109TH CONGRESS

1ST SESSION S. 1783

AN ACT

To amend the Employee Retirement Income Security Act

of 1974 and the Internal Revenue Code of 1986 to

reform the pension funding rules, 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,

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Pension Security and Transparency Act of 2005’’.
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1 (b) TABLE OF CONTENTS.—The table of contents for

2 this Act is as follows:

Sec. 1. Short title and table of contents.

TITLE I—FUNDING AND DEDUCTION RULES FOR SINGLE-EMPLOYER DEFINED BENEFIT PLANS AND RELATED PROVISIONS

Subtitle A—Amendments to Employee Retirement Income Security Act of

1974

Sec. 101. Minimum funding standards.

Sec. 102. Funding rules for single-employer defined benefit pension plans.

Sec. 103. Benefit limitations under single-employer plans.

Sec. 104. Technical and conforming amendments.

Sec. 105. Special rules for multiple employer plans of certain cooperatives.

Sec. 106. Temporary relief for certain rescued plans.

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 111. Modifications of the minimum funding standards.

Sec. 112. Funding rules applicable to single-employer pension plans.

Sec. 113. Benefit limitations under single-employer plans.

Sec. 114. Increase in deduction limit for single-employer plans.

Sec. 115. Technical and conforming amendments.

Subtitle C—Interest Rate Assumptions and Deductible Amounts for 2006

Sec. 121. Extension of replacement of 30-year Treasury rates.

Sec. 122. Deduction limits for plan contributions.

Sec. 123. Updating deduction rules for combination of plans.

TITLE II—FUNDING AND DEDUCTION RULES FOR MULTIEMPLOYER DEFINED BENEFIT PLANS AND RELATED PROVISIONS

Subtitle A—Funding Rules

PART I—AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT

OF 1974

Sec. 201. Funding rules for multiemployer defined benefit plans.

Sec. 202. Additional funding rules for multiemployer plans in endangered or

critical status.

Sec. 203. Measures to forestall insolvency of multiemployer plans.

Sec. 204. Special rule for certain benefits funded under an agreement approved

by the Pension Benefit Guaranty Corporation.

Sec. 205. Withdrawal liability reforms.

PART II—AMENDMENTS TO INTERNAL REVENUE CODE OF 1986

Sec. 211. Funding rules for multiemployer defined benefit plans.

Sec. 212. Additional funding rules for multiemployer plans in endangered or

critical status.

PART III—SUNSET OF FUNDING RULES

Sec. 216. Sunset of funding rules.
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Subtitle B—Deduction and Related Provisions

Sec. 221. Deduction limits for multiemployer plans.

Sec. 222. Transfer of excess pension assets to multiemployer health plan.

TITLE III—INTEREST RATE ASSUMPTIONS

Sec. 301. Interest rate assumption for determination of lump sum distributions.

Sec. 302. Interest rate assumption for applying benefit limitations to lump sum

distributions.

Sec. 303. Restrictions on funding of nonqualified deferred compensation plans

by employers maintaining underfunded or terminated singleemployer plans.

Sec. 304. Modification of pension funding requirements for plans subject to

current transition rule.

TITLE IV—IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

Sec. 401. Increases in PBGC premiums.

Sec. 402. Authority to enter alternative funding agreements to prevent plan terminations.

Sec. 403. Special funding rules for plans maintained by commercial airlines

that are amended to cease future benefit accruals.

Sec. 404. Limitation on PBGC guarantee of shutdown and other benefits.

Sec. 405. Rules relating to bankruptcy of employer.

Sec. 406. PBGC premiums for new plans of small employers.

Sec. 407. PBGC premiums for small and new plans.

Sec. 408. Authorization for PBGC to pay interest on premium overpayment refunds.

Sec. 409. Rules for substantial owner benefits in terminated plans.

Sec. 410. Acceleration of PBGC computation of benefits attributable to recoveries from employers.

Sec. 411. Treatment of certain plans where cessation or change in membership

of a controlled group.

Sec. 412. Effect of title.

Sec. 413. Wage requirement for employers.

TITLE V—DISCLOSURE

Sec. 501. Defined benefit plan funding notice.

Sec. 502. Access to multiemployer pension plan information.

Sec. 503. Additional annual reporting requirements.

Sec. 504. Timing of annual reporting requirements.

Sec. 505. Section 4010 filings with the PBGC.

Sec. 506. Disclosure of termination information to plan participants.

Sec. 507. Benefit suspension notice.

Sec. 508. Study and report by Government Accountability Office.

TITLE VI—TREATMENT OF CASH BALANCE AND OTHER HYBRID

DEFINED BENEFIT PENSION PLANS

Sec. 601. Prospective application of age discrimination, conversion, and present

value assumption rules.

Sec. 602. Regulations relating to mergers and acquisitions.

TITLE VII—DIVERSIFICATION RIGHTS AND OTHER PARTICIPANT

PROTECTIONS UNDER DEFINED CONTRIBUTION PLANS
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Sec. 701. Defined contribution plans required to provide employees with freedom to invest their plan assets.

Sec. 702. Notice of freedom to divest employer securities or real property.

Sec. 703. Periodic pension benefit statements.

Sec. 704. Notice to participants or beneficiaries of blackout periods.

Sec. 705. Allowance of, and credit for, additional IRA payments in certain

bankruptcy cases.

Sec. 706. Inapplicability of relief from fiduciary liability during suspension of

ability of participant or beneficiary to direct investments.

Sec. 707. Increase in maximum bond amount.

TITLE VIII—INFORMATION TO ASSIST PENSION PLAN

PARTICIPANTS

Sec. 801. Defined contribution plans required to provide adequate investment

education to participants.

Sec. 802. Independent investment advice provided to plan participants.

Sec. 803. Treatment of qualified retirement planning services.

Sec. 804. Increase in penalties for coercive interference with exercise of ERISA

rights.

Sec. 805. Administrative provision.

TITLE IX—PROVISIONS RELATING TO SPOUSAL PENSION

PROTECTION

Sec. 901. Regulations on time and order of issuance of domestic relations orders.

Sec. 902. Entitlement of divorced spouses to railroad retirement annuities independent of actual entitlement of employee.

Sec. 903. Extension of tier II railroad retirement benefits to surviving former

spouses pursuant to divorce agreements.

Sec. 904. Requirement for additional survivor annuity option.

TITLE X—IMPROVEMENTS IN PORTABILITY AND DISTRIBUTION

RULES

Sec. 1001. Clarifications regarding purchase of permissive service credit.

Sec. 1002. Allow rollover of after-tax amounts in annuity contracts.

Sec. 1003. Clarification of minimum distribution rules for governmental plans.

Sec. 1004. Waiver of 10 percent early withdrawal penalty tax on certain distributions of pension plans for public safety employees.

Sec. 1005. Allow rollovers by nonspouse beneficiaries of certain retirement plan

distributions.

Sec. 1006. Faster vesting of employer nonelective contributions.

Sec. 1007. Allow direct rollovers from retirement plans to Roth IRAS.

Sec. 1008. Elimination of higher penalty on certain simple plan distributions.

Sec. 1009. Simple plan portability.

Sec. 1010. Eligibility for participation in retirement plans.

Sec. 1011. Transfers to the PBGC.

Sec. 1012. Missing participants.

Sec. 1013. Modifications of rules governing hardships and unforseen financial

emergencies.

TITLE XI—ADMINISTRATIVE PROVISIONS

Sec. 1101. Employee plans compliance resolution system.

Sec. 1102. Notice and consent period regarding distributions.
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Sec. 1103. Reporting simplification.

Sec. 1104. Voluntary early retirement incentive and employment retention

plans maintained by local educational agencies and other entities.

Sec. 1105. No reduction in unemployment compensation as a result of pension

rollovers.

Sec. 1106. Withholding on distributions from governmental section 457 plans.

Sec. 1107. Treatment of defined benefit plan as governmental plan.

Sec. 1108. Increasing participation in cash or deferred plans through automatic

contribution arrangements.

Sec. 1109. Treatment of investment of assets by plan where participant fails

to exercise investment election.

Sec. 1110. Clarification of fiduciary rules.

TITLE XII—UNITED STATES TAX COURT MODERNIZATION

Sec. 1200. Amendment of 1986 Code.

Sec. 1201. Annuities for survivors of Tax Court judges who are assassinated.

Sec. 1202. Cost-of-living adjustments for Tax Court judicial survivor annuities.

Sec. 1203. Life insurance coverage for Tax Court judges.

Sec. 1204. Cost of life insurance coverage for Tax Court judges age 65 or over.

Sec. 1205. Modification of timing of lump-sum payment of judges’ accrued annual leave.

Sec. 1206. Participation of Tax Court judges in the Thrift Savings Plan.

Sec. 1207. Exemption of teaching compensation of retired judges from limitation on outside earned income.

Sec. 1208. General provisions relating to Magistrate Judges of the Tax Court.

Sec. 1209. Annuities to surviving spouses and dependent children of Magistrate

Judges of the Tax Court.

Sec. 1210. Retirement and annuity program.

Sec. 1211. Incumbent Magistrate Judges of the Tax Court.

Sec. 1212. Provisions for recall.

Sec. 1213. Effective date.

TITLE XIII—OTHER PROVISIONS

Subtitle A—Administrative Provision

Sec. 1301. Provisions relating to plan amendments.

Sec. 1302. Authority to the Secretary of Labor, Secretary of the Treasury, and

the Pension Benefit Guaranty Corporation to postpone certain

deadlines.

Subtitle B—Governmental Pension Plan Equalization

Sec. 1311. Definition of governmental plan.

Sec. 1312. Extension to all governmental plans of current moratorium on application of certain nondiscrimination rules applicable to State

and local plans.

Sec. 1313. Clarification that Tribal governments are subject to the same defined benefit plan rules and regulations applied to State and

other local governments, their police and firefighters.

Sec. 1314. Effective date.

Subtitle C—Miscellaneous Provisions
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Sec. 1321. Transfer of excess funds from black lung disability trusts to United

Mine Workers of America Combined Benefit Fund.

Sec. 1322. Treatment of death benefits from corporate-owned life insurance.

Subtitle D—Other Related Pension Provisions

PART I—HEALTH AND MEDICAL BENEFITS

Sec. 1331. Use of excess pension assets for future retiree health benefits.

Sec. 1332. Special rules for funding of collectively bargained retiree health benefits.

Sec. 1333. Allowance of reserve for medical benefits of plans sponsored by bona

fide associations.

PART II—CASH OR DEFERRED ARRANGEMENTS

Sec. 1336. Treatment of eligible combined defined benefit plans and qualified

cash or deferred arrangements.

Sec. 1337. State and local governments eligible to maintain section 401(k)

plans.

PART III—EXCESS CONTRIBUTIONS

Sec. 1339. Excess contributions.

PART IV—OTHER PROVISIONS

Sec. 1341. Amendments relating to prohibited transactions.

Sec. 1342. Federal Task Force on Older Workers.

Sec. 1343. Technical corrections to Saver Act.

1 TITLE I—FUNDING AND DEDUC2 TION RULES FOR SINGLE-EM3 PLOYER DEFINED BENEFIT

4 PLANS AND RELATED PROVI5 SIONS

6 Subtitle A—Amendments to Em7 ployee Retirement Income Secu8 rity Act of 1974

9 SEC. 101. MINIMUM FUNDING STANDARDS.

10 (a) REPEAL OF EXISTING FUNDING RULES.—Sec11 tions 302 through 308 of the Employee Retirement In-
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1 come Security Act of 1974 (29 U.S.C. 1082 through

2 1086) are repealed.

3 (b) NEW MINIMUM FUNDING STANDARDS.—Part 3

4 of subtitle B of title I of such Act (as amended by sub5 section (a)) is amended by inserting after section 301 the

6 following new section:

7 ‘‘MINIMUM FUNDING STANDARDS

8 ‘‘SEC. 302. (a) REQUIREMENT TO MEET MINIMUM

9 FUNDING STANDARD.—

10 ‘‘(1) IN GENERAL.—A plan to which this part

11 applies shall satisfy the minimum funding standard

12 applicable to the plan for any plan year.

13 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur14 poses of paragraph (1), a plan shall be treated as

15 satisfying the minimum funding standard for a plan

16 year if—

17 ‘‘(A) in the case of a defined benefit plan

18 which is a single-employer plan, the employer

19 makes contributions to or under the plan for

20 the plan year which, in the aggregate, are not

21 less than the minimum required contribution

22 determined under section 303 for the plan for

23 the plan year,

24 ‘‘(B) in the case of a money purchase plan

25 which is a single-employer plan, the employer

26 makes contributions to or under the plan for
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1 the plan year which are required under the

2 terms of the plan, and

3 ‘‘(C) in the case of a multiemployer plan,

4 the employers make contributions to or under

5 the plan for any plan year which, in the aggre6 gate, are sufficient to ensure that the plan does

7 not have an accumulated funding deficiency

8 under section 304 as of the end of the plan

9 year.

10 ‘‘(b) LIABILITY FOR CONTRIBUTIONS.—

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (2), the amount of any contribution required

13 by this section (including any required installments

14 under section 303(j)) shall be paid by the employer

15 responsible for making contributions to or under the

16 plan.

17 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

18 EMPLOYER MEMBER OF CONTROLLED GROUP.—If

19 the employer referred to in paragraph (1) is a mem20 ber of a controlled group, each member of such

21 group shall be jointly and severally liable for pay22 ment of such contributions.

23 ‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND24 ARDS.—
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1 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD2 SHIP.—

3 ‘‘(A) IN GENERAL.—If—

4 ‘‘(i) an employer is (or in the case of

5 a multiemployer plan, 10 percent or more

6 of the number of employers contributing to

7 or under the plan are) unable to satisfy the

8 minimum funding standard for a plan year

9 without temporary substantial business

10 hardship (substantial business hardship in

11 the case of a multiemployer plan), and

12 ‘‘(ii) application of the standard would

13 be adverse to the interests of plan partici14 pants in the aggregate,

15 the Secretary of the Treasury may, subject to

16 subparagraph (C), waive the requirements of

17 subsection (a) for such year with respect to all

18 or any portion of the minimum funding stand19 ard. The Secretary of the Treasury shall not

20 waive the minimum funding standard with re21 spect to a plan for more than 3 of any 15 (5

22 of any 15 in the case of a multiemployer plan)

23 consecutive plan years.
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1 ‘‘(B) EFFECTS OF WAIVER.—If a waiver is

2 granted under subparagraph (A) for any plan

3 year—

4 ‘‘(i) in the case of a single-employer

5 plan, the minimum required contribution

6 under section 303 for the plan year shall

7 be reduced by the amount of the waived

8 funding deficiency and such amount shall

9 be amortized as required under section

10 303(e), and

11 ‘‘(ii) in the case of a multiemployer

12 plan, the funding standard account shall

13 be credited under section 304(b)(3)(C)

14 with the amount of the waived funding de15 ficiency and such amount shall be amor16 tized as required under section

17 304(b)(2)(C).

18 ‘‘(C) WAIVER OF AMORTIZED PORTION

19 NOT ALLOWED.—The Secretary of the Treasury

20 may not waive under subparagraph (A) any

21 portion of the minimum funding standard

22 under subsection (a) for a plan year which is

23 attributable to any waived funding deficiency

24 for any preceding plan year.
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1 ‘‘(2) DETERMINATION OF BUSINESS HARD2 SHIP.—For purposes of this subsection, the factors

3 taken into account in determining temporary sub4 stantial business hardship (substantial business

5 hardship in the case of a multiemployer plan) shall

6 include (but shall not be limited to) whether or

7 not—

8 ‘‘(A) the employer is operating at an eco9 nomic loss,

10 ‘‘(B) there is substantial unemployment or

11 underemployment in the trade or business and

12 in the industry concerned,

13 ‘‘(C) the sales and profits of the industry

14 concerned are depressed or declining, and

15 ‘‘(D) it is reasonable to expect that the

16 plan will be continued only if the waiver is

17 granted.

18 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur19 poses of this part, the term ‘waived funding defi20 ciency’ means the portion of the minimum funding

21 standard under subsection (a) (determined without

22 regard to the waiver) for a plan year waived by the

23 Secretary of the Treasury and not satisfied by em24 ployer contributions.
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1 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM2 PLOYER PLANS, CONSULTATIONS.—

3 ‘‘(A) SECURITY MAY BE REQUIRED.—

4 ‘‘(i) IN GENERAL.—Except as pro5 vided in subparagraph (C), the Secretary

6 of the Treasury may require an employer

7 maintaining a defined benefit plan which is

8 a single-employer plan (within the meaning

9 of section 4001(a)(15)) to provide security

10 to such plan as a condition for granting or

11 modifying a waiver under paragraph (1).

12 ‘‘(ii) SPECIAL RULES.—Any security

13 provided under clause (i) may be perfected

14 and enforced only by the Pension Benefit

15 Guaranty Corporation, or, at the direction

16 of the Corporation, by a contributing spon17 sor (within the meaning of section

18 4001(a)(13)) or a member of such spon19 sor’s controlled group (within the meaning

20 of section 4001(a)(14)).

21 ‘‘(B) CONSULTATION WITH THE PENSION

22 BENEFIT GUARANTY CORPORATION.—Except as

23 provided in subparagraph (C), the Secretary of

24 the Treasury shall, before granting or modi25 fying a waiver under this subsection with re-
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1 spect to a plan described in subparagraph

2 (A)(i)—

3 ‘‘(i) provide the Pension Benefit

4 Guaranty Corporation with—

5 ‘‘(I) notice of the completed ap6 plication for any waiver or modifica7 tion, and

8 ‘‘(II) an opportunity to comment

9 on such application within 30 days

10 after receipt of such notice, and

11 ‘‘(ii) consider—

12 ‘‘(I) any comments of the Cor13 poration under clause (i)(II), and

14 ‘‘(II) any views of any employee

15 organization (within the meaning of

16 section 3(4)) representing participants

17 in the plan which are submitted in

18 writing to the Secretary of the Treas19 ury in connection with such applica20 tion.

21 Information provided to the Corporation under

22 this subparagraph shall be considered tax re23 turn information and subject to the safe24 guarding and reporting requirements of section

25 6103(p) of the Internal Revenue Code of 1986.
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1 ‘‘(C) EXCEPTION FOR CERTAIN WAIV2 ERS.—

3 ‘‘(i) IN GENERAL.—The preceding

4 provisions of this paragraph shall not

5 apply to any plan with respect to which the

6 sum of—

7 ‘‘(I) the aggregate unpaid min8 imum required contributions for the

9 plan year and all preceding plan

10 years, and

11 ‘‘(II) the present value of all

12 waiver amortization installments de13 termined for the plan year and suc14 ceeding plan years under section

15 303(e)(2),

16 is less than $1,000,000.

17 ‘‘(ii) TREATMENT OF WAIVERS FOR

18 WHICH APPLICATIONS ARE PENDING.—The

19 amount described in clause (i)(I) shall in20 clude any increase in such amount which

21 would result if all applications for waivers

22 of the minimum funding standard under

23 this subsection which are pending with re24 spect to such plan were denied.
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1 ‘‘(iii) UNPAID MINIMUM REQUIRED

2 CONTRIBUTION.—For purposes of this

3 subparagraph—

4 ‘‘(I) IN GENERAL.—The term

5 ‘unpaid minimum required contribu6 tion’ means, with respect to any plan

7 year, any minimum required contribu8 tion under section 303 for the plan

9 year which is not paid on or before

10 the due date (as determined under

11 section 303(j)(1)) for the plan year.

12 ‘‘(II) ORDERING RULE.—For

13 purposes of subclause (I), any pay14 ment to or under a plan for any plan

15 year shall be allocated first to unpaid

16 minimum required contributions for

17 all preceding plan years on a first-in,

18 first-out basis and then to the min19 imum required contribution under sec20 tion 303 for the plan year.

21 ‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER

22 PLANS.—

23 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 24 ⁄2 MONTHS AFTER CLOSE OF

25 YEAR.—In the case of a single-employer plan,
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1 no waiver may be granted under this subsection

2 with respect to any plan for any plan year un3 less an application therefor is submitted to the

4 Secretary of the Treasury not later than the

5 15th day of the 3rd month beginning after the

6 close of such plan year.

7 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM8 BER OF CONTROLLED GROUP.—In the case of a

9 single-employer plan, if an employer is a mem10 ber of a controlled group, the temporary sub11 stantial business hardship requirements of

12 paragraph (1) shall be treated as met only if

13 such requirements are met—

14 ‘‘(i) with respect to such employer,

15 and

16 ‘‘(ii) with respect to the controlled

17 group of which such employer is a member

18 (determined by treating all members of

19 such group as a single employer).

20 The Secretary of the Treasury may provide that

21 an analysis of a trade or business or industry

22 of a member need not be conducted if the Sec23 retary of the Treasury determines such analysis

24 is not necessary because the taking into account
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1 of such member would not significantly affect

2 the determination under this paragraph.

3 ‘‘(6) ADVANCE NOTICE.—

4 ‘‘(A) IN GENERAL.—The Secretary of the

5 Treasury shall, before granting a waiver under

6 this subsection, require each applicant to pro7 vide evidence satisfactory to such Secretary that

8 the applicant has provided notice of the filing of

9 the application for such waiver to each affected

10 party (as defined in section 4001(a)(21)) other

11 than the Pension Benefit Guaranty Corporation

12 and in the case of a multiemployer plan, to each

13 employer required to contribute to the plan

14 under subsection (b)(1). Such notice shall in15 clude a description of the extent to which the

16 plan is funded for benefits which are guaran17 teed under title IV and for benefit liabilities.

18 ‘‘(B) CONSIDERATION OF RELEVANT IN19 FORMATION.—The Secretary of the Treasury

20 shall consider any relevant information provided

21 by a person to whom notice was given under

22 subparagraph (A).

23 ‘‘(7) RESTRICTION ON PLAN AMENDMENTS.—

24 ‘‘(A) IN GENERAL.—No amendment of a

25 plan which increases the liabilities of the plan
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1 by reason of any increase in benefits, any

2 change in the accrual of benefits, or any change

3 in the rate at which benefits become nonforfeit4 able under the plan shall be adopted if a waiver

5 under this subsection or an extension of time

6 under section 304(d) is in effect with respect to

7 the plan, or if a plan amendment described in

8 subsection (d)(2) has been made at any time in

9 the preceding 24 months. If a plan is amended

10 in violation of the preceding sentence, any such

11 waiver, or extension of time, shall not apply to

12 any plan year ending on or after the date on

13 which such amendment is adopted.

14 ‘‘(B) EXCEPTION.—Subparagraph (A)

15 shall not apply to any plan amendment which—

16 ‘‘(i) the Secretary of the Treasury de17 termines to be reasonable and which pro18 vides for only de minimis increases in the

19 liabilities of the plan,

20 ‘‘(ii) only repeals an amendment de21 scribed in subsection (d)(2), or

22 ‘‘(iii) is required as a condition of

23 qualification under part I of subchapter D,

24 of chapter 1 of the Internal Revenue Code

25 of 1986.
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1 ‘‘(8) CROSS REFERENCE.—For corresponding

2 duties of the Secretary of the Treasury with regard

3 to implementation of the Internal Revenue Code of

4 1986, see section 412(d) of such Code.

5 ‘‘(d) MISCELLANEOUS RULES.—

6 ‘‘(1) CHANGE IN METHOD OR YEAR.—If the

7 funding method, the valuation date, or a plan year

8 for a plan is changed, the change shall take effect

9 only if approved by the Secretary of the Treasury.

10 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND11 MENTS.—For purposes of this section, any amend12 ment applying to a plan year which—

13 ‘‘(A) is adopted after the close of such plan

year but no later than 21 14 ⁄2 months after the

15 close of the plan year (or, in the case of a mul16 tiemployer plan, no later than 2 years after the

17 close of such plan year),

18 ‘‘(B) does not reduce the accrued benefit

19 of any participant determined as of the begin20 ning of the first plan year to which the amend21 ment applies, and

22 ‘‘(C) does not reduce the accrued benefit of

23 any participant determined as of the time of

24 adoption except to the extent required by the

25 circumstances,
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1 shall, at the election of the plan administrator, be

2 deemed to have been made on the first day of such

3 plan year. No amendment described in this para4 graph which reduces the accrued benefits of any par5 ticipant shall take effect unless the plan adminis6 trator files a notice with the Secretary of the Treas7 ury notifying him of such amendment and such Sec8 retary has approved such amendment, or within 90

9 days after the date on which such notice was filed,

10 failed to disapprove such amendment. No amend11 ment described in this subsection shall be approved

12 by the Secretary of the Treasury unless such Sec13 retary determines that such amendment is necessary

14 because of a temporary substantial business hard15 ship (as determined under subsection (c)(2)) or a

16 substantial business hardship (as so determined) in

17 the case of a multiemployer plan and that a waiver

18 under subsection (c) (or, in the case of a multiem19 ployer plan, any extension of the amortization period

20 under section 304(d)) is unavailable or inadequate.

21 ‘‘(3) CONTROLLED GROUP.—For purposes of

22 this section, the term ‘controlled group’ means any

23 group treated as a single employer under subsection

24 (b), (c), (m), or (o) of section 414 of the Internal

25 Revenue Code of 1986.’’.
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1 (c) CLERICAL AMENDMENT.—The table of contents

2 in section 1 of such Act is amended by striking the items

3 relating to sections 302 through 308 and inserting the fol4 lowing new item:

‘‘Sec. 302. Minimum funding standards.’’.

5 (d) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to plan years beginning after 2006.

7 SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE8 FINED BENEFIT PENSION PLANS.

9 (a) IN GENERAL.—Part 3 of subtitle B of title I of

10 the Employee Retirement Income Security Act of 1974 (as

11 amended by section 101 of this Act) is amended by insert12 ing after section 302 the following new section:

13 ‘‘MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER

14 DEFINED BENEFIT PENSION PLANS

15 ‘‘SEC. 303. (a) MINIMUM REQUIRED CONTRIBU16 TION.—For purposes of this section and section

17 302(a)(2)(A), except as provided in subsection (f), the

18 term ‘minimum required contribution’ means, with respect

19 to any plan year of a defined benefit plan which is a single

20 employer plan—

21 ‘‘(1) in any case in which the value of plan as22 sets of the plan (as reduced under subsection (f)(4))

23 is less than the funding target of the plan for the

24 plan year, the sum of—
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1 ‘‘(A) the target normal cost of the plan for

2 the plan year,

3 ‘‘(B) the shortfall amortization charge (if

4 any) for the plan for the plan year determined

5 under subsection (c), and

6 ‘‘(C) the waiver amortization charge (if

7 any) for the plan for the plan year as deter8 mined under subsection (e); or

9 ‘‘(2) in any case in which the value of plan as10 sets of the plan (as reduced under subsection (f)(4))

11 equals or exceeds the funding target of the plan for

12 the plan year, the target normal cost of the plan for

13 the plan year reduced (but not below zero) by any

14 such excess.

15 ‘‘(b) TARGET NORMAL COST.—For purposes of this

16 section, except as provided in subsection (i)(2) with re17 spect to plans in at-risk status, the term ‘target normal

18 cost’ means, for any plan year, the present value of all

19 benefits which are expected to accrue or to be earned

20 under the plan during the plan year. For purposes of this

21 subsection, if any benefit attributable to services per22 formed in a preceding plan year is increased by reason

23 of any increase in compensation during the current plan

24 year, the increase in such benefit shall be treated as hav25 ing accrued during the current plan year.
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1 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.—

2 ‘‘(1) IN GENERAL.—For purposes of this sec3 tion, the shortfall amortization charge for a plan for

4 any plan year is the aggregate total of the shortfall

5 amortization installments for such plan year with re6 spect to the shortfall amortization bases for such

7 plan year and each of the 6 preceding plan years.

8 ‘‘(2) SHORTFALL AMORTIZATION INSTALL9 MENT.—For purposes of paragraph (1)—

10 ‘‘(A) DETERMINATION.—The shortfall am11 ortization installments are the amounts nec12 essary to amortize the shortfall amortization

13 base of the plan for any plan year in level an14 nual installments over the 7-plan-year period

15 beginning with such plan year.

16 ‘‘(B) SHORTFALL INSTALLMENT.—The

17 shortfall amortization installment for any plan

18 year in the 7-plan-year period under subpara19 graph (A) with respect to any shortfall amorti20 zation base is the annual installment deter21 mined under subparagraph (A) for that year for

22 that base.

23 ‘‘(C) SEGMENT RATES.—In determining

24 any shortfall amortization installment under

25 this paragraph, the plan sponsor shall use the
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1 segment rates determined under subparagraph

2 (C) of subsection (h)(2), applied under rules

3 similar to the rules of subparagraph (B) of sub4 section (h)(2).

5 ‘‘(3) SHORTFALL AMORTIZATION BASE.—For

6 purposes of this section, the shortfall amortization

7 base of a plan for a plan year is the excess (if any)

8 of—

9 ‘‘(A) the funding shortfall of such plan for

10 such plan year, over

11 ‘‘(B) the present value (determined using

12 the segment rates determined under subpara13 graph (C) of subsection (h)(2), applied under

14 rules similar to the rules of subparagraph (B)

15 of subsection (h)(2)) of the aggregate total of

16 the shortfall amortization installments and

17 waiver amortization installments which have

18 been determined for such plan year and any

19 succeeding plan year with respect to the short20 fall amortization bases and waiver amortization

21 bases of the plan for any plan year preceding

22 such plan year.

23 ‘‘(4) FUNDING SHORTFALL.—

24 ‘‘(A) IN GENERAL.—For purposes of this

25 section, except as provided in subparagraph
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1 (B), the funding shortfall of a plan for any plan

2 year is the excess (if any) of—

3 ‘‘(i) the funding target of the plan for

4 the plan year, over

5 ‘‘(ii) the value of plan assets of the

6 plan (as reduced under subsection (f)(4))

7 for the plan year which are held by the

8 plan on the valuation date.

9 ‘‘(B) TRANSITION RULE FOR AMORTIZA10 TION OF FUNDING SHORTFALL.—

11 ‘‘(i) IN GENERAL.—Solely for pur12 poses of applying paragraph (3) in the case

13 of plan years beginning after 2006 and be14 fore 2011, only the applicable percentage

15 of the funding target shall be taken into

16 account under paragraph (3)(A) in deter17 mining the funding shortfall for the plan

18 year.

19 ‘‘(ii) APPLICABLE PERCENTAGE.—For

20 purposes of subparagraph (A)—

21 ‘‘(I) IN GENERAL.—Except as

22 provided in subclause (II), the appli23 cable percentage shall be 93 percent

24 for plan years beginning in 2007, 96

25 percent for plan years beginning in
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1 2008, and 100 percent for any suc2 ceeding plan year.

3 ‘‘(II) SMALL PLANS.—In the case

4 of a plan described in subsection

5 (g)(2)(B), the applicable percentage

6 shall be determined in accordance

7 with the following table:

‘‘In the case of a plan year The applicable

beginning in calendar year: percentage is—

2007 ......................................................................................... 92

2008 ......................................................................................... 94

2009 ......................................................................................... 96

2010 ......................................................................................... 98.

8 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT9 TAINMENT OF FUNDING TARGET.—In any case in

10 which the funding shortfall of a plan for a plan year

11 is zero, for purposes of determining the shortfall am12 ortization charge for such plan year and succeeding

13 plan years, the shortfall amortization bases for all

14 preceding plan years (and all shortfall amortization

15 installments determined with respect to such bases)

16 shall be reduced to zero.

17 ‘‘(d) RULES RELATING TO FUNDING TARGET.—For

18 purposes of this section—

19 ‘‘(1) FUNDING TARGET.—Except as provided in

20 subsection (i)(1) with respect to plans in at-risk sta21 tus, the funding target of a plan for a plan year is
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1 the present value of all benefits accrued or earned

2 under the plan as of the beginning of the plan year.

3 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT4 AGE.—The ‘funding target attainment percentage’ of

5 a plan for a plan year is the ratio (expressed as a

6 percentage) which—

7 ‘‘(A) the value of plan assets for the plan

8 year, bears to

9 ‘‘(B) the funding target of the plan for the

10 plan year (determined without regard to sub11 section (i)(1)).

12 ‘‘(e) WAIVER AMORTIZATION CHARGE.—

13 ‘‘(1) DETERMINATION OF WAIVER AMORTIZA14 TION CHARGE.—The waiver amortization charge (if

15 any) for a plan for any plan year is the aggregate

16 total of the waiver amortization installments for

17 such plan year with respect to the waiver amortiza18 tion bases for each of the 5 preceding plan years.

19 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—

20 For purposes of paragraph (1)—

21 ‘‘(A) DETERMINATION.—The waiver amor22 tization installments are the amounts necessary

23 to amortize the waiver amortization base of the

24 plan for any plan year in level annual install-
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1 ments over a period of 5 plan years beginning

2 with the succeeding plan year.

3 ‘‘(B) WAIVER INSTALLMENT.—The waiver

4 amortization installment for any plan year in

5 the 5-year period under subparagraph (A) with

6 respect to any waiver amortization base is the

7 annual installment determined under subpara8 graph (A) for that year for that base.

9 ‘‘(3) INTEREST RATE.—In determining any

10 waiver amortization installment under this sub11 section, the plan sponsor shall use the segment rates

12 determined under subparagraph (C) of subsection

13 (h)(2), applied under rules similar to the rules of

14 subparagraph (B) of subsection (h)(2).

15 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiv16 er amortization base of a plan for a plan year is the

17 amount of the waived funding deficiency (if any) for

18 such plan year under section 302(c).

19 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT20 TAINMENT OF FUNDING TARGET.—In any case in

21 which the funding shortfall of a plan for a plan year

22 is zero, for purposes of determining the waiver am23 ortization charge for such plan year and succeeding

24 plan years, the waiver amortization bases for all pre25 ceding plan years (and all waiver amortization in-
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1 stallments with respect to such bases) shall be re2 duced to zero.

3 ‘‘(f) USE OF PREFUNDING BALANCES TO SATISFY

4 MINIMUM REQUIRED CONTRIBUTIONS.—

5 ‘‘(1) IN GENERAL.—A plan sponsor may credit

6 any amount of a plan’s prefunding balance for a

7 plan year against the minimum required contribu8 tion for the plan year and the amount of the con9 tributions an employer is required to make under

10 section 302(b) for the plan year shall be reduced by

11 the amount so credited. Any such amount shall be

12 credited on the first day of the plan year.

13 ‘‘(2) PREFUNDING BALANCE.—

14 ‘‘(A) BEGINNING BALANCE.—The begin15 ning balance of a prefunding balance main16 tained by a plan shall be zero, except that if a

17 plan was in effect for a plan year beginning in

18 2006 and had a positive balance in the funding

19 standard account under section 302(b) (as in

20 effect for such plan year) as of the end of such

21 plan year, the beginning balance for the plan

22 for its first plan year beginning after 2006 shall

23 be such positive balance.

24 ‘‘(B) INCREASES.—
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1 ‘‘(i) IN GENERAL.—As of the first day

2 of each plan year beginning after 2007, the

3 prefunding balance of a plan shall be in4 creased by the excess (if any) of—

5 ‘‘(I) the aggregate amount of em6 ployer contributions to the plan for

7 the preceding plan year, over

8 ‘‘(II) the minimum required con9 tribution for the preceding plan year.

10 ‘‘(ii) ADJUSTMENTS FOR INTEREST.—

11 Any excess contributions under clause (i)

12 shall be properly adjusted for interest ac13 cruing for the periods between the first

14 day of the current plan year and the dates

15 on which the excess contributions were

16 made, determined by using the effective in17 terest rate for the preceding plan year and

18 by treating contributions as being first

19 used to satisfy the minimum required con20 tribution.

21 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS22 REGARDED.—Any contribution which is re23 quired to be made under section 206(g) in

24 addition to any contribution required
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S 1783 ES

1 under this section shall not be taken into

2 account for purposes of clause (i).

3 ‘‘(C) DECREASES.—As of the first day of

4 each plan year after 2007, the prefunding bal5 ance of a plan shall be decreased (but not below

6 zero) by the amount of the balance credited

7 under paragraph (1) against the minimum re8 quired contribution of the plan for the pre9 ceding plan year.

10 ‘‘(D) ADJUSTMENTS FOR INVESTMENT EX11 PERIENCE.—In determining the prefunding bal12 ance of a plan as of the first day of the plan

13 year, the plan sponsor shall, in accordance with

14 regulations prescribed by the Secretary of the

15 Treasury, adjust such balance to reflect the

16 rate of return on plan assets for the preceding

17 plan year. Notwithstanding subsection (g)(3),

18 such rate of return shall be determined on the

19 basis of fair market value and shall properly

20 take into account, in accordance with such reg21 ulations, all contributions, distributions, and

22 other plan payments made during such period.

23 ‘‘(3) LIMITATION FOR UNDERFUNDED PLANS.—

24 ‘‘(A) IN GENERAL.—If the ratio (expressed

25 as a percentage) for any plan year which—
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S 1783 ES

1 ‘‘(i) the value of plan assets for the

2 preceding plan year, bears to

3 ‘‘(ii) the funding target of the plan for

4 the preceding plan year (determined with5 out regard to subsection (i)(1)),

6 is less than 80 percent, the preceding provisions

7 of this subsection shall not apply unless employ8 ers liable for contributions to the plan under

9 section 302(b) make contributions to the plan

10 for the plan year in an aggregate amount not

11 less than the amount determined under sub12 paragraph (B). Any contribution required by

13 this subparagraph may not be reduced by any

14 credit otherwise allowable under paragraph (1).

15 ‘‘(B) APPLICABLE AMOUNT.—The amount

16 determined under this subparagraph for any

17 plan year is the greater of—

18 ‘‘(i) the target normal cost of the plan

19 for the plan year, or

20 ‘‘(ii) 25 percent of the minimum re21 quired contribution under subsection (a)

22 for the plan year without regard to this

23 subsection.

24 ‘‘(4) REDUCTION IN VALUE OF ASSETS.—Solely

25 for purposes of applying subsections (a) and
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1 (c)(4)(A)(ii) in determining the minimum required

2 contribution under this section, the value of the plan

3 assets otherwise determined without regard to this

4 paragraph shall be reduced by the amount of the

5 prefunding balance under this subsection.

6 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL7 ITIES.—

8 ‘‘(1) TIMING OF DETERMINATIONS.—Except as

9 otherwise provided under this subsection, all deter10 minations under this section for a plan year shall be

11 made as of the valuation date of the plan for such

12 plan year.

13 ‘‘(2) VALUATION DATE.—For purposes of this

14 section—

15 ‘‘(A) IN GENERAL.—Except as provided in

16 subparagraph (B), the valuation date of a plan

17 for any plan year shall be the first day of the

18 plan year.

19 ‘‘(B) EXCEPTION FOR SMALL PLANS.—If,

20 on each day during the preceding plan year, a

21 plan had 100 or fewer participants, the plan

22 may designate any day during the plan year as

23 its valuation date for such plan year and suc24 ceeding plan years. For purposes of this sub25 paragraph, all defined benefit plans (other than
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S 1783 ES

1 multiemployer plans) maintained by the same

2 employer (or any member of such employer’s

3 controlled group) shall be treated as 1 plan, but

4 only employees of such employer or member

5 shall be taken into account.

6 ‘‘(C) APPLICATION OF CERTAIN RULES IN

7 DETERMINATION OF PLAN SIZE.—For purposes

8 of this paragraph—

9 ‘‘(i) PLANS NOT IN EXISTENCE IN

10 PRECEDING YEAR.—In the case of the first

11 plan year of any plan, subparagraph (B)

12 shall apply to such plan by taking into ac13 count the number of participants that the

14 plan is reasonably expected to have on

15 days during such first plan year.

16 ‘‘(ii) PREDECESSORS.—Any reference

17 in subparagraph (B) to an employer shall

18 include a reference to any predecessor of

19 such employer.

20 ‘‘(3) DETERMINATION OF VALUE OF PLAN AS21 SETS.—For purposes of this section—

22 ‘‘(A) IN GENERAL.—Except as provided in

23 subparagraph (B), the value of plan assets shall

24 be the fair market value of the assets.
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1 ‘‘(B) AVERAGING ALLOWED.—A plan may

2 determine the value of plan assets on the basis

3 of any reasonable actuarial method of valuation

4 providing for the averaging of fair market val5 ues, but only if such method—

6 ‘‘(i) is permitted under regulations

7 prescribed by the Secretary of the Treas8 ury, and

9 ‘‘(ii) does not provide for averaging of

10 such values over more than the period be11 ginning on the last day of the 12th month

12 preceding the valuation date and ending on

13 the valuation date (or a similar period in

14 the case of a valuation date which is not

15 the 1st day of a month).

16 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE17 CEIPTS.—For purposes of determining the value of

18 assets under paragraph (3)—

19 ‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

20 ‘‘(i) an employer makes any contribu21 tion to the plan after the valuation date for

22 the plan year in which the contribution is

23 made, and

24 ‘‘(ii) the contribution is for a pre25 ceding plan year,
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1 the contribution shall be taken into account as

2 an asset of the plan as of the valuation date,

3 except that in the case of any plan year begin4 ning after 2007, only the present value (deter5 mined as of the valuation date) of such con6 tribution may be taken into account. For pur7 poses of the preceding sentence, present value

8 shall be determined using the effective interest

9 rate for the preceding plan year to which the

10 contribution is properly allocable.

11 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

12 CONTRIBUTIONS MADE BEFORE VALUATION

13 DATE.—If any contributions for any plan year

14 are made to or under the plan during the plan

15 year but before the valuation date for the plan

16 year, the assets of the plan as of the valuation

17 date shall not include—

18 ‘‘(i) such contributions, and

19 ‘‘(ii) interest on such contributions for

20 the period between the date of the con21 tributions and the valuation date, deter22 mined by using the effective interest rate

23 for the plan year.

24 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—
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S 1783 ES

1 ‘‘(1) IN GENERAL.—Subject to this subsection,

2 the determination of any present value or other com3 putation under this section shall be made on the

4 basis of actuarial assumptions and methods—

5 ‘‘(A) each of which is reasonable (taking

6 into account the experience of the plan and rea7 sonable expectations), and

8 ‘‘(B) which, in combination, offer the actu9 ary’s best estimate of anticipated experience

10 under the plan.

11 ‘‘(2) INTEREST RATES.—

12 ‘‘(A) EFFECTIVE INTEREST RATE.—For

13 purposes of this section, the term ‘effective in14 terest rate’ means, with respect to any plan for

15 any plan year, the single rate of interest which,

16 if used to determine the present value of the

17 plan’s accrued or earned benefits referred to in

18 subsection (d)(1), would result in an amount

19 equal to the funding target of the plan for such

20 plan year.

21 ‘‘(B) INTEREST RATES FOR DETERMINING

22 FUNDING TARGET.—For purposes of deter23 mining the funding target of a plan for any

24 plan year, the interest rate used in determining
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S 1783 ES

1 the present value of the benefits of the plan

2 shall be—

3 ‘‘(i) in the case of benefits reasonably

4 determined to be payable during the 5-year

5 period beginning on the first day of the

6 plan year, the first segment rate with re7 spect to the applicable month,

8 ‘‘(ii) in the case of benefits reasonably

9 determined to be payable during the 15-

10 year period beginning at the end of the pe11 riod described in clause (i), the second seg12 ment rate with respect to the applicable

13 month, and

14 ‘‘(iii) in the case of benefits reason15 ably determined to be payable after the pe16 riod described in clause (ii), the third seg17 ment rate with respect to the applicable

18 month.

19 ‘‘(C) SEGMENT RATES.—For purposes of

20 this paragraph—

21 ‘‘(i) FIRST SEGMENT RATE.—The

22 term ‘first segment rate’ means, with re23 spect to any month, the single rate of in24 terest which shall be determined by the

25 Secretary of the Treasury for such month
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S 1783 ES

1 on the basis of the corporate bond yield

2 curve for such month, taking into account

3 only that portion of such yield curve which

4 is based on bonds maturing during the 5-

5 year period commencing with such month.

6 ‘‘(ii) SECOND SEGMENT RATE.—The

7 term ‘second segment rate’ means, with re8 spect to any month, the single rate of in9 terest which shall be determined by the

10 Secretary of the Treasury for such month

11 on the basis of the corporate bond yield

12 curve for such month, taking into account

13 only that portion of such yield curve which

14 is based on bonds maturing during each of

15 the years in the 15-year period beginning

16 at the end of the period described in clause

17 (i).

18 ‘‘(iii) THIRD SEGMENT RATE.—The

19 term ‘third segment rate’ means, with re20 spect to any month, the single rate of in21 terest which shall be determined by the

22 Secretary of the Treasury for such month

23 on the basis of the corporate bond yield

24 curve for such month, taking into account

25 only that portion of such yield curve which
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S 1783 ES

1 is based on bonds maturing during periods

2 beginning after the period described in

3 clause (ii).

4 ‘‘(D) CORPORATE BOND YIELD CURVE.—

5 The term ‘corporate bond yield curve’ means,

6 with respect to any month, a yield curve which

7 is prescribed by the Secretary of the Treasury

8 for such month and which reflects the average,

9 for the 12-month period ending with the month

10 preceding such month, of yields on investment

11 grade corporate bonds with varying maturities.

12 ‘‘(E) APPLICABLE MONTH.—For purposes

13 of this paragraph, the term ‘applicable month’

14 means, with respect to any plan for any plan

15 year, the month which includes the valuation

16 date of such plan for such plan year or, at the

17 election of the plan administrator, any of the 4

18 months which precede such month. Any election

19 made under this subparagraph shall apply to

20 the plan year for which the election is made and

21 all succeeding plan years, unless the election is

22 revoked with the consent of the Secretary of the

23 Treasury.

24 ‘‘(F) PUBLICATION REQUIREMENTS.—The

25 Secretary of the Treasury shall publish for each
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1 month the corporate bond yield curve for such

2 month and each of the rates determined under

3 this paragraph for such month. The Secretary

4 of the Treasury shall also publish a description

5 of the methodology used to determine such yield

6 curve and such rates which is sufficiently de7 tailed to enable plans to make reasonable pro8 jections regarding the yield curve and such

9 rates for future months based on the plan’s

10 projection of future interest rates.

11 ‘‘(G) TRANSITION RULE.—

12 ‘‘(i) IN GENERAL.—Notwithstanding

13 the preceding provisions of this paragraph,

14 for plan years beginning in 2007 or 2008,

15 the first, second, or third segment rate for

16 a plan with respect to any month shall be

17 equal to the sum of—

18 ‘‘(I) the product of such rate for

19 such month determined without re20 gard to this subparagraph, multiplied

21 by the applicable percentage, and

22 ‘‘(II) the product of the rate de23 termined under the rules of section

24 302(b)(5)(B)(ii)(II) (as in effect for

25 plan years beginning in 2006), multi-
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1 plied by a percentage equal to 100

2 percent minus the applicable percent3 age.

4 ‘‘(ii) APPLICABLE PERCENTAGE.—For

5 purposes of clause (i), the applicable percentage is 331 6 ⁄3 percent for plan years beginning in 2007 and 662 7 ⁄3 percent for plan

8 years beginning in 2008.

9 ‘‘(3) MORTALITY TABLES.—

10 ‘‘(A) IN GENERAL.—Except as provided in

11 subparagraphs (C) and (D), the mortality table

12 used in determining any present value or mak13 ing any computation under this section shall be

14 the RP–2000 Combined Mortality Table, using

15 Scale AA, as published by the Society of Actu16 aries, as in effect on the date of the enactment

17 of the Pension Security and Transparency Act

18 of 2005 and as revised from time to time under

19 subparagraph (B).

20 ‘‘(B) PERIODIC REVISION.—The Secretary

21 of the Treasury shall (at least every 10 years)

22 make revisions in any table in effect under sub23 paragraph (A) to reflect the actual experience

24 of pension plans and projected trends in such

25 experience.
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1 ‘‘(C) SUBSTITUTE MORTALITY TABLE.—

2 ‘‘(i) IN GENERAL.—Upon request by

3 the plan sponsor and approval by the Sec4 retary of the Treasury, a mortality table

5 which meets the requirements of clause (ii)

6 shall be used in determining any present

7 value or making any computation under

8 this section during the 10-consecutive plan

9 year period specified in the request. A

10 mortality table described in this clause

11 shall cease to be in effect if the plan actu12 ary determines at any time that such table

13 does not meet the requirements of clause

14 (ii).

15 ‘‘(ii) REQUIREMENTS.—A mortality

16 table meets the requirements of this clause

17 if the Secretary of the Treasury determines

18 that—

19 ‘‘(I) there is a sufficient number

20 of plan participants, and the pension

21 plans have been maintained for a suf22 ficient period of time, to have credible

23 information necessary for purposes of

24 subclause (II),
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1 ‘‘(II) such table reflects the ac2 tual experience of the pension plans

3 maintained by the sponsor and pro4 jected trends in general mortality ex5 perience,

6 ‘‘(III) except as provided by the

7 Secretary, such table will be used by

8 all plans maintained by the plan spon9 sor and all members of any controlled

10 group which includes the plan spon11 sor, and

12 ‘‘(IV) such table is significantly

13 different from the table described in

14 subparagraph (A).

15 ‘‘(iii) DEADLINE FOR DISPOSITION OF

16 APPLICATION.—Any mortality table sub17 mitted to the Secretary of the Treasury for

18 approval under this subparagraph shall be

19 treated as in effect for the first plan year

20 in the 10-year period described in clause

21 (i) unless the Secretary of the Treasury,

22 during the 180-day period beginning on

23 the date of such submission, disapproves of

24 such table and provides the reasons that

25 such table fails to meet the requirements
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S 1783 ES

1 of clause (ii). The 180-day period shall be

2 extended for any period during which the

3 Secretary of the Treasury has requested

4 information from the plan sponsor and

5 such information has not been provided.

6 ‘‘(D) SEPARATE MORTALITY TABLES FOR

7 THE DISABLED.—Notwithstanding subpara8 graph (A)—

9 ‘‘(i) IN GENERAL.—The Secretary of

10 the Treasury shall establish mortality ta11 bles which may be used (in lieu of the ta12 bles under subparagraph (A)) under this

13 subsection for individuals who are entitled

14 to benefits under the plan on account of

15 disability. The Secretary of the Treasury

16 shall establish separate tables for individ17 uals whose disabilities occur in plan years

18 beginning before January 1, 1995, and for

19 individuals whose disabilities occur in plan

20 years beginning on or after such date.

21 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

22 OCCURRING AFTER 1994.—In the case of

23 disabilities occurring in plan years begin24 ning after December 31, 1994, the tables

25 under clause (i) shall apply only with re-
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S 1783 ES

1 spect to individuals described in such sub2 clause who are disabled within the meaning

3 of title II of the Social Security Act and

4 the regulations thereunder.

5 ‘‘(iii) PERIODIC REVISION.—The Sec6 retary of the Treasury shall (at least every

7 10 years) make revisions in any table in ef8 fect under clause (i) to reflect the actual

9 experience of pension plans and projected

10 trends in such experience.

11 ‘‘(E) TRANSITION RULE.—Under regula12 tions of the Secretary of the Treasury, any dif13 ference in present value resulting from any dif14 ferences in assumptions as set forth in the mor15 tality table specified in subparagraph (A) and

16 assumptions as set forth in the mortality table

17 described in section 302(d)(7)(C)(ii) (as in ef18 fect for plan years beginning in 2006) shall be

19 phased in ratably over the first period of 5 plan

20 years beginning in or after 2007 so as to be

21 fully effective for the fifth plan year.

22 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

23 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

24 FORMS.—For purposes of determining any present
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S 1783 ES

1 value or making any computation under this section,

2 there shall be taken into account—

3 ‘‘(A) the probability that future benefit

4 payments under the plan will be made in the

5 form of optional forms of benefits provided

6 under the plan (including lump sum distribu7 tions, determined on the basis of the plan’s ex8 perience and other related assumptions), and

9 ‘‘(B) any difference in the present value of

10 such future benefit payments resulting from the

11 use of actuarial assumptions, in determining

12 benefit payments in any such optional form of

13 benefits, which are different from those speci14 fied in this subsection.

15 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU16 ARIAL ASSUMPTIONS.—

17 ‘‘(A) IN GENERAL.—No actuarial assump18 tion used to determine the funding target for a

19 plan to which this paragraph applies may be

20 changed without the approval of the Secretary

21 of the Treasury.

22 ‘‘(B) PLANS TO WHICH PARAGRAPH AP23 PLIES.—This paragraph shall apply to a plan

24 only if—
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S 1783 ES

1 ‘‘(i) the aggregate unfunded benefits

2 as of the close of the preceding plan year

3 (as determined under section

4 4006(a)(3)(E)(iii)) of such plan and all

5 other plans maintained by the contributing

6 sponsors (as defined in section

7 4001(a)(13)) and members of such spon8 sors’ controlled groups (as defined in sec9 tion 4001(a)(14)) which are covered by

10 title IV (disregarding plans with no un11 funded benefits) exceed $50,000,000; and

12 ‘‘(ii) the change in assumptions (de13 termined after taking into account any

14 changes in interest rate and mortality

15 table) results in a decrease in the funding

16 shortfall of the plan for the current plan

17 year that exceeds $50,000,000, or that ex18 ceeds $5,000,000 and that is 5 percent or

19 more of the funding target of the plan be20 fore such change.

21 ‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.—

22 ‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK

23 STATUS.—

24 ‘‘(A) IN GENERAL.—In the case of a plan

25 to which this subsection applies for a plan year,
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S 1783 ES

1 the funding target of the plan for the plan year

2 is equal to the present value of all liabilities to

3 participants and their beneficiaries under the

4 plan for the plan year, as determined by using

5 the additional actuarial assumptions described

6 in subparagraph (B).

7 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP8 TIONS.—The actuarial assumptions described in

9 this subparagraph are as follows:

10 ‘‘(i) All employees who are not other11 wise assumed to retire as of the valuation

12 date but who will be eligible to elect bene13 fits during the plan year and the 7 suc14 ceeding plan years shall be assumed to re15 tire at the earliest retirement date under

16 the plan but not before the end of the plan

17 year for which the at-risk target liability

18 and at-risk target normal cost are being

19 determined.

20 ‘‘(ii) All employees shall be assumed

21 to elect the retirement benefit available

22 under the plan at the assumed retirement

23 age (determined after application of clause

24 (i)) which would result in the highest

25 present value of liabilities.
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1 ‘‘(2) TARGET NORMAL COST OF AT-RISK

2 PLANS.—In the case of a plan to which this sub3 section applies for a plan year, the target normal

4 cost of the plan for such plan year shall be equal to

5 the present value of all benefits which are expected

6 to accrue or be earned under the plan during the

7 plan year, determined using the additional actuarial

8 assumptions described in paragraph (1)(B).

9 ‘‘(3) MINIMUM AMOUNT.—In no event shall—

10 ‘‘(A) the at-risk target liability be less than

11 the target liability, as determined without re12 gard to this subsection, or

13 ‘‘(B) the at-risk target normal cost be less

14 than the target normal cost, as determined

15 without regard to this subsection.

16 ‘‘(4) DETERMINATION OF AT-RISK STATUS.—

17 For purposes of this subsection, a plan is in at-risk

18 status for a plan year if—

19 ‘‘(A) the plan is maintained by a finan20 cially-weak employer, and

21 ‘‘(B) the funding target attainment per22 centage for the plan year is less than 93 per23 cent.

24 ‘‘(5) FINANCIALLY-WEAK EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—For purposes of this

2 subsection, the term ‘financially-weak employer’

3 means any employer if—

4 ‘‘(i) as of the valuation date for each

5 of the years during a period of at least 3

6 consecutive plan years ending with the

7 plan year—

8 ‘‘(I) the employer has an out9 standing senior unsecured debt instru10 ment which is rated lower than invest11 ment grade by each of the nationally

12 recognized statistical rating organiza13 tions for corporate bonds that has

14 issued a credit rating for such instru15 ment, or

16 ‘‘(II) if no such debt instrument

17 has been rated by such an organiza18 tion but 1 or more of such organiza19 tions has made an issuer credit rating

20 for such employer, all such organiza21 tions which have so rated the em22 ployer have rated such employer lower

23 than investment grade, and

24 ‘‘(ii) at least 2 of the years during

25 such period are deterioration years.
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1 If an employer is treated as a financially-weak

2 employer for any plan year, clause (ii) shall not

3 apply in determining whether the employer is so

4 treated for any succeeding plan year in any

5 continuous period of plan years for which the

6 employer is treated as a financially-weak em7 ployer.

8 ‘‘(B) CONTROLLED GROUP EXCEPTION.—

9 If an employer treated as a financially-weak

10 employer under subparagraph (A) is a member

11 of a controlled group (as defined in section

12 302(d)(3)), the employer shall not be treated as

13 a financially-weak employer if a significant

14 member (as determined under regulations pre15 scribed by the Secretary of the Treasury) of

16 such group has an outstanding senior unse17 cured debt instrument that is rated as being in18 vestment grade by an organization described in

19 subparagraph (A).

20 ‘‘(C) EMPLOYERS WITH NO RATINGS.—

21 If—

22 ‘‘(i) an employer has no debt instru23 ment described in subparagraph (A)(i)

24 which was rated by an organization de25 scribed in such subparagraph, and
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1 ‘‘(ii) no such organization has made

2 an issuer credit rating for such employer,

3 then such employer shall only be treated as a

4 financially-weak employer to the extent provided

5 in regulations prescribed by the Secretary of

6 the Treasury.

7 ‘‘(6) DETERMINATION OF DETERIORATION

8 YEAR.—For purposes of paragraph (5), the term

9 ‘deterioration year’ means any year during the pe10 riod described in paragraph (5)(A)(i) for which the

11 rating described in subclause (I) or (II) of para12 graph (5)(A)(i) by each organization is either—

13 ‘‘(A) lower than the lowest rating of the

14 employer by such organization for a preceding

15 year in such period, or

16 ‘‘(B) the lowest rating used by such orga17 nization.

18 ‘‘(7) YEARS BEFORE EFFECTIVE DATE.—For

19 purposes of paragraphs (5) and (6), plan years be20 ginning before 2007 shall not be taken into account.

21 ‘‘(8) TRANSITION BETWEEN APPLICABLE FUND22 ING TARGETS AND BETWEEN APPLICABLE TARGET

23 NORMAL COSTS.—

24 ‘‘(A) IN GENERAL.—In any case in which

25 a plan which is in at-risk status for a plan year
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S 1783 ES

1 has been in such status for a consecutive period

2 of fewer than 5 plan years, the applicable

3 amount of the funding target and of the target

4 normal cost shall be, in lieu of the amount de5 termined without regard to this paragraph, the

6 sum of—

7 ‘‘(i) the amount determined under this

8 section without regard to this subsection,

9 plus

10 ‘‘(ii) the transition percentage for

11 such plan year of the excess of the amount

12 determined under this subsection (without

13 regard to this paragraph) over the amount

14 determined under this section without re15 gard to this subsection.

16 ‘‘(B) IMPROVEMENT YEARS NOT TAKEN

17 INTO ACCOUNT.—

18 ‘‘(i) IN GENERAL.—An improvement

19 year shall not be taken into account in de20 termining any consecutive period of plan

21 years for purposes of subparagraph (A).

22 ‘‘(ii) APPLICATION OF SUBSECTION

23 AFTER IMPROVEMENT YEAR ENDS.—Plan

24 years immediately before and after an im25 provement year (or consecutive period of
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1 improvement years) shall be treated as

2 consecutive for purposes of subparagraph

3 (A).

4 ‘‘(iii) IMPROVEMENT YEAR.—For pur5 poses of this subparagraph, the term ‘im6 provement year’ means any plan year for

7 which any rating described in subclause (I)

8 or (II) of paragraph (5)(A)(i) is higher

9 than such rating for the preceding plan

10 year.

11 ‘‘(C) TRANSITION PERCENTAGE.—For pur12 poses of subparagraph (A), the transition per13 centage shall be determined in accordance with

14 the following table:

‘‘If the consecutive number of

years (including the plan year) The transition

the plan is in at-risk status is— percentage is—

1 ............................................................................................... 20

2 ............................................................................................... 40

3 ............................................................................................... 60

4 ............................................................................................... 80.

15 ‘‘(D) YEARS BEFORE EFFECTIVE DATE.—

16 For purposes of this paragraph, plan years be17 ginning before 2007 shall not be taken into ac18 count.

19 ‘‘(9) PLANS TO WHICH SUBSECTION APPLIES.—

20 ‘‘(A) IN GENERAL.—Except as provided in

21 this paragraph, this subsection shall apply to
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S 1783 ES

1 any plan to which this section applies and

2 which is in at-risk status for the plan year.

3 ‘‘(B) EXCEPTION FOR SMALL PLANS.—

4 This subsection shall not apply to a plan for a

5 plan year if the plan was described in sub6 section (g)(2)(B) for the preceding plan year,

7 determined by substituting ‘500’ for ‘100’.

8 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

9 BY CERTAIN COOPERATIVES.—This subsection

10 shall not apply to an eligible cooperative plan

11 described in subparagraph (D).

12 ‘‘(D) ELIGIBLE COOPERATIVE PLAN DE13 FINED.—For purposes of subparagraph (C), a

14 plan shall be treated as an eligible cooperative

15 plan for a plan year if the plan is maintained

16 by more than 1 employer and at least 85 per17 cent of the employers are—

18 ‘‘(i) rural cooperatives (as defined in

19 section 401(k)(7)(B) of the Internal Rev20 enue Code of 1986 without regard to

21 clause (iv) thereof), or

22 ‘‘(ii) organizations which are—

23 ‘‘(I) cooperative organizations de24 scribed in section 1381(a) of such

25 Code which are more than 50-percent
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S 1783 ES

1 owned by agricultural producers or by

2 cooperatives owned by agricultural

3 producers, or

4 ‘‘(II) more than 50-percent

5 owned, or controlled by, one or more

6 cooperative organizations described in

7 subclause (I).

8 A plan shall also be treated as an eligible coop9 erative plan for any plan year for which it is de10 scribed in section 210(a) and is maintained by

11 a rural telephone cooperative association de12 scribed in section 3(40)(B)(v).

13 ‘‘(E) EXCEPTION FOR PLANS SECURED BY

14 THIRD PARTIES BOUND BY PBGC AGREE15 MENTS.—This subsection shall not apply to any

16 plan if—

17 ‘‘(i) a person other than the employer

18 obligated to contribute under the plan is,

19 under the terms of an agreement with the

20 Pension Benefit Guaranty Corporation, lia21 ble for any failure of the employer to meet

22 its obligation to pay any minimum required

23 contribution or termination liability with

24 respect to the plan; and
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1 ‘‘(ii) such person is not a financially2 weak employer under paragraph (5).

3 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU4 TIONS.—

5 ‘‘(1) IN GENERAL.—For purposes of this sec6 tion, the due date for any payment of any minimum

required contribution for any plan year shall be 81 7 ⁄2

8 months after the close of the plan year.

9 ‘‘(2) INTEREST.—Any payment required under

10 paragraph (1) for a plan year made after the valu11 ation date for such plan year shall be increased by

12 interest for the period from the valuation date to the

13 payment date, determined by using the effective rate

14 of interest for the plan for such plan year.

15 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

16 SCHEDULE FOR UNDERFUNDED PLANS.—

17 ‘‘(A) FAILURE TO TIMELY MAKE RE18 QUIRED INSTALLMENT.—

19 ‘‘(i) IN GENERAL.—In the case of a

20 plan to which this paragraph applies, the

21 employer maintaining the plan shall make

22 the required installments under this para23 graph and if the employer fails to pay the

24 full amount of a required installment for

25 the plan year, then the amount of interest
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1 charged under paragraph (2) on the under2 payment for the period of underpayment

3 shall be determined by using a rate of in4 terest equal to the rate otherwise used

5 under paragraph (2) plus 5 percentage

6 points.

7 ‘‘(ii) PLANS TO WHICH PARAGRAPH

8 APPLIES.—This paragraph applies to any

9 defined benefit plan to which this section

10 applies other than a plan which—

11 ‘‘(I) is a plan described in sub12 section (g)(2)(B)), or

13 ‘‘(II) had a funding shortfall of

14 $1,000,000 or less for the preceding

15 plan year.

16 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE17 RIOD OF UNDERPAYMENT.—For purposes of

18 subparagraph (A)—

19 ‘‘(i) AMOUNT.—The amount of the

20 underpayment shall be the excess of—

21 ‘‘(I) the required installment,

22 over

23 ‘‘(II) the amount (if any) of the

24 installment contributed to or under
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1 the plan on or before the due date for

2 the installment.

3 ‘‘(ii) PERIOD OF UNDERPAYMENT.—

4 The period for which any interest is

5 charged under this paragraph with respect

6 to any portion of the underpayment shall

7 run from the due date for the installment

8 to the date on which such portion is con9 tributed to or under the plan.

10 ‘‘(iii) ORDER OF CREDITING CON11 TRIBUTIONS.—For purposes of clause

12 (i)(II), contributions shall be credited

13 against unpaid required installments in the

14 order in which such installments are re15 quired to be paid.

16 ‘‘(C) NUMBER OF REQUIRED INSTALL17 MENTS; DUE DATES.—For purposes of this

18 paragraph—

19 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.—

20 There shall be 4 required installments for

21 each plan year.

22 ‘‘(ii) TIME FOR PAYMENT OF IN23 STALLMENTS.—The due dates for required

24 installments are set forth in the following

25 table:
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In the case of the following required installment: The due date is:

1st ........................................................................... April 15

2nd ......................................................................... July 15

3rd .......................................................................... October 15

4th .......................................................................... January 15 of the following year.

1 ‘‘(D) AMOUNT OF REQUIRED INSTALL2 MENT.—For purposes of this paragraph—

3 ‘‘(i) IN GENERAL.—The amount of

4 any required installment shall be 25 per5 cent of the required annual payment.

6 ‘‘(ii) REQUIRED ANNUAL PAYMENT.—

7 For purposes of clause (i), the term ‘re8 quired annual payment’ means the lesser

9 of—

10 ‘‘(I) 90 percent of the minimum

11 required contribution (without regard

12 to any waiver under section 302(c)) to

13 the plan for the plan year under this

14 section, or

15 ‘‘(II) in the case of a plan year

16 beginning after 2007, 100 percent of

17 the minimum required contribution

18 (without regard to any waiver under

19 section 302(c)) to the plan for the

20 preceding plan year.
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1 Subclause (II) shall not apply if the pre2 ceding plan year referred to in such clause

3 was not a year of 12 months.

4 ‘‘(E) FISCAL YEARS AND SHORT YEARS.—

5 ‘‘(i) FISCAL YEARS.—In applying this

6 paragraph to a plan year beginning on any

7 date other than January 1, there shall be

8 substituted for the months specified in this

9 paragraph, the months which correspond

10 thereto.

11 ‘‘(ii) SHORT PLAN YEAR.—This sub12 paragraph shall be applied to plan years of

13 less than 12 months in accordance with

14 regulations prescribed by the Secretary of

15 the Treasury.

16 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

17 WITH QUARTERLY CONTRIBUTIONS.—

18 ‘‘(A) IN GENERAL.—A plan to which this

19 paragraph applies shall be treated as failing to

20 pay the full amount of any required installment

21 under paragraph (3) to the extent that the

22 value of the liquid assets paid in such install23 ment is less than the liquidity shortfall (wheth24 er or not such liquidity shortfall exceeds the
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1 amount of such installment required to be paid

2 but for this paragraph).

3 ‘‘(B) PLANS TO WHICH PARAGRAPH AP4 PLIES.—This paragraph shall apply to a plan

5 which—

6 ‘‘(i) is required to pay installments

7 under paragraph (3) for a plan year, and

8 ‘‘(ii) has a liquidity shortfall for any

9 quarter during such plan year.

10 ‘‘(C) PERIOD OF UNDERPAYMENT.—For

11 purposes of paragraph (3)(A), any portion of an

12 installment that is treated as not paid under

13 subparagraph (A) shall continue to be treated

14 as unpaid until the close of the quarter in

15 which the due date for such installment occurs.

16 ‘‘(D) LIMITATION ON INCREASE.—If the

17 amount of any required installment is increased

18 by reason of subparagraph (A), in no event

19 shall such increase exceed the amount which,

20 when added to prior installments for the plan

21 year, is necessary to increase the funding target

22 attainment percentage of the plan for the plan

23 year (taking into account the expected increase

24 in funding target due to benefits accruing or

25 earned during the plan year) to 100 percent.
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1 ‘‘(E) DEFINITIONS.—For purposes of this

2 subparagraph:

3 ‘‘(i) LIQUIDITY SHORTFALL.—The

4 term ‘liquidity shortfall’ means, with re5 spect to any required installment, an

6 amount equal to the excess (as of the last

7 day of the quarter for which such install8 ment is made) of—

9 ‘‘(I) the base amount with re10 spect to such quarter, over

11 ‘‘(II) the value (as of such last

12 day) of the plan’s liquid assets.

13 ‘‘(ii) BASE AMOUNT.—

14 ‘‘(I) IN GENERAL.—The term

15 ‘base amount’ means, with respect to

16 any quarter, an amount equal to 3

17 times the sum of the adjusted dis18 bursements from the plan for the 12

19 months ending on the last day of such

20 quarter.

21 ‘‘(II) SPECIAL RULE.—If the

22 amount determined under subclause

23 (I) exceeds an amount equal to 2

24 times the sum of the adjusted dis25 bursements from the plan for the 36
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1 months ending on the last day of the

2 quarter and an enrolled actuary cer3 tifies to the satisfaction of the Sec4 retary of the Treasury that such ex5 cess is the result of nonrecurring cir6 cumstances, the base amount with re7 spect to such quarter shall be deter8 mined without regard to amounts re9 lated to those nonrecurring cir10 cumstances.

11 ‘‘(iii) DISBURSEMENTS FROM THE

12 PLAN.—The term ‘disbursements from the

13 plan’ means all disbursements from the

14 trust, including purchases of annuities,

15 payments of single sums and other bene16 fits, and administrative expenses.

17 ‘‘(iv) ADJUSTED DISBURSEMENTS.—

18 The term ‘adjusted disbursements’ means

19 disbursements from the plan reduced by

20 the product of—

21 ‘‘(I) the plan’s funding target at22 tainment percentage for the plan year,

23 and

24 ‘‘(II) the sum of the purchases of

25 annuities, payments of single sums,
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1 and such other disbursements as the

2 Secretary of the Treasury shall pro3 vide in regulations.

4 ‘‘(v) LIQUID ASSETS.—The term ‘liq5 uid assets’ means cash, marketable securi6 ties, and such other assets as specified by

7 the Secretary of the Treasury in regula8 tions.

9 ‘‘(vi) QUARTER.—The term ‘quarter’

10 means, with respect to any required install11 ment, the 3-month period preceding the

12 month in which the due date for such in13 stallment occurs.

14 ‘‘(F) REGULATIONS.—The Secretary of the

15 Treasury may prescribe such regulations as are

16 necessary to carry out this paragraph.

17 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO

18 MAKE REQUIRED CONTRIBUTIONS.—

19 ‘‘(1) IN GENERAL.—In the case of a plan to

20 which this subsection applies, if—

21 ‘‘(A) any person fails to make a contribu22 tion payment required by section 302 and this

23 section before the due date for such payment,

24 and
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1 ‘‘(B) the unpaid balance of such payment

2 (including interest), when added to the aggre3 gate unpaid balance of all preceding such pay4 ments for which payment was not made before

5 the due date (including interest), exceeds

6 $1,000,000,

7 then there shall be a lien in favor of the plan in the

8 amount determined under paragraph (3) upon all

9 property and rights to property, whether real or per10 sonal, belonging to such person and any other per11 son who is a member of the same controlled group

12 of which such person is a member.

13 ‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—

14 This subsection shall apply to a defined benefit plan

15 which is a single-employer plan covered under sec16 tion 4021 for any plan year for which the funding

17 target attainment percentage (as defined in sub18 section (d)(2)) of such plan is less than 100 percent.

19 ‘‘(3) AMOUNT OF LIEN.—For purposes of para20 graph (1), the amount of the lien shall be equal to

21 the aggregate unpaid balance of contribution pay22 ments required under this section and section 302

23 for which payment has not been made before the due

24 date.

25 ‘‘(4) NOTICE OF FAILURE; LIEN.—
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1 ‘‘(A) NOTICE OF FAILURE.—A person

2 committing a failure described in paragraph (1)

3 shall notify the Pension Benefit Guaranty Cor4 poration of such failure within 10 days of the

5 due date for the required contribution payment.

6 ‘‘(B) PERIOD OF LIEN.—The lien imposed

7 by paragraph (1) shall arise on the due date for

8 the required contribution payment and shall

9 continue until the last day of the first plan year

10 in which the plan ceases to be described in

11 paragraph (1)(B). Such lien shall continue to

12 run without regard to whether such plan con13 tinues to be described in paragraph (2) during

14 the period referred to in the preceding sentence.

15 ‘‘(C) CERTAIN RULES TO APPLY.—Any

16 amount with respect to which a lien is imposed

17 under paragraph (1) shall be treated as taxes

18 due and owing the United States and rules

19 similar to the rules of subsections (c), (d), and

20 (e) of section 4068 shall apply with respect to

21 a lien imposed by subsection (a) and the

22 amount with respect to such lien.

23 ‘‘(5) ENFORCEMENT.—Any lien created under

24 paragraph (1) may be perfected and enforced only

25 by the Pension Benefit Guaranty Corporation, or at
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1 the direction of the Pension Benefit Guaranty Cor2 poration, by the contributing sponsor (or any mem3 ber of the controlled group of the contributing spon4 sor).

5 ‘‘(6) DEFINITIONS.—For purposes of this

6 subsection—

7 ‘‘(A) CONTRIBUTION PAYMENT.—The term

8 ‘contribution payment’ means, in connection

9 with a plan, a contribution payment required to

10 be made to the plan, including any required in11 stallment under paragraphs (3) and (4) of sub12 section (j).

13 ‘‘(B) DUE DATE; REQUIRED INSTALL14 MENT.—The terms ‘due date’ and ‘required in15 stallment’ have the meanings given such terms

16 by subsection (j), except that in the case of a

17 payment other than a required installment, the

18 due date shall be the date such payment is re19 quired to be made under section 303.

20 ‘‘(C) CONTROLLED GROUP.—The term

21 ‘controlled group’ means any group treated as

22 a single employer under subsections (b), (c),

23 (m), and (o) of section 414 of the Internal Rev24 enue Code of 1986.
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1 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

2 ACCOUNTS.—In the case of a qualified transfer (as de3 fined in section 420 of the Internal Revenue Code of

4 1986), any assets so transferred shall not, for purposes

5 of this section, be treated as assets in the plan.’’.

6 (b) CLERICAL AMENDMENT.—The table of sections

7 in section 1 of such Act (as amended by section 101) is

8 amended by inserting after the item relating to section

9 302 the following new item:

‘‘Sec. 303. Minimum funding standards for single-employer defined benefit

pension plans.’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply with respect to plan years begin12 ning after 2006.

13 SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EM14 PLOYER PLANS.

15 (a) LIMITS ON BENEFITS AND BENEFIT ACCRU16 ALS.—

17 (1) IN GENERAL.—Section 206 of such Act is

18 amended by adding at the end the following new

19 subsection:

20 ‘‘(g) FUNDING-BASED LIMITS ON BENEFITS AND

21 BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER

22 PLANS.—

23 ‘‘(1) LIMITATIONS ON PLAN AMENDMENTS IN24 CREASING LIABILITY FOR BENEFITS.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 paragraph (4), no amendment to a single-em3 ployer plan which has the effect of increasing li4 abilities of the plan by reason of increases in

5 benefits, establishment of new benefits, chang6 ing the rate of benefit accrual, or changing the

7 rate at which benefits become nonforfeitable

8 may take effect during any plan year if the ad9 justed funding target attainment percentage as

10 of the valuation date of the plan for such plan

11 year is—

12 ‘‘(i) less than 80 percent, or

13 ‘‘(ii) would be less than 80 percent

14 taking into account such amendment.

15 ‘‘(B) EXEMPTION.—Subparagraph (A)

16 shall cease to apply with respect to any plan

17 year, effective as of the first date of the plan

18 year (or if later, the effective date of the

19 amendment), upon payment by the plan sponsor

20 of a contribution (in addition to any minimum

21 required contribution under section 303) equal

22 to—

23 ‘‘(i) in the case of subparagraph

24 (A)(i), the amount of the increase in the

25 funding target of the plan (under section
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1 303) for the plan year attributable to the

2 amendment, and

3 ‘‘(ii) in the case of subparagraph

4 (A)(ii), the amount sufficient to result in

5 an adjusted funding target attainment per6 centage of 80 percent.

7 ‘‘(C) EXCEPTION FOR CERTAIN BENEFIT

8 INCREASES.—Subparagraph (A) shall not apply

9 to any amendment which provides for an in10 crease in benefits under a formula which is not

11 based on a participant’s compensation, but only

12 if the rate of such increase is not in excess of

13 the contemporaneous rate of increase in average

14 wages of participants covered by the amend15 ment.

16 ‘‘(2) LIMITATIONS ON ACCELERATED BENEFIT

17 DISTRIBUTIONS.—

18 ‘‘(A) IN GENERAL.—A defined benefit plan

19 which is a single-employer plan shall provide

20 that, with respect to any plan year—

21 ‘‘(i) if the plan’s adjusted funded tar22 get liability percentage as of the valuation

23 date for the preceding plan year was less

24 than 60 percent and the preceding plan

25 year is not otherwise in a prohibited pe-
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1 riod, the plan sponsor shall, in addition to

2 any other contribution required under sec3 tion 303, contribute for the current plan

4 year and each succeeding plan year in the

5 prohibited period with respect to the cur6 rent plan year the amount (if any) which,

7 when added to the portion of the minimum

8 required contribution for the plan year de9 scribed in subparagraphs (B) and (C) of

10 section 303(a)(1), is sufficient to result in

11 an adjusted funded target liability percent12 age for the plan year of 60 percent, and

13 ‘‘(ii) no prohibited payments will be

14 made during a prohibited period.

15 ‘‘(B) PROHIBITED PAYMENT.—For pur16 pose of this subsection—

17 ‘‘(i) IN GENERAL.—The term ‘prohib18 ited payment’ means—

19 ‘‘(I) any payment, in excess of

20 the monthly amount paid under a sin21 gle life annuity (plus any social secu22 rity supplements described in the last

23 sentence of section 204(b)(1)(G)), to

24 a participant or beneficiary whose an25 nuity starting date (as defined in sec-
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1 tion 205(h)(2)) occurs during a pro2 hibited period,

3 ‘‘(II) any payment for the pur4 chase of an irrevocable commitment

5 from an insurer to pay benefits, and

6 ‘‘(III) any other payment speci7 fied by the Secretary of the Treasury

8 by regulations.

9 ‘‘(ii) EXCEPTION FOR CERTAIN PAY10 MENTS.—In the case of any prohibited pe11 riod described in subparagraph (C)(i), the

12 term ‘prohibited payment’ shall not include

13 any payment if the amount of the payment

14 does not exceed the lesser of—

15 ‘‘(I) 50 percent of the amount of

16 the payment which could be made

17 without regard to this subsection, or

18 ‘‘(II) the present value (deter19 mined under guidance prescribed by

20 the Pension Benefit Guaranty Cor21 poration, using the interest and mor22 tality assumptions under section

23 205(g)) of the maximum guarantee

24 with respect to the participant under

25 section 4022.
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1 The exception under this clause shall only

2 apply once with respect to any participant,

3 except that, for purposes of this sentence,

4 a participant and any beneficiary on his

5 behalf (including an alternate payee, as de6 fined in section 206(d)(3)(K)) shall be

7 treated as 1 participant. If the accrued

8 benefit of a participant is allocated to such

9 an alternate payee and 1 or more other

10 persons, the amount under subclause (II)

11 shall be allocated among such persons in

12 the same manner as the accrued benefit is

13 allocated unless the qualified domestic rela14 tions order (as defined in section

15 206(d)(3)(B)(i)) provides otherwise.

16 ‘‘(C) PROHIBITED PERIOD.—For purposes

17 of subparagraph (A), the term ‘prohibited pe18 riod’ means—

19 ‘‘(i) except as provided in subpara20 graph (D), if a plan sponsor is required to

21 make the contribution for the current plan

22 year under subparagraph (A), the period

23 beginning on the 1st day of the plan year

24 and ending on the last day of the 1st pe25 riod of 2 consecutive plan years (beginning
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1 on or after such 1st day) for which the

2 plan’s adjusted funded target liability per3 centage was at least 60 percent,

4 ‘‘(ii) any period the plan sponsor is in

5 bankruptcy, or

6 ‘‘(iii) any period during which the

7 plan has a liquidity shortfall (as defined in

8 section 303(j)(4)(E)(i)).

9 The prohibited period for purposes of clause (ii)

10 shall not include any portion of a plan year

11 (even if the plan sponsor is in bankruptcy dur12 ing such period) which occurs on or after the

13 date the plan’s enrolled actuary certifies that,

14 as of the valuation date for the plan year, the

15 plan’s adjusted funded target liability percent16 age is at least 100 percent.

17 ‘‘(D) SATISFACTION OF REQUIREMENT BE18 FORE CLOSE OF PLAN YEAR.—If, before the

19 close of the current plan year—

20 ‘‘(i) the plan sponsor makes the con21 tribution required to be made under sub22 paragraph (A), or

23 ‘‘(ii) the plan’s enrolled actuary cer24 tifies that, as of the valuation date for the

25 plan year, the adjusted funded target li-
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1 ability percentage of the plan is at least 60

2 percent,

3 this paragraph shall be applied as if no prohib4 ited period had begun as of the beginning of

5 such year and the plan shall, under rules de6 scribed by the Secretary of the Treasury, re7 store any payments not made during the pro8 hibited period in effect before the application of

9 this paragraph.

10 ‘‘(3) LIMITATION ON BENEFIT ACCRUALS FOR

11 PLANS WITH SEVERE FUNDING SHORTFALLS.—

12 ‘‘(A) IN GENERAL.—Except as provided in

13 paragraph (4), a single-employer plan shall pro14 vide that all future benefit accruals under the

15 plan shall cease during a severe funding short16 fall period, but only to the extent the cessation

17 of such accruals would have been permitted

18 under section 204(g) if the cessation had been

19 implemented by a plan amendment adopted im20 mediately before the severe funding shortfall pe21 riod.

22 ‘‘(B) SEVERE FUNDING SHORTFALL PE23 RIOD.—For purposes of subparagraph (A), the

24 term ‘severe funding shortfall period’ means in

25 the case of a plan the adjusted funding target
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1 attainment percentage of which as of the valu2 ation date of the plan for any plan year is less

3 than 60 percent, the period—

4 ‘‘(i) beginning on the 1st day of the

5 succeeding plan year, and

6 ‘‘(ii) ending on the date the plan’s en7 rolled actuary certifies that the plan’s ad8 justed funding target attainment percent9 age is at least 60 percent, and

10 ‘‘(C) OPPORTUNITY FOR INCREASED

11 FUNDING.—For purposes of subparagraph (B),

12 a plan shall not be treated as described in such

13 subparagraph for a plan year if the plan’s en14 rolled actuary certifies that the plan sponsor

15 has before the end of the plan year contributed

16 (in addition to any minimum required contribu17 tion under section 303) the amount sufficient to

18 result in an adjusted funding target attainment

19 percentage as of the valuation date for the plan

20 year of 60 percent.

21 ‘‘(4) EXCEPTION FOR CERTAIN COLLECTIVELY

22 BARGAINED BENEFITS.—In the case of a plan main23 tained pursuant to a collective bargaining agreement

24 between employee representatives and the plan spon25 sor and in effect before the beginning of the first
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1 day on which a limitation would otherwise apply

2 under paragraph (1), (2), or (3)—

3 ‘‘(A) such limitations shall not apply to

4 any amendment, prohibited payment, or accrual

5 with respect to such plan, but

6 ‘‘(B) the plan sponsor shall contribute (in

7 addition to any minimum required contribution

8 under section 303) the amount sufficient to re9 sult in an adjusted funding target attainment

10 percentage (as of the valuation date for the

11 plan year in which any such limitation would

12 otherwise apply) equal to the percentage nec13 essary to prevent the limitation from applying.

14 ‘‘(5) RULES RELATING TO REQUIRED CON15 TRIBUTIONS.—

16 ‘‘(A) SECURITY MAY BE PROVIDED.—

17 ‘‘(i) IN GENERAL.—For purposes of

18 this subsection, the adjusted funding tar19 get attainment percentage shall be deter20 mined by treating as an asset of the plan

21 any security provided by a plan sponsor in

22 a form meeting the requirements of clause

23 (ii).
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1 ‘‘(ii) FORM OF SECURITY.—The secu2 rity required under clause (i) shall consist

3 of—

4 ‘‘(I) a bond issued by a corporate

5 surety company that is an acceptable

6 surety for purposes of section 412 of

7 this Act,

8 ‘‘(II) cash, or United States obli9 gations which mature in 3 years or

10 less, held in escrow by a bank or simi11 lar financial institution, or

12 ‘‘(III) such other form of security

13 as is satisfactory to the Secretary of

14 the Treasury and the parties involved.

15 ‘‘(iii) ENFORCEMENT.—Any security

16 provided under clause (i) may be perfected

17 and enforced at any time after the earlier

18 of—

19 ‘‘(I) the date on which the plan

20 terminates,

21 ‘‘(II) if there is a failure to make

22 a payment of the minimum required

23 contribution for any plan year begin24 ning after the security is provided, the
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1 due date for the payment under sec2 tion 303(j), or

3 ‘‘(III) if the adjusted funding

4 target attainment percentage is less

5 than 60 percent for a consecutive pe6 riod of 7 years, the valuation date for

7 the last year in the period.

8 ‘‘(iv) RELEASE OF SECURITY.—The

9 security shall be released (and any

10 amounts thereunder shall be refunded to11 gether with any interest accrued thereon)

12 at such time as the Secretary of the Treas13 ury may prescribe in regulations, including

14 regulations for partial releases of the secu15 rity by reason of increases in the funding

16 target attainment percentage.

17 ‘‘(B) PREFUNDING BALANCE MAY NOT BE

18 USED.—No prefunding balance under section

19 303(f) may be used to satisfy any required con20 tribution under this subsection.

21 ‘‘(C) TREATMENT AS UNPAID MINIMUM

22 REQUIRED CONTRIBUTION.—The amount of any

23 required contribution which a plan sponsor fails

24 to make under paragraph (1) or (3) for any

25 plan year shall be treated as an unpaid min-
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1 imum required contribution for purposes of sub2 section (j) and (k) of section 303 and for pur3 poses of section 4971 of the Internal Revenue

4 Code of 1986.

5 ‘‘(6) NEW PLANS.—Paragraphs (1) and (3)

6 shall not apply to a plan for the first 5 plan years

7 of the plan. For purposes of this paragraph, the ref8 erence in this paragraph to a plan shall include a

9 reference to any predecessor plan.

10 ‘‘(7) PRESUMED UNDERFUNDING FOR PUR11 POSES OF BENEFIT LIMITATIONS BASED ON PRIOR

12 YEAR’S FUNDING STATUS.—

13 ‘‘(A) PRESUMPTION OF CONTINUED

14 UNDERFUNDING.—In any case in which a ben15 efit limitation under paragraph (1), (2), or (3)

16 has been applied to a plan with respect to the

17 plan year preceding the current plan year, the

18 adjusted funding target attainment percentage

19 of the plan as of the valuation date of the plan

20 for the current plan year shall be presumed to

21 be equal to the adjusted funding target attain22 ment percentage of the plan as of the valuation

23 date of the plan for the preceding plan year

24 until the enrolled actuary of the plan certifies

25 the actual adjusted funding target attainment
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1 percentage of the plan as of the valuation date

2 of the plan for the current plan year.

3 ‘‘(B) PRESUMPTION OF UNDERFUNDING

4 AFTER 10TH MONTH.—In any case in which no

5 such certification is made with respect to the

6 plan before the first day of the 10th month of

7 the current plan year, for purposes of para8 graphs (1), (2), and (3), the plan’s adjusted

9 funding target attainment percentage shall be

10 conclusively presumed to be less than 60 per11 cent as of the first day of such 10th month.

12 ‘‘(8) TREATMENT OF PLAN AS OF CLOSE OF

13 PROHIBITED OR CESSATION PERIOD.—For purposes

14 of applying this part—

15 ‘‘(A) OPERATION OF PLAN AFTER PE16 RIOD.—Unless the plan provides otherwise, pay17 ments and accruals will resume effective as of

18 the day following the close of a period of limita19 tion of payment or accrual of benefits under

20 paragraph (2) or (3).

21 ‘‘(B) TREATMENT OF AFFECTED BENE22 FITS.—Nothing in this paragraph shall be con23 strued as affecting the plan’s treatment of ben24 efits which would have been paid or accrued but

25 for this subsection.
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1 ‘‘(9) FUNDING TARGET ATTAINMENT PERCENT2 AGE.—For purposes of this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘funding

4 target attainment percentage’ has the same

5 meaning given such term by section 303(d)(2).

6 ‘‘(B) ADJUSTED FUNDED TARGET LIABIL7 ITY PERCENTAGE.—The term ‘adjusted funded

8 target liability percentage’ means the funded

9 target liability percentage which is determined

10 under subparagraph (A) by increasing each of

11 the amounts under subparagraphs (A) and (B)

12 of section 303(d)(2) by the aggregate amount

13 of purchases of annuities, payments of single

14 sums, and such other disbursements as the Sec15 retary of the Treasury shall prescribe in regula16 tions, which were made by the plan during the

17 preceding 2 plan years.

18 ‘‘(10) YEARS BEFORE EFFECTIVE DATE.—No

19 plan year beginning before 2007 shall be taken into

20 account in determining whether this subsection ap21 plies to any plan year beginning after 2006.’’.

22 (2) NOTICE REQUIREMENT.—

23 (A) IN GENERAL.—Section 101 of such

24 Act (29 U.S.C. 1021) is amended—
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1 (i) by redesignating subsection (j) as

2 subsection (k); and

3 (ii) by inserting after subsection (i)

4 the following new subsection:

5 ‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON

6 CERTAIN FORMS OF DISTRIBUTION.—The plan adminis7 trator of a single-employer plan shall provide a written no8 tice to plan participants and beneficiaries within 30

9 days—

10 ‘‘(1) after the plan has become subject to the

11 restriction described in section 206(g)(2),

12 ‘‘(2) in the case of a plan to which section

13 206(g)(3) applies, after—

14 ‘‘(A) the date in the plan year described in

15 section 206(g)(3)(B) on which the plan’s en16 rolled actuary certifies that the plan’s adjusted

17 funding target attainment percentage for the

18 plan year is less than 60 percent (or, if earlier,

19 the date such percentage is deemed to be less

20 than 60 percent under section 206(g)(7)), and

21 ‘‘(B) the first day of the severe funding

22 shortfall period, and

23 ‘‘(3) at such other time as may be determined

24 by the Secretary of the Treasury.
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1 The notice required to be provided under this subsection

2 shall be in writing, except that such notice may be in elec3 tronic or other form to the extent that such form is rea4 sonably accessible to the recipient.’’.

5 (B) ENFORCEMENT.—Section 502(c)(4) of

6 such Act (29 U.S.C. 1132(c)(4)) is amended by

7 striking ‘‘section 302(b)(7)(F)(iv)’’ and insert8 ing ‘‘sections 101(j) and 302(b)(7)(F)(iv)’’.

9 (b) EFFECTIVE DATES.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall apply to plan years beginning after

12 December 31, 2006.

13 (2) COLLECTIVE BARGAINING EXCEPTION.—In

14 the case of a plan maintained pursuant to 1 or more

15 collective bargaining agreements between employee

16 representatives and 1 or more employers ratified be17 fore January 1, 2007, the amendments made by this

18 section shall not apply to plan years beginning be19 fore the earlier of—

20 (A) the later of—

21 (i) the date on which the last collec22 tive bargaining agreement relating to the

23 plan terminates (determined without re24 gard to any extension thereof agreed to
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1 after the date of the enactment of this

2 Act), or

3 (ii) the first day of the first plan year

4 to which the amendments made by this

5 subsection would (but for this subpara6 graph) apply, or

7 (B) January 1, 2010.

8 For purposes of subparagraph (A)(i), any plan

9 amendment made pursuant to a collective bargaining

10 agreement relating to the plan which amends the

11 plan solely to conform to any requirement added by

12 this section shall not be treated as a termination of

13 such collective bargaining agreement.

14 SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

15 (a) MISCELLANEOUS AMENDMENTS TO TITLE I.—

16 Subtitle B of title I of such Act (29 U.S.C. 1021 et seq.)

17 is amended—

18 (1) in section 101(d)(3), by striking ‘‘section

19 302(e)’’ and inserting ‘‘section 303(j)’’;

20 (2) in section 103(d)(8)(B), by striking ‘‘the re21 quirements of section 302(c)(3)’’ and inserting ‘‘the

22 applicable requirements of sections 303(h) and

23 304(c)(3)’’;

24 (3) in section 103(d), by striking paragraph

25 (11) and inserting the following:
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1 ‘‘(11) If the current value of the assets of the

2 plan is less than 70 percent of—

3 ‘‘(A) in the case of a single-employer plan,

4 the funding target (as defined in section

5 303(d)(1)) of the plan, or

6 ‘‘(B) in the case of a multiemployer plan,

7 the current liability (as defined in section

8 304(c)(6)(D)) under the plan,

9 the percentage which such value is of the amount

10 described in subparagraph (A) or (B).’’;

11 (4) in section 203(a)(3)(C), by striking ‘‘section

12 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’;

13 (5) in section 204(g)(1), by striking ‘‘section

14 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’;

15 (6) in section 204(i)(2)(B), by striking ‘‘section

16 302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’;

17 (7) in section 204(i)(3), by striking ‘‘funded

18 current liability percentage (within the meaning of

19 section 302(d)(8) of this Act)’’ and inserting ‘‘fund20 ing target attainment percentage (as defined in sec21 tion 303(d)(2))’’;

22 (8) in section 204(i)(4), by striking ‘‘section

23 302(c)(11)(A), without regard to section

24 302(c)(11)(B)’’ and inserting ‘‘section 302(b)(1),

25 without regard to section 302(b)(2)’’;
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1 (9) in section 206(e)(1), by striking ‘‘section

2 302(d)’’ and inserting ‘‘section 303(j)(4)’’, and by

3 striking ‘‘section 302(e)(5)’’ and inserting ‘‘section

4 303(j)(4)(E)(i)’’;

5 (10) in section 206(e)(3), by striking ‘‘section

6 302(e) by reason of paragraph (5)(A) thereof’’ and

7 inserting ‘‘section 303(j)(3) by reason of section

8 303(j)(4)(A)’’; and

9 (11) in sections 101(e)(3), 403(c)(1), and

10 408(b)(13), by striking ‘‘American Jobs Creation

11 Act of 2004’’ and inserting ‘‘Pension Security and

12 Transparency Act of 2005’’.

13 (b) MISCELLANEOUS AMENDMENTS TO TITLE IV.—

14 Title IV of such Act is amended—

15 (1) in section 4001(a)(13) (29 U.S.C.

16 1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and in17 serting ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’

18 and inserting ‘‘412(c)(1)’’, by striking

19 ‘‘302(c)(11)(B)’’ and inserting ‘‘302(b)(2)’’, and by

20 striking ‘‘412(c)(11)(B)’’ and inserting ‘‘412(c)(2)’’;

21 (2) in section 4003(e)(1) (29 U.S.C.

22 1303(e)(1)), by striking ‘‘302(f)(1)(A) and (B)’’ and

23 inserting ‘‘303(k)(1)(A) and (B)’’, and by striking

24 ‘‘412(n)(1)(A) and (B)’’ and inserting

25 ‘‘430(k)(1)(A) and (B)’’;
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1 (3) in section 4010(b)(2) (29 U.S.C.

2 1310(b)(2)), by striking ‘‘302(f)(1)(A) and (B)’’ and

3 inserting ‘‘303(k)(1)(A) and (B)’’, and by striking

4 ‘‘412(n)(1)(A) and (B)’’ and inserting

5 ‘‘430(k)(1)(A) and (B)’’;

6 (4) in section 4062(c)(1) (29 U.S.C.

