II 

109TH CONGRESS 

1ST SESSION S. 1573 

To amend the Internal Revenue Code of 1986 to encourage the funding 

of collectively bargained retiree health benefits. 

IN THE SENATE OF THE UNITED STATES 

JULY 29, 2005 

Mrs. DOLE (for herself and Mr. CORZINE) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to encourage 

the funding of collectively bargained retiree health benefits. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Retiree Health Bene5 fits Act of 2005’’. 

6 SEC. 2. FUNDING OF RETIREE HEALTH BENEFITS. 

7 (a) COLLECTIVELY BARGAINED TRANSFER TREATED

8 AS A QUALIFIED TRANSFER.— 

9 (1) IN GENERAL.—Section 420(b) of the Inter10 nal Revenue Code of 1986 (defining qualified trans-
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1 fer) is amended by redesignating paragraph (5) as 

2 paragraph (6) and by inserting after paragraph (4) 

3 the following new paragraph: 

4 ‘‘(5) A collectively bargained transfer (as de5 fined in subsection (e)(5)) shall be treated as a 

6 qualified transfer.’’. 

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Subparagraph (B) of section 420(b)(2) 

9 of such Code is amended by inserting ‘‘or a col10 lectively bargained transfer’’ after ‘‘paragraph 

11 (4)’’. 

12 (B) Paragraph (3) of section 420(b) of 

13 such Code is amended to read as follows: 

14 ‘‘(3) LIMITATION ON AMOUNT TRANSFERRED.— 

15 ‘‘(A) IN GENERAL.—The amount of excess 

16 pension assets which may be transferred in a 

17 qualified transfer (other than a collectively bar18 gained transfer) shall not exceed the amount 

19 which is reasonably estimated to be the amount 

20 the employer maintaining the plan will pay 

21 (whether directly or through reimbursement) 

22 out of such account during the taxable year of 

23 the transfer for qualified current retiree health 

24 liabilities. 
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1 ‘‘(B) EXCEPTION FOR COLLECTIVELY BAR2 GAINED TRANSFERS.—The amount of excess 

3 pension assets which may be transferred in a 

4 collectively bargained transfer shall not exceed 

5 the amount which is reasonably estimated, in 

6 accordance with the provisions of the collective 

7 bargaining agreement and generally accepted 

8 accounting principles, to be the amount the em9 ployer maintaining the plan will pay (whether 

10 directly or through reimbursement) out of such 

11 account during the collectively bargained cost 

12 maintenance period for collectively bargained 

13 retiree health liabilities.’’. 

14 (C) Section 420(b)(6) of such Code, as re15 designated by paragraph (1), is amended by in16 serting ‘‘(other than a collectively bargained 

17 transfer)’’ after ‘‘No transfer’’. 

18 (b) REQUIREMENTS OF PLANS MAKING COLLEC19 TIVELY BARGAINED TRANSFERS.— 

20 (1) IN GENERAL.—Paragraph (1) of section 

21 420(c) of the Internal Revenue Code of 1986 (relat22 ing to requirements of plan transferring assets) is 

23 amended to read as follows: 

24 ‘‘(1) USE OF TRANSFERRED ASSETS.— 
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1 ‘‘(A) IN GENERAL.—Except in the case of 

2 a collectively bargained transfer, any assets 

3 transferred to a health benefits account in a 

4 qualified transfer (and any income allocable 

5 thereto) shall be used only to pay qualified cur6 rent retiree health liabilities (other than liabil7 ities of key employees not taken into account 

8 under subsection (e)(1)(D)) for the taxable year 

9 of the transfer (whether directly or through re10 imbursement). 

11 ‘‘(B) COLLECTIVELY BARGAINED TRANS12 FER.—Any assets transferred to a health bene13 fits account in a collectively bargained transfer 

14 (and any income allocable thereto) shall be used 

15 only to pay collectively bargained retiree health 

16 liabilities (other than liabilities of key employees 

17 not taken into account under subsection 

18 (e)(6)(D)) for the taxable year of the transfer 

19 or for any subsequent taxable year during the 

20 collectively bargained cost maintenance period 

21 (whether directly or through reimbursement). 

