II 

115TH CONGRESS 

1ST SESSION S. 852 

To amend the Internal Revenue Code of 1986 to protect older, longer service 

and grandfathered participants in defined benefit plans. 

IN THE SENATE OF THE UNITED STATES 

APRIL 5 (legislative day, APRIL 4), 2017 

Mr. CARDIN (for himself and Mr. PORTMAN) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to protect 

older, longer service and grandfathered participants in 

defined benefit plans. 

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. 

4 This Act may be cited as the ‘‘Retirement Security 

5 Preservation Act of 2017’’. 

6 SEC. 2. MODIFICATION OF NONDISCRIMINATION RULES TO 

7 PROTECT OLDER, LONGER SERVICE PARTICI8 PANTS. 

9 (a) IN GENERAL.—Section 401 of the Internal Rev10 enue Code of 1986 is amended— 


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1 (1) by redesignating subsection (o) as sub2 section (p), and 

3 (2) by inserting after subsection (n) the fol4 lowing new subsection: 

5 ‘‘(o) SPECIAL RULES FOR APPLYING NON6 DISCRIMINATION RULES TO PROTECT OLDER, LONGER

7 SERVICE AND GRANDFATHERED PARTICIPANTS.— 

8 ‘‘(1) TESTING OF DEFINED BENEFIT PLANS

9 WITH CLOSED CLASSES OF PARTICIPANTS.— 

10 ‘‘(A) BENEFITS, RIGHTS, OR FEATURES

11 PROVIDED TO CLOSED CLASSES.—A defined 

12 benefit plan which provides benefits, rights, or 

13 features to a closed class of participants shall 

14 not fail to satisfy the requirements of sub15 section (a)(4) by reason of the composition of 

16 such closed class or the benefits, rights, or fea17 tures provided to such closed class, if— 

18 ‘‘(i) for the plan year as of which the 

19 class closes and the 2 succeeding plan 

20 years, such benefits, rights, and features 

21 satisfy the requirements of subsection 

22 (a)(4) (without regard to this subpara23 graph but taking into account the rules of 

24 subparagraph (I)), 


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1 ‘‘(ii) after the date as of which the 

2 class was closed, any plan amendment 

3 which modifies the closed class or the ben4 efits, rights, and features provided to such 

5 closed class does not discriminate signifi6 cantly in favor of highly compensated em7 ployees (determined as of the effective date 

8 of the amendment), and 

9 ‘‘(iii) the class was closed before April 

10 5, 2017, or the plan is described in sub11 paragraph (C). 

12 ‘‘(B) AGGREGATE TESTING WITH DEFINED

13 CONTRIBUTION PLANS PERMITTED ON A BENE14 FITS BASIS.— 

15 ‘‘(i) IN GENERAL.—For purposes of 

16 determining compliance with subsection 

17 (a)(4) and section 410(b), a defined benefit 

18 plan described in clause (iii) may be aggre19 gated and tested on a benefits basis with 

20 1 or more defined contribution plans, in21 cluding with the portion of 1 or more de22 fined contribution plans which— 

23 ‘‘(I) provides matching contribu24 tions (as defined in subsection 

25 (m)(4)(A)), 


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1 ‘‘(II) provides annuity contracts 

2 described in section 403(b) which are 

3 purchased with matching contribu4 tions or nonelective contributions, or 

5 ‘‘(III) consists of an employee 

6 stock ownership plan (within the 

7 meaning of section 4975(e)(7)) or a 

8 tax credit employee stock ownership 

9 plan (within the meaning of section 

10 409(a)). 

11 ‘‘(ii) SPECIAL RULES FOR MATCHING

12 CONTRIBUTIONS.—For purposes of clause 

13 (i), if a defined benefit plan is aggregated 

14 with a portion of a defined contribution 

15 plan providing matching contributions— 

16 ‘‘(I) such defined benefit plan 

17 must also be aggregated with any por18 tion of such defined contribution plan 

19 which provides elective deferrals de20 scribed in subparagraph (A) or (C) of 

21 section 402(g)(3), and 

22 ‘‘(II) such matching contribu23 tions shall be treated in the same 

24 manner as nonelective contributions, 


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1 including for purposes of applying the 

2 rules of subsection (l). 

