H. R. 3108

One Hundred Eighth Congress

of the

United States of America

AT THE SECOND SESSION

Begun and held at the City of Washington on Tuesday,

the twentieth day of January, two thousand and four

An Act

To amend the Employee Retirement Income Security Act of 1974 and the Internal

Revenue Code of 1986 to temporarily replace the 30-year Treasury rate with

a rate based on long-term corporate bonds for certain pension plan funding

requirements and other provisions, and for other purposes.

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 ‘‘Pension Funding Equity Act

of 2004’’.

TITLE I—PENSION FUNDING

SEC. 101. TEMPORARY REPLACEMENT OF 30-YEAR TREASURY RATE.

(a) EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) DETERMINATION OF PERMISSIBLE RANGE.— (A) IN GENERAL.—Clause (ii) of section 302(b)(5)(B)

of the Employee Retirement Income Security Act of 1974

is amended by redesignating subclause (II) as subclause

(III) and by inserting after subclause (I) the following new

subclause:

‘‘(II) SPECIAL RULE FOR YEARS 2004 AND 2005.— In the case of plan years beginning after December

31, 2003, and before January 1, 2006, the term ‘permissible range’ means a rate of interest which is not

above, and not more than 10 percent below, the

weighted average of the rates of interest on amounts

invested conservatively in long-term investment grade

corporate bonds during the 4-year period ending on

the last day before the beginning of the plan year.

Such rates shall be determined by the Secretary of

the Treasury on the basis of 2 or more indices that

are selected periodically by the Secretary of the

Treasury and that are in the top 3 quality levels available. The Secretary of the Treasury shall make the

permissible range, and the indices and methodology

used to determine the average rate, publicly available.’’.

(B) SECRETARIAL AUTHORITY.—Subclause (III) of section

302(b)(5)(B)(ii) of such Act, as redesignated by subparagraph (A), is amended—

(i) by inserting ‘‘or (II)’’ after ‘‘subclause (I)’’ the

first place it appears, and
H. R. 3108—2

(ii) by striking ‘‘subclause (I)’’ the second place

it appears and inserting ‘‘such subclause’’.

(C) CONFORMING AMENDMENT.—Subclause (I) of section

302(b)(5)(B)(ii) of such Act is amended by inserting ‘‘or

(III)’’ after ‘‘subclause (II)’’.

(2) DETERMINATION OF CURRENT LIABILITY.—Clause (i) of

section 302(d)(7)(C) of such Act is amended by adding at the

end the following new subclause:

‘‘(IV) SPECIAL RULE FOR 2004 AND 2005.—For

plan years beginning in 2004 or 2005, notwithstanding subclause (I), the rate of interest used

to determine current liability under this subsection

shall be the rate of interest under subsection

(b)(5).’’.

(3) CONFORMING AMENDMENT.—Paragraph (7) of section

302(e) of such Act is amended to read as follows:

‘‘(7) SPECIAL RULE FOR 2002.—In any case in which the

interest rate used to determine current liability is determined

under subsection (d)(7)(C)(i)(III), for purposes of applying paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002,

the current liability for the preceding plan year shall be redetermined using 120 percent as the specified percentage determined

under subsection (d)(7)(C)(i)(II).’’.

(4) PBGC.—Clause (iii) of section 4006(a)(3)(E) of such

Act is amended by adding at the end the following new subclause:

‘‘(V) In the case of plan years beginning after December

31, 2003, and before January 1, 2006, the annual yield taken

into account under subclause (II) shall be the annual rate

of interest determined by the Secretary of the Treasury on

amounts invested conservatively in long-term investment grade

corporate bonds for the month preceding the month in which

the plan year begins. For purposes of the preceding sentence,

the Secretary of the Treasury shall determine such rate of

interest on the basis of 2 or more indices that are selected

periodically by the Secretary of the Treasury and that are

in the top 3 quality levels available. The Secretary of the

Treasury shall make the permissible range, and the indices

and methodology used to determine the rate, publicly available.’’.

(b) INTERNAL REVENUE CODE OF 1986.—

(1) DETERMINATION OF PERMISSIBLE RANGE.—

(A) IN GENERAL.—Clause (ii) of section 412(b)(5)(B)

of the Internal Revenue Code of 1986 is amended by

redesignating subclause (II) as subclause (III) and by

inserting after subclause (I) the following new subclause:

‘‘(II) SPECIAL RULE FOR YEARS 2004 AND 2005.—

In the case of plan years beginning after December

31, 2003, and before January 1, 2006, the term

‘permissible range’ means a rate of interest which

is not above, and not more than 10 percent below,

the weighted average of the rates of interest on

amounts invested conservatively in long-term

investment grade corporate bonds during the 4-

year period ending on the last day before the beginning of the plan year. Such rates shall be determined by the Secretary on the basis of 2 or more
H. R. 3108—3

indices that are selected periodically by the Secretary and that are in the top 3 quality levels

available. The Secretary shall make the permissible range, and the indices and methodology used

to determine the average rate, publicly available.’’.

(B) SECRETARIAL AUTHORITY.—Subclause (III) of section

412(b)(5)(B)(ii) of such Code, as redesignated by subparagraph (A), is amended—

(i) by inserting ‘‘or (II)’’ after ‘‘subclause (I)’’ the

first place it appears, and

(ii) by striking ‘‘subclause (I)’’ the second place

it appears and inserting ‘‘such subclause’’.

(C) CONFORMING AMENDMENT.—Subclause (I) of section

412(b)(5)(B)(ii) of such Code is amended by inserting ‘‘or

(III)’’ after ‘‘subclause (II)’’.

