In the Senate of the United States,

January 28, 2004.

Resolved, That the bill from the House of Representatives (H.R. 3108) entitled ‘‘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.’’, do pass with the following

AMENDMENT:

1 Page 2, line 3, strike out all after ‘‘SECTION’’ and

2 insert:

3 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Pension Stability Act’’.
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1 SEC. 2. TEMPORARY REPLACEMENT OF INTEREST RATE ON

2 30-YEAR TREASURY SECURITIES WITH INTER3 EST RATE ON CONSERVATIVELY INVESTED

4 LONG-TERM CORPORATE BONDS.

5 (a) INTERNAL REVENUE CODE OF 1986.—

6 (1) DETERMINATION OF PERMISSIBLE RANGE.—

7 (A) IN GENERAL.—Section 412(b)(5)(B)(ii)

8 of the Internal Revenue Code of 1986 is

9 amended—

10 (i) in subclause (I), by inserting ‘‘or

11 (III)’’ after ‘‘subclause (II)’’;

12 (ii) by redesignating subclause (II) as

13 subclause (III);

14 (iii) by inserting after subclause (I) the

15 following new subclause:

16 ‘‘(II) SPECIAL RULE FOR 2004 AND

17 2005.—In the case of plan years begin18 ning in 2004 or 2005, the term ‘per19 missible range’ means a rate of interest

20 which is not above, and not more than

21 10 percent below, the weighted average

22 of the conservative long-term corporate

23 bond rates during the 4-year period

24 ending on the last day before the begin25 ning of the plan year. The Secretary

26 shall, by regulation, prescribe a method
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1 for periodically determining conserv2 ative long-term bond rates for purposes

3 of this paragraph. Such rates shall re4 flect the rates of interest on amounts

5 invested conservatively in long-term

6 corporate bonds and shall be based on

7 the use of 2 or more indices that are in

8 the top 2 quality levels available re9 flecting average maturities of 20 years

10 or more.’’; and

11 (iv) in subclause (III), as so

12 redesignated—

13 (I) by inserting ‘‘or (II)’’ after

14 ‘‘subclause (I)’’ the first place it ap15 pears; and

16 (II) by striking ‘‘subclause (I)’’

17 the second place it appears and insert18 ing ‘‘such subclause’’.

19 (2) DETERMINATION OF CURRENT LIABILITY.—

20 Section 412(l)(7)(C)(i) of such Code is amended by

21 adding at the end the following new subclause:

22 ‘‘(IV) SPECIAL RULE FOR 2004

23 AND 2005.—For plan years beginning

24 in 2004 or 2005, notwithstanding sub25 clause (I), the rate of interest used to
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1 determine current liability under this

2 subsection shall be the rate of interest

3 under subsection (b)(5).’’.

4 (3) CONFORMING AMENDMENT.—Section

5 412(m)(7) of such Code is amended to read as follows:

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

7 which the interest rate used to determine current li8 ability is determined under subsection

9 (l)(7)(C)(i)(III), for purposes of applying paragraphs

10 (1) and (4)(B)(ii) for plan years beginning in 2002,

11 the current liability of the plan for the preceding plan

12 year shall be redetermined using 120 percent as the

13 specified percentage determined under subsection

14 (l)(7)(C)(i)(II).’’.

15 (4) LIMITATION ON CERTAIN ASSUMPTIONS.—

16 Section 415(b)(2)(E)(ii) of such Code is amended by

17 inserting ‘‘, except that in the case of plan years be18 ginning in 2004 or 2005, ‘5.5 percent’ shall be sub19 stituted for ‘5 percent’ in clause (i)’’ before the period

20 at the end.

21 (5) ELECTION TO DISREGARD MODIFICATION FOR

22 DEDUCTION PURPOSES.—Section 404(a)(1) of such

23 Code is amended by adding at the end the following

24 new subparagraph:
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1 ‘‘(F) ELECTION TO DISREGARD MODIFIED

2 INTEREST RATE.—An employer may elect to dis3 regard subsections (b)(5)(B)(ii)(II) and

4 (l)(7)(C)(i) of section 412 solely for purposes of

5 determining the interest rate used in calculating

6 the maximum amount of the deduction allowable

7 under this section for contributions to a plan to

8 which such subsections apply.’’

9 (b) EMPLOYEE RETIREMENT INCOME SECURITY ACT

10 OF 1974.—

11 (1) DETERMINATION OF PERMISSIBLE RANGE.—

12 (A) IN GENERAL.—Section 302(b)(5)(B)(ii)

13 of the Employee Retirement Income Security Act

14 of 1974 (29 U.S.C. 1082(b)(5)(B)(ii)) is

15 amended—

16 (i) in subclause (I), by inserting ‘‘or

17 (III)’’ after ‘‘subclause (II)’’;

18 (ii) by redesignating subclause (II) as

19 subclause (III);

20 (iii) by inserting after subclause (I) the

21 following new subclause:

22 ‘‘(II) SPECIAL RULE FOR YEARS 2004

23 AND 2005.—In the case of plan years begin24 ning in 2004 or 2005, the term ‘permissible

25 range’ means a rate of interest which is not
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1 above, and not more than 10 percent below,

2 the weighted average of the conservative

3 long-term corporate bond rates (as deter4 mined under section 412(b)(5)(B)(ii)(II) of

5 the Internal Revenue Code of 1986) during

6 the 4-year period ending on the last day be7 fore the beginning of the plan year.’’; and

8 (iv) in subclause (III), as so

9 redesignated—

10 (I) by inserting ‘‘or (II)’’ after

11 ‘‘subclause (I)’’ the first place it ap12 pears; and

13 (II) by striking ‘‘subclause (I)’’

14 the second place it appears and insert15 ing ‘‘such subclause’’.

