pre13 ceding plan year, exceeds 

14 ‘‘(II) the present value, as of 

15 the beginning of the current plan 

16 year, of the reasonably antici17 pated employer and employee 

18 contributions for the current plan 

19 year, 

20 ‘‘(ii) the present value, as of 

21 the beginning of the current plan 

22 year, of nonforfeitable benefits of 

23 inactive participants is greater 

24 than the present value, as of the 

25 beginning of the current plan 
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1 year, of nonforfeitable benefits of 

2 active participants, and 

3 ‘‘(iii) the plan is projected to 

4 have an accumulated funding de5 ficiency for the current plan year 

6 or any of the 4 succeeding plan 

7 years, not taking into account any 

8 extension of amortization periods 

9 under section 431(d). 

10 ‘‘(E) A plan is described in this 

11 subparagraph if—

12 ‘‘(i) the funded percentage of 

13 the plan is greater than 65 per14 cent for the current plan year, 

15 and 

16 ‘‘(ii) the plan is projected to 

17 have an accumulated funding de18 ficiency during any of the suc19 ceeding 3 plan years, not taking 

20 into account any extension of am21 ortization periods under section 

22 431(d). 

23 ‘‘(4) REHABILITATION PLAN.—

24 ‘‘(A) IN GENERAL.—A rehabilitation 

25 plan shall consist of—
364 

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1 ‘‘(i) amendments to the plan 

2 providing (under reasonable actu3 arial assumptions) for measures, 

4 agreed to by the bargaining par5 ties, to increase contributions, re6 duce plan expenditures (includ7 ing plan mergers and consolida8 tions), or reduce future benefit 

9 accruals, or to take any combina10 tion of such actions, determined 

11 necessary to cause the plan to 

12 cease, during the rehabilitation 

13 period, to be in critical status, or 

14 ‘‘(ii) reasonable measures to 

15 forestall possible insolvency 

16 (within the meaning of section 

17 418E) if the plan sponsor deter18 mines that, upon exhaustion of all 

19 reasonable measures, the plan 

20 would not cease during the reha21 bilitation period to be in critical 

22 status. 

23 ‘‘(B) REHABILITATION PERIOD.—The 

24 rehabilitation period for any rehabili25 tation plan adopted pursuant to this 
365 

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1 subsection is the 10-year period be2 ginning on the earlier of—

3 ‘‘(i) the second anniversary of 

4 the date of the adoption of the re5 habilitation plan, or 

6 ‘‘(ii) the first day of the first 

7 plan year of the multiemployer 

8 plan following the plan year in 

9 which occurs the first date, after 

10 the date of the plan’s entry into 

11 critical status, as of which collec12 tive bargaining agreements cov13 ering at least 75 percent of active 

14 participants in such multiem15 ployer plan (determined as of 

16 such date of entry) have expired. 

17 ‘‘(C) REPORTING.—A summary of 

18 any rehabilitation plan or modifica19 tion thereto adopted during any plan 

20 year, together with annual updates 

21 regarding the funding ratio of the 

22 plan, shall be included in the annual 

23 report for such plan year under sec24 tion 104(a) of the Employee Retire25 ment Income Security Act of 1974 and 
366 

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1 in the summary annual report de2 scribed in section 104(b)(3). 

3 ‘‘(5) DEVELOPMENT OF REHABILITATION

4 PLAN.—

5 ‘‘(A) PROPOSALS BY PLAN SPON6 SOR.—

7 ‘‘(i) IN GENERAL.—Within 90 

8 days after the date of entry into 

9 critical status (or the date as of 

10 which the requirements of sub11 section (b)(1) are not met with re12 spect to the plan), the plan spon13 sor shall propose to all bargaining 

14 parties a range of alternative 

15 schedules of increases in con16 tributions and reductions in fu17 ture benefit accruals that would 

18 serve to carry out a rehabilitation 

19 plan under this subsection. 

20 ‘‘(ii) PROPOSAL ASSUMING NO

21 CONTRIBUTION INCREASES.—Such 

22 proposals shall include, as one of 

23 the proposed schedules, a sched24 ule of those reductions in future 

25 benefit accruals that would be 
367 

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1 necessary to cause the plan to 

2 cease to be in critical status if 

3 there were no further increases 

4 in rates of contribution to the 

5 plan. 

6 ‘‘(iii) PROPOSAL WHERE CON7 TRIBUTIONS ARE NECESSARY.—If the 

8 plan sponsor determines that the 

9 plan will not cease to be in crit10 ical status during the rehabilita11 tion period unless the plan is 

12 amended to provide for an in13 crease in contributions, the plan 

14 sponsor’s proposals shall include 

15 a schedule of those increases in 

16 contribution rates that would be 

17 necessary to cause the plan to 

18 cease to be in critical status if fu19 ture benefit accruals were re20 duced to the maximum extent 

21 permitted by law. 

22 ‘‘(B) REQUESTS FOR ADDITIONAL

23 SCHEDULES.—Upon the request of any 

24 bargaining party who—
368 

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1 ‘‘(i) employs at least 5 percent 

2 of the active participants, or 

3 ‘‘(ii) represents as an em4 ployee organization, for purposes 

5 of collective bargaining, at least 5 

6 percent of active participants, 

7 the plan sponsor shall include among 

8 the proposed schedules such sched9 ules of increases in contributions and 

10 reductions in future benefit accruals 

11 as may be specified by the bargaining 

12 parties. 

13 ‘‘(C) SUBSEQUENT AMENDMENTS.—

14 Upon the adoption of a schedule of 

15 increases in contributions or reduc16 tions in future benefit accruals as 

17 part of the rehabilitation plan, the 

18 plan sponsor may amend the plan 

19 thereafter to update the schedule to 

20 adjust for any experience of the plan 

21 contrary to past actuarial assump22 tions, except that such an amendment 

23 may be made not more than once in 

24 any 3-year period. 
369 

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1 ‘‘(D) ALLOCATION OF REDUCTIONS IN

2 FUTURE BENEFIT ACCRUALS.—Any 

3 schedule containing reductions in fu4 ture benefit accruals forming a part 

5 of a rehabilitation plan shall be appli6 cable with respect to any group of ac7 tive participants who are employed 

8 by any bargaining party (as an em9 ployer obligated to contribute under 

10 the plan) in proportion to the extent 

11 to which increases in contributions 

12 under such schedule apply to such 

13 bargaining party. 

14 ‘‘(E) LIMITATION ON REDUCTION IN

15 RATES OF FUTURE ACCRUALS.—Any 

16 schedule proposed under this para17 graph shall not reduce the rate of fu18 ture accruals below the lower of—

19 ‘‘(i) a monthly benefit equal to 

20 1 percent of the contributions re21 quired to be made with respect to 

22 a participant or the equivalent 

23 standard accrual rate for a partic24 ipant or group of participants 

25 under the collective bargaining 
370 

•HR 2830 RH 

1 agreements in effect as of the first 

2 day of the plan year in which the 

3 plan enters critical status, or 

4 ‘‘(ii) if lower, the accrual rate 

5 under the plan on such date. 

6 The equivalent standard accrual rate 

7 shall be determined by the trustees 

8 based on the standard or average 

9 contribution base units that they de10 termine to be representative for ac11 tive participants and such other fac12 tors as they determine to be relevant. 

13 ‘‘(6) MAINTENANCE OF CONTRIBUTIONS

14 AND RESTRICTIONS ON BENEFITS PENDING

15 ADOPTION OF REHABILITATION PLAN.—The 

16 rules of paragraphs (5) and (6) of sub17 section (b) shall apply for purposes of 

18 this subsection by substituting the term 

19 ‘rehabilitation plan’ for ‘funding improve20 ment plan’. 

21 ‘‘(7) RESTRICTIONS UPON APPROVAL OF

22 REHABILITATION PLAN.—Upon adoption of 

23 a rehabilitation plan with respect to a 

24 multiemployer plan, the plan may not be 

25 amended—
371 

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1 ‘‘(A) so as to be inconsistent with 

2 the rehabilitation plan, or 

3 ‘‘(B) so as to increase future ben4 efit accruals, unless the plan actuary 

5 certifies in advance that, after taking 

6 into account the proposed increase, 

7 the plan is reasonably expected to 

8 cease to be in critical status. 

9 ‘‘(8) IMPLEMENTATION OF DEFAULT

10 SCHEDULE UPON FAILURE TO ADOPT REHA11 BILITATION PLAN.—If the plan is not 

12 amended by the end of the 240-day period 

13 after entry into critical status to include 

14 a rehabilitation plan, the plan sponsor 

15 shall amend the plan to implement the 

16 schedule required by paragraph (5)(A)(ii). 

17 ‘‘(9) DEEMED WITHDRAWAL.—Upon the 

18 failure of any employer who has an obli19 gation to contribute under the plan to 

20 make contributions in compliance with 

21 the schedule adopted under paragraph 

22 (4) as part of the rehabilitation plan, the 

23 failure of the employer may, at the dis24 cretion of the plan sponsor, be treated as 

25 a withdrawal by the employer from the 
372 

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1 plan under section 4203 of the Employee 

2 Retirement Income Security Act of 1974 

3 or a partial withdrawal by the employer 

4 under section 4205 of such Act. 

5 ‘‘(d) DEFINITIONS.—For purposes of this 

6 section—

7 ‘‘(1) BARGAINING PARTY.—The term 

8 ‘bargaining party’ means, in connection 

9 with a multiemployer plan—

10 ‘‘(A) an employer who has an obli11 gation to contribute under the plan, 

12 and 

13 ‘‘(B) an employee organization 

14 which, for purposes of collective bar15 gaining, represents plan participants 

16 employed by such an employer. 

17 ‘‘(2) FUNDED PERCENTAGE.—The term 

18 ‘funded percentage’ means the percent19 age expressed as a ratio of which—

20 ‘‘(A) the numerator of which is 

21 the value of the plan’s assets, as de22 termined under section 431(c)(2), and 

23 ‘‘(B) the denominator of which is 

24 the accrued liability of the plan. 
373 

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1 ‘‘(3) ACCUMULATED FUNDING DEFI2 CIENCY.—The term ‘accumulated funding 

3 deficiency’ has the meaning provided 

4 such term in section 431(a). 

5 ‘‘(4) ACTIVE PARTICIPANT.—The term 

6 ‘active participant’ means, in connection 

7 with a multiemployer plan, a participant 

8 who is in covered service under the plan. 

9 ‘‘(5) INACTIVE PARTICIPANT.—The term 

10 ‘inactive participant’ means, in connec11 tion with a multiemployer plan, a partici12 pant who—

13 ‘‘(A) is not in covered service 

14 under the plan, and 

15 ‘‘(B) is in pay status under the 

16 plan or has a nonforfeitable right to 

17 benefits under the plan. 

18 ‘‘(6) PAY STATUS.—A person is in ‘pay 

19 status’ under a multiemployer plan if—

20 ‘‘(A) at any time during the cur21 rent plan year, such person is a par22 ticipant or beneficiary under the plan 

23 and is paid an early, late, normal, or 

24 disability retirement benefit under 

25 the plan (or a death benefit under the 
374 

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1 plan related to a retirement benefit), 

2 or 

3 ‘‘(B) to the extent provided in reg4 ulations of the Secretary, such person 

5 is entitled to such a benefit under the 

6 plan. 

7 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The 

8 term ‘obligation to contribute’ has the 

9 meaning provided such term under sec10 tion 4212(a) of the Employee Retirement 

11 Income Security Act of 1974. 

12 ‘‘(8) ENTRY INTO CRITICAL STATUS.—A 

13 plan shall be treated as entering into crit14 ical status as of the date that such plan is 

15 certified to be in critical status under 

16 subsection (a)(1), is presumed to be in 

17 critical status under subsection (a)(3), or 

18 enters into critical status under sub19 section (b)(7).’’. 

20 (b) CLERICAL AMENDMENT.—The table of 

21 sections for subpart A of part III of sub22 chapter D of chapter 1 of such Code is amend23 ed by adding at the end the following new 

24 item: 

‘‘Sec. 432. Additional funding rules for multiemployer plans in 

endangered status or critical status.’’. 
375 

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1 (c) EFFECTIVE DATE.—The amendment 

2 made by this section shall apply with respect 

3 to plan years beginning after December 31, 

4 2005. 

5 (d) SPECIAL RULE FOR 2006.—In the case of 

6 any plan year beginning in 2006, any ref7 erence in section 432 of the Internal Revenue 

8 Code of 1986 (as added by this section) to sec9 tion 431 of such Code (as added by this Act) 

10 shall be treated as a reference to the cor11 responding provision of such Code as in effect 

12 for plan years beginning in such year. 

13 SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MUL14 TIEMPLOYER PLANS. 

15 (a) ADVANCE DETERMINATION OF IMPENDING

16 INSOLVENCY OVER 5 YEARS.—Section 418E(d)(1) 

17 of the Internal Revenue Code of 1986 is 

18 amended—

19 (1) by striking ‘‘3 plan years’’ the sec20 ond place it appears and inserting ‘‘5 

21 plan years’’, and 

22 (2) by adding at the end the following 

23 new sentence: ‘‘If the plan sponsor makes 

24 such a determination that the plan will 

25 be insolvent in any of the next 5 plan 
376 

•HR 2830 RH 

1 years, the plan sponsor shall make the 

2 comparison under this paragraph at least 

3 annually until the plan sponsor makes a 

4 determination that the plan will not be 

5 insolvent in any of the next 5 plan 

6 years.’’. 

7 (b) EFFECTIVE DATE.—The amendments 

8 made by this section shall apply with respect 

9 to determinations made in plan years begin10 ning after December 31, 2005. 

11 TITLE III—OTHER PROVISIONS 

12 SEC. 301. INTEREST RATE FOR 2006 FUNDING REQUIRE13 MENTS. 

14 (a) IN GENERAL.—Subclause (II) of section 

15 412(b)(5)(B)(ii) of the Internal Revenue Code 

16 of 1986 is amended—

17 (1) by striking ‘‘January 1, 2006’’ and 

18 inserting ‘‘January 1, 2007’’, and 

19 (2) by striking ‘‘AND 2005’’ in the head20 ing and inserting ‘‘

, 2005, AND 2006’’. 