3 ‘‘(iii) PLANS DESCRIBED.—A defined 

4 benefit plan is described in this clause if— 

5 ‘‘(I) the plan provides benefits to 

6 a closed class of participants, 

7 ‘‘(II) for the plan year as of 

8 which the class closes and the 2 suc9 ceeding plan years, the plan satisfies 

10 the requirements of section 410(b) 

11 and subsection (a)(4) (without regard 

12 to this subparagraph but taking into 

13 account the rules of subparagraph 

14 (I)), 

15 ‘‘(III) after the date as of which 

16 the class was closed, any plan amend17 ment which modifies the closed class 

18 or the benefits provided to such closed 

19 class does not discriminate signifi20 cantly in favor of highly compensated 

21 employees (determined as of the effec22 tive date of the amendment), and 

23 ‘‘(IV) the class was closed before 

24 April 5, 2017, or the plan is described 

25 in subparagraph (C). 


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1 ‘‘(C) PLANS DESCRIBED.—A plan is de2 scribed in this subparagraph if, taking into ac3 count any predecessor plan— 

4 ‘‘(i) such plan has been in effect for 

5 at least 5 years as of the date the class is 

6 closed, and 

7 ‘‘(ii) during the 5-year period pre8 ceding the date the class is closed, there 

9 has not been a substantial increase in the 

10 coverage or value of the benefits, rights, or 

11 features described in subparagraph (A) or 

12 in the coverage or benefits under the plan 

13 described in subparagraph (B)(iii) (which14 ever is applicable). 

15 ‘‘(D) DETERMINATION OF SUBSTANTIAL

16 INCREASE FOR BENEFITS, RIGHTS, AND FEA17 TURES.—In applying subparagraph (C)(ii) for 

18 purposes of subparagraph (A)(iii), a plan shall 

19 be treated as having had a substantial increase 

20 in coverage or value of the benefits, rights, or 

21 features described in subparagraph (A) during 

22 the applicable 5-year period only if, during such 

23 period— 

24 ‘‘(i) the number of participants cov25 ered by such benefits, rights, or features 


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1 on the date such period ends is more than 

2 50 percent greater than the number of 

3 such participants on the first day of the 

4 plan year in which such period began, or 

5 ‘‘(ii) such benefits, rights, and fea6 tures have been modified by 1 or more 

7 plan amendments in such a way that, as of 

8 the date the class is closed, the value of 

9 such benefits, rights, and features to the 

10 closed class as a whole is substantially 

11 greater than the value as of the first day 

12 of such 5-year period, solely as a result of 

13 such amendments. 

14 ‘‘(E) DETERMINATION OF SUBSTANTIAL

15 INCREASE FOR AGGREGATE TESTING ON BENE16 FITS BASIS.—In applying subparagraph (C)(ii) 

17 for purposes of subparagraph (B)(iii)(IV), a 

18 plan shall be treated as having had a substan19 tial increase in coverage or benefits during the 

20 applicable 5-year period only if, during such pe21 riod— 

22 ‘‘(i) the number of participants bene23 fitting under the plan on the date such pe24 riod ends is more than 50 percent greater 

25 than the number of such participants on 


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1 the first day of the plan year in which such 

2 period began, or 

3 ‘‘(ii) the average benefit provided to 

4 such participants on the date such period 

5 ends is more than 50 percent greater than 

6 the average benefit provided on the first 

7 day of the plan year in which such period 

8 began. 

9 ‘‘(F) CERTAIN EMPLOYEES DIS10 REGARDED.—For purposes of subparagraphs 

11 (D) and (E), any increase in coverage or value 

12 or in coverage or benefits, whichever is applica13 ble, which is attributable to such coverage and 

14 value or coverage and benefits provided to em15 ployees— 

16 ‘‘(i) who became participants as a re17 sult of a merger, acquisition, or similar 

18 event which occurred during the 7-year pe19 riod preceding the date the class is closed, 

20 or 

21 ‘‘(ii) who became participants by rea22 son of a merger of the plan with another 

23 plan which had been in effect for at least 

24 5 years as of the date of the merger, 


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1 shall be disregarded, except that clause (ii) 

2 shall apply for purposes of subparagraph (D) 

3 only if, under the merger, the benefits, rights, 

4 or features under 1 plan are conformed to the 

5 benefits, rights, or features of the other plan 

6 prospectively. 