22 ‘‘(C) AMOUNTS NOT USED TO PAY FOR

23 HEALTH BENEFITS.— 

24 ‘‘(i) IN GENERAL.—Any assets trans25 ferred to a health benefits account in a 
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1 qualified transfer (and any income allo2 cable thereto) which are not used as pro3 vided in subparagraph (A) (in the case of 

4 a qualified transfer other than a collec5 tively bargained transfer) or cannot be 

6 used as provided in subparagraph (B) (in 

7 the case of a collectively bargained trans8 fer) shall be transferred out of the account 

9 to the transferor plan. 

10 ‘‘(ii) TAX TREATMENT OF

11 AMOUNTS.—Any amount transferred out of 

12 an account under clause (i)— 

13 ‘‘(I) shall not be includible in the 

14 gross income of the employer, but 

15 ‘‘(II) shall be treated as an em16 ployer reversion for purposes of sec17 tion 4980 (without regard to sub18 section (d) thereof). 

19 ‘‘(D) ORDERING RULE.—For purposes of 

20 this section, any amount paid out of a health 

21 benefits account shall be treated as paid first 

22 out of the assets and income described in sub23 paragraph (A) (in the case of a qualified trans24 fer other than a collectively bargained transfer) 
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1 or subparagraph (B) (in the case of a collec2 tively bargained transfer).’’. 

3 (2) CONFORMING AMENDMENTS.— 

4 (A) Subparagraph (A) of section 420(c)(3) 

5 of such Code is amended to read as follows: 

6 ‘‘(A) IN GENERAL.—The requirements of 

7 this paragraph are met if— 

8 ‘‘(i) except as provided in clause (ii), 

9 each group health plan or arrangement 

10 under which applicable health benefits are 

11 provided provides that the applicable em12 ployer cost for each taxable year during 

13 the cost maintenance period shall not be 

14 less than the higher of the applicable em15 ployer costs for each of the 2 taxable years 

16 immediately preceding the taxable year of 

17 the qualified transfer, and 

18 ‘‘(ii) in the case of a collectively bar19 gained transfer, each collectively bargained 

20 group health plan under which collectively 

21 bargained health benefits are provided pro22 vides that the collectively bargained em23 ployer cost for each taxable year during 

24 the collectively bargained cost maintenance 

25 period shall not be less than the amount 
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1 specified by the collective bargaining agree2 ment.’’. 

3 (B) Section 420(c)(3) of such Code is 

4 amended by redesignating subparagraphs (C), 

5 (D), and (E) as subparagraphs (D), (E), and 

6 (F), respectively, and by inserting after sub7 paragraph (B) the following new subparagraph: 

8 ‘‘(C) COLLECTIVELY BARGAINED EM9 PLOYER COST.—For purposes of this para10 graph, the term ‘collectively bargained employer 

11 cost’ means the average cost per covered indi12 vidual of providing collectively bargained retiree 

13 health benefits as determined in accordance 

14 with the applicable collective bargaining agree15 ment. Such agreement may provide for an ap16 propriate reduction in the collectively bargained 

17 employer cost to take into account any portion 

18 of the collectively bargained retiree health bene19 fits that is provided or financed by a govern20 ment program or other source.’’. 

21 (C) Subparagraph (E) of section 420(c)(3) 

22 of such Code (as redesignated by subparagraph 

23 (B)) is amended to read as follows: 

24 ‘‘(E) MAINTENANCE PERIOD.—For pur25 poses of this paragraph— 
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1 ‘‘(i) COST MAINTENANCE PERIOD.— 

2 The term ‘cost maintenance period’ means 

3 the period of 5 taxable years beginning 

4 with the taxable year in which the qualified 

5 transfer occurs. If a taxable year is in 2 or 

6 more overlapping cost maintenance peri7 ods, this paragraph shall be applied by 

8 taking into account the highest applicable 

9 employer cost required to be provided 

10 under subparagraph (A)(i) for such taxable 

11 year. 