(2) DETERMINATION OF CURRENT LIABILITY.—Clause (i) of

section 412(l)(7)(C) of such Code is amended by adding at

the end the following new subclause:

‘‘(IV) SPECIAL RULE FOR 2004 AND 2005.—For

plan years beginning in 2004 or 2005, notwithstanding subclause (I), the rate of interest used

to determine current liability under this subsection

shall be the rate of interest under subsection

(b)(5).’’.

(3) CONFORMING AMENDMENT.—Paragraph (7) of section

412(m) of such Code is amended to read as follows:

‘‘(7) SPECIAL RULE FOR 2002.—In any case in which the

interest rate used to determine current liability is determined

under subsection (l)(7)(C)(i)(III), for purposes of applying paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002,

the current liability for the preceding plan year shall be redetermined using 120 percent as the specified percentage determined

under subsection (l)(7)(C)(i)(II).’’.

(4) LIMITATION ON CERTAIN ASSUMPTIONS.—Section

415(b)(2)(E)(ii) of such Code is amended by inserting ‘‘, except

that in the case of plan years beginning in 2004 or 2005,

‘5.5 percent’ shall be substituted for ‘5 percent’ in clause (i)’’

before the period at the end.

(5) ELECTION TO DISREGARD MODIFICATION FOR DEDUCTION

PURPOSES.—Section 404(a)(1) of such Code is amended by

adding at the end the following new subparagraph:

‘‘(F) ELECTION TO DISREGARD MODIFIED INTEREST

RATE.—An employer may elect to disregard subsections

(b)(5)(B)(ii)(II) and (l)(7)(C)(i)(IV) of section 412 solely for

purposes of determining the interest rate used in calculating the maximum amount of the deduction allowable

under this paragraph.’’.

(c) PROVISIONS RELATING TO PLAN AMENDMENTS.—

(1) IN GENERAL.—If this subsection applies to any plan

or annuity contract amendment—

(A) such plan or contract shall be treated as being

operated in accordance with the terms of the plan or contract during the period described in paragraph (2)(B)(i),

and

(B) except as provided by the Secretary of the Treasury,

such plan shall not fail to meet the requirements of section

411(d)(6) of the Internal Revenue Code of 1986 and section
H. R. 3108—4

204(g) of the Employee Retirement Income Security Act

of 1974 by reason of such amendment.

(2) AMENDMENTS TO WHICH SECTION APPLIES.—

(A) IN GENERAL.—This subsection shall apply to any

amendment to any plan or annuity contract which is

made—

(i) pursuant to any amendment made by this section, and

(ii) on or before the last day of the first plan

year beginning on or after January 1, 2006.

(B) CONDITIONS.—This subsection shall not apply to

any plan or annuity contract amendment unless—

(i) during the period beginning on the date the

amendment described in subparagraph (A)(i) takes

effect and ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract

amendment is adopted), the plan or contract is operated as if such plan or contract amendment were in

effect; and

(ii) such plan or contract amendment applies retroactively for such period.

(d) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraphs (2)

and (3), the amendments made by this section shall apply

to plan years beginning after December 31, 2003.

(2) LOOKBACK RULES.—For purposes of applying subsections

(d)(9)(B)(ii) and (e)(1) of section 302 of the Employee Retirement

Income Security Act of 1974 and subsections (l)(9)(B)(ii) and

(m)(1) of section 412 of the Internal Revenue Code of 1986

to plan years beginning after December 31, 2003, the amendments made by this section may be applied as if such amendments had been in effect for all prior plan years. The Secretary

of the Treasury may prescribe simplified assumptions which

may be used in applying the amendments made by this section

to such prior plan years.

(3) TRANSITION RULE FOR SECTION 415 LIMITATION.—In the

case of any participant or beneficiary receiving a distribution

after December 31, 2003 and before January 1, 2005, the

amount payable under any form of benefit subject to section

417(e)(3) of the Internal Revenue Code of 1986 and subject

to adjustment under section 415(b)(2)(B) of such Code shall

not, solely by reason of the amendment made by subsection

(b)(4), be less than the amount that would have been so payable

had the amount payable been determined using the applicable

interest rate in effect as of the last day of the last plan year

beginning before January 1, 2004.

SEC. 102. ELECTION OF ALTERNATIVE DEFICIT REDUCTION CONTRIBUTION.

(a) AMENDMENT OF ERISA.—Section 302(d) of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1082(d)) is

amended by adding at the end the following new paragraph:

‘‘(12) ELECTION FOR CERTAIN PLANS.—

‘‘(A) IN GENERAL.—In the case of a defined benefit

plan established and maintained by an applicable employer,

if this subsection did not apply to the plan for the plan
H. R. 3108—5

year beginning in 2000 (determined without regard to paragraph (6)), then, at the election of the employer, the

increased amount under paragraph (1) for any applicable

plan year shall be the greater of—

‘‘(i) 20 percent of the increased amount under paragraph (1) determined without regard to this paragraph,

or

‘‘(ii) the increased amount which would be determined under paragraph (1) if the deficit reduction contribution under paragraph (2) for the applicable plan

year were determined without regard to subparagraphs

(A), (B), and (D) of paragraph (2).

‘‘(B) RESTRICTIONS ON BENEFIT INCREASES.—No amendment which increases the liabilities of the plan by reason

of any increase in benefits, any change in the accrual

of benefits, or any change in the rate at which benefits

become nonforfeitable under the plan shall be adopted

during any applicable plan year, unless—

‘‘(i) the plan’s enrolled actuary certifies (in such

form and manner prescribed by the Secretary of the

Treasury) that the amendment provides for an increase

in annual contributions which will exceed the increase

in annual charges to the funding standard account

attributable to such amendment, or

‘‘(ii) the amendment is required by a collective

bargaining agreement which is in effect on the date

of enactment of this subparagraph.