7 ‘‘(G) RULES RELATING TO AVERAGE BEN8 EFIT.—For purposes of subparagraph (E)— 

9 ‘‘(i) the average benefit provided to 

10 participants under the plan will be treated 

11 as having remained the same between the 

12 2 dates described in subparagraph (E)(ii) 

13 if the benefit formula applicable to such 

14 participants has not changed between such 

15 dates, and 

16 ‘‘(ii) if the benefit formula applicable 

17 to 1 or more participants under the plan 

18 has changed between such 2 dates, then 

19 the average benefit under the plan shall be 

20 considered to have increased by more than 

21 50 percent only if— 

22 ‘‘(I) the total amount determined 

23 under section 430(b)(1)(A)(i) for all 

24 participants benefitting under the 

25 plan for the plan year in which the 5- 


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1 year period described in subparagraph 

2 (E) ends, exceeds 

3 ‘‘(II) the total amount deter4 mined under section 430(b)(1)(A)(i) 

5 for all such participants for such plan 

6 year, by using the benefit formula in 

7 effect for each such participant for 

8 the first plan year in such 5-year pe9 riod, 

10 by more than 50 percent. In the case of a 

11 CSEC plan (as defined in section 414(y)), 

12 the normal cost of the plan (as determined 

13 under section 433(j)(1)(B)) shall be used 

14 in lieu of the amount determined under 

15 section 430(b)(1)(A)(i). 

16 ‘‘(H) TREATMENT AS SINGLE PLAN.—For 

17 purposes of subparagraphs (E) and (G), a plan 

18 described in section 413(c) shall be treated as 

19 a single plan rather than as separate plans 

20 maintained by each participating employer. 

21 ‘‘(I) SPECIAL RULES.—For purposes of 

22 subparagraphs (A)(i) and (B)(iii)(II), the fol23 lowing rules shall apply: 

24 ‘‘(i) In applying section 410(b)(6)(C), 

25 the closing of the class of participants shall 


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1 not be treated as a significant change in 

2 coverage under section 410(b)(6)(C)(i)(II). 

3 ‘‘(ii) Two or more plans shall not fail 

4 to be eligible to be aggregated and treated 

5 as a single plan solely by reason of having 

6 different plan years. 

7 ‘‘(iii) Changes in the employee popu8 lation shall be disregarded to the extent at9 tributable to individuals who become em10 ployees or cease to be employees, after the 

11 date the class is closed, by reason of a 

12 merger, acquisition, divestiture, or similar 

13 event. 

14 ‘‘(iv) Aggregation and all other testing 

15 methodologies otherwise applicable under 

16 subsection (a)(4) and section 410(b) may 

17 be taken into account. 

18 The rule of clause (ii) shall also apply for pur19 poses of determining whether plans to which 

20 subparagraph (B)(i) applies may be aggregated 

21 and treated as 1 plan for purposes of deter22 mining whether such plans meet the require23 ments of subsection (a)(4) and section 410(b). 

24 ‘‘(J) SPUN-OFF PLANS.—For purposes of 

25 this paragraph, if a portion of a defined benefit 


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1 plan described in subparagraph (A) or (B)(iii) 

2 is spun off to another employer and the spun3 off plan continues to satisfy the requirements 

4 of— 

5 ‘‘(i) subparagraph (A)(i) or 

6 (B)(iii)(II), whichever is applicable, if the 

7 original plan was still within the 3-year pe8 riod described in such subparagraph at the 

9 time of the spin off, and 

10 ‘‘(ii) subparagraph (A)(ii) or 

11 (B)(iii)(III), whichever is applicable, 

12 the treatment under subparagraph (A) or (B) 

13 of the spun-off plan shall continue with respect 

14 to such other employer. 

15 ‘‘(2) TESTING OF DEFINED CONTRIBUTION

16 PLANS.— 

17 ‘‘(A) TESTING ON A BENEFITS BASIS.—A 

18 defined contribution plan shall be permitted to 

19 be tested on a benefits basis if— 

20 ‘‘(i) such defined contribution plan 

21 provides make-whole contributions to a 

22 closed class of participants whose accruals 

23 under a defined benefit plan have been re24 duced or eliminated, 


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1 ‘‘(ii) for the plan year of the defined 

2 contribution plan as of which the class eli3 gible to receive such make-whole contribu4 tions closes and the 2 succeeding plan 

5 years, such closed class of participants sat6 isfies the requirements of section 

7 410(b)(2)(A)(i) (determined by applying 

8 the rules of paragraph (1)(I)), 

9 ‘‘(iii) after the date as of which the 

10 class was closed, any plan amendment to 

11 the defined contribution plan which modi12 fies the closed class or the allocations, ben13 efits, rights, and features provided to such 

14 closed class does not discriminate signifi15 cantly in favor of highly compensated em16 ployees (determined as of the effective date 

17 of the amendment), and 

18 ‘‘(iv) the class was closed before April 

19 5, 2017, or the defined benefit plan under 

20 clause (i) is described in paragraph (1)(C) 

21 (as applied for purposes of paragraph 

22 (1)(B)(iii)(IV)). 