7 1362(c)(1)), by striking paragraphs (1), (2), and (3)

8 and inserting the following:

9 ‘‘(1)(A) in the case of a single-employer plan,

10 the sum of the shortfall amortization charge (within

11 the meaning of section 303(c)(1) of this Act and

12 430(d)(1) of the Internal Revenue Code of 1986)

13 with respect to the plan (if any) for the plan year

14 in which the termination date occurs, plus the aggre15 gate total of shortfall amortization installments (if

16 any) determined for succeeding plan years under

17 section 303(c)(2) of this Act and section 430(d)(2)

18 of such Code (which, for purposes of this subpara19 graph, shall include any increase in such sum which

20 would result if all applications for waivers of the

21 minimum funding standard under section 302(c) of

22 this Act and section 412(d) of such Code which are

23 pending with respect to such plan were denied and

24 if no additional contributions (other than those al25 ready made by the termination date) were made for
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1 the plan year in which the termination date occurs

2 or for any previous plan year), or

3 ‘‘(B) in the case of a multiemployer plan, the

4 outstanding balance of the accumulated funding de5 ficiencies (within the meaning of section 304(a)(2)

6 of this Act and section 431(a) of the Internal Rev7 enue Code of 1986) of the plan (if any) (which, for

8 purposes of this subparagraph, shall include the

9 amount of any increase in such accumulated funding

10 deficiencies of the plan which would result if all

11 pending applications for waivers of the minimum

12 funding standard under section 302(c) of this Act or

13 section 412(d) of such Code and for extensions of

14 the amortization period under section 304(d) of this

15 Act or section 431(d) of such Code with respect to

16 such plan were denied and if no additional contribu17 tions (other than those already made by the termi18 nation date) were made for the plan year in which

19 the termination date occurs or for any previous plan

20 year),

21 ‘‘(2)(A) in the case of a single-employer plan,

22 the sum of the waiver amortization charge (within

23 the meaning of section 303(e)(1) of this Act and

24 430(e)(2) of the Internal Revenue Code of 1986)

25 with respect to the plan (if any) for the plan year
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1 in which the termination date occurs, plus the aggre2 gate total of waiver amortization installments (if

3 any) determined for succeeding plan years under

4 section 303(e)(3) of this Act and section 430(e)(3)

5 of such Code, or

6 ‘‘(B) in the case of a multiemployer plan, the

7 outstanding balance of the amount of waived fund8 ing deficiencies of the plan waived before such date

9 under section 302(c) of this Act or section 412(d) of

10 such Code (if any), and

11 ‘‘(3) in the case of a multiemployer plan, the

12 outstanding balance of the amount of decreases in

13 the minimum funding standard allowed before such

14 date under section 304(d) of this Act or section

15 431(d) of such Code (if any);’’;

16 (5) in section 4071 (29 U.S.C. 1371), by strik17 ing ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’;

18 (6) in section 4243(a)(1)(B) (29 U.S.C.

19 1423(a)(1)(B)), by striking ‘‘302(a)’’ and inserting

20 ‘‘304(a)’’, and, in clause (i), by striking ‘‘302(a)’’

21 and inserting ‘‘304(a)’’;

22 (7) in section 4243(f)(1) (29 U.S.C.

23 1423(f)(1)), by striking ‘‘303(a)’’ and inserting

24 ‘‘302(c)’’;
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1 (8) in section 4243(f)(2) (29 U.S.C.

2 1423(f)(2)), by striking ‘‘303(c)’’ and inserting

3 ‘‘302(c)(3)’’; and

4 (9) in section 4243(g) (29 U.S.C. 1423(g)), by

5 striking ‘‘302(c)(3)’’ and inserting ‘‘304(c)(3)’’.

6 (c) AMENDMENTS TO REORGANIZATION PLAN NO. 4

7 OF 1978.—Section 106(b)(ii) of Reorganization Plan No.

8 4 of 1978 (ratified and affirmed as law by Public Law

9 98–532 (98 Stat. 2705)) is amended by striking

10 ‘‘302(c)(8)’’ and inserting ‘‘302(d)(2)’’, by striking

11 ‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘304(d)(1), (d)(2),

12 and (e)(2)(A)’’, and by striking ‘‘412(c)(8), (e), and

13 (f)(2)(A)’’ and inserting ‘‘412(d)(2) and 431(d)(1), (d)(2),

14 and (e)(2)(A)’’.

15 (d) REPEAL OF EXPIRED AUTHORITY FOR TEM16 PORARY VARIANCES.—Section 207 of such Act (29 U.S.C.

17 1057) is repealed.

18 (e) EFFECTIVE DATE.—The amendments made by

19 this section shall apply to plan years beginning after 2006.

20 SEC. 105. SPECIAL RULES FOR MULTIPLE EMPLOYER

21 PLANS OF CERTAIN COOPERATIVES.

22 (a) GENERAL RULE.—Except as provided in this sec23 tion, if a plan in existence on July 26, 2005, was an eligi24 ble cooperative plan for its plan year which includes such

25 date, the amendments made by section 401 of this Act,
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1 this subtitle, and subtitle B shall not apply to plan years

2 beginning before the earlier of—

3 (1) the first plan year for which the plan ceases

4 to be an eligible cooperative plan, or

5 (2) January 1, 2017.

6 (b) INTEREST RATE.—In applying section

7 302(b)(5)(B) of the Employee Retirement Income Secu8 rity Act of 1974 and section 412(b)(5)(B) of the Internal

9 Revenue Code of 1986 (as in effect before the amendments

10 made by this subtitle and subtitle B) and in applying sec11 tion 4006(a)(3)(E)(iii) of such Act (as in effect before the

12 amendments made by section 401) to an eligible coopera13 tive plan for plan years beginning after December 31,

14 2006, and before the first plan year to which such amend15 ments apply, the third segment rate determined under sec16 tion 303(h)(2)(C)(iii) of such Act and section

17 430(h)(2)(C)(iii) of such Code (as added by such amend18 ments) shall be used in lieu of the interest rate otherwise

19 used.

20 (c) ELIGIBLE COOPERATIVE PLAN DEFINED.—For

21 purposes of this section, a plan shall be treated as an eligi22 ble cooperative plan for a plan year if the plan is main23 tained by more than 1 employer and at least 85 percent

24 of the employers are—
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1 (1) rural cooperatives (as defined in section

2 401(k)(7)(B) of such Code without regard to clause

3 (iv) thereof), or

4 (2) organizations which are—

5 (A) cooperative organizations described in

6 section 1381(a) of such Code which are more

7 than 50-percent owned by agricultural pro8 ducers or by cooperatives owned by agricultural

9 producers, or

10 (B) more than 50-percent owned, or con11 trolled by, one or more cooperative organiza12 tions described in subparagraph (A).

13 A plan shall also be treated as an eligible cooperative plan

14 for any plan year for which it is described in section

15 210(a) of the Employee Retirement Income Security Act

16 of 1974 and is maintained by a rural telephone cooperative

17 association described in section 3(40)(B)(v) of such Act.

18 SEC. 106. TEMPORARY RELIEF FOR CERTAIN RESCUED

19 PLANS.

20 (a) GENERAL RULE.—Except as provided in this sec21 tion, if a plan in existence on July 26, 2005, was a rescued

22 plan as of such date, the amendments made by section

23 401 of this Act, this subtitle, and subtitle B shall not

24 apply to plan years beginning before January 1, 2014.
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1 (b) INTEREST RATE.—In applying section

2 302(b)(5)(B) of the Employee Retirement Income Secu3 rity Act of 1974 and section 412(b)(5)(B) of the Internal

4 Revenue Code of 1986 (as in effect before the amendments

5 made by this subtitle and subtitle B), and in applying sec6 tion 4006(a)(3)(E)(iii) of such Act (as in effect before the

7 amendments made by section 401), to a rescued plan for

8 plan years beginning after December 31, 2006, and before

9 January 1, 2014, the third segment rate determined under

10 section 303(h)(2)(C)(iii) of such Act and section

11 430(h)(2)(C)(iii) of such Code (as added by such amend12 ments) shall be used in lieu of the interest rate otherwise

13 used.

14 (c) RESCUED PLAN.—For purposes of this section,

15 the term ‘‘rescued plan’’ means a defined benefit plan

16 (other than a multiemployer plan) to which section 302

17 of such Act and section 412 of such Code apply and—

18 (1) which was sponsored by an employer which

19 was in bankruptcy, giving rise to a claim by the

20 Pension Benefit Guaranty Corporation of at least

21 $100,000,000, but not greater than $150,000,000,

22 and

23 (2) the sponsorship of which was assumed by

24 another employer that was not a member of the

25 same controlled group as the bankrupt sponsor and
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1 the claim of the Pension Benefit Guaranty Corpora2 tion was settled or withdrawn in connection with the

3 assumption of the sponsorship.

4 Subtitle B—Amendments to

5 Internal Revenue Code of 1986

6 SEC. 111. MODIFICATIONS OF THE MINIMUM FUNDING

7 STANDARDS.

8 (a) IN GENERAL.—Section 412 of the Internal Rev9 enue Code of 1986 (relating to minimum funding stand10 ards) is amended to read as follows:

11 ‘‘SEC. 412. MINIMUM FUNDING STANDARDS.

12 ‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING

13 STANDARD.—

14 ‘‘(1) IN GENERAL.—A plan to which this sec15 tion applies shall satisfy the minimum funding

16 standard applicable to the plan for any plan year.

17 ‘‘(2) MINIMUM FUNDING STANDARD.—For pur18 poses of paragraph (1), a plan shall be treated as

19 satisfying the minimum funding standard for a plan

20 year if—

21 ‘‘(A) in the case of a defined benefit plan

22 which is a single-employer plan, the employer

23 makes contributions to or under the plan for

24 the plan year which, in the aggregate, are not

25 less than the minimum required contribution
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1 determined under section 430 for the plan for

2 the plan year,

3 ‘‘(B) in the case of a money purchase pen4 sion plan which is a single-employer plan, the

5 employer makes contributions to or under the

6 plan for the plan year which are required under

7 the terms of the plan, and

8 ‘‘(C) in the case of a multiemployer plan,

9 the employers make contributions to or under

10 the plan for the plan year which, in the aggre11 gate, are sufficient to ensure that the plan does

12 not have an accumulated funding deficiency

13 under section 431 as of the end of the plan

14 year.

15 ‘‘(b) PLANS TO WHICH SECTION APPLIES.—

16 ‘‘(1) IN GENERAL.—Except as provided in para17 graphs (2) and (3), this section applies to a plan if,

18 for any plan year beginning on or after the effective

19 date of this section for such plan under the Em20 ployee Retirement Income Security Act of 1974—

21 ‘‘(A) the plan included a trust which quali22 fied (or was determined by the Secretary to

23 have qualified) under section 401(a), or
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1 ‘‘(B) the plan satisfied (or was determined

2 by the Secretary to have satisfied) the require3 ments of section 403(a).

4 ‘‘(2) EXCEPTIONS.—This section shall not

5 apply to—

6 ‘‘(A) any profit-sharing or stock bonus

7 plan,

8 ‘‘(B) any insurance contract plan described

9 in subsection (g)(3),

10 ‘‘(C) any governmental plan (within the

11 meaning of section 414(d)),

12 ‘‘(D) any church plan (within the meaning

13 of section 414(e)) with respect to which the

14 election provided by section 410(d) has not been

15 made,

16 ‘‘(E) any plan which has not, at any time

17 after September 2, 1974, provided for employer

18 contributions, or

19 ‘‘(F) any plan established and maintained

20 by a society, order, or association described in

21 section 501(c)(8) or (9), if no part of the con22 tributions to or under such plan are made by

23 employers of participants in such plan.

24 No plan described in subparagraph (C), (D), or (F)

25 shall be treated as a qualified plan for purposes of
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1 section 401(a) unless such plan meets the require2 ments of section 401(a)(7) as in effect on September

3 1, 1974.

4 ‘‘(3) CERTAIN TERMINATED MULTIEMPLOYER

5 PLANS.—This section applies with respect to a ter6 minated multiemployer plan to which section 4021

7 of the Employee Retirement Income Security Act of

8 1974 applies until the last day of the plan year in

9 which the plan terminates (within the meaning of

10 section 4041A(a)(2) of such Act).

11 ‘‘(c) LIABILITY FOR CONTRIBUTIONS.—

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), the amount of any contribution required

14 by this section and any required installments under

15 section 430(j) shall be paid by any employer respon16 sible for making the contribution to or under the

17 plan.

18 ‘‘(2) JOINT AND SEVERAL LIABILITY WHERE

19 EMPLOYER MEMBER OF CONTROLLED GROUP.—If

20 the employer referred to in paragraph (1) is a mem21 ber of a controlled group, each member of such

22 group shall be jointly and severally liable for pay23 ment of such contribution or required installment.

24 ‘‘(d) VARIANCE FROM MINIMUM FUNDING STAND25 ARDS.—
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1 ‘‘(1) WAIVER IN CASE OF BUSINESS HARD2 SHIP.—

3 ‘‘(A) IN GENERAL.—If—

4 ‘‘(i) an employer is (or in the case of

5 a multiemployer plan, 10 percent or more

6 of the number of employers contributing to

7 or under the plan are) unable to satisfy the

8 minimum funding standard for a plan year

9 without temporary substantial business

10 hardship (substantial business hardship in

11 the case of a multiemployer plan), and

12 ‘‘(ii) application of the standard would

13 be adverse to the interests of plan partici14 pants in the aggregate,

15 the Secretary may, subject to subparagraph

16 (C), waive the requirements of subsection (a)

17 for such year with respect to all or any portion

18 of the minimum funding standard. The Sec19 retary of the Treasury shall not waive the min20 imum funding standard with respect to a plan

21 for more than 3 of any 15 (5 of any 15 in the

22 case of a multiemployer plan) consecutive plan

23 years.
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1 ‘‘(B) EFFECTS OF WAIVER.—If a waiver is

2 granted under subparagraph (A) for any plan

3 year—

4 ‘‘(i) in the case of a single-employer

5 plan, the minimum required contribution

6 under section 430 for the plan year shall

7 be reduced by the amount of the waived

8 funding deficiency and such amount shall

9 be amortized as required under section

10 430(e), and

11 ‘‘(ii) in the case of a multiemployer

12 plan, the funding standard account shall

13 be credited under section 431(b)(3)(C)

14 with the amount of the waived funding de15 ficiency and such amount shall be amor16 tized as required under section

17 431(b)(2)(C).

18 ‘‘(C) WAIVER OF AMORTIZED PORTION

19 NOT ALLOWED.—The Secretary may not waive

20 under subparagraph (A) any portion of the

21 minimum funding standard under subsection

22 (a) for a plan year which is attributable to any

23 waived funding deficiency for any preceding

24 plan year.
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1 ‘‘(2) DETERMINATION OF BUSINESS HARD2 SHIP.—For purposes of this subsection, the factors

3 taken into account in determining temporary sub4 stantial business hardship (substantial business

5 hardship in the case of a multiemployer plan) shall

6 include (but shall not be limited to) whether or

7 not—

8 ‘‘(A) the employer is operating at an eco9 nomic loss,

10 ‘‘(B) there is substantial unemployment or

11 underemployment in the trade or business and

12 in the industry concerned,

13 ‘‘(C) the sales and profits of the industry

14 concerned are depressed or declining, and

15 ‘‘(D) it is reasonable to expect that the

16 plan will be continued only if the waiver is

17 granted.

18 ‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur19 poses of this part, the term ‘waived funding defi20 ciency’ means the portion of the minimum funding

21 standard under subsection (a) (determined without

22 regard to the waiver) for a plan year waived by the

23 Secretary and not satisfied by employer contribu24 tions.
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1 ‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM2 PLOYER PLANS, CONSULTATIONS.—

3 ‘‘(A) SECURITY MAY BE REQUIRED.—

4 ‘‘(i) IN GENERAL.—Except as pro5 vided in subparagraph (C), the Secretary

6 may require an employer maintaining a de7 fined benefit plan which is a single-em8 ployer plan (within the meaning of section

9 4001(a)(15) of the Employee Retirement

10 Income Security Act of 1974) to provide

11 security to such plan as a condition for

12 granting or modifying a waiver under

13 paragraph (1).

14 ‘‘(ii) SPECIAL RULES.—Any security

15 provided under clause (i) may be perfected

16 and enforced only by the Pension Benefit

17 Guaranty Corporation, or, at the direction

18 of the Corporation, by a contributing spon19 sor (within the meaning of section

20 4001(a)(13) of such Act) or a member of

21 such sponsor’s controlled group (within the

22 meaning of section 4001(a)(14) of such

23 Act).

24 ‘‘(B) CONSULTATION WITH THE PENSION

25 BENEFIT GUARANTY CORPORATION.—Except as
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1 provided in subparagraph (C), the Secretary

2 shall, before granting or modifying a waiver

3 under this subsection with respect to a plan de4 scribed in subparagraph (A)(i)—

5 ‘‘(i) provide the Pension Benefit

6 Guaranty Corporation with—

7 ‘‘(I) notice of the completed ap8 plication for any waiver or modifica9 tion, and

10 ‘‘(II) an opportunity to comment

11 on such application within 30 days

12 after receipt of such notice, and

13 ‘‘(ii) consider—

14 ‘‘(I) any comments of the Cor15 poration under clause (i)(II), and

16 ‘‘(II) any views of any employee

17 organization (within the meaning of

18 section 3(4) of such Act) representing

19 participants in the plan which are

20 submitted in writing to the Secretary

21 of the Treasury in connection with

22 such application.

23 Information provided to the Corporation under

24 this subparagraph shall be considered tax re25 turn information and subject to the safe-
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1 guarding and reporting requirements of section

2 6103(p).

3 ‘‘(C) EXCEPTION FOR CERTAIN WAIV4 ERS.—

5 ‘‘(i) IN GENERAL.—The preceding

6 provisions of this paragraph shall not

7 apply to any plan with respect to which the

8 sum of—

9 ‘‘(I) the aggregate unpaid min10 imum required contributions for the

11 plan year and all preceding plan

12 years, and

13 ‘‘(II) the present value of all

14 waiver amortization installments de15 termined for the plan year and suc16 ceeding plan years under section

17 430(e)(2),

18 is less than $1,000,000.

19 ‘‘(ii) TREATMENT OF WAIVERS FOR

20 WHICH APPLICATIONS ARE PENDING.—The

21 amount described in clause (i)(I) shall in22 clude any increase in such amount which

23 would result if all applications for waivers

24 of the minimum funding standard under
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1 this subsection which are pending with re2 spect to such plan were denied.

3 ‘‘(iii) UNPAID MINIMUM REQUIRED

4 CONTRIBUTION.—For purposes of this

5 subparagraph—

6 ‘‘(I) IN GENERAL.—The term

7 ‘unpaid minimum required contribu8 tion’ means, with respect to any plan

9 year, any minimum required contribu10 tion under section 430 for the plan

11 year which is not paid on or before

12 the due date (as determined under

13 section 430(j)(1)) for the plan year.

14 ‘‘(II) ORDERING RULE.—For

15 purposes of subclause (I), any pay16 ment to or under a plan for any plan

17 year shall be allocated first to unpaid

18 minimum required contributions for

19 all preceding plan years on a first-in,

20 first-out basis and then to the min21 imum required contribution under sec22 tion 430 for the plan year.

23 ‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER

24 PLANS.—
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1 ‘‘(A) APPLICATION MUST BE SUBMITTED

BEFORE DATE 21 2 ⁄2 MONTHS AFTER CLOSE OF

3 YEAR.—In the case of a single-employer plan,

4 no waiver may be granted under this subsection

5 with respect to any plan for any plan year un6 less an application therefor is submitted to the

7 Secretary not later than the 15th day of the

8 3rd month beginning after the close of such

9 plan year.

10 ‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM11 BER OF CONTROLLED GROUP.—In the case of a

12 single-employer plan, if an employer is a mem13 ber of a controlled group, the temporary sub14 stantial business hardship requirements of

15 paragraph (1) shall be treated as met only if

16 such requirements are met—

17 ‘‘(i) with respect to such employer,

18 and

19 ‘‘(ii) with respect to the controlled

20 group of which such employer is a member

21 (determined by treating all members of

22 such group as a single employer).

23 The Secretary may provide that an analysis of

24 a trade or business or industry of a member

25 need not be conducted if the Secretary deter-
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1 mines such analysis is not necessary because

2 the taking into account of such member would

3 not significantly affect the determination under

4 this paragraph.

5 ‘‘(6) ADVANCE NOTICE.—

6 ‘‘(A) IN GENERAL.—The Secretary shall,

7 before granting a waiver under this subsection,

8 require each applicant to provide evidence satis9 factory to such Secretary that the applicant has

10 provided notice of the filing of the application

11 for such waiver to each affected party (as de12 fined in section 4001(a)(21) of the Employee

13 Retirement Income Security Act of 1974) other

14 than the Pension Benefit Guaranty Corporation

15 and in the case of a multiemployer plan, to each

16 employer required to contribute to the plan

17 under subsection (b)(1). Such notice shall in18 clude a description of the extent to which the

19 plan is funded for benefits which are guaran20 teed under title IV of such Act and for benefit

21 liabilities.

22 ‘‘(B) CONSIDERATION OF RELEVANT IN23 FORMATION.—The Secretary shall consider any

24 relevant information provided by a person to
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1 whom notice was given under subparagraph

2 (A).

3 ‘‘(7) RESTRICTION ON PLAN AMENDMENTS.—

4 ‘‘(A) IN GENERAL.—No amendment of a

5 plan which increases the liabilities of the plan

6 by reason of any increase in benefits, any

7 change in the accrual of benefits, or any change

8 in the rate at which benefits become nonforfeit9 able under the plan shall be adopted if a waiver

10 under this subsection or an extension of time

11 under section 431(d) is in effect with respect to

12 the plan, or if a plan amendment described in

13 subsection (e)(2) has been made at any time in

14 the preceding 24 months. If a plan is amended

15 in violation of the preceding sentence, any such

16 waiver, or extension of time, shall not apply to

17 any plan year ending on or after the date on

18 which such amendment is adopted.

19 ‘‘(B) EXCEPTION.—Subparagraph (A)

20 shall not apply to any plan amendment which—

21 ‘‘(i) the Secretary determines to be

22 reasonable and which provides for only de

23 minimis increases in the liabilities of the

24 plan,
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1 ‘‘(ii) only repeals an amendment de2 scribed in subsection (e)(2), or

3 ‘‘(iii) is required as a condition of

4 qualification under part I of subchapter D,

5 of chapter 1 of the Internal Revenue Code

6 of 1986.

7 ‘‘(e) MISCELLANEOUS RULES.—For purposes of this

8 section—

9 ‘‘(1) CHANGE IN METHOD OR YEAR.—If the

10 funding method, the valuation date, or a plan year

11 for a plan is changed, the change shall take effect

12 only if approved by the Secretary.

13 ‘‘(2) CERTAIN RETROACTIVE PLAN AMEND14 MENTS.—For purposes of this section, any amend15 ment applying to a plan year which—

16 ‘‘(A) is adopted after the close of such plan

year but no later than 21 17 ⁄2 months after the

18 close of the plan year (or, in the case of a mul19 tiemployer plan, no later than 2 years after the

20 close of such plan year),

21 ‘‘(B) does not reduce the accrued benefit

22 of any participant determined as of the begin23 ning of the first plan year to which the amend24 ment applies, and
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1 ‘‘(C) does not reduce the accrued benefit of

2 any participant determined as of the time of

3 adoption except to the extent required by the

4 circumstances,

5 shall, at the election of the plan administrator, be

6 deemed to have been made on the first day of such

7 plan year. No amendment described in this para8 graph which reduces the accrued benefits of any par9 ticipant shall take effect unless the plan adminis10 trator files a notice with the Secretary notifying him

11 of such amendment and the Secretary has approved

12 such amendment, or within 90 days after the date

13 on which such notice was filed, failed to disapprove

14 such amendment. No amendment described in this

15 subsection shall be approved by the Secretary unless

16 the Secretary determines that such amendment is

17 necessary because of a temporary substantial busi18 ness hardship (as determined under subsection

19 (d)(2)) or a substantial business hardship (as so de20 termined) in the case of a multiemployer plan and

21 that a waiver under subsection (d)(1) (or in the case

22 of a multiemployer plan, any extension of the amor23 tization period under section 431(d)) is unavailable

24 or inadequate.
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1 ‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.—

2 A plan is described in this paragraph if—

3 ‘‘(A) the plan is funded exclusively by the

4 purchase of individual insurance contracts,

5 ‘‘(B) such contracts provide for level an6 nual premium payments to be paid extending

7 not later than the retirement age for each indi8 vidual participating in the plan, and com9 mencing with the date the individual became a

10 participant in the plan (or, in the case of an in11 crease in benefits, commencing at the time such

12 increase becomes effective),

13 ‘‘(C) benefits provided by the plan are

14 equal to the benefits provided under each con15 tract at normal retirement age under the plan

16 and are guaranteed by an insurance carrier (li17 censed under the laws of a State to do business

18 with the plan) to the extent premiums have

19 been paid,

20 ‘‘(D) premiums payable for the plan year,

21 and all prior plan years, under such contracts

22 have been paid before lapse or there is rein23 statement of the policy,
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1 ‘‘(E) no rights under such contracts have

2 been subject to a security interest at any time

3 during the plan year, and

4 ‘‘(F) no policy loans are outstanding at

5 any time during the plan year.

6 A plan funded exclusively by the purchase of group

7 insurance contracts which are determined under reg8 ulations prescribed by the Secretary to have the

9 same characteristics as contracts described in the

10 preceding sentence shall be treated as a plan de11 scribed in this paragraph.

12 ‘‘(4) CONTROLLED GROUP.—For purposes of

13 this section and section 430, the term ‘controlled

14 group’ means any group treated as a single employer

15 under subsection (b), (c), (m), or (o) of section

16 414.’’.

17 (b) EFFECTIVE DATE.—The amendment made by

18 this section shall apply to plan years beginning after De19 cember 31, 2006.

20 SEC. 112. FUNDING RULES APPLICABLE TO SINGLE-EM21 PLOYER PENSION PLANS.

22 Subchapter D of chapter 1 of the Internal Revenue

23 Code of 1986 (relating to deferred compensation, etc.) is

24 amended by adding at the end the following new part:
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1 ‘‘PART III—RULES RELATING TO MINIMUM

2 FUNDING STANDARDS AND BENEFIT LIMITATION

‘‘430. Minimum funding standards for single-employer defined benefit plans.

‘‘431. Minimum funding standards for multiemployer plans.

3 ‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE4 EMPLOYER DEFINED BENEFIT PLANS.

5 ‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For

6 purposes of this section and section 412(a)(2)(A), except

7 as provided in subsection (f), the term ‘minimum required

8 contribution’ means, with respect to any plan year of a

9 defined benefit plan which is a single employer plan—

10 ‘‘(1) in any case in which the value of plan as11 sets of the plan (as reduced under subsection (f)(4))

12 is less than the funding target of the plan for the

13 plan year, the sum of—

14 ‘‘(A) the target normal cost of the plan for

15 the plan year,

16 ‘‘(B) the shortfall amortization charge (if

17 any) for the plan for the plan year determined

18 under subsection (c), and

19 ‘‘(C) the waiver amortization charge (if

20 any) for the plan for the plan year as deter21 mined under subsection (e); or

22 ‘‘(2) in any case in which the value of plan as23 sets of the plan (as reduced under subsection (f)(4))

24 equals or exceeds the funding target of the plan for
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1 the plan year, the target normal cost of the plan for

2 the plan year reduced (but not below zero) by any

3 such excess.

4 ‘‘(b) TARGET NORMAL COST.—For purposes of this

5 section, except as provided in subsection (i)(2) with re6 spect to plans in at-risk status, the term ‘target normal

7 cost’ means, for any plan year, the present value of all

8 benefits which are expected to accrue or to be earned

9 under the plan during the plan year. For purposes of this

10 subsection, if any benefit attributable to services per11 formed in a preceding plan year is increased by reason

12 of any increase in compensation during the current plan

13 year, the increase in such benefit shall be treated as hav14 ing accrued during the current plan year.

15 ‘‘(c) SHORTFALL AMORTIZATION CHARGE.—

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, the shortfall amortization charge for a plan for

18 any plan year is the aggregate total of the shortfall

19 amortization installments for such plan year with re20 spect to the shortfall amortization bases for such

21 plan year and each of the 6 preceding plan years.

22 ‘‘(2) SHORTFALL AMORTIZATION INSTALL23 MENT.—For purposes of paragraph (1)—

24 ‘‘(A) DETERMINATION.—The shortfall am25 ortization installments are the amounts nec-
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1 essary to amortize the shortfall amortization

2 base of the plan for any plan year in level an3 nual installments over the 7-plan-year period

4 beginning with such plan year.

5 ‘‘(B) SHORTFALL INSTALLMENT.—The

6 shortfall amortization installment for any plan

7 year in the 7-plan-year period under subpara8 graph (A) with respect to any shortfall amorti9 zation base is the annual installment deter10 mined under subparagraph (A) for that year for

11 that base.

12 ‘‘(C) SEGMENT RATES.—In determining

13 any shortfall amortization installment under

14 this paragraph, the plan sponsor shall use the

15 segment rates determined under subparagraph

16 (C) of subsection (h)(2), applied under rules

17 similar to the rules of subparagraph (B) of sub18 section (h)(2).

19 ‘‘(3) SHORTFALL AMORTIZATION BASE.—For

20 purposes of this section, the shortfall amortization

21 base of a plan for a plan year is the excess (if any)

22 of—

23 ‘‘(A) the funding shortfall of such plan for

24 such plan year, over
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1 ‘‘(B) the present value (determined using

2 the segment rates determined under subpara3 graph (C) of subsection (h)(2), applied under

4 rules similar to the rules of subparagraph (B)

5 of subsection (h)(2)) of the aggregate total of

6 the shortfall amortization installments and

7 waiver amortization installments which have

8 been determined for such plan year and any

9 succeeding plan year with respect to the short10 fall amortization bases and waiver amortization

11 bases of the plan for any plan year preceding

12 such plan year.

13 ‘‘(4) FUNDING SHORTFALL.—

14 ‘‘(A) IN GENERAL.—For purposes of this

15 section, except as provided in subparagraph

16 (B), the funding shortfall of a plan for any plan

17 year is the excess (if any) of—

18 ‘‘(i) the funding target of the plan for

19 the plan year, over

20 ‘‘(ii) the value of plan assets of the

21 plan (as reduced under subsection (f)(4))

22 for the plan year which are held by the

23 plan on the valuation date.

24 ‘‘(B) TRANSITION RULE FOR AMORTIZA25 TION OF FUNDING SHORTFALL.—
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1 ‘‘(i) IN GENERAL.—Solely for pur2 poses of applying paragraph (3) in the case

3 of plan years beginning after 2006 and be4 fore 2011, only the applicable percentage

5 of the funding target shall be taken into

6 account under paragraph (3)(A) in deter7 mining the funding shortfall for the plan

8 year.

9 ‘‘(ii) APPLICABLE PERCENTAGE.—For

10 purposes of subparagraph (A)—

11 ‘‘(I) IN GENERAL.—Except as

12 provided in subclause (II), the appli13 cable percentage shall be 93 percent

14 for plan years beginning in 2007, 96

15 percent for plan years beginning in

16 2008, and 100 percent for any suc17 ceeding plan year.

18 ‘‘(II) SMALL PLANS.—In the case

19 of a plan described in subsection

20 (g)(2)(B), the applicable percentage

21 shall be determined in accordance

22 with the following table:

‘‘In the case of a plan year The applicable

beginning in calendar year: percentage is—

2007 ......................................................................................... 92

2008 ......................................................................................... 94

2009 ......................................................................................... 96

2010 ......................................................................................... 98.
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1 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT2 TAINMENT OF FUNDING TARGET.—In any case in

3 which the funding shortfall of a plan for a plan year

4 is zero, for purposes of determining the shortfall am5 ortization charge for such plan year and succeeding

6 plan years, the shortfall amortization bases for all

7 preceding plan years (and all shortfall amortization

8 installments determined with respect to such bases)

9 shall be reduced to zero.

10 ‘‘(d) RULES RELATING TO FUNDING TARGET.—For

11 purposes of this section—

12 ‘‘(1) FUNDING TARGET.—Except as provided in

13 subsection (i)(1) with respect to plans in at-risk sta14 tus, the funding target of a plan for a plan year is

15 the present value of all benefits accrued or earned

16 under the plan as of the beginning of the plan year.

17 ‘‘(2) FUNDING TARGET ATTAINMENT PERCENT18 AGE.—The ‘funding target attainment percentage’ of

19 a plan for a plan year is the ratio (expressed as a

20 percentage) which—

21 ‘‘(A) the value of plan assets for the plan

22 year, bears to

23 ‘‘(B) the funding target of the plan for the

24 plan year (determined without regard to sub25 section (i)(1)).
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1 ‘‘(e) WAIVER AMORTIZATION CHARGE.—

2 ‘‘(1) DETERMINATION OF WAIVER AMORTIZA3 TION CHARGE.—The waiver amortization charge (if

4 any) for a plan for any plan year is the aggregate

5 total of the waiver amortization installments for

6 such plan year with respect to the waiver amortiza7 tion bases for each of the 5 preceding plan years.

8 ‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—

9 For purposes of paragraph (1)—

10 ‘‘(A) DETERMINATION.—The waiver amor11 tization installments are the amounts necessary

12 to amortize the waiver amortization base of the

13 plan for any plan year in level annual install14 ments over a period of 5 plan years beginning

15 with the succeeding plan year.

16 ‘‘(B) WAIVER INSTALLMENT.—The waiver

17 amortization installment for any plan year in

18 the 5-year period under subparagraph (A) with

19 respect to any waiver amortization base is the

20 annual installment determined under subpara21 graph (A) for that year for that base.

22 ‘‘(3) INTEREST RATE.—In determining any

23 waiver amortization installment under this sub24 section, the plan sponsor shall use the segment rates

25 determined under subparagraph (C) of subsection
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1 (h)(2), applied under rules similar to the rules of

2 subparagraph (B) of subsection (h)(2).

3 ‘‘(4) WAIVER AMORTIZATION BASE.—The waiv4 er amortization base of a plan for a plan year is the

5 amount of the waived funding deficiency (if any) for

6 such plan year under section 412(d).

7 ‘‘(5) EARLY DEEMED AMORTIZATION UPON AT8 TAINMENT OF FUNDING TARGET.—In any case in

9 which the funding shortfall of a plan for a plan year

10 is zero, for purposes of determining the waiver am11 ortization charge for such plan year and succeeding

12 plan years, the waiver amortization bases for all pre13 ceding plan years (and all waiver amortization in14 stallments with respect to such bases) shall be re15 duced to zero.

16 ‘‘(f) USE OF PREFUNDING BALANCES TO SATISFY

17 MINIMUM REQUIRED CONTRIBUTIONS.—

18 ‘‘(1) IN GENERAL.—A plan sponsor may credit

19 any amount of a plan’s prefunding balance for a

20 plan year against the minimum required contribu21 tion for the plan year and the amount of the con22 tributions an employer is required to make under

23 section 412(c) for the plan year shall be reduced by

24 the amount so credited. Any such amount shall be

25 credited on the first day of the plan year.
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1 ‘‘(2) PREFUNDING BALANCE.—

2 ‘‘(A) BEGINNING BALANCE.—The begin3 ning balance of a prefunding balance main4 tained by a plan shall be zero, except that if a

5 plan was in effect for a plan year beginning in

6 2006 and had a positive balance in the funding

7 standard account under section 412(b) (as in

8 effect for such plan year) as of the end of such

9 plan year, the beginning balance for the plan

10 for its first plan year beginning after 2006 shall

11 be such positive balance.

12 ‘‘(B) INCREASES.—

13 ‘‘(i) IN GENERAL.—As of the first day

14 of each plan year beginning after 2007, the

15 prefunding balance of a plan shall be in16 creased by the excess (if any) of—

17 ‘‘(I) the aggregate amount of em18 ployer contributions to the plan for

19 the preceding plan year, over

20 ‘‘(II) the minimum required con21 tribution for the preceding plan year.

22 ‘‘(ii) ADJUSTMENTS FOR INTEREST.—

23 Any excess contributions under clause (i)

24 shall be properly adjusted for interest ac25 cruing for the periods between the first
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1 day of the current plan year and the dates

2 on which the excess contributions were

3 made, determined by using the effective in4 terest rate for the preceding plan year and

5 by treating contributions as being first

6 used to satisfy the minimum required con7 tribution.

8 ‘‘(iii) CERTAIN CONTRIBUTIONS DIS9 REGARDED.—Any contribution which is re10 quired to be made under section 436 in ad11 dition to any contribution required under

12 this section shall not be taken into account

13 for purposes of clause (i).

14 ‘‘(C) DECREASES.—As of the first day of

15 each plan year after 2007, the prefunding bal16 ance of a plan shall be decreased (but not below

17 zero) by the amount of the balance credited

18 under paragraph (1) against the minimum re19 quired contribution of the plan for the pre20 ceding plan year.

21 ‘‘(D) ADJUSTMENTS FOR INVESTMENT EX22 PERIENCE.—In determining the prefunding bal23 ance of a plan as of the first day of the plan

24 year, the plan sponsor shall, in accordance with

25 regulations prescribed by the Secretary, adjust
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1 such balance to reflect the rate of return on

2 plan assets for the preceding plan year. Not3 withstanding subsection (g)(3), such rate of re4 turn shall be determined on the basis of fair

5 market value and shall properly take into ac6 count, in accordance with such regulations, all

7 contributions, distributions, and other plan pay8 ments made during such period.

9 ‘‘(3) LIMITATION FOR UNDERFUNDED PLANS.—

10 ‘‘(A) IN GENERAL.—If the ratio (expressed

11 as a percentage) for any plan year which—

12 ‘‘(i) the value of plan assets for the

13 preceding plan year, bears to

14 ‘‘(ii) the funding target of the plan for

15 the preceding plan year (determined with16 out regard to subsection (i)(1)),

17 is less than 80 percent, the preceding provisions

18 of this subsection shall not apply unless employ19 ers liable for contributions to the plan under

20 section 412(c) make contributions to the plan

21 for the plan year in an aggregate amount not

22 less than the amount determined under sub23 paragraph (B). Any contribution required by

24 this subparagraph may not be reduced by any

25 credit otherwise allowable under paragraph (1).
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1 ‘‘(B) APPLICABLE AMOUNT.—The amount

2 determined under this subparagraph for any

3 plan year is the greater of—

4 ‘‘(i) the target normal cost of the plan

5 for the plan year, or

6 ‘‘(ii) 25 percent of the minimum re7 quired contribution under subsection (a)

8 for the plan year without regard to this

9 subsection.

10 ‘‘(4) REDUCTION IN VALUE OF ASSETS.—Solely

11 for purposes of applying subsections (a) and

12 (c)(4)(A)(ii) in determining the minimum required

13 contribution under this section, the value of the plan

14 assets otherwise determined without regard to this

15 paragraph shall be reduced by the amount of the

16 prefunding balance under this subsection.

17 ‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL18 ITIES.—

19 ‘‘(1) TIMING OF DETERMINATIONS.—Except as

20 otherwise provided under this subsection, all deter21 minations under this section for a plan year shall be

22 made as of the valuation date of the plan for such

23 plan year.

24 ‘‘(2) VALUATION DATE.—For purposes of this

25 section—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), the valuation date of a plan

3 for any plan year shall be the first day of the

4 plan year.

5 ‘‘(B) EXCEPTION FOR SMALL PLANS.—If,

6 on each day during the preceding plan year, a

7 plan had 100 or fewer participants, the plan

8 may designate any day during the plan year as

9 its valuation date for such plan year and suc10 ceeding plan years. For purposes of this sub11 paragraph, all defined benefit plans (other than

12 multiemployer plans) maintained by the same

13 employer (or any member of such employer’s

14 controlled group) shall be treated as 1 plan, but

15 only employees of such employer or member

16 shall be taken into account.

17 ‘‘(C) APPLICATION OF CERTAIN RULES IN

18 DETERMINATION OF PLAN SIZE.—For purposes

19 of this paragraph—

20 ‘‘(i) PLANS NOT IN EXISTENCE IN

21 PRECEDING YEAR.—In the case of the first

22 plan year of any plan, subparagraph (B)

23 shall apply to such plan by taking into ac24 count the number of participants that the
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1 plan is reasonably expected to have on

2 days during such first plan year.

3 ‘‘(ii) PREDECESSORS.—Any reference

4 in subparagraph (B) to an employer shall

5 include a reference to any predecessor of

6 such employer.

7 ‘‘(3) DETERMINATION OF VALUE OF PLAN AS8 SETS.—For purposes of this section—

9 ‘‘(A) IN GENERAL.—Except as provided in

10 subparagraph (B), the value of plan assets shall

11 be the fair market value of the assets.

12 ‘‘(B) AVERAGING ALLOWED.—A plan may

13 determine the value of plan assets on the basis

14 of any reasonable actuarial method of valuation

15 providing for the averaging of fair market val16 ues, but only if such method—

17 ‘‘(i) is permitted under regulations

18 prescribed by the Secretary, and

19 ‘‘(ii) does not provide for averaging of

20 such values over more than the period be21 ginning on the last day of the 12th month

22 preceding the valuation date and ending on

23 the valuation date (or a similar period in

24 the case of a valuation date which is not

25 the 1st day of a month).
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1 ‘‘(4) ACCOUNTING FOR CONTRIBUTION RE2 CEIPTS.—For purposes of determining the value of

3 assets under paragraph (3)—

4 ‘‘(A) PRIOR YEAR CONTRIBUTIONS.—If—

5 ‘‘(i) an employer makes any contribu6 tion to the plan after the valuation date for

7 the plan year in which the contribution is

8 made, and

9 ‘‘(ii) the contribution is for a pre10 ceding plan year,

11 the contribution shall be taken into account as

12 an asset of the plan as of the valuation date,

13 except that in the case of any plan year begin14 ning after 2007, only the present value (deter15 mined as of the valuation date) of such con16 tribution may be taken into account. For pur17 poses of the preceding sentence, present value

18 shall be determined using the effective interest

19 rate for the preceding plan year to which the

20 contribution is properly allocable.

21 ‘‘(B) SPECIAL RULE FOR CURRENT YEAR

22 CONTRIBUTIONS MADE BEFORE VALUATION

23 DATE.—If any contributions for any plan year

24 are made to or under the plan during the plan

25 year but before the valuation date for the plan
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1 year, the assets of the plan as of the valuation

2 date shall not include—

3 ‘‘(i) such contributions, and

4 ‘‘(ii) interest on such contributions for

5 the period between the date of the con6 tributions and the valuation date, deter7 mined by using the effective interest rate

8 for the plan year.

9 ‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—

10 ‘‘(1) IN GENERAL.—Subject to this subsection,

11 the determination of any present value or other com12 putation under this section shall be made on the

13 basis of actuarial assumptions and methods—

14 ‘‘(A) each of which is reasonable (taking

15 into account the experience of the plan and rea16 sonable expectations), and

17 ‘‘(B) which, in combination, offer the actu18 ary’s best estimate of anticipated experience

19 under the plan.

20 ‘‘(2) INTEREST RATES.—

21 ‘‘(A) EFFECTIVE INTEREST RATE.—For

22 purposes of this section, the term ‘effective in23 terest rate’ means, with respect to any plan for

24 any plan year, the single rate of interest which,

25 if used to determine the present value of the
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1 plan’s accrued or earned benefits referred to in

2 subsection (d)(1), would result in an amount

3 equal to the funding target of the plan for such

4 plan year.

5 ‘‘(B) INTEREST RATES FOR DETERMINING

6 FUNDING TARGET.—For purposes of deter7 mining the funding target of a plan for any

8 plan year, the interest rate used in determining

9 the present value of the benefits of the plan

10 shall be—

11 ‘‘(i) in the case of benefits reasonably

12 determined to be payable during the 5-year

13 period beginning on the first day of the

14 plan year, the first segment rate with re15 spect to the applicable month,

16 ‘‘(ii) in the case of benefits reasonably

17 determined to be payable during the 15-

18 year period beginning at the end of the pe19 riod described in clause (i), the second seg20 ment rate with respect to the applicable

21 month, and

22 ‘‘(iii) in the case of benefits reason23 ably determined to be payable after the pe24 riod described in clause (ii), the third seg-
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1 ment rate with respect to the applicable

2 month.

3 ‘‘(C) SEGMENT RATES.—For purposes of

4 this paragraph—

5 ‘‘(i) FIRST SEGMENT RATE.—The

6 term ‘first segment rate’ means, with re7 spect to any month, the single rate of in8 terest which shall be determined by the

9 Secretary for such month on the basis of

10 the corporate bond yield curve for such

11 month, taking into account only that por12 tion of such yield curve which is based on

13 bonds maturing during the 5-year period

14 commencing with such month.

15 ‘‘(ii) SECOND SEGMENT RATE.—The

16 term ‘second segment rate’ means, with re17 spect to any month, the single rate of in18 terest which shall be determined by the

19 Secretary for such month on the basis of

20 the corporate bond yield curve for such

21 month, taking into account only that por22 tion of such yield curve which is based on

23 bonds maturing during each of the years in

24 the 15-year period beginning at the end of

25 the period described in clause (i).
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1 ‘‘(iii) THIRD SEGMENT RATE.—The

2 term ‘third segment rate’ means, with re3 spect to any month, the single rate of in4 terest which shall be determined by the

5 Secretary for such month on the basis of

6 the corporate bond yield curve for such

7 month, taking into account only that por8 tion of such yield curve which is based on

9 bonds maturing during periods beginning

10 after the period described in clause (ii).

11 ‘‘(D) CORPORATE BOND YIELD CURVE.—

12 The term ‘corporate bond yield curve’ means,

13 with respect to any month, a yield curve which

14 is prescribed by the Secretary for such month

15 and which reflects the average, for the 12-

16 month period ending with the month preceding

17 such month, of yields on investment grade cor18 porate bonds with varying maturities.

19 ‘‘(E) APPLICABLE MONTH.—For purposes

20 of this paragraph, the term ‘applicable month’

21 means, with respect to any plan for any plan

22 year, the month which includes the valuation

23 date of such plan for such plan year or, at the

24 election of the plan administrator, any of the 4

25 months which precede such month. Any election
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1 made under this subparagraph shall apply to

2 the plan year for which the election is made and

3 all succeeding plan years, unless the election is

4 revoked with the consent of the Secretary.

5 ‘‘(F) PUBLICATION REQUIREMENTS.—The

6 Secretary shall publish for each month the cor7 porate bond yield curve for such month and

8 each of the rates determined under this para9 graph for such month. The Secretary shall also

10 publish a description of the methodology used

11 to determine such yield curve and such rates

12 which is sufficiently detailed to enable plans to

13 make reasonable projections regarding the yield

14 curve and such rates for future months based

15 on the plan’s projection of future interest rates.

16 ‘‘(G) TRANSITION RULE.—

17 ‘‘(i) IN GENERAL.—Notwithstanding

18 the preceding provisions of this paragraph,

19 for plan years beginning in 2007 or 2008,

20 the first, second, or third segment rate for

21 a plan with respect to any month shall be

22 equal to the sum of—

23 ‘‘(I) the product of such rate for

24 such month determined without re-
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1 gard to this subparagraph, multiplied

2 by the applicable percentage, and

3 ‘‘(II) the product of the rate de4 termined under the rules of section

5 412(b)(5)(B)(ii)(II) (as in effect for

6 plan years beginning in 2006), multi7 plied by a percentage equal to 100

8 percent minus the applicable percent9 age.

10 ‘‘(ii) APPLICABLE PERCENTAGE.—For

11 purposes of clause (i), the applicable percentage is 331 12 ⁄3 percent for plan years beginning in 2007 and 662 13 ⁄3 percent for plan

14 years beginning in 2008.

15 ‘‘(3) MORTALITY TABLES.—

16 ‘‘(A) IN GENERAL.—Except as provided in

17 subparagraphs (C) and (D), the mortality table

18 used in determining any present value or mak19 ing any computation under this section shall be

20 the RP–2000 Combined Mortality Table, using

21 Scale AA, as published by the Society of Actu22 aries, as in effect on the date of the enactment

23 of the Pension Security and Transparency Act

24 of 2005 and as revised from time to time under

25 subparagraph (B).
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1 ‘‘(B) PERIODIC REVISION.—The Secretary

2 shall (at least every 10 years) make revisions in

3 any table in effect under subparagraph (A) to

4 reflect the actual experience of pension plans

5 and projected trends in such experience.

6 ‘‘(C) SUBSTITUTE MORTALITY TABLE.—

7 ‘‘(i) IN GENERAL.—Upon request by

8 the plan sponsor and approval by the Sec9 retary, a mortality table which meets the

10 requirements of clause (ii) shall be used in

11 determining any present value or making

12 any computation under this section during

13 the 10-consecutive plan year period speci14 fied in the request. A mortality table de15 scribed in this clause shall cease to be in

16 effect if the plan actuary determines at

17 any time that such table does not meet the

18 requirements of clause (ii).

19 ‘‘(ii) REQUIREMENTS.—A mortality

20 table meets the requirements of this clause

21 if the Secretary determines that—

22 ‘‘(I) there is a sufficient number

23 of plan participants, and the pension

24 plans have been maintained for a suf25 ficient period of time, to have credible
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1 information necessary for purposes of

2 subclause (II),

3 ‘‘(II) such table reflects the ac4 tual experience of the pension plans

5 maintained by the sponsor and pro6 jected trends in general mortality ex7 perience,

8 ‘‘(III) except as provided by the

9 Secretary, such table will be used by

10 all plans maintained by the plan spon11 sor and all members of any controlled

12 group which includes the plan spon13 sor, and

14 ‘‘(IV) such table is significantly

15 different from the table described in

16 subparagraph (A).

17 ‘‘(iii) DEADLINE FOR DISPOSITION OF

18 APPLICATION.—Any mortality table sub19 mitted to the Secretary for approval under

20 this subparagraph shall be treated as in ef21 fect for the first plan year in the 10-year

22 period described in clause (i) unless the

23 Secretary, during the 180-day period be24 ginning on the date of such submission,

25 disapproves of such table and provides the
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1 reasons that such table fails to meet the

2 requirements of clause (ii). The 180-day

3 period shall be extended for any period

4 during which the Secretary has requested

5 information from the plan sponsor and

6 such information has not been provided.

7 ‘‘(D) SEPARATE MORTALITY TABLES FOR

8 THE DISABLED.—Notwithstanding subpara9 graph (A)—

10 ‘‘(i) IN GENERAL.—The Secretary

11 shall establish mortality tables which may

12 be used (in lieu of the tables under sub13 paragraph (A)) under this subsection for

14 individuals who are entitled to benefits

15 under the plan on account of disability.

16 The Secretary shall establish separate ta17 bles for individuals whose disabilities occur

18 in plan years beginning before January 1,

19 1995, and for individuals whose disabilities

20 occur in plan years beginning on or after

21 such date.

22 ‘‘(ii) SPECIAL RULE FOR DISABILITIES

23 OCCURRING AFTER 1994.—In the case of

24 disabilities occurring in plan years begin25 ning after December 31, 1994, the tables
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1 under clause (i) shall apply only with re2 spect to individuals described in such sub3 clause who are disabled within the meaning

4 of title II of the Social Security Act and

5 the regulations thereunder.

6 ‘‘(iii) PERIODIC REVISION.—The Sec7 retary shall (at least every 10 years) make

8 revisions in any table in effect under clause

9 (i) to reflect the actual experience of pen10 sion plans and projected trends in such ex11 perience.

12 ‘‘(E) TRANSITION RULE.—Under regula13 tions of the Secretary, any difference in present

14 value resulting from any differences in assump15 tions as set forth in the mortality table speci16 fied in subparagraph (A) and assumptions as

17 set forth in the mortality table described in sec18 tion 412(l)(7)(C)(ii) (as in effect for plan years

19 beginning in 2006) shall be phased in ratably

20 over the first period of 5 plan years beginning

21 in or after 2007 so as to be fully effective for

22 the fifth plan year.

23 ‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN

24 THE FORM OF LUMP SUMS OR OTHER OPTIONAL

25 FORMS.—For purposes of determining any present
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1 value or making any computation under this section,

2 there shall be taken into account—

3 ‘‘(A) the probability that future benefit

4 payments under the plan will be made in the

5 form of optional forms of benefits provided

6 under the plan (including lump sum distribu7 tions, determined on the basis of the plan’s ex8 perience and other related assumptions), and

9 ‘‘(B) any difference in the present value of

10 such future benefit payments resulting from the

11 use of actuarial assumptions, in determining

12 benefit payments in any such optional form of

13 benefits, which are different from those speci14 fied in this subsection.

15 ‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU16 ARIAL ASSUMPTIONS.—

17 ‘‘(A) IN GENERAL.—No actuarial assump18 tion used to determine the funding target for a

19 plan to which this paragraph applies may be

20 changed without the approval of the Secretary.

21 ‘‘(B) PLANS TO WHICH PARAGRAPH AP22 PLIES.—This paragraph shall apply to a plan

23 only if—

24 ‘‘(i) the aggregate unfunded benefits

25 as of the close of the preceding plan year
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1 (as determined under section

2 4006(a)(3)(E)(iii) of the Employee Retire3 ment Income Security Act of 1974) of such

4 plan and all other plans maintained by the

5 contributing sponsors (as defined in sec6 tion 4001(a)(13) of such Act) and mem7 bers of such sponsors’ controlled groups

8 (as defined in section 4001(a)(14) of such

9 Act) which are covered by title IV of such

10 Act (disregarding plans with no unfunded

11 benefits) exceed $50,000,000; and

12 ‘‘(ii) the change in assumptions (de13 termined after taking into account any

14 changes in interest rate and mortality

15 table) results in a decrease in the funding

16 shortfall of the plan for the current plan

17 year that exceeds $50,000,000, or that ex18 ceeds $5,000,000 and that is 5 percent or

19 more of the funding target of the plan be20 fore such change.

21 ‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.—

22 ‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK

23 STATUS.—

24 ‘‘(A) IN GENERAL.—In the case of a plan

25 to which this subsection applies for a plan year,
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1 the funding target of the plan for the plan year

2 is equal to the present value of all liabilities to

3 participants and their beneficiaries under the

4 plan for the plan year, as determined by using

5 the additional actuarial assumptions described

6 in subparagraph (B).

7 ‘‘(B) ADDITIONAL ACTUARIAL ASSUMP8 TIONS.—The actuarial assumptions described in

9 this subparagraph are as follows:

10 ‘‘(i) All employees who are not other11 wise assumed to retire as of the valuation

12 date but who will be eligible to elect bene13 fits during the plan year and the 7 suc14 ceeding plan years shall be assumed to re15 tire at the earliest retirement date under

16 the plan but not before the end of the plan

17 year for which the at-risk target liability

18 and at-risk target normal cost are being

19 determined.

20 ‘‘(ii) All employees shall be assumed

21 to elect the retirement benefit available

22 under the plan at the assumed retirement

23 age (determined after application of clause

24 (i)) which would result in the highest

25 present value of liabilities.
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1 ‘‘(2) TARGET NORMAL COST OF AT-RISK

2 PLANS.—In the case of a plan to which this sub3 section applies for a plan year, the target normal

4 cost of the plan for such plan year shall be equal to

5 the present value of all benefits which are expected

6 to accrue or be earned under the plan during the

7 plan year, determined using the additional actuarial

8 assumptions described in paragraph (1)(B).

9 ‘‘(3) MINIMUM AMOUNT.—In no event shall—

10 ‘‘(A) the at-risk target liability be less than

11 the target liability, as determined without re12 gard to this subsection, or

13 ‘‘(B) the at-risk target normal cost be less

14 than the target normal cost, as determined

15 without regard to this subsection.

16 ‘‘(4) DETERMINATION OF AT-RISK STATUS.—

17 For purposes of this subsection, a plan is in at-risk

18 status for a plan year if—

19 ‘‘(A) the plan is maintained by a finan20 cially-weak employer, and

21 ‘‘(B) the funding target attainment per22 centage for the plan year is less than 93 per23 cent.

24 ‘‘(5) FINANCIALLY-WEAK EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—For purposes of this

2 subsection, the term ‘financially-weak employer’

3 means any employer if—

4 ‘‘(i) as of the valuation date for each

5 of the years during a period of at least 3

6 consecutive plan years ending with the

7 plan year—

8 ‘‘(I) the employer has an out9 standing senior unsecured debt instru10 ment which is rated lower than invest11 ment grade by each of the nationally

12 recognized statistical rating organiza13 tions for corporate bonds that has

14 issued a credit rating for such instru15 ment, or

16 ‘‘(II) if no such debt instrument

17 has been rated by such an organiza18 tion but 1 or more of such organiza19 tions has made an issuer credit rating

20 for such employer, all such organiza21 tions which have so rated the em22 ployer have rated such employer lower

23 than investment grade, and

24 ‘‘(ii) at least 2 of the years during

25 such period are deterioration years.
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1 If an employer is treated as a financially-weak

2 employer for any plan year, clause (ii) shall not

3 apply in determining whether the employer is so

4 treated for any succeeding plan year in any

5 continuous period of plan years for which the

6 employer is treated as a financially-weak em7 ployer.

8 ‘‘(B) CONTROLLED GROUP EXCEPTION.—

9 If an employer treated as a financially-weak

10 employer under subparagraph (A) is a member

11 of a controlled group (as defined in section

12 412(e)(4)), the employer shall not be treated as

13 a financially-weak employer if a significant

14 member (as determined under regulations pre15 scribed by the Secretary) of such group has an

16 outstanding senior unsecured debt instrument

17 that is rated as being investment grade by an

18 organization described in subparagraph (A).

19 ‘‘(C) EMPLOYERS WITH NO RATINGS.—

20 If—

21 ‘‘(i) an employer has no debt instru22 ment described in subparagraph (A)(i)

23 which was rated by an organization de24 scribed in such subparagraph, and
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1 ‘‘(ii) no such organization has made

2 an issuer credit rating for such employer,

3 then such employer shall only be treated as a

4 financially-weak employer to the extent provided

5 in regulations prescribed by the Secretary.

6 ‘‘(6) DETERMINATION OF DETERIORATION

7 YEAR.—For purposes of paragraph (5), the term

8 ‘deterioration year’ means any year during the pe9 riod described in paragraph (5)(A)(i) for which the

10 rating described in subclause (I) or (II) of para11 graph (5)(A)(i) by each organization is either—

12 ‘‘(A) lower than the lowest rating of the

13 employer by such organization for a preceding

14 year in such period, or

15 ‘‘(B) the lowest rating used by such orga16 nization.

17 ‘‘(7) YEARS BEFORE EFFECTIVE DATE.—For

18 purposes of paragraphs (5) and (6), plan years be19 ginning before 2007 shall not be taken into account.

20 ‘‘(8) TRANSITION BETWEEN APPLICABLE FUND21 ING TARGETS AND BETWEEN APPLICABLE TARGET

22 NORMAL COSTS.—

23 ‘‘(A) IN GENERAL.—In any case in which

24 a plan which is in at-risk status for a plan year

25 has been in such status for a consecutive period
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1 of fewer than 5 plan years, the applicable

2 amount of the funding target and of the target

3 normal cost shall be, in lieu of the amount de4 termined without regard to this paragraph, the

5 sum of—

6 ‘‘(i) the amount determined under this

7 section without regard to this subsection,

8 plus

9 ‘‘(ii) the transition percentage for

10 such plan year of the excess of the amount

11 determined under this subsection (without

12 regard to this paragraph) over the amount

13 determined under this section without re14 gard to this subsection.

15 ‘‘(B) IMPROVEMENT YEARS NOT TAKEN

16 INTO ACCOUNT.—

17 ‘‘(i) IN GENERAL.—An improvement

18 year shall not be taken into account in de19 termining any consecutive period of plan

20 years for purposes of subparagraph (A).

21 ‘‘(ii) APPLICATION OF SUBSECTION

22 AFTER IMPROVEMENT YEAR ENDS.—Plan

23 years immediately before and after an im24 provement year (or consecutive period of

25 improvement years) shall be treated as
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1 consecutive for purposes of subparagraph

2 (A).

3 ‘‘(iii) IMPROVEMENT YEAR.—For pur4 poses of this subparagraph, the term ‘im5 provement year’ means any plan year for

6 which any rating described in subclause (I)

7 or (II) of paragraph (5)(A)(i) is higher

8 than such rating for the preceding plan

9 year.

10 ‘‘(C) TRANSITION PERCENTAGE.—For pur11 poses of subparagraph (A), the transition per12 centage shall be determined in accordance with

13 the following table:

‘‘If the consecutive number of

years (including the plan year) The transition

the plan is in at-risk status is— percentage is—

1 ............................................................................................... 20

2 ............................................................................................... 40

3 ............................................................................................... 60

4 ............................................................................................... 80.

14 ‘‘(D) YEARS BEFORE EFFECTIVE DATE.—

15 For purposes of this paragraph, plan years be16 ginning before 2007 shall not be taken into ac17 count.

18 ‘‘(9) PLANS TO WHICH SUBSECTION APPLIES.—

19 ‘‘(A) IN GENERAL.—Except as provided in

20 this paragraph, this subsection shall apply to

21 any plan to which this section applies and

22 which is in at-risk status for the plan year.
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1 ‘‘(B) EXCEPTION FOR SMALL PLANS.—

2 This subsection shall not apply to a plan for a

3 plan year if the plan was described in sub4 section (g)(2)(B) for the preceding plan year,

5 determined by substituting ‘500’ for ‘100’.

6 ‘‘(C) EXCEPTION FOR PLANS MAINTAINED

7 BY CERTAIN COOPERATIVES.—This subsection

8 shall not apply to an eligible cooperative plan

9 described in subparagraph (D).

10 ‘‘(D) ELIGIBLE COOPERATIVE PLAN DE11 FINED.—For purposes of subparagraph (C), a

12 plan shall be treated as an eligible cooperative

13 plan for a plan year if the plan is maintained

14 by more than 1 employer and at least 85 per15 cent of the employers are—

16 ‘‘(i) rural cooperatives (as defined in

17 section 401(k)(7)(B) without regard to

18 clause (iv) thereof), or

19 ‘‘(ii) organizations which are—

20 ‘‘(I) cooperative organizations de21 scribed in section 1381(a) which are

22 more than 50-percent owned by agri23 cultural producers or by cooperatives

24 owned by agricultural producers, or
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1 ‘‘(II) more than 50-percent

2 owned, or controlled by, one or more

3 cooperative organizations described in

4 subclause (I).

5 A plan shall also be treated as an eligible coop6 erative plan for any plan year for which it is de7 scribed in section 210(a) of the Employee Re8 tirement Income Security Act of 1974 and is

9 maintained by a rural telephone cooperative as10 sociation described in section 3(40)(B)(v) of

11 such Act.

12 ‘‘(E) EXCEPTION FOR PLANS SECURED BY

13 THIRD PARTIES BOUND BY PBGC AGREE14 MENTS.—This subsection shall not apply to any

15 plan if—

16 ‘‘(i) a person other than the employer

17 obligated to contribute under the plan is,

18 under the terms of an agreement with the

19 Pension Benefit Guaranty Corporation, lia20 ble for any failure of the employer to meet

21 its obligation to pay any minimum required

22 contribution or termination liability with

23 respect to the plan; and

24 ‘‘(ii) such person is not a financially25 weak employer under paragraph (5).
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1 ‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU2 TIONS.—

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion, the due date for any payment of any minimum

required contribution for any plan year shall be 81 5 ⁄2

6 months after the close of the plan year.

7 ‘‘(2) INTEREST.—Any payment required under

8 paragraph (1) for a plan year made after the valu9 ation date for such plan year shall be increased by

10 interest for the period from the valuation date to the

11 payment date, determined by using the effective rate

12 of interest for the plan for such plan year.

13 ‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION

14 SCHEDULE FOR UNDERFUNDED PLANS.—

15 ‘‘(A) INTEREST PENALTY FOR FAILURE TO

16 MEET ACCELERATED QUARTERLY PAYMENT

17 SCHEDULE.—A plan shall make the required in18 stallments under this paragraph for a plan year

19 if the plan had a funding shortfall for the pre20 ceding plan year. If the required installment is

21 not paid in full, then the minimum required

22 contribution for the plan year (as increased

23 under paragraph (2)) shall be further increased

24 by an amount equal to the interest on the

25 amount of the underpayment for the period of
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1 the underpayment, using an interest rate equal

2 to the excess of—

3 ‘‘(i) 175 percent of the Federal mid4 term rate (as in effect under section 1274

5 for the 1st month of such plan year), over

6 ‘‘(ii) the effective rate of interest for

7 the plan for the plan year.

8 ‘‘(B) AMOUNT OF UNDERPAYMENT, PE9 RIOD OF UNDERPAYMENT.—For purposes of

10 subparagraph (A)—

11 ‘‘(i) AMOUNT.—The amount of the

12 underpayment shall be the excess of—

13 ‘‘(I) the required installment,

14 over

15 ‘‘(II) the amount (if any) of the

16 installment contributed to or under

17 the plan on or before the due date for

18 the installment.

19 ‘‘(ii) PERIOD OF UNDERPAYMENT.—

20 The period for which any interest is

21 charged under this paragraph with respect

22 to any portion of the underpayment shall

23 run from the due date for the installment

24 to the date on which such portion is con25 tributed to or under the plan.
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1 ‘‘(iii) ORDER OF CREDITING CON2 TRIBUTIONS.—For purposes of clause

3 (i)(II), contributions shall be credited

4 against unpaid required installments in the

5 order in which such installments are re6 quired to be paid.

7 ‘‘(C) NUMBER OF REQUIRED INSTALL8 MENTS; DUE DATES.—For purposes of this

9 paragraph—

10 ‘‘(i) PAYABLE IN 4 INSTALLMENTS.—

11 There shall be 4 required installments for

12 each plan year.

13 ‘‘(ii) TIME FOR PAYMENT OF IN14 STALLMENTS.—The due dates for required

15 installments are set forth in the following

16 table:

In the case of the following required installment: The due date is:

1st ........................................................................... April 15

2nd ......................................................................... July 15

3rd .......................................................................... October 15

4th .......................................................................... January 15 of the following year.

17 ‘‘(D) AMOUNT OF REQUIRED INSTALL18 MENT.—For purposes of this paragraph—

19 ‘‘(i) IN GENERAL.—The amount of

20 any required installment shall be 25 per21 cent of the required annual payment.
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1 ‘‘(ii) REQUIRED ANNUAL PAYMENT.—

2 For purposes of clause (i), the term ‘re3 quired annual payment’ means the lesser

4 of—

5 ‘‘(I) 90 percent of the minimum

6 required contribution (without regard

7 to any waiver under section 302(c)) to

8 the plan for the plan year under this

9 section, or

10 ‘‘(II) in the case of a plan year

11 beginning after 2007, 100 percent of

12 the minimum required contribution

13 (without regard to any waiver under

14 section 302(c)) to the plan for the

15 preceding plan year.

16 Subclause (II) shall not apply if the pre17 ceding plan year referred to in such clause

18 was not a year of 12 months.

19 ‘‘(E) FISCAL YEARS AND SHORT YEARS.—

20 ‘‘(i) FISCAL YEARS.—In applying this

21 paragraph to a plan year beginning on any

22 date other than January 1, there shall be

23 substituted for the months specified in this

24 paragraph, the months which correspond

25 thereto.
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1 ‘‘(ii) SHORT PLAN YEAR.—This sub2 paragraph shall be applied to plan years of

3 less than 12 months in accordance with

4 regulations prescribed by the Secretary of

5 the Treasury.

6 ‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION

7 WITH QUARTERLY CONTRIBUTIONS.—

8 ‘‘(A) IN GENERAL.—A plan to which this

9 paragraph applies shall be treated as failing to

10 pay the full amount of any required installment

11 under paragraph (3) to the extent that the

12 value of the liquid assets paid in such install13 ment is less than the liquidity shortfall (wheth14 er or not such liquidity shortfall exceeds the

15 amount of such installment required to be paid

16 but for this paragraph).

17 ‘‘(B) PLANS TO WHICH PARAGRAPH AP18 PLIES.—This paragraph shall apply to a plan

19 which—

20 ‘‘(i) is required to pay installments

21 under paragraph (3) for a plan year, and

22 ‘‘(ii) has a liquidity shortfall for any

23 quarter during such plan year.

24 ‘‘(C) PERIOD OF UNDERPAYMENT.—For

25 purposes of paragraph (3)(A), any portion of an
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1 installment that is treated as not paid under

2 subparagraph (A) shall continue to be treated

3 as unpaid until the close of the quarter in

4 which the due date for such installment occurs.

5 ‘‘(D) LIMITATION ON INCREASE.—If the

6 amount of any required installment is increased

7 by reason of subparagraph (A), in no event

8 shall such increase exceed the amount which,

9 when added to prior installments for the plan

10 year, is necessary to increase the funding target

11 attainment percentage of the plan for the plan

12 year (taking into account the expected increase

13 in funding target due to benefits accruing or

14 earned during the plan year) to 100 percent.

15 ‘‘(E) DEFINITIONS.—For purposes of this

16 subparagraph:

17 ‘‘(i) LIQUIDITY SHORTFALL.—The

18 term ‘liquidity shortfall’ means, with re19 spect to any required installment, an

20 amount equal to the excess (as of the last

21 day of the quarter for which such install22 ment is made) of—

23 ‘‘(I) the base amount with re24 spect to such quarter, over
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1 ‘‘(II) the value (as of such last

2 day) of the plan’s liquid assets.

3 ‘‘(ii) BASE AMOUNT.—

4 ‘‘(I) IN GENERAL.—The term

5 ‘base amount’ means, with respect to

6 any quarter, an amount equal to 3

7 times the sum of the adjusted dis8 bursements from the plan for the 12

9 months ending on the last day of such

10 quarter.

11 ‘‘(II) SPECIAL RULE.—If the

12 amount determined under subclause

13 (I) exceeds an amount equal to 2

14 times the sum of the adjusted dis15 bursements from the plan for the 36

16 months ending on the last day of the

17 quarter and an enrolled actuary cer18 tifies to the satisfaction of the Sec19 retary that such excess is the result of

20 nonrecurring circumstances, the base

21 amount with respect to such quarter

22 shall be determined without regard to

23 amounts related to those nonrecurring

24 circumstances.
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1 ‘‘(iii) DISBURSEMENTS FROM THE

2 PLAN.—The term ‘disbursements from the

3 plan’ means all disbursements from the

4 trust, including purchases of annuities,

5 payments of single sums and other bene6 fits, and administrative expenses.

7 ‘‘(iv) ADJUSTED DISBURSEMENTS.—

8 The term ‘adjusted disbursements’ means

9 disbursements from the plan reduced by

10 the product of—

11 ‘‘(I) the plan’s funding target at12 tainment percentage for the plan year,

13 and

14 ‘‘(II) the sum of the purchases of

15 annuities, payments of single sums,

16 and such other disbursements as the

17 Secretary shall provide in regulations.

18 ‘‘(v) LIQUID ASSETS.—The term ‘liq19 uid assets’ means cash, marketable securi20 ties, and such other assets as specified by

21 the Secretary in regulations.

22 ‘‘(vi) QUARTER.—The term ‘quarter’

23 means, with respect to any required install24 ment, the 3-month period preceding the
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1 month in which the due date for such in2 stallment occurs.

3 ‘‘(F) REGULATIONS.—The Secretary may

4 prescribe such regulations as are necessary to

5 carry out this paragraph.

6 ‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO

7 MAKE REQUIRED CONTRIBUTIONS.—

8 ‘‘(1) IN GENERAL.—In the case of a plan to

9 which this subsection applies, if—

10 ‘‘(A) any person fails to make a contribu11 tion payment required by section 412 and this

12 section before the due date for such payment,

13 and

14 ‘‘(B) the unpaid balance of such payment

15 (including interest), when added to the aggre16 gate unpaid balance of all preceding such pay17 ments for which payment was not made before

18 the due date (including interest), exceeds

19 $1,000,000,

20 then there shall be a lien in favor of the plan in the

21 amount determined under paragraph (3) upon all

22 property and rights to property, whether real or per23 sonal, belonging to such person and any other per24 son who is a member of the same controlled group

25 of which such person is a member.
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1 ‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—

2 This subsection shall apply to a defined benefit plan

3 which is a single-employer plan covered under sec4 tion 4021 of the Employee Retirement Income Secu5 rity Act of 1974 for any plan year for which the

6 funding target attainment percentage (as defined in

7 subsection (d)(2)) of such plan is less than 100 per8 cent.

9 ‘‘(3) AMOUNT OF LIEN.—For purposes of para10 graph (1), the amount of the lien shall be equal to

11 the aggregate unpaid balance of contribution pay12 ments required under this section and section 302

13 for which payment has not been made before the due

14 date.

15 ‘‘(4) NOTICE OF FAILURE; LIEN.—

16 ‘‘(A) NOTICE OF FAILURE.—A person

17 committing a failure described in paragraph (1)

18 shall notify the Pension Benefit Guaranty Cor19 poration of such failure within 10 days of the

20 due date for the required contribution payment.

21 ‘‘(B) PERIOD OF LIEN.—The lien imposed

22 by paragraph (1) shall arise on the due date for

23 the required contribution payment and shall

24 continue until the last day of the first plan year

25 in which the plan ceases to be described in
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1 paragraph (1)(B). Such lien shall continue to

2 run without regard to whether such plan con3 tinues to be described in paragraph (2) during

4 the period referred to in the preceding sentence.

5 ‘‘(C) CERTAIN RULES TO APPLY.—Any

6 amount with respect to which a lien is imposed

7 under paragraph (1) shall be treated as taxes

8 due and owing the United States and rules

9 similar to the rules of subsections (c), (d), and

10 (e) of section 4068 of the Employee Retirement

11 Income Security Act of 1974 shall apply with

12 respect to a lien imposed by subsection (a) and

13 the amount with respect to such lien.

14 ‘‘(5) ENFORCEMENT.—Any lien created under

15 paragraph (1) may be perfected and enforced only

16 by the Pension Benefit Guaranty Corporation, or at

17 the direction of the Pension Benefit Guaranty Cor18 poration, by the contributing sponsor (or any mem19 ber of the controlled group of the contributing spon20 sor).

21 ‘‘(6) DEFINITIONS.—For purposes of this

22 subsection—

23 ‘‘(A) CONTRIBUTION PAYMENT.—The term

24 ‘contribution payment’ means, in connection

25 with a plan, a contribution payment required to
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1 be made to the plan, including any required in2 stallment under paragraphs (3) and (4) of sub3 section (j).

4 ‘‘(B) DUE DATE; REQUIRED INSTALL5 MENT.—The terms ‘due date’ and ‘required in6 stallment’ have the meanings given such terms

7 by subsection (j), except that in the case of a

8 payment other than a required installment, the

9 due date shall be the date such payment is re10 quired to be made under section 303.

11 ‘‘(C) CONTROLLED GROUP.—The term

12 ‘controlled group’ means any group treated as

13 a single employer under subsections (b), (c),

14 (m), and (o) of section 414.

15 ‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT

16 ACCOUNTS.—In the case of a qualified transfer (as de17 fined in section 420), any assets so transferred shall not,

18 for purposes of this section, be treated as assets in the

19 plan.’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 this section shall apply with respect to plan years begin22 ning after 2006.
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1 SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EM2 PLOYER PLANS.

3 (a) IN GENERAL.—Part III of subchapter D of chap4 ter 1 of the Internal Revenue Code of 1986 (relating to

5 rules relating to minimum funding standards) is amended

6 by adding at the end the following new subpart:

7 ‘‘Subpart B—Limitations on Benefit Improvements

8 by Single-Employer Plans

‘‘Sec. 436. Funding-based limits on benefits and benefit accruals under

single-employer plans.

9 ‘‘SEC. 436. FUNDING-BASED LIMITS ON BENEFITS AND BEN10 EFIT ACCRUALS UNDER SINGLE-EMPLOYER

11 PLANS.

12 ‘‘(a) GENERAL RULE.—For purposes of section

13 401(a)(29), a defined benefit plan which is a single-em14 ployer plan shall be treated as meeting the requirements

15 of this section if the plan meets the requirements of sub16 sections (b), (c), and (d).

17 ‘‘(b) LIMITATIONS ON PLAN AMENDMENTS INCREAS18 ING LIABILITY FOR BENEFITS.—

19 ‘‘(1) IN GENERAL.—Except as provided in this

20 section, no amendment to a single-employer plan

21 which has the effect of increasing liabilities of the

22 plan by reason of increases in benefits, establish23 ment of new benefits, changing the rate of benefit

24 accrual, or changing the rate at which benefits be-
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1 come nonforfeitable may take effect during any plan

2 year if the adjusted funding target attainment per3 centage as of the valuation date of the plan for such

4 plan year is—

5 ‘‘(A) less than 80 percent, or

6 ‘‘(B) would be less than 80 percent taking

7 into account such amendment.

8 ‘‘(2) EXEMPTION.—Paragraph (1) shall cease

9 to apply with respect to any plan year, effective as

10 of the first date of the plan year (or if later, the ef11 fective date of the amendment), upon payment by

12 the plan sponsor of a contribution (in addition to

13 any minimum required contribution under section

14 430) equal to—

15 ‘‘(A) in the case of paragraph (1)(A), the

16 amount of the increase in the funding target of

17 the plan (under section 430) for the plan year

18 attributable to the amendment, and

19 ‘‘(B) in the case of paragraph (1)(B), the

20 amount sufficient to result in a funding target

21 attainment percentage of 80 percent.

22 ‘‘(3) EXCEPTION FOR CERTAIN BENEFIT IN23 CREASES.—Paragraph (1) shall not apply to any

24 amendment which provides for an increase in bene25 fits under a formula which is not based on a partici-
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1 pant’s compensation, but only if the rate of such in2 crease is not in excess of the contemporaneous rate

3 of increase in average wages of participants covered

4 by the amendment.

5 ‘‘(c) LIMITATIONS ON ACCELERATED BENEFIT DIS6 TRIBUTIONS.—

7 ‘‘(1) IN GENERAL.—The requirements of this

8 subsection are met if the plan provides that, with re9 spect to any plan year—

10 ‘‘(A) if the plan’s adjusted funded target

11 liability percentage as of the valuation date for

12 the preceding plan year was less than 60 per13 cent and the preceding plan year is not other14 wise in a prohibited period, the plan sponsor

15 shall, in addition to any other contribution re16 quired under section 430, contribute for the

17 current plan year and each succeeding plan

18 year in the prohibited period with respect to the

19 current plan year the amount (if any) which,

20 when added to the portion of the minimum re21 quired contribution for the plan year described

22 in subparagraphs (B) and (C) of section

23 430(a)(1), is sufficient to result in an adjusted

24 funded target liability percentage for the plan

25 year of 60 percent, and
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1 ‘‘(B) no prohibited payments will be made

2 during a prohibited period.

3 ‘‘(2) PROHIBITED PAYMENT.—For purpose of

4 this subsection—

5 ‘‘(A) IN GENERAL.—The term ‘prohibited

6 payment’ means—

7 ‘‘(i) any payment, in excess of the

8 monthly amount paid under a single life

9 annuity (plus any social security supple10 ments described in the last sentence of sec11 tion 411(a)(9)), to a participant or bene12 ficiary whose annuity starting date (as de13 fined in section 417(f)(2)) occurs during a

14 prohibited period,

15 ‘‘(ii) any payment for the purchase of

16 an irrevocable commitment from an insurer

17 to pay benefits, and

18 ‘‘(iii) any other payment specified by

19 the Secretary by regulations.

20 ‘‘(B) EXCEPTION FOR CERTAIN PAY21 MENTS.—In the case of any prohibited period

22 described in paragraph (3)(A), the term ‘pro23 hibited payment’ shall not include any payment

24 if the amount of the payment does not exceed

25 the lesser of—
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1 ‘‘(i) 50 percent of the amount of the

2 payment which could be made without re3 gard to this subsection, or

4 ‘‘(ii) the present value (determined

5 under guidance prescribed by the Pension

6 Benefit Guaranty Corporation, using the

7 interest and mortality assumptions under

8 section 417(e)) of the maximum guarantee

9 with respect to the participant under sec10 tion 4022 of the Employee Retirement In11 come Security Act of 1974.

12 The exception under this subparagraph shall

13 only apply once with respect to any participant,

14 except that, for purposes of this sentence, a

15 participant and any beneficiary on his behalf

16 (including an alternate payee, as defined in sec17 tion 414(p)(8)) shall be treated as 1 partici18 pant. If the accrued benefit of a participant is

19 allocated to such an alternate payee and 1 or

20 more other persons, the amount under clause

21 (ii) shall be allocated among such persons in

22 the same manner as the accrued benefit is allo23 cated unless the qualified domestic relations

24 order (as defined in section 414(p)(1)(A)) pro25 vides otherwise.
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1 ‘‘(3) PROHIBITED PERIOD.—For purposes of

2 paragraph (1), the term ‘prohibited period’ means—

3 ‘‘(A) except as provided in paragraph (4),

4 if a plan sponsor is required to make the con5 tribution for the current plan year under para6 graph (1), the period beginning on the 1st day

7 of the plan year and ending on the last day of

8 the 1st period of 2 consecutive plan years (be9 ginning on or after such 1st day) for which the

10 plan’s adjusted funded target liability percent11 age was at least 60 percent,

12 ‘‘(B) any period the plan sponsor is in

13 bankruptcy, or

14 ‘‘(C) any period during which the plan has

15 a liquidity shortfall (as defined in section

16 430(j)(4)(E)(i)).

17 The prohibited period for purposes of subparagraph

18 (B) shall not include any portion of a plan year

19 (even if the plan sponsor is in bankruptcy during

20 such period) which occurs on or after the date the

21 plan’s enrolled actuary certifies that, as of the valu22 ation date for the plan year, the plan’s adjusted

23 funded target liability percentage is at least 100 per24 cent.
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1 ‘‘(4) SATISFACTION OF REQUIREMENT BEFORE

2 CLOSE OF PLAN YEAR.—If, before the close of the

3 current plan year—

4 ‘‘(A) the plan sponsor makes the contribu5 tion required to be made under paragraph (1),

6 or

7 ‘‘(B) the plan’s enrolled actuary certifies

8 that, as of the valuation date for the plan year,

9 the adjusted funded target liability percentage

10 of the plan is at least 60 percent,

11 this subsection shall be applied as if no prohibited

12 period had begun as of the beginning of such year

13 and the plan shall, under rules described by the Sec14 retary, restore any payments not made during the

15 prohibited period in effect before the application of

16 this paragraph.

17 ‘‘(d) LIMITATION ON BENEFIT ACCRUALS FOR

18 PLANS WITH SEVERE FUNDING SHORTFALLS.—

19 ‘‘(1) IN GENERAL.—Except as provided in sub20 section (e), a single-employer plan shall provide that

21 all future benefit accruals under the plan shall cease

22 during a severe funding shortfall period, but only to

23 the extent the cessation of such accruals would have

24 been permitted under section 411(d)(6) if the ces25 sation had been implemented by a plan amendment
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1 adopted immediately before the severe funding short2 fall period.

3 ‘‘(2) SEVERE FUNDING SHORTFALL PERIOD.—

4 For purposes of paragraph (1), the term ‘severe

5 funding shortfall period’ means in the case of a plan

6 the adjusted funding target attainment percentage

7 of which as of the valuation date of the plan for any

8 plan year is less than 60 percent, the period—

9 ‘‘(A) beginning on the 1st day of the suc10 ceeding plan year, and

11 ‘‘(B) ending on the date the plan’s enrolled

12 actuary certifies that the plan’s funding target

13 attainment percentage is at least 60 percent.

14 ‘‘(3) OPPORTUNITY FOR INCREASED FUND15 ING.—For purposes of paragraph (2)(A), a plan

16 shall not be treated as described in such paragraph

17 for a plan year if the plan’s enrolled actuary certifies

18 that the plan sponsor has before the end of the plan

19 year contributed (in addition to any minimum re20 quired contribution under section 430) the amount

21 sufficient to result in an adjusted funding target at22 tainment percentage as of the valuation date for the

23 plan year of 60 percent.

24 ‘‘(e) EXCEPTION FOR CERTAIN COLLECTIVELY BAR25 GAINED BENEFITS.—In the case of a plan maintained
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1 pursuant to a collective bargaining agreement between em2 ployee representatives and the plan sponsor and in effect

3 before the beginning of the first day on which a limitation

4 would otherwise apply under subsections (b), (c), or (d)—

5 ‘‘(1) such limitations shall not apply to any

6 amendment, prohibited payment, or accrual with re7 spect to such plan, but

8 ‘‘(2) the plan sponsor shall contribute (in addi9 tion to any minimum required contribution under

10 section 430) the amount sufficient to result in a

11 funding target attainment percentage (as of the

12 valuation date for the plan year in which any such

13 limitation would otherwise apply) equal to the per14 centage necessary to prevent the limitation from ap15 plying.

16 ‘‘(f) RULES RELATING TO REQUIRED CONTRIBU17 TIONS.—

18 ‘‘(1) SECURITY MAY BE PROVIDED.—

19 ‘‘(A) IN GENERAL.—For purposes of this

20 section, the adjusted funding target attainment

21 percentage shall be determined by treating as

22 an asset of the plan any security provided by a

23 plan sponsor in a form meeting the require24 ments of subparagraph (B) .
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1 ‘‘(B) FORM OF SECURITY.—The security

2 required under subparagraph (A) shall consist

3 of—

4 ‘‘(i) a bond issued by a corporate sur5 ety company that is an acceptable surety

6 for purposes of section 412 of the Em7 ployee Retirement Income Security Act of

8 1974,

9 ‘‘(ii) cash, or United States obliga10 tions which mature in 3 years or less, held

11 in escrow by a bank or similar financial in12 stitution, or

13 ‘‘(iii) such other form of security as is

14 satisfactory to the Secretary and the par15 ties involved.

16 ‘‘(C) ENFORCEMENT.—Any security pro17 vided under subparagraph (A) may be perfected

18 and enforced at any time after the earlier of—

19 ‘‘(i) the date on which the plan termi20 nates,

21 ‘‘(ii) if there is a failure to make a

22 payment of the minimum required con23 tribution for any plan year beginning after

24 the security is provided, the due date for

25 the payment under section 430(j), or
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1 ‘‘(iii) if the adjusted funding target

2 attainment percentage is less than 60 per3 cent for a consecutive period of 7 years,

4 the valuation date for the last year in the

5 period.

6 ‘‘(D) RELEASE OF SECURITY.—The secu7 rity shall be released (and any amounts there8 under shall be refunded together with any inter9 est accrued thereon) at such time as the Sec10 retary may prescribe in regulations, including

11 regulations for partial releases of the security

12 by reason of increases in the funding target at13 tainment percentage.

14 ‘‘(2) PREFUNDING BALANCE MAY NOT BE

15 USED.—No prefunding balance under section 430(f)

16 may be used to satisfy any required contribution

17 under this section.

18 ‘‘(3) TREATMENT AS UNPAID MINIMUM RE19 QUIRED CONTRIBUTION.—The amount of any re20 quired contribution which a plan sponsor fails to

21 make under subsection (b) or (d) for any plan year

22 shall be treated as an unpaid minimum required

23 contribution for purposes of subsection (j) and (k) of

24 section 430 and for purposes of section 4971.
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1 ‘‘(g) NEW PLANS.—Subsections (b) and (d) shall not

2 apply to a plan for the first 5 plan years of the plan. For

3 purposes of this subsection, the reference in this sub4 section to a plan shall include a reference to any prede5 cessor plan.

6 ‘‘(h) PRESUMED UNDERFUNDING FOR PURPOSES OF

7 BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S FUND8 ING STATUS.—

9 ‘‘(1) PRESUMPTION OF CONTINUED UNDER10 FUNDING.—In any case in which a benefit limitation

11 under subsection (b), (c), or (d) has been applied to

12 a plan with respect to the plan year preceding the

13 current plan year, the adjusted funding target at14 tainment percentage of the plan as of the valuation

15 date of the plan for the current plan year shall be

16 presumed to be equal to the adjusted funding target

17 attainment percentage of the plan as of the valu18 ation date of the plan for the preceding plan year

19 until the enrolled actuary of the plan certifies the

20 actual adjusted funding target attainment percent21 age of the plan as of the valuation date of the plan

22 for the current plan year.

23 ‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER

24 10TH MONTH.—In any case in which no such certifi25 cation is made with respect to the plan before the
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1 first day of the 10th month of the current plan year,

2 for purposes of subsections (b), (c), and (d), the

3 plan’s adjusted funding target attainment percent4 age shall be conclusively presumed to be less than 60

5 percent as of the first day of such 10th month.

6 ‘‘(i) TREATMENT OF PLA N A S OF CLOSE OF PROHIB7 ITED OR CESSATION PERIOD.—For purposes of applying

8 this part—

9 ‘‘(1) OPERATION OF PLAN AFTER PERIOD.—

10 Unless the plan provides otherwise, payments and

11 accruals will resume effective as of the day following

12 the close of a period of limitation of payment or ac13 crual of benefits under subsection (c) or (d).

14 ‘‘(2) TREATMENT OF AFFECTED BENEFITS.—

15 Nothing in this subsection shall be construed as af16 fecting the plan’s treatment of benefits which would

17 have been paid or accrued but for this section.

18 ‘‘(j) FUNDING TARGET ATTAINMENT PERCENT19 AGE.—For purposes of this section—

20 ‘‘(1) IN GENERAL.—The term ‘funding target

21 attainment percentage’ has the same meaning given

22 such term by section 430(d)(2).

23 ‘‘(2) ADJUSTED FUNDED TARGET LIABILITY

24 PERCENTAGE.—The term ‘adjusted funded target li25 ability percentage’ means the funded target liability
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1 percentage which is determined under subparagraph

2 (A) by increasing each of the amounts under sub3 paragraphs (A) and (B) of section 430(d)(2) by the

4 aggregate amount of purchases of annuities, pay5 ments of single sums, and such other disbursements

6 as the Secretary shall prescribe in regulations, which

7 were made by the plan during the preceding 2 plan

8 years.

9 ‘‘(k) SPECIAL RULES.—

10 ‘‘(1) BANKRUPTCY.—In the case of a plan

11 sponsor during any period the plan is in

12 bankruptcy—

13 ‘‘(A) subsection (b) shall be applied by

14 substituting ‘100 percent’ for ‘80 percent’ each

15 place it appears,

16 ‘‘(B) any exception under subsection (b)

17 for any benefit increases pursuant to a collec18 tive bargaining agreement shall not apply, and

19 ‘‘(C) the exception under subsection (f)

20 shall not apply for purposes of subsection (b).

21 ‘‘(2) YEARS BEFORE EFFECTIVE DATE.—No

22 plan year beginning before 2007 shall be taken into

23 account in determining whether this section applies

24 to any plan year beginning after 2006.’’.

25 (b) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to plan years beginning after

3 December 31, 2006.

4 (2) COLLECTIVE BARGAINING EXCEPTION.—In

5 the case of a plan maintained pursuant to 1 or more

6 collective bargaining agreements between employee

7 representatives and 1 or more employers ratified be8 fore January 1, 2007, the amendments made by this

9 section shall not apply to plan years beginning be10 fore the earlier of—

11 (A) the later of—

12 (i) the date on which the last collec13 tive bargaining agreement relating to the

14 plan terminates (determined without re15 gard to any extension thereof agreed to

16 after the date of the enactment of this

17 Act), or

18 (ii) the first day of the first plan year

19 to which the amendments made by this

20 subsection would (but for this subpara21 graph) apply, or

22 (B) January 1, 2010.

23 For purposes of subparagraph (A)(i), any plan

24 amendment made pursuant to a collective bargaining

25 agreement relating to the plan which amends the
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1 plan solely to conform to any requirement added by

2 this section shall not be treated as a termination of

3 such collective bargaining agreement.

4 SEC. 114. INCREASE IN DEDUCTION LIMIT FOR SINGLE-EM5 PLOYER PLANS.

6 (a) IN GENERAL.—Section 404 of the Internal Rev7 enue Code of 1986 (relating to deduction for contributions

8 of an employer to an employees’ trust or annuity plan and

9 compensation under a deferred payment plan) is

10 amended—

11 (1) in subsection (a)(1)(A), by inserting ‘‘in the

12 case of a defined benefit plan other than a multiem13 ployer plan, in an amount determined under sub14 section (o), and in the case of any other plan’’ after

15 ‘‘section 501(a),’’, and

16 (2) by inserting at the end the following new

17 subsection:

18 ‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER

19 PLANS.—For purposes of subsection (a)(1)(A)—

20 ‘‘(1) IN GENERAL.—In the case of a defined

21 benefit plan to which subsection (a)(1)(A) applies

22 (other than a multiemployer plan), the amount de23 termined under this subsection for any taxable year

24 shall be equal to the greater of—
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1 ‘‘(A) the sum of the amounts determined

2 under paragraph (2) with respect to each plan

3 year ending with or within the taxable year, or

4 ‘‘(B) the sum of the minimum required

5 contributions under section 430 for such plan

6 years.

7 ‘‘(2) DETERMINATION OF AMOUNT.—

8 ‘‘(A) IN GENERAL.—The amount deter9 mined under this paragraph for any plan year

10 shall be equal to the excess (if any) of—

11 ‘‘(i) the sum of—

12 ‘‘(I) the funding target for the

13 plan year,

14 ‘‘(II) the target normal cost for

15 the plan year, and

16 ‘‘(III) the cushion amount for the

17 plan year, over

18 ‘‘(ii) the value (determined under sec19 tion 430(g)(2)) of the assets of the plan

20 which are held by the plan as of the valu21 ation date for the plan year.

22 ‘‘(B) SPECIAL RULE FOR CERTAIN EM23 PLOYERS.—If section 430(i) does not apply to

24 a plan for a plan year, the amount determined
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1 under subparagraph (A)(i) for the plan year

2 shall in no event be less than the sum of—

3 ‘‘(i) the funding target for the plan

4 year (determined as if section 430(i) ap5 plied to the plan), plus

6 ‘‘(ii) the target normal cost for the

7 plan year (as so determined).

8 ‘‘(3) CUSHION AMOUNT.—For purposes of para9 graph (2)(A)(i)(III)—

10 ‘‘(A) IN GENERAL.—The cushion amount

11 for any plan year is the sum of—

12 ‘‘(i) 80 percent of the funding target

13 for the plan year, and

14 ‘‘(ii) the amount by which the funding

15 target for the plan year would increase if

16 the plan were to take into account—

17 ‘‘(I) increases in compensation

18 which are expected to occur in suc19 ceeding plan years, or

20 ‘‘(II) if the plan does not base

21 benefits for service to date on com22 pensation, increases in benefits which

23 are expected to occur in succeeding

24 plan years (determined on the basis of

25 the average annual increase in bene-
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1 fits over the 6 immediately preceding

2 plan years).

3 ‘‘(B) LIMITATIONS.—

4 ‘‘(i) IN GENERAL.—In making the

5 computation under subparagraph (A)(ii),

6 the plan’s actuary shall assume that the

7 limitations under subsection (l) and section

8 415(b) shall apply.

9 ‘‘(ii) EXPECTED INCREASES.—In the

10 case of a plan year during which a plan is

11 covered under section 4021 of the Em12 ployee Retirement Income Security Act of

13 1974, the plan’s actuary may, notwith14 standing subsection (j) or (l), take into ac15 count increases in the limitations which are

16 expected to occur in succeeding plan years.

17 ‘‘(4) SPECIAL RULES FOR PLANS WITH 100 OR

18 FEWER PARTICIPANTS.—

19 ‘‘(A) IN GENERAL.—For purposes of deter20 mining the amount under paragraph (3) for any

21 plan year, in the case of a plan which has 100

22 or fewer participants for the plan year, the li23 ability of the plan attributable to benefit in24 creases for highly compensated employees (as

25 defined in section 414(q)) resulting from a plan
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1 amendment which is made or becomes effective,

2 whichever is later, within the last 2 years shall

3 not be taken into account in determining the

4 target liability.

5 ‘‘(B) RULE FOR DETERMINING NUMBER

6 OF PARTICIPANTS.—For purposes of deter7 mining the number of plan participants, all de8 fined benefit plans maintained by the same em9 ployer (or any member of such employer’s con10 trolled group (within the meaning of section

11 412(f)(4))) shall be treated as one plan, but

12 only participants of such member or employer

13 shall be taken into account.

14 ‘‘(5) SPECIAL RULE FOR TERMINATING

15 PLANS.—In the case of a plan which, subject to sec16 tion 4041 of the Employee Retirement Income Secu17 rity Act of 1974, terminates during the plan year,

18 the amount determined under paragraph (2) shall in

19 no event be less than the amount required to make

20 the plan sufficient for benefit liabilities (within the

21 meaning of section 4041(d) of such Act).

22 ‘‘(6) ACTUARIAL ASSUMPTIONS.—Any computa23 tion under this subsection for any plan year shall

24 use the same actuarial assumptions which are used

25 for the plan year under section 430.
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1 ‘‘(7) DEFINITIONS.—Any term used in this sub2 section which is also used in section 430 shall have

3 the same meaning given such term by section 430.’’.

4 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

5 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

6 DEFINED BENEFIT PLANS.—Section 404(a)(7)(C) of

7 such Code, as amended by this Act, is amended by adding

8 at the end the following new clause:

9 ‘‘(iv) GUARANTEED PLANS.—In apply10 ing this paragraph, any single-employer

11 plan covered under section 4021 of the

12 Employee Retirement Income Security Act

13 of 1974 shall not be taken into account.’’.

14 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

15 (1) The last sentence of section 404(a)(1)(A) of

16 such Code is amended by striking ‘‘section 412’’

17 each place it appears and inserting ‘‘section 431’’.

18 (2) Section 404(a)(1)(B) of such Code is

19 amended—

20 (A) by striking ‘‘In the case of a plan’’ and

21 inserting ‘‘In the case of a multiemployer plan’’,

22 (B) by striking ‘‘section 412(c)(7)’’ each

23 place it appears and inserting ‘‘section

24 431(c)(6)’’,
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1 (C) by striking ‘‘section 412(c)(7)(B)’’ and

2 inserting ‘‘section 431(c)(6)(A)(ii)’’,

3 (D) by striking ‘‘section 412(c)(7)(A)’’ and

4 inserting ‘‘section 431(c)(6)(A)(i)’’, and

5 (E) by striking ‘‘section 412’’ and insert6 ing ‘‘section 431’’.