If a plan is amended during any applicable plan year

in violation of the preceding sentence, any election under

this paragraph shall not apply to any applicable plan year

ending on or after the date on which such amendment

is adopted.

‘‘(C) APPLICABLE EMPLOYER.—For purposes of this paragraph, the term ‘applicable employer’ means an employer

which is—

‘‘(i) a commercial passenger airline,

‘‘(ii) primarily engaged in the production or manufacture of a steel mill product or the processing of

iron ore pellets, or

‘‘(iii) an organization described in section 501(c)(5)

of the Internal Revenue Code of 1986 and which established the plan to which this paragraph applies on

June 30, 1955.

‘‘(D) APPLICABLE PLAN YEAR.—For purposes of this

paragraph—

‘‘(i) IN GENERAL.—The term ‘applicable plan year’

means any plan year beginning after December 27,

2003, and before December 28, 2005, for which the

employer elects the application of this paragraph.

‘‘(ii) LIMITATION ON NUMBER OF YEARS WHICH MAY

BE ELECTED.—An election may not be made under this

paragraph with respect to more than 2 plan years.

‘‘(E) NOTICE REQUIREMENTS FOR PLANS ELECTING

ALTERNATIVE DEFICIT REDUCTION CONTRIBUTIONS.—

‘‘(i) IN GENERAL.—If an employer elects an alternative deficit reduction contribution under this paragraph and section 412(l)(12) of the Internal Revenue
H. R. 3108—6

Code of 1986 for any year, the employer shall provide,

within 30 days of filing the election for such year,

written notice of the election to participants and beneficiaries and to the Pension Benefit Guaranty Corporation.

‘‘(ii) NOTICE TO PARTICIPANTS AND BENEFICIARIES.—

The notice under clause (i) to participants and beneficiaries shall include with respect to any election—

‘‘(I) the due date of the alternative deficit

reduction contribution and the amount by which

such contribution was reduced from the amount

which would have been owed if the election were

not made, and

‘‘(II) a description of the benefits under the

plan which are eligible to be guaranteed by the

Pension Benefit Guaranty Corporation and an

explanation of the limitations on the guarantee

and the circumstances under which such limitations apply, including the maximum guaranteed

monthly benefits which the Pension Benefit Guaranty Corporation would pay if the plan terminated

while underfunded.

‘‘(iii) NOTICE TO PBGC.—The notice under clause

(i) to the Pension Benefit Guaranty Corporation shall

include—

‘‘(I) the information described in clause (ii)(I),

‘‘(II) the number of years it will take to restore

the plan to full funding if the employer only makes

the required contributions, and

‘‘(III) information as to how the amount by

which the plan is underfunded compares with the

capitalization of the employer making the election.

‘‘(F) ELECTION.—An election under this paragraph shall

be made at such time and in such manner as the Secretary

of the Treasury may prescribe.’’.

(b) AMENDMENT OF 1986 CODE.—Section 412(l) of the Internal

Revenue Code of 1986 (relating to applicability of subsection) is

amended by adding at the end the following new paragraph:

‘‘(12) ELECTION FOR CERTAIN PLANS.—

‘‘(A) IN GENERAL.—In the case of a defined benefit

plan established and maintained by an applicable employer,

if this subsection did not apply to the plan for the plan

year beginning in 2000 (determined without regard to paragraph (6)), then, at the election of the employer, the

increased amount under paragraph (1) for any applicable

plan year shall be the greater of—

‘‘(i) 20 percent of the increased amount under paragraph (1) determined without regard to this paragraph,

or

‘‘(ii) the increased amount which would be determined under paragraph (1) if the deficit reduction contribution under paragraph (2) for the applicable plan

year were determined without regard to subparagraphs

(A), (B), and (D) of paragraph (2).

‘‘(B) RESTRICTIONS ON BENEFIT INCREASES.—No amendment which increases the liabilities of the plan by reason

of any increase in benefits, any change in the accrual
H. R. 3108—7

of benefits, or any change in the rate at which benefits

become nonforfeitable under the plan shall be adopted

during any applicable plan year, unless—

‘‘(i) the plan’s enrolled actuary certifies (in such

form and manner prescribed by the Secretary) that

the amendment provides for an increase in annual

contributions which will exceed the increase in annual

charges to the funding standard account attributable

to such amendment, or

‘‘(ii) the amendment is required by a collective

bargaining agreement which is in effect on the date

of enactment of this subparagraph.

If a plan is amended during any applicable plan year

in violation of the preceding sentence, any election under

this paragraph shall not apply to any applicable plan year

ending on or after the date on which such amendment

is adopted.

‘‘(C) APPLICABLE EMPLOYER.—For purposes of this paragraph, the term ‘applicable employer’ means an employer

which is—

‘‘(i) a commercial passenger airline,

‘‘(ii) primarily engaged in the production or manufacture of a steel mill product or the processing of

iron ore pellets, or

‘‘(iii) an organization described in section 501(c)(5)

and which established the plan to which this paragraph

applies on June 30, 1955.

‘‘(D) APPLICABLE PLAN YEAR.—For purposes of this

paragraph—

‘‘(i) IN GENERAL.—The term ‘applicable plan year’

means any plan year beginning after December 27,

2003, and before December 28, 2005, for which the

employer elects the application of this paragraph.

‘‘(ii) LIMITATION ON NUMBER OF YEARS WHICH MAY

BE ELECTED.—An election may not be made under this

paragraph with respect to more than 2 plan years.

‘‘(E) ELECTION.—An election under this paragraph shall

be made at such time and in such manner as the Secretary

may prescribe.’’.

