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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1628 Introduced in House (IH)]

113th CONGRESS
  1st Session
                                H. R. 1628

To amend the Internal Revenue Code of 1986 to provide for reporting and 
disclosure by State and local public employee retirement pension plans.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 18, 2013

Mr. Nunes (for himself, Mr. Ryan of Wisconsin, and Mr. Issa) introduced 
  the following bill; which was referred to the Committee on Ways and 
                                 Means

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to provide for reporting and 
disclosure by State and local public employee retirement pension plans.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Public Employee Pension Transparency 
Act''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Pursuant to clauses 1 and 3 of section 8 of article I 
        of the Constitution of the United States, the Congress has the 
        authority to condition the continuation of certain specified 
        Federal tax benefits upon State or local government employee 
        pension benefit plans on the provision of meaningful disclosure 
        under section 4980J of the Internal Revenue Code of 1986, as 
        added by this Act.
            (2) State and local government employee pension benefit 
        plans have promised pension benefits to approximately 
        20,000,000 Americans who are active employees of these 
        entities. An additional 7,000,000 retirees and their dependents 
        currently receive benefits from State or local government 
        employee pension benefit plans. The interests of participants 
        in many of such plans are in the nature of property rights 
        under State law.
            (3) State and local government employee pension benefit 
        plans are substantially facilitated by the favorable tax 
        treatment of participants and beneficiaries, investment 
        earnings, and employee contributions with respect to such plans 
        provided by the Federal Government under the Internal Revenue 
        Code of 1986.
            (4) The investment of State or local government employee 
        pension benefit plan assets, the distribution of benefits under 
        such plans, and other related financial activities are 
        facilitated through the use of instrumentalities of, and 
        substantially affect, interstate commerce. These activities, 
        which are interstate in nature and have a substantial impact on 
        the national economy, affect capital formation, regional growth 
        and decline, the national markets for insurance, and the 
        markets for securities and the trading of securities of State 
        and local governments.
            (5) The financial status of State or local government 
        employee pension benefit plans also has a direct impact on the 
        national markets for insurance and trading of securities of 
        State and local governments.
            (6) State or local government employee pension benefit 
        plans additionally have a substantial impact on interstate 
        commerce as a consequence of the interstate movement of 
        participants.
            (7) State or local government employee pension benefit 
        plans are becoming a large financial burden on certain State 
        and local governments and have already resulted in tax 
        increases and the reduction of services.
            (8) In fact, a recent study published in the Journal of 
        Economic Perspectives found that the present value of the 
        already promised pension liabilities of the 50 States amount to 
        $5,170,000,000,000 and that these pension plans are unfunded by 
        $3,230,000,000,000. Another study determined that the total 
        unfunded liability for all municipal plans in the United States 
        is $574,000,000,000.
            (9) Some economists and observers have stated that the 
        extent to which State or local government employee pension 
        benefit plans are underfunded is obscured by governmental 
        accounting rules and practices, particularly as they relate to 
        the valuation of plan assets and liabilities. This results in a 
        misstatement of the value of plan assets and an understatement 
        of plan liabilities, a situation that poses a significant 
        threat to the soundness of State and local budgets.
            (10) There currently is a lack of meaningful disclosure 
        regarding the value of State or local government employee 
        pension benefit plan assets and liabilities. This lack of 
        meaningful disclosure poses a direct and serious threat to the 
        financial stability of such plans and their sponsoring 
        governments, impairs the ability of State and local government 
        taxpayers and officials to understand the financial obligations 
        of their government, and reduces the likelihood that State and 
        local government processes will be effective in assuring the 
        prudent management of their plans. The status quo also 
        constitutes a serious threat to the future economic health of 
        the Nation and places an undue burden upon State and local 
        government taxpayers, who will be called upon to fully fund 
        existing, and future, pension promises.
            (11) State or local government employee pension benefit 
        plans affect the national public interest and meaningful 
        disclosure of the value of their assets and liabilities is 
        necessary and desirable in order to adequately protect plan 
        participants and their beneficiaries and the general public. 
        Meaningful disclosure would also further efforts to provide for 
        the general welfare and the free flow of commerce.

SEC. 3. REPORTING OF INFORMATION WITH RESPECT TO STATE OR LOCAL 
              GOVERNMENT EMPLOYEE PENSION BENEFIT PLANS TREATED AS A 
              TAX EXEMPTION, ETC., REQUIREMENT FOR STATE AND LOCAL 
              BONDS.