21 (b) CURRENT LIABILITY.—Subclause (IV) of 

22 section 412(l)(7)(C)(i) of such Code is amend23 ed—

24 (1) by striking ‘‘or 2005’’ and inserting 

25 ‘‘, 2005, or 2006’’, and 
377 

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1 (2) by striking ‘‘AND 2005’’ in the head2 ing and inserting ‘‘

, 2005, AND 2006’’. 

3 (c) EFFECTIVE DATE.—The amendments 

4 made by this section shall apply to plan years 

5 beginning after December 31, 2005. 

6 SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINA7 TION OF LUMP SUM DISTRIBUTIONS. 

8 (a) AMENDMENTS TO EMPLOYEE RETIREMENT

9 INCOME SECURITY ACT OF 1974.—[See section 

10 301(a) of the bill as reported by the Com11 mittee on Education and the Workforce.] 

12 (b) AMENDMENTS TO INTERNAL REVENUE

13 CODE OF 1986.—Section 417(e)(3)(A) of the In14 ternal Revenue Code of 1986 is amended by 

15 striking clause (ii) and inserting the fol16 lowing: 

17 ‘‘(ii) For purposes of clause (i), 

18 the term ‘applicable mortality 

19 table’ means a mortality table, 

20 modified as appropriate by the 

21 Secretary, based on the mortality 

22 table specified for the plan year 

23 under section 430(h)(3). 

24 ‘‘(iii) For purposes of clause 

25 (i), the term ‘applicable interest 
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1 rate’ means the adjusted first, sec2 ond, and third segment rates ap3 plied under rules similar to the 

4 rules of section 430(h)(2)(C) for 

5 the month before the date of the 

6 distribution or such other time as 

7 the Secretary may by regulations 

8 prescribe. 

9 ‘‘(iv) For purposes of clause 

10 (iii), the adjusted first, second, 

11 and third segment rates are the 

12 first, second, and third segment 

13 rates which would be determined 

14 under section 430(h)(2)(C) if—

15 ‘‘(I) section 430(h)(2)(D)(i) 

16 were applied by substituting 

17 ‘the yields’ for ‘a 3-year 

18 weighted average of yields’, 

19 ‘‘(II) section 

20 430(h)(2)(G)(i)(II) were ap21 plied by substituting ‘section 

22 417(e)(3)(A)(ii)(II)’ for ‘section 

23 412(b)(5)(B)(ii)(II)’, and 

24 ‘‘(III) the applicable per25 centage under section 
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1 430(h)(2)(G) were determined 

2 in accordance with the fol3 lowing table: 

‘‘In the case of plan years beginning in: The applicable 

percentage is:

2007 .................................................................. 20 percent

2008 .................................................................. 40 percent

2009 .................................................................. 60 percent

2010 .................................................................. 80 percent.’’. 

4 (c) SPECIAL RULE FOR PLAN AMENDMENTS.—

5 A plan shall not fail to meet the requirements 

6 of section 411(d)(6) of the Internal Revenue 

7 Code of 1986 or section 204(g) of the Employee 

8 Retirement Income Security Act of 1974 solely 

9 by reason of the adoption by the plan of an 

10 amendment necessary to meet the require11 ments of the amendments made by this sec12 tion. 

13 (d) EFFECTIVE DATE.—The amendments 

14 made by this section shall apply with respect 

15 to plan years beginning after December 31, 

16 2006. 
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1 SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING 

2 BENEFIT LIMITATIONS TO LUMP SUM DIS3 TRIBUTIONS. 

4 (a) IN GENERAL.—Clause (ii) of section 

5 415(b)(2)(E) of the Internal Revenue Code of 

6 1986 is amended to read as follows: 

7 ‘‘(ii) For purposes of adjusting 

8 any benefit under subparagraph 

9 (B) for any form of benefit subject 

10 to section 417(e)(3), the interest 

11 rate assumption shall not be less 

12 than the greater of—

13 ‘‘(I) 5.5 percent, 

14 ‘‘(II) the rate that provides 

15 a benefit of not more than 105 

16 percent of the benefit that 

17 would be provided if the ap18 plicable interest rate (as de19 fined in section 417(e)(3)) 

20 were the interest rate as21 sumption, or 

22 ‘‘(III) the rate specified 

23 under the plan.’’. 

24 (b) EFFECTIVE DATE.—The amendment 

25 made by subsection (a) shall apply to distribu-
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1 tions made in years beginning after December 

2 31, 2005. 

3 SEC. 304. DISTRIBUTIONS DURING WORKING RETIREMENT. 

4 (a) AMENDMENT TO THE EMPLOYEE RETIRE5 MENT INCOME SECURITY ACT OF 1974.—[See sec6 tion 303(a) of the bill as reported by the Com7 mittee on Education and the Workforce.] 

8 (b) AMENDMENT TO THE INTERNAL REVENUE

9 CODE OF 1986.—Subsection (a) of section 401 

10 of the Internal Revenue Code of 1986 is 

11 amended by inserting after paragraph (34) 

12 the following new paragraph: 

13 ‘‘(35) DISTRIBUTIONS DURING WORKING

14 RETIREMENT.—A trust forming part of a 

15 pension plan shall not be treated as fail16 ing to constitute a qualified trust under 

17 this section solely because a distribution 

18 is made from such trust to an employee 

19 who has attained age 62 and who is not 

20 separated from employment at the time 

21 of such distribution.’’. 

22 (c) EFFECTIVE DATE.—The amendments 

23 made by this section shall apply to distribu24 tions in plan years beginning after December 

25 31, 2005. 
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1 SEC. 305. OTHER AMENDMENTS RELATING TO PROHIBITED 

2 TRANSACTIONS. 

3 [See section 304 of the bill as reported by 

4 the Committee on Education and the Work5 force.] 

6 SEC. 306. CORRECTION PERIOD FOR CERTAIN TRANS7 ACTIONS INVOLVING SECURITIES AND COM8 MODITIES. 

9 [See section 305 of the bill as reported by 

10 the Committee on Education and the Work11 force.] 

12 SEC. 307. GOVERNMENT ACCOUNTABILITY OFFICE PEN13 SION FUNDING REPORT. 

14 [See section 306 of the bill as reported by 

15 the Committee on Education and the Work16 force.] 

17 TITLE IV—IMPROVEMENTS IN 

18 PBGC GUARANTEE PROVISIONS 

19 SEC. 401. INCREASES IN PBGC PREMIUMS. 

20 (a) FLAT-RATE PREMIUMS.—Section 

21 4006(a)(3) of the Employee Retirement Income 

22 Security Act of 1974 (29 U.S.C. 1306(a)(3)) is 

23 amended—

24 (1) by striking clause (i) of subpara25 graph (A) and inserting the following: 
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1 ‘‘(i) in the case of a single-employer 

2 plan, an amount equal to—

3 ‘‘(I) for plan years beginning after 

4 December 31, 1990, and before Janu5 ary 1, 2006, $19, or 

6 ‘‘(II) for plan years beginning 

7 after December 31, 2005, the amount 

8 determined under subparagraph (F), 

9 plus the additional premium (if any) de10 termined under subparagraph (E) for 

11 each individual who is a participant in 

12 such plan during the plan year;’’; and 

13 (2) by adding at the end the following 

14 new subparagraph: 

15 ‘‘(F)(i) Except as otherwise provided in 

16 this subparagraph, for purposes of deter17 mining the annual premium rate payable to 

18 the corporation by a single-employer plan for 

19 basic benefits guaranteed under this title, the 

20 amount determined under this subparagraph 

21 is the greater of $30 or the adjusted amount 

22 determined under clause (ii). 

23 ‘‘(ii) For plan years beginning after 2006, 

24 the adjusted amount determined under this 
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1 clause is the product derived by multiplying 

2 $30 by the ratio of—

3 ‘‘(I) the national average wage index 

4 (as defined in section 209(k)(1) of the So5 cial Security Act) for the first of the 2 cal6 endar years preceding the calendar year 

7 in which the plan year begins, to 

8 ‘‘(II) the national average wage index 

9 (as so defined) for 2004, 

10 with such product, if not a multiple of $1, 

11 being rounded to the next higher multiple of 

12 $1 where such product is a multiple of $0.50 

13 but not of $1, and to the nearest multiple of 

14 $1 in any other case. 

15 ‘‘(iii) For purposes of determining the an16 nual premium rate payable to the corporation 

17 by a single-employer plan for basic benefits 

18 guaranteed under this title for any plan year 

19 beginning after 2005 and before 2010—

20 ‘‘(I) except as provided in subclause 

21 (II), the premium amount referred to in 

22 subparagraph (A)(i)(II) for any such plan 

23 year is the amount set forth in connec24 tion with such plan year in the following 

25 table: 
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‘‘If the plan year begins in: The amount is: 

2006 .................................................................. $21.20 

2007 .................................................................. $23.40 

2008 .................................................................. $25.60 

2009 .................................................................. $27.80; or 

1 ‘‘(II) if the plan’s funding target at2 tainment percentage for the plan year 

3 preceding the current plan year was less 

4 than 80 percent, the premium amount re5 ferred to in subparagraph (A)(i)(II) for 

6 such current plan year is the amount set 

7 forth in connection with such current 

8 plan year in the following table: 

‘‘If the plan year begins in: The amount is:

2006 .................................................................. $22.67

2007 .................................................................. $26.33

2008 or 2009 ................................................... the amount provided under 

clause (i). 

9 ‘‘(iv) For purposes of this subparagraph, 

10 the term ‘funding target attainment percent11 age’ has the meaning provided such term in 

12 section 303(d)(2).’’. 

13 (b) PREMIUM RATE FOR CERTAIN TERMI14 NATED SINGLE-EMPLOYER PLANS.—Subsection 

15 (a) of section 4006 of such Act (29 U.S.C. 1306) 

16 is amended by adding at the end the fol17 lowing: 
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1 ‘‘(7) PREMIUM RATE FOR CERTAIN TERMI2 NATED SINGLE-EMPLOYER PLANS.—

3 ‘‘(A) IN GENERAL.—If there is a termi4 nation of a single-employer plan under 

5 clause (ii) or (iii) of section 4041(c)(2)(B) 

6 or section 4042, there shall be payable to 

7 the corporation, with respect to each ap8 plicable 12-month period, a premium at a 

9 rate equal to $1,250 multiplied by the 

10 number of individuals who were partici11 pants in the plan immediately before the 

12 termination date. Such premium shall be 

13 in addition to any other premium under 

14 this section. 

15 ‘‘(B) SPECIAL RULE FOR PLANS TERMI16 NATED IN BANKRUPTCY REORGANIZATION.—If 

17 the plan is terminated under 

18 4041(c)(2)(B)(ii) or under section 4042 

19 and, as of the termination date, a person 

20 who is (as of such date) a contributing 

21 sponsor of the plan or a member of such 

22 sponsor’s controlled group has filed or 

23 has had filed against such person a peti24 tion seeking reorganization in a case 

25 under title 11 of the United States Code, 
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1 or under any similar law of a State or a 

2 political subdivision of a State (or a case 

3 described in section 4041(c)(2)(B)(i) filed 

4 by or against such person has been con5 verted, as of such date, to such a case in 

6 which reorganization is sought), subpara7 graph (A) shall not apply to such plan 

8 until the date of the discharge of such 

9 person in such case. 

10 ‘‘(C) APPLICABLE 12-MONTH PERIOD.—

11 For purposes of subparagraph (A)—

12 ‘‘(i) IN GENERAL.—The term ‘appli13 cable 12-month period’ means—

14 ‘‘(I) the 12-month period be15 ginning with the first month fol16 lowing the month in which the 

17 termination date occurs, and 

18 ‘‘(II) each of the first two 12- 

19 month periods immediately fol20 lowing the period described in 

21 subclause (I). 

22 ‘‘(ii) PLANS TERMINATED IN BANK23 RUPTCY REORGANIZATION.—In any case 

24 in which the requirements of sub25 paragraph (B) are met in connection 
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1 with the termination of the plan with 

2 respect to 1 or more persons de3 scribed in such subparagraph, the 12- 

4 month period described in clause 

5 (i)(I) shall be the 12-month period be6 ginning with the first month fol7 lowing the month which includes the 

8 earliest date as of which each such 

9 person is discharged in the case de10 scribed in such clause in connection 

11 with such person. 

12 ‘‘(D) COORDINATION WITH SECTION

13 4007.—

14 ‘‘(i) Notwithstanding section 

15 4007—

16 ‘‘(I) premiums under this 

17 paragraph shall be due within 30 

18 days after the beginning of any 

19 applicable 12-month period, and 

20 ‘‘(II) the designated payor 

21 shall be the person who is the 

22 contributing sponsor as of imme23 diately before the termination 

24 date. 
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1 ‘‘(ii) The fifth sentence of section 

2 4007(a) shall not apply in connection 

3 with premiums determined under 

4 this paragraph.’’. 

5 (c) RISK-BASED PREMIUMS.—

6 (1) EXTENSION THROUGH 2006.—Section 

7 4006(a)(3)(E)(iii)(V) of such Act is amend8 ed by striking ‘‘January 1, 2006’’ and in9 serting ‘‘January 1, 2007’’. 

10 (2) CONFORMING AMENDMENTS RELATED

11 TO FUNDING RULES FOR SINGLE-EMPLOYER

12 PLANS.—Section 4006(a)(3)(E) of such Act 

13 is amended by striking clauses (iii) and 

14 (iv) and inserting the following: 

15 ‘‘(iii)(I) For purposes of clause (ii), except 

16 as provided in subclause (II), the term ‘un17 funded vested benefits’ means, for a plan year, 

18 the amount which would be the plan’s fund19 ing shortfall (as defined in section 303(c)(4)), 

20 if the value of plan assets of the plan were 

21 equal to the fair market value of such assets 

22 and only vested benefits were taken into ac23 count. 

24 ‘‘(II) The interest rate used in valuing 

25 vested benefits for purposes of subclause (I) 
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1 shall be equal to the first, second, or third seg2 ment rate which would be determined under 

3 section 303(h)(2)(C) if section 303(h)(2)(D)(i) 

4 were applied by substituting ‘the yields’ for 

5 ‘the 3-year weighted average of yields’, as ap6 plicable under rules similar to the rules under 

7 section 303(h)(2)(B).’’. 