(c) EFFECT OF ELECTION.—An election under section 302(d)(12)

of the Employee Retirement Income Security Act of 1974 or section

412(l)(12) of the Internal Revenue Code of 1986 (as added by this

section) with respect to a plan shall not invalidate any obligation

(pursuant to a collective bargaining agreement in effect on the

date of the election) to provide benefits, to change the accrual

of benefits, or to change the rate at which benefits become nonforfeitable under the plan.

(d) PENALTY FOR FAILING TO PROVIDE NOTICE.—Section

502(c)(3) of the Employee Retirement Income Security Act of 1974

(29 U.S.C. 1132(c)(3)) is amended by inserting ‘‘or who fails to

meet the requirements of section 302(d)(12)(E) with respect to any

person’’ after ‘‘101(e)(2) with respect to any person’’.

SEC. 103. MULTIEMPLOYER PLAN FUNDING NOTICES.

(a) IN GENERAL.—Section 101 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1021) is amended by

inserting after subsection (e) the following new subsection:
H. R. 3108—8

‘‘(f) MULTIEMPLOYER DEFINED BENEFIT PLAN FUNDING

NOTICES.—

‘‘(1) IN GENERAL.—The administrator of a defined benefit

plan which is a multiemployer plan shall for each plan year

provide a plan funding notice to each plan participant and

beneficiary, to each labor organization representing such

participants or beneficiaries, to each employer that has an

obligation to contribute under the plan, and to the Pension

Benefit Guaranty Corporation.

‘‘(2) INFORMATION CONTAINED IN NOTICES.—

‘‘(A) IDENTIFYING INFORMATION.—Each notice required

under paragraph (1) shall contain identifying information,

including the name of the plan, the address and phone

number of the plan administrator and the plan’s principal

administrative officer, each plan sponsor’s employer identification number, and the plan number of the plan.

‘‘(B) SPECIFIC INFORMATION.—A plan funding notice

under paragraph (1) shall include—

‘‘(i) a statement as to whether the plan’s funded

current liability percentage (as defined in section

302(d)(8)(B)) for the plan year to which the notice

relates is at least 100 percent (and, if not, the actual

percentage);

‘‘(ii) a statement of the value of the plan’s assets,

the amount of benefit payments, and the ratio of the

assets to the payments for the plan year to which

the notice relates;

‘‘(iii) a summary of the rules governing insolvent

multiemployer plans, including the limitations on benefit payments and any potential benefit reductions and

suspensions (and the potential effects of such limitations, reductions, and suspensions on the plan); and

‘‘(iv) a general description of the benefits under

the plan which are eligible to be guaranteed by the

Pension Benefit Guaranty Corporation, along with an

explanation of the limitations on the guarantee and

the circumstances under which such limitations apply.

‘‘(C) OTHER INFORMATION.—Each notice under paragraph (1) shall include any additional information which

the plan administrator elects to include to the extent not

inconsistent with regulations prescribed by the Secretary.

‘‘(3) TIME FOR PROVIDING NOTICE.—Any notice under paragraph (1) shall be provided no later than two months after

the deadline (including extensions) for filing the annual report

for the plan year to which the notice relates.

‘‘(4) FORM AND MANNER.—Any notice under paragraph (1)—

‘‘(A) shall be provided in a form and manner prescribed

in regulations of the Secretary,

‘‘(B) shall be written in a manner so as to be understood

by the average plan participant, and

‘‘(C) may be provided in written, electronic, or other

appropriate form to the extent such form is reasonably

accessible to persons to whom the notice is required to

be provided.’’.

(b) PENALTIES.—Section 502(c)(1) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1132(c)(1)) is amended
H. R. 3108—9

by striking ‘‘or section 101(e)(1)’’ and inserting ‘‘, section 101(e)(1),

or section 101(f)’’.

(c) REGULATIONS AND MODEL NOTICE.—The Secretary of Labor

shall, not later than 1 year after the date of the enactment of

this Act, issue regulations (including a model notice) necessary

to implement the amendments made by this section.

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

shall apply to plan years beginning after December 31, 2004.

SEC. 104. ELECTION FOR DEFERRAL OF CHARGE FOR PORTION OF

NET EXPERIENCE LOSS.

(a) EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

(1) IN GENERAL.—Section 302(b)(7) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1082(b)(7)) is

amended by adding at the end the following new subparagraph:

‘‘(F) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION

OF NET EXPERIENCE LOSS.—

‘‘(i) IN GENERAL.—With respect to the net experience loss of an eligible multiemployer plan for the

first plan year beginning after December 31, 2001,

the plan sponsor may elect to defer up to 80 percent

of the amount otherwise required to be charged under

paragraph (2)(B)(iv) for any plan year beginning after

June 30, 2003, and before July 1, 2005, to any plan

year selected by the plan from either of the 2 immediately succeeding plan years.

‘‘(ii) INTEREST.—For the plan year to which a

charge is deferred pursuant to an election under clause

(i), the funding standard account shall be charged with

interest on the deferred charge for the period of

deferral at the rate determined under section 304(a)

for multiemployer plans.

‘‘(iii) RESTRICTIONS ON BENEFIT INCREASES.—No

amendment which increases the liabilities of the plan

by reason of any increase in benefits, any change in

the accrual of benefits, or any change in the rate

at which benefits become nonforfeitable under the plan

shall be adopted during any period for which a charge

is deferred pursuant to an election under clause (i),

unless—

‘‘(I) the plan’s enrolled actuary certifies (in

such form and manner prescribed by the Secretary

of the Treasury) that the amendment provides for

an increase in annual contributions which will

exceed the increase in annual charges to the

funding standard account attributable to such

amendment, or

‘‘(II) the amendment is required by a collective

bargaining agreement which is in effect on the

date of enactment of this subparagraph.