7 (3) Section 404(a)(7)(A) of such Code, as

8 amended by this Act, is amended—

9 (A) by adding at the end of subparagraph

10 (A) the following new sentence: ‘‘In the case of

11 a defined benefit plan which is a single em12 ployer plan, the amount necessary to satisfy the

13 minimum funding standard provided by section

14 412 shall not be less than the plan’s funding

15 shortfall determined under section 430.’’, and

16 (B) by striking subparagraph (D) and in17 serting:

18 ‘‘(D) INSURANCE CONTRACT PLANS.—For

19 purposes of this paragraph, a plan described in

20 section 412(g)(3) shall be treated as a defined

21 benefit plan.’’.

22 (4) Section 404A(g)(3)(A) of such Code is

23 amended by striking ‘‘paragraphs (3) and (7) of sec24 tion 412(c)’’ and inserting ‘‘paragraphs (3) and (6)

25 of section 431(c)’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to plan years beginning after De3 cember 31, 2006.

4 SEC. 115. TECHNICAL AND CONFORMING AMENDMENTS.

5 (a) AMENDMENTS RELATED TO QUALIFICATION RE6 QUIREMENTS.—

7 (1) Section 401(a)(29) of the Internal Revenue

8 Code of 1986 is amended to read as follows:

9 ‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT10 RISK STATUS.—In the case of a defined benefit plan

11 (other than a multiemployer plan) to which the re12 quirements of section 412 apply, the trust of which

13 the plan is a part shall not constitute a qualified

14 trust under this subsection unless the plan meets the

15 requirements of section 436.’’.

16 (2) Section 401(a)(32) of such Code is

17 amended—

18 (A) in subparagraph (A), by striking

19 ‘‘412(m)(5)’’ each place it appears and insert20 ing ‘‘section 430(j)(4)’’, and

21 (B) in subparagraph (C), by striking ‘‘sec22 tion 412(m)’’ and inserting ‘‘section 430(j)’’.

23 (3) Section 401(a), as amended by this Act, is

24 amended by striking paragraph (33) and by redesig-
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1 nating paragraphs (34) and (35) as paragraph (33)

2 and (34).

3 (b) VESTING RULES.—Section 411 of such Code is

4 amended—

5 (1) by striking ‘‘section 412(c)(8)’’ in sub6 section (a)(3)(C) and inserting ‘‘section 412(d)(2)’’,

7 (2) in subsection (b)(1)(F)—

8 (A) by striking ‘‘paragraphs (2) and (3) of

9 section 412(i)’’ in clause (ii) and inserting

10 ‘‘subparagraphs (B) and (C) of section

11 412(e)(3)’’, and

12 (B) by striking ‘‘paragraphs (4), (5), and

13 (6) of section 412(i)’’ and inserting ‘‘subpara14 graphs (D), (E), and (F) of section 412(e)(3)’’,

15 and

16 (3) by striking ‘‘section 412(c)(8)’’ in sub17 section (d)(6)(A) and inserting ‘‘section 412(e)(2)’’.

18 (c) MERGERS AND CONSOLIDATIONS OF PLANS.—

19 Subclause (I) of section 414(l)(2)(B)(i) of such Code is

20 amended to read as follows:

21 ‘‘(I) the amount determined

22 under section 431(c)(6)(A)(i) in the

23 case of a multiemployer plan (and the

24 sum of the funding shortfall and tar25 get normal cost determined under sec-
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1 tion 430 in the case of any other

2 plan), over’’.

3 (d) TRANSFER OF EXCESS PENSION ASSETS TO RE4 TIREE HEALTH ACCOUNTS.—

5 (1) Section 420(e)(2) of such Code is amended

6 to read as follows:

7 ‘‘(2) EXCESS PENSION ASSETS.—The term ‘ex8 cess pension assets’ means the excess (if any) of—

9 ‘‘(A) the lesser of—

10 ‘‘(i) the fair market value of the

11 plan’s assets (reduced by the prefunding

12 balance determined under section 430(f)),

13 or

14 ‘‘(ii) the value of plan assets as deter15 mined under section 430(g)(3) after reduc16 tion under section 430(f), over

17 ‘‘(B) 125 percent of the sum of the fund18 ing shortfall and the target normal cost deter19 mined under section 430 for such plan year.’’.

20 (2) Section 420(e)(4) of such Code is amended

21 to read as follows:

22 ‘‘(4) COORDINATION WITH SECTION 430.—In

23 the case of a qualified transfer, any assets so trans24 ferred shall not, for purposes of this section, be

25 treated as assets in the plan.’’.
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1 (e) EXCISE TAXES.—

2 (1) IN GENERAL.—Subsections (a) and (b) of

3 section 4971 of such Code are amended to read as

4 follows:

5 ‘‘(a) INITIAL TAX.—If at any time during any taxable

6 year an employer maintains a plan to which section 412

7 applies, there is hereby imposed for the taxable year a tax

8 equal to—

9 ‘‘(1) in the case of a single-employer plan, 10

10 percent of the aggregate unpaid minimum required

11 contributions for all plan years remaining unpaid as

12 of the end of any plan year ending with or within

13 the taxable year, and

14 ‘‘(2) in the case of a multiemployer plan, 5 per15 cent of the accumulated funding deficiency deter16 mined under section 431 as of the end of any plan

17 year ending with or within the taxable year.

18 ‘‘(b) ADDITIONAL TAX.—If—

19 ‘‘(1) a tax is imposed under subsection (a)(1)

20 on any unpaid required minimum contribution and

21 such amount remains unpaid as of the close of the

22 taxable period, or

23 ‘‘(2) a tax is imposed under subsection (a)(2)

24 on any accumulated funding deficiency and the accu-
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1 mulated funding deficiency is not corrected within

2 the taxable period,

3 there is hereby imposed a tax equal to 100 percent of the

4 unpaid minimum required contribution or accumulated

5 funding deficiency, whichever is applicable, to the extent

6 not so paid or corrected.’’.

7 (2) Section 4971(c) of such Code is amended—

8 (A) by striking ‘‘the last two sentences of

9 section 412(a)’’ in paragraph (1) and inserting

10 ‘‘section 431’’, and

11 (B) by adding at the end the following new

12 paragraph:

13 ‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU14 TION.—

15 ‘‘(A) IN GENERAL.—The term ‘unpaid

16 minimum required contribution’ means, with re17 spect to any plan year, any minimum required

18 contribution under section 430 for the plan

19 year which is not paid on or before the due date

20 (as determined under section 430(j)(1)) for the

21 plan year.

22 ‘‘(B) ORDERING RULE.—Any payment to

23 or under a plan for any plan year shall be allo24 cated first to unpaid minimum required con25 tributions for all preceding plan years on a
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1 first-in, first-out basis and then to the min2 imum required contribution under section 430

3 for the plan year.’’.

4 (3) Section 4971(e)(1) of such Code is amended

5 by striking ‘‘section 412(b)(3)(A)’’ and inserting

6 ‘‘section 412(a)(1)(A)’’.

7 (4) Section 4971(f)(1) of such Code is

8 amended—

9 (A) by striking ‘‘section 412(m)(5)’’ and

10 inserting ‘‘section 430(j)(4)’’, and

11 (B) by striking ‘‘section 412(m)’’ and in12 serting ‘‘section 430(j)’’.

13 (5) Section 4972(c)(7) of such Code is amended

14 by striking ‘‘except to the extent that such contribu15 tions exceed the full-funding limitation (as defined in

16 section 412(c)(7), determined without regard to sub17 paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except,

18 in the case of a multiemployer plan, to the extent

19 that such contributions exceed the full-funding limi20 tation (as defined in section 431(c)(6))’’.

21 (f) REPORTING REQUIREMENTS.—Section 6059(b) of

22 such Code is amended—

23 (1) by striking ‘‘the accumulated funding defi24 ciency (as defined in section 412(a))’’ in paragraph

25 (2) and inserting ‘‘the minimum required contribu-
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1 tion determined under section 430, or the accumu2 lated funding deficiency determined under section

3 431,’’, and

4 (2) by striking paragraph (3)(B) and inserting:

5 ‘‘(B) the requirements for reasonable actu6 arial assumptions under section 430(h)(1) or

7 431(c)(3), whichever are applicable, have been

8 complied with.’’.

9 Subtitle C—Interest Rate Assump10 tions and Deductible Amounts

11 for 2006

12 SEC. 121. EXTENSION OF REPLACEMENT OF 30-YEAR

13 TREASURY RATES.

14 (a) AMENDMENTS OF ERISA.—

15 (1) DETERMINATION OF RANGE.—Subclause

16 (II) of section 302(b)(5)(B)(ii) of the Employee Re17 tirement Income Security Act of 1974 is amended—

18 (A) by striking ‘‘2006’’ and inserting

19 ‘‘2007’’, and

20 (B) by striking ‘‘AND 2005’’ in the heading

21 and inserting ‘‘, 2005, AND 2006’’.

22 (2) DETERMINATION OF CURRENT LIABILITY.—

23 Subclause (IV) of section 302(d)(7)(C)(i) of such

24 Act is amended—
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1 (A) by striking ‘‘or 2005’’ and inserting ‘‘,

2 2005, or 2006’’, and

3 (B) by striking ‘‘AND 2005’’ in the heading

4 and inserting ‘‘, 2005, AND 2006’’.

5 (3) PBGC PREMIUM RATE.—Subclause (V) of

6 section 4006(a)(3)(E)(iii) of such Act is amended by

7 striking ‘‘2006’’ and inserting ‘‘2007’’.

8 (b) AMENDMENTS OF INTERNAL REVENUE CODE.—

9 (1) DETERMINATION OF RANGE.—Subclause

10 (II) of section 412(b)(5)(B)(ii) of the Internal Rev11 enue Code of 1986 is amended—

12 (A) by striking ‘‘2006’’ and inserting

13 ‘‘2007’’, and

14 (B) by striking ‘‘AND 2005’’ in the heading

15 and inserting ‘‘, 2005, AND 2006’’.

16 (2) DETERMINATION OF CURRENT LIABILITY.—

17 Subclause (IV) of section 412(l)(7)(C)(i) of such

18 Code is amended—

19 (A) by striking ‘‘or 2005’’ and inserting ‘‘,

20 2005, or 2006’’, and

21 (B) by striking ‘‘AND 2005’’ in the heading

22 and inserting ‘‘, 2005, AND 2006’’.

23 (c) PLAN AMENDMENTS.—Clause (ii) of section

24 101(c)(2)(A) of the Pension Funding Equity Act of 2004

25 is amended by striking ‘‘2006’’ and inserting ‘‘2007’’.
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1 SEC. 122. DEDUCTION LIMITS FOR PLAN CONTRIBUTIONS.

2 (a) IN GENERAL.—Clause (i) of section 404(a)(1)(D)

3 of the Internal Revenue Code of 1986 (relating to special

4 rule in case of certain plans) is amended by striking ‘‘sec5 tion 412(l)’’ and inserting ‘‘section 412(l)(8)(A), except

6 that section 412(l)(8)(A) shall be applied for purposes of

7 this clause by substituting ‘180 percent (130 percent in

8 the case of a multiemployer plan) of current liability’ for

9 ‘the current liability’ in clause (i).’’

10 (b) CONFORMING AMENDMENT.—Section 404(a)(1)

11 of the Internal Revenue Code of 1986 is amended by strik12 ing subparagraph (F).

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to years beginning after December

15 31, 2005.

16 SEC. 123. UPDATING DEDUCTION RULES FOR COMBINA17 TION OF PLANS.

18 (a) IN GENERAL.—Subparagraph (C) of section

19 404(a)(7) of the Internal Revenue Code of 1986 (relating

20 to limitation on deductions where combination of defined

21 contribution plan and defined benefit plan) is amended by

22 adding after clause (ii) the following new clause:

23 ‘‘(iii) LIMITATION.—In the case of

24 employer contributions to 1 or more de25 fined contribution plans, this paragraph

26 shall only apply to the extent that such
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1 contributions exceed 6 percent of the com2 pensation otherwise paid or accrued during

3 the taxable year to the beneficiaries under

4 such plans. For purposes of this clause,

5 amounts carried over from preceding tax6 able years under subparagraph (B) shall

7 be treated as employer contributions to 1

8 or more defined contributions to the extent

9 attributable to employer contributions to

10 such plans in such preceding taxable

11 years.’’

12 (b) CONFORMING AMENDMENT.—Subparagraph (A)

13 of section 4972(c)(6) of such Code (relating to nondeduct14 ible contributions) is amended to read as follows:

15 ‘‘(A) so much of the contributions to 1 or

16 more defined contribution plans which are not

17 deductible when contributed solely because of

18 section 404(a)(7) as does not exceed the

19 amount of contributions described in section

20 401(m)(4)(A), or’’.

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to contributions for taxable years

23 beginning after December 31, 2005.
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1 TITLE II—FUNDING AND DEDUC2 TION RULES FOR MULTIEM3 PLOYER DEFINED BENEFIT

4 PLANS AND RELATED PROVI5 SIONS

6 Subtitle A—Funding Rules

7 PART I—AMENDMENTS TO EMPLOYEE

8 RETIREMENT INCOME SECURITY ACT OF 1974

9 SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED

10 BENEFIT PLANS.

11 (a) IN GENERAL.—Part 3 of subtitle B of title I of

12 the Employee Retirement Income Security Act of 1974 (as

13 amended by this Act) is amended by inserting after section

14 303 the following new section:

15 ‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER

16 PLANS

17 ‘‘SEC. 304. (a) IN GENERAL.—For purposes of sec18 tion 302, the accumulated funding deficiency of a multi19 employer plan for any plan year is—

20 ‘‘(1) except as provided in paragraph (2), the

21 amount, determined as of the end of the plan year,

22 equal to the excess (if any) of the total charges to

23 the funding standard account of the plan for all plan

24 years (beginning with the first plan year for which
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1 this part applies to the plan) over the total credits

2 to such account for such years, and

3 ‘‘(2) if the multiemployer plan is in reorganiza4 tion for any plan year, the accumulated funding de5 ficiency of the plan determined under section 4243.

6 ‘‘(b) FUNDING STANDARD ACCOUNT.—

7 ‘‘(1) ACCOUNT REQUIRED.—Each multiem8 ployer plan to which this part applies shall establish

9 and maintain a funding standard account. Such ac10 count shall be credited and charged solely as pro11 vided in this section.

12 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year,

13 the funding standard account shall be charged with

14 the sum of—

15 ‘‘(A) the normal cost of the plan for the

16 plan year,

17 ‘‘(B) the amounts necessary to amortize in

18 equal annual installments (until fully amor19 tized)—

20 ‘‘(i) separately, with respect to each

21 plan year, the net increase (if any) in un22 funded past service liability under the plan

23 arising from plan amendments adopted in

24 such year, over a period of 15 plan years,
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1 ‘‘(ii) separately, with respect to each

2 plan year, the net experience loss (if any)

3 under the plan, over a period of 15 plan

4 years, and

5 ‘‘(iii) separately, with respect to each

6 plan year, the net loss (if any) resulting

7 from changes in actuarial assumptions

8 used under the plan, over a period of 15

9 plan years,

10 ‘‘(C) the amount necessary to amortize

11 each waived funding deficiency (within the

12 meaning of section 302(c)(3)) for each prior

13 plan year in equal annual installments (until

14 fully amortized) over a period of 15 plan years,

15 ‘‘(D) the amount necessary to amortize in

16 equal annual installments (until fully amor17 tized) over a period of 5 plan years any amount

18 credited to the funding standard account under

19 section 302(b)(3)(D) (as in effect on the day

20 before the date of the enactment of the Pension

21 Security and Transparency Act of 2005), and

22 ‘‘(E) the amount necessary to amortize in

23 equal annual installments (until fully amor24 tized) over a period of 20 years the contribu25 tions which would be required to be made under
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1 the plan but for the provisions of section

2 302(c)(7)(A)(i)(I) (as in effect on the day be3 fore the date of the enactment of the Pension

4 Security and Transparency Act of 2005).

5 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year,

6 the funding standard account shall be credited with

7 the sum of—

8 ‘‘(A) the amount considered contributed by

9 the employer to or under the plan for the plan

10 year,

11 ‘‘(B) the amount necessary to amortize in

12 equal annual installments (until fully amor13 tized)—

14 ‘‘(i) separately, with respect to each

15 plan year, the net decrease (if any) in un16 funded past service liability under the plan

17 arising from plan amendments adopted in

18 such year, over a period of 15 plan years,

19 ‘‘(ii) separately, with respect to each

20 plan year, the net experience gain (if any)

21 under the plan, over a period of 15 plan

22 years, and

23 ‘‘(iii) separately, with respect to each

24 plan year, the net gain (if any) resulting

25 from changes in actuarial assumptions
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1 used under the plan, over a period of 15

2 plan years,

3 ‘‘(C) the amount of the waived funding de4 ficiency (within the meaning of section

5 302(c)(3)) for the plan year, and

6 ‘‘(D) in the case of a plan year for which

7 the accumulated funding deficiency is deter8 mined under the funding standard account if

9 such plan year follows a plan year for which

10 such deficiency was determined under the alter11 native minimum funding standard under section

12 305 (as in effect on the day before the date of

13 the enactment of the Pension Security and

14 Transparency Act of 2005), the excess (if any)

15 of any debit balance in the funding standard

16 account (determined without regard to this sub17 paragraph) over any debit balance in the alter18 native minimum funding standard account.

19 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AM20 ORTIZED TO PLAN YEARS BEFORE 2007.—In the case

21 of any amount amortized under section 302(b) (as

22 in effect on the day before the date of the enactment

23 of the Pension Security and Transparency Act of

24 2005) over any period beginning with a plan year

25 beginning before 2007, in lieu of the amortization
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1 described in paragraphs (2)(B) and (3)(B), such

2 amount shall continue to be amortized under such

3 section as so in effect.

4 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS

5 TO BE AMORTIZED.—Under regulations prescribed

6 by the Secretary of the Treasury, amounts required

7 to be amortized under paragraph (2) or paragraph

8 (3), as the case may be—

9 ‘‘(A) may be combined into one amount

10 under such paragraph to be amortized over a

11 period determined on the basis of the remaining

12 amortization period for all items entering into

13 such combined amount, and

14 ‘‘(B) may be offset against amounts re15 quired to be amortized under the other such

16 paragraph, with the resulting amount to be am17 ortized over a period determined on the basis of

18 the remaining amortization periods for all items

19 entering into whichever of the two amounts

20 being offset is the greater.

21 ‘‘(6) INTEREST.—The funding standard ac22 count (and items therein) shall be charged or cred23 ited (as determined under regulations prescribed by

24 the Secretary of the Treasury) with interest at the
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1 appropriate rate consistent with the rate or rates of

2 interest used under the plan to determine costs.

3 ‘‘(7) SPECIAL RULES RELATING TO CHARGES

4 AND CREDITS TO FUNDING STANDARD ACCOUNT.—

5 For purposes of this part—

6 ‘‘(A) WITHDRAWAL LIABILITY.—Any

7 amount received by a multiemployer plan in

8 payment of all or part of an employer’s with9 drawal liability under part 1 of subtitle E of

10 title IV shall be considered an amount contrib11 uted by the employer to or under the plan. The

12 Secretary of the Treasury may prescribe by reg13 ulation additional charges and credits to a mul14 tiemployer plan’s funding standard account to

15 the extent necessary to prevent withdrawal li16 ability payments from being unduly reflected as

17 advance funding for plan liabilities.

18 ‘‘(B) ADJUSTMENTS WHEN AMULTIEM19 PLOYER PLAN LEAVES REORGANIZATION.—If a

20 multiemployer plan is not in reorganization in

21 the plan year but was in reorganization in the

22 immediately preceding plan year, any balance in

23 the funding standard account at the close of

24 such immediately preceding plan year—
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1 ‘‘(i) shall be eliminated by an offset2 ting credit or charge (as the case may be),

3 but

4 ‘‘(ii) shall be taken into account in

5 subsequent plan years by being amortized

6 in equal annual installments (until fully

7 amortized) over 30 plan years.

8 The preceding sentence shall not apply to the

9 extent of any accumulated funding deficiency

10 under section 4243(a) as of the end of the last

11 plan year that the plan was in reorganization.

12 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

13 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

14 FUND.—Any amount paid by a plan during a

15 plan year to the Pension Benefit Guaranty Cor16 poration pursuant to section 4222 of this Act or

17 to a fund exempt under section 501(c)(22) of

18 the Internal Revenue Code of 1986 pursuant to

19 section 4223 of this Act shall reduce the

20 amount of contributions considered received by

21 the plan for the plan year.

22 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

23 PAYMENTS.—Any amount paid by an employer

24 pending a final determination of the employer’s

25 withdrawal liability under part 1 of subtitle E
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1 of title IV and subsequently refunded to the

2 employer by the plan shall be charged to the

3 funding standard account in accordance with

4 regulations prescribed by the Secretary of the

5 Treasury.

6 ‘‘(E) ELECTION FOR DEFERRAL OF

7 CHARGE FOR PORTION OF NET EXPERIENCE

8 LOSS.—If an election is in effect under section

9 302(b)(7)(F) (as in effect on the day before the

10 date of the enactment of the Pension Security

11 and Transparency Act of 2005) for any plan

12 year, the funding standard account shall be

13 charged in the plan year to which the portion

14 of the net experience loss deferred by such elec15 tion was deferred with the amount so deferred

16 (and paragraph (2)(B)(ii) shall not apply to the

17 amount so charged).

18 ‘‘(F) FINANCIAL ASSISTANCE.—Any

19 amount of any financial assistance from the

20 Pension Benefit Guaranty Corporation to any

21 plan, and any repayment of such amount, shall

22 be taken into account under this section and

23 section 412 of the Internal Revenue Code of

24 1986 in such manner as is determined by the

25 Secretary of the Treasury.
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1 ‘‘(G) SHORT-TERM BENEFITS.—To the ex2 tent that any plan amendment increases the un3 funded past service liability under the plan by

4 reason of an increase in benefits which are pay5 able under the terms of the plan for a period

6 that does not exceed 14 years from the effective

7 date of the amendment, paragraph (2)(B)(i)

8 shall be applied separately with respect to such

9 increase in unfunded past service liability by

10 substituting the number of years of the period

11 during which such benefits are payable for ‘15’.

12 ‘‘(c) ADDITIONAL RULES.—

13 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

14 FUNDING METHOD.—For purposes of this part, nor15 mal costs, accrued liability, past service liabilities,

16 and experience gains and losses shall be determined

17 under the funding method used to determine costs

18 under the plan.

19 ‘‘(2) VALUATION OF ASSETS.—

20 ‘‘(A) IN GENERAL.—For purposes of this

21 part, the value of the plan’s assets shall be de22 termined on the basis of any reasonable actu23 arial method of valuation which takes into ac24 count fair market value and which is permitted
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1 under regulations prescribed by the Secretary of

2 the Treasury.

3 ‘‘(B) ELECTION WITH RESPECT TO

4 BONDS.—The value of a bond or other evidence

5 of indebtedness which is not in default as to

6 principal or interest may, at the election of the

7 plan administrator, be determined on an amor8 tized basis running from initial cost at purchase

9 to par value at maturity or earliest call date.

10 Any election under this subparagraph shall be

11 made at such time and in such manner as the

12 Secretary of the Treasury shall by regulations

13 provide, shall apply to all such evidences of in14 debtedness, and may be revoked only with the

15 consent of such Secretary.

16 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA17 SONABLE.—For purposes of this section, all costs, li18 abilities, rates of interest, and other factors under

19 the plan shall be determined on the basis of actu20 arial assumptions and methods—

21 ‘‘(A) each of which is reasonable (taking

22 into account the experience of the plan and rea23 sonable expectations), and
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1 ‘‘(B) which, in combination, offer the actu2 ary’s best estimate of anticipated experience

3 under the plan.

4 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX5 PERIENCE GAIN OR LOSS.—For purposes of this sec6 tion, if—

7 ‘‘(A) a change in benefits under the Social

8 Security Act or in other retirement benefits cre9 ated under Federal or State law, or

10 ‘‘(B) a change in the definition of the term

11 ‘wages’ under section 3121 of the Internal Rev12 enue Code of 1986, or a change in the amount

13 of such wages taken into account under regula14 tions prescribed for purposes of section

15 401(a)(5) of such Code,

16 results in an increase or decrease in accrued liability

17 under a plan, such increase or decrease shall be

18 treated as an experience loss or gain.

19 ‘‘(5) FULL FUNDING.—If, as of the close of a

20 plan year, a plan would (without regard to this para21 graph) have an accumulated funding deficiency in

22 excess of the full funding limitation—

23 ‘‘(A) the funding standard account shall be

24 credited with the amount of such excess, and
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1 ‘‘(B) all amounts described in subpara2 graphs (B), (C), and (D) of subsection (b) (2)

3 and subparagraph (B) of subsection (b)(3)

4 which are required to be amortized shall be con5 sidered fully amortized for purposes of such

6 subparagraphs.

7 ‘‘(6) FULL-FUNDING LIMITATION.—

8 ‘‘(A) IN GENERAL.—For purposes of para9 graph (5), the term ‘full-funding limitation’

10 means the excess (if any) of—

11 ‘‘(i) the accrued liability (including

12 normal cost) under the plan (determined

13 under the entry age normal funding meth14 od if such accrued liability cannot be di15 rectly calculated under the funding method

16 used for the plan), over

17 ‘‘(ii) the lesser of—

18 ‘‘(I) the fair market value of the

19 plan’s assets, or

20 ‘‘(II) the value of such assets de21 termined under paragraph (2).

22 ‘‘(B) MINIMUM AMOUNT.—

23 ‘‘(i) IN GENERAL.—In no event shall

24 the full-funding limitation determined
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1 under subparagraph (A) be less than the

2 excess (if any) of—

3 ‘‘(I) 90 percent of the current li4 ability of the plan (including the ex5 pected increase in current liability due

6 to benefits accruing during the plan

7 year), over

8 ‘‘(II) the value of the plan’s as9 sets determined under paragraph (2).

10 ‘‘(ii) ASSETS.—For purposes of clause

11 (i), assets shall not be reduced by any

12 credit balance in the funding standard ac13 count.

14 ‘‘(C) FULL FUNDING LIMITATION.—For

15 purposes of this paragraph, unless otherwise

16 provided by the plan, the accrued liability under

17 a multiemployer plan shall not include benefits

18 which are not nonforfeitable under the plan

19 after the termination of the plan (taking into

20 consideration section 411(d)(3) of the Internal

21 Revenue Code of 1986).

22 ‘‘(D) CURRENT LIABILITY.—For purposes

23 of this paragraph—
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1 ‘‘(i) IN GENERAL.—The term ‘current

2 liability’ means all liabilities to employees

3 and their beneficiaries under the plan.

4 ‘‘(ii) TREATMENT OF UNPREDICTABLE

5 CONTINGENT EVENT BENEFITS.—For pur6 poses of clause (i), any benefit contingent

7 on an event other than—

8 ‘‘(I) age, service, compensation,

9 death, or disability, or

10 ‘‘(II) an event which is reason11 ably and reliably predictable (as deter12 mined by the Secretary of the Treas13 ury),

14 shall not be taken into account until the

15 event on which the benefit is contingent oc16 curs.

17 ‘‘(iii) INTEREST RATE USED.—The

18 rate of interest used to determine current

19 liability under this paragraph shall be the

20 rate of interest determined under subpara21 graph (E).

22 ‘‘(iv) MORTALITY TABLES.—

23 ‘‘(I) COMMISSIONERS’ STANDARD

24 TABLE.—In the case of plan years be25 ginning before the first plan year to
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1 which the first tables prescribed under

2 subclause (II) apply, the mortality

3 table used in determining current li4 ability under this paragraph shall be

5 the table prescribed by the Secretary

6 of the Treasury which is based on the

7 prevailing commissioners’ standard

8 table (described in section

9 807(d)(5)(A) of the Internal Revenue

10 Code of 1986) used to determine re11 serves for group annuity contracts

12 issued on January 1, 1993.

13 ‘‘(II) SECRETARIAL AUTHOR14 ITY.—The Secretary of the Treasury

15 may by regulation prescribe for plan

16 years beginning after December 31,

17 1999, mortality tables to be used in

18 determining current liability under

19 this subsection. Such tables shall be

20 based upon the actual experience of

21 pension plans and projected trends in

22 such experience. In prescribing such

23 tables, such Secretary shall take into

24 account results of available inde-
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1 pendent studies of mortality of indi2 viduals covered by pension plans.

3 ‘‘(v) SEPARATE MORTALITY TABLES

4 FOR THE DISABLED.—Notwithstanding

5 clause (iv)—

6 ‘‘(I) IN GENERAL.—The Sec7 retary of the Treasury shall establish

8 mortality tables which may be used

9 (in lieu of the tables under clause (iv))

10 to determine current liability under

11 this subsection for individuals who are

12 entitled to benefits under the plan on

13 account of disability. Such Secretary

14 shall establish separate tables for indi15 viduals whose disabilities occur in

16 plan years beginning before January

17 1, 1995, and for individuals whose

18 disabilities occur in plan years begin19 ning on or after such date.

20 ‘‘(II) SPECIAL RULE FOR DIS21 ABILITIES OCCURRING AFTER 1994.—

22 In the case of disabilities occurring in

23 plan years beginning after December

24 31, 1994, the tables under subclause

25 (I) shall apply only with respect to in-
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1 dividuals described in such subclause

2 who are disabled within the meaning

3 of title II of the Social Security Act

4 and the regulations thereunder.

5 ‘‘(vi) PERIODIC REVIEW.—The Sec6 retary of the Treasury shall periodically (at

7 least every 5 years) review any tables in ef8 fect under this subparagraph and shall, to

9 the extent such Secretary determines nec10 essary, by regulation update the tables to

11 reflect the actual experience of pension

12 plans and projected trends in such experi13 ence.

14 ‘‘(E) REQUIRED CHANGE OF INTEREST

15 RATE.—For purposes of determining a plan’s

16 current liability for purposes of this

17 paragraph—

18 ‘‘(i) IN GENERAL.—If any rate of in19 terest used under the plan under sub20 section (b)(6) to determine cost is not

21 within the permissible range, the plan shall

22 establish a new rate of interest within the

23 permissible range.

24 ‘‘(ii) PERMISSIBLE RANGE.—For pur25 poses of this subparagraph—
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1 ‘‘(I) IN GENERAL.—Except as

2 provided in subclause (II), the term

3 ‘permissible range’ means a rate of in4 terest which is not more than 5 per5 cent above, and not more than 10 per6 cent below, the weighted average of

7 the rates of interest on 30-year Treas8 ury securities during the 4-year period

9 ending on the last day before the be10 ginning of the plan year.

11 ‘‘(II) SECRETARIAL AUTHOR12 ITY.—If the Secretary of the Treasury

13 finds that the lowest rate of interest

14 permissible under subclause (I) is un15 reasonably high, such Secretary may

16 prescribe a lower rate of interest, ex17 cept that such rate may not be less

18 than 80 percent of the average rate

19 determined under such subclause.

20 ‘‘(iii) ASSUMPTIONS.—Notwith21 standing paragraph (3)(A), the interest

22 rate used under the plan shall be—

23 ‘‘(I) determined without taking

24 into account the experience of the

25 plan and reasonable expectations, but
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1 ‘‘(II) consistent with the assump2 tions which reflect the purchase rates

3 which would be used by insurance

4 companies to satisfy the liabilities

5 under the plan.

6 ‘‘(7) ANNUAL VALUATION.—

7 ‘‘(A) IN GENERAL.—For purposes of this

8 section, a determination of experience gains and

9 losses and a valuation of the plan’s liability

10 shall be made not less frequently than once

11 every year, except that such determination shall

12 be made more frequently to the extent required

13 in particular cases under regulations prescribed

14 by the Secretary of the Treasury.

15 ‘‘(B) VALUATION DATE.—

16 ‘‘(i) CURRENT YEAR.—Except as pro17 vided in clause (ii), the valuation referred

18 to in subparagraph (A) shall be made as of

19 a date within the plan year to which the

20 valuation refers or within one month prior

21 to the beginning of such year.

22 ‘‘(ii) USE OF PRIOR YEAR VALU23 ATION.—The valuation referred to in sub24 paragraph (A) may be made as of a date

25 within the plan year prior to the year to
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1 which the valuation refers if, as of such

2 date, the value of the assets of the plan are

3 not less than 100 percent of the plan’s cur4 rent liability (as defined in paragraph

5 (6)(D) without regard to clause (iv) there6 of).

7 ‘‘(iii) ADJUSTMENTS.—Information

8 under clause (ii) shall, in accordance with

9 regulations, be actuarially adjusted to re10 flect significant differences in participants.

11 ‘‘(iv) LIMITATION.—A change in fund12 ing method to use a prior year valuation,

13 as provided in clause (ii), may not be made

14 unless as of the valuation date within the

15 prior plan year, the value of the assets of

16 the plan are not less than 125 percent of

17 the plan’s current liability (as defined in

18 paragraph (6)(D) without regard to clause

19 (iv) thereof).

20 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

21 DEEMED MADE.—For purposes of this section, any

22 contributions for a plan year made by an employer

23 after the last day of such plan year, but not later

24 than two and one-half months after such day, shall

25 be deemed to have been made on such last day. For
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1 purposes of this subparagraph, such two and one2 half month period may be extended for not more

3 than six months under regulations prescribed by the

4 Secretary of the Treasury.

5 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

6 MULTIEMPLOYER PLANS.—

7 ‘‘(1) AUTOMATIC EXTENSION UPON APPLICA8 TION BY CERTAIN PLANS.—

9 ‘‘(A) IN GENERAL.—If the plan sponsor of

10 a multiemployer plan—

11 ‘‘(i) submits to the Secretary of the

12 Treasury an application for an extension of

13 the period of years required to amortize

14 any unfunded liability described in any

15 clause of subsection (b)(2)(B) or described

16 in subsection (b)(4), and

17 ‘‘(ii) includes with the application a

18 certification by the plan’s actuary de19 scribed in subparagraph (B),

20 the Secretary of the Treasury shall extend the

21 amortization period for the period of time (not

22 in excess of 5 years) specified in the applica23 tion. Such extension shall be in addition to any

24 extension under paragraph (2).
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1 ‘‘(B) CRITERIA.—A certification with re2 spect to a multiemployer plan is described in

3 this subparagraph if the plan’s actuary certifies

4 that, based on reasonable assumptions—

5 ‘‘(i) absent the extension under sub6 paragraph (A), the plan would have an ac7 cumulated funding deficiency in the cur8 rent plan year or any of the 9 succeeding

9 plan years,

10 ‘‘(ii) the plan sponsor has adopted a

11 plan to improve the plan’s funding status,

12 ‘‘(iii) the plan is projected to have suf13 ficient assets to timely pay expected bene14 fits and anticipated expenditures over the

15 amortization period as extended, and

16 ‘‘(iv) the notice required under para17 graph (3)(A) has been provided.

18 ‘‘(2) ADDITIONAL EXTENSION.—

19 ‘‘(A) IN GENERAL.—If the plan sponsor of

20 a multiemployer plan submits to the Secretary

21 of the Treasury an application for an extension

22 of the period of years required to amortize any

23 unfunded liability described in any clause of

24 subsection (b)(2)(B) or described in subsection

25 (b)(4), the Secretary of the Treasury may ex-
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1 tend the amortization period for a period of

2 time (not in excess of 5 years) if the Secretary

3 of the Treasury makes the determination de4 scribed in subparagraph (B). Such extension

5 shall be in addition to any extension under

6 paragraph (1).

7 ‘‘(B) DETERMINATION.—The Secretary

8 make grant an extension under subparagraph

9 (A) if the Secretary determines that—

10 ‘‘(i) such extension would carry out

11 the purposes of this Act and would provide

12 adequate protection for participants under

13 the plan and their beneficiaries, and

14 ‘‘(ii) the failure to permit such exten15 sion would—

16 ‘‘(I) result in a substantial risk

17 to the voluntary continuation of the

18 plan, or a substantial curtailment of

19 pension benefit levels or employee

20 compensation, and

21 ‘‘(II) be adverse to the interests

22 of plan participants in the aggregate.

23 ‘‘(C) ACTION BY SECRETARY.—The Sec24 retary of the Treasury shall act upon any appli25 cation for an extension under this paragraph
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1 within 180 days of the submission of such ap2 plication. If the Secretary rejects the applica3 tion for an extension under this paragraph, the

4 Secretary shall provide notice to the plan detail5 ing the specific reasons for the rejection, includ6 ing references to the criteria set forth above.

7 ‘‘(3) ADVANCE NOTICE.—

8 ‘‘(A) IN GENERAL.—The Secretary of the

9 Treasury shall, before granting an extension

10 under this subsection, require each applicant to

11 provide evidence satisfactory to such Secretary

12 that the applicant has provided notice of the fil13 ing of the application for such extension to each

14 affected party (as defined in section

15 4001(a)(21)) with respect to the affected plan.

16 Such notice shall include a description of the

17 extent to which the plan is funded for benefits

18 which are guaranteed under title IV and for

19 benefit liabilities.

20 ‘‘(B) CONSIDERATION OF RELEVANT IN21 FORMATION.—The Secretary of the Treasury

22 shall consider any relevant information provided

23 by a person to whom notice was given under

24 paragraph (1).’’.

25 (b) SHORTFALL FUNDING METHOD.—
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1 (1) IN GENERAL.—A multiemployer plan meet2 ing the criteria of paragraph (2) may adopt, use, or

3 cease using, the shortfall funding method and such

4 adoption, use, or cessation of use of such method,

5 shall be deemed approved by the Secretary of the

6 Treasury under section 302(d)(1) of the Employee

7 Retirement Income Security Act of 1974 and section

8 412(e)(1) of the Internal Revenue Code of 1986.

9 (2) CRITERIA.—A multiemployer pension plan

10 meets the criteria of this clause if—

11 (A) the plan has not used the shortfall

12 funding method during the 5-year period ending

13 on the day before the date the plan is to use

14 the method under paragraph (1); and

15 (B) the plan is not operating under an am16 ortization period extension under section 304(d)

17 of such Act and did not operate under such an

18 extension during such 5-year period.

19 (3) SHORTFALL FUNDING METHOD DEFINED.—

20 For purposes of this subsection, the term ‘‘shortfall

21 funding method’’ means the shortfall funding meth22 od described in Treasury Regulations section

23 1.412(c)(1)–2 (26 C.F.R. 1.412(c)(1)–2).

24 (4) BENEFIT RESTRICTIONS TO APPLY.—The

25 benefit restrictions under section 302(c)(7) of such
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1 Act and section 412(d)(7) of such Code shall apply

2 during any period a multiemployer plan is on the

3 shortfall funding method pursuant to this sub4 section.

5 (5) USE OF SHORTFALL METHOD NOT TO PRE6 CLUDE OTHER OPTIONS.—Nothing in this subsection

7 shall be construed to affect a multiemployer plan’s

8 ability to adopt the shortfall funding method with

9 the Secretary’s permission under otherwise applica10 ble regulations or to affect a multiemployer plan’s

11 right to change funding methods, with or without

12 the Secretary’s consent, as provided in applicable

13 rules and regulations.

14 (c) CONFORMING AMENDMENTS.—

15 (1) Section 301 of the Employee Retirement In16 come Security Act of 1974 (29 U.S.C. 1081) is

17 amended by striking subsection (d).

18 (2) The table of contents in section 1 of such

19 Act (as amended by this Act) is amended by insert20 ing after the item relating to section 303 the fol21 lowing new item:

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’.

22 (d) EFFECTIVE DATE.—

23 (1) IN GENERAL.—The amendments made by

24 this section shall apply to plan years beginning after

25 2006.
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1 (2) SPECIAL RULE FOR CERTAIN AMORTIZATION

2 EXTENSIONS.—If the Secretary of the Treasury

3 grants an extension under section 304 of the Em4 ployee Retirement Income Security Act of 1974 and

5 section 412(e) of the Internal Revenue Code of 1986

6 with respect to any application filed with the Sec7 retary of the Treasury on or before June 30, 2005,

8 the extension (and any modification thereof) shall be

9 applied and administered under the rules of such

10 sections as in effect before the enactment of this

11 Act, including the use of the rate of interest deter12 mined under section 6621(b) of such Code.

13 SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM14 PLOYER PLANS IN ENDANGERED OR CRIT15 ICAL STATUS.

16 (a) IN GENERAL.—Part 3 of subtitle B of title I of

17 the Employee Retirement Income Security Act of 1974 (as

18 amended by the preceding provisions of this Act) is

19 amended by inserting after section 304 the following new

20 section:

21 ‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER

22 PLANS IN ENDANGERED STATUS OR CRITICAL STATUS

23 ‘‘SEC. 305. (a) GENERAL RULE.—For purposes of

24 this part, in the case of a multiemployer plan—

25 ‘‘(1) if the plan is in endangered status—
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1 ‘‘(A) the plan sponsor shall adopt and im2 plement a funding improvement plan in accord3 ance with the requirements of subsection (c),

4 and

5 ‘‘(B) the requirements of subsection (d)

6 shall apply during the funding plan adoption

7 period and the funding improvement period,

8 and

9 ‘‘(2) if the plan is in critical status—

10 ‘‘(A) the plan sponsor shall adopt and im11 plement a rehabilitation plan in accordance with

12 the requirements of subsection (e), and

13 ‘‘(B) the requirements of subsection (f)

14 shall apply during the rehabilitation plan adop15 tion period and the rehabilitation period.

16 ‘‘(b) DETERMINATION OF ENDANGERED AND CRIT17 ICAL STATUS.—For purposes of this section—

18 ‘‘(1) ENDANGERED STATUS.—A multiemployer

19 plan is in endangered status for a plan year if, as

20 determined by the plan actuary under paragraph

21 (3), the plan is not in critical status for the plan

22 year and either—

23 ‘‘(A) the plan’s funded percentage for such

24 plan year is less than 80 percent, or
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1 ‘‘(B) the plan has an accumulated funding

2 deficiency for such plan year, or is projected to

3 have such an accumulated funding deficiency

4 for any of the 6 succeeding plan years, taking

5 into account any extension of amortization peri6 ods under section 304(d).

7 For purposes of this section, a plan described in

8 subparagraph (B) shall be treated as in seriously en9 dangered status.

10 ‘‘(2) CRITICAL STATUS.—A multiemployer plan

11 is in critical status for a plan year if, as determined

12 by the plan actuary under paragraph (3), the plan

13 is described in 1 or more of the following subpara14 graphs as of the beginning of the plan year:

15 ‘‘(A) A plan is described in this subpara16 graph if—

17 ‘‘(i) the funded percentage of the plan

18 is less than 65 percent, and

19 ‘‘(ii) the sum of—

20 ‘‘(I) the market value of plan as21 sets, plus

22 ‘‘(II) the present value of the

23 reasonably anticipated employer con24 tributions for the current plan year

25 and each of the 5 succeeding plan
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1 years, assuming that the terms of all

2 collective bargaining agreements pur3 suant to which the plan is maintained

4 for the current plan year continue in

5 effect for succeeding plan years,

6 is less than the present value of all benefits

7 projected to be payable under the plan dur8 ing the current plan year and each of the

9 5 succeeding plan years (plus administra10 tive expenses for such plan years).

11 ‘‘(B) A plan is described in this subpara12 graph if—

13 ‘‘(i) the plan has an accumulated

14 funding deficiency for the current plan

15 year, not taking into account any extension

16 of amortization periods under section

17 304(d), or

18 ‘‘(ii) the plan is projected to have an

19 accumulated funding deficiency for any of

20 the 3 succeeding plan years (4 succeeding

21 plan years if the funded percentage of the

22 plan is 65 percent or less), not taking into

23 account any extension of amortization peri24 ods under section 304(d).
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1 ‘‘(C) A plan is described in this subpara2 graph if—

3 ‘‘(i)(I) the plan’s normal cost for the

4 current plan year, plus interest (deter5 mined at the rate used for determining

6 costs under the plan) for the current plan

7 year on the amount of unfunded benefit li8 abilities under the plan as of the last date

9 of the preceding plan year, exceeds

10 ‘‘(II) the present value of the reason11 ably anticipated employer contributions for

12 the current plan year,

13 ‘‘(ii) the present value of nonforfeit14 able benefits of inactive participants is

15 greater than the present value of non16 forfeitable benefits of active participants,

17 and

18 ‘‘(iii) the plan has an accumulated

19 funding deficiency for the current plan

20 year, or is projected to have such a defi21 ciency for any of the 4 succeeding plan

22 years, not taking into account any exten23 sion of amortization periods under section

24 304(d).
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1 ‘‘(D) A plan is described in this subpara2 graph if the sum of—

3 ‘‘(i) the market value of plan assets,

4 plus

5 ‘‘(ii) the present value of the reason6 ably anticipated employer contributions for

7 the current plan year and each of the 4

8 succeeding plan years, assuming that the

9 terms of all collective bargaining agree10 ments pursuant to which the plan is main11 tained for the current plan year continue

12 in effect for succeeding plan years,

13 is less than the present value of all benefits pro14 jected to be payable under the plan during the

15 current plan year and each of the 4 succeeding

16 plan years (plus administrative expenses for

17 such plan years).

18 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU19 ARY.—

20 ‘‘(A) IN GENERAL.—During the 90-day pe21 riod beginning on the first day of each plan

22 year of a multiemployer plan, the plan actuary

23 shall certify to the Secretary of the Treasury—

24 ‘‘(i) whether or not the plan is in en25 dangered status for such plan year and
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1 whether or not the plan is in critical status

2 for such plan year, and

3 ‘‘(ii) in the case of a plan which is in

4 a funding improvement or rehabilitation

5 period, whether or not the plan is making

6 the scheduled progress in meeting the re7 quirements of its funding improvement or

8 rehabilitation plan.

9 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

10 AND LIABILITIES.—

11 ‘‘(i) IN GENERAL.—In making the de12 terminations and projections under this

13 subsection, the plan actuary shall make

14 projections required for the current and

15 succeeding plan years, using reasonable ac16 tuarial estimates, assumptions, and meth17 ods, of the current value of the assets of

18 the plan and the present value of all liabil19 ities to participants and beneficiaries under

20 the plan for the current plan year as of the

21 beginning of such year. The projected

22 present value of liabilities as of the begin23 ning of such year shall be determined

24 based on the actuarial statement required

25 under section 103(d) with respect to the
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1 most recently filed annual report or the ac2 tuarial valuation for the preceding plan

3 year.

4 ‘‘(ii) DETERMINATIONS OF FUTURE

5 CONTRIBUTIONS.—Any actuarial projection

6 of plan assets shall assume—

7 ‘‘(I) reasonably anticipated em8 ployer contributions for the current

9 and succeeding plan years, assuming

10 that the terms of the one or more col11 lective bargaining agreements pursu12 ant to which the plan is maintained

13 for the current plan year continue in

14 effect for succeeding plan years, or

15 ‘‘(II) that employer contributions

16 for the most recent plan year will con17 tinue indefinitely, but only if the plan

18 actuary determines there have been no

19 significant demographic changes that

20 would make such assumption unrea21 sonable.

22 ‘‘(C) PENALTY FOR FAILURE TO SECURE

23 TIMELY ACTUARIAL CERTIFICATION.—Any fail24 ure of the plan’s actuary to certify the plan’s

25 status under this subsection by the date speci-
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1 fied in subparagraph (A) shall be treated for

2 purposes of section 502(c)(2) as a failure or re3 fusal by the plan administrator to file the an4 nual report required to be filed with the Sec5 retary under section 101(b)(4).

6 ‘‘(D) NOTICE.—In any case in which a

7 multiemployer plan is certified to be in endan8 gered or critical status under subparagraph (A),

9 the plan sponsor shall, not later than 30 days

10 after the date of the certification, provide notifi11 cation of the endangered or critical status to

12 the participants and beneficiaries, the bar13 gaining parties, the Pension Benefit Guaranty

14 Corporation, the Secretary of the Treasury, and

15 the Secretary.

16 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE

17 ADOPTED FOR MULTIEMPLOYER PLANS IN ENDANGERED

18 STATUS.—

19 ‘‘(1) IN GENERAL.—In any case in which a

20 multiemployer plan is in endangered status for a

21 plan year, the plan sponsor, in accordance with this

22 subsection—

23 ‘‘(A) shall adopt a funding improvement

24 plan not later than 240 days following the re25 quired date for the actuarial certification of en-
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1 dangered status under subsection (b)(3)(A),

2 and

3 ‘‘(B) within 30 days after the adoption of

4 the funding improvement plan—

5 ‘‘(i) in the case of a plan in seriously

6 endangered status, shall provide to the

7 bargaining parties 1 or more schedules

8 showing revised benefit structures, revised

9 contribution structures, or both, which, if

10 adopted, may reasonably be expected to en11 able the multiemployer plan to meet the

12 applicable requirements under paragraph

13 (3) in accordance with the funding im14 provement plan, including a description of

15 the reductions in future benefit accruals

16 and increases in contributions that the

17 plan sponsor determines are reasonably

18 necessary to meet the applicable require19 ments if the plan sponsor assumes that

20 there are no increases in contributions

21 under the plan other than the increases

22 necessary to meet the applicable require23 ments after future benefit accruals have

24 been reduced to the maximum extent per25 mitted by law, and
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1 ‘‘(ii) may, if the plan sponsor deems

2 appropriate, prepare and provide the bar3 gaining parties with additional information

4 relating to contribution rates or benefit re5 ductions, alternative schedules, or other in6 formation relevant to achieving the re7 quirements under paragraph (3) in accord8 ance with the funding improvement plan.

9 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

10 BEGINS.—Paragraph (1) shall not apply to a plan

11 year if such year is in a funding plan adoption pe12 riod or funding improvement period by reason of the

13 plan being in endangered status for a preceding plan

14 year. For purposes of this section, such preceding

15 plan year shall be the initial determination year with

16 respect to the funding improvement plan to which it

17 relates.

18 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur19 poses of this section—

20 ‘‘(A) IN GENERAL.—A funding improve21 ment plan is a plan which consists of the ac22 tions, including options or a range of options to

23 be proposed to the bargaining parties, which,

24 under reasonable actuarial assumptions, will re-
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1 sult in the plan meeting the requirements of

2 this paragraph.

3 ‘‘(B) PLANS OTHER THAN SERIOUSLY EN4 DANGERED PLANS.—In the case of plan not in

5 seriously endangered status, the requirements

6 of this paragraph are met if the plan’s funded

7 percentage as of the close of the funding im8 provement period exceeds the lesser of 80 per9 cent or a percentage equal to the sum of—

10 ‘‘(i) such percentage as of the begin11 ning of such period, plus

12 ‘‘(ii) 10 percent of the percentage

13 under clause (i).

14 ‘‘(C) SERIOUSLY ENDANGERED PLANS.—

15 In the case of a plan in seriously endangered

16 status, the requirements of this paragraph are

17 met if—

18 ‘‘(i) the plan’s funded percentage as

19 of the close of the funding improvement

20 period equals or exceeds the percentage

21 which is equal to the sum of—

22 ‘‘(I) such percentage as of the

23 beginning of such period, plus
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1 ‘‘(II) 33 percent of the difference

2 between 100 percent and the percent3 age under subclause (I), and

4 ‘‘(ii) there is no accumulated funding

5 deficiency for any plan year during the

6 funding improvement period (taking into

7 account any extension of amortization peri8 ods under section 304(d)).

9 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For

10 purposes of this section—

11 ‘‘(A) IN GENERAL.—The funding improve12 ment period for any funding improvement plan

13 adopted pursuant to this subsection is the 10-

14 year period beginning on the first day of the

15 first plan year of the multiemployer plan begin16 ning after the earlier of—

17 ‘‘(i) the second anniversary of the

18 date of the adoption of the funding im19 provement plan, or

20 ‘‘(ii) the expiration of the collective

21 bargaining agreements in effect on the due

22 date for the actuarial certification of en23 dangered status for the initial determina24 tion year under subsection (b)(3)(A) and

25 covering, as of such due date, at least 75
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1 percent of the active participants in such

2 multiemployer plan.

3 ‘‘(B) COORDINATION WITH CHANGES IN

4 STATUS.—

5 ‘‘(i) PLANS NO LONGER IN ENDAN6 GERED STATUS.—If the plan’s actuary cer7 tifies under subsection (b)(3)(A) for a plan

8 year in any funding plan adoption period

9 or funding improvement period that the

10 plan is no longer in endangered status and

11 is not in critical status, the funding plan

12 adoption period or funding improvement

13 period, whichever is applicable, shall end as

14 of the close of the preceding plan year.

15 ‘‘(ii) PLANS IN CRITICAL STATUS.—If

16 the plan’s actuary certifies under sub17 section (b)(3)(A) for a plan year in any

18 funding plan adoption period or funding

19 improvement period that the plan is in

20 critical status, the funding plan adoption

21 period or funding improvement period,

22 whichever is applicable, shall end as of the

23 close of the plan year preceding the first

24 plan year in the rehabilitation period with

25 respect to such status.
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1 ‘‘(C) PLANS IN ENDANGERED STATUS AT

2 END OF PERIOD.—If the plan’s actuary certifies

3 under subsection (b)(3)(A) for the first plan

4 year following the close of the period described

5 in subparagraph (A) that the plan is in endan6 gered status, the provisions of this subsection

7 and subsection (d) shall be applied as if such

8 first plan year were an initial determination

9 year, except that the plan may not be amended

10 in a manner inconsistent with the funding im11 provement plan in effect for the preceding plan

12 year until a new funding improvement plan is

13 adopted.

14 ‘‘(5) SPECIAL RULES FOR CERTAIN UNDER15 FUNDED PLANS.—

16 ‘‘(A) IN GENERAL.—Except as provided in

17 subparagraph (B), if the funded percentage of

18 a plan in seriously endangered status was 70

19 percent or less as of the beginning of the initial

20 determination year, the following rules shall

21 apply in determining whether the requirements

22 of paragraph (3)(C)(i) are met:

23 ‘‘(i) The plan’s funded percentage as

24 of the close of the funding improvement
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1 period must equal or exceed a percentage

2 which is equal to the sum of—

3 ‘‘(I) such percentage as of the

4 beginning of such period, plus

5 ‘‘(II) 20 percent of the difference

6 between 100 percent and the percent7 age under subclause (I).

8 ‘‘(ii) The funding improvement period

9 under paragraph (4)(A) shall be 15 years

10 rather than 10 years.

11 ‘‘(B) SPECIAL RULES FOR PLANS WITH

12 FUNDED PERCENTAGE OVER 70 PERCENT.—If

13 the funded percentage described in subpara14 graph (A) was more than 70 percent but less

15 than 80 percent as of the beginning of the ini16 tial determination year—

17 ‘‘(i) subparagraph (A) shall apply if

18 the plan’s actuary certifies, within 30 days

19 after the certification under subsection

20 (b)(3)(A) for the initial determination

21 year, that, based on the terms of the plan

22 and the collective bargaining agreements in

23 effect at the time of such certification, the

24 plan is not projected to meet the require-
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1 ments of paragraph (3)(C)(i) without re2 gard to this paragraph, and

3 ‘‘(ii) if there is a certification under

4 clause (i), the plan may, in formulating its

5 funding improvement plan, only take into

6 account the rules of subparagraph (A) for

7 plan years in the funding improvement pe8 riod beginning on or before the date on

9 which the last of the collective bargaining

10 agreements described in paragraph

11 (4)(A)(ii) expires.

12 Notwithstanding clause (ii), if for any plan year

13 ending after the date described in clause (ii) the

14 plan actuary certifies (at the time of the annual

15 certification under subsection (b)(3)(A) for such

16 plan year) that, based on the terms of the plan

17 and collective bargaining agreements in effect

18 at the time of that annual certification, the plan

19 is not projected to be able to meet the require20 ments of paragraph (3)(C)(i) without regard to

21 this paragraph, the plan may continue to as22 sume for such year that the funding improve23 ment period is 15 years rather than 10 years.

24 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT

25 PLAN AND SCHEDULES.—
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1 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The

2 plan sponsor shall annually update the funding

3 improvement plan and shall file the update with

4 the plan’s annual report under section 104.

5 ‘‘(B) SCHEDULES.—The plan sponsor may

6 periodically update any schedule of contribution

7 rates provided under this subsection to reflect

8 the experience of the plan, except that the

9 schedule or schedules described in paragraph

10 (1)(B)(i) shall be updated at least once every 3

11 years.

12 ‘‘(C) DURATION OF SCHEDULE.—A sched13 ule of contribution rates provided by the plan

14 sponsor and relied upon by bargaining parties

15 in negotiating a collective bargaining agreement

16 shall remain in effect for the duration of that

17 collective bargaining agreement.

18 ‘‘(7) PENALTY IF NO FUNDING IMPROVEMENT

19 PLAN ADOPTED.—A failure of the plan sponsor to

20 adopt a funding improvement plan by the date speci21 fied in paragraph (1)(A) shall be treated for pur22 poses of section 502(c)(2) as a failure or refusal by

23 the plan administrator to file the annual report re24 quired to be filed with the Secretary under section

25 101(b)(4).
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1 ‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For

2 purposes of this section, the term ‘funding plan

3 adoption period’ means the period beginning on the

4 date of the certification under subsection (b)(3)(A)

5 for the initial determination year and ending on the

6 day before the first day of the funding improvement

7 period.

8 ‘‘(d) RULES FOR OPERATION OF PLAN DURING

9 ADOPTION AND IMPROVEMENT PERIODS; FAILURE TO

10 MEET REQUIREMENTS.—

11 ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PE12 RIOD.—During the plan adoption period—

13 ‘‘(A) the plan sponsor may not accept a

14 collective bargaining agreement or participation

15 agreement with respect to the multiemployer

16 plan that provides for—

17 ‘‘(i) a reduction in the level of con18 tributions for any participants,

19 ‘‘(ii) a suspension of contributions

20 with respect to any period of service, or

21 ‘‘(iii) any new direct or indirect exclu22 sion of younger or newly hired employees

23 from plan participation,

24 ‘‘(B) no amendment of the plan which in25 creases the liabilities of the plan by reason of
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1 any increase in benefits, any change in the ac2 crual of benefits, or any change in the rate at

3 which benefits become nonforfeitable under the

4 plan may be adopted unless the amendment is

5 required as a condition of qualification under

6 part I of subchapter D of chapter 1 of the In7 ternal Revenue Code of 1986 or to comply with

8 other applicable law, and

9 ‘‘(C) in the case of a plan in seriously en10 dangered status, the plan sponsor shall take all

11 reasonable actions which are consistent with the

12 terms of the plan and applicable law and which

13 are expected, based on reasonable assumptions,

14 to achieve—

15 ‘‘(i) an increase in the plan’s funded

16 percentage, and

17 ‘‘(ii) postponement of an accumulated

18 funding deficiency for at least 1 additional

19 plan year.

20 Actions under subparagraph (C) include applications

21 for extensions of amortization periods under section

22 304(d), use of the shortfall funding method in mak23 ing funding standard account computations, amend24 ments to the plan’s benefit structure, reductions in

25 future benefit accruals, and other reasonable actions
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1 consistent with the terms of the plan and applicable

2 law.

3 ‘‘(2) COMPLIANCE WITH FUNDING IMPROVE4 MENT PLAN.—

5 ‘‘(A) IN GENERAL.—A plan may not be

6 amended after the date of the adoption of a

7 funding improvement plan under subsection (c)

8 so as to be inconsistent with the funding im9 provement plan.

10 ‘‘(B) NO REDUCTION IN CONTRIBU11 TIONS.—A plan sponsor may not during any

12 funding improvement period accept a collective

13 bargaining agreement or participation agree14 ment with respect to the multiemployer plan

15 that provides for—

16 ‘‘(i) a reduction in the level of con17 tributions for any participants,

18 ‘‘(ii) a suspension of contributions

19 with respect to any period of service, or

20 ‘‘(iii) any new direct or indirect exclu21 sion of younger or newly hired employees

22 from plan participation.

23 ‘‘(C) SPECIAL RULES FOR BENEFIT IN24 CREASES.—A plan may not be amended after

25 the date of the adoption of a funding improve-
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1 ment plan under subsection (c) so as to in2 crease benefits, including future benefit accru3 als, unless—

4 ‘‘(i) in the case of a plan in seriously

5 endangered status, the plan actuary cer6 tifies that, after taking into account the

7 benefit increase, the plan is still reasonably

8 expected to meet the requirements under

9 subsection (c)(3) in accordance with the

10 schedule contemplated in the funding im11 provement plan, and

12 ‘‘(ii) in the case of a plan not in seri13 ously endangered status, the actuary cer14 tifies that such increase is paid for out of

15 contributions not required by the funding

16 improvement plan to meet the require17 ments under subsection (c)(3) in accord18 ance with the schedule contemplated in the

19 funding improvement plan.

20 ‘‘(3) FAILURE TO MEET REQUIREMENTS.—

21 ‘‘(A) IN GENERAL.—Notwithstanding sec22 tion 4971(g) of the Internal Revenue Code of

23 1986, if a plan fails to meet the requirements

24 of subsection (c)(3) by the end of the funding

25 improvement period, the plan shall be treated
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1 as having an accumulated funding deficiency

2 for purposes of section 4971 of such Code for

3 the last plan year in such period (and each suc4 ceeding plan year until such requirements are

5 met) in an amount equal to the greater of the

6 amount of the contributions necessary to meet

7 such requirements or the amount of such accu8 mulated funding deficiency without regard to

9 this paragraph.

10 ‘‘(B) WAIVER.—In the case of a failure de11 scribed in subparagraph (A) which is due to

12 reasonable cause and not to willful neglect, the

13 Secretary of the Treasury may waive part or all

14 of the tax imposed by section 4971 of such

15 Code to the extent that the payment of such tax

16 would be excessive or otherwise inequitable rel17 ative to the failure involved.

18 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED

19 FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.—

20 ‘‘(1) IN GENERAL.—In any case in which a

21 multiemployer plan is in critical status for a plan

22 year, the plan sponsor, in accordance with this

23 subsection—

24 ‘‘(A) shall adopt a rehabilitation plan not

25 later than 240 days following the required date
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1 for the actuarial certification of critical status

2 under subsection (b)(3)(A), and

3 ‘‘(B) within 30 days after the adoption of

4 the rehabilitation plan—

5 ‘‘(i) shall provide to the bargaining

6 parties 1 or more schedules showing re7 vised benefit structures, revised contribu8 tion structures, or both, which, if adopted,

9 may reasonably be expected to enable the

10 multiemployer plan to emerge from critical

11 status in accordance with the rehabilitation

12 plan, and

13 ‘‘(ii) may, if the plan sponsor deems

14 appropriate, prepare and provide the bar15 gaining parties with additional information

16 relating to contribution rates or benefit re17 ductions, alternative schedules, or other in18 formation relevant to emerging from crit19 ical status in accordance with the rehabili20 tation plan.

21 The schedule or schedules described in subparagraph

22 (B)(i) shall reflect reductions in future benefit ac23 cruals and increases in contributions that the plan

24 sponsor determines are reasonably necessary to

25 emerge from critical status. One schedule shall be
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1 designated as the default schedule and such schedule

2 shall assume that there are no increases in contribu3 tions under the plan other than the increases nec4 essary to emerge from critical status after future

5 benefit accruals and other benefits (other than bene6 fits the reduction or elimination of which are not

7 permitted under section 204(g)) have been reduced

8 to the maximum extent permitted by law.

9 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

10 BEGINS.—Paragraph (1) shall not apply to a plan

11 year if such year is in a rehabilitation plan adoption

12 period or rehabilitation period by reason of the plan

13 being in critical status for a preceding plan year.

14 For purposes of this section, such preceding plan

15 year shall be the initial critical year with respect to

16 the rehabilitation plan to which it relates.

17 ‘‘(3) REHABILITATION PLAN.—For purposes of

18 this section—

19 ‘‘(A) IN GENERAL.—A rehabilitation plan

20 is a plan which consists of—

21 ‘‘(i) actions which will enable, under

22 reasonable actuarial assumptions, the plan

23 to cease to be in critical status by the end

24 of the rehabilitation period and may in25 clude reductions in plan expenditures (in-
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1 cluding plan mergers and consolidations),

2 reductions in future benefit accruals or in3 creases in contributions, if agreed to by the

4 bargaining parties, or any combination of

5 such actions, or

6 ‘‘(ii) if the plan sponsor determines

7 that, based on reasonable actuarial as8 sumptions and upon exhaustion of all rea9 sonable measures, the plan can not reason10 ably be expected to emerge from critical

11 status by the end of the rehabilitation pe12 riod, reasonable measures to emerge from

13 critical status at a later time or to forestall

14 possible insolvency (within the meaning of

15 section 4245).

16 Such plan shall include the schedules required

17 to be provided under paragraph (1)(B)(i). If

18 clause (ii) applies, such plan shall set forth the

19 alternatives considered, explain why the plan is

20 not reasonably expected to emerge from critical

21 status by the end of the rehabilitation period,

22 and specify when, if ever, the plan is expected

23 to emerge from critical status in accordance

24 with the rehabilitation plan.
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1 ‘‘(B) UPDATES TO REHABILITATION PLAN

2 AND SCHEDULES.—

3 ‘‘(i) REHABILITATION PLAN.—The

4 plan sponsor shall annually update the re5 habilitation plan and shall file the update

6 with the plan’s annual report under section

7 104.

8 ‘‘(ii) SCHEDULES.—The plan sponsor

9 may periodically update any schedule of

10 contribution rates provided under this sub11 section to reflect the experience of the

12 plan, except that the schedule or schedules

13 described in paragraph (1)(B)(i) shall be

14 updated at least once every 3 years.

15 ‘‘(iii) DURATION OF SCHEDULE.—A

16 schedule of contribution rates provided by

17 the plan sponsor and relied upon by bar18 gaining parties in negotiating a collective

19 bargaining agreement shall remain in ef20 fect for the duration of that collective bar21 gaining agreement.

22 ‘‘(C) DEFAULT SCHEDULE.—If the collec23 tive bargaining agreement providing for con24 tributions under a multiemployer plan that was

25 in effect at the time the plan entered critical
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1 status expires and, after receiving a schedule

2 from the plan sponsor under paragraph

3 (1)(B)(i), the bargaining parties have not

4 adopted a collective bargaining agreement with

5 terms consistent with such a schedule, the de6 fault schedule described in the last sentence of

7 paragraph (1) shall go into effect with respect

8 to those bargaining parties.

9 ‘‘(4) REHABILITATION PERIOD.—For purposes

10 of this section—

11 ‘‘(A) IN GENERAL.—The rehabilitation pe12 riod for a plan in critical status is the 10-year

13 period beginning on the first day of the first

14 plan year of the multiemployer plan following

15 the earlier of—

16 ‘‘(i) the second anniversary of the

17 date of the adoption of the rehabilitation

18 plan, or

19 ‘‘(ii) the expiration of the collective

20 bargaining agreements in effect on the

21 date of the due date for the actuarial cer22 tification of critical status for the initial

23 critical year under subsection (a)(1) and

24 covering, as of such date at least 75 per-
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1 cent of the active participants in such mul2 tiemployer plan.

3 If a plan emerges from critical status as pro4 vided under subparagraph (B) before the end of

5 such 10-year period, the rehabilitation period

6 shall end with the plan year preceding the plan

7 year for which the determination under sub8 paragraph (B) is made.

9 ‘‘(B) EMERGENCE.—A plan in critical sta10 tus shall remain in such status until a plan

11 year for which the plan actuary certifies, in ac12 cordance with subsection (b)(3)(A), that the

13 plan is not projected to have an accumulated

14 funding deficiency for the plan year or any of

15 the 9 succeeding plan years, without regard to

16 use of the shortfall method or any extension of

17 amortization periods under section 304(d).

18 ‘‘(5) PENALTY IF NO REHABILITATION PLAN

19 ADOPTED.—A failure of a plan sponsor to adopt a

20 rehabilitation plan by the date specified in para21 graph (1)(A) shall be treated for purposes of section

22 502(c)(2) as a failure or refusal by the plan admin23 istrator to file the annual report required to be filed

24 with the Secretary under section 101(b)(4).
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1 ‘‘(6) REHABILITATION PLAN ADOPTION PE2 RIOD.—For purposes of this section, the term ‘reha3 bilitation plan adoption period’ means the period be4 ginning on the date of the certification under sub5 section (b)(3)(A) for the initial critical year and end6 ing on the day before the first day of the rehabilita7 tion period.

8 ‘‘(7) LIMITATION ON REDUCTION IN RATES OF

9 FUTURE ACCRUALS.—Any reduction in the rate of

10 future accruals under any schedule described in

11 paragraph (1)(B)(i) shall not reduce the rate of fu12 ture accruals below—

13 ‘‘(A) a monthly benefit (payable as a single

14 life annuity commencing at the participant’s

15 normal retirement age) equal to 1 percent of

16 the contributions required to be made with re17 spect to a participant, or the equivalent stand18 ard accrual rate for a participant or group of

19 participants under the collective bargaining

20 agreements in effect as of the first day of the

21 initial critical year, or

22 ‘‘(B) if lower, the accrual rate under the

23 plan on such first day.

24 The equivalent standard accrual rate shall be deter25 mined by the plan sponsor based on the standard or
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1 average contribution base units which the plan spon2 sor determines to be representative for active partici3 pants and such other factors as the plan sponsor de4 termines to be relevant. Nothing in this paragraph

5 shall be construed as limiting the ability of the plan

6 sponsor to prepare and provide the bargaining par7 ties with alternative schedules to the default sched8 ule that established lower or higher accrual and con9 tribution rates than the rates otherwise described in

10 this paragraph.

11 ‘‘(8) EMPLOYER IMPACT.—For the purposes of

12 this section, the plan sponsor shall consider the im13 pact of the rehabilitation plan and contribution

14 schedules authorized by this section on bargaining

15 parties with fewer than 500 employees and shall im16 plement the plan in a manner that encourages their

17 continued participation in the plan and minimizes fi18 nancial harm to employers and their workers.

19 ‘‘(f) RULES FOR OPERATION OF PLAN DURING

20 ADOPTION AND REHABILITATION PERIOD.—

21 ‘‘(1) COMPLIANCE WITH REHABILITATION

22 PLAN.—

23 ‘‘(A) IN GENERAL.—A plan may not be

24 amended after the date of the adoption of a re-
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1 habilitation plan under subsection (e) so as to

2 be inconsistent with the rehabilitation plan.

3 ‘‘(B) SPECIAL RULES FOR BENEFIT IN4 CREASES.—A plan may not be amended after

5 the date of the adoption of a rehabilitation plan

6 under subsection (e) so as to increase benefits,

7 including future benefit accruals, unless the

8 plan actuary certifies that such increase is paid

9 for out of additional contributions not con10 templated by the rehabilitation plan, and, after

11 taking into account the benefit increase, the

12 multiemployer plan still is reasonably expected

13 to emerge from critical status by the end of the

14 rehabilitation period on the schedule con15 templated in the rehabilitation plan.

16 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMI17 LAR BENEFITS.—

18 ‘‘(A) IN GENERAL.—Effective on the date

19 the notice of certification of the plan’s critical

20 status for the initial critical year under sub21 section (b)(3)(D) is sent, and notwithstanding

22 section 204(g), the plan shall not pay—

23 ‘‘(i) any payment, in excess of the

24 monthly amount paid under a single life

25 annuity (plus any social security supple-
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1 ments described in the last sentence of sec2 tion 204(b)(1)(G)),

3 ‘‘(ii) any payment for the purchase of

4 an irrevocable commitment from an insurer

5 to pay benefits, and

6 ‘‘(iii) any other payment specified by

7 the Secretary of the Treasury by regula8 tions.

9 ‘‘(B) EXCEPTION.—Subparagraph (A)

10 shall not apply to a benefit which under section

11 203(e) may be immediately distributed without

12 the consent of the participant or to any makeup

13 payment in the case of a retroactive annuity

14 starting date or any similar payment of benefits

15 owed with respect to a prior period.

16 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH17 DRAWAL LIABILITY DETERMINATION.—Any benefit

18 reductions under this subsection shall be disregarded

19 in determining a plan’s unfunded vested benefits for

20 purposes of determining an employer’s withdrawal li21 ability under section 4201.

22 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE23 RIOD.—During the rehabilitation plan adoption

24 period—
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S 1783 ES

1 ‘‘(A) the plan sponsor may not accept a

2 collective bargaining agreement or participation

3 agreement with respect to the multiemployer

4 plan that provides for—

5 ‘‘(i) a reduction in the level of con6 tributions for any participants,

7 ‘‘(ii) a suspension of contributions

8 with respect to any period of service, or

9 ‘‘(iii) any new direct or indirect exclu10 sion of younger or newly hired employees

11 from plan participation, and

12 ‘‘(B) no amendment of the plan which in13 creases the liabilities of the plan by reason of

14 any increase in benefits, any change in the ac15 crual of benefits, or any change in the rate at

16 which benefits become nonforfeitable under the

17 plan may be adopted unless the amendment is

18 required as a condition of qualification under

19 part I of subchapter D of chapter 1 of the In20 ternal Revenue Code of 1986 or to comply with

21 other applicable law.

22 ‘‘(5) FAILURE TO MEET REQUIREMENTS.—

23 ‘‘(A) IN GENERAL.—Notwithstanding sec24 tion 4971(g) of the Internal Revenue Code of

25 1986, if a plan—
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1 ‘‘(i) fails to meet the requirements of

2 subsection (e) by the end of the rehabilita3 tion period, or

4 ‘‘(ii) has received a certification under

5 subsection (b)(3)(A)(ii) for 3 consecutive

6 plan years that the plan is not making the

7 scheduled progress in meeting its require8 ments under the rehabilitation plan,

9 the plan shall be treated as having an accumu10 lated funding deficiency for purposes of section

11 4971 of such Code for the last plan year in

12 such period (and each succeeding plan year

13 until such requirements are met) in an amount

14 equal to the greater of the amount of the con15 tributions necessary to meet such requirements

16 or the amount of such accumulated funding de17 ficiency without regard to this paragraph.

18 ‘‘(B) WAIVER.—In the case of a failure de19 scribed in subparagraph (A) which is due to

20 reasonable cause and not to willful neglect, the

21 Secretary of the Treasury may waive part or all

22 of the tax imposed by section 4971 of such

23 Code to the extent that the payment of such tax

24 would be excessive or otherwise inequitable rel25 ative to the failure involved.
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1 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR

2 DECISIONS.—If, within 60 days of the due date for adop3 tion of a funding improvement plan under subsection (c)

4 or a rehabilitation plan under subsection (e), the plan

5 sponsor of a plan in endangered status or a plan in critical

6 status has not agreed on a funding improvement plan or

7 rehabilitation plan, then any member of the board or

8 group that constitutes the plan sponsor may require that

9 the plan sponsor enter into an expedited dispute resolution

10 procedure for the development and adoption of a funding

11 improvement plan or rehabilitation plan.

12 ‘‘(h) NONBARGAINED PARTICIPATION.—

13 ‘‘(1) BOTH BARGAINED AND NONBARGAINED

14 EMPLOYEE-PARTICIPANTS.—In the case of an em15 ployer that contributes to a multiemployer plan with

16 respect to both employees who are covered by one or

17 more collective bargaining agreements and to em18 ployees who are not so covered, if the plan is in en19 dangered status or in critical status, benefits of and

20 contributions for the nonbargained employees, in21 cluding surcharges on those contributions, shall be

22 determined as if those nonbargained employees were

23 covered under the first to expire of the employer’s

24 collective bargaining agreements in effect when the

25 plan entered endangered or critical status.
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1 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In

2 the case of an employer that contributes to a multi3 employer plan only with respect to employees who

4 are not covered by a collective bargaining agreement,

5 this section shall be applied as if the employer were

6 the bargaining parties, and its participation agree7 ment with the plan was a collective bargaining

8 agreement with a term ending on the first day of the

9 plan year beginning after the employer is provided

10 the schedule or schedules described in subsections

11 (c) and (e).

12 ‘‘(3) EMPLOYEES COVERED BY ACOLLECTIVE

13 BARGAINING AGREEMENT.—The determination as to

14 whether an employee covered by a collective bar15 gaining agreement for purposes of this section shall

16 be made without regard to the special rule in Treas17 ury Regulation section 1.410(b)–6(d)(ii)(D).

18 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur19 poses of this section—

20 ‘‘(1) BARGAINING PARTY.—The term ‘bar21 gaining party’ means—

22 ‘‘(A)(i) except as provided in clause (ii), an

23 employer who has an obligation to contribute

24 under the plan; or
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1 ‘‘(ii) in the case of a plan described under

2 section 404(c) of the Internal Revenue Code of

3 1986, or a continuation of such a plan, the as4 sociation of employers that is the employee set5 tlor of the plan; and

6 ‘‘(B) an employee organization which, for

7 purposes of collective bargaining, represents

8 plan participants employed by an employer who

9 has an obligation to contribute under the plan.

10 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund11 ed percentage’ means the percentage equal to a

12 fraction—

13 ‘‘(A) the numerator of which is the value

14 of the plan’s assets, as determined under sec15 tion 304(c)(2), and

16 ‘‘(B) the denominator of which is the ac17 crued liability of the plan, determined using ac18 tuarial assumptions described in section

19 304(c)(3).

20 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—

21 The term ‘accumulated funding deficiency’ has the

22 meaning given such term in section 304(a).

23 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active

24 participant’ means, in connection with a multiem-
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1 ployer plan, a participant who is in covered service

2 under the plan.

3 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac4 tive participant’ means, in connection with a multi5 employer plan, a participant, or the beneficiary or

6 alternate payee of a participant, who—

7 ‘‘(A) is not in covered service under the

8 plan, and

9 ‘‘(B) is in pay status under the plan or has

10 a nonforfeitable right to benefits under the

11 plan.

12 ‘‘(6) PAY STATUS.—A person is in pay status

13 under a multiemployer plan if—

14 ‘‘(A) at any time during the current plan

15 year, such person is a participant or beneficiary

16 under the plan and is paid an early, late, nor17 mal, or disability retirement benefit under the

18 plan (or a death benefit under the plan related

19 to a retirement benefit), or

20 ‘‘(B) to the extent provided in regulations

21 of the Secretary of the Treasury, such person

22 is entitled to such a benefit under the plan.

23 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term

24 ‘obligation to contribute’ has the meaning given such

25 term under section 4212(a).
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1 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding

2 any other provision of this section, the actuary’s de3 terminations with respect to a plan’s normal cost,

4 actuarial accrued liability, and improvements in a

5 plan’s funded percentage under this section shall be

6 based upon the unit credit funding method (whether

7 or not that method is used for the plan’s actuarial

8 valuation).

9 ‘‘(9) PLAN SPONSOR.—In the case of a plan de10 scribed under section 404(c) of the Internal Revenue

11 Code of 1986, or a continuation of such a plan, the

12 term ‘plan sponsor’ means the bargaining parties de13 scribed under paragraph (1).’’.

14 (b) CAUSE OF ACTION TO COMPEL ADOPTION OF

15 FUNDING IMPROVEMENT OR REHABILITATION PLAN.—

16 Section 502(a) of the Employee Retirement Income Secu17 rity Act of 1974 is amended by striking ‘‘or’’ at the end

18 of paragraph (8), by striking the period at the end of para19 graph (9) and inserting ‘‘; or’’ and by adding at the end

20 the following:

21 ‘‘(10) in the case of a multiemployer plan that

22 has been certified by the actuary to be in endan23 gered or critical status under section 305, if the plan

24 sponsor has not adopted a funding improvement or

25 rehabilitation plan under subsection (c) or (e) of
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1 that section by the deadline established in that sec2 tion, by an employer that has an obligation to con3 tribute with respect to the multiemployer plan or an

4 employee organization that represents active partici5 pants in the multiemployer plan, for an order com6 pelling the plan sponsor to adopt a funding improve7 ment or rehabilitation plan.’’.

8 (c) 4971 EXCISE TAX INAPPLICABLE.—Section 4971

9 of the Internal Revenue Code of 1986 is amended by re10 designating subsection (g) as subsection (h), and inserting

11 after subsection (f) the following:

12 ‘‘(g) MULTIEMPLOYER PLANS IN CRITICAL STA13 TUS.—No tax shall be imposed under this section for a

14 taxable year with respect to a multiemployer plan if, for

15 the plan years ending with or within the taxable year, the

16 plan is in critical status pursuant to section 305 of the

17 Employee Retirement Income Security Act of 1974. This

18 subsection shall only apply if the plan adopts a rehabilita19 tion plan in accordance with section 305(e) of such Act

20 and complies with such rehabilitation plan (and any modi21 fications of the plan) and shall not apply if an excise tax

22 is required to be imposed under this section by reason of

23 a violation of such section 305.’’.

24 (d) NO ADDITIONAL CONTRIBUTIONS REQUIRED.—
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1 (1) Section 302(b) of the Employee Retirement

2 Income Security Act of 1974, as amended by this

3 Act , is amended by adding at the end the following

4 new paragraph:

5 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA6 TUS.—Subparagraph (A) shall not apply in the case

7 of a multiemployer plan for any plan year in which

8 the plan is in critical status pursuant to section 305.

9 This paragraph shall only apply if the plan adopts

10 a rehabilitation plan in accordance with section

11 305(e) and complies with such rehabilitation plan

12 (and any modifications of the plan).’’.

13 (2) Section 412(c) of the Internal Revenue

14 Code of 1986, as amended by this Act, is amended

15 by adding at the end the following new paragraph:

16 ‘‘(3) MULTIEMPLOYER PLANS IN CRITICAL STA17 TUS.—Subparagraph (A) shall not apply in the case

18 of a multiemployer plan for any plan year in which

19 the plan is in critical status pursuant to section 305

20 of the Employee Retirement Income Security Act of

21 1974. This paragraph shall only apply if the plan

22 adopts a rehabilitation plan in accordance with sec23 tion 305(e) of such Act and complies with such re24 habilitation plan (and any modifications of the

25 plan).’’.
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1 (e) CONFORMING AMENDMENT.—The table of con2 tents in section 1 of such Act (as amended by the pre3 ceding provisions of this Act) is amended by inserting

4 after the item relating to section 304 the following new

5 item:

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered status or critical status.’’.

6 (f) EFFECTIVE DATES.—

7 (1) IN GENERAL.—The amendment made by

8 this section shall apply with respect to plan years be9 ginning after 2006.

10 (2) SPECIAL RULE FOR CERTAIN RESTORED

11 BENEFITS.—In the case of a multiemployer plan—

12 (A) with respect to which benefits were re13 duced pursuant to a plan amendment adopted

14 on or after January 1, 2002, and before June

15 30, 2005, and

16 (B) which, pursuant to the plan document,

17 the trust agreement, or a formal written com18 munication from the plan sponsor to partici19 pants provided before June 30, 2005, provided

20 for the restoration of such benefits,

21 the amendments made by this section shall not apply

22 to such benefit restorations to the extent that any

23 restriction on the providing or accrual of such bene-
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1 fits would otherwise apply by reason of such amend2 ments.

3 SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL4 TIEMPLOYER PLANS.

5 (a) ADVANCE DETERMINATION OF IMPENDING IN6 SOLVENCY OVER 5 YEARS.—Section 4245(d)(1) of the

7 Employee Retirement Income Security Act of 1974 (29

8 U.S.C. 1426(d)(1)) is amended—

9 (1) by striking ‘‘3 plan years’’ the second place

10 it appears and inserting ‘‘5 plan years’’; and

11 (2) by adding at the end the following new sen12 tence: ‘‘If the plan sponsor makes such a determina13 tion that the plan will be insolvent in any of the next

14 5 plan years, the plan sponsor shall make the com15 parison under this paragraph at least annually until

16 the plan sponsor makes a determination that the

17 plan will not be insolvent in any of the next 5 plan

18 years.’’.

19 (b) EFFECTIVE DATE.—The amendments made by

20 this section shall apply with respect to determinations

21 made in plan years beginning after 2006.
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1 SEC. 204. SPECIAL RULE FOR CERTAIN BENEFITS FUNDED

2 UNDER AN AGREEMENT APPROVED BY THE

3 PENSION BENEFIT GUARANTY CORPORA4 TION.

5 In the case of a multiemployer plan that is a party

6 to an agreement that was approved by the Pension Benefit

7 Guaranty Corporation prior to June 30, 2005, and that—

8 (1) increases benefits, and

9 (2) provides for special withdrawal liability

10 rules under section 4203(f) of the Employee Retire11 ment Income Security Act of 1974 (29 U.S.C.

12 1383),

13 the amendments made by sections 201, 202, 211, and 212

14 of this Act shall not apply to the benefit increases under

15 any plan amendment adopted prior to June 30, 2005, that

16 are funded pursuant to such agreement if the plan is fund17 ed in compliance with such agreement (and any amend18 ments thereto).

19 SEC. 205. WITHDRAWAL LIABILITY REFORMS.

20 (a) REPEAL OF LIMITATION ON WITHDRAWAL LI21 ABILITY OF INSOLVENT EMPLOYERS.—

22 (1) IN GENERAL.—Subsections (b) and (d) of

23 section 4225 of the Employee Retirement Income

24 Security Act of 1974 (29 U.S.C. 1405) are repealed.
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1 (2) CONFORMING AMENDMENTS.—Subsections

2 (c) and (e) of section 4225 of such Act are redesig3 nated as subsections (b) and (c), respectively.

4 (3) EFFECTIVE DATE.—The amendments made

5 by this section shall apply with respect to sales oc6 curring on or after January 1, 2006.

7 (b) WITHDRAWAL LIABILITY CONTINUES IF WORK

8 CONTRACTED OUT.—

9 (1) IN GENERAL.—Clause (i) of section

10 4205(b)(2)(A) of such Act (29 U.S.C.

11 1385(b)(2)(A)) is amended by inserting ‘‘or to an

12 entity or entities owned or controlled by the em13 ployer’’ after ‘‘to another location’’.

14 (2) EFFECTIVE DATE.—The amendment made

15 by this subsection shall apply with respect to work

16 transferred on or after the date of the enactment of

17 this Act.

18 (c) APPLICATION OF FORGIVENESS RULE TO PLANS

19 PRIMARILY COVERING EMPLOYEES IN THE BUILDING

20 AND CONSTRUCTION.—

21 (1) IN GENERAL.—Section 4210(b) of such Act

22 (29 U.S.C. 1390(b)) is amended—

23 (A) by striking paragraph (1); and
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1 (B) by redesignating paragraphs (2)

2 through (4) as paragraphs (1) through (3), re3 spectively.

4 (2) EFFECTIVE DATE.—The amendments made

5 by this subsection shall apply with respect to plan

6 withdrawals occurring on or after January 1, 2006.

7 PART II—AMENDMENTS TO INTERNAL REVENUE

8 CODE OF 1986

9 SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED

10 BENEFIT PLANS.

11 (a) IN GENERAL.—Subpart A of part III of sub12 chapter D of chapter 1 of the Internal Revenue Code of

13 1986 (as added by this Act) is amended by inserting after

14 section 430 the following new section:

15 ‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM16 PLOYER PLANS.

17 ‘‘(a) IN GENERAL.—For purposes of section 412, the

18 accumulated funding deficiency of a multiemployer plan

19 for any plan year is—

20 ‘‘(1) except as provided in paragraph (2), the

21 amount, determined as of the end of the plan year,

22 equal to the excess (if any) of the total charges to

23 the funding standard account of the plan for all plan

24 years (beginning with the first plan year for which
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1 this part applies to the plan) over the total credits

2 to such account for such years, and

3 ‘‘(2) if the multiemployer plan is in reorganiza4 tion for any plan year, the accumulated funding de5 ficiency of the plan determined under section 4243

6 of the Employee Retirement Income Security Act of

7 1974.

8 ‘‘(b) FUNDING STANDARD ACCOUNT.—

9 ‘‘(1) ACCOUNT REQUIRED.—Each multiem10 ployer plan to which this part applies shall establish

11 and maintain a funding standard account. Such ac12 count shall be credited and charged solely as pro13 vided in this section.

14 ‘‘(2) CHARGES TO ACCOUNT.—For a plan year,

15 the funding standard account shall be charged with

16 the sum of—

17 ‘‘(A) the normal cost of the plan for the

18 plan year,

19 ‘‘(B) the amounts necessary to amortize in

20 equal annual installments (until fully amor21 tized)—

22 ‘‘(i) separately, with respect to each

23 plan year, the net increase (if any) in un24 funded past service liability under the plan
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1 arising from plan amendments adopted in

2 such year, over a period of 15 plan years,

3 ‘‘(ii) separately, with respect to each

4 plan year, the net experience loss (if any)

5 under the plan, over a period of 15 plan

6 years, and

7 ‘‘(iii) separately, with respect to each

8 plan year, the net loss (if any) resulting

9 from changes in actuarial assumptions

10 used under the plan, over a period of 15

11 plan years,

12 ‘‘(C) the amount necessary to amortize

13 each waived funding deficiency (within the

14 meaning of section 412(d)(3)) for each prior

15 plan year in equal annual installments (until

16 fully amortized) over a period of 15 plan years,

17 ‘‘(D) the amount necessary to amortize in

18 equal annual installments (until fully amor19 tized) over a period of 5 plan years any amount

20 credited to the funding standard account under

21 section 412(b)(3)(D) (as in effect on the day

22 before the date of the enactment of the Pension

23 Security and Transparency Act of 2005), and

24 ‘‘(E) the amount necessary to amortize in

25 equal annual installments (until fully amor-
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1 tized) over a period of 20 years the contribu2 tions which would be required to be made under

3 the plan but for the provisions of section

4 412(c)(7)(A)(i)(I) (as in effect on the day be5 fore the date of the enactment of the Pension

6 Security and Transparency Act of 2005).

7 ‘‘(3) CREDITS TO ACCOUNT.—For a plan year,

8 the funding standard account shall be credited with

9 the sum of—

10 ‘‘(A) the amount considered contributed by

11 the employer to or under the plan for the plan

12 year,

13 ‘‘(B) the amount necessary to amortize in

14 equal annual installments (until fully amor15 tized)—

16 ‘‘(i) separately, with respect to each

17 plan year, the net decrease (if any) in un18 funded past service liability under the plan

19 arising from plan amendments adopted in

20 such year, over a period of 15 plan years,

21 ‘‘(ii) separately, with respect to each

22 plan year, the net experience gain (if any)

23 under the plan, over a period of 15 plan

24 years, and
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1 ‘‘(iii) separately, with respect to each

2 plan year, the net gain (if any) resulting

3 from changes in actuarial assumptions

4 used under the plan, over a period of 15

5 plan years,

6 ‘‘(C) the amount of the waived funding de7 ficiency (within the meaning of section

8 412(d)(3)) for the plan year, and

9 ‘‘(D) in the case of a plan year for which

10 the accumulated funding deficiency is deter11 mined under the funding standard account if

12 such plan year follows a plan year for which

13 such deficiency was determined under the alter14 native minimum funding standard under section

15 412(g) (as in effect on the day before the date

16 of the enactment of the Pension Security and

17 Transparency Act of 2005), the excess (if any)

18 of any debit balance in the funding standard

19 account (determined without regard to this sub20 paragraph) over any debit balance in the alter21 native minimum funding standard account.

22 ‘‘(4) SPECIAL RULE FOR AMOUNTS FIRST AM23 ORTIZED TO PLAN YEARS BEFORE 2007.—In the case

24 of any amount amortized under section 412(b) (as

25 in effect on the day before the date of the enactment
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1 of the Pension Security and Transparency Act of

2 2005) over any period beginning with a plan year

3 beginning before 2007, in lieu of the amortization

4 described in paragraphs (2)(B) and (3)(B), such

5 amount shall continue to be amortized under such

6 section as so in effect.

7 ‘‘(5) COMBINING AND OFFSETTING AMOUNTS

8 TO BE AMORTIZED.—Under regulations prescribed

9 by the Secretary, amounts required to be amortized

10 under paragraph (2) or paragraph (3), as the case

11 may be—

12 ‘‘(A) may be combined into one amount

13 under such paragraph to be amortized over a

14 period determined on the basis of the remaining

15 amortization period for all items entering into

16 such combined amount, and

17 ‘‘(B) may be offset against amounts re18 quired to be amortized under the other such

19 paragraph, with the resulting amount to be am20 ortized over a period determined on the basis of

21 the remaining amortization periods for all items

22 entering into whichever of the two amounts

23 being offset is the greater.

24 ‘‘(6) INTEREST.—The funding standard ac25 count (and items therein) shall be charged or cred-
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1 ited (as determined under regulations prescribed by

2 the Secretary of the Treasury) with interest at the

3 appropriate rate consistent with the rate or rates of

4 interest used under the plan to determine costs.

5 ‘‘(7) SPECIAL RULES RELATING TO CHARGES

6 AND CREDITS TO FUNDING STANDARD ACCOUNT.—

7 For purposes of this part—

8 ‘‘(A) WITHDRAWAL LIABILITY.—Any

9 amount received by a multiemployer plan in

10 payment of all or part of an employer’s with11 drawal liability under part 1 of subtitle E of

12 title IV of the Employee Retirement Income Se13 curity Act of 1974 shall be considered an

14 amount contributed by the employer to or

15 under the plan. The Secretary may prescribe by

16 regulation additional charges and credits to a

17 multiemployer plan’s funding standard account

18 to the extent necessary to prevent withdrawal li19 ability payments from being unduly reflected as

20 advance funding for plan liabilities.

21 ‘‘(B) ADJUSTMENTS WHEN AMULTIEM22 PLOYER PLAN LEAVES REORGANIZATION.—If a

23 multiemployer plan is not in reorganization in

24 the plan year but was in reorganization in the

25 immediately preceding plan year, any balance in
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1 the funding standard account at the close of

2 such immediately preceding plan year—

3 ‘‘(i) shall be eliminated by an offset4 ting credit or charge (as the case may be),

5 but

6 ‘‘(ii) shall be taken into account in

7 subsequent plan years by being amortized

8 in equal annual installments (until fully

9 amortized) over 30 plan years.

10 The preceding sentence shall not apply to the

11 extent of any accumulated funding deficiency

12 under section 4243(a) of such Act as of the end

13 of the last plan year that the plan was in reor14 ganization.

15 ‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL

16 PROGRAM OR WITHDRAWAL LIABILITY PAYMENT

17 FUND.—Any amount paid by a plan during a

18 plan year to the Pension Benefit Guaranty Cor19 poration pursuant to section 4222 of such Act

20 or to a fund exempt under section 501(c)(22)

21 pursuant to section 4223 of such Act shall re22 duce the amount of contributions considered re23 ceived by the plan for the plan year.

24 ‘‘(D) INTERIM WITHDRAWAL LIABILITY

25 PAYMENTS.—Any amount paid by an employer
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1 pending a final determination of the employer’s

2 withdrawal liability under part 1 of subtitle E

3 of title IV of such Act and subsequently re4 funded to the employer by the plan shall be

5 charged to the funding standard account in ac6 cordance with regulations prescribed by the

7 Secretary.

8 ‘‘(E) ELECTION FOR DEFERRAL OF

9 CHARGE FOR PORTION OF NET EXPERIENCE

10 LOSS.—If an election is in effect under section

11 412(b)(7)(F) (as in effect on the day before the

12 date of the enactment of the Pension Security

13 and Transparency Act of 2005) for any plan

14 year, the funding standard account shall be

15 charged in the plan year to which the portion

16 of the net experience loss deferred by such elec17 tion was deferred with the amount so deferred

18 (and paragraph (2)(B)(ii) shall not apply to the

19 amount so charged).

20 ‘‘(F) FINANCIAL ASSISTANCE.—Any

21 amount of any financial assistance from the

22 Pension Benefit Guaranty Corporation to any

23 plan, and any repayment of such amount, shall

24 be taken into account under this section and
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1 section 412 in such manner as is determined by

2 the Secretary.

3 ‘‘(G) SHORT-TERM BENEFITS.—To the ex4 tent that any plan amendment increases the un5 funded past service liability under the plan by

6 reason of an increase in benefits which are pay7 able under the terms of the plan for a period

8 that does not exceed 14 years from the effective

9 date of the amendment, paragraph (2)(B)(i)

10 shall be applied separately with respect to such

11 increase in unfunded past service liability by

12 substituting the number of years of the period

13 during which such benefits are payable for ‘15’.

14 ‘‘(c) ADDITIONAL RULES.—

15 ‘‘(1) DETERMINATIONS TO BE MADE UNDER

16 FUNDING METHOD.—For purposes of this part, nor17 mal costs, accrued liability, past service liabilities,

18 and experience gains and losses shall be determined

19 under the funding method used to determine costs

20 under the plan.

21 ‘‘(2) VALUATION OF ASSETS.—

22 ‘‘(A) IN GENERAL.—For purposes of this

23 part, the value of the plan’s assets shall be de24 termined on the basis of any reasonable actu25 arial method of valuation which takes into ac-
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1 count fair market value and which is permitted

2 under regulations prescribed by the Secretary.

3 ‘‘(B) ELECTION WITH RESPECT TO

4 BONDS.—The value of a bond or other evidence

5 of indebtedness which is not in default as to

6 principal or interest may, at the election of the

7 plan administrator, be determined on an amor8 tized basis running from initial cost at purchase

9 to par value at maturity or earliest call date.

10 Any election under this subparagraph shall be

11 made at such time and in such manner as the

12 Secretary shall by regulations provide, shall

13 apply to all such evidences of indebtedness, and

14 may be revoked only with the consent of the

15 Secretary.

16 ‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA17 SONABLE.—For purposes of this section, all costs, li18 abilities, rates of interest, and other factors under

19 the plan shall be determined on the basis of actu20 arial assumptions and methods—

21 ‘‘(A) each of which is reasonable (taking

22 into account the experience of the plan and rea23 sonable expectations), and
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1 ‘‘(B) which, in combination, offer the actu2 ary’s best estimate of anticipated experience

3 under the plan.