8 (d) EFFECTIVE DATES.—

9 (1) IN GENERAL.—The amendments 

10 made by subsection (a) and (c)(1) shall 

11 apply to plan years beginning after De12 cember 31, 2005. 

13 (2) PREMIUM RATE FOR CERTAIN TERMI14 NATED SINGLE-EMPLOYER PLANS.—The 

15 amendment made by subsection (b) shall 

16 apply with respect to cases commenced 

17 under title 11, United States Code, or 

18 under any similar law of a State or polit19 ical subdivision of a State after October 

20 26, 2005. 

21 (3) CONFORMING AMENDMENTS RELATED

22 TO FUNDING RULES FOR SINGLE-EMPLOYER

23 PLANS.—The amendments made by sub24 section (c)(2) shall take effect on Decem-
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1 ber 31, 2006, and shall apply to plan years 

2 beginning after such date. 

3 TITLE V—DISCLOSURE 

4 SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES. 

5 [See section 501 of the bill as reported by 

6 the Committee on Education and the Work7 force.] 

8 SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS. 

9 [See section 502 of the bill as reported by 

10 the Committee on Education and the Work11 force.] 

12 SEC. 503. SECTION 4010 FILINGS WITH THE PBGC. 

13 (a) CHANGE IN CRITERIA FOR PERSONS RE14 QUIRED TO PROVIDE INFORMATION TO PBGC.—

15 Section 4010(b) of the Employee Retirement 

16 Income Security Act of 1974 (29 U.S.C. 1310(b)) 

17 is amended by striking paragraph (1), by re18 designating paragraphs (2) and (3) as para19 graphs (3) and (4), respectively, and by insert20 ing before paragraph (3) (as so redesignated) 

21 the following new paragraphs: 

22 ‘‘(1) the aggregate funding target at23 tainment percentage of the plan (as de24 fined in subsection (d)(2)) is less than 60 

25 percent; 
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1 ‘‘(2)(A) the aggregate funding target 

2 attainment percentage of the plan (as de3 fined in subsection (d)(2)) is less than 75 

4 percent, and 

5 ‘‘(B) the plan sponsor is in an indus6 try with respect to which the corporation 

7 determines that there is substantial un8 employment or underemployment and 

9 the sales and profits are depressed or de10 clining;’’. 

11 (b) NOTICE TO PARTICIPANTS AND BENE12 FICIARIES.—Section 4010 of the Employee Re13 tirement Income Security Act of 1974 (29 

14 U.S.C. 1310) is amended by adding at the end 

15 the following new subsection: 

16 ‘‘(d) NOTICE TO PARTICIPANTS AND BENE17 FICIARIES.—

18 ‘‘(1) IN GENERAL.—Not later than 90 

19 days after the submission by any person 

20 to the corporation of information or doc21 umentary material with respect to any 

22 plan pursuant to subsection (a), such per23 son shall provide notice of such submis24 sion to each participant and beneficiary 

25 under the plan (and under all plans 
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1 maintained by members of the controlled 

2 group of each contributing sponsor of the 

3 plan). Such notice shall also set forth—

4 ‘‘(A) the number of single-em5 ployer plans covered by this title 

6 which are in at-risk status and are 

7 maintained by contributing sponsors 

8 of such plan (and by members of their 

9 controlled groups) with respect to 

10 which the funding target attainment 

11 percentage for the preceding plan 

12 year of each plan is less than 60 per13 cent; 

14 ‘‘(B) the value of the assets of 

15 each of the plans described in sub16 paragraph (A) for the plan year, the 

17 funding target for each of such plans 

18 for the plan year, and the funding 

19 target attainment percentage of each 

20 of such plans for the plan year; and 

21 ‘‘(C) taking into account all sin22 gle-employer plans maintained by the 

23 contributing sponsor and the mem24 bers of its controlled group as of the 

25 end of such plan year—
394 

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1 ‘‘(i) the aggregate total of the 

2 values of plan assets of such plans 

3 as of the end of such plan year, 

4 ‘‘(ii) the aggregate total of the 

5 funding targets of such plans, as 

6 of the end of such plan year, tak7 ing into account only benefits to 

8 which participants and bene9 ficiaries have a nonforfeitable 

10 right, and 

11 ‘‘(iii) the aggregate funding 

12 targets attainment percentage 

13 with respect to the contributing 

14 sponsor for the preceding plan 

15 year. 

16 ‘‘(2) DEFINITIONS.—For purposes of 

17 this subsection—

18 ‘‘(A) VALUE OF PLAN ASSETS.—The 

19 term ‘value of plan assets’ means the 

20 value of plan assets, as determined 

21 under section 303(g)(3). 

22 ‘‘(B) FUNDING TARGET.—The term 

23 ‘funding target’ has the meaning pro24 vided under section 303(d)(1). 
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1 ‘‘(C) FUNDING TARGET ATTAINMENT

2 PERCENTAGE.—The term ‘funding tar3 get attainment percentage’ has the 

4 meaning provided in section 

5 303(d)(2). 

6 ‘‘(D) AGGREGATE FUNDING TARGETS

7 ATTAINMENT PERCENTAGE.—The term 

8 ‘aggregate funding targets attainment 

9 percentage’ with respect to a contrib10 uting sponsor for a plan year is the 

11 percentage, taking into account all 

12 plans maintained by the contributing 

13 sponsor and the members of its con14 trolled group as of the end of such 

15 plan year, which 

16 ‘‘(i) the aggregate total of the 

17 values of plan assets, as of the 

18 end of such plan year, of such 

19 plans, is of 

20 ‘‘(ii) the aggregate total of the 

21 funding targets of such plans, as 

22 of the end of such plan year, tak23 ing into account only benefits to 

24 which participants and bene-
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1 ficiaries have a nonforfeitable 

2 right. 

3 ‘‘(E) AT-RISK STATUS.—The term 

4 ‘at-risk status’ has the meaning pro5 vided in section 303(i)(3). 

6 ‘‘(3) COMPLIANCE.—

7 ‘‘(A) IN GENERAL.—Any notice re8 quired to be provided under para9 graph (1) may be provided in written, 

10 electronic, or other appropriate form 

11 to the extent such form is reasonably 

12 accessible to individuals to whom the 

13 information is required to be pro14 vided. 

15 ‘‘(B) LIMITATIONS.—In no case shall 

16 a participant or beneficiary be enti17 tled under this subsection to receive 

18 more than one notice described in 

19 paragraph (1) during any one 12- 

20 month period. The person required to 

21 provide such notice may make a rea22 sonable charge to cover copying, 

23 mailing, and other costs of furnishing 

24 such notice pursuant to paragraph 

25 (1). The corporation may by regula-
397 

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1 tions prescribe the maximum amount 

2 which will constitute a reasonable 

3 charge under the preceding sentence. 

4 ‘‘(4) NOTICE TO CONGRESS.—Concurrent 

5 with the provision of any notice under 

6 paragraph (1), such person shall provide 

7 such notice to the Committee on Edu8 cation and the Workforce and the Com9 mittee on Ways and Means of the House 

10 of Representatives and the Committee on 

11 Health, Education, Labor, and Pensions 

12 and the Committee on Finance of the 

13 Senate, which shall be treated as mate14 rials provided in executive session.’’. 

15 (c) EFFECTIVE DATE.—The amendment 

16 made by this section shall apply with respect 

17 to plan years beginning after December 31, 

18 2006. 
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1 TITLE VI—INVESTMENT ADVICE 

2 SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT IN3 COME SECURITY ACT OF 1974 PROVIDING 

4 PROHIBITED TRANSACTION EXEMPTION FOR 

5 PROVISION OF INVESTMENT ADVICE. 

6 [See section 601 of the bill as reported by 

7 the Committee on Education and the Work8 force.] 

9 SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF 

10 1986 PROVIDING PROHIBITED TRANSACTION 

11 EXEMPTION FOR PROVISION OF INVESTMENT 

12 ADVICE. 

13 (a) EXEMPTION FROM PROHIBITED TRANS14 ACTIONS.—Subsection (d) of section 4975 of the 

15 Internal Revenue Code of 1986 (relating to ex16 emptions from tax on prohibited trans17 actions) is amended—

18 (1) in paragraph (15), by striking ‘‘or’’

19 at the end; 

20 (2) in paragraph (16), by striking the 

21 period at the end and inserting ‘‘; or’’; 

22 and 

23 (3) by adding at the end the following 

24 new paragraph: 
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1 ‘‘(17) any transaction described in 

2 subsection (f)(8)(A) in connection with 

3 the provision of investment advice de4 scribed in subsection (e)(3)(B)(i), in any 

5 case in which—

6 ‘‘(A) the investment of assets of 

7 the plan is subject to the direction of 

8 plan participants or beneficiaries, 

9 ‘‘(B) the advice is provided to the 

10 plan or a participant or beneficiary of 

11 the plan by a fiduciary adviser in 

12 connection with any sale, acquisition, 

13 or holding of a security or other 

14 property for purposes of investment 

15 of plan assets, and 

16 ‘‘(C) the requirements of sub17 section (f)(8)(B) are met in connection 

18 with the provision of the advice.’’. 

19 (b) ALLOWED TRANSACTIONS AND REQUIRE20 MENTS.—Subsection (f) of such section 4975 

21 (relating to other definitions and special 

22 rules) is amended by adding at the end the fol23 lowing new paragraph: 
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1 ‘‘(8) PROVISIONS RELATING TO INVEST2 MENT ADVICE PROVIDED BY FIDUCIARY ADVIS3 ERS.—

4 ‘‘(A) TRANSACTIONS ALLOWABLE IN

5 CONNECTION WITH INVESTMENT ADVICE

6 PROVIDED BY FIDUCIARY ADVISERS.—The 

7 transactions referred to in subsection 

8 (d)(17), in connection with the provi9 sion of investment advice by a fidu10 ciary adviser, are the following: 

11 ‘‘(i) the provision of the advice 

12 to the plan, participant, or bene13 ficiary; 

14 ‘‘(ii) the sale, acquisition, or 

15 holding of a security or other 

16 property (including any lending 

17 of money or other extension of 

18 credit associated with the sale, 

19 acquisition, or holding of a secu20 rity or other property) pursuant 

21 to the advice; and 

22 ‘‘(iii) the direct or indirect re23 ceipt of fees or other compensa24 tion by the fiduciary adviser or 

25 an affiliate thereof (or any em-
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1 ployee, agent, or registered rep2 resentative of the fiduciary ad3 viser or affiliate) in connection 

4 with the provision of the advice 

5 or in connection with a sale, ac6 quisition, or holding of a security 

7 or other property pursuant to the 

8 advice. 

9 ‘‘(B) REQUIREMENTS RELATING TO

10 PROVISION OF INVESTMENT ADVICE BY FI11 DUCIARY ADVISERS.—The requirements 

12 of this subparagraph (referred to in 

13 subsection (d)(17)(C)) are met in con14 nection with the provision of invest15 ment advice referred to in subsection 

16 (e)(3)(B), provided to a plan or a par17 ticipant or beneficiary of a plan by a 

18 fiduciary adviser with respect to the 

19 plan in connection with any sale, ac20 quisition, or holding of a security or 

21 other property for purposes of invest22 ment of amounts held by the plan, 

23 if—

24 ‘‘(i) in the case of the initial 

25 provision of the advice with re-
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1 gard to the security or other 

2 property by the fiduciary adviser 

3 to the plan, participant, or bene4 ficiary, the fiduciary adviser pro5 vides to the recipient of the ad6 vice, at a time reasonably contem7 poraneous with the initial provi8 sion of the advice, a written noti9 fication (which may consist of no10 tification by means of electronic 

11 communication)—

12 ‘‘(I) of all fees or other 

13 compensation relating to the 

14 advice that the fiduciary ad15 viser or any affiliate thereof is 

16 to receive (including com17 pensation provided by any 

18 third party) in connection 

19 with the provision of the ad20 vice or in connection with the 

21 sale, acquisition, or holding of 

22 the security or other prop23 erty, 

24 ‘‘(II) of any material affili25 ation or contractual relation-
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1 ship of the fiduciary adviser 

2 or affiliates thereof in the se3 curity or other property, 

4 ‘‘(III) of any limitation 

5 placed on the scope of the in6 vestment advice to be pro7 vided by the fiduciary adviser 

8 with respect to any such sale, 

9 acquisition, or holding of a se10 curity or other property, 

11 ‘‘(IV) of the types of serv12 ices provided by the fiduciary 

13 adviser in connection with 

14 the provision of investment 

15 advice by the fiduciary ad16 viser, 

17 ‘‘(V) that the adviser is 

18 acting as a fiduciary of the 

19 plan in connection with the 

20 provision of the advice, and 

21 ‘‘(VI) that a recipient of 

22 the advice may separately ar23 range for the provision of ad24 vice by another adviser, that 

25 could have no material affili-
404 

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1 ation with and receive no fees 

2 or other compensation in con3 nection with the security or 

4 other property, 

5 ‘‘(ii) the fiduciary adviser pro6 vides appropriate disclosure, in 

7 connection with the sale, acquisi8 tion, or holding of the security or 

9 other property, in accordance 

10 with all applicable securities 

11 laws, 

12 ‘‘(iii) the sale, acquisition, or 

13 holding occurs solely at the direc14 tion of the recipient of the advice, 

15 ‘‘(iv) the compensation re16 ceived by the fiduciary adviser 

17 and affiliates thereof in connec18 tion with the sale, acquisition, or 

19 holding of the security or other 

20 property is reasonable, and 

21 ‘‘(v) the terms of the sale, ac22 quisition, or holding of the secu23 rity or other property are at least 

24 as favorable to the plan as an 
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1 arm’s length transaction would 

2 be. 

3 ‘‘(C) STANDARDS FOR PRESENTATION

4 OF INFORMATION.—The notification re5 quired to be provided to participants 

6 and beneficiaries under subpara7 graph (B)(i) shall be written in a clear 

8 and conspicuous manner and in a 

9 manner calculated to be understood 

10 by the average plan participant and 

11 shall be sufficiently accurate and 

12 comprehensive to reasonably apprise 

13 such participants and beneficiaries of 

14 the information required to be pro15 vided in the notification. 