If a plan is amended during any such plan year in

violation of the preceding sentence, any election under

this paragraph shall not apply to any such plan year

ending on or after the date on which such amendment

is adopted.
H. R. 3108—10

‘‘(iv) ELIGIBLE MULTIEMPLOYER PLAN.—For purposes of this subparagraph, the term ‘eligible multiemployer plan’ means a multiemployer plan—

‘‘(I) which had a net investment loss for the

first plan year beginning after December 31, 2001,

of at least 10 percent of the average fair market

value of the plan assets during the plan year,

and

‘‘(II) with respect to which the plan’s enrolled

actuary certifies (not taking into account the

application of this subparagraph), on the basis of

the acutuarial assumptions used for the last plan

year ending before the date of the enactment of

this subparagraph, that the plan is projected to

have an accumulated funding deficiency (within

the meaning of subsection (a)(2)) for any plan year

beginning after June 30, 2003, and before July

1, 2006.

For purposes of subclause (I), a plan’s net investment

loss shall be determined on the basis of the actual

loss and not under any actuarial method used under

subsection (c)(2).

‘‘(v) EXCEPTION TO TREATMENT OF ELIGIBLE MULTIEMPLOYER PLAN.—In no event shall a plan be treated

as an eligible multiemployer plan under clause (iv)

if—

‘‘(I) for any taxable year beginning during the

10-year period preceding the first plan year for

which an election is made under clause (i), any

employer required to contribute to the plan failed

to timely pay any excise tax imposed under section

4971 of the Internal Revenue Code of 1986 with

respect to the plan,

‘‘(II) for any plan year beginning after June

30, 1993, and before the first plan year for which

an election is made under clause (i), the average

contribution required to be made by all employers

to the plan does not exceed 10 cents per hour

or no employer is required to make contributions

to the plan, or

‘‘(III) with respect to any of the plan years

beginning after June 30, 1993, and before the first

plan year for which an election is made under

clause (i), a waiver was granted under section

303 of this Act or section 412(d) of the Internal

Revenue Code of 1986 with respect to the plan

or an extension of an amortization period was

granted under section 304 of this Act or section

412(e) of such Code with respect to the plan.

‘‘(vi) NOTICE.—If a plan sponsor makes an election

under this subparagraph or section 412(b)(7)(F) of the

Internal Revenue Code of 1986 for any plan year, the

plan administrator shall provide, within 30 days of

filing the election for such year, written notice of the

election to participants and beneficiaries, to each labor

organization representing such participants or beneficiaries, to each employer that has an obligation to
H. R. 3108—11

contribute under the plan, and to the Pension Benefit

Guaranty Corporation. Such notice shall include with

respect to any election the amount of any charge to

be deferred and the period of the deferral. Such notice

shall also include the maximum guaranteed monthly

benefits which the Pension Benefit Guaranty Corporation would pay if the plan terminated while underfunded.

‘‘(vii) ELECTION.—An election under this subparagraph shall be made at such time and in such manner

as the Secretary of the Treasury may prescribe.’’.

(2) PENALTY.—Section 502(c)(4) of such Act (29 U.S.C.

1132(c)(4)) is amended to read as follows:

‘‘(4) The Secretary may assess a civil penalty of not more

than $1,000 a day for each violation by any person of section

302(b)(7)(F)(vi).’’.

(b) INTERNAL REVENUE CODE OF 1986.—Section 412(b)(7) of

the Internal Revenue Code of 1986 (relating to special rules for

multiemployer plans) is amended by adding at the end the following

new subparagraph:

‘‘(F) ELECTION FOR DEFERRAL OF CHARGE FOR PORTION

OF NET EXPERIENCE LOSS.—

‘‘(i) IN GENERAL.—With respect to the net experience loss of an eligible multiemployer plan for the

first plan year beginning after December 31, 2001,

the plan sponsor may elect to defer up to 80 percent

of the amount otherwise required to be charged under

paragraph (2)(B)(iv) for any plan year beginning after

June 30, 2003, and before July 1, 2005, to any plan

year selected by the plan from either of the 2 immediately succeeding plan years.

‘‘(ii) INTEREST.—For the plan year to which a

charge is deferred pursuant to an election under clause

(i), the funding standard account shall be charged with

interest on the deferred charge for the period of

deferral at the rate determined under subsection (d)

for multiemployer plans.

‘‘(iii) RESTRICTIONS ON BENEFIT INCREASES.—No

amendment which increases the liabilities of the plan

by reason of any increase in benefits, any change in

the accrual of benefits, or any change in the rate

at which benefits become nonforfeitable under the plan

shall be adopted during any period for which a charge

is deferred pursuant to an election under clause (i),

unless—

‘‘(I) the plan’s enrolled actuary certifies (in

such form and manner prescribed by the Secretary)

that the amendment provides for an increase in

annual contributions which will exceed the

increase in annual charges to the funding standard

account attributable to such amendment, or

‘‘(II) the amendment is required by a collective

bargaining agreement which is in effect on the

date of enactment of this subparagraph.

If a plan is amended during any such plan year in

violation of the preceding sentence, any election under

this paragraph shall not apply to any such plan year
H. R. 3108—12

ending on or after the date on which such amendment

is adopted.

‘‘(iv) ELIGIBLE MULTIEMPLOYER PLAN.—For purposes of this subparagraph, the term ‘eligible multiemployer plan’ means a multiemployer plan—

‘‘(I) which had a net investment loss for the

first plan year beginning after December 31, 2001,

of at least 10 percent of the average fair market

value of the plan assets during the plan year,

and

‘‘(II) with respect to which the plan’s enrolled

actuary certifies (not taking into account the

application of this subparagraph), on the basis of

the acutuarial assumptions used for the last plan

year ending before the date of the enactment of

this subparagraph, that the plan is projected to

have an accumulated funding deficiency (within

the meaning of subsection (a)) for any plan year

beginning after June 30, 2003, and before July

1, 2006.