16 (2) DETERMINATION OF CURRENT LIABILITY.—

17 Section 302(d)(7)(C)(i) of such Act (29 U.S.C.

18 1082(d)(7)(C)(i)) is amended by adding at the end

19 the following new subclause:

20 ‘‘(IV) SPECIAL RULE FOR 2004

21 AND 2005.—For plan years beginning

22 in 2004 or 2005, notwithstanding sub23 clause (I), the rate of interest used to

24 determine current liability under this
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1 subsection shall be the rate of interest

2 under subsection (b)(5).’’.

3 (3) CONFORMING AMENDMENT.—Section

4 302(e)(7) of such Act (29 U.S.C. 1082(e)(7)) is

5 amended to read as follows:

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

7 which the interest rate used to determine current li8 ability is determined under subsection

9 (d)(7)(C)(i)(III), for purposes of applying paragraphs

10 (1) and (4)(B)(ii) for plan years beginning in 2002,

11 the current liability of the plan for the preceding plan

12 year shall be redetermined using 120 as the specified

13 percentage determined under subsection

14 (d)(7)(C)(i)(II).’’.

15 (4) PBGC.—Section 4006(a)(3)(E)(iii) of such

16 Act (29 U.S.C. 1306(a)(3)(E)(iii)) is amended by

17 adding at the end the following new subclause:

18 ‘‘(V) In the case of plan years beginning in 2004

19 or 2005, the annual yield taken into account under

20 subclause (II) shall be the annual yield computed by

21 using the conservative long-term corporate bond rate

22 (as determined under section 412(b)(5)(B)(ii)(II) of

23 the Internal Revenue Code of 1986) for the month

24 preceding the month in which the plan year begins.’’

25 (c) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section shall

3 apply to plan years beginning after December 31,

4 2003.

5 (2) LOOKBACK RULES.—For purposes of apply6 ing subsections (l)(9)(B)(ii) and (m)(1) of section 412

7 of the Internal Revenue Code of 1986, and subsections

8 (d)(9)(B)(ii) and (e)(1) of section 302 of the Em9 ployee Retirement Income Security Act of 1974 to

10 plan years beginning after December 31, 2003, the

11 amendments made by this section may be applied as

12 if such amendments had been in effect for all years

13 beginning before such date.

14 (3) TRANSITION RULE FOR SECTION 415 LIMITA15 TION.—In the case of any participant or beneficiary

16 receiving a distribution after December 31, 2003 and

17 before January 1, 2005, the amount payable under

18 any form of benefit subject to section 417(b)(3) of the

19 Internal Revenue Code of 1986 and subject to adjust20 ment under section 415(b)(2)(B) of such Code shall

21 not, solely by reason of the amendment made by sub22 section (a)(4), be less than the amount that would

23 have been so payable had the amount payable been

24 determined using the applicable interest rate in effect
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1 as of the last day of the last plan year beginning be2 fore January 1, 2004.

3 SEC. 3. ELECTION OF ALTERNATIVE DEFICIT REDUCTION

4 CONTRIBUTION.

5 (a) AMENDMENT OF 1986 CODE.—Section 412(l) of the

6 Internal Revenue Code of 1986 (relating to applicability

7 of subsection) is amended by adding at the end the following

8 new paragraph:

9 ‘‘(12) ALTERNATIVE INCREASE FOR CERTAIN

10 PLANS MEETING REQUIREMENTS IN 2000.—

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

12 benefit plan established and maintained by an

13 applicable employer, if this subsection did not

14 apply to the plan for the plan year beginning in

15 2000 (determined without regard to paragraph

16 (6)), then, at the election of the employer, the in17 creased amount under paragraph (1) for any ap18 plicable plan year shall be the greater of—

19 ‘‘(i) 20 percent (40 percent in the case

20 of an applicable plan year beginning after

21 December 27, 2004) of the increased amount

22 under paragraph (1) determined without re23 gard to this paragraph, or

24 ‘‘(ii) the increased amount which

25 would be determined under paragraph (1) if
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1 the deficit reduction contribution under

2 paragraph (2) for the applicable plan year

3 were determined without regard to subpara4 graphs (A), (B), and (D) of paragraph (2).

5 ‘‘(B) RESTRICTIONS ON BENEFIT IN6 CREASES.—No amendment which increases the

7 liabilities of the plan by reason of any increase

8 in benefits, any change in the accrual of benefits,

9 or any change in the rate at which benefits be10 come nonforfeitable shall be adopted during any

11 applicable plan year, unless—

12 ‘‘(i) the funded current liability per13 centage (as defined in paragraph (8)(B)) as

14 of the end of such plan year is projected

15 (taking into account the effect of the amend16 ment) to be at least 75 percent,

17 ‘‘(ii) the amendment provides for an

18 increase in benefits under a formula which

19 is not based on a participant’s compensa20 tion, but only if the rate of such increase is

21 not in excess of the contemporaneous rate of

22 increase in average wages of participants

23 covered by the amendment,

24 ‘‘(iii) the amendment is required by a

25 collective bargaining agreement which is in
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1 effect on the date of enactment of this sub2 paragraph, or

3 ‘‘(iv) the amendment is otherwise de4 scribed in subparagraph (A) or (C) of sub5 section (f)(2).