16 ‘‘(D) EXEMPTION CONDITIONED ON

17 MAKING REQUIRED INFORMATION AVAIL18 ABLE ANNUALLY, ON REQUEST, AND IN

19 THE EVENT OF MATERIAL CHANGE.—The 

20 requirements of subparagraph (B)(i) 

21 shall be deemed not to have been met 

22 in connection with the initial or any 

23 subsequent provision of advice de24 scribed in subparagraph (B) to the 

25 plan, participant, or beneficiary if, at 
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1 any time during the provision of advi2 sory services to the plan, participant, 

3 or beneficiary, the fiduciary adviser 

4 fails to maintain the information de5 scribed in subclauses (I) through (IV) 

6 of subparagraph (B)(i) in currently 

7 accurate form and in the manner re8 quired by subparagraph (C), or fails—

9 ‘‘(i) to provide, without 

10 charge, such currently accurate 

11 information to the recipient of 

12 the advice no less than annually, 

13 ‘‘(ii) to make such currently 

14 accurate information available, 

15 upon request and without charge, 

16 to the recipient of the advice, or 

17 ‘‘(iii) in the event of a material 

18 change to the information de19 scribed in subclauses (I) through 

20 (IV) of subparagraph (B)(i), to 

21 provide, without charge, such 

22 currently accurate information to 

23 the recipient of the advice at a 

24 time reasonably contemporaneous 
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1 to the material change in infor2 mation. 

3 ‘‘(E) MAINTENANCE FOR 6 YEARS OF

4 EVIDENCE OF COMPLIANCE.—A fiduciary 

5 adviser referred to in subparagraph 

6 (B) who has provided advice referred 

7 to in such subparagraph shall, for a 

8 period of not less than 6 years after 

9 the provision of the advice, maintain 

10 any records necessary for deter11 mining whether the requirements of 

12 the preceding provisions of this para13 graph and of subsection (d)(17) have 

14 been met. A transaction prohibited 

15 under subsection (c)(1) shall not be 

16 considered to have occurred solely 

17 because the records are lost or de18 stroyed prior to the end of the 6-year 

19 period due to circumstances beyond 

20 the control of the fiduciary adviser. 

21 ‘‘(F) EXEMPTION FOR PLAN SPONSOR

22 AND CERTAIN OTHER FIDUCIARIES.—A 

23 plan sponsor or other person who is a 

24 fiduciary (other than a fiduciary ad25 viser) shall not be treated as failing 
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1 to meet the requirements of this sec2 tion solely by reason of the provision 

3 of investment advice referred to in 

4 subsection (e)(3)(B) (or solely by rea5 son of contracting for or otherwise 

6 arranging for the provision of the ad7 vice), if—

8 ‘‘(i) the advice is provided by 

9 a fiduciary adviser pursuant to an 

10 arrangement between the plan 

11 sponsor or other fiduciary and 

12 the fiduciary adviser for the pro13 vision by the fiduciary adviser of 

14 investment advice referred to in 

15 such section, 

16 ‘‘(ii) the terms of the arrange17 ment require compliance by the 

18 fiduciary adviser with the re19 quirements of this paragraph, 

20 ‘‘(iii) the terms of the arrange21 ment include a written acknowl22 edgment by the fiduciary adviser 

23 that the fiduciary adviser is a fi24 duciary of the plan with respect 

25 to the provision of the advice, and 
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1 ‘‘(iv) the requirements of part 

2 4 of subtitle B of title I of the Em3 ployee Retirement Income Secu4 rity Act of 1974 are met in connec5 tion with the provision of such 

6 advice. 

7 ‘‘(G) DEFINITIONS.—For purposes 

8 of this paragraph and subsection 

9 (d)(17)—

10 ‘‘(i) FIDUCIARY ADVISER.—The 

11 term ‘fiduciary adviser’ means, 

12 with respect to a plan, a person 

13 who is a fiduciary of the plan by 

14 reason of the provision of invest15 ment advice by the person to the 

16 plan or to a participant or bene17 ficiary and who is—

18 ‘‘(I) registered as an in19 vestment adviser under the 

20 Investment Advisers Act of 

21 1940 (15 U.S.C. 80b–1 et seq.) 

22 or under the laws of the State 

23 in which the fiduciary main24 tains its principal office and 

25 place of business, 
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1 ‘‘(II) a bank or similar fi2 nancial institution referred to 

3 in subsection (d)(4) or a sav4 ings association (as defined in 

5 section 3(b)(1) of the Federal 

6 Deposit Insurance Act (12 

7 U.S.C. 1813(b)(1))), but only if 

8 the advice is provided 

9 through a trust department of 

10 the bank or similar financial 

11 institution or savings associa12 tion which is subject to peri13 odic examination and review 

14 by Federal or State banking 

15 authorities, 

16 ‘‘(III) an insurance com17 pany qualified to do business 

18 under the laws of a State, 

19 ‘‘(IV) a person registered 

20 as a broker or dealer under 

21 the Securities Exchange Act 

22 of 1934 (15 U.S.C. 78a et seq.), 

23 ‘‘(V) an affiliate of a per24 son described in any of sub25 clauses (I) through (IV), or 
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1 ‘‘(VI) an employee, agent, 

2 or registered representative 

3 of a person described in any 

4 of subclauses (I) through (V) 

5 who satisfies the require6 ments of applicable insur7 ance, banking, and securities 

8 laws relating to the provision 

9 of the advice. 

10 ‘‘(ii) AFFILIATE.—The term ‘af11 filiate’ of another entity means an 

12 affiliated person of the entity (as 

13 defined in section 2(a)(3) of the 

14 Investment Company Act of 1940 

15 (15 U.S.C. 80a–2(a)(3))). 

16 ‘‘(iii) REGISTERED REPRESENTA17 TIVE.—The term ‘registered rep18 resentative’ of another entity 

19 means a person described in sec20 tion 3(a)(18) of the Securities Ex21 change Act of 1934 (15 U.S.C. 

22 78c(a)(18)) (substituting the entity 

23 for the broker or dealer referred 

24 to in such section) or a person de25 scribed in section 202(a)(17) of the 
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1 Investment Advisers Act of 1940 

2 (15 U.S.C. 80b–2(a)(17)) (sub3 stituting the entity for the invest4 ment adviser referred to in such 

5 section).’’. 

6 (c) EFFECTIVE DATE.—The amendments 

7 made by this section shall apply with respect 

8 to advice referred to in section 4975(c)(3)(B) 

9 of the Internal Revenue Code of 1986 pro10 vided on or after January 1, 2006. 

11 TITLE VII—BENEFIT ACCRUAL 

12 STANDARDS 

13 SEC. 701. IMPROVEMENTS IN BENEFIT ACCRUAL STAND14 ARDS. 

15 (a) AMENDMENTS TO THE EMPLOYEE RETIRE16 MENT INCOME SECURITY ACT OF 1974.—[See sec17 tion 701(a) of the bill as reported by the Com18 mittee on Education and the Workforce.] 

19 (b) AMENDMENTS TO THE INTERNAL REVENUE

20 CODE OF 1986.—

21 (1) RULES RELATING TO REDUCTION IN

22 ACCRUED BENEFITS BECAUSE OF ATTAINMENT

23 OF ANY AGE.—Subparagraph (H) of section 

24 411(b)(1) of the Internal Revenue Code of 
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1 1986 is amended by adding at the end the 

2 following new clauses: 

3 ‘‘(vi) COMPARISON TO SIMILARLY

4 SITUATED YOUNGER INDIVIDUAL.—

5 ‘‘(I) IN GENERAL.—A plan 

6 shall not be treated as failing 

7 to meet the requirements of 

8 clause (i) if a participant’s en9 tire accrued benefit, as deter10 mined as of any date under 

11 the formula for determining 

12 benefits as set forth in the 

13 text of the plan documents, 

14 would be equal to or greater 

15 than that of any similarly sit16 uated, younger individual. 

17 ‘‘(II) SIMILARLY SITUATED.—

18 For purposes of this clause, 

19 an individual is similarly situ20 ated to a participant if such 

21 individual is identical to such 

22 participant in every respect 

23 (including period of service, 

24 compensation, position, date 
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1 of hire, work history, and any 

2 other respect) except for age. 

3 ‘‘(III) DISREGARD OF SUB4 SIDIZED EARLY RETIREMENT

5 BENEFITS.—In determining the 

6 entire accrued benefit for 

7 purposes of this clause, the 

8 subsidized portion of any 

9 early retirement benefit (in10 cluding any early retirement 

11 subsidy that is fully or par12 tially included or reflected in 

13 an employee’s opening bal14 ance or other transition bene15 fits) shall be disregarded. 

16 ‘‘(vii) INTEREST ON HYPO17 THETICAL ACCOUNTS.—A plan 

18 under which the accrued benefit 

19 payable under the plan upon dis20 tribution (or any portion thereof) 

21 is expressed as the balance of a 

22 hypothetical account maintained 

23 for the participant shall not be 

24 treated as failing to meet the re25 quirements of clause (i) solely be-
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1 cause interest accruing on such 

2 balance is taken into account. 

3 ‘‘(viii) CERTAIN OFFSETS PER4 MITTED.—A plan shall not be treat5 ed as failing to meet the require6 ments of this subparagraph solely 

7 because the plan provides allow8 able offsets against those benefits 

9 under the plan which are attrib10 utable to employer contributions, 

11 based on benefits which are pro12 vided under title II of the Social 

13 Security Act, the Railroad Retire14 ment Act of 1974, another plan de15 scribed in section 401(a) main16 tained by the same employer, or 

17 under any retirement program 

18 for officers or employees of the 

19 Federal Government or of the 

20 government of any State or polit21 ical subdivision thereof. For pur22 poses of this clause, allowable off23 sets based on such benefits con24 sist of offsets equal to all or part 

25 of the actual benefit payment 
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1 amounts, reasonable projections 

2 or estimations of such benefit 

3 payment amounts, or actuarial 

4 equivalents of such actual benefit 

5 payment amounts, projections, or 

6 estimations (determined on the 

7 basis of reasonable actuarial as8 sumptions). 

9 ‘‘(ix) PERMITTED DISPARITIES IN

10 PLAN CONTRIBUTIONS OR BENE11 FITS.—A plan shall not be treated 

12 as failing to meet the require13 ments of this subparagraph solely 

14 because the plan provides a dis15 parity in contributions or benefits 

16 with respect to which the require17 ments of section 401(l) are met. 

18 ‘‘(x) PRE-RETIREMENT INDEXING

19 PERMITTED.—

20 ‘‘(I) IN GENERAL.—A plan 

21 shall not be treated as failing 

22 to meet the requirements of 

23 this subparagraph solely be24 cause the plan provides for 
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1 pre-retirement indexing of ac2 crued benefits under the plan. 

3 ‘‘(II) PRE-RETIREMENT IN4 DEXING.—For purposes of this 

5 clause, the term ‘pre-retire6 ment indexing’ means, in con7 nection with an accrued ben8 efit, the periodic adjustment 

9 of the accrued benefit by 

10 means of the application of a 

11 recognized index or method12 ology so as to protect the eco13 nomic value of the benefit 

14 against inflation prior to dis15 tribution.’’. 

16 (2) DETERMINATIONS OF ACCRUED BEN17 EFIT AS BALANCE OF BENEFIT ACCOUNT.—

18 Subsection (a) of section 411 of such Code 

19 is amended by adding at the end the fol20 lowing new paragraph: 

21 ‘‘(13) DETERMINATIONS OF ACCRUED

22 BENEFIT AS BALANCE OF BENEFIT AC23 COUNT.—

24 ‘‘(A) IN GENERAL.—A defined ben25 efit plan under which the accrued 
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1 benefit payable under the plan upon 

2 distribution (or any portion thereof) 

3 is expressed as the balance of a hypo4 thetical account maintained for the 

5 participant shall not be treated as 

6 failing to meet the requirements of 

7 subsection (a)(2) and section 417(e) 

8 solely because of the amount actually 

9 made available for such distribution 

10 under the terms of the plan, in any 

11 case in which the applicable interest 

12 rate that would be used under the 

13 terms of the plan to project the 

14 amount of the participant’s account 

15 balance to normal retirement age is 

16 not greater than a market rate of re17 turn. 

18 ‘‘(B) REGULATIONS.—The Secretary 

19 may provide by regulation for rules 

20 governing the calculation of a market 

21 rate of return for purposes of sub22 paragraph (A) and for permissible 

23 methods of crediting interest to the 

24 account (including variable interest 

25 rates) resulting in effective rates of 
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1 return meeting the requirements of 

2 subparagraph (A).’’. 

3 (c) EFFECTIVE DATE.—The amendments 

4 made by this section shall apply to periods be5 ginning on or after June 29, 2005. 

6 TITLE VIII—DEDUCTION 

7 LIMITATIONS 

8 SEC. 801. INCREASE IN DEDUCTION LIMITS. 

9 (a) INCREASE IN DEDUCTION LIMIT FOR SIN10 GLE-EMPLOYER PLANS.—Section 404 of the In11 ternal Revenue Code of 1986 (relating to de12 duction for contributions of an employer to 

13 an employees’ trust or annuity plan and com14 pensation under a deferred payment plan) is 

15 amended—

16 (1) in subsection (a)(1)(A), by insert17 ing ‘‘in the case of a defined benefit plan 

18 other than a multiemployer plan, in an 

19 amount determined under subsection (o), 

20 and in the case of any other plan’’ after 

21 ‘‘section 501(a),’’, and 

22 (2) by inserting at the end the fol23 lowing new subsection: 
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1 ‘‘(o) DEDUCTION LIMIT FOR SINGLE-EM2 PLOYER PLANS.—For purposes of subsection 

3 (a)(1)(A)—

4 ‘‘(1) IN GENERAL.—In the case of a de5 fined benefit plan to which subsection 

6 (a)(1)(A) applies (other than a multiem7 ployer plan), the amount determined 

8 under this subsection for any taxable 

9 year shall be equal to the amount deter10 mined under paragraph (2) with respect 

11 to each plan year ending with or within 

12 the taxable year. 