    (a) In General.--Subpart B of part IV of subchapter B of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 149A. REPORTING WITH RESPECT TO STATE OR LOCAL GOVERNMENT 
              EMPLOYEE PENSION BENEFIT PLANS.

    ``(a) In General.--In the case of a failure to satisfy any 
requirement of subsection (a) or (b) of section 4980J with respect to 
any plan maintained with respect to employees of one or more States or 
political subdivisions of one or more States, no specified Federal tax 
benefit shall be allowed or made with respect to any specified bond 
issued by any such State or political subdivision (or by any bonding 
authority acting on behalf, or for the benefit, of such State or 
political subdivision) during the noncompliance period.
    ``(b) Noncompliance Period.--For purposes of this section, the term 
`noncompliance period' means, with respect to any State or political 
subdivision in connection with any failure described in subsection (a), 
the period beginning on the date that the Secretary notifies such State 
or political subdivision of such failure and ending on the date that 
such failure is cured (as determined by the Secretary).
    ``(c) Specified Bond.--For purposes of this section, the term 
`specified bond' means--
            ``(1) any State or local bond within the meaning of section 
        103,
            ``(2) any qualified tax credit bond within the meaning of 
        section 54A, and
            ``(3) any build America bond within the meaning of section 
        54AA.
    ``(d) Specified Federal Tax Benefit.--For purposes of this section, 
the term `specified Federal tax benefit' means--
            ``(1) any exemption from gross income allowed under section 
        103 (relating to interest on State and local bonds),
            ``(2) any credit allowed under section 54A (relating to 
        credit to holders of qualified tax credit bonds),
            ``(3) any credit allowed under section 54AA (relating to 
        build America bonds), and
            ``(4) any credit or payment allowed or made under section 
        6431 (relating to credit for qualified bonds allowed to 
        issuer).''.
    (b) Reporting Requirements.--Chapter 43 of such Code is amended by 
adding at the end the following new section:

``SEC. 4980J. FAILURE OF STATE OR LOCAL GOVERNMENT EMPLOYEE PENSION 
              BENEFIT PLANS TO MEET REPORTING REQUIREMENTS.