6 If a plan is amended during any applicable plan

7 year in violation of the preceding sentence, any

8 election under this paragraph shall not apply to

9 any applicable plan year ending on or after the

10 date on which such amendment is adopted.

11 ‘‘(C) APPLICABLE EMPLOYER.—For pur12 poses of this paragraph—

13 ‘‘(i) IN GENERAL.—The term ‘applica14 ble employer’ means an employer which

15 is—

16 ‘‘(I) a commercial passenger air17 line,

18 ‘‘(II) primarily engaged in the

19 production or manufacture of a steel

20 mill product, or the mining or proc21 essing of iron ore or beneficiated iron

22 ore products, or

23 ‘‘(III) an organization described

24 in section 501(c)(5) and which estab-
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1 lished the plan to which this para2 graph applies on June 30, 1955.

3 ‘‘(ii) OTHER EMPLOYERS MAY APPLY

4 FOR RELIEF.—

5 ‘‘(I) IN GENERAL.—Except as pro6 vided in subclause (II), an employer

7 other than an employer described in

8 clause (i) shall be treated as an appli9 cable employer if the employer files an

10 application (at such time and in such

11 manner as the Secretary may pre12 scribe) to be treated as an applicable

13 employer for purposes of this para14 graph.

15 ‘‘(II) EXCEPTION.—Subclause (I)

16 shall not apply to an employer if,

17 within 90 days of the filing of the ap18 plication, the Secretary determines

19 (taking into account the application of

20 this paragraph) that there is a reason21 able likelihood that the employer will

22 be unable to make future required con23 tributions to the plan in a timely

24 manner.
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1 ‘‘(D) APPLICABLE PLAN YEAR.—For pur2 poses of this paragraph—

3 ‘‘(i) IN GENERAL.—The term ‘applica4 ble plan year’ means any plan year begin5 ning after December 27, 2003, and before

6 December 28, 2005, for which the employer

7 elects the application of this paragraph.

8 ‘‘(ii) LIMITATION ON NUMBER OF

9 YEARS WHICH MAY BE ELECTED.—An elec10 tion may not be made under this paragraph

11 with respect to more than 2 plan years.

12 ‘‘(E) ELECTION.—An election under this

13 paragraph shall be made at such time and in

14 such manner as the Secretary may prescribe.’’

15 (b) AMENDMENT OF ERISA.—Section 302(d) of the

16 Employee Retirement Income Security Act of 1974 (29

17 U.S.C. 1082(d)) is amended by adding at the end the fol18 lowing new paragraph:

19 ‘‘(12) ALTERNATIVE INCREASE FOR CERTAIN

20 PLANS MEETING REQUIREMENTS IN 2000.—

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

22 benefit plan established and maintained by an

23 applicable employer, if this subsection did not

24 apply to the plan for the plan year beginning in

25 2000 (determined without regard to paragraph
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1 (6)), then, at the election of the employer, the in2 creased amount under paragraph (1) for any ap3 plicable plan year shall be the greater of—

4 ‘‘(i) 20 percent (40 percent in the case

5 of an applicable plan year beginning after

6 December 27, 2004) of the increased amount

7 under paragraph (1) determined without re8 gard to this paragraph, or

9 ‘‘(ii) the increased amount which

10 would be determined under paragraph (1) if

11 the deficit reduction contribution under

12 paragraph (2) for the applicable plan year

13 were determined without regard to subpara14 graphs (A), (B), and (D) of paragraph (2).

15 ‘‘(B) RESTRICTIONS ON BENEFIT IN16 CREASES.—No amendment which increases the

17 liabilities of the plan by reason of any increase

18 in benefits, any change in the accrual of benefits,

19 or any change in the rate at which benefits be20 come nonforfeitable under the plan shall be

21 adopted during any applicable plan year,

22 unless—

23 ‘‘(i) the funded current liability per24 centage (as defined in paragraph (8)(B)) as

25 of the end of such plan year is projected
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1 (taking into account the effect of the amend2 ment) to be at least 75 percent,

3 ‘‘(ii) the amendment provides for an

4 increase in benefits under a formula which

5 is not based on a participant’s compensa6 tion, but only if the rate of such increase is

7 not in excess of the contemporaneous rate of

8 increase in average wages of participants

9 covered by the amendment,

10 ‘‘(iii) the amendment is required by a

11 collective bargaining agreement which is in

12 effect on the date of enactment of this sub13 paragraph, or

14 ‘‘(iv) the amendment is otherwise de15 scribed in subparagraph (A) or (C) of sec16 tion 304(b)(2).

17 If a plan is amended during any applicable plan

18 year in violation of the preceding sentence, any

19 election under this paragraph shall not apply to

20 any applicable plan year ending on or after the

21 date on which such amendment is adopted.

22 ‘‘(C) APPLICABLE EMPLOYER.—For pur23 poses of this paragraph—
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1 ‘‘(i) IN GENERAL.—The term ‘applica2 ble employer’ means an employer which

3 is—

4 ‘‘(I) a commercial passenger air5 line,

6 ‘‘(II) primarily engaged in the

7 production or manufacture of a steel

8 mill product, or the mining or proc9 essing of iron ore or beneficiated iron

10 ore products, or

11 ‘‘(III) an organization described

12 in section 501(c)(5) of the Internal

13 Revenue Code of 1986 and which estab14 lished the plan to which this para15 graph applies on June 30, 1955.

16 ‘‘(ii) OTHER EMPLOYERS MAY APPLY

17 FOR RELIEF.—

18 ‘‘(I) IN GENERAL.—Except as pro19 vided in subclause (II), an employer

20 other than an employer described in

21 clause (i) shall be treated as an appli22 cable employer if the employer files an

23 application (at such time and in such

24 manner as the Secretary of the Treas25 ury may prescribe) to be treated as an
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1 applicable employer for purposes of

2 this paragraph.