13 ‘‘(2) DETERMINATION OF AMOUNT.—The 

14 amount determined under this paragraph 

15 for any plan year shall be equal to the ex16 cess (if any) of—

17 ‘‘(A) the greater of—

18 ‘‘(i) the sum of—

19 ‘‘(I) 150 percent of the 

20 funding target applicable to 

21 the plan for such plan year, 

22 determined under section 430, 

23 plus 

24 ‘‘(II) the target normal 

25 cost applicable to the plan for 
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1 such plan year, determined 

2 under section 430(b), or 

3 ‘‘(ii) in the case of a plan that 

4 is not in an at-risk status (as de5 termined under 430(i)), the sum 

6 of—

7 ‘‘(I) the funding target 

8 which would be applicable to 

9 the plan for such plan year if 

10 such plan were in an at-risk 

11 status, determined under sec12 tion 430(d) (with regard to 

13 section 430(i)), plus 

14 ‘‘(II) the target normal 

15 cost which would be applica16 ble to the plan for such plan 

17 year if such plan were in an 

18 at-risk status, determined 

19 under section 430(d) (with re20 gard to section 430(i)), over 

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

22 (determined under section 430(g)). 

23 ‘‘(3) SPECIAL RULE FOR TERMINATING

24 PLANS.—In the case of a plan which, sub25 ject to section 4041 of the Employee Re-
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1 tirement Income Security Act of 1974, ter2 minates during the plan year, the amount 

3 determined under paragraph (2) shall not 

4 be less than the amount required to make 

5 the plan sufficient for benefit liabilities 

6 (within the meaning of section 4041(d) of 

7 such Act). 

8 ‘‘(4) DEFINITIONS.—Any term used in 

9 this subsection which is also used in sec10 tion 430 shall have the same meaning 

11 given such term by section 430.’’. 

12 (b) INCREASE IN DEDUCTION LIMIT FOR MUL13 TIEMPLOYER PLANS.—Section 404(a)(1)(D) of 

14 such Code is amended to read as follows: 

15 ‘‘(D) MINIMUM DEDUCTION FOR MUL16 TIEMPLOYER PLANS.—In the case of a 

17 defined benefit plan which is a multi18 employer plan, except as provided in 

19 regulations, the maximum amount de20 ductible under the limitations of this 

21 paragraph shall not be less than the 

22 excess (if any) of—

23 ‘‘(i) 140 percent of the current 

24 liability of the plan determined 

25 under section 431(c)(6)(D), over 
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1 ‘‘(ii) the value of the plan’s as2 sets determined under section 

3 431(c)(2).’’. 

4 (c) TECHNICAL AND CONFORMING AMEND5 MENTS.—

6 (1) The last sentence of section 

7 404(a)(1)(A) of such Code is amended by 

8 striking ‘‘section 412’’ each place it ap9 pears and inserting ‘‘section 431’’. 

10 (2) Section 404(a)(1)(B) of such Code 

11 is amended—

12 (A) by striking ‘‘In the case of a 

13 plan’’ and inserting ‘‘In the case of a 

14 multiemployer plan’’, 

15 (B) by striking ‘‘section 412(c)(7)’’

16 each place it appears and inserting 

17 ‘‘section 431(c)(6)’’, 

18 (C) by striking ‘‘section 

19 412(c)(7)(B)’’ and inserting ‘‘section 

20 431(c)(6)(D)’’, 

21 (D) by striking ‘‘section 

22 412(c)(7)(A)’’ and inserting ‘‘section 

23 431(c)(6)(A)’’, and 

24 (E) by striking ‘‘section 412’’ and 

25 inserting ‘‘section 431’’. 
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1 (3) Section 404(a)(1) of such Code is 

2 amended by striking subparagraph (F). 

3 (4) Section 404(a)(7) of such Code is 

4 amended—

5 (A) in subparagraph (A)(ii), by 

6 striking ‘‘for the plan year’’ and all 

7 that follows and inserting ‘‘which are 

8 multiemployer plans for the plan year 

9 which ends with or within such tax10 able year (or for any prior plan year) 

11 and the maximum amount of em12 ployer contributions allowable under 

13 subsection (o) with respect to any 

14 such defined benefit plans which are 

15 not multiemployer plans for the plan 

16 year.’’, 

17 (B) by striking ‘‘section 412(l)’’ in 

18 the last sentence of subparagraph (A) 

19 and inserting ‘‘paragraph (1)(D)(ii)’’, 

20 and 

21 (C) by striking subparagraph (D) 

22 and inserting: 

23 ‘‘(D) INSURANCE CONTRACT PLANS.—

24 For purposes of this paragraph, a 

25 plan described in section 412(e)(3) 
425 

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1 shall be treated as a defined benefit 

2 plan.’’. 

3 (5) Section 404A(g)(3)(A) of such Code 

4 is amended by striking ‘‘paragraphs (3) 

5 and (7) of section 412(c)’’ and inserting 

6 ‘‘sections 430(h)(1) and 431(c)(3) and (6)’’. 

7 (d) EFFECTIVE DATE.—The amendments 

8 made by this section shall apply to contribu9 tions for taxable years beginning after Decem10 ber 31, 2006. 

11 SEC. 802. UPDATING DEDUCTION RULES FOR COMBINA12 TION OF PLANS. 

13 (a) IN GENERAL.—Subparagraph (C) of sec14 tion 404(a)(7) of the Internal Revenue Code of 

15 1986 (relating to limitation on deductions 

16 where combination of defined contribution 

17 plan and defined benefit plan) is amended by 

18 adding after clause (ii) the following new 

19 clause: 

20 ‘‘(iii) LIMITATION.—In the case 

21 of employer contributions to 1 or 

22 more defined contribution plans, 

23 this paragraph shall only apply to 

24 the extent that such contributions 

25 exceed 6 percent of the compensa-
426 

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1 tion otherwise paid or accrued 

2 during the taxable year to the 

3 beneficiaries under such plans. 

4 For purposes of this clause, 

5 amounts carried over from pre6 ceding taxable years under sub7 paragraph (B) shall be treated as 

8 employer contributions to 1 or 

9 more defined contributions to the 

10 extent attributable to employer 

11 contributions to such plans in 

12 such preceding taxable years.’’. 

13 (b) CONFORMING AMENDMENTS.—Subpara14 graph (A) of section 4972(c)(6) of such Code 

15 (relating to nondeductible contributions) is 

16 amended to read as follows: 

17 ‘‘(A) so much of the contributions 

18 to 1 or more defined contribution 

19 plans which are not deductible when 

20 contributed solely because of section 

21 404(a)(7) as does not exceed the 

22 amount of contributions described in 

23 section 401(m)(4)(A), or’’. 

24 (c) EFFECTIVE DATE.—The amendments 

25 made by this section shall apply to contribu-
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1 tions for taxable years beginning after Decem2 ber 31, 2006. 

3 TITLE IX—ENHANCED RETIRE4 MENTS SAVINGS AND DE5 FINED CONTRIBUTION PLANS 

6 SEC. 901. PENSIONS AND INDIVIDUAL RETIREMENT AR7 RANGEMENT PROVISIONS OF ECONOMIC 

8 GROWTH AND TAX RELIEF RECONCILIATION 

9 ACT OF 2001 MADE PERMANENT. 

10 Title IX of the Economic Growth and Tax 

11 Relief Reconciliation Act of 2001 shall not 

12 apply to the provisions of, and amendments 

13 made by, subtitles (A) through (F) of title VI 

14 of such Act (relating to pension and indi15 vidual retirement arrangement provisions). 

16 SEC. 902. SAVER’S CREDIT. 

17 (a) PERMANENCY.—Section 25B of the In18 ternal Revenue Code of 1986 (relating to elec19 tive deferrals and IRA contributions by cer20 tain individuals) is amended by striking sub21 section (h). 

22 (b) VOLUNTARY DEPOSIT INTO QUALIFIED

23 ACCOUNT.—

24 (1) Section 25B of such Code, as 

25 amended by subsection (a), is further 
428 

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1 amended by adding at the end the fol2 lowing new subsection: 

3 ‘‘(h) VOLUNTARY DEPOSIT INTO QUALIFIED

4 ACCOUNT.—

5 ‘‘(1) IN GENERAL.—So much of any 

6 overpayment under section 6401(b) as 

7 does not exceed the amount allowed as a 

8 tax credit under subsection (a) shall, at 

9 the election of the taxpayer, be paid on 

10 behalf of the individual taxpayer to an 

11 applicable retirement plan designated by 

12 the individual, except that in the case of 

13 a joint return, each spouse shall be enti14 tled to designate an applicable retire15 ment plan with respect to payments at16 tributable to such spouse. 

17 ‘‘(2) APPLICABLE RETIREMENT PLAN.—

18 For purposes of this subsection, the term 

19 ‘applicable retirement plan’ means any el20 igible retirement plan (as defined in sec21 tion 402(c)(8)(B)) that elects to accept de22 posits under this subsection.’’. 

23 (2) EFFECTIVE DATE.—The amendment 

24 made by paragraph (1) shall apply to tax-
429 

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1 able years beginning after December 31, 

2 2006. 

3 SEC. 903. INCREASING PARTICIPATION THROUGH AUTO4 MATIC CONTRIBUTION ARRANGEMENTS. 

5 (a) IN GENERAL.—Section 401(k) of the In6 ternal Revenue Code of 1986 (relating to cash 

7 or deferred arrangement) is amended by add8 ing at the end the following new paragraph: 

9 ‘‘(13) ALTERNATIVE METHOD FOR AUTO10 MATIC CONTRIBUTION ARRANGEMENTS TO

11 MEET NONDISCRIMINATION REQUIREMENTS.—

12 ‘‘(A) IN GENERAL.—A qualified 

13 automatic contribution arrangement 

14 shall be treated as meeting the re15 quirements of paragraph (3)(A)(ii). 

16 ‘‘(B) QUALIFIED AUTOMATIC CON17 TRIBUTION ARRANGEMENT.—For pur18 poses of this paragraph, the term 

19 ‘qualified automatic contribution ar20 rangement’ means any cash or de21 ferred arrangement which meets the 

22 requirements of subparagraphs (C) 

23 through (F). 

24 ‘‘(C) AUTOMATIC DEFERRAL.—
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1 ‘‘(i) IN GENERAL.—The require2 ments of this subparagraph are 

3 met if, under the arrangement, 

4 each employee eligible to partici5 pate in the arrangement is treat6 ed as having elected to have the 

7 employer make elective contribu8 tions in an amount equal to a 

9 qualified percentage of compensa10 tion. 

11 ‘‘(ii) ELECTION OUT.—The elec12 tion treated as having been made 

13 under clause (i) shall cease to 

14 apply with respect to any em15 ployee if such employee makes an 

16 affirmative election—

17 ‘‘(I) to not have such con18 tributions made, or 

19 ‘‘(II) to make elective con20 tributions at a level specified 

21 in such affirmative election. 

22 ‘‘(iii) QUALIFIED PERCENTAGE.—

23 For purposes of this subpara24 graph, the term ‘qualified per25 centage’ means, with respect to 
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1 any employee, any percentage de2 termined under the arrangement 

3 if such percentage is applied uni4 formly, does not exceed 10 per5 cent, and is at least—

6 ‘‘(I) 3 percent during the 

7 period ending on the last day 

8 of the first plan year which 

9 begins after the date on which 

10 the first elective contribution 

11 described in clause (i) is made 

12 with respect to such em13 ployee, 

14 ‘‘(II) 4 percent during the 

15 first plan year following the 

16 plan year described in sub17 clause (I), 

18 ‘‘(III) 5 percent during the 

19 second plan year following 

20 the plan year described in 

21 subclause (I), and 

22 ‘‘(IV) 6 percent during any 

23 subsequent plan year. 

24 ‘‘(iv) AUTOMATIC DEFERRAL FOR

25 CURRENT EMPLOYEES NOT RE-
432 

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1 QUIRED.—Clause (i) shall be ap2 plied without taking into account 

3 any employee who was eligible to 

4 participate in the arrangement 

5 (or a predecessor arrangement) 

6 immediately before the date on 

7 which such arrangement becomes 

8 a qualified automatic contribu9 tion arrangement (determined 

10 after application of this clause). 

11 ‘‘(D) PARTICIPATION.—

12 ‘‘(i) IN GENERAL.—An arrange13 ment meets the requirements of 

14 this subparagraph for any year if, 

15 during the plan year or the pre16 ceding plan year, elective con17 tributions are made on behalf of 

18 at least 70 percent of the employ19 ees eligible to participate in the 

20 arrangement other than—

21 ‘‘(I) highly compensated 

22 employees, and 

23 ‘‘(II) at the election of the 

24 plan administrator, employees 
433 

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1 described in subparagraph 

2 (C)(iv). 

3 ‘‘(ii) FIRST PLAN YEAR.—An ar4 rangement (other than a suc5 cessor arrangement) shall be 

6 treated as meeting the require7 ments of this subparagraph with 

8 respect to the first plan year with 

9 respect to which such arrange10 ment is a qualified automatic con11 tribution arrangement (deter12 mined without regard to this sub13 paragraph). 

14 ‘‘(E) MATCHING OR NONELECTIVE

15 CONTRIBUTIONS.—

16 ‘‘(i) IN GENERAL.—The require17 ments of this subparagraph are 

18 met if, under the arrangement, 

19 the employer—

20 ‘‘(I) makes matching con21 tributions on behalf of each 

22 employee who is not a highly 

23 compensated employee in an 

24 amount equal to 50 percent of 

25 the elective contributions of 
434 

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1 the employee to the extent 

2 such elective contributions do 

3 not exceed 6 percent of com4 pensation, or 

5 ‘‘(II) is required, without 

6 regard to whether the em7 ployee makes an elective con8 tribution or employee con9 tribution, to make a contribu10 tion to a defined contribution 

11 plan on behalf of each em12 ployee who is not a highly 

13 compensated employee and 

14 who is eligible to participate 

15 in the arrangement in an 

16 amount equal to at least 2 

17 percent of the employee’s 

18 compensation. 