4 ‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX5 PERIENCE GAIN OR LOSS.—For purposes of this sec6 tion, if—

7 ‘‘(A) a change in benefits under the Social

8 Security Act or in other retirement benefits cre9 ated under Federal or State law, or

10 ‘‘(B) a change in the definition of the term

11 ‘wages’ under section 3121, or a change in the

12 amount of such wages taken into account under

13 regulations prescribed for purposes of section

14 401(a)(5),

15 results in an increase or decrease in accrued liability

16 under a plan, such increase or decrease shall be

17 treated as an experience loss or gain.

18 ‘‘(5) FULL FUNDING.—If, as of the close of a

19 plan year, a plan would (without regard to this para20 graph) have an accumulated funding deficiency in

21 excess of the full funding limitation—

22 ‘‘(A) the funding standard account shall be

23 credited with the amount of such excess, and

24 ‘‘(B) all amounts described in subpara25 graphs (B), (C), and (D) of subsection (b) (2)
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1 and subparagraph (B) of subsection (b)(3)

2 which are required to be amortized shall be con3 sidered fully amortized for purposes of such

4 subparagraphs.

5 ‘‘(6) FULL-FUNDING LIMITATION.—

6 ‘‘(A) IN GENERAL.—For purposes of para7 graph (5), the term ‘full-funding limitation’

8 means the excess (if any) of—

9 ‘‘(i) the accrued liability (including

10 normal cost) under the plan (determined

11 under the entry age normal funding meth12 od if such accrued liability cannot be di13 rectly calculated under the funding method

14 used for the plan), over

15 ‘‘(ii) the lesser of—

16 ‘‘(I) the fair market value of the

17 plan’s assets, or

18 ‘‘(II) the value of such assets de19 termined under paragraph (2).

20 ‘‘(B) MINIMUM AMOUNT.—

21 ‘‘(i) IN GENERAL.—In no event shall

22 the full-funding limitation determined

23 under subparagraph (A) be less than the

24 excess (if any) of—
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1 ‘‘(I) 90 percent of the current li2 ability of the plan (including the ex3 pected increase in current liability due

4 to benefits accruing during the plan

5 year), over

6 ‘‘(II) the value of the plan’s as7 sets determined under paragraph (2).

8 ‘‘(ii) ASSETS.—For purposes of clause

9 (i), assets shall not be reduced by any

10 credit balance in the funding standard ac11 count.

12 ‘‘(C) FULL FUNDING LIMITATION.—For

13 purposes of this paragraph, unless otherwise

14 provided by the plan, the accrued liability under

15 a multiemployer plan shall not include benefits

16 which are not nonforfeitable under the plan

17 after the termination of the plan (taking into

18 consideration section 411(d)(3)).

19 ‘‘(D) CURRENT LIABILITY.—For purposes

20 of this paragraph—

21 ‘‘(i) IN GENERAL.—The term ‘current

22 liability’ means all liabilities to employees

23 and their beneficiaries under the plan.

24 ‘‘(ii) TREATMENT OF UNPREDICTABLE

25 CONTINGENT EVENT BENEFITS.—For pur-
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1 poses of clause (i), any benefit contingent

2 on an event other than—

3 ‘‘(I) age, service, compensation,

4 death, or disability, or

5 ‘‘(II) an event which is reason6 ably and reliably predictable (as deter7 mined by the Secretary),

8 shall not be taken into account until the

9 event on which the benefit is contingent oc10 curs.

11 ‘‘(iii) INTEREST RATE USED.—The

12 rate of interest used to determine current

13 liability under this paragraph shall be the

14 rate of interest determined under subpara15 graph (E).

16 ‘‘(iv) MORTALITY TABLES.—

17 ‘‘(I) COMMISSIONERS’ STANDARD

18 TABLE.—In the case of plan years be19 ginning before the first plan year to

20 which the first tables prescribed under

21 subclause (II) apply, the mortality

22 table used in determining current li23 ability under this paragraph shall be

24 the table prescribed by the Secretary

25 which is based on the prevailing com-
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1 missioners’ standard table (described

2 in section 807(d)(5)(A)) used to de3 termine reserves for group annuity

4 contracts issued on January 1, 1993.

5 ‘‘(II) SECRETARIAL AUTHOR6 ITY.—The Secretary may by regula7 tion prescribe for plan years beginning

8 after December 31, 1999, mortality

9 tables to be used in determining cur10 rent liability under this subsection.

11 Such tables shall be based upon the

12 actual experience of pension plans and

13 projected trends in such experience.

14 In prescribing such tables, the Sec15 retary shall take into account results

16 of available independent studies of

17 mortality of individuals covered by

18 pension plans.

19 ‘‘(v) SEPARATE MORTALITY TABLES

20 FOR THE DISABLED.—Notwithstanding

21 clause (iv)—

22 ‘‘(I) IN GENERAL.—The Sec23 retary shall establish mortality tables

24 which may be used (in lieu of the ta25 bles under clause (iv)) to determine
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1 current liability under this subsection

2 for individuals who are entitled to

3 benefits under the plan on account of

4 disability. The Secretary shall estab5 lish separate tables for individuals

6 whose disabilities occur in plan years

7 beginning before January 1, 1995,

8 and for individuals whose disabilities

9 occur in plan years beginning on or

10 after such date.

11 ‘‘(II) SPECIAL RULE FOR DIS12 ABILITIES OCCURRING AFTER 1994.—

13 In the case of disabilities occurring in

14 plan years beginning after December

15 31, 1994, the tables under subclause

16 (I) shall apply only with respect to in17 dividuals described in such subclause

18 who are disabled within the meaning

19 of title II of the Social Security Act

20 and the regulations thereunder.

21 ‘‘(vi) PERIODIC REVIEW.—The Sec22 retary shall periodically (at least every 5

23 years) review any tables in effect under

24 this subparagraph and shall, to the extent

25 such Secretary determines necessary, by
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1 regulation update the tables to reflect the

2 actual experience of pension plans and pro3 jected trends in such experience.

4 ‘‘(E) REQUIRED CHANGE OF INTEREST

5 RATE.—For purposes of determining a plan’s

6 current liability for purposes of this

7 paragraph—

8 ‘‘(i) IN GENERAL.—If any rate of in9 terest used under the plan under sub10 section (b)(6) to determine cost is not

11 within the permissible range, the plan shall

12 establish a new rate of interest within the

13 permissible range.

14 ‘‘(ii) PERMISSIBLE RANGE.—For pur15 poses of this subparagraph—

16 ‘‘(I) IN GENERAL.—Except as

17 provided in subclause (II), the term

18 ‘permissible range’ means a rate of in19 terest which is not more than 5 per20 cent above, and not more than 10 per21 cent below, the weighted average of

22 the rates of interest on 30-year Treas23 ury securities during the 4-year period

24 ending on the last day before the be25 ginning of the plan year.
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1 ‘‘(II) SECRETARIAL AUTHOR2 ITY.—If the Secretary finds that the

3 lowest rate of interest permissible

4 under subclause (I) is unreasonably

5 high, the Secretary may prescribe a

6 lower rate of interest, except that

7 such rate may not be less than 80

8 percent of the average rate deter9 mined under such subclause.

10 ‘‘(iii) ASSUMPTIONS.—Notwith11 standing paragraph (3)(A), the interest

12 rate used under the plan shall be—

13 ‘‘(I) determined without taking

14 into account the experience of the

15 plan and reasonable expectations, but

16 ‘‘(II) consistent with the assump17 tions which reflect the purchase rates

18 which would be used by insurance

19 companies to satisfy the liabilities

20 under the plan.

21 ‘‘(7) ANNUAL VALUATION.—

22 ‘‘(A) IN GENERAL.—For purposes of this

23 section, a determination of experience gains and

24 losses and a valuation of the plan’s liability

25 shall be made not less frequently than once
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1 every year, except that such determination shall

2 be made more frequently to the extent required

3 in particular cases under regulations prescribed

4 by the Secretary.

5 ‘‘(B) VALUATION DATE.—

6 ‘‘(i) CURRENT YEAR.—Except as pro7 vided in clause (ii), the valuation referred

8 to in subparagraph (A) shall be made as of

9 a date within the plan year to which the

10 valuation refers or within one month prior

11 to the beginning of such year.

12 ‘‘(ii) USE OF PRIOR YEAR VALU13 ATION.—The valuation referred to in sub14 paragraph (A) may be made as of a date

15 within the plan year prior to the year to

16 which the valuation refers if, as of such

17 date, the value of the assets of the plan are

18 not less than 100 percent of the plan’s cur19 rent liability (as defined in paragraph

20 (6)(D) without regard to clause (iv) there21 of).

22 ‘‘(iii) ADJUSTMENTS.—Information

23 under clause (ii) shall, in accordance with

24 regulations, be actuarially adjusted to re25 flect significant differences in participants.
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1 ‘‘(iv) LIMITATION.—A change in fund2 ing method to use a prior year valuation,

3 as provided in clause (ii), may not be made

4 unless as of the valuation date within the

5 prior plan year, the value of the assets of

6 the plan are not less than 125 percent of

7 the plan’s current liability (as defined in

8 paragraph (6)(D) without regard to clause

9 (iv) thereof).

10 ‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS

11 DEEMED MADE.—For purposes of this section, any

12 contributions for a plan year made by an employer

13 after the last day of such plan year, but not later

14 than two and one-half months after such day, shall

15 be deemed to have been made on such last day. For

16 purposes of this subparagraph, such two and one17 half month period may be extended for not more

18 than six months under regulations prescribed by the

19 Secretary.

20 ‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR

21 MULTIEMPLOYER PLANS.—

22 ‘‘(1) AUTOMATIC EXTENSION UPON APPLICA23 TION BY CERTAIN PLANS.—

24 ‘‘(A) IN GENERAL.—If the plan sponsor of

25 a multiemployer plan—
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1 ‘‘(i) submits to the Secretary an appli2 cation for an extension of the period of

3 years required to amortize any unfunded

4 liability described in any clause of sub5 section (b)(2)(B) or described in subsection

6 (b)(4), and

7 ‘‘(ii) includes with the application a

8 certification by the plan’s actuary de9 scribed in subparagraph (B),

10 the Secretary shall extend the amortization pe11 riod for the period of time (not in excess of 5

12 years) specified in the application. Such exten13 sion shall be in addition to any extension under

14 paragraph (2).

15 ‘‘(B) CRITERIA.—A certification with re16 spect to a multiemployer plan is described in

17 this subparagraph if the plan’s actuary certifies

18 that, based on reasonable assumptions—

19 ‘‘(i) absent the extension under sub20 paragraph (A), the plan would have an ac21 cumulated funding deficiency in the cur22 rent plan year or any of the 9 succeeding

23 plan years,

24 ‘‘(ii) the plan sponsor has adopted a

25 plan to improve the plan’s funding status,
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1 ‘‘(iii) the plan is projected to have suf2 ficient assets to timely pay expected bene3 fits and anticipated expenditures over the

4 amortization period as extended, and

5 ‘‘(iv) the notice required under para6 graph (3)(A) has been provided.

7 ‘‘(2) ADDITIONAL EXTENSION.—

8 ‘‘(A) IN GENERAL.—If the plan sponsor of

9 a multiemployer plan submits to the Secretary

10 an application for an extension of the period of

11 years required to amortize any unfunded liabil12 ity described in any clause of subsection

13 (b)(2)(B) or described in subsection (b)(4), the

14 Secretary may extend the amortization period

15 for a period of time (not in excess of 5 years)

16 if the Secretary of the Treasury makes the de17 termination described in subparagraph (B).

18 Such extension shall be in addition to any ex19 tension under paragraph (1).

20 ‘‘(B) DETERMINATION.—The Secretary

21 may grant an extension under subparagraph

22 (A) if the Secretary determines that—

23 ‘‘(i) such extension would carry out

24 the purposes of this Act and would provide
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1 adequate protection for participants under

2 the plan and their beneficiaries, and

3 ‘‘(ii) the failure to permit such exten4 sion would—

5 ‘‘(I) result in a substantial risk

6 to the voluntary continuation of the

7 plan, or a substantial curtailment of

8 pension benefit levels or employee

9 compensation, and

10 ‘‘(II) be adverse to the interests

11 of plan participants in the aggregate.

12 ‘‘(C) ACTION BY SECRETARY.—The Sec13 retary shall act upon any application for an ex14 tension under this paragraph within 180 days

15 of the submission of such application. If the

16 Secretary rejects the application for an exten17 sion under this paragraph, the Secretary shall

18 provide notice to the plan detailing the specific

19 reasons for the rejection, including references to

20 the criteria set forth above.

21 ‘‘(3) ADVANCE NOTICE.—

22 ‘‘(A) IN GENERAL.—The Secretary shall,

23 before granting an extension under this sub24 section, require each applicant to provide evi25 dence satisfactory to such Secretary that the
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1 applicant has provided notice of the filing of the

2 application for such extension to each affected

3 party (as defined in section 4001(a)(21) of the

4 Employee Retirement Income Security Act of

5 1974) with respect to the affected plan. Such

6 notice shall include a description of the extent

7 to which the plan is funded for benefits which

8 are guaranteed under title IV of such Act and

9 for benefit liabilities.

10 ‘‘(B) CONSIDERATION OF RELEVANT IN11 FORMATION.—The Secretary shall consider any

12 relevant information provided by a person to

13 whom notice was given under paragraph (1).’’.

14 (b) EFFECTIVE DATE.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall apply to plan years beginning after

17 2006.

18 (2) SPECIAL RULE FOR CERTAIN AMORTIZATION

19 EXTENSIONS.—If the Secretary of the Treasury

20 grants an extension under section 304 of the Em21 ployee Retirement Income Security Act of 1974 and

22 section 412(e) of the Internal Revenue Code of 1986

23 with respect to any application filed with the Sec24 retary of the Treasury on or before June 30, 2005,

25 the extension (and any modification thereof) shall be
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1 applied and administered under the rules of such

2 sections as in effect before the enactment of this

3 Act, including the use of the rate of interest deter4 mined under section 6621(b) of such Code.

5 SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEM6 PLOYER PLANS IN ENDANGERED OR CRIT7 ICAL STATUS.

8 (a) IN GENERAL.—Subpart A of part III of sub9 chapter D of chapter 1 of the Internal Revenue Code of

10 1986 (as amended by this Act) is amended by inserting

11 after section 431 the following new section:

12 ‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEM13 PLOYER PLANS IN ENDANGERED STATUS OR

14 CRITICAL STATUS.

15 ‘‘(a) GENERAL RULE.—For purposes of this part, in

16 the case of a multiemployer plan—

17 ‘‘(1) if the plan is in endangered status—

18 ‘‘(A) the plan sponsor shall adopt and im19 plement a funding improvement plan in accord20 ance with the requirements of subsection (c),

21 and

22 ‘‘(B) the requirements of subsection (d)

23 shall apply during the funding plan adoption

24 period and the funding improvement period,

25 and
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1 ‘‘(2) if the plan is in critical status—

2 ‘‘(A) the plan sponsor shall adopt and im3 plement a rehabilitation plan in accordance with

4 the requirements of subsection (e), and

5 ‘‘(B) the requirements of subsection (f)

6 shall apply during the rehabilitation plan adop7 tion period and the rehabilitation period.

8 ‘‘(b) DETERMINATION OF ENDANGERED AND CRIT9 ICAL STATUS.—For purposes of this section—

10 ‘‘(1) ENDANGERED STATUS.—A multiemployer

11 plan is in endangered status for a plan year if, as

12 determined by the plan actuary under paragraph

13 (3), the plan is not in critical status for the plan

14 year and either—

15 ‘‘(A) the plan’s funded percentage for such

16 plan year is less than 80 percent, or

17 ‘‘(B) the plan has an accumulated funding

18 deficiency for such plan year, or is projected to

19 have such an accumulated funding deficiency

20 for any of the 6 succeeding plan years, taking

21 into account any extension of amortization peri22 ods under section 431(d).

23 For purposes of this section, a plan described in

24 subparagraph (B) shall be treated as in seriously en25 dangered status.
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1 ‘‘(2) CRITICAL STATUS.—A multiemployer plan

2 is in critical status for a plan year if, as determined

3 by the plan actuary under paragraph (3), the plan

4 is described in 1 or more of the following subpara5 graphs as of the beginning of the plan year:

6 ‘‘(A) A plan is described in this subpara7 graph if—

8 ‘‘(i) the funded percentage of the plan

9 is less than 65 percent, and

10 ‘‘(ii) the sum of—

11 ‘‘(I) the market value of plan as12 sets, plus

13 ‘‘(II) the present value of the

14 reasonably anticipated employer con15 tributions for the current plan year

16 and each of the 5 succeeding plan

17 years, assuming that the terms of all

18 collective bargaining agreements pur19 suant to which the plan is maintained

20 for the current plan year continue in

21 effect for succeeding plan years,

22 is less than the present value of all benefits

23 projected to be payable under the plan dur24 ing the current plan year and each of the
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1 5 succeeding plan years (plus administra2 tive expenses for such plan years).

3 ‘‘(B) A plan is described in this subpara4 graph if—

5 ‘‘(i) the plan has an accumulated

6 funding deficiency for the current plan

7 year, not taking into account any extension

8 of amortization periods under section

9 431(d), or

10 ‘‘(ii) the plan is projected to have an

11 accumulated funding deficiency for any of

12 the 3 succeeding plan years (4 succeeding

13 plan years if the funded percentage of the

14 plan is 65 percent or less), not taking into

15 account any extension of amortization peri16 ods under section 431(d).

17 ‘‘(C) A plan is described in this subpara18 graph if—

19 ‘‘(i)(I) the plan’s normal cost for the

20 current plan year, plus interest (deter21 mined at the rate used for determining

22 costs under the plan) for the current plan

23 year on the amount of unfunded benefit li24 abilities under the plan as of the last date

25 of the preceding plan year, exceeds
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1 ‘‘(II) the present value of the reason2 ably anticipated employer contributions for

3 the current plan year,

4 ‘‘(ii) the present value of nonforfeit5 able benefits of inactive participants is

6 greater than the present value of non7 forfeitable benefits of active participants,

8 and

9 ‘‘(iii) the plan has an accumulated

10 funding deficiency for the current plan

11 year, or is projected to have such a defi12 ciency for any of the 4 succeeding plan

13 years, not taking into account any exten14 sion of amortization periods under section

15 431(d).

16 ‘‘(D) A plan is described in this subpara17 graph if the sum of—

18 ‘‘(i) the market value of plan assets,

19 plus

20 ‘‘(ii) the present value of the reason21 ably anticipated employer contributions for

22 the current plan year and each of the 4

23 succeeding plan years, assuming that the

24 terms of all collective bargaining agree25 ments pursuant to which the plan is main-
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1 tained for the current plan year continue

2 in effect for succeeding plan years,

3 is less than the present value of all benefits pro4 jected to be payable under the plan during the

5 current plan year and each of the 4 succeeding

6 plan years (plus administrative expenses for

7 such plan years).

8 ‘‘(3) ANNUAL CERTIFICATION BY PLAN ACTU9 ARY.—

10 ‘‘(A) IN GENERAL.—During the 90-day pe11 riod beginning on the first day of each plan

12 year of a multiemployer plan, the plan actuary

13 shall certify to the Secretary—

14 ‘‘(i) whether or not the plan is in en15 dangered status for such plan year and

16 whether or not the plan is in critical status

17 for such plan year, and

18 ‘‘(ii) in the case of a plan which is in

19 a funding improvement or rehabilitation

20 period, whether or not the plan is making

21 the scheduled progress in meeting the re22 quirements of its funding improvement or

23 rehabilitation plan.

24 ‘‘(B) ACTUARIAL PROJECTIONS OF ASSETS

25 AND LIABILITIES.—
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1 ‘‘(i) IN GENERAL.—In making the de2 terminations and projections under this

3 subsection, the plan actuary shall make

4 projections required for the current and

5 succeeding plan years, using reasonable ac6 tuarial estimates, assumptions, and meth7 ods, of the current value of the assets of

8 the plan and the present value of all liabil9 ities to participants and beneficiaries under

10 the plan for the current plan year as of the

11 beginning of such year. The projected

12 present value of liabilities as of the begin13 ning of such year shall be determined

14 based on the actuarial statement required

15 under section 103(d) of the Employee Re16 tirement Income Security Act of 1974 with

17 respect to the most recently filed annual

18 report or the actuarial valuation for the

19 preceding plan year.

20 ‘‘(ii) DETERMINATIONS OF FUTURE

21 CONTRIBUTIONS.—Any actuarial projection

22 of plan assets shall assume—

23 ‘‘(I) reasonably anticipated em24 ployer contributions for the current

25 and succeeding plan years, assuming
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1 that the terms of the one or more col2 lective bargaining agreements pursu3 ant to which the plan is maintained

4 for the current plan year continue in

5 effect for succeeding plan years, or

6 ‘‘(II) that employer contributions

7 for the most recent plan year will con8 tinue indefinitely, but only if the plan

9 actuary determines there have been no

10 significant demographic changes that

11 would make such assumption unrea12 sonable.

13 ‘‘(C) PENALTY FOR FAILURE TO SECURE

14 TIMELY ACTUARIAL CERTIFICATION.—Any fail15 ure of the plan’s actuary to certify the plan’s

16 status under this subsection by the date speci17 fied in subparagraph (A) shall be treated for

18 purposes of section 502(c)(2) of such Act as a

19 failure or refusal by the plan administrator to

20 file the annual report required to be filed with

21 the Secretary under section 101(b)(4) of such

22 Act.

23 ‘‘(D) NOTICE.—In any case in which a

24 multiemployer plan is certified to be in endan25 gered or critical status under subparagraph (A),
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1 the plan sponsor shall, not later than 30 days

2 after the date of the certification, provide notifi3 cation of the endangered or critical status to

4 the participants and beneficiaries, the bar5 gaining parties, the Pension Benefit Guaranty

6 Corporation, the Secretary, and the Secretary

7 of Labor.

8 ‘‘(c) FUNDING IMPROVEMENT PLAN MUST BE

9 ADOPTED FOR MULTIEMPLOYER PLANS IN ENDANGERED

10 STATUS.—

11 ‘‘(1) IN GENERAL.—In any case in which a

12 multiemployer plan is in endangered status for a

13 plan year, the plan sponsor, in accordance with this

14 subsection—

15 ‘‘(A) shall adopt a funding improvement

16 plan not later than 240 days following the re17 quired date for the actuarial certification of en18 dangered status under subsection (b)(3)(A),

19 and

20 ‘‘(B) within 30 days after the adoption of

21 the funding improvement plan—

22 ‘‘(i) in the case of a plan in seriously

23 endangered status, shall provide to the

24 bargaining parties 1 or more schedules

25 showing revised benefit structures, revised
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1 contribution structures, or both, which, if

2 adopted, may reasonably be expected to en3 able the multiemployer plan to meet the

4 applicable requirements under paragraph

5 (3) in accordance with the funding im6 provement plan, including a description of

7 the reductions in future benefit accruals

8 and increases in contributions that the

9 plan sponsor determines are reasonably

10 necessary to meet the applicable require11 ments if the plan sponsor assumes that

12 there are no increases in contributions

13 under the plan other than the increases

14 necessary to meet the applicable require15 ments after future benefit accruals have

16 been reduced to the maximum extent per17 mitted by law, and

18 ‘‘(ii) may, if the plan sponsor deems

19 appropriate, prepare and provide the bar20 gaining parties with additional information

21 relating to contribution rates or benefit re22 ductions, alternative schedules, or other in23 formation relevant to achieving the re24 quirements under paragraph (3) in accord25 ance with the funding improvement plan.
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1 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

2 BEGINS.—Paragraph (1) shall not apply to a plan

3 year if such year is in a funding plan adoption pe4 riod or funding improvement period by reason of the

5 plan being in endangered status for a preceding plan

6 year. For purposes of this section, such preceding

7 plan year shall be the initial determination year with

8 respect to the funding improvement plan to which it

9 relates.

10 ‘‘(3) FUNDING IMPROVEMENT PLAN.—For pur11 poses of this section—

12 ‘‘(A) IN GENERAL.—A funding improve13 ment plan is a plan which consists of the ac14 tions, including options or a range of options to

15 be proposed to the bargaining parties, which,

16 under reasonable actuarial assumptions, will re17 sult in the plan meeting the requirements of

18 this paragraph.

19 ‘‘(B) PLANS OTHER THAN SERIOUSLY EN20 DANGERED PLANS.—In the case of plan not in

21 seriously endangered status, the requirements

22 of this paragraph are met if the plan’s funded

23 percentage as of the close of the funding im24 provement period exceeds the lesser of 80 per25 cent or a percentage equal to the sum of—
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1 ‘‘(i) such percentage as of the begin2 ning of such period, plus

3 ‘‘(ii) 10 percent of the percentage de4 termined under clause (i).

5 ‘‘(C) SERIOUSLY ENDANGERED PLANS.—

6 In the case of a plan in seriously endangered

7 status, the requirements of this paragraph are

8 met if—

9 ‘‘(i) the plan’s funded percentage as

10 of the close of the funding improvement

11 period equals or exceeds the percentage

12 which is equal to the sum of—

13 ‘‘(I) such percentage as of the

14 beginning of such period, plus

15 ‘‘(II) 33 percent of the difference

16 between 100 percent and the percent17 age under subclause (I), and

18 ‘‘(ii) there is no accumulated funding

19 deficiency for any plan year during the

20 funding improvement period (taking into

21 account any extension of amortization peri22 ods under section 431(d)).

23 ‘‘(4) FUNDING IMPROVEMENT PERIOD.—For

24 purposes of this section—
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1 ‘‘(A) IN GENERAL.—The funding improve2 ment period for any funding improvement plan

3 adopted pursuant to this subsection is the 10-

4 year period beginning on the first day of the

5 first plan year of the multiemployer plan begin6 ning after the earlier of—

7 ‘‘(i) the second anniversary of the

8 date of the adoption of the funding im9 provement plan, or

10 ‘‘(ii) the expiration of the collective

11 bargaining agreements in effect on the due

12 date for the actuarial certification of en13 dangered status for the initial determina14 tion year under subsection (b)(3)(A) and

15 covering, as of such due date, at least 75

16 percent of the active participants in such

17 multiemployer plan.

18 ‘‘(B) COORDINATION WITH CHANGES IN

19 STATUS.—

20 ‘‘(i) PLANS NO LONGER IN ENDAN21 GERED STATUS.—If the plan’s actuary cer22 tifies under subsection (b)(3)(A) for a plan

23 year in any funding plan adoption period

24 or funding improvement period that the

25 plan is no longer in endangered status and
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1 is not in critical status, the funding plan

2 adoption period or funding improvement

3 period, whichever is applicable, shall end as

4 of the close of the preceding plan year.

5 ‘‘(ii) PLANS IN CRITICAL STATUS.—If

6 the plan’s actuary certifies under sub7 section (b)(3)(A) for a plan year in any

8 funding plan adoption period or funding

9 improvement period that the plan is in

10 critical status, the funding plan adoption

11 period or funding improvement period,

12 whichever is applicable, shall end as of the

13 close of the plan year preceding the first

14 plan year in the rehabilitation period with

15 respect to such status.

16 ‘‘(5) SPECIAL RULES FOR CERTAIN UNDER17 FUNDED PLANS.—

18 ‘‘(A) IN GENERAL.—Except as provided in

19 subparagraph (B), if the funded percentage of

20 a plan in seriously endangered status was 70

21 percent or less as of the beginning of the initial

22 determination year, the following rules shall

23 apply in determining whether the requirements

24 of paragraph (3)(C)(i) are met:
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1 ‘‘(i) The plan’s funded percentage as

2 of the close of the funding improvement

3 period must equal or exceed a percentage

4 which is equal to the sum of—

5 ‘‘(I) such percentage as of the

6 beginning of such period, plus

7 ‘‘(II) 20 percent of the difference

8 between 100 percent and the percent9 age under subclause (I).

10 ‘‘(ii) The funding improvement period

11 under paragraph (4)(A) shall be 15 years

12 rather than 10 years.

13 ‘‘(B) SPECIAL RULES FOR PLANS WITH

14 FUNDED PERCENTAGE OVER 70 PERCENT.—If

15 the funded percentage described in subpara16 graph (A) was more than 70 percent but less

17 than 80 percent as of the beginning of the ini18 tial determination year—

19 ‘‘(i) subparagraph (A) shall apply if

20 the plan’s actuary certifies, within 30 days

21 after the certification under subsection

22 (b)(3)(A) for the initial determination

23 year, that, based on the terms of the plan

24 and the collective bargaining agreements in

25 effect at the time of such certification, the
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1 plan is not projected to meet the require2 ments of paragraph (3)(C)(i) without re3 gard to this paragraph, and

4 ‘‘(ii) if there is a certification under

5 clause (i), the plan may, in formulating its

6 funding improvement plan, only take into

7 account the rules of subparagraph (A) for

8 plan years in the funding improvement pe9 riod beginning on or before the date on

10 which the last of the collective bargaining

11 agreements described in paragraph

12 (4)(A)(ii) expires.

13 Notwithstanding clause (ii), if for any plan year

14 ending after the date described in clause (ii) the

15 plan actuary certifies (at the time of the annual

16 certification under subsection (b)(3)(A) for such

17 plan year) that, based on the terms of the plan

18 and collective bargaining agreements in effect

19 at the time of that annual certification, the plan

20 is not projected to be able to meet the require21 ments of paragraph (3)(C)(i) without regard to

22 this paragraph, the plan may continue to as23 sume for such year that the funding improve24 ment period is 15 years rather than 10 years.
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1 ‘‘(6) UPDATES TO FUNDING IMPROVEMENT

2 PLAN AND SCHEDULES.—

3 ‘‘(A) FUNDING IMPROVEMENT PLAN.—The

4 plan sponsor shall annually update the funding

5 improvement plan and shall file the update with

6 the plan’s annual report under section 104 of

7 the Employee Retirement Income Security Act

8 of 1974.

9 ‘‘(B) SCHEDULES.—The plan sponsor may

10 periodically update any schedule of contribution

11 rates provided under this subsection to reflect

12 the experience of the plan, except that the

13 schedule or schedules described in paragraph

14 (1)(B)(i) shall be updated at least once every 3

15 years.

16 ‘‘(C) DURATION OF SCHEDULE.—A sched17 ule of contribution rates provided by the plan

18 sponsor and relied upon by bargaining parties

19 in negotiating a collective bargaining agreement

20 shall remain in effect for the duration of that

21 collective bargaining agreement.

22 ‘‘(7) PENALTY IF NO FUNDING IMPROVEMENT

23 PLAN ADOPTED.—A failure of the plan sponsor to

24 adopt a funding improvement plan by the date speci25 fied in paragraph (1)(A) shall be treated for pur-
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1 poses of section 502(c)(2) of such Act as a failure

2 or refusal by the plan administrator to file the an3 nual report required to be filed with the Secretary

4 of Labor under section 101(b)(4) of such Act.

5 ‘‘(8) FUNDING PLAN ADOPTION PERIOD.—For

6 purposes of this section, the term ‘funding plan

7 adoption period’ means the period beginning on the

8 date of the certification under subsection (b)(3)(A)

9 for the initial determination year and ending on the

10 day before the first day of the funding improvement

11 period.

12 ‘‘(d) RULES FOR OPERATION OF PLAN DURING

13 ADOPTION AND IMPROVEMENT PERIODS; FAILURE TO

14 MEET REQUIREMENTS.—

15 ‘‘(1) SPECIAL RULES FOR PLAN ADOPTION PE16 RIOD.—During the plan adoption period—

17 ‘‘(A) the plan sponsor may not accept a

18 collective bargaining agreement or participation

19 agreement with respect to the multiemployer

20 plan that provides for—

21 ‘‘(i) a reduction in the level of con22 tributions for any participants,

23 ‘‘(ii) a suspension of contributions

24 with respect to any period of service, or
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1 ‘‘(iii) any new direct or indirect exclu2 sion of younger or newly hired employees

3 from plan participation,

4 ‘‘(B) no amendment of the plan which in5 creases the liabilities of the plan by reason of

6 any increase in benefits, any change in the ac7 crual of benefits, or any change in the rate at

8 which benefits become nonforfeitable under the

9 plan may be adopted unless the amendment is

10 required as a condition of qualification under

11 part I of subchapter D of chapter 1 or to com12 ply with other applicable law, and

13 ‘‘(C) in the case of a plan in seriously en14 dangered status, the plan sponsor shall take all

15 reasonable actions which are consistent with the

16 terms of the plan and applicable law and which

17 are expected, based on reasonable assumptions,

18 to achieve—

19 ‘‘(i) an increase in the plan’s funded

20 percentage, and

21 ‘‘(ii) postponement of an accumulated

22 funding deficiency for at least 1 additional

23 plan year.

24 Actions under subparagraph (C) include applications

25 for extensions of amortization periods under section
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1 431(d), use of the shortfall funding method in mak2 ing funding standard account computations, amend3 ments to the plan’s benefit structure, reductions in

4 future benefit accruals, and other reasonable actions

5 consistent with the terms of the plan and applicable

6 law.

7 ‘‘(2) COMPLIANCE WITH FUNDING IMPROVE8 MENT PLAN.—

9 ‘‘(A) IN GENERAL.—A plan may not be

10 amended after the date of the adoption of a

11 funding improvement plan under subsection (c)

12 so as to be inconsistent with the funding im13 provement plan.

14 ‘‘(B) NO REDUCTION IN CONTRIBU15 TIONS.—A plan sponsor may not during any

16 funding improvement period accept a collective

17 bargaining agreement or participation agree18 ment with respect to the multiemployer plan

19 that provides for—

20 ‘‘(i) a reduction in the level of con21 tributions for any participants,

22 ‘‘(ii) a suspension of contributions

23 with respect to any period of service, or
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1 ‘‘(iii) any new direct or indirect exclu2 sion of younger or newly hired employees

3 from plan participation.

4 ‘‘(C) SPECIAL RULES FOR BENEFIT IN5 CREASES.—A plan may not be amended after

6 the date of the adoption of a funding improve7 ment plan under subsection (c) so as to in8 crease benefits, including future benefit accru9 als, unless—

10 ‘‘(i) in the case of a plan in seriously

11 endangered status, the plan actuary cer12 tifies that, after taking into account the

13 benefit increase, the plan is still reasonably

14 expected to meet the requirements under

15 subsection (c)(3) in accordance with the

16 schedule contemplated in the funding im17 provement plan, and

18 ‘‘(ii) in the case of a plan not in seri19 ously endangered status, the actuary cer20 tifies that such increase is paid for out of

21 contributions not required by the funding

22 improvement plan to meet the require23 ments under subsection (c)(3) in accord24 ance with the schedule contemplated in the

25 funding improvement plan.
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1 ‘‘(3) FAILURE TO MEET REQUIREMENTS.—

2 ‘‘(A) IN GENERAL.—Notwithstanding sec3 tion 4971(g), if a plan fails to meet the require4 ments of subsection (c)(3) by the end of the

5 funding improvement period, the plan shall be

6 treated as having an accumulated funding defi7 ciency for purposes of section 4971 for the last

8 plan year in such period (and each succeeding

9 plan year until such requirements are met) in

10 an amount equal to the greater of the amount

11 of the contributions necessary to meet such re12 quirements or the amount of such accumulated

13 funding deficiency without regard to this para14 graph.

15 ‘‘(B) WAIVER.—In the case of a failure de16 scribed in subparagraph (A) which is due to

17 reasonable cause and not to willful neglect, the

18 Secretary of the Treasury may waive part or all

19 of the tax imposed by section 4971 of such

20 Code to the extent that the payment of such tax

21 would be excessive or otherwise inequitable rel22 ative to the failure involved.

23 ‘‘(e) REHABILITATION PLAN MUST BE ADOPTED

24 FOR MULTIEMPLOYER PLANS IN CRITICAL STATUS.—
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1 ‘‘(1) IN GENERAL.—In any case in which a

2 multiemployer plan is in critical status for a plan

3 year, the plan sponsor, in accordance with this

4 subsection—

5 ‘‘(A) shall adopt a rehabilitation plan not

6 later than 240 days following the required date

7 for the actuarial certification of critical status

8 under subsection (b)(3)(A), and

9 ‘‘(B) within 30 days after the adoption of

10 the rehabilitation plan—

11 ‘‘(i) shall provide to the bargaining

12 parties 1 or more schedules showing re13 vised benefit structures, revised contribu14 tion structures, or both, which, if adopted,

15 may reasonably be expected to enable the

16 multiemployer plan to emerge from critical

17 status in accordance with the rehabilitation

18 plan, and

19 ‘‘(ii) may, if the plan sponsor deems

20 appropriate, prepare and provide the bar21 gaining parties with additional information

22 relating to contribution rates or benefit re23 ductions, alternative schedules, or other in24 formation relevant to emerging from crit-
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1 ical status in accordance with the rehabili2 tation plan.

3 The schedule or schedules described in subparagraph

4 (B)(i) shall reflect reductions in future benefit ac5 cruals and increases in contributions that the plan

6 sponsor determines are reasonably necessary to

7 emerge from critical status. One schedule shall be

8 designated as the default schedule and such schedule

9 shall assume that there are no increases in contribu10 tions under the plan other than the increases nec11 essary to emerge from critical status after future

12 benefit accruals and other benefits (other than bene13 fits the reduction or elimination of which are not

14 permitted under section 411(d)(6)) have been re15 duced to the maximum extent permitted by law.

16 ‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS

17 BEGINS.—Paragraph (1) shall not apply to a plan

18 year if such year is in a rehabilitation plan adoption

19 period or rehabilitation period by reason of the plan

20 being in critical status for a preceding plan year.

21 For purposes of this section, such preceding plan

22 year shall be the initial critical year with respect to

23 the rehabilitation plan to which it relates.

24 ‘‘(3) REHABILITATION PLAN.—For purposes of

25 this section—
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1 ‘‘(A) IN GENERAL.—A rehabilitation plan

2 is a plan which consists of—

3 ‘‘(i) actions which will enable, under

4 reasonable actuarial assumptions, the plan

5 to cease to be in critical status by the end

6 of the rehabilitation period and may in7 clude reductions in plan expenditures (in8 cluding plan mergers and consolidations),

9 reductions in future benefit accruals or in10 creases in contributions, if agreed to by the

11 bargaining parties, or any combination of

12 such actions, or

13 ‘‘(ii) if the plan sponsor determines

14 that, based on reasonable actuarial as15 sumptions and upon exhaustion of all rea16 sonable measures, the plan can not reason17 ably be expected to emerge from critical

18 status by the end of the rehabilitation pe19 riod, reasonable measures to emerge from

20 critical status at a later time or to forestall

21 possible insolvency (within the meaning of

22 section 4245 of the Employee Retirement

23 Income Security Act of 1974).

24 Such plan shall include the schedules required

25 to be provided under paragraph (1)(B)(i). If
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1 clause (ii) applies, such plan shall set forth the

2 alternatives considered, explain why the plan is

3 not reasonably expected to emerge from critical

4 status by the end of the rehabilitation period,

5 and specify when, if ever, the plan is expected

6 to emerge from critical status in accordance

7 with the rehabilitation plan.

8 ‘‘(B) UPDATES TO REHABILITATION PLAN

9 AND SCHEDULES.—

10 ‘‘(i) REHABILITATION PLAN.—The

11 plan sponsor shall annually update the re12 habilitation plan and shall file the update

13 with the plan’s annual report under section

14 104 of the Employee Retirement Income

15 Security Act of 1974.

16 ‘‘(ii) SCHEDULES.—The plan sponsor

17 may periodically update any schedule of

18 contribution rates provided under this sub19 section to reflect the experience of the

20 plan, except that the schedule or schedules

21 described in paragraph (1)(B)(i) shall be

22 updated at least once every 3 years.

23 ‘‘(iii) DURATION OF SCHEDULE.—A

24 schedule of contribution rates provided by

25 the plan sponsor and relied upon by bar-
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1 gaining parties in negotiating a collective

2 bargaining agreement shall remain in ef3 fect for the duration of that collective bar4 gaining agreement.

5 ‘‘(C) DEFAULT SCHEDULE.—If the collec6 tive bargaining agreement providing for con7 tributions under a multiemployer plan that was

8 in effect at the time the plan entered critical

9 status expires and, after receiving a schedule

10 from the plan sponsor under paragraph

11 (1)(B)(i), the bargaining parties have not

12 adopted a collective bargaining agreement with

13 terms consistent with such a schedule, the de14 fault schedule described in the last sentence of

15 paragraph (1) shall go into effect with respect

16 to those bargaining parties.

17 ‘‘(4) REHABILITATION PERIOD.—For purposes

18 of this section—

19 ‘‘(A) IN GENERAL.—The rehabilitation pe20 riod for a plan in critical status is the 10-year

21 period beginning on the first day of the first

22 plan year of the multiemployer plan following

23 the earlier of—
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1 ‘‘(i) the second anniversary of the

2 date of the adoption of the rehabilitation

3 plan, or

4 ‘‘(ii) the expiration of the collective

5 bargaining agreements in effect on the

6 date of the due date for the actuarial cer7 tification of critical status for the initial

8 critical year under subsection (a)(1) and

9 covering, as of such date at least 75 per10 cent of the active participants in such mul11 tiemployer plan.

12 If a plan emerges from critical status as pro13 vided under subparagraph (B) before the end of

14 such 10-year period, the rehabilitation period

15 shall end with the plan year preceding the plan

16 year for which the determination under sub17 paragraph (B) is made.

18 ‘‘(B) EMERGENCE.—A plan in critical sta19 tus shall remain in such status until a plan

20 year for which the plan actuary certifies, in ac21 cordance with subsection (b)(3)(A), that the

22 plan is not projected to have an accumulated

23 funding deficiency for the plan year or any of

24 the 9 succeeding plan years, without regard to
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1 use of the shortfall method or any extension of

2 amortization periods under section 431(d).

3 ‘‘(5) PENALTY IF NO REHABILITATION PLAN

4 ADOPTED.—A failure of a plan sponsor to adopt a

5 rehabilitation plan by the date specified in para6 graph (1)(A) shall be treated for purposes of section

7 502(c)(2) of the Employee Retirement Income Secu8 rity Act of 1974 as a failure or refusal by the plan

9 administrator to file the annual report required to

10 be filed with the Secretary of Labor under section

11 101(b)(4) of such Act.

12 ‘‘(6) REHABILITATION PLAN ADOPTION PE13 RIOD.—For purposes of this section, the term ‘reha14 bilitation plan adoption period’ means the period be15 ginning on the date of the certification under sub16 section (b)(3)(A) for the initial critical year and end17 ing on the day before the first day of the rehabilita18 tion period.

19 ‘‘(7) LIMITATION ON REDUCTION IN RATES OF

20 FUTURE ACCRUALS.—Any reduction in the rate of

21 future accruals under any schedule described in

22 paragraph (1)(B)(i) shall not reduce the rate of fu23 ture accruals below—

24 ‘‘(A) a monthly benefit (payable as a single

25 life annuity commencing at the participant’s
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1 normal retirement age) equal to 1 percent of

2 the contributions required to be made with re3 spect to a participant, or the equivalent stand4 ard accrual rate for a participant or group of

5 participants under the collective bargaining

6 agreements in effect as of the first day of the

7 initial critical year, or

8 ‘‘(B) if lower, the accrual rate under the

9 plan on such first day.

10 The equivalent standard accrual rate shall be deter11 mined by the plan sponsor based on the standard or

12 average contribution base units which the plan spon13 sor determines to be representative for active partici14 pants and such other factors as the plan sponsor de15 termines to be relevant. Nothing in this paragraph

16 shall be construed as limiting the ability of the plan

17 sponsor to prepare and provide the bargaining par18 ties with alternative schedules to the default sched19 ule that established lower or higher accrual and con20 tribution rates than the rates otherwise described in

21 this paragraph.

22 ‘‘(8) EMPLOYER IMPACT.—For the purposes of

23 this section, the plan sponsor shall consider the im24 pact of the rehabilitation plan and contribution

25 schedules authorized by this section on bargaining
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1 parties with fewer than 500 employees and shall im2 plement the plan in a manner that encourages their

3 continued participation in the plan and minimizes fi4 nancial harm to employers and their workers.

5 ‘‘(f) RULES FOR OPERATION OF PLAN DURING

6 ADOPTION AND REHABILITATION PERIOD.—

7 ‘‘(1) COMPLIANCE WITH REHABILITATION

8 PLAN.—

9 ‘‘(A) IN GENERAL.—A plan may not be

10 amended after the date of the adoption of a re11 habilitation plan under subsection (e) so as to

12 be inconsistent with the rehabilitation plan.

13 ‘‘(B) SPECIAL RULES FOR BENEFIT IN14 CREASES.—A plan may not be amended after

15 the date of the adoption of a rehabilitation plan

16 under subsection (e) so as to increase benefits,

17 including future benefit accruals, unless the

18 plan actuary certifies that such increase is paid

19 for out of additional contributions not con20 templated by the rehabilitation plan, and, after

21 taking into account the benefit increase, the

22 multiemployer plan still is reasonably expected

23 to emerge from critical status by the end of the

24 rehabilitation period on the schedule con25 templated in the rehabilitation plan.
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1 ‘‘(2) RESTRICTION ON LUMP SUMS AND SIMI2 LAR BENEFITS.—

3 ‘‘(A) IN GENERAL.—Effective on the date

4 the notice of certification of the plan’s critical

5 status for the initial critical year under sub6 section (b)(3)(D) is sent, and notwithstanding

7 section 411(d)(6), the plan shall not pay—

8 ‘‘(i) any payment, in excess of the

9 monthly amount paid under a single life

10 annuity (plus any social security supple11 ments described in the last sentence of sec12 tion 411(b)(1)(A)),

13 ‘‘(ii) any payment for the purchase of

14 an irrevocable commitment from an insurer

15 to pay benefits, and

16 ‘‘(iii) any other payment specified by

17 the Secretary by regulations.

18 ‘‘(B) EXCEPTION.—Subparagraph (A)

19 shall not apply to a benefit which under section

20 411(a)(11) may be immediately distributed

21 without the consent of the participant or to any

22 makeup payment in the case of a retroactive

23 annuity starting date or any similar payment of

24 benefits owed with respect to a prior period.
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1 ‘‘(3) ADJUSTMENTS DISREGARDED IN WITH2 DRAWAL LIABILITY DETERMINATION.—Any benefit

3 reductions under this subsection shall be disregarded

4 in determining a plan’s unfunded vested benefits for

5 purposes of determining an employer’s withdrawal li6 ability under section 4201 of the Employee Retire7 ment Income Security Act of 1974.

8 ‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE9 RIOD.—During the rehabilitation plan adoption

10 period—

11 ‘‘(A) the plan sponsor may not accept a

12 collective bargaining agreement or participation

13 agreement with respect to the multiemployer

14 plan that provides for—

15 ‘‘(i) a reduction in the level of con16 tributions for any participants,

17 ‘‘(ii) a suspension of contributions

18 with respect to any period of service, or

19 ‘‘(iii) any new direct or indirect exclu20 sion of younger or newly hired employees

21 from plan participation, and

22 ‘‘(B) no amendment of the plan which in23 creases the liabilities of the plan by reason of

24 any increase in benefits, any change in the ac25 crual of benefits, or any change in the rate at
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1 which benefits become nonforfeitable under the

2 plan may be adopted unless the amendment is

3 required as a condition of qualification under

4 part I of subchapter D of chapter 1 or to com5 ply with other applicable law.

6 ‘‘(5) FAILURE TO MEET REQUIREMENTS.—

7 ‘‘(A) IN GENERAL.—Notwithstanding sec8 tion 4971(g), if a plan—

9 ‘‘(i) fails to meet the requirements of

10 subsection (e) by the end of the rehabilita11 tion period, or

12 ‘‘(ii) has received a certification under

13 subsection (b)(3)(A)(ii) for 3 consecutive

14 plan years that the plan is not making the

15 scheduled progress in meeting its require16 ments under the rehabilitation plan,

17 the plan shall be treated as having an accumu18 lated funding deficiency for purposes of section

19 4971 for the last plan year in such period (and

20 each succeeding plan year until such require21 ments are met) in an amount equal to the

22 greater of the amount of the contributions nec23 essary to meet such requirements or the

24 amount of such accumulated funding deficiency

25 without regard to this paragraph.
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1 ‘‘(B) WAIVER.—In the case of a failure de2 scribed in subparagraph (A) which is due to

3 reasonable cause and not to willful neglect, the

4 Secretary may waive part or all of the tax im5 posed by section 4971 to the extent that the

6 payment of such tax would be excessive or oth7 erwise inequitable relative to the failure in8 volved.

9 ‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR

10 DECISIONS.—If, within 60 days of the due date for adop11 tion of a funding improvement plan under subsection (c)

12 or a rehabilitation plan under subsection (e), the plan

13 sponsor of a plan in endangered status or a plan in critical

14 status has not agreed on a funding improvement plan or

15 rehabilitation plan, then any member of the board or

16 group that constitutes the plan sponsor may require that

17 the plan sponsor enter into an expedited dispute resolution

18 procedure for the development and adoption of a funding

19 improvement plan or rehabilitation plan.

20 ‘‘(h) NONBARGAINED PARTICIPATION.—

21 ‘‘(1) BOTH BARGAINED AND NONBARGAINED

22 EMPLOYEE-PARTICIPANTS.—In the case of an em23 ployer that contributes to a multiemployer plan with

24 respect to both employees who are covered by one or

25 more collective bargaining agreements and to em-
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1 ployees who are not so covered, if the plan is in en2 dangered status or in critical status, benefits of and

3 contributions for the nonbargained employees, in4 cluding surcharges on those contributions, shall be

5 determined as if those nonbargained employees were

6 covered under the first to expire of the employer’s

7 collective bargaining agreements in effect when the

8 plan entered endangered or critical status.

9 ‘‘(2) NONBARGAINED EMPLOYEES ONLY.—In

10 the case of an employer that contributes to a multi11 employer plan only with respect to employees who

12 are not covered by a collective bargaining agreement,

13 this section shall be applied as if the employer were

14 the bargaining parties, and its participation agree15 ment with the plan was a collective bargaining

16 agreement with a term ending on the first day of the

17 plan year beginning after the employer is provided

18 the schedule or schedules described in subsections

19 (c) and (e).

20 ‘‘(3) EMPLOYEES COVERED BY ACOLLECTIVE

21 BARGAINING AGREEMENT.—The determination as to

22 whether an employee covered by a collective bar23 gaining agreement for purposes of this section shall

24 be made without regard to the special rule in Treas25 ury Regulation section 1.410(b)–6(d)(ii)(D).
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1 ‘‘(i) DEFINITIONS; ACTUARIAL METHOD.—For pur2 poses of this section—

3 ‘‘(1) BARGAINING PARTY.—The term ‘bar4 gaining party’ means—

5 ‘‘(A)(i) except as provided in clause (ii), an

6 employer who has an obligation to contribute

7 under the plan; or

8 ‘‘(ii) in the case of a plan described under

9 section 404(c), or a continuation of such a plan,

10 the association of employers that is the em11 ployee settlor of the plan; and

12 ‘‘(B) an employee organization which, for

13 purposes of collective bargaining, represents

14 plan participants employed by an employer who

15 has an obligation to contribute under the plan.

16 ‘‘(2) FUNDED PERCENTAGE.—The term ‘fund17 ed percentage’ means the percentage equal to a

18 fraction—

19 ‘‘(A) the numerator of which is the value

20 of the plan’s assets, as determined under sec21 tion 431(c)(2), and

22 ‘‘(B) the denominator of which is the ac23 crued liability of the plan, determined using ac24 tuarial assumptions described in section

25 431(c)(3).
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1 ‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—

2 The term ‘accumulated funding deficiency’ has the

3 meaning given such term in section 412(a).

4 ‘‘(4) ACTIVE PARTICIPANT.—The term ‘active

5 participant’ means, in connection with a multiem6 ployer plan, a participant who is in covered service

7 under the plan.

8 ‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac9 tive participant’ means, in connection with a multi10 employer plan, a participant, or the beneficiary or

11 alternate payee of a participant, who—

12 ‘‘(A) is not in covered service under the

13 plan, and

14 ‘‘(B) is in pay status under the plan or has

15 a nonforfeitable right to benefits under the

16 plan.

17 ‘‘(6) PAY STATUS.—A person is in pay status

18 under a multiemployer plan if—

19 ‘‘(A) at any time during the current plan

20 year, such person is a participant or beneficiary

21 under the plan and is paid an early, late, nor22 mal, or disability retirement benefit under the

23 plan (or a death benefit under the plan related

24 to a retirement benefit), or
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1 ‘‘(B) to the extent provided in regulations

2 of the Secretary, such person is entitled to such

3 a benefit under the plan.

4 ‘‘(7) OBLIGATION TO CONTRIBUTE.—The term

5 ‘obligation to contribute’ has the meaning given such

6 term under section 4212(a) of the Employee Retire7 ment Income Security Act of 1974.

8 ‘‘(8) ACTUARIAL METHOD.—Notwithstanding

9 any other provision of this section, the actuary’s de10 terminations with respect to a plan’s normal cost,

11 actuarial accrued liability, and improvements in a

12 plan’s funded percentage under this section shall be

13 based upon the unit credit funding method (whether

14 or not that method is used for the plan’s actuarial

15 valuation).

16 ‘‘(9) PLAN SPONSOR.—In the case of a plan de17 scribed under section 404(c), or a continuation of

18 such a plan, the term ‘plan sponsor’ means the bar19 gaining parties described under paragraph (1).’’

20 (b) EFFECTIVE DATES.—

21 (1) IN GENERAL.—The amendment made by

22 this section shall apply with respect to plan years be23 ginning after 2006.

24 (2) SPECIAL RULE FOR CERTAIN RESTORED

25 BENEFITS.—In the case of a multiemployer plan—
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1 (A) with respect to which benefits were re2 duced pursuant to a plan amendment adopted

3 on or after January 1, 2002, and before June

4 30, 2005, and

5 (B) which, pursuant to the plan document,

6 the trust agreement, or a formal written com7 munication from the plan sponsor to partici8 pants provided before June 30, 2005, provided

9 for the restoration of such benefits,

10 the amendments made by this section shall not apply

11 to such benefit restorations to the extent that any

12 restriction on the providing or accrual of such bene13 fits would otherwise apply by reason of such amend14 ments.

15 PART III—SUNSET OF FUNDING RULES

16 SEC. 216. SUNSET OF FUNDING RULES.

17 (a) REPORT.—Not later than December 31, 2011,

18 the Secretary of Labor, the Secretary of the Treasury, and

19 the Executive Director of the Pension Benefit Guaranty

20 Corporation shall conduct a study of the effect of the

21 amendments made by this subtitle on the operation and

22 funding status of multiemployer plans and shall report the

23 results of such study, including any recommendations for

24 legislation, to the Congress.
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1 (b) MATTERS INCLUDED IN STUDY.—The study re2 quired under subsection (a) shall include—

3 (1) the effect of funding difficulties, funding

4 rules in effect before the date of the enactment of

5 this Act, and the amendments made by this subtitle

6 on small businesses participating in multiemployer

7 plans,

8 (2) the effect on the financial status of small

9 employers of—

10 (A) funding targets set in funding im11 provement and rehabilitation plans and associ12 ated contribution increases,

13 (B) funding deficiencies,

14 (C) excise taxes,

15 (D) withdrawal liability,

16 (E) the possibility of alternatives schedules

17 and procedures for financially-troubled employ18 ers, and

19 (F) other aspects of the multiemployer sys20 tem, and

21 (3) the role of the multiemployer pension plan

22 system in helping small employers to offer pension

23 benefits.

24 (c) SUNSET.—
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1 (1) IN GENERAL.—Except as provided in this

2 subsection, notwithstanding any other provision of

3 this Act, the provisions of, and the amendments

4 made by, this subtitle shall not apply to plan years

5 beginning after December 31, 2014, and the Em6 ployee Retirement Income Security Act of 1974 and

7 the Internal Revenue Code of 1986 shall be applied

8 to such plan years under the provisions of sections

9 302 through 308 of such Act and 412 of such Code

10 (as in effect before the amendments made by this

11 Act).

12 (2) FUNDING IMPROVEMENT AND REHABILITA13 TION PLANS.—If a plan is operating under a fund14 ing improvement or rehabilitation plan under section

15 305 of such Act or 432 of such Code for its last

16 year beginning before January 1, 2015, such plan

17 shall continue to operate under such funding im18 provement or rehabilitation plan during any period

19 after December 31, 2014, such funding improvement

20 or rehabilitation plan is in effect and all provisions

21 of such Act or Code relating to the operation of such

22 funding improvement or rehabilitation plan shall

23 continue in effect during such period.

24 (3) AMORTIZATION SCHEDULES.—In the case

25 of any amount amortized under section 304(b) of
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1 such Act or 431 of such Code (as in effect after the

2 amendments made by this subtitle) over any period

3 beginning with a plan year beginning before January

4 1, 2015, such amount shall, in lieu of the amortiza5 tion which would apply after the application of this

6 subsection, continue to be amortized under such sec7 tion 304 or 431 (as so in effect).

8 Subtitle B—Deduction and Related

9 Provisions

10 SEC. 221. DEDUCTION LIMITS FOR MULTIEMPLOYER

11 PLANS.

12 (a) INCREASE IN DEDUCTION.—Section

13 404(a)(1)(D) of the Internal Revenue Code of 1986, as

14 amended by this Act, is amended to read as follows:

15 ‘‘(D) AMOUNT DETERMINED ON BASIS OF

16 UNFUNDED CURRENT LIABILITY.—

17 ‘‘(i) IN GENERAL.—In the case of a

18 defined benefit plan which is a multiem19 ployer plan, except as provided in regula20 tions, the maximum amount deductible

21 under the limitations of this paragraph

22 shall not be less than the unfunded current

23 liability of the plan.

24 ‘‘(ii) UNFUNDED CURRENT LIABIL25 ITY.—For purposes of clause (i), the term
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1 ‘unfunded current liability’ means the ex2 cess (if any) of—

3 ‘‘(I) 140 percent of the current

4 liability of the plan determined under

5 section 431(c)(6)(C), over

6 ‘‘(II) the value of the plan’s as7 sets determined under section

8 431(c)(2).’’.

9 (b) EXCEPTION FROM LIMITATION ON DEDUCTION

10 WHERE COMBINATION OF DEFINED CONTRIBUTION AND

11 DEFINED BENEFIT PLANS.—

12 (1) IN GENERAL.—Section 404(a)(7)(C) of such

13 Code, as amended by this Act, is amended by adding

14 at the end the following new clause:

15 ‘‘(v) MULTIEMPLOYER PLANS.—In ap16 plying this paragraph, any multiemployer

17 plan shall not be taken into account.’’.

18 (2) CONFORMING AMENDMENT.—Section

19 404(a)(7)(A) of such Code is amended by striking

20 the last sentence.

21 (c) EFFECTIVE DATES.—

22 (1) DEDUCTION LIMIT.—The amendment made

23 by subsection (a) shall apply to years beginning after

24 December 31, 2006.
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1 (2) EXCEPTION.—The amendments made by

2 subsection (b) shall apply to years beginning after

3 December 31, 2005.

4 SEC. 222. TRANSFER OF EXCESS PENSION ASSETS TO MUL5 TIEMPLOYER HEALTH PLAN.

6 (a) IN GENERAL.—Section 420(e) of the Internal

7 Revenue Code of 1986 (relating to definitions and special

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

9 paragraph:

10 ‘‘(5) APPLICATION TO MULTIEMPLOYER

11 PLAN.—In the case of any plan to which section

12 404(c) applies (or any successor plan primarily cov13 ering employees in the building and construction in14 dustry)—

15 ‘‘(A) the prohibition under subsection (a)

16 on the application of this section to a multiem17 ployer plan shall not apply, and

18 ‘‘(B) this section shall be applied to any

19 such plan—

20 ‘‘(i) by treating any reference in this

21 section to an employer as a reference to all

22 employers maintaining the plan (or, if ap23 propriate, the plan sponsor), and

24 ‘‘(ii) in accordance with such modi25 fications of this section (and the provisions
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1 of this title and the Employee Retirement

2 Income Security Act of 1974 relating to

3 this section) as the Secretary determines

4 appropriate to reflect the fact the plan is

5 not maintained by a single employer.’’

6 (b) AMENDMENTS OF ERISA.—

7 (1) Section 101(e)(3) of the Employee Retire8 ment Income Security Act of 1974 (29 U.S.C.

9 1021(e)(3)) is amended by striking ‘‘American Jobs

10 Creation Act of 2004’’ and inserting ‘‘Pension Secu11 rity and Transparency Act of 2005’’.

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

13 1103(c)(1)) is amended by striking ‘‘American Jobs

14 Creation Act of 2004’’ and inserting ‘‘Pension Secu15 rity and Transparency Act of 2005’’.

16 (3) Section 408(b)(13) of such Act (29 U.S.C.

17 1108(b)(13)) is amended by striking ‘‘American

18 Jobs Creation Act of 2004’’ and inserting ‘‘Pension

19 Security and Transparency Act of 2005’’.

20 (c) EFFECTIVE DATE.—The amendment made by

21 this section shall apply to transfers made in taxable years

22 beginning after December 31, 2004.
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1 TITLE III—INTEREST RATE

2 ASSUMPTIONS

3 SEC. 301. INTEREST RATE ASSUMPTION FOR DETERMINA4 TION OF LUMP SUM DISTRIBUTIONS.

5 (a) AMENDMENTS OF ERISA.—

6 (1) IN GENERAL.—Section 205(g)(3)(A) of the

7 Employee Retirement Income Security Act of 1974

8 (29 U.S.C. 1055(g)(3)(A)) is amended by adding at

9 the end the following new sentence: ‘‘In the case of

10 plan years beginning after 2006, the preceding sen11 tence shall be applied by using the applicable yield

12 curve method under subparagraph (C) rather than

13 the applicable interest rate.’’.

14 (2) APPLICABLE YIELD CURVE METHOD.—Sec15 tion 205(g)(3) of such Act (29 U.S.C. 1055(g)(3))

16 is amended by adding at the end the following new

17 subparagraphs:

18 ‘‘(C) APPLICABLE YIELD CURVE METH19 OD.—For purposes of subparagraph (A), the

20 term ‘applicable yield curve method’ means—

21 ‘‘(i) the phase-in yield curve method

22 in the case of plan years beginning in

23 2007, 2008, and 2009, and

24 ‘‘(ii) the yield curve method for years

25 beginning after 2009.
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1 ‘‘(D) YIELD CURVE METHOD.—For pur2 poses of this paragraph—

3 ‘‘(i) IN GENERAL.—The yield curve

4 method is a method under which present

5 value is determined—

6 ‘‘(I) by using interest rates

7 drawn from a yield curve which is pre8 scribed by the Secretary of the Treas9 ury and which reflects the yield on

10 high-quality corporate bonds with

11 varying maturities, and

12 ‘‘(II) by matching the timing of

13 the expected benefit payments under

14 the plan to the interest rates on such

15 yield curve.

16 ‘‘(ii) PUBLICATION.—Each month the

17 Secretary of the Treasury shall publish any

18 yield curve prescribed under this subpara19 graph which shall apply to plan years be20 ginning in such month and such yield

21 curve shall be based on average interest

22 rates for business days occurring during

23 the 3 preceding months.

24 ‘‘(E) PHASE-IN YIELD CURVE METHOD.—
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1 ‘‘(i) IN GENERAL.—Present value de2 termined under the phase-in yield curve

3 method shall be equal to the sum of—

4 ‘‘(I) the applicable percentage of

5 such amount determined under the

6 yield curve method described in sub7 paragraph (D), and

8 ‘‘(II) the product of such amount

9 determined by using the applicable in10 terest rate and a percentage equal to

11 100 percent minus the applicable per12 centage.

13 ‘‘(ii) APPLICABLE PERCENTAGE.—For

14 purposes of clause (i), the applicable per15 centage is 25 percent for plan years begin16 ning in 2007, 50 percent for plan years be17 ginning in 2008, and 75 percent for plan

18 years beginning in 2009.’’.

19 (b) AMENDMENTS OF INTERNAL REVENUE CODE.—

20 (1) IN GENERAL.—Section 417(e)(3)(A) of the

21 Internal Revenue Code of 1986 (relating to deter22 mination of present value) is amended by adding at

23 the end the following new sentence: ‘‘In the case of

24 plan years beginning after 2006, the preceding sen25 tence shall be applied by using the applicable yield
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1 curve method under subparagraph (C) rather than

2 the applicable interest rate.’’

3 (2) APPLICABLE YIELD CURVE METHOD.—Sec4 tion 417(e) of such Code is amended by adding at

5 the end the following new subparagraphs:

6 ‘‘(C) APPLICABLE YIELD CURVE METH7 OD.—For purposes of subparagraph (A), the

8 term ‘applicable yield curve method’ means—

9 ‘‘(i) the phase-in yield curve method

10 in the case of plan years beginning in

11 2007, 2008, and 2009, and

12 ‘‘(ii) the yield curve method for years

13 beginning after 2009.

14 ‘‘(D) YIELD CURVE METHOD.—For pur15 poses of this paragraph—

16 ‘‘(i) IN GENERAL.—The yield curve

17 method is a method under which present

18 value is determined—

19 ‘‘(I) by using interest rates

20 drawn from a yield curve which is pre21 scribed by the Secretary and which re22 flects the yield on high-quality cor23 porate bonds with varying maturities,

24 and
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1 ‘‘(II) by matching the timing of

2 the expected benefit payments under

3 the plan to the interest rates on such

4 yield curve.

5 ‘‘(ii) PUBLICATION.—Each month the

6 Secretary shall publish any yield curve pre7 scribed under this subparagraph which

8 shall apply to plan years beginning in such

9 month and such yield curve shall be based

10 on average interest rates for business days

11 occurring during the 3 preceding months.

12 ‘‘(E) PHASE-IN YIELD CURVE METHOD.—

13 ‘‘(i) IN GENERAL.—Present value de14 termined under the phase-in yield curve

15 method shall be equal to the sum of—

16 ‘‘(I) the applicable percentage of

17 such amount determined under the

18 yield curve method described in sub19 paragraph (D), and

20 ‘‘(II) the product of such amount

21 determined by using the applicable in22 terest rate and a percentage equal to

23 100 percent minus the applicable per24 centage.
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1 ‘‘(ii) APPLICABLE PERCENTAGE.—For

2 purposes of clause (i), the applicable per3 centage is 25 percent for plan years begin4 ning in 2007, 50 percent for plan years be5 ginning in 2008, and 75 percent for plan

6 years beginning in 2009.’’.

7 (c) SPECIAL RULE FOR PLAN AMENDMENTS.—A

8 plan shall not fail to meet the requirements of section

9 204(g) of the Employee Retirement Income Security Act

10 of 1974 or section 411(d)(6) of the Internal Revenue Code

11 of 1986 solely by reason of the adoption by the plan of

12 an amendment necessary to meet the requirements of the

13 amendments made by this section.

14 (d) EFFECTIVE DATE.—The amendments made by

15 this section shall apply with respect to plan years begin16 ning after 2006.

17 SEC. 302. INTEREST RATE ASSUMPTION FOR APPLYING

18 BENEFIT LIMITATIONS TO LUMP SUM DIS19 TRIBUTIONS.

20 (a) IN GENERAL.—Clause (ii) of section

21 415(b)(2)(E) of the Internal Revenue Code of 1986 is

22 amended to read as follows:

23 ‘‘(ii) For purposes of adjusting any

24 benefit under subparagraph (B) for any

25 form of benefit subject to section
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1 417(e)(3), clause (i) shall be applied by

2 substituting ‘5.5 percent’ for ‘5 percent’.’’.

3 (b) EFFECTIVE DATE.—The amendment made by

4 subsection (a) shall apply to years beginning after Decem5 ber 31, 2005.

6 SEC. 303. RESTRICTIONS ON FUNDING OF NONQUALIFIED

7 DEFERRED COMPENSATION PLANS BY EM8 PLOYERS MAINTAINING UNDERFUNDED OR

9 TERMINATED SINGLE-EMPLOYER PLANS.

10 (a) AMENDMENTS OF ERISA.—

11 (1) IN GENERAL.—Part 3 of subtitle A of title

12 I of the Employee Retirement Income Security Act

13 of 1974 (29 U.S.C. 1081 et seq.), as amended by

14 this Act, is amended by adding at the end the fol15 lowing new section:

16 ‘‘NOTICE OF FUNDING OF NONQUALIFIED DEFERRED

17 COMPENSATION PLANS

18 ‘‘SEC. 306. (a) NOTICE AND ACCESS.—

19 ‘‘(1) NOTICE RELATING TO RESTRICTED PE20 RIOD.—The plan administrator of a defined benefit

21 plan which is a single-employer plan shall notify

22 each plan sponsor of the plan within a reasonable

23 period of time after the occurrence of an event which

24 results in a restricted period with respect to the

25 plan. Such notice shall include information—
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1 ‘‘(A) as to the duration of the restricted

2 period, and

3 ‘‘(B) the restrictions under section

4 409A(b)(3) of the Internal Revenue Code of

5 1986 which apply during the restricted period

6 to the plan sponsor and any member of a con7 trolled group which includes such sponsor.

8 ‘‘(2) NOTICE OF EXISTENCE OF, AND TRANS9 FERS TO, NONQUALIFIED DEFERRED COMPENSATION

10 PLANS.—

11 ‘‘(A) INITIAL NOTICE.—Within 30 days of

12 receipt of a notice under paragraph (1), each

13 plan sponsor shall notify the plan administrator

14 of the plan described in paragraph (1)—

15 ‘‘(i) of nonqualified deferred com16 pensation plans maintained by the plan

17 sponsor or any member of a controlled

18 group which includes such sponsor, and

19 ‘‘(ii) the amount of any assets trans20 ferred or otherwise reserved by the plan

21 sponsor or such member in violation of sec22 tion 409A(b)(3) of such Code during any

23 portion of the restricted period occurring

24 on or before the date the plan sponsor pro25 vides such notice.
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1 ‘‘(B) ADDITIONAL NOTICES.—If, after the

2 date on which notice is provided under subpara3 graph (A) and during any portion of the re4 maining restricted period specified in the notice

5 provided under paragraph (1), the plan sponsor

6 of a plan described in paragraph (1) or a mem7 ber of a controlled group which includes such

8 sponsor—

9 ‘‘(i) transfers or reserves assets in vio10 lation of section 409A(b)(3) of such Code,

11 or

12 ‘‘(ii) establishes a new nonqualified

13 deferred compensation plan,

14 the plan sponsor shall notify the plan adminis15 trator of the plan described in paragraph (1) of

16 such transfer, reservation, or establishment

17 within 3 days of the date of such action.

18 ‘‘(3) ACCESS TO FINANCIAL DATA.—Any fidu19 ciary of the plan shall have access to the financial

20 records of a plan sponsor or any member of a con21 trolled group which includes such sponsor to deter22 mine if assets were transferred or otherwise reserved

23 in violation of section 409A(b)(3) of such Code.

24 ‘‘(4) FORM AND MANNER.—The Secretary may

25 prescribe the form and manner of a notice required
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1 under this section. Such a notice shall be written in

2 a manner calculated to be understood by the average

3 plan participant and may be delivered in written,

4 electronic, or other appropriate form to the extent

5 that such form is reasonably accessible to the recipi6 ent.

7 ‘‘(b) RESTRICTED PERIOD.—For purposes of this

8 section, the term ‘restricted period’ means, with respect

9 to any plan described in subsection (a)(1)—

10 ‘‘(1) any period—

11 ‘‘(A) beginning on the first day of a plan

12 year following a plan year for which the plan’s

13 adjusted funding target attainment percentage

14 (as defined in section 303) was less than 60

15 percent (determined as of the close of such

16 year), and

17 ‘‘(B) ending on the last day of the first pe18 riod of 2 consecutive plan years (beginning on

19 or after such first day) for which such percent20 age was at least 60 percent,

21 ‘‘(2) any period the plan sponsor is in bank22 ruptcy, and

23 ‘‘(3) the 12-month period beginning on the date

24 which is 6 months before the termination date of the

25 plan if, as of the termination date, the plan is not
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1 sufficient for benefit liabilities (within the meaning

2 of section 4041).

3 In the case of a plan which is in at-risk status, paragraph

4 (1) shall be applied by substituting ‘80 percent’ for ‘60

5 percent’ each place it appears.

6 ‘‘(c) NONQUALIFIED DEFERRED COMPENSATION

7 PLAN.—For purposes of this section—

8 ‘‘(1) IN GENERAL.—The term ‘nonqualified de9 ferred compensation plan’ means any plan that pro10 vides for the deferral of compensation, other than—

11 ‘‘(A) a qualified employer plan, and

12 ‘‘(B) any bona fide vacation leave, sick

13 leave, compensatory time, disability pay, or

14 death benefit plan.

15 ‘‘(2) QUALIFIED EMPLOYER PLAN.—The term

16 ‘qualified employer plan’ means—

17 ‘‘(A) any plan, contract, pension, account,

18 or trust described in subparagraph (A) or (B)

19 of section 219(g)(5) of the Internal Revenue

20 Code of 1986 (without regard to subparagraph

21 (A)(iii)),

22 ‘‘(B) any eligible deferred compensation

23 plan (within the meaning of section 457(b)) of

24 such Code, and
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1 ‘‘(C) any plan described in section 415(m)

2 of such Code.

3 ‘‘(3) PLAN INCLUDES ARRANGEMENTS, ETC.—

4 The term ‘plan’ includes any agreement or arrange5 ment, including an agreement or arrangement that

6 includes one person.

7 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

8 section—

9 ‘‘(1) APPLICABLE COVERED EMPLOYEE.—

10 ‘‘(A) IN GENERAL.—The term ‘applicable

11 covered employee’ means any—

12 ‘‘(i) covered employee of a plan spon13 sor,

14 ‘‘(ii) covered employee of a member of

15 a controlled group which includes the plan

16 sponsor, and

17 ‘‘(iii) former employee who was a cov18 ered employee at the time of termination of

19 employment with the plan sponsor or a

20 member of a controlled group which in21 cludes the plan sponsor.

22 ‘‘(B) COVERED EMPLOYEE.—The term

23 ‘covered employee’ has the meaning given such

24 term by section 162(m)(3) of the Internal Rev25 enue Code of 1986.
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1 ‘‘(2) CONTROLLED GROUP.—The term ‘con2 trolled group’ has the meaning given such term by

3 section 302(d)(3).’’.

4 (2) ENFORCEMENT.—

5 (A) IN GENERAL.—Section 502(a) of the

6 Employee Retirement Income Security Act (29

7 U.S.C. 1132(a)), as amended by this Act, is

8 amended—

9 (i) by striking ‘‘or’’ at the end of

10 paragraph (9), by striking the period at

11 the end of paragraph (10) and inserting ‘‘;

12 or’’, and by adding at the end the following

13 new paragraph:

14 ‘‘(11) by a fiduciary of a defined benefit plan

15 which is a single-employer plan against—

16 ‘‘(A) a plan sponsor, a member of a con17 trolled group which includes the plan sponsor,

18 an applicable covered employee, or a person

19 holding assets which are part of a nonqualified

20 deferred compensation plan to recover on behalf

21 of the plan—

22 ‘‘(i) assets which were set aside or

23 transferred in violation of section

24 409A(b)(3) of the Internal Revenue Code
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1 of 1986 (and any earnings properly allo2 cable to the assets); or

3 ‘‘(ii) amounts equivalent to the assets

4 and earnings described in clause (i); or

5 ‘‘(B) a plan sponsor, or a member of a

6 controlled group which includes the plan spon7 sor, to compel the production of records the fi8 duciary is entitled to under section 306.’’; and

9 (ii) by adding at the end the following

10 new flush sentence:

11 ‘‘For purposes of paragraph (11), any term used in such

12 paragraph which is also used in section 306 shall have

13 the meaning given such term by section 306.’’.

14 (B) AWARDING OF FEES.—Section 502(g)

15 of such Act (29 U.S.C. 1132(g)) is amended by

16 adding at the end the following new paragraph:

17 ‘‘(3) ACTIONS TO RECOVER ASSETS TRANS18 FERRED TO NONQUALIFIED DEFERRED COMPENSA19 TION PLANS.—If, in any action under subsection

20 (a)(11) by a fiduciary for or on behalf of a plan to

21 enforce section 306 of this Act and section

22 409A(b)(3), a judgment is awarded in favor of the

23 plan, the court may, in addition to any other

24 amount, award the plan reasonable attorney’s fees
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1 and costs of the action, to be paid by the defend2 ant’’.

3 (3) CLERICAL AMENDMENT.—The table of con4 tents in section 1 of such Act, as amended by this

5 Act, is amended by adding at the end the following

6 new item:

‘‘Sec. 306. Restrictions on funding of nonqualified deferred compensation

plans.’’.

7 (b) AMENDMENTS OF INTERNAL REVENUE CODE.—

8 (1) IN GENERAL.—Subsection (b) of section

9 409A of the Internal Revenue Code of 1986 (pro10 viding rules relating to funding) is amended by re11 designating paragraphs (3) and (4) as paragraphs

12 (4) and (5), respectively, and by inserting after

13 paragraph (2) the following new paragraph:

14 ‘‘(3) EMPLOYERS OF UNDERFUNDED OR TERMI15 NATED DEFINED BENEFIT PLANS.—During any re16 stricted period—

17 ‘‘(A) a plan sponsor of a defined benefit

18 plan which is a single-employer plan, or

19 ‘‘(B) any member of a controlled group

20 which includes such sponsor,

21 shall not directly or indirectly transfer assets, or di22 rectly or indirectly otherwise reserve assets, in a

23 trust (or other arrangement determined by the Sec24 retary) for purposes of paying deferred compensa-
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1 tion of an applicable covered employee under a non2 qualified deferred compensation plan of the plan

3 sponsor or member. Any assets transferred or re4 served in violation of the preceding sentence shall,

5 for purposes of section 83, be treated as property

6 transferred in connection with the performance of

7 services whether or not such assets are available to

8 satisfy claims of general creditors. For purposes of

9 this paragraph, any term used in this paragraph

10 which is also used in section 306 of the Employee

11 Retirement Income Security Act of 1974 shall have

12 the meaning given such term by such section.’’.

13 (2) CONFORMING AMENDMENTS.—Paragraphs

14 (4) and (5) of section 409A(b) of such Code, as re15 designated by subsection (a) of this subsection, are

16 each amended by striking ‘‘paragraph (1) or (2)’’

17 each place it appears and inserting ‘‘paragraph (1),

18 (2), or (3)’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to transfers or other reservation

21 of assets after December 31, 2006.
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1 SEC. 304. MODIFICATION OF PENSION FUNDING REQUIRE2 MENTS FOR PLANS SUBJECT TO CURRENT

3 TRANSITION RULE.

4 (a) PLAN YEAR BEFORE NEW FUNDING RULES.—

5 Section 769(c)(3) of the Retirement Protection Act of

6 1994, as added by section 201 of the Pension Funding

7 Equity Act of 2004, is amended by striking ‘‘and 2005’’

8 and inserting ‘‘, 2005, and 2006’’.

9 (b) PLAN YEARS AFTER NEW FUNDING RULES.—

10 (1) IN GENERAL.—In the case of a plan that—

11 (A) was not required to pay a variable rate

12 premium for the plan year beginning in 1996,

13 (B) has not, in any plan year beginning

14 after 1995, merged with another plan (other

15 than a plan sponsored by an employer that was

16 in 1996 within the controlled group of the plan

17 sponsor), and

18 (C) is sponsored by a company that is en19 gaged primarily in the interurban or interstate

20 passenger bus service,

21 the rules described in subsection (b) shall apply for

22 any plan year beginning after 2006.

23 (2) MODIFIED RULES.—The rules described in

24 this subsection are as follows:

25 (A) For purposes of—
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1 (i) determining unfunded benefits

2 under section 4006(a)(3)(E)(ii) of the Em3 ployee Retirement Income Security Act of

4 1974, and

5 (ii) determining any present value or

6 making any computation under section 412

7 and section 430 of the Internal Revenue

8 Code of 1986 and sections 302 and 303 of

9 such Act,

10 the mortality table shall be the mortality table used

11 by the plan.

12 (B) Notwithstanding section 303(f)(4) of

13 such Act or 430(f)(4) of such Code, for pur14 poses of section 303(c)(4)(A)(ii) of such Act

15 and 430(c)(4)(A)(ii) of such Code, the value of

16 plan assets shall not be reduced by the amount

17 of the prefunding balance if, pursuant to a

18 binding written agreement with the Pension

19 Benefit Guaranty Corporation entered into be20 fore January 1, 2006, the prefunding balance is

21 not available to reduce the minimum required

22 contribution for the plan year.

23 (3) DEFINITIONS.—Any term used in this sec24 tion which is also used in section 303 of such Act
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1 or section 430 of such Code shall have the meaning

2 provided such term in such section.

3 (4) CONFORMING AMENDMENT.—Section 769

4 of the Retirement Protection Act of 1994 is amend5 ed by striking subsection (c).

6 (5) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply to plan years begin8 ning after 2006.

9 TITLE IV—IMPROVEMENTS IN

10 PBGC GUARANTEE PROVISIONS

11 SEC. 401. INCREASES IN PBGC PREMIUMS.

12 (a) FLAT-RATE PREMIUMS.—

13 (1) IN GENERAL.—Section 4006(a)(3)(A)(i) of

14 the Employee Retirement Income Security Act of

15 1974 (29 U.S.C. 1306(a)(3)(A)(i)) is amended to

16 read as follows:

17 ‘‘(i) in the case of a single-employer

18 plan, an amount equal to—

19 ‘‘(I) for plan years beginning

20 after December 31, 1990, and before

21 January 1, 2006, $19, or

22 ‘‘(II) for plan years beginning

23 after December 31, 2005, the amount

24 determined under subparagraph (H),
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1 plus the additional premium (if any) deter2 mined under subparagraph (E) for each in3 dividual who is a participant in such plan

4 during the plan year;’’.

5 (2) AMOUNT OF PREMIUM AFTER 2005.—Sec6 tion 4006(a)(3) of such Act (29 U.S.C. 1306(a)(3)),

7 as amended by sections 406 and 407, is amended by

8 adding at the end the following:

9 ‘‘(H) AMOUNT OF PREMIUM.—

10 ‘‘(i) IN GENERAL.—The amount de11 termined under this subparagraph is the

12 greater of $30 or in the case of plan years

13 beginning after December 31, 2006, the

14 adjusted amount determined under clause

15 (ii).

16 ‘‘(ii) ADJUSTED AMOUNT.—The ad17 justed amount determined under this

18 clause is the product derived by multi19 plying $30 by the ratio of—

20 ‘‘(I) the contribution and benefit

21 base (determined under section 230 of

22 the Social Security Act) in effect in

23 the calendar year in which the plan

24 year begins, to
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1 ‘‘(II) the contribution and benefit

2 base in effect in 2006.

3 ‘‘(iii) ROUNDING.—If the amount de4 termined under clause (ii) is not a multiple

5 of $1, such product shall be rounded to the

6 nearest multiple of $1.’’.

7 (b) RISK-BASED PREMIUMS.—

8 (1) CONFORMING AMENDMENTS RELATED TO

9 FUNDING RULES FOR SINGLE-EMPLOYER PLANS.—

10 Section 4006(a)(3)(E) of such Act is amended by

11 striking clauses (iii) and (iv) and inserting the fol12 lowing:

13 ‘‘(iii)(I) For purposes of clause (ii), except as pro14 vided in subclause (II), the term ‘unfunded benefits’

15 means, for a plan year, the amount which would be the

16 plan’s funding shortfall (as defined in section 303(c)(4))

17 if the value of plan assets of the plan were equal to the

18 fair market value of such assets.

19 ‘‘(II) The interest rate used in valuing benefits for

20 purposes of subclause (I) shall be equal to the first, sec21 ond, or third segment rate which would be determined

22 under section 303(h)(2)(C) if section 303(h)(2)(D) were

23 applied by using the yields on investment grade corporate

24 bonds with varying maturities rather than the average of

25 such yields for a 12-month period.’’.
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1 (2) EFFECTIVE DATE.—The amendments made

2 by paragraph (1) shall apply with respect to plan

3 years beginning after 2006.

4 (c) FLAT-RATE PREMIUM ADJUSTMENT.—

5 (1) IN GENERAL.—Beginning in 2011, and

6 every 5 years thereafter, the Board of Directors of

7 the Pension Benefit Guaranty Corporation under

8 title IV of the Employee Retirement Income Security

9 Act (29 U.S.C. 1301 et seq.) shall submit to Con10 gress a report that describes any recommendations

11 for adjusting the premium rate payable to the Cor12 poration described under section 4006(a)(3)(A)(i) of

13 such Act (as amended by subsection (a)).

14 (2) CONSIDERATIONS.—In developing the re15 port described under paragraph (1), the Corporation

16 shall consider—

17 (A) the national average wage index (as

18 defined in section 209(k)(1) of the Social Secu19 rity Act (42 U.S.C. 409(k)(1)));

20 (B) the finances of the Corporation as of

21 the date of such report and an actuarial evalua22 tion of the expected operations and status of

23 the funds established under section 4005 of

24 such title IV (29 U.S.C. 1305) for the 5 years

25 succeeding such date;
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1 (C) the impact of any increases in such

2 premium rate on plan sponsors subject to such

3 title IV; and

4 (D) such other factors determined relevant

5 by the Corporation.

6 SEC. 402. AUTHORITY TO ENTER ALTERNATIVE FUNDING

7 AGREEMENTS TO PREVENT PLAN TERMI8 NATIONS.

9 (a) AUTHORITY TO ENTER INTO AGREEMENTS.—

10 (1) DISTRESS TERMINATIONS.—Section 4041(c)

11 of the Employee Retirement Income Security Act of

12 1974 (29 U.S.C. 1341(c)) is amended by adding at

13 the end the following:

14 ‘‘(4) ALTERNATIVE FUNDING AGREEMENTS.—

15 ‘‘(A) IN GENERAL.—If the corporation de16 termines that—

17 ‘‘(i) a plan meets the requirements for

18 a distress termination under this sub19 section without regard to an alternative

20 funding agreement under section 4047(a),

21 and

22 ‘‘(ii) the termination of the plan

23 would not be necessary if such an agree24 ment were entered into,
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1 the corporation may request that the Secretary

2 of the Treasury, in consultation with the cor3 poration, enter into such an agreement with the

4 contributing sponsors under the plan.

5 ‘‘(B) EARLY ACTION INITIATIVES.—Sub6 ject to the limitations in subsection (a)(3), if—

7 ‘‘(i) the corporation determines that it

8 is reasonable to believe that a plan may be

9 subject to a distress termination within 6

10 months unless action is taken, the corpora11 tion may request that the Secretary of the

12 Treasury, in consultation with the corpora13 tion, enter into an alternative funding

14 agreement under section 4047(a); and

15 ‘‘(ii) the corporation, upon the request

16 of the contributing sponsor of a plan or

17 other person, determines that it is reason18 able to believe that a plan may be subject

19 to a distress termination within 2 years

20 unless action is taken, the corporation may

21 request that the Secretary of the Treasury,

22 in consultation with the corporation, enter

23 into an alternative funding agreement

24 under section 4047(a).’’.
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1 (2) INVOLUNTARY TERMINATIONS.—Section

2 4042 of the Employee Retirement Income Security

3 Act of 1974 (29 U.S.C. 1342) is amended by adding

4 at the end the following:

5 ‘‘(i) ALTERNATIVE FUNDING AGREEMENTS.—If—

6 ‘‘(1) the corporation determines that it is rea7 sonable to believe that a plan will meet the require8 ments for an involuntary termination under this sec9 tion without regard to an alternative funding agree10 ment under section 4047(a) within 6 months unless

11 action is taken, or

12 ‘‘(B) the corporation, upon the request of the

13 contributing sponsor of a plan or other person, de14 termines that it is reasonable to believe that a plan

15 may be subject to an involuntary termination within

16 2 years unless action is taken,

17 and such a termination would not be necessary if such

18 an agreement is entered into, the corporation may request

19 that the Secretary of the Treasury, in consultation with

20 the corporation, enter into an alternative funding agree21 ment under section 4047(a).’’.

22 (b) ALTERNATIVE FUNDING SCHEDULES TO PRE23 VENT PLAN TERMINATION.—
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1 (1) IN GENERAL.—Section 4047 of the Em2 ployee Retirement Income Security Act of 1974 (29

3 U.S.C. 1347) is amended by—

4 (A) striking the section heading and all

5 that follows through ‘‘Whenever’’ and

6 inserting—

7 ‘‘SEC. 4047. ALTERNATIVE FUNDING SCHEDULES TO PRE8 VENT TERMINATION; RESTORATION OF TER9 MINATED PLANS.

10 ‘‘(a) ALTERNATIVE FUNDING AGREEMENTS.—

11 ‘‘(1) IN GENERAL.—If the requirements of sec12 tion 4041(c)(4) or 4042(i) are met with respect to

13 any plan, the Secretary of the Treasury, in consulta14 tion with the corporation, may enter into an alter15 native funding agreement with the contributing

16 sponsors under the plan that meets the requirements

17 of this subsection.

18 ‘‘(2) OTHER REQUIREMENTS.—An alternative

19 funding agreement may be entered into by the Sec20 retary of the Treasury, in consultation with corpora21 tion, only if—

22 ‘‘(A) such Secretary finds the agreement to

23 be in the best interests of the participants and

24 beneficiaries; and
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1 ‘‘(B) the agreement meets the require2 ments set forth by such Secretary in regula3 tions.

4 ‘‘(3) ALTERNATIVE FUNDING AGREEMENT.—

5 ‘‘(A) IN GENERAL.—An agreement meets

6 the requirements of this subsection if the

7 agreement—

8 ‘‘(i) provides for an additional amorti9 zation schedule for a period not to exceed

10 10 years,

11 ‘‘(ii) requires the plan to pay at the

12 time the agreement is entered into any

13 professional fees or other expenses in14 curred by the Secretary of the Treasury or

15 the corporation in connection with the

16 agreements,

17 ‘‘(iii) requires approval by the cor18 poration before the contributing sponsor

19 establishes or maintains any other defined

20 benefit plan other than any multiemployer

21 plan that covers a substantial number of

22 employees who are covered by the plan

23 subject to the agreement or who perform

24 substantially the same type of work with
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1 respect to the same business operations as

2 employees covered by such plan, and

3 ‘‘(iv) provides for a termination date,

4 or a schedule of termination dates, for the

5 purpose of the guarantee under section

6 4022, to apply if a plan terminates during

7 the period that the agreement is in effect.

8 ‘‘(B) OTHER CONDITIONS.—Notwith9 standing any other provision of this Act, an

10 agreement meeting the requirements of this

11 subsection may provide—

12 ‘‘(i) for restrictions on, or the elimi13 nation of, future accruals, but only to the

14 extent that such restrictions or elimi15 nations would have been permitted under

16 section 204(g) or section 411(d)(6) of the

17 Internal Revenue Code of 1986 if they had

18 been implemented by a plan amendment

19 adopted immediately before the effective

20 date of the agreement,

21 ‘‘(ii) that the contributing sponsors

22 will provide security or other collateral in

23 such form and amount as specified in the

24 agreement,
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1 ‘‘(iii) conditions under which the plan

2 could be terminated in a standard termi3 nation under section 4041(b) or conditions

4 under which accruals to which clause (i)

5 applies could resume in the future, and

6 ‘‘(iv) for such other terms and condi7 tions as the Secretary of the Treasury, in

8 consultation with the corporation, deter9 mines necessary to protect the interests of

10 the corporation.

11 ‘‘(C) EMPLOYEE REQUIREMENTS.—

12 ‘‘(i) IN GENERAL.—An agreement

13 meets the requirements of this subsection

14 only if—

15 ‘‘(I) at least 60 days before the

16 agreement is to take effect the con17 tributing sponsors notify affected par18 ties (other than the corporation) of

19 the terms of the agreement and its ef20 fect on such parties, and

21 ‘‘(II) each employee organization

22 representing participants in the plan

23 approves the agreement before it

24 takes effect.
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1 ‘‘(ii) FORM AND MANNER OF NO2 TICE.—The notice under clause (i) shall be

3 written in a manner calculated to be un4 derstood by the average plan participant

5 and may be provided to a person des6 ignated, in writing, by the person to which

7 it would otherwise be provided. Such notice

8 may be provided in written, electronic, or

9 other appropriate form to the extent such

10 form is reasonably accessible to persons to

11 whom the notice is required to be provided.

12 ‘‘(4) COORDINATION WITH MINIMUM FUNDING

13 REQUIREMENTS.—Any alternative funding schedule

14 under an agreement meeting the requirements under

15 this subsection shall supersede the minimum funding

16 requirements of this Act and the Internal Revenue

17 Code of 1986. For purposes of applying this Act or

18 such Code, any contribution required under such

19 schedule shall be treated in the same manner as con20 tributions required under section 302 of this Act

21 and section 412 of such Code.

22 ‘‘(b) RESTORATION OF TERMINATED PLANS.—

23 Whenever’’.

24 (2) CONFORMING AMENDMENT.—The table of

25 contents for title IV of such Act is amended by
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1 striking the item relating to section 4047 and insert2 ing the following:

‘‘4047. Alternative funding schedules to prevent terminations; restoration of

terminated plans.’’.

3 (c) AMENDMENTS TO OTHER PROVISIONS.—

4 (1) QUALIFICATION REQUIREMENT.—Section

5 401(a) of the Internal Revenue Code of 1986, as

6 amended by sections 115 and 701 of this Act, is

7 amended by inserting after paragraph (35) the fol8 lowing new paragraph:

9 ‘‘(36) SUCCESSOR PLANS TO CERTAIN PLANS.—

10 If—

11 ‘‘(A) an alternative funding agreement de12 scribed in section 4047(a) of the Employee Re13 tirement Income Security Act of 1974 is in ef14 fect with respect to any plan, and

15 ‘‘(B) the plan is maintained by an em16 ployer that establishes or maintains 1 or more

17 other defined benefit plans (other than any

18 multiemployer plan), and such other plans in

19 combination provide benefit accruals to any

20 substantial number of successor employees,

21 the Secretary may, in the Secretary’s discretion, de22 termine that any trust of which any other such plan

23 is a part does not constitute a qualified trust under

24 this subsection unless all benefit obligations of the
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1 plan to which the alternative funding agreement ap2 plies have been satisfied. For purposes of this para3 graph, the term ‘successor employee’ means any em4 ployee who is or was covered by the plan to which

5 the alternative funding agreement applies and any

6 employee who performs substantially the same type

7 of work with respect to the same business operations

8 as an employee covered by such plan.’’.

9 (2) LIMITATION ON DEDUCTIONS UNDER CER10 TAIN PLANS.—Section 404(a)(7)(C) of the Internal

11 Revenue Code of 1986 is amended by adding at the

12 end the following:

13 ‘‘(iii) PLANS SUBJECT TO ALTER14 NATIVE FUNDING AGREEMENTS.—This

15 paragraph shall not apply to any plan for

16 a plan year if an alternative funding agree17 ment described in section 4047(a) of the

18 Employee Retirement Income Security Act

19 of 1974 is in effect for such year.’’.

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall take effect on the date of enactment of

22 this Act.
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1 SEC. 403. SPECIAL FUNDING RULES FOR PLANS MAIN2 TAINED BY COMMERCIAL AIRLINES THAT

3 ARE AMENDED TO CEASE FUTURE BENEFIT

4 ACCRUALS.

5 (a) IN GENERAL.—If an election is made to have this

6 section apply to an eligible plan—

7 (1) in the case of any applicable plan year be8 ginning before January 1, 2007, the plan shall not

9 have an accumulated funding deficiency for purposes

10 of section 302 of the Employee Retirement Income

11 Security Act of 1974 and sections 412 and 4971 of

12 the Internal Revenue Code of 1986 if contributions

13 to the plan for the plan year are not less than the

14 minimum required contribution determined under

15 subsection (d) for the plan for the plan year, and

16 (2) in the case of any applicable plan year be17 ginning on or after January 1, 2007, the minimum

18 required contribution determined under sections 303

19 of such Act and 430 of such Code shall, for purposes

20 of sections 302 and 303 of such Act and sections

21 412, 430, and 4971 of such Code, be equal to the

22 minimum required contribution determined under

23 subsection (d) for the plan for the plan year.

24 (b) ELIGIBLE PLAN.—For purposes of this section—

25 (1) IN GENERAL.—The term ‘‘eligible plan’’

26 means a defined benefit plan (other than a multiem-
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1 ployer plan) to which sections 302 of such Act and

2 412 of such Code applies—

3 (A) which is sponsored by an employer—

4 (i) which is a commercial airline pas5 senger airline, or

6 (ii) the principal business of which is

7 providing catering services to a commercial

8 passenger airline, and

9 (B) with respect to which the requirements

10 of paragraphs (2) and (3) are met.

11 (2) ACCRUAL RESTRICTIONS.—

12 (A) IN GENERAL.—The requirements of

13 this paragraph are met if, effective as of the

14 first day of the first applicable plan year and at

15 all times thereafter while an election under this

16 section is in effect, the plan provides that—

17 (i) the accrued benefit, any death or

18 disability benefit, and any social security

19 supplement described in the last sentence

20 of section 411(a)(9) of such Code and sec21 tion 204(b)(1)(G) of such Act, of each par22 ticipant are frozen at the amount of such

23 benefit or supplement immediately before

24 such first day, and
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1 (ii) all other benefits under the plan

2 are eliminated,

3 but only to the extent the freezing or elimi4 nation of such benefits would have been per5 mitted under section 411(d)(6) of such Code

6 and section 204(g) of such Act if they had been

7 implemented by a plan amendment adopted im8 mediately before such first day.