3 ‘‘(II) EXCEPTION.—Subclause (I)

4 shall not apply to an employer if,

5 within 90 days of the filing of the ap6 plication, the Secretary of the Treasury

7 determines (taking into account the

8 application of this paragraph) that

9 there is a reasonable likelihood that the

10 employer will be unable to make future

11 required contributions to the plan in a

12 timely manner.

13 ‘‘(D) APPLICABLE PLAN YEAR.—For pur14 poses of this paragraph—

15 ‘‘(i) IN GENERAL.—The term ‘applica16 ble plan year’ means any plan year begin17 ning after December 27, 2003, and before

18 December 28, 2005, for which the employer

19 elects the application of this paragraph.

20 ‘‘(ii) LIMITATION ON NUMBER OF

21 YEARS WHICH MAY BE ELECTED.—An elec22 tion may not be made under this paragraph

23 with respect to more than 2 plan years.
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1 ‘‘(E) NOTICE REQUIREMENTS FOR PLANS

2 ELECTING ALTERNATIVE DEFICIT REDUCTION

3 CONTRIBUTIONS.—

4 ‘‘(i) IN GENERAL.—If an employer

5 elects an alternative deficit reduction con6 tribution under this paragraph and section

7 412(l)(12) of the Internal Revenue Code of

8 1986 for any year, the employer shall pro9 vide, within 30 days (120 days in the case

10 of an employer described in subparagraph

11 (C)(ii)) of filing the election for such year,

12 written notice of the election to participants

13 and beneficiaries and to the Pension Benefit

14 Guaranty Corporation.

15 ‘‘(ii) NOTICE TO PARTICIPANTS AND

16 BENEFICIARIES.—The notice under clause

17 (i) to participants and beneficiaries shall

18 include with respect to any election—

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

20 deficit reduction contribution and the

21 amount by which such contribution

22 was reduced from the amount which

23 would have been owed if the election

24 were not made, and
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1 ‘‘(II) a description of the benefits

2 under the plan which are eligible to be

3 guaranteed by the Pension Benefit

4 Guaranty Corporation and an expla5 nation of the limitations on the guar6 antee and the circumstances under

7 which such limitations apply, includ8 ing the maximum guaranteed monthly

9 benefits which the Pension Benefit

10 Guaranty Corporation would pay if

11 the plan terminated while under12 funded.

13 ‘‘(iii) NOTICE TO PBGC.—The notice

14 under clause (i) to the Pension Benefit

15 Guaranty Corporation shall include—

16 ‘‘(I) the information described in

17 clause (ii)(I),

18 ‘‘(II) the number of years it will

19 take to restore the plan to full funding

20 if the employer only makes the re21 quired contributions, and

22 ‘‘(III) information as to how the

23 amount by which the plan is under24 funded compares with the capitaliza-
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1 tion of the employer making the elec2 tion.

3 ‘‘(F) ELECTION.—An election under this

4 paragraph shall be made at such time and in

5 such manner as the Secretary of the Treasury

6 may prescribe.’’

7 (c) EFFECT OF ELECTION.—An election under section

8 412(l)(12) of the Internal Revenue Code of 1986 or section

9 302(d)(12) of the Employee Retirement Income Security

10 Act of 1974 (as added by this section) with respect to a

11 plan shall not invalidate any obligation (pursuant to a col12 lective bargaining agreement in effect on the date of the elec13 tion) to provide benefits, to change the accrual of benefits,

14 or to change the rate at which benefits become nonforfeitable

15 under the plan .

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

17 Section 502(c)(3) of the Employee Retirement Income Secu18 rity Act of 1974 (29 U.S.C. 1132(c)(3)) is amended by in19 serting ‘‘or who fails to meet the requirements of section

20 302(d)(12)(E) with respect to any participant or bene21 ficiary’’ after ‘‘101(e)(2)’’.

22 SEC. 4. MULTIEMPLOYER PLAN FUNDING NOTICES.

23 (a) IN GENERAL.—Section 104 of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C. 104) is

25 amended by redesignating subsection (d) as subsection (e)
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1 and by inserting after subsection (c) the following new sub2 section:

3 ‘‘(d) MULTIEMPLOYER DEFINED BENEFIT PLAN

4 FUNDING NOTICES.—

5 ‘‘(1) IN GENERAL.—The administrator of a de6 fined benefit plan which is a multiemployer plan

7 shall for each plan year provide a plan funding no8 tice to each plan participant and beneficiary, to each

9 labor organization representing such participants or

10 beneficiaries, and to each employer that has an obli11 gation to contribute under the plan.

12 ‘‘(2) INFORMATION CONTAINED IN NOTICES.—

13 ‘‘(A) IDENTIFYING INFORMATION.—Each no14 tice required under paragraph (1) shall contain

15 identifying information, including the name of

16 the plan, the address and phone number of the

17 plan administrator and the plan’s principal ad18 ministrative officer, each plan sponsor’s em19 ployer identification number, and the plan num20 ber of the plan.