12 ‘‘(ii) COLLECTIVELY BARGAINED COST

13 MAINTENANCE PERIOD.—The term ‘collec14 tively bargained cost maintenance period’ 

15 means, with respect to each covered retiree 

16 and his covered spouse and dependents, 

17 the shorter of— 

18 ‘‘(I) the remaining lifetime of 

19 such covered retiree and his covered 

20 spouse and dependents, or 

21 ‘‘(II) the period of coverage pro22 vided by the collectively bargained 

23 health plan (determined as of the date 

24 of the collectively bargained transfer) 

25 with respect to such covered retiree 
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1 and his covered spouse and depend2 ents.’’. 

3 (c) LIMITATIONS ON EMPLOYER.—Subsection (d) of 

4 section 420 of the Internal Revenue Code of 1986 is 

5 amended to read as follows: 

6 ‘‘(d) LIMITATIONS ON EMPLOYER.—For purposes of 

7 this title— 

8 ‘‘(1) DEDUCTION LIMITATIONS.—No deduction 

9 shall be allowed— 

10 ‘‘(A) for the transfer of any amount to a 

11 health benefits account in a qualified transfer 

12 (or any retransfer to the plan under subsection 

13 (c)(1)(C)), 

14 ‘‘(B) for qualified current retiree health li15 abilities or collectively bargained retiree health 

16 liabilities paid out of the assets (and income) 

17 described in subsection (c)(1), or 

18 ‘‘(C) except in the case of a collectively 

19 bargained transfer, for any amounts to which 

20 subparagraph (B) does not apply and which are 

21 paid for qualified current retiree health liabil22 ities for the taxable year to the extent such 

23 amounts are not greater than the excess (if 

24 any) of— 
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1 ‘‘(i) the amount determined under 

2 subparagraph (A) (and income allocable 

3 thereto), over 

4 ‘‘(ii) the amount determined under 

5 subparagraph (B). 

6 ‘‘(2) OTHER LIMITATIONS.— 

7 ‘‘(A) NO CONTRIBUTIONS ALLOWED.—Ex8 cept as provided in subparagraph (B), an em9 ployer may not contribute after December 31, 

10 1990, any amount to a health benefits account 

11 or welfare benefit fund (as defined in section 

12 419(e)(1)) with respect to qualified current re13 tiree health liabilities for which transferred as14 sets are required to be used under subsection 

15 (c)(1)(A). 

16 ‘‘(B) EXCEPTION.—An employer may con17 tribute an amount to a health benefits account 

18 or welfare benefit fund (as defined in section 

19 419(e)(1)) with respect to collectively bargained 

20 retiree health liabilities for which transferred 

21 assets are required to be used under subsection 

22 (c)(1)(B), and the deductibility of any such con23 tribution shall be governed by the limits appli24 cable to the deductibility of contributions to a 

25 welfare benefit fund under a collective bar-
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1 gaining agreement (as determined under section 

2 419A(f)(5)(A)) without regard to whether such 

3 contributions are made to a health benefits ac4 count or welfare benefit fund and without re5 gard to the provisions of section 404 or the 

6 other provisions of this section.’’. 

7 (d) DEFINITIONS.—Section 420(e) of the Internal 

8 Revenue Code of 1986 (relating to definition and special 

9 rules) is amended by adding at the end the following new 

10 paragraphs: 

11 ‘‘(5) COLLECTIVELY BARGAINED TRANSFER.— 

12 The term ‘collectively bargained transfer’ means a 

13 transfer— 

14 ‘‘(A) of excess pension assets to a health 

15 benefits account which is part of such plan in 

16 a taxable year beginning after December 31, 

17 2004, 

18 ‘‘(B) which does not contravene any other 

19 provision of law, 

20 ‘‘(C) with respect to which are met in con21 nection with the plan— 

22 ‘‘(i) the use requirements of sub23 section (c)(1), 

24 ‘‘(ii) the vesting requirements of sub25 section (c)(2), and 
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1 ‘‘(iii) the minimum cost requirements 

2 of subsection (c)(3), 

3 ‘‘(D) which is made in accordance with a 

4 collective bargaining agreement, and 

5 ‘‘(E) which, before the transfer, the em6 ployer designates, in a written notice delivered 

7 to each employee organization that is a party to 

8 the collective bargaining agreement, as a collec9 tively bargained transfer in accordance with 

10 this section. 