For purposes of subclause (I), a plan’s net investment

loss shall be determined on the basis of the actual

loss and not under any actuarial method used under

subsection (c)(2).

‘‘(v) EXCEPTION TO TREATMENT OF ELIGIBLE MULTIEMPLOYER PLAN.—In no event shall a plan be treated

as an eligible multiemployer plan under clause (iv)

if—

‘‘(I) for any taxable year beginning during the

10-year period preceding the first plan year for

which an election is made under clause (i), any

employer required to contribute to the plan failed

to timely pay any excise tax imposed under section

4971 with respect to the plan,

‘‘(II) for any plan year beginning after June

30, 1993, and before the first plan year for which

an election is made under clause (i), the average

contribution required to be made by all employers

to the plan does not exceed 10 cents per hour

or no employer is required to make contributions

to the plan, or

‘‘(III) with respect to any of the plan years

beginning after June 30, 1993, and before the first

plan year for which an election is made under

clause (i), a waiver was granted under section

412(d) or section 303 of the Employee Retirement

Income Security Act of 1974 with respect to the

plan or an extension of an amortization period

was granted under subsection (e) or section 304

of such Act with respect to the plan.

‘‘(vi) ELECTION.—An election under this subparagraph shall be made at such time and in such manner

as the Secretary may prescribe.’’.
H. R. 3108—13

TITLE II—OTHER PROVISIONS

SEC. 201. TWO-YEAR EXTENSION OF TRANSITION RULE TO PENSION

FUNDING REQUIREMENTS.

(a) IN GENERAL.—Section 769(c) of the Retirement Protection

Act of 1994, as added by section 1508 of the Taxpayer Relief

Act of 1997, is amended— (1) by inserting ‘‘except as provided in paragraph (3),’’ before ‘‘the transition rules’’, and

(2) by adding at the end the following:

‘‘(3) SPECIAL RULES.—In the case of plan years beginning

in 2004 and 2005, the following transition rules shall apply

in lieu of the transition rules described in paragraph (2):

‘‘(A) For purposes of section 412(l)(9)(A) of the Internal

Revenue Code of 1986 and section 302(d)(9)(A) of the

Employee Retirement Income Security Act of 1974, the

funded current liability percentage for any plan year shall

be treated as not less than 90 percent.

‘‘(B) For purposes of section 412(m) of the Internal

Revenue Code of 1986 and section 302(e) of the Employee

Retirement Income Security Act of 1974, the funded current

liability percentage for any plan year shall be treated as

not less than 100 percent.

‘‘(C) For purposes of determining unfunded vested

benefits under section 4006(a)(3)(E)(iii) of the Employee

Retirement Income Security Act of 1974, the mortality

table shall be the mortality table used by the plan.’’. (b) EFFECTIVE DATE.—The amendments made by this section

shall apply to plan years beginning after December 31, 2003.

SEC. 202. PROCEDURES APPLICABLE TO DISPUTES INVOLVING PENSION PLAN WITHDRAWAL LIABILITY.

(a) IN GENERAL.—Section 4221 of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1401) is amended by adding

at the end the following new subsection:

‘‘(f) PROCEDURES APPLICABLE TO CERTAIN DISPUTES.—

‘‘(1) IN GENERAL.—If—

‘‘(A) a plan sponsor of a plan determines that—

‘‘(i) a complete or partial withdrawal of an

employer has occurred, or

‘‘(ii) an employer is liable for withdrawal liability

payments with respect to the complete or partial withdrawal of an employer from the plan,

‘‘(B) such determination is based in whole or in part

on a finding by the plan sponsor under section 4212(c)

that a principal purpose of a transaction that occurred

before January 1, 1999, was to evade or avoid withdrawal

liability under this subtitle, and

‘‘(C) such transaction occurred at least 5 years before

the date of the complete or partial withdrawal,

then the special rules under paragraph (2) shall be used in

applying subsections (a) and (d) of this section and section

4219(c) to the employer.

‘‘(2) SPECIAL RULES.—

‘‘(A) DETERMINATION.—Notwithstanding subsection

(a)(3)—
H. R. 3108—14

‘‘(i) a determination by the plan sponsor under

paragraph (1)(B) shall not be presumed to be correct,

and ‘‘(ii) the plan sponsor shall have the burden to

establish, by a preponderance of the evidence, the elements of the claim under section 4212(c) that a principal purpose of the transaction was to evade or avoid

withdrawal liability under this subtitle.

Nothing in this subparagraph shall affect the burden of

establishing any other element of a claim for withdrawal

liability under this subtitle. ‘‘(B) PROCEDURE.—Notwithstanding subsection (d) and

section 4219(c), if an employer contests the plan sponsor’s

determination under paragraph (1) through an arbitration

proceeding pursuant to subsection (a), or through a claim

brought in a court of competent jurisdiction, the employer

shall not be obligated to make any withdrawal liability

payments until a final decision in the arbitration proceeding, or in court, upholds the plan sponsor’s determination.’’. (b) EFFECTIVE DATE.—The amendments made by this section

shall apply to any employer that receives a notification under

section 4219(b)(1) of the Employee Retirement Income Security

Act of 1974 (29 U.S.C. 1399(b)(1)) after October 31, 2003.

SEC. 203. SENSE OF CONGRESS REGARDING DEFINED BENEFIT PENSION SYSTEM REFORM.