21 ‘‘(B) SPECIFIC INFORMATION.—A plan

22 funding notice under paragraph (1) shall

23 include—

24 ‘‘(i) a statement as to whether the

25 plan’s funded current liability percentage
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1 (as defined in section 302(d)(8)(B)) for the

2 plan year to which the notice relates is at

3 least 100 percent (and, if not, the actual

4 percentage);

5 ‘‘(ii) a statement of the value of the

6 plan’s assets, the amount of benefit pay7 ments, and the ratio of the assets to the

8 payments for the plan year to which the re9 port relates;

10 ‘‘(iii) a summary of the rules gov11 erning insolvent multiemployer plans, in12 cluding the limitations on benefit payments

13 and any potential benefit reductions and

14 suspensions (and the potential effects of

15 such limitations, reductions, and suspen16 sions on the plan); and

17 ‘‘(iv) a general description of the bene18 fits under the plan which are eligible to be

19 guaranteed by the Pension Benefit Guar20 anty Corporation, along with an expla21 nation of the limitations on the guarantee

22 and the circumstances under which such

23 limitations apply.

24 ‘‘(C) OTHER INFORMATION.—Each notice

25 under paragraph (1) shall include any addi-
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1 tional information which the plan administrator

2 elects to include to the extent not inconsistent

3 with regulations prescribed by the Secretary.

4 ‘‘(3) TIME FOR PROVIDING NOTICE.—Any notice

5 under paragraph (1) shall be provided no later than

6 two months after the deadline (including extensions)

7 for filing the annual report for the plan year to which

8 the notice relates.

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

10 paragraph (1)—

11 ‘‘(A) shall be provided in a form and man12 ner prescribed in regulations of the Secretary,

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

14 be understood by the average plan participant,

15 and

16 ‘‘(C) may be provided in written, electronic,

17 or other appropriate form to the extent such form

18 is reasonably accessible to persons to whom the

19 notice is required to be provided.’’

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

21 Retirement Income Security Act of 1974 (29 U.S.C.

22 1132(c)(1)) is amended by striking ‘‘or section 101(e)(1)’’

23 and inserting ‘‘, section 101(e)(1), or section 104(d)’’.

24 (c) REGULATIONS AND MODEL NOTICE.—The Sec25 retary of Labor shall, not later than 1 year after the date
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1 of the enactment of this Act, issue regulations (including

2 a model notice) necessary to implement the amendments

3 made by this section.

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

5 section shall apply to plan years beginning after December

6 31, 2004.

7 SEC. 5. AMORTIZATION HIATUS FOR NET EXPERIENCE

8 LOSSES IN MULTIEMPLOYER PLANS.

9 (a) AMENDMENTS TO THE EMPLOYEE RETIREMENT

10 INCOME SECURITY ACT OF 1974.—

11 (1) IN GENERAL.—Section 302(b)(7) of the Em12 ployee Retirement Income Security Act of 1974 (29

13 U.S.C.1082(b)(7)) is amended by adding at the end

14 the following new subparagraph:

15 ‘‘(F)(i) If a multiemployer plan has a net expe16 rience loss for any plan year beginning after June 30,

17 2002, and before July 1, 2006—

18 ‘‘(I) the plan may elect to have the 15-year

19 amortization period under paragraph (2)(B)(iv)

20 with respect to the loss begin in any plan year

21 selected by the plan from among the 3 imme22 diately succeeding plan years, and

23 ‘‘(II) if the plan makes an election under

24 subclause (I) for any plan year, the net experi25 ence loss for the year shall, for purposes of deter-
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1 mining any charge to the funding standard ac2 count, or interest, with respect to the loss, be

3 treated in the same manner as if it were a net

4 experience loss occurring in the year selected by

5 the plan under subclause (I) (without regard to

6 any net experience loss or gain otherwise deter7 mined for such year).

8 Notwithstanding the preceding sentence, a plan may

9 elect to have this subparagraph apply to net experi10 ence losses for only 2 plan years beginning after June

11 30, 2002, and before July 1, 2006.

12 ‘‘(ii) An amendment which increases the liabil13 ities of the plan by reason of any increase in benefits,

14 any change in the accrual of benefits, or any change

15 in the rate at which benefits become nonforfeitable

16 under the plan shall not take effect for any plan year

17 in the hiatus period, unless—

18 ‘‘(I) the funded current liability percentage

19 (as defined in subsection (d)(8)(B)) as of the end

20 of the plan year is projected (taking into account

21 the effect of the amendment) to be at least 75

22 percent,

23 ‘‘(II) the plan’s actuary certifies that, due

24 to an increase in contribution rates, the normal

25 cost attributable to the benefit increase or other
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1 change is expected to be fully funded in the year

2 following the year the increase or other change

3 takes effect, and any increase in the plan’s ac4 crued liabilities attributable to the benefit in5 crease or other change is expected to be fully

6 funded by the end of the third plan year fol7 lowing the end of the last hiatus period of the

8 plan, or

9 ‘‘(III) the plan amendment is otherwise de10 scribed in subparagraph (A) or (C) of section

11 304(b)(2).

12 ‘‘(iii) Clause (ii) shall not apply to an increase

13 in benefits for a group of participants resulting solely

14 from a collectively bargained increase in the contribu15 tions made on their behalf.