9 (B) INCREASES IN SECTION 415 LIMITS

10 DISREGARDED.—If a plan provides that an ac11 crued benefit of a participant which has been

12 subject to any limitation under section 415 of

13 such Code will be increased if such limitation is

14 increased, the plan shall not be treated as meet15 ing the requirements of this paragraph unless,

16 effective as of the first day of the first applica17 ble plan year and at all times thereafter while

18 an election under this section is in effect, the

19 plan provides that any such increase shall not

20 take effect. A plan shall not fail to meet the re21 quirements of section 411(d)(6) of such Code

22 and section 204(g) of such Act solely because

23 the plan is amended to meet the requirements

24 of this subparagraph.
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1 (3) RESTRICTION ON APPLICABLE BENEFIT IN2 CREASES.—

3 (A) IN GENERAL.—The requirements of

4 this paragraph are met if no applicable benefit

5 increase takes effect at any time during the pe6 riod beginning on July 26, 2005, and ending on

7 the day before the first day of the first applica8 ble plan year.

9 (B) APPLICABLE BENEFIT INCREASE.—

10 For purposes of this paragraph, the term ‘‘ap11 plicable benefit increase’’ means, with respect to

12 any plan year, any increase in liabilities of the

13 plan by plan amendment (or otherwise provided

14 in regulations provided by the Secretary) which,

15 but for this paragraph, would occur during the

16 plan year by reason of—

17 (i) any increase in benefits,

18 (ii) any change in the accrual of bene19 fits, or

20 (iii) any change in the rate at which

21 benefits become nonforfeitable under the

22 plan.

23 (4) EXCEPTION FOR IMPUTED DISABILITY

24 SERVICE.—Paragraphs (2) and (3) shall not apply

25 to any accrual or increase with respect to imputed
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1 service provided to a participant during any period

2 of the participant’s disability occurring on or after

3 the effective date of the plan amendment providing

4 the restrictions under paragraph (2) if the

5 participant—

6 (A) was receiving disability benefits as of

7 such date, or

8 (B) was receiving sick pay and subse9 quently determined to be eligible for disability

10 benefits as of such date.

11 (c) ELECTIONS AND RELATED TERMS.—

12 (1) IN GENERAL.—A plan sponsor shall make

13 the election under subsection (a) at such time and

14 in such manner as the Secretary of the Treasury

15 may prescribe. Except as provided in subsection

16 (h)(5), such election, once made, may be revoked

17 only with the consent of such Secretary.

18 (2) YEARS FOR WHICH ELECTION MADE.—

19 (A) IN GENERAL.—The plan sponsor may

20 select the first plan year to which the election

21 under subsection (a) applies from among plan

22 years ending after the date of the election. The

23 election shall apply to such plan year and all

24 subsequent years.
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1 (B) ELECTION OF NEW PLAN YEAR.—The

2 plan sponsor may specify a new plan year in the

3 election under subsection (a) and the plan year

4 of the plan may be changed to such new plan

5 year without the approval of the Secretary of

6 the Treasury.

7 (3) APPLICABLE PLAN YEAR.—The term ‘‘ap8 plicable plan year’’ means each plan year to which

9 the election under subsection (a) applies under para10 graph (1).

11 (d) MINIMUM REQUIRED CONTRIBUTION.—

12 (1) IN GENERAL.—In the case of any applicable

13 plan year during the amortization period, the min14 imum required contribution shall be the amount nec15 essary to amortize the unfunded liability of the plan,

16 determined as of the first day of the plan year, in

17 equal annual installments (until fully amortized)

18 over the remainder of the amortization period. Such

19 amount shall be separately determined for each ap20 plicable plan year.

21 (2) YEARS AFTER AMORTIZATION PERIOD.—In

22 the case of any plan year beginning after the end of

23 the amortization period, section 302(a)(2)(A) of

24 such Act and section 412(a)(2)(A) of such Code

25 shall apply to such plan, but the prefunding balance
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1 as of the first day of the first of such years under

2 section 303(f) of such Act and section 430(f) of such

3 Code shall be zero.

4 (3) DEFINITIONS.—For purposes of this

5 section—

6 (A) UNFUNDED LIABILITY.—The term

7 ‘‘unfunded liability’’ means the unfunded ac8 crued liability under the plan, determined under

9 the unit credit funding method.

10 (B) AMORTIZATION PERIOD.—The term

11 ‘‘amortization period’’ means the 20-plan year

12 period beginning with the first applicable plan

13 year.

14 (4) OTHER RULES.—In determining the min15 imum required contribution and amortization

16 amount under this subsection—

17 (A) the provisions of section 302(c)(3) of

18 such Act and section 412(c)(3) of such Code, as

19 in effect before the date of enactment of this

20 section, shall apply,

21 (B) the rate of interest under section

22 302(b) of such Act and section 412(b) of such

23 Code, as so in effect, shall be used for all cal24 culations requiring an interest rate, and
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1 (C) the value of plan assets shall be equal

2 to their fair market value.

3 (5) SPECIAL RULE FOR CERTAIN PLAN SPIN4 OFFS.—For purposes of subsection (a), if, with re5 spect to any eligible plan to which this subsection

6 applies—

7 (A) any applicable plan year includes the

8 date of the enactment of this Act,

9 (B) a plan was spun off from the eligible

10 plan during the plan year but before such date

11 of enactment,

12 the minimum required contribution under subsection

13 (a)(1) for the eligible plan for such applicable plan

14 year shall be determined as if the plans were a sin15 gle plan for that plan year (based on the full 12-

16 month plan year in effect prior to the spin-off). The

17 employer shall designate the allocation of the min18 imum required contribution between such plans for

19 the applicable plan year and direct the appropriate

20 reallocation between the plans of any contributions

21 for the applicable plan year.

22 (e) FUNDING STANDARD ACCOUNT AND

23 PREFUNDING BALANCE.—Any charge or credit in the

24 funding standard account under section 302 of such Act

25 or section 412 of such Code, and any prefunding balance
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1 under section 303 of such Act or section 430 of such Code,

2 as of the day before the first day of the first applicable

3 plan year, shall be reduced to zero.

4 (f) AMENDMENTS TO OTHER PROVISIONS.—

5 (1) QUALIFICATION REQUIREMENT.—Section

6 401(a)(36) of the Internal Revenue Code of 1986, as

7 added by section 402 of this Act, is amended by

8 adding at the end the following: ‘‘This paragraph

9 shall also apply to any plan during any period dur10 ing which an amortization schedule under section

11 403 of the Pension Security and Transparency Act

12 of 2005 is in effect.’’

13 (2) PBGC LIABILITY LIMITED.—Section 4022

14 of the Employee Retirement Income Security Act of

15 1974, as amended by this Act, is amended by adding

16 at the end the following new subsection:

17 ‘‘(h) SPECIAL RULE FOR PLANS ELECTING CERTAIN

18 FUNDING REQUIREMENTS.—During any period in which

19 an election by a plan under section 403 of the Pension

20 Security and Transparency Act of 2005 is in effect, then

21 this section and section 4044(a)(3) shall be applied by

22 treating the first day of the first applicable plan year as

23 the termination date of the plan. This subsection shall not

24 apply to any plan for which an election under section

25 403(h) of such Act is in effect.’’.
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1 (3) LIMITATION ON DEDUCTIONS UNDER CER2 TAIN PLANS.—Section 404(a)(7)(C)(iii) of the Inter3 nal Revenue Code of 1986, as added by this Act, is

4 amended by adding at the end the following new

5 sentence: ‘‘This clause shall also apply to any plan

6 for a plan year if an election under section 403 of

7 the Pension Security and Transparency Act of 2005

8 is in effect for such year.’’

9 (4) NOTICE.—In the case of a plan amendment

10 adopted in order to comply with this section, any no11 tice required under section 204(h) of such Act or

12 section 4980F(e) of such Code shall be provided

13 within 15 days of the effective date of such plan

14 amendment. This subsection shall not apply to any

15 plan unless such plan is maintained pursuant to one

16 or more collective bargaining agreements between

17 employee representatives and 1 or more employers.

18 (g) SPECIAL RULES FOR TERMINATION OF ELIGIBLE

19 PLANS.—During any period an election is in effect under

20 this section with respect to an eligible plan, the Pension

21 Benefit Guaranty Corporation shall, before it seeks or ap22 proves a termination of such plan under section 4041(c)

23 or 4042 of the Employee Retirement Income Security Act

24 of 1974—
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1 (1) make a determination under section

2 4041(c)(4) or 4042(i) of such Act whether the ter3 mination would be necessary if the Secretary of the

4 Treasury were to enter into an agreement under sec5 tion 4047(a) of such Act which provides an alter6 native funding agreement to replace the amortiza7 tion schedule under this section, and

8 (2) if the Corporation determines such an

9 agreement would make such termination unneces10 sary, take all necessary actions to ensure the agree11 ment is entered into.

12 The Pension Benefit Guaranty Corporation shall make the

13 determination under paragraph (1) within 90 days of re14 ceiving all information needed in connection with a request

15 for a termination (or if no such request is made, within

16 90 days of consideration of the termination by the Cor17 poration).

18 (h) CERTAIN BENEFIT ACCRUALS AND INCREASES

19 ALLOWED IF ADDITIONAL CONTRIBUTIONS MADE TO

20 COVER COSTS.—

21 (1) IN GENERAL.—If an employer elects the ap22 plication of this subsection—

23 (A) the requirements of paragraphs (2)

24 and (3) of subsection (b) shall not apply with
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1 respect to any eligible plan maintained by the

2 employer and specified in the election, and

3 (B) the minimum required contribution

4 under subsection (d) for any plan year with re5 spect to the plan shall be increased by the

6 amounts described in paragraphs (2) and (3).

7 Any liabilities and assets taken into account under

8 this subsection shall not be taken into account in de9 termining the unfunded liability of the plan for pur10 poses of subsection (d).

11 (2) CURRENT FUNDING OF ACCRUALS AND IN12 CREASES.—The amount determined under this para13 graph for any plan year is the target normal cost

14 which would occur under section 303(b) of such Act

15 and 430(b) of such Code if—

16 (A) any benefit accrual, or benefit increase

17 taking effect, during the plan year by reason of

18 this subsection were treated as having been ac19 crued or earned during the plan year, and

20 (B) the plan were treated as if it were in

21 at-risk status.

22 (3) FUNDING MUST BE MAINTAINED.—The

23 amount determined under this paragraph for any

24 plan year is the amount of any increase in the short25 fall amortization charge which would occur under
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1 section 303(c) of such Act and 430(c) of such Code

2 if—

3 (A) the funding target were determined by

4 only taking into account benefits to which para5 graph (2) applied for preceding plan years,

6 (B) the only assets taken into account

7 were the contributions required under this para8 graph and paragraph (2) for preceding plan

9 years (and any earnings thereon),

10 (C) the amortization period included only

11 the plan year,

12 (D) the transition rule under section

13 303(c)(4)(B) of such Act and section

14 430(c)(4)(B) of such Code did not apply, and

15 (E) the plan were treated as if it were in

16 at-risk status.

17 (4) SPECIAL RULES FOR YEARS BEFORE 2007.—

18 Notwithstanding any other provision of this Act, in

19 the case of an applicable plan year of an eligible

20 plan to which this subsection applies which begins

21 before January 1, 2007, in determining the amounts

22 described in paragraphs (2) and (3) for such plan

23 year—
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1 (A) the provisions of, and amendments

2 made by, sections 101, 102, 111, and 112 shall

3 apply to such plan year, except that

4 (B) the interest rate used under section

5 303 of such Act and section 430 of such Code

6 for purposes of applying paragraphs (2) and (3)

7 to such plan year shall be the interest rate de8 termined under section 302(b)(5) of such Act

9 and section 412(b)(5) of such Code, as in effect

10 for plan years beginning in 2005.

11 (5) ELECTION OUT OF SECTION.—An employer

12 maintaining an eligible plan to which this subsection

13 applies may make a one-time election with respect to

14 any applicable plan year not to have this section

15 apply to such plan year and all subsequent plan

16 years. Subject to subsection (d)(2), the minimum re17 quired contribution under section 303 of such Act

18 and 430 of such Code for all such plan years shall

19 be determined without regard to this section.

20 (i) EXCLUSION OF CERTAIN EMPLOYEES FROM MIN21 IMUM COVERAGE REQUIREMENTS.—

22 (1) IN GENERAL.—Section 410(b)(3) of such

23 Code is amended by striking the last sentence and

24 inserting the following: ‘‘For purposes of subpara25 graph (B), management pilots who are not rep-
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1 resented in accordance with title II of the Railway

2 Labor Act shall be treated as covered by a collective

3 bargaining agreement described in such subpara4 graph if the management pilots manage the flight

5 operations of air pilots who are so represented and

6 the management pilots are, pursuant to the terms of

7 the agreement, included in the group of employees

8 benefitting under the trust described in such sub9 paragraph. Subparagraph (B) shall not apply in the

10 case of a plan which provides contributions or bene11 fits for employees whose principal duties are not cus12 tomarily performed aboard an aircraft in flight

13 (other than management pilots described in the pre14 ceding sentence).’’

15 (2) EFFECTIVE DATE.—The amendment made

16 by this subsection shall apply to years beginning be17 fore, on, or after the date of the enactment of this

18 Act.

19 (j) EFFECTIVE DATE.—Except as otherwise provided

20 in this section, the amendments made by this section shall

21 apply to plan years ending after the date of the enactment

22 of this Act.
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1 SEC. 404. LIMITATION ON PBGC GUARANTEE OF SHUT2 DOWN AND OTHER BENEFITS.

3 (a) IN GENERAL.—Section 4022(b) of the Employee

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

5 1322(b)) is amended by adding at the end the following:

6 ‘‘(8) If a benefit is payable by reason of—

7 ‘‘(A) a plant shutdown or similar event; or

8 ‘‘(B) any event other than attainment of

9 any age, performance of any service, receipt or

10 derivation of any compensation, or the occur11 rence of death or disability,

12 this section shall be applied as if a plan amendment

13 had been adopted on the date such event occurred

14 that provides for the payment of such benefit.’’.

15 (b) EFFECTIVE DATE.—The amendment made by

16 this section shall apply to benefits that become payable

17 as a result of a plant shutdown or other similar event,

18 as such terms are used in the amendment made by sub19 section (a), that occurs after July 26, 2005.

20 SEC. 405. RULES RELATING TO BANKRUPTCY OF EM21 PLOYER.

22 (a) GUARANTEE.—Section 4022 of the Employee Re23 tirement Income Security Act of 1974 (29 U.S.C. 1322),

24 as amended by this Act, is amended by adding at the end

25 the following:
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1 ‘‘(i) BANKRUPTCY FILING SUBSTITUTED FOR TER2 MINATION DATE.—If a contributing sponsor of a plan has

3 filed or has had filed against such person a petition seek4 ing liquidation or reorganization in a case under title 11,

5 United States Code, or under any similar Federal law or

6 law of a State or political subdivision, and the case has

7 not been dismissed as of the termination date, then this

8 section shall be applied by treating the date such petition

9 was filed as the termination date of the plan.’’.

10 (b) ALLOCATION OF ASSETS AMONG PRIORITY

11 GROUPS IN BANKRUPTCY PROCEEDINGS.—Section 4044

12 of the Employee Retirement Income Security Act of 1974

13 (29 U.S.C. 1344) is amended by adding at the end the

14 following:

15 ‘‘(e) BANKRUPTCY FILING SUBSTITUTED FOR TER16 MINATION DATE.—If a contributing sponsor of a plan has

17 filed or has had filed against such person a petition seek18 ing liquidation or reorganization in a case under title 11,

19 United States Code, or under any similar Federal law or

20 law of a State or political subdivision, and the case has

21 not been dismissed as of the termination date, then sub22 section (a)(3) shall be applied by treating the date such

23 petition was filed as the termination date of the plan.’’.

24 (c) EFFECTIVE DATE.—The amendments made this

25 section shall apply with respect to proceedings initiated
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1 under title 11, United States Code, or under any similar

2 Federal law or law of a State or political subdivision, on

3 or after the date that is 30 days after the date of enact4 ment of this Act.

5 SEC. 406. PBGC PREMIUMS FOR NEW PLANS OF SMALL EM6 PLOYERS.

7 (a) IN GENERAL.—Subparagraph (A) of section

8 4006(a)(3) of the Employee Retirement Income Security

9 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—

10 (1) in clause (i), by inserting ‘‘other than a new

11 single-employer plan (as defined in subparagraph

12 (F)) maintained by a small employer (as so de13 fined),’’ after ‘‘single-employer plan,’’,

14 (2) in clause (iii), by striking the period at the

15 end and inserting ‘‘, and’’, and

16 (3) by adding at the end the following new

17 clause:

18 ‘‘(v) in the case of a new single-employer plan

19 (as defined in subparagraph (F)) maintained by a

20 small employer (as so defined) for the plan year, $5

21 for each individual who is a participant in such plan

22 during the plan year.’’

23 (b) DEFINITION OF NEW SINGLE-EMPLOYER

24 PLAN.—Section 4006(a)(3) of the Employee Retirement

25 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is
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1 amended by adding at the end the following new subpara2 graph:

3 ‘‘(F)(i) For purposes of this paragraph, a single-em4 ployer plan maintained by a contributing sponsor shall be

5 treated as a new single-employer plan for each of its first

6 5 plan years if, during the 36-month period ending on the

7 date of the adoption of such plan, the sponsor or any

8 member of such sponsor’s controlled group (or any prede9 cessor of either) did not establish or maintain a plan to

10 which this title applies with respect to which benefits were

11 accrued for substantially the same employees as are in the

12 new single-employer plan.

13 ‘‘(ii)(I) For purposes of this paragraph, the term

14 ‘small employer’ means an employer which on the first day

15 of any plan year has, in aggregation with all members of

16 the controlled group of such employer, 100 or fewer em17 ployees.

18 ‘‘(II) In the case of a plan maintained by two or more

19 contributing sponsors that are not part of the same con20 trolled group, the employees of all contributing sponsors

21 and controlled groups of such sponsors shall be aggregated

22 for purposes of determining whether any contributing

23 sponsor is a small employer.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to plans first effective after Decem3 ber 31, 2005.

4 SEC. 407. PBGC PREMIUMS FOR SMALL AND NEW PLANS.

5 (a) NEW PLANS.—Subparagraph (E) of section

6 4006(a)(3) of the Employee Retirement Income Security

7 Act of 1974 (29 U.S.C. 1306(a)(3)), as amended by this

8 Act, is amended by adding at the end the following new

9 clause:

10 ‘‘(iv) In the case of a new defined benefit plan, the

11 amount determined under clause (ii) for any plan year

12 shall be an amount equal to the product of the amount

13 determined under clause (ii) and the applicable percent14 age. For purposes of this clause, the term ‘applicable per15 centage’ means—

16 ‘‘(I) 0 percent, for the first plan year.

17 ‘‘(II) 20 percent, for the second plan year.

18 ‘‘(III) 40 percent, for the third plan year.

19 ‘‘(IV) 60 percent, for the fourth plan year.

20 ‘‘(V) 80 percent, for the fifth plan year.

21 For purposes of this clause, a defined benefit plan (as de22 fined in section 3(35)) maintained by a contributing spon23 sor shall be treated as a new defined benefit plan for each

24 of its first 5 plan years if, during the 36-month period

25 ending on the date of the adoption of the plan, the sponsor
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1 and each member of any controlled group including the

2 sponsor (or any predecessor of either) did not establish

3 or maintain a plan to which this title applies with respect

4 to which benefits were accrued for substantially the same

5 employees as are in the new plan.’’

6 (b) SMALL PLANS.—Paragraph (3) of section

7 4006(a) of the Employee Retirement Income Security Act

8 of 1974 (29 U.S.C. 1306(a)), is amended—

9 (1) by striking ‘‘The’’ in subparagraph (E)(i)

10 and inserting ‘‘Except as provided in subparagraph

11 (G), the’’, and

12 (2) by inserting after subparagraph (F) the fol13 lowing new subparagraph:

14 ‘‘(G)(i) In the case of an employer who has 25 or

15 fewer employees on the first day of the plan year, the addi16 tional premium determined under subparagraph (E) for

17 each participant shall not exceed $5 multiplied by the

18 number of participants in the plan as of the close of the

19 preceding plan year.

20 ‘‘(ii) For purposes of clause (i), whether an employer

21 has 25 or fewer employees on the first day of the plan

22 year is determined by taking into consideration all of the

23 employees of all members of the contributing sponsor’s

24 controlled group. In the case of a plan maintained by two

25 or more contributing sponsors, the employees of all con-
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1 tributing sponsors and their controlled groups shall be ag2 gregated for purposes of determining whether the 25-or3 fewer-employees limitation has been satisfied.’’

4 (c) EFFECTIVE DATES.—

5 (1) SUBSECTION (a).—The amendments made

6 by subsection (a) shall apply to plans first effective

7 after December 31, 2005.

8 (2) SUBSECTION (b).—The amendments made

9 by subsection (b) shall apply to plan years beginning

10 after December 31, 2005.

11 SEC. 408. AUTHORIZATION FOR PBGC TO PAY INTEREST ON

12 PREMIUM OVERPAYMENT REFUNDS.

13 (a) IN GENERAL.—Section 4007(b) of the Employ14 ment Retirement Income Security Act of 1974 (29 U.S.C.

15 1307(b)) is amended—

16 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’,

17 and

18 (2) by inserting at the end the following new

19 paragraph:

20 ‘‘(2) The corporation is authorized to pay, subject to

21 regulations prescribed by the corporation, interest on the

22 amount of any overpayment of premium refunded to a des23 ignated payor. Interest under this paragraph shall be cal24 culated at the same rate and in the same manner as inter25 est is calculated for underpayments under paragraph (1).’’
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall apply to interest accruing for periods

3 beginning not earlier than the date of the enactment of

4 this Act.

5 SEC. 409. RULES FOR SUBSTANTIAL OWNER BENEFITS IN

6 TERMINATED PLANS.

7 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

8 Section 4022(b)(5) of the Employee Retirement Income

9 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended

10 to read as follows:

11 ‘‘(5)(A) For purposes of this paragraph, the term

12 ‘majority owner’ means an individual who, at any time

13 during the 60-month period ending on the date the deter14 mination is being made—

15 ‘‘(i) owns the entire interest in an unincor16 porated trade or business,

17 ‘‘(ii) in the case of a partnership, is a partner

18 who owns, directly or indirectly, 50 percent or more

19 of either the capital interest or the profits interest

20 in such partnership, or

21 ‘‘(iii) in the case of a corporation, owns, directly

22 or indirectly, 50 percent or more in value of either

23 the voting stock of that corporation or all the stock

24 of that corporation.
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1 For purposes of clause (iii), the constructive ownership

2 rules of section 1563(e) of the Internal Revenue Code of

3 1986 (other than paragraph (3)(C) thereof) shall apply,

4 including the application of such rules under section

5 414(c) of such Code.

6 ‘‘(B) In the case of a participant who is a majority

7 owner, the amount of benefits guaranteed under this sec8 tion shall equal the product of—

9 ‘‘(i) a fraction (not to exceed 1) the numerator

10 of which is the number of years from the later of the

11 effective date or the adoption date of the plan to the

12 termination date, and the denominator of which is

13 10, and

14 ‘‘(ii) the amount of benefits that would be guar15 anteed under this section if the participant were not

16 a majority owner.’’

17 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

18 (1) Section 4044(a)(4)(B) of the Employee Re19 tirement Income Security Act of 1974 (29 U.S.C.

20 1344(a)(4)(B)) is amended by striking ‘‘section

21 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.

22 (2) Section 4044(b) of such Act (29 U.S.C.

23 1344(b)) is amended—

24 (A) by striking ‘‘(5)’’ in paragraph (2) and

25 inserting ‘‘(4), (5),’’, and
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1 (B) by redesignating paragraphs (3)

2 through (6) as paragraphs (4) through (7), re3 spectively, and by inserting after paragraph (2)

4 the following new paragraph:

5 ‘‘(3) If assets available for allocation under

6 paragraph (4) of subsection (a) are insufficient to

7 satisfy in full the benefits of all individuals who are

8 described in that paragraph, the assets shall be allo9 cated first to benefits described in subparagraph (A)

10 of that paragraph. Any remaining assets shall then

11 be allocated to benefits described in subparagraph

12 (B) of that paragraph. If assets allocated to such

13 subparagraph (B) are insufficient to satisfy in full

14 the benefits described in that subparagraph, the as15 sets shall be allocated pro rata among individuals on

16 the basis of the present value (as of the termination

17 date) of their respective benefits described in that

18 subparagraph.’’

19 (c) CONFORMING AMENDMENTS.—

20 (1) Section 4021 of the Employee Retirement

21 Income Security Act of 1974 (29 U.S.C. 1321) is

22 amended—

23 (A) in subsection (b)(9), by striking ‘‘as

24 defined in section 4022(b)(6)’’, and
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1 (B) by adding at the end the following new

2 subsection:

3 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub4 stantial owner’ means an individual who, at any time dur5 ing the 60-month period ending on the date the determina6 tion is being made—

7 ‘‘(1) owns the entire interest in an unincor8 porated trade or business,

9 ‘‘(2) in the case of a partnership, is a partner

10 who owns, directly or indirectly, more than 10 per11 cent of either the capital interest or the profits inter12 est in such partnership, or

13 ‘‘(3) in the case of a corporation, owns, directly

14 or indirectly, more than 10 percent in value of either

15 the voting stock of that corporation or all the stock

16 of that corporation.

17 For purposes of paragraph (3), the constructive ownership

18 rules of section 1563(e) of the Internal Revenue Code of

19 1986 (other than paragraph (3)(C) thereof) shall apply,

20 including the application of such rules under section

21 414(c) of such Code.’’

22 (2) Section 4043(c)(7) of such Act (29 U.S.C.

23 1343(c)(7)) is amended by striking ‘‘section

24 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’.

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

3 shall apply to plan terminations—

4 (A) under section 4041(c) of the Employee

5 Retirement Income Security Act of 1974 (29

6 U.S.C. 1341(c)) with respect to which notices

7 of intent to terminate are provided under sec8 tion 4041(a)(2) of such Act (29 U.S.C.

9 1341(a)(2)) after December 31, 2005, and

10 (B) under section 4042 of such Act (29

11 U.S.C. 1342) with respect to which proceedings

12 are instituted by the corporation after such

13 date.

14 (2) CONFORMING AMENDMENTS.—The amend15 ments made by subsection (c) shall take effect on

16 January 1, 2006.

17 SEC. 410. ACCELERATION OF PBGC COMPUTATION OF BEN18 EFITS ATTRIBUTABLE TO RECOVERIES FROM

19 EMPLOYERS.

20 (a) MODIFICATION OF AVERAGE RECOVERY PER21 CENTAGE OF OUTSTANDING AMOUNT OF BENEFIT LI22 ABILITIES PAYABLE BY CORPORATION TO PARTICIPANTS

23 AND BENEFICIARIES.—Section 4022(c)(3)(B)(ii) of the

24 Employee Retirement Income Security Act of 1974 (29

25 U.S.C. 1322(c)(3)(B)(ii)) is amended to read as follows:
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1 ‘‘(ii) notices of intent to terminate

2 were provided (or in the case of a termi3 nation by the corporation, a notice of de4 termination under section 4042 was

5 issued) during the 5-Federal fiscal year pe6 riod ending with the third fiscal year pre7 ceding the fiscal year in which occurs the

8 date of the notice of intent to terminate

9 (or the notice of determination under sec10 tion 4042) with respect to the plan termi11 nation for which the recovery ratio is being

12 determined.’’

13 (b) VALUATION OF SECTION 4062(c) LIABILITY FOR

14 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

15 PARTICIPANTS AND BENEFICIARIES.—

16 (1) SINGLE-EMPLOYER PLAN BENEFITS GUAR17 ANTEED.—Section 4022(c)(3)(A) of the Employee

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

19 13) is amended to read as follows:

20 ‘‘(A) IN GENERAL.—Except as provided in

21 subparagraph (C), the term ‘recovery ratio’

22 means the ratio which—

23 ‘‘(i) the sum of the values of all recov24 eries under section 4062, 4063, or 4064,

25 determined by the corporation in connec-
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1 tion with plan terminations described

2 under subparagraph (B), bears to

3 ‘‘(ii) the sum of all unfunded benefit

4 liabilities under such plans as of the termi5 nation date in connection with any such

6 prior termination.’’.

7 (2) ALLOCATION OF ASSETS.—Section 4044 of

8 the Employee Retirement Income Security Act of

9 1974 (29 U.S.C. 1362) is amended by adding at the

10 end the following new subsection:

11 ‘‘(e) VALUATION OF SECTION 4062(c) LIABILITY FOR

12 DETERMINING AMOUNTS PAYABLE BY CORPORATION TO

13 PARTICIPANTS AND BENEFICIARIES.—

14 ‘‘(1) IN GENERAL.—In the case of a terminated

15 plan, the value of the recovery of liability under sec16 tion 4062(c) allocable as a plan asset under this sec17 tion for purposes of determining the amount of ben18 efits payable by the corporation shall be determined

19 by multiplying—

20 ‘‘(A) the amount of liability under section

21 4062(c) as of the termination date of the plan,

22 by

23 ‘‘(B) the applicable section 4062(c) recov24 ery ratio.
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1 ‘‘(2) SECTION 4062(c) RECOVERY RATIO.—For

2 purposes of this subsection—

3 ‘‘(A) IN GENERAL.—Except as provided in

4 subparagraph (C), the term ‘section 4062(c) re5 covery ratio’ means the ratio which—

6 ‘‘(i) the sum of the values of all recov7 eries under section 4062(c) determined by

8 the corporation in connection with plan

9 terminations described under subparagraph

10 (B), bears to

11 ‘‘(ii) the sum of all the amounts of li12 ability under section 4062(c) with respect

13 to such plans as of the termination date in

14 connection with any such prior termi15 nation.

16 ‘‘(B) PRIOR TERMINATIONS.—A plan ter17 mination described in this subparagraph is a

18 termination with respect to which—

19 ‘‘(i) the value of recoveries under sec20 tion 4062(c) have been determined by the

21 corporation, and

22 ‘‘(ii) notices of intent to terminate

23 were provided (or in the case of a termi24 nation by the corporation, a notice of de25 termination under section 4042 was
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1 issued) during the 5-Federal fiscal year pe2 riod ending with the third fiscal year pre3 ceding the fiscal year in which occurs the

4 date of the notice of intent to terminate

5 (or the notice of determination under sec6 tion 4042) with respect to the plan termi7 nation for which the recovery ratio is being

8 determined.

9 ‘‘(C) EXCEPTION.—In the case of a termi10 nated plan with respect to which the out11 standing amount of benefit liabilities exceeds

12 $20,000,000, the term ‘section 4062(c) recovery

13 ratio’ means, with respect to the termination of

14 such plan, the ratio of—

15 ‘‘(i) the value of the recoveries on be16 half of the plan under section 4062(c), to

17 ‘‘(ii) the amount of the liability owed

18 under section 4062(c) as of the date of

19 plan termination to the trustee appointed

20 under section 4042 (b) or (c).

21 ‘‘(3) SUBSECTION NOT TO APPLY.—This sub22 section shall not apply with respect to the deter23 mination of—

24 ‘‘(A) whether the amount of outstanding

25 benefit liabilities exceeds $20,000,000, or
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1 ‘‘(B) the amount of any liability under sec2 tion 4062 to the corporation or the trustee ap3 pointed under section 4042 (b) or (c).

4 ‘‘(4) DETERMINATIONS.—Determinations under

5 this subsection shall be made by the corporation.

6 Such determinations shall be binding unless shown

7 by clear and convincing evidence to be unreason8 able.’’

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply for any termination for which no11 tices of intent to terminate are provided (or in the case

12 of a termination by the corporation, a notice of determina13 tion under section 4042 under the Employee Retirement

14 Income Security Act of 1974 is issued) on or after the

15 date which is 30 days after the date of enactment of this

16 section.

17 SEC. 411. TREATMENT OF CERTAIN PLANS WHERE CES18 SATION OR CHANGE IN MEMBERSHIP OF A

19 CONTROLLED GROUP.

20 (a) IN GENERAL.—Section 4041(b) of the Employee

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

22 1341(b)) is amended by adding at the end the following

23 new paragraph:
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1 ‘‘(5) SPECIAL RULE FOR CERTAIN PLANS

2 WHERE CESSATION OR CHANGE IN MEMBERSHIP OF

3 ACONTROLLED GROUP.—

4 ‘‘(A) IN GENERAL.—Except as provided in

5 subparagraph (B), if—

6 ‘‘(i) there is transaction or series of

7 transactions which result in a single-em8 ployer plan which is a defined benefit plan

9 being maintained by an employer which is

10 not a member of the same controlled group

11 of which the employer maintaining the

12 plan before such transaction or series of

13 transactions was a member,

14 ‘‘(ii) the corporation treats the trans15 action or series of transactions as resulting

16 in a standard termination to which this

17 subsection applies, and

18 ‘‘(iii) the plan is fully funded,

19 then the interest rate used in determining

20 whether the plan is sufficient for benefit liabil21 ities for purposes of this subsection shall be the

22 interest rate used in determining whether the

23 plan is fully funded.
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1 ‘‘(B) LIMITATIONS.—Subparagraph (A)

2 shall not apply to any transaction or series of

3 transactions unless—

4 ‘‘(i) any employer maintaining the

5 plan immediately before or after such

6 transaction or series of transactions—

7 ‘‘(I) has an outstanding senior

8 unsecured debt instrument which is

9 rated investment grade by each of the

10 nationally recognized statistical rating

11 organizations for corporate bonds that

12 has issued a credit rating for such in13 strument, or

14 ‘‘(II) if no such debt instrument

15 of such employer has been rated by

16 such an organization but 1 or more of

17 such organizations has made an issuer

18 credit rating for such employer, all

19 such organizations which have so

20 rated the employer have rated such

21 employer investment grade, and

22 ‘‘(ii) the employer maintaining the

23 plan after the transaction or series of

24 transactions employs at least 30 percent of

25 the employees located in the United States
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1 who were employed by such employer im2 mediately before the transaction or series

3 of transactions.

4 ‘‘(C) FULLY FUNDED.—For purposes of

5 subparagraph (A), a plan shall be treated as

6 fully funded with respect to any transaction or

7 series of transactions if—

8 ‘‘(i) in the case of a transaction or se9 ries of transactions which occur in a plan

10 year beginning before January 1, 2007,

11 the funded current liability percentage de12 termined under section 302(d) for the plan

13 year is at least 100 percent, and

14 ‘‘(ii) in the case of a transaction or

15 series of transactions which occur in a plan

16 year beginning on or after such date, the

17 funding target attainment percentage de18 termined under section 303 is, as of the

19 valuation date for such plan year, at least

20 100 percent.’’

21 (b) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to any transaction or series of

23 transactions occurring on and after the date of the enact24 ment of this Act.
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1 SEC. 412. EFFECT OF TITLE.

2 The decreases in Federal outlays resulting from the

3 enactment of this title, and the amendments made by this

4 title, shall be treated as in lieu of the decreases in Federal

5 outlays which—

6 (1) resulted from amendments made to title IV

7 of the Employee Retirement Income Security Act of

8 1974 (29 U.S.C. 1301 et seq.); and

9 (2) were contained in an Act enacted pursuant

10 to the concurrent resolution on the budget for fiscal

11 year 2006.

12 SEC. 413. AGE REQUIREMENT FOR EMPLOYERS.

13 (a) SINGLE-EMPLOYER PLAN BENEFITS GUARAN14 TEED.—Section 4022(b) of the Employee Retirement In15 come Security Act of 1974 (29 U.S.C. 1322(b)) is amend16 ed in the flush matter following paragraph (3), by adding

17 at the end the following: ‘‘If, at the time of termination

18 of a plan under this title, regulations prescribed by the

19 Federal Aviation Administration require an individual to

20 separate from service as a commercial airline pilot after

21 attaining any age before age 65, paragraph (3) shall be

22 applied to an individual who is a participant in the plan

23 by reason of such service by substituting such age for age

24 65.’’.

25 (b) MULTIEMPLOYER PLAN BENEFITS GUARAN26 TEED.—Section 4022B(a) of the Employee Retirement In-
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1 come Security Act of 1974 (29 U.S.C. 1322b(a)) is

2 amended by adding at the end the following: ‘‘If, at the

3 time of termination of a plan under this title, regulations

4 prescribed by the Federal Aviation Administration require

5 an individual to separate from service as a commercial air6 line pilot after attaining any age before age 65, this sub7 section shall be applied to an individual who is a partici8 pant in the plan by reason of such service by substituting

9 such age for age 65.’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to benefits payable on or after the

12 date of enactment of this Act.

13 TITLE V—DISCLOSURE

14 SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICE.

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

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

17 1021(f)) is amended to read as follows:

18 ‘‘(f) DEFINED BENEFIT PLAN FUNDING NOTICES.—

19 ‘‘(1) IN GENERAL.—The administrator of a de20 fined benefit plan shall for each plan year provide a

21 plan funding notice to the Pension Benefit Guaranty

22 Corporation, to each plan participant and bene23 ficiary, to each labor organization representing such

24 participants or beneficiaries, and, in the case of a
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1 multiemployer plan, to each employer that has an

2 obligation to contribute to the plan.

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

4 ‘‘(A) IDENTIFYING INFORMATION.—Each

5 notice required under paragraph (1) shall con6 tain identifying information, including the name

7 of the plan, the address and phone number of

8 the plan administrator and the plan’s principal

9 administrative officer, each plan sponsor’s em10 ployer identification number, and the plan num11 ber of the plan.

12 ‘‘(B) SPECIFIC INFORMATION.—A plan

13 funding notice under paragraph (1) shall

14 include—

15 ‘‘(i)(I) in the case of a single-employer

16 plan, a statement as to whether the plan’s

17 funding target attainment percentage (as

18 defined in section 303(d)(2)) for the plan

19 year to which the notice relates, and for

20 the 2 preceding plan years, is at least 100

21 percent (and, if not, the actual percent22 ages), or

23 ‘‘(II) in the case of a multiemployer

24 plan, a statement as to whether the plan’s

25 funded percentage (as defined in section
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1 305(i)) for the plan year to which the no2 tice relates, and for the 2 preceding plan

3 years, is at least 100 percent (and, if not,

4 the actual percentages),

5 ‘‘(ii)(I) in the case of a single-em6 ployer plan, a statement of the value of the

7 plan’s assets and liabilities for the plan

8 year to which the notice relates as of the

9 last day of the plan year to which the no10 tice relates determined using the asset

11 valuation under subclause (I) of section

12 4006(a)(3)(E)(iii) and the interest rate

13 under subclause (II) of such section, and

14 ‘‘(II) in the case of a multiemployer

15 plan, a statement of the value of the plan’s

16 assets and liabilities for the plan year to

17 which the notice relates as the last day of

18 such plan year,

19 ‘‘(iii) a statement of the number of

20 participants who are—

21 ‘‘(I) retired or separated from

22 service and are receiving benefits,

23 ‘‘(II) retired or separated partici24 pants entitled to future benefits, and
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1 ‘‘(II) active participants under

2 the plan,

3 ‘‘(iv) a statement setting forth the

4 funding policy of the plan and the asset al5 location of investments under the plan (ex6 pressed as percentages of total assets) as

7 of the end of the plan year to which the

8 notice relates,

9 ‘‘(v) in the case of a multiemployer

10 plan, whether the plan was in critical or

11 endangered status under section 305 for

12 such plan year and, if so—

13 ‘‘(I) a list of the actions taken by

14 the plan to improve its funding status,

15 and

16 ‘‘(II) a statement describing how

17 a person may obtain a copy of the

18 plan’s improvement or rehabilitation

19 plan, as appropriate, adopted under

20 section 305 and the actuarial and fi21 nancial data that demonstrate any ac22 tion taken by the plan toward fiscal

23 improvement,

24 ‘‘(vi) a summary of any funding im25 provement plan, rehabilitation plan, or
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1 modification thereof adopted under section

2 305 during the plan year to which the no3 tice relates,

4 ‘‘(vii) in the case of any plan amend5 ments, scheduled benefit increase or reduc6 tion, or other known event taking effect in

7 the current plan year and having a mate8 rial effect on plan liabilities or assets for

9 the year (as defined in regulations by the

10 Secretary), an explanation of the amend11 ment, schedule increase or reduction, or

12 event, and a projection to the end of such

13 plan year of the effect of the amendment,

14 scheduled increase or reduction, or event

15 on plan liabilities,

16 ‘‘(viii)(I) in the case of a single-em17 ployer plan, a summary of the rules gov18 erning termination of single-employer plans

19 under subtitle C of title IV, or

20 ‘‘(II) in the case of a multiemployer

21 plan, a summary of the rules governing re22 organization or insolvency, including the

23 limitations on benefit payments and any

24 potential benefit reductions and suspen25 sions (and the potential effects of such lim-
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1 itations, reductions, and suspensions on

2 the plan), and

3 ‘‘(ix) a general description of the ben4 efits under the plan which are eligible to be

5 guaranteed by the Pension Benefit Guar6 anty Corporation, along with an expla7 nation of the limitations on the guarantee

8 and the circumstances under which such

9 limitations apply.

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

11 under paragraph (1) shall include—

12 ‘‘(i) in the case of a multiemployer

13 plan, a statement that the plan adminis14 trator shall provide, upon written request,

15 to any labor organization representing plan

16 participants and beneficiaries and any em17 ployer that has an obligation to contribute

18 to the plan, a copy of the annual report

19 filed with the Secretary under section

20 104(a), and

21 ‘‘(ii) any additional information which

22 the plan administrator elects to include to

23 the extent not inconsistent with regulations

24 prescribed by the Secretary.

25 ‘‘(3) TIME FOR PROVIDING NOTICE.—
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1 ‘‘(A) IN GENERAL.—Any notice under

2 paragraph (1) shall be provided not later than

3 90 days after the end of the plan year to which

4 the notice relates.

5 ‘‘(B) EXCEPTION FOR SMALL PLANS.—In

6 the case of a small plan (as such term is used

7 under section 303(g)(2)(B)) any notice under

8 paragraph (1) shall be provided upon filing of

9 the annual report under section 104(a).

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

11 paragraph (1)—

12 ‘‘(A) shall be provided in a form and man13 ner prescribed in regulations of the Secretary,

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

15 be understood by the average plan participant,

16 and

17 ‘‘(C) may be provided in written, elec18 tronic, or other appropriate form to the extent

19 such form is reasonably accessible to persons to

20 whom the notice is required to be provided.’’.

21 (b) MODEL NOTICE.—Not later than 180 days after

22 the date of the enactment of this Act, the Secretary of

23 Labor shall publish a model version of the notice required

24 by section 101(f) of the Employee Retirement Income Se25 curity Act of 1974. The Secretary of Labor may promul-
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1 gate any interim final rules as the Secretary determines

2 appropriate to carry out the provisions of this subsection.

3 (c) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to plan years beginning after De5 cember 31, 2005.

6 SEC. 502. ACCESS TO MULTIEMPLOYER PENSION PLAN IN7 FORMATION.

8 (a) FINANCIAL INFORMATION WITH RESPECT TO

9 MULTIEMPLOYER PLANS.—

10 (1) IN GENERAL.—Section 101 of the Employee

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

12 1021) is amended—

13 (A) by redesignating subsection (k) as sub14 section (l); and

15 (B) by inserting after subsection (j) the

16 following new subsection:

17 ‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE

18 AVAILABLE ON REQUEST.—

19 ‘‘(1) IN GENERAL.—Each administrator of a

20 multiemployer plan shall, upon written request, fur21 nish to any plan participant or beneficiary, employee

22 representative, or any employer that has an obliga23 tion to contribute to the plan—

24 ‘‘(A) a copy of any periodic actuarial re25 port (including sensitivity testing) received by
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1 the plan for any plan year which has been in

2 the plan’s possession for at least 30 days, and

3 ‘‘(B)(i) a copy of any quarterly, semi-an4 nual, or annual financial report prepared for

5 the plan by any plan investment manager or ad6 visor or other fiduciary which has been in the

7 plan’s possession for at least 30 days, or

8 ‘‘(ii) at the discretion of the person sub9 mitting the written request, a copy of a quar10 terly summary of the financial reports described

11 clause (i).

12 ‘‘(2) COMPLIANCE.—Information required to be

13 provided under paragraph (1) —

14 ‘‘(A) shall be provided to the requesting

15 participant, beneficiary, or employer within 30

16 days after the request in a form and manner

17 prescribed in regulations of the Secretary,

18 ‘‘(B) may be provided in written, elec19 tronic, or other appropriate form to the extent

20 such form is reasonably accessible to persons to

21 whom the information is required to be pro22 vided, and

23 ‘‘(C) shall not—

24 ‘‘(i) include any individually identifi25 able information regarding any plan partic-
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1 ipant, beneficiary, employee, fiduciary, or

2 contributing employer, or

3 ‘‘(ii) reveal any proprietary informa4 tion regarding the plan, any contributing

5 employer, or entity providing services to

6 the plan.

7 ‘‘(3) LIMITATIONS.—In no case shall a partici8 pant, beneficiary, or employer be entitled under this

9 subsection to receive more than one copy of any re10 port described in paragraph (1) during any one 12-

11 month period. The administrator may make a rea12 sonable charge to cover copying, mailing, and other

13 costs of furnishing copies of information pursuant to

14 paragraph (1). The Secretary may by regulations

15 prescribe the maximum amount which will constitute

16 a reasonable charge under the preceding sentence.’’.

17 (2) ENFORCEMENT.—Section 502(c)(4) of such

18 Act (29 U.S.C. 1132(c)(4)) is amended by striking

19 ‘‘section 101(j)’’ and inserting ‘‘subsection (j) or (k)

20 of section 101’’.

21 (3) REGULATIONS.—The Secretary shall pre22 scribe regulations under section 101(k)(2) of the

23 Employee Retirement Income Security Act of 1974

24 (added by paragraph (1)) not later than 270 days

25 after the date of the enactment of this Act.
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1 (b) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY

2 TO MULTIEMPLOYER PLANS.—

3 (1) IN GENERAL.—Section 101 of such Act (as

4 amended by subsection (a)) is amended—

5 (A) by redesignating subsection (l) as sub6 section (m); and

7 (B) by inserting after subsection (k) the

8 following new subsection:

9 ‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABIL10 ITY.—

11 ‘‘(1) IN GENERAL.—The plan sponsor or ad12 ministrator of a multiemployer plan shall, upon writ13 ten request, furnish to any employer who has an ob14 ligation to contribute to the plan a notice of—

15 ‘‘(A) the estimated amount which would be

16 the amount of such employer’s withdrawal li17 ability under part 1 of subtitle E of title IV if

18 such employer withdrew on the last day of the

19 plan year preceding the date of the request, and

20 ‘‘(B) an explanation of how such estimated

21 liability amount was determined, including the

22 actuarial assumptions and methods used to de23 termine the value of the plan liabilities and as24 sets, the data regarding employer contributions,

25 unfunded vested benefits, annual changes in the
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1 plan’s unfunded vested benefits, and the appli2 cation of any relevant limitations on the esti3 mated withdrawal liability.

4 For purposes of subparagraph (B), the term ‘em5 ployer contribution’ means, in connection with a par6 ticipant, a contribution made by an employer as an

7 employer of such participant.

8 ‘‘(2) COMPLIANCE.—Any notice required to be

9 provided under paragraph (1)—

10 ‘‘(A) shall be provided to the requesting

11 employer within—

12 ‘‘(i) 180 days after the request in a

13 form and manner prescribed in regulations

14 of the Secretary, or

15 ‘‘(ii) subject to regulations of the Sec16 retary, such longer time as may be nec17 essary in the case of a plan that deter18 mines withdrawal liability based on any

19 method described under paragraph (4) or

20 (5) of section 4211(c); and

21 ‘‘(B) may be provided in written, elec22 tronic, or other appropriate form to the extent

23 such form is reasonably accessible to employers

24 to whom the information is required to be pro25 vided.
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1 ‘‘(3) LIMITATIONS.—In no case shall an em2 ployer be entitled under this subsection to receive

3 more than one notice described in paragraph (1)

4 during any one 12-month period. The person re5 quired to provide such notice may make a reasonable

6 charge to cover copying, mailing, and other costs of

7 furnishing such notice pursuant to paragraph (1).

8 The Secretary may by regulations prescribe the max9 imum amount which will constitute a reasonable

10 charge under the preceding sentence.’’.

11 (2) ENFORCEMENT.—Section 502(c)(4) of such

12 Act (29 U.S.C. 1132(c)(4)) is amended by striking

13 ‘‘section 101(j) or (k)’’ and inserting ‘‘subsection (j),

14 (k), or (l) of section 101’’.

15 (c) NOTICE OF AMENDMENT REDUCING FUTURE AC16 CRUALS.—Section 204(h)(1) of such Act (29 U.S.C.

17 1054(h)(1)) is amended by inserting at the end before the

18 period ‘‘and to each employer who has an obligation to

19 contribute to the plan.’’.

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to plan years beginning after De22 cember 31, 2005.
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1 SEC. 503. ADDITIONAL ANNUAL REPORTING REQUIRE2 MENTS.

3 (a) ADDITIONAL ANNUAL REPORTING REQUIRE4 MENTS WITH RESPECT TO DEFINED BENEFIT PLANS.—

5 (1) IN GENERAL.—Section 103 of the Employee

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

7 1023) is amended—

8 (A) in subsection (a)(1)(B), by striking

9 ‘‘subsections (d) and (e)’’ and inserting ‘‘sub10 sections (d), (e), and (f)’’; and

11 (B) by adding at the end the following new

12 subsection:

13 ‘‘(f) ADDITIONAL INFORMATION WITH RESPECT TO

14 DEFINED BENEFIT PLANS.—

15 ‘‘(1) GENERAL INFORMATION.—With respect to

16 any defined benefit plan, an annual report under

17 this section for a plan year shall include the fol18 lowing:

19 ‘‘(A) In any case in which any liabilities to

20 participants or their beneficiaries under such

21 plan as of the end of such plan year consist (in

22 whole or in part) of liabilities to such partici23 pants and beneficiaries under 2 or more pen24 sion plans as of immediately before such plan

25 year, the funded percentage of each of such 2

26 or more pension plans as of the last day of such
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1 plan year and the funded percentage of the plan

2 with respect to which the annual report is filed

3 as of the last day of such plan year.

4 ‘‘(B) For purposes of this paragraph, the

5 term ‘funded percentage’—

6 ‘‘(i) in the case of a single-employer

7 plan, means the funding target attainment

8 percentage, as defined in section

9 303(d)(2), and

10 ‘‘(ii) in the case of a multiemployer

11 plan, has the meaning given such term in

12 section 305(i)(2).

13 ‘‘(2) ADDITIONAL INFORMATION FOR MULTIEM14 PLOYER PLANS.—With respect to any defined ben15 efit plan which is a multiemployer plan, an annual

16 report under this section for a plan year shall in17 clude, in addition to the information required under

18 paragraph (1), the following, as of the end of the

19 plan year to which the notice relates:

20 ‘‘(A) The number of employers obligated to

21 contribute to the plan.

22 ‘‘(B) A list of the employers that contrib23 uted more than 5 percent of the total contribu24 tions to the plan during such plan year.
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1 ‘‘(C) The number of participants under the

2 plan on whose behalf no employer contributions

3 have been made to the plan for such plan year

4 and for each of the 2 preceding plan years. For

5 purposes of this subparagraph, the term ‘em6 ployer contribution’ means, in connection with a

7 participant, a contribution made by an em8 ployer as an employer of such participant.

9 ‘‘(D) The ratio of—

10 ‘‘(i) the number of participants under

11 the plan on whose behalf no employer had

12 an obligation to make an employer con13 tribution during the plan year, to

14 ‘‘(ii) the number of participants under

15 the plan on whose behalf no employer had

16 an obligation to make an employer con17 tribution during each of the 2 preceding

18 plan years.

19 ‘‘(E) Whether the plan received an amorti20 zation extension under section 304(d) or section

21 431(d) of the Internal Revenue Code of 1986

22 for such plan year and, if so, the amount of the

23 difference between the minimum required con24 tribution for the year and the minimum re25 quired contribution which would have been re-
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1 quired without regard to the extension, and the

2 period of such extension.

3 ‘‘(F) Whether the plan used the shortfall

4 funding method (as such term is used in section

5 305) for such plan year and, if so, the amount

6 of the difference between the minimum required

7 contribution for the year and the minimum re8 quired contribution which would have been re9 quired without regard to the use of such meth10 od, and the period of use of such method.

11 ‘‘(G) Whether the plan was in critical or

12 endangered status under section 305 for such

13 plan year, and if so, a summary of any funding

14 improvement or rehabilitation plan (or modi15 fication thereto) adopted during the plan year,

16 and the funding ratio of the plan.

17 ‘‘(H) The number of employers that with18 drew from the plan during the preceding plan

19 year and the aggregate amount of withdrawal

20 liability assessed, or estimated to be assessed,

21 against such withdrawn employers.

22 ‘‘(I) In the case of a multiemployer plan

23 that has merged with another plan or to which

24 assets and liabilities have been transferred, the

25 actuarial valuation of the assets and liabilities
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1 of each affected plan during the year preceding

2 the effective date of the merger or transfer,

3 based upon the most recent data available as of

4 the day before the first day of the plan year, or

5 other valuation method performed under stand6 ards and procedures as the Secretary may pre7 scribe by regulation.’’.

8 (2) GUIDANCE BY SECRETARY OF LABOR.—

9 (A) IN GENERAL.—Not later than 180

10 days after the date of enactment of this Act,

11 the Secretary of Labor shall publish guidance

12 to assist multiemployer defined benefit plans

13 to—

14 (i) identify and enumerate plan par15 ticipants for whom there is no employer

16 with an obligation to make an employer

17 contribution under the plan; and

18 (ii) report such information under sec19 tion 103(f)(2)(D) of the Employee Retire20 ment Income Security Act of 1974 (as

21 added by this section).

22 (B) WAIVER OF REQUIREMENT.—The Sec23 retary of Labor shall waive the requirement

24 under section 103(f)(2)(D) of such Act (as
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1 added by this section) for the construction and

2 entertainment industries.

3 (b) ADDITIONAL INFORMATION IN ANNUAL ACTU4 ARIAL STATEMENT REGARDING PLAN RETIREMENT PRO5 JECTIONS.—Section 103(d) of such Act (29 U.S.C.

6 1023(d)) is amended—

7 (1) by redesignating paragraphs (12) and (13)

8 as paragraphs (13) and (14), respectively; and

9 (2) by inserting after paragraph (11) the fol10 lowing new paragraph:

11 ‘‘(12) A statement explaining the actuarial as12 sumptions and methods used in projecting future re13 tirements and forms of benefit distributions under

14 the plan.’’.

15 (c) FORM AND MANNER OF REPORT.—Section

16 104(b)(3) of such Act (29 U.S.C. 1024(b)(3)) is amended

17 by—

18 (1) striking ‘‘(3) Within’’ and inserting—

19 ‘‘(A) IN GENERAL.—Within’’; and

20 (2) adding at the end the following:

21 ‘‘(B) FORM OF REPORT.—The material

22 provided pursuant to subparagraph (A) to sum23 marize the latest annual report shall be written

24 in a manner calculated to be understood by the

25 average plan participant.
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1 (d) FURNISHING SUMMARY PLAN INFORMATION TO

2 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF

3 MULTIEMPLOYER PLANS.—

4 (1) IN GENERAL.—Section 104 of such Act (29

5 U.S.C. 1024) is amended—

6 (A) in the header, by striking ‘‘PARTICI7 PANTS’’ and inserting ‘‘PARTICIPANTS AND CER8 TAIN EMPLOYERS’’;

9 (B) redesignating subsection (d) as sub10 section (e); and

11 (C) inserting after subsection (c) the fol12 lowing:

13 ‘‘(d) FURNISHING SUMMARY PLAN INFORMATION TO

14 EMPLOYERS AND EMPLOYEE REPRESENTATIVES OF

15 MULTIEMPLOYER PLANS.—

16 ‘‘(1) IN GENERAL.—With respect to a multiem17 ployer plan subject to this section, within 30 days

18 after the due date under subsection (a)(1) for the

19 filing of the annual report for the fiscal year of the

20 plan, the administrators shall furnish to each em21 ployee organization, employer with an obligation to

22 contribute to the plan, and the Pension Benefit

23 Guaranty Corporation, a report that contains—

24 ‘‘(A) a description of the contribution

25 schedules and benefit formulas under the plan,
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1 and any modification to such schedules and for2 mulas, during such plan year;

3 ‘‘(B) the number of employers obligated to

4 contribute to the plan;

5 ‘‘(C) a list of the employers that contrib6 uted more than 5 percent of the total contribu7 tions to the plan during such plan year;

8 ‘‘(D) the number of participants under the

9 plan on whose behalf no employer contributions

10 (which, for purposes of this paragraph, means,

11 in connection with a participant, a contribution

12 made by an employer as an employer of such

13 participant) have been made to the plan for

14 such plan year and for each of the 2 preceding

15 plan years;

16 ‘‘(E) whether the plan was in critical or

17 endangered status under section 305 for such

18 plan year and, if so, include—

19 ‘‘(i) a list of the actions taken by the

20 plan to improve its funding status; and

21 ‘‘(ii) a statement describing how a

22 person may obtain a copy of the plan’s im23 provement or rehabilitation plan, as appro24 priate, adopted under section 305 and the

25 actuarial and financial data that dem-
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1 onstrate any action taken by the plan to2 ward fiscal improvement;

3 ‘‘(H) the number of employers that with4 drew from the plan during the preceding plan

5 year and the aggregate amount of withdrawal

6 liability assessed, or estimated to be assessed,

7 against such withdrawn employers, as reported

8 on the annual report for the plan year to which

9 the report under this subsection relates;

10 ‘‘(I) in the case of a multiemployer plan

11 that has merged with another plan or to which

12 assets and liabilities have been transferred, the

13 actuarial valuation of the assets and liabilities

14 of each affected plan during the year preceding

15 the effective date of the merger or transfer,

16 based upon the most recent data available as of

17 the day before the first day of the plan year, or

18 other valuation method performed under stand19 ards and procedures as the Secretary may pre20 scribe by regulation;

21 ‘‘(J) a description as to whether the

22 plan—

23 ‘‘(i) sought or received an amortiza24 tion extension under section 304(d) or sec-
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1 tion 431(d) of the Internal Revenue Code

2 of 1986 for such plan year;

3 ‘‘(ii) used the shortfall funding meth4 od (as such term is used in section 305)

5 for such plan year; or

6 ‘‘(iii) was in critical or endangered

7 status under section 305 for such plan

8 year; and

9 ‘‘(K) notification of the right under this

10 section of the recipient to a copy of the annual

11 report filed with the Secretary under subsection

12 (a), summary annual report, summary plan de13 scription, summary of any material modification

14 of the plan, upon written request, but that—

15 ‘‘(i) in no case shall a recipient be en16 titled to receive more than one copy of any

17 such report described during any one 12-

18 month period; and

19 ‘‘(ii) the administrator may make a

20 reasonable charge to cover copying, mail21 ing, and other costs of furnishing copies of

22 information pursuant to this subpara23 graph.

24 ‘‘(2) EFFECT OF SECTION.—Nothing in this

25 section waives any other provision under this title re-
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1 quiring plan administrators to provide, upon request,

2 information to employers that have an obligation to

3 contribution under the plan.’’.

4 (e) MODEL FORM.—Not later than 270 days after

5 the date of the enactment of this Act, the Secretary of

6 Labor shall publish a model form for providing the state7 ments, schedules, and other material required to be pro8 vided under section 104(b)(3) of the Employee Retirement

9 Income Security Act of 1974, as amended by this section.

10 The Secretary of Labor may promulgate any interim final

11 rules as the Secretary determines appropriate to carry out

12 the provisions of this subsection.

13 (f) FIVE-YEAR REPORT WITH RESPECT TO MULTI14 EMPLOYER PLANS.—Section 4022A(f) of such Act (29

15 U.S.C. 1322a(f)) is amended by adding at the end the fol16 lowing:

17 ‘‘(6) Not later than 5 years after the date of

18 the enactment of the Pension Security and Trans19 parency Act of 2005, and at least every fifth year

20 thereafter, the corporation shall submit to Congress

21 a report that contains a description of the fiscal con22 ditions of the multiemployer pension plan system as

23 of the date of such report based on the information

24 submitted to the corporation under section 104(d).’’.
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1 (g) CONFORMING AMENDMENT.—Title IV of such

2 Act (29 U.S.C. 1301 et seq.) is amended by striking sec3 tion 4011.

4 (h) EFFECTIVE DATES.—

5 (1) IN GENERAL.—The amendments made by

6 this section shall apply to plan years beginning after

7 December 31, 2005.

8 (2) SPECIAL RULE.—Notwithstanding the pro9 visions of paragraph (1), the requirement under sec10 tion 103(f)(2)(D) of the Employee Retirement In11 come Security Act (as added by this section) shall

12 apply to plan years beginning after December 31,

13 2007.

14 SEC. 504. TIMING OF ANNUAL REPORTING REQUIREMENTS.

15 (a) FILING AFTER 285 DAYS AFTER PLAN YEAR

16 ONLY IN CASES OF HARDSHIP.—Section 104(a)(1) of

17 such Act (29 U.S.C. 1024(a)(1)) is amended by inserting

18 after the first sentence the following new sentence: ‘‘In

19 the case of a pension plan, the Secretary may extend the

20 deadline for filing the annual report for any plan year past

21 285 days after the close of the plan year only on a case

22 by case basis and only in cases of hardship, in accordance

23 with regulations which shall be prescribed by the Sec24 retary.’’.
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1 (b) INTERNET DISPLAY OF INFORMATION.—Section

2 104(b) of such Act (29 U.S.C. 1024(b)) is amended by

3 adding at the end the following:

4 ‘‘(5) Identification and basic plan information and ac5 tuarial information included in the annual report for any

6 plan year shall be filed with the Secretary in an electronic

7 format which accommodates display on the Internet, in ac8 cordance with regulations which shall be prescribed by the

9 Secretary. The Secretary shall provide for display of such

10 information included in the annual report, within 90 days

11 after the date of the filing of the annual report, on an

12 Internet website maintained by the Secretary and other

13 appropriate media. Such information shall also be dis14 played on any Internet website maintained by the plan

15 sponsor (or by the plan administrator on behalf of the plan

16 sponsor), in accordance with regulations which shall be

17 prescribed by the Secretary.’’.

18 (c) SUMMARY ANNUAL REPORT FILED WITHIN 30

19 DAYS AFTER DEADLINE FOR FILING OF ANNUAL RE20 PORT.—Section 104(b)(3) of such Act (29 U.S.C.

21 1024(b)(3)), as amended by section 503, is amended by—

22 (1) striking ‘‘(3)(A) Within 210 days after the

23 close of the fiscal year,’’ and inserting ‘‘(3)(A) With24 in 30 days after the due date under subsection
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1 (a)(1) for the filing of the annual report for the fis2 cal year of the plan’’;

3 (2) striking ‘‘the latest’’ and inserting ‘‘such’’;

4 and

5 (3) adding at the end the following

6 ‘‘(C) DATE OF INTERNET DISPLAY.—Dis7 play of the summary annual report on the

8 Internet website maintained by the plan spon9 sor (or by the plan administrator on behalf of

10 the plan sponsor) by the date required under

11 subparagraph (A) shall be treated as furnishing

12 such report to each participant and beneficiary

13 receiving benefits under the plan by such date,

14 except that such report shall be furnished to

15 each such participant and beneficiary as soon

16 as practicable thereafter, and in no event later

17 the 30 days after such date.’’.

18 (d) EFFECTIVE DATE.—The amendments made by

19 this section shall apply to plan years beginning after De20 cember 31, 2005.

21 SEC. 505. SECTION 4010 FILINGS WITH THE PBGC.

22 (a) CHANGE IN CRITERIAFOR PERSONS REQUIRED

23 TO PROVIDE INFORMATION TO PBGC.—Section 4010(b)

24 of the Employee Retirement Income Security Act of 1974

25 (29 U.S.C. 1310(b)) is amended—
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1 (1) in paragraph (1)—

2 (A) by striking ’’(1) the aggregate’’ and in3 serting ‘‘(1)(A) the aggregate’’;

4 (B) by striking the semicolon and inserting

5 ‘‘; and’’;

6 (C) by inserting after subparagraph (A)

7 the following:

8 ‘‘(B)(i) the aggregate funding targets attain9 ment percentage of the plan (as defined in sub10 section (d)) is less than 90 percent; or

11 ‘‘(ii) any debt instrument of the plan sponsor or

12 the plan sponsor has received a rating described in

13 subclause (I) or (II) of section 303(i)(5)(A)(i);’’; and

14 (2) by redesignating paragraphs (2) and (3) as

15 paragraphs (4) and (5), respectively, and by insert16 ing before paragraph (4) (as so redesignated) the

17 following new paragraphs:

18 ‘‘(2) the aggregate funding targets attainment

19 percentage of the plan (as defined in subsection (d))

20 is less than 60 percent;

21 ‘‘(3)(A) the aggregate funding targets attain22 ment percentage of the plan (as defined in sub23 section (d)) is less than 75 percent, and

24 ‘‘(B) the plan sponsor is in an industry with re25 spect to which the corporation determines that there
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1 is substantial unemployment or underemployment

2 and the sales and profits are depressed or declin3 ing;’’.

4 (b) ADDITIONAL INFORMATION REQUIRED.—Section

5 4010 of the Employee Retirement Income Security Act of

6 1974 (29 U.S.C. 1310) is amended by adding at the end

7 the following new subsection:

8 ‘‘(d) ADDITIONAL INFORMATION REQUIRED.—

9 ‘‘(1) IN GENERAL.—The information submitted

10 to the corporation under subsection (a) shall

11 include—

12 ‘‘(A) the amount of benefit liabilities under

13 the plan determined using the assumptions used

14 by the corporation in determining liabilities;

15 ‘‘(B) the funding target of the plan deter16 mined as if the plan has been in at-risk status

17 for at least 5 plan years; and

18 ‘‘(C) the funding target attainment per19 centage of the plan.

20 ‘‘(2) DEFINITIONS.—For purposes of this sub21 section:

22 ‘‘(A) VALUE OF PLAN ASSETS.—The term

23 ‘value of plan assets’ means the value of plan

24 assets, as determined under section 303(g)(3).
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1 ‘‘(B) FUNDING TARGET.—The term ‘fund2 ing target’ has the meaning provided under sec3 tion 303(d)(1).

4 ‘‘(C) FUNDING TARGET ATTAINMENT PER5 CENTAGE.—The term ‘funding target attain6 ment percentage’ has the meaning provided in

7 section 303(d)(2).

8 ‘‘(D) AGGREGATE FUNDING TARGETS AT9 TAINMENT PERCENTAGE.—The term ‘aggregate

10 funding targets attainment percentage’ means,

11 with respect to a contributing sponsor for a

12 plan year, the percentage, taking into account

13 all plans maintained by the contributing spon14 sor and the members of its controlled group as

15 of the end of such plan year, which—

16 ‘‘(i) the aggregate total of the values

17 of plan assets, as of the end of such plan

18 year, of such plans, is of

19 ‘‘(ii) the aggregate total of the fund20 ing targets of such plans, as of the end of

21 such plan year, taking into account only

22 benefits to which participants and bene23 ficiaries have a nonforfeitable right.
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1 ‘‘(E) AT-RISK STATUS.—The term ‘at-risk

2 status’ has the meaning provided in section

3 303(i)(4).

4 ‘‘(e) NOTICE TO CONGRESS.—The Corporation shall,

5 on an annual basis, submit to the Committee on Health,

6 Education, Labor, and Pensions of the Senate and the

7 Committee on Education and the Workforce of the House

8 of Representatives, a summary report of the information

9 submitted to the Corporation under this section.’’.

10 (c) EFFECTIVE DATE.—The amendment made by

11 this section shall apply with respect to plan years begin12 ning after 2006.

13 SEC. 506. DISCLOSURE OF TERMINATION INFORMATION TO

14 PLAN PARTICIPANTS.

15 (a) DISTRESS TERMINATIONS.—

16 (1) IN GENERAL.—Section 4041(c)(2) of the

17 Employee Retirement Income Security Act of 1974

18 (29 U.S.C. 1341(c)(2)) is amended by adding at the

19 end the following:

20 ‘‘(D) DISCLOSURE OF TERMINATION IN21 FORMATION.—

22 ‘‘(i) IN GENERAL.—A plan adminis23 trator that has filed a notice of intent to

24 terminate under subsection (a)(2) shall

25 provide to an affected party any informa-
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1 tion provided to the corporation under

2 paragraph (2) not later than 15 days

3 after—

4 ‘‘(I) receipt of a request from the

5 affected party for the information; or

6 ‘‘(II) the provision of new infor7 mation to the corporation relating to

8 the previous request.

9 ‘‘(ii) CONFIDENTIALITY.—

10 ‘‘(I) IN GENERAL.—The plan ad11 ministrator shall not provide informa12 tion under clause (i) in a form that

13 includes any information that may di14 rectly or indirectly be associated with,

15 or otherwise identify, an individual

16 participant or beneficiary.

17 ‘‘(II) LIMITATION.—A court may

18 limit disclosure under this subpara19 graph of confidential information de20 scribed in section 552(b) of title 5,

21 United States Code, to any authorized

22 representative of the participants or

23 beneficiaries that agrees to ensure the

24 confidentiality of such information.
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1 ‘‘(iii) FORM AND MANNER OF INFOR2 MATION; CHARGES.—

3 ‘‘(I) FORM AND MANNER.—The

4 corporation may prescribe the form

5 and manner of the provision of infor6 mation under this subparagraph,

7 which shall include delivery in written,

8 electronic, or other appropriate form

9 to the extent that such form is rea10 sonably accessible to individuals to

11 whom the information is required to

12 be provided.

13 ‘‘(II) REASONABLE CHARGES.—A

14 plan sponsor may charge a reasonable

15 fee for any information provided

16 under this subparagraph in other than

17 electronic form.

18 ‘‘(iv) AUTHORIZED REPRESENTA19 TIVE.—For purposes of this subparagraph,

20 the term ‘authorized representative’ means

21 any employee organization representing

22 participants in the pension plan.’’.

23 (2) CONFORMING AMENDMENT.—Section

24 4041(c)(1) of the Employee Retirement Income Se25 curity Act of 1974 (29 U.S.C. 1341(c)(1)) is amend-
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1 ed in subparagraph (C) by striking ‘‘subparagraph

2 (B)’’ and inserting ‘‘subparagraphs (B) and (D)’’.

3 (b) INVOLUNTARY TERMINATIONS.—

4 (1) IN GENERAL.—Section 4042(c) of the Em5 ployee Retirement Income Security Act of 1974 (29

6 U.S.C. 1342(c)) is amended by—

7 (A) striking ‘‘(c) If the’’ and inserting

8 ‘‘(c)(1) If the’’;

9 (B) redesignating paragraph (3) as para10 graph (2); and

11 (C) adding at the end the following:

12 ‘‘(3) DISCLOSURE OF TERMINATION INFORMA13 TION.—

14 ‘‘(A) IN GENERAL.—

15 ‘‘(i) INFORMATION FROM PLAN SPON16 SOR OR ADMINISTRATOR.—A plan sponsor

17 or plan administrator of a single-employer

18 plan that has received a notice from the

19 corporation of a determination that the

20 plan should be terminated under this sec21 tion shall provide to an affected party any

22 information provided to the corporation in

23 conjunction with the plan termination.

24 ‘‘(ii) INFORMATION FROM CORPORA25 TION.—The corporation shall provide a
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1 copy of the administrative record, includ2 ing the trusteeship decision record of a ter3 mination of a plan described under clause

4 (i).

5 ‘‘(B) TIMING OF DISCLOSURE.—The plan

6 sponsor, plan administrator, or the corporation,

7 as applicable, shall provide the information de8 scribed in subparagraph (A) not later than 15

9 days after—

10 ‘‘(i) receipt of a request from an af11 fected party for such information; or

12 ‘‘(ii) in the case of information de13 scribed under subparagraph (A)(i), the

14 provision of any new information to the

15 corporation relating to a previous request

16 by an affected party.

17 ‘‘(C) CONFIDENTIALITY.—

18 ‘‘(i) IN GENERAL.—The plan adminis19 trator and plan sponsor shall not provide

20 information under subparagraph (A)(i) in

21 a form which includes any information that

22 may directly or indirectly be associated

23 with, or otherwise identify, an individual

24 participant or beneficiary.
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1 ‘‘(ii) LIMITATION.—A court may limit

2 disclosure under this paragraph of con3 fidential information described in section

4 552(b) of title 5, United States Code, to

5 authorized representatives (within the

6 meaning of section 4041(c)(2)(D)(iv)) of

7 the participants or beneficiaries that agree

8 to ensure the confidentiality of such infor9 mation.

10 ‘‘(D) FORM AND MANNER OF INFORMA11 TION; CHARGES.—

12 ‘‘(i) FORM AND MANNER.—The cor13 poration may prescribe the form and man14 ner of the provision of information under

15 this paragraph, which shall include delivery

16 in written, electronic, or other appropriate

17 form to the extent that such form is rea18 sonably accessible to individuals to whom

19 the information is required to be provided.

20 ‘‘(ii) REASONABLE CHARGES.—A plan

21 sponsor may charge a reasonable fee for

22 any information provided under this para23 graph in other than electronic form.’’.

24 (c) EFFECTIVE DATE.—The amendments made by

25 this section shall apply to any plan termination under title
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1 IV of the Employee Retirement Income Security Act of

2 1974 (29 U.S.C. 1301 et seq.) with respect to which the

3 notice of intent to terminate (or in the case of a termi4 nation by the Pension Benefit Guaranty Corporation, a

5 notice of determination under section 4042 of such Act

6 (29 U.S.C. 1342)) occurs after the date of enactment of

7 this Act.

8 SEC. 507. BENEFIT SUSPENSION NOTICE.

9 (a) MODIFICATION OF REGULATION.—The Secretary

10 of Labor shall modify the regulation under subparagraph

11 (B) of section 203(a)(3) of the Employee Retirement In12 come Security Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to

13 provide that the notification required by such regulation

14 in connection with any suspension of benefits described in

15 such subparagraph—

16 (1) in the case of an employee who returns to

17 service described in section 203(a)(3)(B) (i) or (ii)

18 of such Act after commencement of payment of ben19 efits under the plan, shall be made during the first

20 calendar month or the first 4- or 5-week payroll pe21 riod ending in a calendar month in which the plan

22 withholds payments, and

23 (2) in the case of any employee who is not de24 scribed in paragraph (1)—
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1 (A) may be included in the summary plan

2 description for the plan furnished in accordance

3 with section 104(b) of such Act (29 U.S.C.

4 1024(b)), rather than in a separate notice, and

5 (B) need not include a copy of the relevant

6 plan provisions.

7 (b) EFFECTIVE DATE.—The modification made

8 under this section shall apply to plan years beginning after

9 December 31, 2005.

10 SEC. 508. STUDY AND REPORT BY GOVERNMENT ACCOUNT11 ABILITY OFFICE.

12 (a) IN GENERAL.—The Comptroller General of the

13 United States shall conduct a study to determine the effec14 tiveness of the enforcement of provisions in the Employee

15 Retirement Income Security Act of 1974 (29 U.S.C. 1001

16 et seq.) and in other Federal laws designed to protect pen17 sion plans and the assets and participants of such plan

18 from fraud and mismanagement, including excessive in19 vestment management fees, violations of fiduciary duties

20 under Title I of such Act, and the quality of plan assets.

21 (b) CONTENT OF STUDY.—The study described in

22 subsection (a) shall include:

23 (1) An identification of which Federal depart24 ments and agencies have responsibility for enforce-
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1 ment of these provisions, including the recovery of

2 lost plan assets due to fraud and mismanagement.

3 (2) Identification of all administrative enforce4 ment powers, procedures, and strategies used by the

5 Securities and Exchange Commission that have the

6 potential to improve the Department of Labor’s en7 forcement of the fiduciary provisions of the Em8 ployee Retirement Income Security Act of 1974 (29

9 U.S.C. 1001 et seq.).

10 (3) Identification of any statutory or other bar11 riers that restrict the Department of Labor’s author12 ity to use such powers, procedures, and strategies

13 identified in paragraph (2).

14 (4) An evaluation of whether giving additional

15 investigative or enforcement authority to the Pension

16 Benefit Guaranty Corporation or the Securities and

17 Exchange Commission would significantly improve

18 enforcement of those provisions.

19 (5) An evaluation of the current authority of

20 the Pension Benefit Guaranty Corporation to bring

21 actions to recover any funds lost by pension plans

22 due to violations of any fiduciary standards under

23 Title I of such Act or other Federal statutes.

24 (6) The impact that expanding any such au25 thority by the Pension Benefit Guaranty Corpora-
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1 tion to bring such actions would have on the Cor2 poration’s solvency.

3 (c) REPORT.—Not later than 6 months after the en4 actment of this Act, the Comptroller General shall submit

5 a report to Congress on the study conducted under sub6 section (a) that includes such recommendations for legisla7 tion or administrative action as the Comptroller General

8 determines are appropriate.

9 TITLE VI—TREATMENT OF CASH

10 BALANCE AND OTHER HY11 BRID DEFINED BENEFIT PEN12 SION PLANS

13 SEC. 601. PROSPECTIVE APPLICATION OF AGE DISCRIMINA14 TION, CONVERSION, AND PRESENT VALUE AS15 SUMPTION RULES.

16 (a) APPLICATION OF AGE DISCRIMINATION PROHIBI17 TIONS.—

18 (1) AMENDMENT OF ERISA.—Section 204(b) of

19 the Employee Retirement Income Security Act of

20 1974 (29 U.S.C. 1054(b)) is amended by adding at

21 the end the following:

22 ‘‘(5) SPECIAL RULES FOR CASH BALANCE AND

23 OTHER HYBRID DEFINED BENEFIT PLANS.—

24 ‘‘(A) IN GENERAL.—A qualified cash bal25 ance plan shall not be treated as violating the
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1 requirements of paragraph (1)(H) merely be2 cause it may reasonably be expected that the

3 period over which interest credits will be made

4 to a participant’s accumulation account (or its

5 equivalent) is longer for a younger participant.

6 This paragraph shall not apply to any plan if

7 the rate of any pay credit or interest credit to

8 such an account under the plan decreases by

9 reason of the participant’s attainment of any

10 age.

11 ‘‘(B) QUALIFIED CASH BALANCE PLAN.—

12 For purposes of this paragraph—

13 ‘‘(i) IN GENERAL.—The term ‘quali14 fied cash balance plan’ means a cash bal15 ance plan which meets the vesting require16 ment under clause (ii) and the interest

17 credit requirement under clause (iii).

18 ‘‘(ii) VESTING REQUIREMENTS.—A

19 plan meets the requirements of this clause

20 if an employee who has completed at least

21 3 years of service has a nonforfeitable

22 right to 100 percent of the employee’s ac23 crued benefit derived from employer con24 tributions.
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1 ‘‘(iii) INTEREST CREDITS.—A plan

2 meets the requirements of this clause if the

3 terms of the plan provide that any interest

4 credit (or equivalent amount) for any plan

5 year shall be at a rate which—

6 ‘‘(I) is not less than the applica7 ble Federal mid-term interest rate (as

8 determined under section 1274(d)(1)

9 of the Internal Revenue Code of

10 1986), and

11 ‘‘(II) is not greater than the

12 greater of the rate determined under

13 subclause (I) or a rate equal to the

14 rate of interest on amounts invested

15 conservatively in long-term investment

16 grade corporate bonds.

17 ‘‘(iv) DETERMINATION OF RATES.—

18 For purposes of clause (iii)(II), the rate of

19 interest on amounts invested conservatively

20 in long-term investment grade corporate

21 bonds shall be determined by the Secretary

22 of the Treasury on the basis of 2 or more

23 indices that are selected periodically by the

24 Secretary of the Treasury. The Secretary

25 of the Treasury shall make publicly avail-
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1 able the indices and methodology used to

2 determine the rate.

3 ‘‘(v) VARIABLE RATE OF INTEREST.—

4 If the interest credit rate under the plan is

5 a variable rate, the plan shall provide that,

6 upon the termination of the plan, the rate

7 of interest used to determine accrued bene8 fits under the plan shall be equal to the av9 erage of the rates of interest used under

10 the plan during the 5-year period ending

11 on the termination date.

12 ‘‘(C) CASH BALANCE PLAN.—For purposes

13 of this paragraph, the term ‘cash balance plan’

14 means a defined benefit plan under which—

15 ‘‘(i) the accrued benefit is determined

16 by reference to the balance of a hypo17 thetical accumulation account, and

18 ‘‘(ii) pay credits and interest credits

19 are credited to such account.

20 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

21 OR OTHER HYBRID PLANS.—

22 ‘‘(i) CASH BALANCE PLAN.—The Sec23 retary of the Treasury shall issue regula24 tions which include in the definition of

25 cash balance plan any defined benefit plan
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1 (or any portion of such a plan) which has

2 an effect similar to a cash balance plan.

3 Such regulations may provide that if a

4 plan sponsor represents in communications

5 to participants and beneficiaries that a

6 plan amendment results in a plan being

7 described in the preceding sentence, such

8 plan shall be treated as a cash balance

9 plan.

10 ‘‘(ii) QUALIFIED CASH BALANCE

11 PLAN.—The Secretary of the Treasury

12 may in the regulations issued under clause

13 (i) provide for the treatment of a cash bal14 ance plan as a qualified cash balance plan

15 in cases where the cash balance plan has

16 an effect similar to the qualified cash bal17 ance plan.’’.

18 (2) AGE DISCRIMINATION IN EMPLOYMENT

19 ACT.—Section 4(i)(2) of the Age Discrimination of

20 Employment Act of 1967 (29 U.S.C. 623(i)(2)) is

21 amended—

22 (A) by inserting ‘‘(A)’’ after ‘‘(2)’’, and

23 (B) by adding at the end the following new

24 subparagraph:
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1 ‘‘(B) A defined benefit plan which is treated as a

2 qualified cash balance plan for purposes of section

3 204(b)(5) of the Employee Retirement Income Security

4 Act of 1974 shall not be treated as violating the require5 ments of paragraph (1)(A) merely because it may reason6 ably be expected that the period over which interest credits

7 will be made under the plan to a participant’s accumula8 tion account (or its equivalent) is longer for a younger

9 participant. This subparagraph shall not apply to any plan

10 if the rate of any pay credit or interest credit to such an

11 account under the plan decreases by reason of the partici12 pant’s attainment of any age.’’.

13 (3) AMENDMENT OF INTERNAL REVENUE

14 CODE.—Section 411(b) of the Internal Revenue

15 Code of 1986 (relating to accrued benefit require16 ments) is amended by adding at the end the fol17 lowing:

18 ‘‘(5) SPECIAL RULES FOR CASH BALANCE AND

19 OTHER HYBRID DEFINED BENEFIT PLANS.—

20 ‘‘(A) IN GENERAL.—A qualified cash bal21 ance plan shall not be treated as violating the

22 requirements of paragraph (1)(H) merely be23 cause it may reasonably be expected that the

24 period over which interest credits will be made

25 to a participant’s accumulation account (or its
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1 equivalent) is longer for a younger participant.

2 This paragraph shall not apply to any plan if

3 the rate of any pay credit or interest credit to

4 such an account under the plan decreases by

5 reason of the participant’s attainment of any

6 age.

7 ‘‘(B) QUALIFIED CASH BALANCE PLAN.—

8 For purposes of this paragraph—

9 ‘‘(i) IN GENERAL.—The term ‘quali10 fied cash balance plan’ means a cash bal11 ance plan which meets the vesting require12 ment under clause (ii) and the interest

13 credit requirement under clause (iii).

14 ‘‘(ii) VESTING REQUIREMENTS.—A

15 plan meets the requirements of this clause

16 if an employee who has completed at least

17 3 years of service has a nonforfeitable

18 right to 100 percent of the employee’s ac19 crued benefit derived from employer con20 tributions.

21 ‘‘(iii) INTEREST CREDITS.—A plan

22 meets the requirements of this clause if the

23 terms of the plan provide that any interest

24 credit (or equivalent amount) for any plan

25 year shall be at a rate which—
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1 ‘‘(I) is not less than the applica2 ble Federal mid-term interest rate (as

3 determined under section 1274(d)(1)),

4 and

5 ‘‘(II) is not greater than the

6 greater of the rate determined under

7 subclause (I) or a rate equal to the

8 rate of interest on amounts invested

9 conservatively in long-term investment

10 grade corporate bonds.

11 ‘‘(iv) DETERMINATION OF RATES.—

12 For purposes of clause (iii)(II), the rate of

13 interest on amounts invested conservatively

14 in long-term investment grade corporate

15 bonds shall be determined by the Secretary

16 on the basis of 2 or more indices that are

17 selected periodically by the Secretary. The

18 Secretary shall make publicly available the

19 indices and methodology used to determine

20 the rate.

21 ‘‘(v) VARIABLE RATE OF INTEREST.—

22 If the interest credit rate under the plan is

23 a variable rate, the plan shall provide that,

24 upon the termination of the plan, the rate

25 of interest used to determine accrued bene-
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1 fits under the plan shall be equal to the av2 erage of the rates of interest used under

3 the plan during the 5-year period ending

4 on the termination date.

5 ‘‘(C) CASH BALANCE PLAN.—For purposes

6 of this paragraph, the term ‘cash balance plan’

7 means a defined benefit plan under which—

8 ‘‘(i) the accrued benefit is determined

9 by reference to the balance of a hypo10 thetical accumulation account, and

11 ‘‘(ii) pay credits and interest credits

12 are credited to such account.

13 ‘‘(D) REGULATIONS TO INCLUDE SIMILAR

14 OR OTHER HYBRID PLANS.—

15 ‘‘(i) CASH BALANCE PLAN.—The Sec16 retary shall issue regulations which include

17 in the definition of cash balance plan any

18 defined benefit plan (or any portion of

19 such a plan) which has an effect similar to

20 a cash balance plan. Such regulations may

21 provide that if a plan sponsor represents in

22 communications to participants and bene23 ficiaries that a plan amendment results in

24 a plan being described in the preceding
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1 sentence, such plan shall be treated as a

2 cash balance plan.

3 ‘‘(ii) QUALIFIED CASH BALANCE

4 PLAN.—The Secretary may in the regula5 tions issued under clause (i) provide for

6 the treatment of a cash balance plan as a

7 qualified cash balance plan in cases where

8 the cash balance plan has an effect similar

9 to the qualified cash balance plan.’’.

10 (b) RULES APPLICABLE TO ACCRUED BENEFITS

11 UNDER CONVERTED PLANS.—

12 (1) AMENDMENT OF ERISA.—Section 204(g) of

13 the Employee Retirement Income Security Act of

14 1974 (29 U.S.C. 1054(g)) is amended by adding at

15 the end the following new paragraph:

16 ‘‘(6) TREATMENT OF CONVERSIONS TO CASH

17 BALANCE OR OTHER HYBRID PLANS.—

18 ‘‘(A) IN GENERAL.—For purposes of this

19 subsection, an applicable plan amendment shall

20 be treated as reducing the accrued benefit of a

21 participant if, under the terms of the plan as in

22 effect after the amendment, the accrued benefit

23 of any participant who was a participant as of

24 the effective date of the amendment may at any

25 time be less than the accrued benefit deter-
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1 mined under the method under subparagraph

2 (B), (C), or (D) which is specified in the plan

3 and applies uniformly to all participants. An

4 applicable plan amendment shall in no event be

5 treated as meeting the requirements of any

6 such subparagraph if the conversion described

7 in subparagraph (G)(i) is into a cash balance

8 plan other than a qualified cash balance plan

9 (as defined in subsection (b)(5)(B)).

10 ‘‘(B) NO WEARAWAY.—

11 ‘‘(i) IN GENERAL.—The accrued ben12 efit determined under this subparagraph is

13 the sum of—

14 ‘‘(I) the participant’s accrued

15 benefit for years of service before the

16 effective date of the amendment, de17 termined under the terms of the plan

18 as in effect before the amendment,

19 plus

20 ‘‘(II) except as provided in clause

21 (ii), the participant’s accrued benefit

22 for years of service after the effective

23 date of the amendment, determined

24 under the terms of the plan as in ef25 fect after the amendment.
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1 ‘‘(ii) REQUIRED AMOUNTS FOR CER2 TAIN PERIODS.—Notwithstanding clause

3 (i)(II), the plan shall provide that either—

4 ‘‘(I) the accrued benefit of all

5 participants for each of the first 5

6 plan years to which the amendment

7 applies shall be equal to the greater of

8 the accrued benefit determined under

9 the terms of the plan as in effect both

10 before and after the amendment, or

11 ‘‘(II) the accrued benefit for peri12 ods after the effective date of the

13 amendment of all participants who, as

14 of the effective date of the amend15 ment, had attained the age of 40 and

16 had a combined age and years of serv17 ice under the plan of not less than 55

18 shall be determined under either of

19 the methods described in clause (iii)

20 which is selected by the plan and

21 which is specified in the amendment.

22 ‘‘(iii) APPLICABLE METHOD.—For

23 purposes of clause (ii)(II), the plan shall

24 select 1 of the following methods:
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1 ‘‘(I) The accrued benefit shall be

2 equal to the greater of the accrued

3 benefit determined under the terms of

4 the plan as in effect both before and

5 after the amendment.

6 ‘‘(II) At the election of the par7 ticipant, the accrued benefit shall be

8 determined under the terms of the

9 plan as in effect either before or after

10 the amendment.

11 ‘‘(C) GREATER OF OLD OR NEW OR ELEC12 TION OF EITHER.—The accrued benefit deter13 mined under this subparagraph is the accrued

14 benefit determined under 1 of the following

15 methods which is selected by the plan and

16 which is specified in the amendment:

17 ‘‘(i) The accrued benefit shall be equal

18 to the greater of the accrued benefit deter19 mined under the terms of the plan as in ef20 fect both before and after the amendment.

21 ‘‘(ii) At the election of the participant,

22 the accrued benefit shall be determined

23 under the terms of the plan as in effect ei24 ther before or after the amendment.
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1 ‘‘(D) METHOD PRESCRIBED BY SEC2 RETARY.—The accrued benefit determined

3 under this subparagraph shall be determined

4 under regulations prescribed by the Secretary

5 which are consistent with the purposes of this

6 paragraph and which may require a plan to

7 provide a credit of additional amounts or in8 creases in initial account balances in amounts

9 substantially equivalent to the benefits that

10 would be required to be provided to meet the

11 requirements of subparagraphs (B) or (C).

12 ‘‘(E) INCLUSION OF PRIOR ACCRUED BEN13 EFIT INTO INITIAL ACCOUNT BALANCE.—

14 ‘‘(i) IN GENERAL.—If, for purposes of

15 subparagraphs (B), (C), or (D), an appli16 cable plan amendment provides that an

17 amount will be initially credited to a par18 ticipant’s accumulation account (or its

19 equivalent) on the effective date of the

20 amendment with respect to the partici21 pant’s accrued benefit for periods before

22 such date, the requirements of such sub23 paragraph shall be treated as met with re24 spect to such accrued benefit if the amount

25 initially credited is not less than the
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1 present value of the participant’s accrued

2 benefit determined by using the applicable

3 mortality table and the lower of the appli4 cable interest rate under section

5 205(g)(3)(A), or the interest rate used to

6 credit interest under the plan, as of such

7 date.

8 ‘‘(ii) ADJUSTMENTS FOR CERTAIN

9 SUBSIDIZED BENEFITS.—For purposes of

10 subparagraph (B), if any early retirement

11 benefit or retirement-type subsidy (within

12 the meaning of paragraph (6)(B)(i)) is not

13 included in the initial account balance

14 under clause (i), the plan shall credit the

15 accumulation account with the amount of

16 such benefit or subsidy for the plan year in

17 which the participant retires if, as of such

18 time, the participant has met the age,

19 years of service, and other requirements

20 under the plan for entitlement to such ben21 efit or subsidy.

22 ‘‘(F) REQUIREMENTS WHERE PARTICIPANT

23 OFFERED CHOICE.—If a plan provides a partici24 pant with an election described in subparagraph
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1 (B)(iii)(II) or (C)(ii), the following rules shall

2 apply:

3 ‘‘(i) NOTICE.—The plan shall not be

4 treated as meeting the requirements of ei5 ther such subparagraph unless the plan

6 provides the participant a notice of the

7 right to make such election which includes

8 information (meeting such requirements as

9 may be prescribed by the Secretary of the

10 Treasury)—

11 ‘‘(I) by which the participant

12 may project benefits under the for13 mulas from which the participant may

14 choose and may model the impact of

15 any such choice, and

16 ‘‘(II) with respect to cir17 cumstances under which a participant

18 may not receive the projected accrued

19 benefits by reason of a plan termi20 nation or otherwise.

21 ‘‘(ii) SIGNIFICANT REDUCTION OF

22 RATE OF ACCRUAL.—The plan shall pro23 vide that if, during any of the first 5 plan

24 years during which such an election is in

25 effect, the plan adopts an amendment
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1 which results in a significant reduction in

2 the rate of future benefit accrual (within

3 the meaning of section 204(h)), the ac4 crued benefit of the participant shall be de5 termined as if the participant had made

6 the election which resulted in the greatest

7 accrued benefit.

8 ‘‘(iii) BENEFITS MUST NOT BE CON9 TINGENT ON ELECTION.—The plan shall

10 not be treated as meeting the requirements

11 of either such subparagraph if any other

12 benefit is conditioned (directly or indi13 rectly) on such election.

14 ‘‘(G) APPLICABLE PLAN AMENDMENT.—

15 For purposes of this paragraph—

16 ‘‘(i) IN GENERAL.—The term ‘applica17 ble plan amendment’ means an amendment

18 to a defined benefit plan which has the ef19 fect of converting the plan to a cash bal20 ance plan.

21 ‘‘(ii) SPECIAL RULE FOR COORDI22 NATED BENEFITS.—If the benefits of 2 or

23 more defined benefit plans established or

24 maintained by an employer are coordinated

25 in such a manner as to have the effect of
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1 the adoption of an amendment described in

2 clause (i), the sponsor of the defined ben3 efit plan or plans providing for such co4 ordination shall be treated as having

5 adopted such a plan amendment as of the

6 date such coordination begins.

7 ‘‘(iii) MULTIPLE AMENDMENTS.—The

8 Secretary of the Treasury shall issue regu9 lations to prevent the avoidance of the pur10 poses of this paragraph through the use of

11 2 or more plan amendments rather than a

12 single amendment.

13 ‘‘(iv) CASH BALANCE PLAN.—For pur14 poses of this paragraph, the term ‘cash

15 balance plan’ has the meaning given such

16 term by subsection (b)(5)(C).

17 ‘‘(v) COORDINATION WITH ACCRUAL

18 RULES.—If a plan amendment is treated

19 as meeting the requirements of this para20 graph with respect to any participant be21 cause such participant is eligible to con22 tinue to accrue benefits in the same man23 ner as under the terms of the plan in ef24 fect before the amendment, the Secretary

25 of the Treasury shall prescribe regulations
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1 under which the plan shall not be treated

2 as failing to meet the requirements of sub3 paragraph (A), (B), or (C) of section

4 204(b)(1) if the requirements of this para5 graph are met.

6 ‘‘(H) APPLICATION OF CERTAIN RULES TO

7 EARLY-RETIREMENT BENEFITS.—Rules similar

8 to the rules of clauses (i), (ii), and (iii) of sub9 paragraph (B) and subparagraph (C) shall

10 apply in the case of any early retirement benefit

11 or retirement-type subsidy (within the meaning

12 of section 204(g)(2)(A)).’’.

13 (2) AMENDMENT OF INTERNAL REVENUE

14 CODE.—Section 411(d) of the Internal Revenue

15 Code of 1986 (relating to special rules) is amended

16 by adding at the end the following new paragraph:

17 ‘‘(7) TREATMENT OF CONVERSIONS TO CASH

18 BALANCE OR OTHER HYBRID PLANS.—

19 ‘‘(A) IN GENERAL.—For purposes of para20 graph (6), an applicable plan amendment shall

21 be treated as reducing the accrued benefit of a

22 participant if, under the terms of the plan as in

23 effect after the amendment, the accrued benefit

24 of any participant who was a participant as of

25 the effective date of the amendment may at any
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1 time be less than the accrued benefit deter2 mined under the method under subparagraph

3 (B), (C), or (D) which is specified in the plan

4 and applies uniformly to all participants. An

5 applicable plan amendment shall in no event be

6 treated as meeting the requirements of any

7 such subparagraph if the conversion described

8 in subparagraph (G)(i) is into a cash balance

9 plan other than a qualified cash balance plan

10 (as defined in subsection (b)(5)(B)).

11 ‘‘(B) NO WEARAWAY.—

12 ‘‘(i) IN GENERAL.—The accrued ben13 efit determined under this subparagraph is

14 the sum of—

15 ‘‘(I) the participant’s accrued

16 benefit for years of service before the

17 effective date of the amendment, de18 termined under the terms of the plan

19 as in effect before the amendment,

20 plus

21 ‘‘(II) except as provided in clause

22 (ii), the participant’s accrued benefit

23 for years of service after the effective

24 date of the amendment, determined
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1 under the terms of the plan as in ef2 fect after the amendment.