It is the sense of the Congress that the Congress must ensure

the financial health of the defined benefit pension system by

working to promptly implement— (1) a permanent replacement for the pension discount rate

used for defined benefit pension plan calculations, and

(2) comprehensive funding reforms for all defined benefit

pension plans aimed at achieving accurate and sound pension

funding to enhance retirement security for workers who rely

on defined pension plan benefits, to reduce the volatility of

contributions, to provide plan sponsors with predictability for

plan contributions, and to ensure adequate disclosures for plan

participants in the case of underfunded pension plans.

SEC. 204. EXTENSION OF TRANSFERS OF EXCESS PENSION ASSETS

TO RETIREE HEALTH ACCOUNTS.

(a) AMENDMENT OF INTERNAL REVENUE CODE OF 1986.—Paragraph (5) of section 420(b) of the Internal Revenue Code of 1986

(relating to expiration) is amended by striking ‘‘December 31, 2005’’ and inserting ‘‘December 31, 2013’’. (b) AMENDMENTS OF ERISA.— (1) Section 101(e)(3) of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by

striking ‘‘Tax Relief Extension Act of 1999’’ and inserting ‘‘Pension Funding Equity Act of 2004’’.

(2) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is

amended by striking ‘‘Tax Relief Extension Act of 1999’’ and

inserting ‘‘Pension Funding Equity Act of 2004’’.

(3) Paragraph (13) of section 408(b) of such Act (29 U.S.C.

1108(b)(3)) is amended—

(A) by striking ‘‘January 1, 2006’’ and inserting ‘‘January 1, 2014’’, and
H. R. 3108—15

(B) by striking ‘‘Tax Relief Extension Act of 1999’’

and inserting ‘‘Pension Funding Equity Act of 2004’’.

SEC. 205. REPEAL OF REDUCTION OF DEDUCTIONS FOR MUTUAL LIFE

INSURANCE COMPANIES.

(a) IN GENERAL.—Section 809 of the Internal Revenue Code

of 1986 (relating to reductions in certain deduction of mutual life

insurance companies) is hereby repealed.

(b) CONFORMING AMENDMENTS.—

(1) Subsections (a)(2)(B) and (b)(1)(B) of section 807 of

such Code are each amended by striking ‘‘the sum of (i)’’ and

by striking ‘‘plus (ii) any excess described in section 809(a)(2)

for the taxable year,’’.

(2)(A) The last sentence of section 807(d)(1) of such Code

is amended by striking ‘‘section 809(b)(4)(B)’’ and inserting

‘‘paragraph (6)’’.

(B) Subsection (d) of section 807 of such Code is amended

by adding at the end the following new paragraph:

‘‘(6) STATUTORY RESERVES.—The term ‘statutory reserves’

means the aggregate amount set forth in the annual statement

with respect to items described in section 807(c). Such term

shall not include any reserve attributable to a deferred and

uncollected premium if the establishment of such reserve is

not permitted under section 811(c).’’.

(3) Subsection (c) of section 808 of such Code is amended

to read as follows:

‘‘(c) AMOUNT OF DEDUCTION.—The deduction for policyholder

dividends for any taxable year shall be an amount equal to the

policyholder dividends paid or accrued during the taxable year.’’.

(4) Subparagraph (A) of section 812(b)(3) of such Code

is amended by striking ‘‘sections 808 and 809’’ and inserting

‘‘section 808’’.

(5) Subsection (c) of section 817 of such Code is amended

by striking ‘‘(other than section 809)’’.

(6) Subsection (c) of section 842 of such Code is amended

by striking paragraph (3) and by redesignating paragraph (4)

as paragraph (3).

(7) The table of sections for subpart C of part I of subchapter L of chapter 1 of such Code is amended by striking

the item relating to section 809.

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

shall apply to taxable years beginning after December 31, 2004.

SEC. 206. CLARIFICATION OF EXEMPTION FROM TAX FOR SMALL PROPERTY AND CASUALTY INSURANCE COMPANIES.

(a) IN GENERAL.—Section 501(c)(15)(A) of the Internal Revenue

Code of 1986 is amended to read as follows:

‘‘(A) Insurance companies (as defined in section 816(a))

other than life (including interinsurers and reciprocal underwriters) if—

‘‘(i)(I) the gross receipts for the taxable year do not

exceed $600,000, and

‘‘(II) more than 50 percent of such gross receipts consist

of premiums, or

‘‘(ii) in the case of a mutual insurance company—

‘‘(I) the gross receipts of which for the taxable

year do not exceed $150,000, and
H. R. 3108—16

‘‘(II) more than 35 percent of such gross receipts

consist of premiums.

Clause (ii) shall not apply to a company if any employee of

the company, or a member of the employee’s family (as defined

in section 2032A(e)(2)), is an employee of another company

exempt from taxation by reason of this paragraph (or would

be so exempt but for this sentence).’’.

(b) CONTROLLED GROUP RULE.—Section 501(c)(15)(C) of the

Internal Revenue Code of 1986 is amended by inserting ‘‘, except

that in applying section 831(b)(2)(B)(ii) for purposes of this subparagraph, subparagraphs (B) and (C) of section 1563(b)(2) shall be

disregarded’’ before the period at the end.

(c) DEFINITION OF INSURANCE COMPANY FOR SECTION 831.—

Section 831 of the Internal Revenue Code of 1986 is amended

by redesignating subsection (c) as subsection (d) and by inserting

after subsection (b) the following new subsection:

‘‘(c) INSURANCE COMPANY DEFINED.—For purposes of this section, the term ‘insurance company’ has the meaning given to such

term by section 816(a)).’’.

(d) CONFORMING AMENDMENT.—Clause (i) of section 831(b)(2)(A)

of the Internal Revenue Code of 1986 is amended by striking

‘‘exceed $350,000 but’’.