16 ‘‘(iv) For purposes of this subparagraph, the

17 term ‘hiatus period’ means any period during which

18 the amortization of a net experience loss is suspended

19 by reason of this subparagraph.

20 ‘‘(v) Interest accrued on any net experience loss

21 during a hiatus period shall be charged to a reconcili22 ation account and not to the funding standard ac23 count.

24 ‘‘(vi) If a plan elects an amortization hiatus

25 under this subparagraph and section 412(b)(7)(F) of
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1 the Internal Revenue Code of 1986 for any plan year,

2 the plan administrator shall provide, within 30 days

3 of filing the election for such year, written notice of

4 the election to participants and beneficiaries, to each

5 labor organization representing such participants or

6 beneficiaries, and to each employer that has an obli7 gation to contribute under the plan. Such notice shall

8 include with respect to any election the amount of the

9 net experience loss to be deferred and the period of the

10 deferral. Such notice shall also include the maximum

11 guaranteed monthly benefits which the Pension Ben12 efit Guaranty Corporation would pay if the plan ter13 minated while underfunded.

14 ‘‘(vii) An election under this subparagraph shall

15 be made at such time and in such manner as the Sec16 retary, after consultation with the Secretary of the

17 Treasury, may prescribe.’’

18 (2) PENALTY.—Section 502(c)(4) of such Act (29

19 U.S.C. 1132(c)(4)) is amended to read as follows:

20 ‘‘(4) The Secretary may assess a civil penalty of

21 not more than $1,000 a day for each violation by any

22 person of section 302(b)(7)(F)(vi).’’

23 (b) AMENDMENTS TO THE INTERNAL REVENUE CODE

24 OF 1986.—
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1 (1) IN GENERAL.—Section 412(b)(7) of the Inter2 nal Revenue Code of 1986 (relating to special rules

3 for multiemployer plans) is amended by adding at the

4 end the following new subparagraph:

5 ‘‘(F) AMORTIZATION HIATUS.—

6 ‘‘(i) IN GENERAL.—If a multiemployer

7 plan has a net experience loss for any plan

8 year beginning after June 30, 2002, and be9 fore July 1, 2006—

10 ‘‘(I) the plan may elect to have

11 the 15-year amortization period under

12 paragraph (2)(B)(iv) with respect to

13 the loss begin in any plan year selected

14 by the plan from among the 3 imme15 diately succeeding plan years, and

16 ‘‘(II) if the plan makes an election

17 under subclause (I) for any plan year,

18 the net experience loss for the year

19 shall, for purposes of determining any

20 charge to the funding standard ac21 count, or interest, with respect to the

22 loss, be treated in the same manner as

23 if it were a net experience loss occur24 ring in the year selected by the plan

25 under subclause (I) (without regard to
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1 any net experience loss or gain other2 wise determined for such year).

3 Notwithstanding the preceding sentence, a

4 plan may elect to have this subparagraph

5 apply to net experience losses for only 2

6 plan years beginning after June 30, 2002,

7 and before July 1, 2006.

8 ‘‘(ii) RESTRICTIONS ON BENEFIT IN9 CREASES.—An amendment which increases

10 the liabilities of the plan by reason of any

11 increase in benefits, any change in the ac12 crual of benefits, or any change in the rate

13 at which benefits become nonforfeitable

14 under the plan shall not take effect for any

15 plan year in the hiatus period, unless—

16 ‘‘(I) the funded current liability

17 percentage (as defined in subsection

18 (l)(8)(B)) as of the end of the plan

19 year is projected (taking into account

20 the effect of the amendment) to be at

21 least 75 percent,

22 ‘‘(II) the plan’s actuary certifies

23 that, due to an increase in contribu24 tion rates, the normal cost attributable

25 to the benefit increase or other change
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1 is expected to be fully funded in the

2 year following the year in which the

3 increase or other change takes effect,

4 and any increase in the plan’s accrued

5 liabilities attributable to the benefit in6 crease or other change is expected to be

7 fully funded by the end of the third

8 plan year following the end of the last

9 hiatus period of the plan, or

10 ‘‘(III) the plan amendment is oth11 erwise described in subparagraph (A)

12 or (C) of subsection (f)(2).

13 ‘‘(iii) COLLECTIVELY BARGAINED IN14 CREASES IN CONTRIBUTIONS.—Clause (ii)

15 shall not apply to an increase in benefits

16 for a group of participants resulting solely

17 from a collectively bargained increase in the

18 contributions made on their behalf.

19 ‘‘(iv) HIATUS PERIOD DEFINED.—For

20 purposes of this subparagraph, the term ‘hi21 atus period’ means any period during

22 which the amortization of a net experience

23 loss is suspended by reason of this subpara24 graph.
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1 ‘‘(v) INTEREST ACCRUED DURING HIA2 TUS.—Interest accrued on any net experi3 ence loss during a hiatus period shall be

4 charged to a reconciliation account and not

5 to the funding standard account.

6 ‘‘(vi) ELECTION.—An election under

7 this subparagraph shall be made at such

8 time and in such manner as the Secretary

9 of Labor, after consultation with the Sec10 retary, may prescribe.’’

11 (2) QUALIFICATION REQUIREMENT.—Section

12 401(a) of such Code is amended by inserting after

13 paragraph (34) the following new paragraph:

14 ‘‘(35) BENEFIT INCREASES IN CERTAIN MULTI15 EMPLOYER PLANS.—A trust which is part of a plan

16 shall not constitute a qualified trust under this sec17 tion if the plan adopts an amendment during a hia18 tus period (within the meaning of section

19 412(b)(7)(F)(iv)) which the plan is prohibited from

20 adopting by reason of section 412(b)(7)(F)(ii).’’.