3 A similar rule shall apply in the case of

4 any early retirement benefit or retirement5 type subsidy (within the meaning of section

6 411(d)(6)(B)(i)).

7 ‘‘(ii) REQUIRED AMOUNTS FOR CER8 TAIN PERIODS.—Notwithstanding clause

9 (i)(II), the plan shall provide that either—

10 ‘‘(I) the accrued benefit of all

11 participants for each of the first 5

12 plan years to which the amendment

13 applies shall be equal to the greater of

14 the accrued benefit determined under

15 the terms of the plan as in effect both

16 before and after the amendment, or

17 ‘‘(II) the accrued benefit for peri18 ods after the effective date of the

19 amendment of all participants who, as

20 of the effective date of the amend21 ment, had attained the age of 40 and

22 had a combined age and years of serv23 ice under the plan of not less than 55

24 shall be determined under either of

25 the methods described in clause (iii)
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1 which is selected by the plan and

2 which is specified in the amendment.

3 ‘‘(iii) APPLICABLE METHOD.—For

4 purposes of clause (ii)(II), the plan shall

5 select 1 of the following methods:

6 ‘‘(I) The accrued benefit shall be

7 equal to the greater of the accrued

8 benefit determined under the terms of

9 the plan as in effect both before and

10 after the amendment.

11 ‘‘(II) At the election of the par12 ticipant, the accrued benefit shall be

13 determined under the terms of the

14 plan as in effect either before or after

15 the amendment.

16 ‘‘(C) GREATER OF OLD OR NEW OR ELEC17 TION OF EITHER.—The accrued benefit deter18 mined under this subparagraph is the accrued

19 benefit determined under 1 of the following

20 methods which is selected by the plan and

21 which is specified in the amendment:

22 ‘‘(i) The accrued benefit shall be equal

23 to the greater of the accrued benefit deter24 mined under the terms of the plan as in ef25 fect both before and after the amendment.
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1 ‘‘(ii) At the election of the participant,

2 the accrued benefit shall be determined

3 under the terms of the plan as in effect ei4 ther before or after the amendment.

5 ‘‘(D) METHOD PRESCRIBED BY SEC6 RETARY.—The accrued benefit determined

7 under this subparagraph shall be determined

8 under regulations prescribed by the Secretary

9 which are consistent with the purposes of this

10 paragraph and which may require a plan to

11 provide a credit of additional amounts or in12 creases in initial account balances in amounts

13 substantially equivalent to the benefits that

14 would be required to be provided to meet the

15 requirements of subparagraphs (B) or (C).

16 ‘‘(E) INCLUSION OF PRIOR ACCRUED BEN17 EFIT INTO INITIAL ACCOUNT BALANCE.—

18 ‘‘(i) IN GENERAL.—If, for purposes of

19 subparagraphs (B), (C), or (D), an appli20 cable plan amendment provides that an

21 amount will be initially credited to a par22 ticipant’s accumulation account (or its

23 equivalent) on the effective date of the

24 amendment with respect to the partici25 pant’s accrued benefit for periods before
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1 such date, the requirements of such sub2 paragraph shall be treated as met with re3 spect to such accrued benefit if the amount

4 initially credited is not less than the

5 present value of the participant’s accrued

6 benefit determined by using the applicable

7 mortality table and the lower of the appli8 cable interest rate under section

9 417(e)(3)(A), or the interest rate used to

10 credit interest under the plan, as of such

11 date.

12 ‘‘(ii) ADJUSTMENTS FOR CERTAIN

13 SUBSIDIZED BENEFITS.—For purposes of

14 subparagraph (B), if any early retirement

15 benefit or retirement-type subsidy (within

16 the meaning of paragraph (6)(B)(i)) is not

17 included in the initial account balance

18 under clause (i), the plan shall credit the

19 accumulation account with the amount of

20 such benefit or subsidy for the plan year in

21 which the participant retires if, as of such

22 time, the participant has met the age,

23 years of service, and other requirements

24 under the plan for entitlement to such ben25 efit or subsidy.
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1 ‘‘(F) REQUIREMENTS WHERE PARTICIPANT

2 OFFERED CHOICE.—If a plan provides a partici3 pant with an election described in subparagraph

4 (B)(iii)(II) or (C)(ii), the following rules shall

5 apply:

6 ‘‘(i) NOTICE.—The plan shall not be

7 treated as meeting the requirements of ei8 ther such subparagraph unless the plan

9 provides the participant a notice of the

10 right to make such election which includes

11 information (meeting such requirements as

12 may be prescribed by the Secretary)—

13 ‘‘(I) by which the participant

14 may project benefits under the for15 mulas from which the participant may

16 choose and may model the impact of

17 any such choice, and

18 ‘‘(II) with respect to cir19 cumstances under which a participant

20 may not receive the projected accrued

21 benefits by reason of a plan termi22 nation or otherwise.

23 ‘‘(ii) SIGNIFICANT REDUCTION OF

24 RATE OF ACCRUAL.—The plan shall pro25 vide that if, during any of the first 5 plan
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1 years during which such an election is in

2 effect, the plan adopts an amendment

3 which results in a significant reduction in

4 the rate of future benefit accrual (within

5 the meaning of section 4980F(e)), the ac6 crued benefit of the participant shall be de7 termined as if the participant had made

8 the election which resulted in the greatest

9 accrued benefit.

10 ‘‘(iii) BENEFITS MUST NOT BE CON11 TINGENT ON ELECTION.—The plan shall

12 not be treated as meeting the requirements

13 of either such subparagraph if any other

14 benefit is conditioned (directly or indi15 rectly) on such election.

16 ‘‘(G) APPLICABLE PLAN AMENDMENT.—

17 For purposes of this paragraph—

18 ‘‘(i) IN GENERAL.—The term ‘applica19 ble plan amendment’ means an amendment

20 to a defined benefit plan which has the ef21 fect of converting the plan to a cash bal22 ance plan.

23 ‘‘(ii) SPECIAL RULE FOR COORDI24 NATED BENEFITS.—If the benefits of 2 or

25 more defined benefit plans established or
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1 maintained by an employer are coordinated

2 in such a manner as to have the effect of

3 the adoption of an amendment described in

4 clause (i), the sponsor of the defined ben5 efit plan or plans providing for such co6 ordination shall be treated as having

7 adopted such a plan amendment as of the

8 date such coordination begins.

9 ‘‘(iii) MULTIPLE AMENDMENTS.—The

10 Secretary shall issue regulations to prevent

11 the avoidance of the purposes of this para12 graph through the use of 2 or more plan

13 amendments rather than a single amend14 ment.

15 ‘‘(iv) CASH BALANCE PLAN.—For pur16 poses of this paragraph, the term ‘cash

17 balance plan’ has the meaning given such

18 term by subsection (b)(5)(C).

19 ‘‘(v) COORDINATION WITH ACCRUAL

20 AND NONDISCRIMINATION RULES.—If a

21 plan amendment is treated as meeting the

22 requirements of this paragraph with re23 spect to any participant because such par24 ticipant is eligible to continue to accrue

25 benefits in the same manner as under the
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1 terms of the plan in effect before the

2 amendment, the Secretary shall prescribe

3 regulations under which—

4 ‘‘(I) the plan shall not be treated

5 as failing to meet the requirements of

6 subparagraph (A), (B), or (C) of sec7 tion 411(b)(1) if the requirements of

8 this paragraph are met, and

9 ‘‘(II) the plan shall, subject to

10 such terms and conditions as may be

11 provided in such regulations, not be

12 treated as failing to meet the require13 ments of section 401(a)(4) merely be14 cause the plan provides any accrual or

15 benefit which is required to be pro16 vided under subparagraph (B), (C), or

17 (D) or because only participants as of

18 the effective date of the amendment

19 are so eligible, except that this sub20 clause shall only apply if the plan met

21 the requirements of section 401(a)(4)

22 under the terms of the plan as in ef23 fect before the amendment.

24 ‘‘(H) APPLICATION OF CERTAIN RULES TO

25 EARLY-RETIREMENT BENEFITS.—Rules similar
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1 to the rules of clauses (i), (ii), and (iii) of sub2 paragraph (B) and subparagraph (C) shall

3 apply in the case of any early retirement benefit

4 or retirement-type subsidy (within the meaning

5 of section 411(d)(6)(B)(i)).’’.

6 (c) ASSUMPTIONS USED IN COMPUTING PRESENT

7 VALUE OF ACCRUED BENEFIT.—

8 (1) AMENDMENT OF ERISA.—Section 205(g)(3)

9 of such Act (29 U.S.C. 1055(g)(3)), is amended—

10 (A) by striking ‘‘or (B)’’ in subparagraph

11 (A)(i) and inserting ‘‘, (B), or (C)’’, and

12 (B) by adding at the end the following new

13 subparagraph:

14 ‘‘(C) PRESENT VALUE OF ACCRUED BEN15 EFIT UNDER CASH BALANCE PLAN.—Except as

16 provided in regulations, in the case of a quali17 fied cash balance plan (as defined in section

18 204(g)(6)(B)), the present value of the accrued

19 benefit of any participant shall, for purposes of

20 paragraphs (1) and (2), be equal to the balance

21 in the participant’s accumulation account (or

22 its equivalent) as of the time the present value

23 determination is being made.’’.
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1 (2) AMENDMENT OF INTERNAL REVENUE

2 CODE.—Section 417(e)(3) of such Code, is

3 amended—

4 (A) by striking ‘‘or (B)’’ in subparagraph

5 (A)(i) and inserting ‘‘, (B), or (C)’’, and

6 (B) by adding at the end the following new

7 subparagraph:

8 ‘‘(C) PRESENT VALUE OF ACCRUED BEN9 EFIT UNDER CASH BALANCE PLAN.—Except as

10 provided in regulations, in the case of a quali11 fied cash balance plan (as defined in section

12 411(d)(7)(B)), the present value of the accrued

13 benefit of any participant shall, for purposes of

14 paragraphs (1) and (2), be equal to the balance

15 in the participant’s accumulation account (or

16 its equivalent) as of the time the present value

17 determination is being made.’’

18 (d) NO INFERENCE.—Nothing in the amendments

19 made by this section shall be construed to infer the proper

20 treatment of cash balance plans or conversions to cash bal21 ance plans under sections 204(b)(1)(H) of the Employee

22 Retirement Income Security Act of 1974, 4(i)(1) of the

23 Age Discrimination in Employment Act of 1967, and

24 411(b)(1)(H) of the Internal Revenue Code of 1986, as

25 in effect before such amendments.
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1 (e) EFFECTIVE DATES.—

2 (1) AGE DISCRIMINATION AND LUMP-SUM DIS3 TRIBUTIONS.—

4 (A) IN GENERAL.—The amendments made

5 by subsections (a) and (c) shall apply to periods

6 after July 31, 2005.

7 (B) VESTING AND INTEREST CREDIT RE8 QUIREMENTS.—In the case of a plan in exist9 ence on July 31, 2005, the requirements of

10 clauses (ii) and (iii) of section 411(b)(5)(B) of

11 the Internal Revenue Code of 1986, and of

12 clauses (ii) and (iii) of 204(b)(5)(B) of the Em13 ployee Retirement Income Security Act of 1974

14 shall, for purposes of applying the amendments

15 made by subsections (a) and (c), apply to years

16 beginning after December 31, 2006, unless the

17 plan sponsor elects the application of such re18 quirements for any period after July 31, 2005,

19 and before the first year beginning after De20 cember 31, 2006.

21 (C) SPECIAL RULE FOR COLLECTIVELY

22 BARGAINED PLANS.—In the case of a plan

23 maintained pursuant to 1 or more collective

24 bargaining agreements between employee rep25 resentatives and 1 or more employers ratified
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1 on or before the date of the enactment of this

2 Act, the requirements described in subpara3 graph (B) shall, for purposes of applying the

4 amendments made by subsections (a) and (c),

5 not apply to plan years beginning before—

6 (i) the earlier of—

7 (I) the date on which the last of

8 such collective bargaining agreements

9 terminates (determined without re10 gard to any extension thereof on or

11 after such date of enactment), or

12 (II) January 1, 2007, or

13 (ii) January 1, 2009.

14 (2) CONVERSIONS.—The amendments made by

15 subsection (b) shall apply to plan amendments

16 adopted after, and taking effect after, July 31,

17 2005, except that the plan sponsor may elect to have

18 such amendments apply to plan amendments adopt19 ed before, and taking effect after, such date.

20 SEC. 602. REGULATIONS RELATING TO MERGERS AND AC21 QUISITIONS.

22 The Secretary of the Treasury or his delegate shall,

23 not later than 12 months after the date of the enactment

24 of this Act, prescribe regulations for the application of the

25 amendments made by, and the provisions of, this title in
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1 cases where the conversion of a plan to a cash balance

2 plan is made with respect to a group of employees who

3 become employees by reason of a merger, acquisition, or

4 similar transaction.

5 TITLE VII—DIVERSIFICATION

6 RIGHTS AND OTHER PARTICI7 PANT PROTECTIONS UNDER

8 DEFINED CONTRIBUTION

9 PLANS

10 SEC. 701. DEFINED CONTRIBUTION PLANS REQUIRED TO

11 PROVIDE EMPLOYEES WITH FREEDOM TO IN12 VEST THEIR PLAN ASSETS.

13 (a) AMENDMENTS OF INTERNAL REVENUE CODE.—

14 (1) QUALIFICATION REQUIREMENT.—Section

15 401(a) of the Internal Revenue Code of 1986 (relat16 ing to qualified pension, profit-sharing, and stock

17 bonus plans), as amended by section 115 of this Act,

18 is amended by inserting after paragraph (34) the

19 following new paragraph:

20 ‘‘(35) DIVERSIFICATION REQUIREMENTS FOR

21 CERTAIN DEFINED CONTRIBUTION PLANS.—

22 ‘‘(A) IN GENERAL.—A trust which is part

23 of an applicable defined contribution plan shall

24 not be treated as a qualified trust unless the
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1 plan meets the diversification requirements of

2 subparagraphs (B), (C), and (D).

3 ‘‘(B) EMPLOYEE CONTRIBUTIONS AND

4 ELECTIVE DEFERRALS INVESTED IN EMPLOYER

5 SECURITIES OR REAL PROPERTY.—In the case

6 of the portion of an applicable individual’s ac7 count attributable to employee contributions

8 and elective deferrals which is invested in em9 ployer securities or employer real property, a

10 plan meets the requirements of this subpara11 graph if the applicable individual may elect to

12 direct the plan to divest any such securities or

13 real property and to reinvest an equivalent

14 amount in other investment options meeting the

15 requirements of subparagraph (D).

16 ‘‘(C) EMPLOYER CONTRIBUTIONS IN17 VESTED IN EMPLOYER SECURITIES OR REAL

18 PROPERTY.—In the case of the portion of the

19 account attributable to employer contributions

20 other than elective deferrals which is invested in

21 employer securities or employer real property, a

22 plan meets the requirements of this subpara23 graph if each applicable individual who—

24 ‘‘(i) is a participant who has com25 pleted at least 3 years of service, or
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1 ‘‘(ii) is a beneficiary of a participant

2 described in clause (i) or of a deceased

3 participant,

4 may elect to direct the plan to divest any such

5 securities or real property and to reinvest an

6 equivalent amount in other investment options

7 meeting the requirements of subparagraph (D).

8 ‘‘(D) INVESTMENT OPTIONS.—

9 ‘‘(i) IN GENERAL.—The requirements

10 of this subparagraph are met if the plan

11 offers not less than 3 investment options,

12 other than employer securities or employer

13 real property, to which an applicable indi14 vidual may direct the proceeds from the di15 vestment of employer securities or em16 ployer real property pursuant to this para17 graph, each of which is diversified and has

18 materially different risk and return charac19 teristics.

20 ‘‘(ii) TREATMENT OF CERTAIN RE21 STRICTIONS AND CONDITIONS.—

22 ‘‘(I) TIME FOR MAKING INVEST23 MENT CHOICES.—A plan shall not be

24 treated as failing to meet the require25 ments of this subparagraph merely be-
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1 cause the plan limits the time for di2 vestment and reinvestment to peri3 odic, reasonable opportunities occur4 ring no less frequently than quarterly.

5 ‘‘(II) CERTAIN RESTRICTIONS

6 AND CONDITIONS NOT ALLOWED.—

7 Except as provided in regulations, a

8 plan shall not meet the requirements

9 of this subparagraph if the plan im10 poses restrictions or conditions with

11 respect to the investment of employer

12 securities or employer real property

13 which are not imposed on the invest14 ment of other assets of the plan. This

15 subclause shall not apply to any re16 strictions or conditions imposed by

17 reason of the application of securities

18 laws.

19 ‘‘(E) APPLICABLE DEFINED CONTRIBU20 TION PLAN.—For purposes of this paragraph—

21 ‘‘(i) IN GENERAL.—The term ‘applica22 ble defined contribution plan’ means any

23 defined contribution plan which holds any

24 publicly traded employer securities.
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1 ‘‘(ii) EXCEPTION FOR CERTAIN

2 ESOPS.—Such term does not include an

3 employee stock ownership plan if—

4 ‘‘(I) there are no contributions to

5 such plan (or earnings thereunder)

6 which are held within such plan and

7 are subject to subsection (k) or (m),

8 and

9 ‘‘(II) such plan is a separate plan

10 for purposes of section 414(l) with re11 spect to any other defined benefit plan

12 or defined contribution plan main13 tained by the same employer or em14 ployers.

15 ‘‘(iii) EXCEPTION FOR ONE PARTICI16 PANT PLANS.—Such term does not include

17 a one-participant retirement plan.

18 ‘‘(iv) ONE-PARTICIPANT RETIREMENT

19 PLAN.—For purposes of clause (iii), the

20 term ‘one-participant retirement plan’

21 means a retirement plan that—

22 ‘‘(I) on the first day of the plan

23 year covered only one individual (or

24 the individual and the individual’s

25 spouse) and the individual owned 100
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1 percent of the plan sponsor (whether

2 or not incorporated), or covered only

3 one or more partners (or partners and

4 their spouses) in the plan sponsor,

5 ‘‘(II) meets the minimum cov6 erage requirements of section 410(b)

7 without being combined with any

8 other plan of the business that covers

9 the employees of the business,

10 ‘‘(III) does not provide benefits

11 to anyone except the individual (and

12 the individual’s spouse) or the part13 ners (and their spouses),

14 ‘‘(IV) does not cover a business

15 that is a member of an affiliated serv16 ice group, a controlled group of cor17 porations, or a group of businesses

18 under common control, and

19 ‘‘(V) does not cover a business

20 that uses the services of leased em21 ployees (within the meaning of section

22 414(n)).

23 For purposes of this clause, the term ‘part24 ner’ includes a 2-percent shareholder (as
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1 defined in section 1372(b)) of an S cor2 poration.

3 ‘‘(F) CERTAIN PLANS TREATED AS HOLD4 ING PUBLICLY TRADED EMPLOYER SECURI5 TIES.—

6 ‘‘(i) IN GENERAL.—Except as pro7 vided in regulations or in clause (ii), a plan

8 holding employer securities which are not

9 publicly traded employer securities shall be

10 treated as holding publicly traded employer

11 securities if any employer corporation, or

12 any member of a controlled group of cor13 porations which includes such employer

14 corporation, has issued a class of stock

15 which is a publicly traded employer secu16 rity.

17 ‘‘(ii) EXCEPTION FOR CERTAIN CON18 TROLLED GROUPS WITH PUBLICLY TRAD19 ED SECURITIES.—Clause (i) shall not

20 apply to a plan if—

21 ‘‘(I) no employer corporation, or

22 parent corporation of an employer

23 corporation, has issued any publicly

24 traded employer security, and
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1 ‘‘(II) no employer corporation, or

2 parent corporation of an employer

3 corporation, has issued any special

4 class of stock which grants particular

5 rights to, or bears particular risks for,

6 the holder or issuer with respect to

7 any corporation described in clause (i)

8 which has issued any publicly traded

9 employer security.

10 ‘‘(iii) DEFINITIONS.—For purposes of

11 this subparagraph, the term—

12 ‘‘(I) ‘controlled group of corpora13 tions’ has the meaning given such

14 term by section 1563(a), except that

15 ‘50 percent’ shall be substituted for

16 ‘80 percent’ each place it appears,

17 ‘‘(II) ‘employer corporation’

18 means a corporation which is an em19 ployer maintaining the plan, and

20 ‘‘(III) ‘parent corporation’ has

21 the meaning given such term by sec22 tion 424(e).

23 ‘‘(G) OTHER DEFINITIONS.—For purposes

24 of this paragraph—
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1 ‘‘(i) APPLICABLE INDIVIDUAL.—The

2 term ‘applicable individual’ means—

3 ‘‘(I) any participant in the plan,

4 and

5 ‘‘(II) any beneficiary who has an

6 account under the plan with respect to

7 which the beneficiary is entitled to ex8 ercise the rights of a participant.

9 ‘‘(ii) ELECTIVE DEFERRAL.—The

10 term ‘elective deferral’ means an employer

11 contribution described in section

12 402(g)(3)(A).

13 ‘‘(iii) EMPLOYER SECURITY.—The

14 term ‘employer security’ has the meaning

15 given such term by section 407(d)(1) of

16 the Employee Retirement Income Security

17 Act of 1974.

18 ‘‘(iv) EMPLOYER REAL PROPERTY.—

19 The term ‘employer real property’ has the

20 meaning given such term by section

21 407(d)(2) of the Employee Retirement In22 come Security Act of 1974.

23 ‘‘(v) EMPLOYEE STOCK OWNERSHIP

24 PLAN.—The term ‘employee stock owner-
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1 ship plan’ has the meaning given such

2 term by section 4975(e)(7).

3 ‘‘(vi) PUBLICLY TRADED EMPLOYER

4 SECURITIES.—The term ‘publicly traded

5 employer securities’ means employer secu6 rities which are readily tradable on an es7 tablished securities market.

8 ‘‘(vii) YEAR OF SERVICE.—The term

9 ‘year of service’ has the meaning given

10 such term by section 411(a)(5).

11 ‘‘(H) TRANSITION RULE FOR SECURITIES

12 OR REAL PROPERTY ATTRIBUTABLE TO EM13 PLOYER CONTRIBUTIONS.—

14 ‘‘(i) RULES PHASED IN OVER 3

15 YEARS.—

16 ‘‘(I) IN GENERAL.—In the case

17 of the portion of an account to which

18 subparagraph (C) applies and which

19 consists of employer securities or em20 ployer real property acquired in a plan

21 year beginning before January 1,

22 2006, subparagraph (C) shall only

23 apply to the applicable percentage of

24 such securities or real property. This

25 subparagraph shall be applied sepa-
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1 rately with respect to each class of se2 curities and employer real property.

3 ‘‘(II) EXCEPTION FOR CERTAIN

4 PARTICIPANTS AGED 55 OR OVER.—

5 Subclause (I) shall not apply to an

6 applicable individual who is a partici7 pant who has attained age 55 and

8 completed at least 3 years of service

9 before the first plan year beginning

10 after December 31, 2005.

11 ‘‘(ii) APPLICABLE PERCENTAGE.—For

12 purposes of clause (i), the applicable per13 centage shall be determined as follows:

Plan year to which The applicable

subparagraph (C) applies: percentage is:

1st ............................................................................................ 33

2d ............................................................................................. 66

3d and following ....................................................................... 100.’’.

14 (2) CONFORMING AMENDMENTS.—

15 (A) Section 401(a)(28)(B) of such Code

16 (relating to additional requirements relating to

17 employee stock ownership plans) is amended by

18 adding at the end the following new clause:

19 ‘‘(v) EXCEPTION.—This subparagraph

20 shall not apply to an applicable defined

21 contribution plan (as defined in paragraph

22 (35)(E)).’’
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1 (B) Section 409(h)(7) of such Code is

2 amended by inserting ‘‘or subparagraph (B) or

3 (C) of section 401(a)(35)’’ before the period at

4 the end.

5 (C) Section 4980(c)(3)(A) of such Code is

6 amended by striking ‘‘if—’’ and all that follows

7 and inserting ‘‘if the requirements of subpara8 graphs (B), (C), and (D) are met.’’

9 (b) AMENDMENTS OF ERISA.—

10 (1) IN GENERAL.—Section 204 of the Employee

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

12 1054) is amended by redesignating subsection (j) as

13 subsection (k) and by inserting after subsection (i)

14 the following new subsection:

15 ‘‘(j) DIVERSIFICATION REQUIREMENTS FOR CERTAIN

16 INDIVIDUAL ACCOUNT PLANS.—

17 ‘‘(1) IN GENERAL.—An applicable individual ac18 count plan shall meet the diversification require19 ments of paragraphs (2), (3), and (4).

20 ‘‘(2) EMPLOYEE CONTRIBUTIONS AND ELEC21 TIVE DEFERRALS INVESTED IN EMPLOYER SECURI22 TIES OR REAL PROPERTY.—In the case of the por23 tion of an applicable individual’s account attrib24 utable to employee contributions and elective defer25 rals which is invested in employer securities or em-
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1 ployer real property, a plan meets the requirements

2 of this paragraph if the applicable individual may

3 elect to direct the plan to divest any such securities

4 or real property and to reinvest an equivalent

5 amount in other investment options meeting the re6 quirements of paragraph (4).

7 ‘‘(3) EMPLOYER CONTRIBUTIONS INVESTED IN

8 EMPLOYER SECURITIES OR REAL PROPERTY.—In the

9 case of the portion of the account attributable to

10 employer contributions other than elective deferrals

11 which is invested in employer securities or employer

12 real property, a plan meets the requirements of this

13 paragraph if each applicable individual who—

14 ‘‘(A) is a participant who has completed at

15 least 3 years of service, or

16 ‘‘(B) is a beneficiary of a participant de17 scribed in subparagraph (A) or of a deceased

18 participant,

19 may elect to direct the plan to divest any such secu20 rities or real property and to reinvest an equivalent

21 amount in other investment options meeting the re22 quirements of paragraph (4).

23 ‘‘(4) INVESTMENT OPTIONS.—

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

25 this paragraph are met if the plan offers not
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1 less than 3 investment options, other than em2 ployer securities or employer real property, to

3 which an applicable individual may direct the

4 proceeds from the divestment of employer secu5 rities or employer real property pursuant to this

6 subsection, each of which is diversified and has

7 materially different risk and return characteris8 tics.

9 ‘‘(B) TREATMENT OF CERTAIN RESTRIC10 TIONS AND CONDITIONS.—

11 ‘‘(i) TIME FOR MAKING INVESTMENT

12 CHOICES.—A plan shall not be treated as

13 failing to meet the requirements of this

14 paragraph merely because the plan limits

15 the time for divestment and reinvestment

16 to periodic, reasonable opportunities occur17 ring no less frequently than quarterly.

18 ‘‘(ii) CERTAIN RESTRICTIONS AND

19 CONDITIONS NOT ALLOWED.—Except as

20 provided in regulations, a plan shall not

21 meet the requirements of this paragraph if

22 the plan imposes restrictions or conditions

23 with respect to the investment of employer

24 securities or employer real property which

25 are not imposed on the investment of other
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1 assets of the plan. This subparagraph shall

2 not apply to any restrictions or conditions

3 imposed by reason of the application of se4 curities laws.

5 ‘‘(5) APPLICABLE INDIVIDUAL ACCOUNT

6 PLAN.—For purposes of this subsection—

7 ‘‘(A) IN GENERAL.—The term ‘applicable

8 individual account plan’ means any individual

9 account plan (as defined in section 3(34)) which

10 holds any publicly traded employer securities.

11 ‘‘(B) EXCEPTION FOR CERTAIN ESOPS.—

12 Such term does not include an employee stock

13 ownership plan if—

14 ‘‘(i) there are no contributions to such

15 plan (or earnings thereunder) which are

16 held within such plan and are subject to

17 subsection (k) or (m) of section 401 of the

18 Internal Revenue Code of 1986, and

19 ‘‘(ii) such plan is a separate plan (for

20 purposes of section 414(l) of such Code)

21 with respect to any other defined benefit

22 plan or individual account plan maintained

23 by the same employer or employers.

24 ‘‘(C) EXCEPTION FOR ONE PARTICIPANT

25 PLANS.—Such term shall not include a one-par-
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1 ticipant retirement plan (as defined in section

2 101(i)(8)(B)).

3 ‘‘(D) CERTAIN PLANS TREATED AS HOLD4 ING PUBLICLY TRADED EMPLOYER SECURI5 TIES.—

6 ‘‘(i) IN GENERAL.—Except as pro7 vided in regulations or in clause (ii), a plan

8 holding employer securities which are not

9 publicly traded employer securities shall be

10 treated as holding publicly traded employer

11 securities if any employer corporation, or

12 any member of a controlled group of cor13 porations which includes such employer

14 corporation, has issued a class of stock

15 which is a publicly traded employer secu16 rity.

17 ‘‘(ii) EXCEPTION FOR CERTAIN CON18 TROLLED GROUPS WITH PUBLICLY TRAD19 ED SECURITIES.—Clause (i) shall not

20 apply to a plan if—

21 ‘‘(I) no employer corporation, or

22 parent corporation of an employer

23 corporation, has issued any publicly

24 traded employer security, and
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1 ‘‘(II) no employer corporation, or

2 parent corporation of an employer

3 corporation, has issued any special

4 class of stock which grants particular

5 rights to, or bears particular risks for,

6 the holder or issuer with respect to

7 any corporation described in clause (i)

8 which has issued any publicly traded

9 employer security.

10 ‘‘(iii) DEFINITIONS.—For purposes of

11 this subparagraph, the term—

12 ‘‘(I) ‘controlled group of corpora13 tions’ has the meaning given such

14 term by section 1563(a) of the Inter15 nal Revenue Code of 1986, except

16 that ‘50 percent’ shall be substituted

17 for ‘80 percent’ each place it appears,

18 ‘‘(II) ‘employer corporation’

19 means a corporation which is an em20 ployer maintaining the plan, and

21 ‘‘(III) ‘parent corporation’ has

22 the meaning given such term by sec23 tion 424(e) of such Code.

24 ‘‘(6) OTHER DEFINITIONS.—For purposes of

25 this paragraph—
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1 ‘‘(A) APPLICABLE INDIVIDUAL.—The term

2 ‘applicable individual’ means—

3 ‘‘(i) any participant in the plan, and

4 ‘‘(ii) any beneficiary who has an ac5 count under the plan with respect to which

6 the beneficiary is entitled to exercise the

7 rights of a participant.

8 ‘‘(B) ELECTIVE DEFERRAL.—The term

9 ‘elective deferral’ means an employer contribu10 tion described in section 402(g)(3)(A) of the In11 ternal Revenue Code of 1986.

12 ‘‘(C) EMPLOYER SECURITY.—The term

13 ‘employer security’ has the meaning given such

14 term by section 407(d)(1).

15 ‘‘(D) EMPLOYER REAL PROPERTY.—The

16 term ‘employer real property’ has the meaning

17 given such term by section 407(d)(2).

18 ‘‘(E) EMPLOYEE STOCK OWNERSHIP

19 PLAN.—The term ‘employee stock ownership

20 plan’ has the meaning given such term by sec21 tion 4975(e)(7) of such Code.

22 ‘‘(F) PUBLICLY TRADED EMPLOYER SECU23 RITIES.—The term ‘publicly traded employer

24 securities’ means employer securities which are
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1 readily tradable on an established securities

2 market.

3 ‘‘(G) YEAR OF SERVICE.—The term ‘year

4 of service’ has the meaning given such term by

5 section 203(b)(2).

6 ‘‘(7) TRANSITION RULE FOR SECURITIES OR

7 REAL PROPERTY ATTRIBUTABLE TO EMPLOYER CON8 TRIBUTIONS.—

9 ‘‘(A) RULES PHASED IN OVER 3 YEARS.—

10 ‘‘(i) IN GENERAL.—In the case of the

11 portion of an account to which paragraph

12 (3) applies and which consists of employer

13 securities or employer real property ac14 quired in a plan year beginning before

15 January 1, 2006, paragraph (3) shall only

16 apply to the applicable percentage of such

17 securities or real property. This subpara18 graph shall be applied separately with re19 spect to each class of securities and em20 ployer real property.

21 ‘‘(ii) EXCEPTION FOR CERTAIN PAR22 TICIPANTS AGED 55 OR OVER.—Clause (i)

23 shall not apply to an applicable individual

24 who is a participant who has attained age

25 55 and completed at least 3 years of serv-
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1 ice before the first plan year beginning

2 after December 31, 2005.

3 ‘‘(B) APPLICABLE PERCENTAGE.—For

4 purposes of subparagraph (A), the applicable

5 percentage shall be determined as follows:

Plan year to which The applicable

paragraph (3) applies: percentage is:

1st ............................................................................................ 33

2d ............................................................................................. 66

3d and following ....................................................................... 100.’’.

6 (2) CONFORMING AMENDMENT.—Section

7 407(b)(3) of such Act (29 U.S.C. 1107(b)(3)) is

8 amended by adding at the end the following:

‘‘(D) For diversification requirements for qualifying employer securities and qualifying real property held in certain individual account plans, see

section 204(j).’’

9 (c) EFFECTIVE DATES.—

10 (1) IN GENERAL.—Except as provided in para11 graphs (2) and (3), the amendments made by this

12 section shall apply to plan years beginning after De13 cember 31, 2005.

14 (2) SPECIAL RULE FOR COLLECTIVELY BAR15 GAINED AGREEMENTS.—In the case of a plan main16 tained pursuant to 1 or more collective bargaining

17 agreements between employee representatives and 1

18 or more employers ratified on or before the date of

19 the enactment of this Act, paragraph (1) shall be

20 applied to benefits pursuant to, and individuals cov-
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1 ered by, any such agreement by substituting for

2 ‘‘December 31, 2005’’ the earlier of—

3 (A) the later of—

4 (i) December 31, 2006, or

5 (ii) the date on which the last of such

6 collective bargaining agreements termi7 nates (determined without regard to any

8 extension thereof after such date of enact9 ment), or

10 (B) December 31, 2007.

11 (3) SPECIAL RULE FOR CERTAIN EMPLOYER SE12 CURITIES HELD IN AN ESOP.—

13 (A) IN GENERAL.—In the case of employer

14 securities to which this paragraph applies, the

15 amendments made by this section shall apply to

16 plan years beginning after the earlier of—

17 (i) December 31, 2006, or

18 (ii) the first date on which the fair

19 market value of such securities exceeds the

20 guaranteed minimum value described in

21 subparagraph (B)(ii).

22 (B) APPLICABLE SECURITIES.—This para23 graph shall apply to employer securities which

24 are attributable to employer contributions other
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1 than elective deferrals, and which, on Sep2 tember 17, 2003—

3 (i) consist of preferred stock, and

4 (ii) are within an employee stock own5 ership plan (as defined in section

6 4975(e)(7) of the Internal Revenue Code

7 of 1986), the terms of which provide that

8 the value of the securities cannot be less

9 than the guaranteed minimum value speci10 fied by the plan on such date.

11 (C) COORDINATION WITH TRANSITION

12 RULE.—In applying section 401(a)(35)(H) of

13 the Internal Revenue Code of 1986 and section

14 204(j)(7) of the Employee Retirement Income

15 Security Act of 1974 (as added by this section)

16 to employer securities to which this paragraph

17 applies, the applicable percentage shall be de18 termined without regard to this paragraph.

19 SEC. 702. NOTICE OF FREEDOM TO DIVEST EMPLOYER SE20 CURITIES OR REAL PROPERTY.

21 (a) IN GENERAL.—Section 101 of the Employee Re22 tirement Income Security Act of 1974 (29 U.S.C. 1021),

23 as amended by this Act, is amended by redesignating sub24 section (m) as subsection (n) and by inserting after sub25 section (l) the following:
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1 ‘‘(m) NOTICE OF RIGHT TO DIVEST.—Not later than

2 30 days before the first date on which an applicable indi3 vidual of an applicable individual account plan is eligible

4 to exercise the right under section 204(j) to direct the pro5 ceeds from the divestment of employer securities or em6 ployer real property with respect to any type of contribu7 tion, the administrator shall provide to such individual a

8 notice—

9 ‘‘(1) setting forth such right under such sec10 tion, and

11 ‘‘(2) describing the importance of diversifying

12 the investment of retirement account assets.

13 The notice required by this subsection shall be written in

14 a manner calculated to be understood by the average plan

15 participant and may be delivered in written, electronic, or

16 other appropriate form to the extent that such form is rea17 sonably accessible to the recipient.’’

18 (b) PENALTIES.—Section 502(c)(7) of the Employee

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

20 1132(c)(7)) is amended by striking ‘‘section 101(i)’’ and

21 inserting ‘‘subsection (i) or (m) of section 101’’.

22 (c) MODEL NOTICE.—The Secretary of the Treasury

23 shall, within 180 days after the date of the enactment of

24 this subsection, prescribe a model notice for purposes of
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1 satisfying the requirements of the amendments made by

2 this section.

3 (d) EFFECTIVE DATES.—

4 (1) IN GENERAL.—The amendments made by

5 this section shall apply to plan years beginning after

6 December 31, 2005.

7 (2) TRANSITION RULE.—If notice under section

8 101(m) of the Employee Retirement Income Secu9 rity Act of 1974 (as added by this section) would

10 otherwise be required to be provided before the 90th

11 day after the date of the enactment of this Act, such

12 notice shall not be required to be provided until such

13 90th day.

14 SEC. 703. PERIODIC PENSION BENEFIT STATEMENTS.

15 (a) AMENDMENTS OF ERISA.—

16 (1) IN GENERAL.—Section 105(a) of the Em17 ployee Retirement Income Security Act of 1974 (29

18 U.S.C. 1025(a)) is amended to read as follows:

19 ‘‘(a) REQUIREMENTS TO PROVIDE PENSION BEN20 EFIT STATEMENTS.—

21 ‘‘(1) REQUIREMENTS.—

22 ‘‘(A) INDIVIDUAL ACCOUNT PLAN.—The

23 administrator of an individual account plan

24 (other than a one-participant retirement plan
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1 described in section 101(i)(8)(B)) shall furnish

2 a pension benefit statement—

3 ‘‘(i) at least once each calendar quar4 ter to a participant or beneficiary who has

5 the right to direct the investment of assets

6 in his or her account under the plan,

7 ‘‘(ii) at least once each calendar year

8 to a participant or beneficiary who has his

9 or her own account under the plan but

10 does not have the right to direct the invest11 ment of assets in that account, and

12 ‘‘(iii) upon written request to a plan

13 beneficiary not described in clause (i) or

14 (ii).

15 ‘‘(B) DEFINED BENEFIT PLAN.—The ad16 ministrator of a defined benefit plan (other

17 than a one-participant retirement plan de18 scribed in section 101(i)(8)(B)) shall furnish a

19 pension benefit statement—

20 ‘‘(i) at least once every 3 years to

21 each participant with a nonforfeitable ac22 crued benefit and who is employed by the

23 employer maintaining the plan at the time

24 the statement is to be furnished, and
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1 ‘‘(ii) to a participant or beneficiary of

2 the plan upon written request.

3 Information furnished under clause (i) to a par4 ticipant may be based on reasonable estimates

5 determined under regulations prescribed by the

6 Secretary, in consultation with the Pension

7 Benefit Guaranty Corporation.

8 ‘‘(2) STATEMENTS.—

9 ‘‘(A) IN GENERAL.—A pension benefit

10 statement under paragraph (1)—

11 ‘‘(i) shall indicate, on the basis of the

12 latest available information—

13 ‘‘(I) the total benefits accrued,

14 and

15 ‘‘(II) the nonforfeitable pension

16 benefits, if any, which have accrued,

17 or the earliest date on which benefits

18 will become nonforfeitable,

19 ‘‘(ii) shall include an explanation of

20 any permitted disparity under section

21 401(l) of the Internal Revenue Code of

22 1986 or any floor-offset arrangement that

23 may be applied in determining any accrued

24 benefits described in clause (i),
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1 ‘‘(iii) shall be written in a manner cal2 culated to be understood by the average

3 plan participant, and

4 ‘‘(iv) may be delivered in written, elec5 tronic, or other appropriate form to the ex6 tent such form is reasonably accessible to

7 the participant or beneficiary.

8 ‘‘(B) ADDITIONAL INFORMATION.—In the

9 case of an individual account plan, any pension

10 benefit statement under clause (i) or (ii) of

11 paragraph (1)(A) shall include—

12 ‘‘(i) the value of each investment to

13 which assets in the individual account have

14 been allocated, determined as of the most

15 recent valuation date under the plan, in16 cluding the value of any assets held in the

17 form of employer securities or employer

18 real property, without regard to whether

19 such securities or real property were con20 tributed by the plan sponsor or acquired at

21 the direction of the plan or of the partici22 pant or beneficiary, and

23 ‘‘(ii) in the case of a pension benefit

24 statement under paragraph (1)(A)(i)—
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1 ‘‘(I) an explanation of any limita2 tions or restrictions on any right of

3 the participant or beneficiary under

4 the plan to direct an investment, and

5 ‘‘(II) a notice that investments in

6 any individual account may not be

7 adequately diversified if the value of

8 any investment in the account exceeds

9 20 percent of the fair market value of

10 all investments in the account.

11 ‘‘(C) ALTERNATIVE NOTICE.—The require12 ments of subparagraph (A)(i)(II) are met if, at

13 least annually and in accordance with require14 ments of the Secretary, the plan—

15 ‘‘(i) updates the information described

16 in such paragraph which is provided in the

17 pension benefit statement, or

18 ‘‘(ii) provides in a separate statement

19 such information as is necessary to enable

20 a participant or beneficiary to determine

21 their nonforfeitable vested benefits.

22 ‘‘(3) DEFINED BENEFIT PLANS.—

23 ‘‘(A) ALTERNATIVE NOTICE.—In the case

24 of a defined benefit plan, the requirements of

25 paragraph (1)(B)(i) shall be treated as met
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1 with respect to a participant if at least once

2 each year the administrator provides to the par3 ticipant notice of the availability of the pension

4 benefit statement and the ways in which the

5 participant may obtain such statement. Such

6 notice may be delivered in written, electronic, or

7 other appropriate form to the extent such form

8 is reasonably accessible to the participant.

9 ‘‘(B) YEARS IN WHICH NO BENEFITS AC10 CRUE.—The Secretary may provide that years

11 in which no employee or former employee bene12 fits (within the meaning of section 410(b) of

13 the Internal Revenue Code of 1986) under the

14 plan need not be taken into account in deter15 mining the 3-year period under paragraph

16 (1)(B)(i).’’

17 (2) CONFORMING AMENDMENTS.—

18 (A) Section 105 of the Employee Retire19 ment Income Security Act of 1974 (29 U.S.C.

20 1025) is amended by striking subsection (d).

21 (B) Section 105(b) of such Act (29 U.S.C.

22 1025(b)) is amended to read as follows:

23 ‘‘(b) LIMITATION ON NUMBER OF STATEMENTS.—In

24 no case shall a participant or beneficiary of a plan be enti25 tled to more than 1 statement described in subparagraph
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1 (A)(iii) or (B)(ii) of subsection (a)(1), whichever is appli2 cable, in any 12-month period.’’

3 (C) Section 502(c)(1) of such Act (29

4 U.S.C. 1132(c)(1)) is amended by striking ‘‘or

5 section 101(f)’’ and inserting ‘‘section 101(f),

6 or section 105(a)’’.

7 (b) MODEL STATEMENTS.—

8 (1) IN GENERAL.—The Secretary of Labor

9 shall, within 180 days after the date of the enact10 ment of this section, develop 1 or more model benefit

11 statements that are written in a manner calculated

12 to be understood by the average plan participant and

13 that may be used by plan administrators in com14 plying with the requirements of section 105 of the

15 Employee Retirement Income Security Act of 1974.

16 (2) INTERIM FINAL RULES.—The Secretary of

17 Labor may promulgate any interim final rules as the

18 Secretary determines appropriate to carry out the

19 provisions of this subsection.

20 (d) EFFECTIVE DATE.—

21 (1) IN GENERAL.—The amendments made by

22 this section shall apply to plan years beginning after

23 December 31, 2006.

24 (2) SPECIAL RULE FOR COLLECTIVELY BAR25 GAINED AGREEMENTS.—In the case of a plan main-
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1 tained pursuant to 1 or more collective bargaining

2 agreements between employee representatives and 1

3 or more employers ratified on or before the date of

4 the enactment of this Act, paragraph (1) shall be

5 applied to benefits pursuant to, and individuals cov6 ered by, any such agreement by substituting for

7 ‘‘December 31, 2006’’ the earlier of—

8 (A) the later of—

9 (i) December 31, 2007, or

10 (ii) the date on which the last of such

11 collective bargaining agreements termi12 nates (determined without regard to any

13 extension thereof after such date of enact14 ment), or

15 (B) December 31, 2008.

16 SEC. 704. NOTICE TO PARTICIPANTS OR BENEFICIARIES OF

17 BLACKOUT PERIODS.

18 (a) AMENDMENTS OF ERISA.—

19 (1) IN GENERAL.—Section 101(i) of the Em20 ployee Retirement Income Security Act of 1974 (29

21 U.S.C. 1021(i)) is amended—

22 (A) by striking clauses (i) through (iv) of

23 paragraph (8)(B) and inserting:

24 ‘‘(i) on the first day of the plan

25 year—
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1 ‘‘(I) covered only one individual

2 (or the individual and the individual’s

3 spouse) and the individual (or the in4 dividual and the individual’s spouse)

5 owned 100 percent of the plan spon6 sor (whether or not incorporated), or

7 ‘‘(II) covered only one or more

8 partners (or partners and their

9 spouses) in the plan sponsor, and’’,

10 and

11 (B) in paragraph (8)(B), by redesignating

12 clause (v) as clause (ii).

13 (2) EFFECTIVE DATE.—The amendments made

14 by this subsection shall take effect as if included in

15 the provisions of section 306 of Public Law 107–204

16 (116 Stat. 745 et seq.).

17 SEC. 705. ALLOWANCE OF, AND CREDIT FOR, ADDITIONAL

18 IRA PAYMENTS IN CERTAIN BANKRUPTCY

19 CASES.

20 (a) ALLOWANCE OF CONTRIBUTIONS.—Section

21 219(b)(5) of the Internal Revenue Code of 1986 (relating

22 to deductible amount) is amended by redesignating sub23 paragraph (C) as subparagraph (D) and by inserting after

24 subparagraph (B) the following new subparagraph:
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1 ‘‘(C) CATCHUP CONTRIBUTIONS FOR CER2 TAIN INDIVIDUALS.—

3 ‘‘(i) IN GENERAL.—In the case of an

4 applicable individual who elects to make a

5 qualified retirement contribution in addi6 tion to the deductible amount determined

7 under subparagraph (A)—

8 ‘‘(I) the deductible amount for

9 any taxable year shall be increased by

10 an amount equal to 3 times the appli11 cable amount determined under sub12 paragraph (B) for such taxable year,

13 and

14 ‘‘(II) subparagraph (B) shall not

15 apply.

16 ‘‘(ii) APPLICABLE INDIVIDUAL.—For

17 purposes of this subparagraph, the term

18 ‘applicable individual’ means, with respect

19 to any taxable year, any individual who

20 was a qualified participant in a qualified

21 cash or deferred arrangement (as defined

22 in section 401(k)) of an employer described

23 in clause (iii) under which the employer

24 matched at least 50 percent of the employ-
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1 ee’s contributions to such arrangement

2 with stock of such employer.

3 ‘‘(iii) EMPLOYER DESCRIBED.—An

4 employer is described in this clause if, in

5 any taxable year preceding the taxable year

6 described in clause (ii)—

7 ‘‘(I) such employer (or any con8 trolling corporation of such employer)

9 was a debtor in a case under title 11

10 of the United States Code, or similar

11 Federal or State law, and

12 ‘‘(II) such employer (or any other

13 person) was subject to an indictment

14 or conviction resulting from business

15 transactions related to such case.

16 ‘‘(iv) QUALIFIED PARTICIPANT.—For

17 purposes of clause (ii), the term ‘qualified

18 participant’ means any applicable indi19 vidual who was a participant in the cash or

20 deferred arrangement described in clause

21 (i) on the date that is 6 months before the

22 filing of the case described in clause (iii).

23 ‘‘(v) TERMINATION.—This subpara24 graph shall not apply to taxable years be25 ginning after December 31, 2009.’’
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1 (b) SAVER’S CREDIT EXPANDED TO INCLUDE

2 CATCHUP CONTRIBUTIONS.—

3 (1) IN GENERAL.—Section 25B of the Internal

4 Revenue Code of 1986 (relating to credit for elective

5 deferrals and IRA contributions by certain individ6 uals) is amended by redesignating subsection (h) as

7 subsection (i) and by inserting after subsection (g)

8 the following new subsection:

9 ‘‘(h) ADDITIONAL CREDIT FOR CERTAIN CATCHUP

10 CONTRIBUTIONS.—

11 ‘‘(1) IN GENERAL.—In the case of an eligible

12 individual who is an applicable individual under sec13 tion 219(b)(5)(C) for any taxable year, the amount

14 of the credit allowable under subsection (a) for the

15 taxable year shall be increased by 50 percent of so

16 much of the qualified retirement contributions (as

17 defined in section 219(e)) of the individual for the

18 taxable year as exceeds the deductible amount for

19 the taxable year under section 219(b)(5) (without

20 regard to subparagraphs (B) and (C) thereof).

21 ‘‘(2) COORDINATION WITH OTHER CONTRIBU22 TIONS.—For purposes of this section—

23 ‘‘(A) any contribution to which this sub24 section applies shall not be taken into account

25 in determining the amount of the credit allow-
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1 able under subsection (a) without regard to this

2 subsection, and

3 ‘‘(B) in applying any reduction in qualified

4 retirement savings contributions under sub5 section (d)(2), the reduction shall be applied

6 first to qualified retirement savings contribu7 tions other than contributions to which this

8 subsection applies.’’.

9 (2) EXTENSION OF TERMINATION DATE FOR

10 CATCHUP CREDIT.—Section 25B(i) of such Code, as

11 redesignated by paragraph (1), is amended by in12 serting ‘‘(December 31, 2007, in the case of the por13 tion of the credit allowed under subsection (h))’’

14 after ‘‘2006’’.

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

16 this section shall apply to taxable years beginning after

17 December 31, 2004.

18 SEC. 706. INAPPLICABILITY OF RELIEF FROM FIDUCIARY

19 LIABILITY DURING SUSPENSION OF ABILITY

20 OF PARTICIPANT OR BENEFICIARY TO DI21 RECT INVESTMENTS.

22 (a) IN GENERAL.—Section 404(c)(1) of the Em23 ployee Retirement Income Security Act of 1974 (29

24 U.S.C. 1104(c)(1)) is amended—
†

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1 (1) by redesignating subparagraphs (A) and

2 (B) as clauses (i) and (ii), respectively, and by in3 serting ‘‘(A)’’ after ‘‘(c)(1)’’,

4 (2) in subparagraph (A)(ii) (as redesignated by

5 paragraph (1)), by inserting before the period the

6 following: ‘‘, except that this clause shall not apply

7 in connection with such participant or beneficiary

8 for any blackout period during which the ability of

9 such participant or beneficiary to direct the invest10 ment of the assets in his or her account is sus11 pended by a plan sponsor or fiduciary’’, and

12 (3) by adding at the end the following new sub13 paragraphs:

14 ‘‘(B)(i) If a person referred to in subparagraph

15 (A)(ii) meets the requirements of this title in connection

16 with authorizing and implementing the blackout period,

17 any person who is otherwise a fiduciary shall not be liable

18 under this title for any loss occurring during such period

19 as a result of any exercise by the participant or beneficiary

20 of control over assets in his or her account before the pe21 riod. Matters to be considered in determining whether

22 such person has satisfied the requirements of this title in23 clude, but are not limited to, whether such person—

24 ‘‘(I) has considered the reasonableness of the

25 expected blackout period,
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1 ‘‘(II) has provided the notice required under

2 section 101(i)(1), and

3 ‘‘(III) has acted in accordance with the require4 ments of subsection (a) in determining whether to

5 enter into the blackout period.

6 ‘‘(ii) For purposes of this subsection, if a blackout

7 period arises in connection with a change in the invest8 ment options offered under the plan, a participant or bene9 ficiary shall be deemed to have exercised control over the

10 assets in his or her account prior to the blackout period

11 if, after notice of the change in investment options is given

12 to such participant or beneficiary, assets in the account

13 of the participant or beneficiary are transferred—

14 ‘‘(I) to plan investment options in accordance

15 with the affirmative election of the participant or

16 beneficiary; or

17 ‘‘(II) in the absence of such an election and in

18 the case in which fiduciary relief was provided under

19 this subsection for the prior investment options, to

20 plan investment options in the manner set forth in

21 such notice.

22 ‘‘(C) For purposes of this paragraph, the term ‘black23 out period’ has the meaning given such term by section

24 101(i)(7).’’
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1 (b) GUIDANCE.—Not later than 180 days after the

2 date of enactment of this Act, the Secretary of Labor, in

3 consultation with the Secretary of the Treasury, shall

4 issue interim final regulations providing guidance, includ5 ing safe harbors, on how plan sponsors or any other af6 fected fiduciaries can satisfy their fiduciary responsibilities

7 during any blackout period during which the ability of a

8 participant or beneficiary to direct the investment of as9 sets in his or her individual account is suspended.

10 (c) EFFECTIVE DATE.—

11 (1) IN GENERAL.—The amendments made by

12 this section shall apply to plan years beginning after

13 December 31, 2005.

14 (2) SPECIAL RULE FOR COLLECTIVELY BAR15 GAINED AGREEMENTS.—In the case of a plan main16 tained pursuant to 1 or more collective bargaining

17 agreements between employee representatives and 1

18 or more employers ratified on or before the date of

19 the enactment of this Act, paragraph (1) shall be

20 applied to benefits pursuant to, and individuals cov21 ered by, any such agreement by substituting for

22 ‘‘December 31, 2005’’ the earlier of—

23 (A) the later of—

24 (i) December 31, 2006, or
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1 (ii) the date on which the last of such

2 collective bargaining agreements termi3 nates (determined without regard to any

4 extension thereof after such date of enact5 ment), or

6 (B) December 31, 2007.

7 SEC. 707. INCREASE IN MAXIMUM BOND AMOUNT.

8 (a) IN GENERAL.—Section 412(a) of the Employee

9 Retirement Income Security Act of 1974 (29 U.S.C. 1112)

10 is amended by adding at the end the following: ‘‘In the

11 case of a plan that holds employer securities (within the

12 meaning of section 407(d)(1)), this subsection shall be ap13 plied by substituting ‘$1,000,000’ for ‘$500,000’ each

14 place it appears.’’

15 (b) EFFECTIVE DATE.—The amendment made by

16 this section shall apply to plan years beginning after De17 cember 31, 2005.

18 TITLE VIII—INFORMATION TO

19 ASSIST PENSION PLAN PAR20 TICIPANTS

21 SEC. 801. DEFINED CONTRIBUTION PLANS REQUIRED TO

22 PROVIDE ADEQUATE INVESTMENT EDU23 CATION TO PARTICIPANTS.

24 (a) ADEQUATE INVESTMENT EDUCATION.—
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1 (1) IN GENERAL.—Section 101 of the Employee

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

3 1024), as amended by this Act, is amended by redes4 ignating subsection (n) as subsection (o) and by in5 serting after subsection (m) the following:

6 ‘‘(n) BASIC INVESTMENT GUIDELINES.—

7 ‘‘(1) IN GENERAL.—The administrator of an in8 dividual account plan (other than a one-participant

9 retirement plan described in subsection (i)(8)(B))

10 shall furnish at least once each year to each partici11 pant or beneficiary who has the right to direct the

12 investment of assets in his or her account the model

13 form relating to basic investment guidelines which is

14 described in paragraph (2).

15 ‘‘(2) MODEL FORM.—

16 ‘‘(A) IN GENERAL.—The Secretary shall,

17 in consultation with the Secretary of Treasury,

18 develop and make available to individual ac19 count plans for distribution under paragraph

20 (1) a model form containing basic guidelines for

21 investing for retirement. Except as otherwise

22 provided by the Secretary, such guidelines shall

23 include—

24 ‘‘(i) information on the benefits of di25 versification,
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1 ‘‘(ii) information on the essential dif2 ferences, in terms of risk and return, of

3 pension plan investments, including stocks,

4 bonds, mutual funds, and money market

5 investments,

6 ‘‘(iii) information on how an individ7 ual’s pension plan investment allocations

8 may differ depending on the individual’s

9 age and years to retirement and on other

10 factors determined by the Secretary,

11 ‘‘(iv) sources of information where in12 dividuals may learn more about pension

13 rights, individual investing, and investment

14 advice, and

15 ‘‘(v) such other information related to

16 individual investing as the Secretary deter17 mines appropriate.

18 ‘‘(B) CALCULATION INFORMATION.—The

19 model form under subparagraph (A) shall in20 clude addresses for Internet sites, and a work21 sheet, which a participant or beneficiary may

22 use to calculate—

23 ‘‘(i) the retirement age value of the

24 participant’s or beneficiary’s nonforfeitable

25 pension benefits under the plan (expressed
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1 as an annuity amount and determined by

2 reference to varied historical annual rates

3 of return and annuity interest rates), and

4 ‘‘(ii) other important amounts relating

5 to retirement savings, including the

6 amount which a participant or beneficiary

7 would be required to save annually to pro8 vide a retirement income equal to various

9 percentages of their current salary (ad10 justed for expected growth prior to retire11 ment).

12 The Secretary shall develop an Internet site

13 which an individual may use in making such

14 calculations and the address for such site shall

15 be included with the form.

16 ‘‘(C) PUBLIC COMMENT.—The Secretary of

17 Labor shall provide at least 90 days for public

18 comment before publishing final notice of the

19 model form.

20 ‘‘(3) RULES RELATING TO FORM AND STATE21 MENT.—The model form under paragraph (2)—

22 ‘‘(A) shall be written in a manner cal23 culated to be understood by the average plan

24 participant, and
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1 ‘‘(B) may be delivered in written, elec2 tronic, or other appropriate form to the extent

3 such form is reasonably accessible to partici4 pants and beneficiaries.’’

5 (2) ENFORCEMENT.—Section 502(c)(7) of such

6 Act (29 U.S.C. 1132(c)(7)), as amended by this Act,

7 is amended by striking ‘‘or (l)’’ and inserting ‘‘, (l),

8 or (n)’’.

9 (c) EFFECTIVE DATE.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall apply to plan years beginning after

12 December 31, 2006.

13 (2) SPECIAL RULE FOR COLLECTIVELY BAR14 GAINED AGREEMENTS.—In the case of a plan main15 tained pursuant to 1 or more collective bargaining

16 agreements between employee representatives and 1

17 or more employers ratified on or before the date of

18 the enactment of this Act, paragraph (1) shall be

19 applied to benefits pursuant to, and individuals cov20 ered by, any such agreement by substituting for

21 ‘‘December 31, 2006’’ the earlier of—

22 (A) the later of—

23 (i) December 31, 2007, or

24 (ii) the date on which the last of such

25 collective bargaining agreements termi-
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1 nates (determined without regard to any

2 extension thereof after such date of enact3 ment), or

4 (B) December 31, 2008.

5 SEC. 802. INDEPENDENT INVESTMENT ADVICE PROVIDED

6 TO PLAN PARTICIPANTS.

7 (a) IN GENERAL.—Section 404 of the Employee Re8 tirement Income Security Act of 1974 (29 U.S.C. 1104)

9 is amended by adding at the end the following new sub10 section:

11 ‘‘(e) INDEPENDENT INVESTMENT ADVISER.—

12 ‘‘(1) IN GENERAL.—In the case of an individual

13 account plan which permits a plan participant or

14 beneficiary to direct the investment of the assets in

15 his or her account, if a plan sponsor or other person

16 who is a fiduciary designates and monitors a quali17 fied investment adviser pursuant to the requirements

18 of paragraph (3), such fiduciary—

19 ‘‘(A) shall be deemed to have satisfied the

20 requirements under this section for the prudent

21 designation and periodic review of an invest22 ment adviser with whom the plan sponsor or

23 other person who is a fiduciary enters into an

24 arrangement for the provision of advice referred

25 to in section 3(21)(A)(ii),
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1 ‘‘(B) shall not be liable under this section

2 for any loss, or by reason of any breach, with

3 respect to the provision of investment advice

4 given by such adviser to any plan participant or

5 beneficiary, and

6 ‘‘(C) shall not be liable for any co-fiduciary

7 liability under subsections (a)(2) and (b) of sec8 tion 405 with respect to the provision of invest9 ment advice given by such adviser to any plan

10 participant or beneficiary.

11 ‘‘(2) QUALIFIED INVESTMENT ADVISER.—

12 ‘‘(A) IN GENERAL.—For purposes of this

13 subsection, the term ‘qualified investment ad14 viser’ means, with respect to a plan, a person—

15 ‘‘(i) who is a fiduciary of the plan by

16 reason of the provision of investment ad17 vice by such person to a plan participant

18 or beneficiary;

19 ‘‘(ii) who—

20 ‘‘(I) is registered as an invest21 ment adviser under the Investment

22 Advisers Act of 1940 (15 U.S.C. 80b–

23 1 et seq.),

24 ‘‘(II) is registered as an invest25 ment adviser under the laws of the
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1 State in which such adviser maintains

2 the principal office and place of busi3 ness of such adviser, but only if such

4 State laws are consistent with section

5 203A of the Investment Advisers Act

6 of 1940 (15 U.S.C. 80b–3a),

7 ‘‘(III) is a bank or similar finan8 cial institution referred to in section

9 408(b)(4),

10 ‘‘(IV) is an insurance company

11 qualified to do business under the

12 laws of a State, or

13 ‘‘(V) is any other comparably

14 qualified entity which satisfies such

15 criteria as the Secretary determines

16 appropriate, consistent with the pur17 poses of this subsection, and

18 ‘‘(iii) who meets the requirements of

19 subparagraph (B).

20 ‘‘(B) ADVISER REQUIREMENTS.—The re21 quirements of this subparagraph are met if

22 every individual employed (or otherwise com23 pensated) by a person described in subpara24 graph (A)(ii) who provides investment advice on
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1 behalf of such person to any plan participant or

2 beneficiary is—

3 ‘‘(i) an individual described in sub4 clause (I) of subparagraph (A)(ii),

5 ‘‘(ii) an individual described in sub6 clause (II) of subparagraph (A)(ii), but

7 only if such State has an examination re8 quirement to qualify for registration,

9 ‘‘(iii) registered as a broker or dealer

10 under the Securities Exchange Act of 1934

11 (15 U.S.C. 78a et seq.),

12 ‘‘(iv) a registered representative as de13 scribed in section 3(a)(18) of the Securi14 ties Exchange Act of 1934 (15 U.S.C.

15 78c(a)(18)) or section 202(a)(17) of the

16 Investment Advisers Act of 1940 (15

17 U.S.C. 80b–2(a)(17)), or

18 ‘‘(v) any other comparably qualified

19 individual who satisfies such criteria as the

20 Secretary determines appropriate, con21 sistent with the purposes of this sub22 section.

23 ‘‘(3) VERIFICATION REQUIREMENTS.—The re24 quirements of this paragraph are met if—
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1 ‘‘(A) the plan sponsor or other person who

2 is a fiduciary in designating a qualified invest3 ment adviser receives at the time of the des4 ignation, and annually thereafter, a written

5 verification from the qualified investment ad6 viser that the investment adviser—

7 ‘‘(i) is and remains a qualified invest8 ment adviser,

9 ‘‘(ii) acknowledges that the investment

10 adviser is a fiduciary with respect to the

11 plan and is solely responsible for its invest12 ment advice,

13 ‘‘(iii) has reviewed the plan documents

14 (including investment options) and has de15 termined that its relationship with the plan

16 and the investment advice provided to any

17 plan participant or beneficiary, including

18 any fees or other compensation it will re19 ceive, will not constitute a violation of sec20 tion 406,

21 ‘‘(iv) will, in providing investment ad22 vice to any participant or beneficiary, con23 sider any employer securities or employer

24 real property allocated to his or her ac25 count, and
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1 ‘‘(v) has the necessary insurance cov2 erage (as determined by the Secretary) for

3 any claim by any plan participant or bene4 ficiary,

5 ‘‘(B) the plan sponsor or other person who

6 is a fiduciary in designating a qualified invest7 ment adviser reviews the documents described

8 in paragraph (4) provided by such adviser and

9 determines that there is no material reason not

10 to enter into an arrangement for the provision

11 of advice by such qualified investment adviser,

12 and

13 ‘‘(C) the plan sponsor or other person who

14 is a fiduciary in designating a qualified invest15 ment adviser, within 30 days of having informa16 tion brought to its attention that the invest17 ment adviser is no longer qualified or that a

18 substantial number of plan participants or

19 beneficiaries have raised concerns about the

20 services being provided by the investment

21 adviser—

22 ‘‘(i) investigates such information and

23 concerns, and

24 ‘‘(ii) determines that there is no mate25 rial reason not to continue the designation
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1 of the adviser as a qualified investment ad2 viser.

3 ‘‘(4) DOCUMENTATION.—A qualified investment

4 adviser shall provide the following documents to the

5 plan sponsor or other person who is a fiduciary in

6 designating the adviser:

7 ‘‘(A) The contract with the plan sponsor or

8 other person who is a fiduciary for the services

9 to be provided by the investment adviser to the

10 plan participants and beneficiaries.

11 ‘‘(B) A disclosure as to any fees or other

12 compensation that will be received by the in13 vestment adviser for the provision of such in14 vestment advice and as to any fees and other

15 compensation that will be received as a result of

16 a participant’s investment election.

17 ‘‘(C) The Uniform Application for Invest18 ment Adviser Registration as filed with the Se19 curities and Exchange Commission or a sub20 stantially similar disclosure application as de21 termined by and filed with the Secretary.

22 ‘‘(5) TREATMENT AS FIDUCIARY.—Any quali23 fied investment adviser that acknowledges it is a fi24 duciary pursuant to paragraph (3)(A)(ii) shall be

25 deemed a fiduciary under this part with respect to
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1 the provision of investment advice to a plan partici2 pant or beneficiary.’’

3 (b) FIDUCIARY LIABILITY.—Section 404(c)(1)(B) of

4 such Act is amended by inserting ‘‘(other than a qualified

5 investment adviser)’’ after ‘‘fiduciary’’.

6 (c) EFFECTIVE DATE.—The amendments made by

7 this section shall apply with respect to investment advisers

8 designated after the date of the enactment of this Act.

9 SEC. 803. TREATMENT OF QUALIFIED RETIREMENT PLAN10 NING SERVICES.

11 (a) IN GENERAL.—Subsection (m) of section 132 of

12 the Internal Revenue Code of 1986 (defining qualified re13 tirement services) is amended by adding at the end the

14 following new paragraph:

15 ‘‘(4) NO CONSTRUCTIVE RECEIPT.—

16 ‘‘(A) IN GENERAL.—No amount shall be

17 included in the gross income of any employee

18 solely because the employee may choose between

19 any qualified retirement planning services pro20 vided by an eligible investment advisor and

21 compensation which would otherwise be includ22 ible in the gross income of such employee. The

23 preceding sentence shall apply to highly com24 pensated employees only if the choice described

25 in such sentence is available on substantially
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1 the same terms to each member of the group of

2 employees normally provided education and in3 formation regarding the employer’s qualified

4 employer plan.

5 ‘‘(B) LIMITATION.—The maximum amount

6 which may be excluded under subparagraph (A)

7 with respect to any employee for any taxable

8 year shall not exceed $1,000.

9 ‘‘(C) ELIGIBLE INVESTMENT ADVISER.—

10 For purposes of this paragraph, the term ‘eligi11 ble investment adviser’ means, with respect to

12 a plan, a person—

13 ‘‘(i) who—

14 ‘‘(I) is registered as an invest15 ment adviser under the Investment

16 Advisers Act of 1940 (15 U.S.C. 80b–

17 1 et seq.),

18 ‘‘(II) is registered as an invest19 ment adviser under the laws of the

20 State in which such adviser maintains

21 the principal office and place of busi22 ness of such adviser, but only if such

23 State laws are consistent with section

24 203A of the Investment Advisers Act

25 of 1940 (15 U.S.C. 80b–3a),
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1 ‘‘(III) is a bank or similar finan2 cial institution referred to in section

3 408(b)(4),

4 ‘‘(IV) is an insurance company

5 qualified to do business under the

6 laws of a State, or

7 ‘‘(V) is any other comparably

8 qualified entity which satisfies such

9 criteria as the Secretary determines

10 appropriate, consistent with the pur11 poses of this subsection, and

12 ‘‘(ii) who meets the requirements of

13 subparagraph (D).

14 ‘‘(D) ADVISER REQUIREMENTS.—The re15 quirements of this subparagraph are met if

16 every individual employed (or otherwise com17 pensated) by a person described in subpara18 graph (C)(i) who provides investment advice on

19 behalf of such person to any plan participant or

20 beneficiary is—

21 ‘‘(i) an individual described in sub22 clause (I) of subparagraph (C)(i),

23 ‘‘(ii) an individual described in sub24 clause (II) of subparagraph (C)(i), but
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1 only if such State has an examination re2 quirement to qualify for registration,

3 ‘‘(iii) registered as a broker or dealer

4 under the Securities Exchange Act of 1934

5 (15 U.S.C. 78a et seq.),

6 ‘‘(iv) a registered representative as de7 scribed in section 3(a)(18) of the Securi8 ties Exchange Act of 1934 (15 U.S.C.

9 78c(a)(18)) or section 202(a)(17) of the

10 Investment Advisers Act of 1940 (15

11 U.S.C. 80b–2(a)(17)), or

12 ‘‘(v) any other comparably qualified

13 individual who satisfies such criteria as the

14 Secretary determines appropriate, con15 sistent with the purposes of this para16 graph.

17 ‘‘(E) TERMINATION.—This paragraph

18 shall not apply to taxable years beginning after

19 December 31, 2010.’’.

20 (b) CONFORMING AMENDMENTS.—

21 (1) Section 403(b)(3)(B) of such Code is

22 amended by inserting ‘‘132(m)(4),’’ after

23 ‘‘132(f)(4),’’.

24 (2) Section 414(s)(2) of such Code is amended

25 by inserting ‘‘132(m)(4),’’ after ‘‘132(f)(4),’’.
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1 (3) Section 415(c)(3)(D)(ii) of such Code is

2 amended by inserting ‘‘132(m)(4),’’ after

3 ‘‘132(f)(4),’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years beginning after

6 December 31, 2005.

7 SEC. 804. INCREASE IN PENALTIES FOR COERCIVE INTER8 FERENCE WITH EXERCISE OF ERISA RIGHTS.

9 (a) IN GENERAL.—Section 511 of the Employment

10 Retirement Income Security Act of 1974 (29 U.S.C. 1141)

11 is amended—

12 (1) by striking ‘‘$10,000’’ and inserting

13 ‘‘$100,000’’, and

14 (2) by striking ‘‘one year’’ and inserting ‘‘10

15 years’’.

16 (b) EFFECTIVE DATE.—The amendments made by

17 this section shall apply to violations occurring on and after

18 the date of the enactment of this Act.

19 SEC. 805. ADMINISTRATIVE PROVISION.

20 The Secretary of the Treasury shall have the author21 ity to prescribe rules applicable to the statements required

22 under sections 101(j) and 101(m) of the Employee Retire23 ment Income Security Act of 1974 (as added by this Act).
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1 TITLE IX—PROVISIONS RELAT2 ING TO SPOUSAL PENSION

3 PROTECTION

4 SEC. 901. REGULATIONS ON TIME AND ORDER OF

5 ISSUANCE OF DOMESTIC RELATIONS OR6 DERS.

7 Not later than 1 year after the date of the enactment

8 of this Act, the Secretary of Labor shall issue regulations

9 under section 206(d)(3) of the Employee Retirement Secu10 rity Act of 1974 and section 414(p) of the Internal Rev11 enue Code of 1986 which clarify that—

12 (1) a domestic relations order otherwise meet13 ing the requirements to be a qualified domestic rela14 tions order, including the requirements of section

15 206(d)(3)(D) of such Act and section 414(p)(3) of

16 such Code, shall not fail to be treated as a qualified

17 domestic relations order solely because—

18 (A) the order is issued after, or revises, an19 other domestic relations order or qualified do20 mestic relations order; or

21 (B) of the time at which it is issued; and

22 (2) any order described in paragraph (1) shall

23 be subject to the same requirements and protections

24 which apply to qualified domestic relations orders,
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1 including the provisions of section 206(d)(3)(H) of

2 such Act and section 414(p)(7) of such Code.

3 SEC. 902. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL4 ROAD RETIREMENT ANNUITIES INDE5 PENDENT OF ACTUAL ENTITLEMENT OF EM6 PLOYEE.

7 (a) IN GENERAL.—Section 2 of the Railroad Retire8 ment Act of 1974 (45 U.S.C. 231a) is amended—

9 (1) in subsection (c)(4)(i), by striking ‘‘(A) is

10 entitled to an annuity under subsection (a)(1) and

11 (B)’’; and

12 (2) in subsection (e)(5), by striking ‘‘or di13 vorced wife’’ the second place it appears.

14 (b) EFFECTIVE DATE.—The amendments made by

15 this section shall take effect 1 year after the date of the

16 enactment of this Act.

17 SEC. 903. EXTENSION OF TIER II RAILROAD RETIREMENT

18 BENEFITS TO SURVIVING FORMER SPOUSES

19 PURSUANT TO DIVORCE AGREEMENTS.

20 (a) IN GENERAL.—Section 5 of the Railroad Retire21 ment Act of 1974 (45 U.S.C. 231d) is amended by adding

22 at the end the following:

23 ‘‘(d) Notwithstanding any other provision of law, the

24 payment of any portion of an annuity computed under sec25 tion 3(b) to a surviving former spouse in accordance with
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1 a court decree of divorce, annulment, or legal separation

2 or the terms of any court-approved property settlement

3 incident to any such court decree shall not be terminated

4 upon the death of the individual who performed the service

5 with respect to which such annuity is so computed unless

6 such termination is otherwise required by the terms of

7 such court decree.’’

8 (b) EFFECTIVE DATE.—The amendment made by

9 this section shall take effect 1 year after the date of the

10 enactment of this Act.

11 SEC. 904. REQUIREMENT FOR ADDITIONAL SURVIVOR AN12 NUITY OPTION.

13 (a) AMENDMENTS TO INTERNAL REVENUE CODE.—

14 (1) ELECTION OF SURVIVOR ANNUITY.—Section

15 417(a)(1)(A) of the Internal Revenue Code of 1986

16 is amended—

17 (A) in clause (i), by striking ‘‘, and’’ and

18 inserting a comma;

19 (B) by redesignating clause (ii) as clause

20 (iii); and

21 (C) by inserting after clause (i) the fol22 lowing:

23 ‘‘(ii) if the participant elects a waiver

24 under clause (i), may elect the qualified op-
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1 tional survivor annuity at any time during the

2 applicable election period, and’’.

3 (2) DEFINITION.—Section 417 of such Code is

4 amended by adding at the end the following:

5 ‘‘(g) DEFINITION OF QUALIFIED OPTIONAL SUR6 VIVOR ANNUITY.—

7 ‘‘(1) IN GENERAL.—For purposes of this sec8 tion, the term ‘qualified optional survivor annuity’

9 means an annuity—

10 ‘‘(A) for the life of the participant with a

11 survivor annuity for the life of the spouse which

12 is equal to the applicable percentage of the

13 amount of the annuity which is payable during

14 the joint lives of the participant and the spouse,

15 and

16 ‘‘(B) which is the actuarial equivalent of a

17 single annuity for the life of the participant.

18 Such term also includes any annuity in a form hav19 ing the effect of an annuity described in the pre20 ceding sentence.

21 ‘‘(2) APPLICABLE PERCENTAGE.—

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (1), if the survivor annuity percentage—

24 ‘‘(i) is less than 75 percent, the appli25 cable percentage is 75 percent, and
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1 ‘‘(ii) is greater than or equal to 75

2 percent, the applicable percentage is 50

3 percent.

4 ‘‘(B) SURVIVOR ANNUITY PERCENTAGE.—

5 For purposes of subparagraph (A), the term

6 ‘survivor annuity percentage’ means the per7 centage which the survivor annuity under the

8 plan’s qualified joint and survivor annuity bears

9 to the annuity payable during the joint lives of

10 the participant and the spouse.’’.

11 (3) NOTICE.—Section 417(a)(3)(A)(i) of such

12 Code is amended by inserting ‘‘and of the qualified

13 optional survivor annuity’’ after ‘‘annuity’’.

14 (b) AMENDMENTS TO ERISA.—

15 (1) ELECTION OF SURVIVOR ANNUITY.—Section

16 205(c)(1)(A) of the Employee Retirement Income

17 Security Act of 1974 (29 U.S.C. 1055(c)(1)(A)) is

18 amended—

19 (A) in clause (i), by striking ‘‘, and’’ and

20 inserting a comma;

21 (B) by redesignating clause (ii) as clause

22 (iii); and

23 (C) by inserting after clause (i) the fol24 lowing:
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1 ‘‘(ii) if the participant elects a waiver

2 under clause (i), may elect the qualified op3 tional survivor annuity at any time during the

4 applicable election period, and’’.

5 (2) DEFINITION.—Section 205(d) of such Act

6 (29 U.S.C. 1055(d)) is amended—

7 (A) by inserting ‘‘(1)’’ after ‘‘(d)’’;

8 (B) by redesignating paragraphs (1) and

9 (2) as subparagraphs (A) and (B), respectively;

10 and

11 (C) by adding at the end the following:

12 ‘‘(2)(A) For purposes of this section, the term ‘quali13 fied optional survivor annuity’ means an annuity—

14 ‘‘(i) for the life of the participant with a sur15 vivor annuity for the life of the spouse which is

16 equal to the applicable percentage of the amount of

17 the annuity which is payable during the joint lives

18 of the participant and the spouse, and

19 ‘‘(ii) which is the actuarial equivalent of a sin20 gle annuity for the life of the participant.

21 Such term also includes any annuity in a form having the

22 effect of an annuity described in the preceding sentence.

23 ‘‘(B)(i) For purposes of subparagraph (A), if the sur24 vivor annuity percentage—
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1 ‘‘(I) is less than 75 percent, the applicable per2 centage is 75 percent, and

3 ‘‘(II) is greater than or equal to 75 percent, the

4 applicable percentage is 50 percent.

5 ‘‘(ii) For purposes of clause (i), the term ‘survivor

6 annuity percentage’ means the percentage which the sur7 vivor annuity under the plan’s qualified joint and survivor

8 annuity bears to the annuity payable during the joint lives

9 of the participant and the spouse.’’.

10 (3) NOTICE.—Section 205(c)(3)(A)(i) of such

11 Act (29 U.S.C. 1055(c)(3)(A)(i)) is amended by in12 serting ‘‘and of the qualified optional survivor annu13 ity’’ after ‘‘annuity’’.

14 (c) EFFECTIVE DATES.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall apply to plan years beginning after

17 December 31, 2005.

18 (2) SPECIAL RULE FOR COLLECTIVELY BAR19 GAINED PLANS.—In the case of a plan maintained

20 pursuant to 1 or more collective bargaining agree21 ments between employee representatives and 1 or

22 more employers ratified on or before the date of the

23 enactment of this Act, the amendments made by this

24 section shall apply to the first plan year beginning

25 on or after the earlier of—
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1 (A) the later of—

2 (i) January 1, 2006, or

3 (ii) the date on which the last of such

4 collective bargaining agreements termi5 nates (determined without regard to any

6 extension thereof after the date of enact7 ment of this Act), or

8 (B) January 1, 2007.

9 TITLE X—IMPROVEMENTS IN

10 PORTABILITY AND DISTRIBU11 TION RULES

12 SEC. 1001. CLARIFICATIONS REGARDING PURCHASE OF

13 PERMISSIVE SERVICE CREDIT.

14 (a) IN GENERAL.—Section 415(n) of the Internal

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

16 purchase of permissive service credit) is amended—

17 (1) by striking ‘‘an employee’’ in paragraph (1)

18 and inserting ‘‘a participant’’, and

19 (2) by adding at the end of paragraph (3)(A)

20 the following new flush sentence:

21 ‘‘Such term may include service credit for peri22 ods for which there is no performance of serv23 ice, and notwithstanding clause (ii), may in24 clude service credited in order to provide an in-
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1 creased benefit for service credit which a partic2 ipant is receiving under the plan.’’

3 (b) SPECIAL RULES FOR TRUSTEE-TO-TRUSTEE

4 TRANSFERS.—Section 415(n)(3) of such Code is amended

5 by adding at the end the following new subparagraph:

6 ‘‘(D) SPECIAL RULES FOR TRUSTEE-TO7 TRUSTEE TRANSFERS.—In the case of a trust8 ee-to-trustee transfer to which section

9 403(b)(13)(A) or 457(e)(17)(A) applies (with10 out regard to whether the transfer is made be11 tween plans maintained by the same em12 ployer)—

13 ‘‘(i) the limitations of subparagraph

14 (B) shall not apply in determining whether

15 the transfer is for the purchase of permis16 sive service credit, and

17 ‘‘(ii) the distribution rules applicable

18 under this title to the defined benefit gov19 ernmental plan to which any amounts are

20 so transferred shall apply to such amounts

21 and any benefits attributable to such

22 amounts.’’.

23 (c) NONQUALIFIED SERVICE.—Section 415(n)(3) of

24 such Code is amended—
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1 (1) by striking ‘‘permissive service credit attrib2 utable to nonqualified service’’ each place it appears

3 in subparagraph (B) and inserting ‘‘nonqualified

4 service credit’’,

5 (2) by striking so much of subparagraph (C) as

6 precedes clause (i) and inserting:

7 ‘‘(C) NONQUALIFIED SERVICE CREDIT.—

8 For purposes of subparagraph (B), the term

9 ‘nonqualified service credit’ means permissive

10 service credit other than that allowed with re11 spect to—’’, and

12 (3) by striking ‘‘elementary or secondary edu13 cation (through grade 12), as determined under

14 State law’’ and inserting ‘‘elementary or secondary

15 education (through grade 12), or a comparable level

16 of education, as determined under the applicable law

17 of the jurisdiction in which the service was per18 formed’’.

19 (d) EFFECTIVE DATES.—

20 (1) IN GENERAL.—The amendments made by

21 subsections (a) and (c) shall take effect as if in22 cluded in the amendments made by section 1526 of

23 the Taxpayer Relief Act of 1997.

24 (2) SUBSECTION (b).—The amendments made

25 by subsection (b) shall take effect as if included in
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1 the amendments made by section 647 of the Eco2 nomic Growth and Tax Relief Reconciliation Act of

3 2001.

4 SEC. 1002. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN

5 ANNUITY CONTRACTS.

6 (a) IN GENERAL.—Subparagraph (A) of section

7 402(c)(2) (relating to the maximum amount which may

8 be rolled over) is amended—

9 (1) by striking ‘‘which is part of a plan which

10 is a defined contribution plan and which agrees to

11 separately account’’ and inserting ‘‘or to an annuity

12 contract described in section 403(b) and such trust

13 or contract provides for separate accounting’’; and

14 (2) by inserting ‘‘(and earnings thereon)’’ after

15 ‘‘so transferred’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 subsection (a) shall apply to taxable years beginning after

18 December 31, 2005.

19 SEC. 1003. CLARIFICATION OF MINIMUM DISTRIBUTION

20 RULES FOR GOVERNMENTAL PLANS.

21 The Secretary of the Treasury shall issue regulations

22 under which a governmental plan (as defined in section

23 414(d) of the Internal Revenue Code of 1986) shall, for

24 all years to which section 401(a)(9) of such Code applies

25 to such plan, be treated as having complied with such sec-
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1 tion 401(a)(9) if such plan complies with a reasonable

2 good faith interpretation of such section 401(a)(9).

3 SEC. 1004. WAIVER OF 10 PERCENT EARLY WITHDRAWAL

4 PENALTY TAX ON CERTAIN DISTRIBUTIONS

5 OF PENSION PLANS FOR PUBLIC SAFETY EM6 PLOYEES.

7 (a) IN GENERAL.—Section 72(t) of the Internal Rev8 enue Code of 1986 (relating to subsection not to apply

9 to certain distributions) is amended by adding at the end

10 the following new paragraph:

11 ‘‘(10) DISTRIBUTIONS TO QUALIFIED PUBLIC

12 SAFETY EMPLOYEES IN GOVERNMENTAL PLANS.—

13 ‘‘(A) IN GENERAL.—In the case of a dis14 tribution to a qualified public safety employee

15 from a governmental plan (within the meaning

16 of section 414(d)) which is a defined benefit

17 plan, paragraph (2)(A)(v) shall be applied by

18 substituting ‘age 50’ for ‘age 55’.

19 ‘‘(B) QUALIFIED PUBLIC SAFETY EM20 PLOYEE.—For purposes of this paragraph, the

21 term ‘qualified public safety employee’ means

22 any employee of a State or political subdivision

23 of a State who provides police protection, fire24 fighting services, or emergency medical services
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1 for any area within the jurisdiction of such

2 State or political subdivision.’’

3 (b) EFFECTIVE DATE.—The amendment made by

4 this section shall apply to distributions after the date of

5 the enactment of this Act.

6 SEC. 1005. ALLOW ROLLOVERS BY NONSPOUSE BENE7 FICIARIES OF CERTAIN RETIREMENT PLAN

8 DISTRIBUTIONS.

9 (a) IN GENERAL.—

10 (1) QUALIFIED PLANS.—Section 402(c) of the

11 Internal Revenue Code of 1986 (relating to rollovers

12 from exempt trusts) is amended by adding at the

13 end the following new paragraph:

14 ‘‘(11) DISTRIBUTIONS TO INHERITED INDI15 VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE16 FICIARY.—

17 ‘‘(A) IN GENERAL.—If, with respect to any

18 portion of a distribution from an eligible retire19 ment plan of a deceased employee, a direct

20 trustee-to-trustee transfer is made to an indi21 vidual retirement plan described in clause (i) or

22 (ii) of paragraph (8)(B) established for the pur23 poses of receiving the distribution on behalf of

24 an individual who is a designated beneficiary

25 (as defined by section 401(a)(9)(E)) of the em-
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1 ployee and who is not the surviving spouse of

2 the employee—

3 ‘‘(i) the transfer shall be treated as an

4 eligible rollover distribution for purposes of

5 this subsection,

6 ‘‘(ii) the individual retirement plan

7 shall be treated as an inherited individual

8 retirement account or individual retirement

9 annuity (within the meaning of section

10 408(d)(3)(C)) for purposes of this title,

11 and

12 ‘‘(iii) section 401(a)(9)(B) (other than

13 clause (iv) thereof) shall apply to such

14 plan.

15 ‘‘(B) CERTAIN TRUSTS TREATED AS BENE16 FICIARIES.—For purposes of this paragraph, to

17 the extent provided in rules prescribed by the

18 Secretary, a trust maintained for the benefit of

19 one or more designated beneficiaries shall be

20 treated in the same manner as a designated

21 beneficiary.’’.

22 (2) SECTION 403(a) PLANS.—Subparagraph

23 (B) of section 403(a)(4) of such Code (relating to

24 rollover amounts) is amended by striking ‘‘and (9)’’

25 and inserting ‘‘, (9), and (11)’’.
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1 (3) SECTION 403(b) PLANS.—Subparagraph

2 (B) of section 403(b)(8) of such Code (relating to

3 rollover amounts) is amended by striking ‘‘and (9)’’

4 and inserting ‘‘, (9), and (11)’’.

5 (4) SECTION 457 PLANS.—Subparagraph (B) of

6 section 457(e)(16) of such Code (relating to rollover

7 amounts) is amended by striking ‘‘and (9)’’ and in8 serting ‘‘, (9), and (11)’’.

9 (b) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to distributions after December 31,

11 2005.

12 SEC. 1006. FASTER VESTING OF EMPLOYER NONELECTIVE

13 CONTRIBUTIONS.

14 (a) AMENDMENTS TO THE INTERNAL REVENUE

15 CODE OF 1986.—

16 (1) IN GENERAL.—Paragraph (2) of section

17 411(a) of the Internal Revenue Code of 1986 (relat18 ing to employer contributions) is amended to read as

19 follows:

20 ‘‘(2) EMPLOYER CONTRIBUTIONS.—

21 ‘‘(A) DEFINED BENEFIT PLANS.—

22 ‘‘(i) IN GENERAL.—In the case of a

23 defined benefit plan, a plan satisfies the

24 requirements of this paragraph if it satis25 fies the requirements of clause (ii) or (iii).
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1 ‘‘(ii) 5-YEAR VESTING.—A plan satis2 fies the requirements of this clause if an

3 employee who has completed at least 5

4 years of service has a nonforfeitable right

5 to 100 percent of the employee’s accrued

6 benefit derived from employer contribu7 tions.

8 ‘‘(iii) 3 TO 7 YEAR VESTING.—A plan

9 satisfies the requirements of this clause if

10 an employee has a nonforfeitable right to

11 a percentage of the employee’s accrued

12 benefit derived from employer contribu13 tions determined under the following table:

The nonforfeitable

‘‘Years of service: percentage is:

3 ........................................................................................... 20

4 ........................................................................................... 40

5 ........................................................................................... 60

6 ........................................................................................... 80

7 or more ............................................................................. 100.

14 ‘‘(B) DEFINED CONTRIBUTION PLANS.—

15 ‘‘(i) IN GENERAL.—In the case of a

16 defined contribution plan, a plan satisfies

17 the requirements of this paragraph if it

18 satisfies the requirements of clause (ii) or

19 (iii).

20 ‘‘(ii) 3-YEAR VESTING.—A plan satis21 fies the requirements of this clause if an

22 employee who has completed at least 3
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1 years of service has a nonforfeitable right

2 to 100 percent of the employee’s accrued

3 benefit derived from employer contribu4 tions.

5 ‘‘(iii) 2 TO 6 YEAR VESTING.—A plan

6 satisfies the requirements of this clause if

7 an employee has a nonforfeitable right to

8 a percentage of the employee’s accrued

9 benefit derived from employer contribu10 tions determined under the following table:

The nonforfeitable

‘‘Years of service: percentage is:

2 ........................................................................................... 20

3 ........................................................................................... 40

4 ........................................................................................... 60

5 ........................................................................................... 80

6 or more ............................................................................. 100.’’.

11 (2) CONFORMING AMENDMENT.—Section

12 411(a) of such Code (relating to general rule for

13 minimum vesting standards) is amended by striking

14 paragraph (12).

15 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

16 INCOME SECURITY ACT OF 1974.—

17 (1) IN GENERAL.—Paragraph (2) of section

18 203(a) of the Employee Retirement Income Security

19 Act of 1974 (29 U.S.C. 1053(a)(2)) is amended to

20 read as follows:
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1 ‘‘(2)(A)(i) In the case of a defined benefit plan,

2 a plan satisfies the requirements of this paragraph

3 if it satisfies the requirements of clause (ii) or (iii).

4 ‘‘(ii) A plan satisfies the requirements of this

5 clause if an employee who has completed at least 5

6 years of service has a nonforfeitable right to 100

7 percent of the employee’s accrued benefit derived

8 from employer contributions.

9 ‘‘(iii) A plan satisfies the requirements of this

10 clause if an employee has a nonforfeitable right to

11 a percentage of the employee’s accrued benefit de12 rived from employer contributions determined under

13 the following table:

The nonforfeitable

‘‘Years of service: percentage is:

3 ........................................................................................... 20

4 ........................................................................................... 40

5 ........................................................................................... 60

6 ........................................................................................... 80

7 or more ............................................................................. 100.

14 ‘‘(B)(i) In the case of an individual account

15 plan, a plan satisfies the requirements of this para16 graph if it satisfies the requirements of clause (ii) or

17 (iii).

18 ‘‘(ii) A plan satisfies the requirements of this

19 clause if an employee who has completed at least 3

20 years of service has a nonforfeitable right to 100

21 percent of the employee’s accrued benefit derived

22 from employer contributions.
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1 ‘‘(iii) A plan satisfies the requirements of this

2 clause if an employee has a nonforfeitable right to

3 a percentage of the employee’s accrued benefit de4 rived from employer contributions determined under

5 the following table:

The nonforfeitable

‘‘Years of service: percentage is:

2 ........................................................................................... 20

3 ........................................................................................... 40

4 ........................................................................................... 60

5 ........................................................................................... 80

6 or more ............................................................................. 100.’’.

6 (2) CONFORMING AMENDMENT.—Section

7 203(a) of such Act is amended by striking para8 graph (4).

9 (c) EFFECTIVE DATES.—

10 (1) IN GENERAL.—Except as provided in para11 graphs (2) and (4), the amendments made by this

12 section shall apply to contributions for plan years

13 beginning after December 31, 2005.

14 (2) COLLECTIVE BARGAINING AGREEMENTS.—

15 In the case of a plan maintained pursuant to one or

16 more collective bargaining agreements between em17 ployee representatives and one or more employers

18 ratified before the date of the enactment of this Act,

19 the amendments made by this section shall not apply

20 to contributions on behalf of employees covered by

21 any such agreement for plan years beginning before

22 the earlier of—
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1 (A) the later of—

2 (i) the date on which the last of such

3 collective bargaining agreements termi4 nates (determined without regard to any

5 extension thereof on or after such date of

6 the enactment); or

7 (ii) January 1, 2006; or

8 (B) January 1, 2008.

9 (3) SERVICE REQUIRED.—With respect to any

10 plan, the amendments made by this section shall not

11 apply to any employee before the date that such em12 ployee has 1 hour of service under such plan in any

13 plan year to which the amendments made by this

14 section apply.

15 (4) SPECIAL RULE FOR STOCK OWNERSHIP

16 PLANS.—Notwithstanding paragraph (1) or (2), in

17 the case of an employee stock ownership plan (as de18 fined in section 4975(e)(7) of the Internal Revenue

19 Code of 1986) which had outstanding on September

20 26, 2005, a loan incurred for the purpose of acquir21 ing qualifying employer securities (as defined in sec22 tion 4975(e)(8) of such Code), the amendments

23 made by this section shall not apply to any plan year

24 beginning before the earlier of—
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1 (A) the date on which the loan is fully re2 paid, or

3 (B) the date on which the loan was, as of

4 September 26, 2005, scheduled to be fully re5 paid.

6 SEC. 1007. ALLOW DIRECT ROLLOVERS FROM RETIREMENT

7 PLANS TO ROTH IRAS.

8 (a) IN GENERAL.—Subsection (e) of section 408A of

9 the Internal Revenue Code of 1986 (defining qualified roll10 over contribution) is amended to read as follows:

11 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For

12 purposes of this section, the term ‘qualified rollover con13 tribution’ means a rollover contribution—

14 ‘‘(1) to a Roth IRA from another such account,

15 ‘‘(2) from an eligible retirement plan, but only

16 if—

17 ‘‘(A) in the case of an individual retire18 ment plan, such rollover contribution meets the

19 requirements of section 408(d)(3), and

20 ‘‘(B) in the case of any eligible retirement

21 plan (as defined in section 402(c)(8)(B) other

22 than clauses (i) and (ii) thereof), such rollover

23 contribution meets the requirements of section

24 402(c), 403(b)(8), or 457(e)(16), as applicable.
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1 For purposes of section 408(d)(3)(B), there shall be dis2 regarded any qualified rollover contribution from an indi3 vidual retirement plan (other than a Roth IRA) to a Roth

4 IRA.’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Section 408A(c)(3)(B) of such Code is

7 amended—

8 (A) in the text by striking ‘‘individual re9 tirement plan’’ and inserting ‘‘an eligible retire10 ment plan (as defined by section

11 402(c)(8)(B))’’, and

12 (B) in the heading by striking ‘‘IRA’’ and

13 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.

14 (2) Section 408A(d)(3) of such Code is

15 amended—

16 (A) in subparagraph (A), by striking ‘‘sec17 tion 408(d)(3)’’ inserting ‘‘sections 402(c),

18 403(b)(8), 408(d)(3), and 457(e)(16)’’,

19 (B) in subparagraph (B), by striking ‘‘in20 dividual retirement plan’’ and inserting ‘‘eligible

21 retirement plan (as defined by section

22 402(c)(8)(B))’’,

23 (C) in subparagraph (D), by inserting ‘‘or

24 6047’’ after ‘‘408(i)’’,
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1 (D) in subparagraph (D), by striking ‘‘or

2 both’’ and inserting ‘‘persons subject to section

3 6047(d)(1), or all of the foregoing persons’’,

4 and

5 (E) in the heading, by striking ‘‘IRA’’ and

6 inserting ‘‘ELIGIBLE RETIREMENT PLAN’’.

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to distributions after December 31,

9 2005.

10 SEC. 1008. ELIMINATION OF HIGHER PENALTY ON CERTAIN

11 SIMPLE PLAN DISTRIBUTIONS.

12 (a) IN GENERAL.—Subsection (t) of section 72 of the

13 Internal Revenue Code of 1986 (relating to 10-percent ad14 ditional tax on early distributions from qualified retire15 ment plans), as amended by section 1004, is amended by

16 striking paragraph (6) and redesignating paragraphs (7),

17 (8), (9), and (10) as paragraphs (6), (7), (8), and (9),

18 respectively.

