I 

108TH CONGRESS 

1ST SESSION H. R. 3108

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. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 17, 2003

Mr. BOEHNER (for himself, Mr. THOMAS, Mr. GEORGE MILLER of California, 

Mr. RANGEL, Mr. SAM JOHNSON of Texas, and Mr. PORTMAN) introduced the following bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committee on Ways and 

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

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL

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.

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

2 This Act may be cited as the ‘‘Pension Funding Eq3 uity Act of 2003’’. 

4 SEC. 2. FINDINGS; SENSE OF CONGRESS. 

5 (a) FINDINGS.—The Congress finds the following: 

6 (1) The defined benefit pension system has re7 cently experienced severe difficulties due to an un8 precedented economic climate of low interest rates, 

9 market losses, and an increased number of retirees. 

10 (2) The discontinuation of the issuance of 30-

11 year Treasury securities has made the interest rate 

12 on such securities an inappropriate and inaccurate 

13 benchmark for measuring pension liabilities. 

14 (3) Using the current 30-year Treasury bond 

15 interest rate has artificially inflated pension liabil16 ities and therefore adversely affected both employers 

17 offering defined benefit pension plans and working 

18 families who rely on the safe and secure benefits 

19 that these plans provide. 

20 (4) There is consensus among pension experts 

21 that an interest rate based on long-term, conserv22 ative corporate bonds would provide a more accurate 

23 benchmark for measuring pension plan liabilities. 

24 (5) A temporary replacement for the 30-year 

25 Treasury bond interest rate should be enacted while 
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1 the Congress evaluates permanent and comprehen2 sive funding reforms. 

3 (b) SENSE OF CONGRESS.—It is the sense of the 

4 Congress that the Congress must ensure the financial 

5 health of the defined benefit pension system by working 

6 to promptly implement— 

7 (1) a permanent replacement for the pension 

8 discount rate used for defined benefit pension plan 

9 calculations, and 

10 (2) comprehensive funding reforms aimed at 

11 achieving accurate and sound pension funding to en12 hance retirement security for workers who rely on 

13 defined pension plan benefits, to reduce the volatility 

14 of contributions, to provide plan sponsors with pre15 dictability for plan contributions, and to ensure ade16 quate disclosures for plan participants in the case of 

17 underfunded pension plans. 

18 SEC. 3. TEMPORARY REPLACEMENT OF 30-YEAR TREASURY 

19 RATE. 

20 (a) EMPLOYEE RETIREMENT INCOME SECURITY ACT

21 OF 1974.—

22 (1) DETERMINATION OF PERMISSIBLE

23 RANGE.—

24 (A) IN GENERAL.—Clause (ii) of section 

25 302(b)(5)(B) of the Employee Retirement In-
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1 come Security Act of 1974 is amended by re2 designating subclause (II) as subclause (III) 

3 and by inserting after subclause (I) the fol4 lowing new subclause: 

5 ‘‘(II) SPECIAL RULE FOR YEARS 2004

6 AND 2005.—In the case of plan years be7 ginning after December 31, 2003, and be8 fore January 1, 2006, the term ‘permis9 sible range’ means a rate of interest which 

10 is not above, and not more than 10 percent 

11 below, the weighted average of the rates of 

12 interest on amounts conservatively invested 

13 in long-term corporate bonds during the 4-

14 year period ending on the last day before 

15 the beginning of the plan year. Such rates 

16 shall be determined by the Secretary on 

17 the basis of one or more indices selected 

18 periodically by the Secretary, and the Sec19 retary shall make the permissible range 

20 publicly available.’’. 

21 (B) SECRETARIAL AUTHORITY.—Subclause 

22 (III) of section 302(b)(5)(B)(ii) of such Act, as 

23 redesignated by subparagraph (A), is amend24 ed—
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1 (i) by inserting ‘‘or (II)’’ after ‘‘sub2 clause (I)’’ the first place it appears, and 

3 (ii) by striking ‘‘subclause (I)’’ the 

4 second place it appears and inserting 

5 ‘‘such subclause’’. 

6 (C) CONFORMING AMENDMENT.—Sub7 clause (I) of section 302(b)(5)(B)(ii) of such 

8 Act is amended by inserting ‘‘or (III)’’ after 

9 ‘‘subclause (II)’’. 

10 (2) DETERMINATION OF CURRENT LIABILITY.—

11 Clause (i) of section 302(d)(7)(C) of such Act is 

12 amended by adding at the end the following new 

13 subclause: 

14 ‘‘(IV) SPECIAL RULE FOR 2004

15 AND 2005.—For plan years beginning 

16 in 2004 or 2005, notwithstanding 

17 subclause (I), the rate of interest used 

18 to determine current liability under 

19 this subsection shall be the rate of in20 terest under subsection (b)(5).’’. 

21 (3) PBGC.—Clause (iii) of section 

22 4006(a)(3)(E) of such Act is amended by adding at 

23 the end the following new subclause: 

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

25 December 31, 2003, and before January 1, 2006,
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1 the annual yield taken into account under subclause 

2 (II) shall be the annual yield determined by the Sec3 retary of the Treasury on amounts conservatively in4 vested in long-term corporate bonds for the month 

5 preceding the month in which the plan year begins. 

6 For purposes of the preceding sentence, the Sec7 retary of the Treasury shall determine such yield on 

8 the basis of one or more indices selected periodically 

9 by the Secretary, and the Secretary shall make such 

10 yield publicly available.’’. 