19 ‘‘(ii) APPLICATION OF RULES FOR

20 MATCHING CONTRIBUTIONS.—The 

21 rules of clauses (ii) and (iii) of 

22 paragraph (12)(B) shall apply for 

23 purposes of clause (i)(I). 

24 ‘‘(iii) WITHDRAWAL AND VESTING

25 RESTRICTIONS.—An arrangement 
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1 shall not be treated as meeting 

2 the requirements of clause (i) un3 less, with respect to employer 

4 contributions (including match5 ing contributions) taken into ac6 count in determining whether the 

7 requirements of clause (i) are 

8 met—

9 ‘‘(I) any employee who has 

10 completed at least 2 years of 

11 service (within the meaning 

12 of section 411(a)) has a non13 forfeitable right to 100 per14 cent of the employee’s ac15 crued benefit derived from 

16 such employer contributions, 

17 and 

18 ‘‘(II) the requirements of 

19 subparagraph (B) of para20 graph (2) are met with respect 

21 to all such employer contribu22 tions. 

23 ‘‘(iv) APPLICATION OF CERTAIN

24 OTHER RULES.—The rules of sub25 paragraphs (E)(ii) and (F) of para-
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1 graph (12) shall apply for pur2 poses of subclauses (I) and (II) of 

3 clause (i). 

4 ‘‘(F) NOTICE REQUIREMENTS.—

5 ‘‘(i) IN GENERAL.—The require6 ments of this subparagraph are 

7 met if, within a reasonable period 

8 before each plan year, each em9 ployee eligible to participate in 

10 the arrangement for such year re11 ceives written notice of the em12 ployee’s rights and obligations 

13 under the arrangement which—

14 ‘‘(I) is sufficiently accu15 rate and comprehensive to ap16 prise the employee of such 

17 rights and obligations, and 

18 ‘‘(II) is written in a man19 ner calculated to be under20 stood by the average em21 ployee to whom the arrange22 ment applies. 

23 ‘‘(ii) TIMING AND CONTENT RE24 QUIREMENTS.—A notice shall not 

25 be treated as meeting the require-
437 

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1 ments of clause (i) with respect to 

2 an employee unless—

3 ‘‘(I) the notice explains the 

4 employee’s right under the ar5 rangement to elect not to 

6 have elective contributions 

7 made on the employee’s be8 half (or to elect to have such 

9 contributions made at a dif10 ferent percentage), 

11 ‘‘(II) in the case of an ar12 rangement under which the 

13 employee may elect among 2 

14 or more investment options, 

15 the notice explains how con16 tributions made under the ar17 rangement will be invested in 

18 the absence of any investment 

19 election by the employee, and 

20 ‘‘(III) the employee has a 

21 reasonable period of time 

22 after receipt of the notice de23 scribed in subclauses (I) and 

24 (II) and before the first elec-
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1 tive contribution is made to 

2 make either such election.’’. 

3 (b) MATCHING CONTRIBUTIONS.—Section 

4 401(m) of such Code (relating to non5 discrimination test for matching contribu6 tions and employee contributions) is amended 

7 by redesignating paragraph (12) as paragraph 

8 (13) and by inserting after paragraph (11) the 

9 following new paragraph: 

10 ‘‘(12) ALTERNATIVE METHOD FOR AUTO11 MATIC CONTRIBUTION ARRANGEMENTS.—A 

12 defined contribution plan shall be treated 

13 as meeting the requirements of para14 graph (2) with respect to matching con15 tributions if the plan—

16 ‘‘(A) is a qualified automatic con17 tribution arrangement (as defined in 

18 subsection (k)(13)), and 

19 ‘‘(B) meets the requirements of 

20 paragraph (11)(B).’’. 

21 (c) EXCLUSION FROM DEFINITION OF TOP22 HEAVY PLANS.—

23 (1) ELECTIVE CONTRIBUTION RULE.—

24 Clause (i) of section 416(g)(4)(H) of such 
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1 Code is amended by inserting ‘‘or 

2 401(k)(13)’’ after ‘‘section 401(k)(12)’’. 

3 (2) MATCHING CONTRIBUTION RULE.—

4 Clause (ii) of section 416(g)(4)(H) of such 

5 Code is amended by inserting ‘‘or 

6 401(m)(12)’’ after ‘‘section 401(m)(11)’’. 

7 (d) CORRECTIVE DISTRIBUTIONS.—

8 (1) IN GENERAL.—Section 414 of the In9 ternal Revenue Code of 1986 (relating to 

10 definitions and special rules) is amended 

11 by adding at the end the following new 

12 subsection: 

13 ‘‘(w) AUTOMATIC CONTRIBUTION ARRANGE14 MENTS.—

15 ‘‘(1) IN GENERAL.—No tax shall be im16 posed under section 72(t) on a distribu17 tion from an applicable employer plan to 

18 the employee with respect to whom such 

19 contribution relates if such distribution 

20 does not exceed the erroneous automatic 

21 contribution amount and is made not 

22 later than the 1st April 15 following the 

23 close of the taxable year in which such 

24 contribution was made. 
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1 ‘‘(2) ERRONEOUS AUTOMATIC CONTRIBU2 TION AMOUNT.—For purposes of this sub3 section—

4 ‘‘(A) IN GENERAL.—The term ‘erro5 neous automatic contribution 

6 amount’ means the lesser of—

7 ‘‘(i) the amount of automatic 

8 contributions made during the 

9 applicable period which the em10 ployee elects in a notice to the 

11 plan administrator to treat as an 

12 erroneous automatic contribution 

13 amount for purposes of this sub14 section, or 

15 ‘‘(ii) $500. 

16 ‘‘(B) AUTOMATIC CONTRIBUTION.—

17 The term ‘automatic contribution’

18 means contributions which, under 

19 the terms of the plan—

20 ‘‘(i) the employee can elect to 

21 be made as contributions under 

22 the plan on behalf of the em23 ployee, or to the employee di24 rectly in cash, and 
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1 ‘‘(ii) which are made on behalf 

2 of the employee under the plan 

3 pursuant to a plan provision 

4 treating the employee as having 

5 elected to have the employer 

6 make such contributions on be7 half of the employee until the em8 ployee affirmatively elects not to 

9 have such contribution made or 

10 affirmatively elects to make con11 tributions as a specified level. 

12 ‘‘(3) APPLICABLE EMPLOYER PLAN.—For 

13 purposes of this subsection, the term ‘ap14 plicable employer plan’means—

15 ‘‘(A) an employees’ trust described 

16 in section 401(a) which is exempt 

17 from tax under section 501(a), and 

18 ‘‘(B) a plan under which amounts 

19 are contributed by an individual’s 

20 employer for an annuity contract de21 scribed in section 403(b). 

22 ‘‘(4) APPLICABLE PERIOD.—For pur23 poses of this subsection, the term ‘appli24 cable period’ means, with respect to any 

25 employee, the three month period that 
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1 begins on the first date that an automatic 

2 contribution described in paragraph 

3 (2)(B) is made with respect to such em4 ployee.’’. 

5 (2) VESTING CONFORMING AMEND6 MENTS.—

7 (A) Section 411(a)(3)(G) of such 

8 Code is amended by inserting ‘‘an er9 roneous automatic contribution 

10 under section 414(w),’’ after 

11 ‘‘402(g)(2)(A),’’. 

12 (B) The heading of section 

13 411(a)(3)(G) of such Code is amended 

14 by inserting ‘‘OR ERRONEOUS AUTO15 MATIC CONTRIBUTION’’ before the pe16 riod. 

17 (C) Section 401(k)(8)(E) of such 

18 Code is amended by inserting ‘‘an er19 roneous automatic contribution 

20 under section 414(w),’’ after 

21 ‘‘402(g)(2)(A),’’. 

22 (D) The heading of section 

23 401(k)(8)(E) of such Code is amended 

24 by inserting ‘‘OR ERRONEOUS AUTO-
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1 MATIC CONTRIBUTION’’ before the pe2 riod. 

3 (e) EFFECTIVE DATE.—The amendments 

4 made by this section shall apply to plan years 

5 beginning after December 31, 2005. 

6 SEC. 904. PENALTY-FREE WITHDRAWALS FROM RETIRE7 MENT PLANS FOR INDIVIDUALS CALLED TO 

8 ACTIVE DUTY FOR AT LEAST 179 DAYS. 

9 (a) IN GENERAL.—Paragraph (2) of section 

10 72(t) of the Internal Revenue Code of 1986 (re11 lating to 10-percent additional tax on early 

12 distributions from qualified retirement plans) 

13 is amended by adding at the end the following 

14 new subparagraph: 

15 ‘‘(G) DISTRIBUTIONS FROM RETIRE16 MENT PLANS TO INDIVIDUALS CALLED TO

17 ACTIVE DUTY.—

18 ‘‘(i) IN GENERAL.—Any quali19 fied reservist distribution. 

20 ‘‘(ii) AMOUNT DISTRIBUTED MAY

21 BE REPAID.—Any individual who 

22 receives a qualified reservist dis23 tribution may, at any time during 

24 the 2-year period beginning on 

25 the day after the end of the active 
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1 duty period, make one or more 

2 contributions to an individual re3 tirement plan of such individual 

4 in an aggregate amount not to ex5 ceed the amount of such distribu6 tion. The dollar limitations other7 wise applicable to contributions 

8 to individual retirement plans 

9 shall not apply to any contribu10 tion made pursuant to the pre11 ceding sentence. No deduction 

12 shall be allowed for any contribu13 tion pursuant to this clause. 

14 ‘‘(iii) QUALIFIED RESERVIST DIS15 TRIBUTION.—For purposes of this 

16 subparagraph, the term ‘qualified 

17 reservist distribution’ means any 

18 distribution to an individual if—

19 ‘‘(I) such distribution is 

20 from an individual retirement 

21 plan, or from amounts attrib22 utable to employer contribu23 tions made pursuant to elec24 tive deferrals described in 

25 subparagraph (A) or (C) of 
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1 section 402(g)(3) or section 

2 501(c)(18)(D)(iii), 

3 ‘‘(II) such individual was 

4 (by reason of being a member 

5 of a reserve component (as de6 fined in section 101 of title 37, 

7 United States Code)), ordered 

8 or called to active duty for a 

9 period in excess of 179 days or 

10 for an indefinite period, and 

11 ‘‘(III) such distribution is 

12 made during the period begin13 ning on the date of such order 

14 or call and ending at the close 

15 of the active duty period. 

16 ‘‘(iv) APPLICATION OF SUBPARA17 GRAPH.—This subparagraph ap18 plies to individuals ordered or 

19 called to active duty after Sep20 tember 11, 2001, and before Sep21 tember 12, 2007. In no event shall 

22 the 2-year period referred to in 

23 clause (ii) end before the date 

24 which is 2-years after the date of 
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1 the enactment of this subpara2 graph.’’. 

3 (b) CONFORMING AMENDMENTS.—

4 (1) Section 401(k)(2)(B)(i) of such 

5 Code is amended by striking ‘‘or’’ at the 

6 end of subclause (III), by striking ‘‘and’’

7 at the end of subclause (IV) and inserting 

8 ‘‘or’’, and by inserting after subclause (IV) 

9 the following new subclause: 

10 ‘‘(V) in the case of a quali11 fied reservist distribution (as 

12 defined in section 

13 72(t)(2)(G)(iii)), the date on 

14 which a period referred to in 

15 subclause (III) of such section 

16 begins, and’’. 

17 (2) Section 403(b)(7)(A)(ii) of such 

18 Code is amended by inserting ‘‘(unless 

19 such amount is a distribution to which 

20 section 72(t)(2)(G) applies)’’ after ‘‘dis21 tributee’’. 

22 (3) Section 403(b)(11) of such Code is 

23 amended by striking ‘‘or’’ at the end of 

24 subparagraph (A), by striking the period 

25 at the end of subparagraph (B) and in-
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1 serting ‘‘, or’’, and by inserting after sub2 paragraph (B) the following new subpara3 graph: 

4 ‘‘(C) for distributions to which 

5 section 72(t)(2)(G) applies.’’. 

6 (c) EFFECTIVE DATE; WAIVER OF LIMITA7 TIONS.—

8 (1) EFFECTIVE DATE.—The amendment 

9 made by this section shall apply to dis10 tributions after September 11, 2001. 

11 (2) WAIVER OF LIMITATIONS.—If refund 

12 or credit of any overpayment of tax re13 sulting from the amendments made by 

14 this section is prevented at any time be15 fore the close of the 1-year period begin16 ning on the date of the enactment of this 

17 Act by the operation of any law or rule of 

18 law (including res judicata), such refund 

19 or credit may nevertheless be made or al20 lowed if claim therefor is filed before the 

21 close of such period. 
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1 SEC. 905. WAIVER OF 10 PERCENT EARLY WITHDRAWAL 

2 PENALTY TAX ON CERTAIN DISTRIBUTIONS 

3 OF PENSION PLANS FOR PUBLIC SAFETY EM4 PLOYEES. 

5 (a) IN GENERAL.—Section 72(t)(2) of the In6 ternal Revenue Code of 1986 (relating to sub7 section not to apply to certain distributions), 

8 as amended by section 904, is amended by 

9 adding at the end the following new sub10 section: 

11 ‘‘(H) DROP DISTRIBUTIONS TO

12 QUALIFIED PUBLIC SAFETY EMPLOYEES IN

13 GOVERNMENTAL PLANS.—

14 ‘‘(i) IN GENERAL.—Distribu15 tions to an individual who is a 

16 qualified public safety employee 

17 from a governmental plan within 

18 the meaning of section 414(d) to 

19 the extent such distributions are 

20 attributable to a DROP benefit. 

21 ‘‘(ii) DEFINITIONS.—For pur22 poses of this subparagraph—

23 ‘‘(I) DROP BENEFIT.—The 

24 term ‘DROP benefit’ means a 

25 feature of a governmental 

26 plan which is a defined ben-
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1 efit plan and under which an 

2 employee elects to receive 

3 credits to an account (includ4 ing a notional account) in the 

5 plan which are not in excess 

6 of the plan benefits (payable 

7 in the form of an annuity) 

8 that would have been pro9 vided if the employee had re10 tired under the plan at a spec11 ified earlier retirement date 

12 and which are in lieu of in13 creases in the employee’s ac14 crued pension benefit based 

15 on years of service after the 

16 effective date of the DROP 

17 election. 