19 (b) CONFORMING AMENDMENTS.—

20 (1) Section 72(t)(2)(E) of such Code is amend21 ed by striking ‘‘paragraph (7)’’ and inserting ‘‘para22 graph (6)’’.

23 (2) Section 72(t)(2)(F) of such Code is amend24 ed by striking ‘‘paragraph (8)’’ and inserting ‘‘para25 graph (7)’’.
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1 (3) Section 408(d)(3)(G) of such Code is

2 amended by striking ‘‘applies’’ and inserting ‘‘ap3 plied on the day before the date of the enactment of

4 the Pension Security and Transparency Act of

5 2005)’’.

6 (4) Section 457(a)(2) of such Code is amended

7 by striking ‘‘section 72(t)(9)’’ and inserting ‘‘section

8 72(t)(8)’’.

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to years beginning after December

11 31, 2005.

12 SEC. 1009. SIMPLE PLAN PORTABILITY.

13 (a) REPEAL OF LIMITATION.—Paragraph (3) of sec14 tion 408(d) of the Internal Revenue Code of 1986 (relat15 ing to rollover contributions), as amended by this Act, is

16 amended by striking subparagraph (G) and redesignating

17 subparagraphs (H) and (I) as subparagraphs (G) and (H),

18 respectively.

19 (b) EFFECTIVE DATE.—The amendment made by

20 this section shall apply to years beginning after December

21 31, 2005.

22 SEC. 1010. ELIGIBILITY FOR PARTICIPATION IN RETIRE23 MENT PLANS.

24 An individual shall not be precluded from partici25 pating in an eligible deferred compensation plan by reason
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1 of having received a distribution under section 457(e)(9)

2 of the Internal Revenue Code of 1986, as in effect prior

3 to the enactment of the Small Business Job Protection

4 Act of 1996.

5 SEC. 1011. TRANSFERS TO THE PBGC.

6 (a) MANDATORY DISTRIBUTIONS TO PBGC.—Clause

7 (i) of section 401(a)(31)(B) of the Internal Revenue Code

8 of 1986 (relating to general rule for certain mandatory

9 distributions) is amended by inserting ‘‘to the Pension

10 Benefit Guaranty Corporation in accordance with section

11 4050(e) of the Employee Retirement Income Security Act

12 of 1974 or’’ after ‘‘such transfer’’.

13 (b) TAX TREATMENT OF DISTRIBUTIONS.—Subpara14 graph (B) of section 401(a)(31) of such Code is amended

15 by adding at the end the following new clause:

16 ‘‘(iii) INCOME TAX TREATMENT OF

17 TRANSFERS TO PBGC.—For purposes of

18 determining the income tax treatment re19 lating to transfers to the Pension Benefit

20 Guaranty Corporation under clause (i)—

21 ‘‘(I) the transfer of amounts to

22 the Pension Benefit Guaranty Cor23 poration pursuant to clause (i) shall

24 be treated as a transfer to an indi-
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1 vidual retirement plan under such

2 clause, and

3 ‘‘(II) the distribution of such

4 amounts from the Pension Benefit

5 Guaranty Corporation shall be treated

6 as a distribution from an individual

7 retirement plan.’’.

8 (c) MISSING PARTICIPANTS AND BENEFICIARIES.—

9 Section 4050 of the Employee Retirement Income Security

10 Act of 1974 (29 U.S.C. 1350), as amended by section

11 1012, is amended by redesignating subsection (e) as sub12 section (g) and by inserting after subsection (d) the fol13 lowing new subsections:

14 ‘‘(e) INVOLUNTARY CASHOUTS.—

15 ‘‘(1) PAYMENT BY THE CORPORATION.—If ben16 efits under a plan described in paragraph (3) were

17 transferred to the corporation under section

18 401(a)(31)(B) of the Internal Revenue Code of

19 1986, the corporation shall, upon application filed by

20 the participant or beneficiary with the corporation in

21 such form and manner as may be prescribed in regu22 lations of the corporation, pay to the participant or

23 beneficiary the amount transferred (or the appro24 priate survivor benefit) either—

25 ‘‘(A) in a single sum (plus interest), or
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1 ‘‘(B) in such other form as is specified in

2 regulations of the corporation.

3 ‘‘(2) INFORMATION TO THE CORPORATION.—To

4 the extent provided in regulations, the plan adminis5 trator of a plan described in paragraph (3) shall,

6 upon a transfer of benefits to the corporation under

7 section 401(a)(31)(B) of such Code, provide the cor8 poration information with respect to benefits of the

9 participant or beneficiary so transferred.

10 ‘‘(3) PLANS DESCRIBED.—A plan is described

11 in this paragraph if the plan is a pension plan (with12 in the meaning of section 3(2))—

13 ‘‘(A) which provides for mandatory dis14 tributions under section 401(a)(31)(B) of the

15 Internal Revenue Code of 1986, and

16 ‘‘(B) which is not a plan described in para17 graphs (2) through (11) of section 4021(b).

18 ‘‘(4) CERTAIN PROVISIONS NOT TO APPLY.—

19 Subsections (a)(1) and (a)(3) shall not apply to a

20 plan described in paragraph (3).

21 ‘‘(f) AUTHORITY TO CHARGE FEE.—The corporation

22 may charge a reasonable fee for costs incurred in connec23 tion with the transfer and management of amounts trans24 ferred to the corporation under this section. Such fee may
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1 be imposed on the transferor and may be deducted from

2 amounts so transferred.’’.

3 (d) EFFECTIVE DATES.—

4 (1) INTERNAL REVENUE CODE PROVISIONS.—

5 The amendments made by subsections (a) and (b)

6 shall take effect as if included in the amendments

7 made by section 657 of the Economic Growth and

8 Tax Relief Reconciliation Act of 2001.

9 (2) EMPLOYEE RETIREMENT INCOME SECURITY

10 ACT OF 1974 PROVISIONS.—The amendments made

11 by subsection (c) shall apply to distributions made

12 after final regulations implementing subsections (e)

13 and (f) of section 4050 of the Employee Retirement

14 Income Security Act of 1974 (as added by sub15 section (c)) are prescribed.

16 (3) REGULATIONS.—The Pension Benefit Guar17 anty Corporation shall issue regulations necessary to

18 carry out the amendments made by subsection (c)

19 not later than December 31, 2006.

20 SEC. 1012. MISSING PARTICIPANTS.

21 (a) IN GENERAL.—Section 4050 of the Employee Re22 tirement Income Security Act of 1974 (29 U.S.C. 1350)

23 is amended by redesignating subsection (c) as subsection

24 (e) and by inserting after subsection (b) the following new

25 subsections:
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1 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

2 shall prescribe rules similar to the rules in subsection (a)

3 for multiemployer plans covered by this title that termi4 nate under section 4041A.

5 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

6 ‘‘(1) TRANSFER TO CORPORATION.—The plan

7 administrator of a plan described in paragraph (4)

8 may elect to transfer a missing participant’s benefits

9 to the corporation upon termination of the plan.

10 ‘‘(2) INFORMATION TO THE CORPORATION.—To

11 the extent provided in regulations, the plan adminis12 trator of a plan described in paragraph (4) shall,

13 upon termination of the plan, provide the corpora14 tion information with respect to benefits of a miss15 ing participant if the plan transfers such benefits—

16 ‘‘(A) to the corporation, or

17 ‘‘(B) to an entity other than the corpora18 tion or a plan described in paragraph (4)(B)(ii).

19 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben20 efits of a missing participant were transferred to the

21 corporation under paragraph (1), the corporation

22 shall, upon location of the participant or beneficiary,

23 pay to the participant or beneficiary the amount

24 transferred (or the appropriate survivor benefit)

25 either—
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1 ‘‘(A) in a single sum (plus interest), or

2 ‘‘(B) in such other form as is specified in

3 regulations of the corporation.

4 ‘‘(4) PLANS DESCRIBED.—A plan is described

5 in this paragraph if—

6 ‘‘(A) the plan is a pension plan (within the

7 meaning of section 3(2))—

8 ‘‘(i) to which the provisions of this

9 section do not apply (without regard to

10 this subsection), and

11 ‘‘(ii) which is not a plan described in

12 paragraphs (2) through (11) of section

13 4021(b), and

14 ‘‘(B) at the time the assets are to be dis15 tributed upon termination, the plan—

16 ‘‘(i) has missing participants, and

17 ‘‘(ii) has not provided for the transfer

18 of assets to pay the benefits of all missing

19 participants to another pension plan (with20 in the meaning of section 3(2)).

21 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

22 Subsections (a)(1) and (a)(3) shall not apply to a

23 plan described in paragraph (4).’’.

24 (b) CONFORMING AMENDMENTS.—Section 206(f) of

25 such Act (29 U.S.C. 1056(f)) is amended—
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1 (1) by striking ‘‘title IV’’ and inserting ‘‘section

2 4050’’; and

3 (2) by striking ‘‘the plan shall provide that,’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to distributions made after final

6 regulations implementing subsections (c) and (d) of sec7 tion 4050 of the Employee Retirement Income Security

8 Act of 1974 (as added by subsection (a)), respectively, are

9 prescribed.

10 SEC. 1013. MODIFICATIONS OF RULES GOVERNING HARD11 SHIPS AND UNFORSEEN FINANCIAL EMER12 GENCIES.

13 Within 180 days after the date of the enactment of

14 this Act, the Secretary of the Treasury shall modify the

15 rules for determining whether a participant has had a

16 hardship for purposes of section 401(k)(2)(B)(i)(IV) of

17 the Internal Revenue Code of 1986 to provide that if an

18 event (including the occurrence of a medical expense)

19 would constitute a hardship under the plan if it occurred

20 with respect to the participant’s spouse or dependent (as

21 defined in section 152 of such Code), such event shall, to

22 the extent permitted under a plan, constitute a hardship

23 if it occurs with respect to a person who is a beneficiary

24 under the plan with respect to the participant. The Sec-
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1 retary of the Treasury shall issue similar rules for pur2 poses of determining whether a participant has had—

3 (1) a hardship for purposes of section

4 403(b)(11)(B) of such Code; or

5 (2) an unforeseen financial emergency for pur6 poses of sections 409A(a)(2)(A)(vi),

7 409A(a)(2)(B)(ii), and 457(d)(1)(A)(iii) of such

8 Code.

9 TITLE XI—ADMINISTRATIVE

10 PROVISIONS

11 SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION

12 SYSTEM.

13 (a) IN GENERAL.—The Secretary of the Treasury

14 shall have full authority to establish and implement the

15 Employee Plans Compliance Resolution System (or any

16 successor program) and any other employee plans correc17 tion policies, including the authority to waive income, ex18 cise, or other taxes to ensure that any tax, penalty, or

19 sanction is not excessive and bears a reasonable relation20 ship to the nature, extent, and severity of the failure.

21 (b) IMPROVEMENTS.—The Secretary of the Treasury

22 shall continue to update and improve the Employee Plans

23 Compliance Resolution System (or any successor pro24 gram), giving special attention to—
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1 (1) increasing the awareness and knowledge of

2 small employers concerning the availability and use

3 of the program;

4 (2) taking into account special concerns and

5 circumstances that small employers face with respect

6 to compliance and correction of compliance failures;

7 (3) extending the duration of the self-correction

8 period under the Self-Correction Program for signifi9 cant compliance failures;

10 (4) expanding the availability to correct insig11 nificant compliance failures under the Self-Correc12 tion Program during audit; and

13 (5) assuring that any tax, penalty, or sanction

14 that is imposed by reason of a compliance failure is

15 not excessive and bears a reasonable relationship to

16 the nature, extent, and severity of the failure.

17 SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DIS18 TRIBUTIONS.

19 (a) EXPANSION OF PERIOD.—

20 (1) AMENDMENT OF INTERNAL REVENUE

21 CODE.—

22 (A) IN GENERAL.—Section 417(a)(6)(A) of

23 the Internal Revenue Code of 1986 is amended

24 by striking ‘‘90-day’’ and inserting ‘‘180-day’’.
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1 (B) MODIFICATION OF REGULATIONS.—

2 The Secretary of the Treasury shall modify the

3 regulations under sections 402(f), 411(a)(11),

4 and 417 of the Internal Revenue Code of 1986

5 by substituting ‘‘180 days’’ for ‘‘90 days’’ each

6 place it appears in Treasury Regulations sec7 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–

8 1(b).

9 (2) AMENDMENT OF ERISA.—

10 (A) IN GENERAL.—Section 205(c)(7)(A) of

11 the Employee Retirement Income Security Act

12 of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended

13 by striking ‘‘90-day’’ and inserting ‘‘180-day’’.

14 (B) MODIFICATION OF REGULATIONS.—

15 The Secretary of the Treasury shall modify the

16 regulations under part 2 of subtitle B of title

17 I of the Employee Retirement Income Security

18 Act of 1974 relating to sections 203(e) and 205

19 of such Act by substituting ‘‘180 days’’ for ‘‘90

20 days’’ each place it appears.

21 (3) EFFECTIVE DATE.—The amendments and

22 modifications made or required by this subsection

23 shall apply to years beginning after December 31,

24 2005.

25 (b) NOTIFICATION OF RIGHT TO DEFER.—
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1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall modify the regulations under section

3 411(a)(11) of the Internal Revenue Code of 1986

4 and under section 205 of the Employee Retirement

5 Income Security Act of 1974 to provide that the de6 scription of a participant’s right, if any, to defer re7 ceipt of a distribution shall also describe the con8 sequences of failing to defer such receipt.

9 (2) EFFECTIVE DATE.—

10 (A) IN GENERAL.—The modifications re11 quired by paragraph (1) shall apply to years be12 ginning after December 31, 2005.

13 (B) REASONABLE NOTICE.—A plan shall

14 not be treated as failing to meet the require15 ments of section 411(a)(11) of such Code or

16 section 205 of such Act with respect to any de17 scription of consequences described in para18 graph (1) made within 90 days after the Sec19 retary of the Treasury issues the modifications

20 required by paragraph (1) if the plan adminis21 trator makes a reasonable attempt to comply

22 with such requirements.

23 SEC. 1103. REPORTING SIMPLIFICATION.

24 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

25 OWNERS AND THEIR SPOUSES.—
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1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall modify the requirements for filing annual

3 returns with respect to one-participant retirement

4 plans to ensure that such plans with assets of

5 $250,000 or less as of the close of the plan year

6 need not file a return for that year.

7 (2) ONE-PARTICIPANT RETIREMENT PLAN DE8 FINED.—For purposes of this subsection, the term

9 ‘‘one-participant retirement plan’’ means a retire10 ment plan with respect to which the following re11 quirements are met:

12 (A) on the first day of the plan year—

13 (i) the plan covered only one indi14 vidual (or the individual and the individ15 ual’s spouse) and the individual owned 100

16 percent of the plan sponsor (whether or

17 not incorporated), or

18 (ii) the plan covered only one or more

19 partners (or partners and their spouses) in

20 the plan sponsor;

21 (B) the plan meets the minimum coverage

22 requirements of section 410(b) of the Internal

23 Revenue Code of 1986 without being combined

24 with any other plan of the business that covers

25 the employees of the business;
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1 (C) the plan does not provide benefits to

2 anyone except the individual (and the individ3 ual’s spouse) or the partners (and their

4 spouses);

5 (D) the plan does not cover a business that

6 is a member of an affiliated service group, a

7 controlled group of corporations, or a group of

8 businesses under common control; and

9 (E) the plan does not cover a business that

10 uses the services of leased employees (within

11 the meaning of section 414(n) of such Code).

12 For purposes of this paragraph, the term ‘‘partner’’

13 includes a 2-percent shareholder (as defined in sec14 tion 1372(b) of such Code) of an S corporation.

15 (3) OTHER DEFINITIONS.—Terms used in para16 graph (2) which are also used in section 414 of the

17 Internal Revenue Code of 1986 shall have the re18 spective meanings given such terms by such section.

19 (4) EFFECTIVE DATE.—The provisions of this

20 subsection shall apply to plan years beginning on or

21 after January 1, 2006.

22 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

23 PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the

24 case of plan years beginning after December 31, 2006, the

25 Secretary of the Treasury and the Secretary of Labor shall
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1 provide for the filing of a simplified annual return for any

2 retirement plan which covers less than 25 participants on

3 the first day of a plan year and which meets the require4 ments described in subparagraphs (B), (D), and (E) of

5 subsection (a)(2).

6 SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE

7 AND EMPLOYMENT RETENTION PLANS MAIN8 TAINED BY LOCAL EDUCATIONAL AGENCIES

9 AND OTHER ENTITIES.

10 (a) VOLUNTARY EARLY RETIREMENT INCENTIVE

11 PLANS.—

12 (1) TREATMENT AS PLAN PROVIDING SEVER13 ANCE PAY.—Section 457(e)(11) of the Internal Rev14 enue Code of 1986 (relating to certain plans ex15 cluded) is amended by adding at the end the fol16 lowing new subparagraph:

17 ‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE18 MENT INCENTIVE PLANS.—

19 ‘‘(i) IN GENERAL.—If an applicable

20 voluntary early retirement incentive plan—

21 ‘‘(I) makes payments or supple22 ments as an early retirement benefit,

23 a retirement-type subsidy, or a benefit

24 described in the last sentence of sec25 tion 411(a)(9), and
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1 ‘‘(II) such payments or supple2 ments are made in coordination with

3 a defined benefit plan which is de4 scribed in section 401(a) and includes

5 a trust exempt from tax under section

6 501(a) and which is maintained by an

7 eligible employer described in para8 graph (1)(A) or by an education asso9 ciation described in clause (ii)(II),

10 such applicable plan shall be treated for

11 purposes of subparagraph (A)(i) as a bona

12 fide severance pay plan with respect to

13 such payments or supplements to the ex14 tent such payments or supplements could

15 otherwise have been provided under such

16 defined benefit plan (determined as if sec17 tion 411 applied to such defined benefit

18 plan).

19 ‘‘(ii) APPLICABLE VOLUNTARY EARLY

20 RETIREMENT INCENTIVE PLAN.—For pur21 poses of this subparagraph, the term ‘ap22 plicable voluntary early retirement incen23 tive plan’ means a voluntary early retire24 ment incentive plan maintained by—
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1 ‘‘(I) a local educational agency

2 (as defined in section 9101 of the Ele3 mentary and Secondary Education

4 Act of 1965 (20 U.S.C. 7801)), or

5 ‘‘(II) an education association

6 which principally represents employees

7 of 1 or more agencies described in

8 subclause (I) and which is described

9 in section 501(c) (5) or (6) and ex10 empt from tax under section 501(a).’’

11 (2) AGE DISCRIMINATION IN EMPLOYMENT

12 ACT.—Section 4(l)(1) of the Age Discrimination in

13 Employment Act of 1967 (29 U.S.C. 623(l)(1)) is

14 amended—

15 (A) by inserting ‘‘(A)’’ after ‘‘(1)’’,

16 (B) by redesignating subparagraphs (A)

17 and (B) as clauses (i) and (ii), respectively,

18 (C) by redesignating clauses (i) and (ii) of

19 subparagraph (B) (as in effect before the

20 amendments made by subparagraph (B)) as

21 subclauses (I) and (II), respectively, and

22 (D) by adding at the end the following:

23 ‘‘(B) A voluntary early retirement incentive

24 plan that—

25 ‘‘(i) is maintained by—
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1 ‘‘(I) a local educational agency (as de2 fined in section 9101 of the Elementary

3 and Secondary Education Act of 1965 (20

4 U.S.C. 7801), or

5 ‘‘(II) an education association which

6 principally represents employees of 1 or

7 more agencies described in subclause (I)

8 and which is described in section 501(c)

9 (5) or (6) of the Internal Revenue Code of

10 1986 and exempt from taxation under sec11 tion 501(a) of such Code, and

12 ‘‘(ii) makes payments or supplements de13 scribed in subclauses (I) and (II) of subpara14 graph (A)(ii) in coordination with a defined

15 benefit plan (as so defined) maintained by an

16 eligible employer described in section

17 457(e)(1)(A) of such Code or by an education

18 association described in clause (i)(II),

19 shall be treated solely for purposes of subparagraph

20 (A)(ii) as if it were a part of the defined benefit plan

21 with respect to such payments or supplements. Pay22 ments or supplements under such a voluntary early

23 retirement incentive plan shall not constitute sever24 ance pay for purposes of section 4(l)(2) of the Age
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1 Discrimination in Employment Act (29 U.S.C.

2 623(l)(2)).’’.

3 (b) EMPLOYMENT RETENTION PLANS.—

4 (1) IN GENERAL.—Section 457(f)(2) of the In5 ternal Revenue Code of 1986 (relating to exceptions)

6 is amended by striking ‘‘and’’ at the end of subpara7 graph (D), by striking the period at the end of sub8 paragraph (E) and inserting ‘‘, and’’, and by adding

9 at the end the following:

10 ‘‘(F) that portion of any applicable employ11 ment retention plan described in paragraph (4)

12 with respect to any participant.’’

13 (2) DEFINITIONS AND RULES RELATING TO EM14 PLOYMENT RETENTION PLANS.—Section 457(f) of

15 such Code is amended by adding at the end the fol16 lowing new paragraph:

17 ‘‘(4) EMPLOYMENT RETENTION PLANS.—For

18 purposes of paragraph (2)(F)—

19 ‘‘(A) IN GENERAL.—The portion of an ap20 plicable employment retention plan described in

21 this paragraph with respect to any participant

22 is that portion of the plan which provides bene23 fits payable to the participant not in excess of

24 twice the applicable dollar limit determined

25 under subsection (e)(15).
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1 ‘‘(B) OTHER RULES.—

2 ‘‘(i) LIMITATION.—Paragraph (2)(F)

3 shall only apply to the portion of the plan

4 described in subparagraph (A) for years

5 preceding the year in which such portion is

6 paid or otherwise made available to the

7 participant.

8 ‘‘(ii) TREATMENT.—A plan shall not

9 be treated for purposes of this title as pro10 viding for the deferral of compensation for

11 any year with respect to the portion of the

12 plan described in subparagraph (A).

13 ‘‘(C) APPLICABLE EMPLOYMENT RETEN14 TION PLAN.—The term ‘applicable employment

15 retention plan’ means an employment retention

16 plan maintained by—

17 ‘‘(i) a local educational agency (as de18 fined in section 9101 of the Elementary

19 and Secondary Education Act of 1965 (20

20 U.S.C. 7801), or

21 ‘‘(ii) an education association which

22 principally represents employees of 1 or

23 more agencies described in clause (i) and

24 which is described in section 501(c) (5) or
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1 (6) and exempt from taxation under sec2 tion 501(a).

3 ‘‘(D) EMPLOYMENT RETENTION PLAN.—

4 The term ‘employment retention plan’ means a

5 plan to pay, upon termination of employment,

6 compensation to an employee of a local edu7 cational agency or education association de8 scribed in subparagraph (C) for purposes of—

9 ‘‘(i) retaining the services of the em10 ployee, or

11 ‘‘(ii) rewarding such employee for the

12 employee’s service with 1 or more such

13 agencies or associations.’’.

14 (c) COORDINATION WITH ERISA.—Section 3(2)(B)

15 of the Employee Retirement Income Security Act of 1974

16 (29 U.S.C. 1002(2)(B)) is amended by adding at the end

17 the following: ‘‘An applicable voluntary early retirement

18 incentive plan (as defined in section 457(e)(11)(D)(ii) of

19 the Internal Revenue Code of 1986) making payments or

20 supplements described in section 457(e)(11)(D)(i) of such

21 Code, and an applicable employment retention plan (as de22 fined in section 457(f)(4)(C) of such Code) making pay23 ments of benefits described in section 457(f)(4)(A) of such

24 Code, shall, for purposes of this title, be treated as a wel-
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1 fare plan (and not a pension plan) with respect to such

2 payments and supplements.’’

3 (d) EFFECTIVE DATES.—

4 (1) IN GENERAL.—The amendments made by

5 this Act shall take effect on the date of the enact6 ment of this Act.

7 (2) TAX AMENDMENTS.—The amendments

8 made by subsections (a)(1) and (b) shall apply to

9 taxable years ending after the date of the enactment

10 of this Act.

11 (3) ERISA AMENDMENTS.—The amendment

12 made by subsection (c) shall apply to plan years

13 ending after the date of the enactment of this Act.

14 (4) CONSTRUCTION.—Nothing in the amend15 ments made by this section shall alter or affect the

16 construction of the Internal Revenue Code of 1986,

17 the Employee Retirement Income Security Act of

18 1974, or the Age Discrimination in Employment Act

19 of 1967 as applied to any plan, arrangement, or con20 duct to which such amendments do not apply.

21 SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSA22 TION AS A RESULT OF PENSION ROLLOVERS.

23 (a) IN GENERAL.—Section 3304(a) of the Internal

24 Revenue Code of 1986 (relating to requirements for State
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1 unemployment laws) is amended by adding at the end the

2 following new flush sentence:

3 ‘‘Compensation shall not be reduced under paragraph (15)

4 for any pension, retirement or retired pay, annuity, or

5 similar payment which is not includible in gross income

6 of the individual for the taxable year in which paid because

7 it was part of a rollover distribution.’’.

8 (b) EFFECTIVE DATE.—The amendment made by

9 this section shall apply to weeks beginning on or after the

10 date of the enactment of this Act.

11 SEC. 1106. WITHHOLDING ON DISTRIBUTIONS FROM GOV12 ERNMENTAL SECTION 457 PLANS.

13 (a) IN GENERAL.—Section 641(f) of the Economic

14 Growth and Tax Relief Reconciliation Act of 2001 is

15 amended by adding at the end the following new para16 graph:

17 ‘‘(4) TRANSITION RULE FOR CERTAIN GOVERN18 MENTAL PLANS.—In the case of distributions from

19 an eligible deferred compensation plan of an em20 ployer described in section 457(e)(1)(A) of the Inter21 nal Revenue Code of 1986 which are made after De22 cember 31, 2001, and which are part of a series of

23 distributions which—

24 ‘‘(A) began before January 1, 2002, and
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1 ‘‘(B) are payable for 10 years or less, the

2 Internal Revenue Code of 1986 may be applied

3 to such distributions without regard to the

4 amendments made by subsection (a)(1)(D).’’.

5 (b) EFFECTIVE DATE.—The amendment made by

6 subsection (a) shall take effect as if included in the provi7 sions of section 641 of the Economic Growth and Tax Re8 lief Reconciliation Act of 2001.

9 SEC. 1107. TREATMENT OF DEFINED BENEFIT PLAN AS

10 GOVERNMENTAL PLAN.

11 (a) IN GENERAL.—For purposes of the Internal Rev12 enue Code of 1986 and the Employee Retirement Income

13 Security Act of 1974, an eligible defined benefit plan shall

14 be treated as a governmental plan (within the meaning

15 of section 414(d) of such Code and section 3(32) of such

16 Act).

17 (b) ELIGIBLE DEFINED BENEFIT PLAN.—For pur18 poses of this section, an eligible defined benefit plan is

19 a defined benefit plan maintained by a nonprofit corpora20 tion which was—

21 (1) incorporated on September 16, 1998, under

22 a State nonprofit corporation statute; and

23 (2) organized for the express purpose of sup24 porting the missions and goals of a public corpora25 tion which—
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1 (A) was created by a State statute effective

2 on July 1, 1995;

3 (B) is a governmental entity under State

4 law; and

5 (C) is a member of the nonprofit corpora6 tion.

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to any year beginning before, on,

9 or after the date of the enactment of this Act.

10 SEC. 1108. INCREASING PARTICIPATION IN CASH OR DE11 FERRED PLANS THROUGH AUTOMATIC CON12 TRIBUTION ARRANGEMENTS.

13 (a) IN GENERAL.—Section 401(k) of the Internal

14 Revenue Code of 1986 (relating to cash or deferred ar15 rangement) is amended by adding at the end the following

16 new paragraph:

17 ‘‘(13) NONDISCRIMINATION REQUIREMENTS

18 FOR AUTOMATIC CONTRIBUTION TRUSTS.—

19 ‘‘(A) IN GENERAL.—A cash or deferred ar20 rangement shall be treated as meeting the re21 quirements of paragraph (3)(A)(ii) if such ar22 rangement constitutes an automatic contribu23 tion trust.

24 ‘‘(B) AUTOMATIC CONTRIBUTION TRUST.—
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1 ‘‘(i) IN GENERAL.—For purposes of

2 this paragraph, the term ‘automatic con3 tribution trust’ means an arrangement—

4 ‘‘(I) except as provided in clauses

5 (ii) and (iii), under which each em6 ployee eligible to participate in the ar7 rangement is treated as having elected

8 to have the employer make elective

9 contributions in an amount equal to

10 the applicable percentage of the em11 ployee’s compensation, and

12 ‘‘(II) which meets the require13 ments of subparagraphs (C), (D), (E),

14 and (F).

15 ‘‘(ii) EXCEPTION FOR EXISTING EM16 PLOYEES.—In the case of any employee—

17 ‘‘(I) who was eligible to partici18 pate in the arrangement (or a prede19 cessor arrangement) immediately be20 fore the first date on which the ar21 rangement is an automatic contribu22 tion trust, and

23 ‘‘(II) whose rate of contribution

24 immediately before such first date was
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1 less than the applicable percentage for

2 the employee,

3 clause (i)(I) shall not apply to such em4 ployee until the date which is 1 year after

5 such first date (or such earlier date as the

6 employee may elect).

7 ‘‘(iii) ELECTION OUT.—Each em8 ployee eligible to participate in the ar9 rangement may specifically elect not to

10 have contributions made under clause (i),

11 and such clause shall cease to apply to

12 compensation paid on or after the effective

13 date of the election.

14 ‘‘(iv) APPLICABLE PERCENTAGE.—

15 For purposes of this subparagraph—

16 ‘‘(I) IN GENERAL.—The term

17 ‘applicable percentage’ means, with

18 respect to any employee, the uniform

19 percentage (not less than 3 percent)

20 determined under the arrangement. In

21 the case of an employee who was eligi22 ble to participate in the arrangement

23 (or a predecessor arrangement) imme24 diately before the first date on which

25 the arrangement is an automatic con-
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1 tribution trust, the initial applicable

2 percentage shall in no event be less

3 than the percentage in effect with re4 spect to the employee under the ar5 rangement immediately before the em6 ployee first begins participation in the

7 automatic contribution trust.

8 ‘‘(II) INCREASE IN PERCENT9 AGE.—In the case of the second plan

10 year beginning after the first date on

11 which the election under clause (i)(I)

12 is in effect with respect to the em13 ployee and any succeeding plan year,

14 the applicable percentage shall be a

15 percentage (not greater than 10 per16 cent or such higher uniform percent17 age determined under the arrange18 ment) equal to the sum of the applica19 ble percentage for the employee as of

20 the close of the preceding plan year

21 plus 1 percentage point (or such high22 er percentage specified by the plan). A

23 plan may elect to provide that, in lieu

24 of any increase under the preceding

25 sentence, the increase in the applica-
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1 ble percentage required under this

2 subclause shall occur after each in3 crease in compensation an employee

4 receives on or after the first day of

5 such second plan year and that the

6 applicable percentage after each such

7 increase in compensation shall be

8 equal to the applicable percentage for

9 the employee immediately before such

10 increase in compensation plus 1 per11 centage point (or such higher percent12 age specified by the plan).

13 ‘‘(C) MATCHING OR NONELECTIVE CON14 TRIBUTIONS.—

15 ‘‘(i) IN GENERAL.—The requirements

16 of this subparagraph are met if, under the

17 arrangement, the employer—

18 ‘‘(I) makes matching contribu19 tions on behalf of each employee who

20 is not a highly compensated employee

21 in an amount equal to 50 percent of

22 the elective contributions of the em23 ployee to the extent such elective con24 tributions do not exceed 7 percent of

25 compensation; or
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1 ‘‘(II) is required, without regard

2 to whether the employee makes an

3 elective contribution or employee con4 tribution, to make a contribution to a

5 defined contribution plan on behalf of

6 each employee who is not a highly

7 compensated employee and who is eli8 gible to participate in the arrange9 ment in an amount equal to at least

10 3 percent of the employee’s compensa11 tion,

12 The rules of clauses (ii) and (iii) of para13 graph (12)(B) shall apply for purposes of

14 subclause (I). The rules of paragraph

15 (12)(E)(ii) shall apply for purposes of sub16 clauses (I) and (II).

17 ‘‘(ii) OTHER PLANS.—An arrange18 ment shall be treated as meeting the re19 quirements under clause (i) if any other

20 plan maintained by the employer meets

21 such requirements with respect to employ22 ees eligible under the arrangement.

23 ‘‘(D) NOTICE REQUIREMENTS.—
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1 ‘‘(i) IN GENERAL.—The requirements

2 of this subparagraph are met if the re3 quirements of clauses (ii) and (iii) are met.

4 ‘‘(ii) REASONABLE PERIOD TO MAKE

5 ELECTION.—The requirements of this

6 clause are met if each employee to whom

7 subparagraph (B)(i) applies—

8 ‘‘(I) receives a notice explaining

9 the employee’s right under the ar10 rangement to elect not to have elective

11 contributions made on the employee’s

12 behalf, and how contributions made

13 under the arrangement will be in14 vested in the absence of any invest15 ment election by the employee, and

16 ‘‘(II) has a reasonable period of

17 time after receipt of such notice and

18 before the first elective contribution is

19 made to make such election.

20 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

21 AND OBLIGATIONS.—The requirements of

22 this clause are met if each employee eligi23 ble to participate in the arrangement is,

24 within a reasonable period before any year

25 (or if the plan elects to change the applica-
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1 ble percentage after any increase in com2 pensation, before the increase), given no3 tice of the employee’s rights and obliga4 tions under the arrangement.

5 The requirements of clauses (i) and (ii) of para6 graph (12)(D) shall be met with respect to the

7 notices described in clauses (ii) and (iii) of this

8 subparagraph.

9 ‘‘(E) PARTICIPATION, WITHDRAWAL, AND

10 VESTING REQUIREMENTS.—The requirements

11 of this subparagraph are met if—

12 ‘‘(i) the arrangement requires that

13 each employee eligible to participate in the

14 arrangement (determined without regard

15 to any minimum service requirement other16 wise applicable under section 410(a) or the

17 plan) commences participation in the ar18 rangement no later than the 1st day of the

19 1st calendar quarter beginning after the

20 date on which employee first becomes so

21 eligible,

22 ‘‘(ii) the withdrawal requirements of

23 paragraph (2)(B) are met with respect to

24 all employer contributions (including

25 matching and elective contributions) taken
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1 into account in determining whether the

2 arrangement meets the requirements of

3 subparagraph (C), and

4 ‘‘(iii) the arrangement requires that

5 an employee’s right to the accrued benefit

6 derived from employer contributions de7 scribed in clause (ii) (other than elective

8 contributions) is nonforfeitable after the

9 employee has completed at least 2 years of

10 service.

11 ‘‘(F) CERTAIN WITHDRAWALS MUST BE

12 ALLOWED.—Notwithstanding any other provi13 sion of this subsection, the requirements of this

14 subparagraph are met if the arrangement al15 lows employees to elect to make permissible

16 withdrawals in accordance with section

17 414(w).’’

18 (b) MATCHING CONTRIBUTIONS.—Section 401(m) of

19 the Internal Revenue Code of 1986 (relating to non20 discrimination test for matching contributions and em21 ployee contributions) is amended by redesignating para22 graph (12) as paragraph (13) and by inserting after para23 graph (11) the following new paragraph:

24 ‘‘(12) ALTERNATE METHOD FOR AUTOMATIC

25 CONTRIBUTION TRUSTS.—A defined contribution
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1 plan shall be treated as meeting the requirements of

2 paragraph (2) with respect to matching contribu3 tions if the plan—

4 ‘‘(A) meets the contribution requirements

5 of subparagraphs (B)(i) and (C) of subsection

6 (k)(13);

7 ‘‘(B) meets the notice requirements of sub8 paragraph (D) of subsection (k)(13); and

9 ‘‘(C) meets the requirements of paragraph

10 (11)(B) (ii) and (iii).’’.

11 (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY

12 PLANS.—

13 (1) ELECTIVE CONTRIBUTION RULE.—Clause

14 (i) of section 416(g)(4)(H) of the Internal Revenue

15 Code of 1986 is amended by inserting ‘‘or

16 401(k)(13)’’ after ‘‘section 401(k)(12)’’.

17 (2) MATCHING CONTRIBUTION RULE.—Clause

18 (ii) of section 416(g)(4)(H) of such Code is amended

19 by inserting ‘‘or 401(m)(12)’’ after ‘‘section

20 401(m)(11)’’.

21 (d) SECTION 403(b) CONTRACTS.—Paragraph (11) of

22 section 401(m) of the Internal Revenue Code of 1986 is

23 amended by adding at the end the following:

24 ‘‘(C) SECTION 403(b) CONTRACTS.—An

25 annuity contract under section 403(b) shall be
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1 treated as meeting the requirements of para2 graph (2) with respect to matching contribu3 tions if such contract meets requirements simi4 lar to the requirements under subparagraph

5 (A).’’.

6 (e) PREEMPTION OF CONFLICTING STATE REGULA7 TION.—Section 514 of the Employee Retirement Income

8 Security of 1974 (29 U.S.C. 1144) is amended by insert9 ing at the end the following new subsection:

10 ‘‘(e) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—

11 ‘‘(1) IN GENERAL.—Notwithstanding any other

12 provision of this section, any law of a State shall be

13 superseded if it would directly or indirectly prohibit

14 or restrict the inclusion in any plan of an eligible

15 automatic contribution arrangement.

16 ‘‘(2) ELIGIBLE AUTOMATIC CONTRIBUTION AR17 RANGEMENT.—For purposes of this subsection, the

18 term ‘eligible automatic contribution arrangement’

19 means an arrangement—

20 ‘‘(A) under which a participant may elect

21 to have the employer make payments as con22 tributions under the plan on behalf of the par23 ticipant, or to the participant directly in cash,

24 ‘‘(B) under which the participant is treated

25 as having elected to have the employer make
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1 such contributions in an amount equal to a uni2 form percentage of compensation provided

3 under the plan until the participant specifically

4 elects not to have such contributions made (or

5 specifically elects to have such contributions

6 made at a different percentage),

7 ‘‘(C) under which contributions described

8 in subparagraph (B) are invested in accordance

9 with regulations prescribed by the Secretary

10 under section 404(c)(4), and

11 ‘‘(D) which meets the requirements of

12 paragraph (3).

13 ‘‘(3) NOTICE REQUIREMENTS.—

14 ‘‘(A) IN GENERAL.—The administrator of

15 an individual account plan shall, within a rea16 sonable period before each plan year, give to

17 each employee to whom an arrangement de18 scribed in paragraph (2) applies for such plan

19 year notice of the employee’s rights and obliga20 tions under the arrangement which—

21 ‘‘(i) is sufficiently accurate and com22 prehensive to apprise the employee of such

23 rights and obligations, and
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1 ‘‘(ii) is written in a manner calculated

2 to be understood by the average employee

3 to whom the arrangement applies.

4 ‘‘(B) TIME AND FORM OF NOTICE.—A no5 tice shall not be treated as meeting the require6 ments of subparagraph (A) with respect to an

7 employee unless—

8 ‘‘(i) the notice includes a notice ex9 plaining the employee’s right under the ar10 rangement to elect not to have elective con11 tributions made on the employee’s behalf

12 (or to elect to have such contributions

13 made at a different percentage),

14 ‘‘(ii) the employee has a reasonable

15 period of time after receipt of the notice

16 described in clause (i) and before the first

17 elective contribution is made to make such

18 election, and

19 ‘‘(iii) the notice explains how contribu20 tions made under the arrangement will be

21 invested in the absence of any investment

22 election by the employee.’’.

23 (f) TREATMENT OF WITHDRAWALS OF CONTRIBU24 TIONS DURING FIRST 60 DAYS.—Section 414 of the In-
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1 ternal Revenue Code of 1986 is amended by adding at the

2 end the following new subsection:

3 ‘‘(w) SPECIAL RULES FOR CERTAIN WITHDRAWALS

4 FROM ELIGIBLE AUTOMATIC CONTRIBUTION ARRANGE5 MENTS.—

6 ‘‘(1) IN GENERAL.—If an eligible automatic

7 contribution arrangement allows an employee to

8 elect to make permissible withdrawals—

9 ‘‘(A) the amount of any such withdrawal

10 shall be includible in the gross income of the

11 employee for the taxable year of the employee

12 in which the distribution is made,

13 ‘‘(B) no tax shall be imposed under section

14 72(t) with respect to the distribution, and

15 ‘‘(C) the arrangement shall not be treated

16 as violating any restriction on distributions

17 under this title solely by reason of allowing the

18 withdrawal.

19 In the case of any distribution to an employee by

20 reason of an election under this paragraph, employer

21 matching contributions shall be forfeited or subject

22 to such other treatment as the Secretary may pre23 scribe.

24 ‘‘(2) PERMISSIBLE WITHDRAWAL.—For pur25 poses of this subsection—
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1 ‘‘(A) IN GENERAL.—The term ‘permissible

2 withdrawal’ means any withdrawal from an eli3 gible automatic contribution arrangement meet4 ing the requirements of this paragraph which—

5 ‘‘(i) is made pursuant to an election

6 by an employee, and

7 ‘‘(ii) consists of elective contributions

8 described in paragraph (3)(B) (and earn9 ings attributable thereto).

10 ‘‘(B) TIME FOR MAKING ELECTION.—Sub11 paragraph (A) shall not apply to an election by

12 an employee unless the election is made no later

13 than the date which is 60 days after the date

14 of the first elective contribution with respect to

15 the employee under the arrangement.

16 ‘‘(C) AMOUNT OF DISTRIBUTION.—Sub17 paragraph (A) shall not apply to any election by

18 an employee unless the amount of any distribu19 tion by reason of the election is equal to the

20 amount of elective contributions made with re21 spect to the first payroll period to which the eli22 gible automatic contribution arrangement ap23 plies to the employee and any succeeding pay24 roll period beginning before the effective date of

25 the election (and earnings attributable thereto).
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1 ‘‘(3) ELIGIBLE AUTOMATIC CONTRIBUTION AR2 RANGEMENT.—For purposes of this subsection, the

3 term ‘eligible automatic contribution arrangement’

4 means an arrangement—

5 ‘‘(A) under which a participant may elect

6 to have the employer make payments as con7 tributions under the plan on behalf of the par8 ticipant, or to the participant directly in cash,

9 ‘‘(B) under which the participant is treated

10 as having elected to have the employer make

11 such contributions in an amount equal to a uni12 form percentage of compensation provided

13 under the plan until the participant specifically

14 elects not to have such contributions made (or

15 specifically elects to have such contributions

16 made at a different percentage),

17 ‘‘(C) under which contributions described

18 in subparagraph (B) are invested in accordance

19 with regulations prescribed by the Secretary of

20 Labor under section 404(c)(4) of the Employee

21 Retirement Income Security Act of 1974, and

22 ‘‘(D) which meets the requirements of

23 paragraph (4).

24 ‘‘(4) NOTICE REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—The administrator of

2 a plan containing an arrangement described in

3 paragraph (3) shall, within a reasonable period

4 before each plan year, give to each employee to

5 whom an arrangement described in paragraph

6 (3) applies for such plan year notice of the em7 ployee’s rights and obligations under the ar8 rangement which—

9 ‘‘(i) is sufficiently accurate and com10 prehensive to apprise the employee of such

11 rights and obligations, and

12 ‘‘(ii) is written in a manner calculated

13 to be understood by the average employee

14 to whom the arrangement applies.

15 ‘‘(B) TIME AND FORM OF NOTICE.—A no16 tice shall not be treated as meeting the require17 ments of subparagraph (A) with respect to an

18 employee unless—

19 ‘‘(i) the notice includes a notice ex20 plaining the employee’s right under the ar21 rangement to elect not to have elective con22 tributions made on the employee’s behalf

23 (or to elect to have such contributions

24 made at a different percentage),
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1 ‘‘(ii) the employee has a reasonable

2 period of time after receipt of the notice

3 described in clause (i) and before the first

4 elective contribution is made to make such

5 election, and

6 ‘‘(iii) the notice explains how contribu7 tions made under the arrangement will be

8 invested in the absence of any investment

9 election by the employee.’’.

10 (g) EFFECTIVE DATE.—

11 (1) IN GENERAL.—Except as provided by para12 graph (2), the amendments made by this section

13 shall apply to plan years beginning after December

14 31, 2005.

15 (2) SECTION 403(b) CONTRACTS.—The amend16 ments made by subsection (d) shall apply to years

17 ending after the date of the enactment of this Act.

18 SEC. 1109. TREATMENT OF INVESTMENT OF ASSETS BY

19 PLAN WHERE PARTICIPANT FAILS TO EXER20 CISE INVESTMENT ELECTION.

21 (a) IN GENERAL.—Section 404(c) of the Employee

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

23 1104(c)) is amended by adding at the end the following

24 new paragraph:
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1 ‘‘(4) DEFAULT INVESTMENT ARRANGE2 MENTS.—

3 ‘‘(A) IN GENERAL.—For purposes of para4 graph (1), a participant in an individual ac5 count plan meeting the notice requirements of

6 subparagraph (B) shall be treated as exercising

7 control over the assets in the account with re8 spect to the amount of contributions and earn9 ings which, in the absence of an investment

10 election by the participant, are invested by the

11 plan in accordance with regulations prescribed

12 by the Secretary. The regulations under this

13 subparagraph shall provide guidance on the ap14 propriateness of designating default investments

15 that include a mix of asset classes consistent

16 with capital preservation, long-term capital ap17 preciation, or a blend of both.

18 ‘‘(B) NOTICE REQUIREMENTS.—

19 ‘‘(i) IN GENERAL.—The requirements

20 of this subparagraph are met if each

21 participant—

22 ‘‘(I) receives, within a reasonable

23 period of time before each plan year,

24 a notice explaining the employee’s

25 right under the plan to designate how
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1 contributions and earnings will be in2 vested and explaining how, in the ab3 sence of any investment election by

4 the participant, such contributions

5 and earnings will be invested, and

6 ‘‘(II) has a reasonable period of

7 time after receipt of such notice and

8 before the beginning of the plan year

9 to make such designation.

10 ‘‘(ii) FORM OF NOTICE.—The require11 ments of clauses (i) and (ii) of section

12 401(k)(12)(D) of the Internal Revenue

13 Code of 1986 shall be met with respect to

14 the notices described in this subpara15 graph.’’.

16 (b) EFFECTIVE DATE.—

17 (1) IN GENERAL.—The amendments made by

18 this section shall apply to plan years beginning after

19 December 31, 2005.

20 (2) REGULATIONS.—Final regulations under

21 section 404(c)(4)(A) of the Employee Retirement In22 come Security Act of 1974 (as added by this section)

23 shall be issued no later than 6 months after the date

24 of the enactment of this Act.
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1 SEC. 1110. CLARIFICATION OF FIDUCIARY RULES.

2 (a) IN GENERAL.—Not later than 1 year after the

3 date of the enactment of this Act, the Secretary of Labor

4 shall issue final regulations clarifying that the selection

5 of an annuity contract as an optional form of distribution

6 from an individual account plan to a participant or

7 beneficiary—

8 (1) is not subject to the safest available annuity

9 standard under Interpretive Bulletin 95–1 (29

10 C.F.R. 2509.95–1), and

11 (2) is subject to all otherwise applicable fidu12 ciary standards.

13 (b) EFFECTIVE DATE.—This section shall take effect

14 on the date of enactment of this Act.

15 TITLE XII—UNITED STATES TAX

16 COURT MODERNIZATION

17 SEC. 1200. AMENDMENT OF 1986 CODE.

18 Except as otherwise expressly provided, whenever in

19 this title an amendment or repeal is expressed in terms

20 of an amendment to, or repeal of, a section or other provi21 sion, the reference shall be considered to be made to a

22 section or other provision of the Internal Revenue Code

23 of 1986.
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1 SEC. 1201. ANNUITIES FOR SURVIVORS OF TAX COURT

2 JUDGES WHO ARE ASSASSINATED.

3 (a) ELIGIBILITY IN CASE OF DEATH BY ASSASSINA4 TION.—Subsection (h) of section 7448 (relating to annu5 ities to surviving spouses and dependent children of

6 judges) is amended to read as follows:

7 ‘‘(h) ENTITLEMENT TO ANNUITY.—

8 ‘‘(1) IN GENERAL.—

9 ‘‘(A) ANNUITY TO SURVIVING SPOUSE.—If

10 a judge described in paragraph (2) is survived

11 by a surviving spouse but not by a dependent

12 child, there shall be paid to such surviving

13 spouse an annuity beginning with the day of the

14 death of the judge or following the surviving

15 spouse’s attainment of the age of 50 years,

16 whichever is the later, in an amount computed

17 as provided in subsection (m).

18 ‘‘(B) ANNUITY TO CHILD.—If such a judge

19 is survived by a surviving spouse and a depend20 ent child or children, there shall be paid to such

21 surviving spouse an immediate annuity in an

22 amount computed as provided in subsection

23 (m), and there shall also be paid to or on behalf

24 of each such child an immediate annuity equal

25 to the lesser of—
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1 ‘‘(i) 10 percent of the average annual

2 salary of such judge (determined in accord3 ance with subsection (m)), or

4 ‘‘(ii) 20 percent of such average an5 nual salary, divided by the number of such

6 children.

7 ‘‘(C) ANNUITY TO SURVIVING DEPENDENT

8 CHILDREN.—If such a judge leaves no surviving

9 spouse but leaves a surviving dependent child or

10 children, there shall be paid to or on behalf of

11 each such child an immediate annuity equal to

12 the lesser of—

13 ‘‘(i) 20 percent of the average annual

14 salary of such judge (determined in accord15 ance with subsection (m)), or

16 ‘‘(ii) 40 percent of such average an17 nual salary, divided by the number of such

18 children.

19 ‘‘(2) COVERED JUDGES.—Paragraph (1) applies

20 to any judge electing under subsection (b)—

21 ‘‘(A) who dies while a judge after having

22 rendered at least 5 years of civilian service com23 puted as prescribed in subsection (n), for the

24 last 5 years of which the salary deductions pro25 vided for by subsection (c)(1) or the deposits
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1 required by subsection (d) have actually been

2 made or the salary deductions required by the

3 civil service retirement laws have actually been

4 made, or

5 ‘‘(B) who dies by assassination after hav6 ing rendered less than 5 years of civilian service

7 computed as prescribed in subsection (n) if, for

8 the period of such service, the salary deductions

9 provided for by subsection (c)(1) or the deposits

10 required by subsection (d) have actually been

11 made.

12 ‘‘(3) TERMINATION OF ANNUITY.—

13 ‘‘(A) IN THE CASE OF A SURVIVING

14 SPOUSE.—The annuity payable to a surviving

15 spouse under this subsection shall be terminable

16 upon such surviving spouse’s death or such sur17 viving spouse’s remarriage before attaining age

18 55.

19 ‘‘(B) IN THE CASE OF A CHILD.—The an20 nuity payable to a child under this subsection

21 shall be terminable upon (i) the child attaining

22 the age of 18 years, (ii) the child’s marriage, or

23 (iii) the child’s death, whichever first occurs, ex24 cept that if such child is incapable of self-sup25 port by reason of mental or physical disability
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1 the child’s annuity shall be terminable only

2 upon death, marriage, or recovery from such

3 disability.

4 ‘‘(C) IN THE CASE OF A DEPENDENT

5 CHILD AFTER DEATH OF SURVIVING SPOUSE.—

6 In case of the death of a surviving spouse of a

7 judge leaving a dependent child or children of

8 the judge surviving such spouse, the annuity of

9 such child or children shall be recomputed and

10 paid as provided in paragraph (1)(C).

11 ‘‘(D) RECOMPUTATION.—In any case in

12 which the annuity of a dependent child is termi13 nated under this subsection, the annuities of

14 any remaining dependent child or children,

15 based upon the service of the same judge, shall

16 be recomputed and paid as though the child

17 whose annuity was so terminated had not sur18 vived such judge.

19 ‘‘(4) SPECIAL RULE FOR ASSASSINATED

20 JUDGES.—In the case of a survivor or survivors of

21 a judge described in paragraph (2)(B), there shall be

22 deducted from the annuities otherwise payable under

23 this section an amount equal to—

24 ‘‘(A) the amount of salary deductions pro25 vided for by subsection (c)(1) that would have
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1 been made if such deductions had been made

2 for 5 years of civilian service computed as pre3 scribed in subsection (n) before the judge’s

4 death, reduced by

5 ‘‘(B) the amount of such salary deductions

6 that were actually made before the date of the

7 judge’s death.’.’

8 (b) DEFINITION OF ASSASSINATION.—Section

9 7448(a) (relating to definitions) is amended by adding at

10 the end the following new paragraph:

11 ‘‘(8) The terms ‘assassinated’ and ‘assassina12 tion’ mean the killing of a judge that is motivated

13 by the performance by that judge of his or her offi14 cial duties.’’.

15 (c) DETERMINATION OF ASSASSINATION.—Sub16 section (i) of section 7448 is amended—

17 (1) by striking the subsection heading and in18 serting the following:

19 ‘‘(i) DETERMINATIONS BY CHIEF JUDGE.—

20 ‘‘(1) DEPENDENCY AND DISABILITY.—’’,

21 (2) by moving the text 2 ems to the right, and

22 (3) by adding at the end the following new

23 paragraph:

24 ‘‘(2) ASSASSINATION.—The chief judge shall

25 determine whether the killing of a judge was an as-
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1 sassination, subject to review only by the Tax Court.

2 The head of any Federal agency that investigates

3 the killing of a judge shall provide information to

4 the chief judge that would assist the chief judge in

5 making such a determination.’’.

6 (d) COMPUTATION OF ANNUITIES.—Subsection (m)

7 of section 7448 is amended—

8 (1) by striking the subsection heading and in9 serting the following:

10 ‘‘(m) COMPUTATION OF ANNUITIES.—

11 ‘‘(1) IN GENERAL.—’’,

12 (2) by moving the text 2 ems to the right, and

13 (3) by adding at the end the following new

14 paragraph:

15 ‘‘(2) ASSASSINATED JUDGES.—In the case of a

16 judge who is assassinated and who has served less

17 than 3 years, the annuity of the surviving spouse of

18 such judge shall be based upon the average annual

19 salary received by such judge for judicial service.’’.

20 (e) OTHER BENEFITS.—Section 7448 is amended by

21 adding at the end the following:

22 ‘‘(u) OTHER BENEFITS.—In the case of a judge who

23 is assassinated, an annuity shall be paid under this section

24 notwithstanding a survivor’s eligibility for or receipt of

25 benefits under chapter 81 of title 5, United States Code,
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1 except that the annuity for which a surviving spouse is

2 eligible under this section shall be reduced to the extent

3 that the total benefits paid under this section and chapter

4 81 of that title for any year would exceed the current sal5 ary for that year of the office of the judge.’’.

6 SEC. 1202. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT

7 JUDICIAL SURVIVOR ANNUITIES.

8 (a) IN GENERAL.—Subsection (s) of section 7448

9 (relating to annuities to surviving spouses and dependent

10 children of judges) is amended to read as follows:

11 ‘‘(s) INCREASES IN SURVIVOR ANNUITIES.—Each

12 time that an increase is made under section 8340(b) of

13 title 5, United States Code, in annuities payable under

14 subchapter III of chapter 83 of that title, each annuity

15 payable from the survivors annuity fund under this section

16 shall be increased at the same time by the same percent17 age by which annuities are increased under such section

18 8340(b).’’.

19 (b) EFFECTIVE DATE.—The amendment made by

20 this section shall apply with respect to increases made

21 under section 8340(b) of title 5, United States Code, in

22 annuities payable under subchapter III of chapter 83 of

23 that title, taking effect after the date of the enactment

24 of this Act.
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1 SEC. 1203. LIFE INSURANCE COVERAGE FOR TAX COURT

2 JUDGES.

3 (a) IN GENERAL.—Section 7447 (relating to retire4 ment of judges) is amended by adding at the end the fol5 lowing new subsection:

6 ‘‘(j) LIFE INSURANCE COVERAGE.—For purposes of

7 chapter 87 of title 5, United States Code (relating to life

8 insurance), any individual who is serving as a judge of

9 the Tax Court or who is retired under this section is

10 deemed to be an employee who is continuing in active em11 ployment.’’.

12 (b) EFFECTIVE DATE.—The amendment made by

13 this section shall apply to any individual serving as a judge

14 of the United States Tax Court or to any retired judge

15 of the United States Tax Court on the date of the enact16 ment of this Act.

17 SEC. 1204. COST OF LIFE INSURANCE COVERAGE FOR TAX

18 COURT JUDGES AGE 65 OR OVER.

19 Section 7472 (relating to expenditures) is amended

20 by inserting after the first sentence the following new sen21 tence: ‘‘Notwithstanding any other provision of law, the

22 Tax Court is authorized to pay on behalf of its judges,

23 age 65 or over, any increase in the cost of Federal Em24 ployees’ Group Life Insurance imposed after April 24,

25 1999, including any expenses generated by such payments,

26 as authorized by the chief judge in a manner consistent
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1 with such payments authorized by the Judicial Conference

2 of the United States pursuant to section 604(a)(5) of title

3 28, United States Code.’’

4 SEC. 1205. MODIFICATION OF TIMING OF LUMP-SUM PAY5 MENT OF JUDGES’ ACCRUED ANNUAL LEAVE.

6 (a) IN GENERAL.—Section 7443 (relating to mem7 bership of the Tax Court) is amended by adding at the

8 end the following new subsection:

9 ‘‘(h) LUMP-SUM PAYMENT OF JUDGES’ ACCRUED

10 ANNUAL LEAVE.—Notwithstanding the provisions of sec11 tions 5551 and 6301 of title 5, United States Code, when

12 an individual subject to the leave system provided in chap13 ter 63 of that title is appointed by the President to be

14 a judge of the Tax Court, the individual shall be entitled

15 to receive, upon appointment to the Tax Court, a lump16 sum payment from the Tax Court of the accumulated and

17 accrued current annual leave standing to the individual’s

18 credit as certified by the agency from which the individual

19 resigned.’’.

20 (b) EFFECTIVE DATE.—The amendment made by

21 this section shall apply to any judge of the United States

22 Tax Court who has an outstanding leave balance on the

23 date of the enactment of this Act and to any individual

24 appointed by the President to serve as a judge of the

25 United States Tax Court after such date.
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1 SEC. 1206. PARTICIPATION OF TAX COURT JUDGES IN THE

2 THRIFT SAVINGS PLAN.

3 (a) IN GENERAL.—Section 7447 (relating to retire4 ment of judges), as amended by this Act, is amended by

5 adding at the end the following new subsection:

6 ‘‘(k) THRIFT SAVINGS PLAN.—

7 ‘‘(1) ELECTION TO CONTRIBUTE.—

8 ‘‘(A) IN GENERAL.—A judge of the Tax

9 Court may elect to contribute to the Thrift Sav10 ings Fund established by section 8437 of title

11 5, United States Code.

12 ‘‘(B) PERIOD OF ELECTION.—An election

13 may be made under this paragraph only during

14 a period provided under section 8432(b) of title

15 5, United States Code, for individuals subject to

16 chapter 84 of such title.

17 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—

18 Except as otherwise provided in this subsection, the

19 provisions of subchapters III and VII of chapter 84

20 of title 5, United States Code, shall apply with re21 spect to a judge who makes an election under para22 graph (1).

23 ‘‘(3) SPECIAL RULES.—

24 ‘‘(A) AMOUNT CONTRIBUTED.—The

25 amount contributed by a judge to the Thrift

26 Savings Fund in any pay period shall not ex-
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1 ceed the maximum percentage of such judge’s

2 basic pay for such period as allowable under

3 section 8440f of title 5, United States Code.

4 Basic pay does not include any retired pay paid

5 pursuant to this section.

6 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

7 JUDGE.—No contributions may be made for the

8 benefit of a judge under section 8432(c) of title

9 5, United States Code.

10 ‘‘(C) APPLICABILITY OF SECTION 8433(b)

11 OF TITLE 5 WHETHER OR NOT JUDGE RE12 TIRES.—Section 8433(b) of title 5, United

13 States Code, applies with respect to a judge

14 who makes an election under paragraph (1) and

15 who either—

16 ‘‘(i) retires under subsection (b), or

17 ‘‘(ii) ceases to serve as a judge of the

18 Tax Court but does not retire under sub19 section (b).

20 Retirement under subsection (b) is a separation

21 from service for purposes of subchapters III

22 and VII of chapter 84 of that title.

23 ‘‘(D) APPLICABILITY OF SECTION

24 8351(b)(5) OF TITLE 5.—The provisions of sec25 tion 8351(b)(5) of title 5, United States Code,
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1 shall apply with respect to a judge who makes

2 an election under paragraph (1).

3 ‘‘(E) EXCEPTION.—Notwithstanding sub4 paragraph (C), if any judge retires under this

5 section, or resigns without having met the age

6 and service requirements set forth under sub7 section (b)(2), and such judge’s nonforfeitable

8 account balance is less than an amount that the

9 Executive Director of the Office of Personnel

10 Management prescribes by regulation, the Exec11 utive Director shall pay the nonforfeitable ac12 count balance to the participant in a single pay13 ment.’’.

14 (b) EFFECTIVE DATE.—The amendment made by

15 this section shall take effect on the date of the enactment

16 of this Act, except that United States Tax Court judges

17 may only begin to participate in the Thrift Savings Plan

18 at the next open season beginning after such date.

19 SEC. 1207. EXEMPTION OF TEACHING COMPENSATION OF

20 RETIRED JUDGES FROM LIMITATION ON

21 OUTSIDE EARNED INCOME.

22 (a) IN GENERAL.—Section 7447 (relating to retire23 ment of judges), as amended by this Act, is amended by

24 adding at the end the following new subsection:
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1 ‘‘(l) TEACHING COMPENSATION OF RETIRED

2 JUDGES.—For purposes of the limitation under section

3 501(a) of the Ethics in Government Act of 1978 (5 U.S.C.

4 App.), any compensation for teaching approved under sec5 tion 502(a)(5) of such Act shall not be treated as outside

6 earned income when received by a judge of the Tax Court

7 who has retired under subsection (b) for teaching per8 formed during any calendar year for which such a judge

9 has met the requirements of subsection (c), as certified

10 by the chief judge of the Tax Court.’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 this section shall apply to any individual serving as a re13 tired judge of the United States Tax Court on or after

14 the date of the enactment of this Act.

15 SEC. 1208. GENERAL PROVISIONS RELATING TO MAG16 ISTRATE JUDGES OF THE TAX COURT.

17 (a) TITLE OF SPECIAL TRIAL JUDGE CHANGED TO

18 MAGISTRATE JUDGE OF THE TAX COURT.—The heading

19 of section 7443A is amended to read as follows:

20 ‘‘SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.’’

21 (b) APPOINTMENT, TENURE, AND REMOVAL.—Sub22 section (a) of section 7443A is amended to read as follows:

23 ‘‘(a) APPOINTMENT, TENURE, AND REMOVAL.—

24 ‘‘(1) APPOINTMENT.—The chief judge may,

25 from time to time, appoint and reappoint magistrate
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1 judges of the Tax Court for a term of 8 years. The

2 magistrate judges of the Tax Court shall proceed

3 under such rules as may be promulgated by the Tax

4 Court.

5 ‘‘(2) REMOVAL.—Removal of a magistrate

6 judge of the Tax Court during the term for which

7 he or she is appointed shall be only for incom8 petency, misconduct, neglect of duty, or physical or

9 mental disability, but the office of a magistrate

10 judge of the Tax Court shall be terminated if the

11 judges of the Tax Court determine that the services

12 performed by the magistrate judge of the Tax Court

13 are no longer needed. Removal shall not occur unless

14 a majority of all the judges of the Tax Court concur

15 in the order of removal. Before any order of removal

16 shall be entered, a full specification of the charges

17 shall be furnished to the magistrate judge of the Tax

18 Court, and he or she shall be accorded by the judges

19 of the Tax Court an opportunity to be heard on the

20 charges.’’.

21 (c) SALARY.—Section 7443A(d) (relating to salary)

22 is amended by striking ‘‘90’’ and inserting ‘‘92’’.

23 (d) EXEMPTION FROM FEDERAL LEAVE PROVI24 SIONS.—Section 7443A is amended by adding at the end

25 the following new subsection:
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1 ‘‘(f) EXEMPTION FROM FEDERAL LEAVE PROVI2 SIONS.—

3 ‘‘(1) IN GENERAL.—A magistrate judge of the

4 Tax Court appointed under this section shall be ex5 empt from the provisions of subchapter I of chapter

6 63 of title 5, United States Code.

7 ‘‘(2) TREATMENT OF UNUSED LEAVE.—

8 ‘‘(A) AFTER SERVICE AS MAGISTRATE

9 JUDGE.—If an individual who is exempted

10 under paragraph (1) from the subchapter re11 ferred to in such paragraph was previously sub12 ject to such subchapter and, without a break in

13 service, again becomes subject to such sub14 chapter on completion of the individual’s service

15 as a magistrate judge, the unused annual leave

16 and sick leave standing to the individual’s cred17 it when such individual was exempted from this

18 subchapter is deemed to have remained to the

19 individual’s credit.

20 ‘‘(B) COMPUTATION OF ANNUITY.—In

21 computing an annuity under section 8339 of

22 title 5, United States Code, the total service of

23 an individual specified in subparagraph (A) who

24 retires on an immediate annuity or dies leaving

25 a survivor or survivors entitled to an annuity
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1 includes, without regard to the limitations im2 posed by subsection (f) of such section 8339,

3 the days of unused sick leave standing to the

4 individual’s credit when such individual was ex5 empted from subchapter I of chapter 63 of title

6 5, United States Code, except that these days

7 will not be counted in determining average pay

8 or annuity eligibility.

9 ‘‘(C) LUMP SUM PAYMENT.—Any accumu10 lated and current accrued annual leave or vaca11 tion balances credited to a magistrate judge as

12 of the date of the enactment of this subsection

13 shall be paid in a lump sum at the time of sepa14 ration from service pursuant to the provisions

15 and restrictions set forth in section 5551 of

16 title 5, United States Code, and related provi17 sions referred to in such section.’’.

18 (e) CONFORMING AMENDMENTS.—

19 (1) The heading of subsection (b) of section

20 7443A is amended by striking ‘‘SPECIAL TRIAL

21 JUDGES’’ and inserting ‘‘Magistrate Judges of the

22 Tax Court’’.

23 (2) Section 7443A(b) is amended by striking

24 ‘‘special trial judges of the court’’ and inserting

25 ‘‘magistrate judges of the Tax Court’’.
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1 (3) Subsections (c) and (d) of section 7443A

2 are amended by striking ‘‘special trial judge’’ and

3 inserting ‘‘magistrate judge of the Tax Court’’ each

4 place it appears.

5 (4) Section 7443A(e) is amended by striking

6 ‘‘special trial judges’’ and inserting ‘‘magistrate

7 judges of the Tax Court’’.

8 (5) Section 7456(a) is amended by striking

9 ‘‘special trial judge’’ each place it appears and in10 serting ‘‘magistrate judge’’.

11 (6) Subsection (c) of section 7471 is

12 amended—

13 (A) by striking the subsection heading and

14 inserting ‘‘MAGISTRATE JUDGES OF THE TAX

15 COURT.—’’, and

16 (B) by striking ‘‘special trial judges’’ and

17 inserting ‘‘magistrate judges’’.

18 SEC. 1209. ANNUITIES TO SURVIVING SPOUSES AND DE19 PENDENT CHILDREN OF MAGISTRATE

20 JUDGES OF THE TAX COURT.

21 (a) DEFINITIONS.—Section 7448(a) (relating to defi22 nitions), as amended by this Act, is amended by redesig23 nating paragraphs (5), (6), (7), and (8) as paragraphs (7),

24 (8), (9), and (10), respectively, and by inserting after

25 paragraph (4) the following new paragraphs:
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1 ‘‘(5) The term ‘magistrate judge’ means a judi2 cial officer appointed pursuant to section 7443A, in3 cluding any individual receiving an annuity under

4 section 7443B, or chapters 83 or 84, as the case

5 may be, of title 5, United States Code, whether or

6 not performing judicial duties under section 7443C.

7 ‘‘(6) The term ‘magistrate judge’s salary’

8 means the salary of a magistrate judge received

9 under section 7443A(d), any amount received as an

10 annuity under section 7443B, or chapters 83 or 84,

11 as the case may be, of title 5, United States Code,

12 and compensation received under section 7443C.’’.

13 (b) ELECTION.—Subsection (b) of section 7448 (re14 lating to annuities to surviving spouses and dependent

15 children of judges) is amended—

16 (1) by striking the subsection heading and in17 serting the following:

18 ‘‘(b) ELECTION.—

19 ‘‘(1) JUDGES.—’’,

20 (2) by moving the text 2 ems to the right, and

21 (3) by adding at the end the following new

22 paragraph:

23 ‘‘(2) MAGISTRATE JUDGES.—Any magistrate

24 judge may by written election filed with the chief

25 judge bring himself or herself within the purview of
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1 this section. Such election shall be filed not later

2 than the later of 6 months after—

3 ‘‘(A) 6 months after the date of the enact4 ment of this paragraph,

5 ‘‘(B) the date the judge takes office, or

6 ‘‘(C) the date the judge marries.’’.

7 (c) CONFORMING AMENDMENTS.—

8 (1) The heading of section 7448 is amended by

9 inserting ‘‘AND MAGISTRATE JUDGES’’ after

10 ‘‘JUDGES’’.

11 (2) The item relating to section 7448 in the

12 table of sections for part I of subchapter C of chap13 ter 76 is amended by inserting ‘‘and magistrate

14 judges’’ after ‘‘judges’’.

15 (3) Subsections (c)(1), (d), (f), (g), (h), (j),

16 (m), (n), and (u) of section 7448, as amended by

17 this Act, are each amended—

18 (A) by inserting ‘‘or magistrate judge’’

19 after ‘‘judge’’ each place it appears other than

20 in the phrase ‘‘chief judge’’, and

21 (B) by inserting ‘‘or magistrate judge’s’’

22 after ‘‘judge’s’’ each place it appears.

23 (4) Section 7448(c) is amended—
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1 (A) in paragraph (1), by striking ‘‘Tax

2 Court judges’’ and inserting ‘‘Tax Court judi3 cial officers’’,

4 (B) in paragraph (2)—

5 (i) in subparagraph (A), by inserting

6 ‘‘and section 7443A(d)’’ after ‘‘(a)(4)’’,

7 and

8 (ii) in subparagraph (B), by striking

9 ‘‘subsection (a)(4)’’ and inserting ‘‘sub10 sections (a)(4) and (a)(6)’’.

11 (5) Section 7448(g) is amended by inserting

12 ‘‘or section 7443B’’ after ‘‘section 7447’’ each place

13 it appears, and by inserting ‘‘or an annuity’’ after

14 ‘‘retired pay’’.

15 (6) Section 7448(j)(1) is amended—

16 (A) in subparagraph (A), by striking

17 ‘‘service or retired’’ and inserting ‘‘service, re18 tired’’, and by inserting ‘‘, or receiving any an19 nuity under section 7443B or chapters 83 or 84

20 of title 5, United States Code,’’ after ‘‘section

21 7447’’, and

22 (B) in the last sentence, by striking ‘‘sub23 sections (a) (6) and (7)’’ and inserting ‘‘para24 graphs (8) and (9) of subsection (a)’’.
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1 (7) Section 7448(m)(1), as amended by this

2 Act, is amended—

3 (A) by inserting ‘‘or any annuity under

4 section 7443B or chapters 83 or 84 of title 5,

5 United States Code’’ after ‘‘7447(d)’’, and

6 (B) by inserting ‘‘or 7443B(m)(1)(B) after

7 ‘‘7447(f)(4)’’.

8 (8) Section 7448(n) is amended by inserting

9 ‘‘his years of service pursuant to any appointment

10 under section 7443A,’’ after ‘‘of the Tax Court,’’.

11 (9) Section 3121(b)(5)(E) is amended by in12 serting ‘‘or magistrate judge’’ before ‘‘of the United

13 States Tax Court’’.

14 (10) Section 210(a)(5)(E) of the Social Secu15 rity Act is amended by inserting ‘‘or magistrate

16 judge’’ before ‘‘of the United States Tax Court’’.

17 SEC. 1210. RETIREMENT AND ANNUITY PROGRAM.

18 (a) RETIREMENT AND ANNUITY PROGRAM.—Part I

19 of subchapter C of chapter 76 is amended by inserting

20 after section 7443A the following new section:

21 ‘‘SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF

22 THE TAX COURT.

23 ‘‘(a) RETIREMENT BASED ON YEARS OF SERVICE.—

24 A magistrate judge of the Tax Court to whom this section

25 applies and who retires from office after attaining the age
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1 of 65 years and serving at least 14 years, whether continu2 ously or otherwise, as such magistrate judge shall, subject

3 to subsection (f), be entitled to receive, during the remain4 der of the magistrate judge’s lifetime, an annuity equal

5 to the salary being received at the time the magistrate

6 judge leaves office.

7 ‘‘(b) RETIREMENT UPON FAILURE OF REAPPOINT8 MENT.—A magistrate judge of the Tax Court to whom

9 this section applies who is not reappointed following the

10 expiration of the term of office of such magistrate judge

11 and who retires upon the completion of the term shall,

12 subject to subsection (f), be entitled to receive, upon at13 taining the age of 65 years and during the remainder of

14 such magistrate judge’s lifetime, an annuity equal to that

15 portion of the salary being received at the time the mag16 istrate judge leaves office which the aggregate number of

17 years of service, not to exceed 14, bears to 14, if—

18 ‘‘(1) such magistrate judge has served at least

19 1 full term as a magistrate judge, and

20 ‘‘(2) not earlier than 9 months before the date

21 on which the term of office of such magistrate judge

22 expires, and not later than 6 months before such

23 date, such magistrate judge notified the chief judge

24 of the Tax Court in writing that such magistrate
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1 judge was willing to accept reappointment to the po2 sition in which such magistrate judge was serving.

3 ‘‘(c) SERVICE OF AT LEAST 8 YEARS.—A magistrate

4 judge of the Tax Court to whom this section applies and

5 who retires after serving at least 8 years, whether continu6 ously or otherwise, as such a magistrate judge shall, sub7 ject to subsection (f), be entitled to receive, upon attaining

8 the age of 65 years and during the remainder of the mag9 istrate judge’s lifetime, an annuity equal to that portion

10 of the salary being received at the time the magistrate

11 judge leaves office which the aggregate number of years

12 of service, not to exceed 14, bears to 14. Such annuity

shall be reduced by 1 13 ⁄6 of 1 percent for each full month

14 such magistrate judge was under the age of 65 at the time

15 the magistrate judge left office, except that such reduction

16 shall not exceed 20 percent.

17 ‘‘(d) RETIREMENT FOR DISABILITY.—A magistrate

18 judge of the Tax Court to whom this section applies, who

19 has served at least 5 years, whether continuously or other20 wise, as such a magistrate judge and who retires or is re21 moved from office upon the sole ground of mental or phys22 ical disability shall, subject to subsection (f), be entitled

23 to receive, during the remainder of the magistrate judge’s

24 lifetime, an annuity equal to 40 percent of the salary being

25 received at the time of retirement or removal or, in the
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1 case of a magistrate judge who has served for at least 10

2 years, an amount equal to that proportion of the salary

3 being received at the time of retirement or removal which

4 the aggregate number of years of service, not to exceed

5 14, bears to 14.

6 ‘‘(e) COST-OF-LIVING ADJUSTMENTS.—A magistrate

7 judge of the Tax Court who is entitled to an annuity under

8 this section is also entitled to a cost-of-living adjustment

9 in such annuity, calculated and payable in the same man10 ner as adjustments under section 8340(b) of title 5,

11 United States Code, except that any such annuity, as in12 creased under this subsection, may not exceed the salary

13 then payable for the position from which the magistrate

14 judge retired or was removed.

15 ‘‘(f) ELECTION; ANNUITY IN LIEU OF OTHER ANNU16 ITIES.—

17 ‘‘(1) IN GENERAL.—A magistrate judge of the

18 Tax Court shall be entitled to an annuity under this

19 section if the magistrate judge elects an annuity

20 under this section by notifying the chief judge of the

21 Tax Court not later than the later of—

22 ‘‘(A) 5 years after the magistrate judge of

23 the Tax Court begins judicial service, or

24 ‘‘(B) 5 years after the date of the enact25 ment of this subsection.
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1 Such notice shall be given in accordance with proce2 dures prescribed by the Tax Court.

3 ‘‘(2) ANNUITY IN LIEU OF OTHER ANNUITY.—

4 A magistrate judge who elects to receive an annuity

5 under this section shall not be entitled to receive—

6 ‘‘(A) any annuity to which such magistrate

7 judge would otherwise have been entitled under

8 subchapter III of chapter 83, or under chapter

9 84 (except for subchapters III and VII), of title

10 5, United States Code, for service performed as

11 a magistrate or otherwise,

12 ‘‘(B) an annuity or salary in senior status

13 or retirement under section 371 or 372 of title

14 28, United States Code,

15 ‘‘(C) retired pay under section 7447, or

16 ‘‘(D) retired pay under section 7296 of

17 title 38, United States Code.

18 ‘‘(3) COORDINATION WITH TITLE 5.—A mag19 istrate judge of the Tax Court who elects to receive

20 an annuity under this section—

21 ‘‘(A) shall not be subject to deductions and

22 contributions otherwise required by section

23 8334(a) of title 5, United States Code,
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1 ‘‘(B) shall be excluded from the operation

2 of chapter 84 (other than subchapters III and

3 VII) of such title 5, and

4 ‘‘(C) is entitled to a lump-sum credit under

5 section 8342(a) or 8424 of such title 5, as the

6 case may be.

7 ‘‘(g) CALCULATION OF SERVICE.—For purposes of

8 calculating an annuity under this section—

9 ‘‘(1) service as a magistrate judge of the Tax

10 Court to whom this section applies may be credited,

11 and

12 ‘‘(2) each month of service shall be credited as

1 13 ⁄12 of a year, and the fractional part of any month

14 shall not be credited.

15 ‘‘(h) COVERED POSITIONS AND SERVICE.—This sec16 tion applies to any magistrate judge of the Tax Court or

17 special trial judge of the Tax Court appointed under this

18 subchapter, but only with respect to service as such a mag19 istrate judge or special trial judge after a date not earlier

than 91 20 ⁄2 years before the date of the enactment of this

21 subsection.

22 ‘‘(i) PAYMENTS PURSUANT TO COURT ORDER.—

23 ‘‘(1) IN GENERAL.—Payments under this sec24 tion which would otherwise be made to a magistrate

25 judge of the Tax Court based upon his or her service
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1 shall be paid (in whole or in part) by the chief judge

2 of the Tax Court to another person if and to the ex3 tent expressly provided for in the terms of any court

4 decree of divorce, annulment, or legal separation, or

5 the terms of any court order or court-approved prop6 erty settlement agreement incident to any court de7 cree of divorce, annulment, or legal separation. Any

8 payment under this paragraph to a person bars re9 covery by any other person.

10 ‘‘(2) REQUIREMENTS FOR PAYMENT.—Para11 graph (1) shall apply only to payments made by the

12 chief judge of the Tax Court after the date of re13 ceipt by the chief judge of written notice of such de14 cree, order, or agreement, and such additional infor15 mation as the chief judge may prescribe.

16 ‘‘(3) COURT DEFINED.—For purposes of this

17 subsection, the term ‘court’ means any court of any

18 State, the District of Columbia, the Commonwealth

19 of Puerto Rico, Guam, the Northern Mariana Is20 lands, or the Virgin Islands, and any Indian tribal

21 court or courts of Indian offense.

22 ‘‘(j) DEDUCTIONS, CONTRIBUTIONS, AND DEPOS23 ITS.—

24 ‘‘(1) DEDUCTIONS.—Beginning with the next

25 pay period after the chief judge of the Tax Court re-
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1 ceives a notice under subsection (f) that a mag2 istrate judge of the Tax Court has elected an annu3 ity under this section, the chief judge shall deduct

4 and withhold 1 percent of the salary of such mag5 istrate judge. Amounts shall be so deducted and

6 withheld in a manner determined by the chief judge.

7 Amounts deducted and withheld under this sub8 section shall be deposited in the Treasury of the

9 United States to the credit of the Tax Court Judi10 cial Officers’ Retirement Fund. Deductions under

11 this subsection from the salary of a magistrate judge

12 shall terminate upon the retirement of the mag13 istrate judge or upon completion of 14 years of serv14 ice for which contributions under this section have

15 been made, whether continuously or otherwise, as

16 calculated under subsection (g), whichever occurs

17 first.

18 ‘‘(2) CONSENT TO DEDUCTIONS; DISCHARGE OF

19 CLAIMS.—Each magistrate judge of the Tax Court

20 who makes an election under subsection (f) shall be

21 deemed to consent and agree to the deductions from

22 salary which are made under paragraph (1). Pay23 ment of such salary less such deductions (and any

24 deductions made under section 7448) is a full and

25 complete discharge and acquittance of all claims and
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1 demands for all services rendered by such magistrate

2 judge during the period covered by such payment,

3 except the right to those benefits to which the mag4 istrate judge is entitled under this section (and sec5 tion 7448).

6 ‘‘(k) DEPOSITS FOR PRIOR SERVICE.—Each mag7 istrate judge of the Tax Court who makes an election

8 under subsection (f) may deposit, for service performed

9 before such election for which contributions may be made

10 under this section, an amount equal to 1 percent of the

11 salary received for that service. Credit for any period cov12 ered by that service may not be allowed for purposes of

13 an annuity under this section until a deposit under this

14 subsection has been made for that period.

15 ‘‘(l) INDIVIDUAL RETIREMENT RECORDS.—The

16 amounts deducted and withheld under subsection (j), and

17 the amounts deposited under subsection (k), shall be cred18 ited to individual accounts in the name of each magistrate

19 judge of the Tax Court from whom such amounts are re20 ceived, for credit to the Tax Court Judicial Officers’ Re21 tirement Fund.

22 ‘‘(m) ANNUITIES AFFECTED IN CERTAIN CASES.—

23 ‘‘(1) 1-YEAR FORFEITURE FOR FAILURE TO

24 PERFORM JUDICIAL DUTIES.—Subject to paragraph

25 (3), any magistrate judge of the Tax Court who re-
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1 tires under this section and who fails to perform ju2 dicial duties required of such individual by section

3 7443C shall forfeit all rights to an annuity under

4 this section for a 1-year period which begins on the

5 1st day on which such individual fails to perform

6 such duties.

7 ‘‘(2) PERMANENT FORFEITURE OF RETIRED

8 PAY WHERE CERTAIN NON-GOVERNMENT SERVICES

9 PERFORMED.—Subject to paragraph (3), any mag10 istrate judge of the Tax Court who retires under this

11 section and who thereafter performs (or supervises

12 or directs the performance of) legal or accounting

13 services in the field of Federal taxation for the indi14 vidual’s client, the individual’s employer, or any of

15 such employer’s clients, shall forfeit all rights to an

16 annuity under this section for all periods beginning

17 on or after the first day on which the individual per18 forms (or supervises or directs the performance of)

19 such services. The preceding sentence shall not apply

20 to any civil office or employment under the Govern21 ment of the United States.

22 ‘‘(3) FORFEITURES NOT TO APPLY WHERE IN23 DIVIDUAL ELECTS TO FREEZE AMOUNT OF ANNU24 ITY.—
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1 ‘‘(A) IN GENERAL.—If a magistrate judge

2 of the Tax Court makes an election under this

3 paragraph—

4 ‘‘(i) paragraphs (1) and (2) (and sec5 tion 7443C) shall not apply to such mag6 istrate judge beginning on the date such

7 election takes effect, and

8 ‘‘(ii) the annuity payable under this

9 section to such magistrate judge, for peri10 ods beginning on or after the date such

11 election takes effect, shall be equal to the

12 annuity to which such magistrate judge is

13 entitled on the day before such effective

14 date.

15 ‘‘(B) ELECTION REQUIREMENTS.—An elec16 tion under subparagraph (A)—

17 ‘‘(i) may be made by a magistrate

18 judge of the Tax Court eligible for retire19 ment under this section, and

20 ‘‘(ii) shall be filed with the chief judge

21 of the Tax Court.

22 Such an election, once it takes effect, shall be

23 irrevocable.

24 ‘‘(C) EFFECTIVE DATE OF ELECTION.—

25 Any election under subparagraph (A) shall take
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1 effect on the first day of the first month fol2 lowing the month in which the election is made.

3 ‘‘(4) ACCEPTING OTHER EMPLOYMENT.—Any

4 magistrate judge of the Tax Court who retires under

5 this section and thereafter accepts compensation for

6 civil office or employment under the United States

7 Government (other than for the performance of

8 functions as a magistrate judge of the Tax Court

9 under section 7443C) shall forfeit all rights to an

10 annuity under this section for the period for which

11 such compensation is received. For purposes of this

12 paragraph, the term ‘compensation’ includes retired

13 pay or salary received in retired status.

14 ‘‘(n) LUMP-SUM PAYMENTS.—

15 ‘‘(1) ELIGIBILITY.—

16 ‘‘(A) IN GENERAL.—Subject to paragraph

17 (2), an individual who serves as a magistrate

18 judge of the Tax Court and—

19 ‘‘(i) who leaves office and is not re20 appointed as a magistrate judge of the Tax

21 Court for at least 31 consecutive days,

22 ‘‘(ii) who files an application with the

23 chief judge of the Tax Court for payment

24 of a lump-sum credit,
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1 ‘‘(iii) is not serving as a magistrate

2 judge of the Tax Court at the time of fil3 ing of the application, and

4 ‘‘(iv) will not become eligible to re5 ceive an annuity under this section within

6 31 days after filing the application,

7 is entitled to be paid the lump-sum credit. Pay8 ment of the lump-sum credit voids all rights to

9 an annuity under this section based on the serv10 ice on which the lump-sum credit is based, until

11 that individual resumes office as a magistrate

12 judge of the Tax Court.

13 ‘‘(B) PAYMENT TO SURVIVORS.—Lump14 sum benefits authorized by subparagraphs (C),

15 (D), and (E) of this paragraph shall be paid to

16 the person or persons surviving the magistrate

17 judge of the Tax Court and alive on the date

18 title to the payment arises, in the order of prec19 edence set forth in subsection (o) of section 376

20 of title 28, United States Code, and in accord21 ance with the last 2 sentences of paragraph (1)

22 of that subsection. For purposes of the pre23 ceding sentence, the term ‘judicial official’ as

24 used in subsection (o) of such section 376 shall

25 be deemed to mean ‘magistrate judge of the
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1 Tax Court’ and the terms ‘Administrative Of2 fice of the United States Courts’ and ‘Director

3 of the Administrative Office of the United

4 States Courts’ shall be deemed to mean ‘chief

5 judge of the Tax Court’.

6 ‘‘(C) PAYMENT UPON DEATH OF JUDGE

7 BEFORE RECEIPT OF ANNUITY.—If a mag8 istrate judge of the Tax Court dies before re9 ceiving an annuity under this section, the lump10 sum credit shall be paid.

11 ‘‘(D) PAYMENT OF ANNUITY REMAIN12 DER.—If all annuity rights under this section

13 based on the service of a deceased magistrate

14 judge of the Tax Court terminate before the

15 total annuity paid equals the lump-sum credit,

16 the difference shall be paid.

17 ‘‘(E) PAYMENT UPON DEATH OF JUDGE

18 DURING RECEIPT OF ANNUITY.—If a magistrate

19 judge of the Tax Court who is receiving an an20 nuity under this section dies, any accrued annu21 ity benefits remaining unpaid shall be paid.

22 ‘‘(F) PAYMENT UPON TERMINATION.—Any

23 accrued annuity benefits remaining unpaid on

24 the termination, except by death, of the annuity
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1 of a magistrate judge of the Tax Court shall be

2 paid to that individual.

3 ‘‘(G) PAYMENT UPON ACCEPTING OTHER

4 EMPLOYMENT.—Subject to paragraph (2), a

5 magistrate judge of the Tax Court who forfeits

6 rights to an annuity under subsection (m)(4)

7 before the total annuity paid equals the lump8 sum credit shall be entitled to be paid the dif9 ference if the magistrate judge of the Tax

10 Court files an application with the chief judge

11 of the Tax Court for payment of that dif12 ference. A payment under this subparagraph

13 voids all rights to an annuity on which the pay14 ment is based.

15 ‘‘(2) SPOUSES AND FORMER SPOUSES.—

16 ‘‘(A) IN GENERAL.—Payment of the lump17 sum credit under paragraph (1)(A) or a pay18 ment under paragraph (1)(G)—

19 ‘‘(i) may be made only if any current

20 spouse and any former spouse of the mag21 istrate judge of the Tax Court are notified

22 of the magistrate judge’s application, and

23 ‘‘(ii) shall be subject to the terms of

24 a court decree of divorce, annulment, or

25 legal separation, or any court or court ap-
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1 proved property settlement agreement inci2 dent to such decree, if—

3 ‘‘(I) the decree, order, or agree4 ment expressly relates to any portion

5 of the lump-sum credit or other pay6 ment involved, and

7 ‘‘(II) payment of the lump-sum

8 credit or other payment would extin9 guish entitlement of the magistrate

10 judge’s spouse or former spouse to

11 any portion of an annuity under sub12 section (i).

13 ‘‘(B) NOTIFICATION.—Notification of a

14 spouse or former spouse under this paragraph

15 shall be made in accordance with such proce16 dures as the chief judge of the Tax Court shall

17 prescribe. The chief judge may provide under

18 such procedures that subparagraph (A)(i) may

19 be waived with respect to a spouse or former

20 spouse if the magistrate judge establishes to the

21 satisfaction of the chief judge that the where22 abouts of such spouse or former spouse cannot

23 be determined.

24 ‘‘(C) RESOLUTION OF 2 OR MORE OR25 DERS.—The chief judge shall prescribe proce-
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1 dures under which this paragraph shall be ap2 plied in any case in which the chief judge re3 ceives 2 or more orders or decrees described in

4 subparagraph (A).

5 ‘‘(3) DEFINITION.—For purposes of this sub6 section, the term ‘lump-sum credit’ means the

7 unrefunded amount consisting of—

8 ‘‘(A) retirement deductions made under

9 this section from the salary of a magistrate

10 judge of the Tax Court,

11 ‘‘(B) amounts deposited under subsection

12 (k) by a magistrate judge of the Tax Court cov13 ering earlier service, and

14 ‘‘(C) interest on the deductions and depos15 its which, for any calendar year, shall be equal

16 to the overall average yield to the Tax Court

17 Judicial Officers’ Retirement Fund during the

18 preceding fiscal year from all obligations pur19 chased by the Secretary during such fiscal year

20 under subsection (o); but does not include

21 interest—

22 ‘‘(i) if the service covered thereby ag23 gregates 1 year or less, or

24 ‘‘(ii) for the fractional part of a

25 month in the total service.
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1 ‘‘(o) TAX COURT JUDICIAL OFFICERS’ RETIREMENT

2 FUND.—

3 ‘‘(1) ESTABLISHMENT.—There is established in

4 the Treasury a fund which shall be known as the

5 ‘Tax Court Judicial Officers’ Retirement Fund’.

6 Amounts in the Fund are authorized to be appro7 priated for the payment of annuities, refunds, and

8 other payments under this section.

9 ‘‘(2) INVESTMENT OF FUND.—The Secretary

10 shall invest, in interest bearing securities of the

11 United States, such currently available portions of

12 the Tax Court Judicial Officers’ Retirement Fund as

13 are not immediately required for payments from the

14 Fund. The income derived from these investments

15 constitutes a part of the Fund.

16 ‘‘(3) UNFUNDED LIABILITY.—

17 ‘‘(A) IN GENERAL.—There are authorized

18 to be appropriated to the Tax Court Judicial

19 Officers’ Retirement Fund amounts required to

20 reduce to zero the unfunded liability of the

21 Fund.

22 ‘‘(B) UNFUNDED LIABILITY.—For pur23 poses of subparagraph (A), the term ‘unfunded

24 liability’ means the estimated excess, deter25 mined on an annual basis in accordance with
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1 the provisions of section 9503 of title 31,

2 United States Code, of the present value of all

3 benefits payable from the Tax Court Judicial

4 Officers’ Retirement Fund over the sum of—

5 ‘‘(i) the present value of deductions to

6 be withheld under this section from the fu7 ture basic pay of magistrate judges of the

8 Tax Court, plus

9 ‘‘(ii) the balance in the Fund as of the

10 date the unfunded liability is determined.

11 ‘‘(p) PARTICIPATION IN THRIFT SAVINGS PLAN.—

12 ‘‘(1) ELECTION TO CONTRIBUTE.—

13 ‘‘(A) IN GENERAL.—A magistrate judge of

14 the Tax Court who elects to receive an annuity

15 under this section or under section 611 of the

16 Pension Security and Transparency Act of

17 2005 may elect to contribute an amount of such

18 individual’s basic pay to the Thrift Savings

19 Fund established by section 8437 of title 5,

20 United States Code.

21 ‘‘(B) PERIOD OF ELECTION.—An election

22 may be made under this paragraph only during

23 a period provided under section 8432(b) of title

24 5, United States Code, for individuals subject to

25 chapter 84 of such title.
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1 ‘‘(2) APPLICABILITY OF TITLE 5 PROVISIONS.—

2 Except as otherwise provided in this subsection, the

3 provisions of subchapters III and VII of chapter 84

4 of title 5, United States Code, shall apply with re5 spect to a magistrate judge who makes an election

6 under paragraph (1).

7 ‘‘(3) SPECIAL RULES.—

8 ‘‘(A) AMOUNT CONTRIBUTED.—The

9 amount contributed by a magistrate judge to

10 the Thrift Savings Fund in any pay period shall

11 not exceed the maximum percentage of such

12 judge’s basic pay for such pay period as allow13 able under section 8440f of title 5, United

14 States Code.

15 ‘‘(B) CONTRIBUTIONS FOR BENEFIT OF

16 JUDGE.—No contributions may be made for the

17 benefit of a magistrate judge under section

18 8432(c) of title 5, United States Code.

19 ‘‘(C) APPLICABILITY OF SECTION 8433(b)

20 OF TITLE 5.—Section 8433(b) of title 5, United

21 States Code, applies with respect to a mag22 istrate judge who makes an election under para23 graph (1) and—

24 ‘‘(i) who retires entitled to an imme25 diate annuity under this section (including
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1 a disability annuity under subsection (d) of

2 this section) or section 611 of the Pension

3 Security and Transparency Act of 2005,

4 ‘‘(ii) who retires before attaining age

5 65 but is entitled, upon attaining age 65,

6 to an annuity under this section or section

7 611 of the Pension Security and Trans8 parency Act of 2005, or

9 ‘‘(iii) who retires before becoming en10 titled to an immediate annuity, or an an11 nuity upon attaining age 65, under this

12 section or section 611 of the Pension Secu13 rity and Transparency Act of 2005.

14 ‘‘(D) SEPARATION FROM SERVICE.—With

15 respect to a magistrate judge to whom this sub16 section applies, retirement under this section or

17 section 611 of the Pension Security and Trans18 parency Act of 2005 is a separation from serv19 ice for purposes of subchapters III and VII of

20 chapter 84 of title 5, United States Code.

21 ‘‘(4) DEFINITIONS.—For purposes of this sub22 section, the terms ‘retirement’ and ‘retire’ include

23 removal from office under section 7443A(a)(2) on

24 the sole ground of mental or physical disability.
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1 ‘‘(5) OFFSET.—In the case of a magistrate

2 judge who receives a distribution from the Thrift

3 Savings Fund and who later receives an annuity

4 under this section, that annuity shall be offset by an

5 amount equal to the amount which represents the

6 Government’s contribution to that person’s Thrift

7 Savings Account, without regard to earnings attrib8 utable to that amount. Where such an offset would

9 exceed 50 percent of the annuity to be received in

10 the first year, the offset may be divided equally over

11 the first 2 years in which that person receives the

12 annuity.

13 ‘‘(6) EXCEPTION.—Notwithstanding clauses (i)

14 and (ii) of paragraph (3)(C), if any magistrate judge

15 retires under circumstances making such magistrate

16 judge eligible to make an election under subsection

17 (b) of section 8433 of title 5, United States Code,

18 and such magistrate judge’s nonforfeitable account

19 balance is less than an amount that the Executive

20 Director of the Office of Personnel Management pre21 scribes by regulation, the Executive Director shall

22 pay the nonforfeitable account balance to the partici23 pant in a single payment.’’.

24 (b) CONFORMING AMENDMENT.—The table of sec25 tions for part I of subchapter C of chapter 76 is amended
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1 by inserting after the item relating to section 7443A the

2 following new item:

‘‘Sec. 7443B. Retirement for magistrate judges of the Tax Court.’’.