11 (b) INTERNAL REVENUE CODE OF 1986.—

12 (1) DETERMINATION OF PERMISSIBLE

13 RANGE.—

14 (A) IN GENERAL.—Clause (ii) of section 

15 412(b)(5)(B) of the Internal Revenue Code of 

16 1986 is amended by redesignating subclause 

17 (II) as subclause (III) and by inserting after 

18 subclause (I) the following new subclause: 

19 ‘‘(II) SPECIAL RULE FOR YEARS

20 2004 AND 2005.—In the case of plan 

21 years beginning after December 31, 

22 2003, and before January 1, 2006, 

23 the term ‘permissible range’ means a 

24 rate of interest which is not above, 

25 and not more than 10 percent below, 
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1 the weighted average of the rates of 

2 interest on amounts conservatively in3 vested in long-term corporate bonds 

4 during the 4-year period ending on 

5 the last day before the beginning of 

6 the plan year. Such rates shall be de7 termined by the Secretary on the 

8 basis of one or more indices selected 

9 periodically by the Secretary, and the 

10 Secretary shall make the permissible 

11 range publicly available.’’. 

12 (B) SECRETARIAL AUTHORITY.—Subclause 

13 (III) of section 412(b)(5)(B)(ii) of such Code, 

14 as redesignated by subparagraph (A), is amend15 ed—

16 (i) by inserting ‘‘or (II)’’ after ‘‘sub17 clause (I)’’ the first place it appears, and 

18 (ii) by striking ‘‘subclause (I)’’ the 

19 second place it appears and inserting 

20 ‘‘such subclause’’. 

21 (C) CONFORMING AMENDMENT.—Sub22 clause (I) of section 412(b)(5)(B)(ii) of such 

23 Code is amended by inserting ‘‘or (III)’’ after 

24 ‘‘subclause (II)’’. 
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1 (2) DETERMINATION OF CURRENT LIABILITY.—

2 Clause (i) of section 412(l)(7)(C) of such Code is 

3 amended by adding at the end the following new 

4 subclause: 

5 ‘‘(IV) SPECIAL RULE FOR 2004

6 AND 2005.—For plan years beginning 

7 in 2004 or 2005, notwithstanding 

8 subclause (I), the rate of interest used 

9 to determine current liability under 

10 this subsection shall be the rate of in11 terest under subsection (b)(5).’’. 

12 (3) CONFORMING AMENDMENT.—Section 

13 415(b)(2)(E)(ii) of such Code is amended by insert14 ing before the period at the end ‘‘, except that in the 

15 case of years beginning in 2004 or 2005, ‘5.5 per16 cent’ shall be substituted for ‘5 percent’ in clause 

17 (i)’’. 

18 (c) PROVISIONS RELATING TO PLAN AMEND19 MENTS.—

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

21 any plan or annuity contract amendment—

22 (A) such plan or contract shall be treated 

23 as being operated in accordance with the terms 

24 of the plan or contract during the period de25 scribed in paragraph (2)(B)(i), and 
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1 (B) except as provided by the Secretary of 

2 the Treasury, such plan shall not fail to meet 

3 the requirements of section 411(d)(6) of the In4 ternal Revenue Code of 1986 and section 

5 204(g) of the Employee Retirement Income Se6 curity Act of 1974 by reason of such amend7 ment. 

8 (2) AMENDMENTS TO WHICH SECTION AP9 PLIES.—

10 (A) IN GENERAL.—This subsection shall 

11 apply to any amendment to any plan or annuity 

12 contract which is made—

13 (i) pursuant to any amendment made 

14 by this section, and 

15 (ii) on or before the last day of the 

16 first plan year beginning on or after Janu17 ary 1, 2006. 

18 In the case of a governmental plan (as defined 

19 in section 414(d) of the Internal Revenue Code 

20 of 1986), this paragraph shall be applied by 

21 substituting ‘‘2008’’ for ‘‘2006’’. 

22 (B) CONDITIONS.—This subsection shall 

23 not apply to any plan or annuity contract 

24 amendment unless—
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1 (i) during the period beginning on the 

2 date the amendment described in subpara3 graph (A)(i) takes effect and ending on the 

4 date described in subparagraph (A)(ii) (or, 

5 if earlier, the date the plan or contract 

6 amendment is adopted), the plan or con7 tract is operated as if such plan or con8 tract amendment were in effect; and 

9 (ii) such plan or contract amendment 

10 applies retroactively for such period. 

11 (d) EFFECTIVE DATE.—

12 (1) IN GENERAL.—Except as provided in para13 graphs (2) and (3), the amendments made by this 

14 section shall apply to years beginning after Decem15 ber 31, 2003. 

16 (2) LOOKBACK RULES.—For purposes of apply17 ing subsections (l)(9)(B)(ii) and (m)(1) of section 

18 412 of the Internal Revenue Code of 1986 and sub19 sections (d)(9)(B)(ii) and (e)(1) of section 302 of 

20 the Employee Retirement Income Security Act of 

21 1974 to plan years beginning after December 31, 

22 2003, the amendments made by this section may be 

23 applied as if such amendments had been in effect for 

24 all years beginning before such date. 
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1 (3) NO REDUCTION REQUIRED.—In the case of 

2 any participant or beneficiary, the amount payable 

3 under any form of benefit subject to section 

4 417(e)(3) of the Internal Revenue Code of 1986 

5 shall not be required to be reduced below the 

6 amount determined as of the last day of the last 

7 plan year beginning before January 1, 2004, merely 

8 because of the amendments made by subsection 

9 (b)(3).

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