18 ‘‘(II) QUALIFIED PUBLIC

19 SAFETY EMPLOYEE.—The term 

20 ‘qualified public safety em21 ployee’ means any employee 

22 of any police department or 

23 fire department organized 

24 and operated by a State or po25 litical subdivision of a State if 
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1 the employee provides police 

2 protection, firefighting serv3 ices, or emergency medical 

4 services for any area within 

5 the jurisdiction of such State 

6 or political subdivision and if 

7 the employee was eligible to 

8 retire on or before the date of 

9 such election and receive im10 mediate retirement benefits.’’. 

11 (b) EFFECTIVE DATE.—The amendments 

12 made by this section shall apply to distribu13 tions after the date of the enactment of this 

14 Act. 

15 SEC. 906. COMBAT ZONE COMPENSATION TAKEN INTO AC16 COUNT FOR PURPOSES OF DETERMINING 

17 LIMITATION AND DEDUCTIBILITY OF CON18 TRIBUTIONS TO INDIVIDUAL RETIREMENT 

19 PLANS. 

20 (a) IN GENERAL.—Subsection (f) of section 

21 219 of the Internal Revenue Code of 1986 is 

22 amended by redesignating paragraph (7) as 

23 paragraph (8) and by inserting after para24 graph (6) the following new paragraph: 
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1 ‘‘(7) SPECIAL RULE FOR COMPENSATION

2 EARNED BY MEMBERS OF THE ARMED FORCES

3 FOR SERVICE IN A COMBAT ZONE.—For pur4 poses of subsections (b)(1)(B) and (c), the 

5 amount of compensation includible in an 

6 individual’s gross income shall be deter7 mined without regard to section 112.’’. 

8 (b) EFFECTIVE DATE.—The amendments 

9 made by this section shall apply to taxable 

10 years beginning after December 31, 2005. 

11 SEC. 907. DIRECT PAYMENT OF TAX REFUNDS TO INDI12 VIDUAL RETIREMENT PLANS. 

13 (a) IN GENERAL.—The Secretary of the 

14 Treasury (or the Secretary’s delegate) shall 

15 make available a form (or modify existing 

16 forms) for use by individuals to direct that a 

17 portion of any refund of overpayment of tax 

18 imposed by chapter 1 of the Internal Revenue 

19 Code of 1986 be paid directly to an individual 

20 retirement plan (as defined in section 

21 7701(a)(37) of such Code) of such individual. 

22 (b) EFFECTIVE DATE.—The form required 

23 by subsection (a) shall be made available for 

24 taxable years beginning after December 31, 

25 2006. 
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1 SEC. 908. IRA ELIGIBILITY FOR THE DISABLED. 

2 (a) IN GENERAL.—Subsection (f) of section 

3 219 of the Internal Revenue Code of 1986 (re4 lating to other definitions and special rules), 

5 as amended by this Act, is further amended by 

6 redesignating paragraph (8) as paragraph (9) 

7 and by inserting after paragraph (7) the fol8 lowing new paragraph: 

9 ‘‘(8) SPECIAL RULE FOR CERTAIN DIS10 ABLED INDIVIDUALS.—In the case of an in11 dividual—

12 ‘‘(A) who is disabled (within the 

13 meaning of section 72(m)(7)), and 

14 ‘‘(B) who has not attained the ap15 plicable age (as defined in section 

16 401(a)(9)(H)) before the close of the 

17 taxable year, 

18 subparagraph (B) of subsection (b)(1) 

19 shall not apply.’’. 

20 (b) EFFECTIVE DATE.—The amendment 

21 made by this section shall apply to taxable 

22 years beginning after December 31, 2005. 

23 SEC. 909. ALLOW ROLLOVERS BY NONSPOUSE BENE24 FICIARIES OF CERTAIN RETIREMENT PLAN 

25 DISTRIBUTIONS. 

26 (a) IN GENERAL.—
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1 (1) QUALIFIED PLANS.—Section 402(c) 

2 of the Internal Revenue Code of 1986 (re3 lating to rollovers from exempt trusts) is 

4 amended by adding at the end the fol5 lowing new paragraph: 

6 ‘‘(11) DISTRIBUTIONS TO INHERITED INDI7 VIDUAL RETIREMENT PLAN OF NONSPOUSE

8 BENEFICIARY.—

9 ‘‘(A) IN GENERAL.—If, with respect 

10 to any portion of a distribution from 

11 an eligible retirement plan of a de12 ceased employee, a direct trustee-to13 trustee transfer is made to an indi14 vidual retirement plan described in 

15 clause (i) or (ii) of paragraph (8)(B) 

16 established for the purposes of re17 ceiving the distribution on behalf of 

18 an individual who is a designated 

19 beneficiary (as defined by section 

20 401(a)(9)(E)) of the employee and who 

21 is not the surviving spouse of the em22 ployee—

23 ‘‘(i) the transfer shall be treat24 ed as an eligible rollover distribu-
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1 tion for purposes of this sub2 section, 

3 ‘‘(ii) the individual retirement 

4 plan shall be treated as an inher5 ited individual retirement ac6 count or individual retirement 

7 annuity (within the meaning of 

8 section 408(d)(3)(C)) for purposes 

9 of this title, and 

10 ‘‘(iii) section 401(a)(9)(B) 

11 (other than clause (iv) thereof) 

12 shall apply to such plan. 

13 ‘‘(B) CERTAIN TRUSTS TREATED AS

14 BENEFICIARIES.—For purposes of this 

15 paragraph, to the extent provided in 

16 rules prescribed by the Secretary, a 

17 trust maintained for the benefit of 

18 one or more designated beneficiaries 

19 shall be treated in the same manner 

20 as a trust designated beneficiary.’’. 

21 (2) SECTION 403(a) PLANS.—Subpara22 graph (B) of section 403(a)(4) of such 

23 Code (relating to rollover amounts) is 

24 amended by inserting ‘‘and (11)’’ after 

25 ‘‘(7)’’. 
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1 (3) SECTION 403(b) PLANS.—Subpara2 graph (B) of section 403(b)(8) of such 

3 Code (relating to rollover amounts) is 

4 amended by striking ‘‘and (9)’’ and insert5 ing ‘‘, (9), and (11)’’. 

6 (4) SECTION 457 PLANS.—Subparagraph 

7 (B) of section 457(e)(16) of such Code (re8 lating to rollover amounts) is amended by 

9 striking ‘‘and (9)’’ and inserting ‘‘, (9), and 

10 (11)’’. 

11 (b) EFFECTIVE DATE.—The amendments 

12 made by this section shall apply to distribu13 tions after December 31, 2005. 

14 TITLE X—PROVISIONS TO EN15 HANCE HEALTH CARE AF16 FORDABILITY 

17 SEC. 1001. TREATMENT OF ANNUITY AND LIFE INSURANCE 

18 CONTRACTS WITH A LONG-TERM CARE IN19 SURANCE FEATURE. 

20 (a) EXCLUSION FROM GROSS INCOME.—Sub21 section (e) of section 72 of the Internal Rev22 enue Code of 1986 (relating to amounts not re23 ceived as annuities) is amended by redesig24 nating paragraph (11) as paragraph (12) and 
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1 by inserting after paragraph (10) the fol2 lowing new paragraph: 

3 ‘‘(11) SPECIAL RULES FOR CERTAIN COM4 BINATION CONTRACTS PROVIDING LONG-TERM

5 CARE INSURANCE.—Notwithstanding para6 graphs (2), (5)(C), and (10), in the case of 

7 any charge against the cash value of an 

8 annuity contract or the cash surrender 

9 value of a life insurance contract made as 

10 payment for coverage under a qualified 

11 long-term care insurance contract which 

12 is part of or a rider on such annuity or 

13 life insurance contract—

14 ‘‘(A) the investment in the con15 tract shall be reduced (but not below 

16 zero) by such charge, and 

17 ‘‘(B) such charge shall not be in18 cludible in gross income.’’. 

19 (b) TAX-FREE EXCHANGES AMONG CERTAIN

20 INSURANCE POLICIES.—

21 (1) ANNUITY CONTRACTS CAN INCLUDE

22 QUALIFIED LONG-TERM CARE INSURANCE RID23 ERS.—Paragraph (2) of section 1035(b) of 

24 such Code is amended by adding at the 

25 end the following new sentence: ‘‘For pur-
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1 poses of the preceding sentence, a con2 tract shall not fail to be treated as an an3 nuity contract solely because a qualified 

4 long-term care insurance contract is a 

5 part of or a rider on such contract.’’. 

6 (2) LIFE INSURANCE CONTRACTS CAN IN7 CLUDE QUALIFIED LONG-TERM CARE INSUR8 ANCE RIDERS.—Paragraph (3) of section 

9 1035(b) of such Code is amended by add10 ing at the end the following new sen11 tence: ‘‘For purposes of the preceding 

12 sentence, a contract shall not fail to be 

13 treated as a life insurance contract solely 

14 because a qualified long-term care insur15 ance contract is a part of or a rider on 

16 such contract.’’. 

17 (3) EXPANSION OF TAX-FREE EXCHANGES

18 OF LIFE INSURANCE, ENDOWMENT, AND ANNU19 ITY CONTRACTS FOR LONG-TERM CARE CON20 TRACTS.—Subsection (a) of section 1035 of 

21 such Code (relating to certain exchanges 

22 of insurance policies) is amended—

23 (A) in paragraph (1) by striking 

24 ‘‘contract;’’ and inserting ‘‘contract or 
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1 for a qualified long-term care insur2 ance contract;’’

, 

3 (B) in paragraph (2) by striking 

4 ‘‘contract;’’ and inserting ‘‘contract, or 

5 (C) for a qualified long-term care in6 surance contract;’’, and 

7 (C) in paragraph (3) by striking 

8 ‘‘contract.’’ and inserting ‘‘contract or 

9 for a qualified long-term care insur10 ance contract.’’. 

11 (4) TAX-FREE EXCHANGES OF QUALIFIED

12 LONG-TERM CARE INSURANCE CONTRACT.—

13 Subsection (a) of section 1035 of such 

14 Code (relating to certain exchanges of in15 surance policies) is amended by striking 

16 ‘‘or’’ at the end of paragraph (2), by strik17 ing the period at the end of paragraph (3) 

18 and inserting ‘‘; or’’, and by inserting 

19 after paragraph (3) the following new 

20 paragraph: 

21 ‘‘(4) a qualified long-term care insur22 ance contract for a qualified long-term 

23 care insurance contract.’’. 

24 (c) TREATMENT OF COVERAGE PROVIDED AS

25 PART OF A LIFE INSURANCE OR ANNUITY CON-
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1 TRACT.—Subsection (e) of section 7702B of 

2 such Code (relating to treatment of qualified 

3 long-term care insurance) is amended to read 

4 as follows: 

5 ‘‘(e) TREATMENT OF COVERAGE PROVIDED AS

6 PART OF A LIFE INSURANCE OR ANNUITY CON7 TRACT.—

8 ‘‘(1) COVERAGE TREATED AS CON9 TRACT.—Except as otherwise provided in 

10 regulations prescribed by the Secretary, 

11 in the case of any long-term care insur12 ance coverage (whether or not qualified) 

13 provided by a rider on or as part of a life 

14 insurance contract or an annuity con15 tract, this title shall apply as if the por16 tion of the contract providing such cov17 erage is a separate contract. 

18 ‘‘(2) DENIAL OF DEDUCTION UNDER SEC19 TION 213.—No deduction shall be allowed 

20 under section 213(a) for any payment 

21 made for coverage under a qualified long22 term care insurance contract if such pay23 ment is made as a charge against the 

24 cash value of an annuity contract or the 
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1 cash surrender value of a life insurance 

2 contract. 

3 ‘‘(3) APPLICATION OF SECTION 7702.—

4 Section 7702(c)(2) (relating to the guide5 line premium limitation) shall be applied 

6 by increasing the guideline premium lim7 itation with respect to the life insurance 

8 contract, as of any date—

9 ‘‘(A) by the sum of any charges 

10 (but not premium payments) against 

11 the life insurance contract’s cash sur12 render value (within the meaning of 

13 section 7702(f)(2)(A)) for coverage 

14 under the qualified long-term care in15 surance contract made to that date 

16 under the life insurance contract, less 

17 ‘‘(B) any such charges the imposi18 tion of which reduces the premiums 

19 paid for the life insurance contract 

20 (within the meaning of section 

21 7702(f)(1)). 

22 ‘‘(4) PORTION DEFINED.—For purposes 

23 of this subsection, the term ‘portion’

24 means only the terms and benefits under 

25 a life insurance contract or annuity con-
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1 tract that are in addition to the terms 

2 and benefits under the contract without 

3 regard to long-term care insurance cov4 erage. 

5 ‘‘(5) ANNUITY CONTRACTS TO WHICH

6 PARAGRAPH (1) DOES NOT APPLY.—For pur7 poses of this subsection, none of the fol8 lowing shall be treated as an annuity 

9 contract: 

10 ‘‘(A) A trust described in section 

11 401(a) which is exempt from tax 

12 under section 501(a). 

13 ‘‘(B) A contract—

14 ‘‘(i) purchased by a trust de15 scribed in subparagraph (A), 

16 ‘‘(ii) purchased as part of a 

17 plan described in section 403(a), 

18 ‘‘(iii) described in section 

19 403(b), 

20 ‘‘(iv) provided for employees 

21 of a life insurance company under 

22 a plan described in section 

23 818(a)(3), or 
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1 ‘‘(v) from an individual retire2 ment account or an individual re3 tirement annuity. 

4 ‘‘(C) A contract purchased by an 

5 employer for the benefit of the em6 ployee (or the employee’s spouse). 

7 Any dividend described in section 404(k) 

8 which is received by a participant or ben9 eficiary shall, for purposes of this para10 graph, be treated as paid under a sepa11 rate contract to which subparagraph 

12 (B)(i) applies.’’. 