(e) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to taxable years

beginning after December 31, 2003.

(2) TRANSITION RULE FOR COMPANIES IN RECEIVERSHIP OR

LIQUIDATION.—In the case of a company or association which—

(A) for the taxable year which includes April 1, 2004,

meets the requirements of section 501(c)(15)(A) of the

Internal Revenue Code of 1986, as in effect for the last

taxable year beginning before January 1, 2004, and

(B) on April 1, 2004, is in a receivership, liquidation,

or similar proceeding under the supervision of a State

court,

the amendments made by this section shall apply to taxable

years beginning after the earlier of the date such proceeding

ends or December 31, 2007.

SEC. 207. CONFIRMATION OF ANTITRUST STATUS OF GRADUATE MEDICAL RESIDENT MATCHING PROGRAMS.

(a) FINDINGS AND PURPOSES.—

(1) FINDINGS.—Congress makes the following findings:

(A) For over 50 years, most United States medical

school seniors and the large majority of graduate medical

education programs (popularly known as ‘‘residency programs’’) have chosen to use a matching program to match

medical students with residency programs to which they

have applied. These matching programs have been an

integral part of an educational system that has produced

the finest physicians and medical researchers in the world.

(B) Before such matching programs were instituted,

medical students often felt pressure, at an unreasonably

early stage of their medical education, to seek admission

to, and accept offers from, residency programs. As a result,

medical students often made binding commitments before

they were in a position to make an informed decision
H. R. 3108—17

about a medical specialty or a residency program and before

residency programs could make an informed assessment

of students’ qualifications. This situation was inefficient,

chaotic, and unfair and it often led to placements that

did not serve the interests of either medical students or

residency programs.

(C) The original matching program, now operated by

the independent non-profit National Resident Matching

Program and popularly known as ‘‘the Match’’, was developed and implemented more than 50 years ago in response

to widespread student complaints about the prior process.

This Program includes on its board of directors individuals

nominated by medical student organizations as well as

by major medical education and hospital associations.

(D) The Match uses a computerized mathematical algorithm, as students had recommended, to analyze the preferences of students and residency programs and match

students with their highest preferences from among the

available positions in residency programs that listed them.

Students thus obtain a residency position in the most

highly ranked program on their list that has ranked them

sufficiently high among its preferences. Each year, about

85 percent of participating United States medical students

secure a place in one of their top 3 residency program

choices.

(E) Antitrust lawsuits challenging the matching

process, regardless of their merit or lack thereof, have

the potential to undermine this highly efficient, procompetitive, and long-standing process. The costs of

defending such litigation would divert the scarce resources

of our country’s teaching hospitals and medical schools

from their crucial missions of patient care, physician

training, and medical research. In addition, such costs may

lead to abandonment of the matching process, which has

effectively served the interests of medical students,

teaching hospitals, and patients for over half a century.

(2) PURPOSES.—It is the purpose of this section to—

(A) confirm that the antitrust laws do not prohibit

sponsoring, conducting, or participating in a graduate medical education residency matching program, or agreeing

to do so; and

(B) ensure that those who sponsor, conduct or participate in such matching programs are not subjected to the

burden and expense of defending against litigation that

challenges such matching programs under the antitrust

laws.

(b) APPLICATION OF ANTITRUST LAWS TO GRADUATE MEDICAL

EDUCATION RESIDENCY MATCHING PROGRAMS.—

(1) DEFINITIONS.—In this subsection:

(A) ANTITRUST LAWS.—The term ‘‘antitrust laws’’—

(i) has the meaning given such term in subsection

(a) of the first section of the Clayton Act (15 U.S.C.

12(a)), except that such term includes section 5 of

the Federal Trade Commission Act (15 U.S.C. 45) to

the extent such section 5 applies to unfair methods

of competition; and
H. R. 3108—18

(ii) includes any State law similar to the laws

referred to in clause (i).

(B) GRADUATE MEDICAL EDUCATION PROGRAM.—The

term ‘‘graduate medical education program’’ means—

(i) a residency program for the medical education

and training of individuals following graduation from

medical school;

(ii) a program, known as a specialty or subspecialty

fellowship program, that provides more advanced

training; and

(iii) an institution or organization that operates,

sponsors or participates in such a program.

(C) GRADUATE MEDICAL EDUCATION RESIDENCY

MATCHING PROGRAM.—The term ‘‘graduate medical education residency matching program’’ means a program

(such as those conducted by the National Resident

Matching Program) that, in connection with the admission

of students to graduate medical education programs, uses

an algorithm and matching rules to match students in

accordance with the preferences of students and the preferences of graduate medical education programs.

(D) STUDENT.—The term ‘‘student’’ means any individual who seeks to be admitted to a graduate medical

education program.

(2) CONFIRMATION OF ANTITRUST STATUS.—It shall not be

unlawful under the antitrust laws to sponsor, conduct, or

participate in a graduate medical education residency matching

program, or to agree to sponsor, conduct, or participate in

such a program. Evidence of any of the conduct described

in the preceding sentence shall not be admissible in Federal

court to support any claim or action alleging a violation of

the antitrust laws.

(3) APPLICABILITY.—Nothing in this section shall be construed to exempt from the antitrust laws any agreement on

the part of 2 or more graduate medical education programs

to fix the amount of the stipend or other benefits received

by students participating in such programs.

(c) EFFECTIVE DATE.—This section shall take effect on the date

of enactment of this Act, shall apply to conduct whether it occurs

prior to, on, or after such date of enactment, and shall apply
H. R. 3108—19

to all judicial and administrative actions or other proceedings

pending on such date of enactment.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.