3 SEC. 1211. INCUMBENT MAGISTRATE JUDGES OF THE TAX

4 COURT.

5 (a) RETIREMENT ANNUITY UNDER TITLE 5 AND

6 SECTION 7443B OF THE INTERNAL REVENUE CODE OF

7 1986.—A magistrate judge of the United States Tax

8 Court in active service on the date of the enactment of

9 this Act shall, subject to subsection (b), be entitled, in lieu

10 of the annuity otherwise provided under the amendments

11 made by this title, to—

12 (1) an annuity under subchapter III of chapter

13 83, or under chapter 84 (except for subchapters III

14 and VII), of title 5, United States Code, as the case

15 may be, for creditable service before the date on

16 which service would begin to be credited for pur17 poses of paragraph (2), and

18 (2) an annuity calculated under subsection (b)

19 or (c) and subsection (g) of section 7443B of the In20 ternal Revenue Code of 1986, as added by this Act,

21 for any service as a magistrate judge of the United

22 States Tax Court or special trial judge of the United

23 States Tax Court but only with respect to service as

24 such a magistrate judge or special trial judge after

a date not earlier than 91 25 ⁄2 years prior to the date
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1 of the enactment of this Act (as specified in the elec2 tion pursuant to subsection (b)) for which deduc3 tions and deposits are made under subsections (j)

4 and (k) of such section 7443B, as applicable, with5 out regard to the minimum number of years of serv6 ice as such a magistrate judge of the United States

7 Tax Court, except that—

8 (A) in the case of a magistrate judge who

9 retired with less than 8 years of service, the an10 nuity under subsection (c) of such section

11 7443B shall be equal to that proportion of the

12 salary being received at the time the magistrate

13 judge leaves office which the years of service

14 bears to 14, subject to a reduction in accord15 ance with subsection (c) of such section 7443B

16 if the magistrate judge is under age 65 at the

17 time he or she leaves office, and

18 (B) the aggregate amount of the annuity

19 initially payable on retirement under this sub20 section may not exceed the rate of pay for the

21 magistrate judge which is in effect on the day

22 before the retirement becomes effective.

23 (b) FILING OF NOTICE OF ELECTION.—A magistrate

24 judge of the United States Tax Court shall be entitled to

25 an annuity under this section only if the magistrate judge
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1 files a notice of that election with the chief judge of the

2 United States Tax Court specifying the date on which

3 service would begin to be credited under section 7443B

4 of the Internal Revenue Code of 1986, as added by this

5 Act, in lieu of chapter 83 or chapter 84 of title 5, United

6 States Code. Such notice shall be filed in accordance with

7 such procedures as the chief judge of the United States

8 Tax Court shall prescribe.

9 (c) LUMP-SUM CREDIT UNDER TITLE 5.—A mag10 istrate judge of the United States Tax Court who makes

11 an election under subsection (b) shall be entitled to a

12 lump-sum credit under section 8342 or 8424 of title 5,

13 United States Code, as the case may be, for any service

14 which is covered under section 7443B of the Internal Rev15 enue Code of 1986, as added by this Act, pursuant to that

16 election, and with respect to which any contributions were

17 made by the magistrate judge under the applicable provi18 sions of title 5, United States Code.

19 (d) RECALL.—With respect to any magistrate judge

20 of the United States Tax Court receiving an annuity under

21 this section who is recalled to serve under section 7443C

22 of the Internal Revenue Code of 1986, as added by this

23 Act—

24 (1) the amount of compensation which such re25 called magistrate judge receives under such section
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1 7443C shall be calculated on the basis of the annu2 ity received under this section, and

3 (2) such recalled magistrate judge of the United

4 States Tax Court may serve as a reemployed annu5 itant to the extent otherwise permitted under title 5,

6 United States Code.

7 Section 7443B(m)(4) of the Internal Revenue Code of

8 1986, as added by this Act, shall not apply with respect

9 to service as a reemployed annuitant described in para10 graph (2).

11 SEC. 1212. PROVISIONS FOR RECALL.

12 (a) IN GENERAL.—Part I of subchapter C of chapter

13 76, as amended by this Act, is amended by inserting after

14 section 7443B the following new section:

15 ‘‘SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX

16 COURT.

17 ‘‘(a) RECALLING OF RETIRED MAGISTRATE

18 JUDGES.—Any individual who has retired pursuant to sec19 tion 7443B or the applicable provisions of title 5, United

20 States Code, upon reaching the age and service require21 ments established therein, may at or after retirement be

22 called upon by the chief judge of the Tax Court to perform

23 such judicial duties with the Tax Court as may be re24 quested of such individual for any period or periods speci-
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1 fied by the chief judge; except that in the case of any such

2 individual—

3 ‘‘(1) the aggregate of such periods in any 1 cal4 endar year shall not (without such individual’s con5 sent) exceed 90 calendar days, and

6 ‘‘(2) such individual shall be relieved of per7 forming such duties during any period in which ill8 ness or disability precludes the performance of such

9 duties.

10 Any act, or failure to act, by an individual performing ju11 dicial duties pursuant to this subsection shall have the

12 same force and effect as if it were the act (or failure to

13 act) of a magistrate judge of the Tax Court.

14 ‘‘(b) COMPENSATION.—For the year in which a pe15 riod of recall occurs, the magistrate judge shall receive,

16 in addition to the annuity provided under the provisions

17 of section 7443B or under the applicable provisions of title

18 5, United States Code, an amount equal to the difference

19 between that annuity and the current salary of the office

20 to which the magistrate judge is recalled. The annuity of

21 the magistrate judge who completes that period of service,

22 who is not recalled in a subsequent year, and who retired

23 under section 7443B, shall be equal to the salary in effect

24 at the end of the year in which the period of recall oc25 curred for the office from which such individual retired.
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1 ‘‘(c) RULEMAKING AUTHORITY.—The provisions of

2 this section may be implemented under such rules as may

3 be promulgated by the Tax Court.’’

4 (b) CONFORMING AMENDMENT.—The table of sec5 tions for part I of subchapter C of chapter 76, as amended

6 by this Act, is amended by inserting after the item relating

7 to section 7443B the following new item:

‘‘Sec. 7443C. Recall of magistrate judges of the Tax Court.’’.

8 SEC. 1213. EFFECTIVE DATE.

9 Except as otherwise provided, the amendments made

10 by this subtitle shall take effect on the date of the enact11 ment of this Act.

12 TITLE XIII—OTHER PROVISIONS

13 Subtitle A—Administrative

14 Provision

15 SEC. 1301. PROVISIONS RELATING TO PLAN AMENDMENTS.

16 (a) IN GENERAL.—If this section applies to any plan

17 or contract amendment—

18 (1) such plan or contract shall be treated as

19 being operated in accordance with the terms of the

20 plan during the period described in subsection

21 (b)(2)(A), and

22 (2) except as provided by the Secretary of the

23 Treasury, such plan shall not fail to meet the re24 quirements of section 411(d)(6) of the Internal Rev25 enue Code of 1986 and section 204(g) of the Em-
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1 ployee Retirement Income Security Act of 1974 by

2 reason of such amendment.

3 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

4 (1) IN GENERAL.—This section shall apply to

5 any amendment to any plan or annuity contract

6 which is made—

7 (A) pursuant to any amendment made by

8 this Act or the Economic Growth and Tax Re9 lief Reconciliation Act of 2001, or pursuant to

10 any regulation issued by the Secretary of the

11 Treasury or the Secretary of Labor under such

12 Acts, and

13 (B) on or before the last day of the first

14 plan year beginning on or after January 1,

15 2007, or such later date as the Secretary of the

16 Treasury may prescribe.

17 In the case of a governmental plan (as defined in

18 section 414(d) of the Internal Revenue Code of

19 1986), subparagraph (B) shall be applied by sub20 stituting the date which is 2 years after the date

21 otherwise applied under subparagraph (B).

22 (2) CONDITIONS.—This section shall not apply

23 to any amendment unless—

24 (A) during the period—
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1 (i) beginning on the date the legisla2 tive or regulatory amendment described in

3 paragraph (1)(A) takes effect (or in the

4 case of a plan or contract amendment not

5 required by such legislative or regulatory

6 amendment, the effective date specified by

7 the plan), and

8 (ii) ending on the date described in

9 paragraph (1)(B) (or, if earlier, the date

10 the plan or contract amendment is adopt11 ed),

12 the plan or contract is operated as if such plan

13 or contract amendment were in effect; and

14 (B) such plan or contract amendment ap15 plies retroactively for such period.

16 SEC. 1302. AUTHORITY TO THE SECRETARY OF LABOR, SEC17 RETARY OF THE TREASURY, AND THE PEN18 SION BENEFIT GUARANTY CORPORATION TO

19 POSTPONE CERTAIN DEADLINES.

20 The Secretary of Labor, the Secretary of the Treas21 ury, and the Executive Director of the Pension Benefit

22 Guaranty Corporation shall exercise their authority under

23 section 518 of the Employee Retirement Income Security

24 Act of 1974 (29 U.S.C. 1148) and section 7508A of the

25 Internal Revenue Code of 1986 to postpone certain dead-
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1 lines by reason of the Presidentially declared disaster

2 areas in Louisiana, Mississippi, Alabama, Texas, Florida,

3 or elsewhere, due to the effect of Hurricane Katrina, Rita,

4 or Wilma. The Secretaries and the Executive Director of

5 the Corporation shall issue guidance as soon as is prac6 ticable to plan sponsors and participants regarding exten7 sion of deadlines and rules applicable to these extraor8 dinary circumstances. Nothing in this section shall be con9 strued to relieve any plan sponsor from any requirement

10 to pay benefits or make contributions under the plan of

11 the sponsor.

12 Subtitle B—Governmental Pension

13 Plan Equalization

14 SEC. 1311. DEFINITION OF GOVERNMENTAL PLAN.

15 (a) AMENDMENT TO INTERNAL REVENUE CODE OF

16 1986.—Section 414(d) of the Internal Revenue Code of

17 1986 (definition of governmental plan) is amended by add18 ing at the end the following: ‘‘The term ‘governmental

19 plan’ includes a plan established or maintained for its em20 ployees by an Indian tribal government (as defined in sec21 tion 7701(a)(40)), a subdivision of an Indian tribal gov22 ernment (determined in accordance with section 7871(d)),

23 an agency instrumentality (or subdivision) of an Indian

24 tribal government, or an entity established under Federal,
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1 State, or tribal law which is wholly owned or controlled

2 by any of the foregoing.’’.

3 (b) AMENDMENT TO EMPLOYEE RETIREMENT IN4 COME SECURITY ACT OF 1974.—Section 3(32) of the Em5 ployee Retirement Income Security Act of 1974 (29

6 U.S.C. 1002(32)) is amended by adding at the end the

7 following: ‘‘The term ‘governmental plan’ includes a plan

8 established or maintained for its employees by an Indian

9 tribal government (as defined in section 7701(a)(40)), a

10 subdivision of an Indian tribal government (determined in

11 accordance with section 7871(d)), an agency instrumen12 tality (or subdivision) of an Indian tribal government, or

13 an entity established under Federal, State, or tribal law

14 that is wholly owned or controlled by any of the fore15 going.’’.

16 SEC. 1312. EXTENSION TO ALL GOVERNMENTAL PLANS OF

17 CURRENT MORATORIUM ON APPLICATION OF

18 CERTAIN NONDISCRIMINATION RULES APPLI19 CABLE TO STATE AND LOCAL PLANS.

20 (a) IN GENERAL.—

21 (1) Subparagraph (G) of section 401(a)(5) and

22 subparagraph (G) of section 401(a)(26) of the Inter23 nal Revenue Code of 1986 are each amended by

24 striking ‘‘section 414(d))’’ and all that follows and

25 inserting ‘‘section 414(d)).’’.
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1 (2) Subparagraph (G) of section 401(k)(3) of

2 such Code and paragraph (2) of section 1505(d) of

3 the Taxpayer Relief Act of 1997 (Public Law 105–

4 34; 111 Stat. 1063) are each amended by striking

5 ‘‘maintained by a State or local government or polit6 ical subdivision thereof (or agency or instrumentality

7 thereof)’’.

8 (b) CONFORMING AMENDMENTS.—

9 (1) The heading of subparagraph (G) of section

10 401(a)(5) of the Internal Revenue Code of 1986 is

11 amended by striking ‘‘STATE AND LOCAL GOVERN12 MENTAL’’ and inserting ‘‘GOVERNMENTAL’’.

13 (2) The heading of subparagraph (G) of section

14 401(a)(26) of such Code is amended by striking

15 ‘‘EXCEPTION FOR STATE AND LOCAL’’ and inserting

16 ‘‘EXCEPTION FOR’’.

17 (3) Section 401(k)(3)(G) of such Code is

18 amended by inserting ‘‘GOVERNMENTAL PLAN.—’’

19 after ‘‘(G)’’.
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1 SEC. 1313. CLARIFICATION THAT TRIBAL GOVERNMENTS

2 ARE SUBJECT TO THE SAME DEFINED BEN3 EFIT PLAN RULES AND REGULATIONS AP4 PLIED TO STATE AND OTHER LOCAL GOV5 ERNMENTS, THEIR POLICE AND FIRE6 FIGHTERS.

7 (a) AMENDMENTS TO INTERNAL REVENUE CODE OF

8 1986.—

9 (1) POLICE AND FIREFIGHTERS.—Subpara10 graph (H) section 415(b)(2) of the Internal Revenue

11 Code of 1986 (defining participant) is amended—

12 (A) in clause (i), by striking ‘‘State or po13 litical subdivision’’ and inserting ‘‘State, Indian

14 tribal government (as defined in section

15 7701(a)(40)), or any political subdivision’’; and

16 (B) in clause (ii)(I), by striking ‘‘State or

17 political subdivision’’ each place it appears and

18 inserting ‘‘State, Indian tribal government (as

19 so defined), or any political subdivision’’.

20 (2) STATE AND LOCAL GOVERNMENT PLANS.—

21 (A) IN GENERAL.—Subparagraph (A) of

22 section 415(b)(10) of such Code (relating to

23 limitation to equal accrued benefit) is

24 amended—
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1 (i) by inserting ‘‘, Indian tribal gov2 ernment (as defined in section

3 7701(a)(40)),’’ after ‘‘State’’;

4 (ii) by inserting ‘‘any’’ before ‘‘polit5 ical subdivision’’; and

6 (iii) by inserting ‘‘any of’’ before ‘‘the

7 foregoing’’.

8 (B) CONFORMING AMENDMENT.—The

9 heading of paragraph (1) of section 415(b) of

10 such Code is amended by striking ‘‘SPECIAL

11 RULE FOR STATE AND’’ and inserting ‘‘SPECIAL

12 RULE FOR STATE, INDIAN TRIBAL, AND’’.

13 (3) GOVERNMENT PICK UP CONTRIBUTIONS.—

14 Paragraph (2) of section 414(h) of such Code (relat15 ing to designation by units of government) is amend16 ed by striking ‘‘State or political subdivision’’ and

17 inserting ‘‘State, Indian tribal government (as de18 fined in section 7701(a)(40)), or any political sub19 division’’.

20 (b) AMENDMENTS TO EMPLOYEE RETIREMENT IN21 COME SECURITY ACT OF 1974.—Section 4021(b) of the

22 Employee Retirement Income Security Act of 1974 (29

23 U.S.C. 1321(b)) is amended—

24 (1) in paragraph (12), by striking ‘‘or’’ at the

25 end;
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1 (2) in paragraph (13), by striking ‘‘plan.’’ and

2 inserting ‘‘plan; or’’; and

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

4 ‘‘(14) established and maintained for its em5 ployees by an Indian tribal government (as defined

6 in section 7701(a)(40) of the Internal Revenue Code

7 of 1986), a subdivision of an Indian tribal govern8 ment (determined in accordance with section

9 7871(d) of such Code), an agency or instrumentality

10 of an Indian tribal government or subdivision there11 of, or an entity established under Federal, State, or

12 tribal law that is wholly owned or controlled by any

13 of the foregoing.’’.

14 SEC. 1314. EFFECTIVE DATE.

15 The amendments made by this subtitle shall apply to

16 any year beginning before, on, or after the date of the

17 enactment of this Act.

18 Subtitle C—Miscellaneous

19 Provisions

20 SEC. 1321. TRANSFER OF EXCESS FUNDS FROM BLACK

21 LUNG DISABILITY TRUSTS TO UNITED MINE

22 WORKERS OF AMERICA COMBINED BENEFIT

23 FUND.

24 (a) IN GENERAL.—So much of section 501(c)(21)(C)

25 of the Internal Revenue Code of 1986 (relating to black
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1 lung disability trusts) as precedes the last sentence is

2 amended to read as follows:

3 ‘‘(C) Payments described in subparagraph

4 (A)(i)(IV) may be made from such trust during

5 a taxable year only to the extent that the aggre6 gate amount of such payments during such tax7 able year does not exceed the excess (if any), as

8 of the close of the preceding taxable year, of—

9 ‘‘(i) the fair market value of the as10 sets of the trust, over

11 ‘‘(ii) 110 percent of the present value

12 of the liability described in subparagraph

13 (A)(i)(I) of such person.’’

14 (b) TRANSFER.—Section 9705 of such Code (relating

15 to transfer) is amended by adding at the end the following

16 new subsection:

17 ‘‘(c) TRANSFER FROM BLACK LUNG DISABILITY

18 TRUSTS.—

19 ‘‘(1) IN GENERAL.—The Secretary shall trans20 fer each fiscal year to the Fund from the general

21 fund of the Treasury an amount which the Secretary

22 estimates to be the additional amounts received in

23 the Treasury for that fiscal year by reason of the

24 amendment made by section 1321(a) of the Pension

25 Security and Transparency Act of 2005. The Sec-
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1 retary shall adjust the amount transferred for any

2 year to the extent necessary to correct errors in any

3 estimate for any prior year.

4 ‘‘(2) USE OF FUNDS.—Any amount transferred

5 to the Combined Fund under paragraph (1) shall be

6 used to proportionately reduce the unassigned bene7 ficiary premium under section 9704(a)(3) of each

8 assigned operator for any plan year beginning after

9 December 31, 2002.’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years beginning after

12 December 31, 2002.

13 SEC. 1322. TREATMENT OF DEATH BENEFITS FROM COR14 PORATE-OWNED LIFE INSURANCE.

15 (a) IN GENERAL.—Section 101 of the Internal Rev16 enue Code of 1986 (relating to certain death benefits) is

17 amended by adding at the end the following new sub18 section:

19 ‘‘(j) TREATMENT OF CERTAIN EMPLOYER-OWNED

20 LIFE INSURANCE CONTRACTS.—

21 ‘‘(1) GENERAL RULE.—In the case of an em22 ployer-owned life insurance contract, the amount ex23 cluded from gross income of an applicable policy24 holder by reason of paragraph (1) of subsection (a)

25 shall not exceed an amount equal to the sum of the
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1 premiums and other amounts paid by the policy2 holder for the contract.

3 ‘‘(2) EXCEPTIONS.—In the case of an employer4 owned life insurance contract with respect to which

5 the notice and consent requirements of paragraph

6 (4) are met, paragraph (1) shall not apply to any of

7 the following:

8 ‘‘(A) EXCEPTIONS BASED ON INSURED’S

9 STATUS.—Any amount received by reason of

10 the death of an insured who, with respect to an

11 applicable policyholder—

12 ‘‘(i) was an employee at any time dur13 ing the 12-month period before the in14 sured’s death, or

15 ‘‘(ii) is, at the time the contract is

16 issued—

17 ‘‘(I) a director,

18 ‘‘(II) a highly compensated em19 ployee within the meaning of section

20 414(q) (without regard to paragraph

21 (1)(B)(ii) thereof), or

22 ‘‘(III) a highly compensated indi23 vidual within the meaning of section

24 105(h)(5), except that ‘35 percent’
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1 shall be substituted for ‘25 percent’ in

2 subparagraph (C) thereof.

3 ‘‘(B) EXCEPTION FOR AMOUNTS PAID TO

4 INSURED’S HEIRS.—Any amount received by

5 reason of the death of an insured to the

6 extent—

7 ‘‘(i) the amount is paid to a member

8 of the family (within the meaning of sec9 tion 267(c)(4)) of the insured, any indi10 vidual who is the designated beneficiary of

11 the insured under the contract (other than

12 the applicable policyholder), a trust estab13 lished for the benefit of any such member

14 of the family or designated beneficiary, or

15 the estate of the insured, or

16 ‘‘(ii) the amount is used to purchase

17 an equity (or capital or profits) interest in

18 the applicable policyholder from any person

19 described in clause (i).

20 ‘‘(3) EMPLOYER-OWNED LIFE INSURANCE CON21 TRACT.—

22 ‘‘(A) IN GENERAL.—For purposes of this

23 subsection, the term ‘employer-owned life insur24 ance contract’ means a life insurance contract

25 which—
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1 ‘‘(i) is owned by a person engaged in

2 a trade or business and under which such

3 person (or a related person described in

4 subparagraph (B)(ii)) is directly or indi5 rectly a beneficiary under the contract, and

6 ‘‘(ii) covers the life of an insured who

7 is an employee with respect to the trade or

8 business of the applicable policyholder on

9 the date the contract is issued.

10 For purposes of the preceding sentence, if cov11 erage for each insured under a master contract

12 is treated as a separate contract for purposes of

13 sections 817(h), 7702, and 7702A, coverage for

14 each such insured shall be treated as a separate

15 contract.

16 ‘‘(B) APPLICABLE POLICYHOLDER.—For

17 purposes of this subsection—

18 ‘‘(i) IN GENERAL.—The term ‘applica19 ble policyholder’ means, with respect to

20 any employer-owned life insurance con21 tract, the person described in subpara22 graph (A)(i) which owns the contract.

23 ‘‘(ii) RELATED PERSONS.—The term

24 ‘applicable policyholder’ includes any per25 son which—
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1 ‘‘(I) bears a relationship to the

2 person described in clause (i) which is

3 specified in section 267(b) or

4 707(b)(1), or

5 ‘‘(II) is engaged in trades or

6 businesses with such person which are

7 under common control (within the

8 meaning of subsection (a) or (b) of

9 section 52).

10 ‘‘(4) NOTICE AND CONSENT REQUIREMENTS.—

11 The notice and consent requirements of this para12 graph are met if, before the issuance of the contract,

13 the employee—

14 ‘‘(A) is notified in writing that the applica15 ble policyholder intends to insure the employee’s

16 life and the maximum face amount for which

17 the employee could be insured at the time the

18 contract was issued,

19 ‘‘(B) provides written consent to being in20 sured under the contract and that such cov21 erage may continue after the insured terminates

22 employment, and

23 ‘‘(C) is informed in writing that an appli24 cable policyholder will be a beneficiary of any
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1 proceeds payable upon the death of the em2 ployee.

3 ‘‘(5) DEFINITIONS.—For purposes of this

4 subsection—

5 ‘‘(A) EMPLOYEE.—The term ‘employee’ in6 cludes an officer, director, and highly com7 pensated employee (within the meaning of sec8 tion 414(q)).

9 ‘‘(B) INSURED.—The term ‘insured’

10 means, with respect to an employer-owned life

11 insurance contract, an individual covered by the

12 contract who is a United States citizen or resi13 dent. In the case of a contract covering the

14 joint lives of 2 individuals, references to an in15 sured include both of the individuals.’’.

16 (b) REPORTING REQUIREMENTS.—Subpart A of part

17 III of subchapter A of chapter 61 of the Internal Revenue

18 Code of 1986 (relating to information concerning persons

19 subject to special provisions) is amended by inserting after

20 section 6039H the following new section:

21 ‘‘SEC. 6039I. RETURNS AND RECORDS WITH RESPECT TO

22 EMPLOYER-OWNED LIFE INSURANCE CON23 TRACTS.

24 ‘‘(a) IN GENERAL.—Every applicable policyholder

25 owning 1 or more employer-owned life insurance contracts
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1 issued after the date of the enactment of this section shall

2 file a return (at such time and in such manner as the

3 Secretary shall by regulations prescribe) showing for each

4 year such contracts are owned—

5 ‘‘(1) the number of employees of the applicable

6 policyholder at the end of the year,

7 ‘‘(2) the number of such employees insured

8 under such contracts at the end of the year,

9 ‘‘(3) the total amount of insurance in force at

10 the end of the year under such contracts,

11 ‘‘(4) the name, address, and taxpayer identifica12 tion number of the applicable policyholder and the

13 type of business in which the policyholder is en14 gaged, and

15 ‘‘(5) that the applicable policyholder has a valid

16 consent for each insured employee (or, if all such

17 consents are not obtained, the number of insured

18 employees for whom such consent was not obtained).

19 ‘‘(b) RECORDKEEPING REQUIREMENT.—Each appli20 cable policyholder owning 1 or more employer-owned life

21 insurance contracts during any year shall keep such

22 records as may be necessary for purposes of determining

23 whether the requirements of this section and section

24 101(j) are met.
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1 ‘‘(c) DEFINITIONS.—Any term used in this section

2 which is used in section 101(j) shall have the same mean3 ing given such term by section 101(j).’’.

4 (c) CONFORMING AMENDMENTS.—

5 (1) Paragraph (1) of section 101(a) of the In6 ternal Revenue Code of 1986 is amended by striking

7 ‘‘and subsection (f)’’ and inserting ‘‘subsection (f),

8 and subsection (j)’’.

9 (2) The table of sections for subpart A of part

10 III of subchapter A of chapter 61 of such Code is

11 amended by inserting after the item relating to sec12 tion 6039H the following new item:

‘‘Sec. 6039I. Returns and records with respect to employer-owned life insurance

contracts.’’.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to life insurance contracts issued

15 after the date of the enactment of this Act, except for a

16 contract issued after such date pursuant to an exchange

17 described in section 1035 of the Internal Revenue Code

18 of 1986 for a contract issued on or prior to that date.

19 For purposes of the preceding sentence, any material in20 crease in the death benefit or other material change shall

21 cause the contract to be treated as a new contract except

22 that, in the case of a master contract (within the meaning

23 of section 264(f)(4)(E) of such Code), the addition of cov-
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1 ered lives shall be treated as a new contract only with re2 spect to such additional covered lives.

3 Subtitle D—Other Related Pension

4 Provisions

5 PART I—HEALTH AND MEDICAL BENEFITS

6 SEC. 1331. USE OF EXCESS PENSION ASSETS FOR FUTURE

7 RETIREE HEALTH BENEFITS.

8 (a) IN GENERAL.—Section 420 of the Internal Rev9 enue Code of 1986 (relating to transfers of excess pension

10 assets to retiree health accounts), as amended by this Act,

11 is amended by adding at the end the following new sub12 section:

13 ‘‘(f) QUALIFIED TRANSFER TO COVER FUTURE RE14 TIREE HEALTH COSTS.—

15 ‘‘(1) IN GENERAL.—An employer maintaining a

16 defined benefit plan (other than a multiemployer

17 plan) may elect for any taxable year to have the plan

18 make a qualified future transfer rather than a quali19 fied transfer for the taxable year. Except as pro20 vided in this subsection, a qualified future transfer

21 shall be treated for purposes of this title and the

22 Employee Retirement Income Security Act of 1974

23 as if it were a qualified transfer.

24 ‘‘(2) QUALIFIED FUTURE TRANSFER.—For pur25 poses of this subsection—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 future transfer’ means a transfer which meets

3 all of the requirements for a qualified transfer,

4 except that—

5 ‘‘(i) the determination of excess pen6 sion assets shall be made under subpara7 graph (B),

8 ‘‘(ii) the limitation on the amount

9 transferred shall be made under subpara10 graph (C), and

11 ‘‘(iii) the minimum cost requirements

12 of subsection (c)(3) shall be modified as

13 provided under subparagraph (D).

14 ‘‘(B) EXCESS PENSION ASSETS.—

15 ‘‘(i) IN GENERAL.—In determining ex16 cess pension assets for purposes of this

17 subsection, subsection (e)(2) shall be ap18 plied by substituting ‘115 percent’ for ‘125

19 percent’.

20 ‘‘(ii) REQUIREMENT TO MAINTAIN

21 FUNDED STATUS.—If, as of any valuation

22 date of any plan year in the transfer pe23 riod, the amount determined under sub24 section (e)(2)(B) (after application of
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1 clause (i)) exceeds the amount determined

2 under subsection (e)(2)(A), either—

3 ‘‘(I) the employer maintaining

4 the plan shall make contributions to

5 the plan in an amount not less than

6 the amount required to reduce such

7 excess to zero as of such date, or

8 ‘‘(II) there is transferred from

9 the health benefits account to the plan

10 an amount not less than the amount

11 required to reduce such excess to zero

12 as of such date.

13 ‘‘(C) LIMITATION ON AMOUNT TRANS14 FERRED.—Notwithstanding subsection (b)(3),

15 the amount of the excess pension assets which

16 may be transferred in a qualified future trans17 fer shall be equal to the sum of—

18 ‘‘(i) if the transfer period includes the

19 taxable year of the transfer, the amount

20 determined under subsection (b)(3) for

21 such taxable year, plus

22 ‘‘(ii) in the case of all other taxable

23 years in the transfer period, the sum of the

24 qualified current retiree health liabilities

25 which the plan reasonably estimates, in ac-
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1 cordance with guidance issued by the Sec2 retary, will be incurred for each of such

3 years.

4 ‘‘(D) MINIMUM COST REQUIREMENTS.—

5 ‘‘(i) IN GENERAL.—The requirements

6 of subsection (c)(3) shall be treated as met

7 if each group health plan or arrangement

8 under which applicable health benefits are

9 provided provides applicable health benefits

10 during the period beginning with the first

11 year of the transfer period and ending with

12 the last day of the 4th year following the

13 transfer period such that the annual aver14 age amount of such benefits provided dur15 ing such period is not less than the appli16 cable employer cost determined under sub17 section (c)(3)(A) with respect to the trans18 fer.

19 ‘‘(ii) ELECTION TO MAINTAIN BENE20 FITS.—An employer may elect, in lieu of

21 the requirements of clause (i), to meet the

22 requirements of subsection (c)(3) by meet23 ing the requirements of such subsection (as

24 in effect before the amendments made by

25 section 535 of the Tax Relief Extension
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1 Act of 1999) for each of the years de2 scribed in the period under clause (i).

3 ‘‘(3) COORDINATION WITH OTHER TRANS4 FERS.—In applying subsection (b)(3) to any subse5 quent transfer during a taxable year in a transfer

6 period, qualified current retiree health liabilities

7 shall be reduced by any such liabilities taken into ac8 count with respect to the qualified future transfer to

9 which such period relates.

10 ‘‘(4) TRANSFER PERIOD.—For purposes of this

11 subsection, the term ‘transfer period’ means, with

12 respect to any transfer, a period of consecutive tax13 able years specified in the election under paragraph

14 (1) which begins and ends during the 10-taxable15 year period beginning with the taxable year of the

16 transfer.’’.

17 (b) EFFECTIVE DATE.—The amendments made by

18 this section shall apply to transfers after the date of the

19 enactment of this Act.

20 SEC. 1332. SPECIAL RULES FOR FUNDING OF COLLEC21 TIVELY BARGAINED RETIREE HEALTH BENE22 FITS.

23 (a) COLLECTIVELY BARGAINED TRANSFER TREATED

24 ASA QUALIFIED TRANSFER.—
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1 (1) IN GENERAL.—Section 420(b) of the Inter2 nal Revenue Code of 1986 (defining qualified trans3 fer) is amended by redesignating paragraph (5) as

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

5 the following new paragraph:

6 ‘‘(5) A collectively bargained transfer (as de7 fined in subsection (e)(5)) shall be treated as a

8 qualified transfer.’’.

9 (2) CONFORMING AMENDMENTS.—

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

11 of such Code is amended by inserting ‘‘or a col12 lectively bargained transfer’’ after ‘‘paragraph

13 (4)’’.

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

15 such Code is amended to read as follows:

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

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

18 pension assets which may be transferred in a

19 qualified transfer (other than a collectively bar20 gained transfer) shall not exceed the amount

21 which is reasonably estimated to be the amount

22 the employer maintaining the plan will pay

23 (whether directly or through reimbursement)

24 out of such account during the taxable year of
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1 the transfer for qualified current retiree health

2 liabilities.

3 ‘‘(B) EXCEPTION FOR COLLECTIVELY BAR4 GAINED TRANSFERS.—The amount of excess

5 pension assets which may be transferred in a

6 collectively bargained transfer shall not exceed

7 the amount which is reasonably estimated, in

8 accordance with the provisions of the collective

9 bargaining agreement and generally accepted

10 accounting principles, to be the amount the em11 ployer maintaining the plan will pay (whether

12 directly or through reimbursement) out of such

13 account during the collectively bargained cost

14 maintenance period for collectively bargained

15 retiree health liabilities.’’.

16 (b) REQUIREMENTS OF PLANS MAKING COLLEC17 TIVELY BARGAINED TRANSFERS.—

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

19 420(c) of the Internal Revenue Code of 1986 (relat20 ing to requirements of plan transferring assets) is

21 amended to read as follows:

22 ‘‘(1) USE OF TRANSFERRED ASSETS.—

23 ‘‘(A) IN GENERAL.—Except in the case of

24 a collectively bargained transfer, any assets

25 transferred to a health benefits account in a
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1 qualified transfer (and any income allocable

2 thereto) shall be used only to pay qualified cur3 rent retiree health liabilities (other than liabil4 ities of key employees not taken into account

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

6 of the transfer (whether directly or through re7 imbursement).

8 ‘‘(B) COLLECTIVELY BARGAINED TRANS9 FER.—Any assets transferred to a health bene10 fits account in a collectively bargained transfer

11 (and any income allocable thereto) shall be used

12 only to pay collectively bargained retiree health

13 liabilities (other than liabilities of key employees

14 not taken into account under subsection

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

16 or for any subsequent taxable year during the

17 collectively bargained cost maintenance period

18 (whether directly or through reimbursement).

19 ‘‘(C) AMOUNTS NOT USED TO PAY FOR

20 HEALTH BENEFITS.—

21 ‘‘(i) IN GENERAL.—Any assets trans22 ferred to a health benefits account in a

23 qualified transfer (and any income allo24 cable thereto) which are not used as pro25 vided in subparagraph (A) (in the case of
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1 a qualified transfer other than a collec2 tively bargained transfer) or cannot be

3 used as provided in subparagraph (B) (in

4 the case of a collectively bargained trans5 fer) shall be transferred out of the account

6 to the transferor plan.

7 ‘‘(ii) TAX TREATMENT OF

8 AMOUNTS.—Any amount transferred out of

9 an account under clause (i)—

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

11 gross income of the employer, but

12 ‘‘(II) shall be treated as an em13 ployer reversion for purposes of sec14 tion 4980 (without regard to sub15 section (d) thereof).

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

17 this section, any amount paid out of a health

18 benefits account shall be treated as paid first

19 out of the assets and income described in sub20 paragraph (A) (in the case of a qualified trans21 fer other than a collectively bargained transfer)

22 or subparagraph (B) (in the case of a collec23 tively bargained transfer).’’.

24 (2) CONFORMING AMENDMENTS.—
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1 (A) Subparagraph (A) of section 420(c)(3)

2 of such Code is amended to read as follows:

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

4 this paragraph are met if—

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

6 each group health plan or arrangement

7 under which applicable health benefits are

8 provided provides that the applicable em9 ployer cost for each taxable year during

10 the cost maintenance period shall not be

11 less than the higher of the applicable em12 ployer costs for each of the 2 taxable years

13 immediately preceding the taxable year of

14 the qualified transfer, and

15 ‘‘(ii) in the case of a collectively bar16 gained transfer, each collectively bargained

17 group health plan under which collectively

18 bargained health benefits are provided pro19 vides that the collectively bargained em20 ployer cost for each taxable year during

21 the collectively bargained cost maintenance

22 period shall not be less than the amount

23 specified by the collective bargaining agree24 ment.’’.
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1 (B) Section 420(c)(3) of such Code is

2 amended by redesignating subparagraphs (C),

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

4 (F), respectively, and by inserting after sub5 paragraph (B) the following new subparagraph:

6 ‘‘(C) COLLECTIVELY BARGAINED EM7 PLOYER COST.—For purposes of this para8 graph, the term ‘collectively bargained employer

9 cost’ means the average cost per covered indi10 vidual of providing collectively bargained retiree

11 health benefits as determined in accordance

12 with the applicable collective bargaining agree13 ment. Such agreement may provide for an ap14 propriate reduction in the collectively bargained

15 employer cost to take into account any portion

16 of the collectively bargained retiree health bene17 fits that is provided or financed by a govern18 ment program or other source.’’.

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

20 of such Code (as redesignated by subparagraph

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

22 ‘‘(E) MAINTENANCE PERIOD.—For pur23 poses of this paragraph—

24 ‘‘(i) COST MAINTENANCE PERIOD.—

25 The term ‘cost maintenance period’ means
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1 the period of 5 taxable years beginning

2 with the taxable year in which the qualified

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

4 more overlapping cost maintenance peri5 ods, this paragraph shall be applied by

6 taking into account the highest applicable

7 employer cost required to be provided

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

9 year.

10 ‘‘(ii) COLLECTIVELY BARGAINED COST

11 MAINTENANCE PERIOD.—The term ‘collec12 tively bargained cost maintenance period’

13 means, with respect to each covered retiree

14 and his covered spouse and dependents,

15 the shorter of—

16 ‘‘(I) the remaining lifetime of

17 such covered retiree and his covered

18 spouse and dependents, or

19 ‘‘(II) the period of coverage pro20 vided by the collectively bargained

21 health plan (determined as of the date

22 of the collectively bargained transfer)

23 with respect to such covered retiree

24 and his covered spouse and depend25 ents.’’.
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1 (c) LIMITATIONS ON EMPLOYER.—Subsection (d) of

2 section 420 of the Internal Revenue Code of 1986 is

3 amended to read as follows:

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

5 this title—

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

7 shall be allowed—

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

9 health benefits account in a qualified transfer

10 (or any retransfer to the plan under subsection

11 (c)(1)(C)),

12 ‘‘(B) for qualified current retiree health li13 abilities or collectively bargained retiree health

14 liabilities paid out of the assets (and income)

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

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

17 bargained transfer, for any amounts to which

18 subparagraph (B) does not apply and which are

19 paid for qualified current retiree health liabil20 ities for the taxable year to the extent such

21 amounts are not greater than the excess (if

22 any) of—

23 ‘‘(i) the amount determined under

24 subparagraph (A) (and income allocable

25 thereto), over
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1 ‘‘(ii) the amount determined under

2 subparagraph (B).

3 ‘‘(2) OTHER LIMITATIONS.—

4 ‘‘(A) NO CONTRIBUTIONS ALLOWED.—Ex5 cept as provided in subparagraph (B), an em6 ployer may not contribute after December 31,

7 1990, any amount to a health benefits account

8 or welfare benefit fund (as defined in section

9 419(e)(1)) with respect to qualified current re10 tiree health liabilities for which transferred as11 sets are required to be used under subsection

12 (c)(1)(A).

13 ‘‘(B) EXCEPTION.—An employer may con14 tribute an amount to a health benefits account

15 or welfare benefit fund (as defined in section

16 419(e)(1)) with respect to collectively bargained

17 retiree health liabilities for which transferred

18 assets are required to be used under subsection

19 (c)(1)(B), and the deductibility of any such con20 tribution shall be governed by the limits appli21 cable to the deductibility of contributions to a

22 welfare benefit fund under a collective bar23 gaining agreement (as determined under section

24 419A(f)(5)(A)) without regard to whether such

25 contributions are made to a health benefits ac-
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1 count or welfare benefit fund and without re2 gard to the provisions of section 404 or the

3 other provisions of this section. The Secretary

4 shall provide rules to ensure that the applica5 tion of this section does not result in a deduc6 tion being allowed more than once for the same

7 contribution or for 2 or more contributions or

8 expenditures relating to the same collectively

9 bargained retiree health liabilities.’’.

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

11 Revenue Code of 1986 (relating to definition and special

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

13 paragraphs:

14 ‘‘(5) COLLECTIVELY BARGAINED TRANSFER.—

15 The term ‘collectively bargained transfer’ means a

16 transfer—

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

18 benefits account which is part of such plan in

19 a taxable year beginning after December 31,

20 2005, and

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

22 provision of law,

23 ‘‘(C) with respect to which are met in con24 nection with the plan—
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1 ‘‘(i) the use requirements of sub2 section (c)(1),

3 ‘‘(ii) the vesting requirements of sub4 section (c)(2), and

5 ‘‘(iii) the minimum cost requirements

6 of subsection (c)(3),

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

8 collective bargaining agreement,

9 ‘‘(E) which, before the transfer, the em10 ployer designates, in a written notice delivered

11 to each employee organization that is a party to

12 the collective bargaining agreement, as a collec13 tively bargained transfer in accordance with

14 this section, and

15 ‘‘(F) which involves—

16 ‘‘(i) a plan maintained by an employer

17 which, in its taxable year ending in 2005,

18 provided health benefits or coverage to re19 tirees and their spouses and dependents

20 under all of the benefit plans maintained

21 by the employer, but only if the aggregate

22 cost (including administrative expenses) of

23 such benefits or coverage which would have

24 been allowable as a deduction to the em25 ployer (if such benefits or coverage had
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1 been provided directly by the employer and

2 the employer used the cash receipts and

3 disbursements method of accounting) is at

4 least 5 percent of the gross receipts of the

5 employer (determined in accordance with

6 the last sentence of subsection

7 (c)(2)(E)(ii)(II)) for such taxable year,

8 ‘‘(ii) or a plan maintained by a suc9 cessor to such employer.

10 Such term shall not include a transfer after De11 cember 31, 2013.

12 ‘‘(6) COLLECTIVELY BARGAINED RETIREE

13 HEALTH LIABILITIES.—

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

15 bargained retiree health liabilities’ means the

16 present value, as of the beginning of a taxable

17 year and determined in accordance with the ap18 plicable collective bargaining agreement, of all

19 collectively bargained health benefits (including

20 administrative expenses) for such taxable year

21 and all subsequent taxable years during the col22 lectively bargained cost maintenance period.

23 ‘‘(B) REDUCTION FOR AMOUNTS PRE24 VIOUSLY SET ASIDE.—The amount determined

25 under subparagraph (A) shall be reduced by the
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1 value (as of the close of the plan year preceding

2 the year of the collectively bargained transfer)

3 of the assets in all health benefits accounts or

4 welfare benefit funds (as defined in section

5 419(e)(1)) set aside to pay for the collectively

6 bargained retiree health liabilities.

7 ‘‘(C) KEY EMPLOYEES EXCLUDED.—If an

8 employee is a key employee (within the meaning

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

10 year ending in a taxable year, such employee

11 shall not be taken into account in computing

12 collectively bargained retiree health liabilities

13 for such taxable year or in calculating collec14 tively bargained employer cost under subsection

15 (c)(3)(C).

16 ‘‘(7) COLLECTIVELY BARGAINED HEALTH BEN17 EFITS.—The term ‘collectively bargained health ben18 efits’ means health benefits or coverage which are

19 provided to—

20 ‘‘(A) retired employees who, immediately

21 before the collectively bargained transfer, are

22 entitled to receive such benefits upon retirement

23 and who are entitled to pension benefits under

24 the plan, and their spouses and dependents,

25 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 AMENDMENT.—The last sentence

15 of section 401(h) of the Internal Revenue Code of 1986

16 is amended by inserting ‘‘(other than contributions with

17 respect to collectively bargained retiree health liabilities

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

19 benefits’’.

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

21 this section shall apply to years beginning after December

22 31, 2004.
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1 SEC. 1333. ALLOWANCE OF RESERVE FOR MEDICAL BENE2 FITS OF PLANS SPONSORED BY BONA FIDE

3 ASSOCIATIONS.

4 (a) IN GENERAL.—Section 419A(c) of the Internal

5 Revenue Code of 1986 (relating to account limit) is

6 amended by adding at the end the following new para7 graph:

8 ‘‘(6) ADDITIONAL RESERVE FOR MEDICAL BEN9 EFITS OF BONA FIDE ASSOCIATION PLANS.—

10 ‘‘(A) IN GENERAL.—An applicable account

11 limit for any taxable year may include a reserve

12 in an amount not to exceed 35 percent of the

13 sum of—

14 ‘‘(i) the qualified direct costs, and

15 ‘‘(ii) the change in claims incurred

16 but unpaid,

17 for such taxable year with respect to medical

18 benefits (other than post-retirement medical

19 benefits).

20 ‘‘(B) APPLICABLE ACCOUNT LIMIT.—For

21 purposes of this subsection, the term ‘applicable

22 account limit’ means an account limit for a

23 qualified asset account with respect to medical

24 benefits provided through a plan maintained by

25 a bona fide association (as defined in section
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1 2791(d)(3) of the Public Health Service Act

2 (42 U.S.C. 300gg–91(d)(3))’’.

3 (b) EFFECTIVE DATE.—The amendment made by

4 this section shall apply to taxable years ending after De5 cember 31, 2005.

6 PART II—CASH OR DEFERRED ARRANGEMENTS

7 SEC. 1336. TREATMENT OF ELIGIBLE COMBINED DEFINED

8 BENEFIT PLANS AND QUALIFIED CASH OR

9 DEFERRED ARRANGEMENTS.

10 (a) AMENDMENTS OF INTERNAL REVENUE CODE.—

11 Section 414 of the Internal Revenue Code of 1986, as

12 amended by this Act, is amended by adding at the end

13 the following new subsection:

14 ‘‘(x) SPECIAL RULES FOR ELIGIBLE COMBINED DE15 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE16 FERRED ARRANGEMENTS.—

17 ‘‘(1) GENERAL RULE.—Except as provided in

18 this subsection, the requirements of this title shall

19 be applied to any defined benefit plan or applicable

20 defined contribution plan which are part of an eligi21 ble combined plan in the same manner as if each

22 such plan were not a part of the eligible combined

23 plan.

24 ‘‘(2) ELIGIBLE COMBINED PLAN.—For pur25 poses of this subsection—
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1 ‘‘(A) IN GENERAL.—The term ‘eligible

2 combined plan’ means a plan—

3 ‘‘(i) which is maintained by an em4 ployer which, at the time the plan is estab5 lished, is a small employer,

6 ‘‘(ii) which consists of a defined ben7 efit plan and an applicable defined con8 tribution plan,

9 ‘‘(iii) the assets of which are held in

10 a single trust forming part of the plan and

11 are clearly identified and allocated to the

12 defined benefit plan and the applicable de13 fined contribution plan to the extent nec14 essary for the separate application of this

15 title under paragraph (1), and

16 ‘‘(iv) with respect to which the ben17 efit, contribution, vesting, and non18 discrimination requirements of subpara19 graphs (B), (C), (D), (E), and (F) are

20 met.

21 For purposes of this subparagraph, the term

22 ‘small employer’ has the meaning given such

23 term by section 4980D(d)(2), except that such

24 section shall be applied by substituting ‘500’ for

25 ‘50’ each place it appears.
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1 ‘‘(B) BENEFIT REQUIREMENTS.—

2 ‘‘(i) IN GENERAL.—The benefit re3 quirements of this subparagraph are met

4 with respect to the defined benefit plan

5 forming part of the eligible combined plan

6 if the accrued benefit of each participant

7 derived from employer contributions, when

8 expressed as an annual retirement benefit,

9 is not less than the applicable percentage

10 of the participant’s final average pay. For

11 purposes of this clause, final average pay

12 shall be determined using the period of

13 consecutive years (not exceeding 5) during

14 which the participant had the greatest ag15 gregate compensation from the employer.

16 ‘‘(ii) APPLICABLE PERCENTAGE.—For

17 purposes of clause (i), the applicable per18 centage is the lesser of—

19 ‘‘(I) 1 percent multiplied by the

20 number of years of service with the

21 employer, or

22 ‘‘(II) 20 percent.

23 ‘‘(iii) SPECIAL RULE FOR CASH BAL24 ANCE PLANS.—If the defined benefit plan

25 under clause (i) is a qualified cash balance
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1 plan (within the meaning of section

2 411(b)(5)), the plan shall be treated as

3 meeting the requirements of clause (i) with

4 respect to any plan year if each participant

5 receives pay credit for the year which is

6 not less than the percentage of compensa7 tion determined in accordance with the fol8 lowing table:

‘‘If the participant’s age as of the

beginning of the year is— The percentage is—

30 or less .................................................................................. 2

Over 30 but less than 40 ......................................................... 4

40 or over but less than 50 ..................................................... 6

50 or over ................................................................................. 8.

9 ‘‘(iv) YEARS OF SERVICE.—For pur10 poses of this subparagraph, years of serv11 ice shall be determined under the rules of

12 paragraphs (4), (5), and (6) of section

13 411(a), except that the plan may not dis14 regard any year of service because of a

15 participant making, or failing to make, any

16 elective deferral with respect to the quali17 fied cash or deferred arrangement to which

18 subparagraph (C) applies.

19 ‘‘(C) CONTRIBUTION REQUIREMENTS.—

20 ‘‘(i) IN GENERAL.—The contribution

21 requirements of this subparagraph with re22 spect to any applicable defined contribu-
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1 tion plan forming part of eligible combined

2 plan are met if—

3 ‘‘(I) the qualified cash or de4 ferred arrangement included in such

5 plan constitutes an automatic con6 tribution arrangement, and

7 ‘‘(II) the employer is required to

8 make matching contributions on be9 half of each employee eligible to par10 ticipate in the arrangement in an

11 amount equal to 50 percent of the

12 elective contributions of the employee

13 to the extent such elective contribu14 tions do not exceed 4 percent of com15 pensation.

16 Rules similar to the rules of clauses (ii)

17 and (iii) of section 401(k)(12)(B) shall

18 apply for purposes of this clause.

19 ‘‘(ii) NONELECTIVE CONTRIBU20 TIONS.—An applicable defined contribution

21 plan shall not be treated as failing to meet

22 the requirements of clause (i) because the

23 employer makes nonelective contributions

24 under the plan but such contributions shall

25 not be taken into account in determining
†

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1 whether the requirements of clause (i)(II)

2 are met.

3 ‘‘(D) VESTING REQUIREMENTS.—The vest4 ing requirements of this subparagraph are met

5 if—

6 ‘‘(i) in the case of a defined benefit

7 plan forming part of an eligible combined

8 plan an employee who has completed at

9 least 3 years of service has a nonforfeitable

10 right to 100 percent of the employee’s ac11 crued benefit under the plan derived from

12 employer contributions, and

13 ‘‘(ii) in the case of an applicable de14 fined contribution plan forming part of eli15 gible combined plan—

16 ‘‘(I) an employee has a non17 forfeitable right to any matching con18 tribution made under the qualified

19 cash or deferred arrangement included

20 in such plan by an employer with re21 spect to any elective contribution, in22 cluding matching contributions in ex23 cess of the contributions required

24 under subparagraph (C)(i)(II), and
†

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1 ‘‘(II) an employee who has com2 pleted at least 3 years of service has

3 a nonforfeitable right to 100 percent

4 of the employee’s accrued benefit de5 rived under the arrangement from

6 nonelective contributions of the em7 ployer.

8 For purposes of this subparagraph, the

9 rules of section 411 shall apply to the ex10 tent not inconsistent with this subpara11 graph.

12 ‘‘(E) UNIFORM PROVISION OF BENE13 FITS.—In the case of a defined benefit plan or

14 applicable defined contribution plan forming

15 part of an eligible combined plan, the require16 ments of this subparagraph are met if all bene17 fits under each such plan, and all rights and

18 features under each such plan, must be pro19 vided uniformly to all participants.

20 ‘‘(F) REQUIREMENTS MUST BE MET WITH21 OUT TAKING INTO ACCOUNT SOCIAL SECURITY

22 AND SIMILAR CONTRIBUTIONS AND BENEFITS

23 OR OTHER PLANS.—
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1 ‘‘(i) IN GENERAL.—The requirements

2 of this subparagraph are met if the re3 quirements of clauses (ii) and (iii) are met.

4 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

5 CONTRIBUTIONS.—The requirements of

6 this clause are met if—

7 ‘‘(I) the requirements of subpara8 graphs (B) and (C) are met without

9 regard to section 401(l), and

10 ‘‘(II) the requirements of sections

11 401(a)(4) and 410(b) are met with re12 spect to both the applicable defined

13 contribution plan and defined benefit

14 plan forming part of an eligible com15 bined plan without regard to section

16 401(l).

17 ‘‘(iii) OTHER PLANS AND ARRANGE18 MENTS.—The requirements of this clause

19 are met if the applicable defined contribu20 tion plan and defined benefit plan forming

21 part of an eligible combined plan meet the

22 requirements of sections 401(a)(4) and

23 410(b) without being combined with any

24 other plan.
†

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1 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

2 QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

3 ‘‘(A) IN GENERAL.—A qualified cash or

4 deferred arrangement which is included in an

5 applicable defined contribution plan forming

6 part of an eligible combined plan shall be treat7 ed as meeting the requirements of section

8 401(k)(3)(A)(ii) if the requirements of para9 graph (2)(C) are met with respect to such ar10 rangement.

11 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap12 plying section 401(m)(11) to any matching con13 tribution with respect to a contribution to which

14 paragraph (2)(C) applies, the contribution re15 quirement of paragraph (2)(C) and the notice

16 requirements of paragraph (5)(B) shall be sub17 stituted for the requirements otherwise applica18 ble under clauses (i) and (ii) of section

19 401(m)(11)(A).

20 ‘‘(4) SATISFACTION OF TOP-HEAVY RULES.—A

21 defined benefit plan and applicable defined contribu22 tion plan forming part of an eligible combined plan

23 for any plan year shall be treated as meeting the re24 quirements of section 416 for the plan year.
†

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1 ‘‘(5) AUTOMATIC CONTRIBUTION ARRANGE2 MENT.—For purposes of this subsection—

3 ‘‘(A) IN GENERAL.—A qualified cash or

4 deferred arrangement shall be treated as an

5 automatic contribution arrangement if the

6 arrangement—

7 ‘‘(i) provides that each employee eligi8 ble to participate in the arrangement is

9 treated as having elected to have the em10 ployer make elective contributions in an

11 amount equal to 4 percent of the employ12 ee’s compensation unless the employee spe13 cifically elects not to have such contribu14 tions made or to have such contributions

15 made at a different rate, and

16 ‘‘(ii) meets the notice requirements

17 under subparagraph (B).

18 ‘‘(B) NOTICE REQUIREMENTS.—

19 ‘‘(i) IN GENERAL.—The requirements

20 of this subparagraph are met if the re21 quirements of clauses (ii) and (iii) are met.

22 ‘‘(ii) REASONABLE PERIOD TO MAKE

23 ELECTION.—The requirements of this

24 clause are met if each employee to whom

25 subparagraph (A)(i) applies—
†

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1 ‘‘(I) receives a notice explaining

2 the employee’s right under the ar3 rangement to elect not to have elective

4 contributions made on the employee’s

5 behalf or to have the contributions

6 made at a different rate, and

7 ‘‘(II) has a reasonable period of

8 time after receipt of such notice and

9 before the first elective contribution is

10 made to make such election.

11 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

12 AND OBLIGATIONS.—The requirements of

13 this clause are met if each employee eligi14 ble to participate in the arrangement is,

15 within a reasonable period before any year,

16 given notice of the employee’s rights and

17 obligations under the arrangement.

18 The requirements of clauses (i) and (ii) of sec19 tion 401(k)(12)(D) shall be met with respect to

20 the notices described in clauses (ii) and (iii) of

21 this subparagraph.

22 ‘‘(6) COORDINATION WITH OTHER REQUIRE23 MENTS.—
†

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1 ‘‘(A) TREATMENT OF SEPARATE PLANS.—

2 Section 414(k) shall not apply to an eligible

3 combined plan.

4 ‘‘(B) REPORTING.—An eligible combined

5 plan shall be treated as a single plan for pur6 poses of sections 6058 and 6059.

7 ‘‘(7) APPLICABLE DEFINED CONTRIBUTION

8 PLAN.—For purposes of this subsection—

9 ‘‘(A) IN GENERAL.—The term ‘applicable

10 defined contribution plan’ means a defined con11 tribution plan which includes a qualified cash or

12 deferred arrangement.

13 ‘‘(B) QUALIFIED CASH OR DEFERRED AR14 RANGEMENT.—The term ‘qualified cash or de15 ferred arrangement’ has the meaning given

16 such term by section 401(k)(2).’’.

17 (b) AMENDMENTS OF ERISA.—

18 (1) IN GENERAL.—Section 210 of the Employee

19 Retirement Income Security Act of 1974 is amended

20 by adding at the end the following new subsection:

21 ‘‘(e) SPECIAL RULES FOR ELIGIBLE COMBINED DE22 FINED BENEFIT PLANS AND QUALIFIED CASH OR DE23 FERRED ARRANGEMENTS.—

24 ‘‘(1) GENERAL RULE.—Except as provided in

25 this subsection, this Act shall be applied to any de-
†

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1 fined benefit plan or applicable individual account

2 plan which are part of an eligible combined plan in

3 the same manner as if each such plan were not a

4 part of the eligible combined plan.

5 ‘‘(2) ELIGIBLE COMBINED PLAN.—For pur6 poses of this subsection—

7 ‘‘(A) IN GENERAL.—The term ‘eligible

8 combined plan’ means a plan—

9 ‘‘(i) which, at the time the plan is es10 tablished, is maintained by a small em11 ployer,

12 ‘‘(ii) which consists of a defined ben13 efit plan and an applicable individual ac14 count plan each of which qualifies under

15 section 401(a) of the Internal Revenue

16 Code of 1986,

17 ‘‘(iii) the assets of which are held in

18 a single trust forming part of the plan and

19 are clearly identified and allocated to the

20 defined benefit plan and the applicable in21 dividual account plan to the extent nec22 essary for the separate application of this

23 Act under paragraph (1), and

24 ‘‘(iv) with respect to which the ben25 efit, contribution, vesting, and non-
†

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S 1783 ES

1 discrimination requirements of subpara2 graphs (B), (C), (D), (E), and (F) are

3 met.

4 For purposes of this subparagraph, the term

5 ‘small employer’ has the meaning given such

6 term by section 4980D(d)(2), except that such

7 section shall be applied by substituting ‘500’ for

8 ‘50’ each place it appears.

9 ‘‘(B) BENEFIT REQUIREMENTS.—

10 ‘‘(i) IN GENERAL.—The benefit re11 quirements of this subparagraph are met

12 with respect to the defined benefit plan

13 forming part of the eligible combined plan

14 if the accrued benefit of each participant

15 derived from employer contributions, when

16 expressed as an annual retirement benefit,

17 is not less than the applicable percentage

18 of the participant’s final average pay. For

19 purposes of this clause, final average pay

20 shall be determined using the period of

21 consecutive years (not exceeding 5) during

22 which the participant had the greatest ag23 gregate compensation from the employer.
†

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1 ‘‘(ii) APPLICABLE PERCENTAGE.—For

2 purposes of clause (i), the applicable per3 centage is the lesser of—

4 ‘‘(I) 1 percent multiplied by the

5 number of years of service with the

6 employer, or

7 ‘‘(II) 20 percent.

8 ‘‘(iii) SPECIAL RULE FOR CASH BAL9 ANCE PLANS.—If the defined benefit plan

10 under clause (i) is a qualified cash balance

11 plan (within the meaning of section

12 204(b)(5)), the plan shall be treated as

13 meeting the requirements of clause (i) with

14 respect to any plan year if each participant

15 receives pay credit for the year which is

16 not less than the percentage of compensa17 tion determined in accordance with the fol18 lowing table:

‘‘If the participant’s age as of the

beginning of the year is— The percentage is—

30 or less .................................................................................. 2

Over 30 but less than 40 ......................................................... 4

40 or over but less than 50 ..................................................... 6

50 or over ................................................................................. 8.

19 ‘‘(iv) YEARS OF SERVICE.—For pur20 poses of this subparagraph, years of serv21 ice shall be determined under the rules of

22 paragraphs (1), (2), and (3) of section
†

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S 1783 ES

1 203(b), except that the plan may not dis2 regard any year of service because of a

3 participant making, or failing to make, any

4 elective deferral with respect to the quali5 fied cash or deferred arrangement to which

6 subparagraph (C) applies.

7 ‘‘(C) CONTRIBUTION REQUIREMENTS.—

8 ‘‘(i) IN GENERAL.—The contribution

9 requirements of this subparagraph with re10 spect to any applicable individual account

11 plan forming part of eligible combined plan

12 are met if—

13 ‘‘(I) the qualified cash or de14 ferred arrangement included in such

15 plan constitutes an automatic con16 tribution arrangement, and

17 ‘‘(II) the employer is required to

18 make matching contributions on be19 half of each employee eligible to par20 ticipate in the arrangement in an

21 amount equal to 50 percent of the

22 elective contributions of the employee

23 to the extent such elective contribu24 tions do not exceed 4 percent of com25 pensation.
†

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1 Rules similar to the rules of clauses (ii)

2 and (iii) of section 401(k)(12)(B) of the

3 Internal Revenue Code of 1986 shall apply

4 for purposes of this clause.

5 ‘‘(ii) NONELECTIVE CONTRIBU6 TIONS.—An applicable individual account

7 plan shall not be treated as failing to meet

8 the requirements of clause (i) because the

9 employer makes nonelective contributions

10 under the plan but such contributions shall

11 not be taken into account in determining

12 whether the requirements of clause (i)(II)

13 are met.

14 ‘‘(D) VESTING REQUIREMENTS.—The vest15 ing requirements of this subparagraph are met

16 if—

17 ‘‘(i) in the case of a defined benefit

18 plan forming part of an eligible combined

19 plan an employee who has completed at

20 least 3 years of service has a nonforfeitable

21 right to 100 percent of the employee’s ac22 crued benefit under the plan derived from

23 employer contributions, and
†

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1 ‘‘(ii) in the case of an applicable indi2 vidual account plan forming part of eligible

3 combined plan—

4 ‘‘(I) an employee has a non5 forfeitable right to any matching con6 tribution made under the qualified

7 cash or deferred arrangement included

8 in such plan by an employer with re9 spect to any elective contribution, in10 cluding matching contributions in ex11 cess of the contributions required

12 under subparagraph (C)(i)(II), and

13 ‘‘(II) an employee who has com14 pleted at least 3 years of service has

15 a nonforfeitable right to 100 percent

16 of the employee’s accrued benefit de17 rived under the arrangement from

18 nonelective contributions of the em19 ployer.

20 For purposes of this subparagraph, the

21 rules of section 203 shall apply to the ex22 tent not inconsistent with this subpara23 graph.

24 ‘‘(E) UNIFORM PROVISION OF BENE25 FITS.—In the case of a defined benefit plan or
†

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S 1783 ES

1 applicable individual account plan forming part

2 of an eligible combined plan, the requirements

3 of this subparagraph are met if all benefits

4 under each such plan, and all rights and fea5 tures under each such plan, must be provided

6 uniformly to all participants.

7 ‘‘(F) REQUIREMENTS MUST BE MET WITH8 OUT TAKING INTO ACCOUNT SOCIAL SECURITY

9 AND SIMILAR CONTRIBUTIONS AND BENEFITS

10 OR OTHER PLANS.—

11 ‘‘(i) IN GENERAL.—The requirements

12 of this subparagraph are met if the re13 quirements of clauses (ii) and (iii) are met.

14 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

15 CONTRIBUTIONS.—The requirements of

16 this clause are met if—

17 ‘‘(I) the requirements of subpara18 graphs (B) and (C) are met without

19 regard to section 401(l) of the Inter20 nal Revenue Code of 1986, and

21 ‘‘(II) the requirements of sections

22 401(a)(4) and 410(b) of the Internal

23 Revenue Code of 1986 are met with

24 respect to both the applicable defined

25 contribution plan and defined benefit
†

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1 plan forming part of an eligible com2 bined plan without regard to section

3 401(l) of the Internal Revenue Code

4 of 1986.

5 ‘‘(iii) OTHER PLANS AND ARRANGE6 MENTS.—The requirements of this clause

7 are met if the applicable defined contribu8 tion plan and defined benefit plan forming

9 part of an eligible combined plan meet the

10 requirements of sections 401(a)(4) and

11 410(b) of the Internal Revenue Code of

12 1986 without being combined with any

13 other plan.

14 ‘‘(3) NONDISCRIMINATION REQUIREMENTS FOR

15 QUALIFIED CASH OR DEFERRED ARRANGEMENT.—

16 ‘‘(A) IN GENERAL.—A qualified cash or

17 deferred arrangement which is included in an

18 applicable individual account plan forming part

19 of an eligible combined plan shall be treated as

20 meeting the requirements of section

21 401(k)(3)(A)(ii) of the Internal Revenue Code

22 of 1986 if the requirements of subparagraph

23 (C) are met with respect to such arrangement.

24 ‘‘(B) MATCHING CONTRIBUTIONS.—In ap25 plying section 401(m)(11) of such Code to any
†

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1 matching contribution with respect to a con2 tribution to which paragraph (2)(C) applies, the

3 contribution requirement of paragraph (2)(C)

4 and the notice requirements of paragraph

5 (5)(B) shall be substituted for the requirements

6 otherwise applicable under clauses (i) and (ii) of

7 section 401(m)(11)(A) of such Code.

8 ‘‘(4) AUTOMATIC CONTRIBUTION ARRANGE9 MENT.—For purposes of this subsection—

10 ‘‘(A) IN GENERAL.—A qualified cash or

11 deferred arrangement shall be treated as an

12 automatic contribution arrangement if the

13 arrangement—

14 ‘‘(i) provides that each employee eligi15 ble to participate in the arrangement is

16 treated as having elected to have the em17 ployer make elective contributions in an

18 amount equal to 4 percent of the employ19 ee’s compensation unless the employee spe20 cifically elects not to have such contribu21 tions made or to have such contributions

22 made at a different rate, and

23 ‘‘(ii) meets the notice requirements

24 under subparagraph (B).

25 ‘‘(B) NOTICE REQUIREMENTS.—
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1 ‘‘(i) IN GENERAL.—The requirements

2 of this subparagraph are met if the re3 quirements of clauses (ii) and (iii) are met.

4 ‘‘(ii) REASONABLE PERIOD TO MAKE

5 ELECTION.—The requirements of this

6 clause are met if each employee to whom

7 subparagraph (A)(i) applies—

8 ‘‘(I) receives a notice explaining

9 the employee’s right under the ar10 rangement to elect not to have elective

11 contributions made on the employee’s

12 behalf or to have the contributions

13 made at a different rate, and

14 ‘‘(II) has a reasonable period of

15 time after receipt of such notice and

16 before the first elective contribution is

17 made to make such election.

18 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

19 AND OBLIGATIONS.—The requirements of

20 this clause are met if each employee eligi21 ble to participate in the arrangement is,

22 within a reasonable period before any year,

23 given notice of the employee’s rights and

24 obligations under the arrangement.
†

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1 The requirements of clauses (i) and (ii) of sec2 tion 401(k)(12)(D) of the Internal Revenue

3 Code of 1986 shall be met with respect to the

4 notices described in clauses (ii) and (iii) of this

5 subparagraph.

6 ‘‘(5) COORDINATION WITH OTHER REQUIRE7 MENTS.—

8 ‘‘(A) TREATMENT OF SEPARATE PLANS.—

9 Section 414(k) of the Internal Revenue Code of

10 1986 shall not apply to an eligible combined

11 plan.

12 ‘‘(B) REPORTING.—An eligible combined

13 plan shall be treated as a single plan for pur14 poses of section 103.

15 ‘‘(6) APPLICABLE INDIVIDUAL ACCOUNT

16 PLAN.—For purposes of this subsection—

17 ‘‘(A) IN GENERAL.—The term ‘applicable

18 individual account plan’ means an individual ac19 count plan which includes a qualified cash or

20 deferred arrangement.

21 ‘‘(B) QUALIFIED CASH OR DEFERRED AR22 RANGEMENT.—The term ‘qualified cash or de23 ferred arrangement’ has the meaning given

24 such term by section 401(k)(2) of the Internal

25 Revenue Code of 1986.’’.
†

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1 (2) CONFORMING CHANGES.—

2 (A) The heading for section 210 of such

3 Act is amended to read as follows:

4 ‘‘SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPE5 CIAL RULES.’’.

6 (B) The table of contents in section 1 of

7 such Act is amended by striking the item relat8 ing to section 210 and inserting the following

9 new item:

‘‘Sec. 210. Multiple employer plans and other special rules’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to plan years beginning after De12 cember 31, 2008.

13 SEC. 1337. STATE AND LOCAL GOVERNMENTS ELIGIBLE TO

14 MAINTAIN SECTION 401(k) PLANS.

15 (a) IN GENERAL.—Clause (ii) of section

16 401(k)(4)(B) of the Internal Revenue Code of 1986 (relat17 ing to governments ineligible) is amended to read as fol18 lows:

19 ‘‘(ii) GOVERNMENTS ELIGIBLE.—A

20 State or local government or political sub21 division thereof, or any agency or instru22 mentality thereof, may include a qualified

23 cash or deferred arrangement as part of a

24 plan maintained by it.’’
†

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1 (b) COORDINATION WITH SECTION 457 LIMITS.—

2 Section 402(g) of the Internal Revenue Code of 1986 is

3 amended by adding at the end the following:

4 ‘‘(9) COORDINATION OF SECTION 457 LIMITS

5 FOR STATE AND LOCAL GOVERNMENTAL PLANS.—

6 ‘‘(A) IN GENERAL.—Except as provided in

7 subparagraph (B), in the case of an individual

8 who is a participant in 1 or more qualified cash

9 or deferred arrangements maintained by a gov10 ernmental entity described in section

11 401(k)(4)(B)(ii), the amount excludable from

12 gross income under paragraph (1) with respect

13 to the individual for any taxable year with re14 spect to elective deferrals under such arrange15 ments shall be reduced by the aggregate

16 amounts deferred under section 457 with re17 spect to the individual for the taxable year

18 under 1 or more eligible deferred compensation

19 plans (as defined in section 457(b)) maintained

20 by an employer described in section

21 457(e)(1)(A).

22 ‘‘(B) SPECIAL RULE FOR PRE-1986 GRAND23 FATHERED PLANS.—Subparagraph (A) shall

24 not apply to any qualified cash or deferred ar25 rangement maintained by a governmental entity
†

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1 described in section 401(k)(4)(B)(ii) if the ar2 rangement (or any predecessor) was adopted by

3 the entity before May 6, 1986, or treated as so

4 adopted under section 1116(f)(2)(B) of the Tax

5 Reform Act of 1986.’’

6 (c) EFFECTIVE DATES.—The amendments made by

7 this section shall apply to plan years beginning after De8 cember 31, 2005.

9 PART III—EXCESS CONTRIBUTIONS

10 SEC. 1339. EXCESS CONTRIBUTIONS.

11 (a) EXPANSION OF CORRECTIVE DISTRIBUTION PE12 RIOD FOR AUTOMATIC CONTRIBUTION ARRANGE13 MENTS.—Subsection (f) of section 4979 of the Internal

14 Revenue Code of 1986 is amended—

15 (1) by and inserting ‘‘(6 months in the case of

16 an excess contribution or excess aggregate contribu17 tion to an eligible automatic contribution arrangement (as defined in section 414(w)(3)))’’ after ‘‘21 18 ⁄2

19 months’’ in paragraph (1), and

(2) by striking ‘‘21 20 ⁄2 MONTHS OF’’ in the head21 ing and inserting ‘‘SPECIFIED PERIOD AFTER’’.

22 (b) YEAR OF INCLUSION.—Paragraph (2) of section

23 4979(f) of such Code is amended to read as follows:

24 ‘‘(2) YEAR OF INCLUSION.—Any amount dis25 tributed as provided in paragraph (1) shall be treat-
†

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1 ed as earned and received by the recipient in the re2 cipient’s taxable year in which such distributions

3 were made.’’.

4 (c) SIMPLIFICATION OF ALLOCABLE EARNINGS.—

5 (1) SECTION 4979.—Subsection (f) of section

6 4979 of such Code is amended—

7 (A) by adding ‘‘through the end of the

8 plan year for which the contribution was made’’

9 after ‘‘thereto’’ in paragraph (1), and

10 (B) by adding ‘‘through the end of the

11 plan year for which the contributions were

12 made’’ after ‘‘thereto’’ in paragraph (2)(B).

13 (2) SECTION 401(k) AND 401(M).—

14 (A) Clause (i) of section 401(k)(8)(A) is

15 amended by adding ‘‘through the end of such

16 year’’ after ‘‘such contributions’’.

17 (B) Subparagraph (A) of section

18 401(m)(6) of such Code is amended by adding

19 ‘‘through the end of such year’’ after ‘‘to such

20 contributions’’.

21 (d) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to years beginning after December

23 31, 2005.
†

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1 PART IV—OTHER PROVISIONS

2 SEC. 1341. AMENDMENTS RELATING TO PROHIBITED

3 TRANSACTIONS.

4 (a) EXEMPTION FOR BLOCK TRADING.—

5 (1) IN GENERAL.—Section 408(b) of the Em6 ployee Retirement Income Security Act (29 U.S.C.

7 1108(b)) is amended by adding at the end the fol8 lowing new paragraph:

9 ‘‘(14) BLOCK TRADING.—

10 ‘‘(A) IN GENERAL.—Any transaction in11 volving the purchase or sale of securities be12 tween a plan and a party in interest (other than

13 a fiduciary who has investment discretion or

14 control with respect to the assets involved in

15 the transaction or is providing investment ad16 vice as a fiduciary for purposes of this title to

17 enter into the transaction) with respect to a

18 plan if—

19 ‘‘(i) the transaction involves a block

20 trade,

21 ‘‘(ii) at the time of the transaction,

22 the interest of the plan (together with the

23 interests of any other plans maintained by

24 the same plan sponsor) does not exceed 10

25 percent of the aggregate size of the block

26 trade,
†

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1 ‘‘(iii) the terms of the transaction, in2 cluding the price, are at least as favorable

3 to the plan as an arm’s length transaction,

4 and

5 ‘‘(iv) compensation associated with the

6 purchase and sale is not greater than an

7 arm’s length transaction with an unrelated

8 party.

9 ‘‘(B) BLOCK TRADE.—For purposes of this

10 paragraph, the term ‘block trade’ includes any

11 trade of at least 10,000 shares or with a mar12 ket value of at least $200,000 which will be al13 located across two or more unrelated client ac14 counts of a fiduciary.’’.

15 (2) CONFORMING AMENDMENTS.—

16 (A) Section 4975(d) of such Code is

17 amended—

18 (i) by striking ‘‘or’’ at the end of

19 paragraph (15),

20 (ii) by striking the period at the end

21 of paragraph (16)(F) and inserting ‘‘; or’’,

22 and

23 (iii) by adding at the end the fol24 lowing new paragraph:
†

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1 ‘‘(17) any transaction involving the purchase or

2 sale of securities between a plan and a disqualified

3 person (other than a fiduciary who has investment

4 discretion or control over the transaction or is pro5 viding investment advice as a fiduciary for purposes

6 of title I of the Employee Retirement Income Secu7 rity Act to enter into the transaction) with respect

8 to a plan if—

9 ‘‘(A) the transaction involves a block trade,

10 ‘‘(B) at the time of the transaction, the in11 terest of the plan (together with the interests of

12 any other plans maintained by the same plan

13 sponsor) does not exceed 10 percent of the ag14 gregate size of the block trade,

15 ‘‘(C) the terms of the transaction, includ16 ing the price, are at least as favorable to the

17 plan as an arm’s length transaction, and

18 ‘‘(D) compensation associated with the

19 purchase and sale is not greater than an arm’s

20 length transaction with an unrelated party.’’.

21 (B) Section 4975(e) of such Code is

22 amended by adding at the end the following

23 new paragraph:

24 ‘‘(11) BLOCK TRADE.—The term ‘block trade’

25 includes any trade of at least 10,000 shares or with
†

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1 a market value of at least $200,000 which will be al2 located across two or more unrelated client accounts

3 of a fiduciary.’’.

4 (b) BONDING RELIEF.—Section 412(a) of such Act

5 (29 U.S.C. 1112(a)) is amended—

6 (1) by redesignating paragraph (2) as para7 graph (3),

8 (2) by striking ‘‘and’’ at the end of paragraph

9 (1), and

10 (3) by inserting after paragraph (1) the fol11 lowing new paragraph:

12 ‘‘(2) no bond shall be required of any entity

13 which is registered as a broker or a dealer under

14 section 15(b) of the Securities Exchange Act of

15 1934 (15 U.S.C. 78o(b)) if the broker or dealer is

16 subject to the fidelity bond requirements of a self17 regulatory organization (within the meaning of sec18 tion 3(a)(26) of such Act (15 U.S.C. 78c(a)(26)).’’.

19 (c) EXEMPTION FOR FINANCIAL MARKETS TRADING

20 SYSTEMS.—

21 (1) IN GENERAL.—Section 408(b) of such Act,

22 as amended by subsection (b)(1), is amended by

23 adding at the end the following new paragraph:

24 ‘‘(15) FINANCIAL MARKETS TRADING SYS25 TEMS.—Any transaction involving the purchase and
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1 sale of securities between a plan and a fiduciary or

2 a party in interest if—

3 ‘‘(A) the transaction is executed through—

4 ‘‘(i) a national securities exchange or

5 a trading system owned by a national secu6 rities association registered with the Secu7 rities and Exchange Commission, regard8 less of whether such fiduciary or party in

9 interest (or any affiliate of either) has an

10 interest in such exchange or trading sys11 tem,

12 ‘‘(ii) an alternative trading system or

13 electronic communication network subject

14 to regulation and oversight by the Securi15 ties and Exchange Commission, regardless

16 of whether such fiduciary or party in inter17 est (or any affiliate of either) has an inter18 est in such alternative trading system or

19 electronic communications network, or

20 ‘‘(iii) any other trading system for se21 curities or other property approved by the

22 Secretary through regulatory or exemptive

23 relief,

24 ‘‘(B) the price associated with the pur25 chase and sale is at least as favorable as an
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1 arm’s length transaction with an unrelated

2 party,

3 ‘‘(C) the compensation associated with the

4 purchase and sale is not greater than an arm’s

5 length transaction with an unrelated party,

6 ‘‘(D) in the event the fiduciary or party in

7 interest directing the transaction (or any affil8 iate of either) has an ownership interest in the

9 trading system (other than an exchange or

10 trading system described in subparagraph

11 (A)(i)), the execution of transactions on such

12 system is annually authorized by a plan fidu13 ciary,

14 ‘‘(E) the transaction is executed in accord15 ance with the nondiscretionary rules and proce16 dures adopted by such trading system to match

17 offsetting orders, and

18 ‘‘(F) in the event the transaction is not ex19 ecuted on an exchange or trading system de20 scribed in subparagraph (A)(i)—

21 ‘‘(i) neither the trading system nor

22 the parties to the transaction take into ac23 count the identity of the parties in the exe24 cution of trades, and the parties to the

25 transaction do not actually know the iden-
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1 tity of the other at the time that the terms

2 and price of the transaction are agreed to,

3 or

4 ‘‘(ii) the transaction is effected pursu5 ant to rules designed to match purchases

6 and sales at the best price available

7 through the trading system.’’.

8 (2) CONFORMING AMENDMENT.—Section

9 4975(d) of such Code (as amended by subsection

10 (b)(2)) is amended—

11 (A) by striking ‘‘or’’ at the end of para12 graph (16),

13 (B) by striking the period at the end of

14 paragraph (17)(E) and inserting ‘‘; or’’, and

15 (C) by adding at the end the following new

16 paragraph:

17 ‘‘(18) any transaction involving the purchase

18 and sale of securities or other property between a

19 plan and a fiduciary or a disqualified person if—

20 ‘‘(A) the transaction is executed through—

21 ‘‘(i) a national securities exchange or

22 a trading system owned by a national secu23 rities association registered with the Secu24 rities and Exchange Commission, regard25 less of whether such fiduciary or disquali-
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1 fied person (or any affiliate of either) has

2 an interest in such exchange or trading

3 system,

4 ‘‘(ii) an alternative trading system or

5 electronic communication network subject

6 to regulation and oversight by the Securi7 ties and Exchange Commission, regardless

8 of whether such fiduciary or disqualified

9 person (or any affiliate of either) has an

10 interest in such alternative trading system

11 or electronic communications network, or

12 ‘‘(iii) any other trading system for se13 curities or other property approved by the

14 Secretary through regulatory or exemptive

15 relief,

16 ‘‘(B) the price associated with the pur17 chase and sale is at least as favorable as an

18 arm’s length transaction with an unrelated

19 party,

20 ‘‘(C) the compensation associated with the

21 purchase and sale is not greater than an arm’s

22 length transaction with an unrelated party,

23 ‘‘(D) in the event the fiduciary or disquali24 fied person directing the transaction (or any af25 filiate of either) has an ownership interest in
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1 the trading system (other than an exchange or

2 trading system described in subparagraph

3 (A)(i)), the execution of transactions on such

4 system is annually authorized by a plan fidu5 ciary,

6 ‘‘(E) the transaction is executed in accord7 ance with the nondiscretionary rules and proce8 dures adopted by such trading system to match

9 offsetting orders, and

10 ‘‘(F) in the event the transaction is not ex11 ecuted on an exchange or trading system de12 scribed in subparagraph (A)(i)—

13 ‘‘(i) neither the trading system nor

14 the parties to the transaction take into ac15 count the identity of the parties in the exe16 cution of trades, and the parties to the

17 transaction do not actually know the iden18 tity of the other at the time that the terms

19 and price of the transaction are agreed to,

20 or

21 ‘‘(ii) the transaction is effected pursu22 ant to rules designed to match purchases

23 and sales at the best price available

24 through the trading system.’’.
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1 (d) RELIEF FOR FOREIGN EXCHANGE TRANS2 ACTIONS.—

3 (1) IN GENERAL.—Section 408(b) of such Act

4 (29 U.S.C. 1108(b)), as amended by subsection

5 (c)(1), is amended by adding at the end the fol6 lowing new paragraph:

7 ‘‘(16) Any foreign exchange transactions, be8 tween a bank or broker-dealer (or any affiliate of ei9 ther), and a plan or an individual retirement account

10 (within the meaning of section 408 of the Internal

11 Revenue Code of 1986) with respect to which such

12 bank or broker-dealer (or affiliate) is a trustee, cus13 todian, fiduciary, or other party in interest, if—

14 ‘‘(A) the transaction is in connection with

15 the purchase, holding, or sale of securities,

16 ‘‘(B) at the time the foreign exchange

17 transaction is entered into, the terms of the

18 transaction are not less favorable to the plan

19 than the terms generally available in com20 parable arm’s length foreign exchange trans21 actions between unrelated parties, or the terms

22 afforded by the bank or broker-dealer (or any

23 affiliate of either) in comparable arm’s-length

24 foreign exchange transactions involving unre25 lated parties,
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1 ‘‘(C) the exchange rate used by such bank

2 or broker-dealer (or affiliate) for a particular

3 foreign exchange transaction does not deviate

4 by more or less than 3 percent from the inter5 bank bid and asked rates at the time of the

6 transaction as displayed on an independent

7 service that reports rates of exchange in the

8 foreign currency market for such currency, and

9 ‘‘(D) the bank or broker-dealer (or any af10 filiate of either) does not have investment dis11 cretion, or provide investment advice, with re12 spect to the transaction.’’.

13 (2) CONFORMING AMENDMENT.—Section

14 4975(d) of such Code, as amended by subsection

15 (c)(2), is amended—

16 (A) by striking ‘‘or’’ at the end of para17 graph (17)(E),

18 (B) by striking the period at the end of

19 paragraph (18)(F)(ii) and inserting ‘‘; or’’, and

20 (C) by adding at the end the following new

21 paragraph:

22 ‘‘(19) any foreign exchange transactions, be23 tween a bank or broker-dealer (or any affiliate of ei24 ther) and a plan or an individual retirement account

25 (within the meaning of section 408) with respect to
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1 which such bank or broker-dealer (or affiliate) is a

2 trustee, custodian, fiduciary, or disqualified person,

3 if—

4 ‘‘(A) the transaction is in connection with

5 the purchase, holding, or sale of securities,

6 ‘‘(B) at the time the foreign exchange

7 transaction is entered into, the terms of the

8 transaction are not less favorable to the plan

9 than the terms generally available in com10 parable arm’s length foreign exchange trans11 actions between unrelated parties, or the terms

12 afforded by the bank or broker-dealer (or any

13 affiliate of either) in comparable arm’s-length

14 foreign exchange transactions involving unre15 lated parties,

16 ‘‘(C) the exchange rate used by such bank

17 or broker-dealer (or affiliate) for a particular

18 foreign exchange transaction does not deviate

19 by more or less than 3 percent from the inter20 bank bid and asked rates at the time of the

21 transaction as displayed on an independent

22 service that reports rates of exchange in the

23 foreign currency market for such currency, and

24 ‘‘(D) the bank or broker-dealer (or any af25 filiate of either) does not have investment dis-
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1 cretion, or provide investment advice, with re2 spect to the transaction.’’.

3 (e) CORRECTION PERIOD FOR CERTAIN TRANS4 ACTIONS INVOLVING SECURITIES AND COMMODITIES.—

5 (1) IN GENERAL.—Section 408(b) of such Act

6 (29 U.S.C. 1108(b)), as amended by subsection

7 (d)(1), is amended by adding at the end the fol8 lowing new paragraph:

9 ‘‘(17) CORRECTION PERIOD FOR CERTAIN

10 TRANSACTIONS INVOLVING SECURITIES AND COM11 MODITIES.—

12 ‘‘(A) IN GENERAL.—Except as provided in

13 subparagraphs (B) and (C), a transaction de14 scribed in section 406(a) in connection with the

15 acquisition, holding, or disposition of any secu16 rity or commodity, if the transaction is cor17 rected before the end of the correction period.

18 ‘‘(B) EXCEPTION FOR EMPLOYER SECURI19 TIES AND REAL PROPERTY.—Subparagraph (A)

20 does not apply to any transaction between a

21 plan and a plan sponsor or its affiliates that in22 volves the acquisition or sale of an employer se23 curity (as defined in section 407(d)(1)) or the

24 acquisition, sale, or lease of employer real prop25 erty (as defined in section 407(d)(2)).
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1 ‘‘(C) EXCEPTION FOR KNOWING VIOLA2 TIONS.—In the case of any fiduciary or other

3 party in interest (or any other person knowingly

4 participating in such transaction), subpara5 graph (A) does not apply to any prohibited

6 transaction if, at the time such transaction oc7 curs, such fiduciary or party in interest (or

8 other person) knew that the transaction would

9 (without regard to this paragraph) constitute a

10 violation of section 406(a).

11 ‘‘(D) CORRECTION PERIOD.—For purposes

12 of this paragraph, the term ‘correction period’

13 means the 14-day period beginning on the date

14 on which such transaction occurs.

15 ‘‘(E) OTHER DEFINITIONS.—For purposes

16 of this paragraph—

17 ‘‘(i) the term ‘security’ has the mean18 ing given such term by section 475(c)(2) of

19 the Internal Revenue Code of 1986 (with20 out regard to subparagraph (F)(iii) and

21 the last sentence thereof),

22 ‘‘(ii) the term ‘commodity’ has the

23 meaning given such term by section

24 475(e)(2) of such Code (without regard to

25 subparagraph (D)(iii) thereof), and
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1 ‘‘(iii) the terms ‘correction’ and ‘cor2 rect’ mean, with respect to a transaction,

3 undoing the transaction to the extent pos4 sible, but in any case, making good to the

5 plan or affected account any losses result6 ing from the transaction and restoring to

7 the plan or affected account any profits

8 made through use of the plan.’’.

9 (2) CONFORMING AMENDMENTS.—

10 (A) Section 4975(d) of such Code, as

11 amended by subsection (d)(2), is amended—

12 (i) by striking ‘‘or’’ at the end of

13 paragraph (18)(F)(2),

14 (ii) by striking the period at the end

15 of paragraph (19)(D) and inserting ‘‘; or’’,

16 and

17 (iii) by adding at the end the fol18 lowing new paragraph:

19 ‘‘(20) except as provided in subparagraph (B)

20 or (C) of subsection (f)(8), a transaction described

21 in subparagraph (A), (B), (C), or (D) of subsection

22 (c)(1) in connection with the acquisition, holding, or

23 disposition of any security or commodity, if the

24 transaction is corrected before the end of the correc25 tion period.’’.
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1 (B) Section 4975(f) of such Code is

2 amended by adding at the end the following

3 new paragraph:

4 ‘‘(8) CORRECTION PERIOD.—

5 ‘‘(A) IN GENERAL.—For purposes of sub6 section (d)(20), the term ‘correction period’

7 means the 14-day period beginning on the date

8 on which such transaction occurs.

9 ‘‘(B) EXCEPTION FOR EMPLOYER SECURI10 TIES AND REAL PROPERTY.—Subsection

11 (d)(20) does not apply to any transaction be12 tween a plan and a plan sponsor or its affiliates

13 that involves the acquisition or sale of an em14 ployer security (as defined in section 407(d)(1)

15 of the Employee Retirement Income Security

16 Act) or the acquisition, sale, or lease of em17 ployer real property (as defined in section

18 407(d)(2) of such Act).

19 ‘‘(C) EXCEPTION FOR KNOWING VIOLA20 TIONS.—In the case of any fiduciary or other

21 disqualified person (or any other person know22 ingly participating in such transaction), sub23 section (d)(20) does not apply to any prohibited

24 transaction if, at the time such transaction oc25 curs, such fiduciary or disqualified person (or
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1 other person) knew that the transaction would

2 (without regard to subsection (d)(20) or this

3 paragraph) constitute a violation of subpara4 graph (A), (B), (C), or (D) of subsection (c)(1).

5 ‘‘(D) ABATEMENT OF TAX WHERE THERE

6 IS ACORRECTION.—If a transaction is not

7 treated as a prohibited transaction by reason of

8 subsection (d)(20), then no tax under sub9 sections (a) and (b) shall be assessed with re10 spect to such transaction, and, if assessed, the

11 assessment shall be abated, and, if collected,

12 shall be credited or refunded as an overpay13 ment.

14 ‘‘(E) OTHER DEFINITIONS.—For purposes

15 of this paragraph and subsection (d)(20)—

16 ‘‘(i) the term ‘security’ has the mean17 ing given such term by section 475(c)(2)

18 (without regard to subparagraph (F)(iii)

19 and the last sentence thereof),

20 ‘‘(ii) the term ‘commodity’ has the

21 meaning given such term by section

22 475(e)(2) (without regard to subparagraph

23 (D)(iii) thereof), and

24 ‘‘(iii) the terms ‘correction’ and ‘cor25 rect’ mean, with respect to a transaction,
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1 undoing the transaction to the extent pos2 sible, but in any case, making good to the

3 plan or affected account any losses result4 ing from the transaction and restoring to

5 the plan or affected account any profits

6 made through use of the plan.’’.

7 (C) Section 4975(f)(5) of such Code is

8 amended by striking ‘‘The terms’’ and inserting

9 ‘‘Except as provided in paragraph (8)(E)(iii),

10 the terms’’.

11 (f) CROSS TRADES STUDY.—Not later than 2 years

12 after the date of the enactment of this Act, the Secretary

13 of Labor, in consultation with the President’s Working

14 Group on Financial Markets, shall report to the President

15 and Congress the results of a study on the implications

16 for pension plans, plan sponsors, plan fiduciaries, and plan

17 participants of a prohibited transaction exemption for ac18 tive cross trades and the impact that such a prohibited

19 transaction exemption could have on the safety and secu20 rity of pension plan assets. The study shall review and

21 include recommendations regarding—

22 (1) the regulation and practice of passive and

23 active cross trades in United States securities mar24 kets,
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1 (2) the potential benefits and drawbacks of per2 mitting active cross trades for retirement funds, and

3 (3) the ease or difficulty in policing cross trad4 ing activities for plan sponsors, plan fiduciaries, and

5 any Federal agency charged with safeguarding the

6 Nation’s retirement funds.

7 (g) GAO STUDY.—The Comptroller General of the

8 United States shall prepare a preliminary report not later

9 than 2 years after the date of the enactment of this Act

10 and a final report not later than 3 years after such date

11 regarding the effects of the amendments made by this sec12 tion, focusing on the effect of electronic communication

13 networks and block trading on plan investments and on

14 the oversight and enforcement activities of the Depart15 ment of Labor to protect the rights of plan participants

16 and beneficiaries. The Comptroller General of the United

17 States shall submit the reports required under the pre18 ceding sentence to the Committees on Finance and

19 Health, Education, Labor, and Pensions of the Senate and

20 the Committees on Ways and Means and Education and

21 the Workforce of the House of Representatives.

22 (h) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to any transaction after the date

24 of the enactment of this Act.
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1 SEC. 1342. FEDERAL TASK FORCE ON OLDER WORKERS.

2 (a) ESTABLISHMENT.—Not later than 90 days after

3 the date of enactment of this section, the Secretary of

4 Labor shall establish a Federal Task Force on Older

5 Workers (referred to in this section as the ‘‘Task Force’’).

6 (b) MEMBERSHIP.—The Task Force established pur7 suant to subsection (a) shall be composed of representa8 tives from all relevant Federal agencies that have regu9 latory jurisdiction over, or a clear policy interest in, pen10 sion issues relating to older workers, including the Inter11 nal Revenue Service and the Equal Employment Oppor12 tunity Commission.

13 (c) ACTIVITIES.—

14 (1) IN GENERAL.—Not later than 1 year after

15 the date of establishment of the Task Force, the

16 Task Force shall—

17 (A) identify statutory and regulatory provi18 sions in current pension law that are disincen19 tives to work and develop legislative and regu20 latory proposals to address such disincentives;

21 and

22 (B) identify best pension practices in the

23 private sector for hiring and retaining older

24 workers, and serve as a clearinghouse of such

25 information.
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1 (2) REPORT.—Not later than 1 year after the

2 date of establishment of the Task Force, the Task

3 Force shall submit a report to Congress on the ac4 tivities of the Task Force pursuant to paragraph

5 (1). Such report shall be made available to the pub6 lic.

7 (d) CONSULTATION.—In carrying out activities pur8 suant to this section, the Task Force shall consult with

9 senior, business, labor, and other interested organizations.

10 (e) APPLICABILITY OF FACA; TERMINATION OF

11 TASK FORCE.—

12 (1) FACA.—The Federal Advisory Committee

13 Act (5 U.S.C. App.) shall not apply to the Task

14 Force established pursuant to this section.

15 (2) TERMINATION.—The Task Force shall ter16 minate 30 days after the date the Task Force com17 pletes all of its duties under this section.

18 SEC. 1343. TECHNICAL CORRECTIONS TO SAVER ACT.

19 Section 517 of the Employee Retirement Income Se20 curity Act of 1974 (29 U.S.C. 1147) is amended—

21 (1) in subsection (a), by striking ‘‘2001 and

22 2005 on or after September 1 of each year involved’’

23 and inserting ‘‘2006 and 2010’’;

24 (2) in subsection (b), by adding at the end the

25 following new sentence: ‘‘To effectuate the purposes
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1 of this paragraph, the Secretary may enter into a co2 operative agreement, pursuant to the Federal Grant

3 and Cooperative Agreement Act of 1977 (31 U.S.C.

4 6301 et seq.), with any appropriate, qualified enti5 ty.’’;

6 (3) in subsection (e)(2)—

7 (A) by striking ‘‘Committee on Labor and

8 Human Resources’’ in subparagraph (D) and

9 inserting ‘‘Committee on Health, Education,

10 Labor, and Pensions’’;

11 (B) by striking subparagraph (F) and in12 serting the following:

13 ‘‘(F) the Chairman and Ranking Member

14 of the Subcommittee on Labor, Health and

15 Human Services, and Education of the Com16 mittee on Appropriations of the House of Rep17 resentatives and the Chairman and Ranking

18 Member of the Subcommittee on Labor, Health

19 and Human Services, and Education of the

20 Committee on Appropriations of the Senate;’’;

21 (C) by redesignating subparagraph (G) as

22 subparagraph (J); and

23 (D) by inserting after subparagraph (F)

24 the following new subparagraphs:
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1 ‘‘(G) the Chairman and Ranking Member

2 of the Committee on Finance of the Senate;

3 ‘‘(H) the Chairman and Ranking Member

4 of the Committee on Ways and Means of the

5 House of Representatives;

6 ‘‘(I) the Chairman and Ranking Member

7 of the Subcommittee on Employer-Employee

8 Relations of the Committee on Education and

9 the Workforce of the House of Representatives;

10 and’’;

11 (4) in subsection (e)(3)(B), by striking ‘‘Janu12 ary 31, 1998’’ and inserting ‘‘3 months before the

13 convening of each summit;’’;

14 (5) in subsection (f)(1)(C), by inserting ‘‘, no

15 later than 90 days prior to the date of the com16 mencement of the National Summit,’’ after ‘‘com17 ment’’;

18 (6) in subsection (g), by inserting ‘‘, in con19 sultation with the congressional leaders specified in

20 subsection (e)(2),’’ after ‘‘report’’ the first place it

21 appears in the text;

22 (7) in subsection (i)—

23 (A) by striking ‘‘for fiscal years beginning

24 on or after October 1, 1997,’’; and
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1 (B) by adding at the end the following new

2 paragraph:

3 ‘‘(3) RECEPTION AND REPRESENTATION AUTHOR4 ITY.—The Secretary is hereby granted reception and rep5 resentation authority limited specifically to the events at

6 the National Summit. The Secretary shall use any private

7 contributions accepted in connection with the National

8 Summit prior to using funds appropriated for purposes

9 of the National Summit pursuant to this paragraph.’’; and

10 (8) in subsection (k)—

11 (A) by striking ‘‘shall enter into a contract

12 on a sole-source basis’’ and inserting ‘‘may

13 enter into a contract on a sole-source basis’’;

14 and

15 (B) by striking ‘‘in fiscal year 1998’’.

Passed the Senate November 16, 2005.

Attest:

Secretary.
109TH CONGRESS

1ST SESSION S. 1783

AN ACT

To amend the Employee Retirement Income Secufor other purposes. of 1986 to reform the pension funding rules, and rity Act of 1974 and the Internal Revenue Code