13 (d) INFORMATION REPORTING.—

14 (1) Subpart B of part III of sub15 chapter A of chapter 61 of such Code (re16 lating to information concerning trans17 actions with other persons) is amended 

18 by adding at the end the following new 

19 section: 

20 ‘‘SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED 

21 LONG-TERM CARE INSURANCE CONTRACTS 

22 UNDER COMBINED ARRANGEMENTS. 

23 ‘‘(a) REQUIREMENT OF REPORTING.—Any 

24 person who makes a charge against the cash 

25 value of an annuity contract, or the cash sur-
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1 render value of a life insurance contract, 

2 which is excludible from gross income under 

3 section 72(e)(11) shall make a return, accord4 ing to the forms or regulations prescribed by 

5 the Secretary, setting forth—

6 ‘‘(1) the amount of the aggregate of 

7 such charges against each such contract 

8 for the calendar year, 

9 ‘‘(2) the amount of the reduction in 

10 the investment in each such contract by 

11 reason of such charges, and 

12 ‘‘(3) the name, address, and TIN of the 

13 individual who is the holder of each such 

14 contract. 

15 ‘‘(b) STATEMENTS TO BE FURNISHED TO PER16 SONS WITH RESPECT TO WHOM INFORMATION IS

17 REQUIRED.—Every person required to make a 

18 return under subsection (a) shall furnish to 

19 each individual whose name is required to be 

20 set forth in such return a written statement 

21 showing—

22 ‘‘(1) the name, address, and phone 

23 number of the information contact of the 

24 person making the payments, and 
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1 ‘‘(2) the information required to be 

2 shown on the return with respect to such 

3 individual. 

4 The written statement required under the 

5 preceding sentence shall be furnished to the 

6 individual on or before January 31 of the year 

7 following the calendar year for which the re8 turn under subsection (a) was required to be 

9 made.’’. 

10 (2) CLERICAL AMENDMENT.—The table 

11 of sections for subpart B of part III of 

12 subchapter A of such chapter 61 of such 

13 Code is amended by adding at the end 

14 the following new item: 

‘‘Sec. 6050U. Charges or payments for qualified long-term care 

insurance contracts under combined arrangements.’’. 

15 (e) TREATMENT OF POLICY ACQUISITION EX16 PENSES.—Subsection (e) of section 848 of such 

17 Code (relating to classification of contracts) is 

18 amended by adding at the end the following 

19 new paragraph: 

20 ‘‘(6) TREATMENT OF CERTAIN QUALIFIED

21 LONG-TERM CARE INSURANCE CONTRACT AR22 RANGEMENTS.—An annuity or life insur23 ance contract which includes a qualified 

24 long-term care insurance contract as a 
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1 part of or a rider on such annuity or life 

2 insurance contract shall be treated as a 

3 specified insurance contract not de4 scribed in subparagraph (A) or (B) of sub5 section (c)(1).’’. 

6 (f) TREATMENT AS QUALIFIED ADDITIONAL

7 BENEFIT.—Subparagraph (A) of section 

8 7702(f)(5) of such Code (relating to qualified 

9 additional benefits) is amended by striking 

10 ‘‘or’’ at the end of clause (iv), by redesignating 

11 clause (v) as clause (vi), and by inserting after 

12 clause (iv) the following new clause: 

13 ‘‘(v) qualified long-term care 

14 insurance contract which is a 

15 part of or a rider on the contract, 

16 or’’. 

17 (g) EFFECTIVE DATES.—

18 (1) IN GENERAL.—Except as provided 

19 by paragraph (2), the amendments made 

20 by this section shall apply to contracts 

21 issued before, on, or after December 31, 

22 2006, but only with respect to periods be23 ginning after such date. 

24 (2) SUBSECTION (b).—The amendments 

25 made by subsection (b) shall apply with 
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1 respect to exchanges occurring after De2 cember 31, 2006. 

3 SEC. 1002. DISPOSITION OF UNUSED HEALTH BENEFITS IN 

4 CAFETERIA PLANS AND FLEXIBLE SPENDING 

5 ARRANGEMENTS. 

6 (a) IN GENERAL.—Section 125 of the Inter7 nal Revenue Code of 1986 (relating to cafe8 teria plans) is amended by redesignating sub9 sections (h) and (i) as subsections (i) and (j), 

10 respectively, and by inserting after sub11 section (g) the following: 

12 ‘‘(h) CONTRIBUTIONS OF CERTAIN UNUSED

13 HEALTH BENEFITS.—

14 ‘‘(1) IN GENERAL.—For purposes of this 

15 title, a plan or other arrangement shall 

16 not fail to be treated as a cafeteria plan 

17 solely because qualified benefits under 

18 such plan include a health flexible spend19 ing arrangement under which not more 

20 than $500 of unused health benefits may 

21 be—

22 ‘‘(A) carried forward to the suc23 ceeding plan year of such health 

24 flexible spending arrangement, or 
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1 ‘‘(B) to the extent permitted by 

2 section 106(d), contributed by the em3 ployer to a health savings account (as 

4 defined in section 223(d)) maintained 

5 for the benefit of the employee. 

6 ‘‘(2) HEALTH FLEXIBLE SPENDING AR7 RANGEMENT.—For purposes of this sub8 section, the term ‘health flexible spend9 ing arrangement’ means a flexible spend10 ing arrangement (as defined in section 

11 106(c)) that is a qualified benefit and only 

12 permits reimbursement for expenses for 

13 medical care (as defined in section 

14 213(d)(1), without regard to subpara15 graphs (C) and (D) thereof). 

16 ‘‘(3) UNUSED HEALTH BENEFITS.—For 

17 purposes of this subsection, with respect 

18 to an employee, the term ‘unused health 

19 benefits’ means the excess of—

20 ‘‘(A) the maximum amount of re21 imbursement allowable to the em22 ployee for a plan year under a health 

23 flexible spending arrangement, over 
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1 ‘‘(B) the actual amount of reim2 bursement for such year under such 

3 arrangement.’’. 

4 (b) EFFECTIVE DATE.—The amendments 

5 made by subsection (a) shall apply to taxable 

6 years beginning after December 31, 2005. 

7 SEC. 1003. DISTRIBUTIONS FROM GOVERNMENTAL RETIRE8 MENT PLANS FOR HEALTH AND LONG-TERM 

9 CARE INSURANCE FOR PUBLIC SAFETY OFFI10 CERS. 

11 (a) IN GENERAL.—Section 402 of the Inter12 nal Revenue Code of 1986 (relating to tax13 ability of beneficiary of employees’ trust) is 

14 amended by adding at the end the following 

15 new subsection: 

16 ‘‘(l) DISTRIBUTIONS FROM GOVERNMENTAL

17 PLANS FOR HEALTH AND LONG-TERM CARE IN18 SURANCE.—

19 ‘‘(1) IN GENERAL.—In the case of an 

20 employee who is an eligible retired pub21 lic safety officer who makes the election 

22 described in paragraph (6) with respect 

23 to any taxable year of such employee, 

24 gross income of such employee for such 

25 taxable year does not include any dis-
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1 tribution from an eligible retirement plan 

2 to the extent that the aggregate amount 

3 of such distributions does not exceed the 

4 amount paid by such employee for quali5 fied health insurance premiums of the 

6 employee, his spouse, or dependents (as 

7 defined in section 152) for such taxable 

8 year. 

9 ‘‘(2) LIMITATION.—The amount which 

10 may be excluded from gross income for 

11 the taxable year by reason of paragraph 

12 (1) shall not exceed $5,000. 

13 ‘‘(3) DISTRIBUTIONS MUST OTHERWISE BE

14 INCLUDIBLE.—

15 ‘‘(A) IN GENERAL.—An amount 

16 shall be treated as a distribution for 

17 purposes of paragraph (1) only to the 

18 extent that such amount would be in19 cludible in gross income without re20 gard to paragraph (1). 

21 ‘‘(B) APPLICATION OF SECTION 72.—

22 Notwithstanding section 72, in deter23 mining the extent to which an 

24 amount is treated as a distribution 

25 for purposes of subparagraph (A), the 
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1 aggregate amounts distributed from 

2 an eligible retirement plan in a tax3 able year (up to the amount excluded 

4 under paragraph (1)) shall be treated 

5 as includible in gross income (with6 out regard to subparagraph (A)) to 

7 the extent that such amount does not 

8 exceed the aggregate amount which 

9 would have been so includible if all 

10 amounts distributed from all eligible 

11 retirement plans were treated as 1 

12 contract for purposes of determining 

13 the inclusion of such distribution 

14 under section 72. Proper adjustments 

15 shall be made in applying section 72 

16 to other distributions in such taxable 

17 year and subsequent taxable years. 

18 ‘‘(4) DEFINITIONS.—For purposes of 

19 this subsection—

20 ‘‘(A) ELIGIBLE RETIREMENT PLAN.—

21 For purposes of paragraph (1), the 

22 term ‘eligible retirement plan’ means 

23 a governmental plan (within the 

24 meaning of section 414(d)) which is 
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1 described in clause (iii), (iv), (v), or 

2 (vi) of subsection (c)(8)(B). 

3 ‘‘(B) ELIGIBLE RETIRED PUBLIC

4 SAFETY OFFICER.—The term ‘eligible 

5 retired public safety officer’ means an 

6 individual who, by reason of dis7 ability or attainment of normal retire8 ment age, is separated from service 

9 as a public safety officer with the em10 ployer who maintains the eligible re11 tirement plan from which distribu12 tions subject to paragraph (1) are 

13 made. 

14 ‘‘(C) PUBLIC SAFETY OFFICER.—The 

15 term ‘public safety officer’ shall have 

16 the same meaning given such term by 

17 section 1204(8)(A) of the Omnibus 

18 Crime Control and Safe Streets Act of 

19 1968 (42 U.S.C. 3796b(8)(A)). 

20 ‘‘(D) QUALIFIED HEALTH INSURANCE

21 PREMIUMS.—The term ‘qualified health 

22 insurance premiums’ means pre23 miums for coverage for the eligible 

24 retired public safety officer, his 

25 spouse, and dependents, by an acci-
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1 dent or health insurance plan or 

2 qualified long-term care insurance 

3 contract (as defined in section 

4 7702B(b)). 

5 ‘‘(5) SPECIAL RULES.—For purposes of 

6 this subsection—

7 ‘‘(A) DIRECT PAYMENT TO INSURER

8 REQUIRED.—Paragraph (1) shall only 

9 apply to a distribution if payment of 

10 the premiums is made directly to the 

11 provider of the accident or health in12 surance plan or qualified long-term 

13 care insurance contract by deduction 

14 from a distribution from the eligible 

15 retirement plan. 

16 ‘‘(B) RELATED PLANS TREATED AS

17 1.—All eligible retirement plans of an 

18 employer shall be treated as a single 

19 plan. 

20 ‘‘(6) ELECTION DESCRIBED.—

21 ‘‘(A) IN GENERAL.—For purposes of 

22 paragraph (1), an election is de23 scribed in this paragraph if the elec24 tion is made by an employee after 

25 separation from service with respect 
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1 to amounts not distributed from an 

2 eligible retirement plan to have 

3 amounts from such plan distributed 

4 in order to pay for qualified health 

5 insurance premiums. 

6 ‘‘(B) SPECIAL RULE.—A plan shall 

7 not be treated as violating the re8 quirements of section 401, or as en9 gaging in a prohibited transaction for 

10 purposes of section 503(b), merely be11 cause it provides for an election with 

12 respect to amounts that are otherwise 

13 distributable under the plan or mere14 ly because of a distribution made pur15 suant to an election described in sub16 paragraph (A). 

17 ‘‘(7) COORDINATION WITH MEDICAL EX18 PENSE DEDUCTION.—The amounts excluded 

19 from gross income under paragraph (1) 

20 shall not be taken into account under 

21 section 213. 

22 ‘‘(8) COORDINATION WITH DEDUCTION

23 FOR HEALTH INSURANCE COSTS OF SELF-EM24 PLOYED INDIVIDUALS.—The amounts ex25 cluded from gross income under para-
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1 graph (1) shall not be taken into account 

2 under section 162(l).’’. 

3 (b) CONFORMING AMENDMENTS.—

4 (1) Section 403(a) of such Code (relat5 ing to taxability of beneficiary under a 

6 qualified annuity plan) is amended by in7 serting after paragraph (1) the following 

8 new paragraph: 

9 ‘‘(2) SPECIAL RULE FOR HEALTH AND

10 LONG-TERM CARE INSURANCE.—To the ex11 tent provided in section 402(l), paragraph 

12 (1) shall not apply to the amount distrib13 uted under the contract which is other14 wise includible in gross income under 

15 this subsection.’’. 

16 (2) Section 403(b) of such Code (relat17 ing to taxability of beneficiary under an18 nuity purchased by section 501(c)(3) orga19 nization or public school) is amended by 

20 inserting after paragraph (1) the fol21 lowing new paragraph: 

22 ‘‘(2) SPECIAL RULE FOR HEALTH AND

23 LONG-TERM CARE INSURANCE.—To the ex24 tent provided in section 402(l), paragraph 

25 (1) shall not apply to the amount distrib-
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1 uted under the contract which is other2 wise includible in gross income under 

3 this subsection.’’. 

4 (3) Section 457(a) of such Code (relat5 ing to year of inclusion in gross income) 

6 is amended by adding at the end the fol7 lowing new paragraph: 

8 ‘‘(3) SPECIAL RULE FOR HEALTH AND

9 LONG-TERM CARE INSURANCE.—In the case 

10 of a plan of an eligible employer de11 scribed in subsection (e)(1)(A), to the ex12 tent provided in section 402(l), paragraph 

13 (1) shall not apply to amounts otherwise 

14 includible in gross income under this 

15 subsection.’’. 

16 (c) EFFECTIVE DATE.—The amendments 

17 made by this section shall apply to distribu18 tions in taxable years beginning after Decem19 ber 31, 2005. 
Union Calendar No. 172 

109TH CONGRESS 

1ST SESSION H. R. 2830 

[Report No. 109–232, Parts I and II] 

A BILL 

To amend the Employee Retirement Income Secufor other purposes. of 1986 to reform the pension funding rules, and rity Act of 1974 and the Internal Revenue Code 

DECEMBER 6, 2005 

Reported from the Committee on Ways and Means with 

to be printed Whole House on the State of the Union and ordered an amendment; committed to the Committee of the