23 ‘‘(B) AGGREGATION WITH PLANS INCLUD24 ING MATCHING CONTRIBUTIONS.— 


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1 ‘‘(i) IN GENERAL.—With respect to 1 

2 or more defined contribution plans de3 scribed in subparagraph (A), for purposes 

4 of determining compliance with subsection 

5 (a)(4) and section 410(b), the portion of 

6 such plans which provides make-whole con7 tributions or other nonelective contribu8 tions may be aggregated and tested on a 

9 benefits basis with the portion of 1 or 

10 more other defined contribution plans 

11 which— 

12 ‘‘(I) provides matching contribu13 tions (as defined in subsection 

14 (m)(4)(A)), 

15 ‘‘(II) provides annuity contracts 

16 described in section 403(b) which are 

17 purchased with matching contribu18 tions or nonelective contributions, or 

19 ‘‘(III) consists of an employee 

20 stock ownership plan (within the 

21 meaning of section 4975(e)(7)) or a 

22 tax credit employee stock ownership 

23 plan (within the meaning of section 

24 409(a)). 


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1 ‘‘(ii) SPECIAL RULES FOR MATCHING

2 CONTRIBUTIONS.—Rules similar to the 

3 rules of paragraph (1)(B)(ii) shall apply 

4 for purposes of clause (i). 

5 ‘‘(C) SPECIAL RULES FOR TESTING DE6 FINED CONTRIBUTION PLAN FEATURES PRO7 VIDING MATCHING CONTRIBUTIONS TO CERTAIN

8 OLDER, LONGER SERVICE PARTICIPANTS.—In 

9 the case of a defined contribution plan which 

10 provides benefits, rights, or features to a closed 

11 class of participants whose accruals under a de12 fined benefit plan have been reduced or elimi13 nated, the plan shall not fail to satisfy the re14 quirements of subsection (a)(4) solely by reason 

15 of the composition of the closed class or the 

16 benefits, rights, or features provided to such 

17 closed class if the defined contribution plan and 

18 defined benefit plan otherwise meet the require19 ments of subparagraph (A) but for the fact that 

20 the make-whole contributions under the defined 

21 contribution plan are made in whole or in part 

22 through matching contributions. 

23 ‘‘(D) SPUN-OFF PLANS.—For purposes of 

24 this paragraph, if a portion of a defined con25 tribution plan described in subparagraph (A) or 


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1 (C) is spun off to another employer, the treat2 ment under subparagraph (A) or (C) of the 

3 spun-off plan shall continue with respect to the 

4 other employer if such plan continues to comply 

5 with the requirements of clauses (ii) (if the 

6 original plan was still within the 3-year period 

7 described in such clause at the time of the spin 

8 off) and (iii) of subparagraph (A), as deter9 mined for purposes of subparagraph (A) or (C), 

10 whichever is applicable. 

11 ‘‘(3) DEFINITIONS.—For purposes of this sub12 section— 

13 ‘‘(A) MAKE-WHOLE CONTRIBUTIONS.—Ex14 cept as otherwise provided in paragraph (2)(C), 

15 the term ‘make-whole contributions’ means non16 elective allocations for each employee in the 

17 class which are reasonably calculated, in a con18 sistent manner, to replace some or all of the re19 tirement benefits which the employee would 

20 have received under the defined benefit plan 

21 and any other plan or qualified cash or deferred 

22 arrangement under subsection (k)(2) if no 

23 change had been made to such defined benefit 

24 plan and such other plan or arrangement. For 

25 purposes of the preceding sentence, consistency 


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1 shall not be required with respect to employees 

2 who were subject to different benefit formulas 

3 under the defined benefit plan. 

4 ‘‘(B) REFERENCES TO CLOSED CLASS OF

5 PARTICIPANTS.—References to a closed class of 

6 participants and similar references to a closed 

7 class shall include arrangements under which 1 

8 or more classes of participants are closed, ex9 cept that 1 or more classes of participants 

10 closed on different dates shall not be aggre11 gated for purposes of determining the date any 

12 such class was closed. 

13 ‘‘(C) HIGHLY COMPENSATED EMPLOYEE.— 

14 The term ‘highly compensated employee’ has 

15 the meaning given such term in section 414(q). 