    ``(a) Annual Report.--For purposes of section 149A, the 
requirements of this subsection are as follows:
            ``(1) In general.--The plan sponsor of a State or local 
        government employee pension benefit plan shall file with the 
        Secretary, in such form and manner as shall be prescribed by 
        the Secretary, a report for each plan year beginning on or 
        after January 1, 2014, setting forth the following information 
        with respect to the plan, as determined by the plan sponsor as 
        of the end of such plan year:
                    ``(A) A schedule of funding status, which shall 
                include a statement as to the current liability of the 
                plan, the amount of plan assets available to meet that 
                liability, the amount of the net unfunded liability (if 
                any), and the funding percentage of the plan.
                    ``(B) A schedule of contributions by the plan 
                sponsor for the plan year, indicating which are or are 
                not taken into account under subparagraph (A).
                    ``(C) Alternative projections which shall be 
                specified in regulations of the Secretary for each of 
                the next 60 plan years following the plan year of the 
                cash flows associated with the current liability, 
                together with a statement of the assumptions used in 
                connection with such projections. The Secretary shall 
                specify in such regulations the projection assumptions 
                to be used as necessary to achieve comparability across 
                plans.
                    ``(D) A statement of the actuarial assumptions used 
                for the plan year, including the rate of return on 
                investment of plan assets and assumptions as to such 
                other matters as the Secretary may prescribe by 
                regulation.
                    ``(E) A statement of the number of participants who 
                are each of the following--
                            ``(i) those who are retired or separated 
                        from service and are receiving benefits,
                            ``(ii) those who are retired or separated 
                        and are entitled to future benefits, and
                            ``(iii) those who are active under the 
                        plan.
                    ``(F) A statement of the plan's investment returns, 
                including the rate of return, for the plan year and the 
                5 preceding plan years.
                    ``(G) A statement of the degree to which, and 
                manner in which, the plan sponsor expects to eliminate 
                any unfunded current liability that may exist for the 
                plan year and the extent to which the plan sponsor has 
                followed the plan's funding policy for each of the 
                preceding 5 plan years. The Secretary shall prescribe 
                by regulation the specific criteria to be used for 
                meeting the requirements of this paragraph.
                    ``(H) A statement of the amount of pension 
                obligation bonds outstanding.
                    ``(I) A statement of the current cost of the plan 
                for the plan year.
            ``(2) Timing of report.--The plan sponsor of a State or 
        local government employee pension benefit plan shall make the 
        filing required under paragraph (1) for each plan year not 
        later than 210 days after the end of such plan year (or within 
        such time as may be required by regulations prescribed by the 
        Secretary in order to reduce duplicative filing).
    ``(b) Additional Reporting Requirements.--For purposes of section 
149A, the requirements of this subsection are as follows:
            ``(1) Supplementary reports.--In any case in which, in 
        determining the information filed in the annual report for a 
        plan year under subsection (a)--
                    ``(A) the value of plan assets is determined using 
                a standard other than fair market value, or
                    ``(B) the interest rate or rates used to determine 
                the value of liabilities or as the discount value for 
                liabilities are not the interest rates described in 
                paragraph (3), the plan sponsor shall include in the 
                annual report filed for such plan year pursuant to 
                subsection (a) the supplementary report for such plan 
                year described in paragraph (2) of this subsection.
            ``(2) Use of prescribed valuation method and interest 
        rates.--A supplementary report for a plan year filed for a plan 
        year pursuant to this subsection shall include the information 
        specified as required in the annual report under subparagraphs 
        (A), (F), (G) and (I) of subsection (a)(1), determined as of 
        the end of such plan year by valuing plan assets at fair market 
        value and by using the interest rates described in paragraph 
        (3) to value liabilities and as the discount value for 
        liabilities.
            ``(3) Interest rates based on u.s. treasury obligation 
        yield curve rate.--
                    ``(A) In general.--The interest rates described in 
                this subsection are, with respect to any day, the rates 
                of interest which shall be determined by the Secretary 
                for such day on the basis of the U.S. Treasury 
                obligation yield curve for such day.
                    ``(B) U.S. treasury obligation yield curve.--For 
                purposes of this subsection, the term `U.S. Treasury 
                obligation yield curve' means, with respect to any day, 
                a yield curve which shall be prescribed by the 
                Secretary for such day on interest-bearing obligations 
                of the United States.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) State or local government employee pension benefit 
        plan.--The terms `State or local government employee pension 
        benefit plan' and `plan' mean any plan, fund, or program, other 
        than a defined contribution plan (within the meaning of section 
        414(i)), which was heretofore or is hereafter established or 
        maintained, in whole or in part, by a State, a political 
        subdivision of a State, or any agency or instrumentality of a 
        State or political subdivision of a State, to the extent that 
        by its express terms or as a result of surrounding 
        circumstances such plan, fund, or program--
                    ``(A) provides retirement income to employees, or
                    ``(B) results in a deferral of income by employees 
                for periods extending to the termination of covered 
                employment or beyond, regardless of the method of 
                calculating the contributions made to the plan, the 
                method of calculating the benefits under the plan, or 
                the method of distributing benefits from the plan.
            ``(2) Funding percentage.--The term `funding percentage' 
        for a plan year means the ratio (expressed as a percentage) 
        which--
                    ``(A) the value of plan assets as of the end of the 
                plan year bears to