11 ‘‘(6) COLLECTIVELY BARGAINED RETIREE

12 HEALTH LIABILITIES.— 

13 ‘‘(A) IN GENERAL.—The term ‘collectively 

14 bargained retiree health liabilities’ means the 

15 present value, as of the beginning of a taxable 

16 year and determined in accordance with the ap17 plicable collective bargaining agreement, of all 

18 collectively bargained health benefits (including 

19 administrative expenses) for such taxable year 

20 and all subsequent taxable years during the col21 lectively bargained cost maintenance period. 

22 ‘‘(B) REDUCTION FOR AMOUNTS PRE23 VIOUSLY SET ASIDE.—The amount determined 

24 under subparagraph (A) shall be reduced by the 

25 value (as of the close of the plan year preceding 
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1 the year of the collectively bargained transfer) 

2 of the assets in all health benefits accounts or 

3 welfare benefit funds (as defined in section 

4 419(e)(1)) set aside to pay for the collectively 

5 bargained retiree health liabilities. 

6 ‘‘(C) KEY EMPLOYEES EXCLUDED.—If an 

7 employee is a key employee (within the meaning 

8 of section 416(I)(1)) with respect to any plan 

9 year ending in a taxable year, such employee 

10 shall not be taken into account in computing 

11 collectively bargained retiree health liabilities 

12 for such taxable year or in calculating collec13 tively bargained employer cost under subsection 

14 (c)(3)(C). 

15 ‘‘(7) COLLECTIVELY BARGAINED HEALTH BEN16 EFITS.—The term ‘collectively bargained health ben17 efits’ means health benefits or coverage which are 

18 provided to— 

19 ‘‘(A) retired employees who, immediately 

20 before the collectively bargained transfer, are 

21 entitled to receive such benefits upon retirement 

22 and who are entitled to pension benefits under 

23 the plan, and their spouses and dependents, 

24 and 
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1 ‘‘(B) if specified by the provisions of the 

2 collective bargaining agreement governing the 

3 collectively bargained transfer, active employees 

4 who, following their retirement, are entitled to 

5 receive such benefits and who are entitled to 

6 pension benefits under the plan, and their 

7 spouses and dependents. 

8 ‘‘(8) COLLECTIVELY BARGAINED HEALTH

9 PLAN.—The term ‘collectively bargained health plan’ 

10 means a group health plan or arrangement for re11 tired employees and their spouses and dependents 

12 that is maintained pursuant to 1 or more collective 

13 bargaining agreements.’’. 

14 (e) CONFORMING AMENDMENTS.— 

15 (1) The last sentence of section 401(h) of the 

16 Internal Revenue Code of 1986 is amended by in17 serting ‘‘(other than contributions with respect to 

18 collectively bargained retiree health liabilities within 

19 the meaning of section 420(e)(6))’’ after ‘‘medical 

20 benefits’’. 

21 (2) Section 101(e)(3) of the Employee Retire22 ment Income Security Act of 1974 (29 U.S.C. 

23 1021(e)(3)) is amended by striking ‘‘Pension Fund24 ing Equity Act of 2004’’ and inserting ‘‘Retiree 

25 Health Benefits Act of 2005.’’ 
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1 (3) Section 403(c)(1) of such Act (29 U.S.C. 

2 1103(c)(1)) is amended by striking ‘‘Pension Fund3 ing Equity Act of 2004’’ and inserting ‘‘Retiree 

4 Health Benefits Act of 2005.’’ 

5 (4) Paragraph (13) of section 408(b) of such 

6 Act (29 U.S.C. 1108(b)) is amended— 

7 (A) by striking ‘‘before January 1, 2014’’ 

8 and inserting ‘‘in accordance with section 420 

9 of the Internal Revenue Code of 1986 (as in ef10 fect on the date of the enactment of the Retiree 

11 Health Benefits Act of 2005)’’, and 

12 (B) by striking ‘‘Pension Funding Equity 

13 Act of 2004’’ and inserting ‘‘Retiree Health 

14 Benefits Act of 2005’’. 

15 (f) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to years beginning after December 

17 31, 2004. 

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