16 ‘‘(D) DISCRIMINATORY AMENDMENTS.—A 

17 plan amendment shall be treated as discrimi18 nating significantly in favor of highly com19 pensated employees only if such amendment, if 

20 adopted before the enactment of this sub21 section, would have been treated as violating 

22 subsection (a)(4).’’. 

23 (b) PARTICIPATION REQUIREMENTS.—Paragraph 

24 (26) of section 401(a) of the Internal Revenue Code of 


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1 1986 is amended by adding at the end the following new 

2 subparagraph: 

3 ‘‘(I) PROTECTED PARTICIPANTS.— 

4 ‘‘(i) IN GENERAL.—A plan shall be 

5 deemed to satisfy the requirements of sub6 paragraph (A) if— 

7 ‘‘(I) the plan is amended— 

8 ‘‘(aa) to cease all benefit ac9 cruals, or 

10 ‘‘(bb) to provide future ben11 efit accruals only to a closed 

12 class of participants, 

13 ‘‘(II) the plan satisfies subpara14 graph (A) (without regard to this sub15 paragraph) as of the effective date of 

16 the amendment, and 

17 ‘‘(III) the amendment was adopt18 ed before April 5, 2017, or the plan is 

19 described in clause (ii). 

20 ‘‘(ii) PLANS DESCRIBED.—A plan is 

21 described in this clause if the plan would 

22 be described in subsection (o)(1)(C), as ap23 plied for purposes of subsection 

24 (o)(1)(B)(iii)(IV) and by treating the effec25 tive date of the amendment as the date the 


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1 class was closed for purposes of subsection 

2 (o)(1)(C). 

3 ‘‘(iii) SPECIAL RULES.—For purposes 

4 of clause (i)(II), in applying section 

5 410(b)(6)(C), the amendments described in 

6 clause (i) shall not be treated as a signifi7 cant change in coverage under section 

8 410(b)(6)(C)(i)(II). 

9 ‘‘(iv) SPUN-OFF PLANS.—For pur10 poses of this subparagraph, if a portion of 

11 a plan described in clause (i) is spun off to 

12 another employer, the treatment under 

13 clause (i) of the spun-off plan shall con14 tinue with respect to the other employer.’’. 

15 (c) EFFECTIVE DATE.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the amendments made by this section 

18 shall take effect on the date of the enactment of this 

19 Act, without regard to whether any plan modifica20 tions referred to in such amendments are adopted or 

21 effective before, on, or after such date of enactment. 

22 (2) SPECIAL RULES.— 

23 (A) ELECTION OF EARLIER APPLICA24 TION.—At the election of the plan sponsor, the 


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1 amendments made by this section shall apply to 

2 plan years beginning after December 31, 2013. 

3 (B) CLOSED CLASSES OF PARTICIPANTS.— 

4 For purposes of paragraphs (1)(A)(iii), 

5 (1)(B)(iii)(IV), and (2)(A)(iv) of section 401(o) 

6 of the Internal Revenue Code of 1986 (as added 

7 by this section), a closed class of participants 

8 shall be treated as being closed before April 5, 

9 2017, if the plan sponsor’s intention to create 

10 such closed class is reflected in formal written 

11 documents and communicated to participants 

12 before such date. 

13 (C) CERTAIN POST-ENACTMENT PLAN

14 AMENDMENTS.—A plan shall not be treated as 

15 failing to be eligible for the application of sec16 tion 401(o)(1)(A), 401(o)(1)(B)(iii), or 

17 401(a)(26) of such Code (as added by this sec18 tion) to such plan solely because in the case 

19 of— 

20 (i) such section 401(o)(1)(A), the plan 

21 was amended before the date of the enact22 ment of this Act to eliminate 1 or more 

23 benefits, rights, or features, and is further 

24 amended after such date of enactment to 

25 provide such previously eliminated benefits, 


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1 rights, or features to a closed class of par2 ticipants, or 

3 (ii) such section 401(o)(1)(B)(iii) or 

4 section 401(a)(26), the plan was amended 

5 before the date of the enactment of this 

6 Act to cease all benefit accruals, and is 

7 further amended after such date of enact8 ment to provide benefit accruals to a closed 

9 class of participants. 

10 Any such section shall only apply if the plan 

11 otherwise meets the requirements of such sec12 tion and in applying such section, the date the 

13 class of participants is closed shall be the effec14 tive date of the later amendment. 

Æ 


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