                    ``(B) the current liability of the plan for the 
                plan year.
            ``(3) Current liability.--The term `current liability' of a 
        plan for a plan year means the present value of all benefits 
        accrued or earned under the plan as of the end of the plan 
        year.
            ``(4) Present value.--
                    ``(A) In general.--The present value of an accrued 
                benefit shall be determined by discounting its future 
                cash flows in accordance with subsection (b)(3). The 
                present value of all benefits accrued for a participant 
                shall be calculated as the sum of the present value of 
                the accrued benefit for each exit event multiplied by 
                the probability of the associated exit event.
                    ``(B) Exit event.--An `exit event' occurs when the 
                employment of a plan participant terminates. For each 
                currently employed plan participant as of the 
                measurement date, there are one or more potential 
                future exit events. Each exit event is associated with 
                a termination date, a cause of termination (e.g., 
                retirement, death, disability, quit, etc.), a 
                contractual benefit, and a probability that the 
                participant will exit employment via the particular 
                event.
            ``(5) Accrued benefit.--
                    ``(A) In general.--An `accrued benefit' is 
                determined for each exit event as the projected benefit 
                multiplied by service earned as of the measurement date 
                divided by service projected to be earned by the event 
                date. For participants retired or separated from 
                service as of the measurement date, the accrued benefit 
                equals the projected benefit.
                    ``(B) Projected benefit.--As of the measurement 
                date, a `projected benefit' (consisting of future cash 
                flows) is calculated for each possible exit event using 
                service projected to be earned to the event date and 
                salary as of the measurement date. Such projected 
                benefit shall reflect any cost-of-living adjustments 
                payable in the future based on the law in effect as of 
                the measurement date.
            ``(6) Measurement date.--The term `measurement date' means 
        the date as of which the value of the pension obligation is 
        determined (sometimes referred to as the `valuation date').
            ``(7) Current cost.--The term `current cost' of a plan for 
        a plan year means the present value as of the end of the plan 
        year of all benefits accrued or earned under the plan during 
        the plan year.
            ``(8) Plan sponsor.--The term `plan sponsor' means, in 
        connection with a State or local government employee pension 
        benefit plan, the State, political subdivision of a State, or 
        agency or instrumentality of a State or a political subdivision 
        of a State which establishes or maintains the plan.
            ``(9) Participant.--
                    ``(A) In general.--The term `participant' means, in 
                connection with a State or local government employee 
                pension benefit plan, an individual--
                            ``(i) who is an employee or former employee 
                        of a State, political subdivision of a State, 
                        or agency or instrumentality of a State or a 
                        political subdivision of a State which is the 
                        plan sponsor of such plan, and
                            ``(ii) who is or may become eligible to 
                        receive a benefit of any type from such plan or 
                        whose beneficiaries may be eligible to receive 
                        any such benefit.
                    ``(B) Beneficiary.--The term `beneficiary' means a 
                person designated by a participant, or by the terms of 
                the plan, who is or may become entitled to a benefit 
                thereunder.
            ``(10) Plan year.--The term `plan year' means, in 
        connection with a plan, the calendar or fiscal year on which 
        the records of the plan are kept.
            ``(11) State.--The term `State' includes any State of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the United States Virgin Islands, American Samoa, 
        Guam, and the Commonwealth of the Northern Mariana Islands.
            ``(12) Fair market value.--The term `fair market value' has 
        the meaning of such term under section 430(g)(3)(A) (without 
        regard to section 430(g)(3)(B)).
    ``(d) Model Reporting Statement.--The Secretary shall develop model 
reporting statements for purposes of subsections (a) and (b). Plan 
sponsors of State or local government employee pension plans may elect, 
in such form and manner as shall be prescribed by the Secretary, to 
utilize the applicable model reporting statement for purposes of 
complying with requirements of such subsections.
    ``(e) Transparency of Information Filed.--The Secretary shall 
create and maintain a public Web site, with searchable capabilities, 
for purposes of posting the information received by the Secretary 
pursuant to subsections (a) and (b). Any such information received by 
the Secretary (including any updates to such information received by 
the Secretary) shall be posted on the Web site not later than 60 days 
after receipt and shall not be treated as return information for 
purposes of this title.''.
    (c) Clerical Amendments.--
            (1) The table of sections for subpart B of part IV of 
        subchapter B of chapter 1 of such Code is amended by adding at 
        the end the following new item:

``Sec. 149A. Reporting with respect to State or local government 
                            employee pension benefit plans.''.
            (2) The table of sections for chapter 43 of such Code is 
        amended by adding at the end the following new item:

``Sec. 4980J. Failure of State or local government employee pension 
                            benefit plans to meet reporting 
                            requirements.''.

SEC. 4. GENERAL PROVISIONS AND RULES OF CONSTRUCTION.

    (a) Limitations on Federal Responsibilities Relating to Plan 
Obligations and Liabilities.--The United States shall not be liable for 
any obligation related to any current or future shortfall in any State 
or local government employee pension plan. Nothing in this Act (or any 
amendment made by this Act) or any other provision of law shall be 
construed to provide Federal Government funds to diminish or meet any 
current or future shortfall in, or obligation of, any State or local 
government employee pension plan. The preceding sentence shall also 
apply to the Federal Reserve.
    (b) No Federal Funding Standards.--Nothing in this Act (or any 
amendment made by this Act) shall be construed to alter existing 
funding standards for State or local government employee pension plans 
or to require Federal funding standards for such plans.
    (c) Definitions.--Terms used in this section which are also used in 
section 4980J of the Internal Revenue Code of 1986 shall have the same 
meaning as when used in such section.
                                 <all>
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