21 SEC. 6. 2-YEAR EXTENSION OF TRANSITION RULE TO PEN22 SION FUNDING REQUIREMENTS.

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

24 Protection Act of 1994, as added by section 1508 of the Tax25 payer Relief Act of 1997, is amended—
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1 (1) by inserting ‘‘except as provided in para2 graph (3),’’ before ‘‘the transition rules’’, and

3 (2) by adding at the end the following:

4 ‘‘(3) SPECIAL RULES.—In the case of plan years begin5 ning in 2004 and 2005, the following transition rules shall

6 apply in lieu of the transition rules described in paragraph

7 (2):

8 ‘‘(A) For purposes of section 412(l)(9)(A) of

9 the Internal Revenue Code of 1986 and section

10 302(d)(9)(A) of the Employee Retirement Income

11 Security Act of 1974, the funded current liability

12 percentage for any plan year shall be treated as

13 not less than 90 percent.

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

15 Internal Revenue Code of 1986 and section

16 302(e) of the Employee Retirement Income Secu17 rity Act of 1974, the funded current liability

18 percentage for any plan year shall be treated as

19 not less than 100 percent.

20 ‘‘(C) For purposes of determining unfunded

21 vested benefits under section 4006(a)(3)(E)(iii)

22 of the Employee Retirement Income Security Act

23 of 1974, the mortality table shall be the mor24 tality table used by the plan.’’
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to plan years beginning after December

3 31, 2003.

4 SEC. 7. PROCEDURES APPLICABLE TO DISPUTES INVOLV5 ING PENSION PLAN WITHDRAWAL LIABILITY.

6 (a) IN GENERAL.—Section 4221 of the Employee Re7 tirement Income Security Act of 1974 (29 U.S.C. 1401) is

8 amended by adding at the end the following new subsection:

9 ‘‘(f) PROCEDURES APPLICABLE TO CERTAIN DIS10 PUTES.—

11 ‘‘(1) IN GENERAL.—If—

12 ‘‘(A) a plan sponsor of a plan determines

13 that—

14 ‘‘(i) a complete or partial withdrawal

15 of an employer has occurred, or

16 ‘‘(ii) an employer is liable for with17 drawal liability payments with respect to

18 the complete or partial withdrawal of an

19 employer from the plan,

20 ‘‘(B) such determination is based in whole

21 or in part on a finding by the plan sponsor

22 under section 4212(c) that a principal purpose

23 of a transaction that occurred before January 1,

24 1999, was to evade or avoid withdrawal liability

25 under this subtitle, and
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1 ‘‘(C) such transaction occurred at least 5

2 years before the date of the complete or partial

3 withdrawal,

4 then the special rules under paragraph (2) shall be

5 used in applying subsections (a) and (d) of this sec6 tion and section 4219(c) to the employer.

7 ‘‘(2) SPECIAL RULES.—

8 ‘‘(A) DETERMINATION.—Notwithstanding

9 subsection (a)(3)—

10 ‘‘(i) a determination by the plan spon11 sor under paragraph (1)(B) shall not be

12 presumed to be correct, and

13 ‘‘(ii) the plan sponsor shall have the

14 burden to establish, by a preponderance of

15 the evidence, the elements of the claim under

16 section 4212(c) that a principal purpose of

17 the transaction was to evade or avoid with18 drawal liability under this subtitle.

19 Nothing in this subparagraph shall affect the

20 burden of establishing any other element of a

21 claim for withdrawal liability under this sub22 title.

23 ‘‘(B) PROCEDURE.—Notwithstanding sub24 section (d) and section 4219(c), if an employer

25 contests the plan sponsor’s determination under
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1 paragraph (1) through an arbitration proceeding

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

3 brought in a court of competent jurisdiction, the

4 employer shall not be obligated to make any

5 withdrawal liability payments until a final deci6 sion in the arbitration proceeding, or in court,

7 upholds the plan sponsor’s determination.’’.

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

9 section shall apply to any employer that receives a notifica10 tion under section 4219(b)(1) of the Employee Retirement

11 Income Security Act of 1974 (29 U.S.C. 1399(b)(1)) after

12 October 31, 2003.

13 SEC. 8. SENSE OF THE SENATE ON STATUS OF PRIVATE

14 PENSION PLANS.

15 (a) FINDINGS.—Congress makes the following findings:

16 (1) The private pension system is integral to the

17 retirement security of Americans, along with indi18 vidual savings and Social Security.

19 (2) The Pension Benefit Guaranty Corporation

20 (PBGC) is responsible for insuring the nation’s pri21 vate pension system, and currently insures the pen22 sions of 34,500,000 participants in 29,500 single-em23 ployer plans, and 9,700,000 participants in more

24 than 1,600 multiemployer plans.
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1 (3) The PBGC announced on January 15, 2004,

2 that it suffered a net loss in fiscal year 2003 of

3 $7,600,000,000 for single-employer pension plans,

4 bringing the PBGC’s deficit to $11,200,000,000. This

5 deficit is the PBGC’s worst on record, three times

6 larger than the $3,600,000,000 deficit experienced in

7 fiscal year 2002.

8 (4) The PBGC also announced that the separate

9 insurance program for multiemployer pension plans

10 sustained a net loss of $419,000,000 in fiscal year

11 2003, resulting in a fiscal year-end deficit of

12 $261,000,000. The 2003 multiemployer plan deficit is

13 the first deficit in more than 20 years and is the larg14 est deficit on record.

15 (5) The PBGC estimates that the total under16 funding in multiemployer pension plans is roughly

17 $100,000,000,000 and in single-employer plans is ap18 proximately $400,000,000,000. This underfunding is

19 due in part to the recent decline in the stock market

20 and low interest rates, but is also due to demographic

21 changes. For example, in 1980, there were four active

22 workers for every one retiree in a multiemployer plan,

23 but in 2002, there was only one active worker for

24 every one retiree.
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1 (6) This pension plan underfunding is con2 centrated in mature and often-declining industries,

3 where plan liabilities will come due sooner.

4 (7) Neither the Senate Committee on Finance

5 nor the Senate Committee on Health, Education,

6 Labor and Pensions (HELP), the committees of juris7 diction over pension matters, has held hearings this

8 Congress nor reported legislation addressing the fund9 ing of multiemployer pension plans;

10 (8) The Senate is concerned about the current

11 funding status of the private pension system, both

12 single and multi-employer plans;

13 (9) The Senate is concerned about the potential

14 liabilities facing the PBGC and, as a result, the po15 tential burdens facing healthy pension plans and tax16 payers;

17 (b) SENSE OF THE SENATE.—It is the sense of the Sen18 ate that the Committee on Finance and the Committee on

19 Health, Education, Labor and Pensions should conduct

20 hearings on the status of the multiemployer pension plans,

21 and should work in consultation with the Departments of

22 Labor and Treasury on permanent measures to strengthen

23 the integrity of the private pension system in order to pro24 tect the benefits of current and future pension plan bene25 ficiaries.
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1 SEC. 9. EXTENSION OF TRANSFERS OF EXCESS PENSION

2 ASSETS TO RETIREE HEALTH ACCOUNTS.

3 (a) AMENDMENT OF INTERNAL REVENUE CODE OF

4 1986.—Paragraph (5) of section 420(b) of the Internal Rev5 enue Code of 1986 (relating to expiration) is amended by

6 striking ‘‘December 31, 2005’’ and inserting ‘‘December 31,

7 2013’’.

8 (b) AMENDMENTS OF ERISA.—

9 (1) Section 101(e)(3) of the Employee Retirement

10 Income Security Act of 1974 (29 U.S.C. 1021(e)(3))

11 is amended by striking ‘‘Tax Relief Extension Act of

12 1999’’ and inserting ‘‘Pension Stability Act’’.

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

14 1103(c)(1)) is amended by striking ‘‘Tax Relief Ex15 tension Act of 1999’’ and inserting ‘‘Pension Stability

16 Act’’.

17 (3) Paragraph (13) of section 408(b) of such Act

18 (29 U.S.C. 1108(b)(3)) is amended—

19 (A) by striking ‘‘January 1, 2006’’ and in20 serting ‘‘January 1, 2014’’, and

21 (B) by striking ‘‘Tax Relief Extension Act

22 of 1999’’ and inserting ‘‘Pension Stability Act’’.
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1 SEC. 10. CLARIFICATION OF EXEMPTION FROM TAX FOR

2 SMALL PROPERTY AND CASUALTY INSUR3 ANCE COMPANIES.

4 (a) IN GENERAL.—Section 501(c)(15)(A) of the Inter5 nal Revenue Code of 1986 is amended to read as follows:

6 ‘‘(A) Insurance companies (as defined in

7 section 816(a)) other than life (including inter8 insurers and reciprocal underwriters) if—

9 ‘‘(i) the gross receipts for the taxable

10 year do not exceed $600,000, and

11 ‘‘(ii) more than 50 percent of such

12 gross receipts consist of premiums.’’.

13 (b) CONTROLLED GROUP RULE.—Section

14 501(c)(15)(C) of the Internal Revenue Code of 1986 is

15 amended by inserting ‘‘, except that in applying section

16 1563 for purposes of section 831(b)(2)(B)(ii), subpara17 graphs (B) and (C) of section 1563(b)(2) shall be dis18 regarded’’ before the period at the end.

19 (c) CONFORMING AMENDMENT.—Clause (i) of section

20 831(b)(2)(A) of the Internal Revenue Code of 1986 is

21 amended by striking ‘‘exceed $350,000 but’’.

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

23 section shall apply to taxable years beginning after Decem24 ber 31, 2003.
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1 SEC. 11. DEFINITION OF INSURANCE COMPANY FOR SEC2 TION 831.

3 (a) IN GENERAL.—Section 831 of the Internal Revenue

4 Code of 1986 is amended by redesignating subsection (c)

5 as subsection (d) and by inserting after subsection (b) the

6 following new subsection:

7 ‘‘(c) INSURANCE COMPANY DEFINED.—For purposes of

8 this section, the term ‘insurance company’ has the meaning

9 given to such term by section 816(a)).’’.

10 (b) EFFECTIVE DATE.—The amendment made by this

11 section shall apply to taxable years beginning after Decem12 ber 31, 2003.

13 SEC. 12. FUNDS FOR REBUILDING FISH STOCKS.

14 Section 105 of the Miscellaneous Appropriations and

15 Offsets Act, 2004 (division H of the Consolidated appro16 priations Act, 2004) is repealed.

Attest:

Secretary.
108TH CONGRESS

2D SESSION H. R. 3108

AMENDMENT